BUSINESS ENVIRONMENT

Business Environment

Business Environment

Introduction

The following study will focus on the UK Retail Banking Operation of Lloyds TSB Group Plc: Lloyds TSB Bank (LTSB). Over the last 25 years companies operating within the retail banking environment have experienced much instability and fluctuation. Preston & Hayward are particularly salient in their remarks: 'Retail banks have moved from operating within a static, largely closed operating environment, to conducting business within a highly open, turbulent and competitive environment.' (1999) Using an adapted version of PESTEL (Johnson et al, 2006, p68); we can identify several macro-environmental influences and in-turn identify the Key Drivers of Change (KDCs) that impact upon the LTSB. From a political and economic standpoint; further deregulation of the banking industry is a significant factor determining the future success of LTSB. The government's encouragement of competitive practise in the industry has historically led to deregulation and consequently resulted in a heightened state of competition. Conversely, due to continual reports of, almost industry-wide, unethical sales practise; additional internal industry regulations have been introduced via the Financial Services Authority (FSA)(L?igh, 2002,, 138).

Retail banks exist to service the needs of society (Trethowan & Scullion, 1997) and hence the changing population demographics and UK's affair with consumerism display significant forces upon LTSB. Banking services are predominantly tailored to meet 'life-events' and hence an aging and growing population will require differing products as their lives progress. Additionally, heightened consumer awareness and attitude to credit usage has provided both benefits in terms of growth, and challenges regarding an increased level of competition between financial services providers.

Discussion

Consequently, when viewing the retail 'arm' of The LTSB Group as a strategic business unit we can see that there is almost a seamless connection between the main macro-environmental forces effecting LTSB and the competitive forces in the industry (Johnson et al, 2006, p80). Using Porter's Five Forces framework (Porter, 1980) we can gain further insight into the relationship between industry competition and the Key Drivers of Change. Hence; where there is a relatively low cost and low risk of switching financial service providers; the big four (Barclays, HSBC, LTSB and NatWest) are subjected to the associated pressures of an intensely competitive environment. A by product of this correlation is that smaller players have either entered the market or 'blossomed' as a result of offering specialised products and superior service. Therefore, the rudimentary key drivers of change are: i) The continuing deregulation of the Financial Services sector spurring unprecedented and unexpected levels of competition, ii) evolving customer needs and market requirements and iii) shareholders' expectation of sustainable and profitable growth(Nonaka, 1991,, 96).

Section 2: Lewin's three step model (1958) suggests a method to improve the implementation and lasting success of procedural changes, however Dawson & Wilson as cited by Burnes (1996) believe that such a process does not 'address crucial issues such as the continuous need for employee flexibility and structural adaptation'. Given the 'complex interplay of multiple variables' within the organisation (Burnes, 1996) it is my recommendation that LTSB, who operate in an ...