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MOHAMMAD ROKUNUZZAMAN ID NO: 3-07-11-039 Batch-11

Supervisor Name: PROFESSOR DR SHAHID UDDIN AHMED Department of Management Studies University of Dhaka

Chapters 1. Introduction 2. Methodology of the report 3. Company Profiles 4. Analysis and Interpretation 5. Conclusions and Recommendations

Introduction

To

analyse the strategy adopted by a major bank in Bangladesh. To have better direction on strategic management activities specially business level strategy To compare the existing BLS of Agrani bank limited with other commercial banks.

To identify and suggest scopes of improvement in strategy of ABL. To get an overall idea about the performance of Agrani Bank Ltd. To fulfill the requirement of the internship program under MBA program

The

study gives me privilege to observe the management of this bank. It showed how strategy is working in a big organization. It also gave me opportunity to analyze balance sheet, financial statement of the bank.

It

enhances my knowledge about ratio analysis, calculation of CRG. I can say this study has learned me about the economy of Bangladesh; regarding issues like how the financial activities are being operated, how it should be conducted etc.

Strategy is an integrated and coordinated set of


commitments and actions designed to exploit core competencies and gain a competitive advantage. Strategic competitiveness is achieved when a firm successfully formulates and implements a value creating strategy. Competitive advantage occurs when a firm implements a value creating strategy and other companies are unable to duplicate it or find it too costly to imitate

Above average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk.
Risk is an investors uncertainty about the economic gains or losses that will result from a particular investment. Average returns are returns equal to those an investor expects to earn from other investments with a similar amount of risk.

The strategic management process is the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn aboveaverage returns. Resources are inputs into a firms production process, such as capital equipment, the skills of individual employees, patents, finances and talented managers. Capability is the capacity for a set of resources to perform a task or an activity in an integrative manner.

Core competencies are resources and capabilities that serve as a source of competitive advantage to a firm over its rivals.
Business-Level-Strategy is an integrated and coordinated set of actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.

Cost Leadership Strategy is an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors.
-Lowest cost compared to rivals -Target market is broad -Product is comparatively standard

Differentiation Strategy is an integrated set of actions taken to produce goods and services at an acceptable cost that customers perceive as being deferent in ways that are important to them.

Focus Strategy is an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment.
1)Focused Cost leadership strategy -Target Market specific & small -Product price is low -Product is standard -Cost of production low

Focused Differentiation Strategy


-Product is different -Target market is small -Product quality is high Integrated Cost Leadership & Differentiation Strategy Relatively differentiated products at relatively low costs is the products of integrated strategy

Those firm doing well in market by using integrated strategy who1) Adapt quickly to environmental changes 2) Learns new skills and technologies more quickly
3) Effectively leverage its core competencies while competing against its rivals.

The target populations of this study were employees of different corporate branches of Agrani Bank Limited. The sample size was allocated as 21. As this sample is very small regarding the size of the population, random sampling techniques were applied. A mix of convenience and judgmental sampling was also performed to select the samples for this research. The primary qualification for being a respondent was those who are involved with Agrani Bank Ltd for many years.

Data collection method was divided into two sources: 1 Data Collection from Primary Sources For the procedure of different banking operations, I observed the operations and talked with the Officers, I provided questionnaire to the employees and also informally interviewed the ABL Officials for getting more information.

2 Data Collection from Secondary Sources Data was collected from different statements and the annual reports of the bank. Besides, different books and training pamphlets were also a good source of information.

For collecting books and periodicals, I have used the following. ABTI Library Agrani bank Ltd web site Janata bank Ltd web site Brac Bank web site Duch-Bangla Bank web site

Agrani

Bank Ltd, in pursuance of Bangladesh Banks (Nationalization) Order 1972, (P.O No.26 of 1972) came into being by taking over the assets and liabilities of the Habib Bank Ltd. and Commerce Bank Ltd., functioning in the then East Pakistan. Now it is one of the four SCB's (State Owned Commercial Banks) performing in Bangladesh and it is fully owned by the government.

The

bank started operation with 249 branches with its head office in Dhaka. Now Agrani Bank ltd is operating with 867 branches and its total manpower is 10921 at 31st December 2008. The Bank also has two wholly owned subsidiary Companies named Agrani Exchange House (Pvt) Ltd. in Singapore and Agrani Remittance House SDN, BHD, Malaysia.

Agrani Bank has been converted into government owned banking company from nationalized commercial bank on 15th May 2007 Bank was registered in Joint Stock Companies and Farm as public limited company. On 15th November by Vendors agreement between Agrani Bank and Government, Agrani Bank took over all its assets and liabilities from government and becames Agrani Bank Limited. Though 100% share is owned by government but Agrani Bank ltd is now a public Limited company

To

help rebuild the economy of Bangladesh by advancing money to all socio-economic activities and developments. To give banking services to all types of people and finance them for their productive purposes. Besides giving advances to general business, priority is given to make advance on agriculture and industrial sector and expanding foreign trade.

To

taking banking services to the rural people by expanding their branch network to the rural area. help government by giving dividend through earning profit.

