National Australia Bank – Business Banking
INTRODUCTION:
National Australia Bank Limited (NAB) was started in 1893 as National Bank Limited but acquired its current name after merging with the Commercial Banking Company of Sydney Limited. NAB has grown over time offering diversified services, and has expanded internationally into New Zealand, USA, UK and Asian financial market among others (Brown 2009). Though 4th largest in Australia, the financial service group is ranked 17th largest by market capitalization worldwide. Its core business units include the Business Banking, Personal Banking and NAB Wealth. The company has been experiencing growth in profit and capital base from $3,916m to $5,400 in profit and $657b to $763b worth of assets in 2008 and 2012 respectively (NAB 2012).
STRATEGIC BUSINESS UNIT – BUSINESS BANKING:
NAB’s customers in wealth management division exceed 2.3 million, while those in Business and Consumer banking are over 8.3 million. Business banking has the largest share in terms of market size and profit contribution. According the NAB Annual Review of the year 2012, Business banking has maintained a sizeable share of the banks operation with a lending share of 24.8% by August 2012, up from 24.2% in March 2011. However, the growth rate of the division has remained very slow over time (Australian Government 2011). The potential growth of this strategic business unit (SBU) is quite immense, given the varying services that can be offered to business and the mere value of such transactions.
SITUATIONAL ANALYSIS:
EXTERNAL ENVIRONMENT:
Markets
Market determines suitability of products and strategies employed to gain or maintain competitiveness. NAB’s business banking market is not limited to the local market but rather extends across boundaries. Essentially, NAB provides commercial banking services and consultancy in specialist expertise needed by business. However, its business lending that offers a great growth opportunity if well utilized. Although international market provides additional market, local market is still large as indicated below.
Australia’s Bank Lending to Businesses (A$ Billions)
Year Agr./Fishing etc Mining Manufacturing Construction
2006 43.5 6.8 37.1 21.3
2007 47.2 9.4 40.8 24.8
2008 53.7 11.7 44.6 30.5
2009 57.4 11.5 43.7 31.5
2010 59.3 15.1 39.7 28.3
Sources: Reserve Bank of Australia, Statistical Table D7 Bank Lending To Business (Last updated 16 Sep 2010); Austrade
Competitive Environment
As indicated in the table below, NAB is one of the major local banking institutions. However, it faces competition from other local and international banks. However, ability to maintain competitiveness depends on affordability. NAB’s performance gives it an edge, but nevertheless, competition will always be there.
The Forbes World’s Leading Companies: Forbes’ rank according to an equal weighting of sales, profits, assets and market value.
Company World Ranking sales Profits Assets (US$ B)
Commonwealth Bank 59 31.8 3.8 500.2
Westpac Banking Group 67 31.2 3 519
NAB 79 32.5 2.3 574.4
Anz Banking 83 26.9 2.6 420.5
Sources: Forbes, The World’s Leading Companies, April 2010; Austrade
Economic Environment
NAB has the capacity to capitalize on its financial strength to improve Business Banking. However, business uptake of services such as loan facilities depends on economic situations. In recession, demand for such services is low. The approach therefore should be able to withstand the unpredictable bad and good economic periods.
Demographic Environment
With a population of 25m, 5m, 320m, and 65m in Australia, New Zealand, United States and United Kingdom, NAB’s business banking potential growth is high. Worthwhile noting, demand for business lending is not limited to countries where the bank operates.
Social and Cultural Environment
Modern lifestyle has offered a great opportunity for business growth. This especially relate to the dynamism of the modern culture that necessitate constant re-adjustments that may offer growth opportunity and hence demand for banking services. The Australian population also participates actively in various sectors such as agriculture, production and manufacturing among others, hence the growth potential.
Political and Legal Environment
Reserve Bank of Australia, among other government agencies, ensures sanctity in the country’s financial market. NAB therefore have to conform to the current policies as well as envisaging possible policy changes from Australian banking reforms, Credit Ombudsman Service and Australian Prudent Regulation Authority (APRA) directives such as the proposed liquidity coverage ration starting from 2015.
Technological Environment
Technology offers growth opportunity to business. As they seek to expand owing to technological breakthrough, need for technical advice arises. Other opportunities may arise from funding new capital acquirements by firms as they seek new technologies.
