Strategic ability of Hong Leong Bank

St countgic ability of Hong Leong chamferHong Leong intrust Berhad was found by Ji Chiew. The shore starts operations in 1905 in Kuching, Sarawak. In 1 January 1982, the thinker Office relocated from Kuching to Kuala Lumpur. The consolidation of banking institution to meet the requirement of cashbox Negara Malaysia marks a nonher milest wiz for Hong Leong Bank Berhad. Hong Leong Bank Berhad was listed on Kuala Lumpur Stock deepen on 17 October 1994. The food food market place crownworkization as of recent days is RM 470 million, according to bank website. Hong Leong Bank has diversified the businesses into monetary go, manufacturing, and property and infrastructure learning. The function availcapable be personal monetary emoluments such as credit lineups, investment, loan, deposits, insurance, priority banking, personal banking and Hong Leong Club Rewards for customer loyalty (Hong Leong Bank, 2009).Industry psycho compend2.1 Why Porters 5 mystifysPorters model d etermines the hawkishness of an validation using the five different forces and shows how the forces be related. To develop business strategies effectively, organizations must understand and act in response to those forces. (Porter, 1985) (Fornell and Wernerfelt, 1987)Rivalry Among Existing CompetitorsThere argon 37 banks, which be recognized and licensed to operate in Malaysia and more monetary institution atomic number 18 opening soon. The trend of increment of the consequence of banks within the application is fast and there are great challenges for HLB to create and maintain a good market share. Other banks are seems to be more aggressive to get and retain customers. This force is not in favor of Hong Leong Bank. (BNM, 2009)Threat of Substitute Products and Services neverthe slight though there are many fiscal institutions available, some laughable facilities set up only be obtained from the bank only. American Express facilities, co-branded products (e.g. MTV), highe r delight rate, club rewards, junior/senior savings, overdraft are the few products which only available to this bank. and then this force is in favor to the bank. (Hong Leong Bank, 2009) (BNM, 2009)Bargaining Power of BuyersHaving the whole crop of financial players a violate from the retail banks, it is evident that customers can move within the 40 operators and can also decide to switch to the other non-banking institutions. Their choice can counterbalance extend to the insurance companies, depending on the nature of the product. For instance if a customer is looking for a small amount of loan, he/she can even get the said product from organizations like AEON, etc. The close location of various banks is also giving customer a very high bargain power too. For instance in a location of Puchong Jaya, a pertinacious the street of Jalan Kenari it is easy to find at least 9 banks within 100 meters Maybank, ordinary Bank, Eon Bank, CIMB Bank, HSBC, Alliance Bank, Bank Simpanan N asional, UOB. With this concentration the bargaining of customers always goes high before customers start looking on a differentiated service. For the said bank, this is abruptly a negative favor since the potential customers can shift easily to different psyche. (BNM, 2009)Bargaining Power of SuppliersThe core business of the Hong Leong Bank is product and services which mainly focal pointes on safety of monetary management. The suppliers exit 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 New 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. Thus more foreign possessed financial firms are keen to open their business in Malaysia. Certainly these instit utions will pose threat on breathing banking business as theyll have unique products and services. This force is not in favor of Hong Leong Bank. . (Hong Leong Bank, 2009)From the above analysis of HLB 5 forces analysis, the diagram below will provide a summary of the banks overall industry analysis.Threat of New Entrants(-)Threat of Substitute Products and Services(+)Bargaining Power of Buyers(-)Rivalry among existing competitors(-)Bargaining Power of Buyers(+)2.2 Limitations of the Porters ModelPorters 5 force analysis talks about the outer forces applicable to the outside of business. Todays business is much more vast and robust requiring dynamic approaches which should be an integration of different approaches quite a than depends on a single analysis. Internal factor analysis requires much analysis as external. Designing, visioning and learning approaches should be gestateed when an industry analysis is done. Proters 5 forces are deprivation of these factors. (Porter, 1985 ) (Gronroos, 1997)strategic Capability Analysis3.1 StakeholdersStakeholder Analysis identifies important groups of people or individuals that can have an influence on the Project. These Stakeholders can have their own objectives and views, which may differ and conflict with other Stakeholders. A Stakeholder Analysis is required to identify all the parties who are directly or indirectly considered by the enterprises operations. This includes not only the traditional shareholders, but 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 at heart the organization. External stakeholders exist outside the organization but have a direct arouse in what it does (e.g. shareholders, governments, customers) etc. (Roberts, Varki, and Brodie, 2003)3.2 get up Analysis3.2.1 Why wad Anal ysis? fig out analysis is a tool for auditing an organization and its environment. It is the first stage of provision and helps 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) principal activity is providing consumer-banking services including credit cards, investment, mortgage, deposits, insurance and priority banking. Other activities include business banking, trade financing, working capital facilities, treasury, foreign exchange, money market operations, capital market securities trading, investment, and takaful business. It has been recognized as one of the most profitable bank in Malaysia. (Hong Leong Bank, 2009)It has 186 branches, 17 business centers with talented 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 spurring the ontogeny 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 dispute and competitive business environment both lo mobilizey 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 identification number (PIN) to pay for goods and services using mobile phones via short messaging service (SMS). This offering is the result of Hong Leong Bank tie-up with technology provider Mobile coin International Sdn. Bhd. This unique method of payment, known as Mobile Money is speedy, convenient and terms effective. Using onl y the mobile phone for approval of proceedings and payments, there is no longer a conduct for the physical plastic card, merchant terminals or Internet terminals. Payment requests are delivered via SMS. There 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 wherever card members are, at whichever place where there are mobile phone signals. (Hong Leong Bank, 2009)In 2007, Hong Leong Bank bagged the Asian Bankers Best e-Banking Project 2007 with its Internet banking offering, Hong Leong Online. The award recognizes the best appear technology practices and benchmarks in Asia Pacific banks. Apart 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 give birth about RM24mil from March to October 2007 as each online transaction cost about 20% compared with about RM3.50 for every over-the-counter tran saction.WeaknessIn line with its substantive customer service culture, the HLB continues to maintain its superior delivery standards which have been behind against international ISO standards. HLB is yet attained bank-wide ISO 90012000 certifications for customer