470183906 BUSS1000 Assignment 1S22017 PDF

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Case study for Commonwealth Bank Overview Commonwealth Bank is a bank provider of integrated financial services. The products and services range from private banking, home loan, investment, superannuation to institutional solutions. As one of the big four banks in Australia, Commonwealth Bank of Australia has launched 1121 branches and 16.6 million customers in 2017(Commonwealth Bank,2017).

The vision of Commonwealth Bank is to be proficient in the enhancement and security of financial welfare for citizens, enterprises and the society. In every interaction with our customers, Commonwealth Bank is guided by its values which include honesty, responsibility, cooperation, being qualified and providing satisfied services. The mission of the business aims at creating long-term value through implementing advanced technology, productivity, and efficiency for better customer service(ibid.).

Millions of users feel upset and worry about their financial position so that NetBank launched new digital tools such as Spend Tracker and Transactions Notifications which encourage reasonable financial habits and help consumer manage their daily finances through applying and analyzing the consumption data(ibid.). Therefore, these online services provide various opportunities to secure and enhance the customers' financial well-being which matches the vision of the bank. To match its mission, Commonwealth Bank is continuing to evolve the CommBank app and NetBank with customers after experiencing various first-to-market innovations to make banking easier. From opening accounts at the beginning, and getting instant receipts when consumers make a payment, the process of banking is more convenient and easier to conduct in case of wherever and whenever to bank(ibid.). Implementing technology into banking increase the efficiency of investment and providing an engaging experience of customer services. However, Commonwealth Bank has owed millions of dollars in unpaid superannuation entitlements to over 7000 part-time employees since 2009(Hilton, 2017). The bank failed to meet its vision for its staff to ensure their financial welfare. Besides, 89% of the underpaid Commonwealth Bank workers were women who worked more than 38 hours per week without getting their full superannuation entitlement (ibid.). Commonwealth Bank also does not have integrity and accountability in case of treating their employees, which does not match their value simultaneously. SWOT analysis SWOT stands for Strength, Weakness, Opportunity, and Threat. It is a method to assess the internal and external factors which can influence the business performance for decision making. Internal Analysis Strength 

Commonwealth Bank has a high cultural diversity of the employees.

Commonwealth Bank has 51800 employees in 2017 with 40% from a foreign cultural background (Commonwealth Bank,2017). Commonwealth Bank can benefit from added value and competitive advantages

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because the diverse experiences allow employees to understand customers from different cultural backgrounds better and offer more suitable solutions. However, Nataatmadia and Dysonan (2005) argue that enormous amount of cost may be caused to train the leadership of managers to develop managing diverse workforce efficiently. According to the research launched by Australian Bureau of Statistics (2017), Australia is a multicultural country with 26% of overseas-born people from over 200 countries, the environment can enable employees to respect each other and clients thoroughly. Therefore, the reputation of Commonwealth Bank will be improved.

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Commonwealth Bank has strong revenue and increasing profit

The net profit of Commonwealth Bank has continuously increased from $6,835 million in 2011 to $9,881 million in 2017 (Commonwealth Bank,2017). The positive financial performance may attract consumers and shareholders to invest in the business, so that the consumer confidence and investment will be increased, bringing strong capital inflows to the firm.

Weakness 

Commonwealth Bank has involved in money laundering scandal

Commonwealth Bank was brought civil proceedings for its failure to report money laundering which was conducted through its intelligent deposit machines between 2012 and 2015 by the Australian Transaction Reports and Analysis Centre, involving the total value of $625 million(ibid.).

Money laundering is a criminal activity to conceal the illegality of crime by disguising them into a lawful earning (He, 2010). Commonwealth Bank provides multiple services such as deposit, foreign exchange, and settlement. Besides, it is a multinational bank with 106 branches in a range of countries, transferring funds across international borders is convenient (Commonwealth Bank,2017). Hence Commonwealth Bank's favorable conditions enable criminals to conduct illegal transactions. Although the annual report of Commonwealth Bank (2017) states that it has invested more than $230 million into an anti-money laundering activity. Besides, mandatory training for Anti-Money Laundering and CounterTerrorism Financing Act is required for every employee to take, the scandal has indeed caused an adverse impact to the goodwill of Commonwealth Bank and decreased its attractiveness. Therefore, the involvement in money laundering can become one of the weaknesses of Commonwealth Bank. External Analysis Opportunity 

