Introduction
Business strategy includes formulating and implementing initiatives and goals taken by the organisation. This also gains the competitive advantage in the market. The strategy is important to the success of company and is required before any services and goods are delivered or produced. The report will be based on the NatWest, this has been formed in the year 1968 via the merger of Westminster Bank and National provincial bank (NatWest, 2023). These are becoming the largest banks of UK. It has been expanded `both internationally and domestically, providing the comprehensive baking services. The report will shed light on using the appropriate framework to assess the influence and impact. Moreover, it will determine the appropriate management tool to assess the market sector.
P1: Applying the appropriate frameworks to analyse the impact and influence of the macro environment on the organisation
In order to assess the influence of macro environment on the strategic direction of NetWest, can use the PESTEL analysis.
Political Factors: The NetWest operates in the banking sector which is highly regulated, in which the international trade laws and government policies mainly affect the operations. Focusing on the financial crises of 2008 developed the oversight of government, which guides to effective and stricter capital requirements (PESTEL analysis of NatWest, 2023). Moreover, the Brexit developed the complexities within the talent acquisition and financial transactions cross border. This is overall affecting the European operations of the NatWest. The Geopolitical tensions such as conflict of Ukraine and Russia affect the inflation rates and currency volatility.
Economic factors: The different macroeconomic conditions like as GDP growth, interest rates and inflation, affect the profitability of the NatWest. The pandemic of the Covid-19 increased the economic downturns, driving the banks to offer the loans backed of government to sustain to the struggling businesses (Olson et al, 2021). The recovery of economic is developing interest rates, this influencing the mortgage approvals, consumer lending and enhance the borrowing prices. With the mobile app users more than 7.5 million, the NetWest regularly to expands the E-banking to compensate the in branch declining transactions.
Social factors: The banking habits of consumer have developed effectively, along with the adults of UK 73% utilising the E-banking within the year 2021 than 30% within the year 2007 (Online banking usage in the United Kingdom, 2023). Need for the effective digital experiences developed to effectively invest within the AI driven and mobile banking consumer service. Moreover, the financial inclusivity mainly is becoming a key priority. This is effectively aimed to offer support in communities under banked.
Technological factors: The technological developments effectively developed the overall industry of banking. The NatWest has developed the cyber security innovations and block chains to decrease the fraud risks and boosts the consumer security. On the other hand, the legacy system updates can be challenging, along with developing the pressure to the IT infrastructure.
Legal factors: The overall financial sector is mainly strict within the regulatory frameworks, like as AML laws (Anti money laundering), Basel III regulations and GDPR. The Compliance with the various regulations affects the pricing of product and boosts the operational prices.
Environmental factors: The commitment of NetWest to the 100billion within the sustainable and climate funding by the year 2025. This is supporting the renewable energy and green financing projects (Tien et al, 2019). On the other hand, bank faces issues for the high carbon industries’ investments, needing the strategic change toward the ESG and sustainable investment.
Strategic implications: The investment within the banking based on AI powered, the block chain fir the cloud computing and secure the transactions to boost the scalability. The alignment of the sustainable financial with the commitment of Net Zero, it is emphasising on the sustainable investment and green loans. Boost in risk management and alignment with the data protection and financial laws.
M1: analysing the macro environment to inform and determine the strategic management decisions
Success of the NatWest is relies on the effectively adapting the strategies to the macro environmental external pressures. The rapid digitisation of banking industry is increasing along with the developing consumer expectations, economic fluctuations and geopolitical risks.
Key strategic considerations
Investment in Digital banking and AI: Along with the traditional banks and fintech disruptors, the organisation needs to boost digital offerings via the block chain security, AI driven advice financial and automation to retain the consumer.
Ethical banking and sustainability: The demand of consumer for the effective ethical finance is developing. This is decreasing the investment within the ESG alignment and carbon intensive industries. The lending will boost the reputations of the NatWest (ROTHAERMEL, 2018).
Economic risk mitigations and Geopolitical: The Brexit and Russia Ukraine conflict make the uncertainty. The strong framework of the risk management and investment strategy are important as well.
P2: Conducting an internal environment and capabilities assessment of the organisation
In order to assess the internal capabilities and environment, VRIO and SWOT analysis are utilised to demonstrate the threats, opportunities, weaknesses and strengths.
SWOT analysis
Strengths
- Digital banking leadership: Along with the more than 7.5 million users of mobile app, the organisation is trusted UK’s financial institution.
- Strong bank reputation: With the baking experience of 200 years, the organisation is leader within the innovation within the digital banking.
