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Introduction
Strategic Management - An Introduction
Strategic Management is all about identification and description of the strategies that managerscan carry so as to achieve better performance and a competitive advantage for their organization.
An organization is said to have competitive advantage if its profitability is higher than the
average profitability for all companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts which a manager
undertakes and which decides the result of the firms performance. The manager must have a
thorough knowledge and analysis of the general and competitive organizational environment so
as to take right decisions. They should conduct a SWT Analysis!Strengths" Weaknesses"
pportunities" and Threats#" i.e. they should make best possible utilization of strengths" minimize
the organizational weaknesses" make use of arising opportunities from the business environment
and shouldnt ignore the threats.
Strategic management is nothing but planning for both predictable as well as unfeasible
contingencies. $t is applicable to both small as well as large organizations as even the smallest
organization face competition and" by formulating and implementing appropriate strategies" they
can attain sustainable competitive advantage.
$t is a way in which strategists set the ob%ectives and proceed about attaining them. $t deals with
making and implementing decisions about future direction of an organization. $t helps us to
identify the direction in which an organization is moving.
Strategic management is a continuous process that evaluates and controls the business and the
industries in which an organization is involved& evaluates its competitors and sets goals and
strategies to meet all e'isting and potential competitors& and then reevaluates strategies on a
regular basis to determine how it has been implemented and whether it was successful or does it
needs replacement.
Strategic Management gives a broader perspective to the employees of an organization and they
can better understand how their %ob fits into the entire organizational plan and how it is co(
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related to other organizational members. $t is nothing but the art of managing employees in a
manner which ma'imizes the ability of achieving business ob%ectives. The employees become
more trustworthy" more committed and more satisfied as they can co(relate themselves very well
with each organizational task. They can understand the reaction of environmental changes on the
organization and the probable response of the organization with the help of strategic
management. Thus the employees can %udge the impact of such changes on their own %ob and can
effectively face the changes. The managers and employees must do appropriate things in
appropriate manner. They need to be both effective as well as efficient.
ne of the ma%or role of strategic management is to incorporate various functional areas of the
organization completely" as well as" to ensure these functional areas harmonize and get together
well. Another role of strategic management is to keep a continuous eye on the goals and
ob%ectives of the organization.
Different Types of Strategy
Research and development strategy
)usinesses cannot grow and survive without new products. $t is the role of *+, specialists to
generate new product ideas" nurture them carefully and develop them fully into commercially
viable propositions. Where innovation proves to be a costly e'ercise imitation could also be tried
as a fruitful option. Many -apanese electronics companies were uite successful in copying
American technology and by avoiding *+, costs" improved their competitive strength
significantly.
Operations Strategy
This strategy outlines steps to keep costs under check and improve operational efficiency. The
focus is on arriving at decisions regarding plant layout" plant capacity" production processes"
inventory management etc.
Financial strategy$t deals with financial planning" evaluating investment proposals securing funds for various
investments and controlling financial resources. Thus raising funds" acuiring assets" allocating
funds to operations" using funds efficiently etc are all part of the strategy.
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Marketing Strategy
$t deals with strategies relating to product pricing" distribution and promotion of a companys
offering important issues here cover what type of products at what prices through which
distribution channel and by the use of which promotional tool and sales force etc.
Human Resources strategy
/* strategy deals with hiring" training" assessing" developing rewarding motivating and retaining
the number and types of employees reuired to run the business effectively" internal !union
contracts" productivity indices" labor turnover" absenteeism accidents etc# and e'ternal factors
!labor laws" son of the soil" reservation" eual employment opportunity" employment of children
and women etc# need to be carefully evaluated while formulating /* strategies.
Constraints and strategic choice
0iewed collectively the *+, strategy should encourage innovation& marketing should stress
brand loyalty and reliable distribution channels of production should maintain long production
runs" cost reduction" finance should focus on cash flows and positive returns and /* department
should develop strategies for retaining and developing a stable workforce. f course
organizations do come across constraints while formulating functional level strategies in several
forms" how to finance the proposals what kind of risk to be taken" how to combine suppliers and
make channel partners happy" how to encounter competitive retaliation etc. $n any case while
selecting appropriate strategies at corporate business and functional level the following criteria
should be kept in mind.
