Analysis Report Group Assignment SM
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Transcript of Analysis Report Group Assignment SM
STRATEGIC MANAGEMENT
Report –
Marketing, Financial and Strategic analysis of Askari Bank
Submitted by –
Nouman Ahmed (10877)
Shoaib Qasim
Ali Fahd
Naji Khatak
Zaheer Malik
Submitted to –
Mr. Kamaran Azam
Date – 17/11/2013
- 2 -
TTAABBLLEE OOFF CCOONNTTEENNTTSS
CCOONNTTEENNTTSS PPAAGGEE
FFRRAAMMEEWWOORRKK OOFF AANNAALLYYSSIISS...................................................................................................................................................................... 33
EENNVVIIRROONNMMEENNTTAALL AANNAALLYYSSIISS.................................................................................................................................................................. 44--88
EFE matrix.............................................................................................................. 4-5
Porter’s five forces analysis.................................................................................... 5-6
PEST analysis............................................................................................................ 7-8
INTERNAL ANALYSIS.................................................................................................. 9-10
IFE matrix................................................................................................................ 9-10
IINNDDUUSSTTRRIIAALL AANNAALLYYSSIISS.............................................................................................................................................................................................. 1111
CCPPMM mmaattrriixx............................................................................................................................................................................................................................ 1111
FFIINNAANNCCIIAALL AANNAALLYYSSIISS................................................................................................................................................................................................ 1122--1133
RRaattiioo aannaallyyssiiss.................................................................................................................................................................................................................... 1122--1133
MMAATTCCHHIINNGG SSTTAAGGEE............................................................................................................................................................................................................ 1144--1155
SSttrraatteeggiicc ffoorrmmuullaattiioonn.......................................................................................................................................................................................... 1144--1155
- 3 -
Framework of Askari Bank Limited Analysis
Environmental Analysis
(EFE ,Porter’s five forces model and PEST)
Internal Analysis
(IFE)
Industrial Analysis
(CPM analysis)
Financial Analysis
(Ratio analysis)
Matching Stage
(Strategic formulation)
- 4 -
ENVIRONMENTAL ANALYSIS (EFE, Porter’s five forces model and PEST)
EFE Matrix
EFE Matrix for Askari bank (Key external factors)
Opportunities: Weight Rating WS
Threats: Weight Rating WS
1. Askari Bank can get the opportunities by increasing its
branch network internationally.
2. ACBL can introduce special schemes of lending for
potential small industries.
3. ACBL can increase its operations by proper promotional
campaigns of its new innovative services.
4. Increase the capacity of branch instead of going towards
overstaffing.
5. House financing schemes can be offered to general public.
6. In agrarian cities like Bahawalpur there is a potential for
giving credit facilities to farmers.
7. Bank is not yet performing utility services for the utility
companies like WAPDA it can increase its operations also
in this direction and so a new source of earning.
0.15
0.05
0.03
0.05
0.10
0.14
0.15
3
3
4
3
2
2
2
.45
.15
.12
.15
.20
.28
.30
1. As the bank has not big branch network so customers feel
inconvenience in dealing with ACBL.
2. Bank can lose market share due to insufficient promotional
activities.
3. SBP levy heavy penalties on bank in case of violating the
prudential regulations especially in case of advances.
4. Now the other players of banking are also providing the
modern technology based services like online and Internet
banking facility so there is no more competitive advantage
in this area
5. The bank is completely anatomized in case of system
failure.
6. Expansion of newly established banks like AL-FALAH and
FAYSAL BANK and their best performance can reduce the
market share of ACBL.
7. As the banking procedures are complicated that is why
general public takes interest into other options of
investments like in shares of companies and in Term
Finance Certificates.
8. Responding to the SBP's prudential regulations
management takes too much care while granting loans.
0.10
0.05
0.02
0.05
0.01
0.01
0.01
0.03
3
3
2
3
2
2
2
3
.30
.15
.04
.15
.02
.02
.02
.09
- 5 -
Total 1.00 2.56
W-S of ‘2.56’ suggests that ‘Askari bank’ strategies are working above average to capitalize
external threats and opportunities.
Porter’s five forces analysis
Rivalry among competing firms:
Rivalry not depends on number of competitors in any market but only the rate of competition
that market prevails, means that competitors of equal level are actually the concerned
competitors. Talking of Askari bank three banks (Faysal bank, Alfalah bank and Habib bank)
are concerns for Askari bank.
