Competitive Advantages Analysis of Kiwibank

Topics: Bank, Banking, New Zealand Pages: 9 (2643 words) Published: May 22, 2013
Table of Contents
PESTEL Framework Analysis2
Michael Porter 5 forces analysis4
Discussion further from the environmental analysis7
Strategic capabilities identification8
Discussion from the Strategic Capabilities Analysis11
Recommendation for long-term development11


Banking industry in New Zealand is a developed industry and has a long time history of being dominated by foreign-owned firms. This assignment will provide an overview of banking industry via two analyses, which are PESTEL Framework Analysis and Michael Porter Five Forces Analysis. In particular, the case of Kiwibank within the competition with other banks will be provided. Strategic capabilities and reacting strategies of Kiwibank are also identified, assessed through VRIN criteria, and discussed their feasibility. Finally, recommendations for Kiwibank sustainable development are also suggested in this assignment.


PESTEL Framework Analysis

PESTEL framework analysis provides an overview of the macroeconomics conditions that affecting the banking industry in New Zealand. Five main factors forming PESTEL diagram are Political, Economic, Socio-cultural, Technological, Environment and Legal ones. However, based on the provided information in the case study, just three of them will be clarified next.

Since 1992, New Zealand government (National Party particularly) has followed a non-involvement strategy in banking. The advantage of this is that banks can be free from the interference of government in long-term plan or internal operation strategy. In some cases, there are no longer any nationalization activities from the government, both expropriation and confiscation. Nonetheless, the banking activities are not under control, being floated and small banks have no subsidies to recover their balance statement if there is a bad situation occurring.

However, starting from early 2000s, government started to have some initial intervention towards the banking industry through state-owned enterprises (SOEs). A prominent example is subsidizing for NZ Post to run a new bank named Kiwibank in 2002. This movement until now has no proofs whether it is positive or negative for the banking industry. However, it may become notable in future because it can be seen that there will be more intervention from government. Therefore, the face of banking industry can change rapidly.

It has been a long history of the dominance of foreign-owned banks in New Zealand. In fact, most of the major banks in New Zealand have the Australia-origin, or acquired fully or partly by their neighbor-country banks. ANZ, the biggest bank now in NZ, in term of total assets (Appendix in the case study), headquarters in Australia. These major banks possess a huge source of capital, especially financial resources, which can help solve the problems of bad debts or doubtful debts, and help fluent the liquidation of monetary flow in NZ. They contribute to a developed and stable banking system here in NZ, setting the basis for other industries to grow. However, for small and New Zealand-based banks, competing with these dominants is such an impossible challenge because of lacking financial capital.

Another point to note down is the acquisition trend happening from 1980s until now. In particular, dominants as mentioned above tended to acquire regional bank. For example, 75% shares of Auckland Savings Bank (now ASB Bank) are sold to the Commonwealth Banks of Australia in 1989 and the remaining 25% to ASB Community Trust in 2000. This trend has both side effects on NZ banking industry. Positively, such acquisition helps concentrate the resources, in terms of financial and human, avoiding an intense competition in NZ; however, it can also become one of the fixative factors creating the oligopoly, preventing...
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