Sim Assignment Final Final

8/3/2019 Sim Assignment Final Final

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Strategic Information

Management

Prepared by:sadia3/1/2010


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Executive Summary

Dutch-Bangla Bank Limited is a Private Commercial bank operating in Bangladesh established

in 1991 providing all types of banking services with the exception of investment banking. It has

the largest Automated Teller Machines (ATM) network in the country and is the largest donor

from the banking sector to charitable causes in Bangladesh. The mission statement of the

organization focuses on service quality and contributions to society. The recent economic

downturn since 2008 has dampened the performance of the company, but is expected to rise as

the global economy climbs out of recession. Challenges to the growth of the organization also

come from stiff competition from local and foreign banks.

From the findings of the report, several recommendations have been suggested. These include

improving the credit rating of the organization to the same level as the top local banks and

foreign banks operating in the country. A change in the mission statement has also been

recommended to highlight the importance of financial soundness of the organization. The reportconcludes with the acknowledgement that DBBL is following an evolutionary strategy for growth

by capitalizing on its strengths.


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Table of Contents

1.1 Introduction 4

2.1 Background and Assumptions 5

3.1 Mission and Core Objectives 6

3.1.1 Mission Statement 7

3.1.2 Core Objectives statement 7

4.1 Remote Environment 8

4.1.1 PEST analysis 8

4.1.2 SWOT analysis and Alternate Strategies 10

5.1 Industry Environment (Porters 5 forces) 12

6.1 Competitive advantages and Critical success factors 14

6.1.1 Ansoff matrix 15

7.1 Alternate Strategies 16

8.1 Conclusion and Recommendations 17

9.1 Bibliography and References 18


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1.1 Introduction

The need for a clear strategy in an organization is essential for the success of a company.

Shareholders, customers and employees will have confidence in an organization if they have a

clear understanding of direction the organization is heading. According to Dimmick (2008),

developing strategic options is an essential part of an organizations strategic information

planning (SIM). An organization, thus having identified its goals, vision and priorities can weigh

its strategic options in order to forge its forward looking strategy.

For the purposes of this paper, we shall be analyzing the Dutch-Bangla Bank Limited

(DBBL), a private commercial bank in Bangladesh. The attributes of the organization which

include its strengths, weaknesses, competitors, operating environment and external factors shall

be looked at through several analyzing processes such as PEST, SWOT and Porter5 factors.

We shall also look into how the organizations various attributes shape its strategic plan and

business operations. Alternative strategic approaches and critical success factors shall be

presented and finally, conclusions and recommendations will be provided at the end of the

paper.


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2.1 Background and Assumptions

According to www.dutchbanglabank.com, Dutch-Bangla Bank Limited (DBBL) was established

in 1991 by local (Bangladeshi) shareholders and a Dutch company DMO. DBBL provides all

types of banking services with the exception of investment banking and initially commenced with

a focus on financing high growth manufacturing industries in Bangladesh. According to

www.dbbl.com.bd, it was incorporated as a Public limited company in 1994. According to

www.dsebd.org, DBBL first listed in the Dhaka stock exchange in 2001. According to

www.bangladesh-bank.org there are at present 29 financial institutions in the country and

according to www.dutchbanglabank.com, DBBL was the first amongst those 29 institutions to

become to become fully automated in 2002 when it introduced fully modern banking services in

Bangladesh.

Other than banking activities, its other focus is to further social causes in the country, also

known as Corporate Social responsibility (CSR). DBBL is well known for donating generously to

social causes. According to DBBLs website, it is one of the largest donors in the country and

the largest bank donor in Bangladesh. It is also well known amongst the general public for

having greatest number of Automated Teller Machines (ATM) in the country by a large margin

compared to its competitors.
http://www.dsebd.org/http://www.dsebd.org/


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Purpose

(Why the company exists)

Strategy

(Competitive position anddistinctive competence)

Values

(What the company believes in)

Behavior Standards

(Policies and Behavior patternsthat underpin the distinctiveCompetence and the Value

system)

3.1 Mission, Vision and Objectives

The purpose of the mission statement is to give direction and motivation to the organization in

achieving its goals. Through the mission statement, an organisation can also portray itself the

way it would like to be seen by the public and other organizations such as the government.