INTERNAL ENVIRONMENT:
Products
The great contribution of the Business Banking to NAB’s performance owes to the many products that are offered in this SBU. These products range from accounts, cards, sectorial products such as agribusiness, insurance among others. Accounts include the NAB Business Cheque Account, the NAB Business Management Account and the NAB Everyday Business Account. Cards include the NAB Qantas Business Card, the NAB Business Card, the NAB Business Access Card and the Velocity NAB Business American Express Card. Lending facilities include Business Loans and Overdrafts, Bank Guarantee, Bill Facilities and Asset Finance Fees (NAB 2012).
Prices
Demand of a product depends on its price. Businesses would be interested to have a reasonable profit margin and hence sensitive to the costs of operations (Berry & Parasuraman 1991). NAB charges prices depending on the products and the nature of transaction; whether within Australia or international. For instance, the NAB Business Management Account has a flat monthly fee of $20 and $0.9 per over-the-counter deposit or withdrawal of an item. All the services in NAB Community Fee Saver Account are offered freely. NAB Qantas Business Card and NAB Business Card attracts monthly fee of $12 and $9 respectively while NAB Business Access Card and Velocity NAB Business American Express Card attracts $60 and $149 annually respectively. The prepayment fees for loans and overdrafts have already been abolished while a fee of $60 per drawing is charged for every progressive drawdown (NAB 2012).
Place
NAB has most of its Business banking services, just like any other service that it offers, within Australia. This is further indicated by revenue share across countries, where over 70% comes from Australia, around 14% from UK, 7% from New Zealand, 4% from USA and 1% from Asia.
Promotion
To ensure that the company maintains a positive publicity, NAB has ensured good customer relationship based on trust and quality of services. However, online promotion is the widely used to create awareness of new products, fees, and processes (Lovelock 1991). However, the company conducts activities to create awareness of products too. Such events include the NAB CUP Real Fan of the Match and the NAB Honest Credit Cards Fan Reward Competition among others.
People
NAB has around 43,000 employees to ensure efficient service delivery. The NAB Code of Conduct provides guidelines that ensure value delivery and sustainable performance without compromising customer experience. All employees are trained on any new advancement and are required to complete compliance training, which is mandatory.
Process
The process of getting business products in NAB, as in any other banks, is involving and a clear understanding by customers is a priority. NAB does this by availing information in blue prints and also websites as well as any other opportunities that arises, especially in promotion activities (Harrison 2000).
Physical Evidence
Although the bank provides comfortable banking halls, banking services have provided a new experience in service demand. Use of electronic debit and credit cards and internet banking in NAB business service provides competitive edge.
SWOT ANALYSIS:
References
Australian Government 2011, Australia’s Banking Industry. Sydney, Kuring-gai College of Advanced Education, Centre for Securities Industry Studies.
Berry, L. L., & Parasuraman, A 1991, Marketing services: competing through quality. New York, Free Press.
Brown, K. G 2009, The finance industry. Perth, W.A., Curtin University of Technology, School of Business Law and Taxation.
Beck, T., & Brown, M 2011, Use of banking services in emerging markets: household-level evidence. London, Centre for Economic Policy Research.
Ennew, C., Watkins, T., & Wright, M 1995, Marketing financial services. Oxford, England, Butterworth-Heinemann.
Harrison, T 2000, Financial services marketing. Harlow, England, Pearson Education.
Lovelock, C. H 1991, Services marketing. Englewood Cliffs, N.J., Prentice Hall.
National Australia Bank Limited 2012, Business Banking Fees: A guide to fees and charges Effective 26 November 2012.
Rayner, V., & Bishop, J 2013, Industry dimensions of the resource boom: an input-output analysis.
Skully, M. T 1979, The diversification of Australia’s trading banks. Sydney, Kuring-gai College of Advanced Education, Centre for Securities Industry Studies.
http://www.nab.com.au/wps/wcm/connect/nab/nab/home/About_Us/6/
http://www.nab.com.au/wps/wcm/connect/nab/nab/home/About_Us/
Passport GMID, 2012. National Australia Bank (NAB) in financial cards and payments (Australia) November 2012, 14 August 2013
National Australia Bank, 2012. About us|Shareholder Centre | NAB 2012 Full Year Results, November 2012, 14 August 2013
National Australia Bank, 2012. About us|Shareholder Centre |Annual Review 2012, viewed 14 August 2013
DatAnalysis, 2012 Company reports | National Australia Bank (NAB), viewed at http://datanalysis.morningstar.com.au.ezproxy.lib.swin.edu.au/af/company/corpdetails?ASXCode=NAB&xtm-licensee=datpremium [14 August 2013]
APPENDIX:
