The Banking Industry in

Bangladesh
Whoever, being an individual firm, company or corporation generally dealing in the
business of money and credit is called a bank. In our country any institution that
accepts for the purpose of lending or investment deposits of money from public,
repays on demand or transfers by checks, draft orders & other means is called a
bank. The purpose of banking is to ensure transfer of money from surplus unit to
deficit units. Banks in all countries work as the repository of money. The owners look
for safety and amount of interest for their deposits with banks. Entrepreneurs try to
obtain money from the banks as working capital and for longterm investment. These
entrepreneurs welcome effective and forwardlooking advice for investment. Banking
sector thus owe a great deal to the deposit holders on the one hand and the
entrepreneurs on the other. They are e!pected to play the role of friend, philosopher
and guide for the deposit holders and the entrepreneurs.
Banking is the backbone of national economy. "ll sorts of economic and financial
activities revolve round the a!is of the bank. "s industries produces goods and
commodities, the banks create and controls money market and promotes formation
of capital. #rom this point of view, bankinga technical profession can be termed as
industry. $ervices to its customers are the products of banking industry besides being
1
a pivotal factor in promoting capital formation in the country. "s all economic and
fiscal activities revolve round this important Industry, the role of banking can hardly
be over emphasi%ed.
&ircumstances being such, it becomes imperative to find out the role that banks are
now playing in the country and analy%e its operational aspects so as to ascertain the
importance of this delicate financial sector and it's over all impact on our national
economy. In the global conte!t, the role of banks is far reaching and more penetrating
in the economic and fiscal discipline, trade, commerce, industry, e!port and import all
carried through the banks. Banks are the only media through which international
trade & commerce emanate the entire credit transactions, both national and
international.
The number of schedule banks of Bangladesh are some where around () and
among them there are * states owned commercial banks, ( are speciali%ed banks,
+, local private commercial banks and )- foreign commercial banks. "mong the total
branches of bank there are around +.,/ branches of 0overnment owned commercial
banks, )++/ private banks, +) foreign banks and the branches of speciali%ed bank
)-.(. Besides these schedule bank there is one cooperative bank, one "nsar1234
development bank, ) employment bank and ) 0rameen Bank.
2
The Banking Industrys Features
It is e!tremely important for a firm to understand the dominant economic features of
the relevant industry, as the character and structure of different industries are
significantly different from each other. The basic economic traits in the banking
industry are5
Market Size and Market Growth Rate
6arket si%e of an industry can be measured by many ways, such as Total 7evenue,
volume of production, 8umber of customers and so on.
Number and Types of Banks
The number of banks in all now stands at () in Bangladesh. 9ut of the () banks,
four are nationali%ed commercial banks, +, local private commercial banks, )-
foreign banks and the rest five are 3evelopment #inancial Institutions. $onali Bank is
the largest among the nationali%ed commercial banks while 4ubali Bank is leading in
the private ones. "mong the )- foreign banks, $tandard &hartered has become the
largest in the country. Besides the scheduled banks, $amabai :&ooperative; Bank,
"nsar234 Bank, <armasansthan :Employment; Bank and 0rameen bank are
functioning in the financial sector. The Bangladesh Bank regulates and supervises
the activities of all banks. It is now carrying out a reform program to ensure =uality
services by the banks.
3
eposit S!hemes
"urrent #!!ount$ 0enerally this sort of account is normally opened for business
purpose. &ustomers can withdraw money once or more against their deposit. If the
amount of deposit is below Tk. ),,,,, on average the bank has authority to cut Tk. (,
from each account as incidental charge after every si! months. "gainst this account
loan facility can be ensured. >sually, one can open this account with Tk. (,,. 9ne
can open this sort of account through cash or check?bill. "ll the banks in the industry
follow almost the same rules for opening current account.
Sa%ings Bank #!!ount$ >sually customers open this sort of account at a low
interest for only security purposes. This is also an initiative to create people@s savings
tendency. 0enerally, this account is to be opened at Tk. ),,. Interest is to be paid
after every si! months. If money is withdrawn twice a week or more than Tk. ),,,,,
is withdrawn :if -(A more compared to total deposit; then interest is not paid. This
account guarantees loan. "lmost all the banks follow the same rules in the field of
savings account, e!cept the foreign banks for varying deposit.
Spe!ia& Ser%i!es
$ome banks render special services to the customers to deter them from other
banks. These services include
4
Internet Banking: $ome banks in Bangladesh are offering internet banking services.
But still toady this service is limited in scope in Bangladesh, as the internet service
provided by the banks in this country is nowhere near the internet banking service
provided by banks in the developed countries.
'ome Banking$ Bome banking frees customers of visiting branches and most
transactions will be automated to enable them to check their account activities
transfer fund and to open C?& sitting in their own desk with the help of a 4& and a
telephone. "pplication of this service is still limited in this country.
#utomated Te&&er Ma!hine (#TM)$ "utomated Teller 6achine :"T6;, a new concept
in modern banking, has already been introduced to facilitate subscribers with -*hour
cash access through a plastic card. The network of "T6 installations has been
e!tended to a great e!tent to enable customers to nonbranch banking beyond
banking. But still there is room for improvements.
*&e!troni! Banking Ser%i!es for +indows (*BS+)$ Electronic Banking $ervice for
Windows :EB$W; provides a full range of reporting capabilities and a comprehensive
range of transaction initiation options. The customers using it are able to process all
payments as well as initiate C?&s and amendments through EB$W. They will be able
to view the balances of all accounts, whether with 4rime Bank, $tandard &hartered
or with any other banks using $WI#T. "dditionally, transactions may be approved by
remote authori%ation even if the approver is out of station.
5
S+IFT$ $WI#T is a bank owned nonprofit cooperative based in Belgium, which
serves the financial community worldwide. It ensures secure messaging with a global
reach of .,*D( banks and financial institutions in )E/ countries, -* hours a day.
$WI#T global network carries an average * million message daily and estimated
average value of payment messages is >$3 - trillion. By having $WI#T facility,
banks are now able to serve its customers more profitable by providing C?&, 4ayment
and other messages efficiently and with utmost security. Especially it is of great help
for clients dealing with Imports, E!ports and 7emittances etc.
Te&e Banking$ Tele banking facility allows customers to get access into their
respective banking information -* hours a day. $ubscribers can update themselves
by making a phone call. They can transfer any amount of deposit to other accounts
irrespective of location either from home or office.
*,tent of -rodu!t ifferentiation in the Industry
Most of the banks in Bang&adesh offer %ery mu!h simi&ar finan!ia& produ!ts
with &itt&e differentiation. /n&y Is&ami Banks produ!ts are different from
!on%entiona& banks produ!ts. But an obser%ab&e trend is that a &ot of the &o!a&
pri%ate !ommer!ia& banks and e%er mu&ti0nationa& banks &ike0'SB" ha%e
started offering Shariar (Is&ami!) banking produ!ts to some e,tent.
6
*!onomies of s!a&e
It is present because all banks do not have similar cost of funds, as differences e!ist
as different banks deposits cost are different and amount of classified advances are
different. Those who have less classified advances have advantages in the cost of
funds.
Industry -rofitabi&ity
Industry profitably is largely dependent on the state of the national economy and
individual bank's ability to make good advance. Bowever, profitability for the banks in
the industry is above par.
7
The dri%ers of !hange in the Banking Industry
&hanges in the longterm industry growth rate
Industry's growth is moving upward and an upsurge in longterm demand attracts
new entrants to the market and encourages competition. There have been changes
in who buys the product and how they use it. &ustomers are using the same banking
services in a new way, for e!ample now they can do their banking transaction
without moving to bank and using new digital products like "T6, access card, credit
card etc and this shift is forcing banks to adFust their customer service offerings,
opening new ways to market their product.
4roduct innovation
4roduct innovation in this industry is shaking up the structure of the competition and
as well as the industry by broadening its customer base, reFuvenating the industry's
growth and widening the degree of product differentiation among competing banks.
$uccessful new product introduction will strengthen the market position of the
innovative banks. It is playing the role of a maFor driving force.
Technological change
The pace of technological development in electronic commerce :ecommerce; via the
Internet is fast changing the way business is conducted in the banking industry.
3igital banking products like "T6, access card, credit card have entered into the
8
market and brought a dramatic change in industry's landscape. " technological
development is also producing significant changes in capital re=uirement and e!tra
customer facilities and services to maintain e!isting customers and attract new
customers.
6arketing innovation
In today's banking industry, one of the key driving force is 6arketing innovation.
When banks are successful in introducing new ways to market their products and
services they can get the buyers as well as sellers interest, widen the industry
demand, increase product differentiation and lower their unit costs.
Entry & e!it of maFor firms
Entry & e!it of maFor firms will definitely bring some changes in the industry and it will
shake up the competitive condition. Entry of a new bank often produces new rules for
competition. But in the banking industry the entry barriers are really high. 3ue to high
regulations imposed by the 0overnment to enter this industry the threat of new
entrants is not that much in comparison to other industries. "lso the e!it barriers are
also very high and its really very hard for banks to leave the industry.
&hanges in cost and efficiency
9
3ifferences in the cost and efficiency among key competitors alter the position of the
banks. &onsumers have become very price sensitive and low price of products and
services attracts more customers.
&hanges in 7egulatory and 0overnment policy
The regulatory and government actions make significant changes in the industry
practices and strategic practices. Bangladesh Bank, which is the central bank and
the 6inistry of #inance, has the authority to take policies that will protect the interest
of the public as well as banks. "nd, whatever decisions they take all the banks are
obliged to follow that.
&hanging societal concerns, attitudes and life styles
$ociety is changing rapidly with the change in people's life style and concerns. The
number of women workforce is increasing day by day. "s a result people are money
rich but time poor. &onsumers of the banks are asking for more and convenient
facilities and services. Banks those are providing "T6, credit card and convenient
location are getting more popularity and achieving more market share, this is
specifically true for 3haka.
10
An Overview of Prime Bank
Limited
In the backdrop of economic liberali%ation and financial sector reforms, a group of
highly successful local entrepreneurs conceived an idea of floating a commercial
bank with a different outlook. #or them it was competence, e!cellence and consistent
delivery of reliable service with superior value products. "ccordingly, Prime Bank
Limited was created and commencement of business started on )E
th
"pril )DD(.
"s a fully licensed commercial bank, Prime Bank Limited has being managed by
highly professional and dedicated team with long e!perience in banking. They
constantly focus on understanding and anticipating customer needs. "s the banking
scenario undergoes changes so does the bank and it adFusts and repositions itself to
the changed conditions.
In its ),
th
year of operation in -,,(, Prime Bank has made substantial headway in
terms of business growth, profitability and establishing its image as one of the
leading private commercial banks. Its march towards reaching greater heights in
operation continues with full vigor and enthusiasm. Prime Bank has made significant
11
progress within a very short period of its e!istence. The bank has been graded as a
top class bank in the country through internationally accepted CAMEL Rating. The
bank has already occupied an enviable position among its competitors after
achieving success
In all areas of business operations.
12
Prime Bank Limited offers all kinds of commercial, corporate and personal banking
services covering all segments of society within the framework of banking rules and
regulations laid down by the &entral Bank. 3iversification of products and services
include corporate banking, retail banking and consumer banking right from industry to
agriculture, real state, software and other sectors.
Prime Bank Limited is a fast growing private bank and it is already at the top slot in
terms of =uality service to the customers and value addition for the shareholders. In
the last few years Prime Bank made satisfactory progress in all areas of business
operation. The bank managed to further e!pand and consolidate its customer base in
both of its core businesses and retail banking.
4rime Bank Cimited is one of the strong capital based banks in the country with
capital ade=uacy ratio of ),.E*A as on 3ecember -,,*, which is well above the
stipulated re=uirement of /A. The authori%ed capital of the bank is Tk. *,,,.,,
million and paid up capital stood at Tk. ),,,.,, million as on +)
st
3ecember -,,*.
9n this date the reserve fund of the bank stood at Tk. D/..() million while the e=uity
fund was Tk.--+D./ million. The total asset of the company was Tk. +-+.)..- million
in -,,*. The sources of fund of 4rime Bank Cimited are paid up capital :+A;,
reserves and surpluses :(A;, deposits :/)A; and other Ciabilities :)-A;. The use
funds is concentrated as loans and advances :.+A;, investments :),A;, fi!ed assets
:)A, li=uid assets :-)A; and other assets :(A;.
13
Prime Bank has been very selective in locating branches so that customers are
better served. The bank's currently has a network of +. branches allover Bangladesh
and a booth located at 3haka &lub, 3haka. The bank also plans to add a few
branches to its network that will give the bank strategic advantage in terms of
operation and business potential. 4rime Bank's aim is to be the leading bank in the
country@s principal markets. The bank by concentrating on the activities in its area of
speciali%ation has achieved good market reputation with efficient customer service.
Prime Bank consolidated its position and retained its product line and financial
services aimed at various target groups. In a challenging market conditions, this bank
continued to provide more innovative products and better services to retain and
e!pand its market share. The bank is committed towards providing continuous
training to its staff to keep them up to date with modern practices in their respective
fields of work. This bank also tries to fulfill its share of community responsibilities. By
such measures the bank intends to grow and increase shareholder's earning per
share.
14
+a&kway of -rime Bank 1imited
2334$ &reated and commenced its operation on )E
th
"pril )DD(. 7enowned banker
6r. Cuthfur 7ahman $harker was the first 6anaging 3irector of this Bank.
2335$ Incorporated in 3haka $tock E!change. 9n -)st 8ovember 6r. $harker
resigned.
2336$ 9n /
th
"pril 6r. <a%i "bdul 6a%id took over the leadership of the bank as a
6anaging 3irector. 8o of branches of the bank reached at ).
th
covering all divisional
city of Bangladesh. 4aid up capital reached from T<. ),, to -,, million. 9ne Islamic
Banking branch started its operation at 6otiFheel.
2337$ 8o of branches reached at )/ including two Islamic banking branches.
2333 5 6r. 8aser Bukhtear "hmed Foined as a deputy 6anaging 3irector with lot of
e!perience and foreign banking e!posure. 8o of branches reached at -,. 9nline
banking and credit card facilities were started.
8999$ 8o.) bank in &"6EC 7ating announced by Bangladesh Bank in Bangladesh.
6r. 6. $haFahan Bhuian Foined as a $enior E!ecutive 2ice 4resident came from
>nited &ommercial Bank Cimited.
8992 5 8umber of branches reaches at -.. 6r. <a%i "bdul 6a%id resigned from the
Bank and 6r. 8aser Bukhtear "hmed took over the charge as a 6anaging 3irector.
6r. 6. $haFahan Bhuian was the 3eputy 6anaging 3irector. "lso the no.) bank in
terms of the &"6EC 7ating announced by Bangladesh Bank in Bangladesh.
15
8998$ 6r. $hah 6d. 8urul "lam Foined as a 6anaging 3irector from $outheast Bank
Cimited after 6r. Bukhtear resigned. $till it the number one bank in terms of &"6EC
7ating. 8umber of branches reached at -E including three Islamic banking branches.
8994$ The number of 4rime Bank branches reaches +., and of it ( branches are
designated Islamic branches complying with the rules of Islamic $hariah the modus
operandi of which is substantially different from other branches run on commercial
conventional basis.
16
-rodu!ts and Ser%i!es offered by -rime Bank
eposit produ!ts$
&ontributory $avings $cheme
6onthly Benefit 3eposit $cheme
$pecial 3eposit $cheme
Education $avings $cheme
#i!ed 3eposit
$avings 3eposit "ccount
$T3 "ccount
$enior &iti%en $cheme
6ulti&urrency "ccount
#oreign &urrency 3eposit "ccount
8on7esident Taka "ccount
8on7esident #oreign &urrency 3eposit "ccount
8IT" :8on 7esident Investor Taka "ccount
#actory Workers $avings $cheme
1oan -rodu!ts$
&onsumers &redit $cheme
Cease #inance
17
Bire4urchase
$mall and 6edium Enterprise &redit $chemes
Coan "gainst $hares
Bouse Building #inancing $cheme
#inancing $cheme for &ontractors
&omputer $oftware #inancing $cheme
4rime Bank 6aster&ard &redit &ard
4rime Bank 2I$" &redit &ard
Working &apital #inancing
Import #inancing
E!port #inancing
Industrial Working &apital #inancing
4roFect Coan
$tructured #inance :Coan $yndication;
/ther -rodu!ts : Ser%i!es$
9n Cine Banking
$WI#T
C?& 3elivery $ervices
Cocker #acility
18
Prime Banks Mission Statement
Mission
To build Prime Bank Limited into an efficient market driven customer focused
institution with good cororate governance structure!
Continuous imrovement in its business olicies, rocedures and efficienc" through
integration of technolog" at all levels!
;ision
To be the best 4rivate &ommercial Bank in Bangladesh in terms of efficiency, capital
ade=uacy, asset =uality, sound management and profitability having strong li=uidity.

Management /b<e!ti%es
Prime Bank aims to continuously update and develop its product line and range of
services to cater to the needs of retail and corporate customers. To achieve this goal,
efforts have been directed in three main areas5
3esign and introduction of new products and services
$haping and developing the system to face new challenges and emerging
need of the market
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#ull implementation and utili%ation of the Bank's e!cellence program which
aims to provide service to customers.
While strengthening risk management and improving asset =uality is the main focus
of the bank, it is also aware of its responsibility to the society. With this noble
intention, 4rime Bank #oundation was established in -,,), which took part in diverse
charitable and voluntary programs to alleviate poverty and community welfare.
"orporate Go%ernan!e
Effective corporate governance should be is a part of any bank's identity. $ince
Prime Bank#s stocks are listed on the 3haka $tock E!changeG the bank is subFect to
in certain respects to Bangladesh capital market laws as well as the rules of the
$ecurities and E!change &ommission :$E&; and the 3haka $tock E!change. Prime
Bank tries to ensure responsible, valuedriven management and control of the bank
through its system of corporate governance. Prime Bank to set an e!ample of
#airness, Transparency, "ccountability and 7esponsibility to ensure good
0overnance. "t Prime Bank &orporate 0overnance means Triple Bottom Cine i.e.
increasing the shareholders' value by being ethical, accountable to the society and
the environment.
It is the responsibility of the 0overning Board to present transparent assessment of
the financial reports. The Board is assisted by the audit committee to over see the
financial reporting processes and =uality in reporting up to date results.
20
*thi!a& "odes
Prime Bank recogni%es that its first duty is towards the customers, to the
stockholders and to the public generally, is tries to act in all matters in a manner that
merits public trust and confidence.
Prime Bank has an informal &ode of Ethics, which represents policies that are not all
inclusive and is not intended to be a substitute for good Fudgment concerning the
basic principles of banking. The code applies to all officers, employees and directors
of Prime Bank. "ny individual violating this code is subFect to appropriate corrective
action, which may include dismissal and if appropriate prosecution. The code of
Ethics at Prime Bank more or less deals with the following issues
Confidential$%ensitive and &nsider &nformation
Conflicts of &nterest
'utside Activities
Relations with Customers
Bank Briber" Law and Criminal Law %ummar"
Accounting, Auditing and Record keeing
(eneral Business Conduct
21
So!ia& Responsibi&ity
While strengthening risk management and improving asset =uality is the main focus
for the bank, but Prime Bank is also aware of its responsibility to the society to which
it belongs. Prime Bank has recogni%ed the e!pectations of its valued customers and
shareholders towards its commitment for the welfare of poorer sections of the society.
"gainst this backdrop, Prime Bank )oundation was created in the later part of -,,).
Its activities were further reorgani%ed and efforts intensified in welfare related
initiatives.
