Background of TSB Bank PLC
A PESTEL analysis is defined as a tool which is used by marketers in order to monitor and evaluate macro-environment factors that influence a firm’s business. It is an analytical tool which is used for strategic business planning by understanding different external factors that influences a company’s business. PESTEL is an acronym for political, economic, social, technological, environmental and legal environment that influence a firm’s business. This report will analyse the corporate governance structure and management of TSB Bank PLC and evaluate how it is governed. TSB Bank PLC was founded in 1985 as Trustee Savings Bank PLC, and it is a subsidiary of Sabadell Group. The firm is a retailing and commercial bank situated in the United Kingdom, and it operates a network of 550 branches across different places of Scotland, Wales and England (TSB, 2018). This report will identify the purpose of conducting PESTEL analysis for a business organisation. Further, the report will examine the general external environmental forces of TSB Bank PLC by conducting PESTEL analysis of the firm.
The headquarters of TSB Bank PLC is situated in Edinburgh, Scotland, UK and it provides its services across the UK through its 550 branches which are situated in different areas of England, Wales and Scotland. The company operates in Territory sector, and it provides its services to more than 4.5 million customers (TSB, 2014).
The firm was founded on 27th November 1985 as Trustee Savings Bank, and it merged with Lloyds Bank in 1995 which formed Lloyds TSB in 1999. On 9th September 2013, the enterprise reregistered itself under the name of ‘TSB Bank PLC’. In 2014, the parent company called TSB Banking Group was registered in England and the same year it ended its relationship with Lloyds Banking Group (Simon, 2013).
The company has a hierarchical structure since it is governed by the Board of Directors. Following is a hierarchical diagram of firm’s organisational structure:
Chief Executive Officer (Paul Pester)
On 31st January 2014, Pester was appointed as an Executive Director of the firm. Previously, Pester had an experience of working with first Group CEO of Virgin Money, and he had also worked in management consulting (TSB, 2018c). He is responsible for performing actions related to corporate social responsibility, audit, risk management, business development and others.
Chief Financial Officer (Ralph Coates)
Coates was appointed on 1st July 2016, and he previously worked with PwC or PricewaterhouseCoopers as a Chartered Accountant. He is responsible for performing controllership duties which makes him responsible for providing accurate and timely financial information of the firm (TSB, 2018c).
Organizational Structure of TSB Bank PLC
Chief Information Officer (Carlos Abarca)
Abarca is responsible for performing managing information technology and computer system in the firm in order to ensure that the data of the company and clients are safe.
Chief Marketing Officer (Nigel Gilbert)
Gilbert is responsible for overseeing and ensuring that the activities relating to planning, development and implementation of the marketing strategy of the enterprise.
Chief Operating Officer (Helen Rose)
Rose handles daily operations of the company and provides routine reports to the CEO. She is second in command at the corporation, and she ensures that daily operations are running smoothly and the firm is focusing towards achieving its organisational goals.
Human Resource Director (Rachel Lock)
The HR director ensures that functions of human resource department are running smoothly, and she supervises other operations regarding staffing compensation, budget, plans, benefits and training and development.
The corporation has a hierarchical organisational structure since it is governed by the Board of Directors. There are nine members included in the Board of the firm in which six independent non-executive directors, one group COO, one group CFO and a Chairman. The Chairman of the company, Richard Meddings, manage the Board of Directors and implement different policies to make the corporation one of the largest banking firm in the United Kingdom. On 20th September 2017, Meddings appointed on the Board, and he was appointed as the Chairman on 2nd February 2018 (TSB, 2018).
Stakeholders are referred to different people who are affected by the actions, policies and objectives of an organisation. The example of stakeholders includes creditors, customers, environment, shareholders, government, employees, directors, union and community (Hult, et al., 2011). The key stakeholders of TSB Bank PLC include customers, shareholders and investors, employees, suppliers, government, and trade unions.
The Board focused on implementing policies in order to maximise company’s profits. In 2017, profits of the firm were £115.1 million which showed a reduction as compared to 2016 profits which were £128.1 million (TSB, 2017a). As per directors’ report, the firm did not propose to pay a dividend to its shareholders, and all the returns are reinvested in the business. Following is a graph of giving year data of earning per share of Banco Sabadell which is the parent company of TSB Bank PLC.
