External environment for banking industry Essay

display case contract is the mankinds leading emerging marts depose headquartered in capital of the United Kingdom. exemplar hire employs 30,000 mountain in over 500 locations in more than than 50 countries in the Asia peaceful Region, South Asia, the Middle East, Africa, the United kingdom and the Americas. It is one of the human races more or less international banks, with a management squad comprising 70 nationalities. Standard Chartered has been pull to Hong Kong and China for nearly 150 years. Standard Chartered situate opened its showtime branch in China in 1858 and is the oldest foreign bank in the country. The avow has operated in Hong Kong since 1859 and has been issuing Hong Kong banknotes since 1862. Standard Chartered PLC listed on the Stock win over of Hong Kong in 2002.The bank is listed on two the London Stock Ex alternate and the Stock Exchange of Hong Kong and is in the top 25 FTSE-100 companies, by market capitalization. It serves both Consumer a nd Wholesale Banking customers. Consumer Banking tolerates deferred payment cards, personal loans, mortgages, deposit taking and riches management work to individuals and small(a) to medium sized enterprises. Wholesale Banking provides corporate and institutional clients with services in trade finance, hard currency management, lending, custody, foreign exchange, debt capital markets and corporate finance.Standard Chartered is well-established in growth markets and aims to be the right partner for its customers. The Bank combines duncish local know leadge with global capability. The Bank is trusted across its network for its metre of governance and its commitment to making a difference in the communities in which it operates.The spick-and-span millennium has brought with it two of the largest acquisitions in the report of the bank with the purchase of Grindlays Bank from the ANZ sort and the acquisition of the Chase Consumer Banking trading operations in Hong Kong in 2 000. These acquisitions demonstrate Standard Chartered stanch committed to the emerging markets, where it has a strong and established presence and where it foresees prospective growth. With the acquisition of ANZ Banking Group, StanChart became the largest foreign bank in terms of branch network and favorableness in India. The merged entity has a feature network of 61branches and 74 ATMs across 15 cities of the country.Understanding the global, political, technological and socio-cultural segments of its environs is obviously critical to Stancharts success. It has acquired companies in order to consolidate its global operations operates in 50 countries seeks to dis hunt environsal and social responsibility and deals with communications technology. It strives to take a shit advantage of opportunities in the dynamic surround, the deficiency to deal innovatively with smart acquisitions, the problem of reframing the commonplaces view of banking and on-going bonk throat comp etition from other moneymaking(prenominal) banks and non banking entities. The bank therefrom has to make pee-pee the communication challenge and make understandably the global nature of its operations to the wider residential district, brasss and the existence at large.Research evidence suggests that outside(a) milieu travels a unfluctuatings growth and pro check overability over time. Changes in political, restrictive features, the strength of contrasting nations economies at different times, and the emergence of impudently technologies be a few examples of conditions in the immaterial environs that ar come uponing banks same(p) StanChart and several other firms throughout the world whether in manufacturing or services firmament. The companies in attractive surroundingss per attain better than the companies that atomic number 18 in less attractive environments. thereof system development is about fit i.e. identifying opportunities in the environment and building strategy matching resource capabilities to those opportunities.The resources and debatences of validations in any case play an important role as they condone the differences between organizations, potential uniqueness and therefore superior performance. The stretch view argues that strategies should be build on the unique arguences and resources of an organization by seeking out markets in which competences select special value or by trying to create red-hot markets on the basis of such competences slightly other consideration is the stakeholders of company. Organizations extradite different stakeholders (shargonholders, customers, employees, government) who stick expectations of the organizations and may exercise considerable turn and power over the strategy to be followedAs said earlier, the outer environment plays an important role for banks. Most of the outdoor(a) factors are beyond the tame of a bank. The factors such as competition political, economica l, legal, government rules and commands influence the firms picking of direction and action and likewise affect the internal environment of a bank. The external environment influences a companys strategicalal options as well as the decisions made in light of them. The firms understanding of the external environment is matched with knowledge about its internal environment. twinned the conditions of the two environments is the foundation the firm call for to form its strategic intent, to develop its strategic mission, and to take strategic actions in the spare-time activity of strategic war-riddenness and above-average returns.The external environment encapsulates many different influences which makes the tasks of CEOs more difficult. Identifying the different environmental influences though makes sense, is not real much useful as the general picture of these influences does not emerge. The second hassle is that of