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Strategic Analysis of Westpac

Introduction to Australian Banking Sector and Westpec

The finance sector of Australia gives valuable contribution in total country’s output. Its contribution is above 10%. Among the whole world’s financial systems and capital market, it stands at fifth position. The banking sector of Australia lies at the central place of Australia’s financial system (Ryan and Worthington, 2004). Due to deregulation in 1980s, Australia has welcomed number of global banks. Retail banking sector of Australia comprises of 21 banks including domestic banks and subsidiaries of foreign banks.  The four highly diversified and leading banks of Australia i.e. Commonwealth Bank, Westpac Banking Corporation, Australia and New Zealand Banking Group and National Australia Bank are ruling Australian banking sector. These big title faces competition from comparatively less diversified small and regional banks ((Westpac Group Annual Report, 2014). The market structure applicable to Banking sector of Australia can be oligopoly as it is concentrated by very few but large banks with the contribution of around 68% in banking output.

Overview of Westpac

The Sydney head-quartered bank of Australia, Westpac (Western Pacific), with its inception in 1817 in Sydney, today it is considered one of the four major banks of Australia. It has highly diversified portfolio of financial services divided into two segments: Consumer oriented and institution oriented. Wealth management and advisory services forms the part of diversified product portfolio. Westpac Retail and Business Banking, St.George Banking Group, BT Financial Group, Westpac Institutional Bank & Westpac New Zealand are customer centred divisions of Westpac. It has developed high reputation not only in Australia, it is even ranked at second position in New Zealand. Being member of GAA (Global ATM Alliance), it has collaboration with various foreign banks. It has been rated as AA- by Fitch, Aa2 by Moody’s and AA- by Standard & Poor’s ((Westpac Group Annual Report, 2014). It provides best services in foreign exchange area among the various bank of Australia and on this basis, it has secured top position in foreign exchange services among all Australian banks. Its service in derivative is even outstanding.

Mission

“To help members of society to increase their wealth” is the mission statement of the bank. The mission stated is quite appropriated it provides financial services to huge mass of Australia and New Zealand ((Westpac Group Annual Report, 2014). It has huge clientele and it provides the best wealth solutions considering needs of individual client helping them to take benefits of available opportunities. Peter Lee Associates and IRBSA (Institutional Relationship Banking Survey Australia) has given top rank to Westpac in domestic transactional banking in 2015.

Vision

The vision of the company is, “To have global leadership in the financial sector.” As per this vision, Westpac needs to focus more on expansion strategy. It provides various financial services in Australia, New Zealand and nearby pacific areas but still, to be global market leader it has to focus on other global regions (Westpac Group Annual Report, 2014).. Though, it considers Asia as its potential market for expansion, it also needs to have its branches in United States and European nations at consumer level along with institutional level (Sadler, 2003)

Value Statement

Westpac does not aim at fulfilling its goals at the cost of it stakeholders i.e. its customers, employees, shareholders and government. The delightful customer can be turned to loyal customer in future. Aiming at this strategy, it continuously works for customer satisfaction (Westpac Group Annual Report, 2014). The team work is given due importance while organisation functioning. Organisation has presented quite positive approach towards corporate social responsibility and believes in ethical business. Moreover, it has been optimist towards organisational change and always come up with innovative ideas to overcome such situations (Katsioloudes, 2009). This combination of values of Westpac has helped to improve work efficiency and return on investment. Giving due to importance to various financial parameters like liquidity, operating ratios, asset quality, etc., it has maintained its leading position till today.

Objectives and their appropriateness

To achieve its long term goal, Westpac has framed the number of specified, attainable, measurable and realistic goals. The following are its objectives:

  • The main objective of Westpac is to maximise return on capital.
  • Strong customer relationship is the parameter which is given due to importance.
  • The organisation is concentrating on increasing more branches for customer to have easy access to bank’s services.
  • Westpac has been working for the upliftment of the women class of the Australia.

In 2015, the financial reports of Westpac represent remarkable ROC as 15.8%. To achieve high ROC, the bank has been continuously working on improvement of efficiency, the level of liquidity and quality of capital and assets.  Again, as per Peter Lee Associates and IRBSA (Institutional Relationship Banking Survey Australia) survey, the Westpac leads in relationship banking also.  For easy access to Westpac’s services, there are around 1200 branches in Australia itself (Bains, 2011).  The former CEO of Westpac had worked at a lot on women empowerment. Along with male class, it is providing financial services to large female section to develop and run their own business. There are number of banks in Australia which have this discrimination. To serve the female clientele efficiently, Westpac has gone for restructuring. Female employees were recruited from top to bottom level of organization. Moreover, it has organised number of seminars and workshops imparting training to women business class (Erogbogbo, Eghobamien and Pimentel, 2013).