The #oundation and employees of the bank took part in diverse charitable and
voluntary programs. The main obFective of the #oundation was to invest part of the
bank's profit in poverty alleviation and community welfare. "ccordingly, the
#oundation had made allocations in different areas of poverty alleviation and primary
health care programs for the lowincome group. $ubstantial fund had also been
allocated for research works on various socioeconomic issues confronting the
nation. "ll those strongly reflected strong commitment of the bank to work closely
through the #oundation with the community with which it coe!isted. Castly Prime
Bank )oundation would continue to benefit and contribute in activities that benefit the
lives of common people and communities throughout Bangladesh.
To add the above, Prime Bank has also participated in maFor sponsorship programs
in the area of sports such as #ootball and &ricket to populari%e the same among the
22
public. The bank on its own organi%ed friendly cricket matches between a few private
banks to promote fellow feelings within the banking community.
In all its business decisions, Prime Bank strictly adheres to environmental and safety
regulations and in no way did the bank compromise on ecological imbalance for
which future generation might suffer. Prime Bank has also taken maFor decisions
within the bank to ensure conservation of all forms of energy.
23
-rime Banks /rganizationa& Stru!ture
Prime Bank is listed with promoter shareholders' collectively holding a *.A stake in
the bank. 9ne of the main reasons for the bank's good financial condition is that the
bank's promoters, who have other business interests as well, have refrained from
using the bank for insider lending. This is a huge issue for Bangladeshi private banks
and together with somewhat la! supervision, is the single biggest factor for the poor
financial condition of most private banks. While Prime Bank has so far benefited from
its promoter shareholders' approach of maintaining an armslength relationship
between the bank and their other businesses, whether this would continue to be the
case in future, particularly when the secondgeneration promoters become directors
of the bank remains to be seen.
The bank had a rather large board :-, members in all; with representatives from all
the maFor shareholders. 4reviously central bank norms prevented any one
shareholder individually holding an e=uity stake of greater than (A in the bank, this
was the reason for the -, directors sitting in the board. The central bank rules in this
regard have undergone a slight change. 8ow the rules are that the individual holding
has been enhanced to ),A and the si%e of the Board will now be restricted to )+
members, which should include at least two independent directors.
The bank's board has a policy of rotating the &hairman's position amongst various
membersG conse=uently the bank has a new &hairman every year. The e!ecutive
24
management also appears a bit topheavy :relative to the si%e of the bank; with one
additional managing director besides the managing director, a $enior E!ecutive 2ice
4resident, four E!ecutive 2ice 4residents and many $enior 2ice 4residents. 4rima
facie the rotating &hairman and the presence of effectively two managing directors
may lead to some overlapping responsibilities and possible conflictG however this
does not seem to have happened so far in the bank's history and the bank continues
to perform satisfactorily.
25
/rganizationa& Stru!ture
Managing ire!tor
eputy Managing ire!tor
Senior *,e!uti%e ;i!e -resident
*,e!uti%e ;i!e -resident
Senior ;i!e -resident
;i!e -resident
Senior #ssistant ;i!e -resident
#ssistant ;i!e -resident
First #ssistant ;i!e -resident
Senior *,e!uti%e /ffi!er
*,e!uti%e /ffi!er
-rin!ipa& /ffi!er
Senior /ffi!er
Management Trainee /ffi!er
26
SWOT Analysis
Strengths
The strengths of a company are the most important building blocks re=uired for
growth to take place. Prime Bank is a company that has much strength. The following
are a few of the most prevalent strengths that Prime Bank has at the present time.
#!!ountab&e "orporate Go%ernan!e
0ood &orporate 0overnance is an issue of vital importance to the Board and
6anagement of Prime Bank. The Board of 3irectors, as the ape! level of authority, is
responsible and accountable for the overall direction and is ultimately answerable to
regulatory authorities and shareholders for the activities, strategies and performance
of the company. The board now has )+ members, which also includes at least two
independent directors.
Prime Bank board has a formal schedule of matters especially reserved for its
decision including corporate strategy, approval of budgets and balance sheet, annual
financial results, 3irector appointment, proposal for dividend, approval of maFor
corporate transactions and credit proposals beyond the delegated business power of
the management.
27
*,perien!ed Senior Management
The senior management of the bank is responsible for promoting the highest level of
business ethics and integrity. Their aim is to create and foster a culture throughout
the bank that emphasi%es and demonstrates the importance of maintaining high
business ethics and close relationship with customers.
=ua&ity "ustomer ser%i!e
&ustomers are the focal point of all the banks activities. Prime Bank is committed to
its customers for e!cellent, innovative and speedy solutions across all customer
segments. The bank provides a full range of banking services to small and medium
si%e companies and also to private individuals and entrepreneurs. They have
e!pertise corporate banking, retail banking and trade finance.
"ompensation -a!kage
Prime Bank maintains an e=ual opportunity in recruitment, training and promotion of
all employees regardless of gender or ethnic origin. The bank tries to pay all its
employees the best compensation package. "ccordingly, Prime Bank's salary
structure is revised upward on a regular basis. The bank also keeps in employees
informed about the progress of the business and their part in it for their constant
commitment to the bank. They also encourage the development of the employee
involvement in the bank through formal and informal meetings.
28
-rime Bank Shares
$hares of Prime Bank are one of the most actively traded stocks on the 3haka $tock
E!change :3$E; and &hittagong $tock E!change :&$E;. The continual improvement
in the bank's underlying profitability is the reason for trust and confidence of investors
on the bank.
So!ia& +e&fare
Prime Bank has fully commitment towards serving the communities in which it
operates. The bank believes that healthy economy and sound banking go together. "
chunk of the bank's annual profit is being given to the Prime Bank )oundation for
social welfare. The main obFective of the foundation was to invest part of the bank's
profit in poverty alleviation and community welfare.
The Prime Bank )oundation and the employees of the bank take part in diverse
charitable and voluntary programs. The foundation had made allocations in different
areas of poverty alleviation and primary health care programs for the lowincome
group. $ubstantial fund had also been allocated for research works on various socio
economic issues confronting the nation. "ll these strongly reflected strong
commitment of the bank to work closely through foundation with the community with
which it coe!ists.
29
/n&ine Banking Ser%i!es
Prime Bank is among the few banks in Bangladesh, which provides the online
banking services to its customers. By using the modern banking services, a Prime
Bank customer can withdraw or deposit an amount of cash under the Prime Bank
account no matter in which branch the actual account e!ist. This service gives its
customer huge fle!ibility. 6ore and more urban customers are becoming attracted to
this service day by day.
Training and e%e&opment
Prime Bank has a personneltraining institute with good resources. They give regular
training to the officer of both middle and lower levels. "gain if there is any strategy or
technology change, there will be special training program arranged based on
individual needs.
Strong finan!ia& resour!es to ensure the growth of the bank
In the years -,,* Prime Bank#s total capital T<. -,*E..+* million. The banks capital
surplus in the year -,,* was T<. *,).(+ million. Prime Bank#s Total 3eposits were
T<. -/,,.D.-* million and the Total Coans and "dvances were T<. -+,-)D..E million.
Which makes the &redit 3eposit 7atio stand at /+A for the year -,,*.
Prime Bank#s Total "ssets were T<. +-,+.)..- million. 9f it T<. -D,)+E.-/ million
were Interest earning assets and the rest T<. +,--*.+* million was noninterest
30
earning assets. $o it seems that it terms of financial resources Prime Bank has no
lacking. "nd the bank has ade=uate resources at its disposal considering the si%e of
the bank and this was a good enough platform to ensure future growth of the bank.
The dire!tors being %ery renowned industria&ists of the !ountry
The directors of prime Banks are some of the leading pioneers and industrialist of
Bangladesh. The &hairman of Prime Bank 6r. "%am H. &howhury is also the
&hairman of Bangladesh 8orway &hamber of &ommerce & Industry and 3elta$oft
Cimited. In addition to that he is the 2ice 4resident of Bangladesh Energy &ompanies
"ssociation and 6ember of "dvisory &ouncil of the 0ovt. of the 4eople@s 7epublic of
Bangladesh on 4ower, Energy & 6ineral 7esources. Be is also a 3irector of 3elta
Brac Bousing &ompany Ctd., 6obil Hamuna #uels Ctd., 6obil Hamuna Cubricants
Ctd., 8ewscorp Ctd. and &entral 3epository Bangladesh Cimited :&3BC;. $imilarly the
other directors of the bank are involved with renowned companies.
This is strength for Prime Bank, as the directors of the bank are so prominent they
can help the bank great deal through lobbying. They can to some e!tent influence the
government from not taking and drastic policies the adversely affects the bank.
31
+eaknesses
The fault of an organi%ation is the most important internal problems that might
hamper the growth rate to take place in a company. Though Prime Bank is a
company that has many strengths but it also as well has some weaknesses of its
own. The following are a few of the most common weaknesses that Prime Bank has
at the present time.
'igh emphasize on fi,ed deposits
Prime Bank gives high emphasi%e on fi!ed deposits every year, which means that
they always end up paying high interest e!pense for their deposit mi!. &ertainly, this
will decrease their dealing spread and keeps them always in pressure. $o, their cost
of goods sold is very high which is not very good for any company in this competitive
market.
No feedba!k from bottom &e%e& emp&oyees
The bottomlevel employees and even the midlevel managers at Prime Bank don't
take part in the decisionmaking process. $o the information flow is mostly one way.
Though Prime Bank has some unofficial way to collect information from the bottom
level employees, but it is not effective at all.
32
1ess emphasis on ad%ertising through the e&e!troni! media
Prime Bank does not promote their brand or products on a regular basis. They seem
to be over confident over their company's publicity. They some times see it as an
e!tra e!penditure. They also don't do much electronic media advertising. 9n the
other hand competitors like 3haka Bank, 3utch Bangla Bank, $tandard &hartered
Bank, Hamuna Bank and others do the opposite fre=uently come up with creative
adds for their banks. This is a big weakness for Prime Bank, which may prove to be
very big mistake in the future. To company should concentrate more on its
promotional activities.
