1101IBA: Management Concepts- Griffith College- ANZ Bank

REPORT CASE

‘Australian banks in Asia’, available from page 117-118 of your text book. It is suggested that you select one (1) bank to focus on for your research and writing, however, you may choose to write about the banks from the case collectively, as a group, which is also fine, depending on your Management Issue.

REPORT OBJECTIVES

You are expected to address the following objectives in your report:

1. From your initial understanding of the case context/background at the Australian Banks case, outline one (1) Management Issue (problem, challenge or opportunity) that would be relevant to managers in relation to planning/ strategic management. Use Chapter 7 Planning OR Chapter 8 Strategic Management from your Textbook/Week 7 course site resources to assist with identifying a relevant research area. Also, remember to consider the SWOT analysis tool;
2. Source relevant academic literature (at least 5 Journal Articles) that relate to views/ arguments/ themes about your chosen Management Issue
3. Use the academic literature to support your claim that the Management Issue identified can be considered to be a relevant issue;
4. Identify a relevant Theory/Model that relates to the Management Issue identified, suitably explains the existence of the issue, and helps you to understand the issue;
5. Use the academic literature to assist in critically discussing your chosen explanation and choice of Theory/Model in a balanced manner;
6. Indicate how the academic literature proposes the Management Issue you identified could be addressed through a Recommendation.

The CR2 will assist in developing your written communication, information literacy, secondary research, critical and innovative thinking and academic integrity skills. These skills are critical to fulfilling the role of a practicing manager.

BEFORE YOU START DEVELOPING YOUR CR2, VISIT APPENDIX A IN THE EXERCISE 1 SECTION OF THE WORK BOOK FOR ADVICE. MODELLING OF SECTIONS OF PAST STUDENTS PAPERS WILL ALSO BE AVAILABLE ON THE COURSE SITE.

IMPORTANT NOTES:

1. This report is NOT a case study; the purpose of the case story is to provide you with a scenario that exposes a Management Issue you can research.
2. A Management Issue is something that managers have to address within their organisation and work (e.g. problems, challenges, or even opportunities or threats relating to the Management approach taken, influencing the management functions, requiring consideration). Managers will notice there is an issue because they see symptoms existing in their organisation now, or potential symptoms in the future, that do, or can, affect the success of their organisation. By addressing the Management issue that is connected to these present or potential symptoms, managers will enhance the operation of their organisation. HINT: Use the SWOT analysis tool to help you identify your Management Issue!
3. A minimum of 5 academic standard - or scholarly - reference sources are required.

Contents

Management Issues at Australian Bank

1. Introduction
2. The Issue of Identification
3. Critical Discussion
4. Recommendations
5. Conclusion
6. References

Introduction

The essay discusses one management issue that is experienced by one Australian Bank that operates in the Asian region. The bank that will be used in this discussion is the Australian and New Zealand Banking Group Limited. The business abbreviation for the bank is ANZ Bank. Based on market capitalization, ANZ Bank is the fourth biggest in Australia. In New Zealand it is the biggest bank. The bank is multinational because it operates in thirty other countries including Asian countries. In 2008, the Dow Jones Sustainability Index listed the ANZ Bank as the most sustainable internationally. Management issue implies the business activities and processes that are used in ensuring effectiveness and efficiency in the achievement of mission and goals of an organization. The management issues include problem, challenges and opportunities. In the essay, the management issue that is discussed is the challenges of business expansion in Asia.

The Issue of Identification

Multinationals continuously expand their business activities in different countries. ANZ Bank; for example, has increased its presence in Asia through expanding is several countries. Asian countries that the business has a presence in include the emerging markets of Indonesia, China, and Vietnam. Expansion in foreign markets is a challenging activity because it involves high risks and resource requirements. The expansion approach that the business has adopted is the super-regional strategy (Mohanty & Turner 2010). The business approach enables the ANZ Bank to set effectively and efficiently operations in different regions of Asia. The Chief Executive Officer, Mike Smith, is responsible for ensuring success in the international operations of the bank despite the business challenges. He is confident that all challenges that multinationals experience have appropriate solutions. The challenges that ANZ experiences in the Asian expansion business activities are; risky business environment, high setup expenses, strict regulatory processes (Joshi, Cahill & Sidhu 2010).

