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The World- -Class Bank, Where you come first

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“Strategic Management Project on UNITED BANK LTD PAKISTAN”

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Presented by:

Dr. Tahir saeed (HOD LMS DPT)

Presented To:

SEHRISH KHAN M.PHIL SCHOLAR LMS (NDU)

OutlineUBL Introduction– Brief History– Brief Company Overview– Organizational Structure– UBL Today– Products & Services– Values At UBL

Mission, Vision– Existing– Why change?– Proposed

External Assessment

– List of Competitors Opportunities and Threats

– EFE Matrix– Competitive Profile Matrix (CPM)– Porter's Five Forces Model

Internal AssessmentStrength and Weakness– IFE

Strategy Analysis– SWOT Matrix– SPACE Matrix– BCG Matrix– Grand Strategy Matrix

Decision Stage– QSPM– Strategy Evaluation– Recommendations

• AGHA HASAN ABEDI(MAY 14,1922 Luknow India-AUGUST 5,1995 Karachi Pakistan) Was a Banker who started his Career With HBL before Independence.• He brought significant changes in Pakistan’s banking culture when he founded the UNITED BANK LIMITED in 1959.• MR ABEDI pioneered close economic collaboration in the Private sector B/w PAKISTAN and UAE.• UAE president SHEIKH ZAYED BIN SULTAN AL NAHYAN extended his patronage To UBL operations both in PAKISTAN and Abroad.

• At present there are 41 scheduled banks, The commercial banks comprise of 3 nationalized banks,3 privatized banks, 15 private sector banks, 14 foreign banks, 2 provincial scheduled banks, and 4 specialized banks.

• Total deposists of Pakistani schedule banks.• Total investments of Pakistani banking industry.• Total advances of Pakistani banking industry.

Overview of Pakistani Banking Industry

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History of UBL

• Agha khan Abedi founded the bank in Nov 7,1959• Govt of Pakistan Nationalized in 1971• Privatized on Oct 2002• sponsors include• Best way Group with 25.5% shares• Abu Dahbi Group with 25.5% shares• Govt. of Pakistan and General public hold the balances

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Cont..

• Successful banking history of over 47 year• Represented in 10 countries worldwide• Through 22 offices• All most 1100 branches through Pakistan• UBL has Assets approx Rs.300 billion• UBL has high level contacts with government and regulatory authorities

UBL TODAY

UBL has the largest domestic branch network with over 1,450 branches

55 international branches in 25 countries

Domestic market share of 40% 55% inward foreign remittance

through UBL Paid up capital Rs . 86.8 (B) (2010) Total Assets: 9.24 Trillion (2010) More than 17000 employees HBL present rating: AA+ (by PACRA) Profit after tax: 3.81 (B) (2010) Over 5.5 million customer Award: Best Emerging Market

Banks Award in Pakistan 2010

Product & Services

• Signature Priority Banking • UBL BetterLife Bancassurance • UBL Wiz • UBL netbanking • UBL e-statement• Humrah • UBL Wallet• UBL Online (for corporate customers only)• Charity/ Donations & Flood Relief • Comments & Suggestions• UBL Pay Partner• UBL Cash Collect

UBL ORGANIZATIONAL CHART

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“To be a world class bank dedicated to excellence, and to surpass the highest expectations of our customers and all other stakeholders”

Vision of UBL

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Analysis of Vision Statement.

Is it brief, short and one sentence? Yes Is it provide base for mission? Yes Does it reflects future prospective? No

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Vision Statement Evaluation

“To become a dynamic and efficient bank providing integrated solutions in order to be the first choice

bank for the customers”

• “Set the highest industry standard for quality, across all areas of operation, on a sustained basis

• Optimize people, processes and technology to deliver the best possible financial solution to our customers

• Become the most sought after investment, and • Be recognized as the employer of choice”

UBL’s Mission

Components of UBL’s MissionComponents of Mission Statement UBL Mission1) Customer Yes

2) Product No

3) Market No

4) Technology No

5) Concern for survival , growth and profitability Yes

6) Philosophy Yes

7) Self Concept No

8) Concern for public Image Yes

9) Concern for employee Yes

PROPOSED MISSION “We are committed to provide value added services and high tech innovative solutions to customers. To create sustainable value through growth, efficiency and diversity for all stakeholders. To provide a challenging work environment and reward dedicated team members according to their abilities and performance. To play a proactive role in contributing towards the society.”