Big number of emp&oyees
Prime Bank currently has =uite a big number of employees compared to its
capabilities. This decreases the employee's individual efficiency as well as
effectiveness. In addition to that, a few of the employees are not too sound and loyal
as they are supposed to be. There is a tendency that middle level managers want to
avoid their responsibilities and want it to be done by others.
#gen!y -rob&em
The front desk employees are often found not to be too keen on taking care of their
customers. Though they have a long employee line in every branch, their loyalty to
the company and their ethics level are not very satisfactory. 6ost of the employees
always think about their own interest, which proves that agency problem is there.
33
$ome of them create unofficial groups through which they solve each other's problem
and support each other to achieve their personal goals, not too much concern about
their personal interest.
/pportunities
"n organi%ation's opportunities are positive e!ternal environmental factors. "n
organi%ation should e!plore all possible opportunities available to it. These
opportunities are intended to improve the organi%ation. By making improvements, the
organi%ation should be able to become more competitive in the market. The following
are opportunities available to Prime Bank in order for it to become more aggressive.
>sing their Good market image
Prime Bank has =uite a strong market image. Cocal people know Prime Bank as a
center of trust and professional where local e!pertise use to serve. If they e!pand
their business and utili%e this strength as more diversified business opportunities,
they can create stronger image in the country.
Mobi&e te&ephone bi&& !o&&e!tion
"s telecommunication industry is e!panding with an alarming rate recently, so Prime
Bank could maintain good business relation with those telecommunication
companies. They can look forward to make some mutual agreement of responsibility
34
of bill collections. This will give them more li=uid money, which will boost up their
cash re=uirement.
-remium Ser%i!e Banking
Prime Bank can improve its customer service by tailoring the individual business
needs. This service enhancement collectively will allow a customer to manage their
business finances and cash resources more efficiently and conveniently. The
services like
&ourier
"uto #a! 7eport
Botline :Iour single point of contract;
Inward remittance information services
E!press payments
#oreign E!change and 6oney market information
*,panding the business area
Prime Bank could also boost the number of branches to take advantage of increase
demand among the e!isting customer with better services and thus generate more
net profit. In recent years the bank has opened al lot of new braches, which is a good
sign of improvement and also a commendable strategy.
35
G&oba&ize the Business
"s the bank has a strong business brand image, it holds a great opportunities to
globali%e their business more e!tensively. They can arrange more foreign
correspondent banks or by establishing more foreign branches as the foreign
braches have better and big business opportunities.
>pgrading the /n&ine Banking ser%i!e
Prime Bank#s online banking service is not up to the standard of the service the
foreign banks provide. They usually serve the service based on the historical data,
not real time basis. $o, the bank should take initiative to add some additional
services for their loyal clients. This will give them better opportunity to ac=uire more
market share.
*,panding its network outside haka and "hittagong
The bank has not been effective in increasing the number of branches outside 3haka
and &hittagong. 6ost of Prime Bank#s braches are targeted at the city people onlyG
they have not concentrated of the rural people too much. That's why the company
could not capture a large portion of the market as well as market share. The authority
of the bank needs to take this into consideration not only for them but also for the
poor rural people. "fter all there is =uestion of ethics come in every steps of
business.
36
Go%ernments !hanging attitude towards -ri%ate Se!tor e%e&opment
The government is favoring private sector investment, which is good for the Prime
Bank, as they can now e!pand their business with the favoring rules and regulations
of 0overnment of Bangladesh. This kind of government support will lessen their
problems. "s Prime Bank is a local private bank it holds more diversified
opportunities to do business on their own interest. They always can e!pect feedback
from government.
/penings to take market share away from ri%a& firms
The private local commercial banks of Bangladesh are very similar in the way they
operate. This is especially true for the banks in the same strategic group. $o if Prime
Bank some how manages to differentiate their financial products and services from
the other then there is good chance that it will gain more market share. If the bank
manages to achieve diversified products and wide banking network there is a scope
for market penetration. The bank can serve more customers groups if they e!pand
their e!panding geographic coverage and service segments. "lso, Prime Bank can
portray it self as different by e!ploiting emerging new technologies in banking and
improving services like credit card, telephone banking etc.
37
Threats
"n organi%ation's threats are negative e!ternal environmental factors. "n
organi%ation should e!plore all possible threats available to it. These threats are
intended to diminish the organi%ation. By making improvements and proper
monitoring of the threats, the organi%ation should be able to turn more competitive in
the market. The following are threats are available to Prime Bank in order to threaten
its e!istence.
Fier!e "ompetition
"s the banking industry of Bangladesh has promising prospects in, Prime Bank is
facing strong competition the entrance of new potential competitors. The second
generation banks like 3haka Bank, 3utch Bangla Bank and $outheast Bank are the
main competitors for Prime Bank. "lso foreign banks operations in Bangladesh are
also taking a big portion of market share. These foreign banks have successfully
created better market image than those of local banks in Bangladesh.
-o&iti!a& Interferen!e and Go%ernment Regu&ations
Prime Bank is facing political interference in big loan sanctioning and also there is to
some e!tent unethical recruitment of employees. "lso there is *(A ta! rate for all
financial institutions, which is very high and also a real threat for the growth of the
company.
38
'igh&y "apita& Reser%e Re?uirement imposed by the "entra& Bank
If there is li=uid money crisis the market, Prime Bank will find it hard to manage its
capital reserve re=uirement. "s Banking Caw "ct )DD), Bangladesh Bank is
regulated the capital re=uirement not less than DA. "nd if for some reason the bank
fails to meet the reserve re=uirements then the conse=uences and sanctions will be
severe.
e!reasing banking business area
8owadays banking businesses are being narrowing down and its services and
products are also diversifying in other sector of the financial market. #ew banking
services are being done by insurance companies, leasing firms, house building loan
companies and so on. $o, banks are now surviving by doing general banking, which
is already threat and can be bigger in future. Prime Bank management should start to
think about this issue more closely and have to take necessary steps.
The "entra& Bank !hanging the interest rates
In Bangladesh the &entral Bank decides the interest rates. They give a range and
with in that range the banks have to maintain the interest rates they offer. $o the
result is that all the banks end up having very similar interest rates.
"lso it is the &entral 0overnment who changes the interest rates. They either
increase or decrease it depending on the economy according to the policies they
want to implement. "nd whatever changes the 0overnment makes the banks of
39
Bangladesh have to abide by it. The #inance 6inister 9f Bangladesh 6r. $aifur
7ahman after taking office decreased the interest rate step by step over the years.
3oing this meant that banks were now offerings lower interest rates. "nd the amount
deposits received by banks was significantly reduced as people were now investing
in other nonbanking financial institutions and the stock market. "lso peoples
tendency to take loans increase as the interest charge on loans was also reduced.
But in the recent days, due to pressure from I6# and World Bank the &entral Bank is
going to increase the interest rates.
It is not up to the banks to decide what interest rate they will offer on the deposits. In
fact it is the &entral 0overnment that makes that decision for them whether the
banks like it or not. "lso if the &entral 0overnment comes up with additional
regulations that will mean more costs for the banks to maintain them.
>nstab&e po&iti!a& en%ironment of the !ountry
The political environment of Bangladesh is =uite unstable and it affects the Industry
from performing efficiently. In Bangladesh where the political environment is
absolutely unpredictable the e!ternal forces constantly keep on changing. #or
instance, a sudden call of Bartal or strike might end up with the cancellation of the
events. Thus, there is an enormous possibility of incurring a huge loss.
40
inan!ial Analysis
The prospect of a bank heavily depends on efficient management of sources of
funds. 3eposits are the main source of fund for any commercial bank. $o, deposits
play vital role in shaping the growth of any bank. 9ur discussion is focused on the
deposit mi!, pattern of deposit growth and the strategies followed by the bank to
price deposits.
eposit Mi,
9ver the last three years the deposit mi! of prime banks consists of current deposit,
savings deposit, and bearer certificate of deposits, fi!ed deposit, shortterm deposit,
deposit schemes and bills payable. The following table shows the deposit mi! of this
bank for recent three years.
899@ 8998 8992
eposit Items Taka (999)
A of
tota&
Taka (999)
A of
tota&
Taka (999)
A of
tota&
"urrent and
other deposit
*,,-),*,D )D.,EA +,-/,,-)E -,.-/A -,*DD,.-) )D.,EA
Sa%ings
deposits
-,.+),))+ )-.*/A ),D.*,+D, )-.)(A ),)D.,+,+ D.)+A
Bearer
!ertifi!ate of
deposits
+,()D ,.,-A *+,D-- ,.-EA +,,D+. ,.-*A
Fi,ed deposits /,,*D,,+, +/.)EA (,.E*,(,- +(.,DA (,*+,,+.* *).*-A
41
Short term
deposits
),/((,++, /./,A ),)E+,*+D ..D*A ),,D-,*)+ /.++A
eposit
s!hemes
*,))(,D,D )D.(-A +,.**,*,- --.(*A -,..-,/(* -,.+)A
Bi&&s payab&e *)+,.*E ).D.A +D),-*- -.*-A )DE,-), ).(,A
Tota& 82B973B346 299.99A 25B268B22C 299A 2@B293B692 299A
This table shows that fi!ed deposit is the highest among the deposit mi! of Prime
Bank. But there is a declining trend of fi!ed deposits from -,,) to -,,- as
percentage of total deposits. This happened because of low interest offering. But the
total deposit increases as other forms of deposit increases through various deposit
schemes.
Growth of eposits
The following table summari%es the growth of deposit of Prime Bank Limited over the
last three years.
Dear 8992 8998 899@
eposit #mount (Taka in 999) )+,),D,E,) ).,)E-,))* -),,/D,D(E
In!rease:(e!rease) -,(D),)*. +,,.-,*)+ *,D)E,/*+
0rowth -*..+A -+.+.A +,.*)A
The table shows an increasing trend of deposits with fluctuation. The growth rate
declines in -,,- and again rises in -,,+. Even though there was fluctuation, the
42
bank was able to mobili%e substantial deposits over the years. The pattern of
deposits of 4rime Bank can be visuali%ed by the following figure.
