No business exists for its customers. The idea that it does or should is the myth of the Keynesian economic paradigm, the notion that production is called forth by demand (it is not). The demand-side model of economics is bunk.

The purpose of business is to produce for the owner the means with which they themselves may trade in the market to buy the fruits of other producers. The purpose of business is to produce the currency that makes trade possible.

To think that businesses are formed to serve their customers is to think that employees exist to serve their employers. To be sure we must give good value if we wish to trade successfully however the prime mover, the motive, the engine of our activity is our own need. We work and produce because we love ourselves. And it is right to love ourselves because it is only once we do so that we can truely love others.

"Thou shalt love thy neighbor as thyself." - Matthew 19:19

The prime mover in every economy is the producer. Whether it be the butcher, the baker or the candlestick maker.

Karl Marx understood this. He focused endlessly on the nature of production and its players. Adam Smith understood it with his stories about the Needle factory. It is only the Keynesians that have got it wrong with their presumption that consumers are at the heart of economics. Demand is not the engine of the economy.

A big part of the problem is with our language. The word "demand" sounds like "command" and people think that the consumer is hence the boss. When it does not happen they think some injustice has occured, that some natural order of things has been upset.

In Niger where people are starving it is not for a lack of consumer "want". Rather if is due to a lack of production. And still they persecute anybody there that dares to produce for market.

Dear John,

The other "Stakeholder" you may have overlooked in your analysis John, is: The typical Employee of ANZ Bank.

One of the issues I grapple with, is the Disparity of your Annual CEO Income and the Size of your likely Redundancy Package, and the other average employees at The Bank. If the average employee is earning, say $35, 000 per annum, and you earn, say $4 millions plus per annum, how do you look them honestly "eye to eye" as a fellow ANZ Employee?

Do you John, feel that with all sincerity, your Talents and Contribution to the bank is the equivalent to say, approximately 120 of your fellow employees?

What do you find this does John, implicitly, for Bank Staff's Motivation, Morale, Team Work, Participation, 'esprit de corps' . sense of equity and fairness, and their overall sense, of employees all working for a Common Purpose and meaningful Goal ?

John, if you had to sit in a Room with,125 of your fellow employees, how would you honestly feel,having a full and frank discussion with your fellow employees, about the appropriateness of YOU earning more than all of your fellow employees, in that Room, combined? Would you John,make your contribution to the ANZ,and do your Job,for the equivalent of 25 ANZ employees wages,or what about just 20 employees ?

Would the other group of Senior Executives at ANZ, also who are on high multiples of the average ANZ employees' Salary be prepared to take less, so you could offer More financial incentives, to the less well remunerated ANZ employees?

An example might be, that if the Top 20 ANZ employees, including yourself, took 2/3 off your remuneration, bringing you all into a Band of an average of $225 000 per annum, there might be a differential of a combined $30 millions,to be divided up among the less well paid ANZ employees.

Yes, I think it is proper and right that you, and the top twenty at ANZ, do Deserve to earn More.

But How Much More John ?

Kindest Regards,

Robbo

Believe it or not, non-corporate business also want to make a profit and we try not to eat others to do it. The average Australian does support companies over smaller business even if some prefer not to. Companies should be content with the compulsory superannuation we are all stuck with as without it, far fewer shareholders would be prepared to invest in your companies.

Re your quote: "Governments have a parallel responsibility to provide the right political, social and economic environment for companies to grow and succeed, to advance education so that there is enough talent to fuel our future, and to govern and regulate effectively without imposing an unreasonable burden on companies."

John, believe it or not, governments are meant to govern for Australian people as a whole, not just for the companies.
Governments don't usually go out of their way to impose burdens on companies but regulations governing companies are usually imposed if there is unfair or unjust implications caused by companies.
eg. The Federal government has followed your line of thinking that it would be better to promote GM in order to promote the companies and the scientific sector. Federal government doesn't care that the introduction of the GM companies product will cause economic loss to farmers and a loss of choice for both farmers and consumers. The Federal government has done everything it can to promote genetically modified crops and even gone as far as to promote the misleading information that GM crops yield more when even the GM companies data submitted to the OGTR show GM crops yield 20% less than non-GM comparisons.
State governments have followed good governance to prevent the unfair burden to others by imposing bans, but there is conflict as the Federals prefer to promote companies no matter what the adverse impact on others is.
Nobody wants the burden of economic loss John but the public does insist that the companies pay for the losses they cause and that is what regulation and good governance should address.