External Assessment

Muslim Commercial Bank Limited (MCB) Allied Bank Limited (ABL) Habib Bank Limited (HBL)

These three banks are privatized banks of Pakistan like UBL.

Major Competitors of UBL

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Opportunities:Implementation of Basel II Accord by SBP i-e product and market development through acquisitionGrowing no of people using banking facilities, especially in peripheral areas.Wide range of online network of branches can be used to cater low cost deposit.Shift of Pakistan’s economy to a service economyIncrease client base globally through joint ventures and acquisition and mergers (3.2 M Pound from UK)Diversification towards Islamic banking and non banking services

Threats:Constant tight monetary policy/ High discount rateAttitude of people towards customer serviceCollapse of local industry led banks with little avenues to invest.Withholding tax on banking transactionPeople’s propensity to save/High Inflation/Price fluctuations Social pressure on Govt. to reduce bank’s spreadAnti Money Laundering LawsLow per capita income

Competitor Profile Matrix(CPM)

Factors (Internal and External)

Weight UBL MCB ABL HBL

Rating Score Rating Score Rating Score Rating Score

Financial position

0.18 4 .72 4 .72 3 .54 3 .54

Service quality 0.14 2 .28 3 .42 2 .28 2 .28

Management 0.10 3 .30 3 .30 3 .30 3 .30

Market share 0.12 4 .46 3 .36 2 .24 3 .36

Customer loyalty

0.10 2 .20 3 .30 2 .20 2 .20

Price competitiveness

0.10 3 .30 2 .20 2 .20 2 .20

Expansion 0.14 4 .40 2 .28 2 .28 3 .42

Advertising/Promotion

0.06 3 .18 2 .12 1 .06 1 .06

New Product 0.06 3 .18 2 .12 3 .18 3 .18

3.04 2.82 2.28 2.54

Forces High/ Low

Rivals High

Bargaining Power of Suppliers Low

New Entrants High

Bargaining Power of Buyers Low

Substitutes High

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EXTERNAL FACTOR EVALUATION MATRIX

Opportunities

Implementation of Basel II Accord by SBP i-e product and market development through acquisition

0.08 3 0.24

Growing no. of people using banking facilities, especially in peripheral areas. 0.09 4 0.36

Wide range of online network of branches can be used to cater low cost deposit. 0.07 4 0.28

Shift of Pakistan’s economy to a service economy 0.06 2 0.12

Increase client base globally through joint ventures and acquisition and mergers 0.08 2 0.16

Diversification towards Islamic banking and non banking services 0.07 3 0.21

Weighted Score

Rating Weight External Factor (General and Specific)

Threats/ChallengesConstant tight monetary policy/ High discount rate 0.09 3 0.27

Attitude of people towards customer service 0.07 3 0.21

Collapse of local industry led banks with little avenues to invest. 0.09 3 0.16

Withholding tax on banking transaction 0.06 2 0.12

People’s propensity to save/High Inflation/Price fluctuations 0.08 3 0.24

Social pressure on Govt. to reduce bank’s spread 0.07 3 0.21

Anti Money Laundering Laws 0.04 3 0.12

Low per capita income 0.05 2 0.10

Total 1.00 2.80

The above score shows that UBL is responding to opportunities and threats present in its industry because its score is more than average score of 2.50.

