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Hello Dear Gromit,
Say… If a giant insurance company has acquired a nation-wide commercial bank several years ago. And we have analysed its FS after the acquisition and concluded they have achieved synergy effects. Then, we are required to give strategic advises for its banking sector’s future development.
In your opinion, can we apply models here to give strategic advices? If so, what models are appropriate and proper. (Currently I’m thinking of using Ansoff Matrix)
Thanks and regards.
Rick
You could use many models. For example:
PESTEL: banks are under legal, economic and political pressure. HSBC is thinking of selling off its personal banking division in response to regulations. It’s thinking of moving its HQ from the UK because of tax.
They have to be aware of technological changes (eg the demise of cash because of contactless payment cards) and population trends also.
5 forces draws attention to current competitors and potential new entrants. For example, Santander has entered the UK personal banking sector with very attractive offers that others will have to respond to.
As you say, Ansoff can also be used: efficiency gains, withdrawing form markets, offering new products (like insurance – though they’ve done that already).
Usually, no model on its own will give a definitive answer: they can all give some help and are better than starting planning with a blank sheet of paper and no frameworkds
Dear Gromit,
Thank you for your timely reply and kindly advises. Sorry for the late reply.
You are right indeed, PESTEL could be used to demonstrate the changing macro-environment, and 5 Forces could be used to analyse industrial environment. However, the giant company we are analysing now, they have already acquired a national bank several years ago for the purpose to be a comprehensive financial company. If we use Ansoff to analyse, it was like related diversification (New Product into New Market).
So now what we are doing is to look at the subsequent performance, and give some strategic advises for its future development. From my point of view, it may not be appropriate to analyse macro/micro environment by using PESTEL/5 FORCES. We may can try to recommend “Organic Growth” to further develop. As the company itself now is the Top 150 of the Fortune Global Top 500, and it has a wide financial platform which can achieve cross-selling of banking, insurance products.
What do you think?
Thanks again for all the kind efforts in bringing free study lectures and resources for all ACCA students.
Regards.
Rick.
Why are you recommending ‘organic growth’? Growth in what direction and why? It might be inappropriate for them to do that in their own country if the economy was bad. It might be better for them to get out of some sorts of banking altogether.
Suggesting organic growth must rest on some rationale. It is not an end in itself – it is a means to an end. You cannot recommend that organic growth is good if you are in the teeth of a recession.
So you have to start with PESTEL, 5 forces, resources and see what markets etc might thrive given the environment, competition etc. It might be gaining market share in your home market, or making use of the related diversification that has already happened. But, if for example, the insurance company they had taken over was a specialist in pension and annuities, the recent changes in UK pensions might suggest getting rid of it!
Hello Dear Gromit,
Thank you for timely reply. I‘m from Mianland China, you may be aware that Chinese Economy is booming in recent years, though the expected growthrate of GDP dropped to 7% this year, still, the whole Chinese Capital Market is in a tremendous flourishing condition. The Value of stock market has just doubled in the past six months!
You are right to deal with macro/micro-environment firstly, however, I have to let you be aware that to give strategic advice is the last part of the whole analysis report. The case study, is based on an acquisition completed several years ago, and we have dealt with the rationale behind this acquisition and the subsequent performance of the acquisition in the first two third of the report. And now, we are recommending strategies based on our financial performance appraisal which has been covered in the two third of the report.
But you are right saying looking at the business environment firstly, I think it’s necessary to mention the business environment has changed a lot since acquisition and demonstrate what changes might influence our business.
I will look at it more tomorrow, which is about 7 hours later. (It’s now 12:24 p.m in China), Good night!
Thanks again for your kind efforts.
Regards.
Rick.
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