Global challenges - Research Paper Example

Global challenges Table of contents TOPICS PAGE NO.S I. Introduction A. Management definition ……………………………………………………. 3 B. Different management schools of thought………………………………. 3 C. Management hierarchical levels..………………………………………….4 D. Competing values framework………………………………………………4-5 II. Application- RBS and globalization A. RBS- its foundation, turnover, workforce……………………………….5 III. PESTLE analysis A. Pestle analysis of RBS……………………………………………………5-6 IV. PORTERS five forces analysis of RBS A. Availability of substitutes Rivalry amongst the existing firms Threat of new entrants and entry barriers Power of buyer Bargaining power of suppliers…………………………………………….6-7 V. SWOT analysis A. Strengths, opportunities, weakness and threats of RBS………………7-8 VI. Challenge- globalization A. Definition of globalization………………………………………………… 8 B. Advantages and disadvantages…………………………………………. 8 C. Impact of globalization on RBS……………………………………………8 VII. Recommendation………………………………………………………………………… 8-9 VIII. Conclusion……………………………………………………………………….............. 9 IX. References…………………………………………………………………………………10-11 1.0 Introduction Management begins when people take up responsibilities and work on it to build organizations thereby increasing its value and potential (Boddy, 2005, pp.9). Management is divided into two schools of thought- Classical school pioneered by Henry Fayol and Urwick and Scientific school followed by Frank, Lilian Gilberth and Henry Grant (Cole, 1993, pp.12-16). The difference between the two was that the scientific school of thought aimed at approaching the management problems systematically by conducting scientific research while the Classical school of thought led by Henry Fayol stated that management was a skill that could be learnt or acquired (de Beer, Moolman, Abushchagne & Aardt, 1998, pp.6). The behaviourist school of management founded by Elton Mayo stressed on the working conditions of the worker, team work and the loyalty and harmony amongst them (de Beer, Moolman, Abushchagne & Aardt, 1998, pp.7). There are three hierarchical levels in management. Source fig.1.2 Levels of Management (de Beer, Moolman, Abushchagne & Aardt, 1998, pp. 12) The top level consists of people comprising the decision making body who formulate the goals and objectives. The middle level management is concerned with the achievement of strategic goals and allocation of the resources. The first level consists of the working group and the supervisors. The first line mangers or supervisors should have the relevant knowledge and expertise (de Beer, Moolman, Abushchagne & Aardt, 1998, pp. 9-14). The four functions of management are planning, controlling, organizing and leading. (de Beer, Moolman, Abushchagne, Aardt, 1998, pp.15-21). Competing Values Framework Competing value framework is the most widely used model for increasing value in an organization that can be in terms of products and services, increase in opportunities, work efficiency etc (Cameron, 2006, pp.21). The basic purpose of using a CSF model is to identify the factors that can be used for improving performance (Cameron, 2006, pp.6).The CSV model is a two by two model having four quadrants (Cameron, 2006, pp. 8). The model is based on two different approaches for improving performance in an organization. One dimension explains how performance is improved by orienting towards a flexible, discrete and dynamic working environment while the other dimension explains about improving performance by sticking to stability, order and control (Quinn, 2006, pp.3). These four quadrants are named as four action verbs collaborate, create, compete and control which represents the kinds of activities needed to create value in the organization (Cameron, 2006, pp.31). It also represents four organizational models which were developed by Quinn (Quinn, 2006, pp. 2). Human relations model which emphasizes on development of human resources, flexibility and internal focus. 1. Open systems model which emphasizes on flexibility, external support and focus more. 2. Rational goal model that stresses on planning, goal setting, control and external focus. 3. Internal process model that stresses on communication, information management and internal focus (Competing Values Framework, 2012). 2.0 Application RBS (Royal Bank of Scotland) & globalisation The Royal Bank of Scotland (RBS) was founded in 1727 (RBS, 2012). It provides service in over 40 countries. The annual turnover of RBS in 2008 was £1-£15 million (RBS Newbury Expands, 2008). Presently due to the change in financial regulations it has decided to cut 618 jobs in U.K (HSBC Holdings plc: RBS to Cut 618 U.K. Jobs Before New Regulation, 2012). 2.1 PESTLE analysis PESTLE analysis stands for political, economic, social, technological, environmental and legal (PESTLE analysis definition, n.d). In this context RBS can be analyzed as follows (RBS Group (2012)): Political – RBS needs to have government intervention in its overseas branches to maintain monopoly. Economic- Economic factors can be in the form of interest rates, inflation etc. So, RBs should maintain a sound economic system as it has a diverse portfolio in the form of corporate banking, retail, personal banking etc. Social- As it has been mentioned before that RBS has spread its branches to several overseas locations, so it needs to keep itself aware of the social and cultural sentiments in those regions. Technological- RBS can utilize technological developments to update its existing products as well as introduce new ones in the overseas location. Environmental – RBS has invested in go green policy and provides services to the energy sectors. Legal – RBS should frame laws and regulations to govern its cost structures, labor laws etc. 2.2 Porters five forces analysis of RBS Porter’s five forces model is a model used to analyze the industry as well as business strategy development. It implies an industry to be influenced by five forces. Availability of substitutes – Substitute products are the ones that are available in the other industries. Availability of substitute of products can affect an industry by limiting price competition (Hill, Jones, 2012, pp. 59). Substitute products in the banking industry are not easy to find. But the customers have the choice to choose between the various schemes for savings. Rivalry amongst the existing firms – Rivalry amongst the firms exists when there are many firms supplying the same product or service. If rivalry is low amongst the firms in an industry the market is considered to be stable. RBS faces competition in the Islamic countries like Rak Bank in UAE, Dubai Bank where foreign banks are generally not permitted to operate. Here RBS can create a competitive advantage by lowering their price and improving its product features. Threat of new entrants and entry barriers – Threat from new entrants arise when new players or companies try to gain market share. Companies who are already in the market tend to maintain a high profit and prevent the new entrants from entering the market. This is known as creating entry barriers. Barriers to entry can be in form of economies of scale, maintaining high loyalty, high cost advantage (Hill, Jones, 2012, pp. 51). With the growth of globalization it has become possible for foreign banks to open its branches in countries like the developing countries that have not been explored. As such RBS can face threats from the other foreign banks who also try to open their branches in those countries. RBS can prevent these new entries by taking help from the government and create a monopoly in those countries. Power of buyer – The buyer power is the effect of customers’ buying decision on the e industry. Buyers can be strong if they have considerable market share, are limited in number and have the capacity to purchase tremendous portion of the output. Buyers are weak if they have no power to influence the sale on any product and producers can control the retail operations (Hill, Jones, 2012, pp. 58). As there are many brands under the RBS group like Ulster Bank, Citizens Bank, Charter One there is high level of bargaining power amongst the buyers (RBS group, 2012). Bargaining power of suppliers - Suppliers can be strong or weak in an industry. Suppliers can be strong if they are highly concentrated and there are few substitutes available (Hill, Jones, 2012, pp. 59). There is usually no supplier for the banking industry and hence no condition of bargaining power by them (Analyze marketing strategies of Royal Bank of Scotland, 2011) 2.3 SWOT analysis Strengths- RBS is customer oriented and balances the shareholders’ value and the customer profit effectively. They lay great importance on customer satisfaction. They manage their finances well and have developed many strategies to mitigate their risk exposures areas. Opportunities – Through restructuring, RBS can become a strong market leader. They can explore the markets in the Third World Countries. Commodity trading can prove to be profitable for RBS in future (Royal bank of Scotland SWOT analysis, n.d) Weakness – RBS lacks in Tier 1 capital ratio. Large losses in loan can decrease its profitability (Royal bank of Scotland SWOT analysis, n.d). It depends heavily on the money market for its short term funds. Threats – Online frauds in UK can damage its reputation. Restructuring ABN AMRO may not benefit RBS in future (Royal bank of Scotland SWOT analysis, n.d). 3.0 Challenge – globalization Globalization means the gathering of different countries by interaction through education, society, culture and politics. Globalization is a wider term to include the features of the countries beyond their economic dependency (Kahler, Lake, 2008). Collective trading of different markets across the globe and sharing of its labor force, consumers getting the profit of buying products at the right price are the positive contributions (Nash, 2008). Outsourcing of jobs, imbalance in the pay scales between the rich and the poor, terrorism and environmental degradation are the negative impacts (Pillai, 2011). In a developing economy, globalization encourages foreign banks like RBS to invest in these countries. Globalization has brought many changes in the banking services of different economies through the usage of ATM machines and internet facilities. This has helped to improve productivity in the banking sectors. 3.1 Impact of globalization on RBS Following globalization, there was a merger between RBS and NatWest. Secondly, the merger with ABN AMRO turned out to be unsuccessful as it made RBS more vulnerable to market deterioration which resulted in the fall of its capital ratio (The Failure of the Royal Bank of Scotland, 2011, pp. 6,). According to RBS chief Stephan Hester, globalization has led to deterioration in the efficiency of the sector (THE FIRST CRISIS OF GLOBALISATION, 2010). Globalization has led RBS to go global and thus have access to global currencies which in turn can help to smoothen the liquidity crunch. 4.0 Recommendations The Royal Bank of Scotland has set business objectives like increasing the capital ratio, lowering the leverage ratio, increasing liquidity and reducing its short term borrowings from money market. Hence from the point of view of the CVF model, RBS can explore the rational economic view model as this model will help RBS to increase its output and attain individual and organizational goals. 5.0 Conclusion The analysis of RBS has shown that management concepts can be utilized for the betterment of an organization. It can help to foresee the opportunities for the firm as well as its potential threats and weaknesses. Management theories and the models developed by it have helped the present society to understand the importance of scientific and a systematic way of approaching a problem. It helps to save time and resources as well as to gain many insights too. These methodologies can be used to control any form of disturbance or challenge in the world. REFERENCES 1. Boddy, D. (2005). Management- An Introduction.  Financial Times/ Prentice Hall 2. Cameron, K., S. (2006). Competing Values Leadership: Creating Value in Organizations. Edward Elgar Pub 3. Cole, G. A. (1993). Management Theory and Practice, London: Cengage Learning EMEA 4. de Beer, A.A., & Moolman, B.A. (1998). Focus on Supervision in General Management. Juta and Co. Ltd. 5. Hill, C., W., L., Jones, G., R. (2012), Strategic Management: An Integrated Approach. South-Western College Pub 6. Quinn, R.E. et al. (1996), Becoming A Master Manager: A. Competency Framework. New York: John Wiley and Sons Inc  7. 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