Business Environment and Law - Coursework Example

Business Environment and Law Business Environment and Law Introduction Coutts & Co is an in the wealth management andprivate banking industry founded in 1692 and has its headquarters in London. It has 28 offices within the United Kingdom (UK), and numerous others world-wide (Warf & Stutz 2007, p. 69). From its inception up to the 20th century, it was mainly a clearing bank that rendered services to the landed and nobility. However, as financial requirements have diversified over time, the firm has also included a wider scope of clients ranging from entrepreneurs to executives, entertainers, professionals and even sports personalities. This paper will present a report on Coutts & Co that is based on a research that analysed the firm, its business structure, strategy and management in relation to the industry at large. It will further use both PESTEL and SWOT analysis to describe the firm’s competitive advantage and make recommendations for improvements. Coutts & Co is a family-owned business whose interests in the financial industry include financial planning, banking and accountancy. The management of Coutts & Co has Lord Waldegrave as Chairman at the top and three Chief Executives. Rory Tapner is the Chief Executive of the Wealth division of the Royal Bank of Scotland (RBS); Alexander Classen is the Chief Executive of Coutts & Co Zurich; and Michael Morley is the Chief Executive of Coutts & Co UK (Warf & Stutz 2007, p. 71). In the UK, the financial industry presently employs over one million professionals who serve in the accountancy, tax, audit, loans, pensions, investments and insurance sectors. The industry came into being in the 17th century following the activities of goldsmiths who later started accumulating large stocks of gold when English monasteries were dissolved by Henry VIII. Presently, the UK alone has over 34,000 firms that provide banking, financial advice and insurance services (Johnson, Scholes & Whittington 2008, p. 54). A further 37,000 businesses are registered to deliver tax, assurance, advisory and audit services. These statistics are an indication of how vibrant the financial industry is in the UK. This is in spite of the job cuts witnessed recently in the region, since accountancy and finance are already emerging as the services driving the recovery. Indeed, seven percent of all employment in the UK is in the financial industry, which has refined its services, expanded banks and continues to offer almost similar services only distinguished by the rates of interest charged (Rothaermel 2013, p. 18). It is also worth noting that London may be the dominant finance centre globally, but cities such as Manchester, Edinburgh, Leeds and Glasgow have also established themselves as significant financial centres. To achieve such growth and business success, business organisations need to operate in politically, economically, socially, technologically and legally conducive environments (Rothaermel 2013, p. 14). The PESTEL analytical concept describes and assesses macro-environmental factors, which are the key external forces that are critical in the scanning of the environmental component of strategic management. Because of the ability of these factors to uncover both threats and opportunities, it is important to carry out a PESTEL analysis to determine external aspects that impact on the firm. The management will also be able to identify and exploit changes or protect the firm against them, improving competitive advantages (Johnson, Scholes & Whittington 2008, p. 83). This may vary in applicability and importance depending on a given firm’s industry and services or goods it offers. For Coutts & Co, being a global financial firm, PESTEL is an applicable analytical concept because the firm’s operations are affected by different political factors depending on the country and region of operation. Then, since it is also a lender and is also likely to borrow, it will be affected by economic factors and, in particular and more importantly, interest rates. Because the firm offers a wide range of financial services, PESTEL is also a useful tool because it can be applied to and focus on a specific department and analyse specific factors relevant to it. The social component of PESTEL will be concerned with cultural environments such as career attitudes, health consciousness, and age distribution. Technology will deal with automation, research and development activities and determine competence, decisions on outsourcing and obstacles to entry. After considering the above description and discussion of PESTEL analysis, its application on Coutts & Co found that the Political component of the environment in the UK is favorable for business. In 2013, the Prudential Regulation Authority was established in the UK to supervise close to 2,000 institutions that include credit unions, building societies and banks (Rothaermel 2013, p. 21). The initiative was undertaken with the objective of reducing the possibility of failure and ensuring that the economy remains successful for the sake of the future. In the same year, the Banking Reform Act came into play to ensure that banks have more flexibility to shocks and their financial difficulties can be rectified easily and quickly, hence reducing the impact of possible financial crises. With this political environment, it is recommended that Coutts & Co reduce its restrictions on lending terms