Axis Mutual Fund – A Market Opportunity Report Help

Executive Summary

The Axis Mutual Fund (AMF), a subsidiary of Axis Bank Limited was established in 2009 with the aim of delivering state of art investment solutions to the customers while retaining their confidence and financial security. The company essentially operates in four broad mutual fund categories, namely hybrid, commodities, debt and Equity. Due to it’s effective performance in it’s host country, the company is considering to expand internationally in Australia. This is because Australia has started fostering favorable terms with India and also has a growing and a strongly regulated economy that favors investment. A PESTLE and SWOT analysis is further conducted to evaluate the company’s resources and capabilities to operate in the Australian environment.

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The economic/financial analysis of the Australian environment reveals that the country’s economy has largely decelerated due to the outbreak of Corona Virus. Due to this virus, the AUS currency has depreciated, investor confidence is ruined, and the economy is undergoing a severe recession, which would eventually lead AMF to suffer considerable losses. The political/legal analysis shows that the country has rigid monetary and fiscal dynamics which is worsened by reduced transparency and increased corruption in the governmental legal frameworks. Furthermore, the Social/cultural analysis of the Australian economy shows that the country has recently experienced reduced consumer purchasing power, however the generous and sincere business culture in the country eases the launch route for Axis Mutual Fund. The technological analysis revealed the increased surge of disruptive technology in the country, which hinders the progress of foreign companies like AMF. Lastly, the environmental laws and regulation imposed by the country increases the urge for sustainable business operations.

The SWOT Analysis showed that the company has the strength of being one of the outperforming asset management companies that operates with a customer-centric philosophy and ensures the provision of integrated end-to-end financial solutions via a strong asset management team. However, the fund house has the weakness of lacking innovation in fixed income and operating without globally disruptive technological innovations. The company has many opportunities to expand in the Australian market due to the country’s large asset management history that facilitates greater investment and values diversification and pension schemes. However, some threats are posed to the company due to outperforming MF companies in Australia that operate with innovative technologies and hence act as barriers of entry for foreign investors. Henceforth, it can be concluded that Axis Mutual Funds should enter the Australian market after the settlement of COVID-19 and after entering into a strategic partnership with top Asset Management firms.

Introduction

In this contemporary world, it is integral for corporate organizations to continuously suspect prospective demand in international markets in order to avail consequent opportunities. Organizations that are successful in identifying market opportunities are likely to expand their market share and thereby establish a competitive advantage in the industry (Ozturk, Joiner & Cavusgil, 2015). This report is designed to track and analyze international market opportunities for Axis Mutual Fund which is currently located in India. The focus market for the company management is Australia and hence, the report aims to conduct PESTLE and SWOT analysis in order to suspect market opportunities for Axis Mutual Fund to expand it’s operations in Australia.

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Axis Mutual Fund

Axis Bank Mutual Fund, a subsidiary of Axis Bank Limited is one of India’s top 10 fast-growing asset management companies. The company was established in 2009 as a result of a joint venture between Axis Bank and Schroder Singapore Holding Private Limited. This mutual funds company seeks to deliver state-of-art investment and financial solutions, thereby ensuring confidence and financial security among the customers. Axis Mutual Fund also focuses on risk-management and planning and thereby promotes goal-oriented investment. The company deals in 29 mutual funds which varies across four categories namely debt, commodities, hybrid and equity. Axis Mutual Fund is a rapidly growing mutual funds company which has been largely successful in it’s respective industry in the past 10 years. Hence, the company has multiple growth opportunities which it can avail to expand it’s market share and develop a competitive edge in the industry (Axis Mutual Fund, 2020).

The management of Axis Mutual Fund considered Australia as a viable option for international market expansion since India and Australia are endeavoring to develop partnerships and engage into two-way trade. In 2018, the Australia’s India Economic strategy was launched to bridge the differences between the Indian and Australian relationship. This policy showed the Australian efforts at engaging in corporate endeavors with India and make the country it’s strategic partner in corporate operations. Hence, after analyzing the market prospects for Indian Companies in Australia, this country was selected as Axis Mutual Fund’s focus market for probable international expansion (Bhaskar, 2020). The company has chosen to initially begin it’s operations in the Australian market with it’s outperforming mutual fund schemes that generate a return of more than 13 %. These include Axis Bluechip Fund, Axis Triple Advantage Fund, Axis Dynamic Bond Fund and Axis Long-term Equity Fund (Clear tax, 2020). Furthermore, the company’s prime focus would be the launch of the Axis Retirement savings fund.