To

Accepting deposits. Providing advances and helping in investment. Discount and purchase of bills. Financing trade (both local and foreign). Facilitating remittance (both local and foreign). Providing various information's, guidance and suggestions to the entrepreneur

DEPOSITS: (A) 1. Savings Account 2. Current Deposit Account 3. Special Notice Time Deposit (SNTD) 4. Fixed Deposit Receipts A/C 5. Monthly Deposit Pension Scheme A/C (B) 1. Foreign currency account 2. Non-resident foreign currency deposit account 3. Resident foreign currency deposit account 4.Foreign remittance

LOANS: Overdraft Cash Credit(Hypo) Cash Credit(Pledge) Rural Credit Industrial Credit IBP( Inland Bill Purchased) Local Guarantee

Foreign Trade and Foreign Exchange: Letter of credit Packing credit Payment against document(PAD) Loan against imported merchandise(LIM) Foreign guarantee

LOANS (Sector-Wise): 1. Agriculture 2. Large & Medium Scale Industries 3. Working Capital (Jute) 4. Working Capital (Other than Jute) 5. Jute Trading 6. Jute and Jute Goods Export 7. Other Exports 8. Other Commercial Lending 9. Urban Housing 10. Special Program Small Industry 11. Other Special Program 12. Others

FEE BASED SERVICES: 1. Collection of Bills/Cheque etc. 2. Issuance of Demand Draft/Pay-Order/Mail Transfer/Telegraphic Transfer 3. Issuance of Bank Guarantee 4. Opening of Letter of Credit 5. Exchange Account F.C. 6. Export Bills 7. Godown Rent Record/ Locker Services 8. Dividend Warrant 9. Underwriting 10. Miscellaneous.

Investments: 1. Purchase of Treasury Bills 2. Purchase of Approved Securities of the Govt. 3. Purchase of ICB share certificate 4. Purchase of Debenture of different Autonomous Bodies 5. Other Investment

Profitability In 2009, the Bank earned operating profit of TK. 644 crore. In recent past bank has to sustain cumulative net loss charging of cumulative provision shortfall against loans and advances and superannuation fund since 1972. It was done as per provisions of IAS-30, Implemented by the Bangladesh Bank vide their BRPD circular No.14 dated 25 June 2003 and as such the auditors certified the accounts without any qualification. In spite of huge volume of accumulated loss, the Bank is on the path of recovery and has taken steps to consolidate its position.

Net Profit Year 2005 2006 2007 2008 2009


(in TK) Crore.

214 358 526 633 644

year 2005 2006 2007 2008 2009

Deposit (in Crore. TK) 7731 7491 7129 7209 7357

Year 2005 2006 2007 2008 2009

Advance (in Crore. TK) 9940 10587 11849 11336 12224

year

Export (in Crore. TK)

2005

4171

2006

5171

2007

4892

2008

4954

2009

4461

year

Import (in Crore. TK)

2005

5119

2006

11592

2007

11343

2008

10062

2009

7753

year 2005 2006 2007

Remittances (in Crore. TK) 3457 3930 4281

2008
2009

5269
5587

year 2005 2006 2007 2008 2009

Total Assets (in Crore TK) 7541 8358 9509 9511 10346

Main Issues to find -Are the products are low cost? -Are the market is broad? -Are the product is acceptable to customers. -Relative position of differentiation -Cost of Product.

HBL Interest Rate 16 15.5 15 14.5 14 13.5 13 12.5 12 11.5 Agrani Bank DBBL Brac N.C.C.

Interest Rate

HBL Interest Rate

Bank name

HBL Interest Rate

Agrani Bank 13

DBBL 14

Brac 14

N.C.C. 15.5

Cash Credit Interest Rate 16.5 16 15.5 15 14.5 Agrani Bank 14 13.5 13 Agrani Bank DBBL N.C.C. MTBL DBBL N.C.C. MTBL Cash Credit Interest Rate

Cash Credit Interest Rate


Agrani Bank DBBL N.C.C. MTBL

14

15

16

15

FDR Interest Rate 14 12 10 8 6 4 2 0 Agrani Bank DBBL Brac N.C.C. FDR Interest Rate Agrani Bank DBBL N.C.C.

Brac

FDR Interest Rate Agrani Bank 10 DBBL 11 Brac 12 N.C.C. 13

20 18 16 14 12 10 8 6 4 2 0

18 14.5

17.5

Interest

Agrani Bank

Dhaka Bank Bank

City Bank

Consumer Credit

Agrani Bank

Dhaka Bank

City Bank

14.5

18

17.5

PP Endorse Comm. (in TK)

350 300 250 200 150 100 50 0 Agrani Bank 100

300

300

Janata Bank Bank

Dhaka Bank

Passport Endorse Commission (in TAKA)

Agrani Bank 100

Janata Bank 300

Dhaka Bank 300

After comparison with above five different products we see products are low cost.

