ANZ Bank and RBAs Proposal to Banks - Case Study Example

Heading: ANZ Bank Your name: Course name: Professors’ name: Date Introduction Recently, RBA announced that commercial banks should lower their interest rates. Some of the factors that led it to such a decision include unemployment, inflation rates, federal government, international force, and the dollar. In spite of this directive, various banks refused to comply. ANZ is one of the banks that declined to comply with RBA’s decision, a move that caused a serious threat to its operations, especially in terms of the customers. The company can use public relations to respond that it is independent from RBA; hence, should make its decisions alone. Alternatively, the firm can argue that its decision to defy with RBA’s decision was due to its attempt to safeguard its profitability, as well as to cope with high costs. This issue has certain ethical implications to the company’s organization public relationships (OPRs) in terms of trust, commitment, openness, and satisfaction dimensions. This essay seeks to explore on identification and analysis of ANZ bank’s response in relation to the issue of maintaining its interest rates despite the RBA’s proposal to banks to change their rates. It also seeks to discuss the response’s effects on one of the ANZ’s OPR dimension with the relevant public. The paper will also address various public relations response recommended in order to enhance one or more OPRs dimensions with the relevant public, and reasons for the recommended response. Lastly, the proposal will focus on the ethical importance of the alternative proposal. Recently, Reserve Bank of Australia (RBA) proposed that all banks should adjust their interest rates in order to fit its interest rates (Immigrate Australia, 2012). Although other banks agreed to change their rates in accordance to RBA’s directive, ANZ bank and other financial institutions refused to comply maintaining that they are independent institutions (The Prince in Banks, 2012; Murdoch, 2012). Therefore, the major issue at ANZ bank entails its failure to comply with RBA’s order to adjust its interest rates. The focus of this proposal regards the proposal of ANZ bank’s response to the issue of non-compliance to RBA’s interest rate. Following this issue, ANZ bank responds that it will not regulate its interest rates as per RBA’s instruction because it is an independent bank. It maintains it not reduce its interest rates to suit RBA’s decision, since it is an independent financial institution, and therefore can decide on its cash rates on home loans. ANZ bank made the response to its stakeholders in order to maintain their trust on it. Trust is the most appropriate OPR dimension for in this case. ANZ bank made the response to the stakeholders to regain their trust on it. This is influential in enhancing the bank’s acquisition and retention of new and existing stakeholders respectively (Fisher, 2001). Basing on press agentry or publicity model, the bank can use one-way type of communication to inform its publics on its response regarding its defiance to RBA’s suggestion to reduce interest rates on lending loans (RBA, 2012). This public relations model is suitable in that the firm will employ manipulation and persuasion to influence its publics to behave or act as it desires. In relation to the response, press agentry or publicity model will help the firm in persuading and manipulating stakeholders and other publics to see, understand, and agree with the bank’s decision to raise their interest rates despite RBA’s directive to reduce them. Organization public relationship (OPR) is a fundamental concept in the study of public relations. Distinct research scholars have various definitions for OPR. Firstly, Broom, Casey, and Ritchey's (1997) argue that OPR refers to a representation of patterns of transaction, interaction, exchange, and connection between a firm and its publics. These associations consist of properties that are different from attributes, identities, and perceptions of social collectivities and individuals in the associations. In spite of its dynamic nature, OPR’s description may be at one point in time and trained with time. Secondly, Ledingham and Bruning (1998) assert that OPR refers to a condition existing between a firm and its major publics whereby each entity’s actions affect another entity’s social, economic, cultural, and political welfare. Thirdly, Huang's (1998) defines OPR as the extent to which a firm and its publics believe in each other, consent on one’s legal power to manipulate, commit to each other, and experience contentment with one another. The same research scholars proposed different dimensions of OPR as features that could represent ORPs. One of the dimensions involves openness, involvement, trust, commitment, and investment (Bruning, Ledingham, Thomlison & Lesko, 1997). The second dimension by Grunig and Ehling (1992) involves reciprocity, credibility, trust, openness, mutual legitimacy, mutual understanding, and mutual satisfaction. Ferguson (1984) presents OPR dimension comprising