According to www.dutchbanglabank.com, DBBLs Mission Statement is composed of three

sections provided below -

Mission statement

Vision Statement

Core Objectives statement

The overall mission statement seems to have been presented in three different sections to cater

to different audiences those being primarily its shareholders, general public and its employees.

We shall be analyzing the Mission and Core Objectives statement. The Ashridge mission model

states that the mission statement of an organization should consist of four key elements as

shown in the figure below-

In sections 3.1.1, 3.1.2 and 3.1.3, the report shall analyze the different sections of the mission

statement and see how it fulfills the different components of the Ashridge mission model (AMM).


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3.1.1 Mission Statement

DBBLs mission statement is as follows-

Dutch-Bangla Bank engineers enterprise and creativity in business and

industry with a commitment to social responsibility. "Profits alone" do not hold

a central focus in the Banks operation; because "man does not live by bread

and butter alone".

The mission statement seems aimed primarily at shareholders. It addresses both the

Purpose (engineers enterprise and creativity in business and industry) and Values (social

responsibility) component of the AMM. The second line of the Mission statement serves

to emphasize to its shareholders that profits is not the one and only goal of the banks

operation. This is consistent with its past actions where since 2001, where according to

www.dutchbanglabank.com, DBBL has pursued the philanthropic approach by

contributing 5% of its pre-tax income to discharge its CSR programs.

3.1.2 Core Objectives

Dutch-Bangla Bank believes in its uncompromising commitment to fulfill its

customer needs and satisfaction and to become their first choice in banking.

Taking cue from its pool of esteemed clientele, Dutch-Bangla Bank intends to

pave the way for a new era in banking that upholds and epitomizes its vaunted

marques "YOUR TRUSTED PARTNER."

The core objectives statement addresses the primarily the strategy aspect of the AMM,

whereby it states its aim to become the most attractive bank for customers. This is to be

achieved through service quality and customer satisfaction. A secondary objective of the

Core objectives statement is to act as a reminder to its employees what its customers

expect from the bank.


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4.1 Remote Environment

The remote environment comprises of the factors that the organization has little or no control

over but affects the organisation. A PEST and SWOT analysis will be presented in this report.

4.1.1 PEST analysis

The PEST analysis comprises of Political (and legal), Economic, Socio-cultural and

Technological forces.

Political- Bangladesh has had a stable political environment since elections were

last held in December 2008. Periods of instability usually precedes any upcoming

election. Since slightly more than year has passed since the new government was

elected, the political environment is expected to remain stable in the upcoming years.

However, the present governments inability to as of now state clearly its economic

agenda and policy objectives has not helped the economic climate.

Economic- Due to the global Economic downturn and financial crisis, overall lower

economic activity has adversely affected the performance of the banking industry,

both in Bangladesh and in the rest of the World. Economic growth in the country is

also being stunted by severe electricity shortages which are causing a decline in the

major industries such as textile and garments. The figure 4.1.1.1 shows the growth

rate sector wise. Lower economic activity means less business for banks which

leads to lower profit margins. Nevertheless, throughout 2008 and 2009, Bangladesh

has had positive growth rate unlike the many western nations. The economic

situation is likely to improve significantly within the coming two years with the

western economies coming out of recession leading to increased export and also the

solving of the electricity problem on the domestic front.


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Fig. 4.1.1 Sectoral Growth of GDP according to www.bangladesh-bank.org

Socio-cultural The consumers of Bangladesh has seen an increase in consumer

confidence with lower unemployment rate. This has increased the willingness to take out

consumer loans such as car loans, home loans and educational loans. This socio-

cultural factor has increased the business prospects for banks in the lending sector and

is only likely to increase as the wealth of the population increases.

Technological- The banking sector in Bangladesh is already up-to-date according to

international standards in terms of technology use for banking purposes. The only

foreseeable threat is the prospect of mobile commerce, whereby money transfer and

transactions can take place directly using mobile phones thereby overlapping the

services provided by banks. According to www.allheadlinenews.com, mobile there is a

possibility that mobile commerce could be introduced to Bangladesh. That could in the

long run lead to telecom companies providing services that could overlap with services

provided by the traditional banking sector.

echnological Factors

Technological factors can lower barriers to entry, reduce minimum efficient productionlevels, and influence outsourcing decisions. Some

technological factors include R&Dactivity, automation, technology incentives, rate of technological change, Recenttechnological developments,

Technology's impact on product offering and Impact on coststructure.New technologies

including the internet, email and mobile phones will continue to open possibilities for communication, information sharing and cooperation but

this resourceremains inaccessible to the many people in the region who are poor or illiterate or in other states due to state attempts to controlfreedom of expression.


