PES Institute of Technology, Bangalore

(Department of MBA)

Strategic Management

A term paper on

“AXIS Bank”

Submitted by:Abhilash Chipkar,

1PI11MBA05

III Semester, Sec (A)

Submitted to:Prof. Murali Murti

(Course Faculty)

31/10/2012

Chapter 1

Industry Profile

Banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government.

With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales.

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 60,000 branches and 99,218 ATMs as of June 2012. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

Company Profile

Axis Bank Limited is an Indian financial services firm headquartered in Mumbai, Maharashtra. It had begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the Specified Undertaking of the Unit Trust of India (UTI-I), Life Insurance Corporation of India (LIC), General Insurance Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United India Insurance Company UTI-I holds a special position in the Indian capital markets and has promoted many leading financial institutions in the country. As on the year ended 31 March, 2012, Axis Bank had an operating revenue of 13,437 crores and a net profit of 4,242 crores. Axis Bank (erstwhile UTI Bank) opened its registered office in Ahmedabad and corporate office in Mumbai in December 1993. The first branch was inaugurated in April 1994 in Ahmedabad by Dr. Manmohan

Singh, then the Honorable Finance Minister. The Bank, as on 31st March, 2012, is capitalized to the extent of Rest. 413.20 crores with the public holding (other than promoters and GDRs) at 54.08%

Axis Bank operates in four segments: treasury operation, retail banking, corporate/wholesale banking, and other banking business.

Competitors

ICICI Bank HDFC YES Bank

Evolution of AXIS Bank’s Business Model

Up to FY 2003

Corporate lender Corporate Deposits Slow growth

FY 2004-09

Developed Current Account Savings Account Franchise High Growth Income diversity

FY 2010 onwards

Predictable, consistent, profitable growth Reduced risk concentration Increased share of customer wallet Improve operating leverage Above industry growth

Axis bank has positioned itself as a bank which gives higher standard of services through product innovation for the diverse need of individual & corporate clients. So they want to highlight following points in their positioning statement:

- Customer centric

- Service oriented

- Product innovation

Chapter 2

Strategy Formulation

Strategy formulation is the development of long range plans for the effective management of environmental opportunities and threats in the height of corporate strengths and weaknesses. It includes defining corporate strategic intent covering vision mission specifying objects, developing strategies and setting policy guide lines.

“Strategic intent is an obsession with an organization – an obsession with having ambitions that may even be out of their resources and capabilities. This obsession is to win at all levels of the organization while sustaining that obsession in the quest of global leadership.”

-Mr. C.K. Prahalad and G. Hamel

Vision Statement of Axis Bank

To be the preferred financial solutions provider excelling in customer delivery through insight, empowered employees and smart use of technology.

Core Values

Customer Centricity Ethics Transparency Teamwork Ownership

Balance Sheet of AXIS Bank.

Particulars Mar'12 Mar'11 Mar'10 Mar'09 Mar'08

Liabilities12 Months

12 Months

12 Months

12 Months

12 Months

Share Capital 413.20 410.55 405.35 360.22 359.90

Reserves & Surplus

22,395.34 18,588.28 15,639.27 9,854.58 8,410.79

Net Worth 22,808.54 18,998.83 16,044.62 10,214.80 8,770.69

Secured Loans 34,071.67 26,267.88 17,169.55 10,185.48 5,624.04

Unsecured Loans

220,104.30 189,237.80 141,300.22 117,374.11 87,626.22

TOTAL LIABILITIES

276,984.52

234,504.51

174,514.39

137,774.38

102,020.95

Assets

Gross Block 3,583.67 3,426.49 2,107.98 1,741.86 1,384.70

(-) Acc. Depreciation

1,395.12 1,176.03 942.79 726.45 590.33

Net Block 2,188.56 2,250.46 1,165.18 1,015.40 794.37

Capital Work in Progress.

