Custom «Bank of Melbourne Report» Essay Paper

Banking sector in Australia has remained stable over the past few years despite the global economic slump. The local and regional banks in Australia have successfully managed to have stable income through interests on loans, investments, advances, commissions and fees. Investments on their own infrastructures have also reduced the costs on rentals and operations, leading to a three percent increase in market revenue. However, the market is quite competitive and the Bank of Melbourne is currently facing competition, mostly from regional and international banks. The bank needs to use price and product promotion to cement its position as a market leader. By applying the Strategic Characterization Matrix, the bank will able to align itself with the five principles of grow, enter, harvest, divest or maintain. The Bank of Melbourne will also need to use the same strategy as well as market segmentation to increase sales strategy.

Introduction

The growth of banks in Australia has defied the odds of the global economic slump that faced banks worldwide. The Bank of Melbourne has grown in the past years with the acquisition of assets. For continued growth and success, the bank need to have a strategic approach to the market, considering the increased competition from local, regional and international players. This marketing plan report is aimed at analyzing the position and strategies that the bank should apply in order to enhance its business position for future growth.

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SWOT analysis:

SWOT is a strategic planning technique which is carried out in a business venture or in most of the cases, projects. The technique’s main aim is achieved through scrutiny of Strengths, Weaknesses, Opportunities, and Threats. The main way to achieve the analysis is through contrast of two of the components in the SWOT analysis; contrast between opportunities and threats while on the other hand Strengths and Weaknesses

Opportunities and Threats

Size of the market (Statistics)

Defining the size of the market in which the company develops is the main determinant of the company’s opportunity in market share or a threat to the company’s market share in existence. The market of Australia is faced by many financial industries ranging from credit unions, foreign banks, and other national and Regional commercial banks. Bank of Melbourne has established itself with the finance sector. The industry has increased its revenue by 3.0 percent per annum to reach $114.5 billion in the previous 2011-2012 financial year (ibisworld, 2012).  It is recognized that Australian-owned banks and Australian operational banks form part of the larger networks of financial market. The income for these banks is generated through interest income on loans, investments, advances, commissions, and fees

Market growth (Statistics)

The market faced a dropdown in the financial year of 2008-2009, and in 2000 the market was considered to be low (Arthur, 2012). The reason was due to the high rents paid by the banks. However, they changed their strategy and resorted to owning the premises and areas of operation. The market has improved and increased over the past years; there has been a 3.0% increase in the market revenue (Arthur, 2012). The whole market inclusive of mortgage and other financing sectors expect an increase in revenue though due to other factors a decline in profitability is expected (El-Erian & Spence, 2008).

Since the economy is to demand for credit weakening and to enter into a more subdued patch, the financiers’ industry revenue will be expected to decline. Therefore a decline is expected in the finance industry. Another considered cause is the reduced level of business investment and the increased difficulty in attaining credit by businesses due to higher lending standards imposed by finance companies. The clients have also been recognized to become net savers in order to reduce their debt levels. The interest rates are relatively low; therefore the revenue generated through this means is low.

Competitive structure of the markets

The multiple segments in the finance industry have different techniques in ensuring they reach the widest markets. Some of the banks specialize permanently to service personal accounts of which they improve on customer quality. The mortgage and loans which are the basis of income for most of the companies involved in the industry have also taken different paths in policy and implementation. The low interest rates in the industry have led to decline in most of the companies’ revenue. The Bank of Melbourne has increased its access to their clients through the number of ATMs branches and other facilities that are widely distributed. Though the different companies in the industry are under same government policies, the companies fall under different levels which might be considered by the clients more than the bank of Melbourne. For example, the Money Market dealers or the brokers might offer cheaply available means of cash and faster than the bureaucratic means experienced in the banks such as Bank of Melbourne. The difference is also exhibited in the company’s strategies and client seeking techniques. Therefore, it may also be attributed to the company’s hard work.

Cyclicality of market

The bank of Melbourne has many services through which they ensure involvement of the clients. The strategies involved include fixed deposits which attract interests to the clients. The loans disbursed by the company also ensure that the company is in a capable position to be close.

