Commonwealth Bank of Australia: Strategic Portfolio Analysis Report

This portfolio analysis examines the Commonwealth Bank of Australia (CBA), a leading Australian bank. The report begins with an introduction to CBA's background, including its founding, privatization, and financial services offerings. It then delves into the bank's strategies, focusing on its adoption of cost and differentiation focus strategies within a niche market, and their impact on business performance. The analysis includes CBA's mission, vision, and values. Part B analyzes the competitive environment using Porter's Five Forces, assessing the threats of new entrants, bargaining power of suppliers and buyers, threats of substitutes, and rivalry among competitors. A competitor analysis compares CBA to Westpac, highlighting their differing strategies, capabilities, and subsidiaries. The resource-based theory is applied to identify valuable, rare, inimitable, and non-substitutable resources that contribute to CBA's competitive advantage. The report concludes by identifying major issues, suggesting strategic changes, and providing recommendations based on the analysis.

PORTFOLIO

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
Background of the company...................................................................................................3
Strategies adopted by the organisation...................................................................................3
Mission, vision and value statements.....................................................................................4
Impact of strategy on business performance..........................................................................4
PART B............................................................................................................................................5
Porter's five forces..................................................................................................................5
Competitor analysis................................................................................................................6
Resource based theory............................................................................................................7
SWOT analysis.......................................................................................................................8
PART C............................................................................................................................................9
Major issues identified...........................................................................................................9
Strategic change......................................................................................................................9
Recommendations..................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategies are the plans or policies which enables a firm to accomplish their
predetermined goals and objectives in order to get an upper competitive edge over the
competitors. For getting an upper competitive edge, business strategies must be developed by
keeping in mind about the various macro and micro environmental factors which can negatively
impact the business operations and performance. The taken firm in this assignment report is
commonwealth bank of Australia. This bank was founded in 1911 by the Australian government
and fully privatised in 1996. Bank is providing financial services to the customers in various
countries. This report will discuss the background of the company, along with its vision, mission
and values. Further analysis of business strategies adopted by the organisation will be discussed
along with their impact on business performance. This report will also do the competitor
analysis, SWOT analysis, identify the resources and competencies. In the last, this report will
cover the problem along with the strategic change and recommendations.
PART A
Background of the company
The Commonwealth Bank of Australia also known as CBA is the largest bank of
Australia having business operations across New Zealand, Asia, the United States and the United
Kingdom. It provides a wide range of financial services such as retail, business and institutional
banking, funds management, superannuation, insurance, investment, broking services etc. The
Commonwealth Bank is listed on Australian Stock Exchange in 1991. The bank was founded in
the year 1911 by the government of Australia and fully privatised by the government in the year
1996. It is one of the "big four" Australian banks. The company is headquartered at Tower 1, 201
Sussex Street, Australia. The bank has over 1,100+ branches 4,300+ ATMs in various countries.
The firm is employing around 51,800 employees in 2017.
Strategies adopted by the organisation
The Commonwealth bank of Australia is adopting the focus strategy for getting an upper
competitive edge over their competitors. This strategy is segmented into two strategies i.e. cost
focus and differentiation focus. By using cost focus, CBA is providing their services to a niche
market at comparatively lower prices for attracting the customers. Whereas by using the
differentiation focus, firm is providing the lower prices services with unique features which are

easily differentiable from the competitors of the firm. Through these strategies, CBA is
achieving their desired organisational goals in an effective manner as they are targetting a small
market or portion of a market (Moon and et. al., 2014). The firm is providing their services
effectively to the customer of that particular niche market for enhancing their satisfaction level
and loyalty towards the company. By using these two focus strategies, the firm is improving their
customer base along with the productivity which will assist the CBA in sustaining in the market
for a long period of time.
Mission, vision and value statements
The Mission, vision and value statements of CBA are given below:
Vision: The vision of the CBA is to excel at securing and improving the financial
conditions of the people, businesses and communities. This can be achieved by customer-focused
culture, our sense of responsibility, and our desire to keep getting better.
Mission: The mission of the CBA is to enhance the wealth and fulfilment of life of the
customers. The bank is committed to provide the quality based financial services to the
customers for enhancing their satisfaction and loyalty.
Values: The values of the CBA includes Integrity, Collaboration, Accountability,
Excellence and Service, which define their culture and expectations to treat their customers and
other stakeholders in accomplishing the vision effectively.
Impact of strategy on business performance
The company has adopted the focus strategy of Porter generic strategy for getting an
upper competitive edge in the market. By using the focus strategy, the company is getting a
positive impact on the business performance of the bank as the sales along with the income has
increased which can be seen from the 2018 annual report of the bank. The customer are also
satisfied with the new products which are differentiable from the competitors. With the help of
cost focus strategy, the consumers of the bank are getting the services at low prices than the
competitors which is enabling the bank to retain them from the competitors (Lechner and
Gudmundsson, 2014). Whereas by using the differentiation focus, the firm is providing their
products and services with the unique and innovative features through which the customer
satisfaction is increasing. These both strategies are playing a major role in the development and
growth of firm. Also the business performance is increasing with year after implementing these
strategies.

