Introduction To Management For Shareholder Portfolio- National Australia Bank Case Study

Mission and vision of the National Australia Bank

Describe about the Introduction to Management for Shareholder Portfolio.

The National Australia Bank (NAB) is considered that is one of the four largest financial institutions in Australia. This organization has the annual net income of $13,982 million in the year, which was $13,415 million in the previous year (Nab.com.au, 2016). Their business is growing for their effective business strategy and the target for fulfilling the user’s demand. Moutinho (2016, pp. 515-549) also portrays that to maximize their shareholder value; they strictly act on their portfolio. They also track down all their business proceedings so that they can improve their current approach for better productivity and profitability.

In this business report, the mission and vision statement of the National Australia Bank will be provided along with their past and present business strategy that is beneficial for this retail industry. Furthermore, the “internal environment” and “external environment” analysis will be discussed which is followed by the organizational culture adopts and an overall conclusion of the entire discussion will be the ending note for this business report.

Organization Strategy

The National Australia Bank (NAB) values their strategy for fulfilling the passion of their customers by putting themselves in the place of the customers (Nab.com.au, 2016). They also have respect for the people and encouraging an inclusive culture along with the ability to provide sound decisions to their clients, individuals and communities.

The concerned organization has the vision to expand their business and provide financial guidance to customers across the globe (Nab.com.au, 2016). Laby (2013, p.561) depicts that this objective can be obtained by collaborating with colleagues across the business for attaining maximum profitability.

National Australian Bank follows their basic trait for valuing their customers before any other stakeholders and this provides them the competitive advantage compared to other financial institutes. They also provide the most favorable decision to their clients so that their money can be invested in the best way (Murray, 2014). Moreover, this organization also emphasizes on their workplace relation, performance and remuneration along with the workplace health, safety and wellbeing.

In conventional days, they just focus on the community of Australia and provide them financial help to meet their requirements. The traditional manual approach is used for maintaining all the official details and focuses on better financial growth in the public sector.

In recent times, they also emphasize on the financial solution that can help them to invest their money in a correct way. Kaal and Painter (2012, pp.12-12) depicts that they also improve their strategies towards the modern digital and information technology for the advancement of their business which leads them to the 21st largest bank in the world regarding the market capitalization and regarding a total number of owned assets they ranked 41st largest bank in the world in 2014 (Nab.com.au., 2016). They also focus on the corporate responsibility so that a positive and sustainable impact on their loyal stakeholders and the environment.

Competitive advantage

Scandal for FOREX

Scherbina et al. (2013, pp.233-243) depicts that in the year 2004 the National Australian Bank had lost AU$360 million for the reason of foreign currency trading. The bank had revealed the reason for increased reliance on speculation and high-risk business procedure. After an investigation by the Australian Prudential Regulation Authority, it is found that this problem arises as many people are wrongly designated in a higher position and they are responsible for the misinterpretation of the actual profit. In this situation, experts have highlighted two criticisms towards the organization- the workplace culture has to be changed and they have insufficient risk management policies and inadequate control mechanisms (Moscardo et al. 2013). It is also found that in order to attain better profitability and productivity at the same time they traded at a greater level beyond their official risk caps. As a result, the calculation of Value at Risk (VaR) formula for evaluating the exchange option financial exposure shows the value of $3.25 million. However, the calculation represented that the loss was worth of AU$360 dollars which were 110 times the maximum VaR. Daly and Gebremedhin (2015, pp.128-138) also researched and highlights the fact that in September 1999 the average VaR was $3 million, which increased to $20 million in the next year.

Boehm (2012, p.249) illustrated that most of the organization possess the tendency to avoid tax so that maximum profitability can be obtained.  The National Banks of Australia not only avoid the tax payments but they also have overcharged interest rate from their Irish customers from their subsidiary National Irish Bank. This subsidiary was inaugurated as a foundation of trust but this action proves that there is a breach of trust among their valuable customers. Their action can prove this unethical consideration that they have revealed their write down value to be $450 million in the year 2001, which increased to $1.75 billion in the following year (Demirer et al. 2015, pp.236-255). This results in the investigation of their business approach and it is found that they have implemented incorrect interest rate assumption from their customers.

