Introduction and Brief HistoryAccording to the Lloyds Banking Group website, the group was formed in 2009 with the acquisition of HBOS plc by Lloyds TBS group plc. This made the Lloyds Banking group to be the second largest bank in United Kingdom in terms of customer base. The banking group is made up of main companies which were in existence before merger and they include Lloyds TSB, Bank of Scotland and Halifax (Lloyds Banking Group 2010, p. 1). The business has been able to grow tremendously courtesy of management policies applied to meet the company objectives and purposes. This paper examines its business environment so as to understand the environmental effects on the business and performance of the banking group.Company Objective and PurposeAccording to the company website, the objective of the company is to provide the best financial services in the banking industry. This is done so as to benefit the shareholders, customers and employees of the company. The objective of offering the best financial service is achieved through other strategic objectives engaged by the management of the bank. These objectives are oriented towards customer satisfaction, employee satisfaction, expanded markets and revenue growth (Lloyds Banking Group 2010, p. 1). The main objective of Lloyd banking group is to utilize the available resources and grow its revenues to the satisfaction of stakeholders.The purpose of the banking group is to develop deep and long lasting relationships with its customers to enable them succeed. The success of its customers will in turn enable the banking group to be successful (Lloyds Banking Group 2010, p. 1). This is because the customers will be able to service all their loans as they take more thus resulting in increased group business. The purpose dwells on customer satisfaction because it directly affects its business operational success.Lloyds Business EnvironmentIn analyzing the business environment of Lloyds banking group we consider the factors that affect its business processes. These are the external and internal environmental factors that have considerable influence on the performance of the Lloyds banking group. We analyze this environment by use of SWOT analysis model which we shall discuss in details as follows;SWOT Analysis of Lloyds Banking GroupThese are internal factors that have positive impact on the operational performance. They are those factors generated from the internal environment of the group that favor continued business success. The first strength is on the large banking network of the group (Lloyds Banking Group 2010, p. 1). The group has acquired a huge network of banks that operate in over 30 countries. This large network gives the company the benefit of huge market for its products which result in more returns on its investment. The large network also enables the company to benefit from large economies of scale especially in purchase of technical services needed for its operation since it will be in a position to negotiate with its suppliers.The other strength is that the group has multiple brands (Lloyds Banking Group 2010, p. 1). These brands operate separately but are well known by the customers. Thus the customer loyalty has been developed for its several brands. The benefit of multiple brands is that it leads to increased markets and customer base by associating each brand to the bigger corporate brand. This increases the confidence that customers will have on the group and respective brands because they are assured of the group's stability out of its corporate image.
Moreover, the group attracts and retains the best talents in its workforce (Lloyds Banking Group 2010, p. 1). This is achieved through its competitive remuneration packages. The result of attracting talented staff is that creativity of the workforce is enhanced which will ensure continued business development in terms of new ideas and improvements. The best workforce usually impact on the performance of any business and that's why the group has invested a lot in its employees.Furthermore, the group has diversified its products and services through the entire financial sector. They are offering savings, mortgage, insurance and other financial services (Lloyds Banking Group 2010, p. 1). This gives the group extended customer base of all those who need various financial services at one bank. The strength of having diversified products is that the company is able to increase its competitive advantage over other banks because they are able to carry out several lines of businesses which complement each other in revenues and utilization of large economies of scale. This comes in terms of employees available to carry out duties of several product lines of the group.The other strength of the group is its ability to grow in revenue and gain huge financial muscle. This fact has helped the group in terms of its expansion and acquisition objectives. The benefit of having the required funds to invest has accelerated the growth of the bank to its current lead status in the United Kingdom in terms of revenue and network. This strength comes out of its prudent management skills which favor income growth and cost minimization.There are also weaknesses which are generated out of internal environment that do not favor good performance of the group. When the group bought HBS in 2009 it took over a debt of 13 billion pounds out of which 9 billion were lent without stringent measures. This caused the group to report a loss for half year results in 2009 (Yalm & Mark James, p. 1). This was a weakness which arose out of acquisition and could derail the development process of the group as they sort financial problems of the acquired company.In addition, the job cuts that were recently announced by the group (Yalm & Mark 2010, p. 1) had a negative effect on the performance of the employees. This is because other employees may not feel secure at their jobs as a result of certain downsizing measures adopted by the group. Therefore, the output of the remaining employees is reduced resulting in reduced business growth. Since the employees are the core of success for any business, it becomes a weakness for large organizations like Lloyds to lay off staff instead of generating more employment opportunities.
