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IMPACT OF STRATEGIC INFORMATION SYSTEM ON THE PERFORMANCE OF

BANK OF QINGDAO

Draft Proposal for PhD in Management Studies

By
sonali

CONTENTS

Introduction
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Literature Review
Motivation of the study
Statement of the Problem
Purpose of the study
Objectives of the research
Research Questions
Significance of the Study
Scope of the study
Limitations of the study
Theoretical Framework
Tentative Chapters Scheme
References.

Abstract
The rapid growth of the business environment today has put forth challenges to all sectors, more
so for the financial sector. The integration of information systems with financial services has
become an age old trend. There is increased demand for transparency such as auditing and
reporting by the public. In addition to the evolving strategic environment, security risks have
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always been a constant hindrance, with fraud, identity theft and information leaks more
prevalent currently than in the past. Cyber threats are on the rise and impacting financial
services of the Bank. The list of challenges that financial service sectors face is in-exhaustive. In
order to combat all these, it is crucial for banks and the line managers to adopt innovative
strategies integrated with information systems, BQD has been employing strategic information
systems from 1996, upgrading constantly.
This study tries to determine the impact of strategic information systems adopted by BQD on its
performance. The two measures of performance related to how efficient and profitable the
business entity is due to its operations and investments are Return on Assets (ROA) and Return
on Equity (ROE), this research tries to study the same.
Firstly, this research plans to adopt DuPont Model analysis, for ROA, ROE, EBIT and ROCE
measures for the years 2005 to 2015 and proceeds further to conduct profitability analysis, by
using time series data between 2000 to 2015 and running multivariate regression taking Net
profit, as dependent variable and Gross profit margin, net profit margin, Return on assets,
Return on Equity, Capital employed, Operating Margin and Return on Capital employed as
independent variables.
Lastly it proceeds to do cross-sectional survey design for robustness of the study, to investigate
return on investments for having adopted strategic information systems for all the branches of
BQD in China
This study includes three categories of population: the strategic staff, the operational staff and
the banks customers from all the branches of the bank. The sample size will be considered using
standard methods. Simple random sampling would be adopted for operational staff, purposive
sampling for banks customers. The instrument used will be questionnaire. SPSS tool will be used
for data analysis. The Frequency, percentages, charts and Chi-square test of independence will
be used to ascertain the significance of the relationship between the variables. Logistic
regression will also be used to predict the value of dependent variable using more independent
variables. The results, helps the company to follow specific strategies to sustain its dominance
and grow value, it helps external users such as existing investors, potential investors and other
entities to make right financial decisions regarding their investments in BQD.

Keywords: Information systems, challenges, financial services, bank


INTRODUCTION
EARLY BANKING OPERATIONS IN CHINA

During the early years in China, there were only two banks namely Piaohao and Gianzhuangm,
they were the financial service institutions then, functioning like modern day banks and were
competing with each other. All major banking operations such as acceptance of deposits, issuing
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loans, currency exchange, long distance remittance of money etc. were carried out by the
financial institutions during the Song Dynasty (960-1279). The first paper currency was issued
by the state in Sichuan in 1024. [1].
In the past, due to lack of structure in the traditional Chinese law the financial institutions in
China adopted commercial banking system based on close familial and personal relationships
and the float from short-term money transfers served as their working capital and were short of
long term deposits. The modern concept of consumer banking and fractional reserve banking
were introduced to China by European bankers in the 19th Century.
The Agricultural Bank was created in the 1950s to facilitate financial operations in the rural
areas. It flourished in the late 1950s and mid-1960s but languished thereafter until the late 1970s,
when the functions and autonomy of the Agricultural Bank were increased substantially to help
promote higher agricultural production. In the 1980s it was restructured again and given greater
authority in order to support the growth and diversification of agriculture under the responsibility
system.
During the period of recovery after the Chinese civil war (1949-52), highest priority was given
towards nationalization and consolidation of the banks in China. Banking sector was the first one
to be completely socialized. The peoples bank of China acted very effectively in order to halt
raging inflation and to bring the countrys finances under central control. In due time, gradually
the banking system was modified accordingly to suit the changing conditions and policies of the
government. [2]

The Foreign-Chinese joint bank came into existence in 1885 and again in 1887. The Imperial
Bank of China, China's first modern bank, opened for business in 1897. After the proclamation
of the Republic of China, the bank changed its English name to the Commercial Bank of
China in 1912. In 1905, China's first central bank was established as the Bank of the Board of
Revenue. Three years later, its name was changed to the Great Qing Government Bank.
Following the Xinhai Revolution of 1911, Daqing Bank was renamed the Bank of China. This
bank continues to exist today.