70.77 22.69 57.24 57.48 128.48

Investments. 93,192.09 71,991.62 55,974.82 46,330.35 33,705.10

Inventories 0.00 0.00 0.00 0.00 0.00

Sundry Debtors

0.00 0.00 0.00 0.00 0.00

Cash And Bank 13,933.92 21,408.66 15,206.44 15,016.90 12,504.24

Loans And Advances

176,242.47 147,039.95 108,244.18 85,301.91 62,445.66

Total Current Assets

190,176.38

168,448.61

123,450.62

100,318.81

74,949.90

Current Liabilities

7,095.11 6,911.31 5,566.52 9,527.65 7,305.80

Provisions 1,548.16 1,297.55 566.94 420.02 251.10

Total Current Liabilities

8,643.28 8,208.86 6,133.46 9,947.67 7,556.90

NET CURRENT ASSETS

181,533.11

160,239.74

117,317.16

90,371.14 67,393.00

Misc. Expenses 0.00 0.00 0.00 0.00 0.00

TOTAL ASSETS (A+B+C+D+E)

276,984.52

234,504.51

174,514.39

137,774.38

102,020.95

Chapter 3

Porter’s Five Force Model

Competitors (High)

1. A large no of banks

There are so many banks and non financial institution fighting for same pie, which has intensified competition. 

2. High market growth rate

India is seen as one of the biggest market place and growth rate in Indian banking industry is also very high. This has ignited the competition.

3. Homogegeous product and services

The services banks offer is more of homogeneous which makes the company to offer the same service at a lower rate and eat their competitor market’s share. 

4. Low switching cost

Costumers switching cost is very low, they can easily switch from onebank to another bank and very little loyalty exist.

Competitors

Threats of new

entrants

Bargaining power

of suppliers

Threat substitute

products of services

Bargaining power

of buyers

Bargaining Power of Suppliers (Low)

1. Nature of suppliers

Suppliers of banks are those people who prefer low risk and those who need regular income and safety as well. Bank’s the best place for them to deposit their surplus money.

2. RBI rules and regulations

Banks are subject to RBI rules and regulations .bank have to behave in away that RBI wants. So RBI takes all decisions related to interest rates. This reduces bargaining power of suppliers.

3. Suppliers not concentrated

Banking industry suppliers sure not concentrated. There are numerous with negligible portion of offer .so this reduce their bargaining power

Bargaining Power of Buyers (High)

 

1.Large no of alternatives

Customers have large no of alternatives, there are so many banks, whichfight for same pie. There are many non financial institutions like icici, hdfc, andifci, etc. which has also jump into these business .there are foreign banks , privetbanks, co-operative banks and development banks together with specializedfinancial companies that provides finance to customers .these all increasepreference for customers.

2.Low switching cost

Cost of switching from one bank to another is low. Banks are alsoproviding zero balance account and another types of facilities. They are free toselect any banks service. Switching cost are becoming lower with internetbanking gaining momentum and a result customers loyalties are harder to retain.

3. Undiffentiated service

Bank provide merely similar service there are no much diffracted inservice provides by different banks so, bargaining power of customers increase.They can not be charged for differentiation.

4. Full information about the market

Customers have full information about the market due to globalization anddigitalization Consumers have become advance and sophisticated .they areaware with each market condition so banks have to be more competive andcustomer friendly to serve them.For good creditworthy borrowers bargaining power is high due to theavailability of large number of banks.

Threat of new entrants (Low)

Reserve Bank of India has laid out a stagnant rules and regulation for new entrant in Banking Industry. We expect merger and acquisition in the banking industry in near future. Hence, the industry is less porn of new competitors.

