Regarding Market For National Australia Bank

Strategies that NAB Management used for its Growth and Development

Discuss about the Regarding Market for National Australia Bank.

Regarding market capitalization and customers, National Australia Bank is one of the four largest financial institutions serving in Australia. Across the world, National Australia Bank is ranked 21^st biggest bank in market capitalization and also 41^st when measured as per the total assets that the bank has (Vit, 2006). With around 1600 service centers and branches, and more than 4400 ATMs in New Zealand, Asia, and Australia it is serving more than 12.5 million customers around the world. It came into existences in 1982, with the merger of two companies out of which one was the Commercial Banking Co. of Sydney and the other one was the National Bank of Australia. The goals set by the bank has to provide quality services and products, relationships, guidance, and advice to its customers for fair fees and charges. Providing sustainable and satisfactory profit to its stakeholders is one of its main goals. The bank gained growth in the 20^th century with the help of various mergers with banks in Australia and across the world (Babiak, 2014). In UK, Australia, Ireland, New Zealand, and the USA, National Australia Bank has major share. The reason of these acquisitions was to divide the risk and to increase the income of the bank. Even, after taking many steps to avoid any kind of problem, still, the National Australia Bank faced a very difficult time during the years 2000-2005. The cultural and leadership style that the bank follows and the bank’s development and growth during the same period are discussed in this report. Along with it, the strategies that the management used over a period are also mentioned in the report (Chandok and Gupta, 2014).

NAB has considered all the rewards and risks that include its customers and the market segment in which it serves while forming and developing the strategies of management. It has also given consideration to the external and internal environment and the differentiation received from the competitors regarding the degree, and the sources. The main goal of the bank is to provide maximum returns to its customers. NAB focuses on the giving preference to its customer segment to attain its goals. NAB’s strategy includes to target on the small, micro, and medium business customers. CRM (Customer Relationship Management) strategy is being used by NAB from last ten years which has given the growth and expansion to its customer segment. After recognizing the CRM strategy as its focal point, the bank has attained technologies related to CRM. To develop the vision of the bank NAB has acquired various technologies, and also developed an infrastructure to accomplish its goals (Chen and Silverthorne, 2005). The key technology used by NAB from NCR is the relationship optimizer. This technology acts as a communication gatekeeper regarding customer interactions. It manages the frequency, content, and the method used for customer communication. The other strategy that NAB used for its business across the globe is relationship management strategy that was used for the improvement in the growth and performance of NAB. It also helped in winning customer interface through financial services provided to them. It increased the pace of business across the globe to give competitive advantages to NAB through its capability, services, and efficiency. It helped in developing areas that are beneficial for the growth and financial services of the bank. Relationship management strategy helped in managing the other functions of the bank for increasing its value, and to develop different income methods. Being a global service organization, NAB has brought improvement in its IT infrastructure to improve its services. To connect with its 1200 branches across Australia, NAB has built a WAN environment. NAB understands the challenges and opportunities that are caused by the external environment and digital transformation. NAB understands that for achieving success a better experience need to be provided to the customers (Cherian and Farouq, 2013). A better experience could be given by making the banking experiences easy and creating a cordial relationship with its customers.

NAB and its Business Practices

NAB has incurred huge losses in the year 2004 because it entered into unauthorized trading of foreign currency. To manage the risk, the procedure and management policies followed by NAB proved inefficient. According to a report, in the year 2004, NAB terminated or suspended more than 30 of its financial advisors. The reason for their termination was given were inappropriate advice, practices, repeated agreement breaches, breach of the code of conduct, and conflicts of interests. The report also states that forgery of client’s signature was done by financial advisors, episodes of file reconstruction also surfaced, and a lot of poor-advice was given to the customers that resulted in compensation pay-outs. The culprit advisors tried to manipulate files and forged client’s signatures to hide their poor work episodes. These incidents came into light due to the complaints filed by the customers and by the inquiry of the regulators (de Vries, 2012). The bank’s internal control system failed to identify the forgeries were happening in the bank. One of the strategies used by NAB ‘Growth by Overseas Expansion’ proved to be a total failure, and it ended with the demerger of CYBG. The failure of the overseas expansion strategy led the bank to sell some of its assets due to the high pressure of losses. Another business strategy of NAB that faced a huge criticism was the way of raising funds for the bank. The method used by NAB to raise funds is through private placements that include the sale of shares to small investors or individuals. These shares were sold to them at a lesser price than its actual market value. NAB faced criticism because it was selling the shares at a lower price than its market value and due to the situation of financial crises across the globe. Investors started demanding more compensation for purchasing securities with high risks due to the market situation. The goodwill of NAB suffered, and it incurred huge losses due to the scandals like faulty financial advice, insider trading, an allegation of rate fixing, and disputed fees (de Vries, Bakker-Pieper and Oostenveld, 2009).

