Welcome to UK Essays:

• Home
• Prices
• Order now
• Guarantees
• How this works

About UK Essays:

• About UK Essays
• Helping the Community
• Press
• Custom essays
• FAQs
• Meet us
• Testimonials
• Scam warning
• What's your situation?
• Contact UK Essays
• Request a callback

Our Services:

• Essay writing services
• Dissertation writing services
• LPC writing services
• MBA writing services
• PHD writing services
• Marking services
• Other services

Other Information:

• Get verified
• Search
• Terms and conditions
• Privacy policy
• Further information
• Writer jobs
• Recommend a friend

Essay & Dissertation Help:

• Essay help
• Free essays
• Dissertation help
• Free dissertations
• Plagiarism scanner

Free Essays - Management Essays

Analyse the external factors facing Nationwide

This report will analyse the external factors facing Nationwide and highlight the resulting opportunities and threats it faces as an organisation as a result of this analysis. Before this is addressed in the next section, a brief background on Nationwide's business, mission, goals and objectives is provided below.

The Nationwide Group is the world's largest building society that is part of a group of organisations offering retailing banking services.

Nationwide has its head office in Swindon, 1 major administrative centre in Northampton, a branch network scattered over the UK and 11 subsidiary companies.

The products offered by Nationwide include:

Residential mortgage lending (funded through retail savings)

General retail banking services

Personal investment products

Insurance

Personal lending

Offshore deposit taking

Commercial lending treasury operations

Its mission is:

Honest and straightforward. Treats all people with respect and as individuals and focuses on building long-term and beneficial relationships with members and employees with the objective of being the best retail financial services business in the UK.

Nationwide's goal is to increase overall market shares in the retail savings and residential mortgage markets.

Its objectives, as outlined in www.nationwide.co.uk are:

To maximise value, which is comprised of the mutuality dividend and retained profits, over the long term for our current and future members; and

To provide our members with a range of top quality, competitive financial services that are widely available and delivered with speed, courtesy and reliability, backed by policies of fairness, honesty, employee importance and corporate responsibility

Nationwide is committed to remaining a building society and consequently pass on the success of its business operations to its present and future customers, also known as members, through better quality and cheaper financial products. It believes - and the majority of its members support this view - that becoming a bank will remove that emphasis meaning that business strategies will be geared towards meeting shareholders needs to the detriment of the members.

The External Environment

The external environment is effectively everything outside the building society that may affect its performance or reputation, either directly or indirectly.

An analysis of the external environment forms a significant part in the development of Nationwide's strategy. It involves:

Understanding Nationwide's position, now and going forward within the external environment it operates in

Preparing Nationwide for major changes in this environment

Enabling the building society to identify the external opportunities and threats it faces, as part of a strengths, weaknesses, opportunities and threats audit (SWOT)

Developing such an understanding enables Nationwide to put action plans in place to exploit the opportunities and minimise the threats it faces.

The external factors will be analysed under two sections:

The macro-environment

The micro-environment

This analysis will include examples of threats and opportunities that Nationwide face consequently, summarised at the end of the micro-environment section.

The Macro-environment

The macro-environment in which financial services organisations operate can be analysed using the PESTEL mnemonic framework, with each letter standing representing, political, economic, social, technological, ethical and legal analysis respectively.

Political

The UK political scene is one of democratic stability. This sense of democracy permeates through to the financial services industry as fair competition, innovation and entrepreneurial spirit are encouraged and supported by respective governments.

The UK government's links with the financial services industry is through HM Treasury which aims to:

Raise the rate of sustainable growth; and

Achieve rising prosperity

HM Treasury aims to achieve these goals by creating economic and employment opportunities (www.dti.gov.uk), thus striking a balance between economic efficiency with regulation and protection of consumers of financial products and services.

Another government department, the Financial Services Authority (FSA), regulates the industry. Among the FSA's objectives are protecting consumers which involves making demands of financial services organisations, geared towards, for example:

Providing relevant and timely information to their customers

Striking a balance between profit-making and exploiting customers.

One area where government intervention is required is in the issue of advertised typical rates. For example, a Barclays Bank may advertise that its typical loan rate is 6.9% when in reality only a small proportion of their customers receive that rate with the majority being quoted in excess of that.

Nationwide charges only one rate for its Personal Loan product, currently 6.7%. When this issue is addressed, Nationwide could potentially increase its market share if its 6.7% is less than Barclays advertised rate (i.e. rate quoted to majority of customers).

Economic

The economic outlook in the UK appears strong as at January 2006. Interest rates are stable. Retail sales have continued to be strong - up 2.1% on a year ago and 0.7% on December 2005. Consumer confidence is improving while earnings growth has increased.

House prices have increased for the fourth consecutive month, since September 2005.

Personal lending is on the increase mainly due to the increase in secured lending. However, unsecured lending has decreased, contrary to expectations. Credit card debt growth is decreasing, indicating more debt consolidation

Investment in the economy is increasing, up 2.2% on the previous quarter and 3.9% on January 2005. Inflation levels are generally down, as measured by the Retail Price Index (RPI).

The favourable economic outlook presents opportunities for improving secured lending like mortgages. Organisations must also be aware of the threats posed by the diminishing overall unsecured lending portfolio, which could mean putting in place strategies that focuses on increasing the rates charged for these products to compensate for the potential reduced volumes for example.

Social

The UK demography is changing. The population is getting older and by 2015, there will be more 65 year olds than young people aged below 16 years (www.statistics.gov.uk).