Threat of Substitute product of services (High)

Every day there is one or the other new product in financial sector.Banks are not limited to tradition banking which just offers deposit and lending. In addition, today banks offers loans for all products, derivatives, ForEx, Insurance, Mutual Fund, Demit account to name a few. The wide range of choices and needs give a sufficient room for new product development and product enhancement. Substitute products or services are those, which are different but satisfy the same set of customers

Chapter 4

SWOT Analysis

Strengths:

Core Competency in being a customer-centric bank. Distinctive competency in network. It has the highest number of

ATMs among all private banks in India. A well established brand name and image. International banking with money transfer allowed across 191

countries and a physical presence in 6 countries. Up to date infrastructure and ambience.

Weakneses:

No clear succession planning. Internal differences due to the pattern of ownership. Split image between being a corporate lender and retail banker. Weak rural market penetration. Brand seen by some as a foreign brand.

Opportunities:

Rural market is wide open. Increasing disposable income of people and the emergence of new

higher middle class and upper class. The concept of ETM (Everywhere teller machine) by AXIS Bank had a

good response in terms of attracting new customers in personal banking segment.

Entering into strategic alliances to boost its new age banking solutions like mobile banking, online banking.

Threats:

Emergence of Non Financial Banking Institutions. Rise of foreign banks in the country. High competition from banks Well established network of NGOs and MFIs.

Value Chain Analysis

Primary Activities:

Support ActivitiesFirm InfrastructureHuman Resource ManagementTechnology DevelopmentProcurement

1. Firm Infrastructure: Being a private sector bank, Axis bank has good infrastructure. It has all the facilities for a better work environment. There are different sections for smooth working and providing a sense of customer satisfaction.

2. Human resource management: Axis bank has low attrition rate with high level of employee engagement.

3. Technology Development: In term of technology, Axis bank is in par

with the competition. It has received awards for its IT initiatives. It is equipped with the best in class IT services. Axis Bank operates one of the world’s highest ATM sites at Thegu, Sikkim (at a height of 13,200 feet above sea level) and has the largest ATM network among private banks in India.

4. Supply Chain Management: The money is collected from the investors in various form and is assembled for further transaction. These maybe in the form of FDs, savings account, current account and various other schemes running in the bank.

5. Distribution: It is concerned with the investment gathered to the most beneficial scheme. Here resource allocation is important. With

SCM Operations Distribution Marketing and Sales Services Margin

resource allocation, we mean the bank has to decide where to put the money for maximum benefit.

Chapter 5

Generic Competitive Strategies:

Axis bank follows ‘Broad Differentiation Strategy’.

Among all the generic strategies which help in winning a sustainable competitive advantage, broad differentiation strategy best suits Axis Bank. Not much can be done with the product offering but the area covered and range of products served can be increased. Axis Bank operates in four segments: treasury operation, retail banking, corporate/wholesale banking, and other banking business. Further, it has various products for various market segments like insurance products, agri business loans, travel cards, outward remittances, inward remittances etc.

Strategic alliances and collaborative partnerships:

-Tie ups with Maruti and Hyundai for selling car loans

- Co-financing pact with India infrastructure Finance Company Ltd for infrastructure projects

- Tie ups with Bajaj Allianz and MetLife

- Tie up with Remit2India for money transfer

- In May 2012, AXIS bank tied up with Bharti Airtel for Mobile Banking Services.

Outsourcing by Axis Bank

Outsourcing recruitments to Monsterindia.com: The bank’s time cost involved in processing the application have been halved. However Axis Bank still relies on headhunters for specialized positions.

Outsourcing Print Operations to Xerox: Axis is now able to mail personalized chequebooks to its customers within 24 hours of request. This also means no unused chequebook inventory lie at Axis bank’s 300 branches.

Outsourcing of Electronic Bill Payments and ATM Management: Axis Bank has outsourced its EBP to BillJunction, a specialist Bill Management service provider.

