Essay: FIVE-YEAR STRATEGIC PLAN FOR EAGLE BANK (2016-2021)

Question 1
FIVE-YEAR STRATEGIC PLAN FOR EAGLE BANK (2016-2021)
Who We Are
Eagle Bank is a new bank founded in 2016. The bank was established under the companies code 1963 Act 179 and under the laws of the Republic of Ghana, and currently operating one branch in Ghana located at Airport, Accra. The shareholding is made up of local private sector institutional investors and the general public. Currently the capital structure of the company is made up of $5,000,000 equity capital and $ 20,000,000 debt capital with employee strength of 12 and nine-member Board of Governors.
Mission of the bank
The bank has a mission of providing financial and advisory solutions that are priced competitively and tailored to meet the needs of its customers and maximize share-holder wealth in order to foster development.
Vision of the bank
To become one of the best Ghana’s banking institutions focused on delivering world-class banking services to its customers. The bank is committed to maximizing the wealth of shareholdings and at the same time meeting the expectations of the shareholders and customers and providing conducive working environment of its employees.
Core Values of the bank
The core values of the Bank strive on the following;
• Integrity – showing the objectivity, accountability, honesty, fairness, transparency and responsibility in the execution of duties
• Customer centred – putting the customer at the center of the bank’s operations and delivering a service of high quality all the time
• Recognizing high level performance – the bank recognizes and offer rewards for high level of performance by its employees
• Being Effective – doing the right things at the right time
• Diligence – greatest level of proficiency
• Innovation – ensuring optimal use of information communication technology
• Team work – working together as teams to realize the goals set for the bank within appropriate time frame
Objectives of the bank
Under this strategic plan, the overall objectives of Eagle bank are as follows;
• To ensure rapid growth in business volumes
• To become the market leader in chosen segments and niches
• To Increase and vary product range
• To develop customer responsive pricing policies
• To modernize the information communication technology of the bank
Challenges
Both external environment analysis and internal audit of the bank reveal challenges the bank faces.
External challenges include the following
High Interest Rates
The high cost of borrowing poses a challenge to the bank’s current operations. High interest rate would discourage a number of customers from accessing loans from the bank while at the same time affecting the ability of those who actually access loans to pay back the loan.
Unreliable power supply
The unreliable power supply is a challenge that is driving the cost of operations of the bank high. The bank’s continuous dependence on energy supplied by generator plants instead of electricity from the national grid is draining the profits of the bank.
High Rate of Poverty and Unemployment
There is high incidence of poverty and unemployment. One of the challenges faced by the bank is the high incidence of poverty and unemployment faced by Ghana as a developing country. Reports from other sources indicate that about 30% (people within the poverty bracket) of Ghanaians finds it difficult to afford one meal in a day (instead of 3). This high poverty coupled with high unemployment rate in the country create a challenge to the bank as most possible do not patronize the products of the bank.
Poor Creation and Distribution of Wealth
Also there is poor creation and distribution of wealth, which generally affects the economic standards of the populace, and this eventually affect the ability of customers to promptly honour their loan obligations to the bank.
Among the internal challenges faced by the bank include the following
One of the internal challenges faced by the bank is unclear and inadequate internal policies and procedures. This can prevent the bank from attaining its overall objectives
Also the bank is faced with sluggish credit appraisal and approval system. The credit appraisal and approval system of the bank at times frustrate customers. This is because the credit appraisal and approval system within the bank is characterize with bureaucratic procedures which slow the credit process of the bank
Another internal challenge is the absence of effective project monitoring system. The absence of effective project monitoring system with the bank serves as factor that prevents the bank from fulfilling its core mandate and objectives.
Also poor and ineffective debt collection procedures and systems is one of the challenges faced by the bank. The bank in most instances loses revenue due to the poor and ineffective debt collection procedures.
Another internal challenge faced by the bank is the inadequate skilled staff. The bank lack adequate skilled staff which makes it extremely difficult for the bank to achieve its overall objectives over the years
There is also weak internal control system throughout Eagle Bank. This means that the bank has not put structures in place to ensure that staffs do the right thing at the right time. This also makes it impossible for the bank in achieving its objectives
In addition there is inadequate ICT infrastructure within the bank. One of the main tools for achieving competitive advantage in the changing banking environment is information communication infrastructure. Since the bank lack adequate infrastructure, it makes it difficult to compete.
Other challenges include poor quality of information and inefficient financial and management reporting system.
Plans for dealing with challenges and achieving overall results:
The skills and experience of the workers of Eagle Bank is its most important asset in attaining objectives and gaining competitive advantage. A key element is for the bank to recruit and retain staff with requisite management and technical skills needed to implement its strategic agenda. To this end, the bank will;
Attract and retain competent employees during the period of the strategic plan. In doing this, Eagle Bank will put in place a system of remuneration that equitably competitive in order to attract the best in the industry. The bank would also develop and implement retention policies. The company would bring the introduction of a private pension scheme for the employees.
There would be enhanced staff training programmes. An intensified training program aim at providing the staffs with the needed skills and competencies including management and technical skills will commence in 2017. Also the Bank will provide the employees with a financial support to develop personal development .Also the bank will embark on Young Graduate Programs. The bank from August 2016 will institute young graduate programme aimed at targeting the best young professional from the various institutions in Ghana.
Maintain financial soundness and integrity and making the bank well known. In order for Eagle Bank to deal with the low levels of awareness, low brand recognition, absence of comprehensive corporate social responsibility program and bank wide unity of purpose, there should be a plan to make the bank financially sound and attain integrity as well as making the bank a household name. In doing this, the bank would;
Promote the bank’s image and business. In promoting the bank’s image and business; there would be intensified advertisement and promotion campaigns (which is ongoing) to develop products and services awareness through integrated marketing and communication strategy to stimulate loyalty and trustworthiness (this is expected to take place with the next 6months).
Develop sustainable corporate social responsibility programme. To this end, the bank must initiate actions for generating high level of publicity and goodwill, targeting those untapped groups having the potential to impact significantly on development. Also the bank should arrange for events to market and promote the initiatives identified using various channels of communication. Moreover the bank is expected as part of plan to take part in a number of social events that develop a strong visibility of the bank so as to enhance its outlook.
There should be enhancement of resource mobilization. In the achievement of this, the bank should develop and coordinate resource mobilization strategy with the finance department or division of the bank playing key role in this. Also, the bank should identify sources of income through new products. In addition the bank should bring on board full advisory services its operations to creation and maintenance of a competitive edge. Further, the bank would publish its annual reports or financial statements.
There would be the drive toward improved performance in the bank’s portfolio of lending for the bank to become financially sustainable. In doing this, the bank is expected to review the appraisal process and procedures for its product and service offerings (Jan 2016 – ongoing). Furthermore, there should be increment in lending as follows: SMEs – 25%, Medium Corporate – 20% and Large Corporates – 30% (January 2017).
Also there should be improvement in governance framework. In achieving the improvement in governance framework, the bank should improve customer interface and response time to five working days (August 2017). The bank should outsource technical advisory service for SMEs (December 2016).
There should be improvement in asset quality. In doing this, the bank is should establish a project monitoring unit with the project department.
Monitoring and Implementing the Strategic Plan
The department of the bank responsible for marketing will be in charge of monitoring the strategic plan’s implementation in the various departments. Every department within the bank will be charged to submit report detailing their progress on the strategy implementation on monthly, quarterly and annual basis.
The head of the marketing communication department will be responsible for holding meetings with the heads of department to evaluate progress with the strategy implementation. Quarterly and annual reports on the implementation of the strategic plan will be presented by the CEO of the bank to the Board of directors.
b. Porter’s five forces is a framework for the evaluation of the level of competition within an industry. Porter’s five forces analyze a range of micro-factors that help an organisation to measure the attractiveness of an industry and also understand the complexity of the markets in which it operates. According to Porter, the five forces that determine the competitiveness of an industry include bargaining power of suppliers, threat of substitute products or services, threat of new entrants, bargaining power of buyers, and threat of competitive rivalry.
The banking industry in Ghana can be assessed using the porter five analyses to indicate how competitive the industry is.
Threat of competitive rivalry: The competitive rivalry within the banking marketplace is highly intense. The intense competition has result in a number of mergers and acquisitions, This is because the major players in the industry want to maintain their market share and superior positioning. Also the companies in the banking industry produce similar products and there is no differentiation in the products.