of static versus dynamic, closed versus open, mutual satisfaction versus mutual dissatisfaction, mutual understanding, power distribution, consensus, and agreement. Bruning, Ledingham, Thomlison, and Lesko (1997) also suggest another ORP dimension about commitment, investment, trust, cooperation, reassurance with relational dialects, mutual goals, performance satisfaction, interdependence, comparison of alternative level, and power imbalance, common technology, non-retrievable investment, structural bonds, summate constructs, intimacy, social bonds, and passion. Lastly, Ledingham and Bruning (1998) define OPR as open communication, involvement level, trust level, community investment, and long-term commitment. Some of the key dimensions that the researchers defined include trust, control mutuality commitment, and satisfaction. Control mutuality refers to the extent to which parties consent on who has the lawful power to manipulate another. Even though some imbalance is natural, stable relationships need publics and firms to have some influence on the other. Trust dimension refers to one party’s confidence level in opening itself to another party commitment entails the degree to which every party feels and believes that the link is worth maintaining and promoting. Openness refers to constant sharing of plans between players in a relationship. Communal relationships are those in which both parties offer advantages to the other due their concern for the well-being of the other party regardless of what they gain in return (Ledingham, Bruning, 2000). The chosen OPR dimension in this case is trust, which means one’s party’s confidence level and willingness to open up to another one. The trust dimension has three categories including integrity that entails a belief that a firm is just and fair. The second category in trust dimension is dependability, which is a belief that a firm will undertake whatever it promises to undertake. The third category of trust dimension entails competence that is a belief that a firm has a capacity to accomplish what is set to do (Theaker, 2001). In relation to ANZ bank’s response, the dimension demonstrates that the bank will use public relations or press agentry to manipulate and persuade target publics and stakeholders to accept its decision to raise interest rates in defiance to RBA’s strategy without compromising their trust. Based on this dimension, the bank will be maintaining its integrity, reliability, and competence in order to uphold its stakeholders’ confidence its operations. The bank’s response to raise their interest rates despite RBA’s directive has various effects on trust dimension of the firm’s OPRs. This response will affect trust dimension used by persuading its publics to uphold their confidence in the bank. The bank’s response that it is independent from RBA’s decisions and operations will help in boosting the public’s confidence in it, as well as influencing them to agree to what the bank desires to do. In this case, the bank’s public comprise of customers. Customers are the main target for the bank’s response because the issue mostly affects them. The trust dimension of OPR is essential in every business today, and it is among the most pertinent antecedents of collaborative and stable relationships. Several research scholars found out that trust is vital in the building and maintenance of lasting business relationships (Singh & Sirdeshmukh, 2000). In business, trust exists when one of the party’s has confidence on the other party’s integrity and reliability. Moreover, Akbar and Parvez (2009) say trust exists if one party’s actions constructive behavioral objectives to the other party. Trust, in a business environment, develops when one of the partners believes that the other partner’s actions will lead to positive results. For that trust to exist in a business relationship, one party must be capable of continuing to satisfy its obligations to its clients in the cost-benefits association. Therefore, the customers should not only predict positive results, but also trust that the results are sustainable in the future. Sirdeshmukh, Singh, and Sabol (2002) say that because of developed trust, a positive relationship will also happen due to customer satisfaction. Satisfied customers will develop loyalty towards the organization since its meets its needs sufficiently (Akbar & Parvez, 2009). Akbar & Parvez (2009) also maintains that customer loyalty is a construct that comprises of both clients’ behavior and attitudes towards an organization. clients’ attitudinal component symbolize notions, such as, purchasing additional services or products, repurchase intention, indication of commitment by avoiding switching to other competitors, and willingness to recommend the firm to other people. It also implies clients’ willingness to give a price premium. On contrast, Feick, Lee, & Lee (2001) note that behavioral aspect of client loyalty entails real purchase of services and products from one firm, showing lasting brand’s choice probability, and recommending the firm to other people. Therefore, ANZ bank’s maintenance of trust is crucial in ensuring that its clients develop customer loyalty. Moreover, Gefen (2000) in Lee (2005, pp. 165-177) says that trust is instrumental in the reduction of uncertainty by dismissing potential, but unnecessary and unfavorable other party’s future actions. According to Bitner and Zeithaml (2003), assert that satisfaction is the consumers’ assessment of a service or a product to find out if the service r product satisfies their expectations and needs. Boselie, Wiele, and Hesselink (2002) maintain that satisfaction is the positive, emotional condition of a party’s working association with the other. This implies that trust has an effect on customers’ satisfaction of the firm’s products and services. Thus, ANZ bank’s response will help in the development of trust among its customers; hence, enhancing their satisfaction. The aforementioned effects of trust dimension are highly indispensable for the bank’s success. To start with, the bank’s maintenance of customer loyalty is vital in the improvement of its performance due to acquisition of new customers and retention of the existing ones (Kim, Ferrin & Rao, 2003). This, in turn, will lead to widened market and increased profits. The organization’s move is also crucial in ensuring customer satisfaction by its services and products; hence, an enhanced market size and high performance (Watson, 2007). Therefore, the bank’s response is indispensable in ensuring trust development among the customers, and thus, creation of satisfaction and loyalty. Apart from the above response, there are other possible responses, which the bank can use to justify its defiance to RBA’s directive. Some of these responses include the need for ANZ bank to safeguard its profitability rather than to enhance it, and to cope with increased costs. To start with, ANZ bank can respond to the issue of non-compliance with RBA’s decision to lower interest rates to home loans by maintaining that it did so to safeguard its profits. This implies that the bank’s decision to act against the RBA’s rule was not really to enhance its performance, but to uphold its profitability. ANZ bank should inform its customers that its intentions are to maintain its profitability, and not to improve it. This response will also help in improving the firm’s OPRs, particularly the trust dimension. The bank’s intentions to maintain its profitability will help in the development of the customers’ confidence in its actions. Profitability of a firm is necessary in maintaining the clients’ trustworthiness and confidence in it since it is an indication that the business is doing well in the market. Losing companies easily distract customers as their belief and confidence it will diminish (Hazleton, 2006). This response of safeguarding profitability is also critical in assuring the clients of the organization’s competence in the market. This means that it assures customers that the bank is capable of doing what it promises to do, which is satisfying their expectations and needs through value creation and quality services and products. Moreover, the bank’s response to safeguard its profitability is essential in demonstrating its integrity. This means that response will assure the customers of the business’s willingness to undertake what it plans to undertake. Integrity is fundamental in building clients’ confidence, satisfaction, and loyalty in the bank. This response will also assure the clients about the bank’s reliability; hence, their loyalty to the firm (Singh & Sirdeshmukh, 2000). What is more, this response will play a great role on bank’s other OPRs like commitment, openness and satisfaction. To begin with, the bank’s response to maintain its profitability will influence the dimension of commitment. This means that the bank will demonstrate its commitment to satisfy customers’ expectations and needs effectively (Kim, Ferrin & Rao, 2003). Besides, this will also indicate clients’ commitment to stick to the company and comply with its decisions. Commitment entails the degree to which each party in business feels and believes that the association is worth maintaining and promoting. Imperatively, ANZ bank should demonstrate its commitment to clients by maintaining that it intends to safeguard its profitability. Thus, the response will enhance the bank’s OPR dimension of commitment. In terms of openness, the bank’s response will enhance sharing of plans between the customers and the bank. This means that by responding that way, the firm will be displaying its willingness to open up to its clients regarding its plans to safeguard profitability. In addition, the bank’s claim to safeguard its profitability is important in enhancing its customers’ satisfaction this means that the response will enhance the benefits and reduce costs that the bank and its clients will share in the relationship. Therefore, ANZ bank’s decision to safeguard profitability will promote its OPRs in terms of openness and satisfaction. The bank can justify its non-compliance to RBA’s decision to lower interest rates by saying that it