and increase lending to customers and earn more interest. Looking at economic factors, the fiscal policies enacted by the Banking Reform Act are aimed at ensuring credit availability and protecting against inflation rates. Coupling this with the social aspect of PESTEL shows that the recovery of the banking industry after the global financial crisis has improved attitudes towards the financial industry. Consequently, there are improved attitudes towards investing and saving. To this end, it is recommended that Coutts & Co shift from its harsh requirement that only targets potential clients that must have a minimum of one million pounds in investable assets. This requirement is even more compounded by the fact that the assets are not inclusive of real estate. To be an institution that caters for the general society, it is recommended that Coutts & Co dissociate itself from the image of being a banker for only the eminent and wealthy. Through market segmentation, the firm can acquire smaller clients whose large number will positively impact on business. The UK is not short of technological advances. The basic level of infrastructure and the rate of change of technology in the industry are among the best in the world, and these are further guarded by legislation (Rothaermel 2013, p. 24). It is therefore recommended that such technological incentives be used to diversify and expand the scope of services both product wise and geographically. The penetration provided by the internet can facilitate telemarketing and the establishment of virtual presence anywhere in the world. This perspective will further help in the need to reach different social classes and increasing the client base. Legal aspects will ensure that intellectual property, patent and copyright laws are not infringed especially when venturing into new territories and introducing new products for new and prospective clients. Further, the legal aspects can also work alongside environmental ones to ensure that advertisements and sales practices are ethical and acceptable. From this, it is recommended that the firm should be innovative and create new products suitable for clients in different legal jurisdictions such as, for example, Africa and the Middle East. Viewing the scenario from the perspective of the SWOT analysis, further external and also internal factors that affect business can be seen. First, by virtue of being a family-owned business, Coutts & Co has inherent strengths (Johnson, Scholes & Whittington 2008, p. 56). First, the succession of management in Coutts & Co has always been considered to be as significant as ownership succession. Then, a responsible board that also comprises nonfamily members is at the centre of driving business. This allows for exceptional practice in human resources as well as flexibility and agility in making decisions. Studies have also proven that family-owned businesses are viewed as a source of business strength and contribute to brand image, just as Coutts has done to the business (Chermack & Kasshanna 2009, p. 386). On the other hand, the SWOT analysis also reveals an internal weakness created by the aspect of family-run businesses (Chermack & Kasshanna 2009, p. 386). The most outstanding one is retaining of employees that are not competent for business but rather, out of loyalty. This implies that the introduction and assimilation of new talent may be hindered. It is therefore recommended that the practice of employing professionals, especially those concerned with strategic decisions, be enhanced and for the sake of business continuity, get rid of family members that do not perform as per expectation (Thompson & Martin 2010, p. 87). An opportunity to diversify the way in which the firm targets prospective clients is presented by the Banking Reform Act, which means that there is sufficient protection against financial shocks. It is therefore possible and recommendable that smaller clients are targeted. This will alleviate the threat posed by smaller firms who may acquire the underserved market and grow to become real competition to Coutts & Co. Conclusion Coutts & Co has been shown to be one of the oldest financial institutions in the UK. With the financial industry steadily recovering from the global crisis, the firm has great opportunities to grow and excel further in business. An analysis of the political environment shows that it is stable enough and conducive for such growth. The economic conditions are also favourable following the establishment of the Prudential Regulation Authority and Banking Reform Act. Recommendations for averting threats and facilitating growth include market segmentation to target smaller clients because of their large numbers. The firm should also embrace a business culture that shifts away from rewarding loyalty to recruiting professionals who can manage strategic business decisions. References Chermack, T & Kasshanna, B 2009, ‘The use of and misuse of SWOT analysis and implications for HRD professionals,’ Human Resource Development International vol. 10, no. 4, pp. 383-399. Johnson, G, Scholes, K & Whittington, R 2008, Exploring corporate strategy, Prentice, New Jersey. Rothaermel, F 2013, Strategic management: concepts and cases, McGraw, New York. Thompson, J & Martin, F 2010, Strategic management: awareness & change, Cengage, London. Warf, F & Stutz, B 2007, The world economy : resources, location, trade and development, Pearson, London. Read More