Macquarie Group - Research Paper Example

? Strategic Analysis Report on Macquarie Group, Australia Table of Contents Executive Summary 3 Introduction 3 2. Macquarie Group – Background 4 3. External organizational environment 5 4. Internal organizational environment 7 5. Business strategies 8 5.1 Identification and critical analysis of key business strategies 9 5.2 Ethical issues of business strategies 10 6. Conclusion 11 7. Recommendations for business development in the future 12 8. References 13 9. Appendix 15 Executive Summary The development of globalization in countries worldwide has led modern organizations to seek for strategies that would best support their operations. The criteria on which these initiatives are based can be differentiated under the influence of the internal and the external organizational environment. Current paper focuses on the strategic positioning and decisions of a specific company: Macquarie Group, a leading Australian bank. The firm has managed to keep its competitiveness despite the pressures of the global economic crisis. The examination of the firm’s environment but also of its strategies led to the conclusion that the company’s growth has been mainly based on the continuous update of its strategic decisions and the close monitoring of its strategies’ development. It is concluded that through the above strategies the firm has achieved the continuous increase of its competitiveness towards its rivals in the Australian and the international banking industry. 1. Introduction Banks have a key role in the development of Australian economy; in fact, in accordance with a report of the Australian Bankers’ Association, in Australia banks are ‘the third largest contributor to the nation’s Gross Domestic Product’ (Australian Bankers’ Association, 2011). It is for this reason, that in these institutions, ‘the staff enjoy excellent pay and flexible workplaces’ (Australian Bankers’ Association, 2011). After the crisis, the performance of banks in Australia has not particularly changed; in fact, it has been noted that Australian banks have managed to face the crisis improving their position towards their rivals in the global banking industry; in a recent report, it is made clear that the value of stocks in Australian exchange market has been kept high mostly because of the support offered by the country’s banking industry – the shares of which achieved a high increase (Banking Industry Today, 2011). In order to minimize the potential threats from the global crisis, the Australian government has announced in December its intentions to support the specific industry in case that such need emerges (Bloomberg, 2011). Moreover, in the report published in June 2010 by ‘Austrade’s Financial Services division’ (GovMonitor, 2010) it is noted that banking industry in Australia is facing a significant growth while ‘its collective financial wealth is predicted to surpass that of North America by 2013 and be worth US$13.5 trillion, accounting for 28 per cent of the world’s total’ (GovMonitor). 2. Macquarie Group - Overview Macquarie Group is one of the leading firms in the Australian banking industry; the firm was first established in 1970; currently, it operates in about 28 countries and the number of its employees has been estimated to ‘14,600 people’ (Careers, in the firm’s website, 2011). The alignment of the firm’s strategies with the business ethics and values is ensured and controlled through a detailed code of conduct; moreover, the monitoring of organization’s operations has been delegated to specific groups of persons, ensuring that all business practices follow the principles described in the firm’s corporate governance statement and its Goals and Values statement; the latter emphasizes on the promotion of six principles/ values through the organizational activities: ‘a) integrity, b) client commitment, c) strive for profitability, d) fulfillment for our people, e) teamwork and f) high standards’ (Goals and Values, in the firm’s website, 2011). The firm’s key advantage towards its competitors is considered to be its operational structure: six major operational sectors for controlling and managing the firm’s various activities – for instance, reference can be made to the firm’s ‘Financial and Banking Services Group and its Information Technology Group’ (Understand our business, in the firm’s website, 2011). The above operational framework allows the organization to be independent from its suppliers – at the highest possible level, a fact that is considered a key competitive advantage – as explained through the analysis of the firm’s strategies using relevant theoretical models. 3. External organizational environment The effects of the external organizational environment on business operations can be quite severe. In order to avoid major risks in their daily operations firms worldwide use appropriate strategies in order to identify and evaluate the conditions in their external environment (Williamson et al., 2003, p.3). This task is developed mostly using the following two theoretical models: the Porter’s Five Forces model on industry competition (Porter, 1998) and the PESTEL analysis (Figure 1 and 3). The Porter’s five forces model (Figure 1, Appendix) is based on the following principle: the operations of each firm are likely to be affected by the pressures that the firm – as a part of its industry - suffers from the following forces: a) the buyers, b) the competitors/ entrants, c) the substitute products, d) the suppliers and e) the industry (which is located in the center of the relevant diagram). In regard to the specific organization, the analysis of the Porter’s five forces model would be as follows: a) the Australian market is highly competitive; however consumers seem to trust the particular organization (financial