Research Paper on "Strategic Planning the Internationalized Economic Crisis"

Research Paper 10 pages (3162 words) Sources: 15

[EXCERPT] . . . .

Strategic Planning

The internationalized economic crisis has generated new pressures for economic agents across the globe. By far, the most severely affected sector is represented by the financial sector, where fiscal companies went bankrupt or were subjected to nationalization in an effort to be salvaged. Such is the case of the Anglo Irish Bank, which was nationalized by the government.

The situation at the Anglo Irish Bank is however more dramatic due to loss of trust from the customers and the partners; the Dublin and London Stock Exchange Markets for instance suspended the transaction of the bank's shares. Furthermore, the bank continued to operate on losses and in 2009, it registered the highest negative profits in the history of Irish corporate history.

In this setting of turmoil, a question is being posed relative to the future strategic endeavor which should be undertaken by the Anglo Irish Bank in order to restore its balance. The current project sets out to answer this question through a series of gradual approaches of specific issues impacting the firm.

2. The external environment

The Anglo Irish Bank operates in a highly complex environment, characterized by a wide array of issues, including the following:

The internationalized economic crisis which raised challenges such as high levels of consumer leverage, changes in payment patterns, legal protection for customers or unemployment. Several economies have overcome the most dramatic point of crisis, but they remain highly sensitive to shocks (PricewaterhouseCoopers, 2011).

Irish banks are specifically influenced by globalization and deregulation. Throughout the recent years, the domestic market has been focused on international integration of services and standards and this is also obvious within the banking sector.

The external environment also impacts the Irish banking sector -- and subsequently the Anglo Irish Bank -- through the continuous technological developments. "The recent period of investment in developing the architecture for internet commerce in most retail sectors both nationally and internationally has also been in evidence in the financial sector. Banks are investing heavily in the development of internet access points for individual and corporate customers. The Irish banks are currently in the middle of the process of enhancing their internet platforms and making them more widely available" (The Department of Finance).

Bankruptcies of economic agents, including commercial banks, but also entrepreneurs

Unstable political climate, as the "economic policy [is] likely to remain in crisis management mode for the foreseeable future" (Doddy)

The demise of the real estate industry -- the bank's largest sector of investment

The changing legislations. In the face of the financial disaster, governments across the world develop and implement more protective and restrictive legislations (The House of Commons, 2009).

Increased levels of competition. The banking sector has been increasing throughout the years and now presents customers with a wide selection of products and services. Competitive advantages are represented by product quality and speed of offering and the future is expected to bring about further industry consolidation as mergers and acquisitions would be preferred to marketing investments (Investopedia, 2011).

All in all, the Anglo Irish Bank is subjected to mounting pressures from all sides of the external environment. The demands of all stakeholder categories increase, driving the financial institutions to intensify its strategic efforts to serve the needs of the stakeholders -- customers, employees, business partners, the general public and so on (Kuenkel, Gerlach and Frieg, 2011). And it is essential for the Anglo Irish Bank to serve these needs in order to remain competitive, create demand, build trust and ensure revenues sustainability.

3. Existing business plans and strategies

The Anglo Irish Bank has been severely impacted by the economic crisis and has already developed some strategies to support its revival. The first and foremost important of these strategies has been represented by the collaboration with the Irish government in the nationalization of the bank (Farrell, 2009). This strategy allowed the bank to recapitalize itself and avoid bankruptcy. Nonetheless, it was only efficient within the short-term. Specifically, it served the immediate purpose of avoiding bankruptcy, but it did not manage to support the bank in reviving. As a result, even after recapitalization, the Anglo Irish Bank still ran the largest losses in the corporate history of Ireland (The Telegraph, 2011).

A second strategy implemented by the Anglo Irish Bank was represented by the merger between itself and the Irish Nationwide Building Society. Similar to the Anglo Irish Bank, the Irish Nationwide Building Society had also been dramatically impacted by the economic crisis. While its losses had not been higher than those of Anglo Irish Bank, they were still impressive and characterized as "truly shocking" (Irish Times, 2010). The Irish Nationwide Building Society was also bailed out by the Irish government, and the total costs of bailout for the two financial institutions exceeded "€34.7bn in capital injections from the State to cover losses on property loans" (Breaking News, 2011).

In 2011, the Irish government and the European Commission approved the merger of the two banks. The assets and liabilities of the Irish Nationwide Building Society were transferred to the Anglo Irish Bank and the new institution was named the Irish Bank Resolution Corporation.

The strategic decision to merge is both positive as well as negative. On the one hand, it unites the failures of the two corporations, but on the other hand, it combines their expertise and their still existent resources. A positive aspect is represented by the change in name, which is expected to create more stakeholder trust by distancing the new entity from the failures of the two component firms, including the shortages of the previous managerial teams (Department of Finance, 2011).

Despite the fact that there are several similarities between the Anglo Irish Bank and the Irish Nationwide Building Society, the two financial institutions are differentiated by the nature of the mistakes they made. Specifically, the Anglo Irish Bank relied excessively on the construction industry and was as such hit severely when the crisis unfolded. On the other hand, the Irish Nationwide Building Society had been involved in risky lending operations and sloppy practices (Carswell, 2010). These gradually took their negative tool and diminished the trust of stakeholders. In this setting then, it becomes obvious that the newly formed entity -- the Irish Bank Resolution Corporation -- has to develop a strategic approach to address the shortages of its previous components, namely lack of ethics and lack of diversity.

4. Strategic alternatives

In the setting previously described, the Anglo Irish Bank is faced with the necessity to develop and implement new strategic decisions. Some notable possibilities in this sense would include:

More emphasis on organizational ethics

The diversification of business operations

The development of new infrastructure to support further expansion

The superior management of the human resources.

a) Organizational ethics

The strategic recommendation of focusing more on organizational ethics is virtually based not so much on the past of the Anglo Irish Bank, but more so on the past of its partner, the Irish Nationwide Building Society. This company has been involved in high risk operations and dubious lending activities. And however its past is less popularized with such incidents, the Anglo Irish Bank is not itself a stranger of controversy. Immediately after the crisis hit and the bank was nationalized, problems surfaced regarding loans to the bank's executives and these prompted investigation on accounts of fraud (Mitchell, 2009). In this setting then, it becomes obvious that the newly formed entity ought to focus more on ethical conduct to gain the trust of the stakeholders.

b) Diversification

Lack of diversification was the major problem at the Anglo Irish Bank as the financial institution had limited operations. Specifically, the Irish bank had developed limited operations with individual customers, but had focused almost exclusively on corporate customers. Additionally, most of its large size customers were activating in the construction sector and were mostly affected by the crisis. In this context then, it is recommended for the company to diversify its offering in order to minimize its exposure to risks.

c) New infrastructure

The newly formed entity is a leading banking institution in Ireland, with an impressive size and number of employees. Still, the merger of the two previous institutions does not guarantee the success of the entity; even more so when the companies were both impaired when they joined forces. This virtually means that they should further develop their products, their market share and their market presence in order to attract new customers. This would be achieved through investments in infrastructure, including both technological developments as well as the opening of new banking facilities.

d) Human resource management

The latter strategic possibility is that of investing more in the human resource. In times of crisis, economic agents rely on their staff members to provide their support in overcoming the threats posed (Pride, Hughes and Kapoor, 2011). In this setting, it would be possible for the Anglo Irish Bank to develop and implement a more comprehensive human resource management plan by which to increase the levels of operational efficiency among the… READ MORE

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