The Effects of External and Internal Factors on Lloyd's Banking Group - Case Study Example

The Effects of Macro and Micro Environmental Forces on Lloyds Banking Group The economic sector in the United Kingdom experience substantial intervention by the financial institutions within the country. The global stock exchange market creates a competitive element that demands the choice of financial institutions to man and regulate financially oriented activities. A number of banking institutions are outstandingly rated in the global sector of finance to the extent that any minute change in the sector touches on the forces of the organisation. The common functions of the bank revolve around banking and making savings. However, there are other professional roles of the bank (Gardener, Molyneux, Williams & Carbo 2007). Ideally, there are internal, as well as, external factors responsible for optimal performance of the bank. Concurrently, the impacts of any external factors or internal factors create impacts on the gross financial status of the sector in the area of concern. The Lloyds Banking Group LLC is a financial institution which is British based. It emerged via the acquisition of the HBOS by the prominent Lloyds in the year 2009. It has reputation and experience in service, being the fourth oldest bank situated in the United Kingdom. It is listed amongst the best-performing financial entities as expressed by the London Stock Exchange market with 100 index measurements. It is also listed globally, especially in the New York Stock Exchange Market. Financial markets in any markets comprise roles such as facilitating primary and secondary stock trading. Scholarly evidence establishes a trading platform for the exchange of funds. Thus, it acts as the centre of operation where surplus consumers extend their credit deficit consumers. Accordingly, the Lloyds Banking Group aims at establishing economic and leadership guidance following financial issues. It has a portfolio of employees that expresses expertise and in-depth analysis of economic sectors and elements of organisations. Additionally, they aim at providing customers, media and fellow stakeholders with in-depth research regarding housing in the United Kingdom. In addition, it addresses the savings markets with respect to international markets related to the United Kingdom. The main criterion of analysis of this bank relates to the fact that the bank belongs to the retail banking within the United Kingdom. The purpose of this analysis paper is to exhibit the macro and micro environmental forces that impact the Lloyds (Gardener, Molyneux, Williams & Carbo 2007). These paper will address the magnitude of impacts of these forces with respect to the United Kingdom. The paper will assist in establishing a strategy that is suitable for the Lloyds organisation to conduct a prosperous and effective charge against the environment. TSB is a split result that emerged after the Lloyds three Scottish did disintegrate. The behaviour of the bank gets affected by the macro as well as the micro environmental factors. The behaviour of a company or firm can get managed and changed. However, it is impossible to make immediate changes towards the internal and external environment. Precisely, macro, as well as, microenvironment components are absolutely uncontrollable. Each of the forces demands different approaches towards achieving and controlling the influences of these forces with respect to the financial performance. Lloyds Bank Group is subject to factors that may influence its function ability and performance in the economy of United Kingdom. Most of the activities in the modern economic sector depend on the dimension that the financial sector takes. Hence, each of the environments is distinct with respect to the impacts and the feasible solutions that can get provided with respect to the demands of the economy Macro environmental forces that affect Lloyds Banking Group in the United Kingdom There are myriad factors that influence the performance of the Lloyds Banking Group. Some of these factors are related to its operations sector. For instance, Lloyds gets affected by factors that affected the entire financial markets in the European continent. Some of these factors get externally oriented, and other get internally oriented. These factors include: Shifting industry trends Regulatory forces Technology and the subdued environment Political and legal changes Shifting industry trends The banking and financial sector in the U.K, as well as the rest of the world, is changing. The history of the bank dates many years back. Hence, it might be a victim of changes in the provisions that guide and facilitate the sector’s operations. Accordingly, there are newly improvised strategies of addressing financial issues with respect to the global and domestic market (Goddard, Molyneux &Wilson 2009). Lloyds then is subject to expensive and unwavering changes in the manner through which the financial sector conducts its business. The Lloyds Banking group faces other strong and international financial providers such as Barclay’s group in the European, American and Australian context. All these financial providers are vocal in determining the dimension the market is about to face. Thus, the changing trends in the financial market, investment practices by different nationalities, wealth management by the international communities has led to increased bombardment of the banking group within the United Kingdom. Accordingly, the leadership and the strategy management team of the bank is under pressure to undertake necessary steps to diverge into appropriate management and updated financial practices. Precisely, it has to follow the accepted accounting standards, as well as, financing requirements as stipulated by the