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Business Model Innovation: MIT Sloan Management

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Discuss about the Business Model Innovation for MIT Sloan Management.



The report consists of contrasting the integrated reports of the listed banking companies in Australia. The companies taken for the report are Westpac, National Australia Bank and Commonwealth Bank of Australia. All the above the companies are listed ASX (Australian Securities Exchange). The companies taken for the report is well known banking companies for providing financial services all over the Australia.  The report describes the business model adopted the above companies. It also describes the major trade-offs among the six capitals, with the increase in one decrease in other capital for the same event. The firm’s investment in the human capital and it is affected by the value creation. The report brings out the best firm in managing the resources for the creation of the value.

Westpac is banking corporation for providing financial- services. It is the "big four" bank of the Australia." In 1982, BNSW merged with the Commercial Bank of Australia to become Westpac Banking Corporation. But now it has headquarters in Westpac Place, Sydney Australia (Westpac. 2016). National Australian Bank (NAB) is one of the largest financial Institutions in Australia. It is ranked as the 21st in the list of world market capitalization and 41st in respect of the total assets by 2014. In 1982, it was formed from the merger of the National Bank of Australia and the Commercial Banking Company of Sydney. It has headquarters in Melbourne, Australia (Personal. 2016). Commonwealth Bank of Australia (CBA) is largest banking company in ASX as in 2015. It was founded by the “Commonwealth Bank Act” on 1911. It was the first bank to receive a Federal Government guarantee in Australia. The bank opened its 1st branch in Melbourne. This bank provides its financial services to personal customers and clients who have a small business. It has its headquarters in Sydney, Australia (CommBank. 2016).


Business Model

The banks are generally of two type customers, first who deposits their money in the bank and second who borrows from the bank. The banks serve as a middle man between the borrower and the depositor. The business model for the banks are very simple and easy to understand, it offers lower interest rate to depositors and higher to the borrower. Banks make the profit from the interest rate differential. The borrowers and the depositors can be classified into corporate and retail customers (Amit & Zott 2012). Retail customers are the single people or the individual customers and corporate customers are classified as the small, medium and large companies. Banks also offers various value propositions to various clients segments. In the case of the retail clients, banks are offering home loans, Education loans, personal loans and auto loans. In the case of the corporate clients, there are a different kind of requirement in the nature and type in the industry (Beck et al. 2013). Banks are using multiple channels for reaching to their clients. Several branches are opened in the convenient location so that the clients can meet their need. Banks are offering various kinds of services to help their clients, i.e., ATMs, Internet Banking, Mobile channels. The figure 1 below gives a canvas of the bank business model.

Business Model of Bank

Figure. 1 Business Model of Bank

Westpac follows a business model of both wholesale as well as retail. Business model engages in the alignment of the revenue with the sustainable growth plan. The company is going to cater the kids in difficulties which will be with or without the social learning - the psychological and social advantages of development which plays for the kids on the extreme range are especially eminent and very much explored (Bocken et al., 2014). As a social undertaking, 50% of the profit goes towards the Inside the Brick building up development clubs in neighborhood groups.      

National Australian Bank engages in the all the above criteria mentioned. It engages in an individual as well as the corporate client. It serves as the intermediary between the customer and the money in the section of a corporate client as well as the Individual clients (Schaltegger et al., 2012). NAB also engages in buying and selling of asset. NAB is engaging in services like Business Banking, Personal Banking, U Bank and MLC & NAB Private Wealth. 

Commonwealth Bank follows the model market capitalization as well as retail banking. It provides financial services which include retail banking, premium banking, business banking, institutional banking, funds management, superannuation, insurance, investment and shareholding product and services (Aspara et al., 2013). CBA also aims at giving the higher return to its shareholder. CBA is considered as one of the integrated financial providers of Australia. There are several other services rendered by the CBA like credit cards, Savings accounts, various ATMs center.