General Environments (PESTEL) analysis

Factors	Analysis of the factors
Political Factors	Among the other entire sector, banking sectors are mostly affected by the political factor. Political ideologies, political stabilities and policies of respective country influences the n-business condition of the bank and the stable condition of Australia helps the National Australian Bank for making a global reach. Thus, their risk for business loss is less significant compared to any other organization in Australia. Supported by the legislation “Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA)”, NAB enjoys trading with their partner countries like New Zealand and UK and Asia (Zeller and Cole 2014, pp.236-255).
Economic Factors	The economic factor affects the business procedure of an organization. Doyle et al. (2014) defines the economic factors like recession, unemployment, the financial crisis of the nation. The financial crisis of 2008, the concerned organization grows their business with the support of their investors and governing authorities. The GDP per capita of Australia is $43654.58 that ranked number 10 by the International Monetary Fund which ensures the growth of this banking industry (Tradingeconomics.com, 2016).
Social Factors	Lifestyle preferences, the level of education in the society, values and cultures of the people and the green initiatives define the social factors that can affect the profitability if the National Australian Bank (Turner 2014, p.158). In recent times, the organization takes initiatives for green technology by using eco-friendly products and implementing digital technology so that the natural resource products like paper can be avoided largely. This organization is also associated with the voluntary organizational like the education institutions so that they can work for the betterment of the society and the needy people. This not only enhances their corporate social responsibility but it also improves their popularity in the community.
Technological Factor	Implementation of modern technology provides competitive advantage and banking sector have a direct impact on the long-term sustainability of this new technology (Morris, 2012). Telebanking, Remote Banking and Electronic Banking are some of the technological advances that can make their business procedure easy so that the business objective can be accomplished hassle free. Moreover, POS devices can also be used for making the transaction faster.
Environmental Factors	Increasing concern for the environment is an obligation for every organization and NAB is not an exception thus they have to adopt environment-friendly business practices. (Epstein and Buhovac, 2014) argued that the NAB is facing several criticisms for providing financial help to environment-friendly business practices. Thus, they are not taking initiatives for identifying an ethical organization that fulfills the in credit approval process. In order to accomplish the same, they have developed environmental issues policy to overcome environmental risk.
Legal Factors	The “Australian Prudential Regulation Authority (APRA)” is the authority bodies in Australia that are responsible for monitoring the financial institute in Australia (APRA Authority, 2013). The concerned organization also has to follow the financial legislation formulated by the Reserve Bank of Australia (Costa, 2014, p.16). In this way, they can avoid the unscrupulous business practices that are responsible for the breaching the protections of rights of customers. Moreover, they also follow the privacy law, where according to  Privacy Act 1988 (Privacy Act) no personal details of the customers will be revealed to anonymous person  (Privacy Act 2016)

Table 1: PESTEL Analysis

(Source: Created by Author)

Factors	Analysis of the factors
Customers	Across the Australia, New Zealand and UK. They are taking initiatives to target the Asian counties and their people also.
Partners	“National Irish Bank”, “New Enterprise Incentive Scheme Association (NEIS)”, “Torres Strait Regional Authority (TSRA)”, “Small Business Centres Victoria (SBCV), Indigenous Business Australia (IBA)” and others (Nab.com.au, 2016).
Industry	Banking and financial services
Competitors	“Westpac Banking Corporation”, “Australia And New Zealand Banking Group Limited” and “Commonwealth Bank Of Australia” (Nab.com.au, 2016).
Supplier	They do not have any supplier and customers and governments are the only source of money; however they themselves have an Australian Supplier Diversity Program (Nab.com.au, 2016).

Table 2: Specific Environment Analysis

(Source: Created by Author)

Factors	Analysis of the factors
Strength	The National Australian Banks first inaugurated in 1982 and thus has a strong brand name. They are also financially stable with respect to their business as their business is present in New Zealand, UK and Asian countries also. Moreover, they also provide financial support and plans to lead diverse products and services organization.
Weakness	Though they have expanded their business into some places, they are still less renowned. Hutchings et al. (2016) also depicts that  the National Australia Bank declines revenues impacting growth activities
Opportunity	They can target to larger continents like Asia and Europe so that the can also serve their services across the globe. They can also support the voluntary organization and can do charitable work from their annual profit not only for the betterment of the society but also for their organization.
Threat	Wake of the financial crisis and recession are the two reasons of threat for the company which should be controlled by the Australian government. Other emerging banking institutes worldwide will be the crucial threat for NAB.

Table 3: SWOT Analysis

(Source: Created by Author)

Organizational culture

“Passion for the customer,” “will win”, “be bold”, “respecting the people” and “doing the right thing” are the five core values of the National Australia Bank that drives and supports the organizational culture. However, organizational culture and leadership style complements each other for the maximum productivity and financial growth of an organization. The leader of the concerned organization was Frank Cicuttio, CEO of the NAB. This person adopts transformational leadership style which leads to the tremendous growth of the bank until the foreign currency trader fraud was exposed and after that, the person resigns. This incidents force to adopt the change in the organization cultures after that high security were provided for the bank’s procedure so that inability to risk management and placing control measures to avoid mismanagement can be avoided and monitored continuously (Hornuf and Haas, 2014, pp.192-201). However, Fallon and Cooper (2015, pp.71-83) criticizes that after the foreign currency scandal, the organization is not able to produce a significant leader but they are continuously working on their organizational culture and leadership style so that they can exercise for maximum control on all the functions of the organization. Moreover, the organizational culture represents too much hierarchy and the communication follows the top to bottom strategy, where the participation of the employee are restricted as all the decision are taken by higher authority.  Thus they have to adopt a more holistic and participative style of leadership for expanding their business across the world.

