A Project Report

On

Strategic Management
Presented to

Prof. Jayant Bose, BNK621- Business Policy, Planning & Strategy

MBA F&B, Year-2013, Term V

Submitted byNayanchand Rao P301412CMG393 Amit Kanojia- P301412CMG333 Abhishek Anand- P301412CMG322 Aman Chandan- P301412CMG330 Habib Khan- P301412CMG365

Contents
EXECUTIVE SUMMARY .................................................................................................................................. 2 INTRODUCTION ............................................................................................................................................. 3 INDUSTRY SCENARIO OF INDIAN BANKING INDUSTRY ................................................................................. 3 ABOUT THE COMPANY: HDFC BANK ............................................................................................................. 5 SITUATIONAL ANALYSIS ............................................................................................................................... 6 PEST Analysis ............................................................................................................................................. 6 Five Forces Model ..................................................................................................................................... 7 External Factors Analysis Summary- EFAS ................................................................................................ 8 Internal Factors Analysis Summary- IFAS.................................................................................................. 9 Strategic Factors Analysis Summary- SFAS ............................................................................................. 10 TOWS Matrix ........................................................................................................................................... 11 STRATEGY FORMULATION ................................................................................................................ 13 What-if Analysis: ..................................................................................................................................... 14 CSF Analysis:............................................................................................................................................ 15 Financial Analysis of Competitors ........................................................................................................... 16 SWOT Analysis......................................................................................................................................... 17 Core Capability Analysis: ......................................................................................................................... 18 CORPORATE STRATEGY .............................................................................................................................. 18 Direction Matrix ...................................................................................................................................... 19 Portfolio Matrix:...................................................................................................................................... 21 Parental Matrix ....................................................................................................................................... 22 OTHER STRATEGIES .................................................................................................................................... 23 Business Strategy .................................................................................................................................... 23 Functional Strategy ................................................................................................................................. 24 SUGGESTIONS/RECOMMENDATIONS ......................................................................................................... 26 CONCULSION............................................................................................................................................... 27 Appendix-1: Industry Executive Interview .................................................................................................. 28

EXECUTIVE SUMMARY
The growth of the banking industry is closely linked with the growth of the overall economy. India is one of the fastest growing economies in the world and is set to remain on that path for many years to come. This will be backed by the stellar growth in infrastructure, industry, services and agriculture. This is expected to boost the corporate credit growth in the economy and provide opportunities to banks to lend to fulfil these requirements in the future. Currently, there are many challenges before Indian Banks such as improving capital adequacy requirement, managing non-performing assets, enhancing branch sales & services, improving organization design, using innovative technology through new channels and working on lean operations. Apart from this, frequent changes in policy rates to maintain economic stability, various regulatory requirements, etc. are additional key concerns. Despite these concerns, it is expected that the Indian banking industry will grow through leaps and bounds looking at the huge growth potential of Indian economy. High population base of India, mobile banking offering banking operations through mobile phones, financial inclusion, rising disposable income, etc. will drive the growth Indian banking industry in the long-term. The Indian economy will require additional banks and expansion of existing banks to meet its credit needs. In this study the business banking products of HDFC bank, that best suits the needs of the borrower were analyzed. The observation and findings of the study have helped to give useful recommendations to bank. The implementation of the suggestion can help to improve strategies and build competencies over that of their competitors. This study is backed by giving exposure into new concepts in todays banking scenario as the interface shifts from service to products.

INTRODUCTION
Indias Rs 77 trillion (US$ 1.25 trillion)-banking industry is the backbone to the economy. The sector emerged strong from global financial turmoil and proved its mettle when the developed economies were shaking. Indias banking sector is on a high-growth trajectory with around 3.5 ATMs and less than seven bank branches per 100,000 people, according to a World Bank report. The statistics are going to improve in near future as the Government aims to have maximum financial inclusion in the country. Policymakers are making all the efforts to provide a facilitating policy framework and infrastructure support to ensure meaningful financial inclusion. Apart from that, financial institutions are collaborating with other service providers (in the fields of telecom, technology and consumer product providers) to create an enabling environment. By 2013, 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.

