STRATEGIC MANAGEMENT

Report –

Marketing, Financial and Strategic analysis of Askari Bank

Submitted by –

Nouman Ahmed (10877)

Shoaib Qasim

Ali Fahd

Naji Khatak

Zaheer Malik

Submitted to –

Mr. Kamaran Azam

Date – 17/11/2013

- 2 -

TTAABBLLEE OOFF CCOONNTTEENNTTSS

CCOONNTTEENNTTSS PPAAGGEE

FFRRAAMMEEWWOORRKK OOFF AANNAALLYYSSIISS...................................................................................................................................................................... 33

EENNVVIIRROONNMMEENNTTAALL AANNAALLYYSSIISS.................................................................................................................................................................. 44--88

EFE matrix.............................................................................................................. 4-5

Porter’s five forces analysis.................................................................................... 5-6

PEST analysis............................................................................................................ 7-8

INTERNAL ANALYSIS.................................................................................................. 9-10

IFE matrix................................................................................................................ 9-10

IINNDDUUSSTTRRIIAALL AANNAALLYYSSIISS.............................................................................................................................................................................................. 1111

CCPPMM mmaattrriixx............................................................................................................................................................................................................................ 1111

FFIINNAANNCCIIAALL AANNAALLYYSSIISS................................................................................................................................................................................................ 1122--1133

RRaattiioo aannaallyyssiiss.................................................................................................................................................................................................................... 1122--1133

MMAATTCCHHIINNGG SSTTAAGGEE............................................................................................................................................................................................................ 1144--1155

SSttrraatteeggiicc ffoorrmmuullaattiioonn.......................................................................................................................................................................................... 1144--1155

- 3 -

Framework of Askari Bank Limited Analysis

Environmental Analysis

(EFE ,Porter’s five forces model and PEST)

Internal Analysis

(IFE)

Industrial Analysis

(CPM analysis)

Financial Analysis

(Ratio analysis)

Matching Stage

(Strategic formulation)

- 4 -

ENVIRONMENTAL ANALYSIS (EFE, Porter’s five forces model and PEST)

EFE Matrix

EFE Matrix for Askari bank (Key external factors)

Opportunities: Weight Rating WS

Threats: Weight Rating WS

1. Askari Bank can get the opportunities by increasing its

branch network internationally.

2. ACBL can introduce special schemes of lending for

potential small industries.

3. ACBL can increase its operations by proper promotional

campaigns of its new innovative services.

4. Increase the capacity of branch instead of going towards

overstaffing.

5. House financing schemes can be offered to general public.

6. In agrarian cities like Bahawalpur there is a potential for

giving credit facilities to farmers.

7. Bank is not yet performing utility services for the utility

companies like WAPDA it can increase its operations also

in this direction and so a new source of earning.

0.15

0.05

0.03

0.05

0.10

0.14

0.15

3

3

4

3

2

2

2

.45

.15

.12

.15

.20

.28

.30

1. As the bank has not big branch network so customers feel

inconvenience in dealing with ACBL.

2. Bank can lose market share due to insufficient promotional

activities.

3. SBP levy heavy penalties on bank in case of violating the

prudential regulations especially in case of advances.

4. Now the other players of banking are also providing the

modern technology based services like online and Internet

banking facility so there is no more competitive advantage

in this area

5. The bank is completely anatomized in case of system

failure.

6. Expansion of newly established banks like AL-FALAH and

FAYSAL BANK and their best performance can reduce the

market share of ACBL.

7. As the banking procedures are complicated that is why

general public takes interest into other options of

investments like in shares of companies and in Term

Finance Certificates.

8. Responding to the SBP's prudential regulations

management takes too much care while granting loans.

0.10

0.05

0.02

0.05

0.01

0.01

0.01

0.03

3

3

2

3

2

2

2

3

.30

.15

.04

.15

.02

.02

.02

.09

- 5 -

Total 1.00 2.56

W-S of ‘2.56’ suggests that ‘Askari bank’ strategies are working above average to capitalize

external threats and opportunities.

Porter’s five forces analysis

Rivalry among competing firms:

Rivalry not depends on number of competitors in any market but only the rate of competition

that market prevails, means that competitors of equal level are actually the concerned

competitors. Talking of Askari bank three banks (Faysal bank, Alfalah bank and Habib bank)

are concerns for Askari bank.

