locating a bank branch

Operations Management Locating a bank

0 | P a g e

LOCATING A BANK

Operations

Management

Hassam Ul Haque Mobin Kanjiani Ilyas Khan Hira Anwar Maryum Zafar BBA 6D

Operational Management Locating a Bank

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DECLARATION OF AUTHENTICITY

We declare that all material presented to Bahria University, Karachi

Campus is our own work, or it is fully and specifically acknowledged

wherever adapted from other sources. We understand that if at any

time it is shown that we have significantly misrepresented material

presented to

Bahria University, Karachi Campus, any degree or credits awarded to

us on the basis of that will be revoked.

We also declare that:

This study has not been submitted anywhere else for prior to

acceptance/rejection of our study.

This paper has not been published in the same form elsewhere.

Date: 28,October,2015

Hassam UlHaque (Reg # 32553): _________________

Mobin Kanjiani (Reg# 32581): _________________

Ilyas Khan (Reg# 32599): _________________

Hira Anwar (Reg# 32555): _________________

Mariam Zafar (Reg# 32576): _________________


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LETTER OF TRANSMITTAL

Dated: 28TH, OCTOBER, 2015

COMMANDER (Rtd) AZHAR NISAR

(Course Instructor)

Operations Management.

BBA–6D (Morning)

Subject: Report Submission

Dear Sir,

With reference to the course of Operations Management, We hereby

submit to your esteemed honour our report on the topic:

“Locating A Bank Branch In a Karachi Sub-Urban Area with the

Population of 2 Million.”

We hope that our efforts will not let down your expectations.

Thanking you for your guidance.

Yours Sincerely:

Hassam UlHaque

Mobin Kanjiani

Ilyas Khan

Hira Anwar

Mariam Zafar

CLASS: BBA – 6D

BAHRIA UNIVERSITY KARACHI CAMPUS

(MANAGEMENT SCIENCE DEPARTMENT)


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ACKNOWLEDGEMENT

By the grace of almighty “ALLAH” who gave us strength, courage and

audacity to complete this report. Without his blessings the dream of

completing this report would never come true.

With great respect we would like to express our indebtedness to Mr.

Raheel Jafri (Asst. Manager) BANK AL HABIB. It was indeed a great

pleasure meeting him.

We would like to express our sincere thanks to our teacher,

COMMANDER (Rtd) AZHAR NISAR whose guidance and interest

helped us to accomplish our job.

Last but not the least we owe sincere thanks to our parents for their

love and support. We acknowledge all those people who directly or

indirectly helped us in completing this project with a deep sense of

confidence.

BAHRIA UNIVERSITY

KARACHI CAMPUS

National Stadium Road

Karachi


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DEDICATION

We dedicate our dissertation work to our family and many friends. We

would like to share a special feeling of gratitude with our loving

parents, Mr. and Mrs. Ehtisham-ul-Haque, Mr. and Mrs. Kanjiani, Mr.

and Mrs. Munir Khan, Mr. and Mrs. Anwar Ali, and Mr. and Mrs. Zafar

for supporting us throughout our lives. Our siblings, Misbah, Mehwish,

Ahmer, Anoushia and Munir have never left our side and are very

special to us. We also like to dedicate this dissertation to our many

friends who have supported us throughout the process.


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ABSTRACT

The report is based about "Locating a bank branch in Karachi

suburban town of 02 million population" has been prepared for our

course, Operations Management. The report has been prepared to

help our bank in deciding on a location to open a new branch. Through

extensive internet research and data collection on geo demographic

variables and consultation with Mr. Raheel Jafri Operations Manager

of Bank Al-Habib, we have compiled this report. We have visited

different Locations to gather all the available information regarding a

bank. The report will help to ease the readers in understanding the

essential requirements which are needed to be analyzed when

planning to locate a new bank branch.

Location planning has become one of the most stimulating controlled

areas in operations research. This subject area pursues to

understand, examine, and enhance the processes practiced at

organizations. Product and process design, operations, and supply

chain are some key aspects of production and operations

management. The field includes the areas of facility location

planning, quality management, and operations strategies.

Location planning is a strategic decision. Facility location is a

process of determining geographic sites for a firm’s operations. It is

very important because it has a profound impact on firm’s value chain

and also on the supplier relationship process. Good location planning

can reduce your input costs from your suppliers.

Locating a new bank branch is usually costly, so the process needs

to be carefully located. For service industry such as banking the

proximity to customer is important because their operations involve

extensive customer contact. They need to be close to their

customers. Locating decision involves the participation and

coordination of all the major departments in the firm (HR, Marketing,

Operation, Finance, IT).


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EXECUTIVE SUMMARY

This report is based on “Locating a bank branch in Karachi suburban

town of 02million population”. This report was prepared using the

knowledge we are currently acquiring from the Operations

Management course. We have used the best of our skills and standard

analytical techniques to come up with the best strategic location to

open a new branch.

Locating is the one of the most important decisions which firms have

to make, because its impact will determine the profitability of the

entire organization.1

Before deciding on which locations to use for consideration, we need

to analyze our internal and external environment. Our internal

environment consists of our corporate strategies, our core

competencies, the environment scanning, the market needs and

segmentation, and finally our competitive priorities. The analysis of

external environment consists of competitor analysis, geo

demographic analysis, findings on future development projects,

crime rate and population density indicators.

