External Environment Analysis

This assignment has been executed with a motive to analyse the different aspects present in the environment of business. The discussion will be made regarding the impact of External environment on the business so as to analyse the position of the company in the business environment. All these aspects will be discussed in relation to DBS Bank of Singapore which is operating in the banking industry and is among the largest financial service providers in Asia. DBS Bank is a public company which is operating as a multinational banking and financial services corporation and engaged in offering financial services to its customers all around the globe. Headquarter of DBS Bank is located in Singapore and was established in the year 1968. It is operating through around 280 branches which are located in 18 markets of Asia. 62 % of the revenues of DBS Bank are generated from Singapore (DBS, 2017). It is having a strong employee base of more than 21000 employees who are contributing towards the success and growth of the bank. For the development of the employees, learning and development programs are conducted, training sessions are arranged, and employees are motivated, offering rewards and recognising the efforts of employees and focusing on maintaining a work-life balance. The focus of DBS Bank is towards ensuring the safety of the interest of the different stakeholders. The motive of DBS Bank is to deliver value to the different stakeholders including shareholders, customers, employees, regulators and society (DBS, 2017).

Figure 1: DBS Logo

PESTEL analyis is a framework used by the marketers to analyse the macro environmental factors having impact on the organisation. These factors are Political, Economic, Social, Technological, Environmental and Legal. These factors are related to each other. These factors have impact on the organisation and its performance.

The financial sector of Singapore is highly developed and regulations have been formulated with an effective supervision on the activities of the banks. The Monetary Authority of Singapore is responsible for overseeing the financial system of Singapore (Armstrong, et al., 2014). 

The political factors include different rules and regulations which have been set up by the government for ensuring the operations of the banks within the legal framework. The impact of government and political factors can be seen in the banking industry in direct as well as indirect manner (Yüksel, 2012). It also affects the other elements like legal factors and social factors. There is a high political stability in the Singapore market due to which performance of banks has increased. DBS Bank has been considered as one of the largest financial service providers in Singapore which discloses that DBS Bank is complying with the rules and regulations and gaining an advantage due to the political stability. Singapore is the least corrupt country in Asia and low tax rates and other rules have also contributed towards the growth of DBS Bank (Straits Times, 2015). The low tax rates increases the spending income of the population and vice versa.  This shows that the elements are interrelated.

PESTEL Analysis

The Open economy of Singapore has provided a chance to develop and grow. The economic environment of Singapore is competitive along with an open economy. Due to this aspect or nature, there are high chances of an impact on the economy of Singapore due to the global external shocks. Election of Donald Trump as the President of US has affected the global markets at large (DBS, 2016). Financial crises in the year 2008 have also affected the economy of Singapore adversely. All these economic changes have affected the performance of DBS Bank. These factors have also affected the social elements like the demands and interests of the population.

Social factor affects the business at large as a trend, literacy rates and employment rates determine the chances of growth and success of business. This shows the relationship between the economic elements and the social factors.  Singapore is one of the developed countries where unemployment rates are low and well-educated people. People have the power to avail the luxury services for ensuring better security of the financial assets. The increase in the population has increased the need for financial service providers. This has provided an opportunity to DBS Bank. There is a large customer base for the banks in Singapore (DBS, 2016).  It also affects the technological changes in the bank. The need and demand of the population requires the bank to adopt new technology so that their needs can be met.

Technological changes are taking place at a very fast speed which creates an impact on the performance of the business. It also has to consider the legal aspects of the business and industry. The company need to look for political factors to purchase any technology from the other country. It needs to consider the relationships between different countries. Also, various technological changes have taken place in the banking industry which has enhanced the performance of banks and these have taken place because of the social trends in the country. These technological changes include the use of digital banking, the shift of banking operations to mobile computing and data analytics. All these technological changes have enhanced the effectiveness of DBS Bank and contributed towards the growth of DBS Bank (DBS, 2017).

Environmental conditions affect business and its operations. Every business has the responsibility towards the environment. Various rules and regulations have been formulated for the protection of environment and companies must comply with these rules and regulations. So, this includes the consideration of legal elements. DBS Bank has been named as Asia’s Safest and Asia’s Best Bank by the Global Finance for eight consecutive years from 2009 to 2016. DBS has placed its focus on waste management projects for enhancing the quality of society. DBS has initiated a disaster relief program for providing financial support to the charitable agencies working for the earthquake occurred in China and snowstorms and cyclone occurred in (Myanmar Channel News Aisa, 2016).  For all this, the bank need the support of political parties and it is also done to follow the social trends of saving the environment.

