Impact of Macro Environmental Factors on Commonwealth Bank Operations

This report analyses the impact of macro environmental factors on Commonwealth Bank's operations and discusses the framework for resolving the challenges faced by the organization. The report includes a detailed analysis of PESTLE factors such as political, economic, social, technological, legal, and environmental factors. The McKinsey framework has been discussed for resolving the challenges faced by the organization.

Running Head: Business Environment
Commonwealth Bank
Business Environment

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Table of Contents
Introduction.............................................................................................................................................................. 2
Background of the company.............................................................................................................................. 2
Macro Environmental Analysis......................................................................................................................... 2
Political................................................................................................................................................................... 2
Economic............................................................................................................................................................... 3
Social....................................................................................................................................................................... 3
Technological....................................................................................................................................................... 3
Legal......................................................................................................................................................................... 3
Environment........................................................................................................................................................ 4
Framework for resolving the challenges...................................................................................................... 4
Conclusion................................................................................................................................................................. 5
References................................................................................................................................................................. 6

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Introduction
Commonwealth Bank of Australia is a multinational financial institution operating in
various parts of the globe such as Asia, New Zealand, and United Kingdom and in the United
States. Company offers variety of financial services such as fund management, insurance,
retail and international banking, etc. to its consumers. They target both individuals as well
as business enterprises as their service offering is huge and wide. It is the largest company
in terms of Australian listed companies on the Australian Securitas Exchange as on August
2015 and it is the largest bank in Southern Hemisphere (Commonwealth Bank, 2018).
In this report identification of environmental factors’ impact over Commonwealth Bank’s
operations will be discussed in order to analyse the effect of macro environmental factors.
Along with this, the report will also focus over the application of frameworks in order to
eliminate or reduce the impact of external environmental factors with regards to the
improvement of organizational performance. Being a huge organization along with
varieties of services, it is the duty as well as necessity for the organization to manage its
operations in an appropriate manner. In addition to these aspects, report will also focus
over the frameworks to remove the challenges faced by organization due to macro
environmental factors.
Background of the company
Commonwealth Bank was founded in 1911 by the Australian Government which was later
on fully privatised in 1996. Its headquarters is situated in Darling Harbour, Sydney,
Australia. Commonwealth Bank is one of the “big four” banks of Australian banks along
with National Australia Bank (NAB), Westpac and ANZ. The bank listed in Australian Stock
Exchange in 1991 and currently, it holds more than 1,100 branches along with more than
4,300 ATMs. Macro environmental factors have direct impact over organizational
performance and as company operates in various parts of the globe, thus, organization
required to analyse the external environmental conditions of various countries so that
operations could easily be managed along with enhancing organizational performance
(Commonwealth Bank, 2018).

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Macro Environmental Analysis
It is the tool through which impact of external environmental factors could be analysed
over organizational operations. PESTLE analysis is one of the crucial tool through which
relevant factors could be determined which affects organizational performance (Gutierrez,
Boukrami & Lumsden, 2015). Following is the detailed analysis of PESTLE analysis:
Political
Political factors are one of the primary factors which affect the whole banking sector and in
relation with the operations of Commonwealth Bank, different types as well as different
countries’ political systems affects its performance (Messai & Jouini, 2013). This is because
organization is present in more than dozen countries and every country has its political
systems. In relation with the Australian political system, it is stable and the regulations
imposed by the Australian government are favourable which also supports organizational
operations and it also helps the organization to enhance its operations. Apart from this,
there are numerous factors such as level of corruption, overnight imposition of policies and
regulations, taxation laws, etc. which have direct influence over Commonwealth Bank’s
operations (Lasserre, 2017).
Economic
Economic factors such as inflation rate, economic system, growth rate, and economic
indicators have direct impact over Commonwealth Bank. With regards to the management
of operations, organization has adopted several advanced and dynamic strategies through
every type of situation could be handled along with reducing the negative effect of
economic factors from organizational operation. From the analysis, several economic
factors have been found which mainly affects organizational performance. These factors
are stability of economic system, government interventions, exchange rates, labour cost,
inflation and interest rates, etc. (Huang, Chiang & Tsai, 2015).
Social
Society’s culture, beliefs, perception, etc. are certain effective elements of social attribute of
external environmental analysis. These factors have also direct influence over
organizational performance. Commonwealth Bank always tries to contribute towards