Total Advance at 2007 14000 12000 10000 8000 6000 4000 2000 0 Agrani Bank Janata Bank Brac Bank Dhaka Bank Total Advance at 2007

Total Advance at 2007 Agrani Bank Janata Bank Brac Bank

(In Crore) Dhaka Bank

11900

12000

3300

2000

Deposit at 2007 25000 20000 15000 Deposit at 2007 10000 5000 0 Agrani Bank Janata Bank Brac Bank Dhaka Bank

Deposit at 2007 Agrani Bank 13600 Janata Bank 19800 Brac Bank 3800

(In Crore) Dhaka Bank 2300

Two of the main indicator of a financial institute is advance and deposit. From above two comparison we see market of this bank is broad. As the branch number of this bank is 867 they are able to gain this competitive advantage. And off course products is acceptable to customers.

Income Sectors of Agrani Bank Ltd. Investment income Commission 13% Income 7% Interest Income Exchange c Earning 13%
Interest Income 62%
Investment income Commission Income Exchange Earning

Other Operative Income 5%

Other Operative Income

Income Sectors of Brac Bank

Other Operative Income 0% Commission,Ex change 22%

Income from Investment 20%

Interest Income 58%

Interest Income Income from Investment Commission,Exchange Other Operative Income

Income Sectors of DBBL

Other Operative Income 6% Commission,Excha nge 27% Interest Income 43% Interest Income Income from Investment Commission,Exchange Other Operative Income Income from Investment 24%

From above information we can say differentiation of product is relatively standard. This banks number of income sectors is as like other commercial banks income sector.

Cost of production of this bank is lowest compared to other commercial banks. Here we see Interest paid by this bank is only 66% compared to Brac banks 82%.

Number of branches covering almost all over the country. Amount of confidence regarding this bank in the mind of mass people (being a government bank everyone thinks the policy of this bank will not be changed very rapidly). Ability to give advances in big volume with lowest interest rate. Ability to handle remittances efficiently. Ability to give loans to rural areas especially to farmers. Ability to take help from government to collect classified loans

-Technology used by the bank is not up-to-date. -Service given by the bank is below customers satisfaction level. -Inefficient employees in comparison to other private commercial banks. -Political intervention over this bank is more than other private banks. -Recovery rate of loans is low compared to private banks. -Salary structure of the employees of the bank is very inefficient. In 2006 the number employees were 11793 and the amount was used to give them salary was 2,511,990,943 tk (including salary and allowances). Per month 17500 (almost) tk for each person. This is less than the lowest salary getter of many private sector banks (excluding allowances).

-Net interest income (NII) is increasing day by day. -Amount of classified loan is decreasing. -Operating profit is increasing gradually. -Import-export business is very much favorable to bank now a days. -Loss-making branches has been reducing for last few years. -Remittances increased by 13.68 percent. -Human resources management division is getting more emphasis from top management. -Huge number of IT specialist is being employed to up grade computer system and network. -Salary structure is also improving in some extent.

-The banking industry is the main threat of the bank as many potential competitors are in competition on the market. -Technological drawback is a big problem. -Salary structure is a big threat not to attract potential and efficient employees from market. -Outlook and interior design is not attracting customers as they are attracted by other commercial banks. -Government is a big threat also. Because to balance deficit budget and to pay different dues of various government organization like BPC government is dependent of this bank. -Though classified loan condition is improving but still it is in danger one. -And off course still trade union is a big threat to it, as the CBA leaders are more interested to take leadership than to do well for the bank.

Target market is broad for this Bank. Bank is giving advances for various reasons to all type of customers. It includes poultry loans, SME loans, hatchery loans, shallow water pump loans to high industrial loans. The range of advancement is from 5,000 taka to 2000 ml taka. Cost of product is lowest among competitive banks. In comparison to other commercial banks especially private sector bank the rate of interest of this bank is so minimum. Sonali bank and Janata Bank is also giving advance to their customers all most same rate but most cases those rate are more than the rate given by Agrani bank Ltd. Moreover different general banking services given by Agrani bank Ltd is lower in comparison to all bank in the banking industry. As the market of this bank is broad i.e. hole Bangladesh is their market and almost every type of people is their customer we can say , the business level strategy followed by this bank is cost leadership strategy.

The market of this bank is broad i.e. hole Bangladesh is their market and almost every type of people is their customer. Bank is giving advances to their customers on big amount as well as very little amount. Besides small sized loan bank is pursuing Industrial loans, syndicated loan with other banks which are very huge in volume. And the customers of those loans are big businessmen. So as there is no special emphasis on any particular segment of market we can easily recognize that the bank is pursuing cost leadership strategy. In addition to this we can say, as there are very little differences between the four state owned

commercial banks in Bangladesh from the point of view of uniqueness the bank
is not unique from others, so they are not performing differentiation strategy.

-Some uniqueness should be assessed by strategy formulators and special emphasis is needed to highlight people on that uniqueness. i.e.; integrated low cost differentiation strategy should be implemented. -The bank should invest more to coup up with the current technological changes and adopt online banking in a vast way. -The salary structure should be rational with other banks. -More training is needed to make current employees as customer friendly.

-Top management should be free to formulate banks own strategy. -bank should focus on broader business issues by having outside experts handle various operational details. -An appropriate organizational culture encourages the development of an entrepreneurial orientation among employees so the change of the organization culture is necessary.

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