MAN306 - Business Strategy: Commonwealth Bank Analysis & 5-Year Plan

This report provides a comprehensive analysis of the Commonwealth Bank of Australia's (CBA) business strategy, focusing on its current five-year strategy centered around consumer welfare and supported by pillars of people, technology, financial strength, and productivity. It evaluates the effectiveness of this strategy, highlighting both its successes and shortcomings, particularly in risk management and handling fraudulent activities. The report then recommends a future strategy that emphasizes digital banking and leveraging advanced technologies to enhance customer engagement. It suggests focusing on retail and commercial banking, where CBA holds competitive advantages, and building leadership in the digital space to cater to the increasing preference for digital channels. The analysis includes specific actions the organization should take to maintain a strong competitive position, such as improving internal controls and investing in cybersecurity. Desklib offers a wealth of similar solved assignments and resources for students.

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Business Strategy

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Executive Summary
Strategic management is the wide term which includes number of things in its ambit. It is not
possible for the organization to conduct any function without framing the strategy of the
organization. In other words, it can be said that effective strategy is the key to the success of the
organization. This report is prepared in terms of Commonwealth bank of Australia.
Commonwealth Bank is the leading bank of Australia which provides best financial services to
their clients and also ensures the financial advantages to their clients.
Current strategy of the Commonwealth Bank of Australia is the consumer focus strategy, which
means, the main attribute of this strategy is the consumer satisfaction for the purpose of ensuring
future success and growth. As this strategy stands of four pillars that are people, technology,
financial strength, and productivity. The main aim of this report is to discuss the present five year
strategy adopted by the Commonwealth bank of Australia and also giving recommendation to the
future five year strategy which can be adopted by the organization for ensuring success and
growth.

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Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
About organization......................................................................................................................................4
Strategic evaluation of present strategy......................................................................................................5
Future Recommended strategy...................................................................................................................7
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9

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Introduction
Strategy in the organization is deemed as most important element or process of the organization,
as it is the only function on which each and every process of the organization. Strategy is defined
as the method or plan through which goals and objectives of the organization are achieved. There
are number of experts who studied the concept of the strategy, but still no exact definition of the
strategy is derived. As scope of the strategic management is very wide and it includes number of
aspects in its ambit, as number of experts believed that present situations of the organization
must be analysed effectively and also it includes the forecasting of changes which occurred in
market or industry in near future. Further, the manner through which they succeed in this plan.
However, other experts believe that it is not possible to predict the future and they prefer that
strategies evolve organically.
Some experts stated that strategy is the process through which scope and direction of the
organization for long run is determined for the long term, and they further state that management
is also responsible to determine the manner through which resources of the organization are
determined in context of meeting the needs of market and stakeholders (Ren & Hui, 2018.
Strategic evaluation of the organization is deemed as most important task because on this
function future performance of the organization depends.
This report mainly discuss the present strategy of the Commonwealth Bank of Australia, which
means, five year strategy of the organization, and it further recommends the strategy which is
suitable for next five years in terms of meeting the set goals of the organization. Structure of this
report includes the brief discussion of the organization, evaluation of the present strategy, and
recommendation of the strategy for the next five years. Lastly, brief conclusion is stated in terms
of ending this report.
About organization
Commonwealth Bank of Australia is the leading provider of the integrated financial services
which mainly includes the retail, premium business, and the institutional banking funds
management, superannuation, insurance, investment and share-broking products and services.
International branches of the organization mainly include the Asia, Europe, New Zealand and
North America. In all these countries, Commonwealth Bank offers number of services. The
vision of the organization focuses on giving the securing services and also focuses on enhancing
the financial wellbeing of the people business and communities (Commonwealth Bank, 2018a.
Values of the organization play important role in the functioning of the organization, as these
values guides the interaction of the organizations with the customers, business, colleagues, and
community. These values include the integrity, accountability, excellence, and service.
Executive team of the organization ensures that business must achieve the profitable growth and
support in context of engaging and encouraging the employees of the organization. Further,
organization ensures the effective performance through the approach of strong corporate
governance. As this approach of the organization helps them in maintaining the highest
professional standards and also enable them to act with integrity during the course of their
business activities (Commonwealth Bank, 2018b.

