In hopes of coping with negative interest rates, Commerzbank, Germany’s second largest bank, recently announced a massive restructuring. The process will last until 2020, cutting 9,600 jobs and costing €1.1 billion. The bank will merge its major units and to focus on two customer segments: corporate clients and small-businesses. There will be a suspension of dividends after 2016 payments.2 The bank is expecting “a small net profit” for 2016. Through restructuring, Commerzbank aims to reduce operation costs and create a cost-effective structure by simplifying the structure of the bank and by reducing trade activities, to “[evolve] into a digital enterprise” by investing in digitalization, and to raise market shares.1
Commerzbank’s new strategy seems promising as they use their new strategy to overcome the threats of the sharply fluctuating markets and weaknesses within their cost structure. In the idea of Transient Advantage, a successful company “must be willing to honestly assess whether current advantages are at risk”.3 In Commerzbank’s case, they see that their cost-structure as a competitive advantage is at risk, therefore they are calling to restructure to simplify their cost-structure. It is important for Commerzbank to refocus their key activities through the disengagement3 of certain products to better deliver their value propositions. Porter mentioned in his article, What is Strategy, “operational strategy and effectiveness are both essential to superior performance”.5 Commerzbank’s simplification may allow for better operational effectiveness, while they try to launch, ramp-up, and exploit3 new advantages allow for better operational strategy. Because the competition for banks in Germany is extremely fierce at the moment2, Commerzbank made the right decision to work on their competitive strategy.
Stakeholders at risk of the restructuring of Commerzbank may include customers and clients, shareholders, and employees. The employees will be affected the most as many will lose their jobs. The massive job cuts may pose an ethics issue. A large group of people will now be unemployed and with the banking industry’s instability and sharp fluctuations4, there may be some difficulty for these people to find jobs afterwards; however, conversely if Commerzbank continues with an inefficient cost-structure and decreasing revenues, the bank may fall into trouble, resulting in possibly jeopardizing even more employees.
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References
1 Commerzbank. “Commerzbank 4.0.” PDF file, 30 Sept. 2016.
2 Henning, Eyk, and Ulrike Dauer. “Commerzbank to Slash Jobs, Scrap Dividend in Broad Revamp.” The Wall Street Journal, 29 Sept. 2016, www.wsj.com/articles/commerzbank-to-slash-jobs-scrap-dividend-in-broad-revamp-1475139832. Accessed 2 Oct. 2016.
3 McGrath, Rita Gunther. “Transient Advantage.” Harvard Business Review, PDF ed., 2013, pp. 62-70.
4 Melby, Caleb, and Angela Cullen. “Fines, Withdrawals, Job Cuts. It Was an Ugly Day for Global Banks.” Bloomberg, 29 Sept. 2016, www.bloomberg.com/news/articles/2016-09-29/from-deutsche-bank-to-wells-fargo-a-bad-run-for-giant-lenders. Accessed 2 Oct. 2016.
5 Porter, Michael E. “What Is Strategy?” Harvard Business Review, PDF ed., 1996, pp. 61-78.
Image Source
Pfaffenbach, Kai. “The Headquarters of Germany’s Commerzbank Are Photographed behind the Euro Sign in Frankfurt, Germany.” Reuters, 30 Sept. 2016, www.reuters.com/article/us-commerzbank-restructuring-idUSKCN11Z13T. Accessed 2 Oct. 2016.