Sm project gp6

STRATEGIC

MANAGEMENT

GROUP PROJECT

Submitted to:-

Prof. M.A. Sanjeev

Submitted by: - Group 6

14609021..... Deshna Garg

14609031..... Jasmeet Singh

Strategic Management Group Project: 2014-16 Batch

14609095 ....Tarun Sharma

14609116 ....Aishwarya Alagh

14609141 ....Vaibhav Sharma

Introduction

Banking in India originated in the last decades of the 18th century. The oldest bank in existence in

India is the State Bank of India, a government-owned bank that traces its origins back to June1806

and that is the largest commercial bank in the country. Central banking is the responsibility of the

Reserve Bank of India, which in 1935 formally took over these responsibilities from the then

Imperial Bank of India, relegating it to commercial banking functions. After India's independence in

1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government

nationalized the 14 largest commercial banks; the government nationalized the six next largest in

1980.

Indian banking can be broadly categorized into nationalized (government owned), private banks

and specialized banking institutions. The Reserve Bank of India acts a centralized body monitoring

any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the

public sector banks or the nationalized banks have acquired a place of prominence and has since

then have achieved tremendous progress. The need to become highly customer focused has forced

the slow-moving public sector banks to adopt a fast track approach .Conservative banking practices

allowed Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now

quoting all higher valuation when compared to banks in other Asian countries (viz. Hong Kong,

Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs)

and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient

branch networks focus primarily on the high revenue niche retail segments.

Today the Indian banking sector has emerged as one of the strongest drivers of India’s economic

growth. The Indian banking industry (US$ 1.48 trillion- 2015) has made outstanding advancement in

last few years, even during the times when the rest of the world was struggling with financial

meltdown. India's economic development and financial sector liberalization have led to a

Canara Bank : Environmental Analysis report Page 1


transformation of the Indian banking sector over the past two decades. Today Indian Banking is at

the crossroads of an invisible revolution. The sector has undergone significant developments and

investments in the recent past. Most of banks provide various services such as Mobile banking, SMS

Banking, Net banking and ATMs to their clients.

According to the Reserve Bank of India (RBI), the banking sector in India is sound, adequately

capitalized and well-regulated. Indian financial and economic conditions are much better than in

many other countries of the world. Credit, market and liquidity risk studies show that Indian banks

are generally resilient and have withstood the global downturn well.

The Indian banking sector is fragmented, with 46 commercial banks jostling for business with

dozens of foreign banks as well as rural and co-operative lenders. State banks control 80 percent of

the market, leaving relatively small shares for private rivals.

At the end of February (2015), 13.7 crore accounts had been opened under Pradhanmantri Jan

Dhan Yojna (PMJDY) and 12.2 crore RuPay debit cards were issued. These new accounts have

mobilised deposits of Rs 12,694 crore (US$ 2.01 billion).Standard & Poor’s estimates that credit

growth in India’s banking sector would improve to 12-13 per cent in FY16 from less than 10% in the

second half of CY14.

Today India has outpaced China to become Asia’s fastest growing economy in Q1 2015 (See Figure

1). Concerted policy actions from a reform-minded government and the Reserve Bank of India have

substantially improved the country’s macro stability and activity momentum (See Figure 2).



Considering all these current situations whether the current strategies of Private Banks will

benefit them or harm them? Should they change their strategy or stick to its old one? How can

they grab the opportunities & plan for the threats so as to survive in the Banking Industry

environment. These are some of the questions we’ll try to answer in this report in contrast to

“Canara Bank”, by doing its environmental analysis & formulate the SWOT & TWOS for the

same.

About Canara Bank

History

Widely known for customer centricity, Canara Bank was founded by Shri Ammembal Subba Rao Pai,

a great visionary and philanthropist, in July 1906, at Mangalore, then a small port town in

Karnataka. The Bank has gone through the various phases of its growth trajectory over hundred

years of its existence. Growth of Canara Bank was

phenomenal, especially after nationalization in the year

1969, attaining the status of a national level player in terms

of geographical reach and clientele segments. Eighties was

characterized by business diversification for the Bank. In June

2006, the Bank completed a century of operation in the

Indian banking industry. The eventful journey of the Bank has

been characterized by several memorable milestones.

