Strategic ability of Hong Leong Bank

Strategic ability of Hong Leong blasphemeHong Leong Bank Berhad was found by Ji Chiew. The strand starts operations in 1905 in Kuching, Sarawak. In 1 January 1982, the Head Office relocated from Kuching to Kuala Lumpur. The consolidation of stranding institution to meet the requirement of Bank Negara Malaysia marks a nonher(prenominal) milest unmatchable for Hong Leong Bank Berhad. Hong Leong Bank Berhad was listed on Kuala Lumpur Stock Exchange on 17 October 1994. The market capitalisation as of recent days is RM 470 million, check to brim website. Hong Leong Bank has diversified the businesses into fiscal services, manuf dusturing, and property and home development. The services available argon personal monetary services such as impute cards, investment, loan, deposits, insurance, anteriority coasting, personal affirming and Hong Leong Club Rewards for guest loyalty (Hong Leong Bank, 2009).Industry analytic thinking2.1 Why Porters 5 formsPorters model determines t he competitiveness of an ecesis using the five contrary pull backs and shows how the forces atomic number 18 related. To develop business strategies effectively, organizations must understand and act in response to those forces. (Porter, 1985) (Fornell and Wernerfelt, 1987)Rivalry Among actual Competitors in that location are 37 sticks, which are recognized and license to operate in Malaysia and more financial institution are opening soon. The trend of increment of the minute of banks within the industry is fast and there are great ch eachenges for HLB to create and maintain a ingenuous market share. Other banks are seems to be more aggressive to get and retain customers. This force is non in kick upstairs of Hong Leong Bank. (BNM, 2009)Threat of Substitute productions and ServicesEven though there are m each a(prenominal) financial institutions available, or so unique facilities can only be obtained from the bank only. American Express facilities, co-branded wares (e.g. MTV), extravagantlyer(prenominal) engage rate, club rewards, junior/senior savings, overdraft are the few produces which only available to this bank. Thus this force is in favor to the bank. (Hong Leong Bank, 2009) (BNM, 2009) talk terms Power of BuyersHaving the whole range of financial players apart from the retail banks, it is spare that customers can move within the 40 operators and can also decide to switch to the other non-banking institutions. Their prime(prenominal) can even extend to the insurance companies, depending on the nature of the product. For instance if a customer is spirit for a small standard of loan, he/she can even get the express product from organizations give care AEON, etc. The close location of sundry(a) banks is also giving customer a very high bargaining power too. For instance in a location of Puchong Jaya, along the street of Jalan Kenari it is easy to beget at least 9 banks within 100 meters Maybank, Public Bank, Eon Bank, CIMB Ban k, HSBC, Alliance Bank, Bank Simpanan Nasional, UOB. With this parsimony the bargaining of customers eternally goes high before customers start wait oning on a diametriciated service. For the said bank, this is absolutely a negative favor since the potential customers can shift easily to different point. (BNM, 2009)Bargaining Power of SuppliersThe core business of the Hong Leong Bank is product and services which mainly condensees on safety of fiscal management. The suppliers provide some tangibles like checkbooks, lockers, private banking, priority banking. The impact of these in HLB is not much significant since they are not really like the raw material. (Hong Leong Bank, 2009)Threat of newfound EntrantsThe Bank Negara Malaysia has set a minimum capital requirement of RM5 billion for a bank to be registered. The conditions set for registering a bank are not difficult to obtain, hence entry barriers become low-spirited. Thus more foreign possess financial firms are keen t o open their business in Malaysia. Certainly these institutions impart pose nemesis on real banking business as theyll find unique products and services. This force is not in favor of Hong Leong Bank. . (Hong Leong Bank, 2009)From the above digest of HLB 5 forces analysis, the diagram below give provide a summary of the banks boilersuit industry analysis.Threat of impudently Entrants(-)Threat of Substitute Products and Services(+)Bargaining Power of Buyers(-)Rivalry among animate competitors(-)Bargaining Power of Buyers(+)2.2 Limitations of the Porters ModelPorters 5 force analysis talks about(predicate) the external forces relevant to the away(p) of business. Todays business is much more vast and robust requiring dynamic approaches which should be an integration of different approaches rather than depends on a single analysis. Internal factor analysis requires much analysis as external. Designing, visioning and learning approaches should be considered when an industry an alysis is d iodine. Proters 5 forces are lack of these factors. (Porter, 1985) (Gronroos, 1997)Strategic Capability analysis3.1 Stake encumberersStakeholder compend identifies important groups of people or individuals that can have an influence on the Project. These Stakeholders can have their consume objectives and views, which whitethorn differ and conflict with other Stakeholders. A Stakeholder Analysis is required to identify all the parties who are directly or