highlights, in the firm’s website, 2011); the chances for the firm’s customers to cause pressures on the organizational performance are quite limited, b) the entrance of new firms in the Australian banking industry is always possible; in fact, because the particular industry is extremely competitive – see the relevant analysis in the Introduction section above – it is quite possible that new firms attempt to enter this industry considering it as a safe environment in order to avoid major losses; in this context, competition in the particular industry is expected to be kept high for at least 5 years ahead – even if there can be no standards of such type because of the development of recession worldwide, c) even if no firms enter the Australian banking industry, it is still possible that substitute products are made available in the specific industry – referring to the case of the financial products and services provided by firms operating in other industries, for instance the major supermarkets, d) the firm has developed six operational groups which can cover a range of its activities (as explained in the section Understand our business of the firm’s website, 2011); therefore, the dependency on suppliers has been minimized as possible; their potential pressure on the particular firm would not be strong, e) the Australian banking industry is in a period of stabilization – after a period of continuous growth (see the relevant analysis in the Introduction section); however, in general, the signs regarding its performance are positive. There can be no major pressures on the firm by its industry. Similar assumptions could be developed using the PESTEL analysis framework (Figure 3, Appendix); this framework is based on the following concept: the external environment of a firm is highly affected by the conditions in specific sectors (Political, Economic, Social and Technological); the above conditions in regard to the firm’s environment could be analyzed as follows: a) Political; the political conditions in Australia are quite stable; no major oppositions or periods of instability have appeared up to now; this fact would guarantee the stability in the firm’s external environment, b) Economic; Australia has a strong economy; the country has managed to keep its position among the world’s most powerful economies despite the development of strong turbulences in the global market, c) Social; up to now, Australian society has not suffered phenomena of social crises or severe social conflicts; no threat of such type exists for the firm in its external environment, d) Technological; the advances of technology in Australia are important; technology of any type is available to the firm for the development of its activities. Therefore, the conditions in the firm’s external environment can be characterized as supportive; no threat or risk for the firm’s activities seems to exist, at least up to now, in the external organizational environment. 4. Internal organizational environment The success of firms in the modern market depends on their ability to identify their strengths and weaknesses and take the necessary measures for stabilizing their performance (Sloman, 2005, 11). Such activity can be based on appropriately customized theoretical models, such as the SWOT analysis (see Figure 2, Appendix), a framework used for the strategic analysis of firms in various industrial sectors. SWOT analysis is used in order to evaluate the conditions of a firm’s internal environment – i.e. it refers to the characteristics, the needs and the performance of the firm’s operations – which are based on specific strategic plans (Sekhar, 2009, 53). The above framework focuses on the identification and the evaluation of a firm’s strengths, weaknesses, opportunities and threats; in this way, the firm is able to develop those strategies that will effectively control organizational failures and will enhance the organizational growth (Raisch, 2004, p.15). In the case of the firm under examination the SWOT analysis could be developed as follows: a) Strengths; the firm’s key strength is its operational framework (Grant, 2005, p.37); moreover, the firm’s presence in the global market is another fact that would be considered as one of its competitive advantages. As for the firms’ weaknesses, these seem to be: a) lack of a specific mechanism for controlling cooperation among the various organizational sectors/ groups, b) extremely high number of employees – issue of integrity of organizational strategies. The opportunities of the firm would be: a) the Australian banking industry is offered for a stable and continuous growth – not being particularly affected by the global crisis, b) the firm could develop strategic alliances with other firms, in case that its further expansion in the global market would be attempted – global banking industry is extremely volatile because of the crisis and strong (in terms of their financial status) banking institutions could have many chances to achieve a significant growth. On the other hands, there are certain threats that the firm’s managers should take into consideration when developing the key organizational strategies: a) recession is not over, yet; there is always the risk of expansion of the crisis, b) the global market is not particularly supportive to the financial institutions – mostly because of their role in the development of the financial crisis. Therefore, the firm should try to keep a close control on its global operations in order to avoid high operational risks. As for the current conditions in the firm’s internal environment, these could be characterized as quite satisfactory; the number of its employees is continuously increased while the level of cooperation and communication across the organizational department is kept at high levels (see also Careers section in the firm’s website, 2011). 