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Executive Summary
Dutch-Bangla Bank Limited is a Private Commercial bank operating in Bangladesh established in 1991 providing all types of banking services with the exception of investment banking. It has the largest Automated Teller Machines (ATM) network in the country and is the largest donor from the banking sector to charitable causes in Bangladesh. The mission statement of the organization focuses on service quality and contributions to society. The recent economic downturn since 2008 has dampened the performance of the company, but is expected to rise as the global economy climbs out of recession. Challenges to the growth of the organization also come from stiff competition from local and foreign banks. From the findings of the report, several recommendations have been suggested. These include improving the credit rating of the organization to the same level as the top local banks and foreign banks operating in the country. A change in the mission statement has also been recommended to highlight the importance of financial soundness of the organization. The report concludes with the acknowledgement that DBBL is following an evolutionary strategy for growth by capitalizing on its strengths.
Table of Contents
4 5 6
7 7
4.1
4.1.1 4.1.2
Remote Environment
PEST analysis SWOT analysis and Alternate Strategies
8
8 10
5.1 6.1
6.1.1
Industry Environment (Porters 5 forces) Competitive advantages and Critical success factors
Ansoff matrix
12 14
15
16 17 18
1.1
Introduction
The need for a clear strategy in an organization is essential for the success of a company. Shareholders, customers and employees will have confidence in an organization if they have a clear understanding of direction the organization is heading. According to Dimmick (2008), developing strategic options is an essential part of an organizations strategic information planning (SIM). An organization, thus having identified its goals, vision and priorities can weigh its strategic options in order to forge its forward looking strategy. For the purposes of this paper, we shall be analyzing the Dutch-Bangla Bank Limited (DBBL), a private commercial bank in Bangladesh. The attributes of the organization which include its strengths, weaknesses, competitors, operating environment and external factors shall be looked at through several analyzing processes such as PEST, SWOT and Porter5 factors. We shall also look into how the organizations various attributes shape its strategic plan and business operations. Alternative strategic approaches and critical success factors shall be presented and finally, conclusions and recommendations will be provided at the end of the paper.
2.1
According to www.dutchbanglabank.com, Dutch-Bangla Bank Limited (DBBL) was established in 1991 by local (Bangladeshi) shareholders and a Dutch company DMO. DBBL provides all types of banking services with the exception of investment banking and initially commenced with a focus on financing high growth manufacturing industries in Bangladesh. According to www.dbbl.com.bd, it was incorporated as a Public limited company in 1994. According to www.dsebd.org, DBBL first listed in the Dhaka stock exchange in 2001. According to www.bangladesh-bank.org there are at present 29 financial institutions in the country and according to www.dutchbanglabank.com, DBBL was the first amongst those 29 institutions to become to become fully automated in 2002 when it introduced fully modern banking services in Bangladesh.
Other than banking activities, its other focus is to further social causes in the country, also known as Corporate Social responsibility (CSR). DBBL is well known for donating generously to social causes. According to DBBLs website, it is one of the largest donors in the country and the largest bank donor in Bangladesh. It is also well known amongst the general public for having greatest number of Automated Teller Machines (ATM) in the country by a large margin compared to its competitors.
The overall mission statement seems to have been presented in three different sections to cater to different audiences those being primarily its shareholders, general public and its employees. We shall be analyzing the Mission and Core Objectives statement. The Ashridge mission model states that the mission statement of an organization should consist of four key elements as shown in the figure belowPurpose
(Why the company exists)
Strategy
(Competitive position and distinctive competence)
Values
(What the company believes in)
Behavior Standards
(Policies and Behavior patterns that underpin the distinctive Competence and the Value system)
In sections 3.1.1, 3.1.2 and 3.1.3, the report shall analyze the different sections of the mission statement and see how it fulfills the different components of the Ashridge mission model (AMM).
Economic- Due to the global Economic downturn and financial crisis, overall lower economic activity has adversely affected the performance of the banking industry, both in Bangladesh and in the rest of the World. Economic growth in the country is also being stunted by severe electricity shortages which are causing a decline in the major industries such as textile and garments. The figure 4.1.1.1 shows the growth rate sector wise. Lower economic activity means less business for banks which leads to lower profit margins. Nevertheless, throughout 2008 and 2009, Bangladesh has had positive growth rate unlike the many western nations. The economic situation is likely to improve significantly within the coming two years with the western economies coming out of recession leading to increased export and also the solving of the electricity problem on the domestic front.
Socio-cultural The consumers of Bangladesh has seen an increase in consumer confidence with lower unemployment rate. This has increased the willingness to take out consumer loans such as car loans, home loans and educational loans. This sociocultural factor has increased the business prospects for banks in the lending sector and is only likely to increase as the wealth of the population increases.
Technological- The banking sector in Bangladesh is already up-to-date according to international standards in terms of technology use for banking purposes. The only foreseeable threat is the prospect of mobile commerce, whereby money transfer and transactions can take place directly using mobile phones thereby overlapping the services provided by banks. According to www.allheadlinenews.com, mobile there is a possibility that mobile commerce could be introduced to Bangladesh. That could in the long run lead to telecom companies providing services that could overlap with services provided by the traditional banking sector.
echnological Factors
Technological factors can lower barriers to entry, reduce minimum efficient productionlevels, and influence outsourcing decisions. Some technological factors include R&Dactivity, automation, technology incentives, rate of technological change, Recenttechnological developments, Technology's impact on product offering and Impact on coststructure. New technologies including the internet, email and mobile phones will continue to open possibilities for communication, information sharing and cooperation but this resourceremains inaccessible to the many people in the region who are poor or illiterate or in other states due to state attempts to control freedom of expression.
Figure 4.1.2.1 (SWOT Analysis) The two internal factors of SWOT are Strength and Weaknesses: Strengtho DBBL has the strongest ATM network in the country. According to their annual report, the total number of DBBL automated teller machines is to reach 700 in number. However, according to www.dutchbanglabank.com, the ATM section of DBBL is not financially rewarding and an alternative approach strategy could be to increase usage fees for the ATMs. o DBBL has a well developed and implemented Corporate Social responsibility. This enforces its image and helps to differentiate itself from its competitors
Weaknesseso In order to differentiate itself from the many local banks and put itself in the league of the international banks operating in the country such as HSBC and Standard Chartered bank, it needs to obtain a credit rating in the league of those banks. According to www.dutchbanglabank.com, currently DBBL has been assigned a credit rating of A1 by the Credit Rating Agency of Bangladesh (CRAB) and with the improvement of the credit rating can attract more customers. According to www.reportbd.com, the CAMELS rating for 2008 gave DBBL a rating of (B-) which falls in the second best category. o Its banking products are hard to differentiate against those offered by its competitors. Compelling banking products and the need to market them effectively is necessary to attract new customers.
The two external factors of SWOT are Opportunities and threats: Opportunitieso Being a leader on CSR activities in the banking industry, DBBL can further increase its contributions to CSR and capitalize on it through effective marketing and raising awareness about its activities, thereby cementing its image as a socially conscious bank. o It can diversify away from its focus on financing the manufacturing industry to financing other growing industries such as the service industry and possibly study the agriculture industry. Threatso The main threat comes from stiff competition from other banks.
Threat of entry by new competitors The number of financial institutions has caused market saturation. This is a primary detractor to new entrants in the industry. Secondly, the high cost of setup, such as setting up branches and ATM network acts as a significant barrier to entry in the banking industry. Nevertheless, new competition from reputed international banks could pose major a threat in the long run. According to www.thedailystar.net, Citibank recently expressed its interest in entering the retail banking industry in Bangladesh and this shows that barriers to entry can be overcome by foreign banks.
Pressure from substitute products The service of lending money does not have any significant substitute products to warrant any cause for concern for DBBL and its competitors.
Bargaining power of buyers- Bargaining power of buyers i.e. lenders is low when it comes to negotiating power. Lending rates are usually fixed. However, when it comes to choosing between competitors, the lending rates of banks are where the main bargaining power of the lenders lies. Since there are a large number of competitors, and lending rates vary between the banks, the bargaining power of potential lenders is high in that respect.
Bargaining power of suppliers- A banks main source of supply is its depositors who supply the money. Depositors have no bargaining power as because there is usually a set interest rate that the bank will pay for its deposit. Therefore the deposit rate is primarily used by suppliers to assess where to deposit their money.