The first private bank dates to 1897, courtesy of the entrepreneurship of Shen Xuanhui, Three
private banks appeared in the late Qing period, and all created by private entrepreneurs without
state funding. The Xincheng Bank was established in Shanghai in 1906, followed by the National
Commercial Bank in Hangzhou the following year, and the Ningbo Commercial and Savings
Bank in 1908.
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The British and European banks entered China during the middle of the nineteenth century and
were termed by Chinese as Yinhang menaing silver Institution. The first foreign bank in China
was the Bombay-based British Oriental Bank which opened branches in Hong Kong, Guangzhou
and Shanghai in the 1840s. The British monopolized banking in China for forty years. The Hong
Kong and Shanghai Banking Corporation (HSBC) established in 1845 became the largest foreign
bank in China. By the end of nineteenth century there were nine foreign banks with forty five
branches in Chinas treaty ports.
Throughout the history of the People's Republic, the banking system has exerted close control
over financial transactions and the money supply. All government departments, publicly and
collectively owned economic units, and social, political, military, and educational organizations
were required to hold their financial balances as bank deposits. They were also instructed to keep
on hand only enough cash to meet daily expenses; all major financial transactions were to be
conducted through banks. [3]

HISTORY OF BANK OF QINGDAO

Bank of Qingdao (BQD) was founded in 1996, and is headquartered in Qingdao, China. It is one
of the earliest Urban Commercial Bank in China, and has around 45 branches in Qingdao, Jinan
and Dongying. Qingdao urban is the second biggest urban in Shandong province, and is the
fourth biggest seaport in China.
Bank of Qingdao Co., Ltd. provides retail and corporate banking services in Shandong province.
It offers personal and corporate saving products, and loans; advances; and small and micro
business financing. The company also provides investment and wealth management services;
settlement products and services; trade finance products; and financial market services, as well as
online, telephone, and self-service banking services. As of June 30, 2015, it operated
approximately 8 branches in Jinan, Dongying, Weihai, Zibo, Dezhou, Zaozhuang, Yantai, and
Binzhou [4]. The company was formerly known as Qingdao City Commercial Bank Co., Ltd.
and changed its name to Bank of Qingdao Co., Ltd. in 2008.
By the end of 2012, the Total Assets of BQD exceeded 16 Billion USD, ranking as the No.549
across the world.

Figure 1

By the end of 2012, there were totally 138 Urban Commercial Banks in China, distributed almost
in every province, though richer areas had more Commercial Banks. Normally the business focus
of Urban Commercial Banks is serving local enterprise, and local residents.
In China, Commercial Banks account for the largest market share in terms of total assets;
Urban Commercial Banks ranked as the third group. Joint-Stock Commercial Banks and Urban
Commercial Banks are continuously growing from 2007 to 2012.
Figure2

Currently Bank of Qingdao is focusing on its overall development by stepping up its


performance in order to retain its market share and widen its market share, by concentrating on
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satisfying the ever changing customer requirements, and development of new technology and
implementing new strategies via Strategic Information systems.
INFORMATION SYSTEMS [IS]

Strategic information systems are computer systems that help companies run their operations
efficiently and effectively through automation, though they do not increase the businesss
profitability. In todays world, Information systems exist in every branch of workforce. It is
actually a set of inter-related processes that collect, retrieve, process, store and distribute
information to support decision making in any organization, including banks.
SIS helps companies change their business structure and hence their strategy. They impact the
companys products and operations by integrating information to business policies and
opportunities that come their way.
SIS mainly acts as tool for managers in providing the right information that ensures smooth
running of the business and also guides managers for future planning in the necessary directions.
SIS does have competitive advantage over the business rivals and indirectly affects business
profitability and growth.
Strategic Information systems offer competitive advantage to a firm over others by creating
barriers to competitors entry, since SIS uses information systems to provide products or services
that are either difficult to duplicate or make the system highly specialized such that the
competitors find it expensive to adopt such strategies.
SIS further helps companies generate database that improve their sales and marketing strategies.
SIS utilizes the existing information and finds ways and means as to how best it can be utilized
for increasing the companys performance such as monitoring the operations of its customers and
framing strategies that improve the services offered to customers thus indirectly trying to retain
the existing customers and trying to attract new customers.
Another way that SIS helps companies gain competitive advantage over others in the market is
by framing strategies that help the companies lower their internal operating costs, and thereby
offer services to their customers at a lower price than their competitors. Also SIS helps a
company to identify specific and critical leverage points and apply competitive strategies that
have greater impact and positive impact to help the firm gain advantage over its rivals.
Information systems help a company make adequate use of its data, reduce workload and assist
with compliance with various mandatory regulations. IS also help companies store data, update
and analyze information thus helping companies to detect and identify any drawbacks and fix the
problems on time. Further, IS can integrate data coming from several sources both internal and
external to the company and thereby helping managers to assess the companys performance and
detect any possible threats.