Major trade-offs

This section of the report describes the major agreement that resulted in either increase or decrease in the capital of the company. One thing to illuminate front and center is that Integrated Reporting is not just joining your maintainability report, yearly report and monetary articulations (Koch & MacDonald 2014). There are distinctive perspectives about what it is, however it requires an in a general sense diverse state of mind about what makes an association fruitful and its dependence on a much more extensive arrangement of capitals than money related capital. It also describes the event and happening that had resulted from the performance of the company by analyzing the annual report of the company. 

Westpac announced 3 % increase in the cash profit of the full-year. As a result higher amount of bad-debt charges were offsets in profit from development. Cash profit which excluded one item which was AUD 7.82 billion for the year ended September 30 from the AUD 7.63 billion. In the Sydney one of the lender said that it was the slowest profit which had rise since 8% dropped to form cash earnings for the year ended 2009 (Hirst et al., 2015). Westpac with its competitors are seeing the slowest profit growth. After notching a string in the record of the profit competition became tighter and the regulations even. The big four banks had raised AUD 20 billion this year for meeting the regulatory necessities which partly intends to face any downturn in the market of the housing. They also increased the rates of the mortgage by blaming for holding cost for most of the capital. In 2012, Westpac also declared final dividend which was 94 cents per share, which lead to increase in the bad-debts charges to 16% to AUD 753 million.  A key measurement of profitability i.e., Net interest margin was left unchanged to 2.08%. There was 8% increase in the profit of the retail lender and business banking unit. There was decline of 12% in the institutional units’ earnings which had occurred form the effect of the high liquidity and also due to change in the process of the lender value derivatives (Prahalad & Ramaswamy 2013). In October 14, AUD 3.5 billion shares were offered are preliminary profit for reveling the country’s second largest lender of the mortgage. In the beginning of the 2016, bank’s annual investment had rise to AUD 1.3 billion, which also resulted in the savings which reduced the expense-to-income ratio which was measure of the efficiency for the company. It was reduced to below 40% which was under 3 year for the current result that is 42.5%.

NAB raised AUD 5.5 billion capital in the form of the rights issue within the year, which placed NAB in very strong and withholding position for facing challenges in the near future. NAB also announced the selling of the 80% of the life insurance business to the global insure of the life, which is Nippon life for the long-term and lifetime partnership with the company (Ward & Peppard 2016). This agreement will help in providing the “innovative insurance solutions” to the clients; parallel it will also help in increasing the wealth of the business and improve the returns of the shareholder.  The personal banking had a growth of revenue with 7.3% and maintains it performance strong. In 2015, cash earning was up to 15.5% with AUD 5.84 billion and the owners of the NAB had statutory net profit of AUD 6.34 billion, 19.7% from the previous year. The board also announced 99 cents per share, which was fully franked and also maintained and issued an additional capital.   In the Australian economy remained mixed, with the investment of the mining declining, but there was tremendous growth in the other sector, specifically in the tourism and service sectors (Banks 2016). GDP growth was at normal rate 2.3% but there was forecast of instant increase with 3.2% by 2017. The wealth products were critical to the business as well as for the clients, for this reason the company had to inject an additional AUD 300 million in the NAB Wealth for the platform of superannuation, asset management and advisory sector for the next four years. This will help them in delivering a good customer experience for driving a close relationship among the banking and wealth management business. In the year 2015, NAB had achieved several milestones in the technology which helped in delivering a good experience for the customer. 

CBA has upset the maxim that which is a trade-off amongst risk and return. CBA continues in maintain its capital position strong under the regulatory framework of Base III. In June 2015 the Common Equity ratio was 12.7% on a global basis and 9.1% on an ARA basis. The net profit of the company on the statutory basis for the year June 2015 was increased to 5% from the previous year which was AUD 9063 million. Return on equity and EPS was increased to 4%. The customer deposits were accounted for 63% of the total fund for the year ended 2015. The rest 37% comprised of the different wholesale of the debt insurance. The short-term funding was accounted for 49% because it included short sales and the previous year 45% were due to the effect of the lowering in the value of Australian Dollar (Schoenmaker 2013). During the year, the company raised AUD 31 billion for the wholesale transaction of the long-term debt which was affected by the multiple transactions of the currency which included AUD, USD, EUR, and GBP. The Weighted-Average Maturity for the newly issued wholesale of the long-term debt was 4.2 year. The Weighted-Average Maturity for wholesale of the outstanding of the long-term debt was 3.8 years. The final dividend was declared as 2.22 per share, from the total dividend for the year June 2015 the dividend was AUD 4.20 per share (Reason 2016). This was representing the dividend payout ratio by the cash to be 75% and above 5% to the previous full year dividend. In 2014 The “Dividend Reinvestment Plan” was fully satisfied by the purchase of the share on the market. The rate of participation was 19.9%. Whereas in 2015, the participation rate decreased to 17.9%.


