Adaptive Strategy and Business Sustainability - Westpac - Case Study Example

ADAPTIVE STRATEGY AND BUSINESS SUSTAINABILITY Student’s Name Professor Course Date Background Since its inception is the 1960s, corporate strategy has continuously addressed one important question: how to attain sustainable competitive advantage. For a company to succeed in the new business era, it has to shift from the supplement traditional static strategy to an adaptive and dynamic strategy. One of the ways that companies have been seeking to operationalize an adaptive strategy and attain competitive advantage is through Creating Shared Value (CSV). CSV entails creating value for business, which simultaneously yields greater social impact and increased profits and results in powerful innovation in both the society and the business. CSV focuses on the link between economic progress and societal progress and has the capacity to set free the next wave of competitive advantage and international development (Porter & Kramer 2011). The interface between societal progress and economic progress arising from CSV is evident in Westpac’s, a multinational financial services business, success. Porter (2008) revisited his ‘five forces’ model and addressed the issues of ‘complementors’, which are factors that should be considered in evaluating the external industry environment. This is in line with Porter and Kramer’s (2011) argument that the assessment of the organization stakeholders, as well as the impact of business goals and activities on them, appears to be initial information for undertaking a holistic evaluation of the businesses external risks for opening and closing markets as well as for wider contextual impacts on business sustainability. Hill, Jones, Gavin, and Haidar (2007) also proposes that the considerations of stakeholders be integrated in setting the basic statement of an organization vision or mission, which guides the objectives the organization seeks to realize. This approach holds the key to present and future strategic choices for Westpac. The approach will direct Westpac to look at its opportunities and decisions employing the perspective of shared value more, which will guide the company to new strategies creating greater innovation as well as growth for the company and greater benefits for the society where the bank is established. By embarking on the three ways, which create shared value opportunity, i.e. reconceiving markets and products, facilitating local cluster development and redefining productivity in the value chain, Westpac will have an adaptive strategy, which will lead to business sustainability. Porter and Kramer (2011) propose that companies should begin bringing businesses and society back together. This entails generating economic value in a manner that generates value for the society through attending to its challenges and needs. Currently Westpac embarks on various activities for creating shared value (CSV). The company plays a very important role in contributing to a sustainable social sector in building strong community links by focusing on various areas, promoting organizational mentoring and encouraging employee volunteer programs. There are group foundations, social sector partnerships and mentoring programs which support organizations. There is a number of external commitments and policy frameworks which facilitate community support. Westpac assists the community in disaster relief efforts- the impact of disasters such as tsunamis, bush fires as well as cyclones is usually devastating for the people and the businesses. During such times, the company supports the affected customers with disaster relief packages, personalized assistance and in extreme cases through community grants, donations, as well as mentoring support (Westpac, 2012) Westpac also offer support for indigenous Australia to build a better feature by helping them to grow and prosper. The company strengthens the local community, offers employment opportunities for future leaders, offers tailored financial services, and builds relationships through offering indigenous-owned companies greater opportunities. Westpac also has a Reconciliation Action Plan, which sets out the specific goals, intentions, and achievements for supporting both aboriginal and Torres Strait Islander communities and people (Westpac, 2012). The Westpac Group also supports organizations such as Mission Australia and The Salvation Army in addressing the issue of homeless. These strategies usually help Westpac to achieve business sustainability; it reconnects its success with social progress. Currently CSV enables Westpac to develop its future markets while at the same time strengthening its marketplace, corporate coffers, and communities. This approach prompts Westpac to think increasingly differently about its approach to societal and environmental issues. Nonetheless, it has to go a step further and identify other areas of focus whereby the society and the shareholders interests meet and where creation of value can be optimized for both. Porter and Kramer (2011) argue that a company strategic analysis should recognize