In this report we have spent considerable time collecting the

timeliness data from various statistical portals, such as KMC

(Karachi Municipal Corporation), National Survey of Pakistan, and

through our interview an Assistant Operations Manager working at

Bank Al Habib.

No study will be complete without analytical, quantitative analysis,

and in our report we have managed to use all the analytical

techniques which operations managers use when making locating

decision. We used the following tools to come up with the best

possible location for opening our new bank branch, preference

matrix, and load distance matrix with the help of graphical

information system analysis(GIS).

After using the above mentioned techniques we came up with the

best possible location which will satisfy all our dominant factors of

location, and the location site is Model Colony, Malir Town, Karachi

1 “Location”,Operations Management, L. Krajewski 9th edition, pg. 390


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Chapter 1

AIMS AND OBJECTIVES

To fulfill the course requirement of “Operations Management”.

To increase our understanding about what all factors banks take

in consideration while locating.

To understand the role of Geographic Information System (GIS) in

making locating decisions.

To gather insights on the future developments that are happening

in the suburban towns of Karachi, this will play a major role in the

locating decision.

To understand the role of high standard of living and good access

of roads (infrastructure) have on locating factors.

To apply our analytical skills which we have developed during the

course come up with the best strategic location for the new bank

branch

SCOPE OF THE STUDY

This paper will provide insights on the factors that banks usually

consider before locating. Our research paper would help operation

mangers of other banks in locating. The findings of this paper can

also be used by small and large business owners who are looking to

expand and increase their reach.

Finally, this paper will provide a base for future academics who wish

to further research on locating.


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Chapter 2

IMPORTANCE OF BANKING

Banking plays a vital role in economic growth in any economy2

.

The most important duty of a bank is to provide a protection for

assets. There are also other functions which include, profit making

from the public funds, and loaning of cash to the borrowers.

A growing and dynamic banking sector is essential for revenue

generation in Pakistan because growth in the banking sector has

a profound effect on the growth of the real economy of Pakistan.

The banking sector constitutes the core of the financial sectors in

Pakistan.

The economic and financial transactions are carried out through

banking institutions. Banking sector of Pakistan has shown

tremendous growth in the last couple of years

Banking growth is increasing as compared to the past because

nowadays more people are investing and making deposits in the

bank due to more facilities which banks are providing to people

and these facilities made their life much easier. For example, they

can pay their bill through e-banking by just sitting at home, and

cards which bank have provided to their customers i.e. is debit

card and credit card through these cards they don’t have to carry

large amount of money with them and they don’t have to worry

about money snatching which is very common in our country.

According to analysts, total deposits of scheduled banks grew at

a 5-year high rate of 9 percent in nine months of 20153

.

There are around 37 banks in Karachi4

, some of them include,

Albaraka Islamic Bank, Allied Bank Ltd, Askari Bank Ltd, Atlas

Bank, Bank Alfalah Limited, Bank Islami Pakistan Ltd, The Bank Of

Punjab, Citi Bank, SME Bank, Barclays Bank, Dubai Islamic Bank,

Faysal Bank Ltd., Habib Bank Limited, HSBC, Habib Metropolitan

Bank Ltd., KASB Bank Ltd, MCB Bank, Meezan Bank Ltd, NIB Bank,

Silk Bank, Standard Chartered Bank, Summit Bank Pakistan,

United Bank Ltd., Bank Al Habib, National Bank Pakistan.

Pakistan’s GDP growth was between 3.0 % to 4.0%5

.

2 http://www.investopedia.com/articles/investing/062513/role-commercial-banks-economy.asp 3 Source: This data was published by State Bank of Pakistan on the last week of September 2015 4 Source: Wikipedia- Date 06/12/2012 5 Pakistan’s Banking Sector “Current Situation and Critical Issues” by ISHRAT HUSAIN


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Market Information and customer

feedback

Performance information

TYPICAL BANK PROCESSES

INPUTS PROCESS OUTPUTS

Employee salary

Branch rent

Competition index

Management time

Share

Deposits

Loans to

customers

Loans to banks

Investment in

stocks

Loan to State bank

Revenue

Customer

satisfaction

Variety of

services offered

Complain resolve

time


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CHAPTER 3

OVERVIEW OF THE BANK

R&B BANK

CORPORATE STRATEGY:

Vision:

To become the market leader in the banking industry through

unparalleled reach while maintaining a high degree of customer

satisfaction and loyalty.

Mission:

To make our customers prosper, our staff excel, and create value for

shareholders

Objectives:

Earn profit for the bank and its owners

To achieve sustainable growth

ENVIRONMENT SCANNING6

In the last year, the bank deposits grew by 9%, while the customer

borrowing through loans grew by 9%. In order to maintain the

stability, the State Bank of Pakistan has kept the discount rate at 10

%. The inflation rate has also dropped.

The five largest banks included Habib Bank Limited with the market

share of 16.71 percent, National Bank of Pakistan, commanding a

share of 13.12 percent, United Bank Limited with the share of 9.88

percent in total deposits, MCB Bank having 7.90 share and Allied

Bank 7.44 percent share.

