External environment for banking industry Essay

Standard Chartered is the world’s taking emerging markets bank headquartered in London. Standard Chartered employs 30. 000 people in over 500 locations in more than 50 states in the Asia Pacific Region. South Asia. the Middle East. Africa. the United Kingdom and the Americas. It is one of the world’s most international Bankss. with a direction squad consisting 70 nationalities. Standard Chartered has been committed to Hong Kong and China for about 150 old ages. Standard Chartered Bank opened its first subdivision in China in 1858 and is the oldest foreign bank in the state. The Bank has operated in Hong Kong since 1859 and has been publishing Hong Kong banknotes since 1862. Standard Chartered PLC listed on the Stock Exchange of Hong Kong in 2002.

The bank is listed on both the London Stock Exchange and the Stock Exchange of Hong Kong and is in the top 25 FTSE-100 companies. by market capitalisation. It serves both Consumer and Wholesale Banking clients. Consumer Banking provides recognition cards. personal loans. mortgages. sedimentation pickings and wealth direction services to persons and little to medium sized endeavors. Sweeping Banking provides corporate and institutional clients with services in trade finance. hard currency direction. loaning. detention. foreign exchange. debt capital markets and corporate finance.

Standard Chartered is well-established in growing markets and aims to be the right spouse for its clients. The Bank combines deep local cognition with planetary capableness. The Bank is trusted across its web for its criterion of administration and its committedness to doing a difference in the communities in which it operates.

The new millenary has brought with it two of the largest acquisitions in the history of the bank with the purchase of Grindlays Bank from the ANZ Group and the acquisition of the Chase Consumer Banking operations in Hong Kong in 2000. These acquisitions demonstrate Standard Chartered house committed to the emerging markets. where it has a strong and established presence and where it foresees future growing. With the acquisition of ANZ Banking Group. StanChart became the largest foreign bank in footings of subdivision web and profitableness in India. The merged entity has a combined web of 61 subdivisions and 74 ATMs across 15 metropoliss of the state.

Understanding the planetary. political. technological and socio-cultural sections of its environment is evidently critical to Stanchart’s success. It has acquired companies in order to consolidate its planetary operations ; operates in 50 states ; seeks to expose environmental and societal duty ; and trades with communications engineering. It strives to take advantage of chances in the dynamic environment. the demand to cover innovatively with new acquisitions. the job of reframing the public’s position of banking and on-going cut pharynx competition from other commercial Bankss and non banking entities. The bank therefore has to do clear the communicating challenge and do clear the planetary nature of its operations to the wider community. authoritiess and the population at big.

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Research grounds suggests that external environment affects a firm’s growing and profitableness over clip. Changes in political. regulative characteristics. the strength of different nations’ economic systems at different times. and the outgrowth of new engineerings are a few illustrations of conditions in the external environment that are impacting Bankss like StanChart and several other houses throughout the universe whether in fabrication or services sector. The companies in attractive environments perform better than the companies that are in less attractive environments. Therefore scheme development is about ‘fit’ i. e. placing chances in the environment and edifice scheme fiting resource capablenesss to those chances.

The resources and competencies of organisations besides play an of import function as they explain the differences between organisations. possible singularity and hence superior public presentation. The ‘stretch’ position argues that schemes should be built on the alone competencies and resources of an organisation by seeking out markets in which competencies have particular value or by seeking to make new markets on the footing of such competencies

Another consideration is the stakeholders of company. Organizations have different stakeholders ( stockholders. clients. employees. authorities ) who have outlooks of the organisations and may exert considerable influence and power over the scheme to be followed

As said earlier. the external environment plays an of import function for Bankss. Most of the external factors are beyond the control of a bank. The factors such as competition ; political. economical. legal. authorities regulations and ordinances influence the firm’s pick of way and action and besides affect the internal environment of a bank. The external environment influences a company’s strategic options every bit good as the determinations made in visible radiation of them. The firm’s apprehension of the external environment is matched with cognition about its internal environment. Matching the conditions of the two environments is the foundation the house needs to organize its strategic purpose. to develop its strategic mission. and to take strategic actions in the chase of strategic fight and above-average returns.

The external environment encapsulates many different influences which makes the undertakings of CEOs more hard. Identifying the different environmental influences though makes sense. is non really much utile as the overall image of these influences does non emerge. The 2nd trouble is that of the velocity of alteration. The impact of technological alterations on concerns is much faster than of all time before. Technology has transformed the manner in which the banking concern is carried out. In add-on the competitory force per unit areas are besides driving more Bankss to diversify their merchandise scope in response to market demands.

