Adaptive Strategy and Business Sustainability - Essay Example

?Adaptive Strategy and Business Sustainability – A Report on Rational and Adaptive Strategy Executive Summary Strategies in a business environment are formulated after carefully considering the various alternatives available in a situation and assessing the environment for the external factors and internal factors relating to the strategies under consideration. The changes in the environmental conditions necessitate changes in the strategies made. The adaptability to the environment changes is essential for the stability of the operations. The environment or the environmental changes provide opportunities as well as pose threats. The opportunities and the threats are analyzed in relation to the strengths and weaknesses in the system and organization. The key features of the Burgelman’s 3 stage model deals with the adaptive strategies which are useful in understanding the process and dynamics associated with the strategic decision making in an increasingly fast paced business environments. The ANZ Banking Group Limited is a leading company in banking and financial service sector in Australia and New Zeeland. To lend focus to the study, we have considered all the recent major developments in the operations of the company in relation to application of the conceptual framework. The main arguments are related to application of technology in the business and expansion activities of the company which have direct impact on the growth. Based on the analysis and assessment, conclusion is arrived at as to how successful the organization has been in decision making by applying the conceptual frameworks associated with induced and autonomous strategy and other features of the model. Failure to adapt to the developments in the technological front in the initial stages has been rectified through strategic management decisions later. However, its expansion strategy is not in the right direction and needs to be reoriented. Based on the analysis, it is recommended that the expansion activities should not be restricted to a particular region by stating reasons for the proposal. The company’s expansion strategy focusing mainly on Asian countries needs to be revisited as it should be on global basis. Adaptive Strategy and Business Sustainability – A Report on Rational and Adaptive Strategy Table of Contents Introduction 3 Burgelman’s Strategy Dynamics Model 4 Economic environment 5 Technological innovations 7 Introduction of new products and services 9 Customer relationship Management 10 Political and Social environment 10 Human Resources Development 11 Stakeholders’ interest 12 Other factors 13 Leadership qualities 14 Culture of the organization 14 Corporate social responsibility 14 Adaptive strategies 15 Latest developments and growth 16 Managerial discretion 18 Internal control 19 Conclusion 19 Recommendations 20 References 22 Appendices Appendix – I 25 Introduction Strategic decision making is complex in nature and there are several environmental factors required to be taken into account in the formal decision making process. In the framework called as evolutionary organization theory, decision making towards adaptive strategy relevant to stakeholders, requires the conceptual understanding of the environmental changes that are continuously taking place. This enables the management to evolve conceptual framework incorporating autonomous initiatives and other relevant features for applying an appropriate model. Strategic planning in any setup is a dynamic process and it is susceptible to alterations or modifications in tune with the environmental factors which could be internal or external.   “While process research proliferated into a diverse field, its founding concern was to confront the rational actor model or choice perspective, with a more collective and socialized view of strategy making” (Schmid et al, 2010, p. 146) The strategies of adaptability for operations in tune with the changing conditions in the environment give stability to the enterprise. In this paper the application of strategy, concepts, constructs, models and framework are analyzed with reference to ANZ Banking Group Limited to lend focus to the study. Apart from the framework for making strategies, entrepreneurs’ autonomous initiatives play a crucial role in any management at critical times or startup ventures which are based on intuition and business acumen of the entrepreneur. These insightful autonomous initiatives need to be aligned with strategy and integrated into the system for effective results in an organizational context. Burgelman’s Strategy Dynamics Model Strategy provides basis for detailed plans and actions. The plans need to take into account the political, economic, social, regulatory and technological environments. The model under stable conditions is rule-abiding and under dynamic conditions, it is rule-changing. The model is rule-abiding where the influence to change the industry is low, and it is rule-changing where the influence to change the industry is high. The model brings environment and organization’s perspective together – Degree of environmental change influence against degree of influence of the organization. (iWise2 eBusiness Ltd., 2012) For the analysis of environment, internal and external, various tools such as SWOT (Strengths, Weaknesses, Opportunities and Threats) and PEST (Political, Economic, Social and Technological) are used. But, these are merely tools and not comprehensive framework or models for a rational adaptive decision making process for sustainable business development. ANZ Banking Group Limited is a multinational bank with its presence in several countries, and therefore