Internal Assessment

Strengths:Highest deposit: 747 (B), ABL= 371 (B), MCB = 431(B) and HBL = 567 (B)Largest network of branches: 1455 , ABL= 863, MCB = 1275 and HBL = 1157High total Assets: 946 (B), ABL= 449 (B), MCB = 484(B) and HBL = 725 (B)Banking software: Mysis, purchased of Rs. 5 Billion in 2005Trusted brand: more than 5.5 (M) customer Human resource (Trainings and pay band system) Diversified customer portfolio

Weaknesses:High ratio of high cost deposit to total deposit (57%, net profitability as compared to HBL) Poor customer service (As per service audit of UBL 2010, every 11th customer has complained about customer service)High Non performing loan (1.4 Billion for year 2010) High turnover of employees Always increasing bank service chargesThe physical environment of HBL’ branches is not attractive to the people

.INTERNAL FACTOR

EVALUATION MATRIX

Internal Factor Weight Rating Weighted Score

Strengths

Highest deposit 0.09 3 0.27

Largest network of branches 0.10 4 0.40

Highest total Assets 0.09 4 0.36

Best banking operating system, named Mysis ---- paper less banking 0.08 4 0.32

Human resource 0.06 3 0.18

Trusted brand 0.08 4 0.32

Diverse customer portfolio 0.06 3 0.18

Weaknesses

High Non performing loan (1.4 Billion for year 2010) 0.09 1 0.09

High ratio of high cost deposit to total deposit 0.10 1 0.10

Customer service 0.07 1 0.07

High turnover of employees 0.05 2 0.10

Always increasing bank service charges 0.06 2 0.12

The physical environment of HBL’ branches is not attractive to the people

0.07 2 0.14

Total 1.00 2.65

As the score is above than average score i-e 2.50, which means HBL has better internal position.

Strategy Formulation

Financial Strength Rating Industrial Strength Rating

Leverage --- 1 1 Profit Potential 4

Earning Per Share--- 1 1 Growth Potential 5

Profitability-----1 1 Financial Stability 3

Retained Earning ----- 2 2Ease of Entrance in the Market 3

Total 5   15

Average 1.25   3.75

Competitive Advantage Rating

Environmental Stability Rating

Brand Image -3 Technological Changes -3

Innovation -2 Rate of Inflation -2

Customer Loyalty -3 Competitive Pressure -1

Product Quality -2 Demand Variability -2

Total -10   -8

Average -2.5   -2

SPACE MATRIX

X- Axis:CA+ IS = (-2.5) + 3.75 → 1.25  Y- Axis:ES + FS = (-2) + 1.25 → (-0.75)

External Strategic Position Internal Strategic PositionFinancial Strengths (FS) Financial Strengths (FS)

Demand variability -3Rate of inflation -3Competitive pressur -4Barrier to entry into market -2 Average: -12/4= -3

ROI +4Total Assets +5Total Deposits +6Total Advance +5Average : 20/4= 5

Industry Growth (IS) Competitive Advantage (CA)

Growth potential +5Profit potential +5Ease of entry into market +1Financial stability +4 Average : 15/4= 3.75

Market share -1Service quality -3Trusted brand -2Technological knowhow -2 Average: -8/4= -2

Space Matrix Average Score Table

Space MatrixX axis: IS +CA = 3.75 + (-2) =1.75Y axis: FS+ES = 5+ (-3) = 2

FS

IS

ES

CA1 2 3 4 5 6 7 8-8 -7 -6 -5 -4 -3 -2 -1

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6

5

4

3

2

1

-8

-7

-6

-2

-3

-4

-5

-1

Aggressive Strategies•Integration

•Market Penetration

•Market Development

•Diversification

SPACE

Strengths -S Weaknesses-W1) Highest deposit2) Largest network of branches3) Best banking operating system, 4) Human resource5) Trusted brand 6) Highest total assets7) Diverse customer portfolio

1) High Non Performing Loan2) High ratio of high cost deposit to total deposit3) Customer service4) High turnover of employees5) Always increasing bank service charges6) The physical environment of UBL’ branches is not

attractive to the people

Opportunities-O SO Strategies WO Strategies1) Implementation of Basel II Accord by SBP2) Growing no of people using banking facilities,

especially in peripheral areas.3) Wide range of online network of branches can be

used to cater low cost deposit.4) Shift of Pakistan’s economy to a service economy5) Expand globally6) Diversifaction towards islamic banking and non-

banking services

1) Acquire banks which are not in a position to meet Basel –II requirements (S1,S3,S4, O1) (Horizontal Intergration)