The development in mobile banking

Australia has one of the highest rates of mobile phone ownership in the world leading to the expansion in mobile banking. Regarding Commonwealth Bank, there have been 6.2 million active online users so far (Commonwealth Bank,2017). Mobile phone banking can provide an opportunity for banks to improve their services to clients conveniently and efficiently. At the same time, the cost for banks and consumers can be reduced to increase the competitiveness of bank in the market. In addition, the quality of mobile banking service can be enhanced through the engagement of clients, lead to increasing customer loyalty (Talukder, Quazi, &

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Sathye, 2014). However, it can be hard for regulators to control the users’ details of mobile banking due to private policies. Overall, mobile banking can become an opportunity to improve the quantity of users and quality of banking service.

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International expansion to Asian countries

Paraschiv (2011) states that trade and investment between Australia and Asia have been increasing and expanding.73% of Australia's international trade is with countries in the APEC group. Hence the major banks have been providing cross-border banking services to Australian and Asian countries which can encourage trade and distribute savings to investment opportunities across countries thus increase the bank’s revenue (ibid.). Although some opinions argue that Australia’s banks will be vulnerable to be affected by the financial stability in the global market, the Australian Government implemented various macroeconomic policies to minimize the risks of international banking such as risk-focused supervision(ibid.). Therefore, Asia expansion is beneficial for Commonwealth Bank in the long term.

Threat 

Increasing capital requirement by APRA

APRA requires capital regulation grow continuously to bring financing pressure to Commonwealth Bank. In order to meet the required capital ratio of 10.1%, Commonwealth bank announces massive $9.14bn profit in 2017(Commonwealth Bank,2017). To attract investment, Commonwealth Bank need decrease the interest rate. A low-rate environment has heightened lending competition and reduced bank profits (Stewart, 2015). In the second half year of 2016, income was increased by 1 per cent while expenses grew by 3 per cent (ibid.). The banking industry remains subject to continuously regulatory, and policy changes and it must adapt to regulatory change so as not to affect its customers and revenue (Commonwealth Bank,2017). Nevertheless, the APRA conduct the capital regulation to prevent banks from being insolvent, the growing capital regulation is still a burden for banks to operate.

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Climate change will increase the compensation

Climate change will lead to the increase of the occurrence of extreme weather, such as global warming will increase the frequency of the storm. The service that Commonwealth Bank provided involves natural hazard insurance, which has higher potential losses than others. The insurance income has higher claims leading to a loss recognition of $143 million in 2017 (ibid.). Frequent natural disasters will increase the compensation and reduce the revenue and profit of Commonwealth Bank. However, after a catastrophic event, potential victims' demand for insurance will increase (Paraschiv , 2011). Therefore, the price of insurance will increase. Overall, climate change can be a threat affects the insurance performance of Commonwealth Bank. CSV Recommendation 

What is Creating Shared Value?

Shared Value can be clarified as policies and methods that improve the competitiveness of a company and advance the economic and social conditions in its community at the same time (Kramer, & Porter, 2011).

Reconceiving the products and markets can create shared value. Kramer and Porter (2011) suggest that the

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company should focus on answering the needs of the society. They can do this by considering how to use their goods or services to create satisfaction. Commonwealth Bank can offer positions to refugees to advance societal benefits as well as increase the reputation of the business.

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Providing financial services to the poor

The donation is a straight way to help the poor. However, they cannot get out of poverty thoroughly just rely on donation in the long term. They will also need advices and assistances for financial management. However, for lack of collateral, traditional banks refuse to provide services to them. In order to re-conceive products and the needs of the vulnerable groups, Commonwealth Bank can provide financial services such as microfinance and consultation to improve the quality of life for the poor (Sashi, 2011). Simultaneously, Commonwealth Bank can also gain more customers and capital inflows. As a result, shared value creation is a sustainable role of business in increasing the benefit for both the poor and the Commonwealth Bank.

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How it fits the vision and value of Commonwealth Bank

The vision of Commonwealth Bank is to be proficient in the enhancement and security of financial welfare for the nation. For example, through offering micro-finances to the poor, they can gain capital to start and manage their business. Therefore, more money can be created to enhance their financial well-being thus help them to alleviate the stress of poverty. The value of Commonwealth Bank includes accountability, service, and collaboration (Commonwealth Bank,2017). The business shows its sense of social responsibility through assisting the vulnerable group. Besides, the excellent service may increase the satisfaction of the poor hence enhance the reputation of the business. Enhanced reputation may also lead to better collaboration with stakeholders (Kramer, & Porter,2011). Regarding the negative effect of money laundering scandal, it is essential for Commonwealth Bank to increase its company's image so as not to decrease its investment.

