Investigate a local listed company (OCBC chosen)
Write on the PESTEL, Porter 5 forces and SWOT of the chosen company and environment it is operating in (Singapore and banking industry)
Word Count / Required:
3,120 / 3,000 (report shown is only part of the assignment)
We have written numerous reports on PESTEL, Porter 5 forces and SWOT before. They are after all, basics for all business students. One important point about PESTEL is that, even though it is analysing the macro environment, you often have to include current trends found in the country. In this case, the slowing economy is one of the trend Singapore is facing at the time of writing.
OCBC Bank, founded and established on 1932, is a publicly listed Singaporean financial institution with estimated total assets of USD275.1Bn and a market capitalization of SGD36.85Bn [approx. USD27.07Bn] (OCBC, 2016). It is reportedly the 2nd largest local bank in Singapore in terms of assets, bagging several titles and awards—among these being: Best Managed Bank in Singapore and Asia Pacific (2016), Best Managed Board Gold Awards (2016), and Best Bank in Singapore (2016), from several renowned awarding institutions. It has also been labelled the World’s Strongest Bank by Bloomberg Markets Magazine in years 2011 and 2012 (OCBC Bank, 2016). This report is intended to evaluate the company using several tools in business analysis such as the PESTEL Analysis, Porter’s Five Forces, and the SWOT Analysis. The objective is to arrive at a more comprehensive understanding of OCBC Bank’s core principles, strategies and competitive position—particularly in the Singaporean Market.
To lay the foundation of this review, it is helpful to first establish the macro-economic situation of the subject company. Below is a discussion on three key PESTEL factors affecting OCBC Bank.
For one, the local political scenario fosters a dynamic platform for the banking industry. Ever since Singapore had gained independence in 1965, the country basked in political stability under the one-party government system where the continuity in policy planning, strategy, and implementation had ultimately increased the efficiency and viability of public services.
The Monetary Board of Singapore (MAS), governing authority of all financial institutions in Singapore and regulatory body of monetary policies, exchange rates and inflation, had long since focused on the development of a “world-class financial centre”. With this, MAS had liberalized the financial system and had allowed greater foreign participation, shifting strategy emphasis from regulation to risk-focused supervision. Several initiatives were pursued to allow greater access to domestic funds, develop the credit market and overhaul corporate governance (MAS, no date). These initiatives continually subject the Singaporean financial market to be intertwined with global trends and economies, succinct to local performance of individual institutions.
Closely intertwined with political factors, are economic considerations that directly impact the bank. Similarly, what we have is a capable economy backed by promising historical performance. What could be considered as Asia’s success, stems from a well implemented open and outward-oriented development strategy— that effectively shifted the country’s heavily labor-reliant export products to more high value-added products, such as electronics, chemicals and biomedical. In addition, the service sector maintains significant relevance to the Singapore economy evidenced by increasing share of the financial and business sectors of the economy (MAS, n.d.).
Most-recent financial performance reviews conducted by the MAS, reveals the local economy foreseen to grow at a modest pace in 2016, though with an unoptimistic held-back outlook for global economic growth. This is in reference to the slumped expansion of G3 economies and economic slowdown of China. Thus, regional factors would continue to take a toll on the economy, most especially for external-oriented sectors. Despite this, domestic-oriented sectors such as healthcare, education, and public infrastructure is expected to remain resiliency. Ultimately, the country’s GDP growth is seen to come in at 1–2% in 2016, following the 2% growth registered in the previous year. Of this, 12% is contributed by the financial sector (MAS, 2016).
Highly integral to the performance of the company is the profile of workers and customers of the service institution. Notably, this has become a big factor on why global financial institutions single out Singapore to house their global or regional office; this is due to the local availability of a sizeable pool of finance professionals. Singapore’s workforce is considered highly-educated, with industrious work ethic and tech-savvy. In addition, the multi-cultural based society with a multi-lingual workforce, easily allows for the service of diverse markets globally.
As a means to maintain its quality workforce that stays ahead of the curve, the local industry established the Institute of Banking and Finance (IBF) Standards, to benchmark and certify a certain level of competency, professionalism and ethical standards within its workforce. Notably, Singapore’s work regulations and labor pool have consistently been given high regard by leading international organizations like the World Economic Forum (WEF) and Business Environment Risk Intelligence (BERI) (MAS, no date).
Given Singapore’s political and macroeconomic stability with a skilled and well-educated workforce, financial institutions such as OCBC bank finds itself in a constructive and supportive position, which may have well contributed to its rapid development as a dynamic business model and financial institution of the world.