the larger social pressure for change in order to perform a full assessment of the external pressure. Consequently, the company has to invest resources, both capital and talent, in sectors where the likelihood for mutual value creation is utmost and seek collaborative action with the pertinent stakeholders in the society (Bryan & Joyce 2007). The principles of CSV go beyond those of corporate social responsibility as it binds together the interests of the society and the business. Any business, which follows sound business principles and thinks long term, creates value for its investors and the society through its activities, supporting public services through taxation, jobs for workers and general economic activity (Allen & Helms 2006). Creating shared value should be made an indispensable part of Westpac’s approach to conducting business, which focuses on particular sectors of the company’s key business activities- where value creation is utmost for both society and investors. Issues The CSV approach holds the key to future strategic choices for Westpac. Westpac has over 12 million customers and has about 1200 branches and a network of over 2800ATMs. It ranks second in business banking and it is the second largest bank in Australia by assets. This means that Westpac operations are extensive and widespread and hence to ensure its business sustainability, it has to come up with adaptive strategies that create value. Porter five forces are widely used in all industries to analyze their structure as well as to determine an organizations opportunities for gaining competitive advantage within the industry. The five forces include threat of new entrant, threat of substitutes, rivalry among established corporations, consumer’s power to bargain, as well as that of suppliers. Porter argued that in any industry, whether domestic or international, involved in the provision of services or production of products, the role of competition can be seen in terms of the five forces. The five forces are not adequate because the collective strength of these competitive forces largely determine the ability of companies in any industry to earn, on average, the rates of return on their investment in excess of capital. The five factors do not address the issue, as they only help businesses to understand the competitive environment. The objective of a company is to assess how it can defend itself against the five forces, or the way it influences them, in a way which positively affects its competitive position. The inadequacy of these five forces to determine business sustainability is reflected in Porters (2008) revisit on the ‘five forces’ model to address recent discussions on ‘complementors’. Creating shared value is a complementor, which can complement existing practices. The profit motive remains intact with CSV while addressing the needs of a large group of stakeholders. Benn and Bolton (2011) identified a wide range of stakeholders and suggested that a modern stakeholder model should incorporate four iterations of stakeholder viewpoints, from production to managerial to multilateral to sustainable stakeholder groups’ concepts. The sustainable perspective in this model includes the social, political, local, and global communities and natural environment at an international level and unrepresented future generations. CSR in this case lies in the sustainable stakeholder perspectives. Wicks and Parmar (2004) also call for consideration of a wider range of stakeholders instead of a narrow view of shareholder when determining an organizations goals and mission. Westpac should thus consider both the internal and external contexts which shape strategic responses in the business environment when it comes to business sustainability. This requires Westpac to take a wider perspective on the stakeholders to whom it directs value creation. De wit and Meyer (2010) state that “[i]t is hardly possible for strategizing managers to avoid taking a stance on what they judge to be the purpose of their organization… [in determining] … who will be the main beneficiary of the value-creation activities of the firm” (p. 257). Assessing Westpac’s stakeholders as well as the impact of the financial services on its business objectives and activities is thus important in undertaking a holistic evaluation of external risks to the bank and for business sustainability. Westpac should identify examples of changes in markets, which are in line with changes in the societal attitudes and also the external stakeholders and their changing attitudes. They should then assess whether any of the changes appears to put the company at risk through declining markets or lost opportunity (Porter & Kramer 2011). Dewitt and Meyer (2010) reinforce this point and outline various key facets of industry development which external analysis should take into consideration: the changing rules of competition in the industry, the direction and nature of these changes, as well as the determinant of the industry changes. Numerous aspects in the environment can influence or change the direction of the banking industry development. De Wit and Meyer (2010) argue that the change drivers in contextual environment can be economic, socio cultural, technological or political regulatory. In addition, creating shared value to meet societal needs entails reconceiving markets and products, redefining efficiency in the value chain and facilitating local cluster development. In reconceiving markets and products, Westpac should endeavor to meet the society social needs through development of innovative banking services and products, which allow access to new ones and serve existing markets in a better manner. Second, in order to redefine productivity in its value chain, Westpac should improve the quantity, quality, reliability, and costs of its services while at the same time acting as a steward for fundamental natural resources as well as driving social and economic development. In creating shared value, Westpac also has to enable local cluster developments. Westpac operates in Australia and New Zealand and operates in more than 1400 locations; in these locations, Westpac should endeavour not to operate in isolation from the surroundings. To effectively compete and thrive, Westpac requires a strong competitive context, which includes access to talent, better and functioning roads infrastructure and telecommunications, and a predictable and effective regulatory and legal framework. The important enabling factor for creating shared value and hence competitive advantage is innovation in every aspect of its business operation, for instance, services development, management approaches, and business modeling. Opportunities for creating shared value are very abundant in Australian and New Zealand markets where there are some pressing social needs, which can enable Westpac to prosper in the future after addressing them. Understanding Westpac’s external environmental opportunities for creating shared value would offer the information required to develop the company business model and make related strategic choices, which will enable the company to accomplish a sustained competitive advantage. Conclusion & Recommendations In the contemporary business arena, there are increasing pressures for important changes to their perceived role in the society. This is clearly highlighted by the concerns regarding sustainable development and hence sustainable business practices whereby sustainable business should be defined as the immediate realization of long term integrated social, economic, and environmental goals (Benn & Bolton 2011). The increased pressure calls for businesses to engage in effective business standards that create value for the public through their activities. Maximizing stakeholder value should be the appropriate aim for manager in modern organizations. Hills and Jones (2010) argue that this maximizes economic growth opportunities as well as long-term profitability hence increasing the wealth of the shareholders. Westpac’s sustainability activities usually concentrate on the issues that matter, to assist customers, communities and the people to prosper in the long term. Nonetheless, the company should learn to focus on its opportunities and decisions consistently as dictated by perspective of shared value (Bower & Gilbert 2007). Both internal and external analysis should be undertaken to discover strategies for maximizing shareholders value. Porter five-force analysis can be used to increase the company competitive advantage in the banking industry. In addition, Westpac should embark on the three ways proposed by Porter & Kramer, to create shared value opportunity, i.e. reconceiving markets and products, and facilitating local cluster development and redefining productivity in the value chain. This is an adaptive strategy, which will lead to business sustainability. Reference List Allen, R & Helms, M 2006, ‘Linking strategic practices and organizational performance to Porter’s generic strategies’, Business Process Management Journal, vol. 12, no. 4, pp. 433-454 Benn, S & Bolton, D 2011, ‘Key Concepts in Corporate Social Responsibility’, Sage Bower, J & Gilbert, C 2007, ‘How Manager’s Everyday Decisions Create or Destroy Your Company’s Strategy’, Harvard Business Review, February Bryan, L & Joyce, C 2007, ‘Better strategy through organizational design’, The McKinsey Quarterly, no.2, pp. 22-29 De Wit, B & Meyer, R 2010, ‘Strategy Synthesis: Resolving Strategy Paradoxes to Create Competitive Advantage’, 3rd Ed, South-Western Cengage Learning, UK Hill, C & Jones G 2010, ‘Strategic Management Theory: an Integrated Approach’, 9th Ed, South-Western Cengage Learning, USA. Hill, C., Jones, G., Galvin, P & Haidar, A 2007, ‘Strategic Management: An Integrated Approach’, 2nd Australasian Edition, John Wiley & Sons Australia, Milton Qld. Freeman, R., Wicks, A & Parmar, B 2004, ‘Stakeholder Theory and “The Corporate Objective Revisited”’, Organization Science, vol. 15, no. 3, pp. 364-369 Porter, M 2008, ‘The Five Competitive Forces that Shape Strategy’, Harvard Business Review, January Porter, M & Kramer, M 2011, ‘Creating Shared Value’, Harvard Business Review, vol. 89, no. 1-2, pp. 62-77 WestPac (2012). http://www.westpac.com.au/ Read More