Suggestions for Potential Improvement

In spite of pursuing the best business strategies, working style, organisation structure and management, always there is the scope for improving the outcomes and development of business. Westpac provides various types of services which include migrating accounts, international student loans, and many more. All the objectives of Westpac discussed above are served very well but still there are some areas where it needs to focus. It seems company is less focused in opening its branches at consumer level in United States and European nations. Moreover, the performance of organisation in the sector of home loans is not remarkable (Alkhafaji, 2003). These are areas where it needs to focus more.

Development of New Organisational Objectives and their Applicability

When it comes to improve any work segment, it becomes necessary to set new objectives to arrive at desired level of performance. Keeping above improvement in light, the following new additional objectives are being suggested to aid organisational growth:

  • The timely sector-wise performance analysis of the organisation which will the help organisation to have constant watch on areas of improvement. This will help to mitigate the problems with underperforming areas. In case of Westpac, home loans sector has already not been working at synergy with other services of Westpac and above that the interest rate on home loans has be raised. This has made situation more complicated. This can adversely affect the orgainsation’s reputation (Inglis, Morley, and Sammut, 2006).
  • Westpac needs to have rapid global expansion strategy. It has developed it branches in foreign countries focusing only at institutional level that too at very small number. Market penetration strategy will help Westpac to be global leading financial service provider but for this it needs to even work on expansion of consumer oriented service in various nations (Cole, 2003).  .

SWOT Analysis of Westpac


As objectives of Westpac have been clearly defined, the next stage comes to analyse internal competitive strengths and hurdling weaknesses. This analysis will help to know opportunity and threats waiting for the organisation in external environment. It helps organisation to define strategies to exploit opportunities and overcome threats. These two environment analysis are very well known as SWOT analysis. This tool will help organisation to design appropriate decision making, strategic planning and its implementation (Katsioloudes, 2009). The following presents internal and external factors working of Westpac.

Internal environment analysis

Strengths

  • The number of branches of Westpac in Australia is very high.  There are around 1200 branches.
  • High usage of technology in banking. Number of ATMs, online transactions, EFTPOs of Westpac emphasizes this point.
  • It carries very high goodwill because of being one of the four major banks in Australia.
  • It is considered as one of the most corporate socially responsible bank in Australian financial sector (Robbins, Bergman, Stagg and Coulter, 2014).
  • The organisation has very huge and well trained staff of more than 40,000 employees.
  • It has huge clientele base of around 13 million customers (Carr, 2012).
  • At institutional level, it offers services not only in Australia and New Zealand but it has branches in major countries of Asia, U.S.A and EU.
  • Provision of services like migrant banking and international student account makes its name to be called around the world.
  • Placing female employees at par with male employees has helped Westpac to gain very respectable position in employment world. People are always looking to be a part of Westpac family. It has even increased the women clientele base. As the need of women customer can be taken care of by women employee in the best manner.
  • The optimistic and proactive attitude towards change is major strength of Westpec

Weaknesses

  • Competition always exists in the market. Westpac faces cut throat competition from the rest three major banks of Australia i.e. Commonwealth Bank, Australia and New Zealand Banking Group and National Australia Bank (Carr, 2012).
  • It has comparatively very few branches in foreign countries. Moreover, the number is low compare other leading banks
  • Lack of segment wise performance analysis leads an organisation to overcome problems faced by particular segment.

External environment analysis

Opportunity

  • Westpac, by getting license, can expand its customer oriented clientele base with opening many new branches around the world.
  • Technological development will help to improve overall organisational efficiency. This would be possible through improvement in employee and product efficiency.
  • Initially focusing on expanding its business in developing and emerging nations will have benefit of low operational cost, efficient human resource at low rates and high profitability.

Threats

  • Financial sector is important organ of any economy. So any ups and downs in economy are surely going to affect this sector adversely. So, if any critical change in economy of Australia, Westpac is surely going to get impacted
  • Banking sector being guided by banking regulations is impacted by changes in banking regulations of the country.
  • Changes in economies and banking regulations of the countries with which Australia has tie ups will have impact on Westpac (Carr, 2012).

Suitable Strategies for the development of Westpac

Analysing the key factors, Mission, Vision, Value statement and objectives, for decision making and strategy planning and making the use of SWOT analysis, it’s possible to derive, the measures which can be undertaken to improve profitability and global presence of Westpac. Although current strategies which are being implemented by Westpac are helping to achieve its goals, the following strategies will help to improve its performance and presence in foreign countries.