-ri!ing eposits
The Bank does a competitive analysis and also follows 7educing Balance 6ethod.
"naly%ing the deposit pricing style of Prime Bank Limited in recent years we have
found that this bank uses the combination of Market*Penetration and +eosit )ee
%chedules deposit pricing strategies for different deposit schemes. >nder the market
enetration deposit pricing strategy the bank sets low fees and high interest rates
initially to encourage customers to open an account. Cater on bank has raises fees
and lowers interest rates. #or some deposits, the bank has designed its pricing
strategy according to deposit fee schedules where the fees paid by the customer
depend mainly upon the account balance and the volume of account activity.
43
1oan -ortfo&io
Banking business consists of borrowing and lending. 9ne of the primary functions of
the commercial banks is the sanctioning of credits of borrower. Without ade=uate
finance, there can be no growth or maintenance of a stable output. Banks act as
financial intermediaries between surplus :ultimate lender; and deficit economic unit
:ultimate borrower;. Prime Bank Limited has e!tended its credit facilities to trade
finance, proFect loans, working capital and consumer credit etc. The bank has all
alone encouraged small business and enterprises to its credit facilities. "griculture
and IT sectors both got priority from the bank in line with national interest. The bank
has also e!tended longterm loan to a number of proFects under syndicated financing
arrangement with banks and financial institutions. 4ortfolios of loans and advances of
recent two years are presented in the following table.
899@ 8998 8992
Se!tors of
1oans and
#d%an!es
Taka
(mi&&ion)
A of tota&
Taka
(mi&&ion)
A of
tota&
Taka
(mi&&ion)
A of tota&
#gri!u&ture *E,..* -./(A (/.DD ,.*.A ++.+E ,.+EA
Term &oan +()).() -).-DA -/+-.(( --.++A )*)/.E )(..+A
+orking
!apita&
-(-/.E- )(.++A ).,*.)+ )-..*A )*/-.D )..+*A
*,port finan!e -*--.*. )*..DA ).E(.(( )+.--A -*E-./ -E.-(A
"ommer!ia&
&ending
(,-+.., +,.*.A *-**.,( ++.*(A )/*+.. -,.+-A
'ouse
bui&ding &oan
(*/.)+ +.+-A +D-.)- +.,DA +(+.ED +.D,A
44
Sma&& and
Medium
*nterprise
)*-.(+ ,./EA ))*.E ,.D,A .,.)( ,...A
"onsumer
"redit S!heme
*.(.+* -./-A *E+.(E +.E+A +E.+E ,.*)A
/thers )+ED.-E /.+EA )-D).)D ),.)/A )*,D..+ )(.(+A
Tota& 25C38.89 299.99A 28575.3 299A 396C.3 299A
The table shows that commercial loans, term loan and working capital are ranked
high in the loan portfolio of this bank.
Growth of 1oans and #d%an!es
Cike deposits 4rime Bank Cimited has e!perienced fluctuated growth of loans and
advances. The following table summari%es the growth in loans and advances over
the last ( years.
Dear 8992 8998 899@
1oans and #d%an!es
(Mi&&ion Taka)
D,,E*.D* )-,./../( ).,*D-.-,
"hange )+.E./D +,.)).D) +,/,(.+(
Growth 26.64A @3.79A 83.33A
The table shows that there was a sharp growth in loans from -,,) to -,,-. Then the
growth rate declines, which signifies the low demand in the market due to economic
45
condition. 9ver the years the total loans increased regardless of fluctuations. The
trend of growth is shown in the following figure.
-ri!ing 1oan
6ost of the loans of this bank are concentrated as commercial lending and term loan.
To price its loans the bank follows Price Leadershi Model where it sets loan rates
using a base industry rate in the industry plus marks up for risks. The base industry
rate depends on in which industry the loan is approved. The marks up for risks also
vary industry to industry as well as customers to customers. &urrently the loan
interest rate is in the )-)*A range with the e!port criteria having EA. They follow
&omposite &redit for which they have ensured low rates for backtoback loans.
There is no commitment fee for the unused portion of the loan.
46
In%estment -ortfo&io
9ver the last three years the investment portfolio of the Prime Bank is comprised of
government securities, pri%e bonds, bonds, debentures and shares. 6ost of the
investments are concentrated in government securities in the form of treasury bills in
different maturities. We found that the tendency to invest in government securities
has increased. 9ne notable thing is that the bank has no investment in shares in
-,,-. The investment of the Prime bank in the past + years, change and growth over
the years are shown in the following table5
Dear 8992 8998 899@
In%estment
#mount
),E+,,E+D,*D) ),DD.,-++,,,, -,E*D,E,D,*,,
"hange -,.,-,+,.,) -.(,*D+,(,D E(+,*E.,*,,
Growth 2@.4@A 2@.@9A 86.C9A
The table shows that the investment in marketable securities had a sharp growth in
the period -,,- -,,+. Even though the growth has declined in -,,) and -,,-
compared to previous years, the total investment is growing. This increasing trend
can be seen though the following figure.
47
Ratio #na&ysis
#rom the figure above we can see that Prime Bank#s E4$ :earning per share; fell
gradually up to year -,,+ but it again increased a lot in the last fiscal year due to the
heavy profitability :preta! profit of about ),.. million;. We can also see a lot of
48
fluctuation in its 624$ :6arket value per share;. It was the highest in the last five
years. It reflects the investors' confidence in this bank.
#rom the figure above we see that Prime Bank#s 79" always remained under (A
meaning the bank is not giving any attention t maintain its asset efficiently. The
bank's 79E fell gradually till year -,,+. The 79E increased to -E.+- in the last year.
This will attract the investors and the bank will be able to raise e=uity fund in the
future. We should mention that the central bank has raised its authori%ed capital from
Tk.),,, million to Tk. *,,, million due to the high 79E in year -,,*, which is much
higher than the industry average.
49
Prime Banks Strategi! "rou#ing
To show which strategic group Prime Bank belongs some of the biggest and the most
popular banks operating in Bangladesh were taken into consideration.
The strategi! group mapping of the o%er a&& bank industry$
The graph of the strategic group mapping of the over all bank industry, on its
hori%ontal a!is shows the geographic coverage, while the vertical a!is represents the
image of the firms. It can be seen from the strategic map that Prime Bank Limited is
placed in a position that represents a low range of geographic coverage and a
medium to high image relative to #oreign Banks and growing third generation banks.
Its closest competitors are Eastern Bank, $outheast Bank and 8&& Bank.
In the banking industry of Bangladesh nationali%ed commercial banks are the market
leaders. But due to their poor service =uality, their images are =uite low. 9n the other
hand though foreign banks have very little market share and limited geographic
coverage, they are highly known for their =uality service. 4rivate commercial banks
fall between the two groups. "mong the private banks, Islamic Bank is comparatively
in good position.
50
I
m
a
g
e
Low Medium High
High
Medium
Low
Geographi!a& "o%erage
$onali
"grani
Hanata
7upali
4ubali
>ttara I#I&
8BC
"B
PRIM
E
Eastern
S-East
Dhaka
Bank
+
rd

0eneratio
n banks
Islami
c
Bank
#oreig
n
Banks
51
2379 2374 2339 2334 8999
S
I
E
*
The strategi! group mapping of the -ri%ate "ommer!ia& Banks$
The different strategies each of the 4rivate &ommercial Banks follows, three main
strategic groups can be created by taking in to consideration their establishment time
and si%e.
2
st
Generation Banks (*stab&ished 237802377)$
2
st

generation0
Islamic Bank
"B Bank
8ational
Bank
8
nd
generation
4rime bank
3haka Bank
4remier Bank
3utchBangla Bank
South-east Bank
@
rd

generation0
EJI6
Hamuna Bank
9ne Bank
'igh
Medium
1ow
Time of *stab&ishment
52
8ational Bank Cimited, The &ity Bank Cimited, >nited &ommercial Bank Cimited, "B
Bank Cimited, I#I& Bank Cimited, Islami Bank Bangladesh Cimited and "lBaraka
:9riental; Bank Cimited.
8
nd
Generation Banks (*stab&ished 233802335)$
Prime Bank Limited, Eastern Bank Cimited, 8ational &redit & &ommerce Bank
Cimited, $outheast Bank Cimited, 3haka Bank Cimited, "l"rafa Islami Bank Cimited,
$ocial Investment Bank Cimited and 3utchBangla Bank Cimited.
@
rd
Generation Banks (*stab&ished 2333 to present)$
6ercantile Bank Cimited, $tandard Bank Cimited, 9ne Bank Cimited, EJI6 Bank
Cimited, 4remier Bank Cimited, 6utual Trust Bank Cimited, #irst $ecurity Bank
Cimited, Bank "sia Cimited, The Trust Bank Cimited, Hamuna Bank, Brac Bank, and
$hahFalal Bank.
$o it seems that Prime Bank is in the secondgeneration group, which is
characteri%ed by establishment that is characteri%ed by establishment in the mid
)DD,'s and relatively medium asset si%e. $econd generation group mainly pursue
progressive growth to the general public with relatively healthy asset. "ccording to
e!ecutives in Prime Bank, credit performance of secondgeneration 4&Bs like
3haka Bank, 4remier Bank, 3utchBangla Bank, $outheast Bank, etc are the best in
terms of &amel 7ating. Therefore, it is logic to say that Prime Bank operates in a very
53
competitive environment and its main competitors are the members of second
generation group,
The Industry Life $y!le
54
Embryonic
Each different strategic group is in the different stage of industry life cycle. But as we
are focusing only on Prime Bank in our report we will only talk about Prime Bank#s
strategic group, which is the secondgeneration bank group.