INDUSTRY SCENARIO OF INDIAN BANKING INDUSTRY

The growth in the Indian 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. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that there will be large additions to the capital base and reserves 3

on the liability side. The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, nonscheduled banks and scheduled banks-

On the other hand the Private Sector Banks like ICICI Bank, HDFC Bank, Axis Bank, etc. are making tremendous progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. As far as foreign banks are concerned they are likely to succeed in the Indian Banking Industry. As far as the present scenario is concerned the Banking Industry in India is going through a transitional phase. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as priority 4

sectors. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs and provide better services.

ABOUT THE COMPANY: HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC Bank is one of the Big Four banks of India, along with: State Bank of India, ICICI Bank and Punjab National Bank.

SITUATIONAL ANALYSIS
PEST Analysis
Political factors:
Government regulations: Banks as a financial body are always restricted with policies and rules. The RBI closely governs the banks and other financial institutions and budgets made by the government affects the banking activities and also its business to a certain extent. Governments support to the PSU banks has an impact on the performance of other private players. RBI is going to allow foreign banks to invest up to 74% into the Indian market.

Economic factors:
Every year, the changes in monetary policy affect the workings of the bank. The decisions on the monetary policy impact the interest rates at which banks lend money. In the last 2 years RBI has modified its monetary rates 13 times to curb inflation and other financial risks related. Banking sector has played a major role in the increasing GDP of the country, thereby providing its support to strengthen the economy. Robust economic policies by the regulatory body helped Indian banks survive the severe meltdown of 2009.

Social factors:
The life style of Indians consumers is rapidly changing and the buying power has also grown by leaps and bounds The rural market is expanding rapidly too. The concept of banking has slowly begun to sink in the minds of the rural population and is making an impact on the lives of the rural population and also on the banks operating in rural areas. Illiteracy is still an issue that India is fighting with and therefore not many can read and understand the terms of banks, thereby making them keep distance from banks. 6

Technological factors:
Banks have a wide network of ATMs lately. Automated voice responsive machines help bank tackle small queries of customers. Improved net banking and Mobile facility provided by banks has helped many customers save time, money and also unnecessary hassles.

Five Forces Model

Availability of Substitutes: HIGH

Supplier Power: LOW

Competittve Rivalry: High

Buyer Power: HIGH

Threat of New Entrants: HIGH

Power of Buyers: Customers bargaining power is high because banks provide

homogeneous kind of services and customers can get all the information very easily. So, the switching cost is low for the customer.

Power of Suppliers: In this industry, the suppliers bargaining power is low because
banks have to meet numerous regulatory criteria set by the RBI.

Competitive Rivalry: Competition in this sector is very high because of large number
of public, private, foreign and cooperative banks.

Availability of Substitutes: There is a high threat from substitutes such as Mutual

funds, Treasury bills, government securities and other NBFCs.

Threat of New Entrant: Banking regulations require the approval of the regulator RBI
before setting up a new bank. So, the threat of new entrants is relatively low.

External Factors Analysis Summary- EFAS

External Factors
Opportunities Scope in rural market Steady customer oriented approach Corporate accounts

Weight Rating
0.15 0.05 0.10 4 2 4

Weighted Score
0.6 0.1 0.4

Comments

Operations abroad Greater scope for acquisitions and strategic alliances Improvement in bad debt recovery strategies Threats

0.10 0.05 0.05

3 2 4

0.3 0.1 0.2

This is to drive business in future Especially of the growing SME sector Scope in countries like bangladesh, UAE and Sri Lanka Due to strong financial position

Increasing percentage of Nonperforming assets of the company Major competition threat Increasing number of NBFCs and new age banks

0.05 0.20 0.05

3 4 2

0.15 0.8 0.1 Provided by PSU banks in comparison to private banks Due to modernization of PSUs upto 74% permitted by RBI From banks like ICICI, HSBC, AXIS and SBI

Attractive interest rates Shifting consumer base from private players to PSU FDI In Banks
Total Score

0.05 0.10 0.05 1.00

2 3 2

0.1 0.3 0.1 3.25

EFAS is one way to organize the external factors into the generally accepted categories of opportunities and threats as well as to analyze how well a particular companys management (rating) is responding to these specific factors in light of the perceived importance (weight) of these factors to the company. Notes: 1. Weight: From 1.0 (Most Important) to 0.0 (Not Important) 2. Rating: From 5.0 (Outstanding) to 1.0 (Poor) 3. Weighted Score= Weight*Rating From the EFAS Table we can see that HDFC Banks external factor is above average with a weighted score of 3.25.

