Executive Summary
Standard Chartered’s principal activity is providing banking and other financial services. The Group’s operation are carried out through two divisions, Consumer banking provides credit cards, personal loans, mortgages, deposit taking and wealth management services to individuals and small and medium-sized enterprises. Wholesale Banking provides corporate and institutional clients with services in trade finance, cash management, lending, custody, foreign exchange, debt capital markets and corporate finance.
Standard faces different changes in the political, economic, social and technological spheres that affect its businesses. In the political arena, Standard Chartered face changes in government regulations and policies in countries where it operates. The economic downturn that is being experienced worldwide also affects the company. Changing consumer demands because of changes in demography and lifestyle affect the organization. Technological developments make business operations more efficient.
Introduction
Standard Chartered PLC, listed in both the London and Hong Kong stock exchanges, ranks among the top 25 companies in the FTSE 100 by market capitalization. The Bank has grown substantially in recent years, primarily as a result of organic growth, supplemented by acquisitions. Standard Chartered aspires to be the best international bank for its customers. The Bank derives more than 90 percent of its operating income and profits from Asia, Africa and the Middle East, generated from its Wholesale and Consumer Banking Business. The Group has over 1,600 branches and outlets located in over 70 countries.
The report presents an analysis of the external and internal environments of Standard Chartered Bank. The aim of the report is to analyze the different environmental factors that affect the company’s businesses and the company’s strengths and weaknesses. The opportunities and threats that the company faces will be discussed. Recommendations for strengthening the Group’s marketing will also be presented. Effective marketing will enable the Group to reach and communicate to the customers.
External Analysis
The external analysis pinpoints major opportunities and threats posed by the environment. It analyzes those factors that is beyond the control of the organization but which affect its ability to achieve strategic objectives (Mercer 1991). The environmental analysis is important as it makes the organization aware of what is happening inside and outside that might affect it.
PEST Analysis
A PEST analysis looks at the Political, Economic, Social and Technological drivers of a particular industry. PEST are external factors that must be analyzed and understood in order for an organization to succeed. The PEST analysis focuses on the external forces that affects the organization. It is most useful when used together with other tools such as the SWOT analysis.
o Political Factors – may have direct or indirect impact on the organization’s operation. Decisions made by the government may have an effect on the business. The political arena has a big influence on how organizations operate, the purchasing power of the customers and other businesses.
o Economic Factors – the organization is affected by economic factors. Economy also affects the purchasing power and behavior of the consumers.
o Sociological Factors – include the demography, lifestyle, cultural aspects of the consumers. These factors have a big influence on the consumer needs and wants. Sociological factors also affect the size of potential markets.
o Technological Factors – technological change plays an important role in shaping how organizations operate. Technological factors are important in gaining competitive advantage. Technological innovations can improve production efficiency, quality and speed. New technology is changing how organizations operate.
Internal Analysis
The internal analysis provides an objective understanding of the controllable factors in the organization’s internal environment, identifying those with the greatest long-term impact on the organization’s position. The objective of this analysis is to identify the organization’s major strengths and weaknesses with respect to its overall mission. The importance of the internal analysis depends on objectivity and completeness and identifies strengths and weaknesses of the organization as it attempts to implement strategic plans, goals and objectives, and its overall mission.
SWOT Analysis
SWOT (Strengths and Weaknesses, and Opportunities and Threats) is a basic analytical tool in management that has become popular in recent years. SWOT analysis is often used by strategic planners and top management in developing competitive strategies. It is typically used to decide corporate strategies and to make product or market level analyses (Reddy 1994). SWOT is a widely used thinking framework for identifying Strengths, Weaknesses, Opportunities and Threats. It enables key factors to be visibly recorded as a high-level summary of a business. SWOT analysis is a summary that is simple but powerful. The technique is commonly used by consultants to document the key factors arising from the review of a particular project or business. The use of SWOT enables an assessment to be made of the overall internal state of a business and the direction in which it is heading, through looking at its Strengths and Weaknesses. It also enables a judgment to be made about aspects of the external business environment, which can affect the performance of the business, through looking at the Opportunities and Threats it faces in the wider world (Elkin 1998). The SWOT analysis on its own is not a strategy. It is merely a tool that helps an organization in making informed decisions. The SWOT analysis is primarily used to identify and analyze the strengths and weaknesses of the organization, as well as the opportunities and threats exposed by the information collected of the external environment. The SWOT analysis is a simple yet useful tool in analyzing both the internal and external environments of the organization. SWOT analysis together with other tools such as PEST (Political, Economic, Social, and Technological) analysis can be used as a basis for the analysis of business and environmental factors.