European and United Kingdom financial policies (Goddard, Molyneux &Wilson 2009). The financial sector demands that the Lloyds and other financing institution should accommodate the changing and improving economic sectors within the country. For instance, the United Kingdom entire population is approximately 70 million people. Most of the eligible customers of the financial sector demand that Lloyds and other financial institutions facilitate better financial market resolution. These resolutions ought to rhyme with the gross population and the upcoming financial demands. Accordingly, the banking group is facing challenging moments when trying to adjust to the demands of the new financial trends. In fact, extensive financial constraints may hinder the management team from mitigating and establishing better framework and know-how with reference to dealing with these issues. Regulatory forces The Lloyds is a victim of poor regulatory and unstable regulatory policies as instituted by the government of the United Kingdom. Most of the financial institutions is the United Kingdom suffer from uncontrollable political and government oriented regulations. The level of federal regulations imposed in the United Kingdom imposes unrealistic pressure on the financial institutions, as well as, the customers to these institutions. For instance, the regulatory system in the United Kingdom demands that the financial institutions, among other business entities, ought to carry out sustainability activities (Bátiz-Lazo & Wood 2008). Among the most important requirements in this context is the corporate social responsibilities. This kind of force gets mounted on the financial institutions by the government, the consumers of the services and the entire community. This means that failure to engage in a competitive corporate social responsibility project will lender the financial institution a less competitive position in the country. There are different solid scenarios that political and government influences the direction towards which the financial sector operates. For instance, the Forge Group is an economically affiliated assemblage of organisations. The group, in the recent past, facilitated the recommendations of very stringent policies that compelled the financial institutions to act against their will. In addition, the demands by these economic organisations force the financial institution to act against the financial capabilities and plans. This puts the Lloyds and other financial institutions at risk of losing economic competence (Bátiz-Lazo & Wood 2008). Other perfect examples of stakeholders who have mounted force on the operations of the United Kingdom financial services include the London Corporation, it is also part of the externally influential parties towards development of infringement financial regulations. Resultantly, the financial sector, including Lloyds has gradually consented to the force mounted on it by the stakeholders. The most of the banks now operate on very strict measures where failure by stakeholders to comply with the agreed policies leads to immediate action such as charges and fines (Bátiz-Lazo & Wood 2008). Ideally, this does not show optimality when relating with the financial clients. Lloyds gets affected by these regulations as most of the clients tend to move to the most competitive financial institutions. However, the government of the United Kingdom has not been failing the financial sector entirely. There are some affirmative impacts of government involvement in the operations of financial institutions. For instance, the political elements facilitated the addition of affirmative impacts of the enterprise and financial organisations back in the year 2009. Precisely, the Lloyds Banking Group and the Foe Royal Bank acquired aid from the government. Therefore, the political environment is slightly hopeful. However, the force created by the regulatory system in the United Kingdom is too much to bear for the financial sector. Political and legal forces The government of the United Kingdom is one of the crucial oppressors of the financial sector. This is feasible considering the amount of pressure it mounts and the changes it makes in the financing laws. Most of the changes are completely oppressive to the point of encouraging the entities to quit the market. Hence, the regulatory environment of the United Kingdom is very unstable. Recent oppressive measures that do not favour the finance sector include the politically motivated incentives towards giving democratic support to the South African parties (Goddard, Molyneux &Wilson 2009). This completes affects the financial status of the countries despite the rising demand by the European people for the financial tools such as securities. The reduction in the money supply by the United Kingdom political interference becomes a great challenge to the financial sector. Ideally, the interest rates and discount rates applied in the financial markets are extremely high. The feasibility is that the entire finance sector faces a turn off in terms of the growth. The political growth the United Kingdom and the European territory offers a chance for the finance influence the stability of the finance sector and the of the Lloyds group. Other parts of the world that influence the stability of the group’s operation include the countries that have close relations with the United Kingdom (Bátiz-Lazo & Wood 2008). This includes the southern part of Africa and the United States of America. The group’s operation from the home sector propels affirmative growth whenever the political stability prevails in these regions. Additionally, the new Basel rules form a platform of jurisdiction on how bank capital should get treated. For instance, the Basel rules that all the banking institutions should