Today, Canara Bank occupies a premier position in the comity of Indian banks. With an unbroken

record of profits since its inception, Canara Bank has several firsts to its credit. These include:

Launching of Inter-City ATM Network

Obtaining ISO Certification for a Branch

Articulation of ‘Good Banking’ – Bank’s Citizen Charter

Commissioning of Exclusive Mahila Banking Branch

Launching of Exclusive Subsidiary for IT Consultancy

Issuing credit card for farmers

Providing Agricultural Consultancy Services



Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial

Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India and

abroad. As at June 2015, the Bank has further expanded its domestic presence, with 5708 branches

spread across all geographical segments. Having successfully developed over the years as a major

financial conglomerate of the country Canara Bank today holds an unmatched reputation especially

in South India. Known for its diverse product portfolio and excellent services and facilities Canara

Bank has achieved several milestones in the financial sector in India.

Some of the important functions provided by Canara bank are as follows:

1. Personal Banking

Canara Bank India provides the following services under the Personal Banking section:- Loans Home Loan

Life Insurance

Canara Global credit Cardsv

Canara champ deposit scheme

Personal Loan

Loan against Property

General Insurance

Canara premium current account

SB gold scheme

Canara super savings salary account scheme

CANARA ROBECO Mutual Fund Products

Overdrafts

2. Corporate Banking

Canara Bank provides par excellence services in Corporate Banking as well. These include,

Syndication Services

IPO Monitoring Activity

Merchant Banking Services

Accounts & Deposits

Cash Management Services

Loans & Advances



TUF Schemes

Canara electronic Tax

3. NRI Banking

Canbank remit money scheme

Rupee drawing arrangement

Swift

Bank-western union remittances scheme

4. Priority & SME Credit

The following facilities are listed under this service:-

Priority Credit

SME Business

SME Marketing Desk

Regional Rural Banks

Consultancy Services related to agriculture

Agri-Business Marketing Desk

Rural Development

Entrepreneurship Development for women

Social Banking

5. Bank Deposits

Savings Bank Deposits

Canara Super Savings Salary A/c

Canara Flexi A/c

Current Account

Savings Bank Gold A/c

Canara Saral

Canara Champ

Can Premium Current Account

6. Loans & Advances



Housing Loan

Loan for Personal Needs

Loan for Personal needs of Teaching/Non- Teaching Staff

Loan for Pensioners

Loan against Security of Mortgage of Property

Loan against approved Shares/Debentures/Mutual Funds

7. Canara Bank Loans

Canara Bank provides all conventional banking facilities and various contemporary banking

products. The various types of Canara Bank Loans, which are offered to the customers include:

Personal Loan

Home Loan

Consumer Loan

Vehicle Loan

Educational Loan

CEMAT Facilities

Agricultural Loan

Vision & Mission

Vision

“To emerge as a ‘Preferred Bank’ by pursuing global benchmarks in profitability, operational

efficiency, asset quality, risk management and expanding the global reach.”

The Vision Statement focuses on the future; it is a source of inspiration and motivation.

Often it describes not just the future of the organization but the future of the industry or

society in which the organization hopes to effect change. A Vision statement outlines

WHERE you want to be, communicates both the purpose and values of your business.

Mission

“To provide quality banking services with good customer care, create value for all stakeholders and

continue as a responsive corporate social citizen.”

The Mission Statement concentrates on the present; it defines the customer(s), critical

processes and it informs you about the desired level of performance. A Mission statement



talks about HOW you will get to where you want to be. Defines the purpose and primary

objectives related to your customer needs and team values.

3. Strategic Management: Environmental Analysis

3.1 External Environment AnalysisThe Indian banking has finally worked up to the competitive dynamics of the new Indian market

and is addressing the relevant issues to take on the multifarious challenges of globalization. Banks

that employ IT solutions are perceived to be futuristic and proactive players capable of meeting the

multifarious requirements of the large customer’s base. Private Banks have been fast on the uptake

and are reorienting their strategies using the internet as a medium.

3.1.1. Socio-cultural Environment Analysis:

PESTLE ANALYSIS

1. Political Factors

a) Monetary Policy & Operations:

Monetary policy is the process by which monetary authority of a country, generally a

central bank (such as RBI in India) controls the supply of money in the economy by its

control over interest rates in order to maintain price stability and achieve high economic

growth. Monetary operations involve monetary techniques which operate on monetary

magnitudes such as money supply, interest rates and availability of credit aimed to

maintain Price Stability, Stable exchange rate, Healthy Balance of Payment, Financial

stability, Economic growth. RBI, the apex institute of India which monitors and regulates

the monetary policy of the country stabilizes the price by controlling Inflation. RBI takes

into account the following monetary policies:

Open Market Operations

Cash Reserve Ratio

Statutory Liquidity Ratio

Bank Rate Policy


https://en.wikipedia.org/wiki/Inflation

https://en.wikipedia.org/wiki/Monetary_policy

https://en.wikipedia.org/wiki/India

https://en.wikipedia.org/wiki/RBI

https://en.wikipedia.org/wiki/Balance_of_Payment

https://en.wikipedia.org/wiki/Exchange_rate

https://en.wikipedia.org/wiki/Price

https://en.wikipedia.org/wiki/Credit_(finance)

https://en.wikipedia.org/wiki/Money_supply


Credit Ceiling

Credit Authorization Scheme

Moral Suasion

Repo Rate and Reverse Repo Rate

Table1 : Key Indicators (Jun 2015)Source: allbankingsolutions.com/data.htm

Indicator Current rate Previous

Inflation 8.0%Decreased from last year & is estimated to drop in future as well.

Bank rate 8.25%Decreased from 8.50% which was continuing since 04/03/2015

CRR (Cash Reserve Ratio)

4.00%Decreased from 4.25%which was continuing since 30/10/2012

SLR (Statutory Liquidity Ratio)

21.50%Decreased from 22.00% which was continuing since 09/08/2014

Repo rate 7.25%Decreased from 7.50% which was continuing since 04/03/2015

Reverse repo rate 6.25%Decreased from 6.50% which was continuing since 04/03/2015

Marginal Standing facility rate

8.25%Decreased from 8.50% which was continuing since 04/03/2015

b) Government Regulation:

The expected integration of various intermediaries in the financial system would require a strong regulatory framework. It would also require a number of legislative changes to enable the banking system to remain contemporary and competitive.

c) FDI & Portfolio limits:

In the private banking sector of India, FDI is allowed up to a maximum limit of 74 % of

the paid-up capital of the bank in 2015. The Government has also permitted foreign

banks to set up wholly owned subsidiaries in India. This will negatively impact the

nationalized banks (such as Canara Bank) as the private banks would become more

competitive against nationalized banks.

d) Budget & Budget measures:

The budget 2014-15 allowed for banks to raise capital by selling government stake and

hiked the foreign direct investment limit in the insurance sector to 49%. It also allowed



banks to raise long-term funds for lending to the infrastructure sector with minimum

regulatory obligations such as CRR, SLR and PSL.

This will help banks raise funds more easily for infrastructure projects and reduce

financial burden.

Increase in tax exemptions on investments too could see funds flowing to the

financial sector through increased savings.

However, the hike in the target of credit flow to the farmers from Rs 7.0 trillion

in FY14 to Rs 8.0 trillion in FY15 could have a negative impact on PSU banks as

they may be forced to lend more.

2. Economic Factors

a) Inflation rate:

"Inflation is an important determinant of bank efficiency. According to Boyd et al. (2001)

and Ben Naceur and Ghazouani (2005), high levels of inflation potentially can adversely

affect economic growth and the financial sector performance. This is because economic

growth positively affects the financial sector performance (Barro, 1995). "

b) GDP & GDP per capita:

GDP is one of the primary indicators used to gauge the health of a country's economy. In

any case increase in GDP would positively affect the growth of banking sector

considering the GDP per capita is also increased. Below is past yearly data of Indian GDP

showing gradual growth since 2013.

Figure3: India’s GDP in past few years (Source: statista.com)



c) Interest rates

Banks usually make most of their money on the spread, or difference, between the rates

of interest they pay savers and the one they charge the borrowers. An increase in

interest rates would fatten net interest margins at those banks where the rates they

charge borrowers rise more quickly than their own cost of funding. Higher interest rates

on loans tend to slow down economic growth as well as the bank’s growth. Borrowing is

more expensive therefore, firms will invest less and consumers will spend less. Because

higher rates lead to lower growth, companies will make lower profits and therefore pay

less dividends.

april

2012

january

2013

marc

h 2013

may

2013

septem

ber2013

october

2013

january

2014

january

2015

marc

h 2015

june

20156.807.007.207.407.607.808.00

8.007.75

7.507.25

7.507.75

8.007.75

7.507.25

Figure 4: RBI latest interest rate changes

Percentage Repo rate

(Source:www.global-rates.com)

d) Savings & Investments

Higher interest rates on savings tend to reduce banks’ profit margin. It also contributes

to more savings hence more capital is raised for lending.