  • To rule the finance sector, it should go for product differentiation. Till today, its providing services which are even provided other major banks. It should come up with some extra-ordinary financial service which can be considered as its competitive advantage (Thompson and Martin, 2010)
  • The other strategy needs to be implemented is market penetration strategy. Westpac should get licences for having its branches in various developing countries. Globally it has focused on institutional level, which might hamper its growth. So, to have high global presence and compete with worldwide financial service provider, then it should focus on every front. It should be competitive at all level.
  • Above in the report it has been mentioned that the performance of Westpac in home loan area is not quite satisfactory. So, keeping this in view, it has been suggested to have segment wise performance analysis and it should be carried at regular interval so that obstacles are coming on the ways of its success can be overcome before situation being too drastic (Sadler, 2003).

Conclusion

The above report, after highlighting Australian banking scenario, presents the strategic analysis of Westpac which has secured second position in Australia’s banking sector. Various areas of this functioning like operation, marketing, CSR, banking, human resource have been analysed. All these are done with the help of SWOT analysis. Westpac’s various strengths like large employer, goodwill, its country wide presence, positive attitude towards social responsibility and many more highlighted. In the same, its internal weaknesses have been focused. Westpac’s major weaknesses include competition and segment wise performance analysis.

The third element of SWOT analysis has presented the opportunities which Westpac’s can exploit in near future and in favourable environment. The opportunities which this organisation can exploit include taking benefits of emerging economies and expanding its business at customer level globally to be competitive.  The focus on developing nations will have benefits in operation cost and efficiency. But along with these opportunities are there are many threats which can have adverse impact on the organisation. Major threats include change in economic policies and banking regulations. 

Overall strategic analysis helps to derive some strategies which can be of assistance to Westpac to achieve its vision and fulfil its objective. The report suggested Westpac to focus on product differentiation. This will divert customer’s attention towards Westpac and may raise the number of banks customer. The other suggested strategy which is very important for Westpac is Market penetration Strategy. This will help to achieve its vision of global leadership rapidly. Other suggestion includes regular segment wise performance analysis to overcome bottlenecks.

Introduction to Australian Banking Sector and Westpec

The finance sector of Australia gives valuable contribution in total country’s output. Its contribution is above 10%. Among the whole world’s financial systems and capital market, it stands at fifth position. The banking sector of Australia lies at the central place of Australia’s financial system (Ryan and Worthington, 2004). Due to deregulation in 1980s, Australia has welcomed number of global banks. Retail banking sector of Australia comprises of 21 banks including domestic banks and subsidiaries of foreign banks.  The four highly diversified and leading banks of Australia i.e. Commonwealth Bank, Westpac Banking Corporation, Australia and New Zealand Banking Group and National Australia Bank are ruling Australian banking sector. These big title faces competition from comparatively less diversified small and regional banks ((Westpac Group Annual Report, 2014). The market structure applicable to Banking sector of Australia can be oligopoly as it is concentrated by very few but large banks with the contribution of around 68% in banking output.

Overview of Westpac

The Sydney head-quartered bank of Australia, Westpac (Western Pacific), with its inception in 1817 in Sydney, today it is considered one of the four major banks of Australia. It has highly diversified portfolio of financial services divided into two segments: Consumer oriented and institution oriented. Wealth management and advisory services forms the part of diversified product portfolio. Westpac Retail and Business Banking, St.George Banking Group, BT Financial Group, Westpac Institutional Bank & Westpac New Zealand are customer centred divisions of Westpac. It has developed high reputation not only in Australia, it is even ranked at second position in New Zealand. Being member of GAA (Global ATM Alliance), it has collaboration with various foreign banks. It has been rated as AA- by Fitch, Aa2 by Moody’s and AA- by Standard & Poor’s ((Westpac Group Annual Report, 2014). It provides best services in foreign exchange area among the various bank of Australia and on this basis, it has secured top position in foreign exchange services among all Australian banks. Its service in derivative is even outstanding.

Mission

“To help members of society to increase their wealth” is the mission statement of the bank. The mission stated is quite appropriated it provides financial services to huge mass of Australia and New Zealand ((Westpac Group Annual Report, 2014). It has huge clientele and it provides the best wealth solutions considering needs of individual client helping them to take benefits of available opportunities. Peter Lee Associates and IRBSA (Institutional Relationship Banking Survey Australia) has given top rank to Westpac in domestic transactional banking in 2015.