- Financial stability and government support: After bailout of 2008, the organisation was restructured to makes sure about the financial resilience for long term.
- Consumer centric approach: Effective investments within the customised services and AI powered banking boost the consumer experience.
Weaknesses
- Past financial scandals: The past mismanagement and regulatory fines have impacted the reputations of bank (Pieroni et al, 2019).
- Legacy IT infrastructure: The systems of older banking need the costly upgrades to fulfil the fintech competition and modern cyber security.
- Overdependence on the UK market: The organisation lacks mainly international diversification, creating it effective to the downturns of domestic economic.
- High operating costs: The regulatory compliance and branch maintenance boost the operational expenses.
Opportunities
- Automation and AI: Applying the financial services driven by AI might boost the consumer services and effectiveness (SWOT analysis of NatWest, 2023).
- Sustainable finance growth: Expanding products of ESG linked might attract the environment conscious customers and ethical investors.
- Expanding SME lending: Developed support for the SMEs might boost the market positioning.
- Automation and AI: Applying the financial services driven by AI might boost the consumer service and effectiveness.
Threats
- Regulatory changes: Developing financial regulations can affect the profitability and lending practices.
- Cyber security risks: The increasing cyber threats need the ongoing investment within the framework of the security (Rachinger et al, 2019).
- Economic volatility: The market instability, interest rate hikes and inflation affect the revenue stream of the NatWest.
- Competitive pressure: The fintech disruptors and digital only banks are decreasing the traditional consumer base of NatWest.
VRIO framework
|
Resource/capability |
Valuable |
Rare |
Inimitable |
Organised to exploit |
Competitive advantage |
|
Strong trust and brand |
Yes |
Yes |
No |
Yes |
Temporary |
|
Infrastructure of digital banking |
Yes |
No |
No |
Yes |
Competitive equality |
|
Data and AI analytics |
Yes |
Yes |
Yes |
No |
Temporary beneficial |
|
Consumer relationships |
Yes |
Yes |
No |
Yes |
Rivalry beneficial |
|
Sustainable finance commitment |
Yes |
Yes |
No |
Yes |
Advantages temporary |
M2: Interpret information and data to assess strengths and weaknesses of the internal capabilities of the organisation
The internal capabilities of the NatWest reflect a management of the weaknesses and strengths which shape the overall competitive position.
Strengths: The ESG leadership, consumer focused E-banking and strong brand give the edge within overall financial sector (Morkunas et al, 2019). The data analysis and AI hold the strategic fintech collaboration and untapped potential might boost the future growth.
Weaknesses: The regulatory challenges, high prices of operational and outdated IT systems affect the overall effectiveness. The bank needs to invest within the agile banking and cyber security solutions to be competitive. The organisation has the effective governance framework but needs the effective agility within the innovation and digital transformation.
P3: Determining the appropriate management tools to analyse the market sector of organisation
In order to assess inform the strategic decision of NatWest and baking market sector, the STP and Porter’s five forces analysis are mainly related.
Porter’s five forces analysis
Competitive rivalry (High): The banking sector of UK is mainly competitive, along with the key players with the digital banks (Starling, Revolute and Monzo), Lloyds, HSBC and Barclays competing for the shares in the market. The organisation needs to differentiate via sustainability efforts, consumer service and digital innovation to manage the strong position.
Bargaining power of the consumer (High): Now consumers have effective access to the alternatives of fintech providing the seamless E-banking experiences along with the lower fees. In order to retain consumers, the organisation needs to boost the loyalty programs, financial driven services and personalised banking.
Bargaining power of suppliers (Moderate): Within the banking, the suppliers involve the regulatory bodies, cloud computing services and fintech providers (JOHNSON, G. et al, 2019). The reliance on the IT third party solutions for the AI integration and cyber security boost the prices.
Threat of new entrants (Moderate to high): The boost of the fintech disruptors and digital only banks poses a major challenge. The different novel entrants have advantages from the agile technologies and lower overheard prices. The organisation needs to accelerate the collaborations of fintech and streamline the operations.
Threat of substitutes (High): The services of traditional banking are effectively replaced via the DeFi (Decentralised finance), peer to peer lending and crypto currencies (Bocken et al, 2019). The organisation needs to innovate via the expanding offering of sustainable finance and integrating solutions of block chain.
STP analysis for the market positioning
Segmentation: The organisation might segment the consumer within the retail banking, the individuals who are utilising the digital banking, mortgages and personal savings. The businesses need the investment banking, loans and financial services.
Targeting: The young professional is focusing on the banking solutions with the mobile first banks. The businesses and investors are seeking for the financial ESG compliant products.