Strategic plans serve as a tool for success of a company in the long way. So adequate strategic
plans are essential which is possible with the mangers adopting IS and make decisions that help
companies prosper. SIS also help companies focus on their economic growth and adopt the
necessary market trends and thereby make quality strategic decisions.
Information systems guide managers in employing and implementing larger number of value
added-systems. Thus adoption of information system will help companies to eliminate
unnecessary activities and thereby simplify the operations, thereby ensuring that only qualified
personnel can perform certain tasks. Also Information systems help companies to remove
repetitive tasks and also increase accuracy, thereby helping employees to focus on high level
operations. It is important for businesses to adopt Information systems in their functioning since
it provides operational excellence, provides new services and business models and helps
managers to make improved decisions, and above all it gives a competitive advantage over its
rivals.
Managers find IS a very important tool which aids them with better planning and implementation
of right strategies and help them with effective monitoring and comparison against established
criteria.

INFORMATION TECHNOLOGY & BANKING

Information technology has brought in a drastic change to human life. Life without IT is
crippling in todays digital world. The advent of Internet and technology and widespread access
to broad band has enabled banks to function with great ease unlike the age old traditional banks
operating manually and employing too many staff for smooth running thereby incurring huge
costs. Today the IT infrastructural layout has become a yardstick for measuring the performance
of Banks. This emphasizes the importance of IT in the Banking world, which is true in every
other business.
Financial services sectors are one of the biggest customers for IT industry. This adoption of
technology for their operations has allowed them to evolve rapidly and offer services beyond
loans and deposits, as in the past. In this rapidly changing world, banks are dependent on IT for
their efficient functioning, effectiveness of their services to customers and in order to
strengthening their business process, making sound managerial decisions and workgroup
ICT help banks improve the efficiency and effectiveness of services offered to customers, and
enhances business processes, managerial decision making, and workgroup fraternization, which
strengthens their competitive process which is necessary in this ever-growing world of rapid
technological advancement.
The advent of technology such as ATM has enabled the banks to offer quick service to customers
and also cut on the staff, thereby saving costs of employment for the banks. Call centers again,
save costs for the bank in dealing with answering customer calls quickly and efficiently and cut
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costs of employment. Call center service and internet banking has enabled customers to bank
from any location in the world, thus making it convenient for the banks and customers.
Electronic bank transfer has helped customers immensely. Technology such as usage of debit
card has provided fast, convenient and fairly secure system of payments and enabled customers
to do online transactions with great ease.
The near field communication technology has enabled the banks to overcome the
disadvantages of debit card, such as not-cost effectiveness of debit card for making small
payments , since the card merchants charge a minimum amount for every business transaction. It
is similar to RFID technology.
For centuries, banks had remained the same with no noticeable changes, but from the past 3
decades internet has enabled the banks functioning to be more efficient and effective. Internet
has become a major part of our society now. Internet allows online banking which helps
customers view and download their bank statements, set up and view direct debits or standing
orders, pay their utility bills, BACS transfer money to another account and send message to their
bank. Today we have many online banks without their physical existence.
Hence technology has made the life of banks and customers easy. Internet allows online banking,
enabling customers access their account 24 hours a day without having the branches open. Since
customers carry out the transactions themselves, the staff number can be reduced thus saving
costs to the banks.
Traditional banks were expensive to run, due to rental charges, staff costs, insurance, utility costs
etc. Thus banks can save up to 50% of their costs due to use of online-banking. Due to low
operating costs, banks are able to offer attractive incentives such as lower rates of interest for
borrowers and higher rate of interest for savers.
Though there are certain risks involved with the use of technology for banking such as exposure
to fraud, high costs of security, less chance of selling other services to customers due to lack of
face to face communication, cost of employing specialist web developers and expensive
computers to run the side it still helps cut down the costs to a larger extent than running a bank
manually without access to internet.
Customers do have certain disadvantages too with the risk of fraudulent deception through
phishing and Trojans. And being unable to access their accounts with the website is down.
The bottom line is that, banks today are a far cry from the banks that existed 2 or 3 decades ago.
The banks are the biggest spenders on technology, almost all banks employ technology for their
operations and this has given rise to fierce competition amongst banks. Growth of a bank is
possible by retaining its existing customers and attracting new customers, so in order to make
this possible, banks need to work on improving the banks operation methods and find ways and
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means to offer good incentives to their customers and secure and easy operating methods. So,
bank managers have to be highly efficient and dynamic to cope with the competition, and they
have to devise technics to override their rivals through strategic planning.
At the end of the day, as with any business, the bank that offers a wide array of services at low
costs and with high levels of customer service will be the winner. So proper strategic planning
would be the right solution.