Life expectancy is also on the increase and so is the average retirement age.

People are more knowledgeable when it comes to financial services products. This has resulted in less consumer loyalty and customers patiently shop around for the best deals or returns and also demanding better customer service. Buying behaviour is also changing with the use of increased technology.

Household income is increasing.

Opportunities facing organisations is holding on the well trained staff for longer due to increased retirement age. Lending policies that restrict lending beyond a certain age will need to be reviewed.

Technological

Technological innovation and development is becoming increasingly crucial to achieving and sustaining competitive advantage. Organisations have increased the range of services they provide through online and telephone banking. Technology is increasingly used to automate inefficient manual processes in order to control costs.

Keeping up with the pace of change could however, be costly and could make organisations uncompetitive.

Ethical

Financial services organisations are paying a great deal of attention to its social accountability and responsibility and are not shy to publicise that fact.

The presence of pressure and environmental groups, for instance, keep these organisations aware of their responsibilities as the adverse publicity that can be generated, if a business is deemed to be acting irresponsibly can do long lasting damage to that organisation's reputation. Consequently, organisations include Environmental initiatives as part of their overall group strategy.

Legal

The FSA focuses on legislation geared towards organisational behaviour and customer relations (www.fsa.gov.uk). There has been a great emphasis placed on providing more information to customers from which to make informed decisions, recently.

Basel II requirements, which comes into effect in 2007 and 2008 puts a requirement on organisations to hold sufficient reserves of capital to cover unexpected losses. For firms that are deemed to adequately identify and measure their risks, they would be allowed to hold less capital, thereby providing opportunities to use extra funds to grow their businesses. For example, Nationwide anticipates that their capital reserve requirement will reduce by up to 60% under Basel II. It is anticipated, however, that competition for mortgage lending which is low risk will become fiercer as competitors also meet the requirements.

Finally, financial reporting in the UK must meet the requirements of the International Financial Reporting Standards (IFRS), which requires more detailed reporting. Businesses not complying could potentially present more volatile results and in Nationwide's case turn away investing members.

The Micro-environment

The micro-environment is effectively the industry in which Nationwide operates in and is concerned with the competitive pressures faced within that industry. Porter's five forces model is useful in analysing the micro-economic environment.

Bargaining power of buyers

Buyers refer to consumers in the financial services industry. Consumers are better informed, thanks largely to the efforts of the FSA who promote transparency in organisations to enable them to make better informed decisions. For mortgages, for example, consumers could switch lenders after an initial term which gives them the opportunity to obtain more favourable rates. Product and service differentiation is minimal thereby enhancing the bargaining power of buyers. The bargaining power of buyers is increasing, thereby representing a threat to organisations that cannot provide their services at competitive prices

Bargaining power of suppliers

This is relatively low. Dot com organisations fall into this category. Getting into their 'best buy' tables could result in significant extra business. However, going on such tables depend on the price of the product being sold rather than through what is paid to dot com organisations as commission. However, these sites could be used to advertise individual organisations products.

Threat of New Entrants

Competition is encouraged in the financial services industry which means new entrants are encouraged through government support and legislation. However, the industry is dominated by approximately a dozen organisations in terms of market share (including Nationwide), which operate efficiently, use technology as competitive advantage and possess enormous brand reputation, thus making the threats of new entrants to be fairly low. However, as margins are getting tighter through increased competition, any new significant entrant could prove costly to existing organisations

Threat of substitute products

Product and service differentiation is minimal, in general, therefore the threat of consumers switching to a substitute product is minimal.

The extent of competitive rivalry

Competition is intense, due to the high bargaining power of buyers. A small difference in interest rate can result in significant difference in business volumes.

Products and services offered are also similar, while there are also many providers. However, branding is very important and the likelihood of a customer opting for a Personal Loan with Nationwide at 6.7% say is higher than opting for XYZ New Entrant at 6.5%.

Examples of the opportunities and threats facing Nationwide as a result of analyses of the micro and macro-environments are summarised below:

Opportunities	Threats
Strength of the economy	Competition legislation
Increase in retirement age	Less customer loyalty
Increase in household income	Pace of technological change
Technological advancement	Increased bargaining power of buyers
Meeting Basel II requirements	Fierce competition
Low bargaining power of suppliers
Low threat of substitute products
Low threat of new competitors

Figure 2 Opportunities and threats facing Nationwide Group

Conclusion

Nationwide are in a position to exploit the opportunities above by formulating and implementing strategies that yield increased performance through profitability. It is also in a position to minimise the threats through putting in place appropriate strategies. It will be in a position to do this by firstly carrying out an analysis of its external environment.

REFERENCES AND BIBLIOGRAPHY

Books

Begg, D et al 1997, 'Economics' 5^th edition, McGraw-Hill, Maidenhead

Buckle, M & Thompson, J 1999, 'The UK Financial System', 2^nd edition, Manchester University Press, Manchester

Howells, P & Bain, K 1998, 'The Economics of Money, Banking and Finance' Addison Wesley Longman, Essex

Internet Sources

www.dti.gov.uk

www.fsa.gov.uk

www.hm-treasury.gov.uk

www.nationwide.co.uk

www.palgrave.com

www.statistics.gov.uk

www.wikipedia.org

All of the essays in the "Free Essays" section were written by students and then submitted to us to display and help others. Thanks to all the students who have submitted their essays to us. You should not hand in our essays as your own. We do not condone plagiarism!