indirectly affected by the enterprises operations. This includes not only the traditional shareholders, nevertheless also some new groups that the insights of sustainable development tell us must be consulted in decisions that affect them. (Roberts, Varki, and Brodie, 2003) (Fombrun and Shanley, 1990)In an organization, internal stakeholder is the employees or people who work inside the organization. External stakeholders exist outside the organization still have a direct interest in what it does (e.g. shareholders, governments, customers) etc. (Roberts, Varki, and Brodie, 2003)3.2 SWOT Analysis3.2.1 Why SWOT Analysis?SWOT analysis is a tool for auditing an organization and its environment. It is the first arcdegree of planning and dos marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. (Spreng and Chiou, 2002)In SWOT, strengths and weaknesses are internal factors and opportunities and threats are external factors.3.2.2 Hong Leong Bank SWOT AnalysisStrengthHong Leong Bank Berhad (HLB) master(prenominal) activity is providing consumer-banking services including credit cards, investment, mortgage, deposits, insurance and priority banking. Other activities include business banking, trade financing, running(a) capital facilities, treasury, foreign exchange, notes market operations, capital market securities trading, investment, and takaful business. I t has been recognized as one of the most(prenominal) profitable bank in Malaysia. (Hong Leong Bank, 2009)It has 186 branches, 17 business centers with ingenious and motivated employees throughout Malaysia making it one of the most widened banking sectors in Malaysia.Their first award year 2004, an acknowledgement for their active participation in branch line the growth of the SMEs in the country. This award certainly spur Hong Leongs strength to bring more value added financial services to customers and the SMI community and to help them face the extremely challenging and competitive business environment twain local anestheticly and globally.Launched in October 2005 the Hong Leong Mobile Credit Card is the first of its kind, allowing customers who are provided with a six-digit personal denomination number (PIN) to pay for goods and services using mobile calls via short messaging service (SMS). This offering is the result of Hong Leong Bank tie-up with technology provider Mobi le Money International Sdn. Bhd. This unique method of payment, cognize as Mobile Money is speedy, well-off and terms effective. victimization only the mobile phone for favourable reception of transactions and payments, there is no longer a need for the physical plastic card, merchant terminals or Internet terminals. Payment requests are delivered via SMS. thither is no need for card members to be present at the point of sales or at the merchant outlets. Payments can therefore be made from wheresoever card members are, at whichever place where there are mobile phone signals. (Hong Leong Bank, 2009)In 2007, Hong Leong Bank bagged the Asiatic Bankers Best e-Banking Project 2007 with its Internet banking offering, Hong Leong Online. The award recognizes the best emerging technology practices and benchmarks in Asia Pacific banks. asunder from the Asian Banker award, Hong Leong has also been ranked as the third most popular Malaysian online banking site. Online banking transactions helped the bank save about RM24mil from March to October 2007 as each online transaction cost about 20% compared with about RM3.50 for either over-the-counter transaction.WeaknessIn line with its strong customer service culture, the HLB continues to maintain its first-class delivery standards which have been behind against international ISO standards. HLB is yet attained bank-wide ISO 90012000 certifications for customer service at the reckon office of its branches and bank-wide loan delivery service. This is a major drawback for the HLB to have a better customer lascivious. (Hong Leong Bank, 2009)As to compete in the industry of banking, interest rate is a major challenge as customer impart choose for a higher interest rate for savings account and for the lowest interest rate for the loans that the customers are seeking for their financial assistances and better service for the customer. Hong Leong Bank ineluctably to change according to the environment as to compete and rem ain as the market leader. (Hong Leong Bank, 2009)As Hong Leong Bank has moved leading to the Electronic banking or transaction there is greater risk or security threats circulated to the users of online banking or transaction. There are non technical threats such as phising whereby it is the act of tricking someone into giving them confidential information or tricking them into doing something that they normally wouldnt do. The common applications of this approach is to send fake emails (email spoofing) to a victim purporting to come from a rule-governed source and requesting information (such as the bank account number and the password) or directing the victim to a fake internet website where this information can be captured.OpportunitiesThe bank may recruit spring chicken and talented staffs and provide them proper training to create a talent base as well as provide job to those who are in need. This may also reduces the unemployment rates in Malaysia. This talent base is able to adopt with internal formation and usually stay with the bank until the end. (Hong