There were 3 banks that declared losses in the last year, Summit

Bank, KASB Bank, and Burj Bank.

The National Bank of Pakistan is currently operating with 12.52

workers per branch, MCB is operating at 9.79 workers/branch and

Standard Chartered Bank is operating at 38.38 workers/branch

Habib Bank is the fastest growing bank right now as of June 30, it

has 1,594 branches.

The current trends also suggest that lot of banks are now focusing

on broadening their reach by locating where there is a high

probability of infrastructural development.

6 All the facts and figures in the “environment scanning” section was obtained from Jubilee Insurance Annual

Report 2015


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As far as the nation’s economy performance is concerned, Pakistan’s

GDP growth reached a 6 year high of 4.1% supported by a strong

recovery in industrial output which exhibited growth of 5.8%. Foreign

Exchange reserves have increased by 75% to $15 billion over the

year, and it has helped in bringing back investor confidence.

CORE COMPETENCIES:

Workforce:

Our well trained workforce allows us to respond to the market

needs in a timely fashion. Our bank pays great importance in the

development of staff, we also focus heavily on the management

training programs, and give training to all our staff in customer

relationship.

Technologies:

We are obsessed with technology. We believe that technology is

and will continue to be the game changer. We formulate all our

strategic decisions on the basis of technology. We believe that this

core competency will give us an edge over our competitors.

CORE PROCESSES

Customer Relationship process: It involves identifying, attracting,

and building relationships with external customers. Customers are

a big part of our operations, we need to make sure that their needs

are always met.

New service development process: we take great pride in using

our innovative capabilities to come up with new and exciting

services for our customers. The main objective of our services is

to increase our customers’ value ad satisfaction.

Order fulfillment process: we strive on being the most efficient que

handlers in the country. We set our target that our customer

shouldn’t have to wait for more than 5 minutes to get served.

MARKET ANALYSIS

Segments

Our operations are focused on small and large business owners

and the typical blue and white collar suburban employee.

We have kept aside a budget for advertising to our target market;

our primary means of advertisement will be bill boards, newspaper,

and the social media.


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Needs

The needs of our target segment are basically fast service, and our

customers will also expect us to provide them with innovative

solutions on increasing their wealth.

The small and large business owners will need a hassle free

business transaction system, and top quality customer support.

Above all, all our customers will need a safety assurance for their

money, and investment.

People visiting our branch will need to be attended quickly through

efficient que system. We will also be expected to deliver friendly

and understanding customer service.

COMPETITIVE PRIORITIES

Customer Relationship

Top quality

Consistent quality

Variety

Delivery speed

New service development

Development speed

Order fulfillment

Low cost operations

Top quality

Consistent quality

On- time delivery

Variety


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Chapter 5

Factors Affecting Locating Decisions of a new bank

branch

Small businesses become big businesses through expansion. In most

cases, business expansion occurs due to an increases in demand,

efficiencies, new production lines, more diverse or international

markets and through vertical integration. Planning for expansion is a

strategic exercise which involves identifying the exact need for

expansion. After this, a company can focus on the need and develop

more defined estimates of the time and capital required to implement

expansion efforts.

A bank expands by increasing its branch, which gives customer ease

of operations and a convenient approach to their respective banks.

Opening a bank branch in a new location is dependent on a lot of

variables. Following are a number of dominant factors a bank must

consider before locating a new branch:

1) Security

Wisdom suggests that high or increasing crime levels make

communities decline. Researchers usually translate decline to mean

an increasing desire to move or higher actual mobility of residents;

weaker attachments of residents to, and satisfaction with, their

neighborhood; less local involvement; and lower house values.

Therefore, safety and security issues in an area makes it vulnerable

to a number of un-wanted problem. Residents, as well as local

vendors and business-men take this in their primary consideration

while doing a location analysis of their future targeted areas.

Similarly, banks must also consider the safety and security issues in

an area, it is not only beneficial to the customers but as well as to

the bank staff for continuing their operations safely. Withdrawals and

deposits of cash, transactions and payments, saving and lending are

some of the core operations in a bank, customer seek safe and

healthy environment while performing these operations within and

outside the bank.

Hence, before locating a branch, a bank for the safety of its customer

and more importantly for the fear free delivery of service and

conduction of operations should take in consideration the crime


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rates, criminal events and class of residents of the area they are

interested in.

“Safety First” is an un-disputed mantra of successful businesses.

2) Density of Residents in Area

“An established business can survive without money, but it cannot at

all survive without customers.” -Anonymous

Business don’t operate in vacuum, all business need people to target

as customers and then to retain them through satisfying their need.

Therefore, highly dense areas are more of a blessing for a business

than a challenge. On one hand populated areas give more potential

targets to a business which can be later changed into beneficial

subjects to business, moreover it gives the human resource needed

by the business to run and carry out its operation.

A larger population, in itself, creates demands for education, health,

transport and general services that generates jobs, tax revenues and

enhanced economic activity.

Banks seek these highly dense areas for both of their benefits, i.e. for

targeting huge mass of customers through their marketing strategies

and awareness campaigns, as well as for targeting skilled and

eligible candidates seeking job as a solution of managing their human

resource.