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Strategic evaluation of present strategy
Current five strategy of the Commonwealth Bank of Australia mainly focus on the consumer
welfare. Customers are defined as the number one priority of the organization, because they are
the one who unite the organization. Customers are the central element of any decision taken by
the organization, and management continuously focus on securing and wellbeing of their
customers. In other words, organization mainly focuses on giving the best experience to their
customers. Their five year strategy actually derives the long term value for the customers,
shareholders, and people of the organization. As this strategy clearly compile with the vision of
organization that is ensuring the financial wellbeing of the people, business, and community.
This strategy stands on the four important pillars in terms of ensuring the best services to the
customers and all these pillars are described below-
People- Commonwealth is blessed with the culture which is vibrant, focused, and high integrity,
as their employees and other staff members play central role in the success of the organization.
In this context, organization continually invests in the development of their people, work on the
talent management and ensure that groups ensure safety and diversity for their peoples. The
employees and other staff management are defined as the central to their success, as they are
engaged in customer focused and operates in such culture which encourages the integrity in the
organization. As employees of the organization are defined as the competitive advantage of the
organization, and some important elements in this context are defined below-
 Almost 51800 employees of the diverse workforce of the organization served to the
customers.
 Almost 1350 branches are operated in Australia in terms of meeting the changing needs
of the 16.6 million customers.
However, some issues related to the employees are also faced by the organization and all these
issues directly affect the execution of the strategy. Recently, royal commission investigates the
matter in which employees of the organization are held guilty for the misconduct. Few
employees of the organization unfairly charged extra amount from the customers in terms of
meeting their targets and also stole petty cash from the bank for same reason. Almost 41
employees of the bank have been sacked for the misconduct, and 9 have resigned because of the
investigation. This attitude of the employees cause negative effects on the customers and create
hurdles for the organization (Chalmers, 2018.
After these incidents, it can be said that this pillar of the organization strategy does not work well
and organization fails to manage this element of the strategy in effective manner.
Technology- This is the second pillar of which main aim of the five year strategy of the
organization is depends. As bank focus on implementing the updated and best technology in
terms of meeting the evolving needs of their customers. Applications are developed by the
bank that ensures the leverage in the time capabilities, consider new ways to interact with the

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customers, offer more value and better price to the customers, gives more stability, and
enhance the productivity of the organization. Some important elements of this pillar of the
strategy is defined below-
 Its real-time core banking system makes it the first bank in Australia in context of go-
real time.
 It launches first financial app in Australia, and this app reflects almost 30 million
logins in a week.
 Organization gets almost 6.2 million online customers.
 It enables the customers to open the new savings or transactions account in less than 3
minutes.
 Extensive data and analytics capabilities enhance the experience of the customers.
 Significant investments in the cyber security are given for ensuring the protection of
the customers (Commonwealth Bank, 2018c.
Productivity- Organization mainly focuses on simplifying the ways through which organization
can achieve the better results for their customers and also for their people. This is deemed as the
most important function of the good business an also important for the long term growth of the
business. In this context, management focus on reducing the errors and also on reducing the unit
cost of the organization. In other words, it focuses on simplifying the ways through which things
are done in terms of ensuring the capability to invest in the future. Some important elements of
this pillar are defined below-
 Cost-income ratio of the organization was 41.8%, and this number reflects the focus of
the organization on the cost management and efficiency.
 Bank invests on continuous basis in the productivity and growth initiatives, as $ 681
million is invested in the FY-2017.
 Organization focus on improving their customer experiences by reducing their cost by
giving more self-service options to the customers.
Financial Strength- After the global crises, organization discovered that strength and ability of
the bank makes them trusted brand in the eyes of Australian customers for ensuring the security
of their money. Strong and flexible balance sheet of the organization is important in terms of
ensuring the continuous support to the customers and capitalizing the opportunities. Strength of
the organization lies in the continuous performance of the organization and also in the deep
expertise of the organization in financial and risk management. It also lies in the long term
operational stability. Some important elements in this context are defined below-
 Commonwealth Bank is the largest company of Australia by market capitalization, with
total assets of $976 billion.
 This organization has more than 80000 shareholders and almost 76% average profits are
distributed as dividend.
 Common equity tier 1 ratio 10.1% APRA basis, 15.6% international basis.