John, I appreciate your article. Few if any of the previous commentators understand that the rapid economic development since the start of the UK industrial revolution, which has lifted living standards all around the world, has depended on the risk-taking and entrepreneurship of the corporate businesses which they despise. As you note, "Competitive advantage is about longer-term uniqueness - about being different and more capable than our competitors." To be successful, companies have to out-do their rivals. Ultimately, that means offering to their clients, their customers, a better deal than those rivals - a company can only succeed in the long-term by pleasing its customers. That competitive advantage for companies also involves identifying those areas in which you excel, and in developing them, and buying-in best-in-class products and services from outside where you can't be the best, wherever in the world they are to be found.

As for regulation, my experience in regulatory policy with the Commonwealth and Queensland governments has demonstrated that most regulation is badly designed, inappropriate and/or unnecessary, with costs exceeding benefits. In Queensland, I often demonstrated that particular regulations didn't achieve their stated (or any) aims; they were continued rather than scrapped merely to support public service jobs at the cost of wealth-creating businesses.

John McFarlanes view is correct
A corporation considers

Staying alive
Producing value for shareholders, and
Building an enterprise that will not only survive, but also succeed over the longer term.

1 is the immediate – essentially cashflow
2 is the medium –licensing compliance issues and disenchanted share holders will soon see the stock price fall to the point where growth or even sustenance funds are unavailable
3 is where JM covers what Leigh and alchemist claim he has missed – customers.

Customer satisfaction is one of the requirements needed for a business to succeed over the long term.

Staff – changing culture and a lot of dead wood, a lot of mythical empires of clouds – all of which present more problems than they solve (spent 6 months on a contract inside the ANZ Banking Group some years ago).

Regarding acquisitions etc… claiming 80% of acquisitions fail to deliver what was expected is easy to explain – most of them are oversold and under resourced. Most rely on expectations of market dominance or economies of scale – Economies of scale are only achieved following integration of all systems and procedures and of course – getting rid of the surplus staff (easier said than done).
Market dominance – ignoring what the ACCC might say – opens up opportunity for the astute competitor to attract the disaffected customers and clients and thus blunt the expectations of pre-acquisition.

Considering that 90% of all business ventures fail in their first 5 years and 90% of the remainder within the next 5 years, 80% acquisitions not delivering expectations seems almost “reasonable”.

Corporate structures are important ways of aggregating and organising sufficient capital safely. Their importance should never be underestimated, especially since – for alternatives, government ownership (the only one I can think of – although willing to consider others) is the only model which could attract / direct sufficient capital to make anything work - and the downsides of that are legion (all the way from Telstra to USSR)

Col Rouge, there are different types of customers.
1.There are those that return to a business because of the value and service they receive. This applies to most small businesses
2.There are those customers that return to a business because it is a monopoly and they have no choice.
3. There are those that return because of the propaganda and market power that the business has.
4. Then there are those that have no option.

The 1st, gives people free choice. The 2nd, have no option. The 3rd, are deluded and easily manipulated. The 4th, are the millions that have no option but to use a bank.

As to customer satisfaction, the last 3 show that your reason, is illusionary. If the people were able to receive their income in cash, then banks would have to provide better and cheaper services. As it is, in collusion with the elitist bureaucrats and politicians, they have captured and monopolised the monetary system for the benefit of the elite and the detriment of the people.

Take welfare, or any income. All of it goes into banks, who then charge for using the peoples money. Then the government, charges them for using their own money. When you take into account bank charges, eftpos charges, debit charges, government charges on transactions and interest, then you find that what you support is just an elitist illusion.

Col, you can have an environment without an economy, but you can't have an economy without an environment. That goes for all environments, natural, economic, social, health and welfare.

Sadly it is people like you that have contributed, encouraged and hastened the decline of all these environments for the almighty dollar.

The outcome is obvious, yours and Mc Farlanes approach is unsustainable, as can be seen by the decline of every service to the community. But what would you care, we can see how much by your post and refusal to see reality. Whip out your economies of scale and try to eat those, the majority of people are forced to eat you and your ilks sematic illusions.