3) Close to Main Transportation channels

Location and easy access, is obviously the key convenience success

factor and for your customers your location must be close to where

they live, where they work, or on their normal route to and from home

or work. In addition, your location, to be really convenient, must have

easy access and convenient ways for quick operations.

Customer convenience is continuing as a key driver in loyalty, but the

desire to get things done conveniently is not new. Ease to get at a

company’s outlet is an attractive feature most customers look at. The

right location provides both convenience and value.

Bank branches usually located at main-roads and on main

transportation channels not only attracts customers but also

promotes a bank. Therefore, while locating a branch, a bank must

consider the site which is either on a main road, or at least close to

a main road for better results in business.


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4) Away from competitor

Competition is as inevitable in business as death in human existence.

Even if your startup business has stolen a march on the rest of the

world with your product, service, execution, distribution or customer

service, somebody else will inevitably try to chase you down and beat

you at your own game.

Therefore, most businesses want to avoid competition for obvious

reasons, while targeting their set of customers and while planning

and implementing different strategies they stay alert from this

inevitable threat. Banks while locating a branch in an area must

check how many banks are already operating in that area, and plan

accordingly where to locate. Locating close to competitors will have

negative effects on attracting customers.

5) Quality of Life

Quality of life is the general well-being of individuals and societies.

Quality of life has a wide range of contexts, including the fields

of international development, healthcare, politics and employment. It

is important not to mix up the concept of quality of life with a more

recent growing area of health related quality of life.

Quality of life is also an important factor while locating a bank branch

in an area, because high quality areas tends to develop more. This

development provides a lot of growth opportunities for businesses

and community. People save and invest more, their financial status

stay positive and growing and a bank can easily continue its

successful operations in such areas.

6) Future Development Projects

Future development projects are main characteristics of a developing

and sustaining society, in terms of infrastructure, or human capital,

technology and Investments projects all are the constituents of

future development projects in a community.

These development projects provide untapped opportunities for

businesses to flourish through the need originated from these

projects. Therefore, like every other business banks must also seek

areas and communities having high concerns in these projects, so

that Banks can also benefit through these projects and grow

simultaneously with the society.


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CHAPTER 4

RESEARCH METHODOLOGY

TYPE OF THE STUDY

The nature of our study will be exploratory. Our study is based on

preliminary work.

FORMULATION OF HYPOTHESIS

As the research is exploratory, no formal hypotheses have been

formed or tested in this study.

SAMPLE SIZE

Our research sample size is 4 towns in Karachi.

1) Malir Town

2) Gadap Town

3) Bin Qasim Town

4) New Karachi Town

SAMPLING DESIGN

Our sample frame is 4 towns and was easily available.

The size of our sample will be small, and manageable.

The cost using this design will be low, because our target towns

and sample size will be low.

UNIT OF ANALYSIS

Since we will be interested in each town, our unit of analysis will be

Individual town. We will be looking at the data gathered from each

individual town and treating each town’s as an individual data source.

DATA SOURCES

Primary Source:

We visited a branch of “BANK AL HABIB”. We interviewed their

operations manager and asked him about the Location decision and

factors they weigh important while analyzing different sites for

location. Moreover, with on-place observation we collected relevant

data.


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Secondary source:

We visited official website of KMC (Karachi Metropolitan

Corporation), Sindh Police, and Wikipedia to gather information about

population, crime rate, area in square meter, expected future

developments in the towns, police stations in towns, road length. We

also collect information also from following journals:

“The Study of Location Strategy for Bank through the Analysis

of Inter-Regional Financial Transaction Network”.

“Evaluating Bank Branch Location and Performance”

Our course textbook, Operations Management, Process and

Supply Chain, 9ed

METHODOLOGY

An interview has been conducted with the Manager from whom

we discussed about why they locate a bank branch in this area

and structures of operation carried out within their banks and

how it is managed. We have also applied observation technique

in which we thoroughly analyzed different factors which effect

the bank internally and externally, the overall environment, so

to get a better concept and information about our related topic.

In our research we mostly use secondary source of data. We

visit several websites, journals to collect data.


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CHAPTER 5

ANALYSIS OF DATA

Broadly, we have to locate a bank branch in one of these four Sub-

urban towns in Karachi.

1. GADAP TOWN

2. MALIR TOWN

3. NEW KARACHI TOWN

4. BIN QASAM TOWN

For analyzing the best town from our list of 4 towns we have chosen

the Preference Matrix Analysis. In this calculation our Dominant

Factors are weight factors, we will assign to each of these 4

Alternative choices:

1. Security

2. Density of Residents in Area

3. Close to Main Transportation channels

4. Away from competitor

5. Future Development Projects

A. PREFERENCE MATRIX

A preference matrix operates in the same way as the basic decision

matrix but introduces the concept of weighting the criteria in order

of importance. The resultant scores better reflect the importance to

the decision maker of the criteria involved. The more important the

criteria the higher the weighting it should be given. Each of the

potential options are scored and also multiplied by the weighting

given to each of the criteria in order to produce a result.

Analysis of Weight Index for all towns, (calculation of all indexes is

based on the percentage):


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1. SECURITY

We have collected the data of Number of crimes in all these 4 towns

from the Sindh Police Web Services. Higher the crime rate, lower

the crime rate index.