uphold their high-quality core interests tiers. Accordingly, each of the financial institutions ought to retain at least 10percent of the assets, which gets adjusted for risks. Accordingly, the financial capacity to deal with most issues gets affected by these requirements. In addition, the government levies both direct and indirect taxes on the financial institution without considering the level of the economic burden that they have. The Lloyds suffers from constrained decision-making concerning the financial responsibilities. Technology and the subdued environment Most Lloyd Group branches use weak browsers such as the Mozilla Firefox to retrieve data belonging to potential clients. The systems have run out of time especially with respect to the amount of data that the entity harbours. Most importantly, the existent online bank accounts contain a lot of entries making it hard for a weak browser to facilitate quick service (Goddard, Molyneux &Wilson 2009). Most of the clients in the United Kingdom believe that it is the Lloyds that has failed to facilitate the upcoming developments in the technology banking sector. The likelihood is that most of the customers prefer the financial institutions that will offer reliable and quick services. The market is facilitating new telecommunication systems that facilitate online banking and mobile banking services. The use of fibre optic telecommunication and internet is new development that each of the competitive financial sectors has to endorse. In fact, there is a high level of expectation that the almost all the financial services might get customised towards mobile services. This is a challenge for the Lloyds. It cannot reverse issues otherwise. Microenvironment forces The micro environmental forces are those forces that affect the business or financial sector in a direct manner. It is usually the first destiny of analysis before any corporate strategy of the business gets established. There are several microenvironment forces that affect the Lloyds banking group. A large portion of the micro environmental forces comprises of the marketing forces. Thus, the forces described below are closely related to the marketing arena. Customer’s portfolio The customers of the Lloyds Banking Groups are high profile customers whose potential and demand for quality services is rising by the day. Today, there are almost 16 million private customers. The largest portion comes from the United Kingdom. The customers in the current era demand swift services from the Lloyds banking institutions. In addition, the rate of borrowing, seeking financial guidance and insurance policies is rapidly increasing. This is part of the entire customer market demands (Bátiz-Lazo & Wood 2008). There are numerous individual and households consumers of the financial services that Lloyds offers. The demand of different products that the entity offers is also increasing in the United Kingdom. This establishes increased demand in the United Kingdom than the company can handle. For instance, the customers, in the recent fiscal periods have developed needs and demands that the Lloyds has to achieve successfully. In addition, the customer portfolio has expanded from the private customers to the business sector, the reseller of secondary financial markets and the government markets. Each of these consumers demands differentiated financial products. This situation means that the Lloyds has to ensure increased accountability and efficiency in the process of offering satisfactory services to the customers. Competition The Lloyds is not the only operator in the United Kingdom’s financial sector. There are other competent entities such as the Barclays Banking Group. These competitors install high-profile competition towards the subject Lloyds banking group. Accordingly, failure to show and implement highly competitive structures in its operations may lead to loss of the customer portfolio. Failure to achieve optimality in providing competitive services to the customer assumes that the home-based financial institution is ready to let the international financial entities into the United Kingdom to take over the market. The level of competition, therefore, is outstanding. The fact that there are treaties that allow integrated and international investments facilitate the increased competition level into the country. This means that Lloyds cannot claim ultimate dominance in the finance market. Employees The level of expertise in the employees employed in a company or any other organisation is the initial key to success of an entity. The level of employee’s expertise in the Lloyds banking company is subject to questioning. It remains assumed that the financial entity means it when it is determined to improve the organisation employee relationship. However, the increasing changes in the sector demands a new collection of employees with the zeal to apply newly developed strategies of financial operations (Gardener, Molyneux, Williams & Carbo 2007). This does not call for automatic retrenchment of the old employees. The changing dimension of technology and usability of technology devices is what that matters. Ideally, the increased change in technology could affect the credibility of the employees. This level of incompetence cannot get accrued to ignorance or failure to serve with utmost good faith. Proposed Strategy that will assist Lloyds to overcome the macro and micro environmental forces The greatest challenge that the Lloyds banking group is almost to succumb to could be the level of competition in the market. Hence, the management team to the Lloyds banking group ought to come up with a superb marketing strategy that will enable it to go through the external and internal forces. Ideally, most of the discussed internal and external