continuously monitoring the environment with a view to adapt itself in tune with the political, economic, regulatory and technological changes, is imperative. Adapting to the environment is a continuous process essential in a business setup for overcoming the new challenges. The process of decision making is influenced by new thoughts and ideas to exploit the new opportunities emerge in the environment. In the continuous adaptive strategy making process, there is a room for flexibility in the decision making. “Burgelman’s framework of the strategy-making process provides an analytical tool for exploring and analysing the forces and mechanisms which influence the selection of the future strategic actions at three levels of analysis: industry level, organizational level and process level.” (Kjaergaard, 2004) Burgelman’s model help evaluating how successful the organization has been in decision making towards adaptive strategy relevant to growth of the company and stakeholders needs. The forces and the mechanisms at the three levels, industry, organization and process necessitate the organizational identity to undergo ‘reconstruct’ to live up to the challenges in the operating environment as well as the expectation of the stakeholders on a continuous basis. In the case of signals about the impending changes as indicated by the various economic indices, and the time lag between the signals and changes vary considerably depending upon the nature of the changes. Changes in the environment force an organization to adapt its rational strategy to meet the environmental shifts and attendant risks. In the scenario outlined, the speed with which the companies act in response to such changes in the environmental conditions put them in a superior position strategically Economic environment The global economic environment softened and financial markets were in turmoil as a result of the US sub-prime crisis. In this environment, ANZ experienced a significant increase in provisions for credit impairment following the cyclical lows in 2007. (Annual report of ANZ Group, 2008) Non-performing assets in the books of accounts of a bank is a cause for concern, especially when the US and European countries are undergoing a financial turmoil and the future prospects are uncertain in the wake of monetary adjustment problems among the European Union Countries. Failure in formulating suitable strategies based on the economic indicators and adopting adequate risk management mechanisms are considered as primary reasons for subprime crisis. The Chairman’s Annual report of ANZ Banking Group Limited for the year ended 30 September 2008 said that the Board and their new Chief Executive had acted decisively to address the challenging environment and a number of process and control issues in the Bank. The adaptive strategies with reference to the environmental changes are implemented on three levels, industry, organization and process. The turbulent phase in the economy and the banking sector calls for effective action from process and control perspective. The company has identified ‘process’ and ‘control’ issues for management action and initiated steps to address the challenges. In the economic growth of a country, banking sector plays a crucial role as it is related to the growth of various industries. The subprime crisis in US and the economic meltdown in Europe created mistrust in the minds of the public and they focus their attention on CSR policies of the banks. The strategies developed by the company in response to the environmental changes, in the wake of collapse of Lehman et al which caused confidence crisis among the public, reflects application of the strategic management principles. The management action has yielded good results as reflected in the bank’s performance, in general. “Without the government money, Goldman, Merrill Lynch & Co., Morgan Stanley, Deutsche Bank AG and other firms could have become some of the biggest creditors in a bankruptcy filing by AIG, the world's largest insurer, because of its billions in losses on subprime bonds and corporate debt” Pittman (2008). It is in this back drop, the adaptive strategies of ANZ Group made on the three levels, industry, organization and process and the autonomous initiatives taken in response to the changes in economic environment need to be reviewed. The strategic decisions of the management (ibid: Latest developments and growth) with regard to expansion is grounded on the environmental changes in the industry. The management sees an opportunity in exit of the competitors from the businesses in certain operations/regions for expanding its business, and it is consistent with its strategy of becoming a regional super power in the industry. From the perspective of organization and process, the company has taken strategic decisions in the areas of control and process within the Bank. In a dynamic environment where the activities are cutting across the national boundaries in financial services, the decision to expand in a particular region need to be reviewed, because borders of the nations are not a limiting factors to a company’s growth in this industry as the types of services the company renders are universal in usage. Foreign direct investment in the developing countries, transfer of money by expatriates to their parent countries and supply chain of the manufacturing and trading companies extending to every corner of the globe are some of the important factors, since their synergy to the operations of the company support this argument. Further, the strength of the company in mobilizing resources for expansion is exhibited in their strategic capital management decisions relating to institutional placement