Management in Global Environment - Common Wealth Bank in Australia - Case Study Example

Management in Global Environment Name: Course: Tutor: Institution: Date: Word Count: 2087 words Table of Contents Table of Contents 2 Executive Summary 3 1.0 Introduction 4 2.0 Common Wealth Bank Expansion Challenges 5 2.1 Differences in Consumer Buying Behaviours 5 2.2 Leadership Challenge 7 3.0 Recommendations 8 3.1 Workforce Training and Diversity Management Strategy 8 3.2 Management Structure Decentralisation 9 4.0 Conclusion 10 References 11 Bernanke, R, (2015). The ‘natural’ rate of return. Retrieved from < https://thenextrecession.wordpress.com/2015/03/ > 11 Executive Summary The report offers an evaluation of the Common Wealth Bank in Australia and it expansion process. In this regard, the report evaluated the key challenges facing the bank in its expansion strategy. In its analysis, the report established that the bank is facing key challenges in leadership as well as in customer buying behaviour differences in diverse cultures. As such, the report recommends that this can be overcome through workforce diversity training and the decentralisation of its leadership and management process. 1.0 Introduction The Common Wealth Bank (CWB) was established in 1912 in Australia. Over the years, the venture has expanded and grown to expand its product service development as well as the areas covered. Although initially intended to serve the Australian market, the bank has expanded its scope to cover additional global markets, both in the emerging and the developed nations respectively (Common Wealth Bank, 2016). This process is informed by the rising rate of profitability in the international markets as illustrated in figure 1 below Figure 1: Global Corporate Profits Source: Bernanke, 2015 However, in the expansion strategy, the bank continues to face a number of challenges in the expansion process. The fundamental challenges for the bank have been increasing market competition in the domestic bank market in Australia. This challenge can be linked to the ports five forces model. In this case, according to the porters five force analysis, the buyers bargaining power plays a critical role in market success. As such, with a high number of competitors and a low switching cost, the buyers in the Australian banking industry have a higher power, leading to reduced potential for profitability for the bank. Unfortunately, the expansion strategy has equally faced challenges, mainly pegged on leadership and cultural differences. This report offers a critical focus and evaluation of the experienced challenges in the expansion process. Further, the report creates a recommendation of the avenues and approaches through which the Bank could have overcome and could overcome the challenges into the future. 2.0 Common Wealth Bank Expansion Challenges 2.1 Differences in Consumer Buying Behaviours One of the core challenges faced is differences in consumer buying behaviours. First, it is imperative to define customer buying behaviour. This is the process and approach through which a customer makes a decision to purchase product. The process of customer buying behaviour includes an influence of both internal customer factors such as purchasing power and earnings, as well as the external market influences, such as the existing society and market cultures respectively (Bell, 1995). The variances in consumer buying behaviour for the company can be explained through the Hofstede cultural dimensions model and the porters five forces model respectively. According to the Hofstede cultural dimensions model, different nations have variances in their cultural orientations. In this case, the figure below offers a summary of the Hofstede model review for Australia and this is contrasted to that in China, one of the areas that the bank has sought to expand to in the Asian market. This is represented in figure 1 below (Hofstede, 2016). Figure 2: Australia and China Hofstede Source: Hofstede, 2016 In the figure above, it is evident that the two nations have difference in their cultural orientations. For instance, a focus on the individualism aspect illustrates that Australia has a high individualism index at 90 while China’s index is way low at only 20. This means that the Chinese market has a high orientation for collectiveness while the Australian workforce is oriented towards individualism. Traditionally, the company has had an approach of individual employee reward systems. In this case, awards such as the employee of the year awards are a common phenomenon. In an evaluation of such a culture, Shin, Kim, Lee and Bian (2012) argued that in individualistic cultures, employees are oriented towards the process of individual tasks and performances. Thus, for such employees, tasks are assigned individually. However, this is a contrast to the highly collective cultures such as China. On their part, such markets workforce is oriented towards the execution of tasks in teams rather than as individuals. In addition, this extends to the societal market at large. In the societal context, the collectiveness influences the acceptance of a new brand in the market. As a result, this has increased the overall challenges of creating brand equity against the back drop of already established domestic and international banks in the market. This challenge for expansion can be further illustrated through the porters five forces model, especially with regard to the concept of new market entrants in international markets. In this regard, in the concept of new