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 67% deposit funded.
 Solid credit ratings: AA- / Aa3 / AA- (S&P, Moody’s and Fitch)
Above stated strategy is effective in nature and works well for the CBA, but still some loopholes
are present in this strategy. CBA fails to take measures in terms of the risk management and
fraudulent activities. During the reporting period of the current strategy, numbers of challenge
are faced by the management such as inquiry is committed by the Royal Commission for the
fraudulent activities of the employees of the CBA. All these issues and challenges cause loss of
reputation to the CBA and also result in the broken trust of the consumers. In other words, CBA
fails to ensure the effective internal working while serving their customers and also fail to focus
on these areas while framing thee current strategy of the organization.
Future Recommended strategy
The transformation of the Commonwealth bank is underway with the strategic focus on the retail
sector and commercial banking businesses which is aimed at delivering the simpler and best
banking services for its customers. This is the area in which actual competitive advantages and
strengths are present, as CBA further focus on building its leadership in the digital banking. This
Bank has more than 6.5 million active Australian consumers on digital platform and more than 5
million mobile app logins each day. It becomes important for the organization to focus more on
the digital platform, because in future more number of customers prefers the digital channels.
These new advanced technologies allow the CBA to strengthen their customer engagement with
the offerings which are personalized and innovative in nature. As organization can offer number
leverages to their customers with the help of mobile apps, swipe cards, ATMs, card readers, and
sensors. It also gives the new opportunity in context of the real-time asset financing. There are
number of banks in the market which use the blockchain technology in their banks, because this
technology in the organization offers secure and convenient options to the customers in
comparison of the traditional banking process.
Blockchain in the banking industry gets spotlight because of its ability to reduce the frauds in the
financial sector. There are number of financial instruments in which blockchain is used such as
banking, including payments, private equity asset transfers, tracking derivative commodities,
trading management, spending, mortgage and loan records, microfinance applications, and
customer service records (Reiker, 2018.
In terms of the payments occurred in cross borders blockchain can be used by CBA such as
blockchain reduce the processing time of the transactions to minutes in comparison of the
standard time of three to six days. This further elevates the experience of customers to the new
level with cost-real time transactions. Further organization can improve the stack processes by
block chain which mainly includes the clearing networks, international transfers, clearing and
settlement, auditing, reconciliation, and reporting; and asset ownership.

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However, Digital agenda by itself cannot be considered as enough criteria in context of ensuring
the leading position of the bank in market. As branch networking is equally important, currently
more than 1000 branches are operating by the bank across the globe and also the group’s
Australian-based contact centers. In terms of getting the leading position, bank needs to focus on
the branch networking also. Combination of effective branch networking and strong digital
platforms works well for the organization and help the organization in giving best services to
their customers. In other words, combination of the best digital experience with the best branch
networking will result in growth and success for the organization.
In last few years, few challenges are faced by the CBA which mainly includes the reputational
and regulatory issues, and all these issues cause huge loss to the organization in both the terms
that are monetary and reputational. In terms of referring to the Australian Prudential Regulatory
Authority’s, prudential inquiry is conducted in the board and management of the organization.
CBA further settled number of actions of the Court with AUSTRAC and ASIC and the Royal
Commission in the financial services industry. Management accepted the fact that CBA made the
mistakes, and they fail to implement the strategy in right manner.
CBA further recognize that they fail to done enough good job for their customers, as some things
goes wrong and few mistakes are made by the organizations. Therefore, it is necessary for the
organization to take measures and ensure that such mistakes are not committing again by the
organization.
The big part of the future strategy is to make sure that we are simple and better bank for our
customers, and work closely with all those customers who have bad experience with our bank.
The most important area in which this organization needs to work while framing the strategy is
ensuring that these issues do not occur again. CBA focus on gaining back the trust of the
customers which is broken because of the mistakes occurs by CBA.
Simplifying the bank includes the formation of the strategic choices in term of its future
direction, and the process accelerated under this needs to focus on the core Australian and New
Zealand retail and commercial banking sector, because this sector generates more than 90% of
the group profit and also contributes in the majority of its organic capital.
Following Decision are taken by the CBA in terms of selling the Australian Comm Insure Life
and New Zealand Sovereign Life insurance businesses to the AIA Group-
 The proposed demerger of 2019 of the group wealth management and the mortgage
broking operations as it includes the including Colonial First State, CFS Global Asset
Management, Count Financial , Financial Wisdom and Aussie Home Loans.
 CBA sale its 37.5% equity interest in BoComm Life Insurance Company of China to
Mitsui Sumitomo Insurance Company.
 CBA further planned to sale its group shareholding in TymeDigital of South Africa to
minority shareholder, African Rainbow Capital; and