STRATEGIC INFORMATION SYSTEMS [SIS]

In todays world every enterprise employs information systems for their efficient functioning and
it is a necessity for survival. Banks are no exception in this regard. Banking sectors are major
investors of Information systems. These days with the fierce competition amongst financial
service centers, competitive strategy concepts play a vital role to survive the competition and to
top the market. Information technology should be and can be employed to implement a variety of
competitive strategies.
In order for financial services industry to compete and grow in the current digital era, where
banking customers are more demanding and where intense competition prevails, it has become
necessary to grow and compete successfully. To do so, it is important to deliver innovative new
services to the customers and increase the interaction schemes and thereby increase efficiency
and satisfy the strategic and regulatory requirements of the banks. So, to achieve all these,
appropriate strategic plans integrated with Information systems is mandatory.
The five basic competitive strategies include: differentiation, low cost, innovation, growth and
alliance. These strategies provide a competitive edge for companies over their rivals. Lower
costs, promoting growth, developing alliances, improving quality and efficiency and building IT
platform all serve as strong concepts to be adopted and implemented for thriving in business. The
most useful strategy to be adopted would be to use inter-organizational information systems to
create switching costs that lock in customers and suppliers, also use IT to build barriers to entry
against outsiders of the same industry.

Using IT for the above mentioned strategies would serve a long way for any business to survive
the competition. IT helps lower the cost of business processes and also for customers and
suppliers. New IT features can developed to differentiate products and services and reduce the
differentiation advantages of competitors and focus products and services at selected market
niches. It is also important for banks to create products and services that include IT components
and make radical changes to business process using IT so as to cut costs, improve quality
efficiency and customer service. IT helps banks to manage their regional and global branches and
also helps to diversify and integrate other products and services.
The SIS is mainly concerned with aligning the business needs with information systems and to
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gain strategic advantage over its competitors through proper utilization of IT in the business.
This research explores the impact of the strategies the Bank of Qingdao has adopted and the role
SIS plays in the Bank and how it has been impacting the banks performance in terms of ROA
and ROE and explores to see if positive impacts excel the negative impacts and what measures
should be taken to overcome any drawbacks if they exist.

BANKS IN CHINA

The banking industry in China has evolved from traditional banking to joint banking with foreign
banks to present day westernized and IT integrated banking.
Chinese banks as of today are functioning more like western banks unlike the banks which
followed Chinese traditional law in the early years. China's banking system has undergone
significant changes in the last two decades, with IT integrated into banking operations. All banks
in China are government controlled though they have gained more autonomy these days. The
Peoples Bank of China is the Central Bank of China. It has all the regulatory powers of
monetary policy and on the China Banking Regulatory Commission (CBRC.)
All the activities in Chinas banking system are based primarily on the Central Bank of China,
namely the Peoples Bank of China (PBOC). The PBOC was founded in 1948, it is the central
bank and authority of financial stability. It acts as a Treasury. It also issues currency, monitors
money supply, regulates monetary organizations and formulates monetary policy for the State
Council.
The CBRC was established in 2003, and its main objective is to reform of State Owned Bank
(SOB) and monitor the banking system. Currently, the system is divided into two levels: the
PBOC and other commercial banks. [5]
The other commercial banks are four state commercial banks (the "Big Four").
The "big four" state-owned commercial banks are the
Bank of China- Specializes in the field of foreign trade and foreign exchange reserves.
The China Construction Bank- specializes in the field of infrastructure finances
The Industrial and Commercial Bank of China specializes in the Industrial sector
The Agricultural Bank of China- specializes in the agricultural sector
Apart from these four there are two other banks which do play a significant role:

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The china Development bank specializes in distributing foreign capital from a variety of
sources
China International Trust and Investment corporation (CITIC)-specializes in foreign investment
funds and works with Bank of China. [6]
LITERATURE REVIEW
Information systems or IT, has been a critical component for a long time attributing towards the
success of the Financial Services sector. It has been often described as e-finance, and plays a
vital role in banking sectors. Technology in financial services refers to the accessibility of
financial services such as banking, funding, loaning etc. through the use of electronic
communications. The growth and innovation of the financial sectors have impacted the global
digital economy and attributed to shifting business paradigms.
Within the sphere of financial services, there is strong appetite for e-trading platforms, mobile
banking, and e-banking. Managers of financial service sectors, majorly banking should be
equipped with new skills requirements in order to work and thrive in the rapidly evolving
intersection between technology and finance.
According to Dr. Chris Chapman and Anthony Gandy, in their book Information Technology &
Financial Services: The New Partnership (1997, chp1, page1), [7] have stated that Technology
is a dynamic force. As it becomes an increasingly vital element in the competitive landscape of
the financial service industry, technology is changing the very nature of selling and delivering
financial products. The first technological revolutions transformed the manufacturing and
agricultural industries. Now the continued evolution of technology has created an information
revolution. In this environment service industries are facing change just as fundamental as that
faced by manufacturing in the industrial revolution. As bankers face the certainty that technology
will increasingly influence the development of the banking industry, technology firms have come
to realize that banking is one of the largest and most sophisticated markets for their products.
Consequently the needs of the financial industry are a driving force in the development of new
information-based technologies. Which is truly applicable to present days financial sectors
which face the rapid growth and usage of information systems integrated into their day to day
operations.
Tabiba.M ,(April 3, 2013, page1) [8] in the study on Information systems in Financial service
Industry, their impact on organizational performance , found that , The growth of the internet,
mobiles and communication technology has added value in organizational performance to
compete strategically and globally. The results of the study, revealed that the key technical and
managerial considerations related to IT architecture and infrastructure decisions were found
critical to generate maximum advantage from the use of IS/IT.
In the book :Effects of Information Technology on Financial Services Systems (Washington,
D.C.:U.S. Congress, Office of Technology Assessment, OTA-CIT-202, September 1984,page
262) [9], It has been stated that information technologies have allowed all economic sectors to
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improve their productivity to operate more efficiently and to be decentralized, yet wellcoordinated. The proliferation of information technologies are systems has been comparable to
the spread of electrification in the 1930s and 1940s. The thrust in financial information
technology has been toward automation of lower value transactions and the development of
intelligent media-the smart card and its descendants.
ATMs are now being replaced by automated resource control centers (ARCCS) that not only
dispense currency but automatically transfer funds between accounts. Most stores, gas stations,
and the like have POS terminals, although people do a great deal of their shopping through their
home computers. With computers almost as common as the telephone and with communication
costs low, home banking is common.
Managers need to be innovative and harness strategies that integrate IT into banking operations
in all divisions to overcome the many challenges facing financial service providers such as
secured platform, strategic challenges, regulatory challenges and operational challenges for both
the banks and their customers. Challenges related to cost, quality and timeliness of services,
security and regulatory compliance can all be addressed by accelerating the adoption of right
strategies integrated with IT across all spectrums of the financial service environment.
This research explores the impact the current SIS has on Bank of Qingdao and tries to find the
shortfalls and suggests appropriate measures to ensure its continuous success on the national
stage. To achieve this vision, it is crucial for BQD to employ and implement strategies that prove
to be strong pillars for healthy, successful and forward looking service sector for their customers
and owners, this study focuses on this issue.
MOTIVATION OF THE STUDY
Strategic Information system is an emerging concept in the field of financial services sector. The
researcher being a bank employee is motivated by the fact that much exploration has not been
done regarding SIS related to banks performance in BQD, China. So the researcher tries to
contribute positively to the banking sector of china through this study. Embracing change is
easier and far more profitable than risking irrelevance in the widening digital divide. So, the
researcher feels that, if, through the findings there are some shortcomings that can be amended
through necessary changes, it would contribute immensely and positively to BQD, so all his
efforts in this research would materialize in achieving his goals.
PROBLEM STATEMENT
As we are very much aware that Technology is essential to the success of banks seeking
profitability , Information systems is set to play a more pivotal role compelling banks and
investment services to update their business models to remain competitive.
Information Systems (IS) departments face many challenges in today's rapidly changing, highly
competitive, global environment. One approach to understanding the challenges faced by IS
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departments is to survey IS executives, managers, operating staff and customers in order to elicit
their key issues.
In China, all the banks adopt their own business strategies to suit their requirements. They
employ IT across all their departments for efficient functioning, so does BQD.
1. What remains uncertain is, whether the banks Information systems and the strategies
employed in BQD is helping it achieve its goals and target?
2. What returns is BQD obtaining for its investment in IT and related strategic planning? Has it
been cost effective? (ROI)
A customers choice of bank is highly influenced by its functioning and facilities provided to
customers with convenient and quick services, efficient processing and improved customer
turnaround. Thus the banks survival depends on retaining its customers and attract more
customers through its constantly improving services and incentives.
Though BQD has been performing positively and has expanded noticeably, it is important to
know the short falls and if any of its strategies integrated with IT has be hindering its growth. In
order to fulfill all of these requirements, banks need to employ and implement latest technology
and fruitful strategic plans. Sometimes, some Information systems may not have been
incorporated by the banks, in order to save costs.
3. Some Information systems strategies are formulated by top management and may not involve
tactical and operational staff. This causes problems during implementation, as they may be
reluctant to accept changes made without their consultation or opinion. Certain operations in the
banks are still done manually delaying the process and sometimes leading to loss of data
resulting in frustrations amongst customers. These areas need to be explored through
questionnaire.
STUDY PURPOSE:
The purpose of this study is to determine the impact of information system strategy on
Banks performance of all branches of BQD in China
To measure Return on Assets (ROA) and Return on Equity (ROE), EBIT, ROCE. And
Profitability analysis since the inception of Strategic Information systems into BQD.
OBJECTIVES OF THE STUDY:
Desk Research:
1. Profitability analysis to explore the banks performance over the years since the inception
of Information systems to know how cost effective it has been.