Australia

The Australian economy is one of the largest, most flexible and open economies in the Asia Pacific Region after China, Japan and Korea. The country is also has a highly competitive performance in the financial, technological and manufacturing industries (Basu Das & Masahiro Kawai, 2016). The country has an accelerating economic growth rate of 2.2 % and a high GDP of $1362.07 billion, which highlights the higher growth opportunities for current and new businesses in the country (Statista, 2020). Australia is also based on a strong and a traditional culture of democracy that ensures the prevalence of regulatory frameworks, which thereby facilitates the operations of corporate institutions in the country. The country also has a strong workforce with one of lowest unemployment rates, which is 5.1 %. Hence, these facts indicate that Australia is one of the most dynamic and fast-growing economies to do business (Gauja, 2015).

Australia also has a strongly regulated and highly developed market for mutual funds. All funds that are offered to retail investors are regulated by ASIC and subject to all rules and regulations. Furthermore, a uniform licensing policy applies to all financial entities providing product/depository and other services. The corporate structure of the Australian financial markets also deters money laundering and the financing of counter-terrorism. All these facts enable the Australian economy to serve as a viable option for Axis Mutual Funds to expand their business in Australia (Basu Das & Masahiro Kawai, 2016).

PESTLE Analysis

PESTLE analysis is an integral procedure that corporate organizations follow in order to estimate the strategic risk of doing business within a given environmental framework. Companies operate as a part of a large ecosystem which is vulnerable to various exogenous factors that can have a substantial impact on the firm’s operations and competitive positioning (Sammut-Bonnici & Galea, 2015). The PESTLE analysis of Axis Mutual Fund would enable the identification of potential economic, political, legal, social, cultural and environmental issues that the organization might face when doing business in Australia. This process will enable Axis mutual Funds to realize if they have the resources and capabilities to operate in Australian business environment with their chosen products.

Economic/Financial Analysis

The economic factors are amongst the strongest external forces that impact the operational dynamics of a firm within a given environment. These factors include the economic trends i.e the inflation patterns in the country, the interest and exchange rates, the economic growth rates and the market cycles. Furthermore, it also includes the corporate and product taxations, the GDP and the consumer purchasing power in the given economy (Kim-Keung Ho, 2014). The economic analysis of the Australian economy reveals that Axis Mutual Fund will face potential struggles in adjusting to the economic framework of Australia. The Australian economy has suffered a widespread loss due to the penetration of COVID-19. The economic growth rate decelerated as the stock market crashed, which thereby discouraged investment and disappointed the investors (Knaus, 2020).

The mutual funds and equity holdings would suffer a decline of 16.1 % and 11.1 % over the course of the year. Axis Mutual Fund would be at a great disadvantage in this situation since the company is based on the concept of long-term investment and this pandemic has shrunk people’s investment ability due to the exhausted savings. Furthermore, the current economic condition has posed the greatest threats to the new businesses that are initially setting up it’s operations in the country. Moreover, the current prediction indicates a severe recession in the future with increased inflation, lowered GDP by 5.2% and economic shrink by 0.4% (Statista, 2020). Furthermore, the Australian dollar dramatically depreciated against the US dollar which thereby would enable Axis Mutual Funds to suffer from losses. This dismantled economic predicament will toughen the operations of the Axis Mutual Fund and it will face potential challenges as a new business in an international market (Knaus, 2020).

Political/Legal Analysis

The political analysis comprises of a set of external legal factors that impacts the company’s functional ability within a particular environment. The political factors may include the governmental rules and regulations for instance the fiscal policy, licensing norms, funding and grant initiatives and the anti-corruption policies. It may also include governmental trading agreements and other security controls (Sammut-Bonnici & Galea, 2015). There are various factors within Australia’s political framework that would impact the performance of Axis Bank Mutual Fund. The asset management company would face excessive volatility in the investment flows due to rigid monetary policy that has failed to stimulate economic growth in the recent years. Furthermore, the contractionary fiscal policy has stagnated wage growth, thereby crushing investment incentives and leading to further pro-cyclicality in the investor funds of Axis Mutual Fund (Qureshi, Khan, Rehman, Qureshi & Ghafoor, 2019).

The lower transparency and increased corruption within the Australian governmental dynamics, as reinforced by the corruption index, may enable Axis Mutual Fund to be deprived of fair growth opportunities. Furthermore, the Australian legislative framework has strict policy implications for foreign bank subsidiaries (Knaus, 2020). For instance, Axis Mutual Funds would have to attain APRA’s approval in every step of setting it’s management operations, thereby complicating the establishment procedure. However there are certain governmental laws that facilitate foreign investment. For instance, the country’s foreign investment policy adheres to a flexible framework when reviewing the investment proposals. The favorable political framework can be reiterated by the ease of doing business index of Australia which shows that the company has been ranked 14^th out of 190 economies (World Bank, 2020).