Strategy Implementation:
Strategy implementation is the process of translation of strategies and policies into action
through the development of programs" budgets and procedures $t is typically conducted by the
middle and lower level management but is reviewed by the top management. /owever" programs
and procedures are simply more detailed plans for the eventual implementation of strategy.
1nless the corporation is appropriately organized" programs are adeuately staffed and activities
are properly directed these operational plans fail to deliver the goods. To be effective a strategy
must be implemented through the right organization structure and appropriate management
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practices. $n addition" management must also ensure that there is progress towards" ob%ectives
according to plan by instituting a rigorous process of control over important activities. The
following figure would help in understanding the process of strategy implementation.
Directing
2eople should be motivated to implement a new strategy in desired ways. $t is not sufficient
merely to have people who can do the %ob& it is necessary to have people who want to do the %ob
the way you need it done. $n addition to traditional motivational techniues managers should also
make use of modern techniues in order to inspire people to perk performances.
WHAT IS A FINANCIAL STRAT!"#
To get the most out of your financial resources and achieve sustainability you3ll need to
successfully manage all your funding and financing sources in an overarching strategy for your
organization. 4ind out how to go about this and who to involve.
W$y $a%e strategies#
Many organizations manage income from a number of different funding and finance sources (
from donations" grants" contracts and income generated from trading.
A financial strategy enables your organization to assess your financial needs and the sources of
support reuired to meet your ob%ectives and fulfill the organizational mission" whilst also
planning for continued growth to enable stability.
5ou3re financial strategy will derive from your mission. So the first step is to clearly define why
you e'ist and you plan to achieve your mission before preparing any budgets.
What's your mission?
A mission statement is a brief declaration of an organizations !ur!ose and
"alues # the reason $hy it e%ists& our mission should be a long#term
statement of intent deri"ing from the "ision that originally ins!ired the
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organization to form& )t shouldn't be a detailed list of $hat you $ill do* ho$
you'll do it and $hen&
4ocusing on your mission will help you move your focus from what you do" to what you want to
achieve.
nce your mission is clear you3ll be able to set strategic goals !both medium and long term# that
set the direction of your organization.
With your direction clear you can create a coasted" timed and detailed work plan that outlines the
operational activities necessary to achieve each goal down to the day to day activities. This will
ensure that your mission and financial goals are complementary to each other rather than in
competition.
Whats the role of a +nance function?
*ather than being seen as a separate function" %ust doing the books" your finance function should
be integrated within" and add value to" the overall planning and management of every
organization.
5our finance function ( whether that is a team or an individual ( can add value to both planning
and management. The key roles are6
2roviders of information for decision(making
)usiness management.
4inancial managers will need to assess what information they have" particularly on costs and
income pro%ections to be able to control or plan the future.
What's the role of the trustee board?
The financial management role of a voluntary organization trustee board is uite different to a
commercial organization. The three main financial management functions of the board are
financialmonitoring" proceduresandmanagement.
Most voluntary organizations are financially accountable to a far greater number of stakeholders
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that commercial organizations being funded by a combination of ta' concessions and money
from the general public" local government and charitable trusts.
The goal of ma'imizing shareholder value ( which can be measured ob%ectively ( is not relevant
to non(commercial organizations. $nstead" the whole trustee board must demonstrate value for
money and effectiveness" which by their nature are more sub%ective criteria.
A financing strategy is integral to an organisations strategic plan. $t sets out how the
organisation plans to finance its overall operations to meet its ob%ectives now and in the future.
A financing strategy summarises targets" and the actions to be taken over a three to five yearperiod to achieve the targets. $t also clearly states key policies which will guide those actions.
Managing an organization3s financial resources so as to achieve its business ob%ectives and
ma'imize its value. Strategic financial management involves a defined seuence of steps that
encompasses the full range of a company3s finances" from setting out ob%ectives and identifying
resources" analyzing data and making financial decisions" to tracking the variance between actual
and budgeted results and identifying the reasons for this variance. The term 7strategic7 means
that this approach to financial management has a long(term horizon.