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2. To measure ROE, ROA, ROCE and EBIT through DuPont analysis to find the
effectiveness of the banks investments in Strategic Information systems.
Field Research:
The following are the specific objectives of the intensive study on SISs impact on BQD:
1. To determine how SIS and Business Strategy are related and also to find out the state of the
required IS assets.
2. To explore how successful the predictors of SIS planning have been since their inception.
3. To determine to what extent the staff have been participating in the formulation of strategic
Information systems.
3. To determine what factors act as barriers to the formulation and implementation of information
system strategy.
4. To determine the satisfactory levels amongst bank customer in the usage of electronic banking
systems and other digital products.
5. To determine the relationship between IS investments and banks performance.
6. To determine how effective SIS has been in terms of efficiency and profitability of banks.
7. upon finding of any shortfalls, to recommend appropriate model for aligning information
system strategy with business strategy.
8. Suggesting means to overcome the barriers to the formulation and implementation of
information system strategy.
RESEARCH QUESTIONS:
Based on the research objectives the following questions will be posed:
1. How does SIS relate to Business strategy?
2. What are the required information systems assets?
3. What are the success predictors of SISP?
4. Which level of staff participate in the formulation of SIS?
5. What are the barriers to the formulation and implementation of SIS?
6. What are the electronic banking products and services employed in BQD?
7. How does the banks Investments in SIS relate to its performance?
8. What are the indicators of efficiency and profitability of BQD?
SIGNIFICANCE OF THE STUDY:
Every Bank in China strives to be the leader in the financial services sector in China. In climates
where factors such as ever increasing customer demands, failing strategies, constant pressures
and increased competition can hinder the achievement of this goal, banks look for strategies that
lead to competitive advantages. One such strategy is the adoption of information systems within
the company and integrating its strategy with information systems, which all banks do now, so
has BQD. Today banking is not actually about the banking in the past. It is now all about
enabling peoples lifestyles, meaning Banks have to re-think how they engage with customers.
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Banks need to cater to what their customers want. Digitization has emboldened and empowered
customers in a way it cannot be ignored, so the back-end systems need to be integrated and needs
to be consistent, contextualized and made easy to be deployed across any channel. Due to all
these factors management in most banks are blindsided. The only way out is for Banks to change
their business model, which is a major upheaval that cannot be taken lightly. So as a solution to
all these problems, this study tries to explore to what extent the prevailing strategic model
integrated with information systems thus known as SIS, is effective in the case of BQD, such
that the findings can enable the banks to adopt strategies and models to overcome any hurdles
towards its growth and goals.
Though past works in the area of MIS and SISP have contributed to the financial service sectors,
this study adds to the past works by acting as a source for further reference and new ideas
relating to SIS on banks performance. Though lot of work has been done relating information
systems with Business strategy very little work has been done regarding the Impact of SIS on the
Banks performance, especially in the case of BQD, so this work will fill in that gap.
The study contributes towards better understanding the significance of BQDs investments on
information technology. This would enable investors, management and IT managers to be able to
deal with and justify the resources spent on technology as well as planning, implementation and
evaluation of information system strategy. This study would help bank managers to recognize the
importance of information systems strategy and its use to gain competitive advantage, increase
profit margins, and relate business aims to the information systems strategy.
The benefits of SIS to the banking industry will be highlighted in this research if it shows a
positive impact. The results, helps the banks to follow specific strategies to sustain their
dominance and grow value, it helps external users such as existing investors, potential investors
and other entities to make right financial decisions regarding their investments in Banks.

