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Question: Analysis the Commercial Position of UK Banks in the UK and Global Market. Answer: Introduction UK banks have become a major player in economic growth within the UK and the globe. The banking sector has grown to accommodate all customers which would result in a strong economy. The UK banking industry has contributed to employment opportunities, increased personal banking services, and a source of government revenue. This report gives an overview of the position of the banking industry within the UK and global market using PESTEL and SWOT frameworks. The analysis gives the influence of the industry on the markets and how it has adapted to the changing global needs. Background of the banking sector The banking sector has existed for centuries, playing a significant role in changing the economic environment both within the UK and the globe. It has generated employment opportunities for the population, revenue for the government, and banking services to the society. The banking industry that started in the 17th century provide the local English community with banking services, and during the industrial revolution in 18th century, many banks were established in London due to increased international trade activities (Bennett, and Kottasz 2012). Banking industry were private enterprises during this era, and during the 19th century, the government took control over the industry as the need for control and regulation grew hence the formulation of the Bank Charter Act. Major improvements had been made to the sector including the accounts and the record keeping systems. The technology advancement led to a revolution in the banking sector: ATM and credit card services were established. T he sector has expanded over the year to include insurance, investments, and stock exchange. The banks have become a major contributor to economic growth in different markets globally. PESTEL analysis This framework analyzes factors that affect the banking industry considering both internal factors and the external factors. For the sector to operate normally, it has to navigate through these factors and provide expected services to the customers (Chalabi 2014). PESTEL is an acronym that stands for different environments that banking industry has work in political factors, economic factors, social factors, technological factors, economic factors and legal factors. Political factors These are factors that originate from the government that may include political stability, policies, and regulations. Stability in government gives the banking sector a favorable environment to operate. The pressure facing banks in the UK currently is Brexit and the uncertainty of Scotland being part of the UK in the future. Brexit has affected the normal operations of the sector due to the changes in relations with partners within the region. The uncertainty of the future relations with countries in Europe is likely to affect the operations of the UK banks in Europe and around the globe. The major financial crisis has been as a result of political interference through regulations that undermine operations of the banks. As a result of the interferences, it is a responsibility of managements in the industry to formulate strategies that would aid in compliance with the regulations established. Economic factors The sector is under pressure to offer quality services while the management is only in the hands of a few. Many customers are increasingly using the online platform to access the banking services hence the expansion of bank branches is becoming expensive and difficult. The Lloyds Bank, for example, has faced major setbacks in attempts to sell its branches because of sophistication in technology and increased expenses (David 2005). Barclays banks have branches in many countries, and in 2009, its credit rating dropped which affected its services. Banks have grown and have become an important part of different sectors within the UK and around the globe. The scale at which banks occupy the market is large therefore customers expect them to be crisis-free. Social factors Banks are becoming part of social influencers in the society by meeting their needs. To achieve sustainable growth, the banks have to transform the lives of the society members to the expected current living standards. This can be achieved by providing job opportunities for the society members, and as of 2014, 7% of employees within the UK worked in the banking industry. UK banks have been established in various countries and have become contributors to job opportunities and transformation of societies (El-Manstrly, Paton, Veloutsou, and Moutinho 2011). The presence of UK banks in third world countries has contributed to economic growth and improvement of living standards of the citizens. London has been a leader in the financial industry, but with Brexit, it faces the uncertainty of holding on to the position as neutral cities are rising to challenge it. Some of these cities include Glasgow, Manchester, and Edinburg. Technological factors From the time of banking services inception, technology has become a change agent that drives the dynamics of the industry. The technological advancement has significantly improved banking services across the globe. The ease of access to services has become a positive attribute to technology, but it also comes with setbacks to the industry. Increased online access of services has increased vulnerability to attacks from hackers who take personal bank information to steal money from personal bank accounts. Environmental factors This refers to completion among banks in the market both regionally and globally. There are fewer banks in the UK which result in an increased competition to occupy the market. The UK Bank has faced stiff competition from other world leading banks who want to occupy the leading global space for the industry. Financial crisis has influenced how banks operate and strategies they have formulated to aid in recovery. Legal factors The Bank Act was enacted by the government to make banks safe and strong to continuously provide services as expected by the customers. The reform act regulates banking culture and change is structures. The UK government introduced a bank account switching service that allows people to switch banks at any time. The introduction of the service is a competition agent between the banks. The government introduced Independent Commission aimed at reviewing the industry and giving suggestions on adjustments or changes that could be mad to the industry. The financial service Act that was established in 2013 regulates banking services and formulates changes that could improve the industry. SWOT analysis Strengths Banks have been part of the society from centuries ago which makes it an integral part of human race. This is an industrial and to an extent an organizational strength as they determine the financial course of societies and is a major influence on the economic growth. This role is unlikely to be replaced by any industry or any other form of service. Economic growth has been realized