ORGANIZATION AND ENVIRONMENT

Analysis of the factors in the macro environment that have major impact to a company and assessment of the steps taken by the company to overcome the problems. Case study : Maybank Malaysia By AhmadRawi The writer can be contacted at: scholars.assist@gmail.com

By AhmadRawi The writer can be contacted at: scholars.assist@gmail.com

INTRODUCTION Strategic management experts have stated that in order to achieve a competitive advantage, a company needs to pursue strategies that build on its existing resources and capabilities and formulate strategies that build additional resources and capabilities (develop new competencies) (Hill and Jones, 2010, p.103). Strategies are formulated after considering various factors external and internal to the company. This paper will focus only on the external (macro) environments of the company that have major impacts to them. Towards this end a PEST analysis will be done to the macro environment of a chosen company. PEST analysis is an overview analysis of the environment that the business is in. In PEST analysis, four factors are considered namely Political factors, Economic factors, Social factors and Technological factors (thus the acronym PEST) (Turner, 2010,p.56). Recent trend in the field of strategic management advocates the inclusion of a further two factors namely, Environmental factors and Legal factors. All combined the macro environment factors analysis will be known as PESTEL. Macro environment factors are beyond the control of an organization. This is because those factors are positioned outside the organisational system. Those forces are the prime factors in corporate strategization i.e. determining the objectives of an organisation, its drive for profits, its projection for future sales as well as a protection step in preventing any losses or problems. According to Lowe and Marriott (2006,p. 181),macro factors are the major trends and changes that affect all organizations within a nation, a region or the world and essentially include the

major political, legal, economic, social, cultural, 'green' environments and technological factors. This paper proposes to analyze the macro environment factors impacting Malayan Banking Berhad, or better known as Maybank in their quest to be regional financial services leader .As a prominent financial institution in Malaysia and stands as the Best Domestic Private Banking from Asiamoney Annual Private Banking Poll 2010 as well as won Euromoney Award for the Malaysia Best Private Banking Services Overall, Maybank also received numerous awards and recognitions for its efficiency in customer affair and corporate relation. Despite the glory and honour crowned to Maybank's achievements, it is inevitable to deal with macro environment which commonly come along the way throughout their business days. In order to analyze the impact of macro environments on Maybank generally, it is essential for the scope of analysis to cover the political, economic, social, technological, environmental and legal factors (or better referred as PESTEL analysis). DISCUSSION The first factor i.e political factor refers to the local government policy and administrative affairs in the business geographical location. It covers the level stability and security provided for the outside investors by the government of a particular location or country. The confidence of the reliability and dependability of the government's administration will encourage those investors to spread their business wings in the country. As one of world financial providers, Maybank needs to study the political scenario of one particular country before finalising the decision on venturing into new business in that country. For instance, when Maybank set up its third branch in Cambodia, the increasing political stability in Cambodia had given the confidence to Maybank to operate its business there. Commenting on this, Maybank's CEO Abdul Wahid Omar stated that Maybank believes that Cambodia as a country will continue to grow with its political stability and an economy that is open to trade and investment (Maybank, 2011). Apart from political stability, the local government policy is also important in order to boost the investments inflow. Local government's policy deals with tax issues, investors incentives, free trade zone, restrictions on profits payout and many more will attract the investors to come. The best example here is the Cambodian government policy of allowing 100% foreign ownership of