Bargaining power of supplier:
Suppliers bargaining power increases due to poor liquidity and poor international financial
rating of Pakistan therefore all fund suppliers are avoiding to supply credit to Pakistani.
Depositor’s bargaining power also increases due to availability of many banks as option for
better mark-ups.
9. In near future the world is going to be free trade zone so the
concept of "survival of the fittest" will be in action.
10. After the 11 September incident and due to terrorist
activities in Pakistan the economy is moving very slowly. It
means there is less investment and as a result low loan
demands in the banking sector.
11. High rate of taxes on banking companies are levied
0.01
0.01
0.01
2
2
2
.02
.02
.02
- 6 -
Bargaining power of buyer:
Due to high interest rates demanded by banks small firms are not in position to borrow,
therefore only big organizations (that are very few in numbers) can afford to borrow from
banks. Result in small number of buyers and large number of suppliers. This helps borrowers
to negotiate with banks and get desired spread.
Threat of new entrants:
Many international banks such as (Barclay and BOC) are entering in Pakistan which are
capable of acquiring large number of market share.
Threat of substitute:
This threat is not much serious. Some parties like (mutual funds and security dealers) are
providing financial services aside banks but they are only limited to larger cities.
Forces Intensity
1 Rivalry among competing firms Medium
2 Bargaining power of supplier High
3 Bargaining power of buyer High
4 Threat of new entrants High
5 Threat of new substitute Low
- 7 -
PEST Analysis
A broad view of market is important when management is interested in introducing better
services for customers. Rapid technological change, global competition and the diversity of
buyers preferences in many markets require the constant attention of the market vouchers to
identify promises business opportunities, see the shifting requirements of the buyers, evaluate
changes in competitors positioning and guide the choice of which buyers to target and
classify them according to respective segments. Identification of external and macro factors
that influence buyers and thus change the size and composition of market overtime involves
initially building customer profiles. These influences include.
1. Political environment
2. Economic Indicators
3. Socio cultural environment
4. Technological factors
Political Environment
The events in the last couple of years; ever since the sacking of Chief Justice Iftikhar
Choudhary, Pakistan has faced crisis after crisis, including the lawyers’ movement, violence
in Karachi, the Lal Masjid debacle, militancy in FATA and NWFP and its impact on other
parts of the country, the return of Benazir Bhutto and her subsequent assassination, and many
current ongoing political unstable events– all the above events indubitably made a huge
impact on the economy. Stability and law and order situation under the political regime is
very important for the economy as a whole. The present state of the government in Pakistan
is directly affecting the policies of banks. Continuous political changes have disrupted the
policies and objectives as each regime brings with it its own agenda. Organizations need time
to adjust to one regime and then work with it towards economic enhancement. Due the wrong
policies of the government, the talibanization also develop in Pakistan and become the
international issue in Pakistan and badly affected the Pakistan repute in the world and
promote the uncertain conditions for the business in the Pakistan. Due to this the investors are
not interested in the Pakistan.
Economic Indicators
The economy of any country directly influences any financial organization. Economic
indicators include Gross Domestic Product (GDP), inflation, balance of payment, debt of the
government. Pakistan’s economy has witnessed the most challenging period after posting six
consecutive years of healthy economic growth. However, the strong fundamentals were
compromised to prevailing global crises that’s shacked the confidence of global investors and
FDI flowing in the country. The steep rise in oil prices, soaring inflation, huge fiscal deficits
and balance of payments issues coupled with plummeting forex reserves added to the
economy’s move to an unstable growth. Also the load shading is another factor that affects
the Pakistan economy badly. This not the end of the story after this Pakistan’ economy face
lot of problems like bomb attacks in Pakistan no electricity and the unstable government, due
- 8 -
to this the investor are not invest in the Pakistan and the existing business men are losing
their business unit due to the loss. Due to this poor economy, businesses are reaping low
profits and stock market is in great danger. Pakistan’s foreign debts are rising day by day so
such a situation is a big challenge for banking institution to survive. The financial crisis in
Pakistan has made the management of AKBL tensed to work in such an environment.
Socio cultural environment
A low saving culture has offset the huge population advantage this is enjoyed by Pakistan.