At the most fundamental level" financial management is concerned with managing an
organization3s assets" liabilities" revenues" profitability and cash flow. Strategic financial
management goes a step further in ensuring that the organization remains on track to attain its
short(term and long(term goals" while ma'imizing value for its shareholders.
Strategic financial management also means that short(term goals may occasionally need to be
sacrificed to meet longer(term ob%ectives. A typical e'ample is when a loss(making company
trims its asset base through factory closures or headcount reduction in order to reduce operating
e'penses. While such actions have a detrimental effect on near(term results because of
restructuring costs and other one(time items" it positions the company to achieve profitability in
the longer term.
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Financia& Strategies
A large part of the business plan for any small business is the financial section of the plan. The
financial section includes the income statement" cash flow statement and balance sheet. 4or new
businesses" these financial statements will be pro%ections" whereas for an e'isting the business
the section will contain several years of history as well as pro%ections. $n addition to statements"
the plan should include the financial strategies of the business in how finances will be handled.
Cas$ F&o' Management
The income statement and balance sheet of a business may look great on paper" but if the cash is
not properly managed" the small business can uickly go under. 2art of the financial strategy of
the business plan will detail how cash will be used in the business. This includes identifying an
amount that will always be in reserves as well as how ma%or e'penses will be paid. )y laying out
the financial cash strategy ahead of time" it will make financial decisions easier about when to
write a check and when to access a line of credit during normal business practice.
(urc$ases
Any purchases made through the business" particularly large purchases" should have detailed
guidelines in the business plan. This will determine which purchases will be made with cash" a
line of credit and with a credit card. This strategy will also outline taking advantage of the terms
of suppliers. 4or instance" if a supplier offers 89(day terms" the business will wait until the end of
the term to make a payment. $n addition" the purchasing strategy should specify if approval is
needed by a manager or board for purchases over a certain amount.
Co&&ections
$f the business is not properly managing its own receivable" it can be devastating to the financial
health of the business. The financial strategy should detail the collections plan. This may include
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dedicating in(house staff to following up with overdue customers or turning them over to an
outside agency. $t will also specify late fees and if deposits are due before products and services
are delivered for new customers.
In%estments
Although a specific investment strategy may not be able to be detailed in a written plan" general
guidance should be given to management. This includes a percentage of money invested in high(
risk portfolios vs. lower(risk portfolios. The investment section of the plan will also include
guidelines of when approval is needed to make changes to current investments or to liuidate
investments to cover business necessities.
Considerations
The financial strategy of a business plan should be a general guide. While some specifics" such
as approval authorities can be outlined" it will be difficult to account for every possible financial
scenario that may arise in the business. /owever" the financial strategy should be enough of a
guideline to direct the basic staff of the business in conducting the financial aspects of the
business from paying for purchases to making payroll.
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Strategic Management in )an*ing
,eveloping a strategic mindset in the fast changing environment of banking. )anks and
regulators alike have woken up to the growing needs of emerging $ndia. ver the past couple of
years" the $ndian banking sector has displayed a high level of resilience in the face of high
domestic inflation" rupee depreciation and fiscal uncertainty in the 1S and :urope. This has
necessitated the banks in $ndia to concentrate much more on operating efficiency" outsourcing
and cost optimization now than ever before. With deregulation of savings bank rate and bleak
global economy" the banks are focusing on alternative sources of revenue" like fee income" trade
and vendor financing" geographic e'pansion et al to ma'imize their revenues. The )anking
sector in $ndia has adopted and embraced technology to keep pace with the international
development in the banking industry and offer uality products to its clients. Technology has
enabled banks to conceive and deliver products that are more in line with the reuirements of its
clients on the one hand and also more cost efficient on the other. We have captured few emerging
trends in the )anking space that are gaining traction.