"ccording to our te!t book the industry life cycle model consists of
:); an embryonic industry environment
:-; a growth industry environment
:+; a shakeout environment
:*; a mature environment
:(; a declining industry environment


0rowth
Shakeout
6ature 3eclining
-rime BankF se!ond0generation bank group
55
-rime Bank in the Shakeout stage
Prime Bank like the rest of the banks in the secondgeneration group has already
passed the embryonic stage, because most of the banks in this group started
business in the middle )DD,s. "fter that, Prime Bank create demand as public was
e!posed to the modern banking services and they e!perienced a rapid growth in the
growth stage by late )DD,s. >ntil now, generally the rate of growth has slowed down
more or less. "s Prime Bank enters the shakeout stage it is e!periencing intensive
rivalry. #or e!ample, the advertisements of the banks are very much similar. The
advertisements read 4rime Bank as a ,bank with a difference-, $outheast bank is
characteri%ed as a Kbank with a vision- and so on.
56
$om#etitive or!es% Porters ive or!es
Model
To measure the nature and intensity of competition in an industry 6ichael 4orter
demonstrate five competitive forces for determining the market competition. The
strategic business manager seeking to develop an edge over rival firms and to devise
a successful strategy can use this model to better understand the industry conte!t in
which the firms operate. The nature of competitiveness in the Banking &ndustr" can
be viewed as a composite of the following five forces
57
2. Ri%a&ry among !ompeting banks
7ivalry among the banks is high. The banking sector in Bangladesh comprises four
types of scheduled banks. It is dominated by the four nationali%ed commercial banks
followed by foreign commercial banks and private commercial banks. "ll of the maFor
rivals are offering very much similar products. Besides that there are some 8on
Banking #inancial Institution, which are also providing similar services. Banks of
Bangladesh today are trying to provide best customer services, lowering their service
charges and trying to include new products and services in their product portfolio.
The competing banks for Prime Bank are second generation group are mainly 3haka
Bank, $outheast Bank, 3utch Bangla Bank, Bank "sia, 6ercantile Bank etc. 7ivalies
among e!isting competitor banks tend to increase because the banking industry
under second generation group is in a consolidated nature, out of the +, 4rivate
&ommercial Banks maFority of them are second generation banks and they are
interdependent. "nd the demand conditions, potential growing demand is present
due to economic development in sectors like commercial corporate, small cottage
industry, general public and other moderate competitors. But it is becoming
saturated. "lso the e!it barriers high as banks have relatively high fi!ed costs, which
makes it difficult for banks to get out of the industry.
58
"lso some of the new private banks are snatching the total deposits and total
advances belonging to the nationali%ed commercial banks and each other by
providing e!tra benefits. Every one is moving towards low cost and better services.
Banking business are now more or less depend on personal relationship of the
bankers. Whenever a good banker changes the bank, he?she takes some of his loyal
employees with him?her to the new one where he is going to Foin. This is a common
trend in Bangladeshi banking industry. Bence rivalry in the banking industry is very
intense.
8. -otentia& *ntry of New Banks
The banking industry is a highly regulated industry and entry into this industry is not
easy because it re=uires huge capital and fulfillment of legal re=uirements.
Bangladeshi financial institutions are highly regulated by the &entral Bank
:Bangladesh Bank;. The banking system of Bangladesh is regulated under the
Bangladesh Bank 9rder of )D-E and Banking &ompanies "ct )DE). Bangladesh
Bank incorporated a rule regarding the paid up capital of a banks that it should be at
least ),, crore Taka. The potential entry barriers of this industry are paid up capital,
competition, core deposit and business. &onsidering all the facts we can say that the
entry barrier in the banking industry is high.
@. The bargaining power of the buyers
59
"t one time there was a situation in this industry, only the big business people were
the main customers of the banks, but now people from different classes are banking
with different banks. The consumers credit schemes, personal loans, credit cards,
consumer loans etc. have been launched targeting the middle class and lowermiddle
class. 6ost banks in second generation group tend to maintain relationship banking,
which carefully maintains healthy relationship with customers and try to provide more
than what the customer wants. $witching cost is also low, because a client can easily
get similar credit facility if he another bank or he will get similar interest rate on credit
at another bank. "s the supply group who are the public savers are composed of
many small individuals and banks transfers these saving to their limited number of
buyers and it is not possible for every one to enFoy banks credit facility under certain
rules. "nd, if the client approaches a large amount of loan to its longterm
relationship banks, clients hold more power obviously. If other competitors in second
generation offer attractive interest rate, clients can easily switch to the competitor.
The bargaining power of buyer like household and small businesses or clients have
less power to influence the interest rate but big clients who have a regular transaction
with banks can e!ert its power on interest rate. $o it is seems that the power of
buyers is high in this industry.
C. The bargaining power of the supp&iers
3epositors are considered the suppliers in the banking industry. 3epositors are
regarded as the suppliers because they provide surplus or additional fund to banks
60
and then the banks use these fund to give loans and advances. It is the depositor's
surplus money that is transferred to those who are in need of this money. The banks
act as an intermediary here. Though the power of supplier is not that much but they
can influence interest rate based on the supply of the fund. 4eople from all sorts of
life have to deposit their money in any bank. 4eople are oblige to come to the bank if
they want to keep their money in a risk less and safe place, on the other hand the
banks have to survive on their money so the power of supplier is moderate in this
industry.
4. Substitute -rodu!ts
8onBanking #inancial Institutions offer financial products and services that are
similar to what the banks offer. There are financial institutions that are not banks, but
perform some of the activities similar to banks such as providing loans and leasing
facilities. They are leasing companies, cooperative banks, life insurance companies
etc. In Bangladesh there are -/ 8on Banking #inancial Institutions. 9f them )- are
leasing companies, . are investment finance companies, - are in housing loans and
the rest carry out other sort of activities.

8onBanking #inancial Institutions are e!pected primarily to fill in the gaps in the
supply of financial services that are not normally provided by the banking sector. The
trend is that the 8onBanking #inancial Institutions would continue to progress and
assume a significant role in addressing the development strategies of the country by
61
complementing directly with the banking sector to meet financing re=uirements of the
changing economy.
Strategi! Analysis
"orporate &e%e& strategy
To create value, a corporate strategy should enable a company, one, or more of its
business units, to perform one or more of the value creation functions at a lower cost,
or perform one or more of the value creation functions in a way that allows for
differentiation and a premium price. But the Prime Bank does not have any corporate
level strategy.
Business &e%e& strategy
Business level strategy refers to the plan of action that strategic managers adopt for
using the company's resources and distinctive competencies to gain a competitive
advantage over its rivals in a market or industry. Prime Bank is currently following low
cost generic business level strategy. "ll most all competitors are following same
business level strategy. It can be categori%e as low cost strategic group.
Fun!tiona& &e%e& strategy
62
Prime Bank has perused its functionallevel strategy for building competencies in low
cost for its services divisions.
'uman resour!es department
The bank has institute training and development center for its employees. The bank
tried to create a sense of community among our employees by encouraging
communication with each department. It also, encourages management committee to
participate in the meeting. The training academy had undertaken various training
program, workshops?seminars for developing skills, efficiency, knowledge and
competence to undertake business in this fairly competitive market.
"redit !ard ser%i!es department
It has instituted credit card service department. The success of the operation is
satisfactory. The bank completed arrangement for launching 2I$" card during -,,(.
This 2I$" has help them to get at least some sort of competitive advantages.
"ustomer ser%i!es department
Its customer services department remains ahead of the competition. With this
obFective, customer service improvement program and related activities are
continuously being developed, reviewed and implemented.
63
Pro&lem Analysis
"fter conducting the $W9T "nalysis and the $trategic "nalysis we have came
across some of the maFor problems faced by Prime Bank. The problems are listed in
order of maFor to minor ones.
'igh !ost of Fund (eposits)
"s there are () schedule banks now operating in Bangladesh, the power of supplier
is moderate to high. 3epositors always want a high rate of interest on their deposit.
"nd also the cost of shifting from one bank to the other for consumers is low.
"lso due to competitive market Prime Bank has to incur higher cost on their
3eposits. Prime Bank has more longterm deposit than shortterm deposit, which is
another reason behind the high cost of funds. In addition to that Prime Bank does not
get 0overnment funds, which is less costly than other funds.
1a!k of integration
3ue to the lack of communication the bank is facing serious problems of integration.
64
$o the bank can effectively apply their differentiation strategy. 6oreover, due to the
poor integration it cannot participate in innovation activities. But to be competitive and
sustain in that industry innovation is must. 9nly the low cost competition cannot
protect the company for long time. It has to achieve both low cost :reducing cost of
good sold;. Besides, the inflation rate is high in Bangladesh so all other banks also
focus on low cost. $o the bank faces high competition definitely.
Mu!h higher e,tent of %erti!a& differentiation than other banks
"t Prime Bank the level of hierarchy is much longer in comparison to other
commercial banks. Where as in the other banks there is only / to D posts before the
&hairman but at Prime Bank this number is )-. We fell that because of that Prime
Bank suffers from problems like coordination problems, information disorder,
motivational problems and having too many middle managers. "nd of all theses
problems motivational problem is the most evident at Prime Bank. "s the managers
at Prime Bank have much lesser authority and responsibility in comparison to the
other banks. $o often they lack the motivation to perform their tasks effectively.
In addition to that because of having so many level of hierarchy it is harder to identify
the individual contribution and performance of employees. $o what happens is that
the employees in spite of all their efforts don't get the due rewards and recognitions.
We feel that the shape of the organi%ational structure has a significant affect on the
motivation of Prime Bank#s workforce and the way the bank implements its strategy.
65

'igh turno%er rate of emp&oyees
It is a problem that e!ists in each of the 4rivate &ommercial Bank in Bangladesh.
Prime Bank is no different from that and the bank suffers from huge employees turn
over even at the management levels. "ll the problems associated with the turn over
of managers is not only limited to the bank Fust loosing one good employee, but as
the managers leave they take some other loyal subordinate employees whom them
by offering them higher ranks in other banks. Coyal and efficient employees leaving
means that the bank looses its efficiency in the short term until it hires new recruits
and in addition to that the bank has to incur further cost to go through the screening,
recruiting and hiring of new employees.