Extensive ATM network- This allows DBBL to differentiate itself from its other competitors. Maintaining this competitive advantage will prevents competitors from snatching existing customers away from DBBL who prefer the convenience of the vast network of ATMs spread throughout the country. Several other banks have also opted to use DBBLs ATM network and pay DBBL for the service instead of creating their own and this acts as a testament to the success of DBBLs ATM network policy.
CSR Policy DBBLs CSR policy can be acknowledged as a competitive advantage in gaining exposure and portraying itself in a positive light. Maintaining this policy is critical in differentiating itself from its competitors which could help DBBL in wooing potential and first-time customers.
Credit Rating of Organization- Currently the credit rating of DBBL is satisfactory compared to the other local banks. However, banks with higher
credit ratings are seen as more reliable and trustworthy by the public. Hence obtaining a higher credit rating similar to the foreign banks is a critical success factor in developing its own image to customers and high profile investors.
Service Quality- Good service quality builds relationships and trust which helps retain existing customers. Thus, the reason why DBBLs Core objectives statement emphasizes on service quality and reflects its importance on the success of the organization
Figure 6.1.1.1 Ansoff matrix All banks fundamentally provide two basic products, deposit services and lending services. Through market segmentation, the same product is differentiated slightly and repackaged to cater to specific target groups. DBBL is operating in the existing market-existing product section
of the Ansoff matrix which is the least risky of the four sections. It also has no strategy in place to extend to rural regions of the country or open branches in foreign countries.
From the analysis done in this report, several recommendations can be suggested of which some of them can be implemented through changes in its forward looking strategy.
The credit rating of the company should be improved. Following the global financial crisis, the credit rating of a financial institution has become increasingly important in judging an organisation.
The mission statements should be modified to mention the need for sound financial practices within the organization. This is especially important following the collapse of several prominent financial institutions during the recent economic downturn. Consequently, it could also emphasize the need for a high credit rating.
The benefits of CSR activities, although beneficial for the image of the company is hard to quantify in terms of actual benefit it brings to the success of the organization. A method of quantifying its value should be developed to reassure its critics and shareholders that the benefits obtained from such activities outweigh the costs incurred.
9.1 Bibliography
http://www.dutchbanglabank.com/, (2009), Brief-History, th [URL:http://www.dutchbanglabank.com/about_us/brief_history.html], 14 April 2010 http://www.dbbl.com.bd, (2004), About Us, th [URL:http://www.dbbl.com.bd/old_site/About_Us/aboutus_main.htm], 14 April 2010 http://www.dsebd.org, Dhaka Stock Exchange Limited (2009), Company information: th DutchBangla, [URL: http://www.dsebd.org/displayCompany.php?name=DUTCHBANGL], 15 April 2010 http://www.bangladesh-bank.org/, (2009), Bank & FIs, [URL:http://www.bangladesh-bank.org/], th 15 April 2010 www.dutchbanglabank.com, (2009), Mission_Vision, [URL: http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009\PDFs\Mission_Vision.p th df], 16 April 2010 www.dutchbanglabank.com, (2009), Financial Statements 2009, [URL: th http://www.dutchbanglabank.com/investor_relations/financial_statements_2009.html], 16 April 2010 www.bangladesh-bank.org, (2010), Bangladesh Monetary Policy 2010, [URL: th http://www.bangladesh-bank.org/openpdf.php?urlpdf=mediaroom/speech/apr132010gp.pdf], 16 April 2010 www.allheadlinenews.com, (2008), Exclusive: GrameenPhone Plans For Money Transfer th Business In Bangladesh, [URL: http://www.allheadlinenews.com/articles/7009962107], 15 April 2010] www.dutchbanglabank.com, (2010), Technology Investment rationale, [URL: http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairma th n_foreword.pdf], 17 April 2010 www.dutchbanglabank.com, (2010), Credit Rating of Bank, [URL: http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairma th n_foreword.pdf], 17 April 2010 www.reportbd.com, (2008), CAMELS Rating of Banks Bangladesh, [URL: th http://www.reportbd.com/blogs/11/CAMELS-Rating-of-Banks---Bangladesh.html], 17 April 2010
www.thedailystar.net, (2010), Citi plans retail banking, [URL: th http://www.thedailystar.net/newDesign/news-details.php?nid=133823], 18 April 2010 www.quickmba.com, (2007), Ansoff Matrix, [URL: th http://www.quickmba.com/strategy/matrix/ansoff/],18 April 2010