3. Socio-cultural factors

It includes cultural aspects and health consciousness, population growth rate, age

distribution, career attitudes and emphasis on safety. This could be classified into:

a) Traditional Mahajan Pratha:

Before the birth of the banks, people of India were used to borrow money local money

lenders, shahukars, shroffs. They were used to charge higher interest and also mortgage

land and house. But after emergence of banks attitude of people was changed and they

have started lending from the banks.



b) Change in life style:

Life style of India is changing rapidly. They are demanding high class products. They have

become more advanced. People needs and wants are increasing day by day. And this has

this has opened opportunities for banking sector to tap this change. This has made

things available easily to everyone.

c) Population:

Increase in population is one of the important factors which affect the private sector

banks. Banks would open their branches after looking into the population demographics

of the area. Newer branches are coming to serve the increasing population. This

incentive to banks comes on the back of the continuing need to open more branches in

these States in order to ensure more uniform spatial distribution.

d) Literacy rate:

Literacy rate in India is very low compared to developed countries. Illiterate people

hesitate to transact with banks. So, this impacts negatively on banks. But there is

positive side of this as well i.e. illiterate people trust more on banks to deposit their

money, they do not have market information. Opportunities in stocks or mutual funds

are low if the Literacy rate is low.

4. Technological FactorsTechnology plays a very important role in bank’s internal control mechanisms as well as

services offered by them. Through the use of technology new products and service are

introduced. It includes technological aspects such as R&D activity, automation,

technology incentives and the rate of technological change. Some of the technological

changes which brought radical changes in banking industry are described below:

a) Auto Teller Machine:

The latest developments in terms of technology in computer and telecommunication

have encouraged the bankers to change the concept of branch banking to anywhere

banking. The use of ATM and Internet banking has allowed “anytime- anywhere

banking” facilities.

b) Credit card facility:



Credit card facility has encouraged an era of cashless society. The banks have now

started issuing smartcards or debit cards to be used for making payments. These are also

called as electronic purse.

Some of the banks have also started home banking through telecommunication facilities

and computer technology by using terminals installed at customers home and they can

make the balance inquiry, get the statement of accounts, give instructions for fund

transfers, etc

c) Automatic Voice recorder:

Automatic voice recorders now answer simple queries, currency accounting machines

makes the job easier and self-service counters are now encouraged.

d) IT services and Mobile banking :

Today banks are also using SMS and Internet as major tool of promotions and giving

great utility to its customers. For example SMS functions through simple text messages

sent from your mobile.

Technology advancement has changed the face of traditional banking systems.

Technology advancement has offer 24X7 banking even giving faster and secured service.

e) Big Data Analytics:

The big data revolution happening in and around 21st century has found a resonance

with banking firms, considering the valuable data they’ve been storing since many

decades. This data has now unlocked secrets of money movements, helped prevent

major disasters and thefts and understand consumer behavior. Banks reap the most

benefits from big data as they now can extract good information quickly and easily from

their data and convert it into meaningful benefits for themselves and their customers.

5. Legal Factors

There are two major factors determining the legal aspects of the Banking Industry:

a) Banking regulation act:

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of

India (RBI) "to regulate, control, and inspect the banks in India.



The Banking Regulation Act also provided that no new bank or branch of an existing

bank could be opened without a license from the RBI, and no two banks could have

common directors.

b) Intervention by RBI

The Reserve Bank of India (RBI) will intervene to smooth sharp movements in the rupee

and prevent a downward spiral in its value, but will balance this with the need to retain

reserves in an event of prolonged turbulence.

6. Environmental Factor

a) Indian economy has registered a high growth for last few years and is expected to

maintain robust growth rate as compared to the developed and developing countries.

Banking industry is directly related to the growth of the economy. The Growth rate of

different industries were :

Agriculture: 18.5% Industry : 26.3% Services : 55.2%

Earlier it was agriculture which mainly contributed to the Indian GDP. This increases the

avenues of investment by the industrial sector.

This would further increase the borrowings by the industry’s leading to the banking

Industry. In regards with the service sector, as the income of the people will increase,

lending and savings will increase leading to increased business for the banks.

Also the MAKE IN INDIA initiative is expected to boost the Industrialization in India.

b) Unseasonal Rains or drought:

According to India Ratings and Research (Ind-Ra), agricultural loans grew 16 percent in

FY15 and have contributed 25 percent to incremental credit growth since March 2014.

The Unseasonal rains damages the crop & hence impact the farmers big. In such cases

the agricultural loans lend by the banks to the affected farmers’ increases.

c) Net Export



Net Exports directly contributes to the GDP. If the export increases then the Banks will

lend more money as the exporters’ would require more capital to produce goods &

trade them in foreign countries.