Following are the findings:

Towns Total Crime Incidence

Area (sq metre)

Crime Rate per Sq metre-CR

1

𝐶𝑅7

Crime Rate Index

GADAP TOWN 592 2,194.05 0.27 3.703704 1.928 BIN QASAM TOWN 825 526 1.57 0.636943 0.33

MALIR TOWN 12 17.21 0.7 1.428571 0.74 NEW KARACHI TOWN 1161 21.01 55.26 0.018096 0.0094

Total 5.787314 3.0 Table 1 source: http://www.sindhpolice.gov.pk/annoucements/crime_stat_ccp_karachi.html (as of 01/11/2015)

2. Density of Residents in Area

The population density of residents in each town, is calculated

through dividing population by total area of each town. The higher the

total population, the higher value we have assigned to population

density index:

7 In order to get a high crime rate index for a low crime rate area, we will take the inverse of the values of crime

rate per area. This step will be followed by dividing each value with the sum of all the inverse values and

multiplying by 3 (so the all the Crime Rate indexes add up 3, which is a preset value)

9 PDI of Gadap Town =

200.39

85701.06∗ 3 = 0.007

Towns Population Area Population Density (population/ sq km)

Population Density Index

GADAP TOWN 439,675 2,194.05 200.39 0.0079

BIN QASAM TOWN 480,855 526 914.17 0.032

MALIR TOWN 604,766 17.21 35140.38 1.23

NEW KARACHI TOWN 1,038,863 21.01 49446.12 1.731

Total 85701.06 3.0

Table 2 source: http://kmc.gos.pk/Contents.aspx?id=94 (as of 06/12/2015)


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3. Close to Main Transportation channels

Closeness to the main road is one of the few obvious advantages a

bank has from a location, closer it is from the road, higher index we

have assigned to it:

4. Away from competitor

Competition is in-evitable and an un-wanted challenge, therefore the

higher competition there is, the lower we have assigned competition

index to that town.

10 Rank 1 is assigned the highest weight (1) and rank forth is assigned the lowest weight (0.25), all the weights

have equal distribution of 0.25 11 TI of Gadap town= (0.25/2.5) *3=0.3 12 CI of Gadap town = (0.33/0.702) *3=0.475. We take the inverse of the total competitors because there is an

inverse relationship between the total number of competitors and the competitive index

Towns Rank depending on closeness to Shahrah-e-

Faisal

Weightage10 Transportation Index11

GADAP TOWN 4th 0.25 0.3

BIN QASAM TOWN 2nd 0.75 0.9

MALIR TOWN 1st 1.0 1.2

NEW KARACHI TOWN 3rd 0.5 0.6

Total 2.5 3.0

Table 3 source: www.maps.google.com

Towns Number Of Branches of Competing Banks 1

𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑚𝑝𝑒𝑡𝑖𝑡𝑜𝑟𝑠

Competition Index12 MCB HBL NBP UBL Total

competitors

GADAP TOWN 1 1 0 1 3 0.333333 0.475015

BIN QASAM TOWN

1 2 2 1 6 0.166667 0.237508

MALIR TOWN 2 4 5 3 14 0.071429 0.101789

NEW KARACHI TOWN

1 2 3 4 10 0.1 0.142505

Total 33 0.701732 3.0

Table 4 Source: http://kmc.gos.pk/Contents.aspx?id=94 (as of 06/12/2015)& http://maps.google.com


Page | 21

5. Future development projects

Each year Government spend millions of rupees for the

development projects in every town. These projects attract

number of businessmen and residents to make more investment in

these towns. Therefore, development projects are positively

viewed and are a vital factor for banks to analyze where to locate.

FINAL DATA FOR PREFERENCE MATRIX

Criteria Gadap Town

Bin Qasim Town

Malir Town New Karachi Town

Total

Crime Rate Index 1.92 0.33 0.74 0.0094 3.0 Population Density

Index 0.007 0.032 1.23 1.731 3.0

Transportation Index 0.3 0.9 1.2 0.6 3.0 Competition Index 0.475 0.236 0.101 0.143 3.0

Future Development Index

0.75 1.01 0.82 0.42 3.0

Table 6

13 FD index for Gadap town= (410/1650)*3=0.75

Towns Total Investment projects for next 5 years (millions)

Future Development Index

GADAP TOWN Rs. 410 0.7513

BIN QASAM TOWN Rs .560 1.01

MALIR TOWN Rs. 450 0.82

NEW KARACHI TOWN Rs. 230 0.42

Total Rs.1650 3.0

Table 5 source: http://kmc.gos.pk/Contents.aspx?id=94 (as of 6/12/2015),

http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=79109&Cat=4&dt=12/24/2007,

http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=120672&Cat=4&dt=6/21/2008,

http://www.app.com.pk/en_/index.php?option=com_content&task=view&id=43384


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Assigning weight as per our preferences:

Criteria Weights Crime Rate Index 30%

Population Density Index 30% Transportation Index 20%

Competition Index 10% Future Development Index 10%

Total 100% Table 7

Finding the best town to locate a bank using preference matrix

Gadap Town Criteria Criteria Index Weights Product

Crime Rate Index 1.92 30% 0.576

Population Density Index 0.007 30% 0.0021

Transportation Index 0.3 20% 0.03

Competition Index 0.475 10% 0.095

Future Development Index 0.75 10% 0.075

Total Score (Summation of Products) 0.7781 Table 8

Bin Qasim Town Criteria Criteria Index Weights Product








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Malir Town Criteria Criteria Index Weights Product







New Karachi Town Criteria Criteria Index Weights Product







RESULTS

Calculation of best locating site by preference matrix leads to

following results:

Towns Weighted Score GADAP TOWN 0.78

BIN QASAM TOWN 0.35 MALIR TOWN 0.81

NEW KARACHI TOWN 0.65 Table 12

Therefore, the best choice to locate a bank is in Malir Town.


