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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.
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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
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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
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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
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April 2010
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2010]
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th
April 2010
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thApril 2010
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thApril 2010
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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
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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/