Issues Priority Matrix

• It is used to identify and analyze developments in the external environment factors or

External strategic factors which are key environmental trends that are judged to have both a

medium to high probability of occurrence and a medium to high probability of impact on the

corporation

Probable Impact on Canara Bank

Prob

abili

ty o

f O

ccur

renc

e

High Medium Low

High

Monetary Policy & Operations

Auto Teller Machine Credit card facility IT services and

Mobile banking Industrial Growth rate

Literacy rate Budget & Budget

measures

Automatic Voice recorder

Population growth Change in life style

Med

ium

Savings & Investments Government

Regulation Interest rates (loan) Banking regulation act Increase in Net Export

FDI & Portfolio limits Intervention by RBI GDP & GDP per capita Big Data Analytics

Low

Inflation rate Unseasonal Rains or droughts

Traditional Mahajan Pratha

Figure 5: Issues Priority Matrix(Source: Self /Group 6)

High Priority External Strategic Factors: Monetary Policy & Operations Auto Teller Machine


HIGH PRIORITYMEDIUM PRIORITYLOW PROIRITY


Credit card facility IT services and Mobile banking Industrial Growth rate Literacy rate Budget & Budget measures Savings & Investments Government Regulation Interest rates (loan) Banking regulation act

3.1.2. Task Environment Analysis:

Porter’s Five Forces Model

Figure 6: Porter’s Five Force Model (Source: Self /Group 6)


Industry Rivalry (High)

Intense competition, many private, public, co-operative, foreign banks

Threat of newEntrant (Low)

Low barriers to entry Government policies are

supportive

Bargaining power of suppliers (Low)

Low supplier bargaining power Few alternatives available Subject to RBI Rules and Regulations

Threat ofSubstitutes

(High)

High threat from substitutes like mutual funds, T-bills, Government securities

Bargaining power of customers (High)

High bargaining power Low switching cost Large no. of alternatives Homogeneous service by banks Full information available with customers

Relative Power of other Stakeholders (High)

Control of RBI Loan Insurance policies


Looking at all of the above points in figure-6 individually:

a) Rivalry among the industry: Rivalry in banking industry is very high. There are so many private,

public, co-operative and non-financial institutions operating in the industry. They are fighting

for same customers. Due to government liberalization and globalization policy, banking sector

became open for everybody. So, newer and newer private and foreign firms are opening their

branches in India. This has intensified the competition. The factors that have contributed to

increase in rivalry are:

Number of players: There are so many banks and non-financial institutions fighting for

the same pie which has intensified competition.

High market growth rate: India is seen as one of the biggest market place and growth

rate in Indian banking industry is also very high. This has ignited the competition.

Low switching cost: Customer switching cost is very low. They can easily switch from

one bank to another bank and very little loyalty exists.

Undifferentiated services: Almost every bank provides similar services. No

differentiation exists. Every bank tries to copy each other’s services and technology,

which increases the level of competition.

Low government regulations: There are low regulations to start a new business due to

the LPG policy adopted by

b) Bargaining power of suppliers: Suppliers of banks are depositors. These are those people who

have excess money and prefer regular income and safety. In banking industry suppliers have

low bargaining power. Following are the reasons for low bargaining power of suppliers:

Nature of suppliers: Suppliers of banks are generally those people who prefer low risk

and those who need regular income and safety as well. Bank is best place for them to

deposit their surplus money. They believe that banks are safer than other investment

alternatives. So, they do not consider other alternatives very seriously, which lowers

their bargaining power.

Few alternatives: Suppliers are risk averters and want regular income. So, they have few

alternatives available with them to invest like Treasury bills, government bonds. So, few

alternatives lower their bargaining power.



RBI Rules and Regulations: Banks are subject to RBI rules and regulations. Banks have

to behave in the way that RBI wants. So, RBI takes all decisions relating to interest rates.

This reduces suppliers bargaining power.

Suppliers are not concentrated: Banking industry’s suppliers are not concentrated.

There are numerous suppliers with negligible portion to offer. So, this reduces their

bargaining power. If they were concentrated then they can bargain with banks or can

collectively invest in other non risky projects.

Forward integration: Forward integration is possible like mutual funds, but only few

people now about this. Only educated people can forwardly integrate where as a large

number of suppliers are unaware about these alternatives.

c) Bargaining power of customers: Customers of the banks are those who take loans, advances

and use services of banks. Customers have high bargaining power. Following are the reasons for

high bargaining power of customers:

Large number of players: Customers have very large number of alternatives. There are

so many banks, which fight for the same pie. There are many non-financial institutions

which have also jumped into this business. There are foreign banks, private banks,

cooperative banks and development banks together with the specialized financial

companies that provide finance to customers. These all increase preferences for

customers.

Low switching cost: Cost of switching from one bank to another is low. Banks are also

providing zero balance account and other types of facilities. They are free to select any

bank’s service. Switching costs are becoming lower with internet banking gaining

momentum and as a result consumers‟ loyalties are harder to retain.

Undifferentiated service: Banks provide merely similar services. There is not much

difference in services provided by different banks. So, bargaining power of customers

increases. They cannot be charged for differentiation.