Positioning: The organisation can boost the market position via sustainable financial institution, digital first and consumer centric. Focusing on the ESG focused finance, fintech partnership and AI powered banking will effectively attract the consumers of modern banking.
M3: Justifying the use of an appropriate strategic management tool for the sector
The porter’s five forces is mainly an appropriate tool which assess the competitive environment of the NatWest. This offers the effective evaluation of the market dynamics which offers help to the bank in formulating the strategic responses, assess risks and indentify the rivalry pressure (Keiningham et al, 2020). This showcases the differentiation areas like as sustainability driven banking and digital transformation. By using STP and porter’s five forces analysis, the organisation can boost the consumer engagement, market position and strategic objectives.
P4: Devising the appropriate strategic outcomes of analysis for the organisation
Based on the external and internal analysis conducted utilising the STP, porter’s five forces, SWOT and PESTEL. The organisation needs to develop the strategic goals which align with the competitive challenges, market trends and mission. `The different objectives emphasise on the operational resilience, consumer engagement, sustainability and digital transformation.
AI-driven and digital banking innovation:
Objective: Boost the infrastructure of digital banking via AI driven solutions integration to automate the routine services and customise consumer interactions.
Strategic action: Invest within the robo-advisors, chat bots and machine learning algorithms to boost the effectiveness and consumer service.
Expected outcomes: A boosts 20% in the engagement of mobile banking and are decreased costs of operational by 2026.
Green and sustainability finance leadership
Objective: Expand the financial products compliant with the ESG to attract the investors and eco-conscious customers.
Strategic action: `Introduce funds of carbon neural investment, sustainable business loans and green mortgages.
Expected outcome: Gain 100 billion within the sustainable and climate funding via the year 2025.
Risk management and cyber security
Objective: Boost the cyber security framework to prevent threats of cyber and protect the data of consumer.
Strategic action: Adopt the technology of block chain, upgrade systems of legacy and invest within the fraud detection based on the AI (Parida et al, 2019).
Expected outcome: 30% decrease within the risks of cyber security and developed regulatory compliance.
M4: Producing a strategic management plan that has tactical and tangible strategic objectives and priorities
In order to execute the goals, the organisation needs to emphasise tactical and tangible steps to gain the competitive benefits:
Sustainability linked growth: Boost the green start-ups partnership and initiatives of the ESG.
Investment within the digital infrastructure: Effectively allocate the 500 million more than 3 years for the automation, block chain and AI (Bouwman et al, 2019).
Cyber security fortification: Effectively deploy the real time systems of risk monitoring and fraud detection AI driven.
Business and SME expansion: Boost the dedicated ecosystem of fintech for the SMEs
By applying the strategic priorities, the organisation might boost the long term profitability, consumer loyalty and operational effectiveness.
P5: Applying range of models, concepts and theories to devise and interpret strategic planning for organisation
In order to makes sure about the long term success, the organisation needs to adopt the approach of the structured strategic planning, by utilising the effective theories, concepts and models. The major models utilised involve the Balanced scored, porter’s generic strategies and Ansoff’s Matrix.
Ansoff’s Matrix: Strategies of growth for the NatWest
This offers help in determine the strategies of growth via assessing product expansion and market opportunities
|
Strategy |
Application to the NatWest |
|
Market penetration |
Boost the adoption of the mobile banking via customised consumer engagement and financial AI driven services. Target more than 10% growth within the users of mobile banking by the year 2026. |
|
Market development |
Expand within the novel international market through cross border collaborations fintech and digital baking partnership. |
|
Product development |
Introduce the block chain services based on security, green mortgage and sustainable investment funds to appeal the focused consumer of ESG (Gil-Gomez et al, 2020). |
|
Diversification |
Invest within the start-ups of fintech to boost the payment solutions of alternative digital and innovative technologies for finances. |
Porter’s generic strategies: competitive positioning
In order to manage the competitive edge, the organisation needs to emphasise on the cost leadership and differentiation.
Differentiation strategy: Boost the banking solutions driven by AI, providing the developed features such as predictive and robo advisors financial analytics. This positions the organisation as the sustainable finance’ leader also is integrating the compliance of ESG within the offerings of product.
Cost leadership strategy: Decrease the expenses related to branch and automate operations of BackOffice. Apply the cyber security solutions and fraud detection powered by AI to cut down the compliance prices and operational risks.