through the banking industry. Through banking services, sustainable growth in a country can be realized through creating an environment that allows growth. The industry is a key player involved in fostering financial stability, international trade, and reduce poverty levels in the society. Banks reduce effects of calamities by reclaiming and rebuilding destroyed properties. Banks are central to economic restoration and fostering reconstruction of human lives. Regardless of the cause of calamities, bank has always been part of restoration teams. With new technologies, banks have adopted their efficient use to make it easier for people to access services. Banks have also influenced how businesses operate by providing services that support more investments consequently growing these businesses. Weaknesses The lack of coordination between banks has to lead to major financial crisis. The difference in the value of currencies has challenged the operation of UK banks in other countries (Figueira, Nellis, and Parker 2007). The banking industry is an integral part of any sector. Therefore, it can influence the activities of these sectors in case of any change in the industry. The banks operate in areas where infrastructures are fully developed therefore they are not operational in areas that are underdeveloped. In many African countries, UK banks are only located in major cities. This reduces the penetration of banking markets in developing countries where many of the banks have tried to commit to helping in the development activities. Opportunities UK Banks have an opportunity to expand to different markets globally. Many potential customers could benefit from the presence of the banks in their regions. The demographic shifts in different regions provide markets for these banks as many young people across the world are getting more financial educational hence the need for banking systems. The rise in private banking services has been facilitated by favorable conditions provided by the company. The customers have become beneficiaries of the change due to competition between the private and public sector which results in quality services. Threats The recession is a major threat that banks may face which lead to economic crises and almost total collapse in financial systems. This could adversely affect businesses and affect domestic lives of the societies. Small banks have been affected by the use of weak systems which have threatened their stability. Competition between banks and non-banking financial institutions has affected the operations of banks as both industries are competing for the same customer segments. The table below shows the major banks in the UK and their values Bank Market Value(Billion) Assets(Billion) HSBC 122.2 1736 RBS 49.9 2508 TSB 44.5 1195 Barclays 38.3 2320 Threats facing UK internal business functions Mobile banking risks The use of mobile phones for banking purposes is on the rise, and most traditional regulations do not adjust to this communication tool. According to Researchandmarkets.com (2014), the use of mobile phones creates vulnerability to attacks as personal information can be compromised through an exposed protected interface. The use of mobile phones is on the rise globally, which has increased innovation to cater for banking systems. With limited regulations in the market. The internet of things risks the security of connected devices and privacy of individuals. In this era, most of the home appliances could be connected to a single server that controls them. The intranet created could be compromised by hackers to collect data from unsuspecting users. Many banks create their interconnectivity that allows transfer of information and eases their retrieval. This risk is one of the newest because the technology was created without considering potential risks it might pose to the individuals or institutions. Response to change From the time the UK experienced the credit crunch, financial institutions have tightened the operations within the sector. Public funds were used to save the banking sector from collapsing which angered many people. New systems have since been introduced that seek to make management take responsibility for their actions. Changes introduced to the sector include imposed regulations on the pay and bonuses given to staff. This was a result of the public outcry following the pay the staffs were entitled to, which formed part of the factors that led almost collapse of financial institutions (Wall 2014). Regulations have been put in place, and banks have to comply with them. Regulation on compensation requires bank employees to access it only if deemed worthy. The UK government has established some regulatory policies that include the financial services act replacing the Tripartite. The Act is responsible for consumer protection by supervising individual banks through financial assistance from the Treasury (Treanor 2010). The Act regulates financial systems within the UK through watchdog committees. The committee is responsible for supervising financial institutions by checking their safety and soundness of operations. Technology has affected how banks operate as customers are increasingly becoming tech savvy. Banks have adapted to the changes by having innovations that could be applied to the sector. Companies like Google and Apple have utilized their platforms to expand their services which have prompted the banks to change their approach to consumer strategies. This has resulted in a development of online pay activities. According to Gov.uk (2013), the emergence of the bitcoin has impacted banking dynamics, and many banks are considering the same application into their businesses. This ecosystem is being integrated into banking systems which are likely to broaden the services that banks offer. References Bennett, R, and Kottasz, R, 2012, Public attitudes towards the UK banking industry following the global financial crisis.International Journal of Bank Marketing, 30(2), pp.128--147. Chalabi, M 2014,UK banks: how powerful are they? London publishers. David, F, 2005,Strategic management. 1st ed. Upper Saddle River, N.J.: Pearson Prentice Hall. El-Manstrly, D Paton, R Veloutsou, C and Moutinho, L 2011, An empirical investigation of the relative effect of trust and switching costs on service loyalty in the UK retail banking industry.Journal of Financial Services Marketing, 16(2), pp.101--110. Figueira, C Nellis, J and Parker, D 2007, Challenges facing the Polish banking industry: A comparative study with UK banks.Managing Global Transitions, 5(1), pp.25--44. PwC, 2014,What now for the UK banking industry? Implementing the Independent Commission on Banking recommendations. Pearson Researchandmarkets.com, 2014,UK Retail Banking Sector: Industry Profile - Research and Markets. Researchandmarkets.com, (2014).UK Retail Banking Sector: Industry Profile - Research and Markets. Gov.uk, 2013,Creating stronger and safer banks - Policy - GOV.UK. London Press Treanor, J 2010,Political prying biggest risk facing banks, say bankers. London Press Wall, M 2014, Start-ups challenge big banks' technology. London Press