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S.# Keys External Factors Opportunities 1 Introduction of innovative products 2 State Bank increases Paid up Capital which ultimately opportunity for larger banks 3 Government focusing and support for enhancing the overall exports. Implementation of Enterprise Resource Planning (ERP) & Customer Relationship Management 4 systems. 5 Investment opportunities increases in banking sector through Joint Ventures 6 Increasing scope of small and medium enterprises. Incessant investment in recruiting, retaining and training to high achievers and experienced 7 professionals by banking sector. 8 Extension of International network of the branches Weight 0.1 0.05 0.08 0.15 0.07 0.05 0.08 0.05 Rating 3 3 4 2 3 3 3 3 Weighted Score 0.3 0.15 0.32 0.3 0.21 0.15 0.24 0.15
9 10 11 12 13 14 15
Threats Intense Competition in banking sector. Uncertain economic conditions Unstable political & Law & Order situation in Pakistan Government allows union activities in organizations Inflation is still on high trend of around 20% Fluctuation in State Bank of Pakistan's Fiscal Policy Increasing SBP regulations in the banking industry Total Score
3 2 2 3 3 3 2
Note: The rating Value are as follow: 1= 2= 3= 4= Poor Response Avg. Response Above Avg. Response Superior Response
S.# 1 2 3 4 5 6 7 8 9 10
Critical Success Factor Product/service Quality Govt. Supported products Competitiveness Quality Management Financial Position Advertising Customer Loyalty Global Expansion Market Share Branch network Total Score
Weight 0.15 0.1 0.14 0.08 0.14 0.08 0.06 0.05 0.08 0.12 1.00
Rating 3 2 3 3 2 1 3 1 2 4
Note: The rating Value are as follow: 1= 2= 3= 4= Major Weakness Minor Weakness Minor Strength Major Strength
IFE - Internal Factor Evaluation Matrix S.# Keys Internal Factors Weight 0.10 0.08 0.10 0.12 0.07 0.05 Rate 4 4 3 4 4 3 Weighted Score 0.40 0.32 0.30 0.48 0.28 0.15
Strengths Bank is in its growing stages so there is good financial position. 1 Professional and Committed workforce 2 Low cost than other major banks 3 Increasing the number of branches in the country 4 Successfully launching new Product Lines 5 6 Efficient internal communication system Weaknesses 7 Less market share 8 Lobby system in management 9 Slow in introducing new products 10 Losses in consumer products 11 The staff is not satisfied with the salary structure 12 Employee retention policy is very weak. Note: The rating Value are as follow: 1 2 3 4 = = = = Major Weakness Minor Weakness Minor Strength Major Strength
Total Score
2 2 1 2 2 2
Weaknesses-W
Less market share 2 Lobby system in management
3 4 5
Increasing the number of branches in the country 5 Successfully launching new Product Lines 6 Efficient internal communication system
Losses in consumer products The staff is not satisfied with the salary structure 6 Employee retention policy is very weak.
Opportunities-O
1
SO Strategies
WO Strategies
Introduction of innovative products State Bank increases Paid up Capital which ultimately opportunity for larger banks Government focusing and support for enhancing the overall exports. Implementation of Enterprise Resource Planning (ERP) & Customer Relationship Management systems.
2 3 4 5
Foreign Investment has been in increasing trend so we To increase the participation in Exports Policy due aggressive growth in deposit 1 1 require strong fund manager to invest the bank money in it's mean bank will strategies to increase their exports in Pakistan. (S3,O3) fund market according of Banking & SECP law.(W3,O4) Branches will increase in 2008 due to increase the Paid-Up Capital by SECP Require attractive package and Facilities to Exporters to 2 2 (S1,O1) transit the money.(W3,O3) Try to Retain the talented staff to increase the bank Bank has increase the transaction of Mutual Fund Industries to increase the Capital 3 3 efficiency and banks has also investing in training of staff. Adequacy (S2,O5) (W6, O8)
Investment opportunities increases in banking sector through Joint Ventures 6 Increasing scope of small and medium enterprises. Incessant investment in recruiting, retaining and training to high 7 achievers and experienced professionals by banking sector. 8 Extension of International network of the branches
Threats-T
1 2 3 4 5
ST Strategies
Increase the branches network in rural areas because also strong competitors 1 available in Urban areas. (S1,T8) Interest on Deposit should be require revision due to strong policy of SBP for deceasing differences between loan and deposit interest.(S3,T7) Require increasing network of Consumers Financing to incrementing % of Bank. 3 (S4,T1,T8)
2
WT Strategies
Inflation will be in increasing trend and its is effect on 1 direct bank profit.(W3,T5) GDP Growth expected low in 2008-2009 (6.5% to 7%)its 2 require to reduce the staffing(W6,T3) Provision of Non-performing is big threat during 3 competition environment.(W5,T1)
Intense Competition in banking sector. Uncertain economic conditions Unstable political & Law & Order situation in Pakistan