of shares and ‘share purchase plan’ for retail shareholders. This strength could be leveraged for expansion on global level. “Autonomous Strategic Behavior introduces new categories for the definition of opportunities. Entrepreneurial participants, at the product/market level, conceive new business opportunities, engage in project championing efforts to mobilize corporate resources for these new opportunities, and perform strategic forcing efforts to mobilize corporate resources for theses new opportunities, and perform strategic forcing efforts to create momentum for their further development”. (Ferreira, 2002, 6-7) Technological innovations Technological innovations necessitate reorienting the strategies constantly in line with the latest developments for effective dissemination of information within the organization and to the stakeholders. “According to a report in Retail Banker International, profits rose 25 percent between 2000 and 2005 at the country’s four largest banks — ANZ Bank, Commonwealth Bank of Australia, National Australia Bank, and Westpac Bank — but because of foreign entrants like ING Bank that have used the Internet to draw consumers away from the country’s branch-focused lenders, market share in deposits and loans dropped considerably.” (Strategy+business, 2006) The reach of mobiles and internet even to the people belonging to the lowest economic strata of the society signifies the impact of information and telecommunication technology on the society. “Display technology is reshaping the consumer, business, government, and even not-for-profit markets in the midst of the digital convergence, coupled with recent smart phones led by Apple, Inc.” (Willow, 2010) Under such environment, the ANZ should have been proactive in formulating suitable strategies to deal with the situation effectively to be competitive in the market and to protect/increase its market share. “An important element in integrating technology and strategy is the capacity to perform systematic technological forecasting … Underlying the capacity to forecast – and, perhaps more importantly, to see the relationship between technologically significant events – is the effort to gather data systematically and continuously.” (Burgelman, Christensen, & Wheelwright, 2008, p.8) The Company has failed in adapting to the changes in the initial stages of technological revolution. But, the company has progressed considerably in the technological front later and advanced to a significant level. The company has taken strategic decisions in this respect and initiated the following steps recently. A. Digital online and mobile channels –Developing new channels in line with shifting customer preferences B. Investing in customer data management and analytics to support deeper customer understanding and targeted offers (Chronican, 2012) The strategic investment decisions in technological sphere of the operations have been triggered by the environmental changes at the industry level as well as organization and process level, that is at the industry level on account of competition, at the organization level in view of enhanced customer service and at the process level to improve efficiency and cost reduction. The fast changes in this area necessitate continuously upgrading the software and hardware which have become very capital intensive. The company is in a position to leverage the benefits of investment through expansion on global scale, as it will reduce the cost further. Introduction of new products and services Dynamic economic environment, consequently its interaction with the fluctuating rates of exchanges and interest rates exert tremendous pressure on the banking and financial services sector. They need to keep a continuous tab on them for exploitation of opportunities. Introducing innovative products by seamlessly integrating the changes in the economic front and the development in information technology and telecommunications which are compatible with the existing range of products or services through strategic decision making is essential for retaining the existing customers and attracting new customers to the business. “From a dynamic perspective, innovations, especially in terms of new resource combinations, can substantially contribute to sustainable superior returns.” (Rugman & Verbeke, 2002, p. 770) Several banks have introduced of new types of services to various classes of customers, especially youngsters, with add-on facilities. This is a strategy of ‘catching the customers young’ with long term association and growth in mind. In view of the actions initiated in Australian market by the competitors like ING Bank, introduction of new products and services and modifying the existing products in line with the environmental changes in technological front are prerequisites for sustainable growth. Customer relationship Management CRM has become increasingly a technological issue in the companies. Several manufacturing and trading companies use CRM (Customer Relationship Management) techniques with specialized software for this purpose. CRM techniques are integrated into the system for providing better service to the customers. Improving customer relationship by enhancing the quality and level of services in tune with the changes in the operating environment by being cost efficient and competitive in the industry increases the business volume and profitability. “ANZ spent 18 months developing the strategy, including research with branch staff and customers in China, Vietnam and Australia.” (The financial brand, 2010) This statement reflects the management’s willingness to scan the environment for the opportunities and threats in the market in line with the