Bargaining power of supplier:

Suppliers bargaining power increases due to poor liquidity and poor international financial

rating of Pakistan therefore all fund suppliers are avoiding to supply credit to Pakistani.

Depositor’s bargaining power also increases due to availability of many banks as option for

better mark-ups.

9. In near future the world is going to be free trade zone so the

concept of "survival of the fittest" will be in action.

10. After the 11 September incident and due to terrorist

activities in Pakistan the economy is moving very slowly. It

means there is less investment and as a result low loan

demands in the banking sector.

11. High rate of taxes on banking companies are levied

0.01

0.01

0.01

2

2

2

.02

.02

.02

- 6 -

Bargaining power of buyer:

Due to high interest rates demanded by banks small firms are not in position to borrow,

therefore only big organizations (that are very few in numbers) can afford to borrow from

banks. Result in small number of buyers and large number of suppliers. This helps borrowers

to negotiate with banks and get desired spread.

Threat of new entrants:

Many international banks such as (Barclay and BOC) are entering in Pakistan which are

capable of acquiring large number of market share.

Threat of substitute:

This threat is not much serious. Some parties like (mutual funds and security dealers) are

providing financial services aside banks but they are only limited to larger cities.

Forces Intensity

1 Rivalry among competing firms Medium

2 Bargaining power of supplier High

3 Bargaining power of buyer High

4 Threat of new entrants High

5 Threat of new substitute Low

- 7 -

PEST Analysis

A broad view of market is important when management is interested in introducing better

services for customers. Rapid technological change, global competition and the diversity of

buyers preferences in many markets require the constant attention of the market vouchers to

identify promises business opportunities, see the shifting requirements of the buyers, evaluate

changes in competitors positioning and guide the choice of which buyers to target and

classify them according to respective segments. Identification of external and macro factors

that influence buyers and thus change the size and composition of market overtime involves

initially building customer profiles. These influences include.

1. Political environment

2. Economic Indicators

3. Socio cultural environment

4. Technological factors

Political Environment

The events in the last couple of years; ever since the sacking of Chief Justice Iftikhar

Choudhary, Pakistan has faced crisis after crisis, including the lawyers’ movement, violence

in Karachi, the Lal Masjid debacle, militancy in FATA and NWFP and its impact on other

parts of the country, the return of Benazir Bhutto and her subsequent assassination, and many

current ongoing political unstable events– all the above events indubitably made a huge

impact on the economy. Stability and law and order situation under the political regime is

very important for the economy as a whole. The present state of the government in Pakistan

is directly affecting the policies of banks. Continuous political changes have disrupted the

policies and objectives as each regime brings with it its own agenda. Organizations need time

to adjust to one regime and then work with it towards economic enhancement. Due the wrong

policies of the government, the talibanization also develop in Pakistan and become the

international issue in Pakistan and badly affected the Pakistan repute in the world and

promote the uncertain conditions for the business in the Pakistan. Due to this the investors are

not interested in the Pakistan.

Economic Indicators

The economy of any country directly influences any financial organization. Economic

indicators include Gross Domestic Product (GDP), inflation, balance of payment, debt of the

government. Pakistan’s economy has witnessed the most challenging period after posting six

consecutive years of healthy economic growth. However, the strong fundamentals were

compromised to prevailing global crises that’s shacked the confidence of global investors and

FDI flowing in the country. The steep rise in oil prices, soaring inflation, huge fiscal deficits

and balance of payments issues coupled with plummeting forex reserves added to the

economy’s move to an unstable growth. Also the load shading is another factor that affects

the Pakistan economy badly. This not the end of the story after this Pakistan’ economy face

lot of problems like bomb attacks in Pakistan no electricity and the unstable government, due

- 8 -

to this the investor are not invest in the Pakistan and the existing business men are losing

their business unit due to the loss. Due to this poor economy, businesses are reaping low

profits and stock market is in great danger. Pakistan’s foreign debts are rising day by day so

such a situation is a big challenge for banking institution to survive. The financial crisis in

Pakistan has made the management of AKBL tensed to work in such an environment.

Socio cultural environment

A low saving culture has offset the huge population advantage this is enjoyed by Pakistan.