Leong Bank, 2009)As the banking industry grows and provides opportunities for the local customers indirectly it also presumption an opportunity to the foreigners who stays in Malaysia. They tend to use banking services more frequently to have different types of account. This additional customer base will bring more money inside the bank and of course banks will gain profit from various types of transactions. (Hong Leong Bank, 2009)Bringing the bank close-hauled to the consumer could be the vital opportunity. Providing a payment gateway where ATM card could be employ as like a credit card for everyday usages. Since these customers will use won money, bank may encourage them to save more to get more benefits. Establishing more ATM and branches and electronic features (e.g Western northward money transfer) will definitely bring more customers in. (Hong Leong Bank, 2009)ThreatsEase of distributing c redit card could be a disturbing role the bank is playing. epoch credit card repayments are depends fully on customer payment, if it is not paid, bank has to go long way. (Hong Leong Bank, 2009)The bank is not really in forefront situation to introduce new products and service as market demand changes. It if often seen that the bank introduces the products in different name when the service is already available in the market by other bank. (Hong Leong Bank, 2009)3.2.3 Limitations of SWOT AnalysisSWOT analysis usually very subjective. It simply looks at the negative factors first in parliamentary procedure to turn them into positive factors. So it is advisable to use SWOT as guide and not as prescription. (Spreng and Chiou, 2002)Strategic Choices4.1 Generic Strategy4.1.1 Why Porters Generic StrategyGeneric strategies are widely used today even though it was invented in 1980s. Three options are available for organizations to adopt to achieve sustainability which are cost leadershi p, differentiation and focus. Each of the three options are considered in two aspects of the competitive environment (i) agonistical advantage talks about the prices (high or low) of the products, (ii) hawkish scope talks about the market sizing (narrow or broad). (Porter, 1985) (Chen, 1999) (Sanzo et al, 2003)Overall Cost LeadershipThe low cost products are the product leader in the market. It may also included the time required to built and delivery the products to customers. As it is mentioned earlier, using online banking, it would help the bank as well as customers to save more. Developing and maintaining online business is not low-priced itself. up to now it could provide vital thumbs-up to banks generic system. If more customers opt for online transactions, bank wouldnt have to spent time on serving customer physically thus itll requires less resources (e.g. less branch, less employees). These less resources will impact ahead the bank with extra finance to improve other services. (Harris and Goode, 2004) (Sanzo et al, 2003)DifferentiationDifferentiated goods and services are designed to satisfy the customers with the lowest price/cost available for similar kind of products. HLB Flexi FD is a strict deposit product which gives higher interest rate to the customer. Thus the bank will be in risk of loosing money. So it has to bring and retain much customer to cover the loss. The loss must be cover to be competitive. Since banking industry changes rapidly, HLB will have to customize the products and services over times to hold ensure customer satisfaction. (Dannenberg and Kellner, 1998) (Jones, Mothersbaugh, and Beatty, 2000)FocusIn focus an organization can afford neither a wide scope cost leadership nor does a wide scope differentiation outline, Here an organization focus effort and resources on a narrow segment of a market. Competitive advantage is generated specifically for the niche. A go with has two options to choose use either a cost focus o r a differentiation focus. Taken example of HLB structured investments. Invested amounts are 3rd-party transactions and bank itself doesnt provide any guarantee of returns of money to the customer. In this segment, HLB is a low profile character. Even though bank is charging some commission on the investments, customers who are willing to invest are to do so at own risk. (Jarvelin and Lehtinen, 1996) (Evans and Beltramini, 1987)4.2 Strategic Directions4.2.1 Why Ansoff MatrixThe Ansoff Growth matrix is a strategicalal direction tool that helps businesses decides their strategies for growth. Ansoffs product/market growth matrix discuss about the strategies on which the business deliver new or current products in new or current markets. Overall output of Ansoff product/market matrix is sets of strategies that set the direction for the business growth. (Auh et al, 2007) (Sanzo et al, 2003) These are described below signet brainwaveMarket penetration is a general name of selling curr ent products into current markets. The bank continuously introduces loan and credit products to customers to leap ahead. Since the banks most incomes come from loan and credit facility, reshape of current products will ensure market growth and increase of usages by brisk customers. Market penetration for HLB will be focused on the central markets that it is very familiar with, competitors are known, customer needs are defined and returns are potential. (Gustafsson, Johnson, and Roos, 2005) (Agrawal, 