Also culture is dedicated by the religion, and in Pakistan a significant segment of the
population is reluctant to accept interest for their deposits due to the negative religious
implications of such an act. About 70% of Pakistan’s population is based on rural areas and
literacy rate of the country is very much low, thus making it harder for banks to mobilize
their deposits within these regions. However, in today world, the customers are becoming
more intelligent and through media they keep themselves up to date. Thus, the lifestyle and
expectations of the customers from the service provider is increasing day by day.
Technological Factors
Banks in the developed world have been turning to heavy IT investments, which differentiate
their products, provide response times, enhance accessibility and improve customer
satisfaction. Though investing in state-of-the-art host banking solution, ATM and POS (point
of sale) networks, visa, MasterCard, and, smart cards, telebanking, internet banking and now
mobile banking are common IT investment in the developed world, it is now that these
products and services are gaining faster acceptance in Pakistan. In AKBL technology has
great effect on the working environment. AKBL is always willing to introduce new computer
systems for keeping its staff up to date.
- 9 -
INTERNAL ANALYSIS (IFE)
IFE Matrix
IFE Matrix for Askari bank (Key internal factors)
Strengths Weight Rating WS
0.10
0.05
0.02
0.01
0.02
0.04
0.15
0.02
0.05
0.05
0.01
0.01
0.03
0.06
3
3
3
3
3
4
3
4
3
3
3
3
3
3
0.30
0.15
0.06
0.03
0.06
0.12
0.45
0.08
0.15
0.15
0.03
0.03
0.09
0.18
1. ACBL was organized by Army Welfare Trust (AWT) so it
has strong army background.
2. The bank has entered in international business by
establishing its international branch in Bahrain.
3. The bank design service quality standards to establish
inspiring relationships to its stakeholders.
4. Staff welfare has always been a priority. New initiatives
like hospitalization plan, car buy-back facility and home
loan insurance have added new dimensions to the staff-care
policy and motivated them to outperform competitors.
5. The most important factor in determining the long-term
growth and success of an organization is culture and higher
management of ACBL plays great emphasis on the
development of ‘’Askari Culture’’, a cohesive teamwork to
achieve strategic objectives and provide quality services to
its customers.
6. Technology and automation is a backbone of ACBL’s
strategic competitive advantages overall domestic players.
7. ACBL has a countrywide network of online branch banking
business and ATM’s in all major cities of the country.
8. ACBL is first bank of Pakistan offering 24-hour computer
integrated telephone banking services.
9. ACBL has fully automated transaction-processing system
for bank office support.
10. Bank has well-developed intra-net and inter-net
communication network.
11. Bank is pioneer in e-commerce venture in Pakistan through
a major retail distributor.
12. Askari commercial bank offers Askari Master Card, which
is worldwide accepted.
13. ACBL achieved A1+, the highest possible credit rating, for
the short term obligation and its long term rating stands at
AA. Bank has been honoured with the ‘’the Best Bank in
Pakistan’’ awarded by the Global Finance Magazine.
14. Askari Bank started Islamic banking in December 2005.
- 10 -
Weaknesses Weight Rating WS
Total
W-S of ‘2.77’ suggests that ‘Askari bank’ strategies are working above average to capitalize
internal strengths and weaknesses.
1. In the corporate profile, the bank concentrates on medium
sized business and not emphasizing the small-scale
business, which are large in Pakistan.
2. Bank offers a good number of facilities only for the army
personnel and not to the general public.
3. Bank has no adequate number of branches as compared to
its competitors like MCB.UBL etc.
4. To inform its customers about its new innovative products,
ACBL is not involved any type of promotional activities.
5. The credit policy of ACBL is very strict for individuals.
6. Bank is providing credit facilities only to the urban areas
not too much attention is paid to the rural areas.
7. Most of the investment is in government securities rather
bank should invest in the corporate shares.
8. The procedure and documentation while sanction loan is
thorny, which is a barrier for advances.
9. The return on deposits is very low.
10. Due to lack of computer specialist at branch level it has to
take assistance from the head office so in case they waste
their lot of time.
11. Although the bank’s systems are fully computerised, but
still a many of the staff members are not trained in
operating the computer.