Burgelman’s frame. By analyzing the environmental factors the company takes strategic management decisions at the organizational level in response to the developments taking place in the industry. The company also introduces changes in its organizational structure to improve its service to the customers. Political and Social environment Political stability in a country is very important for the growth of its economy. Operating environment in Asia is very unpredictable. It is very difficult, especially for the banks and financial sector to operate in countries with unstable governments. There is lack of support from opposition parties in passing progressive legislations in parliament. Inefficiency and corruption in government machinery stifles economic growth in these countries. Also, huge subsidies given to various classes of people in the society keeping elections in mind and half-hearted liberalization and globalization attempts made by the governments are in fact counter-productive. In most of the Asian countries, the central banks are independent only for the name sake, and they have no real power in exercising monetary control. Therefore, unpredictability in the policies and procedures are the major barriers for expansion into these countries. The society in most of the Asian countries is fragmented on various lines. Poverty and unemployment are the major worries for the governments in these countries. Illiteracy is another important issue the countries suffer from. Financial inclusion of the underdeveloped and economically weaker sections of the society is a challenge to the governments of these countries. However, in view of the huge market and great potential for growth especially in countries like India and China ANZ group is expanding into these countries. This strategy seems to be sound from the simple point of view that the banking sector, especially in these two countries are very strong and profitable and the Central Banks in these countries are relatively independent. With English as official language in India, it seems to be the best choice for expansion into this country. Also, the government’s thrust on education will prove to be beneficial for the banking sector in the long run. Human resources Development Developing human resources by imparting training to the personnel on various organizational functions relating to utilization of resources, risk management, legal system, technological developments and economic environment is important for a sustainable growth. Adapting the organization’s activities to challenges in the complex and fast paced business environment is important to meet the organizational goals. Auditing of the operations on a continuous basis to identify the weaknesses in the system is essential. The ANZ chairman’s remarks in the company’s Annual Report 2008 on deficiencies in their Institutional Division in risk management and operational controls and their action in technology and systems front underline the organization’s direction setting processes. These actions have been largely responsible for the success of the organization. The effects of the actions taken by the company in responding to the environmental challenges are exemplified in its working results during subsequent years. Sustainable resource usage: The ability to mobilize resources needs to be supplemented by sustainable resource usage with efficient HRD system in place. In ANZ Group, the Group Managing Director, Human Resources, is the executive responsible for assisting the Chair of the Committee in the matters related to administration and efficient operation of the committee. (Annual Report of ANZ Group, 2011) The organization structure is streamlined and strong for efficient functioning. Stakeholders’ interest The company is responsible to various stakeholders including the society. Protecting the stakeholders’ interest is strategically more important for the stability of the company, as their collective support enhances the corporate value. “We feel that more "red lining" is taking place, that the vulnerable members of the community, the elderly, the unemployed, the low paid, are being robbed of mainstream banking activities, of access to credit, leading them no alternative but to go to other sources - the underworld, the shadow financial sector”. (Jennings, 1993, p.58) CSR activities of the company highlighted in their website and annual reports indicate the company’s positive attitude towards the stakeholders. The company’s positive image has been responsible for its success in raising capital. Other factors Other tangible and intangible factors include building up of brand value, expansion as a strategy, management policy on expansion, leadership, culture of the organization and corporate social responsibility. The company has assiduously built up its brand value and its association with Australia as its base over a period of time. The chairman of ANZ outlining his strategy on expansion stated, “ANZ has an aspiration to become a super regional bank through expansion in Asia. Our underlying performance and progress across the Group in 2008 reinforces that ANZ has a good foundation on which to build and achieve this aspiration.” (Annual Report 2008) This reflects the concept of Burgelman’s model with regard to decision making towards adaptive strategy for growth. In an interview, Burgelman told: “Corporate entrepreneurship involves an element of chance. I see the chance element, however, more as fortuitous, unexpected new opportunities that arise from the company’s competence (and sometimes from its strategic position) that can be expressed by internal entrepreneurs in autonomous initiatives that were not contemplated in the