Training po&i!y at -rime Bank being not effe!ti%e enough
Prime Bank doesn't have an effective training policy. "lthough the bank has a training
institute but the bank has so fare failed to make use of it to enhance its efficiency and
effectiveness. $ome officers of the bank have been found not to be properly trained.
In addition to that some of the employees have the necessary educational
background and the necessary e!perience but they lack the proper communication
and people skills.
&ommunication skills are vital for service organi%ations and bank is no different for
66
banks. $ince Prime Bank hasn't emphasi%ed on the communication skills they may
face problems from both the employees side and the customer's perspective.
6oreover they have invested on a training center to speciali%e their worker and build
up their skills. But this training center fails to play a maFor role and it fails improve the
communication and other skills of the employees, which ultimately results in low Fob
satisfaction of the workers and in addition to that the customers are not served in
their full capacity as the bank can.
1ess di%ersified &oan portfo&io
Coan portfolio is another area of concern for Prime Bank. 6ost of the bank's
advances :more than E(A; are in the 760 :7eady made 0arments; and the te!tile
sector. "fter -,,( 6#" Luota withdrawal the future of the 760 industry is uncertain.
This sector is now facing competition in the world market due to the elimination of the
=uotas and much e!posure in this sector may prove to be risky for the bank. "nd if
some of Prime Bank#s lenders who are in that industry collapse this will carry severe
financial implications for the bank.
"lso the bank also sanctions a huge portion of loans to some specific groups. If for
some reason those one or two groups collapse or go bankrupt then Prime Bank will
face a tremendous problem.
1a!k &uster Marketing effort
67
"lthough there is a 6arketing 3epartment in Prime Bank Limited, but the activities of
that particular department isn't able to make any significant changes in the bank's
business. They are Fust focusing on maintaining the relationship with the e!isting
clients rather trying to bring in any new clients. This department lacks
professionalism. There is a 4ublic 7elationship 3epartment under the network of
6arketing 3epartment. They are Fust engaged publishing the news and photograph
of different activities of Prime Bank. In addition to that there are only three marketing
officer with two e!ecutives who are responsible for running both the 4ublic 7elation &
6arketing 3epartment. Today where other 4rivate &ommercial Banks are engaged in
aggressive and sophisticated marketing to take the market share from each other,
Prime Bank#s lack luster marketing efforts are indeed an area of concern. "nd if the
current trend continues Prime Bank will lose its e!isting pool of customers to its
competitors.
1imited rea!h of -rime Bank
Prime Bank Limited has +. branches. "nd most of them are in 3haka. "lthough it is
higher than the number of branches some of Prime Banks competitor banks have.
But its +. branches is no way close to the reach of the nationali%ed banks like $onali
Bank. "lso as Prime Bank focuses so much on 3haka and to some e!tent
&hittagong, they have ignored the rest of Bangladesh specially the rural areas.
1a!k of maturity mat!hing between assets and &iabi&ities
68
6ost of the deposits of Prime Bank are longterm deposits and while most of the
banks loans and advances are short term. #or that they can't utili%e their fund very
well. $ome times the bank also has some idle funds in their hands and they struggle
to finds proper investment opportunities to use those funds. Prime Bank has very few
proFects and long term loans where they can utili%e their longterm deposit in an
effective and efficient manner. "lso this means that if the market interest rates
change :rise; then it will severely upset the bank's profitability to a great e!tent.
"lso high turnover of employees means that the employees at Prime Bank suffer
from low Fob satisfaction. "nd the compensation offered to the employees is although
is e=uitable to the market rates but they do not offer any thing e!tra. $o when another
competitor bank offers a better salary and compensation package some of the
employees leave. In addition to that, we feel that Prime Bank lacks a strong
organi%ational culture, which supports the employees to stay longer and become
loyal.

69
70
Alternative Strategies
The most serious problem that hinders the Prime Bank#s strategic and the financial
performance is the banks inability to follow an appropriate low cost strateg". The
bank faces problems like high cost of deposits, high organi%ational hierarchy, lack of
integration etc and they creates a lot of inefficiency and they hamper the banks ability
to some e!tent to compete on the basis of a low cost strategy. "lso the banks faces
problems concerning some maFor B7 related issues like high turn over of employees
and the bank's current training program not being effective enough. This also hinders
the efficiency and effectiveness of Prime Bank#s value creation activates. Prime Bank
can pursue any of the following alterative strategies to sole this problem.
#&ternati%e 2$
Focus on a Low Cost Strategy
Prime Bank is already following this strategy to some e!tent. "nd its not Fust Prime
Bank but almost all the other private commercial banks in Bangladesh are following
this strategy. "lthough Prime Bank in a better position in comparison to the other
private commercial banks, but still the bank faces the problem of inefficiencies in the
bank's value creation activities. This means that is to a degree Prime Bank is less
then competitive when Fudging it by the potential it has. In fact the bank has the
71
capabilities and potential to become the most competitive bank in the private
commercial bank segment and run way from the competition.
We are suggestion that Prime Bank further amplify its efforts towards becoming a low
cost service provider. #or that the bank will have to make some maFor and minor
adFustments like shortening the organi%ational hierarchy and revising the bank's
e!iting B7 policies and practices.
#d%antages$
4roper and better utili%ation of scarce resources
6uch attractive interest offered to customers on deposits
Economy of scale
Cearning effect
E!perience curve effect
Increase in employee efficiency
Cess employee turn over
Increase in market share
Taking away the competitor's e!isting market share
6uch better integration and communication within the bank
6uch less bureaucratic cost
72
Increase in the companies ability in creating value efficiently
9pportunity to e!pand and e!ploit the regions of Bangladesh, which still
today remain une!plored by the private commercial banks of this country.
This will open the door to completely new customer groups.
isad%antages$
3anger of this strategy back firing if there is a maFor change in 0overnment
policies, such as increase in the reserve re=uirements
The consumers inability to differentiate between the services offered by Prime
Bank with the services offered by other private commercial banks
7isk of loosing the urban upper class potential customer segment to the
multinational banks like B$B& and $tandard &hartered.
&ustomers may regard the service provided by Prime Bank inferior to the multi
national banks.
&osts of enhancing and modifying the e!isting B7 policies and procedures.
Cike cost of improving the training program and facilities.
The e!tra cost of restructuring the organi%ational hierarchy.
Finan!ia& G strategi! imp&i!ations$
73
This alternative has profit potential and at the same less risk as low cost is way other
private banks compete. It can lead to cost leadership by focusing on a solely
reducing the inefficiencies and the costs.
#&ternati%e 8$
Focus on a Service Differentiation Strategy
" problem that ordinary customer face is which bank should they choose to do their
transactions. "s days go by the local private commercial banks are becoming the
more similar. They have very much similar in the services and the financial products
they offer, the places where the banks open up new branches, the way they carry out
their promotional activities. $o in this alternative we suggest Prime Bank to adopt a
differentiation strategy. Which simply means making it appear different then the other
private commercial banks.
In this alternative we recommend Prime Bank to strive for innovation. Its true
innovation is a practice that is really used by Bangladeshi companies in any industry
and the general trend is that successful companies make adFustments to the
practices successful in the West. "nd if that idea works the whole industry will follow
it. In Prime Bank#s case as it is a service provider we are not recommending that the
company incur huge cost by building 7&3 infrastructure. "nd also as banking is a
service industry for innovation the costs can be much lower. $o we are Fust
suggesting that Prime Bank some investments for innovation but that too in only area
that make sense. The company will first need to improve its marketing strategy. It
74
needs to carry out activities so that ordinary people can identify Prime Bank from the
other banks. In addition to that the bank will need to carry out market surreys to
generate ideas about how people feel about their services, what additional services
they want, what are the changes they want. "lso the bank will need to carry out
activities forecasting. 3epending on those data the bank can try to make its services
and financial products different from the competitors. It can also introduce attractive
packages of schemes.
#d%antages$
6uch improved service offered to customers
&hance of gaining new market segments
6uch better integration and communication within the bank
6uch less bureaucratic cost
Increase in the bank's ability in creating value
The bank can charge a premium on the services it offers
Cess need to e!pand in the regions outside 3haka
isad%antages$
The bank loosing some of its e!isting clients
75
3anger of this strategy back firing if the bank faisl to capture the high income
clients
0oing into head to head competition with the multinational banks like B$B&
and $tandard &hartered.
&osts of enhancing and modifying the e!isting B7 policies and procedures,
like cost of improving the training program and facilities.
The e!tra cost of restructuring the organi%ational hierarchy
The e!tra cost of innovation
Bigher service charges deterring some customers
"ny radical change in government policies can adversely affect the bank
Imitation on part of the competitors
Finan!ia& G strategi! imp&i!ations$
This alternative has profit potential and at the same great risk as a differentiation
strategy is very different from what other private banks follows. "s because of the
improved service Prime Bank will be able to charge a premium on the services it
provides and as a result accumulate higher revenue. But by doing so there is the
danger of loosing certain customer segments as higher service charges will deter
some customers.

76
#&ternati%e @$
Focus on combination of Low Cost and Service
Differentiation Strategy
In this alternative we are suggesting Prime Bank to follow a combination of Cow &ost
and 3ifferentiation $trategy. Prime Bank, which already follows the low cost strategy
with some adFustment, can become the cost leader. "nd through taking some
measures like increasing the advertising efforts, restructuring the company's
organi%ational hierarchy, improving the service =uality and increasing the bank's B7
practices on area like 1 compensation, organi%ational culture, reducing employee
turnover and training the employees better.
We are not suggesting that Prime Bank charge a premium on all the services. But all
we are suggesting is that the bank further improves the =uality of its services. In
addition to that the bank can introduce some new high =uality financial products and
services targeted specifically at the high income consumer groups. "nd the bank can
charge at special premium service charge on those services.