Porter’s Five forces Analysis

The Monetary Authority of Singapore is the regulatory body which ensures that all the companies operating in the financial sector are operating within the legal framework. DBS Bank is following the rules and regulations for operating within the framework set by the government and other regulatory bodies (DBS, 2016). The legal rules are made with the efforts of political parties and social requirements are also considered. These legal elements also affect the economic elements like employment rate in the country or inflation rate.

This tool is given by Michael Porter which considers the competition level of the industry to which the organisation belongs. Porter’s five forces analysis will help in analysing the competitive position of DBS Bank, Singapore. The five important dimensions of the Porters Five forces model are Bargaining power of suppliers, bargaining power of buyers, Threat from the substitutes, threat from the potential entrants and competitive rivalry. The tool analyses the same by going through five important dimensions and the relationship between them is explained below:

The suppliers of the DBS bank are the IT companies which provide technologies. The bargaining power of suppliers is high because they have technology on which the banks run. The suppliers are the employees who are giving their services to the bank. The employees of executive level have more bargaining power than the employees at lower level in the bank. DBS Bank should provide attractive packages to retain the best talent in the bank. This would further reduce the threat of substitutes because when the employees are paid at a good rate they won’t leave the bank to join the substitute.

The bargaining power of buyers is high because there are many banks in the industry and the customers have choices to take services from these banks. The financial products offered by these banks are designed as per the needs and requirements of the customers. It depends on the choice of customers. The banks need to pay attention so that the customers can be loyal to the DBS bank and do not switch over to other bank for better services. It is also important to note that individual customers do not have a major impact on the bank but the customers in a group as a whole will reduce the market share of the bank. The High Net worth individuals also have major impact on the performance of the banks (Ogbuji, Onuoha & Owhorchukwu, 2016). It is also noted that the bargaining power of buyers increases the competitive rivalry among the banks because the customer got the choice to select their service provider.

It is seen that the threat from the substitutes is high in the banking industry. There are many other financial institutions at local level and regional level which provides the services similar as banks. Also, there are some foreign banks which are providing world class facilities to the customers and alluring them. There are mobile wallets and payment banks nowadays, which are also providing the facilities of lending and payments. IT provides a huge impact on the business and performance of DBS bank (Rajan & Gopalan, 2015). Also, it increases the competitive rivalry and also the bargaining power of the buyers.

Threat from the new and potential entrants is moderate. It is because the country’s banking regulations are strict which does not let anyone to start a bank. The regulatory requirements for starting a bank in Singapore are high. There is a requirement of high capital investment. But lot of multinational banks are starting their operations in Singapore which can create high competition for DBS bank (Dobbs, 2014). They also create a threat of substitute and increase the competitive rivalry among the institutions.

Competitive rivalry is high in the banking industry of Singapore. There are many local and international banks which are running in the industry and trying hard to increase their market share and customer base. All the competitors launch new services every now and then to allure the customers. They try to highlight the features of their products and the past performances to have more and more clients. The banks want to establish competitive advantage by providing excellent customer service and strong brand power (Upadhyay & Sivakumar, 2015). Competitive rivalry also increases the bargaining power of suppliers and buyers as well.

Figure 2: Porters Five forces analysis

It is vital for a business to establish healthy relationships with the different stakeholders so as to gain a competitive advantage. Few recommendations have been made which will help in contributing to the enhanced performance of DBS bank and these recommendations are listed below:

• For the promotion or for the marketing purpose, social media platforms can be used which is an effective and efficient way for the promotion of the business. DBS Bank is operating with around 280 branches in 18 markets and for offering better services to the customers, it can use social media platforms.
• DBS Bank can offer various services through online banking and mobile banking so as to reduce the workload of the employees as well as providing comfort to its customers. This will contribute to the enhanced satisfaction level of the employees and customers. This will be an effective initiative towards the expansion of the area of operation by enhancing the customer base of the bank.
• DBS bank could effective use a Digital Business strategy because the business digitization is changing the competitive landscape in many industries and so in banks. WITH the help of digitization, they can design new and better customer experiences.
• The bank should also focus on the power of Corporate Social Responsibility. Through this, the bank could create its own space among the customers DBS is a midsized bank with around 22000 employees. The bank should treat its employees well. They should be given training and development lessons in order to provide better services to the customers. The bank should also work for other stakeholders like Environment and society. They could run education programs for the needy or can provide zero charges services for the poor population. This would enhance their image among the customers and the society and will help the bank too in getting the competitive advantage (Strauss, 2016).
• The bank should shift to the customer centred design which says that the customer needs and priorities should be taken care of. Proper market research should be done time to time to know the requirements of the customers so that the services could be designed as per their opinions and needs (Hollensen, 2015). 
• To achieve greater efficiency and focus on the customers, DBS bank should focus on driving innovation. Better the innovation better will be the strategic advantage to the bank. This would become an additional USP of the bank and the customers would like to prefer DBS over other bank because of its new and improved services all the time (Bloomberg, 2016).

Conclusion

Thus, from the execution of this assignment, it can be concluded that DBS Bank of Singapore is performing well and is fulfilling its responsibility towards the different stakeholders. This assignment has covered PESTEL analysis and Porter’s five forces analysis for DBS Bank for the analysis of the impact of external environmental factors on the performance of DBS Bank. Banking sector of Singapore is growing as the economy of Singapore is open and developed. This has formed a base for DBS Bank and enhanced the performance of DBS Bank. Various initiatives have been taken by DBS Bank for its employees, customers and environment or society. Technological changes have been adopted by DBS Bank which has helped in enhancing the satisfaction level of customers and other stakeholders. Companies need to be responsible so as to deal with the customers in a better manner. This will help in providing a competitive advantage to the bank. For enhancing the performance of DBS Bank few initiatives can be taken. Enhancement in the risk management will help in enhancing the satisfaction level of the customers.

References

Armstrong, G, Adam, S, Denize, S and Kotler, P, 2014, Principles of marketing, Pearson Australia.

Bloomberg, J (2016). How DBS Bank Became The Best Digital Bank In The World By Becoming Invisible. Forbes.

Channel News Aisa. (2016). Moody’s revises outlook of Singapore banks to negative. Channel News Asia. Retrieved from https://www.channelnewsasia.com/news/singapore/moody-s-revises-outlook-of-singapore-banks-to-negative-8151128

DBS. (2016). 10 Finalists of DBS Social Innovators 2016. DBS. Retrieved from https://www.dbs.com/hongkong/newsroom/10_Finalists_of_DBS_Social_Innovators_2016.

DBS. (2016). Indonesia and the ‘Trump’ Factor. DBS. Retrieved from https://www.dbs.com/in/personal/templatedata/article/generic/data/en/GR/112016/161130_insights_indonesia_and_the_trump_factor.xml.

DBS. (2017). About Us. [Online] DBS Bank. Retrieved from https://www.dbs.com/about-us/default.page. Accessed on: 25 May 2017.

DBS. (2017). Making A Social Impact With Technology. DBS. Retrieved from https://www.dbs.com.sg/sme/businessclass/articles/business-strategy/making-social-impact.

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Hollensen, S (2015). Marketing management: A relationship approach. Pearson Education.

Ogbuji, C N, Onuoha, O A & Owhorchukwu, O (2016). Brand Personality and Marketing Performance of Deposit Money Banks in Port Harcourt, Nigeria. International Journal, 37.

Rajan, R S & Gopalan, S (2015). Do Foreign Banks Enhance Banking System Efficiency?. In Economic Management in a Volatile Environment (pp. 164-180). Palgrave Macmillan UK.

Straits Times. (2015). Moody’s compares Singapore’s Big Three banks: DBS, OCBC and UOB: Here’s what it found. Straits Times. Retrieved from https://www.straitstimes.com/business/banking/moodys-compares-singapores-big-three-banks-dbs-ocbc-and-uob-heres-what-it-found.

Strauss, J (2016). E-marketing. Routledge.

Upadhyay, A & Sivakumar, N (2015). Impact of Marketing Orientation on Financial Performance of Banks in India. International Journal of Banking, Risk and Insurance, 3(1), 36.

Yüksel, I, 2012, Developing a multi-criteria decision making model for PESTEL analysis, International Journal of Business and Management, 7(24), pp.52-66.