corporate strategy at the time they emerge.” (Chowdary, 2007) Competence in an organization could be developed by autonomous initiatives of the management and this will make them strategically positioned to exploit the new opportunities when they emerge. Changes in the environment cause the organization to adapt their rational strategy to meet environmental shifts and attendant risks. The autonomous initiatives taken by the company has strengthened the adaptability of the organization and rendered stability to the organization as a whole in the case of ANZ Group. These initiatives have formed the basis for the whole frame work, as these decisions have been positively acknowledged and respected by all the stakeholders. Leadership qualities Developing leadership qualities for smooth succession at all levels based on performance keeps the enterprise vibrant. Sustainable people management practices are followed by ANZ and it reflects their performance management framework. “Our simple, globally consistent performance management framework is based on a 'balanced scorecard' approach that assesses employees across the four categories of objectives of Financial, Customer, People and Process/Risk.” (ANZ website) Culture of the organization Culture of the organization is an important determinant not only for a good working atmosphere within an organization, but also in portraying its image to the stake holders and public as it underlines the level of integrity in its functioning. Various programs initiated by the bank in this respect improve the cultural standards in the organization. Corporate social responsibility Corporate social responsibility is viewed as an important tool, rather than statutory obligation, for the growth of the business. The strategic decisions in respect of CSR encourage sustainable usage of resources at the corporate and community level. The company’s operations in Australia are categorized as a ‘high energy user’ under the Energy Efficiency Opportunities Act 2006. The company has developed policies to manage such environmental risks. (Annual Report of ANZ Group, 2011) Adaptability to the environment includes complying with the government regulations with a sense of duty. Otherwise, the environmental analysis is not complete, because its impact on business cannot be overstated. "We are focussed on growing our business responsibly, managing risks rather than taking them and approach our role in society with a heightened sense of duty and care towards our customers and the communities we serve - Mike Smith, ANZ CEO” (anz.com, 2012). The company’s involvement in the CSR activities brings it closer to the community in which it operates. “When a corporation voluntarily engages in socially responsible activity, it does so to advertise its behavior, differentiate its product, increase market share, and boost profits” (Coors and Winegarden, 2005). It could be observed that CSR is closely related and linked to the core objectives of the business. ANZ as a socially responsible bank has encouraged projects which have positive environmental impact on the society, and according to the ANZ Corporate Responsibility Interim Report, 2012 a proposal for Hydro Electric Plant is under consideration. Among the other measures taken by the bank in CSR front, ANZ’s procurement criteria to include provision/consideration of purchasing from Australian Disability Enterprises or suppliers that support disability and equal opportunity reflects its involvement in social causes. (anz.com, 2012) Adaptive strategies The adaptive strategies in a framework consider and take into account other tangible and intangible factors relating to management policies such as recruitment policy, equal opportunity to women, crisis management and inorganic growth through acquisition and mergers. “Analysts say ANZ needs to throw its customary caution to the wind and make some acquisitions. Its "super regional strategy" aims to capture booming Asian growth, trade, investment flows and cash deposits as Western lenders pull out and a highly concentrated Australian banking market slows” (Somasundaram, 2012). The business in ANZ is designed around the customers’ needs rather than product lines, a customer focus strategy. The management has identified four areas Customers, Marketing and Sales Technology and Performance in responding to the environmental challenges and opportunities for progress. Although ANZ’s earnings fell by 21% in 2008, their performance in other areas and growth in Asia Pacific Division under the tough environmental conditions has been good. This reflects the strength within the organization’s direction setting processes and the quality of ANZ’s franchise. However, the increase in credit costs during the period calls for further introspection in the planning and budgeting process. Though the performance in derivative front is in the expected lines in the back of financial crisis started in US and the attendant volatility in the market, it remains a cause for concern. Effective application of Burgelman’s framework of the strategy-making process calls for insulation of the organization from the negative influence of the industry which has the potential to affect growth. Latest developments and growth For assessing the latest progress and developments related to the group, it is essential to review financial reports and the strategic decisions taken by the group in the changed environmental conditions and competition in the market. 