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Malir Town

Malir Town is one of the 18 towns of Karachi City, located in the

eastern part of Karachi, Sindh, Pakistan. Malir town is bordered by

the Jinnah International Airport and the Malir Cantonment to the

west and north, the Malir River and Shah Faisal Town to the south

and Gadap Town to the east across the Thado Nallo stream. Malir

has been regarded in history as the countryside of Karachi City due

to its open atmosphere and lush green farms.

Malir town is furthermore divided in 7 Union Councils:

1. Model Colony Uc-01

2. Kala Board Uc-02

3. Saudabad Uc-03

4. Khokrapar Uc-04

5. Jafar-E-Tayyar Uc-05

6. Gharibabad Uc-06

7. Ghazi Brohi Goth Uc-07

For Choosing the Best Site to locate from these Union Councils, We’re

applying Load-Distance method 3 ways:

1. to calculate the center of gravity (ideal location) when using the

Euclidean distances of the union councils and the Financial

District ( I.I. Chundrigar road) as the Load.

2. to calculate the center of gravity when using the Euclidean

distances of the union councils and the Malir Housing Scheme

as the Load.

3. to calculate the center of gravity when using the Euclidean

distances of the union councils and the Shah Latif town as the

Load.

After we calculate the center of gravities from 3 different loads, we

will then find the midpoint of the 3 center of gravities and that will be

our ideal location to open the new bank branch.


Page | 25

B. Load-Distance Technique

A variation of the center-of-gravity method for determining the

coordinates of a facility location is the load-distance technique. In

this method, a single set of location coordinates is not identified.

Instead, various locations are evaluated using a load-distance value

that is a measure of weight and distance. For a single potential

location, a load-distance value is computed as follows:

The GIS software which we have used to calculate the Euclidean

distances between points is Google Earth.

GOOGLE EARTH

It is formed by keyhole Incorporation a central intelligence agency

(CIA) funded company developed by Google in 2004. It is a virtual

globe, map and geographical information program that was originally

called Earth Viewer 3D. Using Google Earth can help you locate

different landmarks from all over the world. It has the ability to see

any place at any time anywhere, Google Earth can be filled with a

boundless amount of benefits. Once which stands out the most is

being able to see very popular landmarks in either 3D or from the

original space view.

GIS SOFTWARE

A Geographic Information System (GIS) lets us envision, question,

examine, and interpret data to understand relationships, designs, and

fashions. It allows us to map the location of anything like roads,

natural resources, wildlife, springs, wells, fire hydrants, water lines,

streams, and houses. It benefits organizations of all sizes and in

almost every industry.

https://en.wikipedia.org/wiki/Virtual_globe

https://en.wikipedia.org/wiki/Virtual_globe

https://en.wikipedia.org/wiki/Map

https://en.wikipedia.org/wiki/Geography


Page | 26

Data

Table 13 source: Google Earth- Refer to Appendix C pg. 38-52 for more information

UC # Union Council Distance From Shah Latif Town (Kilometers)

Distance From Malir housing

scheme (Kilometers)

Distance From financial district- I.I. Chundrighar Road

(Kilometers) 1. Model Colony 08.94 06.76 19.20

2. Kala Board 08.71 06.96 18.20

3. Saudabad 08.19 06.03 18.70

4. Khokarapar 07.54 04.54 21.30

5. Jafar-E-Tayyar 07.41 05.62 19.42

6. Gharibabad 21.45 19.50 07.58

7. Ghazi Brohi Goth 21.86 19.03 11.63


27 | P a g e

1. Center of Gravity using distance to Financial district as a load:

𝒙∗ =∑ 𝒍𝒊𝒙𝒊𝒊

∑ 𝒍𝒊𝒊 𝒂𝒏𝒅 𝒚∗ =

∑ 𝒍𝒊𝒚𝒊𝒊

∑ 𝒍𝒊𝒊

Where,

li = is the Euclidean distance between the target point and the financial district/ State bank of

Pakistan.

xi = x-coordinates of the union councils of Malir

yi = y-coordinates of the union councils of Malir

UC # Union Council Distance From financial district- I.I. Chundrighar Road (L1)/km