Strengths
One of the strengths of Standard Chartered is its quality customer service. The company has a relationship focused strategy that serves as its greatest strength and a source of sustainable competitive advantage. Through the high quality service that the staff renders to the customers, the company achieved high customer satisfaction and advocacy. The company is notable for its ability to build long-term relationships with its customers. The company has a strong customer focus and it continues to enhance product capabilities and to improve processing efficiency. Another strength is the company’s employees who are the source of competitive advantage for the company. The company through its investments on the training, development and rewards of the employees have high employee engagement scores and strong sales performance.
1. Strong Customer Franchises – Standard Chartered focuses on being differentiated in the creation of customer value to win a bigger share of its customers’ total financial services spend. Strong franchises depend on having highly motivated employees. Motivated employees, combined with investments in improving service, help to build customer satisfaction.
2. Continuous Productivity Improvement – in recent years, the Group has been building a set of capabilities in ‘six sigma’ (error reduction), ‘lean manufacturing’ (operations efficiency) and procurement. Alongside those capabilities, the Group applies an ‘income growth must exceed cost growth’ discipline in setting goals for each business, requiring a wider gap between income growth and cost growth for lower growth/return businesses than for higher growth/return businesses. Finally, the Group has been simplifying management structures, aiming to reduce layers of management and increase spans of control.
3. Capita Efficiency – Standard Chartered has developed a framework to be able to measure economic equity requirements across all its businesses, taking into account market, credit, insurance, business and operational risk. Using economic profit as a key performance measure enables the Group to understand which strategies, products, channels and customer segments are destroying value and which are creating the most value and to make better capital allocation decisions as a result.
Weaknesses
The company recognizes operational risks and that its operation may have weaknesses that may endanger the company. Operational risks, through inadequate or failed internal processes or from people related or external events, are present in Group’s businesses. The Group’s businesses are dependent on their ability to process accurately and efficiently a high volume of complex transactions across numerous and diverse products and services, in different currencies and subject to a number of different legal and regulatory regimes. The Group’s systems and processes are designed to ensure that the operational risks associated with its activities are appropriately controlled, but the Group realizes that any weakness in these systems could have a negative impact on its results of operations during the affected period.
Opportunities
The company in the year 2007 has tapped many business opportunities that are expected to lead to success in the future. In the year 2007, the company was able to achieve a strong financial performance that strengthens the company’s position in the financial services sector in China, India, the Middle East and Africa. The company’s strong customer focus is expected to result in growth and success for the company despite the unpredictable economic condition.
Threats
1. Macroeconomic Conditions in Footprints Countries
One of the biggest threats to the company is the uncertainties that arise from slowing economic growth in the major countries in its footprint and the various uncertainties surrounding global financial markets in 2009. The Group operates in many countries and is affected by the prevailing economic conditions in each. Macroeconomic conditions have an impact in personal expenditure and consumption; demand for business products and services; the general availability of credit and retail and corporate borrowers; and the availability of capital and liquidity funding for the Group. All these factors may impact the performance of the Group.
2. Changes in Government and Regulatory Policy
Another source of threats for the Group is the regulatory and policy measures that governments will take in order to adjust to unstable economic condition around the world. Changes in government policies and regulations may be wide-ranging and influence the volatility and liquidity of financial markets, as well as the ability and willingness of customers to repay their loans. These effects may directly or indirectly impact the Group’s financial performance.
3. Instability in the Financial Services Industry
The availability of liquidity and capital to financial institutions represent a material counterparty risk. Availability depends on the underlying strength and performance of each institution and, just as importantly, on the market perception of that institution at any given point in time.
4. Exchange Rates
Changes in exchange rates affect, among other things, the value of the Group’s assets and liabilities denominated in foreign currencies, as well as the earnings reported by the Group’s non-US dollar denominated branches and subsidiaries.
Competitive Advantages of the Company
Competitive advantage can be considered as a condition, which facilitates more efficient operation and higher quality products and/or services for an organization. Michael Porter considers an organization where earning exceeds cost as an organization that achieved competitive advantage. Competitive advantage in Porter’s perspective is being able increase earnings despite the competitive pressures.
1. Strong Liquidity and Diversification
The bank has a strong liquidity, a well-diversified retail funding base and a conservative balance sheet. The bank has a healthy A/D ration – the relation of customer loans to customer deposits – at 86 percent; and 24 percent of its assets are highly liquid. The Group’s capital ratios are well above the target ranges, reflecting deliberate and effective management of the capital base.
2. Innovation and Transformation
Standard Chartered remains competitive amidst the uncertainties in the business environment because of its ability to innovate and transform. Standard Chartered operates in some of the world’s fastest-growing and most dynamic markets in Asia, Africa, and the Middle East. To improve performance in these markets, the Group continues to innovate and diversify to meet the needs of its customers and clients. Consumer Banking has diversified by building wealth management, personal loans, services for small and medium enterprises (SMEs) and consumer finance onto its traditional mortgage and credit card product range. Innovative SME products that helped drive Consumer Banking’s performance the XtraSaver savings account. Wholesale Banking has been transformed in recent years by adding more sophisticated, higher-value services such as credit derivatives and corporate advisory to its long-standing cash management and lending business.
