Executive Summary
Standard Chartered is a financial company that provides banking and other related services. Standard Chartered’s operations are handled by two major units – consumer banking and wholesale banking. Consumer banking is responsible for rendering services related to credit cards, loans, mortgages deposit and wealth management. Wholesale banking on the other hand, is responsible for rendering services for organizations and companies. Wholesale banking services include trade finance, cash management, lending, foreign exchange and others.
Standard Chartered 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 is a publicly listed company listed in the stock exchanges of London and Hong Kong. Through organic growth, the company was able to extend its operations in different parts of the world and the company is present in more than seventy counties around the world. Today, the company aims to be the leading financial services company in the world.
The report presents an analysis of the external and internal environments of Standard Chartered Bank. The author aims to present an analysis of the internal and external business environment forces that affect the company. The author will also conduct a SWOT analysis of the company to determine the current situation that the company is in. 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 reason why managers and strategists conduct external analysis is to determine the risks to and the prospects of the company and its businesses. The external analysis is used to analyze the business environment factors that the company cannot control (Mercer 1991). External analysis is a very significant undertaking for the company as it reveals the current business environment situation that the company is operating in.
PEST Analysis
Political Analysis
The company faces challenges that are brought upon by the changes in the political and regulatory policies of many countries. The ways by which the governments around the world will cope with the financial crisis and economic downturn will impact the company. Governments are expected to alter their policies and regulations in order to respond to the current economic situation. These changes are expected to have tremendous impact on financial markets. They can also influence the capacity and preparedness of consumers to settle their loans.
In 2008, the Hong Kong government injected HK9 billion into the banking system through market operations involving the purchase of US dollars for Hong Kong dollars, to address a squeeze in the interbank market and rising demand for Hong Kong dollars. The monetary authority expanded acceptable collateral for borrowing under the discount window to include US Treasury securities, while maturities of liquidity assistance provided through its discount window were extended to up to 3 months. The government announced a blanket guarantee of all customer deposits held with authorized institutions in Hong Kong. It also unveiled a facility to provide capital to locally incorporated banks. The government offered banks foreign exchange swaps and a term lending facility to provide Hong Kong dollar against approved collateral for maturities of up to 3 months.
Economic Analysis
Like many organizations around the world, the financial crisis is also affecting the company. The economic sphere is changing as financial markets are in turmoil and financial institutions are collapsing. The economic downturn experienced by many countries around the world also has an impact to Standard Chartered’s operations. The company faces unpredictable economy. Given that the United States and Hong Kong dollars are linked, interest rates in the Hong Kong economy broadly follow those in the US. The Hong Kong Monetary Authority lowered the base rate under its discount window.
Social Analysis
The impact of the current financial crisis is far-reaching. Because of the economic downturn, the spending patterns of the consumers as well as their demands.
Technological Analysis
Technological advances in the banking and finance sector enables the company to improve its products and services. Through technological developments, the company is able expand and grow.
Internal Analysis
Internal analysis is an important undertaking for the management as it enables the company to identify and analyze the business features that they can control and manage. SWOT analysis is done with the objective of identifying the capabilities and problems of the company. SWOT analysis is used to identify the internal business features that have a long-term influence on the company and its businesses.
SWOT Analysis
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 creating mutually advantageous relationships with the consumers. 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 – The strategic focus of Standard Chartered are on building values that are important to the consumers. The company focuses on developing markets. The company is committed to the success of its customers by offering them quality products and services.
2. Focus on the Basics
One of the company’s strategies that is believed to have mitigated the effects of economic downturn is its focus on the basics. There are four principles that the company has taken to heart. First is its commitment to its strategy. The people working in the company envision themselves to be the top international bank in the world. Before Standard Chartered operates in a given market, it makes sure that it fully understands the market, the demands of the consumers and what they need. The company also focuses on the fundamentals of banking. The company is also not afraid to take action amidst the financial turmoil. By helping the consumers even if there are economic challenges, the company is able to create long-lasting relationships with them. Lastly, the company never lost sight of its core values and principles.
Weaknesses
The company recognizes the impact of operational risks on the business. The company does not discount the fact that there are weaknesses in its operations and these weaknesses can lead to serious business problems. Risks in the company’s business processes are present. The company’s success is brought about its capacity to process high number of transactions across a wide network. It is expected that even a single problem in the company’s network of systems that handle the company’s business operations can lead to big problems, The weakness and vulnerability of the company’s systems will have negative effects on its performance.
Opportunities
The company in the year 2007 has tapped many business opportunities that promise a brighter future of the company. 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.
Existing Strategies
1. Strong Liquidity and Diversification
The company seeks to further strengthen its liquidity. Aside from this the company’s products and services as well as the markets that it serves are extremely diversified. 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. The company is present in most of the world’s biggest and promising markets. To improve performance in these markets, the Group continues to seek for innovative ways in which products and services can be delivered to the consumers. The group also seeks for diversity in terms of products and services as well as the markets to serve.
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 strategically so as to be able to seize opportunities as they arise 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 and it also propelled 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
There are over sixty-thousand people in Standard Chartered’s employ today in more or less 70 countries. These people bring success to the company. One of the key strategy of the company is to attract talented people that will share the company’s visions and philosophies and work towards the achievement of the company’s goals and objectives.
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).
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 behavioral 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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