2001)http//strategyiseverywhere.files.wordpress.com/2007/12/ansoff_matrix.pngMarket developmentMarket development tells about the scattering of current products in new market. With its existing banking facilities, the bank introduces private banking for the customers who loves personal banking. For everyday needs of banking, investment, loan, protection a dedicated personal banker is always there to serve the individual customer to fill their needs. These personal banking is nothing di fferent than existing policies focus goes to its loyal customers which puts big amount inside the bank. (Dannenberg and Kellner, 1998) (Filotto, Tanzi, and Saita, 1997)Product developmentProduct development is the name given to a growth strategy where a business aims to introduce new products into existing markets. Saving multiplier plans is recently introduced by the bank. Hong Leong Savings Multiplier Plan is a unique investment tool that utilizes the aright concept of Dollar-Cost-Averaging and offers a customized solution to tackle the distinct financial challenges throughout different life stages be it to secure a comfortable retirement or to ensure a steady flow of pension-like property or for putting aside adequate funds even for childrens education. Islamic banking is another example of product development. (Metawa and Almossawi, 1998) (Haron, Ahmad and Planisek, 1994).DiversificationDiversification is the growth strategy where new products are to be delivered in new marke t. This strategy is more risky for business growth as often business takes longer time to pull round in a new market. HLB recently spread their business in Vietnam. Since Vietnamese culture differs from Malaysia, the bank has to adopt the culture as well as compete with well established Vietnamese banks. (Shankar, Smith, and Rangaswamy, 2003) (Evans and Beltramini, 1987)4.3 method for Pursuing Strategic DirectionForward Looking PolicyMonetary policy management needs a forward-looking policy due to the time gap between policy actions and their intended do on output and inflation. HLB built a macro model which would determine the impact of policy actions. mind the microeconomic factors are important too determine the inter-linkage of monetary policy mechanism. (Fornell and Wernerfelt, 1987)Deepening of Financial MarketsNew financial products are traded in the Money/Bonds market by the introduction of Hong Leong Banks Debt Capital Markets Structured pay (DCM/Structured Finance) u nit within Wholesale Banking provides innovative tailor-made solutions to financial institutions, corporate, agencies and high net-worth individuals through encompassing offerings in the debt capital markets. (Dannenberg and Kellner, 1998)Strong Foreign Currency ReserveForeign exchange reserves form part of the national assets and these needs to be deployed rationally keeping in mind the principles of safety, liquidity, and return. The reserves, which are currently deployed by the HLBs in-house reserve management treasury dealers, are in short-term high tone of voice bank deposits. (Naser, Jamal, and Al-Khatib, 1999)Reliable and Secured Payment SystemsTo reduce the settlement time significantly and increase cost effectiveness the bank plans to establish an electronic clearinghouse to do almost every transactions online with tighten security and flip overy usability. go-ahead an account, apply for credit cards are already in place. The bank further steps in mobile banking for de dicated user. Recently the bank introduces e-broker services (HLeBroking). HLeBroking allows the flexibility of placing orders either through a phone call to our trading hub or via the internet. Professional dealers centralized in the hub are always on hand to execute transactions and monitor shares investment portfolio. (Shankar, Smith, and Rangaswamy, 2003) (Harris and Goode, 2004)4.4 Implication and Evaluation of AnalysisDuring this analysis it was assumed that strategies are reasonably orderly and knowable and, in turn, that evidence can help to evaluate theories that claim to justify these strategic positions. Data and information often founded confusing and imperfect. It seems almost certain that no single content can validate or invalidate a theory. Besides, there is a good chance that a large number of studies will not generate consistent results. (Agrawal, 2001)The methodology were used in analysis is not about developing a foolproof system it is at least partly an art. T here is no mechanical system that will escape judgment, sense, and intelligence. But this does not eliminate the need for techniques and standards. Product delivery approaches, geography, demography does plays role in strategic position which were missing in the analysis done. (Hong Leong Bank, 2009)The strategic planning process adopted by HLB was participative, consultative and result oriented. But the takes time to achieve results. dapple some important factors the bank missed out during strategic choices, individual departments must do their single environmental scans through a SWOT analysis whereby they identified their internal strengths and weaknesses as well as the external opportunities and threats. (Hong Leong Bank, 2009)Business trends changes randomly. Todays product may not be available tomorrow. Thus no strategic plan could be exactly fit into business strategy. However, HLB could consider a more diversified strategy which would be more beneficial to determine strate gic