X-Coordinate Y-Coordinate L1x L1y

1. Model Colony 20 24.9058 67.1865 498.116 1343.73

2. Kala Board 18.83 24.8824 67.1847 468.5356 1265.088

3. Saudabad 20.43 24.8899 67.1924 508.5007 1372.741

4. Khokarapar 22.56 24.9037 67.2125 561.8275 1516.314

5. Jafar-E-Tayyar 21.06 24.9029 67.1976 524.4551 1415.181

6. Gharibabad 23.77 24.9154 67.0635 592.2391 1594.099

7. Ghazi Brohi Goth 21.45 24.9478 67.0687 535.1303 1438.624

Total 148.1 3688.804 9945.777

x1*,y1* 24.90752 67.15582

• The geographic coordinates for Location 1 are (24.908°, 67.156°)

)


Page | 28

1. Center of Gravity using distance to Malir Housing Scheme as a load:




∑ 𝒍𝒊𝒊

Where,

li = is the Euclidean distance between the target point and Malir Housing Scheme

xi = x-coordinate of the union councils of Malir

yi = y-coordinate of the union councils of Malir

UC # Union Council Distance From Malir Housing Scheme (L2)/km X-Coordinate Y-Coordinate L2x L2y

1. Model Colony 6.76 24.9058 67.1865 168.3632 454.1807

2. Kala Board 6.96 24.8824 67.1847 173.1815 467.6055

3. Saudabad 6.03 24.8899 67.1924 150.0861 405.1702

4. Khokarapar 4.54 24.9037 67.2125 113.0628 305.1448

5. Jafar-E-Tayyar 5.62 24.9029 67.1976 139.9543 377.6505

6. Gharibabad 5.45 24.9154 67.0635 135.7889 365.4961

7. Ghazi Brohi Goth 6.48 24.9478 67.0687 161.6617 434.6052

Total 41.84 1042.099 2809.853

x1*,y1* 24.90675 67.1571

• The geographic coordinates for Location 2 are (24.907°, 67.157°)


Page | 29

2. Center of Gravity using distance to Shah Latif Town as a load:




∑ 𝒍𝒊𝒊

Where,

li = is the Euclidean distance between the target point and Shah Latif Town

xi = x-coordinate of the union councils of Malir

yi = y-coordinate of the union councils of Malir

• The geographic coordinates for Location 3 are (24.906°, 67.158°).To plot the coordinates into Google

Earth, the XY coordinates of the location were converted to DMS (Degrees Minute Second)

coordinates14

. The DMS coordinates of the union councils were then plotted on the map.

14 Refer to Appendix C (pg. 53-54)

UC # Union Council Distance From Shah Latif town (L3)/km X-Coordinate Y-Coordinate L3x L3y

1. Model Colony 8.94 24.9058 67.1865 222.6579 600.6473

2. Kala Board 8.71 24.8824 67.1847 216.7257 585.1787

3. Saudabad 8.19 24.8899 67.1924 203.8483 550.3058

4. Khokarapar 7.54 24.9037 67.2125 187.7739 506.7823

5. Jafar-E-Tayyar 7.41 24.9029 67.1976 184.5305 497.9342

6. Gharibabad 8.88 24.9154 67.0635 221.2488 595.5239

7. Ghazi Brohi Goth 7.10 24.9478 67.0687 177.1294 476.1878

Total 56.77 1413.914 3812.56

x1*,y1* 24.90601 67.158


Page | 30

Figure 1 Shows the 3 centers of gravity, Location 1, Location 2, Location 3


Page | 31

Figure 2 shows the midpoint of all the 3 locations which were calculated using the 3 different loads

• The Ideal Location which is the midpoint of all the 3 locations has coordinates (24.90°, 68.19°)15

and

its closest to Model Colony, Malir Town.

15 The DMS coordinates of the Ideal location are shown in Appendix C pg. 55


32 | P a g e

SWOT ANALYSIS

STRENGTH OPPORTUNITY

Close to the target market

Low land value

A strong geographical location

with high traffic input.

Future development projects

that will provide an influx of

new residents

Steps are being taken to

improve infrastructure

WEAKNESS THREAT

Even though major

development and

infrastructure projects are

going on, the location is still

underdeveloped

The location is further away

from the financial district

Competitors opening bank

nearby.

Crime rate can affect the bank.


Page | 33

CHAPTER 7

CONCLUSION

Therefore, we have narrowed the destination of our bank to Model

Colony, Malir. It is one of the main Union Council in Malir town and

have a comparatively low crime rate, low competition, higher density

of residents and it is also close to Main Shara-e-Faisal.

The branch location in Model Colony will minimize the distance from

Financial district, Malir Housing Scheme, and Shah Latif town.

Moreover, this location will help the branch will fulfill our competitive

priority of low cost operations, and help the bank get one step closer

in achieving its vision, that is, to become the market leaders in the

banking industry.

After thorough study and in-depth analysis, we can conclude that

Model Colony is the best place to locate the new bank branch.

LIMITATIONS OF STUDY

One of the major limitation was that the data which we received

from the internet about various variables was last updated on

2005, that makes the data irrelevance on the basis of timeliness

Due to the shortage of time, we could not analyses the prospects

of other suburban towns in Karachi- our sample size was too small.