Full information about the market: Customers have full information about the market.

Internet has increased the customer’s access to information. So, banks have to be more

competitive and customer friendly to serve them.



d) Threat of substitutes: Competition from the non-banking financial sector is increasing rapidly. The threat of substitute products is very high. These new products include credit unions and investment houses. One feature of using an investment house is that the fees that the investment house charges are tax deductible, whereas for a bank it is considered a personal expense, which is not tax deductible. The rate of return with using investment houses is greater than a bank. There are other substitutes as well for banks like mutual funds, stocks (shares), government securities, debentures, gold, real estate etc. so, there is a high threat from substitutes.

e) Threat of new entrant: Barriers to entry in banking industry no longer exist. So, lots of private

and foreign banks are entering in the market. Product differentiation is low and exit is difficult.

So, every bank strives to survive in highly competitive market. So, we see intense competition

and mergers and acquisitions.

f) Relative Power of other Stakeholders: RBI regulates the Indian banking and financial system by

issuing broad guidelines and instructions. Also there are now insurance covers to take care of

the EMIs or of the outstanding loan amount.

Industry Matrix: Key success factors

Industry matrix summarizes the key success factors within a particular industry. Key success factors are variables that can significantly affect the overall competitive positions of companies within an industry.

Assumptions:

The weights are given within a range of 0 (not important) to 1 (Utmost important), on the basis of their importance for a company’s success. Sum of all weights is equal to 1.

Rating is given on a scale of 5, on a comparative basis, where 5 = Is Strongest, 4 = Near to the Strongest, ……….. & 1 = Least strong.

Key Success Factors Wt. Rating (Canara Bank)

Score Rating (BOI)

Score

Receivables turn over 0.2 5 1 2 0.4Brand Image 0.1 4 0.4 5 0.5Marketing 0.2 4 0.8 5 1IT & virtual banking 0.2 5 1 4 0.8Customer Service & satisfaction 0.2 4 0.8 5 1ROA 0.1 5 0.5 4 0.4

1 27 4.5 25 4.1Table 2: Industry Matrix for Competitive Analysis

(Referred from: http://banks.findthebest.in/compare/645-672/Bank-of-India-vs-Canara-Bank)



Hence Canara bank has better probability to grow in the market as compared to its competitors. The Critical success factors for Canara bank are as follows:

1. Receivables turn over: Canara bank is better able to convert its receivables into cash as compared to its competitors.

2. IT & Mobile technology: Canara bank has more number of ATM’s & better online experience for the customers.

3. ROA: Canara bank is better able to utilize its assets for profit making as compared to its rivals.

3.1.3. External Factor Analysis Summary (EFAS)

Assumptions: Weights are assigned to each factor depending upon the probable impact they have

on the strategic position of the firm. The weights are given within a range of 0 (not important) to 1 (most important). Total weights of both Opportunities & threats sum to 1. Rating is given on a scale of 1 to 4, on the basis of company’s response to the factor.

Here 1= poor response, 2= Below average response , 3= Above average response & 4= Superior response.

Table 3: EFAS Matrix

External Factors Weights Rating Wt. Score Comments

Opportunities1. Rural and social banking 0.05 4 0.2 PMJDY2. Agriculture based consultancy 0.03 3 0.09 606 farmer clubs3. Increasing GDP per Capita 0.05 2 0.1 attracting young generations4. Increase in FDI 0.08 3 0.24 Developing new strategies5. Big Data Analytics 0.03 1 0.03 Not doing much 6. Increasing Literacy rate 0.03 2 0.06 CSR initiatives7. Increasing trend of virtual & mobile banking 0.08 4 0.32 Canara M-wallet8. Increasing Industrial growth: Make in India 0.15 4 0.6 Building Brand positionThreats1. Weak monsoon likely to impact rural credit

off-take0.05 2 0.1

Insulated investment portfolio

2. Declining exports likely to subdue trade financing demand in India

0.08 2 0.16Insulated investment portfolio

3. Intensifying competition likely to check growth opportunities

0.08 3 0.24Ranked no.1 public sector bank

4. Economic Crises0.15 3 0.45

Installed Proactive Risk manager Software

5. Changing government and adverse RBI 0.08 3 0.24 Engaging in JV’s & Insulated



policies investment portfolio6. Low barriers to entry in the Sector.

0.05 2 0.1Diversified sources of income.

TOTAL SCORE 1.00 2.93

The total weighted score is above average hence we can say that Canara bank‘s Strategies are effective and they are taking advantage of the existing opportunities while minimizing the effects of potential threats.