The competitive environment in the banking sector is likely to result in individual players
working out differentiated strategies based on their strengths and market niches. 4or e'ample"
some players might emerge as specialists in mortgage products" credit cards etc. whereas some
could choose to concentrate on particular segments of business system" while outsourcing all
other functions. Some other banks may concentrate on SM: segments or high net worth
individuals by providing specially tailored services beyond traditional banking offerings to
satisfy the needs of customers they understand better than a more generalist competitor. To be
strengthened to ensure transfer of funds on real time basis eliminating risks associated with
transactions and settlement process. )anks will have to adopt global standards in capital
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adeuacy" income recognition and provisioning norms. *isk management setup in )anks will
need to be strengthened. )enchmark standards could be evolved. *egulatory set(up will have to
be strengthened" in line with the reuirements of a market(led integrated financial system will
have to adopt best global practices" systems and procedures. )anks may have to evaluate on an
ongoing basis" internally" the need to effect structural changes in the organization. This will
include capital restructuring through mergers ; acuisitions and other measures in the best
business interests.
$)A and ?st century will bring about all(embracing convergence of computing"
communications" information and knowledge to radically change the business of banking. The
growth of high speed networks" coupled with the falling cost of computing power" is makingpossible applications undreamed of in the past. 0oice" data" images" and video may now be
transferred around the world in microseconds.
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opportunities of a rapidly(changing environment. They recognize that without the right
technology" they cannot hope to remain globally competitive. The present study investigates
Sustainable )anking Strategies adopted by $ndian banks by reviewing the last decade
performance of scheduled commercial banks in $ndia. The development of banking sector and its
stability is essential for the overall development of the economy. The stability of banking sector
is determined on the basis of its performance and uality of assets. This study e'amines the
various issues of the
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Improve Income
There is a lot of opportunity to improve income. :ach opportunity reuires adaptation for the
bank that wants to pursue it. The future will be ruled mainly by big banks that can scale up their
value proposition !and a few niche banks" some owned by bigger banks#.
Gro !y ac"uisition
Some banks are buying up troubled or smaller banks or assets at home or abroad. Their challenge
is to effectively integrate their acuisition and ensuring that the promised value is captured. A
heavy(handed approach from the acuiring company without understanding the acuired banks
market" customers" or culture can destroy value and lose business.
Gro !y e#pansion
)anks which are able to fund e'pansion of their operations into new markets need an effective
e'pansion strategy to capture value and recover investments.
Gro !y partnership
$nnovating services and creating something really new for customers can be achieved through
innovative partnerships.
Community Marketing
)anks range in size and capabilities. Small banks may only have one or two branch offices
whereas large commercial banks may have thousands of branches across the nation. *egardless
of the size of the bank" each branch needs to tailor local marketing strategies to serve the
immediate community. =onsumers bank in a place where they feel safe and comfortable. This
means tellers and account representatives who speak :nglish as well as any prominent language
in the community. )y having branch managers look at the local community needs" the bank can
attract a larger percentage of the target market.
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$roduct %undling
A successful strategy employed by all banks is product bundling" such as offering a free checking
account for those who open a savings account. )ecause this has become common practice"
successful strategies implement creative bundling solutions. An automatic home line of credit
with a mortgage refinance might be a solution when interest rates are low or the community has
a large percentage of consumers looking to consolidate debt.
$re&'pproved $roducts
=onsumers are more likely to say yes to something when they already know they are approved
for it. )anks can review e'isting accounts to determine positive banking and credit trends in
customers. Those identified with positive trends and credit history are sent 7pre(approval7 letters
for credit cards" lines of credit or mortgages.
Grow organically
)anks need to grow back their customer bases and deepen their relations and share of wallet.
They must reverse the attrition of their e'isting customers" and try to generate new business by
selling more products to e'isting customers and attracting new customers.
This reuires an innovative approach in order to be the preferred bank for target customers.
)anks are re(e'amining their portfolios and customer segments. They are identifying the
customer segments they want to serve and where they think they can be competitive.
More than ever" they will have to understand each segment and build a pragmatic and convenient
customer value proposition relevant to that segment. More than ever" banks will have to focus on
the long term value of a customer" not %ust immediate transactional value.
ome o!!ortunities for creating "alue $ith your customer base
Customer
ive customers reasons to trust you.