3. Growth Strategies (Acquisitions)
Standard Chartered continues to become competitive because of its successful growth strategies particularly its acquisition strategies. The Group’s strong franchise, built mainly through years of organic growth has positioned it to take advantage of the next upturn in the global economy. The Bank supplemented this strength with selective acquisitions in 2008, which provided the businesses with specialist capabilities in key markets. The acquisition of AEB, which was competed in February 2008, was one such addition which added both scale to the Private Bank as well as boosting the Group’s transaction banking capabilities. The Group’s other acquisitions in 2008 included a majority stake in UTI Securities, an Indian retail brokerage; Yeahreum Mutual Savings Bank in Korea; Asia Trust and Investment Corporation, a bank in Taiwan; Lehman Brothers’ Brazilian franchise; and JPMorgan Cazenove’s Asian brokerage operations, which completed in 2009. These acquisitions were made in response to customers seeking specialized services. They help diversify the Group’s revenue-generating capabilities and position the Wholesale Banking and Consumer banking businesses to acquire new customers and seek a bigger share of business form their best customers.
4. Strategic Human Resource Management
Standard Chartered considers its people as a source of competitive advantage. Standard Chartered employs almost 60,000 people in over 50 countries and territories, Demographic changes, competition and its own rapid growth mean that the Group’s ability to attract, develop and engage its talent is firmly on the Group’s agenda. The build the Group’s capability to attract and develop people, a global, systematic approach to talent management was set up. In 2006, the Group focused on identifying and developing talent at a junior level to build the skills it needs for the future. The Group has increase the number of less experienced high-potential employees by 47 percent and held one-day career development workshops for high-potential employees across the Group. The Group believes that the key to high performance is ensuring employees know what is expected of them. The Group rewards employees competitively for their contribution to the Group’s performance. As part of the total reward philosophy, the Group offers employee the opportunity to share in the Group’s success.
Recommendation
Direct Marketing
One recommendation for the company in order for them to reach new customers and to increase their turnover is to employ a direct marketing strategy. Direct marketing according to Bradley (2003) is an approach to marketing that involves the company knowing precisely who its customers are, understanding that not everybody is a customer, communicating in relevant ways with the customers and prospects, enhancing and refining the relevance of the communications and doing all of the above through a database (Bradley 2003). According to Kitchen and De Pelsmacker (2004) direct marketing is a system of personal and intermediary-free dialogue which uses one or more communications media to effect a measurable behavioural response at any location, forming a basis for creating and further developing an ongoing direct relationship between an organization and each of its customers individually.
Standard Chartered focuses on building strong relationships with its customers. The company strives to understand the needs of the customers and develop its products and services to meet those needs. Employing a direct marketing strategy in addition to the existing marketing tools of the company can help the Standard Chartered to achieve its goal of building stronger and lasting relationships with the customers.
The principal benefits of any direct marketing technique are the accuracy with which the customers can be reached due to the targeting involved based on computer databases, the measurable effect direct marketing allowing the company to determine its impact in the short term; the quality of message due to the ability to provide sophisticated copy appropriately printed; and the low cost of the delivered message, especially compared with advertising. The key element of direct marketing is the development and maintenance of a detailed customer database outlining historical buying behavior that can be statistically manipulated to produce market segments which can be directly served by a customized marketing package (Bradley 2003). Direct marketing can be an effective strategy in reaching the customers and influencing their behavior. The aim of direct marketing is to create one-to-one personalized and persuasive interaction with customers and potential customers. Direct marketing can also be used by the company to build long-term customer relationships.
Direct marketing is a communication tool that is best suited to build the relationship between the customers and the brand. Because it is individualized, it can be very persuasive. It allows personalized interactive communication, and it easily leads to behavioural response, especially in the marketing of business-to-business and higher involvement consumer products. The customer receives convenience, time utility and satisfaction, and an improved quality and speed of service. When built upon a powerful database, it allows flexible and precise targeting of customer segments and it can therefore avoid waste.
References
Bradley, F 2003, Strategic Marketing: In the Customer Driven Organization, Wiley, Hoboken, NJ.
Elkin, P 1998, Mastering Business Planning and Strategy: The Power of
Strategic Thinking, Thorogood, London.
Kitchen, P J and De Pelsmacker, P 2004, Integrated Marketing Communications: A Primer, Routledge, New York.
Mercer, J L 1991, Strategic Planning for Public Managers, Quorum Books, New
York.
Reddy, A C 1994, Total Quality Marketing: The Key to Regaining Market Shares,
Quorum Books, Westport CT.
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