Chapter 6

Formulating long term and grand strategies

BCG Matrix:

Indian growth in the banking industry has been more qualitative than quantitative and it is expected to remain the same in the coming years. Based on the projections made in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate

Axis bank is the second largest private sector bank in India with market share next to only ICICI in private sector. As on 31st March, 2012, is capitalized to the extent of Rest. 413.20 crores with the public holding (other than promoters and GDRs) at 54.08% Thus it can be concluded that Axis Bank stands at Cash Cow in BCG Matrix.

Functional Level StrategyAt the functional level the main focus should be on two areas one being marketing and other being finance. The concept of microfinance is still unknown to many of the customers. The database of the customer to be served is huge. In order to increase market share, market penetration and market development strategies can be followed. Under these strategies the bank should focus on current strategies current market and new

product, current market. Here the focus should be to create more and more awareness among the existing database, target the part of the segment that is still untouched and develop new range of products for the existing database.

Module 7Strategy Implementation

Organisational Structure of Axis Bank

Corporate Social Responsibility:

Axis Bank Foundation aspires to contribute in the areas of education and healthcare. It has set up various programmes which provide educational support, in order to meet these goals.

Balwadis:The Foundation has identified the need to focus on early childhood

programs for 2 - 6 year olds. As part of its initiatives to support education, they help develop learning places for young children living in large urban slum clusters so that it creates a strong foundation and inculcates social and cultural awareness in them.

Highway trauma care:A number of people who meet with accidents on highways face a tragic end due to the lack of medical attention within the 'golden hour' i.e. one hour after the accident. Axis Bank Foundation provides medical rehabilitation program by working with Lifeline Foundation for more than 3 years and funds their Highway Rescue Project in the states of Maharashtra, Kerala and Rajasthan.

Pure education:Axis Bank Foundation strives to ensure that the fruits of education reaches every corner of the country. They have joined hands with several rural partners to make primary education reachable for every child.

Bridge courses:The Foundation supports mainstream education initiatives through non-formal education centres or bridge courses for children who have dropped out or have never been to school. These centres bridge the gap between the age of the child and his or her level of learning and mainstream them in age appropriate classes. These centres also act as back up / tuition centres for in-school children.

Skill DevelopmentIts programs in this area aim at enhancing or teaching new skills to enable our beneficiaries to take up a job or start an enterprise of their own. Programs like PREMA and Yuva Parivartan impart skills like motor driving, electrician, welding, mobile repairing, tailoring as well as courses in hotel management, nursing, computer software and hardware, to youth living in some of the most backward districts of India; making these youth financially independent and contributors to the family income. Within the programs they also have specialised training for adolescent girls and mothers on health, nutrition, sanitation, kitchen gardening, various livelihood initiatives and policy awareness. The skill development programs place great importance on placement of the trainees and in helping budding entrepreneurs set up small enterprises of their own.

Module 8

Strategic review and audit

After carrying out the strategic audit the following recommendations can be

made :

1. Number of Branches should be increased covering a wider area in various states.

2. A wide publicity to be given about the organization and its products through various means of communications to keep growth moments.

3. More number of training and educational programmes should be included in Banks schedule.

4. Developing a learning culture through continuous learning process.

Conclusion

Axis bank has developed manifold in short period of time due tofacilities and services provided to their customer and this growth rate can be keep it up if they start to go in semi-urban areas. In last couple of years they have opened new many branches and they should open many more. The working staff are very co-operative in nature and due to that the bank will also get good benefit. Axis Bank has provided their customer Net-banking facilities and due to that transactions are done fast. Axis Bank has overcome the brand makeover from UTI to AXIS well and it seems optimistic under Shikha Sharma’s leadership.

References

Crafting and executing strategy by Author.A Thomas Jr., and A.J. Stricland III

Strategic Management and Competitive advantage concepts by Barney,

Jay.B.Hesterly and William.S, 3rd edition

Magazines and Journals

Business Today

Journal of Organizational Behaviour

Strategic Management Journal Psychology

www.axisbank.com

www.moneycontrol.com

www.wikipedia.com/axisbank

www.rediff.com