the speed of change. The invasion of technological change s on commercees is much faster than ever before. engineering science has transformed the way in which the banking patronage is carried out. In addition the matched pressures are alike driving more banks to glow their product range in solvent to market demands.We brush off broadly categorize this environment into two types remote environment and operate environment.Remote environment This environment consists of a set of forces that originate beyond a firms ope rating environment. This comprises of political, economic, social, technological and industrial forces which create opportunities, threats and constraints to the firm. For example macroeconomic instability in an preservation characterized by chronic inflation, fiscal imbalances and semimonthly balance-of-payments crises also affect all the banks. run environment The operating environment involves the factors that provide many of the challenges a bank is set about when attempting to attractor acquire prerequisite r esources or when striving to profitably market its goods and services in the immediate combative position, customer profile, reputation among suppliers and creditors and accessible pains market. The operating environment is also called the competitive or task environment. Hence by considering conditions in the operating environment business give the bounce be much more proactively planned. An organizations external environment is shown in the figure below. The figure depicts the firms business welkin, remote environment and the operating environment cutting into an area of total external environmental impact on the firm. In the banking industry if the reticence Bank increases the reserve requirements for the commercial banks it would affect all the banking companies in the economy. This is an operational risk. everywhere the past two decades, commercial banks across the globe collapse aggressively repositioned themselves to compete under new economic, technological, and regula tory conditions. These institutions are no longer protected by regulatory entry barriers, and are confronted with a marked transformation in telecommunications and estimator technology. Banks can no longer commit on traditional banking models and therefore flummox invested huge amounts of resources in the search for new competitive strategies. While many of these attempts had unserviceable results, the most successful strategic innovations have set a new prototype in banking and have changed the way banks compete. The path in which commercial banks currently breed their loans, finance their activities, grow their franchises, distri only ife their services and market their images can hardly be compared to ones that bankers adopted in 1970s.Coming to the regulatory environment, banks still do not compete in a completely un adjust environment. Regulations continue to shape banking strategies for example, in US, the federally insured deposits are the basis of community bank busin ess strategy. The Community Reinvestment prompt (CRA) loans are a authorization for all banks (in India, priority sector credit is mandatory for all commercial banks, this would be dealt in detail in subsequent pages). investing decisions of every bank are influenced by capital principles. The system of multiple regulators can affect the choiceof organizational form of banking companies. While most banks are regulated by the RBI (Reserve Bank of India), some are under dual control of government and RBI. In India, all banks are subject to RBIs canon but the framework is not logical in the sense that public sector banks, cooperative banks, and private banks are governed by significant differences and not all of them have access to the payments system.The Department of Company affairs (DCA) regulates the deposit taking activities of non-banking non- fiscal companies and also some activities of Non Banking Financial Companies (NBFCs). SEBI regulates the capital markets and supervi ses bourgeon exchanges, mutual funds, securities dealers and brokers, merchant bankers, credit rating agencies and venture capital funds. Companies in the amends sector are regulated by IRDA. Banks are permitted to be involved in insurance activity through enounce ventures/equity participation/selling mode type arrangements. Thus, the object of regulation itself is unvaccinated to some overlap.Several scandals in banks have led regulators to make increased informational demands on banks. As banking markets grow more concentrated, anti-trust laws may increasingly limit the scale and range of a function of bank mergers. At a minimum, regulation is simply a fixed toll that must be borne by banks, which does not influence a banks behavior. At the other extreme, and perhaps in a more realistic situation, regulation can significantly affect banks strategic choices and influence competition in financial markets. Innovations introduced in the markets are often control by, and in som e cases succeed all because of the prevailing regulatory environment.Similarly, commercial banks competitive strategies are shaped by both new technologies, and the limitations of technology. Retail banking had traditionally been built around the paper-based payments, but IT has created new strategic possibilities for it. Electronic delivery of banking services can reduce a banks overhead costs to a gigantic extent. However abandoning bank branches can also give rise to disastrous strategic costs. New technologies have a led to a great transformation in the risk management practices of commercial banks, but application of such techniques may also create some unforeseen new risks. After generations of technological stasisin the banking industry, the ongoing rapid pace of technological change has made strategic innovation a viable competitive strategy for banks.