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 Strategic reviews in terms of the group general insurance business, CommInsure, its
shareholding in Vietnam International Bank and its Indonesian life insurance business
PTCL (John, 2018.
All these Decision taken by the organization ensures the inflow of cash in the group and through
these funds organization can more stringently focus on the digitalization and Branch networking.
After considering the above statement, following are the most important attributes which need
focus of the CBA in context of the future strategy-
 Digital platform is the most important area of future strategy because in coming times,
customers mainly rely on the digitalization and prefer those banks which offer them best
services through digitalized modes.
 Branch networking is another area which needs to be focused by the organization because
digital platform services are not the enough criteria to get the leading position in the
market.
 Blockchain technology can be adopted by the organization in terms of preventing the
financial frauds occurred in the organization.
Conclusion
After considering the above facts, it is clear that current five strategy of the Commonwealth
Bank of Australia mainly focus on the consumer welfare. Customers are the central element of
any decision taken by the organization, and management continuously focus on securing and
wellbeing of their customers. As this strategy clearly compile with the vision of organization that
is ensuring the financial wellbeing of the people, business, and community. This strategy stands
on the four important pillars in terms of ensuring the best services to the customers that are
people, technology, financial strength, and productivity.
Above stated strategy is effective in nature and works well for the CBA, but still some loopholes
are present in this strategy. CBA fails to take measures in terms of the risk management and
fraudulent activities. All these issues and challenges cause loss of reputation to the CBA and also
result in the broken trust of the consumers. CBA fails to ensure the effective internal working
while serving their customers and also fail to focus on these areas while framing thee current
strategy of the organization.
It becomes important for the organization to focus more on the digital platform, because in future
more number of customers prefers the digital channels. However, Digital agenda by itself cannot
be considered as enough criteria in context of ensuring the leading position of the bank in
market. Combination of the best digital experience with the best branch networking will result in
growth and success for the organization.

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References
Chalmers, S. (2018). Commonwealth Bank boss Matt Comyn faces parliamentary grilling over
CBA misconduct. Available at https://www.abc.net.au/news/2018-10-11/big-bank-
bosses-face-parliamentary-grilling/10364290. Accessed on 18th October 2018.
Commonwealth Bank of Australia, (2018a). About Commonwealth Bank. Available at
https://www.commbank.com.au/about-us.html. Accessed on 18th October 2018.
Commonwealth Bank of Australia, (2018d). International branches. Available at
https://www.commbank.com.au/about-us/our-company/international-branches.html?
ei=abt-international-branches. Accessed on 18th October 2018.
Commonwealth Bank, (2017). Annual Report 2017. Available at
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/
annual-reports/annual_report_2017_14_aug_2017.pdf. Accessed on 18th October 2018.
Commonwealth Bank, (2018b). Our Company. Available at
https://www.commbank.com.au/about-us/our-company.html#exec. Accessed on 18th
October 2018.
Commonwealth Bank, (2018c). Our Strategy. Available at
https://www.commbank.com.au/content/commbank-neo/2014shareholderreview/
strategy.html. Accessed on 18th October 2018.
Commonwealth Bank, (2018e). Annual Report 2018. Available at
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/
results/fy18/cba-annual-report-2018.pdf. Accessed on 18th October 2018.
John, D. (2018). Strategy To Build A Simpler, Better Bank. Available at
https://www.commbank.com.au/guidance/newsroom/cba-fy18-results-strategy-
201808.html. Accessed on 18th October 2018.
Reiker, F. (2018). Embracing Digital Transformation: The Future Of Banking. Available at
https://www.digitalistmag.com/customer-experience/2018/02/21/embracing-digital-
transformation-future-of-banking-05880240. Accessed on 18th October 2018.
Ren, C. and Hui, Y. (2018). Responses to Rival Exit: Product Variety, Market Expansion, and
Preexisting Market Structure, Strategic Management Journal, 7(2).