stand.Justification of a StrategyAs the strategic position and strategic choices are different from the matrix analysis, a better strategic growth model is optimal solution.5.1 McKinsey Growth PyramidMcKinsey growth pyramid is an upgraded version of Ansoff Matrix with broader discussing of important strategic factors. With every possible action there are certain alternatives (e.g. acquisition, joint ventures, alliances etc) with risk measurement from low to high.Existing products to existing customersThis is considered lowest risk options go on businesses with current asset and current customer. But itll not be much beneficial for bank in long terms.Existing products to new customersIntroduce existing products to new customer which may help them meet their daily financial needs so that they dont look for other financial choices. Consumers always look for much return while bank always looks for low give-away. New customers can be a turning point for any bank. Demographical (e.g. adult, children, senior) products would be vital products to make new customers. (Harris and Goode, 2004)New products and servicesOver time, new products must be channeled into banking business. Broader distribution if Islamic banking could be a important factor. It is seen that many nom-Muslims adopted for Islamic banking. Since there is trend of Islamic banking growth, the bank should not take the risk to risk the potential customers due to lack of proper preparation. Some of the products may be delivered to existing customers. Risk may incur if the products doesnt appeal the customers. (El-Bdour and Erol, 1989) (Gerrad and Cunningham, 1997)New delivery approachesTodays consumer seek more convenient service provider. Banks are not exempted indeed. Many banks had adopted special facilities for different customers. Priority banking could be one solution. In priority banking everyone is unique and therefore has very specific financial needs. Thats why bank will offer a comprehensiv e range of privileges for convenience. Setting up special services only for young generation can be another important product delivery approaches. Dedicated services will invite more young generation to adopt the services. However, it could cost the bank some extra amount and if the products are not selling well, bank will face loss of resources. (Yoon, Guffey, and Kijewski, 1993) (Mols, 2001)http//www.filecluster.com/screenshots/61893.gifNew geographiesGeographical working out is one of the most powerful options for growth but also one of the most difficult. The bank already went global opening branches in Singapore and Vietnam. This strategy is proven fine for well reputed bank (e.g. Citibank) but it has to be cautious in business. Geographical movement may bring new customers with solid financial needs but the bank has narrow down the scope of services due to high risk. (Sanzo et al, 2003)New industry structureThe bank may re-assert the liquidity franchise and continue to addr ess the yield challenge. While economics of the business have changed, unlike other countries, pricing and credit spreads did not adjust in tandem in the Malaysia. The quality of strategic asset-liability management, liquidity and capital management differentiates. Re-asserting core businesses with efficiency, unit cost management, operating leverage, dynamic pricing as well as customer value or returns on each customer relationship. Cross-selling and customer service are key success factors. (Agrawal, 2001)New competitive arenasUsing competitive arena, business may transfer their resources and knowledge to new industry using vertical integration. This may pose immense risk to bank itself. Bank may loose it all investment. Despite the risk, this will help the bank grows rapidly and spread their products throw many distribution channels. (Gronroos, 1997)ConclusionThe pre- and post-crisis strategic postures are a tale of worldwide economic fall down. The postures are characterized by the scaling up of the business, purification value propositions in each business, responding to competition and price war, building new capabilities and strengthening the risk and IT home as the bank sought to incrementally improve our market share and positioning. (Hong Leong Bank, 2009) (Gustafsson, Johnson, and Roos, 2005)The era ahead is more opportunist in nature, with a rapidly changing eco-system and higher regulatory and prudential requirements. The shadow of the state on the sector globally is more pronounced. (Auh et al, 2007)Overall, the banks competitive strategy has to pivot on a competitive delivery, consisting of quality people, knowledge base and result oriented capability, market intelligence and local community embedment, entrepreneurialism and how it organize itself to case and build new names. As it emerges from the crisis, it needs to re-segment the customers to market changes and re-build a compelling proposition on how to scale leaf sustainability while st aying opportunistic tactically. (Auh et al, 2007)ReferencesAuh, S., Bell, S.J., McLeod, C.S., Shih, E. (2007), Co-production and customer loyalty in financial services, diary of Retailing, Vol. 88 no3, pp.359-70.Fombrun, C., Shanley, M. (1990), Whats in a name? Reputation building and corporate strategy, Academy of Management daybook, Vol. 33 no.2, pp.233-48.Gustafsson, A., Johnson, M., Roos, I. 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