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4.1.2 SWOT analysis and Alternate Strategies

SWOT is a tool for evaluating an organization in relation to its environment. It comprises of the

strengths, weaknesses, opportunities and threats that in relation to DBBL.

Figure 4.1.2.1 (SWOT Analysis)

The two internal factors of SWOT are Strength and Weaknesses:

Strength-

o DBBL has the strongest ATM network in the country. According to their annual

report, the total number of DBBL automated teller machines is to reach 700 in

number. However, according to www.dutchbanglabank.com, the ATM section of

DBBL is not financially rewarding and an alternative approach strategy could be

to increase usage fees for the ATMs.

o DBBL has a well developed and implemented Corporate Social responsibility.

This enforces its image and helps to differentiate itself from its competitors
http://www.dutchbanglabank.com/http://www.dutchbanglabank.com/


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Weaknesses-

o In order to differentiate itself from the many local banks and put itself in the

league of the international banks operating in the country such as HSBC and

Standard Chartered bank, it needs to obtain a credit rating in the league of those

banks. According to www.dutchbanglabank.com, currently DBBL has been

assigned a credit rating of A1 by the Credit Rating Agency of Bangladesh

(CRAB) and with the improvement of the credit rating can attract more

customers. According to www.reportbd.com, the CAMELS rating for 2008 gave

DBBL a rating of (B-) which falls in the second best category.

o Its banking products are hard to differentiate against those offered by its

competitors. Compelling banking products and the need to market them

effectively is necessary to attract new customers.

The two external factors of SWOT are Opportunities and threats:

Opportunities-

o Being a leader on CSR activities in the banking industry, DBBL can further

increase its contributions to CSR and capitalize on it through effective marketing

and raising awareness about its activities, thereby cementing its image as a

socially conscious bank.

o It can diversify away from its focus on financing the manufacturing industry to

financing other growing industries such as the service industry and possibly

study the agriculture industry.

Threats-

o The main threat comes from stiff competition from other banks.


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5.1 Industry Environment (Porters 5 forces)

Porters 5 forces, established by Michael Porter in 1979 describe five forces affecting the

profitability of a company. In this section, each of the forces along with an analysis done is for

DBBL in relation to that force-

Intensity of rivalry amongst existing competitors Banks mainly provide only two

types of services, lending services and deposit services on which they have to compete. In

lending services, banks primarily compete by packaging loan services in various forms and

secondly by the loan interest rate. In deposit services, the deposit interest rate and the quality

of service are primary competitive factors. There are 29 financial institutions in Bangladesh

which is quite a high number for a small economy, and this results in intense competition to

attract customers.

Threat of entry by new competitorsThe number of financial institutions has caused

market saturation. This is a primary detractor to new entrants in the industry. Secondly, the high

cost of setup, such as setting up branches and ATM network acts as a significant barrier to

entry in the banking industry. Nevertheless, new competition from reputed international banks

could pose major a threat in the long run. According to www.thedailystar.net, Citibank recently

expressed its interest in entering the retail banking industry in Bangladesh and this shows that

barriers to entry can be overcome by foreign banks.


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Pressure from substitute productsThe service of lending money does not have any

significant substitute products to warrant any cause for concern for DBBL and its competitors.

Bargaining power of buyers- Bargaining power of buyers i.e. lenders is low when it

comes to negotiating power. Lending rates are usually fixed. However, when it comes to

choosing between competitors, the lending rates of banks are where the main bargaining power

of the lenders lies. Since there are a large number of competitors, and lending rates vary

between the banks, the bargaining power of potential lenders is high in that respect.

Bargaining power of suppliers- A banks main source of supply is its depositors who

supply the money. Depositors have no bargaining power as because there is usually a set

interest rate that the bank will pay for its deposit. Therefore the deposit rate is primarily used by

suppliers to assess where to deposit their money.