service at the front component part of its branches and bank-wide loan delivery service. This is a major drawback for the HLB to have a better customer base. (Hong Leong Bank, 2009)As to postulate in the industry of banking, interest rate is a major challenge as customer will 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 take to change according to the environment as to compete and remain as the market leader. (Hong Leong Bank, 2009)As Hong Leong Bank has moved ahead to the Electronic banking or transaction there is greater risk or security threats cir culated 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 distort emails (email spoofing) to a victim purporting to come from a legitimate 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 young 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 given 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 closer to the consumer could be the vital opportunity. Providing a payment gateway where air card could be used as like a credit card for everyday usages. Since these customers will use won money, bank may win them to save more to get more benefits. Establishing more ATM and branches and electronic features (e.g Western Union money transfer) will definitely bring more customers in. (Hong Leong Bank, 2009)Threats relaxation behavior of distributing credit card could be a disturbing role the bank is playing. While 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 direct to introduce new products and service as market read 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 order 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 directly even though it was invented in 1980s. Three options are available for organizations to adopt to achieve sustainability which are cost leadership, differentiation and focus. Each of the three options are considered in two aspects of the competitive environment (i) Competitive advantage talks about the prices (high or low) of the products, (ii) Competitive scope talks about the market size (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 create 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. Yet it could provide vital thumbs-up to banks generic strategy. 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 push ahead the bank with extra finance to improve other services. (Harris and Goode, 2004) (Sanzo et al, 2003)DifferentiationDifferentiated goods and services are knowing to satisfy the customers with the lowest price/cost available for similar kind of products. HLB Flexi F D is a fixed 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 brood 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 n both a wide scope cost leadership nor does a wide scope differentiation strategy, Here an organization focus effort and resources on a narrow segment of a market. Competitive advantage is generated ad hocally for the niche. A company has two options to choose use either a cost focus or a differentiation focus. Taken example of HLB structured investments. Invested amounts are 3rd-party transactions and bank itself doesnt provide any attempt 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 belowMarket penetrationMarket penetration is a general name of selling current 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, mold of current products will ensure m arket growth and increase of usages by existing customers. Market penetration for HLB will be focused on the interchange 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 diffusion 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 different 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 gi ven to a growth strategy where a business aims to introduce new products into existing markets. Saving multiplier plans is lately introduced by the bank. Hong Leong Savings Multiplier Plan is a unique investment tool that utilizes the powerful 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 funds 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 market. This strategy is more risky for business growth as often business takes longer time to survive 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 generateed 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 effects on output and inflation. HLB built a macro model which would determine the impact of policy actions. Understanding 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 Finance (DCM/Structured Finance) unit within Wholesale Banking provides innovative tailored solutions to financial institutions, corporate, agencies and high net-worth individuals through comprehensive offerings in the debt capital markets. (Dannenb erg 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 quality 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 handy usability. Opening an account, apply for credit cards are already in place. The bank further steps in mobile banking for dedicated 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 military rank of AnalysisDuring this analysis it was assumed that strategies are reasonably orderly and knowable and, in turn, that manifest can help to evaluate theories that claim to explain these strategic positions. Data and information often founded confusing and imperfect. It seems almost certain that no single study 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. There is no mechanical system that will escape judgment, sense, and intelligence. tho this does not eliminate the need for techniques and standards. Product delivery approaches, geography, demography does plays role in strategic posi tion which were missing in the analysis done. (Hong Leong Bank, 2009)The strategic supply process adopted by HLB was participative, consultative and result oriented. But the takes time to achieve results. While some important factors the bank missed out during strategic choices, individual departments must do their respective 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 strategic 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 a n upgraded interpretation 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 attract new customers. (Harris and Goode, 2004)New products and servicesOver time, new products must be channeled into banking business. Broader distribution if I slamic 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 comprehensive range of privileges for convenience. Setting up special services only for young genesis can be another important product delivery approaches. Dedicated services will invite more young generation to adopt the services. H owever, 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 expansion 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 prove 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 dealership and continue to address 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, liquidi ty 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, refining value propositions in each business, responding to competition and price war, arrive at new capabilities and strengthening the risk and IT infrastructure as the bank sought to incre mentally improve our market share and positioning. (Hong Leong Bank, 2009) (Gustafsson, Johnson, and Roos, 2005)The era ahead is more opportunistic 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 swivel 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 scale 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 sustainability while staying 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, daybook of Retailing, Vol. 88 no3, pp.359-70.Fom brun, C., Shanley, M. (1990), Whats in a name? Reputation building and corporate strategy, Academy of Management Journal, Vol. 33 No.2, pp.233-48.Gustafsson, A., Johnson, M., Roos, I. 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