entrants into a market, there are many barriers in a market; one of the most cited one as culture. In the case of the new markets, the venture faces cultural barriers on acceptance in the markets. In this case, in most cultures, where there is a collective culture, there is minimal drive to accepting new market brands. The banking industry is a largely sensitive industry, which involves the management and custody of clients’ finances. As such, this sensitivity and the slow acceptance levels have been the major barrier and challenge for the company expansion into the new global markets. Additional example for the company can be cited in the case of other companies such as Qantas Company expansion strategy. In its endeavour to expand into the Asian market, the company faced a major challenge in the new entrants’ barriers (Dresner, Eroglu, Hofer, Mendez & Tan, 2015). In this context, similar to other internationalising companies, the venture has faced a challenge in trust gain in the new markets, a challenge that reduces effectiveness and the success rate for an internationalisation strategy. 2.2 Leadership Challenge The second challenge and internationalisation conflict that the Common wealth bank faces is a leadership challenge. Leadership is the process through which an organisation is managed and administered. In theory, there are different forms of leadership styles and strategies. Among them include utilitarian, democratic, participative, and transformational leadership in the market. In the determination and development of a leadership approach, a number of factors are considered. Internally, the key elements of consideration include the organisational resources and capabilities, including other supporting internal systems. Externally, the evaluation is based on the existing cultural and labour market conditions. For the Common Wealth Bank, its existing leadership approach is the participative approach. In this case, all the stakeholders, both the internal and the external stakeholder acquire an equal opportunity to contribute and participate in the management and decision making process. However, the final decision is on the management’s discretion. This leadership approach is successful and befitting in the Australian context. As already illustrated under the Hofstede cultural dimensions theory, the Australia society has a low power distance value at 36. This means that all the stakeholders are willing to take part and be included in the decision making process. As such, upward communication is a key pillar in the management process, where the employees are motivated and empowered to contribute in strategic issues. However, the leadership approach has faced challenges in the international market. In this context, in a majority of the emerging markets in Asia, Eastern Europe and Africa, where the organisation intends to venture into; there is a high power distance element. This means that the employees are less motivated towards participating in the decision making process. This argument can be affirmed by a previous study developed by Vidyarthi, Anand and Liden (2014). In this context, the study established that there was a direct relationship between cultural power distance and employee participation indecision making. As such, it established that a high power distance led to a low employee willingness by the employee to participate in the decision making process. As a result, this has created a conflict between the organisational leadership style and the existing market culture. As a result, this has created a management culture conflict where the existing organisational systems and strategies are unable to support the existing market culture. For instance, the foreign workforce recruited is unable to provide the expected input in the decision making process. This has been a major reason behind the organisational poor decision making skills in the international market, a challenge that has reduced the bank’s ability to create a competitive edge in the international financial industry. The above arguments relates to the porters five forces analysis with regard to the element of industry rivalry and competition. In this case, the model argues that in order to effectively compete in a highly competitive environment, organisations need to develop sustainable competitive edges. As such, the competitive edges are developed through the use of intangible assets such as quality decision making that creates high brand equity in the global market. Thus, this analysis illustrates that indeed, the Common wealth bank leadership mismatch with the international emerging markets cultures has reduced its competitiveness ability in the light of a high and intense market rivalry in the financial sector. 3.0 Recommendations Although the Common Wealth Bank faces a wide range of challenges, this report argues that the challenges can be mitigated and overcome in the future. This report section offers a detailed analysis of the proposed process through which the company can overcome the key listed challenges in the analysis section. 