The balanced scorecard: performance measuring
In order to track the effective strategic progress, the organisation might utilise the Norton and Kalpan’s balanced scorecard.
|
Perspective |
Strategic focus for the NatWest |
|
Financial |
Boost the margins of profit by the 15% via the digital expansion and cost optimisation. |
|
Customer |
Boost the consumer satisfaction through Ai driven support and customised financial products. |
|
Learning and growth |
Up skill workers within the ESG baking, fintech and AI to future proof workforce of organisation. |
P6: Designing the strategic management plan, applying appropriate strategies to improve competitive edge and market position
In order to boost the market position and competitive edge, the organisation needs to boost the strategic management plan which develops the risk management, consumer engagement, sustainability and digital transformation. The plan is effectively structured by making use of the balanced scorecard, Asoff’s matrix and Porter’s generic strategies to makes sure about the alignment with the objectives of business.
Strategic mission and vision: The strategic vision of the NatWest is to be sustainability driven financial institution, digitally developed and consumer first. The mission is to be sustainable banking, encourage the financial inclusivity and offering the innovative financial solutions.
Key strategic actions and priorities
AI integration and Digital banking innovations:
Objective: Boost the digital banking capabilities of the NatWest to decrease the operational prices and boost consumer experiences.
Actions: Invest within the financial services driven by AI, including predictive analytics and robo advisors. Expand the features of mobile first banking to boost the real time support and accessibility. Partnership with the firms of fintech to boost the DeFi solutions and security based on the block chain.
Expected outcomes: Boost 20% in the adoption of digital banking by the year 2026.
Sustainable banking solution’s expansion
Objective: Boost the leadership of NatWest within ESG finance via providing the financial and sustainable products.
Actions: Allocate the more than 100 billion within the funding of sustainability via the year 2025 for the ESG investments and green loans. Introduce the baking services of carbon neutral, including the eco-friendly savings and green mortgages accounts (Burström et al, 2021). Effectively collaborate with the firms of renewable energy to encourage the sustainable financing.
Expected outcomes: 30% boost within financial product compliant with the ESG by the 2026.
Risk management and cyber security development
Objective: Boost the cyber security frameworks to reduce the digital fraud and protect consumers.
Actions: Upgrades systems of legacy banking to the cloud and modern based infrastructures. Apply the fraud detection of real time utilising the machine learning and AI. Conduct the audits of quarterly cyber security to makes sure about the compliance with the regulations of finances.
Expected outcomes: A reduction of 40% within the fraudulent transactions and cyber threats
Corporate and SEM banking growth
Objective: Boost the SME banking segment of NatWest via offering the developed solutions of the digital baking.
Actions: Launch finance platform of AI powered to provide the SEMs real time analytics. Boost the lending for the SMEs along with the approvals of fast tracked loan by using the risk assessment based on AI. Offer the customised mentorship and customised training programs for the businesses and entrepreneurs.
Expected outcomes: A 15% boost within the SME business loans and consumer base.
Market differentiation and consumer centric personalisation
Objective: Boost the consumer retention via providing the experiences of the customised banking.
Actions: Apply the consumer profiling 360 degree by making use of the big data analytics. Provide the Ai powered tools financial wellness to offer the developed investment recommendations. Boost the effectiveness of consumer service with the virtual banking assistants and chatbots.
Expected outcomes: A 10% boost within the NPS (Net promoter score) and consumer loyalty.
Implement performance tracking and timeline
|
Phase |
Strategic action |
(KPI) Key performance indicator |
Timeline |
|
Phase 1 |
AI driven fintech and banking partnerships |
20% growth within the adoption of digital banking |
2025-2026 |
|
Phase 2 |
Expansion of green loans and ESG finance |
100 B gained sustainable funding |
2025 |
|
Phase 3 |
Fraud detection and cyber security upgrades |
40% boost within the cyber threats |
2025-2026 |
|
Phase 4 |
SME lending AI driven and expansion business banking |
15% boost within the consumers within the SME |
2026 |
|
Phase 5 |
Tools AI driven and personalise financial advisory |
10% increase in consumer loyalty |
2026 |
Mitigation and strategic risk plan
|
Risk factor |
Mitigation strategy |
|
Cyber security threats |
Invest within the regulatory compliance, AI fraud detection and developed encryption |
|
Regulatory challenges |
Establish the compliance protocols and governance frameworks |
|
Market competition |
Emphasize on the ESG leadership, fintech collaboration and AI powered banking |
By executing the effective strategic plan, the organization can makes sure along the long term sustainability of finances, drive innovation and market positioning.
D1: Creating a set of valid strategic directions, objectives and tactical actions for successful achieving the strategic alignment
In order to effectively align the strategy of NatWest with the objectives of business, following effective strategic actions and direction need to be applied.