0.10
0.07
0.03
0.03
0.04
0.03
0.02
0.01
0.01
0.01
0.03
2
2
2
3
3
2
3
2
2
3
4
0.20
0.14
0.06
0.09
0.12
0.06
0.06
0.02
0.02
0.03
0.12
1.00 2.77
- 11 -
INDUSTRIAL ANALYSIS (CPM analysis)
CPM Matrix
CPM Matrix for Askari bank (Competitive Profile Matrix)
AKBL
UBL
MCB
Critical Success Factors Weight Rating Score Rating Score Rating Score
Global Presence 0.13 2 0.26 4 0.52 3 0.39
Market Share 0.07 3 0.14 4 0.28 3 0.21
Product Quality 0.09 4 0.36 3 0.27 2 0.18
Customer Satisfaction 0.08 4 0.32 2 0.16 3 0.24
Financial Stability 0.14 3 0.42 4 0.56 2 0.28
Technology 0.08 3 0.16 4 0.32 3 0.24
Advertising and Promotion 0.05 2 0.10 4 0.20 3 0.15
Brand Awareness 0.16 3 0.32 4 0.64 3 0.48
Price Competitiveness 0.13 3 0.26 4 0.52 3 0.39
Diversification 0.07 3 0.14 3 0.21 4 0.28
TOTALS: 1.00 2.48 3.68 2.84
CPM matrix indicates that AKBL has weakest CPM rating of ‘2.48’ among all three which is
not good.
- 12 -
FINANCIAL ANALYSIS (Ratio analysis)
Financial Ratio analysis
Liquidity Ratio: (determine a company's ability to pay off its short-terms debts obligations.
Generally, higher the value of the ratio, the larger the margin of safety that the company
possesses to cover short-term debts.)
1. Current ratio increased from 1.03 to 1.07
The most common liquidity ratio is the current ratio, which is also the ratio of current asset to
current liabilities. It is also expressed as how many times the assets can cover the liabilities.
Askari Bank is a developed bank but the current ratio of the bank is less than the industry
average. Both the bank’s and the average ratios are in line and within range suggesting that
Bank’s liquidity policy is in compliance with the most of the other banks in industry.
2. Liquidity ratio decreased from 0.21 to .16
It is also a liquidity measure but it is conservative than the current ratio because it doesn’t
involve the inventory in it. This ratio provides a more penetrating measure of the liquidity
than the current ratio. If we see at the bank’s ratio, we find it worse and the bank being weak
in position because the analyst and experts says that, this ratio must be greater than one. But
if we compare it with the industry average, we find it in line with the industry and most of the
other banks in the industry.
Leverage ratio: (measures ability of a firm to meet financial obligations)
1. Debt to equity ratio decreased from 15.91 to 7.49
Creditors generally want this ratio to be lower than one because the lower the ratio, the higher
the financing provided by the shareholders. If we see at the bank’s ratio it is in a worst
condition especially in 2011 (2011 ratio 15.91). It means that the bank was provided with
Rs.15.91 by creditors for financing against each Rs.1 of the shareholders. In (2012 ratioc7.49)
against each Rs.1 provided by the shareholders. Thus Askari bank is not good at this ratio.
2. Debt to total asset ratio decreased from 0.94 to 0.91
Measures a company's financial risk by determining how much of the company's assets have
been financed by debt. The ratio again must be low because the higher ratio has a higher
financial risk. In 2011 the Bank’s ratio is 0.941 which suggests that about 94.10% of the
assets have been financed by the debts, which shows a high financial risk. Same is the case in
2012 that is 91.20%. But if we compare it with the industry average we find them as in line
with the most of the other bank’s in the industry and conclude the Askari bank is in good
position at this ratio.
Activity ratio: (Accounting ratios that measure a firm's ability to convert different accounts
within its balance sheets into cash or sales)
- 13 -
1. Receivable turnover ratio increased from 1.48 to 2.83
This ratio tells us that how many times the account receivable has been turned into cash. If
we see at the Askari Bank ratio in 2011 that is 1.489. This shows that the Bank is not a
quality firm at its collection, but in 2012 it has improved it to 2.832 which suggests the Bank
has improved its collection process. Now if we compare this ratio to the industry average we
find that Bank to be in bad position.
2. Receivable turnover in days
This ratio told how many days the receivables are outstanding. In 2012 it was 272 days. The
credit standard in this regard decides that for how many days should the receivables
outstanding. Comparing the bank’s ratio to the industry average 432 days in
2012 suggest that the bank is not in compliance with the most of the other banks in industry
in 2012.
3. Total assets turnover
The total assets turnover shows that how much sales do the total assets generates. If we see at
the ratios we have 0.037 of total asset turnover that is bank is generating a mildly less sales
than does the industry.