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How it fits the SWOT analysis of the business

With the implementation of mobile banking, Commonwealth Bank can offer online financial service to poor customers who live in remote areas so that the cost of setting rural branches can be avoided (Talukder, Quazi, & Sathye, 2014). Besides, since many of the poor are not well-educated, a well-designed mobile banking application is easier and more convenient for them to understand and operate. Therefore, mobile banking can attract more low-income groups to choose Commonwealth bank to manage their money.

Professional staff in Commonwealth Bank can recommend the best financial products and investments for the poor to choose. Commonwealth Bank can also suggest the poor to buy the stock of Commonwealth Bank or make a saving bank account to increase its capital (Sashi, 2011). Hence the capital inflow of Commonwealth Bank will increase to satisfy the growing capital requirement required by APRA and decrease the risk of bad debt. From the perspective of the poor, due to the bank's positive statement and the guarantee of APRA, it is steadier to invest Commonwealth Bank.

By providing micro-finances to the low-income group, Commonwealth Bank can also gain the interest income.

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Although the interest rate of microfinance is lower than any other kind of loan, the high demand from the poor will enable the bank to create profit. The prospect of serving the disadvantaged group is broad because traditional banks often ignore their substantial purchasing power.

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Critics of providing cheap financial services to the poor

Commonwealth Bank can provide micro-finance to the poor to start a business. However, the interest can cause pressure to the extreme low-income group. If their businesses break down, they have to borrow more money to compensate for the loss. Potentially, the liabilities will increase too incredibly to repay(ibid.). Finally leading to bad debts for the bank. Accordingly, risk control is essential for banks when providing financial services.

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References List Australian Bureau of Statistics. (2017). Census of Population and Housing: Australia Revealed, 2016. Retrieved from http://www.abs.gov.au/ausstats/[email protected]/mf/2024.0

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Commonwealth Bank of Australia.(2017). Annual Report 2017. Retrieved from https://www.commbank.com.au/investors/annual-report.html He, P. (2010). A typological study on money laundering. Journal of Money Laundering Control, 13(Commonwealth Bank,2017), 15-32. doi:http://dx.doi.org.ezproxy1.library.usyd.edu.au/10.1108/13685201011010182

Hilton,J.(2017,February 22). Commonwealth Bank allegedly “ripped off” 7,000 employees, claims union. Human Resources Director. Retrieved from http://www.hcamag.com/ Kramer, M. R., & Porter, M. (2011). Creating shared value. Harvard business review, 89(1/2), 62-77. ccountid=14757

Nataatmadia, I., & Dyson, L. E. (2005). Managing the modern workforce: Cultural diversity and its implications. In IRMA International Conference, Idea Group Inc. Paraschiv, D. (2011). INSURANCE AGAINST LOSSES FROM NATURAL DISASTERS. Contemporary Readings in Law and Social Justice, 3(Hilton, 2017), 224-229. Retrieved from http://ezprroxy.library.usyd.edu.au/login?url=https://search-proquest-com.ezproxy1.library.usyd.edu.au/doc view/928448550?accountid=14757

Sashi, C. M. (2011). The make-buy decision in marketing financial services for poverty alleviation. Journal of Financial Services Marketing, 15(4), 296-308. doi:http://dx.doi.org.ezproxy1.library.usyd.edu.au/10.1057/fsm.2010.25 Stewart, R. M. (2015, Aug 12). Australia's commonwealth bank seeks to raise $3.7 billion to boost capital; Commonwealth Bank is the latest big bank turning to shareholders in bid to meet new regulatory requirement for increased capital buffers. Wall Street Journal (Online) Retrieved from http://ezproxy.library.usyd.edu.au/login?url=https://search-proquest-com.ezproxy1.library.usyd.edu.audocv iew/1703128281?a Talukder, M., Quazi, A., & Sathye, M. (2014). Mobile phone banking usage behaviour: An australian perspective. Australasian Accounting Business & Finance Journal, 8(4), 83-104. Retrieved from http://ezproxy.library.usyd.edu.au/login?url=https://search-proquest-com.ezproxy1.library.usyd.ed u.au/docview/1628902599?accountid=14757

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