Strategic directions
Digital banking leadership: Effectively establish the organisation as the most consumer centric and AI driven bank of UK.
Cyber security excellence: Boost the IT dependency to decrease fraud risks and increase the trust (Morkunas et al, 2019).
Sustainable finance innovation: lead within the ESG investments and green banking solutions
Strategic objectives and tactical actions
|
Strategic objective |
Tactical action |
Success measure |
|
Boost consumer retention |
Customised AI financial tools |
10% boost within NPS |
|
Increase SME banking |
AI driven development for businesses |
15% growth within the consumer of SME |
|
Boost cyber security |
Block chain security and AI fraud detection |
40% decrease within the cyber threats |
|
Expand the ESG financing |
100B green loans and sustainable lending |
30% development within the ESG products |
|
Enhance digital banking |
Block chain security and AI powered banking |
20% growth in the mobile banking |
Conclusion
Conclusively, it states that the strategic management plan of the NatWest emphasise on the consumer centric innovation, cyber security, sustainability and digital transformation to boost the competitive edge within developing financial sector. Through developing the SME support, risk management, ESG financial compliant and AI driven banking solutions position the organisation as the modern banking leader. The implementation of the balanced scorecard, Ansoff’s Matrix and Porter’s generic strategies makes sure about the structured approach. Along with the investment of 100 billion within the finance of sustainability and 20% boost within the adoption of digital banking. By resolving the enhancing consumer expectations, technological developments and market disruptions are the key factors. The strategy of NatWest makes sure about alignment with the trends industry, risk mitigation and long term growth.
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References
Books and journals
Bocken, N., Boons, F. and Baldassarre, B., 2019. Sustainable business model experimentation by understanding ecologies of business models. Journal of Cleaner Production, 208, pp.1498-1512.
Bouwman, H., Nikou, S. and De Reuver, M., 2019. Digitalization, business models, and SMEs: How do business model innovation practices improve performance of digitalizing SMEs?. Telecommunications Policy, 43(9), p.101828.
Burström, T., Parida, V., Lahti, T. and Wincent, J., 2021. AI-enabled business-model innovation and transformation in industrial ecosystems: A framework, model and outline for further research. Journal of Business Research, 127, pp.85-95.
Gil-Gomez, H., Guerola-Navarro, V., Oltra-Badenes, R. and Lozano-Quilis, J.A., 2020. Customer relationship management: digital transformation and sustainable business model innovation. Economic research-Ekonomska istraživanja, 33(1), pp.2733-2750.
JOHNSON, G. et al, 2019 Exploring Strategy: Text and Cases.12th Ed Harlow: Pearson
Keiningham, T., Aksoy, L., Bruce, H.L., Cadet, F., Clennell, N., Hodgkinson, I.R. and Kearney, T., 2020. Customer experience driven business model innovation. Journal of Business Research, 116, pp.431-440.
Morkunas, V.J., Paschen, J. and Boon, E., 2019. How blockchain technologies impact your business model. Business Horizons, 62(3), pp.295-306.
Olson, E.M., Olson, K.M., Czaplewski, A.J. and Key, T.M., 2021. Business strategy and the management of digital marketing. Business horizons, 64(2), pp.285-293.
Parida, V., Sjödin, D. and Reim, W., 2019. Reviewing literature on digitalization, business model innovation, and sustainable industry: Past achievements and future promises. Sustainability, 11(2), p.391.
Pieroni, M.P., McAloone, T.C. and Pigosso, D.C., 2019. Business model innovation for circular economy and sustainability: A review of approaches. Journal of cleaner production, 215, pp.198-216.
Rachinger, M., Rauter, R., Müller, C., Vorraber, W. and Schirgi, E., 2019. Digitalization and its influence on business model innovation. Journal of manufacturing technology management, 30(8), pp.1143-1160.
ROTHAERMEL, F., 2018Strategic Management. 4th Ed. Maidenhead: McGraw-Hill.
Tien, N.H., Phu, P.P. and Chi, D.T.P., 2019. The role of international marketing in international business strategy. International journal of research in marketing management and sales, 1(2), pp.134-138.
Online
NatWest, 2023. Online. Available through https://www.natwest.com/
Online banking usage in the United Kingdom, 2023. Online. Available through <https://www.statista.com/statistics/286273/internet-banking-penetration-in-great-britain/>
PESTEL analysis of NatWest, 2023. Online. Available through <https://www.swotandpestle.com/natwest-group/>
SWOT analysis of NatWest, 2023. Online. Available through https://iide.co/case-studies/swot-analysis-of-natwest/