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The other weakness is associated with its expanded network of operations. There are a lot of management skills which are required to manage a very large network of banks. Sometimes the costs may increase at a higher rate than the increase of income in the expansion processes. This fact is considered as a diseconomy of scale where the cost of offering a service exceeds the returns on investment. This is what has forced the bank to shut some operations resulting in job losses.The external environment offers some opportunities to Lloyd baking group to improve in its business performances. The first opportunity for the bank is the partnerships, mergers and acquisitions that the company has explored to its advantage. The latest acquisition HBOS brings a definite advantage to continued growth of the group and command more of market share. The acquired businesses come with expertise in a particular line of business which enables the parent company to grow and benefit from it. Moreover, the HBOS came with its huge financial savings and bancassurance business with their respective customers (Lloyds Banking Group 2010, p. 1).The other opportunity that exists for the group is to increase its business expansion. The financial strength enables the group to utilize opportunities of expanding to other countries not yet served. The benefit of increased global market enables the group to increase its revenue base and brand loyalty across the globe.The other opportunity is on innovation and product development. The group has the opportunity to create new products as well as purchase existing ones (Yalm & Mark James 2010, p. 1). This will increase the customer base out of new products and increase revenue. The concept of innovation will ensure that the company keeps pace with the changing technological environment and is not left with outdated services to offer.The banking group is in a very good position to obtain financing from other financial institutions and the stock exchanges. The company is listed at the London and New York stock exchanges giving it opportunity to get easy financing though the stocks. Thus the company has opportunity to invest in finances available for more expansion and quality improvement.There are external factors that threaten the continued prosperity of the banking group. These are external environmental factors that discourage growth of a business. It includes the stiff competition in the banking industry. There have been developments in banking sector that has allowed new players as well as mergers that enables banks to have huge operational strength. Therefore the company is faced with stiff competition such that it must act accordingly so as to remain viable in the saturated market.Moreover, the threat of economic crisis exists. This is because economic turbulence affects its customers which may lead to loan defaulting and thus affect the banking operations. Therefore the group should always be at a position to shield itself from external economic factors that might drive it to losses. Furthermore, the technological advance might be a threat to its information storage thus forcing it to develop systems that are tamper proof to secure information of its customers (Greenwood 2010, p. 3).The Impact of Political and Economic Integration on Lloyds Banking GroupThe political environment of the countries of operation has been beneficial to good performance of the bank. During the economic crisis, the government offered to inject more money to the bank thus enabling it to maintain its operations. The funding has enabled the bank to be owned up to 43% by the UK government. Thus the political environment has favored the banking group (Greenwood 2010, p. 4).The turbulent economic environment subjects the banking group to follow its turbulence. The bank operations are closely tied to the economic changes because it involves a lot of monetary transactions. Therefore economic crunch had bad effects on the customer's performance which in turn has negative influence on the bank.The increased socialization in many countries has enabled the bank to penetrate into several countries. This is because the people have been able to change their lifestyles and accept new ideas of banking and use of other financial services. This has had a good impact on the bank operations and especially on expansion to other countriesThere has been constant improvement in the area new technology and improvements. This has impacted positively on the bank because the advanced systems have enabled growth and proper management of the huge banking network. The advanced technology has enabled the bank to keep huge databases of customers securely and have been able to track their financial needs for use in quality improvements.The legal impact on the banking group has been favorable. This is because the legislations of several countries have allowed businesses to thrive without boundaries. The legislation to enable cross-listing at the New York and London stock exchanges has been of good impact to the banking group. However, there are some countries which allow limited multinationals in their countries which impact negatively on Lloyd expansion processes (Greenwood 2010, p. 6).The banking group has been impacted positively by the good business friendly environment. This is because a good environment enables customers to grow their various businesses and as a result the bank benefits from its customers successes. The basic determinant of economic progression is a business friendly environment in which each country is seeking to achieve (Greenwood 2010, p. 3).The Lloyd Banking group has had a good business environment that has enhanced its growth agenda since inception. The concept of a favorable business environment is the basis of success for any business growth. Therefore we can conclude that a successful organization in any undertaking is achieved out of a favorable business environment.
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