SCOPE FOR THE STUDY:


The top 4 challenges facing banks and financial institutions
1. Not making enough money. Despite all of the headlines about banking profitability,
banks and financial institutions still are not making enough return on investment, or the
return on equity, that shareholders require.
2. Consumer expectations. These days its all about the customer experience, and many banks
are feeling pressure because they are not delivering the level of service that consumers are
demanding, especially in regards to technology.
3. Increasing competition from financial technology companies. Financial technology
(FinTech) companies are usually start-up companies based on using software to provide
financial services. The increasing popularity of FinTech companies is disrupting the way
traditional banking has been done. This creates a big challenge for traditional banks
because they are not able to adjust quickly to the changes not just in technology, but
also in operations, culture, and other facets of the industry.

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4. Regulatory pressure. Regulatory requirements continue to increase, and banks need to


spend a large part of their discretionary budget on being compliant, and on building
systems and processes to keep up with the escalating requirements.
These challenges continue to escalate, so traditional banks need to constantly evaluate and
improve their operations in order to keep up with the fast pace of change in the banking and
financial industry today.

LIMITATIONS OF THE STUDY:


1. The study is limited to one bank Bank of Qingdao
2. Before the past decade , IS were not employed by the banks intensively, so the time series data
before 2000 would not help in the regression analysis, so there will be data for only 15 years for
regression analysis. Though it is well accepted sample size.
3.

It uses multivariate regression analysis, but the number of independent variables used, are
few (7), due to the necessity of only those variables in measuring the required parameter in
our model. But in reality there could be several other factors that may be influencing the
profitability of the company.
4. It uses ROE as one of the performance measurement tool, though ROE is a powerful tool for
measuring profitability of a company, but on occasions ROE might deviate the investor since,
companies can resort to financial strategies to artificially maintain a healthy ROE for a while
and hide deteriorating performance in business fundamentals. So, this might not be an
effective measure if companies are adopting such practices.
5. The research uses ROCE as one of the explanatory variables in its regression analysis, but
ROCE has a limitation that it does not account for the depreciation and amortization of the
capital employed. Because capital employed is in the denominator, a company with
depreciated assets may find its ROCE increases without an actual increase in profit, which
might distort our analysis.
6. Funds and time: the scholar has to spend lot of time on obtaining primary data
(questionnaire) which is time consuming and costly.
7. In china due to restrictions in accessing websites, it is hard to get many articles online from
various scholars around the world, which is crucial for any research.

THEORETICAL FRAMEWORK:

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The information systems success model (alternatively IS success model or Delone and McLean
IS success model) is an information systems (IS) theory which seeks to provide a comprehensive
understanding of IS success by identifying, describing, and explaining the relationships among
six of the most critical dimensions of success along which information systems are commonly
evaluated.
Initial development of the theory was undertaken by William H. DeLone and Ephraim R.
McLean in 1992 and was further refined by the original authors a decade later in response to
feedback received from other scholars working in the area.
The IS success model has been cited in thousands of scientific papers, and is considered to be
one of the most influential theories in contemporary information systems research. This model
has been adopted in this study too.

Figure 3

A representation of the Information systems success model

Source: https://en.wikipedia.org/wiki/Information_systems_success_model

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Dimensions of IS success
The IS success model identifies and describes the relationships among six critical dimensions of
IS success: information quality, system quality, service quality, system use/usage intentions, user
satisfaction, and net system benefits.
Information quality
Information quality refers to the quality of the information that the system is able to store,
deliver, or produce, and is one of the commonest dimensions along which information systems
are evaluated. Information quality impacts both a users satisfaction with the system and the
users intentions to use the system, which, in turn, impact the extent to which the system is able
to yield benefits for the user or her organization.
System quality
As with information quality, the overall quality of a system is also one of the most common
dimensions along which information systems are evaluated. System quality indirectly impacts
the extent to which the system is able to deliver benefits by means of mediational
relationships through the usage intentions and user satisfaction constructs.
Service quality
Along with information quality and system quality, information systems are also commonly
evaluated according to the quality of service that they are able to deliver. Service quality directly
impacts usage intentions and user satisfaction with the system, which, in turn, impact the net
benefits produced by the system.
System use/usage intentions
Intentions to use an information system and actual system use are well-established constructs in
the information systems literature. In the IS success model system use and usage intentions are
influenced by information, system, and service quality. System use is posited to influence a
users satisfaction with the information system, which, in turn, is posited to influence usage
intentions. In conjunction with user satisfaction, system use directly affects the net benefits that
the system is able to provide.