2009 – The profit after tax for the year ended 30th September 2009 was down by 11%. The fall in the earnings per share was 23% contributed by one-off items and higher provisions which were at cyclical high, though the revenue growth was strong at 17%. The group has acquired the retail, wealth and commercial businesses of Royal Bank of Scotland (RBS) in various Southeast Asian countries. The group has successfully completed institutional placement of shares and ‘share purchase plan’ for retail shareholders. (ANZ Group’s Annual Report, 2009) The fall in profit is in line with the financial crisis the world has been undergoing. Expansion efforts taken during the times of depression will be at reasonable valuations and consolidate its position vis-a-vis its competitors in the long run. Successful institutional share placement and ‘share purchase plan’ ensure capital adequacy at healthy levels. These expansion activities pursued by the company under the fast changing environmental conditions reflect sound adaptive strategy process followed by the company. The company has used the economic situation for its advantage. This means, the company has identified the opportunities in the influence of environmental changes at the industry level for the benefit of the organization in process level, following the principle as enunciated in the Burgelman’s frame work of the model. It is a rule-changing situation where the influence to change the industry is high and consistent with its strategy and aspiration to become a super regional bank through expansions in Asia. This course for growth is adopted during the subsequent years as well. 2010 – Profit after tax for the year ended 30th September 2010 was up by 53% though it was reduced to 33% due to one-off items mainly related acquisitions. The provisions have been reduced by 41%. The company has acquired Landmark financial services’ loan and deposit books from AWB. It has completed the acquisition of ANZ-ING wealth management and insurance joint ventures in Australia and New Zeeland, and this business performed strongly during the year. In Asia, it has completed acquisition of business from RBS, established a locally incorporated subsidiary in China and obtained bank license in Singapore. (ANZ Group’s Annual Report, 2010) The company has continued to follow the policy of growth through organic as well as inorganic growth strategies. Synergy between the operations of the bank and its acquisitions has pushed up the enterprise value. It is imperative that the acquisitions made by the bank during the period of economic slump paying off in 2010. 2011 – Profit after tax for the year ended 30th September 2011 was up by 19%, reflecting solid performance across the bank. ANZ is one of the few companies globally with AA rating from all the three credit rating agencies. The expansion spree of the group has continued during 2011 as well, and it has reestablished its operations in India with opening of their Mumbai branch. The company has expected the revenues generated from Asia Pacific, Europe and America to grow steadily and projects its profit level at 25-30 of group’s profit by 2017. (ANZ Group’s Annual Report, 2010) Managerial discretion The discretion in the management at various levels acts as a support or impediment in the process of implementation of a strategy. Since discretionary powers need to be exercised at all levels when there are unforeseen disruptions to a task which has been planned after taking into account a set of variables applicable at the time of taking decisions. Kliendienst & “At the core, the concept of managerial discretion argues that situational determinants such as task environment, internal organization and managerial characteristics define the scope of control managers have over their organization’s form and fate” (Hutzschenreuter, 2010, p.24). Though altering the strategies, in the light of the changes in the environment which warrant modifications, is a prerequisite for its effective implementation, continuously tinkering with the strategy may prove counterproductive. However, need for discretion in any task cannot be overstated. But, the strategies or plans conceived at the management level do not provide for discretion at various levels which may lead to frustration. Internal control Carefully formulated strategies cannot achieve the desired results unless there is proper organizational structure in place with the elements of directing and controlling. Likewise, internal control mechanism should be sound for implementing the strategies. Measurement of performance against the yardsticks provided, analyzing the variances to identify the causes for the deviations from the norms and taking corrective steps to ensure proper implementation at all levels are essential for accomplishing the management objectives. The budgetary control system in ANZ Group serves this purpose. A rational and adaptive strategy needs to be supported with budgetary control system for success and sustainability of the business in the long run. In fact, budgetary control system is part and parcel of any corporate strategy for successful implementation. It is the basic document for giving authority for action to the personnel at all levels in an organization. Conclusion The strategies adopted by ANZ group based on the changes in the environmental conditions reflect the application of the Burgelman’s Strategy Dynamics model. Though the group failed to react swiftly to the changes taking place in the information technology and telecommunications space in the early phase, it acted later in a decisive manner to ward off competition. The company taken steps to rectify the weaknesses in these areas and strengthen and consolidate its position in banking industry. The performance of the company during the recent years clearly indicates efficiency in the operations, achieved by commitment and participation from the employees. The business acumen