You are required to identify, review, analyse and critique International Business Practice of a real organization of your choice.
Your first step should be to choose a recently reported event (from past one year) in the business world that highlights a significant international business action. It is recommended that you look for business developments from credible business publications such as The Wall Street Journal, Business Week, The Economist, Fortune, and Forbes. Major newspapers can also be used to identify the event.
The next step should be to analyse the relevance of the reported actions. You should be able to justify or refute the actions based on the theory and models of international business. It is essential that you are able to assess if the reported actions are “theoretically sound and justified”? The discussion section should clearly articulate how the reported event/action makes sense in the context of concepts/theories/models discussed in this unit. You should also provide an explanation of the relevant concepts/theories/models used in your critique.
Overview of Commonwealth Bank of Australia
International commercial banks like Commonwealth Bank of Australia serve millions of business customers as well individual customers around the world. These banks provide gateways for financial transactions worth millions of dollars. The customers in order to conduct financial transactions with CBA input personal data like personal identification numbers. Commercial banks maintain vast databases in which they maintain, acquire, manage and utilize the customers’ data for business purposes. It is evident that any breach in the database can cause loss of data and effect the customers. The aim of the assignment is to analyse the data loss in which CBA lost data of 20 million customers.
Commonwealth Bank of Australia is a multinational bank based in Australia and listed on the ASX. The products of the CBA consists of asset and liability products. The liability products of the bank consists savings account and current account. The asset products of CBA consists of loans and credit cards. The bank offers loan for buying homes and business loans. The market of CBA can be segmented into commercial and domestic customers. The savings bank accounts is meant for domestic clients while the current account is meant for commercial clients. The products like debit cards and credit cards are designed to meet the needs of both business and domestic clients. The bank provides opportunities to invest in assets like shares and bonds to both its business and domestic customers. CBA provides gateways to commercial establishments like retail outlets. The bank offers highly specialised products like multicurrency exchange facilities and travel insurance. The bank offers services to customers at brick and mortar outlets as well as on the digital portals. The customers at access banking services in the forms of net banking and mobile banking which enables customers to bank round the clock. The staff of the bank also provide financial advices to the customers and enable the latter to plan investments.
Commonwealth Bank of Australia is based in Sydney, Australia and has more than a hundred branches in Australia. The bank has a more than 4300 ATMs. The international locations of CBA consist of New Zealand, London, China and India. As far as place is concerned, the bank operates both through physical branches as well as digital platform, the latter being a significant part of its product line. The bank also sell its asset products through broker firms which act as agents of the former. They strong network of brokers has enabled the bank to expand its presence into areas where CBA has no direct operations.
Factors Responsible for Data Loss
The reported issue pertaining to CBA which caused concern was the news that the reputed bank had lost data of around 20 million customers including financial statements of more than 15 years. The incidence caused immense concern among the customers of the bank after surfacing. The acting group executive of retail banking services of CBA Angus Sullivan however pacified the customers in his public statement saying that the data lost did not contain any extra confidential data like passwords.
An analysis of the data loss points out to severe issues on regarding the quality of the services of the bank and its commitment to customer services. There are several factors which might have caused the loss of data of as many as 20 million customers.
The first factor which might have caused the data loss could be the incapability of the bank to protect its expending customer database. As Paul, Mittal and Srivastav (2016) mention that customer services in banks depend on their capacity to predict the future needs of the customers. The data base of customers which the bank captures in its database plays significant role in helping the bank officials identifying these needs of the customers and form appropriate product strategies. Hassan et al. (2015) point out that this capacity of the bank to offer appropriate products have direct relationship with customer satisfaction. This clearly shows the important position customer data holds in the database. Thus, the losing of confidential data actually points out to failure of the bank to strengthen its database security to meet the needs of the expanding customer base.
The second factor which can be held responsible for the loss of data is slack knowledge management system and corporate governance. The commercial bank in its official website claims itself to be embodiment of customer service and seamless banking experience (Commbank.com.au. 2018). However, the data loss actually contradicted this very statement of the bank. The loss of data clearly unearthed the slack knowledge management system and lack of corporate government. Ramachandran and Chang (2016) point out in this respect that the branch managers in order to achieve sales targets, often allow the staff to transfer confidential data like customer information to different devices like personal smart phones and even retain them in hard copies. This weak management of data increases scope of loss of data and even transferring them to unauthorised identities without any knowledge of the customers. Kim and Solomon (2016) point out that CBA also shares a large body of customer information with agents. The branch managers have control over the usage of the data by their agents. Thus, this lead further transfer of data in unauthorised manner which once again shows the lack of control which CBA owns over the data it holds in its DBMS.
International Marketing Issues
The third factor which surfaces upon analysis of the data loss issue is inherent lack of sustainability and stakeholder concerns within CBA. The bank in its official website claims its commitment to sustainability and stakeholders’ concerns. The loss of sensitive customer data actually proved this claims by the bank false. Christl, Kopp and Riechert (2017) mention that the customer database enable the management of the bank and the middle level managers predict future needs of the customers like their plan to buy property which might lead to sale of housing loan for the bank. Thus, it is evident from the discussion that database of customers hold very significant place in the decision making process of the bank. Thus, in reality bank is jeoparadised its own business generation by losing the data. Thus, it can be said in other words that CBA has endangered its own financial sustainability. The concern which OECD raises about the lack of ethics in banking practices is perfectly exemplified by the data loss in CBA (Oecdobserver.org. 2018). Kim and Solomon (2016) can again be reiterated in this respect to point out that CBA has already shown its failure to protect customer interest by loss of data. Now, in the light of the ethical concerns raised by OECD, it can be pointed out that CBA has failed to protect the interest of international bodies as well. It can also be pointed out that ASX requires the companies listed on it including CBA to act in a transparent and fair manner. It can be pointed out that CBA has breached the policies of ASX, one of its key stakeholders. Thus, CBA has shown gross lack of responsibility both towards its own sustainability and stakeholder responsibility which actually climaxed in the form of data loss.