Vision

The vision of the company is, “To have global leadership in the financial sector.” As per this vision, Westpac needs to focus more on expansion strategy. It provides various financial services in Australia, New Zealand and nearby pacific areas but still, to be global market leader it has to focus on other global regions (Westpac Group Annual Report, 2014).. Though, it considers Asia as its potential market for expansion, it also needs to have its branches in United States and European nations at consumer level along with institutional level (Sadler, 2003)

Value Statement

Westpac does not aim at fulfilling its goals at the cost of it stakeholders i.e. its customers, employees, shareholders and government. The delightful customer can be turned to loyal customer in future. Aiming at this strategy, it continuously works for customer satisfaction (Westpac Group Annual Report, 2014). The team work is given due importance while organisation functioning. Organisation has presented quite positive approach towards corporate social responsibility and believes in ethical business. Moreover, it has been optimist towards organisational change and always come up with innovative ideas to overcome such situations (Katsioloudes, 2009). This combination of values of Westpac has helped to improve work efficiency and return on investment. Giving due to importance to various financial parameters like liquidity, operating ratios, asset quality, etc., it has maintained its leading position till today.

Objectives and their appropriateness

To achieve its long term goal, Westpac has framed the number of specified, attainable, measurable and realistic goals. The following are its objectives:

  • The main objective of Westpac is to maximise return on capital.
  • Strong customer relationship is the parameter which is given due to importance.
  • The organisation is concentrating on increasing more branches for customer to have easy access to bank’s services.
  • Westpac has been working for the upliftment of the women class of the Australia.

In 2015, the financial reports of Westpac represent remarkable ROC as 15.8%. To achieve high ROC, the bank has been continuously working on improvement of efficiency, the level of liquidity and quality of capital and assets.  Again, as per Peter Lee Associates and IRBSA (Institutional Relationship Banking Survey Australia) survey, the Westpac leads in relationship banking also.  For easy access to Westpac’s services, there are around 1200 branches in Australia itself (Bains, 2011).  The former CEO of Westpac had worked at a lot on women empowerment. Along with male class, it is providing financial services to large female section to develop and run their own business. There are number of banks in Australia which have this discrimination. To serve the female clientele efficiently, Westpac has gone for restructuring. Female employees were recruited from top to bottom level of organization. Moreover, it has organised number of seminars and workshops imparting training to women business class (Erogbogbo, Eghobamien and Pimentel, 2013).

Suggestions for Potential Improvement

In spite of pursuing the best business strategies, working style, organisation structure and management, always there is the scope for improving the outcomes and development of business. Westpac provides various types of services which include migrating accounts, international student loans, and many more. All the objectives of Westpac discussed above are served very well but still there are some areas where it needs to focus. It seems company is less focused in opening its branches at consumer level in United States and European nations. Moreover, the performance of organisation in the sector of home loans is not remarkable (Alkhafaji, 2003). These are areas where it needs to focus more.

Development of New Organisational Objectives and their Applicability

When it comes to improve any work segment, it becomes necessary to set new objectives to arrive at desired level of performance. Keeping above improvement in light, the following new additional objectives are being suggested to aid organisational growth:

  • The timely sector-wise performance analysis of the organisation which will the help organisation to have constant watch on areas of improvement. This will help to mitigate the problems with underperforming areas. In case of Westpac, home loans sector has already not been working at synergy with other services of Westpac and above that the interest rate on home loans has be raised. This has made situation more complicated. This can adversely affect the orgainsation’s reputation (Inglis, Morley, and Sammut, 2006).
  • Westpac needs to have rapid global expansion strategy. It has developed it branches in foreign countries focusing only at institutional level that too at very small number. Market penetration strategy will help Westpac to be global leading financial service provider but for this it needs to even work on expansion of consumer oriented service in various nations (Cole, 2003).  .

SWOT Analysis of Westpac


As objectives of Westpac have been clearly defined, the next stage comes to analyse internal competitive strengths and hurdling weaknesses. This analysis will help to know opportunity and threats waiting for the organisation in external environment. It helps organisation to define strategies to exploit opportunities and overcome threats. These two environment analysis are very well known as SWOT analysis. This tool will help organisation to design appropriate decision making, strategic planning and its implementation (Katsioloudes, 2009). The following presents internal and external factors working of Westpac.