The above-mentioned data showed a growing value of shareholders’ value by investing in the TSB Bank PLC. Policies implemented by the Board assist in increasing earnings per share value of shareholders.
Stakeholders of TSB Bank PLC
The Human Resource director of the company, Rachel Lock, is responsible for performing activities such as recruitment, performance management, consulting, compensation and others. The conduct regular meeting and provide performance-based rewards to improve the performance of its employees. For example, the firm has partnered with the Curve Group which is a leading recruitment and HR outsourcing companies for attracting and selecting talented candidates in the commercial banking team (APSCo, 2018).
As per Corporate Social Responsibility of the firm, each brand selects a local project or charity to support and the employees volunteer for local charitable causes. Partners also spend at least eight hours in a year to support local good causes. The enterprise complies with the banking regulations that are implemented by local and national government. The firm has fundraised over £500,000 each year since moving to local model (TSB, 2016).
There are various purposes of conducting a PESTEL analysis for a business organisation, for example, when a firm is expanding or establishing business in global markets, PESTEL analysis assists in assessing the prospective market, identify potential competitors and determine various regulations that are necessary to be compiled by the enterprise. The PESTEL analysis identifies significant factors that change or influence a corporation’s supply or demand levels, costs of production factors and others (Issa, Chang and Issa, 2010). Organisations are facing rapid change in business environment due to the introduction of new technology and changing economic environment for the link between users. The companies are required to implement innovative strategies in order to address these challenges and sustain their future development.
Effective PESTEL analysis provides them information regarding these marketing challenges that can be addressed by implementing innovative approach in the firm. The PESTEL analysis enables management to get a deeper understanding of the environments that directly or indirectly influence a firm’s business. It also assists them in understanding different and influential factors that affect the success of a product launch. (Ho, 2014). For example, management might overlook the safety and consumer regulations which are necessary to comply by them in order to launch a new product during global expansion. Therefore, developing alertness in the business is another key purpose of conducting PESTEL analysis for a business organisation.
TSB Bank PLC face a challenging political environment in the United Kingdom as its business is characterised by new regulatory capital rules such as UK Banking reform Act and EU Bank Recovery and Resolution. The new laws implemented by the state and national government affects the business of TSB Bank PLC in the banking sector. For example, Brexit has impacted TSB’s strategy and customers, and it has created various risks for the enterprise. The firm faces difficulties if it wanted to expand its business in European markets due to Brexit. The regulations implemented by the government have a substantial effect on the business of TSB Bank PLC, and it focuses on forecasting the next governmental change. The government changes regulations in the banking industry which are required to be followed by the management of TSB. For example, the eight percent surcharge levied by the government on the profits excess £25 million on banking corporations in the UK has a negative impact on company’s profits (TSB, 2017).
Financial Performance of TSB Bank PLC
Due to Brexit, TSB Bank PLC face various economic risks relating to operations, regulations, impact on clients, customers and employees, and negative consequences for capital. In the short term, Brexit did not have a substantial impact on the financial position of TSB Bank PLC, but in the long run, the firm might face difficulties due to high rate of inflation. The decline in the exchange rate of pound can have a potentially negative impact on firm’s capital. In 2016, the Bank of England has reduced the base rate for banking corporations from 0.5 percent to a record low of 0.25 percent (Partington, 2017). The bank changed the interest rate due to the negative impact of Brexit. A low-interest rate negatively affects a banking firm’s ability to generate profits, and it reduces its profitability. On the other hand, in the final quarter of 2017, the UK economy grew just by 0.6 percent which was slowdown due to Brexit (Partington and Elliott, 2018). High rate of inflation has a negative impact on banking organisations as well. Inflation has a negative impact on currency and its value which resulted in causing instability. Foreign investors did not prefer to invest in a country which has a high currency value. The exchange rate of currency also affect banks situated in the UK since currencies such as US dollar influence spending habits, inflation rates and currencies value in the country.