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Make customers happy" make their lives easier !not more complicated#
Segment customers and develop value propositions for target segments" based on needs
and behaviors
Measure and improve customer loyalty" across product lines
Process
*ethink processes from a customer e'perience perspective and create a superior customer
e'perience
ptimize processes to present a seamless face to the customer across all products and
channels
Channel
*ethink branch operating models and branch network footprint
$ncorporate all channels into an integrated customer e'perience.
1se technology to provide multi(channel" more convenient access to products and
services
Product
=reate more transparent products !for assets" liabilities" off(balance products#
ffer the right products to the right customer segment based on their risk profile
)undle products and services relevant to a target segment to reward customers for
keeping more products with you
)uild a strategic pricing framework that drives relation deepening and customer loyalty
Train front staff to be able to describe products simply and clearly" rightly target them and
take new clients properly on board
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Service
$mprove service operation e'cellence. Train and incentivize staff to delight your target
customers
,evelop personalized relationships with your most valuable customers. *edirect front
staff time to relationship(building with most valuable customer segments& automate standard
transactions through remote channels to gain efficiency
Align the service model with the value that customer segments bring
$nnovate your sales systems& improve cross(selling and retention rates
Improve Efciency
The future will also be ruled by banks that can simplify their product lines and processes. Many
banks have high cost structures. They can improve their bottom line" decrease costs by
improving efficiency" while increasing service levels and the uality of the customer e'perience.
4ocus on a clear customer value proposition. Stop trying to do everything at once
Align processes" systems" structure and key pro%ects to the overall strategy
Streamline systems and processes across functions and product lines. $ntroduce end(to(
end process simplification for key processes.
1se technology to measure and improve operational efficiency and productivity
$mprove efficiency and effectiveness of people by engaging them and reducing attrition
of your best talent
Optimize Allocation o Capital
Adapt to new regulations ( capital" risk" liuidity
,eleverage balance sheets where needed
btain more reliance on fee income and balance loans to deposits ratios
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Manage operational risks6 trading" reputation" product" workforce" and cyber(security.
The challenge is to manage these risks with minimal constraint to customer convenience and
minimum impact on capital
Allocate capital across business lines" investing in the best customers and the business
lines important to them
(eller Re)errals
)ank tellers interact with the ma%ority of the bank clientele. Tellers perform the day(to(day
transactions" such as cashing checks" making deposits or transferring money. Successful banks
consistently train tellers to look for opportunities to cross(sell bank products and refer customers
to the right person. A teller may see a regular customer cash a dividend check and refer the
person to the investment specialist. The teller may see a high savings balance and suggest a
higher (earning time certificate. Smart banks reward top referring tellers to entice them to take
the time to suggest a new product or service.
$remier Services
2remier services are designed to attract high net worth bank clientele. /igh net worth clients
often have different needs as well as e'pectations. )y offering a select set of private bankers to
personally handle all transactions and account reviews" client trust increases. Service is often
better with private bankers able to focus on finding the best solutions to fit complete financial
scenarios.
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Eotak intro
About Eotak Mahindra )ank :stablished in ?BF9" the Eotak Mahindra group has been one of
$ndia3s leading financial services conglomerate. $n 4ebruary >@@G" Eotak Mahindra 4inance Htd"
the group3s flagship company was given the license to carry on banking business by the *eserve
)ank of $ndia !*)$#. This approval creates banking history since Eotak Mahindra 4inance Htd. is
the first non(banking finance company in $ndia to convert itself in to a bank as Eotak Mahindra
)ank Htd.
Eotak Mahindra )ank offers complete retail financial solutions for varied customer
reuirements. The Savings Account goes beyond the traditional role of savings and provides a
range of services through a comprehensive suite of investment services and other transactional
conveniences like nline Shopping" )ill 2ayments" AS)A" !Automatic T, sweep(in and Sweep(
out# etc. The )ank also offers an $nvestment Account where Mutual 4und investments are
recorded and can be viewed in a consolidated fashion across fund houses + schemes. ne can
purchase" redeem" switch and even make systematic investments in Mutual 4und Schemes of
over >@ $ndian Mutual 4und houses. All this can be availed through $nternet or phone banking
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services. The )ank also offers loan products such as 2ersonal Hoans" =ommercial 0ehicle Hoans"
etc.
