NAB Business Banking – Situational Analysis

National Australia Bank Limited (NAB) was launched 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, the USA, the 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 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 (SBU)

Its 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 to the NAB Annual Review of the year 2012, Business banking has maintained a sizeable share of the banks operations 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 businesses 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. NABs 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 businesses. However, its business lending that offers a great growth opportunity if well utilized. Although international market provides additional space, local market is still large, as indicated below.

Australias Bank Lending to Businesses (A$ Billions)

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, an ability to maintain competitiveness depends on affordability. NABs performance gives it an edge, but, nevertheless, competition will always be there.

The Forbes Worlds Leading Companies: Forbes rank according to an equal weighting of sales, profits, assets, and market value.

Sources: Forbes, The Worlds Leading Companies, April 2010; Austrade

Economic Environment

NAB has the capacity to capitalize on its financial strengths in order 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, the United States, and the United Kingdom accordingly, NABs business banking potential growth is high. Worthwhile noting, demand for business lending is not limited to the countries, where the bank operates.

Social and Cultural Environment

Modern lifestyle has offered a great opportunity for business growth. This especially relates to the dynamism of modern culture, which necessitates constant re-adjustments that may offer growth opportunity and, hence, demand for banking services. The Australian population also participates actively in the various sectors such as agriculture, production, and manufacturing among others; hence, bringing additional the growth potential.

Political and Legal Environment

Reserve Bank of Australia, among other government agencies, ensures sanctity in the countrys financial market. NAB, therefore, has to conform to the current policies, as well as to envisage 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

A great contribution of the Business Banking to NABs performance owes to the products that are offered in this SBU. These products range from accounts, cards, sectoral products, such as agribusiness, and insurances among others. Accounts include NAB Business Cheque Account, NAB Business Management Account, and NAB Everyday Business Account. Cards include NAB Qantas Business Card, NAB Business Card, NAB Business Access Card, and 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, whereas it is within Australia or internationally. For instance, 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 attract monthly fee of $12 and $9 respectively, while NAB Business Access Card and Velocity NAB Business American Express Card attract $60 and $149 annually respectively. The prepayment of fees for loans and overdrafts has 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 the revenue share across the countries, where over 70% comes from Australia, around 14% from the UK, 7% from New Zealand, 4% from the USA, and 1% from Asia.

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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 widely used in order to create awareness of the new products, fees, and processes (Lovelock 1991). However, the company conducts various activities to create awareness of the products as well. Such events include NAB CUP Real Fan of the Match and NAB Honest Credit Cards Fan Reward Competition among others.

People

NAB has around 43,000 employees to ensure efficient service delivery. The NABs 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 bank, is involving and requires a clear understanding that customers are a priority. NAB does this by availing information in blue prints and various websites, as well as in any other sources, where an opportunity arises, especially concerning the 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 services provides competitive edge.

SWOT Analysis

Weakness

Products: Business loans are usually big and liquidity requirement may be a challenge.

Prices: Although businesses would prefer as low fee as possible, such strategies may not be possible given the service provision costs.

Place: NAB may not have the capacity to compete adequately in the foreign markets, where other firms are well-established (Ennew et al. 1995).

Promotion: Business procurement processes are rigorous and internet information may prove inadequate, in addition to the current promotion activities.

People: Training is costly and time consuming and time may not be adequately available to the employees.

Process: Online materials may not be adequate for process training without a robust feedback system to provide clarification among other services.

Physical Evidence: Use of spacious banking halls and internet banking comes with additional costs, which may deny NAB the highly desired profits.

Strengths

Products: Sectors such as agriculture, manufacturing, mining, and construction are offering growing and large markets for lending facilities. An example is a ?75m Wind Construction facility issued on October 2012, and Tropicana Gold Project.

Price: The large size of the company offers opportunity to adjust Business product prices downwards e.g. loan and overdraft repayment fees.

Place: Local and international market for business banking offers NAB a large market base.

Promotion: Use of internet marketing enables NAB to reach out to many Businesses; hence, providing a customer base of 8.3 million in business and consumer banking.

People: Constant training of the employees and the code of conduct provide a framework for excellent customer experience and, therefore, customer loyalty.

Process: Use of internet banking and online materials provide training on the requirement and process of acquiring business banking products in NAB.

Physical Evidence: Spacious and Comfortable banking halls and mobile and internet banking are availed in business banking.

Products: Growth of various sectors of the economy depends on macro-economic factors; uncertainty may affect default rate and insurance rate (Rayner & Bishop 2013).

Threats

Price: competitors may match low prices; hence, rendering the strategy inefficient.

Place: International market may have policies to limit entry or give local competitors an upper hand.

Promotion: Use of similar promotion methods by competitors may lead to zero or little marginal benefits in terms of the new businesses.

People: Training and code of ethics may not guarantee customer satisfaction. They may fail to give feedback, but move to a different provider.

Process: Use of internet may face security challenges, which may, in turn, lead to negative publicity.

Physical evidence: If the core service does not appeal adequately to the customers, physical evidence may only lead to an inefficient use of resources; hence, limiting future growth.

Opportunities

Products: The size of agriculture, manufacturing, mining, and construction sector offers immense growth opportunity.

Price: The size of NAB gives an ability to use price strategies to gain market share from many competitors.

Place: Local and international market provide a framework, within which demand fluctuations can be hedged and expanded.

Promotion: Holding activities to create awareness and internet promotion provide an opportunity to target and attract new businesses.

People: Quality services and excellent customer experience offer a competitive edge to create loyal customers for future business.

Process: Blue prints and internet information on processes provide growth opportunity through reduction of turn-around time, as well as through an increased customer satisfaction.

Physical evidence: The total experience in consumption of services offered by NAB may turn the customers into evangelical ones.

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