PART B
Porter's five forces
Porter Five Forces is a strategy framework which is helpful for the firms in analysing the
present competition in the industry or market (Mathooko and Ogutu, 2015). By using the Porter
Five Forces, the Commonwealth Bank Of Australia can gain an upper competitive edge in the
banking industry of Australia. The five forces are discussed below:
Threats of New Entrants: New firms in banking sector brings innovation for doing their
things which can put the pressure on the Commonwealth Bank Of Australia. These new firms
can use lower pricing strategy, reducing costs, offering value propositions etc. for attracting the
customers. The Commonwealth Bank Of Australia can tackle the Threats of New Entrants by
innovating new services and products for the customers for enhancing their experience and
satisfaction level. These innovations can be done by spending more on the research and
development which may discourage new players in the sector. The threat of new entrant in the
banking industry is low as the standards are updated regularly.
Bargaining Power of Suppliers: The bargaining power of suppliers is high in banking
sector as they provides raw material to the various companies (Aithal, 2016). Dominant suppliers
in the banking industry can decrease the margins of Commonwealth Bank Of Australia. The
higher suppliers bargaining power can lowers the overall profitability of Banks. Commonwealth
Bank Of Australia can tackle the Bargaining Power of the Suppliers by developing effective and
efficient supply chain with various suppliers so that the company can shift to other suppliers
when one supplier increase their prices of raw materials. CBA can also choose the suppliers
whose business depends upon the firm.
Bargaining Power of Buyers: Customers bargains a lot as they prefers the quality based
products or services at the lowest prices. This can put pressure on Commonwealth Bank Of
Australia in terms of profitability. Bargaining power of buyers depend upon the number of
customers in the industry which can impact the profit margin of the firms. Commonwealth Bank
Of Australia can tackle the Bargaining Power of Buyers by enhancing their customer base
through providing innovative and new products. The firm can also provide the discounts and
offerings on their established products so that the customers would not shift to other business
firms.

Threats of Substitute Products or Services: When a new product or service fulfil the
demand of customers in new ways than the profit of the industry becomes low. The threat of
substitute products is high when they offer unique value proposition from the existing industry.
Commonwealth Bank Of Australia can tackle the high threat of Substitute Products by becoming
services oriented then just product oriented. The bank can understand the needs of their
customers for providing their products accordingly (Rothaermel, 2013). Also the bank can
increase the switching cost for the customers so that they will not go for substitute products.
Rivalry among the Existing Competitors: When rivalry among the business firms is high
then it can lead to reduced profitability of the industry. Commonwealth Bank Of Australia is
operating in banking industry where the rivalry is very high which can impact the overall profit
of the firm. Commonwealth Bank Of Australia can tackle this high Rivalry by collaborating with
their competitors for increasing the market share rather then competing for small market. Also
the firm can differentiate their product and services so that the competitors does not impact the
firm at huge scale.
Through these above forces of porters, Commonwealth bank of Australia can achieve
high competitive edge over the competitors in their industry as they get the understanding of the
industry environment and performance. The firm can tackle the huge competition from the
competitors through the five forces model.
Competitor analysis
Westpac banking corporation is the chosen bank for the competitor analysis as this is also
one of the Big 4 banks of Australia having operations in multiple countries.
Basis Commonwealth bank of
Australia
Westpac banking corporation
Focus CBA is focused on improving
the financial conditions of the
people, businesses and
communities for enhancing the
market share and customer
base of firm.
Westpac is focused on organic
growth, increasing the
customer base in the selected
segment for building better and
stringer relationship with
customers.
Strategy CBA has adopted the focus Westpac is following the

strategy for delivering the
innovative services at lower
prices to customers.
differentiation strategy for
providing the new and
innovative services to the
consumers.
Capabilities CBA is having a strong
customer base along with more
than 1,100+ branches 4,300+
ATMs and 51,800 employees
in their locations worldwide.
Westpac is the oldest bank of
Australia having 14 million
customers, and over 40,000
people as employees.
Subsidiary or divisions CBA has multiple subsidiaries
such as Bankwest, ASB Bank,
Colonial First State,
Sovereign Limited,
Commonwealth Securities,
CommInsure etc.
Westpac also has several
subsidiaries such as BT
Financial Group, Rothschild
Australia Asset Management,
St George Bank, Westpac
Institutional Bank etc.
From the above analysis, it is clear that Westpac is giving tough competition to the CBA
in terms of mergers, employees, branches, ATM etc. CBA needs to ensure that they are having a
higher competitive advantage in the banking industry for enhancing the customer base and
market share (Piercy, 2016).
Resource based theory
Resource-based theory states that for any organisation, resources are necessary to
perform their business. These resources are valuable, difficult to imitate, rare, and cannot be
substituted. The resource-based theory suggests that the firms needs to look within the
organisations for determining the sources through which competitive advantage can be gained by
the firm by properly using their resources (Kozlenkova, Samaha and Palmatier, 2014). Resources
plays a major role in accomplishing high performance and competitive edge. Resources in an
organisation must have four attributes which are discussed below:

Valuable: These resources are capable of bringing values to the bank which can also
become the source for gaining competitive advantage. Human resources are the valuable
resources for the Commonwealth bank of Australia as they are bringing values to bank.
Rare: Such resources provides a unique strategy which assist the bank in gaining
competitive advantage. The location and number of the branches of the bank are rare resources
for the bank as they could not be copied by any competitors.
Inimitable: These resources are not easily obtainable by the competitors firms due to
which they can become the sources of getting competitive advantage. Customer satisfaction is
such type of resource which assist the firm in gaining high competitive edge.
Non-substitutable: These resources are not easily replaced by any other strategically
equivalent valuable resources due to which firm can gain competitive advantage (Lin and Wu,
2014). These resources includes reputation, brand equity,superior organizational architecture etc.
SWOT analysis
SWOT analysis can be used by Commonwealth bank of Australia for determining their
internal capabilities (Phadermrod, Crowder and Wills, 2019).
Strengths Weakness
 The bank is operating in various
countries such as New Zealand, Fiji,
USA and the United Kingdom due to
which the ban has strong customer
base.
 Bank is employing over 44,000
employees due to which the bank
appears in Dream Employers' top 20
list of preferred employers.
 The bank is highly dependent upon the
off shore debts for funding which is a
major weakness for the bank.
 The bank was involved in money
laundering scandal in 2017 due to
which the brand image of bank has
weaken.
Threats Opportunities
 Risk of foreign exchange rates is high
due to the operations of bank in various
countries which is a threat.
 Bank has implemented technology into
the core banking activities which will
assist the bank in improving the quality
of services provided to the customers

 Because of the commonwealth bank
sales act, the demand deposit and debt
of bank are no longer guaranteed by the
commonwealth of Australia.
which will also increase its reach.
 Bank has taken initiatives such as “One
Commbank” which is helpful in
building better relationships with
customers in order to sustain growth.
PART C
Major issues identified
The major issues identified in implementing the focus strategy are associated with the
technology to be implemented in the business operations and employees who will use the
technology for providing innovative services. Technology is required for converting the
innovative ideas into effective services which can enhance the customer satisfaction and fulfil
the needs of customer. Apart from this, CBA has faced several other issues such as lack of funds
for R&D activities, time constraints etc. The major issues are related with the providing effective
and innovative services as the human resources were not capable of handling new technology for
providing the innovative services (Namada, 2018). Also the less time for developing innovative
services is a major problem which impacted the business performance as time is required for
gathering the new and innovative ideas which can be included in the services. The lack of funds
also impacted the implementation process as without sufficient amount of money, innovative
ideas could not be developed into the services.
Strategic change
For eliminating the issues in implementing the differentiation focus strategy, managers of
the CBA had done several changes before implementing the strategy. The issue of low skilled
workers is eliminated by providing them technical training to perform their work on the new
technological machines in an effective manner (Piercy, 2016). For eliminating the issues of Lack
of funds, Bank has approached the investors from various countries so that the funds required for
the development of innovative services can be gathered for smoothly running of R&D facilities.
Whereas the time barriers are eliminated by properly allotting the tasks to employees according
to their capabilities and knowledge which assisted the employees in executing the work in th pre-
specified time period.

Recommendations
It has been recommended from the above discussed report that the company can gain
competitive advantage in the market if they equip their employees with the required training such
as verbal communication, technical and time management etc. so that the employees can provide
the effective and proper services to the customers for enhancing their satisfaction and loyalty.
The CBA needs to ensure that their HR department is hiring the employees having highly
innovative and problem solving skills so that they can provide the innovative ideas for resolving
the problems of co-workers and clients. The managers of the CBA needs to ensure that the
technology used in business process must be updated and free from any virus or errors which can
be leveraged by the competitors or hackers in getting the confidential information of CBA in
terms of employees, customers and financials.
CONCLUSION
It has been concluded from the above report that the company needs to use suitable
strategies for getting an upper competitive edge. The companies can use the SWOT analysis for
determining their internal capabilities and for determining the competitor's capabilities, firms can
use the competitors analysis. Porter five forces is useful for the firms in determining the forces
through which they can sustain in the market and to determine the competition and environment
in the industry.

REFERENCES
Books and Journals
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firm performance. International Small Business Journal. 32(1). pp.36-60.
Lin, Y. and Wu, L.Y., 2014. Exploring the role of dynamic capabilities in firm performance
under the resource-based view framework. Journal of business research. 67(3). pp.407-
413.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management. 29(3). pp.334-354.
Moon and et. al., 2014. Extending Porter’s generic strategies: from three to eight. European
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Namada, J.M., 2018. Organizational learning and competitive advantage. In Handbook of
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86-104). IGI Global.
Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M., 2017. Human resource management:
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Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based
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Piercy, N.F., 2016. Market-led strategic change: Transforming the process of going to market.
Routledge.
Rothaermel, F.T., 2013. Strategic management: concepts. New York, NY: McGraw-Hill Irwin.