Eeeping in mind the diverse needs of the )usiness =ommunity" Eotak Mahindra )ank offers
comprehensive business solutions that include =urrent Account" Trade Services" =ash
Management Services and =redit facilities. Eotak Mahindra )ank has over 8?? full(fledged
retail branches and over B?F ATMs spread across >8? locations in the country. The )ank has the
products" the e'perience" the infrastructure and most importantly the commitment to deliver
pragmatic" end(to(end solutions that really work.
+ota* Ma$indra )an*is the fourth largest $ndian private sector bank by market capitalization"
headuartered in Mumbai" Maharashtra. The banks registered office !headuarters# is located
at Mumbai"$ndia.
$n 4ebruary >@@G" Eotak Mahindra 4inance Htd" the group3s flagship company was given the
licence to carry on banking business by the *eserve )ank of $ndia!*)$#. Eotak Mahindra
4inance Htd. is the first company in the$ndian banking historyto convert to a bank.
Merger Strategy 1sed by Eotak Mahindra )ank
$ntroduction
$n @?8" Eotak Mahindra )ank Himited !Eotak# announced its acuisition of $
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/owever" industry e'perts had doubts on the synergies of the merger. They uoted a study by
E2M and Wharton which found FGJ of Merger and Acuisitions !M+A# failed to produce any
benefits and over half of M+A ended up reducing shareholder value instead of increasing it.
Some e'perts were worried about the various challenges the merger deal threw up" such as the
cultural differences between the two banks and the reaction of the employees union among
others. /owever" other e'perts were positive about the deal.
Since ancient times" an indigenous banking industry had prevailed in $ndia with some
communities being traditionally involved. These communities mostly ran huge businesses apart
from the banking business. $n fact" the banking business was relatively smaller than their other
businesses. They mainly dealt in money lending" did not accept deposits from customers" and
discouraged savings.
The western type of banks came into the picture in the late ?Fth century in $ndia when )ank of
/industan was established in ?KK@ in =alcutta !now Eolkata# in Western $ndia. Hater" eneral
)ank of $ndia was established in ?KFL in =alcutta. =alcutta became the center of banking
activities mainly due to the trading activities of )ritish :mpire. $n the ?Bth century" the ma%or
development in the $ndian banking industry was the establishment of three presidency banks by
the )ritish :ast $ndia =ompany. /owever" in ?B>?" these three presidency banks were
amalgamated to create the $mperial )ank of $ndia.
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M*' 'ctivity In Indian %anking Sector
The $ndian banking sector did not witness too many M+A activities when compared to western
and other countries. After the first stage of nationalization in ?BLB" only G8 mergers took place in
the $ndian banking sector. $n >L of these deals" 2S)s acuired private sector banks that were on
the brink of failure" mostly on a directive from the *)$. The remaining F deals happened
between private sector banks.
The merger prior to the Eotak and $@?@ when )ank of *a%asthan merged with $=$=$ )ank in a 1SIGBF million deal. There
were many reasons for the low number of M+As in $ndia. These included restrictive regulations"
a ma%or part of the banking industry being owned by the $ndian government" and the rigid
resistance by strong employees unions.
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'!out +otak Mahindra %ank ,imited -+otak.
Eotak started as a 9 shares of Eotak for every ?"@@@ shares
of $
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Synergies Out O) (he Merger
The merger increased the geographical presence and further deepened Eotaks network" thanks to
the complementary network of $
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Challenges O) (his Deal
The ma%or challenge was related to human resource management. The salary structure of both
banks was also uite different. Around one(third employees of the ?@"9B? employees of $
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Strategic Rationale and !ene)its
Eotak" with L8? branches and relatively deeper presence in the West and ?8 branches" with a wide(spread pan($ndia
network" getting both breadth and depth given the strong geographic complementarity between
Eotak and $
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organizations have strong cultures and employee best practices and the combined entity will
work towards imbibing these and building a world(class organization. $