Social, Cultural and Ethical Analysis

The social and cultural factors within a particular economy dictate the consumer tastes, the work patterns, consumer preferences and volume of demand for a particular product or service. The cultural factors that impact the corporate operational ability includes the psychographics and changing life styles of consumers, the consumer purchasing behavior and the consumer perception of particular brands and products. Furthermore, the social factors may also include the educational standards, the gender roles and the potential ethnic and racial influences. There are various social factors that would impact the performance of Axis Mutual Funds within the environmental dynamics of Australia (Kim-Keung Ho, 2014).

The consumer purchasing power to invest in mutual funds would be largely impacted due to the outbreak of COVID in Australia, which would thereby enable Axis Mutual Funds to encounter volatility in the flow of investment (Knaus, 2020). The company should thereby develop mechanisms to counter the cash volatility and regulate the business performance. The social culture of Australia adheres to humility, sincerity and generosity, which would enable the Axis Mutual Fund to prepare their professional management team to adhere to these values whilst delivering their services. Furthermore, most Australians adhere to racial discrimination in their everyday lives, which would thereby create a potential problem for Axis Mutual Fund to gage consumer investment in this country (Grigg & Manderson, 2016).

Technological Analysis

The technological factors in the PESTLE analysis essentially pertain to innovations in technology that may impact the operational tendency of firms within a given environment (Rastogi & Trivedi, 2016). The technological analysis of the Australian environment reveals that the financial markets of the country have been greatly digitalized in terms of the introduction of advanced block chain technology, machine learning, big data, smart analytics and Internet of things. The financial markets have greatly adapted to this trend for instance the Australian Securities exchange has implemented the Block chain Technology for clearance of the Australian equity markets. Since Axis Mutual Fund has not yet met the disruptive technology stage, it will face potential challenges in efficiently regulating it’s operations (Commonwealth Australia, 2017).

Environmental Analysis

The environmental analysis essentially includes the geographical weather, sustainability factors such as waste management and environmental-related laws that may impact the organization’s performance (Kim-Keung Ho, 2014).   The Australian government regulates the business’s sustainable behavior by introducing environment rules and regulations. The country has reinforced the Environmental protection and Biodiversity Conservation Act that enables all the companies to attain approvals for those activities that are hazardous to the environment. Furthermore, the country also charges severe penalties to companies who break these environmental laws. The significance of environmental safety can be highlighted by the fact that the company also has an environmental insurance. These laws show that the Axis Mutual Fund should establish it’s financial operations in a manner that is sustainable and is hazard-free (Winram & Ibbotson, 2020).

SWOT Analysis

In this competitive corporate world, companies adhere to strategic management in order to enable the business to operate productively and efficiently. In this quest, firms tend to take decisions via a strategic route that involves an external and internal factor analysis of the organization. The organizations use a strategic planning framework, in the form of SWOT analysis, to identify organizational and environmental factors that impact the operational capacity of the firm. Organizations use this powerful strategic tool in order to evaluate the organization’s competencies and capabilities and also to estimate the potential market opportunities and external threats that the organization may face in the future (Gurel, 2017). The SWOT analysis of the AXIS Bank Mutual Fund would evaluate if the organization has resources and capabilities that would match the competitive environment of Australia. Hence, this framework will determine the company’s capability and potential to successfully expand beyond the national boundaries.

Strengths

Strengths are those organizational characteristics that may enable the firm to be more productive and efficient in the market, as compared to it’s competitors. These organizational resources, skills and abilities should be further strengthened to enable the company to sustain it’s competitive advantage (Gurel, 2017). Axis Bank Mutual Funds has various strengths that enable the organization to stand out as an efficient asset management corporation. The company has a wide diversity of mutual fund schemes that enables customers to easily pick their individual preferences depending on their risk-management, investment capability and financial goals. Furthermore, this organization is known to have some of the highest return mutual fund schemes, which thereby increases the consumer investment ability. The company was also awarded the ‘equity house of the year’ in 2018 due to it’s outperforming investment schemes (Bazaz, 2019).

Axis Bank Mutual Fund also has a strong asset management team that adheres to quality management and aims at providing integrated end-to-end personalized asset management solutions for all customers in terms of portfolio management services and advisory services. Moreover, the asset management company provides utter convenience and flexibility by providing various platforms through which consumers can invest in their preferred mutual fund scheme (Bazaz, 2019). For instance, online investment is probable via the EasyInvest App and offline investment is facilitated via Karvy, EasySmS and EasyCall. Hence, the company has the biggest strength of operating with a customer-centric philosophy that enables the company to foster long-term customer relationships (Axis Mutual Fund, 2020).

