Strategic Development Of National Australia Bank: Analysis And Criticisms

Company Background

Discuss about the Strategic Development for National Australia Bank.

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The purpose of this report is to analyse strategic development of National Australia Bank (NAB). Therefore, in order to, better understand the concept, the report follows a systematic approach and discusses various factors that affect the strategic development of the organization in logical sequence. The report begins with a brief discussion about the growth and development of NAB since its inception to the present. It discusses what strategies that the organization has implemented over the years. Next, the report discusses various criticisms faced by the company in relation to the business practices it has employed over the years. Further, the report undertakes a comprehensive environmental analysis of the industry where it operates. Lastly, the report discusses and analyses the organizational structure and leadership style within the NAB.

NAB was formed in the year 1982 by the merger of “National Bank of Australia” and the “Commercial Banking Company” of Sydney. The merger resulted in expansion of financial base of the NAB and activated significant expansion outside Australia in the ensuing years. This more than 150 years old bank provides solutions to customers with their money. At present, the company employs more than 35,000 people that serve more than 10 million customers at more than 800 branches in Australia, New Zealand and around the world. The business of NAB business model is built on understanding customer needs, supporting and providing solutions as per their needs. NAB is Australia’s largest bank. Therefore, it provides banking solutions to small, medium and large business organizations in starting, running and growing their businesses. During the period from 1987 to    1997, bank operations grew substantially as the organization acquired many foreign banks ( 2016).

Vision: “To be world’s leading financial services company.”

Mission: NAB bank aim is to take the hard work out of banking.

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Business strategy

Since its inception, NAB has applied market development strategy. The company has focussed on expanding its business through mergers and acquisitions. The bank opened representative offices in different cities around the world. In 1987, NAB acquired Clydesdale (Scotland) and Northern Bank (Ireland). In 1990, NAB purchased Yorkshire Bank (England). Further, in 1992, NAB acquired Bank of New Zealand and in 1995, it acquired Michigan National Bank, the bank’s first foray into the US market (Fleisher and Bensoussan 2015). In addition, NAB acquired HomeSide Lending, a leading US mortgage service provider based in Florida. In 2000, NAB acquired MLC Limited for $4.56bn, which is one of the biggest mergers in Australian corporate history (Liu 2015).  

Business strategies applied by NAB

NAB’s case of growth by overseas expansion strategy has helped the company to access international markets, however expected results outcomes of this strategy has been far from a roaring success story. By the year 1997, NAB was performing exceptionally well and the company was determined to become world’s leading financial services company. In order to achieve this, NAB’s management continued on their strategy of growing organically and through well thought acquisitions. During the initial 10 to 15 years, NAB focused only on expanding its business operations to international markets (Moutinho 2016).

Foreign exchange scandal: On January 13, 2004, NAB announced that it had lost AU$360 million in foreign currency trading. The massive loss was due to increasing reliance on speculation and high-risk investment activity to boost profitability. Subsequent investigation by Price Waterhouse Coopers and the Australian Prudential Regulation Authority found the involvement of internal staff and suggested a need of cultural change. The losses were due to faulty speculative position where the traders misrepresented profits in order to earn heavy bonuses. In order to show profits, traders speculated on the US dollar, proclaiming that it would rise against the Australian dollar and other currencies. NAB put the blame for losses to unauthorized trading by some rouge employees at its foreign exchange options desk. However, PwC highlighted NAB’ insufficient risk management policies and poor control mechanisms (Cummins and Santomero 2012). 

Although, the bank maintained that the “high-risk activity” was not the strategy of the bank, the emergence of information later contradicted NAB’s assertion. It was found that NAB was trading at levels far greater than its official risk caps. The Australian banks usually calculate their “exchange option financial exposure” by a Value at Risk (VaR) formula. It determines the maximum apparent losses that could result at any particular time. At that time, NAB’s “foreign exchange options” cap was $3.25 million dollars; while the company accrued a total loss of AU$360 dollars which was 110 times the maximum VaR. Moreover, NAB’s annual report suggested that increasingly risky trading was mindful policy. It is evident from the fact that The average VaR of bank in Sept. 1999 was $3 million while for the same month in 2000 it stood at $20 million, this increase in the value of VaR clearly indicates that bank’s risky trading. Moreover, in an attempt to hide the unscrupulous business practice, NAB abandoned its usual practice of publishing year-on-year comparisons in annual report figures (Batten et al. 2015).

Criticisms of business practices

Financed greenhouse gas emissions: NAB faced severe criticisms for its involvement in providing loan in the order AUD 11.2 billion to the “fossil fuel industry” in Australia since 2008. On the other hand, the bank’s loan in renewable energy amount to just 20% of the amount of fossil fuels i.e. AUD 2.2 billion dollars. This has raised concerns that the finance provided by NAB has significantly contributed to existing problems of global warming. This has raised considerable outrage in the Australian community and led to various responses including creation of “fossil fuel free” investment products that excluded NAB from the investment universe. The stakeholders of NAB raised their concern in annual general meeting and demanded for detailed emissions disclosure and reduction in loans for fossil fuels. Environmentalists and protest groups covered ATM screens in order to raise awareness regarding the unethical business practices and its impact on the environmental degradation of the Great Barrier Reef. In addition, the customers of the bank shifted their money to those banks that have lower financed emission portfolios (Dao et al. 2016).