Bargaining power of suppliers: much cannot be said about the bargaining power of suppliers. The bargaining power of the suppliers in the banking industry in Ghana is strong because most of the banks in Ghana find it difficult to switch their suppliers
Bargaining power of buyers: the bargaining power of buyers (customers) in the banking industry in Ghana makes the competition intense. This is because the banking industry in Ghana is made of large number of banks fighting for market share in the industry. Also the cost of switching banks is low for customers in Ghana. Both customers in the formal and informal sectors find it less difficult and costly to close their bank accounts in one bank and open another in a different bank.
Threat of substitutes: the threat of substitute in the Ghanaian banking industry indicates that there is intense competition in the industry. This is because there are products or service equivalents in the industry. This means that there are direct equivalent products or services from different banks or brands that create competitive influence. Many micro-finance institutions have sprung up and continue to do so to offer services and products similar to those offered by the traditional banks. Thus the banking industry in Ghana faces intense competition from micro finance institutions, and the telecommunication service providers who have ventured into electronic transfer of cash. Thus the Apex Bank money transfer services provided by the rural banks in the country face a stiff competition from the mobile money transfer services provided by the telecommunication companies such as MTN Ghana, Vodafone Ghana and Tigo.
Threat of potential entrants: the banking industry in Ghana faces threat of new entrants. This is because there are a number of banks that spring up every few years to erode profit in the industry. Also there is competitive retaliation in the industry as competitor try to emulate any innovation a bank brings in order to attract customers. The Bank of Ghana, the central bank, is yet to set a ceiling to the number of banks that could be granted permit to establish and operate in Ghana.
The analysis from the Porter five forces framework indicate that the business competitiveness in the market place for Eagle Bank is intense. Hence the company must embark on an appropriate strategy to overcome the competition.
From this backdrop, the company has now come out with strategies in a strategic plan to go about its operations in order to overcome the intense competition in the market place. The strategic plan that aims at making Eagle Bank one of the giants in the industry seek to overcome the challenges the bank is currently facing and improve the operations of the various departments in order to make the bank a force to reckon with as far as the banking industry in Ghana is concern. Hence the full support of various stakeholders including the board of directors and shareholders will be needed in order to make the strategic plan a success.
c. Careful analysis of the case indicates that Eagle was developed from the scratch through equity capital of $5,000,000 and a debt capital of $20,000,000. Other strategic options available for the bank to expand and be viable include the following; buying another bank, engaging in merger and opening more branches.
One strategic option available for Eagle bank to expand is for the bank to buy existing bank or take over an existing bank. This strategic option involves Eagle Bank buying all the shares of an existing bank. When this is done, Eagle bank would have access to existing customers because the customers of the take it would take over would automatically become the customers of eagle bank after the takeover. This means that Eagle bank can inherit the debt of the bank it has taken over.
Another strategic option is that, Eagle bank instead of taken over another bank can merge with an existing bank. With merger, eagle bank will combine force with another bank for the two banks to become one bank. In this strategic option, both banks would lose their identity and become an entirely new bank. The benefit of this strategic option is that, Eagle bank will get synergy.
Also another strategic option is for Eagle to open more branches across the country. This is where the bank through its own resources establish branches around the country in order to expand its operations. This means that the bank would need huge capital investment before it can embark on this strategy. But this strategy ensures that there would be no dilution of ownership.
d. The implementation of every strategic plan relies on five conditions (5’s) which are very important and crucial for the success implementation of every strategy. This means that if the implementation is unsuccessful, it means that at least one of the C’s is out of alignment. Among the 5 C’s of strategy implementation and their respective importance are as follows;
1. Communication
Effective internal communication is a prerequisite for the successful implementation of every strategy. This means that for the successful implementation of strategy, there strategy and its implantation should be communicated to those who are to successfully carry out the strategy. Without the communication of the strategy to the audience of the strategy, it would be extremely difficult for the strategy to be implemented. This means that communication of strategy should be done in a proper manner to those who are to carry out the strategy (audience)
2. Comprehension
One key ingredient for the successful implementation of a strategy is the understanding of the audience of the strategy or those who are to carry out the strategy. This means that successful strategy implementation requires that those who are to carry out the strategy understand and internalize what to do. This would even prevent overlap of duties from implementers of the strategy since each and everyone understands and knows what to do. Without the understanding of the audience of a strategy, the strategy cannot be implemented successfully.