Government allows union activities in organizations Inflation is still on high trend of around 20% 6 Fluctuation in State Bank of Pakistan's Fiscal Policy 7 Increasing SBP regulations in the banking industry
8
SPACE Matrix
S. #
Rating
1 2 3
Cash and Balances with treasury bank increase by 23.81% in last year Total Assets increase by 3.01% in last quarter of 2008 as compare to 2007 Balance sheet size increase by 15.2 % in 2008 as compare to 2007 Total Rating of FS
4 5 4 13 2 2 3 4 11 -1 -4 -3 -1 -9 -4
New Regulation of increased paid-up capital up 6 bn. provides the capital advantage. Banking sector growing Increasing Demand of Islamic Banking Profit Potential in commercial sector Total Rating of IS
Inflation in Pakistan Political instability in Pakistan Banking deregulation has created instability throughout the industry like decreasing rate on deposit of customer account and increase in interest rate Technological Changes Total Rating of ES
Brand recognition in consumer products Belongs to strong business group Total Rating of CA ES Average is -9/4 = -2.25 CA Average is -12/3= -4.0 IS Average is 11/4=2.75 FS Average is 13/3=4.33
-5 -3 -12
Directional Vector Coordinates: X-axis: 2.75+(-4.0)=-1.25 Directional Vector Coordinates: Y-axis: -2.75+(4.33)= 2.08
Bank AL-Falah
SPACE Matrix
Conclusion:
ES Average is -9/4 = -2.25 CA Average is -12/3= -4.0 IS Average is 11/4=2.75 FS Average is 13/3=4.33
+1 (worst) to +6 (best) -1 (best) to -6 (worst)
Directional Vector Coordinates: X-axis: 2.75+(-4.0)=-1.25 Directional Vector Coordinates: Y-axis: -2.75+(4.33)= 2.08
Financial Strength
FS +Y
+6 Conservative +5 +4 +3 +2 Competitive Advantage Industrial Strength Aggressive
(-1.75,+2.00)
+1
CA -X
-6 -5 -4 -3 -2 -1 -1 -2 Defensive -3 -4 -5 -6 Competitive +1 +2 +3 +4 +5 +6
+X IS
-Y ES
Environmental Stability
Strategies Recommended: Bank Alfalah is in a position of Conservative (2nd Quadrant) where it has achieved. Hence bank should follow the conservative strategies such as utilize their resources carefully, concentrate market penetration and product development.
in % 12%
in %
15
in %
+10
Dogs
Low -20
Strategy Recommended: As Bank Alfalah lies in Ist quadrant and it has relatively low market share but high Industry growth. Therefore Bank Alfalah should apply the Strategies like Market penetration & Product development.
II
III
IV
VI
VII
VIII
IX
Location: Quadrants I, II and IV Quadrants III, V and VII Quadrants VI, VIII and IX = = =
IFE Score
EFE Score
12%
2.8
2.77
Strategy Recommended: Bank AlFalah position lies in Sector-V and it has strong IFE as well as High EFE score. Therefore bank should apply the Hold and maintain strategies ( Market penetration an product development are two commonly employed strategies for these types of division.
Quadrant IV
Recommended Strategy: The evaluation reveal following the factors to be followed, because it fall in 2nd Quadrant: 1 2 3 4 5 6 7
Market Development Market Penetration Product development Forward Integration Backward Integration Horizontal Integration Concentric diversification
1 2 3 4 5 6
Strengths Bank is in its growing stages so there is good financial position. Professional and Committed workforce Low cost than other major banks Increasing the number of branches in the country Successfully launching new Product Lines Efficient internal communication system Weaknesses Less market share Lobby system in management Slow in introducing new products Losses in consumer products The staff is not satisfied with the salary structure Employee retention policy is very weak.
SUB TOTAL
7 8 9 10 11 12
1 2 3 4 5 6 7 8
Opportunities 0.12 3.00 0.36 3.00 Introduction of innovative products State Bank increases Paid up Capital which ultimately opportunity for larger 0.08 3.00 0.24 2.00 banks 0.15 4.00 0.60 4.00 Government focusing and support for enhancing the overall exports. Implementation of Enterprise Resource Planning (ERP) & Customer 0.07 2.00 0.14 4.00 Relationship Management systems. 3.00 0.24 2.00 Investment opportunities increases in banking sector through Joint Ventures 0.08 0.05 3.00 0.15 2.00 Increasing scope of small and medium enterprises. 0.08 0.24 Incessant investment in recruiting, retaining and training to high achievers and experienced3.00 professionals by banking 1.00 sector. 0.05 3.00 0.15 3.00 Extension of International network of the branches Threats Intense Competition in banking sector. Uncertain economic conditions Unstable political & Law & Order situation in Pakistan Government allows union activities in organizations Inflation is still on high trend of around 20% Fluctuation in State Bank of Pakistan's Fiscal Policy Increasing SBP regulations in the banking industry
SUB TOTAL SUM TOTAL ATTRACTIVENESS SCORE
9 10 11 12 13 14 15
Recommendation: Bank Alfalah should emphasize on Product Development toward conventional banking.
S. #
HAS THE FIRM PROGRESSED SATISFACTORILY TOWARD ACHIEVING ITS STATED OJECTIVES?
Result
NO
YES
NO
Nowadays, Monetary Policy have changed (increase discount rate) the economic factors like GDP, Inflation etc. changes. Government emphasizing to increase Pakistan export and try to maintain Rupee value against Dollar.