Profitability ratio: (measures management’s overall effectiveness as shown by the return
generated on sales and investment)
1. Gross spread decreased from 30.72 to 29.10.
The main cause in decrease in gross spread is due to decrease in mark up on loans, increase in
interest on deposits and decrease of returns on investment.
2. Return on capital employed decrease from 1.06 to 0.59
Return on capital employed decreased from as year moves on.
3. Earning assets to total assets increased from 86.05 to 86.90
In financial year 2012, the overall profitability of bank declined whereas there is increase in
earning to total assets from 86.05 to 86.90.
4. EPS decreased from 2.30 to 1.54
EPS also decreased which is a bad sign.
Growth ratio: (measure the firm’s ability to maintain its economic position in the growth of
the economy and industry). Sales, net income and EPS all are low suggesting that growth
ratio of Askari bank is not good.
- 14 -
Matching Stage (Strategic formulation)
SWOT
Matrix
STRENGTHS 1. ACBL was organized by Army
Welfare Trust (AWT) so it has
strong army background.
2. The bank has entered in
international business by
establishing its international
branch in Bahrain.
3. Technology and automation is a
backbone of ACBL’s strategic
competitive advantages overall
domestic players.
4. ACBL has a countrywide network
of online branch banking business
and ATM’s in all major cities of
the country.
5. Bank has well-developed intra-net
and inter-net communication
network.
6. Bank is pioneer in e-commerce
venture in Pakistan through a
major retail distributor.
WEAKNESS 1. In the corporate profile, the bank
concentrates on medium sized
business and not emphasizing the
small-scale business, which are
large in Pakistan.
2. Bank has no adequate number of
branches as compared to its
competitors like MCB.UBL etc.
3. To inform its customers about its
new innovative products, ACBL is
not involved any type of
promotional activities.
4. The credit policy of ACBL is very
strict for individuals.
5. The return on deposits is very low.
6. Although the bank’s systems are
fully computerised, but still a
many of the staff members are not
trained in operating the computer.
OPPORTUNITIES 1. Askari Bank can get the
opportunities by increasing its
branch network internationally. 2. ACBL can introduce special
schemes of lending for potential
small industries. 3. ACBL can increase its operations
by proper promotional campaigns
of its new innovative services. 4. Increase the capacity of branch
instead of going towards
overstaffing.
5. House financing schemes can be
offered to general public.
6. In agrarian cities like Bahawalpur
there is a potential for giving credit
facilities to farmers.
7. Bank is not yet performing utility
services for the utility companies
like WAPDA it can increase its
operations also in this direction and
so a new source of earning.
SO-STRATEGIES 1. As AKBL entered in Bahrain,
now it’s the time to spread
international networking (S2, O1 ,
O4).
2. AKBL is Army backed institution,
this make possible for AKBL to
avail opportunity to increase its
customers (S1, O2, O3, O5, O6,
O7).
3. Good intra and internet network
make it possible for AKBL to go
internationally (S5, O1, O3).
WO-STRATEGIES 1. Increase its customers by going
internationally (W1, W2, O1, O2,
O3, O4, O5, O6, O7).
2. Proper promotion of new services
will increase customers (W3,O3).
THREATS 1. As the bank has not big branch
network so customers feel
inconvenience in dealing with
ACBL.
2. Bank can lose market share due to
insufficient promotional activities.
3. Now the other players of banking
are also providing the modern
technology based services like
online and Internet banking facility
so there is no more competitive
advantage in this area
ST-STRATEGIES 1. AKBL can minimize threats by
going internationally (S2, T1, T5,
T6).
2. Good communication can result in
good promotional activities (S5,
T2).
3. Easy availability of ATM
machines can increase customer
satisfaction (S4, T1).
WT-STRATEGIES 1. Good network system and latest
technology along with addition of
skilled workforce can cover wider
range of customers (W1, W2, W6,
T1, T4,T6 ).
2. Army Backing will help bank in
promotion of new services
(W3,T2).
- 15 -
4. The bank is completely anatomized
in case of system failure.
5. Expansion of newly established
banks like AL-FALAH and
FAYSAL BANK and their best
performance can reduce the market
share of ACBL.
6. In near future the world is going to
be free trade zone so the concept of
"survival of the fittest" will be in
action.
7. High rate of taxes on banking
companies are levied