Human Capital

This section of the report describes the investment of the human capital in the firm and its effect on the creation of the value. The inclusion of the human capital is very much necessary in each and every organization. Human capital is the one which helps the organization running. The human capital here is referred as the employee who is hired for the organization. The expense towards the human capital or the employee helps the company in operating is smoothly, if the employees of the company are happy then they work dedicatedly without any influence or disturbance (Hai & Heckman 2016).

Westpac employed 150 additional employees in the financial year 2015 for ensuring the workforce and representation of the community. Operating expense was increased to 5% for AUD 389 million. Salaries and other staff expense were increased by 2% for AUD 90 million. As compared to the previous year it had large impact on the annual salary got increased but there was partial offset through a reduction in the FTE in respect of initiative the Productivity which lowered the expense of the BTIM, associated with the sale of partial and moving to the equity of the accounting (Martin et al., 2013). The FTE was decreased to 4% for 1132 as compared to the previous year this was the position in the second half 2015. At the year ended FTE was more decreased to 4% for 1132 from the Partial sale of the BTIM.

NAB in FY15, explained an arrangement of five qualities to portray the way of life we are making progress toward. These qualities, as portrayed in the contiguous table, are intended to work close by each other and give an immediate connection between NAB's way of life and technique (Matchup 2014). A division of inquiries in the review has been utilized to make an 'Arrangement to Our Values' file. In 2015, 87% of our kin concurred or emphatically concurred that NAB has an unmistakable arrangement of qualities and practices, that ordinary work is guided by these, and that the qualities and practices are exhibited each day all through the association  (Bennett & Ho 2014). In FY15, to ensure that our qualities turn into the center of our way of life, we joined them into our execution administration framework (Campbell et al., 2012). We trust this change implies enhanced results for our clients, our kin and our groups – through enhanced behavior, more grounded connections and expanded spotlight on superior.    

CBA increased the salary of the employees to 5% for AUD 5816 million, which included an impact of 1%  change because of the change in the value of Australian dollar because of the inflation the salary increased this was the position for the year ended June 2015 (Armstrong & Taylor 2014). Whereas the salaries of the employees for the half yearly positions were AUD 2910 million. There was flat of 1% increase because of the offset of the provisions, for the entitlements of the employee. In the year ended the rental reviews were increased to 3% for AUD 1086 millions. Whereas, the half yearly had AUD 547 million for increased to 1% because of the rental reviews (Vomberg et al., 2015).



From the final report it is found that on the basis of the Price earnings ratio, in 2015 CBA has having the highest ratio which is 15.4, Westpac is having 14.5 and NAB is 14.1 in respect of P/E ratio. CBA is chosen as the criteria for selecting as the company. As we see the ratios of the previous year CBA is performing the highest in all the year. Later if the comparison is done in terms of the loan losses as a share of total loans percentage CAB and NAB are at good and better position than the Westpac. The percentages of CAB and NAB are 0.16 and the Westpac is 0.12. so it is analyzed that CAB and NAB are at the highest position. The loan losses as a share of share of loan from the data it is found that the CAB and NAB are having more losses as compared tom the Westpac. Next comparing to the factor of non-performing assets as share of loans percentage NAB has the most of the non-performing assets in the share of the loan as 0.9% and CBA and Westpac has  0.4%, which means the lowest non-performing assets as in terms of the share of the loan. So on the overall analysis, as per the current and finding it is found that the company the best banking company in terms of investment are varying on the point the investor wants to invest in the company. If the investor wants to go for the long term investment he may go with the NAB and Westpac. But if the investor wants to go with the for the profitability respect he should go with the CBA. So on the overall basis the it is depending on the investor of choosing the investment.