Internal Factors Analysis Summary- IFAS

Weighted Score
0.80 0.60 0.15 0.15

Internal Factors
Strength Branch Network Lower attrition rate as compared to other competitors. Customer friendly approach Sound financial advisors for investment clients Adoption of latest technology for bank softwares and net banking facilities Weakness Low presence in rural areas Lack of aggressive marketing strategies Heavy focus on mid and high level clients Not all the verticals of the bank are performing successfully Unstable share prices

Weight Rating
0.20 0.15 0.05 0.05 4.00 4.00 3.00 3.00

Comments
More than 3000 Branches

0.15 0.10 0.05 0.10 0.05 0.10

3.00 4.00 2.00 3.00 2.00 3.00

0.45 0.40 0.10 0.30 0.10 0.30

Total Score

1.00

3.35

IFAS is one way to organize the internal factors into the generally accepted categories of strengths and weaknesses as well as to analyze how well a particular companys management is responding to these specific factors in light of the perceived importance of these factors to the company. We use the VRIO framework (Value, Rareness, Imitability, & Organization) to assess the importance of each of the factors that might be considered strengths. From the table, we see that HDFC banks strength and weakness is above average and that can be considered as a comfortable position.

Strategic Factors Analysis Summary- SFAS

Duration

Strategic Factors
O O O T Scope in rural market Corporate accounts Operations abroad

Weight Rating
0.10 0.05 0.10 0.15 3.00 3.00 3.00 4.00

Weighted Score
0.3 0.15 0.3 0.6

Intermediate

Short

X X X X

T S

Major competition threat Shifting consumer base from private players to PSU
Branch Network Lower attrition rate as compared to other competitors. Adoption of latest technology for bank softwares and net banking facilities Low presence in rural areas Heavy focus on mid and high level clients Unstable share prices Total Score

0.10 0.05

3.00 2.00

0.3 0.1

X X

0.15

3.00

0.45

S W W W

0.05 0.10 0.05 0.10 1.00

3.00 4.00 3.00 2.00

0.15 0.4 0.15 0.2 3.1 X X

X X

Long
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Notes: 1. Weight: From 1.0 (Most Important) to 0.0 (Not Important) 2. Rating: From 5.0 (Outstanding) to 1.0 (Poor) 3. Weighted Score= Weight*Rating 4. Duration: Short termless than 1 year; intermediate1 to 3 years; long termover 3 years The SFAS (Strategic Factors Analysis Summary) Matrix summarizes an organizations strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table. There are too many factors for most people to use in strategy formulation. The SFAS Matrix requires a strategic decision maker to condense these strengths, weaknesses, opportunities, and threats into fewer than 10 strategic factors. This is done by reviewing and revising the weight given each factor. The revised weights reflect the priority of each factor as a determinant of the companys future success. The highestweighted EFAS and IFAS factors should appear in the SFAS Matrix. The SFAS Matrix includes only the most important factors gathered from environmental scanning and thus provides information that is essential for strategy formulation. The use of EFAS and IFAS Tables together with the SFAS Matrix deals with some of the criticisms of SWOT analysis. For example, the use of the SFAS Matrix reduces the list of factors to a manageable number, weights on each factor, and allows one factor to be listed as both a strength and a weakness (or as an opportunity and a threat).

TOWS Matrix
The TOWS Matrix illustrates how the external opportunities and threats facing a particular corporation can be matched with that companys internal strengths and weaknesses to result in four sets of possible strategic alternatives. This is a good way to use brainstorming to create alternative strategies that might not otherwise be considered. It forces strategic managers to create various kinds of growth as well as retrenchment strategies. It can be used to generate corporate as well as business strategies.