Risky business environment presents a lot of challenges the ANZ Bank. There is intense competition in the financial sector of Asia. The major multinationals that have a strong presence in the Asian financial sector include Standard Chartered, Santander, Citi, and HSBC. These banks continuously develop competitive strategies that aim at hindering other banks from entering their markets. Setting up an operational branch in foreign countries requires a lot of financial resources. The multinational financial institutions are required to have a budget that allocates millions of United States dollars for the expansion efforts. The financial resources are used for marketing activities, acquiring operation permits and licenses, developing branches and adopting competitive innovations and technologies that emerge in the global banking industry (Mohanty & Turner 2010). Most Asian economies have a strict regulatory environment. The regulations in the financial sector have been enhanced because of the negative effects that emerged during and after the 2008 global economic crisis. The central banks thus closely control the levels of interests, lending, and borrowing.

Critical Discussion

The management and staffs of business organizations should continuously adopt strategies that effectively address the challenges experienced in the business environment. The ANZ Bank currently earns record profits from their international operations. The shareholders of the bank earn high dividends. In the last financial period, the shareholders got A6.49 billion bonus earnings. In spite of the rapid trend of profit increase, many financial experts criticize the super-regional business development approach (Huang, Zhou & Zhu 2012). The opinions of

these financial experts are not surprising. Multinational banks like Westpac and NAB experienced an increase in losses after they engaged in strong and aggressive offshore investments. These two organizations were thus forced to retreat to their domestic operations, so as to reduce losses from the overseas operations. Banks usually use three approaches when expanding. The first expansion approach is the wide but shallow business strategy. The business strategy enables financial institutions to have a huge presence in foreign economies and high concentration in commerce flow through financial products such as credit cards and business credits. The business strategy is further enhanced through a central treasury that raises finances from the general economy and then transfers the funds to the economic sectors that can effectively utilize it (Senadheera, Warren & Leitch 2011).

The second expansion strategy focuses on developing financial institutions that have a deep presence in few economies or countries. These banks focus on developing domestic retail franchises that are effective in business, in addition to business organizations that are mostly self-funding (Mohanty & Turner 2010). Santander is one multinational bank that adheres to this business model. The third business strategy involves developing universal financial institutions that provide all banking services in any sector of the economy. Banks that follow this business model include the Citi and HSBC banks. ANZ Bank follows the first business strategy that involves great and shallow business strategy that ensures high levels of finance flow.

Recommendations

The management of ANZ Bank can adopt various strategies or measures that effectively address the challenges experienced in the Asian market operations. The bank can cheaply operate in the Asian markets though franchising. Franchising is relatively affordable than building bank branches in foreign countries. Franchising also enables the citizens of the Asian countries where the bank operates to participate in the management and decision-making processes of the bank. Franchising is given to existing business entities that have structures, resources and financial systems in place. ANZ bank thus saves the costs associated with hiring staffs, installing new technologies, processing permits and licenses, and hiring or building premises. To address the strict regulatory framework challenge, the ANZ bank should strive to raise local deposits in the foreign country that it has operations (Mohanty & Turner 2010). Raising local deposits has less regulatory or oversight processes, than transferring financial deposits across several markets or countries. Different markets have different regulatory procedures. Compliance by multinational banks is, therefore, very challenging. When raising local deposits the ANZ in a particular country like China, the ANZ Bank is supposed only to adhere to the regulation set by the central

bank of only one country (Jones 2012).

ANZ Bank is supposed to invest in the Asian markets or countries that have increasing economic growth trends. The economic growth trends in the desired economic should most preferably be higher than the economic growth level of the home country of Australia. One country with high economic growth trend in Asia that ANZ Bank can increase operations in is China (Jones 2012). If the economy of an Asian economy improves by approximately 6% for several years, while that of Australia increases by 3% in the same period, then the financial returns of the ANZ Bank will be much greater than that of other financial institutions based in Australia.

Conclusion

The discussion has effectively addressed the challenges that are experienced by the ANZ Bank in its Asian operations. The challenges are important management issues that the bank should address if the level of revenues and profitability is to be further improved. Some of the management challenges experienced by the ANZ Bank are; high foreign expansion costs, risky business operation environment, and strict regulatory measures by the foreign governments. Effective measures to address the management issue related to the challenges have been satisfactorily shown. The high expansion costs can be reduced by using franchising business strategy. The franchises have set process, technologies, and processes. The regulatory framework is eased by raising deposits from the domestic market. The Asian governments highly monitor and control the deposits that are raised and transferred to several countries or economies.