2) Provide banking facility to those people who are not using this facility at the movement(S2,O2) (Market Development)

1)Take over an islamic bank having better customer service and low NPL( W1,W3,O6) (Horizontal Intergration)

Threats-T ST Strategies WT Strategies1) Tight monetary policy2) Customer service purification3) Collapse of local industry led banks with little

avenues to invest.4) Withholding tax on banking transaction5) People’s low propensity to save/High Inflation 6) Social pressure on Govt. to reduce bank’s spread7) Anti Money Laundering Laws8) Low per capita income

1) Use large branch network to cater lowcost deposit from market by introducting new products(T3, S2) Product development

1) Lending should be prudent to avoid NPL (W1, T1)2) High cost deposit should be avoided (T3, W2)

SWOT MATRIX

Matching Stage

Grand Strategy Matrix(GSM)

BCG MATRIX

We shall Award UBL A Star

Internal Factor Weight Rating Weighted Score

Strengths

Highest deposit 0.09 3 0.27

Largest network of branches 0.10 4 0.40

Highest total Assets 0.09 4 0.36

Best banking operating system, named Mysis ---- paper less banking 0.08 4 0.32

Human resource 0.06 3 0.18

Trusted brand 0.08 4 0.32

Diverse customer portfolio 0.06 3 0.18

Strategic Alternative

Quantitative strategic Planning Matrix(QSPM)

Strategic Alternatives

Key Factors Weight AS TAS AS TAS

Market Development

Product Development

Opportunities:Implementation of Basel II Accord by SBP i-e product and market development through acquisition

0.08 3 0.24 2 0.16

Growing no. of people using banking facilities, especially in peripheral areas. 0.09 4 0.36 4 0.36Wide range of online network of branches can be used to cater low cost deposit.

0.07 3 0.21 3 0.21

Shift of Pakistan’s economy to a service economy 0.06 2 0.12 3 0.18Increase client base globally through joint ventures and acquisition and mergers

0.08 4 0.32 2 0.16

Diversification towards Islamic banking and non banking services 0.07 1 0.07 3 0.21Threats:Constant tight monetary policy/ High discount rate 0.09 1 0.09 2 0.18Attitude of people towards customer service 0.07 2 0.14 - -Collapse of local industry led banks with little avenues to invest. 0.09 2 0.18 3 0.27Withholding tax on banking transaction 0.06 - - - -People’s propensity to save/High Inflation/Price fluctuations 0.08 2 0.16 3 0.24Social pressure on Govt. to reduce bank’s spread 0.07 1 0.07 - -Anti Money Laundering Laws 0.04 - - - -Low per capita income 0.05 2 0.10 2 0.10

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Strengths:

Highest deposit 0.09 3 0.27 2 0.18

Largest network of branches 0.10 4 0.40 3 0.30

Highest total Assets 0.09 3 0.27 2 0.18

Best banking operating system, named Mysis ---- paper less banking 0.08 3 0.24 2 0.16

Human resource 0.06 3 0.18 - -

Trusted brand 0.08 4 0.32 3 0.32

Diverse customer portfolio 0.06 - - 2 0.12

Weaknesses:

High Non performing loan (1.4 Billion for year 2010) 0.09 - - 1 0.09

High ratio of high cost deposit to total deposit 0.10 2 0.20 4 0.40

Customer service 0.07 - - 1 0.07

High turnover of employees 0.05 - - - -

Always increasing bank service charges 0.06 - - 3 0.18

The physical environment of HBL’ branches is not attractive to the people 0.07 2 0.14 3 0.21

1.00 4.08 4.28

The sum of Total Attractiveness Score shows that product development is

slightly better alternative then market development.

Treasury Rate SheetWednesday, March 31,2011

We will recommend UBL management to use following growth strategies:

Product DevelopmentMarket penetrationHorizontal Diversification

Recommended Strategies

Strategy Implementation

Annual ObjectivesPoliciesResource allocationManaging conflictsOrganizational designChangeMarketing issuesFinancial Issues

Strategy Evaluation Frame workPublished Sources of strategy evaluationInformationEffective Evaluation SystemAuditing

Strategy Evaluation