The loss of data of CBA has also given rise to several international marketing issues. This is because the operations of CBA are not limited to Australia and issues like data loss can have serious implications on the marketing of the products of CBA. Moreover, the sensitive news spread very fast through the online newspaper portals which are accessible to the global consumer base. Thus, surfacing of the aforementioned factors would lead to serious international marketing implications (Martin, Borah and Palmatier 2017). The framework which would form the base of the issues would be customer satisfaction framework. The following are the marketing issues which CBA would likely face in the event of the issues like data loss:
Customer Satisfaction Implications
The losing of data could lead Commonwealth Bank of Australia to lose its customers’ satisfaction and loyalty to competitors. Macdonald, Kleinaltenkamp and Wilson (2016) today customers are far more aware and demand more responsibility from the side of the banks while serving them. The customers are not only concerned with initial account opening amounts and charges but also about quality of services like digital banking. Paul, Mittal, and Srivastav (2016) support this discussion and point out that customers view data loss as the signs of deteriorating services and demeaning capacity of banks to protect their privacy. It can be pointed out in this issues that CBA due to data loss has hampered customers’ trusts. Thus, it would encourage customers to shift their accounts totally or in majority proportion to competitor banks. The outcome of this losing of customers would be waning revenue generation and weakening market image.
Yoganathan, Jebarajakirthy and Thaichon (2015) mention that losing of customers weaken the brand name. Bilgihan (2016) mentions in this respect that the relationship between banks and customers to a great extent on trust. Commonwealth Bank of Australia by losing data has evidently breached customers’ trusts. Thus, it would lose its customers which would gradually weaken its brand name in the market.
The table above shows that the value of intangible assets held by CBA and its Group as on year end 2017. The incidence of data loss took place in 2018 and its impact on the goodwill of the bank is not available. As far as value of goodwill is concerned, the closing balance of goodwill for the group is $ 7872 million compared to $ 7925 in 2016 while the value of goodwill of the bank remains constant in both the years. Considering the international presence of CBA (Fatma, Rahman and Khan 2015), it can be pointed out that decreasing goodwill of the bank shows its waning brand value. The intangible asset acquisitions shows a decrease by $ 2 million while no new brand names were acquired during the period. It can be pointed out in the light in these findings that the financial performances of the bank is not at all positive. Moreover, losing customers due to data loss would further weaken it and its market value.
The issue of data loss happened in CBA due to slack database management system in the 2018. The bank lost data of as many as 20 million in its global market and caused immense concern among them. The data loss happened not only due to its data management system and but also due to unavailability of the backup data base to replenish losses of data.
Conclusion
The data loss caused the following implications and challenges on Commonwealth Bank of Australia:
The loss of data and customer compliant can result in legal actions against CBA. This would lead to increase in the legal expenditure. Moreover, the data loss which proves the slack in customer management and ethical standards. This breach is sufficient to attract actions from ASX which can have implications on the capital raising of the bank.
Commonwealth Bank would be losing its investors due to waning revenue and its consequent power to give back high returns. This weakening revenue and capital generation would lead to further repulsion of investors. Moreover, lowering of goodwill would further advertise the financial weakening of the bank. This would lead to falling in the share index and demand for CBA shares. The outcome would be weakening the position of CBA compared to its competitors in terms of capital generation as well. This is evident from the share chart below. The news of data loss surfaced around May 2, 2018 and the share price of the bank shows a downward movement. The share price recovered around July 2018, again fell around August.
Jacobs et al. (2016) point out that weakening financial position would create sustainability challenge before the bank. This is because the financial assets form the base of all other operations right from marketing to human resources operations. Thus, it is evident that weakening financial position of the bank would affect all its operations, thus causing sustainability challenge (Asx.com.au. 2018).
The losing of customers and investors to competitor banks would hamper the competitive advantage CBA enjoys in the global market. The challenge is very grave because CBA has face competition from strong domestic banks in Australia as well as Australian subsidiaries of the foreign banks. Again, the foreign markets like India and China, the bank faces competition from international banks as well as resident banks. It must also be mentioned that all the major banks like CBA are public sector companies (Strand, Freeman and Hockerts 2015). Thus, losing customers and investors can have serious devastating impact on CBA both in Australia as well as in the host markets.
The following are the recommendations which can be made to CBA on the basis of the above findings:
CBA should strengthen its data base security system and operate more ethically. The bank should exhibit high level of responsibility towards stakeholder benefits.
CBA should supervise the usage of data by both its on roll employees and off roll agents. This would minimise chances of data loss.
Conclusion:
It can be concluded that the international business practices of CBA are highly negative with issues like data loss for several years. The bank has exhibited lack of responsibility towards primary stakeholders as well as key stakeholders. The bank should take steps to prevent such issues in the future.
References:
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