business in Cambodia, which ultimately attract Maybank to invest in Cambodia. These mean that foreign investors are not required to team up with a local partners which means business ownership is absolutely owned by the investor's company (Bangkok Post, June 02, 2007). This policy helped Maybank to lighten its organisation liabilities and therefore convenient for Maybank to reach for any corporate and business decision that required quick action to be taken. However, if there are changes made by the local government with regard to their policy which may reduce the benefits enjoyed by investors, to a certain extend, the investors may be forced to make a choice either to conform to the new policy or to switch to new location. Normally the action taken depends on the organisation's corporate goals and objectives. The views or objections of both majority and minority shareholders will also be taken into account. The good example appears in the situation where Maybank decided to take over BII operation in Indonesia. The policy made by the government of Indonesia pertaining the ownership of financial institution owned by foreign company is limited to one ownership of Indonesian bank per foreign investor had forced BIIs Singaporean majority shareholder to divest its interest in BII. The Indonesia governmental policy change had benefited Maybank by offering a new opportunity in penetrating Indonesia financial segment. On the economical point of view, a country's strong economic growth will definitely attract the influx of investors to join its business community. As common practice, many countries announce their annual budgets to show an indicator for business and commercial growth for both domestic and external demands. The best example is Thailand, despite occasional political unrest, is still a growth economy. (New Straits Times, Jan 08, 2011) Thais government expects economic growth to slow to 4.5 per cent this year after estimated 7.8 per cent growth last year. Due to this economic projection, Maybank plans to penetrate Thai financial market by June of 2011 where an analysis shows that it will a turning key for Maybank expansion into the Southeast Asia second largest economy. A country economy is positioned as one of the important macro environments because of its function in accelerating business growth. According to Kruger (2004,p.57) the economic factors/environment is the controlling factor and forms the central point of change in the macro environment and is in turn influenced by them. The economic growth is in line with the growth of whole package of economic activities. The

inter-relation between those elements is one of contributing factors for a business plan to grow positively. For instance, if the country's inflation is skyrocketing, it may force a higher salary from the employees, and this situation may increase the operating costs of a trading firm. When operating cost increased, the profit earned will decrease apparently as the firm attempts to sustain its business. Due to lower pay-out of dividend towards the shareholders, the firm may possibly experience a pull out of investment by the dissatisfied shareholders. Therefore the economic changes will give impact on the business flow of an organization. Maybank, like other financial institutions, stimulates the economic development through loans, credit and other financing assistance to individual customers as well as various sizes of companies. This move may help to boost the country's economic to it right path. In order to ensure the economic growth is consistent with the business objectives inspired by Maybank, Maybank has to pour in billions of investment for a restructuring process as happened to BII buy over. With a confidence and positive projection of the economic growth in Indonesia, the buying over BII turned into a profitable move in the next financial year as reported in Maybank Financial Report 2010. Maybank owes this positive situation to the positive economic growth in Indonesia, indeed. Social factors in macro environments is another indispensable factors that may give impact on any organisation. Factors include the demographic and cultural aspects that affect customer needs and the size of potential markets. On the corporate social responsibility (CSR) front, as pointed out in Maybank Sustainability Report 2010, Maybank has launched a program called community investment where Maybank concentrates on certain areas related to the impact of their business on the society. Among the areas cover are conservation effort, education support such as scholarship and excellent awards, arts activities, sports and health medical related affairs. Under demographic factor, the elements of marital status, population growth rate or age distribution, to name few, are important for Maybank to design its financial products accordingly. For instance, under age distribution segment, Maybank has introduced a pension scheme called 'Golden Harvest Retirement Package' for those who aged between 45 and 70. The target group is those who plans for a fruitful retirement day. Another financial plan for children called 'Yippie Care2' is designed for children as young as one month old. Among the benefits is the maturity value that is twice the sum insured, which is guaranteed, making it