PESTLE analysis:

PESTLE analysis refers to analysis of Political, Economic, Social, Technological, Legal and Ecological environment where the company operates. It aims at scanning the external business environment of the business that is beyond the control of organization but exercises considerable influence on the long-term success of the business. The PESTLE analysis of NAB can be undertaken as –

Political: The banking sector is most affected by the political factors present within the country where it operates. Moreover, as NAB is expanding its operations by entering global markets, its business is affected by the political ideologies, political stabilities and policies of respective countries. Moreover, the bank’s operations and profitability is directly linked with geo-political environment. The ongoing unrest in Middle Eastern countries, polarization of power, conflict between Russia and the United States of America, problems with North Korea and increasing terrorist activities all around the world, have affected the business of NAB. However, the domestic market provides support and required infrastructure, which is beneficial for NAB (Hill 2012).

Economic: The economic environment is favourable for the business of the organization. The revival of economy after the financial crisis of 2008 sends positive signals and world economy is again forwarding in right direction. The country is experiencing greater foreign investment and positive outlook among the investors presents favourable conditions for NAB to grow in next few years.

Environmental analysis

Socio-cultural:  Socio cultural factors also affect the business operations of NAB. These factors include – level of education in the society, life style preferences, profession, values and cultures of the people, education level and so on. In this regard, Australian society exhibits all the favourable conditions for business development of NAB and people are aware of the importance of banking solutions in their lives (Grant 2016). 

Technological: In the today’s world, technology is evolving at a faster rate. Technological changes in the banking sector have direct impact on the long-term sustainability of the banks. In this context, NAB has invested in developing cutting edge and competitive technology that would provide NAB competitive advantage over the competitors. Further, increasing influence of internet in banking operations and digitalization of currency has changed the dynamics of banking industry and NAB has implemented strategies to take advantage of such technological changes (Safeena and Date 2015).

Legal: All the business organizations are required to comply with the legal requirement of the land where it operates. NAB being a financial institution is subject to various regulations and standards. The Australian Prudential Regulation Authority (APRA) is the governing body that overseers banks and other financial bodies in Australia. In addition, Reserve Bank of Australia also prescribes guidelines that the banks are requires to comply. The purpose of these regulations is to prevent the unscrupulous business practices and protections of rights of customers. Therefore, it can be said that legal environment is beneficial for the long-term sustainability of business operations of NAB (Florey 2012).

Ecological: Increasing concern for the environment has made it crucial for business entities to adopt sustainable and environment friendly business practices. The bank has faced severe criticisms for fossil fuel industries. Therefore, it is important for NAB bank to identify social and environmental risks especially in credit approval process. In this regard, NAB has developed environmental issues policy to identify such risks and undertake appropriate strategies to mitigate those risks (Boersma 2015).


·         Strong brand name

·         Financially strong

·         Leading financial player with diverse products and services


·         Globally less renowned

·         Declining revenues impacting growth activities


·         Expansion in Asian markets

·         Diversifying portfolio


·         Stiff control by government on the wake of financial crisis and recession

·         Stiff competition from other banks

(Source: As created by author)

NAB’s organizational culture is inspired by five core values – “passion for customer”, “will to win”, “be bold”, “respecting the people” and “doing the right thing”. Organizational culture leadership are two sides of the same coin and cannot be understood without each other. From 1999 to 2004, Frank Cicuttio, was the CEO of the company. During his position as a leader, the bank grew tremendously until the foreign currency trader fraud was exposed, which also led to his resignation. This incident also led to change in organizational culture. The culture of the organization has been under scrutiny for its inability to risk management and placing control measures to avoid mismanagement (Alvesson 2012). The leaders were more focussed on increasing profitability and revenues at any cost. Since the debacle of forex scandal, the company is in damage control and has been not able to produce effective leaders. The organizational culture has been secretive and leaders exercise maximum control on all the functions of organization. Therefore, it can be said that the organizational culture of NAB is bureaucratic in nature. There is too much hierarchy and the communication follows top to bottom. The top executives take all the decisions and employee participation is restricted. Moreover, NAB’s inability to make a strong and positive presence in other countries apart from Australia is attributed to failed leadership and the bank has to adopt a more holistic and participative style of leadership in order to be successful globally (Tehan and Thompson 2013).


From the above discussion, it is evident that NAB has been able to achieve the stature of one of the biggest banks in Australia with the effective implementation of its strategic policies. In the domestic market, NAB enjoys dominant position; however, its foreign endeavour has been less successful. The bank has adopted expansionist strategy to grow and entered new markets. Further, the bank has also suffered some set back due to some scandals and business decisions such as loaning of fossil fuel industries that lead to massive public outrage and the foreign exchange scandal that not only cost the company financially but also tarnished the image of the bank. However, from the environmental analysis it is clear that there are huge opportunities for banks growth and development; but in order to exploit these opportunities, bank has to revaluate its organizational and instil string leader at its helm to enhance the image of the organization and to boost the confidence of employees to achieve organizational objectives.


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