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Internal Factors

External Factors

Strengths (S) 1. Huge Branch Network 2. Lower attrition rate as compared to other competitors. 3. Adoption of latest technology for bank softwares and net banking facilities SO STRATEGIES To capitalize on the strong network and capture the opportunities in rural market ST STRATEGIES To Use the latest technology to get ahead of PSU's

Weaknesses (W) 1. Low presence in rural areas 2. Heavy focus on mid and high level clients 3. Unstable share prices WO STRATEGIES To Bring innovative product and services for Rural Market WT STRATEGIES Control NPA such that Share prices may be stable.

Opportunities (O) 1. Scope in rural market 2. Corporate accounts 3. Operations abroad Threats (T) 1. Major competition threat 2. Shifting consumer base from private players to PSU 3. Increase in NPA

A series of possible strategies is generated for the company or business unit under consideration based on particular combinations of the four sets of factors: SO Strategies are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities. ST Strategies consider a companys or units strengths as a way to avoid threats. WO Strategies attempt to take advantage of opportunities by overcoming weaknesses. WT Strategies are basically defensive and primarily act to minimize weaknesses and avoid threats.

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STRATEGY FORMULATION

Mission statement: HDFC Bank's mission is to be a World-Class Indian Bank. Objective: The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values Operational Excellence, Customer Focus, Product Leadership and People.

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A strategy of a corporation forms a comprehensive master plan that states how the corporation will achieve its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage.

What-if Analysis:
In order to be able to evaluate beforehand the impact of a strategic or tactical move so as to plan optimal strategies to reach their goals, decision makers need reliable predictive systems. What-if analysis is a data intensive simulation whose goal is to inspect the behavior of a complex system, such as the corporate business or a part of it, under some given hypotheses called scenarios. In particular, what-if analysis measures how changes in a set of independent variables impact a set of dependent variables with reference to a given simulation model; such a model is a simplified representation of the business, tuned according to the historical corporate data. In practice, formulating a scenario enables the building of a hypothetical world that the analyst can then query and navigate.

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CSF Analysis:
HDFC Banks Critical Success Factor (CSF) includesTop management vision and support Understanding & communicating the vision of the program clearly Driving it as a transformation rather than a technology project Ensuring adequate resource allocation in term of time and money Delivering quick wins to maintain the enthusiasm

Implementation methodology Creating a 3 year roadmap to achieve the full potential of the vision Creating an internal CRM excellence team Ensuring adequate multi-wave iterations for process unification Taking quick decision during departmental conflicts Understanding that user adoption is driven by value & not technology

Respecting technology complexities Creating reliable integrations because they must tested day-on-day Ensuring right strategies to work with LOB system that are not open Understanding scalability requirements is key to decision making Understanding the impact of reports and isolating the work load

Ownership experience Training production teams to own such a high impact CRM Ensuring user training are part of the HR induction program Ensuring adequate user feedback and improvement cycles Using strong production change management practices to deliver always on availability Selecting the right Partners Understanding that such transformation need practice specialists 15

Selecting a partner who can add value to the vision Listening to the partner especially when the advice is counter intuitive

Financial Analysis of Competitors

1. Total Assets:

2. CASA Ratio:

Source- KPMG Report-2013 16

SWOT Analysis

STP Segment Target Group Positioning For people who wish to invest their money in banks Corporates, HINs, Middle income group etc A bank that puts the customer first SWOT Analysis 1. One of the leading new age private sector bank 2. HDFC Bank has over 3000 branches and over 10000 ATMs, in 800 cities in India 3. Existing CBS across its branches 4. Huge employee base i.e more than 51000 employees 5. Large collaborations with corporate for employee salary accounts 1.Rural penetration is low 2.Lesser no. of branches when compared with its competitors 1.Mobile banking, Internet banking 2.Venturing into rural areas 3.Providing more complex products to the ever increasing demands of the industry 1.Competitors 2.New banking licenses 3.Foreign banks that offer complex products

Strength

Weakness

Opportunity

Threats

17

Core Capability Analysis:

Core Capabilities are the Skills that differentiate the manufacturing or service firm from its competitors. HDFC Banks core capabilities are: 1. Customer 360 degrees View- Creating a unified customer views by collating and massaging data from various sources including the data warehouse. 2. Integrated Sales Platform- Multi-wave process workouts to ensure unification and consolidation of all unstructured processes (run on excel) and semi-automated processes. 3. Effective cross-selling capability 4. Customer Experience Management

CORPORATE STRATEGY
Corporate strategy describes a companys overall direction in terms of its general attitude toward growth and the management of its various businesses and product lines. Corporate strategies typically fit within the three main categories of stability, growth, and retrenchment. Mission is to be "a World Class Indian Bank", benchmarking themselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. Bank provide business loan for short or long term financial needs of business organizations. A lot of times it is important for businessmen to acquire a certain amount of money for 18

running their enterprise. It is well known that without the required capital no business can run. For any business whether in initial stage or in growth phase, capital is required to keep up the momentum. Increase market share in Indias expanding banking and financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service.

Direction Matrix

Growth is a very attractive strategy: Concentration The growth strategy is concentration on the current product line(s) in one industry. HDFC current product lines have real growth potential; concentration of resources on those product lines makes sense as a strategy for growth. The two basic concentration strategies are vertical growth and horizontal growth. Growing firms in a growing industry tend to choose these strategies before they try diversification. HDFC has achieved horizontal growth by expanding its operations into other geographic locations and by increasing the range of products and services offered to current markets. Horizontal growth results in horizontal integrationthe degree to which a firm operates in multiple geographic locations at the same point on an industrys value chain. Horizontal growth can be achieved through internal development or externally through acquisitions and strategic alliances with other firms in the same industry. In good times and bad, HDFC Bank sticks to its 30 per cent profit growth. Delivering such growth, quarter after quarter, is a carefully crafted strategy. Its a well-known fact that the bank increases its provision cover for its loans, such that it can deliver 30 per cent growth in more challenging years. This strategy is evidently paying off. Though the net interest income has grown at 22.3 per cent in the first quarter (2012) compared to the corresponding one last year, the bank has managed to deliver a 30 per cent net profit growth. The bank is nimble-footed enough to change its loan mix in different 19

scenarios. With corporate India going through a difficult phase, the bank has increased the share of retail loans to 52 per cent in 2012 from under 50 per cent last year. Analysts say the bank is growing ahead of the sector across most retail segments. Restructuring of Loans and offering customized services to its customer has really helped HDFC to grow horizontally. HDFC history of entering new growth markets is illustrative. In 1998 HDFC joined the Cirrus interbank network so that MasterCard holders worldwide could use it ATMs. In 2001 it became the first bank in India to launch an international debit card, in association with Visa. It introduced various credit card innovations, including a card specifically for farmers, and then reached an agreement with Tata Pipes to offer the farmers credit.

Diversification Strategies - Concentric (Related) Diversification: Growth through concentric diversification into a related industry may be a very appropriate corporate strategy when a firm has a strong competitive position but industry attractiveness is low. HDFC moved early and built from initial success in other new market as well, including telebanking, mobile banking, and foreign exchange services. The only market in which HDFC is still to make its mark is the rural India, where SBI is well established. By focusing on the characteristics that have given HDFC its distinctive competence, the company uses those very strengths as its means of diversification. The firm attempts to secure strategic fit in a new industry where the firms product knowledge, its operations capabilities, and the marketing skills it used so effectively in the original industry can be put to good use. The corporations products or processes are related in some way: they possess some common thread. Key enablers for the Growth: Focused management attention on culture and shared values Avoid dramatic divestitures Hold on to their talent resources Dont change high level strategies quickly 20

Have reliable customer base Keep their senior leadership stable

Portfolio Matrix:
Having the funds to grow is only half the problem. However, will the company actually grow? The sluggish rate of growth in the economy suggests that growth could indeed pose a problem. In fact, in the first quarter of the financial year-ended 2013, HDFC Bank was able to record 29 per cent growth in profits. This, however, may not be good enough to justify the valuation commanded by the stock. And if, due to the slowdown, the bank is forced to invest in government securities rather than in loans, which generate higher returns, the margins will be affected. On the other hand, competition from other banks may increase. Hence it can be concluded that HDFC BANK stands at cash cow in BCG matrix.

