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Strategic Management

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Executive Summary

This report aims at analyzing the ABC Bank PLC with the view on strategic aspects. First the report entails a review on the banking industry and the bank specifically. Then the report proceeds with understanding the core competencies of the bank, whether they could be proven as sustainable so that the competitive advantage last for long time. Then the current issues faced by ABC Bank PLC had been identified and the immediate and root causes had been identified along with the discussion. Finally, the report entails some recommendations to overcome the issues and to reposition the brand among the customers.

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Table of Contents

Executive Summary ................................................................................................................... 1

List of Tables & Figures ............................................................................................................ 3

Task 1 ......................................................................................................................................... 4

1.1 Introduction ...................................................................................................................... 4

1.2 Historical review of ABC Bank ....................................................................................... 4

1.3 Vision and Mission of ABC Bank.................................................................................... 5

Task 2 ......................................................................................................................................... 5

2.1 Characteristics of sustainable core competencies ............................................................ 6

2.1.1 Value to customers .................................................................................................... 6

2.1.2 Rarity ......................................................................................................................... 6

2.1.3 Non Imitability .......................................................................................................... 7

2.1.4 Non Substitutability ................................................................................................... 7

Task 3 ....................................................................................................................................... 10

3.1 The most recent problems .............................................................................................. 10

3.2 Liquidity risk consists of Funding Risk, Time Risk, and Call Risk. .............................. 12

Task 4 ....................................................................................................................................... 13

4.1The re-strategizing its position in the market or product wise ........................................ 13

Conclusion ............................................................................................................................... 15

References ................................................................................................................................ 16

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List of Tables & Figures

Figure 1 - Competitive Landscape ............................................................................................. 6

Figure 2 - Financial Data ABC Bank PLC ............................................................................ 10

Figure 3 - Ratio Analysis ABC Bank Consolidated ............................................................. 11

Figure 4 - Liquid assets/Customer & Short Term Funding ..................................................... 12

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Task 1

1.1 Introduction

Banking sector plays an important role in the services sector contributing the highest percentage to the Gross Domestic Product. The banking sector is moving towards a consolidation process in order to facilitate the economic growth and development process. The purchase of foreign currency by the Central Bank in 2015 has increased the liquidity levels in the economy. The flow of credit to the needed sectors in the economy is a key concern. The regulatory capital levels were effective and the sector moved towards improving the quality of the service. ABC Bank too recorded positive figures for its performance where its net Return on Assets was 1.33% and the Return on Equity was

13.45%.The overall growth rate was 32.95% in 2015. The Capital Adequacy Ratio was

14.73% and it complied with the regulations on the Statutory Reserve Ratio and BASAL II

requirement etc. (ABC Bank PLC, Annual Report, 2014/15)

1.2 Historical review of ABC Bank

ABC Bank was established in the year 1987 as a public limited liability company under the Banking Act. It is listed in the Colombo Stock Exchange. It is a strong bank operating in the local financial system with over Rs. 193.1 Bn in its advances portfolio. Despite the worst time the bank experienced over the last five , it has recovered its market position up to a great extent. ABC There are 13 regional offices through which the island wide operations are being managed. Developments in banking services such as internet banking, mobile banking etc. have made the bank to be a pioneer among the other peer banks. The social responsibility initiatives are also a fact for making the bank to be sustainable in the market environment. ABC Bank has five main operational sections namely Branch Banking, Corporate and Foreign currency Banking, Retail Banking, Treasury Operations, International and Trade operations. These operational sections perform the financial services to each of the target customer categories sing various delivery channels. By 2014, ABC Bank has developed its delivery network with having 157 branches, 177 ATMs and 93 student saving centers all throughout the island. (ABC Bank PLC, Annual Report, 2014/15) The ABC Bank bank target the middle level to lower level customers, but they are committed

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by extending unique services to turn their dreams in to reality. Consumer demands are expanding and diversifying and bank wide range of financial solutions address all the aspiring needs of their customers under one roof. ABC bank is playing a major role in transforming lives of people for the better. ABC Bank expanded with the new developments in technology such as the phone banking facility which is provided at no cost to the customer. The internet payment gateway is one of the advancements in the product portfolio. It enables the use of Master Card as secure credit card payments for purchases. Internet banking is also using updated systems in order to process customer requests for making payments, fund transfers, fund management, bank statements requests, standing order requests, requesting cash advances online etc.

1.3 Vision and Mission of ABC Bank

Vision:

Mission:

terms of value, pricing, delivery and service. We will do so through a team of ABC Bankers who are recognized and rewarded for results orientation. We will ensure that our efforts translate to meeting the expectations of our shareholders, whilst always acting as responsible corporate citizens. (ABC Bank PLC, Annual Report, 2014/15)

Task 2

over other competitors and discuss if these competitive advantages can guarantee a long term sustainable strategic competitiveness for the chosen company in the market. There are two types of competencies that an organization could possess. Threshold competencies do not guarantee a competitive advantage and those are the competencies required to ensure survival in the industry. (Franklin, Kanoknart, 2014) Core competencies are the skills and abilities that are unique to the organization that brings competitive advantage to the organization. Rival actions do not permit a competitive advantage even though secured to last long. Hence, ensuring that the core competencies have the characteristics such as non-imitability, uniqueness, rarity, non-substitutability, complexity,

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causal ambiguity, value etc. is important. And also, continuous monitoring on the competitor actions, changes in the business environment etc. are also very important.

Figure 1 - Competitive Landscape

Source: Fitch Rate

2.1 Characteristics of sustainable core competencies

2.1.1 Value to customers

Those core competencies should be valued by customers. Managers may this idea incorrectly because the thinking that a competency would just be sustainable due to the fact that it is distinctive could be not rewarding as a valued competency. Through the value chain analysis, the valued and less valued competencies could be identified. (Franklin, Kanoknart, 2014)

2.1.2 Rarity

If the core competencies are rare, it will create sustainability. This could be due to the fact that the competencies are linked to the unique resources. Products and services that have taken the patent license could be made rare. Talented employees in a service organization such as ABC Bank is also could be rare. The rarity of competencies could be based on the following three factors. Ease of transferability The ownership of the competence and the ability to transfer it may decide its rarity. For example, the competencies related to the talents of employees in ABC

Bank could not be transferred to others very easily. Durable advantage would lie in the

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activities such as recruiting, training, motivating and rewarding such employees within the organization or the culture within the organization could also bring in advantage. Sustainability The base of the core competencies should be sustainable because even the unique resources may be a target of competitors. Therefore the base of core competencies should be looked for change. 103
Core rigidities Redundancy is another risk associated with the core competencies. There is another danger of redundancy. Overwhelming some bases of core competencies and building of strengths around those bases make them to be core rigidities which would diminish its importance to the customers.

2.1.3 Non Imitability

Core competencies should be non-imitable. If the basis of the competency is common and easily accessed by the competitors this could be imitated. Therefore the competencies should be related to the activities or processes that are valuable to the customers. And the competencies should lead to the performance levels that are superior to the competitors.quotesdbs_dbs7.pdfusesText_5

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