Risk factors: Market risks

The great risks to the banks are the increasing smaller financial companies that deal with fewer expenses hence gain a much higher revenue and profit due to the flexible policies favoring them. Government intervention into the industry’s activities has also been of late more of a risk than an opportunity as the government seeks for measures to reduce the market money supply which affects the banks system. The lower rates of interests experienced by the bank and some entry policies that tend to reduce the banks expansion for broader markets.

Strength and Weaknesses

Cost competitiveness

The large network of the bank of Melbourne branches and ATMs has an increased operational cost to ensure the maintenance of these facilities. The bank has an objective to increase its branches and ATMs within the current financial year. Therefore, more capital costs is going to be included in the costs. The costs would have an increase on the expenditure; the increase in number of staff would demand more payment, the increase in ATMs would require more maintenance cost and the new branches would mean the company would have to increase on its lease or rent payment for the building. The increased costs are to ensure smooth operation of the bank and also to increase the market share of the bank. Therefore, it is expected of the bank to have more benefits from the increased network of branches and ATMs. For the company in its consideration to increase its market share it should be able to identify the areas with high clients; current or potential. Therefore, it would be able to have a broader market share and increase its revenue.

Differentiation competitiveness (Projection of strengths and weaknesses)

The company has a broader number of branches, therefore a large number of market share is expected to be established. The bank of Melbourne has based itself on market attractiveness with its policies. Corporate value would attract clients who hold onto the business but due to the less interests rates the revenues to be expected would be few. It is therefore more reasonable for the company to establish itself on a wider scale with the low interests to attract more clients and increase on the revenue. The company should center itself on promoting the services it has to the public such as the benefits of personal banking such as the decreased percentage on the mortgage finance.

The best policy that would work for the bank of Melbourne so as to be in control of their revenues and the increasing network of branches, the company should consider keeping the prices at level of competitors and using advantage to gain market share. Therefore, the company’s objective of Market attractiveness would be achieved at ease. Different companies operate under different fixed and variable cost to work out the expected price. Mostly the lower prices are attributed to the company’s size. Though the company should also consider its fixed and variable costs, concentrating mainly on the variable costs to measure the price at which they should offer their services.

Determine strategic market objectives

The firm’s main aim is to increase the value of the shareholders. The company can only achieve the objective through growth or entering into new venture. These are the only ways through which bank of Melbourne can achieve and on one hand is already being executed. Traditionally, strategic objectives have been conceptualized and organized as capital rationalizing models, based on the premise that capital is a scarce resource. Traditional models include Boston Consulting Matrix, GE-McKinsey Matrix, and Arthur D. Little Model. These models are well used in market. The model to be used is the Strategic Characterization Matrix (SCM), which is not based on the notion that capital is scarce (El-Erian & Spence, 2008).

Increase volume (This is because the market’s strategic objective is to grow or enter)

The Bank of Melbourne has been able to achieve the market’s strategic objective which would lead to an increase on the sales volume and in this case the number of clients. Entering into other ventures or segments on the other hand would lead to an improvement on productivity. The marketing tasks involved with volume focus include Convert non-users, Enter new segments, increasing the usage rate, Win competitor’s customer.

Segment markets that were selected

 Market segmentation can be described by identifying groups of customers who behave differently in response to a marketing strategy (Jimenez, 2008). Bank of Melbourne has segmented its clients mainly into three groups; personal, business, and corporate. The main objective of market segmentation is to define alternative customers. Segmentation occurs due to exploration of new segments and exploration of existing customers segments. Marketing managers are pressured to exploit customers who are non-users and existing product options.

Segment based on behavior variables

Basing segmentation on behavior variables, the main consideration is age. The bank might consider dividing the personal accounts into student accounts for the students with policies which are flexible for them. This would ensure increased market share especially from the students who normally have a wide market share. On gender, the less persistent gender on gaining accounts or services from the bank should be given more flexible and effective policies.

Segment based on descriptor variables

Basing the segmentation on descriptor variables, it may further be broken into demographics or psychographics. The demographics variables would include the reachable areas having more policies to ensure the people gain the services and products from the bank of Melbourne. The demographics are not only limited to geographic location but include ethnic groups and marital status. The psychographics are inclusive of interests, opinions and lifestyles. The bank should consider including marketing objectives that would initiate the feeling of togetherness and relation to the bank. The bank might for example use different houses to advertise and market on its mortgage financing.