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Parental Matrix
Corporate parenting, in contrast, views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units Developing a corporate parenting strategy: Examine each business unit in terms of areas in which performance can be improved Lower cost strategy is the ability of a company or a business unit to design, produces, and market a comparable product more efficiently than its competitors. The interest rates of frequently changing and the customers get confused with the actual interest rate at the current date. And the bank must inform each and every customer must be personally informed about the interest rates. Can be implemented through E-mails, Post service or Phone calls to customers. The customers are not fully satisfied with the speed and quick service of banking. This must be formulated and speedy services must be provided to the customers. Training of staff and model for ensuring the staff retains the servicing standards. Infrastructure and promotional strategies are to be improved in order to delight its customers. Analyze how well the parent corporation fits with the business unit Corporate headquarters must be aware of its own strengths and weaknesses in terms of resources, skills, and capabilities. To do this, the corporate parent must ask whether it has the characteristics that fit the parenting opportunities in each business unit. It must also ask whether there is a misfit between the parents characteristics and the critical success factors of each business unit. Customer relationship management strategy, functional oriented strategy, value added services strategy are the most influencing factors adopted by the banks. Periodic meetings must be conducted by HDFC in order to provide necessary information and details to the customers. 22

OTHER STRATEGIES
Business Strategy
Business strategy usually occurs at the business unit or product level, and it emphasizes improvement of the competitive position of a corporations products or services in the specific industry or market segment served by that business unit. Business strategies may fit within the two overall categories, competitive and cooperative strategies. Lower cost strategy is the ability of a company or a business unit to design, produces, and market a comparable product more efficiently than its competitors. Differentiation strategy is the ability of a company to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service. Porters Generic Competitive Strategies

Competitive Advantage Lower Cost Differentiation Broad Target

Cost Leadership

Differentiation

Competitive Scope

Narrow Target

Cost Focus

Differentiation Focus

Business Strategy of HDFC Bank Emphasis the Following Leverage technology platform and open scalable systems to deliver more products to more customers and to control operating costs. Develop innovative products and services that attract targeted customers and address inefficiencies in the Indian financial sector. Continue to develop products and services that reduce cost of funds. Focus on high earnings growth with low volatility. 23

Generic Strategy

Overall Cost Leadership

Commonly Required Skills and Resources Sustained capital investment and access to capital: Leasing instead of buying Standardized and automated processes and processing mainly in operations

Common Requirements Tight cost control Frequent, reports

Organizational

detailed

control and

Intense supervision of labor: Structured organization Performance management responsibilities

Services designed as per the Incentives based on meeting market demand strict quantitative targets Low-cost of servicing, operations Strong coordination among functions in product Strong marketing abilities development and marketing Subjective measurement and Service designed for incentives instead of discrimination quantitative measures Differentiation Creative flair Corporate reputation for quality or technological leadership Long tradition in the industry or unique combination of skills drawn from other businesses Strong cooperation from channels Combination of the above Combination of the above policies directed at the policies directed at the particular strategic target particular strategic target Amenities to attract highly skilled labor, or creative people

Focus

Functional Strategy
Functional strategy is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage.

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Technology in Banking Innovations in information and communication technology are perceived to be the important factor for productivity and growth. The relationship between IT and Banking is fundamentally high. Because of which expected to reduce costs, increase volumes and facilitate customized products. Public sector must adopt the technology adoption in order to compete with Private and public sector banks. Retention of the customers can be made through adoption of new technology like ATM, telephone banking, on-line bill payment and Internet banking. Market Focused or Customer Focused Any Bank whether a market-focused, or customer-focused, must first determines who are its potential customers desire, and then builds the business or service. Marketing theory and practice is justified in the belief that customer use a product or service because they have a need, or because it provides a perceived benefit. Two major factors of marketing strategy are: The recruitment of new customers (acquisition) and The retention and expansion of relationships with existing customers (base management).