Also culture is dedicated by the religion, and in Pakistan a significant segment of the

population is reluctant to accept interest for their deposits due to the negative religious

implications of such an act. About 70% of Pakistan’s population is based on rural areas and

literacy rate of the country is very much low, thus making it harder for banks to mobilize

their deposits within these regions. However, in today world, the customers are becoming

more intelligent and through media they keep themselves up to date. Thus, the lifestyle and

expectations of the customers from the service provider is increasing day by day.

Technological Factors

Banks in the developed world have been turning to heavy IT investments, which differentiate

their products, provide response times, enhance accessibility and improve customer

satisfaction. Though investing in state-of-the-art host banking solution, ATM and POS (point

of sale) networks, visa, MasterCard, and, smart cards, telebanking, internet banking and now

mobile banking are common IT investment in the developed world, it is now that these

products and services are gaining faster acceptance in Pakistan. In AKBL technology has

great effect on the working environment. AKBL is always willing to introduce new computer

systems for keeping its staff up to date.

- 9 -

INTERNAL ANALYSIS (IFE)

IFE Matrix

IFE Matrix for Askari bank (Key internal factors)

Strengths Weight Rating WS

0.10

0.05

0.02

0.01

0.02

0.04

0.15

0.02

0.05

0.05

0.01

0.01

0.03

0.06

3

3

3

3

3

4

3

4

3

3

3

3

3

3

0.30

0.15

0.06

0.03

0.06

0.12

0.45

0.08

0.15

0.15

0.03

0.03

0.09

0.18

1. ACBL was organized by Army Welfare Trust (AWT) so it

has strong army background.

2. The bank has entered in international business by

establishing its international branch in Bahrain.

3. The bank design service quality standards to establish

inspiring relationships to its stakeholders.

4. Staff welfare has always been a priority. New initiatives

like hospitalization plan, car buy-back facility and home

loan insurance have added new dimensions to the staff-care

policy and motivated them to outperform competitors.

5. The most important factor in determining the long-term

growth and success of an organization is culture and higher

management of ACBL plays great emphasis on the

development of ‘’Askari Culture’’, a cohesive teamwork to

achieve strategic objectives and provide quality services to

its customers.

6. Technology and automation is a backbone of ACBL’s

strategic competitive advantages overall domestic players.

7. ACBL has a countrywide network of online branch banking

business and ATM’s in all major cities of the country.

8. ACBL is first bank of Pakistan offering 24-hour computer

integrated telephone banking services.

9. ACBL has fully automated transaction-processing system

for bank office support.

10. Bank has well-developed intra-net and inter-net

communication network.

11. Bank is pioneer in e-commerce venture in Pakistan through

a major retail distributor.

12. Askari commercial bank offers Askari Master Card, which

is worldwide accepted.

13. ACBL achieved A1+, the highest possible credit rating, for

the short term obligation and its long term rating stands at

AA. Bank has been honoured with the ‘’the Best Bank in

Pakistan’’ awarded by the Global Finance Magazine.

14. Askari Bank started Islamic banking in December 2005.

- 10 -

Weaknesses Weight Rating WS

Total

W-S of ‘2.77’ suggests that ‘Askari bank’ strategies are working above average to capitalize

internal strengths and weaknesses.

1. In the corporate profile, the bank concentrates on medium

sized business and not emphasizing the small-scale

business, which are large in Pakistan.

2. Bank offers a good number of facilities only for the army

personnel and not to the general public.

3. Bank has no adequate number of branches as compared to

its competitors like MCB.UBL etc.

4. To inform its customers about its new innovative products,

ACBL is not involved any type of promotional activities.

5. The credit policy of ACBL is very strict for individuals.

6. Bank is providing credit facilities only to the urban areas

not too much attention is paid to the rural areas.

7. Most of the investment is in government securities rather

bank should invest in the corporate shares.

8. The procedure and documentation while sanction loan is

thorny, which is a barrier for advances.

9. The return on deposits is very low.

10. Due to lack of computer specialist at branch level it has to

take assistance from the head office so in case they waste

their lot of time.

11. Although the bank’s systems are fully computerised, but

still a many of the staff members are not trained in

operating the computer.