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betterment of society along with generating various employment opportunities for the
local public (Wu & Shen, 2013). This helps towards the development of society which
ultimately helps the organization to set up its positive image amongst the target audience.
Corporate social responsibility is one of the crucial aspects for every organization which
needs to be considered in relation with the development strategies. Non-consideration of
CSR requirements affects organizational performance which will ultimately decline
organizational goodwill in the local as well as in the international market (Wibowo &
Wilhelm Alfen, 2014).
Technological
Technological factors have acquired an effective place in every business’ operations. With
the help of technological factors, organization could easily enhance its performance, satisfy
its target audience’s needs, attain competitive advantage, etc. From last five years,
technology has transformed the whole banking industry and this has provided various
opportunities to the organizations to uplift their performance along with expanding their
business in the local as well as in the international markets. Although, technological
advancements have reduced the importance of human resources along with increasing the
opportunities for enhance their skills for attainment of desired goals and objectives.
Commonwealth Bank is one of the “big four” banks of Australian banking industry and in
terms of maintaining the acquired position as well as for acquiring the leading position in
the target market, organization continuously invests in R&D department so that unique and
advanced measures could be originated (Yeh, Lee & Pai, 2015).
Legal
Every country’s legal frameworks, policies and regulations differ. Legal factors in the
banking industry plays vital role as financial institutions are required to execute their
operations according to the legal frameworks in order to avoid the unethical practices.
Apart from these factors, legal factors which affect banks’ performance are discrimination
law, copyrights, patents, consumer protection and e-commerce and the data protection
laws so that desired goals could be attained. In order to perform in better manner,
organizations in the banking industry should adopt appropriate strategies through which

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data of clients could be protected as leakage of data could affect organizational
performance in negative manner (Pan, 2015).
Environment
Environmental factors does not have much influence over Commonwealth Bank’s
operations but in order to avoid even small glitches in the operations, every aspect of
external environmental factors needs to be considered. Environmental factors are weather
conditions, climate change, waste management, paper usage, etc. Amongst these factors,
paper usage is one of the significant factor which affects organizational performance. In
order to enhance organizational performance as well as for the purpose of acquiring
leading position in the market, it is required for the organization to consider all these
aspects (Mare, 2015).
Framework for resolving the challenges
In order to mitigate the impact of external environmental factors over Commonwealth
Bank’s operations, it is required for the organization to analyse the challenges so that
relevant strategy could be adopted with the motive of reducing its impact. McKinsey’s
framework will be the most appropriate framework to resolve the challenges as well as the
issues faced by the Commonwealth Bank. This framework is basically dependent over
communicating the issue so that the issues could easily be reduced (Hanafizadeh &
Ravasan, 2011). Following are steps included in the McKinsey Framework for meeting with
the challenges faced by Commonwealth Bank:
 Define problem
 Structure problem
 Prioritise issue
 Develop issue analysis and work plan
 Conduct analyses
 Synthesize findings
 Develop recommendations

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These steps play essential role in the accomplishment of tasks of the organization in an
effective manner along with reducing the impact of macro environmental factors which
have a direct influence over organizational operations. This framework helps the
organization to determine the issue and challenges faced by the organization along with
structuring the issue in an appropriate manner. Further, issues are segregated as per
severity so that appropriate resolutions could be developed in order to meet up with the
challenges. In relevance with executing the resolutions, action plan are developed along
with development of issue analysis. The last steps of this framework are conducting
analyses; synthesize findings and developing recommendations for the purpose of
resolving challenges in an appropriate manner (Alshaher,2013).
Conclusion
From the aforesaid information, it can be concluded that Commonwealth Bank is one of the
largest banks in the Australian banking industry. Every organization requires considering
macro environmental factors so that desired goals and objectives could be attained. In this
scenario, it is necessary for the organization to determine the influence of these factors so
that appropriate resolutions could be implemented for eliminating their impact as well as
for enhancing organizational performance. In this report, macro environmental analysis
has been conducted in relevance with the Commonwealth Bank’s operations to analyse the
impact of these factors over organizational performance. Further, McKinsey framework has
been discussed for resolving the challenges faced by the organization.

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References
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Commonwealth Bank. (2018). Our company. Retrieved from:
https://www.commbank.com.au/about-us/our-company.html?ei=CB-footer_who-
we-are
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Huang, T. H., Chiang, D. L., & Tsai, C. M. (2015). Applying the new metafrontier directional
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