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SUGGESTIONS/RECOMMENDATIONS
The customers are very enthusiastic in using more reliable and innovative net banking services. So net banking service must be provided with free from cybercrimes. Strong IT infrastructure base for providing the net banking services. The interest rates of frequently changing and the customers get confused with the actual interest rate at the current date. And the bank must inform each and every customer must be personally informed about the interest rates. Can be implemented through E-mails, Post service or Phone calls to customers. The customers are not fully satisfied with the speed and quick service of banking. This must be formulated and speedy services must be provided to the customers. Training of staff and model for ensuring the staff retains the servicing standards. Since the different age group of the customers requires different category of product features and services they must be provided accordingly to their expectations. Use of technology for innovating new products. Implementation of Business Intelligence to help in innovations and coming out as first in the market products. Periodic meetings must be conducted by HDFC in order to provide necessary information and details to the customers. Customer relationship management strategy, functional oriented strategy, value added services strategy are the most influencing factors adopted by the banks. Yet infrastructure and promotional strategies are to be improved in order to delight its customers.

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CONCULSION
As we all know that Indian banks are becoming more and more innovative and gradually dominating the market. They are capturing market share from their counterpart of the foreign bank by offering services by an innovative way. The observation and findings of the study have helped to understand the strategies followed and implemented in the bank. With this we were also able to identify certain key areas for which strategies were not formulated and were recommended as suggestions. The implementation of the suggestion can help to improve strategies and build competencies over that of their competitors.

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Appendix-1: Industry Executive Interview

(Interview with Paresh Sukthankar, Executive Director, HDFC Bank)

Source: http://www.indiainfoline.com

1. What is your growth target in current fiscal? We have steady performance in spite of a challenging, volatile environment. In the coming fiscal, HDFC Bank will grow faster than the rest of the industry.

2. How was the asset quality for Q4? Asset quality was healthy with gross non-performing assets (NPAs) at 0.97% of gross advances as on March 31, 2013, as against 1.02% of gross advances as on March 31, 2012 and 1.00% of gross advances as on December 31, 2012. Net non-performing assets remained at 0.2% of net advances as on March 31, 2013. The Banks provisioning policies for specific loan loss provisions remained higher than regulatory requirements. The NPA provision coverage ratio based only on specific provisions (not including write-offs, technical or otherwise) was at 80 % as on March 31, 2013. The total floating provision stood at Rs 1,835 crores as of March 31, 2013, as against Rs 1,435 crores as at March 31, 2012. Total restructured loans (including applications received and under process for restructuring) were at 0.2% of gross advances as of March 31, 2013 as against 0.4% as of March 31, 2012. The growth in retail book was at 26% in this quarter.

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3. Are you planning to expand total network branches? As of March 31, 2013, the Banks distribution network was at 3,062 branches and 10,743 ATMs in 1,845 cities / towns as against 2,544 branches and 8,913 ATMs in 1,399 cities / towns as of March 31, 2012. The increase of 518 branches during the year includes 193 micro branches which are primarily two member branches to expand and deepen the penetration in rural markets including in unbanked areas.

4. What is your statement on Cobrapost investigations? The Bank is committed to the highest standards of compliance, corporate governance and ethics, and has in place systems and procedures to ensure that its business is conducted in compliance with laws and regulations. The Bank has, therefore, with utmost responsibility, and after considering the nature of the alleged charges taken immediate steps to appoint Deloitte Touche Tohmatsu India Pvt Ltd; a leading accounting and audit firm, to carry out an independent forensic enquiry into the allegations and reported statements, as made by Cobrapost representatives, when secretly taping bank officials. The bank also appointed. Amarchand & Mangaldas & Suresh A Shroff & Co to examine the breaches, if any of the Banks Code of Conduct & Ethical Standards, by any bank officials, in association with the Banks internal departmental enquiry(ies), commenced to verify the truth or untruth or correctness, as the case may be, in the reported tapings of bank officials, as mentioned above. Carry out special audit of some of its Branches, where the reported videotaping was done. This process has been initiated without prejudice to the authentication of the video recordings or electronic data. In all these case, no transactions of nature have alleged in sting operations. 29