SWOT Analysis is taken to find out the strengths and weaknesses of an organization and the opportunities and threats that the organization may have to deal with.  This analysis helps the company management to find out the actual strategic situation of the organization. Various opportunities were available to NAB due to the strategies and business policies it follows. The acquisition of The Western Bank of US provided numerous opportunities to NAB and also increased its revenue. Expansion of business in China also helped in increasing its market share and revenue income. Ample amount of opportunities was created for NAB due to the positive outlook towards asset management (Dellaportas, Cooper and Braica, 2007). NAB’s geographical, and product diversification is its strength. Diversification has made NAB a leading financial player of Australia. Spread in management has resulted in the increased revenue and interest income for the bank. NAB’s good financial performance has helped the organization in contributing towards group profitability. But the financial facilities and the business volume of NAB got affected due to the slowdown in the global and domestic economy. Due to the competition in the financial system of Australia, the profitability ratio for Australian also got affected, and this resulted in the decline of revenue and growth activities of NAB. For the customer’s benefit finances were made available this made customers manage their own finances. NAB planned to use the ‘Fair Value’ concept that includes four keys. NAB planned in providing quality services to the customers. Also, it provides fee-free banking services to the customer NAB entered into a partnership with rediATM and opened a large number of ATMs (Halsall, 2015). Information regarding interest rates was provided to the customers to better understand the mortgage and its interest. For running a successful business, an organization has to keep pace with the changing conditions of the market and for this practice becomes important. The importance of transparency and innovation is well understood by NAB. Thus, it creates such a business model that is fair and gives full transparency to its customers (Jogulu, 2010). NAB’s approach towards corporate responsibility provides a sustainable and positive impact of NAB in people’s life, environment, communities, and the customers. It increases the value of shares of NAB in the eyes of stakeholders. NAB focuses on the development and the rights of the people it is associated with like its customers.NAB delivers the programs that help in supporting the society socially, and financially. The policies, objectives, strategies, and procedures for the organization are set with a strategy of corporate responsibilities. This helps in measuring and reporting the progress of the organization. A proper internal communication system was used to ensure that the corporate responsibility is well understood by the leaders, board and all the people associated with it (O’Connell, Webb and Schwarzbach, 2005).

SWOT Analysis of the National Australia Bank

Culture and organization go hand in hand; they are one and the same thing that cannot be separated from each other. The vision and strategies of an organization can be executed successfully with the help of the strong culture. The organizational culture is one of the most important variables of an organization that impacts the functioning of the organization drastically. The two scale of culture that is mostly used is weak or strong and efficient or inefficient (Sethuraman and Suresh, 2014). The cultural scale is based on the strength that measures and calculates the power that culture has on the employees. The cultural efficiency scale measures the culture of the entities and the attainment of goals and strategies. Organization with an efficient culture achieves its goals easily. Various human resources policies and programs are the part of NAB for the purpose of the development of its employees. Employees are helped through people framework policy that makes them about their career. Programs like self-initiated programs, talent management programs, and development and performance plans are also a part of an organizational culture of NAB. Integration, fragmentation, and differentiation perspective are the three perspectives of culture (Sheridan and Jang, 2012). The most influential part of an organization is the top management that forms the values of an organization and holds it together; that is the integration perspective. Whereas, differentiation perspective is the total opposite of integration perspective that shows the lack of cultural display among the employees. Fragmentation perspective occurs when there is not a clear competency in the organization. Mismanaged culture of an organization can be very harmful for the organization. NAB was more inclined towards earning profits, which affected their ethical behavior (Troshihin, 2013). They formed their working around the phrase ‘Profit is King’ and continued with unethical behavior in the organization. The balance between risk and profit was tried to be managed by the leaders of NAB. For a successful business, a genuine relationship with the customer is very important, and that can be gained by understanding their needs. NAB’s leadership style prepares employees to give out high-potential and high-performance. The expected behavior and standards from employees are developed by the code of conduct that is followed in an organization. The same code of conduct need to be followed by each and every person associated with the organization for its development (Vazifedoost, Ansar and Yekezare, 2013).

Conclusion

The commitment that was expected from National Australia Bank was to provide fairer banking experience to its customers. This can be achieved by building a relationship with the customers based on trust. NAB failed to follow the right code of conduct and abolished the range of fees. To overcome the scandals that harmed the image of NAB, the duties of the directors need to be redesigned. Their duties should include the consideration of environmental and social responsibilities that are an important part regarding the growth and development of the organization. The redesigning of the system should include the reporting requirements that will help in shifting the burden of proof to the person who caused the harm to the organization. The measures like regulation, governance, and supervision should be considered as a way to gain customer’s trust, not as a restraint in innovation and entrepreneurship. All the activity conducted in the bank should be transparent, fair, and sustainable. All these things will help National Australia Bank to gain back its positive image and be an effective competitor on the global level.

References

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