0.10

0.07

0.03

0.03

0.04

0.03

0.02

0.01

0.01

0.01

0.03

2

2

2

3

3

2

3

2

2

3

4

0.20

0.14

0.06

0.09

0.12

0.06

0.06

0.02

0.02

0.03

0.12

1.00 2.77

- 11 -

INDUSTRIAL ANALYSIS (CPM analysis)

CPM Matrix

CPM Matrix for Askari bank (Competitive Profile Matrix)

AKBL

UBL

MCB

Critical Success Factors Weight Rating Score Rating Score Rating Score

Global Presence 0.13 2 0.26 4 0.52 3 0.39

Market Share 0.07 3 0.14 4 0.28 3 0.21

Product Quality 0.09 4 0.36 3 0.27 2 0.18

Customer Satisfaction 0.08 4 0.32 2 0.16 3 0.24

Financial Stability 0.14 3 0.42 4 0.56 2 0.28

Technology 0.08 3 0.16 4 0.32 3 0.24

Advertising and Promotion 0.05 2 0.10 4 0.20 3 0.15

Brand Awareness 0.16 3 0.32 4 0.64 3 0.48

Price Competitiveness 0.13 3 0.26 4 0.52 3 0.39

Diversification 0.07 3 0.14 3 0.21 4 0.28

TOTALS: 1.00 2.48 3.68 2.84

CPM matrix indicates that AKBL has weakest CPM rating of ‘2.48’ among all three which is

not good.

- 12 -

FINANCIAL ANALYSIS (Ratio analysis)

Financial Ratio analysis

Liquidity Ratio: (determine a company's ability to pay off its short-terms debts obligations.

Generally, higher the value of the ratio, the larger the margin of safety that the company

possesses to cover short-term debts.)

1. Current ratio increased from 1.03 to 1.07

The most common liquidity ratio is the current ratio, which is also the ratio of current asset to

current liabilities. It is also expressed as how many times the assets can cover the liabilities.

Askari Bank is a developed bank but the current ratio of the bank is less than the industry

average. Both the bank’s and the average ratios are in line and within range suggesting that

Bank’s liquidity policy is in compliance with the most of the other banks in industry.

2. Liquidity ratio decreased from 0.21 to .16

It is also a liquidity measure but it is conservative than the current ratio because it doesn’t

involve the inventory in it. This ratio provides a more penetrating measure of the liquidity

than the current ratio. If we see at the bank’s ratio, we find it worse and the bank being weak

in position because the analyst and experts says that, this ratio must be greater than one. But

if we compare it with the industry average, we find it in line with the industry and most of the

other banks in the industry.

Leverage ratio: (measures ability of a firm to meet financial obligations)

1. Debt to equity ratio decreased from 15.91 to 7.49

Creditors generally want this ratio to be lower than one because the lower the ratio, the higher

the financing provided by the shareholders. If we see at the bank’s ratio it is in a worst

condition especially in 2011 (2011 ratio 15.91). It means that the bank was provided with

Rs.15.91 by creditors for financing against each Rs.1 of the shareholders. In (2012 ratioc7.49)

against each Rs.1 provided by the shareholders. Thus Askari bank is not good at this ratio.

2. Debt to total asset ratio decreased from 0.94 to 0.91

Measures a company's financial risk by determining how much of the company's assets have

been financed by debt. The ratio again must be low because the higher ratio has a higher

financial risk. In 2011 the Bank’s ratio is 0.941 which suggests that about 94.10% of the

assets have been financed by the debts, which shows a high financial risk. Same is the case in

2012 that is 91.20%. But if we compare it with the industry average we find them as in line

with the most of the other bank’s in the industry and conclude the Askari bank is in good

position at this ratio.

Activity ratio: (Accounting ratios that measure a firm's ability to convert different accounts

within its balance sheets into cash or sales)

- 13 -

1. Receivable turnover ratio increased from 1.48 to 2.83

This ratio tells us that how many times the account receivable has been turned into cash. If

we see at the Askari Bank ratio in 2011 that is 1.489. This shows that the Bank is not a

quality firm at its collection, but in 2012 it has improved it to 2.832 which suggests the Bank

has improved its collection process. Now if we compare this ratio to the industry average we

find that Bank to be in bad position.

2. Receivable turnover in days

This ratio told how many days the receivables are outstanding. In 2012 it was 272 days. The

credit standard in this regard decides that for how many days should the receivables

outstanding. Comparing the bank’s ratio to the industry average 432 days in

2012 suggest that the bank is not in compliance with the most of the other banks in industry

in 2012.

3. Total assets turnover

The total assets turnover shows that how much sales do the total assets generates. If we see at

the ratios we have 0.037 of total asset turnover that is bank is generating a mildly less sales

than does the industry.