easier to plan for child's future education. Employees' affairs are also part of this social factors where the social impact to the employees' lifestyle and working culture may differ from one country to another country. For instance, when Maybank took over BII, the present Indonesian staff have to adopt the corporate culture practiced by Maybank for decades without losing a grip to their own culture. Maybank also strengthens its human capital development, its valuable assets that is its dedicated staff. According to Maybank Annual Report 2010, The Maybank Group today has a staff strength of more than 39,000 Maybankers in over 700 offices worldwide. The staff are the backbone of Maybank's strive to emerge as the leader in financial sector in Malaysia. Maybank creates leadership style in its corporate culture by making all communications effective at all departments and sectors. A series of continuous and integrated trainings are well-organised and completed by managers at Maybank. This is among the efforts introduced by Maybank in order to ensure the progressive leadership continue from time to time. Several initiatives organised by Maybank in pertaining career enhancement among its employees where Maybank's rewards and recognition schemes has reflected the entire workplace culture. It practices 'Pay for Performance' besides other benefits as outlined by the Ministry of Human Resource where employees are offered with attractive salary package, bonuses and promotion annually. Technology enhances lifestyle and expedites business transactions. It crosses international border to create business opportunities. Unfortunately, in recent years, there are endless list of reports made against online banking fraud world wide. BBC News (March 10,2010) reported that fraud cases has increased tremendously compared to previous year. The report, quoting UK Cards Associations figures, stated that fraud losses on UK credit and debit cards totalled 440m in 2009 - a drop of 28% compared with the previous year. But the number of "phishing" attacks rose by 16% in the same period. Phishing is when fraudsters trick people into entering their personal details on a website or in an e-mail. As a result, the total amount of online banking losses reached 59.7m in 2009, a 14% rise compared with the previous year. Maybank is no exception to this problem. Curbing cyber crime or specifically referred as 'phishing' is one of the Maybank's core focus in enhancing its online banking system. Online banking system helps Maybank to reduce its paper usage which is vital to the environment in the long run. On top of that, Maybank needs to restore its clientele's trust when engaging with online banking. One of Maybank's initiatives is by providing a fraud hotline which appears on

its website for customers' reach. For online shopping protection, Maybank creates Maybankard Secure Online Shopping (MSOS), an additional authentication protocol developed for safer online transactions when customer is using MasterCard and Visa to make online purchase. Environment plays indisputable role in ensuring the sustainability in business survival. Maybank is no exception as well. As part of its social responsibility, preservation of environment is one of the moves taken by Maybank. One of the campaigns is 'maybank2u.love the earth campaign' which is about reducing the usage of papers in daily transactions. This is in line with Maybank's mission to humanize financial services, a strategy that they weave into their business and the way they work to help protect and improve the environment for their community. Maybank also took part in various environment funding for earth disaster such as flood, earthquake, tsunami etc that had occurred worldwide. Maybank provides aid during those disaster recovery and redeveloping process and also is very proactive in promoting the heritage, culture and arts in the countries in which they operate. Among the initiatives adopted by Maybank such as disaster relief, conservation of nature as well as wildlife protec tion.As mentioned in Maybank Sustainability Report 2010, the environment conservation steps were taken as an effort to advocate for greener earth. In order to portray the seriousness of Maybank in current and potential impact of environment changes on the well-being of population at large, Maybank has actively participated in several environmental oriented forums which address the climate change in Malaysia, specifically and global generally. For example, Maybank has worked closely with a UK based organisation on greenhouse gas emission called Carbon Disclosure Project. This project promotes the businesses to emerge with good formula and better implementation in regards to carbon emission reduction strategies as an integral part of their organisation. It is vital that transparent carbon management plan helps to disclose the potential risks and opportunities available for the public. The final macro environment factors to be analyzed is legal factors which consist of restrictions or requirements of laws in the place where a company is doing business. Example of legal restrictions are the local government policy imposed against all foreign companies which is aimed at protecting the interests of their local-based companies. For instance, when Maybank intended to buy over the Bank Internasional Indonesia in year 2008, Maybank has to adhere to the regulatoion imposed by Indonesian government that foreign bank is permitted to own one

local bank only. This is the same regulation that ultimately led to Maybanks takeover of BII as the said regulation had necessitate Temasek Holdings (the Singapore Governments investment arm that owns and manages its direct investments, both locally and overseas) to divest its stake in one of the two Indonesian Banks it owns in order to comply with a new ruling from The Central Bank of Republic of Indonesia with Indonesia's new policy on bank ownership (Reuters, Jan 26,2010).

CONCLUSION As the conclusion, it has been stated that in order to achieve a competitive advantage, a company needs to pursue strategies that build on its existing resources and capabilities and formulate strategies that build additional resources and capabilities (develop new competencies) (Hill and Jones, 2010, p.103). But in order to formulate the strategies, an organization must be aware of its macro/external environments.Though macro economics situations are always beyond the control of organisation, the organisation must be proactive in overcoming the situation. By actively participating in the respective sectors (i.e. Politic.Economy, Social, Technology, Environmental and Legal), effective strategization can be achieved as shown by Maybank.

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