displayed on the part of the management when there was economic turmoil, in acquiring businesses from other banks through autonomous initiatives, has been based on sound business principles. The risk taken by the management to pursue the path of inorganic growth has been in line with their aspiration to become a super regional bank through expansion in Asia. Recommendations The aspirations of the group to become a super regional bank are strategically fraught with several risks. Exposure restricted to a particular region will be riskier on account of declining economy, political problems or natural causes, though the economy of Australia is continuously in upswing compared to the US or Europe and political situation is conducive for business development due to democratic setup. The benefit of scale of operations could not be derived to its full potential if it is not expanding to other countries. For example, investment in technology is very high and continuing innovations would result into further changes in the environment and constant upgrading of the systems. The fixed overheads to be incurred by way of equipments and software can be spread over large business with operations all over the world if the company expands to other countries. Australia and New Zeeland are comparatively small markets and the scope for further expansion in these countries is very limited. Global exposure in financial services sector is very important for a sustainable growth in the long run. Therefore, ANZ group needs to reorient its strategies in the light of its strong current financial position. It is in a good position to tap capital markets for further capital, if required, to pursue inorganic growth strategy through acquisitions and mergers. This should be carried out by the company after making thorough analysis of the environmental factors related to the target banks, the targeted banks’ strengths and weaknesses and the synergy it derives from such acquisitions or mergers. References ANZ 2008, Annual Report of ANZ 2008, ANZ website, viewed 4 November 2012, ANZ, 2009, Annual Report of ANZ 2009, viewed 4 November 2012, ANZ, 2010, Annual Report of ANZ 2010, viewed 4 November 2012, ANZ, 2011, Annual Report of ANZ 2008, viewed 4 November 2012, ANZ, 2008, Annual Report of ANZ 2008, viewed 4 November 2012, ANZ, 2012, Performance management, viewed 4 November 2012, ANZ, 2012, ANZ Corporate Responsibility Report - Interim Report 2012, viewed 4 November 2012, ANZ, 2012, Corporate Social Responsibility, viewed 4 November 2012, Burgelman, RA, Christensen, CM & Wheelwright, SC 2008, Strategic Management of Technology and Innovation, Tata McGraw Hill, Fourth Edition. 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Pittman, M, 2008, Goldman, Merrill Collect Billions After Fed's AIG Bailout Loans, 29 Sep 2008, Bloomberg, viewed 4 November 2012, Rugman, AM & Verbeke, A, 2002, EDITH PENROSE’S CONTRIBUTION TO THE RESOURCE-BASED VIEW OF STRATEGIC MANAGEMENT, Strategic Management Journal, Strat. Mgmt. J, 23: 769–780, John Wiley & Sons, Ltd. Schmid, T, Floyd, SW & Woolridge, B, 2010, Putting the manager back into the picture: the value of a strategy process perspective, Handbook of Research on Strategy Process, pp. 142-164, Edward Edgar Publishing Limited, Cheltenham, UK. Somasundaram, N, 2012, ANALYSIS-ANZ's Asia gamble; time to splash the cash? viewed 4 November 2012, Strategy+business, 2006, Innovating Customer Service: Retail Banking’s New Frontier, Booz & Company, viewed 4 November 2012, Willow, C., 2010, Third-Generation Display Technology: Nominally Transparent Material, Journal of technology management & innovation, v.5 n.4, p.110-120, viewed 4 November 2012, Appendices Appendix I For the year ended 2012 Statutory Results               Half Year Full Year Sep 12 $M Mar 12 $M Movt Sep 12 $M Sep 11 $M Movt Net interest income 6,126 5,984 2% 12,110 11,500 5% Other operating income 2,768 2,833 -2%   5,601 5,432 3% Operating income 8,894 8,817 1% 17,711 16,932 5% Operating expenses (4,386) (4,133) 6%   (8,519) (8,023) 6% Profit before credit impairment and income tax 4,508 4,684 -4% 9,192 8,909 3% Provision for credit impairment (660) (538) 23%   (1,198) (1,237) -3% Profit before income tax 3,848 4,146 -7% 7,994 7,672 4% Income tax expense (1,104) (1,223) -10% (2,327) (2,309) 1% Non-controlling interests (2) (4) -50% (6) (8) -25% Profit attributable to shareholders of the Company 2,742 2,919 -6%   5,661 5,355 6% Earnings per ordinary share (cents) Half Year Full Year Sep 12 Mar 12 Movt Sep 12 Sep 11 Movt Basic 102.6 110.8 -7% 213.4 208.2 2% Diluted 99.1 106.2 -7%   205.6 198.8 3% Half Year Full Year Ordinary share dividends (cents) Sep 12 Mar 12 Sep 12 Sep 11 Interim - 100% franked n/a 66 66 64 Final - 100% franked   79 n/a   79 76 Total - 100% franked 79 66 145 140 Ordinary share dividend payout ratio 78.5% 60.8% 69.3% 68.6% Preference share dividend ($M)     Dividend paid   4 7   11 12 Profitability ratios Return on average ordinary shareholders' equity 13.7% 15.6% 14.6% 15.3% Return on average assets 0.85% 0.95% 0.90% 0.94% Net interest margin 2.28% 2.35% 2.31% 2.42% Net interest margin (excluding Global Markets)   2.67% 2.74%   2.71% 2.80% Efficiency ratios Operating expenses to operating income 49.3% 46.9% 48.1% 47.4% Operating expenses to average assets   1.37% 1.35%   1.36% 1.40% Credit impairment provisioning/(release) Individual provision charge ($M) 887 690 1,577 1,230 Collective provision charge/(release) ($M)   (227) (152)   (379) 7 Total provision charge ($M) 660 538 1,198 1,237 Individual provision charge as a % of average net advances 0.42% 0.34% 0.38% 0.32% Total provision charge as a % of average net advances   0.31% 0.27%   0.29% 0.32% Read More