Profitability ratio: (measures management’s overall effectiveness as shown by the return

generated on sales and investment)

1. Gross spread decreased from 30.72 to 29.10.

The main cause in decrease in gross spread is due to decrease in mark up on loans, increase in

interest on deposits and decrease of returns on investment.

2. Return on capital employed decrease from 1.06 to 0.59

Return on capital employed decreased from as year moves on.

3. Earning assets to total assets increased from 86.05 to 86.90

In financial year 2012, the overall profitability of bank declined whereas there is increase in

earning to total assets from 86.05 to 86.90.

4. EPS decreased from 2.30 to 1.54

EPS also decreased which is a bad sign.

Growth ratio: (measure the firm’s ability to maintain its economic position in the growth of

the economy and industry). Sales, net income and EPS all are low suggesting that growth

ratio of Askari bank is not good.

- 14 -

Matching Stage (Strategic formulation)

SWOT

Matrix

STRENGTHS 1. ACBL was organized by Army

Welfare Trust (AWT) so it has

strong army background.

2. The bank has entered in

international business by

establishing its international

branch in Bahrain.

3. Technology and automation is a

backbone of ACBL’s strategic

competitive advantages overall

domestic players.

4. ACBL has a countrywide network

of online branch banking business

and ATM’s in all major cities of

the country.

5. Bank has well-developed intra-net

and inter-net communication

network.

6. Bank is pioneer in e-commerce

venture in Pakistan through a

major retail distributor.

WEAKNESS 1. In the corporate profile, the bank

concentrates on medium sized

business and not emphasizing the

small-scale business, which are

large in Pakistan.

2. Bank has no adequate number of

branches as compared to its

competitors like MCB.UBL etc.

3. To inform its customers about its

new innovative products, ACBL is

not involved any type of

promotional activities.

4. The credit policy of ACBL is very

strict for individuals.

5. The return on deposits is very low.

6. Although the bank’s systems are

fully computerised, but still a

many of the staff members are not

trained in operating the computer.

OPPORTUNITIES 1. Askari Bank can get the

opportunities by increasing its

branch network internationally. 2. ACBL can introduce special

schemes of lending for potential

small industries. 3. ACBL can increase its operations

by proper promotional campaigns

of its new innovative services. 4. Increase the capacity of branch

instead of going towards

overstaffing.

5. House financing schemes can be

offered to general public.

6. In agrarian cities like Bahawalpur

there is a potential for giving credit

facilities to farmers.

7. Bank is not yet performing utility

services for the utility companies

like WAPDA it can increase its

operations also in this direction and

so a new source of earning.

SO-STRATEGIES 1. As AKBL entered in Bahrain,

now it’s the time to spread

international networking (S2, O1 ,

O4).

2. AKBL is Army backed institution,

this make possible for AKBL to

avail opportunity to increase its

customers (S1, O2, O3, O5, O6,

O7).

3. Good intra and internet network

make it possible for AKBL to go

internationally (S5, O1, O3).

WO-STRATEGIES 1. Increase its customers by going

internationally (W1, W2, O1, O2,

O3, O4, O5, O6, O7).

2. Proper promotion of new services

will increase customers (W3,O3).

THREATS 1. As the bank has not big branch

network so customers feel

inconvenience in dealing with

ACBL.

2. Bank can lose market share due to

insufficient promotional activities.

3. Now the other players of banking

are also providing the modern

technology based services like

online and Internet banking facility

so there is no more competitive

advantage in this area

ST-STRATEGIES 1. AKBL can minimize threats by

going internationally (S2, T1, T5,

T6).

2. Good communication can result in

good promotional activities (S5,

T2).

3. Easy availability of ATM

machines can increase customer

satisfaction (S4, T1).

WT-STRATEGIES 1. Good network system and latest

technology along with addition of

skilled workforce can cover wider

range of customers (W1, W2, W6,

T1, T4,T6 ).

2. Army Backing will help bank in

promotion of new services

(W3,T2).

- 15 -

4. The bank is completely anatomized

in case of system failure.

5. Expansion of newly established

banks like AL-FALAH and

FAYSAL BANK and their best

performance can reduce the market

share of ACBL.

6. In near future the world is going to

be free trade zone so the concept of

"survival of the fittest" will be in

action.

7. High rate of taxes on banking

companies are levied