intends to cope with high costs of operation. This response will play a great role in enhancing the bank’s OPR dimensions of trust, commitment, openness, and satisfaction (Eid & Al-Anazi, 2008). In terms of trust, the bank’s argument to cope with high costs will create confidence and trust among its customers regarding its operations and decisions (Smith, 2011; Singh & Sirdeshmukh, 2000). This response will also assure the clients about its strong commitment to satisfy their expectations and needs efficiently (Kim, Ferrin & Rao, 2003). In addition, ANZ response to cope with high operation costs by defying RBA’s decision to lower interest rates is essential in promoting OPR satisfaction dimension. This response will also assure the bank’s customers of its willingness to share its plans with them. Therefore, it is imperative that the company makes the response to boost its OPR dimensions of satisfaction, trust, commitment, and openness. ANZ bank’s issue of defying RBA’s suggestion to commercial banks to lower their interest rates on home loans has various ethical implications. To begin with, the bank’s decision to raise its interest rates against RBA’s directive is unethical as it shows non-compliance (Murdoch, 2012). This is serious because RBA is Australia’s central bank that has authority over other commercial banks in the country. ANZ bank’s refusal to act as per RBA’s order is a demonstration of bad model to other banks and financial institutions in the country. Consequently, the issue will can greatly ruin the bank’s reputation and image. What is more, the issue of ANZ bank’s non-compliance with RBA’s decision regarding reduction of interest rates will have a negative influence on the bank’s OPRs. Firstly, it will affect the company’s dimension of trust among its customers (Coulter & Coulter, 2000). Trust is crucial in the development and maintenance of a favorable relationship between two business partners, which are the bank and the customers in this case. The news about the bank’s refusal to reduce rates, as per RBA’s advice, is detrimental to the customer’s trust on it. This is because such news will ruin the company’s image and reputation; hence, discouraging both existing and prospective clients. Lack of trust destroys customers’ confidence in the bank’s activities; hence, the desire to shift to other banks. This is because customers will perceive that the bank lacks integrity, reliability, and competence to operate and meet their expectations and needs (Pieczka, 2006). Secondly, the bank’s refusal to comply with RBA’s advice to lower interest rates is also likely to ruin its commitment to its clients. The bank should display a strong commitment to satisfy its clients’ needs and expectations in order to increase their loyalty and satisfaction (Duhé, 2007). Nevertheless, its decision to raise interest rates against RBA’s directive might have a negative impact on the clients’ perception of commitment. Commitment is what makes clients believe and feel that their relationship with ANZ bank is worth promoting and upholding. However, when clients no longer perceive the firm’s commitment to meet their needs and expectations, they will consider moving to other competitors. ANZ’s bank issue of refusing to lower its interest rates as RBA directs is probable to affect the bank’s OPR dimension of satisfaction. In this case, satisfaction involves the degree to which customers feel favorably towards the bank due to the reinforcement of the clients’ positive expectations (Hayes, 2013). This issue might adversely affect the bank’s ability to identify and meet the clients’ needs effectively. Consequently, customers who perceive the bank’s failure to meet their needs will ultimately change their attitudes towards it. Eventually, such consumers will terminate the relationship between them and the bank, in search of better competitors. The issue with ANZ bank’s non-compliance with RBA’s decision to direct all commercial banks to lower their interest rates will also affect the firm’s dimension of openness. This is possible because the bank’s customers will perceive that the firm is not willing to share its plans with them. It is imperative for a bank to share its plans openly with the stakeholders, specifically the customers. This builds trust, loyalty, and satisfaction among the clients; hence, improved public relationships (Eid, 2011). Therefore, there is a possibility of the customers to shifting to other banks due to tainted openness of ANZ bank. Conclusion Following RBA’s recent directive to all commercial banks to lower their lending rates, some banks failed to comply with the decision. ANZ bank is among those banks that defied RBA’s decision. The bank’s non-compliance to RBA caused a serious issue that negatively affected its public relations with the stakeholders. To correct this, the firm asserts that it based its decision on the fact that it is independent from RBA. The bank also directs this response to customers because they are the most affected of all the stakeholders. 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