3.2 Internal Environment AnalysisInternal Environment analysis is concerned with identifying and developing an organization’s

resources and competencies. It also identifies internal strategic factors/ resources that can be

critical S/W in an organizations performance

3.2.1 Product & Services

Investment Banking

Consumer Banking

Commercial Banking

Retail Banking

Private Banking

Asset Management

Pensions

Mortgages

Credit Cards

3.2.2. Major Financial Highlights (Mar 2015)

Net profit at Rs. 2703 crore, up by 10.8% y.o.y.

Gross profit at Rs. 6950 crore, up by 2.3% y.o.y.

Total provisions at Rs. 4248 crore compared to Rs. 4358 crore in FY14

Non-interest income for FY15 at Rs. 4550 crore, up by 15.7% y-o-y.

ROAA for FY15 at 0.55%, up from 0.54% last year.

ROE for FY15 at 11.06%, up from 10.59% last year.

NIM (Domestic) at 2.36% and NIM(Global) at 2.25%.

Net profit for Q4 FY15 at Rs. 613 crore.


http://en.wikipedia.org/wiki/Credit_Cards

http://en.wikipedia.org/wiki/Mortgages

http://en.wikipedia.org/wiki/Pensions

http://en.wikipedia.org/wiki/Asset_Management

http://en.wikipedia.org/wiki/Private_Banking

http://en.wikipedia.org/wiki/Retail_Banking

http://en.wikipedia.org/wiki/Commercial_Banking

http://en.wikipedia.org/wiki/Consumer_Banking

http://en.wikipedia.org/wiki/Investment_Banking


Gross-profit for Q4 FY 15 at Rs. 1733 crore.

Total Provisions for Q4 FY15 at Rs. 1120 crore.

Non-interest income for Q4 FY15 at Rs. 1326 crore, up by 23.9% y-o-y.

Total Business at Rs. 8.04 lakh crore, up by 11.4% y.o.y.

Total Deposits at Rs. 4.74 lakh crore, up by 12.6% y-o-y.

Advances (net) at Rs. 3.30 lakh crore, up by 9.6% y-o-y.

3.2.3 Major Competencies

3rd largest public sector bank in terms of domestic business.

Among the top 5 public banks in terms of sector assets.

Consistent track record of profitability since establishment 105 years ago.

Leading infrastructure lender to the infrastructure sector benefitting from India’s economic

growth.

Pan-India network of over 3,000 branches and over 2,000 ATMs serving over 37 million clients.

Technology focused bank with 100% coverage of branches under Core Banking System.

Subsidiaries, joint ventures and associates in non-traditional banking, including insurance and

asset management.

One of the highest Government shareholding amongst public sector banks at 73.2%.

100 % Core Banking System integrated with solutions such as:

Internet banking

Customer relationship management

Securities trading

Real Time Gross Settlement System and National Electronic Funds Transfer enabled at all

branches.

Taken steps to initiate a data warehouse for credit risk management.

High Receivables turn over: The Bank performed relatively well in Non–Performing Assets (NPA)

management and made record cash recoveries, despite continued stress at the industry level.

With a gross NPA level of Rs.13040 crore, the gross NPA ratio has increased to 3.89% from

2.49% (as at March 2014). With a Net NPA of Rs.8740 crore, the net NPA ratio increased to

2.65% from 1.98% a year ago.



3.2.4 Major Awards & Achievements (2014-15)

Golden Peacock Business Excellence Award 2015 by the Institutes of Directors, India.

"MSME Banking Excellence Awards-2014" organized by Chamber of Indian Micro, Small and

Medium Enterprises (CIMSME) at New Delhi. The Bank has been adjudged as the "Best Bank

Award-Winner" among other awards.

“SKOCH Renaissance Award 2014” under India's Best Projects 2014 Category for Rural Self

Employment Training Institute, Institute for Artisans, Institute for information Technology,

Community Development and Women Empowerment.

Canara bank made a partnership with UNEP to initiate a successful solar loan programme.

Secured 1st Position in mobilizing new Demat Accounts for the second consecutive year and

also adjudged Best Performer in Account Growth Rate by NSDL Star Performer Awards 2014.

Ranked 1st among Public Sector Banks in an article on India's Best Companies for CSR

published in the "Corporate Dossier" of Economic Times.

Awarded ‘Best Inspiring Place to Work (Public Sector)’ by Banking Frontiers partnering with

M/s.Deloitte in an effort to recognize the HR efforts of the BFSI sector.

3.2.5. Internal Factor Analysis Summary (IFAS)

Assumptions: Weights are assigned to each factor depending upon the probable impact they have on

the strategic position of the firm.

The weights are given within a range of 0 (not important) to 1 (most important).