Finally to conclude on the report, it will be said that the report has been successfully fulfilled the requirement. The analysis and findings of the report has been done based on the scenario of the company. Taking into considerations the annual report and by referring to the website analysis has been done based on the recent data. The findings have been critically analyzed and found out. The above report has clearly brought out the business models used by the companies. The business model used by the banking company is almost same in each and company because the above taken company are for the same sector and industries. The aim of each and every company is to deliver financial services to their customers in the best possible way.


Reference list

Amit, R., & Zott, C. (2012). Creating value through business model innovation. MIT Sloan Management Review, 53(3), 41.

Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management practice. Kogan Page Publishers.

Aspara, J., Lamberg, J. A., Laukia, A., & Tikkanen, H. (2013). Corporate business model transformation and inter-organizational cognition: the case of Nokia. Long Range Planning, 46(6), 459-474.

Banks, E. (2016). The credit risk of complex derivatives. Springer.

Beck, T., Demirgüç-Kunt, A., & Merrouche, O. (2013). Islamic vs. conventional banking: Business model, efficiency and stability. Journal of Banking & Finance, 37(2), 433-447.

Bennett, J. M., & Ho, D. S. (2014). Human resource management. In Project management for engineers (pp. 231-249).

Bocken, N. M. P., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes.Journal of cleaner production, 65, 42-56.

Campbell, B. A., Coff, R., & Kryscynski, D. (2012). Rethinking sustained competitive advantage from human capital. Academy of Management Review, 37(3), 376-395.

Hai, R., & Heckman, J. J. (2016). Inequality in Human Capital and Endogenous Credit Constraints. Available at SSRN.

Hirst, P., Thompson, G., & Bromley, S. (2015). Globalization in question. John Wiley & Sons.

Koch, T. W., & MacDonald, S. S. (2014). Bank management. Nelson Education.

Machlup, F. (2014). Knowledge: Its Creation, Distribution and Economic Significance, Volume III: The Economics of Information and Human Capital(Vol. 3). Princeton University Press.

Martin, B. C., McNally, J. J., & Kay, M. J. (2013). Examining the formation of human capital in entrepreneurship: A meta-analysis of entrepreneurship education outcomes. Journal of Business Venturing, 28(2), 211-224.

Personal banking including accounts, credit cards and home loans - CommBank. (2016) Retrieved 25 August 2016, from

Personal. (2016). Retrieved 25 August 2016, from

Prahalad, C. K., & Ramaswamy, V. (2013). The future of competition: Co-creating unique value with customers. Harvard Business Press.

Reason, J. (2016). Managing the risks of organizational accidents. Routledge.

Schaltegger, S., Lüdeke-Freund, F., & Hansen, E. G. (2012). Business cases for sustainability: the role of business model innovation for corporate sustainability. International Journal of Innovation and Sustainable Development, 6(2), 95-119.

Schoenmaker, D. (2013). Governance of international banking: The financial trilemma. Oxford University Press.

Vomberg, A., Homburg, C., & Bornemann, T. (2015). Talented people and strong brands: The contribution of human capital and brand equity to firm value. Strategic Management Journal, 36(13), 2122-2131.

Ward, J., & Peppard, J. (2016). The Strategic Management of Information Systems: Building a Digital Strategy. John Wiley & Sons.

Westpac - Personal, Business and Corporate Banking. (2016). Retrieved 25 August 2016, from provides guaranteed satisfaction with a commitment to complete the work within time. Combined with our meticulous work ethics and extensive domain experience, is the ideal partner for all your homework/assignment needs. We pledge to provide 24*7 support to dissolve all your academic doubts. We are composed of 3000+ esteemed experts who have been empanelled after extensive research and quality check. provides undivided attention to each assignment order with a methodical approach to solution. Our network span is not restricted to US, UK and Australia rather extends to countries like Singapore, Canada and UAE. Our assignment help services include thesis help, case study help, homework help, coursework help, MBA help and Programming help. Get your work done at the best price in industry.

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