Pestel (Political, economic, Social and Technological analysis) analysis of the US Commercial Banking Sector

External Environment

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Pestel (Political, economic, Social and Technological analysis) analysis of the US Commercial Banking Sector

US Commercial banking sector Political SWOT

Strengths

The US government actively intervenes to repair and support the commercial banking sector in the USA. Located in the world’s largest economy the USA Commercial banking sector has an impressive record when it comes to spending on research and development, entrepreneurial dynamism as well as innovation. Commercial banks in the US are ready to run large current and fiscal account deficits because investors globally are always ready to hold US debt (Saaty, 2007).

Weaknesses

The US Commercial banks lie in the center of a subprime crisis and the resultant collapse in investors’ confidence of the financial markets. This is because some of their basic institutions were greatly damaged by the economic down turn.

Opportunities

Recessions in the US provide well funded commercial banks with the opportunity to obtain quality assets at prices that are well below what they get in normal circumstances. A financial downturn provides commercial banks in the US with opportunities to have useful and meaningful reforms in the supervision and operations of their financial services.

Threats

A large increase in public spending by US Commercial banks including security commitments in Iraq and elsewhere coupled with tax cuts could worsen the fiscal deficits ultimately forcing more restrictive slower growth and restrictive monetary policy. A decision by Chinese and Japanese central banks to minimize their larger dollar holdings is likely to cause sharp falls in the US currency value (Yüksel, 2006).

US Commercial banking sector Economic SWOT

Strengths

Commercial Banks in the US are strengthened due to the fact that they thrive in the World’s biggest economy that has a remarkable record of consumer dynamism; high development and research spend as well as innovation. In spite of the threats to their reserve status, the US dollar they use is an international currency and this is a strengths for them since investors globally are willing to hold any debts from the USA. Consequently Commercial banks in the US are exclusively able to run large current and fiscal account arrears (Saaty, 2007).

Weaknesses

In spite of the fact that the US dollar is perceived to be an international currency, unwarranted US debt levels are a big risk to the US commercial banks. Any decision by Chinese or Japanese central banks to minimize their larger dollar assets could result in a sharp decline in the value of the US dollar. Low savings have been rated by US households historically but this has started reversing (Yüksel, 2008).

Opportunities

More liberation of the international trade via the WTO, combined with a more aggressive dollar exchange rate is likely to advance growth in exports and assist in restoring balance to the US Commercial banks peripheral imbalances.

Threats

China’s intensified competition and other low wage economies are likely to accelerate the loss of US manufacturing jobs. Large expansion in public spending combined with tax cuts is likely to degenerate the fiscal discrepancy in the US Commercial banking sector ultimately forcing further slower growth and restrictive monetary policy (Saaty, 2007).

US Commercial banking sector Social and Technological SWOT

Strengths

The US Commercial banking sector boasts of the globe’s largest solitary domestic consumer market. This provides incredible opportunities for commercial enterprises of all sizes and types. Few countries in the world today provide better environments for all sizes and types of businesses with incredible centers for technological innovation, a highly flexible labor force and a legal system that is business friendly.

Weaknesses

Most of the US physical infrastructure requires renovation since the airways and roads are highly congested. The US corporate tax is averagely high in comparison to the other OECD countries.

Opportunities

The US current administration has committed itself to improve the country’s infrastructure with stimulus funds being dedicated to this function. New drivers of economic growth have always stemmed from the US ranging from alternative energy to biotechnology (Yüksel, 2006).

Threats

The fact that the US government frequently intervenes in the economy risks the Commercial banking sector’s standing for free enterprise.

References

Saaty, T. L. (2007). Decision making with dependence and feedback: The analytic network process. Pittsburgh: RWS Publications.

Retrieved from:< HYPERLINK “http://www.iors.ir/journal/files/site1/user_files_ba3acb/mehdi_ghotboddini-A-10-6-2-f082faa.pdf” http://www.iors.ir/journal/files/site1/user_files_ba3acb/mehdi_ghotboddini-A-10-6-2-f082faa.pdf.> [Accecced: 18 October 2013]

Yüksel, İ., & Dağdeviren, M. (2006). En early warning model to identify faulty behaviors risk in social-technique systems and its application. J.Fac. Eng. Arch. Gazi Univ., 21(4), 791-799.

Retrieved from:< HYPERLINK “http://www.ccsenet.org/journal/index.php/ijbm/article/download/20058/14433” http://www.ccsenet.org/journal/index.php/ijbm/article/download/20058/14433.> [Accecced: 18 October 2013]

Yüksel, İ., & Dağdeviren, M. (2008). Using the analytic network process (ANP) in a SWOT analysis.

Retrieved from:< HYPERLINK “http://skyjournals.org/SJBAM/pdf/2013pdf/Mar/Partani%20et%20al%20pdf.pdf” http://skyjournals.org/SJBAM/pdf/2013pdf/Mar/Partani%20et%20al%20pdf.pdf.> [Accecced: 18 October 2013]