3.1 Workforce Training and Diversity Management Strategy The fist recommendation through which the bank could have overcome the challenge of customer buying behaviour in the international market is to adopt a diversified management system. In its current state, the organisation has a large workforce base of Australian staff. This means that the workforce is oriented towards the Australian culture. This means that the managers and the employees lack a clear and proper understanding of the foreign market cultures. In order to overcome this challenge, the organisation ought to have applied a prior employee training program. In this context, training the employees would have equipped them with an understanding of the new foreign cultures as well as understanding the customer buying behaviours. As a result, this would have two strategic implications. On one hand, the process would have allowed the employees to easily integrate into the new cultures in the respective foreign markets. On the other hand, the process of training the employees would have eliminated the aspects of stereotyping and the aspects of culture shock for the employees. In this regard, training would have eliminated the risks of stereotyping, equipping the employees with the right skills and understanding of the market (Chrobot-Mason & Aramovich, 2013). As such, this would ensure that there is the managers’ culture shock is eliminated well in advance in the market. Thus, this report illustrates that through diversity training, the cultural barrier would have been effectively eliminated. An additional approach to overcoming the cultural challenge in the organisations is through workforce diversification. In this case, diversification process would entail the process of recruiting employees from the different market cultures. As such, this would ensure that the employees understand the cultural landscape in the market, reducing the risk of cultural misunderstanding. The process of diversifying the workforce has positive implications on the organisational operations. One such approach is through enhancing the quality of decision making. In this case, Van Knippenberg, Ginkel and Homan (2013) noted that through employee workforce diversity, organisations expand their decision making perspectives’ and scope, creating an increased probability for quality decision making process. Thus, this report argues that such a process would empower the Common Wealth Bank to increase and expand its overall decision making process. 3.2 Management Structure Decentralisation An evident challenge for the bank is the challenges of management and leadership style mismatch with the culture. On the alternative, Farndale, Pai, Sparrow and Scullion (2014) argued that this could be mitigated and overcome through approaches such as a decentralisation process. A decentralisation process is the strategic process through which the management system in an organisation varies and a majority of the decisions and strategies are not centralised at the executive management level. Instead, the management and decision making process is decentralised to the various different markets. As such, every foreign market ventured into is allowed to apply and implement its own management style that fits into the existing resources and market culture and conditions respectively. Through the application of such a system, the Common Wealth Bank would ensure a match between the leadership style applied and the market culture respectively. 4.0 Conclusion In summary, the report offered a strategic review of the Common Wealth Bank operations in Australia and challenges facing its expansion strategy. Due to the challenges of a rising domestic financial industry in Australia, the bank’s need for expansion is vital. However, the report illustrated that the risks of diversity in consumers’ buying behaviour in the international market, as well as a leadership-culture mismatch poses the greatest challenges and risks for expansion. As a means to mitigate the strategy, the report recommends the application of a workforce training and diversity in the workforce. This would ensure a culture match to understand the consumer buying behaviours in the global market. In addition, as a means to reduce leadership-culture challenge, the report recommended the application of a decentralised management approach. References Bell, J. (1995). The internationalization of small computer software firms: A further challenge to “stage” theories. European journal of marketing, 29(8), 60-75. Bernanke, R, (2015). The ‘natural’ rate of return. Retrieved from < https://thenextrecession.wordpress.com/2015/03/ > Chrobot-Mason, D., & Aramovich, N. P. (2013). The psychological benefits of creating an affirming climate for workplace diversity. Group & Organization Management, 38(6), 659-689. Common Wealth Bank, (2016). About Us. Retrieved From < https://www.commbank.com.au/about-us/our-company/history.html > Dresner, M., Eroglu, C., Hofer, C., Mendez, F., & Tan, K. (2015). The impact of Gulf carrier competition on US airlines. Transportation Research Part A: Policy and Practice, 79, 31-41. Farndale, E., Pai, A., Sparrow, P., & Scullion, H. (2014). Balancing individual and organizational goals in global talent management: A mutual-benefits perspective. Journal of World Business, 49(2), 204-214. Hofstede, (2016) Australia. Retrieved From < https://geert-hofstede.com/australia.html> Shin, S. J., Kim, T. Y., Lee, J. Y., & Bian, L. (2012). Cognitive team diversity and individual team member creativity: A cross-level interaction. Academy of Management Journal, 55(1), 197-212. Van Knippenberg, D., van Ginkel, W. P., & Homan, A. C. (2013). Diversity mindsets and the performance of diverse teams. Organizational Behavior and Human Decision Processes, 121(2), 183-193. Vidyarthi, P. R., Anand, S., & Liden, R. C. (2014). Do emotionally perceptive leaders motivate higher employee performance? The moderating role of task interdependence and power distance. The Leadership Quarterly, 25(2), 232-244. Read More