3. Capacity
This refers to the ability of the organisation to actually execute the strategy. Capacity is also an important ingredient in the implementation of any strategy. This implies that, if an organisation does not have the capacity or what it takes to execute a strategy most especially in terms of finances, it implementation will be in futility.
4. Capability
This refers to both human and process factors such as skills of implementers as well as the process that should facilitate the execution of the strategy. This implies that if an organisation lacks the needed skills and facilities to execute a strategy, its implementation would be unsuccessful. This makes capability an important ingredient in strategy implementation.
5. Commitment
Commitment is the last of the 5 c’s of strategy implementation. This refers to the personal commitment of those responsible for the implementation of the strategy. Without the personal commitment of those who are to implement the strategy the implementation would not be successful since there could be sabotage from the people or implementers of the strategy. Hence the support of all is needed for the successful implementation of a strategy.
e. The strategic plan outline above can be said to be financially viable. This is because the strategic plan though will demand commitment of financial resources from Eagle Bank, is expected to generate substantial amount of income to the Bank for the period of the strategic plan.
During the period, it is expected that the bank will use resources amounting to GHS 80million to undertake operations outlined in the strategic plan for the period under consideration. The resources or fund needed is expected to be raised from internally generated funds, issue of equity capital and also debt capital.
The lending target of the bank which is considered to be one of the main income generating unit of the bank is expected to increase during the strategic period. The budgeted growth in the lending operations of the bank would have a positive impact on the bank as a whole.
The budgeted operating income of the bank for the strategic period is as follows:
Eagle Bank Budgeted Operating Income (figures in GHS)
2016 2017 2018 2019 2020 2021
Loan Interest 50,000,000 65,000,000 68,134,900 70,200,498 100,000,000 150,000,000
Commitment Fees 140,000 150,000 185,000 200,000 250,000 320,000
Investment Income 2,100,000 3,500,000 3,750,000 4,352,135 5,500,000 6,800,000
Interest on borrowings -35,000,000 -40,000,000 -51,813,512 -50,144,442 -59,123,115 -72,456,189
Income from Operations 17,240,000 28,650,000 20,256,388 24,608,191 46,626,885 84,663,811
The analysis from the above indicates that the strategy is financially viable as it is possible for the company to generate the resources needed to carry out the strategy since a total of GHS 80million is needed to undertake the strategic plan. In spite of this huge investment the company would generate huge sums of money from the operations during the strategic years.
f. Innovation refers to submission of better answers that meet or exceed new requirements or meet or exceed the needs of the existing market. Most banks have come out with innovations that had made them won a lot of customers over the years. In spite of that, the following strategic banking innovations would help Eagle Bank attract customers in their operations;
First of all, Eagle bank would have to institute automated teller machines (ATM). This would enable the customers to carry out transactions such as cash withdrawals and checking of accounts, with the bank outside the banking hall any time When Eagle Bank provides a lot of ATMs at vintage places, it would attract customers to them, since most customers would want to have access to their cash any time they need it.
Another strategic innovation that enable (Eagle Bank) win most customers is introduction of mobile banking in their operations through the use of mobile phone or personal digital assistant (PDA).
Moreover internet banking is also one of the strategic banking innovations that would introduced for that segment of customers whose use the internet facility to transact business. Electronic Funds Transfer would be introduced to enable bank-to- bank transfer of funds for customers. Furthermore, the bank can also provide debit cards to customers as a strategic option to win or attract customers.
According to Michael Porter, the three generic strategies that lead to competitive advantage include cost leadership, differentiation and focus strategies. The following are the strategies through which Eagle bank can achieve competitive advantage and sustain it in the banking industry in Ghana by the year 2021;
First of all the firm must build an extensive branch network. An extensive branch network means that the bank has network the operations of the various branches into a system.
Another medium through which the bank can gain competitive advantage in the banking industry in Ghana by 2021 is for the bank to improve its Information Technology (IT) infrastructure. When this is done, it would enable the bank to adapt to the changing environment.
Also the bank would also streamline its loan application process in order to gain competitive advantage and become a giant in the banking industry.
Furthermore, Eagle bank can train its staff to be more customers friendly and proactive in order to gain competitive advantage and become a giant in the banking industry by 2021.
Also the bank must make its banking hall attractive to reflect modern banking hall. The bank has to rehabilitate and modernize its branch buildings and facilities to keep up with the trends in the banking industry to keep a physical attractive environment which would make customers feel very comfortable when they come there.