5. Business strategies One of the key requirements for evaluating the firm’s strategic positioning within its industry and for estimating its potentials for future growth is the identification and the analysis of its key strategies. These strategies refer to all levels of business operations, i.e. from its customer services department up to its board of directors. The reasons for the selection of these strategies will be identified – as possible – and evaluated by referring also to the firm’s internal and external environment – as analytically described above. 5.1 Identification and critical analysis of key business strategies The firm’s key strategies could be described as follows: a) establishment of six main goals, on which all organizational activities are based; these goals are the following ones: ‘a) integrity, b) client commitment, c) strive for profitability, d) fulfillment for our people, e) teamwork and f) high standards’ (Goals and Values, in the firm’s website, 2011). b) Establishment of six Operational Groups which have the control of all business activities ensuring the alignment of organizational operations with the firm’s values but also with the principles set through its Corporate Governance statement, c) introduction of an advanced employee selection process; employees are offered the chance to be informed on all the firm’s key values, goals and characteristics; then, their ability to respond to the firm’s demands is judged using objective criteria; particular employment schemes have been introduced for experienced candidates and for graduates; it seems that employees are highly valued across the organization. However, it would be preferable for the employees’ rewarding scheme and for the promotion terms to be clearer – in order to be identified and understood easily by the candidates, d) the firm follows a strategy of continuous expansion in the global market – operating currently across 28 countries (Careers, in the firm’s website, 2011); however, this strategy should be reviewed - because of the potential threats it could hide in regard to the integration of the firm’s values and strategic priorities, e) the firm’s efforts to continuously improve its strategies has been recognized by Australian and worldwide institutions (Company Profile, 2011), the awards given to the firm indicate the effectiveness of the corporate strategies not just in the national but also in the global market. 5.2 Ethical issues of business strategies The ethical concerns in regard to the strategies of Macquarie Group are mostly related to the fact that the firm operates in the banking industry, a sector which is vital for the national economy; moreover, the firm’s strategic decisions can influence the conditions of living of people both directly – referring to the firm’s customers – and indirectly – reference is made to the local communities, at the level that specific community projects are funded by the above organization. Moreover, the firm is one of the Australian market’s leading banking organizations and the number of its employees is high, as explained above; therefore, a sudden change in the firm’s strategic decisions – for instance, the decision for closing one or more branches across the country – would result to severe financial damages for its employees, with both short and long term effects on their lives. It is suggested that any change in the firm’s strategic framework, which is expected to adversely affect the community or the national economy – in the context described above, to be primarily reviewed carefully taking into consideration the views of the firm’s stakeholders. In any case, ethics should be highly involved in the organization’s activities; the firm’s operational practices can easy be criticized for their ethical dimensions – the activities of firms operating in the financial services industry are difficult to be fully aligned with the social and market ethics since the terms under which financial transactions are developed tend to be changed continuously (Duggan, 2007, p.41). Even if it is not planned, it is possible that one or more operational practices of the firm are opposed to social or business ethics. The above risk can be reduced by introducing a detailed plan of business operations; this plan would be applicable during a pre-arranged period of time, for instance for one year; every three months, this plan would be reviewed ensuring its alignment with social and business ethics. In other words, all ethical risks regarding the business operations could be effectively controlled by introducing regular controls on business operations; the firm’s existing code of ethics – as incorporated in its corporate governance framework is also an important tool for preventing potential violations of social or business ethics in the firm’s daily operations. 6. Conclusion The development of the firm within the Australian banking industry has been gradual but stable; despite the fact that this industry is highly competitive – as also explained above – the firm managed to develop strategies, which support the continuous business growth. The achievement of this target has been related to the following facts: a) banking industry in Australia is a powerful industrial sector; even under the influence of the global recession, the specific industry managed to keep its competitiveness within the international market; this means that the organization’s external environment can ensure stability in performance, a fact particularly important for the avoidance of severe organizational failures, b) the firm’s managers have emphasized in the continuous update of organizational strategies; in other words, innovation has been strongly promoted in all organizational activities, a fact which is welcomed by the