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User satisfaction
User, and by information, system, and service quality. Like actual system use, user satisfaction
directly influences the net benefits provided by an information system. Satisfaction refers to the
extent to which a user is pleased or contented with the information system, and is posited to be
directly affected by system use.
Net system benefits
The net benefit that an information system is able to deliver is an important facet of the overall
value of the system to its users or to the underlying organization. In the IS success model, net
system benefits are affected by system use and by user satisfaction with the system. In their own
right, system benefits are posited to influence both user satisfaction and a users intentions to use
the system. [10]

TENTATIVE CHAPTER SCHEME:


Chapter One: Gives introduction of SIS, early Chinese financial services system, current day
Chinese banks, Information systems, Strategic Information systems, and shows how the study is
carried out. It provides the background to the study, problem statement of the study, the purpose
and the objectives of the study as well as the significance, scope and limitations of the study. The
theoretical framework that guides the study is explained in this chapter.
Chapter Two focuses on the past studies i.e. Literature review. The chapter surveys relevant and
pertinent literature relating to the main problem of the study. It describes, summarizes, evaluates
and clarifies this study it gives a theoretical base for the subject under study, it explains about
how the SIS has been implemented in banks in China and BQD. The chapter looks also at
researched literature closely associated with the problem being investigated.
Chapter Three presents an overview of banking in China and the profile of the Bank under
study i.e. BQD. The chapter also looks at the history of the Chinese Banks, BQD and the digital
products and services employed in BQD.
Chapter Four presents the research methodology adopted in the study. The chapter briefs on
areas such as the target population, sample size and sampling techniques, data collection
instruments, pre-testing research instruments, mode of data collection, and method of data
analysis and presentation of results. This chapter will be responsible for the design and the
implementation of the survey.
Chapter Five focuses on the analysis of data and findings on aspects of strategy. It analyses the
data in relation to the objectives of the study. The chapter has been organized under the following
major sub-headings: demographics and strategy, vision and goal, business strategy and IS
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strategy, success predictors and IS strategy, competitive advantage and IS strategy, and barriers
to strategy.
Chapter Six focuses on the analysis of data and findings on aspects of information systems and
related issues like information technology usage, technology and cost reduction, electronic
banking, and customer satisfaction. It analyses the data in relation to the objectives of the study.
Chapter Seven focuses on the analysis of data and findings on aspects of bank performance
taking into consideration information technology investment and bank turnover.
Chapter Eight looks at the discussions of the findings and relates them to the literature
reviewed.
Chapter Nine provides the summary, conclusion and presents recommendations for the solution
of problems identified.

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REFERENCES:
1. [1] Morton, W. Scott, China: Its History and Culture (New York: Lippincott, 1980), p. 95
2. [2] http://countrystudies.us/china/96.htm Source: U.S. Library of Congress
3. [3] https://en.wikipedia.org/wiki/History_of_banking_in_China
4. [4] http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=35104612
5. [5] http://www.bankpedia.org/index.php/en/89-english/c/23726-chinas-banking-systemencyclopedia
6. [6] https://en.wikipedia.org/wiki/Chinese_financial_system
7. [7] Dr. Chris Chapman and Anthony Gandy, in their book Information Technology &
Financial Services: The New Partnership (1997, chp1, page1)
Link:
https://books.google.ae/books?
id=FJcuYd7AEjsC&pg=PA7&lpg=PA7&dq=Impact+of+Information+systems+in+Finan
cial+service+industry&source=bl&ots=j_elCJ7T3&sig=loWUhozsMS5bI_Y9KdLuDbRhLVY&hl=en&sa=X&ved=0ahUKEwjAw
M-QtLXLAhWGuoMKHWDhCTIQ6AEIPDAE#v=onepage&q=Impact%20of
%20Information%20systems%20in%20Financial%20service%20industry&f=false
8. [8] Information Systems in Financial Service Industry, Their impact on organizational
performance ( Tabiba Mehzabeen, April 3, 2013, page3)
9. [9] Effects of Information Technology on Financial Services Systems (Washington,
D.C.:U.S. Congress, Office of Technology Assessment, OTA-CIT-202, September 1984),
page 262.
https://books.google.ae/books?
id=p_DqYGwRm10C&pg=PA210&lpg=PA210&dq=Impact+of+Information+systems+in
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+Financial+service+industry&source=bl&ots=bSK24RmIZ&sig=paYYLb0aNel7OT7_yh0DYy32wJ0&hl=en&sa=X&ved=0ahUKEwjA
wM-QtLXLAhWGuoMKHWDhCTIQ6AEIWDAJ#v=onepage&q=Impact%20of
%20Information%20systems%20in%20Financial%20service%20industry&f=false
10. [10] https://en.wikipedia.org/wiki/Information_systems_success_model

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