Weaknesses

Weaknesses are essentially deficiencies in organizational competencies, skills and abilities that inhibit the company’s effective performance. These organizational attributes enable the company to have a weaker position as compared to it’s competitors. The company lacks innovation in tackling with the fixed income space, which thereby mitigates the company’s investment in this sector (Abraham, 2020). Furthermore, the company lacks disruptive technology innovation that has dominated the financial markets in many countries. For instance, the company operates with basic technologies, however it lacks the presence of smart data analytics, internet of things, artificial intelligence and block chain applications (Commonwealth Australia, 2017). This deficiency enables the company to lack behind efficient and fast regulation of mutual fund operations. Hence, thorough market research and increased digitalization may enable the Fund house to attain a competition position in the international Asset Management Industry (Financial Express, 2019).

Opportunities

Opportunities are essentially those environmental factors that would enable an organization to take advantage of it’s strengths, competencies and capabilities, overcome it’s weaknesses and neutralize the impact of environmental threats. It is integral for organizations to determine it’s opportunistic driving forces in order to increase it’s market share and sustain it’s competitive edge in the industry (Phadermrod, Crowder & Wills, 2019). Axis Mutual Fund has several opportunities that it can avail in the Australian market. Firstly, given the fast-growing nature of the Australian economy, consumers have an  increased willingness to invest and hence, there is ample demand of the mutual Fund Schemes.

Furthermore, the Australian market has the largest asset management fund in the Asian region, thereby reiterating the increased scope for expansion of Axis Mutual Funds (Tang, 2020). Axis Mutual Fund’s first launch would be the Axis Retirement Savings Fund, which is increasingly valued in the Australian market and has widespread demand. The company has been recognized for having the fourth largest pension Fund Assets in the world, which further reinforces it’s increased demand. Furthermore, the high return funds are also increasingly availed in the mutual funds market, thereby increasing the attractiveness of the diversified mutual fund scheme launches by Axis Mutual Fund (Austria Limited, 2017).

Threats

Threats are essentially those environmental factors that may jeopardize the business performance and may enable the company to lose it’s competitive advantage. These external environmental variables may impede organizational efficiency and productivity and may enable the company to face unfavorable outcomes in the near future. Axis mutual Funds may face considerable threats in the Australian Industry (Phadermrod, Crowder & Wills, 2019). Firstly, the Australian asset management Industry has some of the most outperforming mutual fund companies that offers an attractive set of schemes. Some of these companies such as the Macquarie Investment Management and Ausbil Dexia ltd have also been awarded the Canstar Managed Funds award 2020. Hence, these Australian companies would pose dire competition for Axis Mutual Funds and hence, would threaten it’s position (Hurwood, 2020).

Furthermore, there are other barriers to entry in the Australian mutual funds market that may threaten the progress of Axis Mutual Fund. The countries disruptive technology innovation is one potential barrier that may threaten the effective functioning of the company. The financial markets in the Australian economy essentially utilize powerful technologies like machine learning, block chain application and smart analytics that regulates their functioning. For instance, the Commonwealth Bank in Australia uses Block Chain Application for various Capital Markets. This widespread digitalization is a major barrier to entry for the Axis Mutual Funds and may pose a huge threat to the company (Commonwealth Australia, 2017).

Conclusion

The PESTLE and the SWOT analysis indicates that the launch of Axis Mutual Fund as an independent entity in this time of COVID-19 is unfavorable. This is because the Australian economy is increasingly unstable due to rigid monetary and fiscal policies, crashing stock markets, depreciated Australian currency, decelerating economic growth and increased corruption. Furthermore, the company does not have the technological resources to survive in the asset management industry of Australia. Hence, if the company launches it’s operations in Australia, it will highly unsuccessful.

However, if the company aims to enter the market, the fund house should partner with other Australian Asset management companies in order to attain access to the disruptive technologies like smart data analysis and Block chain applications. Furthermore, the strategic partnership would also enable the company to further diversify it’s mutual fund portfolio and strengthen it’s professional team, thereby enhancing the operational dynamics of the fund house. Moreover, if the company aims to execute the strategic partnership, it should wait till the time when the severity of the COVID-19 Pandemic has lowered down and the economy is towards the path of rebuilding. In these circumstances, the Axis Mutual Fund would be successful in it’s endeavors.

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