We had no prior knowledge and idea of using the GIS software, as

a result we were not able to use the software as fluidly as we

would have liked

Due to time constraints, we could not meet operation managers of

other banks to get more insight on locating, it would have had

really helped us gain more understanding on the topic


Page | 34

CHAPTER 8

References

http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=79109&C

at=4&dt=12/24/2007 (As of 06/12/2015)

http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=120672&

Cat=4&dt=6/21/2008 (As of 06/12/2015)

http://www.app.com.pk/en_/index.php?option=com_content&task=

view&id=43384 (As of 06/12/2015)

http://mda.com.pk/ (As of 06/12/2015)

http://pk.99nearby.com/police/25.002283/67.132118/gadap-town-

karachi-pakistan (As of 06/12/2015)

http://www.friendsmania.net/forum/karachi/26491.htm (As of

06/12/2015)

http://www.sindhpolice.gov.pk/annoucements/crime_stat_ccp_kar

achi.html (As of 06/12/2015)

http://kmc.gos.pk/ (As of 06/12/2015)

https://www.google.com/maps (As of 06/12/2015)

“Location”,Operations Management, L. Krajewski 9th edition, pg.

390

http://www.investopedia.com/articles/investing/062513/role-

commercial-banks-economy.asp

Pakistan’s Banking Sector “Current Situation and Critical Issues”

by ISHRAT HUSAIN


35 | P a g e

APPENDIX A

JUSTIFICATION OF VARIABLES

Crime Rate

The greater the crime rate, the riskier will be our everyday

operations.

Population density

The greater the population density, the more the chance what we will

attract and capture the needs of our target market.

Away from competitors

The further away we are from our competitors, the more chance we

have to reap up profits and increase our market share.

Closeness to the housing schemes and other development projects

Once the houses are built and people start residing, they will be

looking to change their current bank, and prefer the bank that gives

them the convenience and superior service. This will be our chance

to capitalize.

Closeness to the financial district/ and State Bank

A comprehensive bank such as ours, need to do business with people,

as well as do business with other banks, State Bank, insurance

companies, and various other financial institutions. To achieve the

maximum responsiveness and business efficiency, we need to be in

a close proximity with the financial district of Karachi.


Page | 36

Appendix B

FUTURE DEVELOPING PROJECTS

MALIR HOUSING SCHEME16

AREA OF THE SCHEME:

4000 Acres approx. (Eastern Part of Karachi) Deh Joreji Malir

Karachi.

SCHEME OBJECTIVES

Meet the Shelter demands of

Approx. 1.0 million Low &

Middle Income Group peoples,

Create economic base in the

eastern periphery of Karachi

as a growth pole to enhance

housing & commercial

development, and

Environment friendly

development.

COMMERCIAL ASPECTS

Close access to:

Highway

Bin Qasim Industrial Zone

Adjacent to Still Mills

New Economic and Commercial hub for eastern part of Karachi.

16 Source: http://mda.com.pk/


Page | 37

SHAH LATIF TOWN17

AREA JURISDICTION

7500 Acres

SCHEME OBJECTIVES

Meet the Shelter demands of Approx. 1.0 million Low Income

Group peoples,

Environment friendly development.

COMMERCIAL ASPECTS

Located in great Commercial

Potential area.

Situated close to the National

Highway

Surrounded by the Industrial

& business activities like;

15 minutes’ drive from

Karachi International Airport,

Railways Marshalling Yard,

Intercity Bus Termini in the

Heart of the Scheme

Export Processing Zone

Landhi Industrial Area

Cattle Complex/Colony

Steel Mill and Port Qasim.

17 Source: http://mda.com.pk


38 | P a g e

Appendix C

CALCULATION OF DISTANCES FOR LOAD DISTANCE METHOD USING GIS:

UNION COUNCIL-MODEL COLONY

Figure 3 Distance from model colony to Shah Latif Town


Page | 39

Figure 4 Distance form model colony to MHS


Page | 40

Figure 5 Distance from Model Colony to financial district


Page | 41

MALIR UNION COUNCIL- KALA BOARD

Figure 6 Distance from Kala Board to MHS


Page | 42

Figure 7 Distance from Kala Board to Shah Latif Town


Page | 43

Figure 8Distance from Kala Board to Financial District


Page | 44

MALIR UNION COUNCIL- SAUDABAD

Figure 9 Distance from Saudabad to MHS


Page | 45

Figure 6 Distance from Saudabad to Shah Latif town


Page | 46

Figure 10 Distance from Saudabad to Financial District


Page | 47

UNION COUNCIL-KOKARABAR

Figure 11 Distance from Khokrapar to Financial District


Page | 48

Figure 12 Distance from Khokrapar to MHS


Page | 49

Figure 13 Distance from Khokrapar to Shah Latif Town


Page | 50

MALIR UNION COUNCIL- JAFFAR E TAYAR SOCIETY

Figure 14 Distance from Jaffar e Tayar Society to Financial District


Page | 51

Figure 15 Distance from Jaffar e Tayar Society to Shah Latif Town


Page | 52

Figure 16 Distance from Jaffar e Tayar Society to MHS


Page | 53

XY coordinate to Degrees Minutes Seconds conversion18

18 The website used for conversion was www.rapidtables.com


Page | 54

Figure 17 shows how the DMS coordinates are entered into Google Earth the X-coordinates are converted to Latitude (N)

and the Y coordinates are converted to Longitude (E)


Page | 55

Figure 18 shows the DMS coordinates of the Ideal Location of the branch

locating a bank branch

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