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We can loosely categorise this environment into two types: remote environment and operating environment.

Distant environment: This environment consists of a set of forces that originate beyond a firm’s operating environment. This comprises of political. economic. societal. technological and industrial forces which create chances. menaces and restraints to the house. For illustration macroeconomic instability in an economic system characterized by chronic rising prices. financial instabilities and periodic balance-of-payments crises besides affect all the Bankss.

Operating environment: The operating environment involves the factors that provide many of the challenges a bank is confronting when trying to pull or get indispensable resources or when endeavoring to productively market its goods and services in the immediate competitory place. client profile. repute among providers and creditors and accessible labour market. The operating environment is besides called the competitory or task environment. Hence by sing conditions in the operating environment concern can be much more proactively planned. An organization’s external environment is shown in the figure below. The figure depicts the firm’s concern country. remote environment and the operating environment cutting into an country of entire external environmental impact on the house. In the banking industry if the Reserve Bank increases the modesty demands for the commercial Bankss it would impact all the banking companies in the economic system. This is an operational hazard.

Over the past two decennaries. commercial Bankss across the Earth have sharply repositioned themselves to vie under new economic. technological. and regulative conditions. These establishments are no longer protected by regulative entry barriers. and are confronted with a pronounced transmutation in telecommunications and computing machine engineering. Banks can no longer rely on traditional banking theoretical accounts and hence have invested immense sums of resources in the hunt for new competitory schemes. While many of these efforts had bootless consequences. the most successful strategic inventions have set a new paradigm in banking and have changed the manner Bankss compete. The mode in which commercial Bankss presently underwrite their loans. finance their activities. turn their franchises. administer their services and market their images can barely be compared to 1s that bankers adopted in 1970s.

Coming to the regulative environment. Bankss still do non vie in a wholly unregulated environment. Regulations continue to determine banking schemes for illustration. in US. the federally insured sedimentations are the footing of community bank concern scheme. The Community Reinvestment Act ( CRA ) loans are a compulsory for all Bankss ( in India. precedence sector recognition is compulsory for all commercial Bankss. this would be dealt in item in subsequent pages ) . Investment determinations of every bank are influenced by capital ordinances. The system of multiple regulators can impact the pick of organisational signifier of banking companies. While most Bankss are regulated by the RBI ( Reserve Bank of India ) . some are under double control of authorities and RBI. In India. all Bankss are capable to RBI’s ordinance but the model is non unvarying in the sense that populace sector Bankss. concerted Bankss. and private Bankss are governed by important differences and non all of them have entree to the payments system.

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The Department of Company Affairs ( DCA ) regulates the sedimentation taking activities of non-banking non- fiscal companies and besides some activities of Non Banking Financial Companies ( NBFCs ) . SEBI regulates the capital markets and supervises stock exchanges. common financess. securities traders and agents. merchandiser bankers. recognition evaluation bureaus and venture capital financess. Companies in the insurance sector are regulated by IRDA. Banks are permitted to be involved in insurance activity through joint ventures/equity participation/selling bureau type agreements. Therefore. the object of ordinance itself is susceptible to some convergence.

Several dirts in Bankss have led regulators to do increased informational demands on Bankss. As banking markets grow more concentrated. anti-trust Torahs may progressively restrict the graduated table and range of bank amalgamations. At a lower limit. ordinance is merely a fixed cost that must be borne by Bankss. which does non act upon a bank’s behaviour. At the other extreme. and possibly in a more realistic state of affairs. ordinance can significantly impact banks’ strategic picks and influence competition in fiscal markets. Inventions introduced in the markets are frequently driven by. and in some instances win entirely because of the predominating regulative environment.

Similarly. commercial banks’ competitory schemes are shaped by both new engineerings. and the restrictions of engineering. Retail banking had traditionally been built around the paper-based payments. but IT has created new strategic possibilities for it. Electronic bringing of banking services can cut down a bank’s operating expense costs to a great extent. However abandoning bank subdivisions can besides give rise to black strategic costs. New engineerings have a led to a great transmutation in the hazard direction patterns of commercial Bankss. but application of such techniques may besides make some unanticipated new hazards. After coevalss of technological stasis in the banking industry. the on-going rapid gait of technological alteration has made “strategic innovation” a feasible competitory scheme for Bankss.