Internal environment analysis

Strengths

  • The number of branches of Westpac in Australia is very high.  There are around 1200 branches.
  • High usage of technology in banking. Number of ATMs, online transactions, EFTPOs of Westpac emphasizes this point.
  • It carries very high goodwill because of being one of the four major banks in Australia.
  • It is considered as one of the most corporate socially responsible bank in Australian financial sector (Robbins, Bergman, Stagg and Coulter, 2014).
  • The organisation has very huge and well trained staff of more than 40,000 employees.
  • It has huge clientele base of around 13 million customers (Carr, 2012).
  • At institutional level, it offers services not only in Australia and New Zealand but it has branches in major countries of Asia, U.S.A and EU.
  • Provision of services like migrant banking and international student account makes its name to be called around the world.
  • Placing female employees at par with male employees has helped Westpac to gain very respectable position in employment world. People are always looking to be a part of Westpac family. It has even increased the women clientele base. As the need of women customer can be taken care of by women employee in the best manner.
  • The optimistic and proactive attitude towards change is major strength of Westpec

Weaknesses

  • Competition always exists in the market. Westpac faces cut throat competition from the rest three major banks of Australia i.e. Commonwealth Bank, Australia and New Zealand Banking Group and National Australia Bank (Carr, 2012).
  • It has comparatively very few branches in foreign countries. Moreover, the number is low compare other leading banks
  • Lack of segment wise performance analysis leads an organisation to overcome problems faced by particular segment.

External environment analysis

Opportunity

  • Westpac, by getting license, can expand its customer oriented clientele base with opening many new branches around the world.
  • Technological development will help to improve overall organisational efficiency. This would be possible through improvement in employee and product efficiency.
  • Initially focusing on expanding its business in developing and emerging nations will have benefit of low operational cost, efficient human resource at low rates and high profitability.

Threats

  • Financial sector is important organ of any economy. So any ups and downs in economy are surely going to affect this sector adversely. So, if any critical change in economy of Australia, Westpac is surely going to get impacted
  • Banking sector being guided by banking regulations is impacted by changes in banking regulations of the country.
  • Changes in economies and banking regulations of the countries with which Australia has tie ups will have impact on Westpac (Carr, 2012).

Suitable Strategies for the development of Westpac

Analysing the key factors, Mission, Vision, Value statement and objectives, for decision making and strategy planning and making the use of SWOT analysis, it’s possible to derive, the measures which can be undertaken to improve profitability and global presence of Westpac. Although current strategies which are being implemented by Westpac are helping to achieve its goals, the following strategies will help to improve its performance and presence in foreign countries.

  • To rule the finance sector, it should go for product differentiation. Till today, its providing services which are even provided other major banks. It should come up with some extra-ordinary financial service which can be considered as its competitive advantage (Thompson and Martin, 2010)
  • The other strategy needs to be implemented is market penetration strategy. Westpac should get licences for having its branches in various developing countries. Globally it has focused on institutional level, which might hamper its growth. So, to have high global presence and compete with worldwide financial service provider, then it should focus on every front. It should be competitive at all level.
  • Above in the report it has been mentioned that the performance of Westpac in home loan area is not quite satisfactory. So, keeping this in view, it has been suggested to have segment wise performance analysis and it should be carried at regular interval so that obstacles are coming on the ways of its success can be overcome before situation being too drastic (Sadler, 2003).

Conclusion

The above report, after highlighting Australian banking scenario, presents the strategic analysis of Westpac which has secured second position in Australia’s banking sector. Various areas of this functioning like operation, marketing, CSR, banking, human resource have been analysed. All these are done with the help of SWOT analysis. Westpac’s various strengths like large employer, goodwill, its country wide presence, positive attitude towards social responsibility and many more highlighted. In the same, its internal weaknesses have been focused. Westpac’s major weaknesses include competition and segment wise performance analysis.

The third element of SWOT analysis has presented the opportunities which Westpac’s can exploit in near future and in favourable environment. The opportunities which this organisation can exploit include taking benefits of emerging economies and expanding its business at customer level globally to be competitive.  The focus on developing nations will have benefits in operation cost and efficiency. But along with these opportunities are there are many threats which can have adverse impact on the organisation. Major threats include change in economic policies and banking regulations. 

Overall strategic analysis helps to derive some strategies which can be of assistance to Westpac to achieve its vision and fulfil its objective. The report suggested Westpac to focus on product differentiation. This will divert customer’s attention towards Westpac and may raise the number of banks customer. The other suggested strategy which is very important for Westpac is Market penetration Strategy. This will help to achieve its vision of global leadership rapidly. Other suggestion includes regular segment wise performance analysis to overcome bottlenecks.


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