Total weights of both Opportunities & threats sum to 1.

Rating is given on a scale of 1 to 4, on the basis of company’s response to the factor.

Here 1= major weakness, 2= minor weakness , 3= minor strength & 4= major Strength

Table 4: IFAS Matrix

Internal Factors Weights Rating Wt. Score Comments

Strengths

1. Technological advancement 0.1 4 0.4Data warehouse for Credit risk management

2. Extensive network 0.12 3 0.36 PAN- India

3. Partnerships & JVs 0.05 4 0.2 Solar loan programme4. Diversified sources of income 0.1 4 0.4 Strong growth in non interest



income

5. Innovative schemes 0.08 3 0.24Credit card for farmers & Exclusive Mahila Banking Branch

6. Leadership in Karnataka & Kerala 0.05 3 0.15 outreach to interior marketsWeaknesses

1. Inadequate Publicity/ marketing 0.15 1 0.15Low investment on Advertising

2. Low International presence 0.08 2 0.16 Trying to expand

3. Weak Customer service 0.15 1 0.15Customer satisfaction is Low (source://banks.findthebest.in)

4. Low POS (Point of Sale) 0.12 2 0.24POS are almost half compared to BOI

TOTAL 1.00 2.45

The total weighted score is below average which indicates that Canara bank is weak internally. It needs to overcome its weaknesses & utilize their strengths more effectively.

4. Strategic Factor Analysis Summary (SFAS) SFAS summarizes an organization’s strategic factors by combining the external factors from

the EFAS Table 3 with the internal factors from the IFAS Table 4. Assumptions:

o The weights are given within a range of 0 (not important) to 1 (most important).o Total weights of both Opportunities & threats sum to 1. o Rating is given on a scale of 1 to 5, on the basis of company’s response to the factor.

Here 1= Poor, & 5 = Outstanding

Table 5: SFAS Matrix

Strategic Factors Weights Rating Wt. Score

Duration Comments

S1Technological advancement 0.1 4 0.4 L Data warehouse for Credit risk

management

S2 Extensive network 0.1 5 0.5 L PAN- India

S4Diversified sources of income 0.1 4 0.4 S + I Strong growth in non interest

income

W1Inadequate Publicity/ marketing 0.1 2 0.2 S+I Low investment on Advertising

W3 Weak Customer Service 0.1 3 0.3 S Customer satisfaction is Low (source://banks.findthebest.in)

O4 Increase in FDI 0.1 3 0.3 I Developing new strategies



O7 Virtual & mobile banking 0.1 5 0.5 I+L Canara M-wallet

O8Industrial growth: Make in India 0.1 4 0.4 I+L Building Brand position

T2 Declining exports 0.1 3 0.3 S+I Insulated investment portfolio

T4 Economic Crises 0.1 4 0.4 I+L Installed Proactive Risk manager Software

TOTAL 1.00 3.7 = 74%

5. SWOT & TOWS

5.1 SWOT ANALYSIS From the SFAS we have derived the SWOT matrix as shown below:

STRENGTHS Technological advancement

Extensive network

Diversified sources of income

WEAKNESSES Inadequate Publicity/ marketing

Weak Customer Service

OPPORTUNITIES

Increase in FDI

Virtual & mobile banking

Industrial growth: Make in India

THREATS

Declining exports

Economic Crises

Figure 7: SWOT Matrix (Source: Self /Group 6)

5.2 TWOS Matrix TOWS matrix illustrates how the external opportunities and threats can be matched with

internal strengths and weaknesses to result in four possible strategic alternatives.

IAFS

EFAS

STRENGTHS (S)

Technological advancement Extensive network Diversified sources of income

WEAKNESSES (W)

Inadequate Publicity/ marketing Weak Customer Service

OPPORTUNITIES (O)

Increase in FDI Virtual & mobile

banking

S O - STRATEGIES

Increase international footprint and thereby enhance the share of overseas business in total business of the bank

W O - STRATEGIES

Intense Promoting as a customer oriented bank with vibrant products & services for everyone.



Industrial growth: Make in India

Focus on leveraging technology for improved customer service and business growth.

Leverage the Bank’s Subsidiaries to emerge as a Financial Super market.

Focus on growth through expansion of domestic delivery channels.

Reposition the Bank's brand to attract young generation through effective use of e- channels and branch transformation models.

THREATS (T)

Declining exports Economic Crises

S T - STRATEGIES Generate Portfolios for more secure

Investments Use ERP systems for forecasting & other

Risk management applications.

W T- STRATEGIES Greater thrust on improving fee based

income through cross selling of financial products & services and through ancillary business



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