The way people live their lives has a substantial impact on the decision of banking firms. Any change in lifestyle, social mobility, labour composition, fashion or other demographic trends has a potential to influence banking companies. TSB Bank PLC requires implementing innovative approach in order to address the issues faced by them due to rapidly changing socio-cultural factors. For example, the population of the United Kingdom is ageing which creates various potential business opportunities for TSB Bank PLC. Currently, the median age in the UK is 40 years which has grown from 33.9 years in 1974 (Office of National Statistics, 2016). Further, many studies have provided that the number of 55-64 years old people will double by 2019 in the UK. The ageing population provide a significant business opportunity to TSB Bank PLC as pension age of customers generate an earning and have a higher disposable income. The firm is shifting its focus towards providing savings, wealth management and investment facilities to its customers as their behaviour changes. Migration is another crucial factor for TSB Bank PLC as more than half (55 percent) of the growth in the UK population between 1991 and 2016 has resulted due to migration (Migration Observatory, 2018). In order to find illegal immigrants, UK banks are required to check more than 70 million accounts (Travis, 2017).
Human Resource Management at TSB Bank PLC
The continuous and rapidly changing has a substantial impact on the business of TSB Bank PLC. The firm faces several potential opportunities and threats due to the advancement of technology. Most banks provide their services through the internet for convenience of their customers, but, it increases the risk of cybersecurity attacks. TSB has to ensure that it implements the latest cybersecurity programs in order to protect company’s and customers’ data from hacking which increase their overall costs. Innovation assists in providing technological solutions of banking enterprises which resulted in improving their services and security. Financial innovations such as FinTech companies are able to prove banking facilities to their customers through modern ways (Dapp, et al., 2014). The traditional methods of financial services have changed with the introduction of smartphones, mobile banking, cryptocurrency and online investing services. These factors provide various opportunities to banking organisation in order to expand their business and increase the number of customers. The Security Operations Centre (SOC) of the firm focuses on protecting the company’s data from cyber-attacks.
The awareness regarding environment protection is growing between modern companies, and they focus on implementing innovative policies to reduce their carbon footprint and protect environmental resources. TSB Bank PLC use innovative approach to establishing energy efficient operations and using renewable energy in order to reduce their carbon footprint and improve their overall operations. As per regulations implemented by the UK government, GHG (Greenhouse Gas) and environmental reporting are mandatory for corporations situated in the United Kingdom, including banking (CDSB, 2018). Therefore, TSB Bank PLC also have to mandatory provided GHG and environmental reporting to the government which require them to implement appropriate policies for reducing their carbon footprint.
In recent years, there have been a number of significant changes in the legal environment in the UK which affects TSB’s behaviour. For example, introduction of age and disability discrimination require the corporation to improve their HR policies for the requirement for avoiding discrimination. Legal changes also have an impact on company’s costs; for example, they are required to implement new systems or procedures as per legal requirements (Yuksel, 2012). Another example is while providing online financial services to customers; the firm is required to comply with the provisions of Consumer law which protect customers from any fraud or unfair trade practices. Similarly, TSB has to comply with Employment Law in order to ensure that it complies with different regulations relating to dismissal, redundancy, minimum wage and working hours. Any changes in law have a substantial impact on company’s operations, for example, the Banking Regulations in the United Kingdom changed after Brexit which influence the business of TSB.
Corporate Social Responsibility (CSR) of TSB Bank PLC
Conclusion
In conclusion, the PESTEL analysis is a strategic tool which is used by marketers in order to evaluate and analyse the external factors which influence a firm’s business. The report analysed the example of TSB Bank PLC to conduct a PESTEL analysis. The organisational structure of TSB Bank PLC is hierarchical since it is governed by the Board of Directors. The executive officers of TSB are responsible for managing and performing daily operations whereas the directors implement policies for sustaining the future of the enterprise. The Board maintained a relationship with different stakeholders by implementing different policies such as establishing training and development program for employees, funding local charities, complying with government regulations and others. The main purpose of PESTEL analysis is that it provides necessary information to corporation regarding their external environment which assists them in formulating appropriate policies to address such challenges. PESTEL analysis of TSB Bank PLC is conducted above which provide different challenges and opportunities faced by the enterprise such as cybersecurity risks, change in government policies, ageing population, and others.
References
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