Past strategies and current Strategies

Conclusion

It is concluded from the above discussion that NAB has been able to achieve the stature of one of the biggest banks in Australia by serving their best to their valuable customers since 1982. NAB enjoys a dominant position in the domestic market, but they are failed to make their organization popular in other countries and continents. This business report also demonstrates the criticism faced by the National Australia Bank due to foreign exchange scandal and high-interest rate and tax avoidance activities from Ireland customers. As a result, the organizational is affected so much that the CEO resign and after that, no significant leader is produced by the organization. They also support an organization that is associated with the work, not advisable fo the environmental sustainability like the fossil fuel industries hat is responsible for the massive public outrage. However, they have huge opportunity to grow in spite of the threats of the growth of other financial institutes. Thus, the National Australia Bank should re-evaluate its organizational and instill strong leader for expanding their business to achieve organizational objectives by boosting their employees.

Reference List

Authority, A.P.R., 2013. Australian Prudential Regulation Authority.

Boehm, J.L., 2012. Private Securities Fraud Litigation after Morrison v. National Australia Bank: Reconsidering a Reliance-Based Approach to Extraterritoriality. Harv. Int’l LJ, 53, p.249.

Costa, S., 2014. Changes to the privacy act. Brief, 41(7), p.16.

Daly, A. and Gebremedhin, T.A., 2015. Can An “Indigenous Employment Program” Work? A Case Study of National Australia Bank. Economic Papers: A journal of applied economics and policy, 34(3), pp.128-138.

Demirer, M., Diebold, F.X., Liu, L. and Yilmaz, K., 2015. Estimating global bank network connectedness. Available at SSRN 2631479.

Doyle, T., Alfonsi, A. and Robertson, P., 2014. The Global Economy Debate point: Does an open, free-market economy make Australia more or less secure in a globalised world?.

Epstein, M.J. and Buhovac, A.R., 2014. Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. Berrett-Koehler Publishers.

Fallon, F. and Cooper, B.J., 2015. Corporate Culture and Greed—The Case of the Australian Wheat Board. Australian Accounting Review, 25(1), pp.71-83.

Hornuf, L. and Haas, G., 2014. Regulating fraud in financial markets: can behavioural designs prevent future criminal offences?. Journal of Risk Management in Financial Institutions, 7(2), pp.192-201.

Hutchings, T.R., Nordblom, T.L., Hayes, R.C., Li, G. and Finlayson, J.D., 2016, February. A framework for modelling financial risk in Southern Australia: the intensive farming (IF) model. In 2016 Conference (60th), February 2-5, 2016, Canberra, Australia (No. 235333). Australian Agricultural and Resource Economics Society.

Kaal, W.A. and Painter, R.W., 2012. Forum Competition and Choice of Law Competition in Securities Law After Morrison v. National Australia Bank.Minnesota Law Review, 97, pp.12-12.

Laby, A.B., 2013. Regulation of Global Financial Firms After Morrison v. National Australia Bank. . John’s L. Rev., 87, p.561.

Morris, T., 2012. Innovations in Banking. Routledge.

Moscardo, G., Lamberton, G., Wells, G., Fallon, W., Lawn, P., Rowe, A., Humphrey, J., Wiesner, R., Pettitt, B., Clifton, D. and Renouf, M., 2013.Sustainability in Australian business: Principles and practice. Wiley-Blackwell.

Moutinho, L., 2016. National Australia Bank (Australia). In Worldwide Casebook in Marketing Management (pp. 515-549).

Murray, P.A., 2014. The nature and sources of competitive advantage.

Nab.com.au., 2016. Personal. [online] Available at: https://www.nab.com.au/ [Accessed 10 Sep. 2016].

Privacy Act, 2016. Privacy Act | Privacy law| Office of the Australian Information Commissioner – OAIC. [online] Oaic.gov.au. Available at: <https://www.oaic.gov.au/privacy-law/privacy-act/> [Accessed 10 Sep. 2016].

Scherbina, T., Afanasyeva, O. and Lapina, Y., 2013. Risk management, corporate governance and investment banking: the role of chief risk officer.Corporate Governance and Investment Banking: The Role of Chief Risk Officer, pp.233-243.

Tradingeconomics.com., 2016. Australia GDP per capita PPP. [online] Available at: https://www.tradingeconomics.com/australia/gdp-per-capita-ppp [Accessed 5 Sep. 2016].

Turner, B.S., 2014. Australia: the debate about hegemonic culture. Dominant Ideologies (RLE Social Theory), p.158.

Zeller, B. and Cole, B., 2014. Australian Trade Agreements–A Divergence between Trade Policy and Business Outcomes–Can They Deliver Trade-related Growth for Australia?. Global Journal of Comparative Law, 3(2), pp.236-255.