Strategic Management - Sample Assignment PDF
Added on 2021-04-21
21 Pages3775 Words62 Views
FinanceData Science and Big DataEconomics
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STRATEGIC MANAGEMENT(FINANCIAL INDUSTRY)Table of content1
Introduction:...............................................................................................................3Key features of the financial industry:........................................................................3PESTLE analysis:.........................................................................................................75 Forces Analysis:.......................................................................................................8Changes in the Companies in the Financial Industry: Innovating Resources andCapabilities...............................................................................................................12Conclusion:...............................................................................................................182
Introduction:Financial institution all over the world is dependent on the international financialindustry as it determines strategic management decisions of the organizations.Globalization has made competition even tough in the industry, the key aim issurvival and success of many financial institutions is to implement strategicpartnership, which makes them more competitive and offer diverse services to theirclients and consumers. It can also be observed that the immediate effects ofderegulation lead to geographic diversification and changes in policies, whichfurther results in the implementation of interstate banking restrictions and gradualreduction of intrastate. Technology and innovation play an important role in thefinance industry, organisations adapt to these in order to conform to the demand ofthe global customers (Coleman, 2016). Some of the organisations thatinternationally operate in an authoritative position are: The World Bank,International Monetary Fund, European central bank, World Economic Forum etc. The assignment focuses on the strategic management and its implementation onfinancial industries. The essay also highlights the key features of financial industrycomprised of market size, industry growth rate, competitiveness and marketstructure. It also analyses the external factors using Porter five forces and PESTELanalysis, focusing on its high impact on the strategic management strategy of thefinancial industry. In fact, this essay also deals with a real-life example of manyfinancial companies to focus the way the external forces impact on theirinnovativeness and implementation of resources and capabilities.Key features of the financial industry:Market size:As per Organization for Economic Cooperation and Development (OECD), financialservices make up 20-30% of total service market revenue and about 20% of thetotal Gross Domestic Product(GDP) in developed economies like Denmark, Germanyand Singapore. According to Al-Mulaliand Ozturk (2015), the most important threefinancial services like retail banking, life insurance and property and casual3
insurance generate annual revenue of approximately $6.6 trillion and have tendedto grow at 6% compound annual rate over the preceding decade.Industry growth rate:International Monetary Fund (IMF) stated that the total global economy is worth$77.6 trillion in recent years. Therefore, if the financial services from banking andinsurance sector are kept up to 6% growth rate for the years from 2014 to 2015,then its 2016 figure would be $13.1 trillion(Baptistaand Oliveira, 2015).On the otherhand, particularly global banking industry has experienced a healthy growth rate inrecent years, generating the Compound Annual Growth Rate (CAGR) of 4.7%between 2016 and 2017 for reaching a value of $134.1 trillion, as per the data fromMarkerLine Research Firm.The global significance of financial industry:This industry has global significance because global financial markets haveundergone major structural changes in recent years. Due to accelerating integrationand globalization, there is a prevalence of certain changes in world financialmarkets. Apart from this, global financial markets also recently experiencedincreased securitization.According to Borio (2014), these developments are alsospurred due to effective mergers and acquisitions worldwide. Broadening andexpansion of derivative markets are also one of a factor that makes this industryglobal. For examples, banks in all over Europe are merging and forming alliances onan unparalleled scale and thereby changing the banking environment and creatingglobal networks.Competitiveness:Competitors in banking sectors:International banks continue to grow their assets as the world economy expands. Infact, there is debate whether China's economy is bigger than the United Statesregarding banking industries. 4
BanksAssetsIndustrial and Commercial Bank of China$3.62 trillionHSBC$2.57 trillionTable 1: Competitors in banking sectorsIt has been found that Industrial and Commercial Bank of China is the largest bankin the world, which has $3.62 trillion assets and $134.8 billion revenue. On the otherhand, HSBC, its competitor has 1800 locations in the UK and has $2.57 trillionassets(Coleman, 2016).Competitors in Life insurance sectors:Some important competitors among global insurance companies are AXA, ZurichInsurance Group and Berkshire Hathaway. In recent years, AXA increased itsfoothold in Latin America and acquired 51% of insurance operations in Colombia. Onthe other hand, Zurich Insurance Group operates more than 170 countries inSwitzerland. Its core businesses are general insurance, global life and farmersinsurance. Apart from that, Berkshire Hathaway is an investment managerconglomerate which is engaged in insurance, rail transportation, finance, andretailing through its subsidiaries(Martinset al.2014).Product lifecycle stage:Introduction:Financial industry which is comprised of banking and insurancesectors deliberately offers effective services like financial leasing, payment services,venture or risk capital guarantees and commitments. As a result, the market size offinancial industry comprises about 16.9% of global economy, as measured inGDP(Philippon, 2015). Growth: According to International Monetary Fund (IMF), total financial servicemakes up about 60 to 65% of total global revenue. In fact, it has found that thefinancial service in developed economies also raised up to 6% growth rate in recentyears.5
Maturity:Figure 1: Global Market ShareAs per the above figure, there is an effective comparison of a global market share ofrevenue of largest global investment banks in 2017. According to that, the revenueof JP Morgan is of 8.1% of the global investment banking revenue (Coleman, 2016).Industry types:A financial industry like banking sectors is more like having oligopolistic marketstructure. It is because it is an industry, which is controlled several small firms allover the world. Some banking firms like a bank of America, JPMorgan Chase,Citigroup, Wells Frago and PNC boasted nearly 40% of their deposits, which leads tothe development of financial industry altogether(Philippon, 2015).PESTLE analysis:Political forces:6
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