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6.1 Competitive advantages and Critical success factors

Since competitive interest rates in delivering credit and deposit services can be easily and

quickly replicated, they do not pose any competitive advantage for DBBL or any other

competing bank. Hence, DBBLs competitive advantage and critical success factors lies in other

factors which are-

Extensive ATM network- This allows DBBL to differentiate itself from its other

competitors. Maintaining this competitive advantage will prevents competitors

from snatching existing customers away from DBBL who prefer the

convenience of the vast network of ATMs spread throughout the country.

Several other banks have also opted to use DBBLs ATM network and pay

DBBL for the service instead of creating their own and this acts as a

testament to the success of DBBLs ATM network policy.

CSR Policy DBBLs CSR policy can be acknowledged as a competitive

advantage in gaining exposure and portraying itself in a positive light.

Maintaining this policy is critical in differentiating itself from its competitors

which could help DBBL in wooing potential and first-time customers.

Credit Rating of Organization- Currently the credit rating of DBBL is

satisfactory compared to the other local banks. However, banks with higher


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credit ratings are seen as more reliable and trustworthy by the public. Hence

obtaining a higher credit rating similar to the foreign banks is a critical

success factor in developing its own image to customers and high profile

investors.

Service Quality- Good service quality builds relationships and trust which

helps retain existing customers. Thus, the reason why DBBLs Core

objectives statement emphasizes on service quality and reflects its

importance on the success of the organization

6.1.1 Ansoff matrix

According to www.quickmba.com, the Ansoff matrix is a tool used by an organization to assess

its present and potential products and markets. There are four possible product-market

combinations as shown in the figure 6.1.1.

Figure 6.1.1.1 Ansoff matrix

All banks fundamentally provide two basic products, deposit services and lending services.

Through market segmentation, the same product is differentiated slightly and repackaged to

cater to specific target groups. DBBL is operating in the existing market-existing product section
http://www.quickmba.com/http://www.quickmba.com/


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of the Ansoff matrix which is the least risky of the four sections. It also has no strategy in place

to extend to rural regions of the country or open branches in foreign countries.

7.1 Alternate Strategies

From the analysis done in this report, several recommendations can be suggested of which

some of them can be implemented through changes in its forward looking strategy.

The credit rating of the company should be improved. Following the global financial

crisis, the credit rating of a financial institution has become increasingly important in

judging an organisation.

The mission statements should be modified to mention the need for sound financial

practices within the organization. This is especially important following the collapse of

several prominent financial institutions during the recent economic downturn.

Consequently, it could also emphasize the need for a high credit rating.

The benefits of CSR activities, although beneficial for the image of the company is hard

to quantify in terms of actual benefit it brings to the success of the organization. A

method of quantifying its value should be developed to reassure its critics and

shareholders that the benefits obtained from such activities outweigh the costs incurred.


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8.1 Conclusion and Recommendations

In conclusion, DBBL seems reliant on an evolutionary strategy for growth of the organization. In

the short run, certain changes can be introduced such as improving its credit rating and

capitalizing on its CSR activities through effective marketing. In the long run, it needs to

differentiate itself from the other local competitors. For this, its strategy should be to utilize its

existing stronger position to build its brand up its brand image and reputation by sustaining

superior service and quality in comparison to its competitors.


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9.1 Bibliography

http://www.dutchbanglabank.com/, (2009), Brief-History,[URL:http://www.dutchbanglabank.com/about_us/brief_history.html], 14

thApril 2010

http://www.dbbl.com.bd, (2004), About Us,[URL:http://www.dbbl.com.bd/old_site/About_Us/aboutus_main.htm], 14

thApril 2010

http://www.dsebd.org, Dhaka Stock Exchange Limited (2009), Company information:DutchBangla, [URL:http://www.dsebd.org/displayCompany.php?name=DUTCHBANGL], 15

th

April 2010

http://www.bangladesh-bank.org/, (2009), Bank & FIs, [URL:http://www.bangladesh-bank.org/],15

thApril 2010

www.dutchbanglabank.com, (2009), Mission_Vision, [URL:http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009\PDFs\Mission_Vision.pdf], 16

thApril 2010

www.dutchbanglabank.com, (2009), Financial Statements 2009, [URL:

http://www.dutchbanglabank.com/investor_relations/financial_statements_2009.html], 16

th

April2010

www.bangladesh-bank.org, (2010), Bangladesh Monetary Policy 2010, [URL:http://www.bangladesh-bank.org/openpdf.php?urlpdf=mediaroom/speech/apr132010gp.pdf], 16