factors converge their impacts on the reduced market status of the bank. Accordingly, a solemn consideration should get undertaken to ensure that the bank does not continually loose track in its home region Europe and precisely, the United Kingdom. The first step of inaugurating the company’s objective of achieving national competence is the conduction of a customer analysis. Ideally, the banking group has a number of branches in the United Kingdom. The market to the bank includes differentiated sectors and agencies. Most of the customers include the government, the public sectors, and corporate entities (Bátiz-Lazo & Wood 2008). However, there are other subsidiary entities such as the public servants, insurance companies, as well as the national residents. They form the basis of any other marketing effort that the financing institution might intend to partake. Hence, the first strategy is the market segmentation strategy. Market segmentation strategy This is the professional splitting up of the gross market is segmented customer portfolios. The criterions that are suitable in this context is that customers sharing similar product and services demands get classified together (Hunt & Arnett 2004). A widespread consensus that market segmentation should form the centre of the bank’s success is feasible and sufficient. The precise elementary criterion that serves as the epicentre for the organisation’s success is that an of the market mix. The market mix involves prices of the financial products, product promotion activities and the demands by customers from the ultimate reference for this strategy (Hunt & Arnett 2004). Lloyds banking group ought to divide the market into a number of the geographical unit within the United Kingdom. These units could refer to the already established authoritative and geographical regions. These regions include the regions, cities, states, and states where feasible. Alternatively, the group can incorporate a demographic segmentation criterion. Some of the demographic characteristics that can get used in this particular exercise include the family sizes, age and gender (Hunt & Arnett 2004). In addition, other factors such as income, occupation and social class can form the basis of its internal structuring with reference to the market. This will allow the back to negotiating and establish relevant and realistic measures for each case. Ideally, the different demographics segmentation have different service and product demand. Thus, this is a feasible and probable method of conquering the market forces. For instance, middle-income earners demand smaller insurance covers and demands. The same case applies to the high-income earners. Students, on the other side, demand specific portfolio of services that do not comprise a lot of complexities (Wedel 2000). The management team can then use essential assessment criteria. Most importantly, the market segments should remain measurable in term of the technological fitness and customer satisfaction. This will assist the firm in the long run to ensure that the banks market competitiveness in the United Kingdom remains outstanding. It is also important to combine the market targeting and positioning with the market segmentation (Hunt & Arnett 2004). Market targeting will enable banking management team to recognise the upcoming target segments. This will enable the bank to restructure its market portfolio into a richer one. Some of the accompanying elements of market targeting include assessing the demanded level of technology in each of the market segments. For instance, the Lloyds may decide to counter the students market. This market segment needs a swift service delivery channel. Hence, the incorporation of high-speed processors and internet browsers will serve the primary role in this context. This form of intervention and strategizing by the bank will ultimately win the bank a large pool of customers in that particular demographic market segment. Finally, the bank ought to establish an ultimate market positioning. Outstanding scholars argue that market positioning assists in designing a company’s offering, as well as, image (Wedel 2000). The objective of establishing it is to ensure that the business entity acquires a competitive position within the mentality of the customers. Hence, the company can apply a good position of the brands and products it is offering to the customers. For instance, it can come up with a reliable mobile broadband which is essential, as well as, appealing to the target market (Hunt & Arnett 2004). This will attract the consumers. In addition, the establishment of an informed mobile banking, interest-free 0verdrafts and friendly covers in case of other financial demands. The Lloyds banking group is not worse off. However, it has to redefine its strategies. Otherwise, the macro and micro environment is increasingly becoming unmanageable. Rest, the entity has to establish own initiatives to ensure that the market forces do not jeopardise its operation ability. Bibliography Gardener, E. P., Molyneux, P., Williams, J., & Carbo, S. 2007, European savings banks: facing up to the new environment. International Journal of Bank Marketing, 15(7), 243-254. Bátiz-Lazo, B., & Wood, D. 2008, Effects of regulatory change on European banks: A case study on the strategy and stock market performance of Lloyds Bank (1980-1993). Goddard, J., Molyneux, P., & Wilson, J. O. 2009, The crisis in UK banking. Public Money & Management, 29(5), 277-284. Hunt, S. D., & Arnett, D. B. 2004, Market segmentation strategy, competitive advantage, and public policy: Grounding segmentation strategy in resource-advantage theory. Australasian Marketing Journal (AMJ), 12(1), 7-25. Wedel, M. 2000, Market segmentation: Conceptual and methodological foundations. Springer. Read More