firm’s customers – as proved through the analysis of the firm’s external environment and the information provided in regard to the Australian banking industry, c) at the same time, the firm has emphasized on the achievement of ‘long term growth and the meeting of its stakeholders’ expectations’ (corporate governance, in the firm’s website), d) emphasis is also given on the development of cooperation and communication across the organization – meaning the relationship between the staff and the members of the board (corporate governance, in the firm’s website). This fact has helped the firm to avoid severe operational failures and to achieve a continuous growth towards its rivals. On the other hand, the examination of the firm’s existing strategies revealed a series of issues that need to be addressed: a) the firm’s activities are expanded in many countries worldwide; it needs to be ensured that the consistency of its strategies is adequately protected (Campbell et al., 2002, p.74), b) the number of its employees is extremely high; conflicts would easily appear; mechanisms should be developed for enhancing the cooperation across the firm’s departments – referring especially to the cooperation between the parent company and its branches worldwide. In any case, it has been made clear that current organizational strategies are flexible enough in order for the firm’s managers to be able to intervene on time in case of unexpected organizational failures or in case that one of the fundamental operational practices of the firm needs to be revised and updated. 7. Recommendations for business development in the future It has been made clear that the firm’s growth is mainly related with its trend to support innovation and expansion; therefore, a dynamic strategic approach has been promoted across the organization. On the other hand, the high range and the continuous update of the organization’s services have helped towards the increase of its power in the Australian banking sector. In the long term, the stabilization and the further growth of the organization could be achieved by the following strategies: a) the continuation of investing in the update of technology required in daily business operations, b) the further improvement of communication and cooperation across the organization (Harrison et al., 2009, p.5), c) the introduction of additional incentives for increasing employee performance, d) the development of strategic alliances – referring not just to the Australian banking industry but mostly to the international one, e) the development of the relationship with local communities; in periods of crises, for instance severe financial pressures because of severe natural disasters, the organization could support the restoration of community centers and other facilities that are used in the provision of daily community services (Hill et al., 2009, p.32 and f) the increase of the support of governmental projects; the improvement of cooperation between the firm and the local government would help towards the establishment of a net of safety in case of severe crisis (Cooper et al. 2009, p.19); moreover, through its participation in the development of governmental projects, the firm’s positioning in the global market is expected to be improved as a result of the increase of the power of its brand name. 8. References Australian Bankers’ Association, revised in 2011, http://www.bankers.asn.au/Banking-Industry4/default.aspx, viewed 15 January 2011 Banking Industry Today, revised in 2011, http://banking.einnews.com/australia-nz/, viewed 15 January 2011 Bloomberg, revised in 2011, http://www.bloomberg.com/news/2010-12-12/swan-announces-changes-to-create-more-competition-in-australia-s-banking.html viewed 15 January 2011 Campbell, D., Stonehouse, G., Houston, B., Business Strategy, 2nd edn, Butterworth-Heinemann, 2002. Cooper, R., Edgett, S., Product Innovation and Technology Strategy, Stage-Gate International, 2009. Duggan, W., Strategic intuition: the creative spark in human achievement, Columbia University Press, 2007. GovMonitor, revised in 2011, http://www.thegovmonitor.com/economy/austrade-releases-private-banking-in-australia-report-33957.html, viewed 15 January 2011 Grant, R., Contemporary strategy analysis, 5th edn, Wiley-Blackwell, 2005. Harrison, J., Caron, J., Foundations in Strategic Management, Cengage Learning, 2009. Hill, C., Jones, G., Strategic Management Theory: An Integrated Approach, Cengage Learning, 2009. Hitt, M., Ireland, D., Hoskisson, R., Strategic management: competitiveness and globalization: concepts & cases, Cengage Learning, 2009. Macquarie Group, revised 2011, http://www.macquarie.com.au/mgl/au/about-macquarie-group, viewed 15 January 2011 Morden, T., Principles of strategic management, 3rd edn, Ashgate Publishing, Ltd., 2007. Porter, M., Competitive strategy: techniques for analyzing industries and competitors : with a new introduction, Simon and Schuster, 1998. Raisch, S., Dynamic Strategic Analysis: Demystifying Simple Success Strategies, DUV, 2004. Sekhar, S., Business Policy And Strategic Management, I. K. International Pvt Ltd, 2009. Sloman, J., The economic environment of business, Pearson Education, 2005. Williamson, D., Cooke, P., Jenkins, W., Strategic management and business analysis, Butterworth-Heinemann, 2003. 9. Appendix Figure 1 – Porter’s Five Forces model on industry competition (source: http://www.emeraldinsight.com/content_images/fig/2720070605001.png) Figure 2- SWOT analysis (source: http://leadershipchamps.files.wordpress.com/2008/04/swot-analysis.jpg) Figure 3 – Pestel analysis (source: http://smehro.files.wordpress.com/2008/11/pest.png?w=604&h=485) Figure 4 – Organizational structure in Macquarie Group (source: http://www.macquarie.com.au/mgl/au/about-macquarie-group/profile/organisation-structure) Read More