th

April 2010

www.allheadlinenews.com, (2008), Exclusive: GrameenPhone Plans For Money TransferBusiness In Bangladesh, [URL:http://www.allheadlinenews.com/articles/7009962107], 15

thApril

2010]

www.dutchbanglabank.com, (2010), Technology Investment rationale, [URL:http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairma

n_foreword.pdf], 17

th

April 2010

www.dutchbanglabank.com, (2010), Credit Rating of Bank, [URL:http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdf], 17

thApril 2010

www.reportbd.com, (2008), CAMELS Rating of Banks Bangladesh, [URL:http://www.reportbd.com/blogs/11/CAMELS-Rating-of-Banks---Bangladesh.html], 17

thApril 2010
http://www.dbbl.com.bd/http://www.dbbl.com.bd/http://www.dsebd.org/http://www.dsebd.org/http://www.dsebd.org/displayCompany.php?name=DUTCHBANGLhttp://www.dsebd.org/displayCompany.php?name=DUTCHBANGLhttp://www.dsebd.org/displayCompany.php?name=DUTCHBANGLhttp://www.bangladesh-bank.org/http://www.bangladesh-bank.org/http://www.dutchbanglabank.com/http://www.dutchbanglabank.com/http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009/PDFs/Mission_Vision.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009/PDFs/Mission_Vision.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009/PDFs/Mission_Vision.pdfhttp://www.dutchbanglabank.com/investor_relations/financial_statements_2009.htmlhttp://www.dutchbanglabank.com/investor_relations/financial_statements_2009.htmlhttp://www.bangladesh-bank.org/http://www.bangladesh-bank.org/http://www.bangladesh-bank.org/openpdf.php?urlpdf=mediaroom/speech/apr132010gp.pdfhttp://www.bangladesh-bank.org/openpdf.php?urlpdf=mediaroom/speech/apr132010gp.pdfhttp://www.allheadlinenews.com/http://www.allheadlinenews.com/http://www.allheadlinenews.com/articles/7009962107http://www.allheadlinenews.com/articles/7009962107http://www.allheadlinenews.com/articles/7009962107http://www.dutchbanglabank.com/http://www.dutchbanglabank.com/http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/http://www.dutchbanglabank.com/http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.reportbd.com/http://www.reportbd.com/http://www.reportbd.com/blogs/11/CAMELS-Rating-of-Banks---Bangladesh.htmlhttp://www.reportbd.com/blogs/11/CAMELS-Rating-of-Banks---Bangladesh.htmlhttp://www.reportbd.com/blogs/11/CAMELS-Rating-of-Banks---Bangladesh.htmlhttp://www.reportbd.com/http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/http://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009%5CPDFs%5Cchairman_foreword.pdfhttp://www.dutchbanglabank.com/http://www.allheadlinenews.com/articles/7009962107http://www.allheadlinenews.com/http://www.bangladesh-bank.org/openpdf.php?urlpdf=mediaroom/speech/apr132010gp.pdfhttp://www.bangladesh-bank.org/http://www.dutchbanglabank.com/investor_relations/financial_statements_2009.htmlhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009/PDFs/Mission_Vision.pdfhttp://www.dutchbanglabank.com/investor_relations/Annual_Report_2009/PDFs/Mission_Vision.pdfhttp://www.dutchbanglabank.com/http://www.bangladesh-bank.org/http://www.dsebd.org/displayCompany.php?name=DUTCHBANGLhttp://www.dsebd.org/http://www.dbbl.com.bd/


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www.thedailystar.net, (2010), Citi plans retail banking, [URL:http://www.thedailystar.net/newDesign/news-details.php?nid=133823], 18

thApril 2010

www.quickmba.com, (2007), Ansoff Matrix, [URL:http://www.quickmba.com/strategy/matrix/ansoff/],18

thApril 2010
http://www.thedailystar.net/http://www.thedailystar.net/http://www.thedailystar.net/newDesign/news-details.php?nid=133823http://www.thedailystar.net/newDesign/news-details.php?nid=133823http://www.quickmba.com/http://www.quickmba.com/http://www.quickmba.com/http://www.thedailystar.net/newDesign/news-details.php?nid=133823http://www.thedailystar.net/

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