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Business Strategies Commercial Bank of Ceylon Plc

   

Added on  2020-11-05

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1UNDERSTANDING BUSINESS STRATEGIES OF COMMERCIAL BANK OF CEYLON PLC1.Introduction This report aims at part fulfilment of PIM MBA course subject MBA 517 Business Strategy of PIM MBA and includes an analysis of business strategies applied by a chosen company. The author has selected M/s Commercial Bank of Ceylon PLC (CBC) in Sri Lank for this purpose. Secret of continuous success of a company to stand out as top performers in comparison to its rivals even in cases of economic downturn and turbulences is mainly due to carefully and cleverly crafted strategy followed by persistent application of it in the execution. In essence a company’s strategy is “its action plan for outperforming its competitors and achieving superior profitability” (Thompson, Peteraf, Gamble, Strickland III, & Jain, 2014, p 3). Therefore a well-defined strategy is an essential tool for a company to be successful in the long-run. Accordingly, the author in the rest of this report has analysed the extent of strategies applied by CBC to be a top performing bank in Sri Lanka over the years. 2.Overview of CBC CBC’s origins date back to 1920’s and operations have been carried out under its present name over the last 50 years. The Bank presently serves over 3 million customers with involvement of 5027 employees through a wide local and international network of branches, subsidiaries, agency arrangements, Business Promotional Offices located in the Middle East countries, and correspondent banking relationships. CBC is the largest private sector commercial bank and 3rdlargest bank in Sri Lanka by total assets, which stand at LKR 1,303 trillion as at the end of 2018. CBS is a systemically important bank in the country and accounts for circa 11.1% of sector assets. (“Commercial Bank of Ceylon PLC Annual Report 2018”, n.d.). The Bank offers diversified set of financial services in the four main business segments of personal banking, corporate banking, treasury, and international operations. CBC is being treated as a benchmark in the banking sector in Sri Lanka as it has set standards, formed identity and trend unsurpassable. CBS has become the leader of private banking owning to its use of state-of-the-art technology and dealt by highly motivated and dedicated staff (www.combank.net/newweb/en/about-us. n.d.)

23.CBC vision, mission, and core values Strategic vision statement of a company pronounces management’s long-term expectations and emphasizes the strategic course and future direction (where we are heading). On the other hand, strategic mission statement elaborates the company’s current actions and purpose of its existence (who we are, what we do, and why we are here). The values of a company shall be the ethical aspects, behavioural standards qualities which are aligned to achieve the mission and vision. It is important that such strategic aspects are communicated effectively down the line in order to inspire and energize every employee of the company towards its direction. (Thompson et al, 2015) 3.1CBC Vision.“To be the most technologically advanced, innovative and customer friendly financial services organisation in Sri Lanka, poised for further expansion in South Asia”The relevance of a vision statement can be evaluated based on “Five F” checklist. Table 1: Evaluation of CBC Vision on 5F Checklist Checklist Score (1 to 5) Comments 1. Focused 5 Focused, plainly state what the bank wants to be in the future 2 Flexible 4 It allows to accommodate emerging trends in the sector 3. Feasible 4 It is an attainable statement with dedication 4. Fathomable 4 It is understandable 5. Friendly 4 It addresses to all the stakeholders Source: Author Analysis included in Table 1 indicates that the CBC’s vision statement expresses clearly its future aspirations for the employees to act in that perspective. 3.2CBC Mission.“Providing reliable, innovative, customer friendly financial services, utilizing cutting edge technology and focusing continuously on productivity improvement whilst developing our staff and acquiring necessary expertise to expand locally and regionally”The relevance of a mission statement can be evaluated based on “Five C” checklist.

3Table 2: Evaluation of CBC Mission on 5C Checklist Checklist Score Comments 1. Clear 3.5 Clarity is there to a reasonable extent 2 Comprehensive 4 It includes all aspects of its purpose 3. Connected 4 It discusses all stakeholders, vision and values 4. Cherished 4 It is appreciated and valued by all stakeholders 5. Concise 3.5 It is reasonably brief whilst providing all aspects of the bank Source: Author 3.3CBC Values.According to the Annual Report 2018, CBC’s core values are inbuilt in the Bank's Code of Ethics – honesty, integrity, fairness, responsible citizenship and accountability. CBC employees are required to adhere on daily basis to these core values in doing the business and accomplishment of strategic vision and mission. As included in CBC website www.combank.net business ethics can be defined as “the process of evaluating decisions, with respect to the moral standards of society”. In other terms, business ethics means “choosing the good over the bad, the right over the wrong, the fair over the unfair and the truth over the untruth”. The Bank insists practicing very high ethical standards in line with professional requirements which are beyond obeying the applicable law. Paying close attention to moral concerns and upholding of an ethical culture is of height importance to the Bank and the employees in making the correct ethical decisions on daily basis. Benefits that would be extended to all the CBC stakeholders by practicing ethics based core values are highlighted in Table 3. Table 3: Benefits of practicing ethics based core values Source: Adapted from Commercial Bank of Ceylon (2019)

44.CBC Business Model A company’s business model is fundamental in setting up of its strategy. According to Thompson el al (2014) business model is a plot setup by company’s management to deliver its products or services by creating value to attract customers and there by generate revenue in order to recover the cost including a satisfactory profit margin. There are two basic elements of a company’s business model: i)Customer value proposition: delivering value (V) through product or services for money that spent by customer (i.e. price – P) to satisfy his or her wants and needs – i.e. value proposition will be more attractive to the customer in case of greater the V provided and lower the P charged by the company. ii)Profit formula: the basis that will create satisfactory profit margin to the company on top of its cost (C) whist pricing is aligned to customer value proposition – i.e. highly profitable business can be run in case of lower the company cost (C) and greater the customer value proposition (V – P) CBC Business Model is included in Appendix 1. It expresses the view that CBC’s strategy centred on creating value through delivering value (i.e. customer value proposition) to the stakeholders in return of deriving value (i.e. profit formula) from stakeholders. 4.1Customer value proposition.CBC is primarily focusing on two processes of the bank, i.e. financial intermediations, and maturity transformation, in order to deliver value to the stakeholders. Financial intermediaries refers to the role that CBC plays between various stakeholders such as depositors – borrowers, importers – exporters, money remitters – beneficiaries, entrepreneurs – investors, tax authorities – tax payers, and so on and so forth. Maturity transformations include the processes of transforming short-term capitals into long-term investments and lending. The Bank has been delivering value to its shareholders for nearly hundred years in operation. Over this period CBC has been able to build a strong base of loyal stakeholders whom the Bank calls “capitals” due to the reason that such stakeholders tend to take longer-term view of the Bank. Accordingly, the terminology used in CBC for such stakeholders includes; financial capital, manufactured capital, intellectual capital, human capital, social and network capital, and natural capital. Even though the Bank has no ownership to such capitals, the

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