77
#d%antages$
4roper and better utili%ation of scarce resources
Economy of scale
Increase in employee efficiency
Cess employee turn over
Increase in market share as the bank will take some of the clients away
from the other private commercial banks
6uch improved service offered to customers
Taking away the e!isting market shares from the multinational banks
6uch better integration and communication within the bank
6uch less bureaucratic cost
Increase in the companies ability in creating value efficiently
The customers can differentiate between Prime Bank and other banks
isad%antages$
0oing into head to head with different types of banks following different
strategies
&ustomers may still regard the service provided by Prime Bank inferior to the
multi national banks although that may not be true
78
&osts of enhancing and modifying the e!isting B7 policies and procedures
The e!tra cost of restructuring the organi%ational hierarchy
The cost of innovation
The additional marketing e!penses
Investments to improve the customer service
Finan!ia& G strategi! imp&i!ations$
This alternative has profit potential and at the same much less risks. It can lead to
achieving low costs and at the same time providing superior services. This strategy
has every chance of making Prime Bank an attractive financial institution in the eyes
of the people and attract huge amount of deposits :funds;, which means the
revenues of the bank will increase. But a reminder is that the bank has to make
some investment in training its employees, improving the customer service and
additional promotional activities.
79
#&ternati%e C$
Changing the credit ortfo!io and diversifying the service
ortfo!io
The biggest risk a bank is prone to is interest rate risk. &hanging the banks current
credit portfolio and also diversifying the bank's service portfolio can deal with this risk.
$mall and medium scale industry and commercial lending constitutes the lion's share
of Prime Bank#s credit portfolio. If the interest rate changes small & medium scale
industry and commercial lending can turn into a huge credit risk because these loans
a re long term in nature. In addition to that huge amount of classified loan is
contributed by small and medium scale industries. If the bank focuses its attention
heavily on the shortterm loans, such as consumer credit, working capital, li=uidating
inventory loan, it can reduce its interest risk substantially.
Prime Bank can further reduce its interest risk by focusing heavily on diversifying the
service portfolio. The bank can focus on merchant banking which will help the bank
earn noninterest revenue and thus reduce interest rate risk.
80
#d%antages$
Bigh noninterest revenue and hence less interest rate risk
Cow noninterest e!pense
4otential of high arbitrage profit
isad%antages$
Bigh licensing cost of merchant banking services
>nderwriting risk arises when client banks or financial institutions are not
prominent in the market
Finan!ia& G strategi! imp&i!ations$
#ollowing this strategy will help the bank reduce interest e!posure and increase non
interest income from such as fees from underwriting, portfolio management and
consultancy.
81
#&ternati%e 4$
Do "othing
K3o nothing,M means when the company wants to maintain its current status. 3oing
nothing rubs many the wrong ways. We are taught and conditioned to make
aggressive decisions and stay proactive. 3eal with problems straight up and face
them head on is the entrepreneur's mantra. But certain issues in business cannot be
reduced and simplified. There may be no black and white answer. Trying to force a
black and white answer on a fu%%y or vague issue can create more problems then it
solves. In this alternative scheme Prime Bank does not need to do anything
regarding any strategic change for the bank. They will Fust remain idle to the current
situation and totally in oblivion of what the other competitors are doing.
If the company sticks to the present status, it can bring both advantages and
disadvantages for the bank. $ometimes advantages outweigh the disadvantages and
sometimes disadvantages outweigh the advantages. This varies from bank to bank.
$ome banks are more adaptive with following present strategy, whereas some
82
companies are more prone to threat from the e!ternal environment. "s far as Prime
Bank is concerned the advantages and disadvantages of the K3o nothingM,
alternative is given below
#d%antages$
8o additional investments in marketing
$aving in the costs of enhancing and modifying the e!isting B7 policies
and procedures.
8o e!tra cost of restructuring the organi%ational hierarchy
&ompany following the same strategy as the competitor, so when there is a
change in 0overnment regulations all the banks will be affected the same
way
Bolding on to its e!iting market share
isad%antages$
8ot the proper and the best utili%ation of scarce resources
7emaining locked in the particular customer base and the geographic regions
the bank operates in.
83
The consumers inability to differentiate between the services offered by Prime
Bank with the services offered by other private commercial banks
&ustomers may regard the service provided by Prime Bank inferior to the multi
national banks
The same employee inefficiency persisting
Bigh employee turnover
The same old long organi%ational hierarchy creating bureaucratic costs
Finan!ia& G strategi! imp&i!ations$
Prime Bank has consistently ranked the number one Bangladeshi private commercial
bank in terms of the &amel 7ating. "lso over the years the bank has been able to
maintain a steady stream of revenues and it has kept its shareholders pretty happy.
$o the Fustification of this strategy is that ,wh" break it, when it isn#t broke-! $o the
strategic and the financial implications of this strategy will remain as it e!its in the
current time, unless there are some maFor e!ternal changes like changes in
0overnment 4olicies that severally handicaps the bank.
84
'e!ommendation
"mong all of our alternative strategy we have organi%ed our recommendation for the
#he combination of !ow cost $ differentiation strategy% Bere we have design
some important recommendation to pursue this strategy.
e%e&op automation
The Prime Bank is facing huge competition with the $tandard &hartered and B$B&.
$ince these banks are highly automated. $o, Prime Bank must take initiative to build
up automated services. 6oreover, the current is increasing demand of automation in
the banking industry. Besides, to differentiate the bank from its maFor competitors
automation will be the best suggestion.
More emphasis shou&d gi%e on marketing effort
Prime Bank has been suffering a lot due to its lack of marketing effort, where
marketing efficiency is needed for any kind of service organi%ation. &ustomers need
to be aware of the new offering and new services of the Prime Bank and only the
heavy advertisement can serve that purpose. The bank should take timely initiative to
present the advertisement to the customer so that they could aware of that particular
services and which also instigate them to get the services as early as possible.
6oreover, by creating dynamic sales force can also help them to achieve that
85
particular goal. Besides, electronic media is the strongest way to convey the
message to the customer and most of it competitors are getting this benefit. $o,
Prime Bank should e!pand it way of advertisement through electronic media, which
will help them to be competitive among the rivalry.
ifferentiate the produ!t in the eye of the !ustomer
If the customer feels that any particular product is offering uni=ue service they like to
take that services. This differentiation can be achieved through innovation. Besides,
only or some innovation will not work when the industry is dynamic. "lthough the
Prime Bank is pursuing some sort of innovation but the maFor competitor like 3utch,
3haka and $outheast bank also involve in innovation. "t this stage customer
perception to this bank is similar to 3utch, 3haka and $outheast bank. Prime Bank
should involve and allocate more resources in continuous innovation so that
customer perceivedthe Prime Bank is offering uni=ue product.
*,pand its bran!h
" huge number of population portion stays in the rural area. Prime Bank can get
huge market by entering to those markets. The purchasing parity of rural customers
is little bit lower, which discourages the banks to get into. But the greater number of
customer participation may offset that drawback and create a new door to do
business. Prime Bank should go for rural market to get access of those. 6oreover,
e!panding its branches will facilitate to build reliability among its customer.
86
-roper initiati%e to impro%e !ommuni!ation ski&&
Prime Bank has established training and development institute for its middle and
lower level employees to build up communication skills. But it is shocking to say that
the training & development center failed to do its activities properly. 7ather lower and
middle level employees have lack of communication skill and they failed to manage
their work thus they give up the Fob. "ccording to our observation Prime Bank has
highest turnover compare to its competitors.
Redu!e the hierar!hy
$uccessfully implement the alternative strategy Prime Bank must reduce the
hierarchy from their organi%ational structure. 9therwise with a high bureaucratic cost
it cannot operate combined low cost & different strategy. 6oreover, differentiation
needs high integration among department, which is hindered by high bureaucratic
cost. Besides, we have found that one of the reason of employee dissatisfaction is
they are not properly guided by the superior because of the tall structure.
87
6oreover reducing the organi%ational hierarchy through developing good
organi%ational design can help Prime Bank in the following way5
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88
Redu!e the !ost of fund
"ll the banks have to face the problem with high cost of funds since there is intense
competition in the industry. $o it is strongly recommended that Prime Bank must try
to come up with the mechanism so that they could able to reduce the cost. "nd it can
play a vital role to pursue their low cost strategy. In addition, it should reduce its
bureaucratic cost which help them to reduce their cost of fund.
89
Im#lementation Plan
Moti%ationa& and "ompensation pra!ti!es
To successfully implement the recommended strategy employee motivation is
needed. Thus the company needs to ensure that the employees are satisfied with
their Fobs and payment. 6oreover, management should focus on the lower and mid
level employees to motivate them because high turn over occurs recently.
Imp&ement the de!entra&ization strategy
They must ac=uire decentrali%e strategy to implement the combine of low cost and
differentiation strategy. 0reater employee empowerment is needed for innovation.
But they will have some centrali%ation power on the top to control their core
competitive tools.
1iaison ro&es
$ince the company is pursuing innovation strategy it need to integrate among the
department. 4rime bank currently they do not have any integrating facility, which we
observed from their employee dissatisfaction because they are not getting enough
support from their superiors. $o the interdepartmental liaison will integrate and
coordinate among the department to facilitate innovation and automation.
90
Strategi! "ontro& System
The company will employ a strategic control process by which managers monitor the
ongoing activities of the organi%ation and its member to evaluate whether activities
are performed efficiently. 9ur recommended strategy will allow organi%ational
manager to use its resources most effectively to create value for its customers. 8e!t
our strategic manger will create control systems to monitor and evaluate whether in
fact tour organi%ation strategy are working as intended. 9ur strategic manager
should also follow the control system to seek information about how they could be
improved and how they can change if they are not working.
The strategic managers will focus on the merchandise and material management so
that the organi%ation could efficiently use its resources and to reduce it cost. Be must
take some control initiatives to increase the =uality of services. 6anagers will be
given empowerment and authority so that they can be creative and take calculated
risks through innovation.
"ontro& system
The manage management will implement a strategic control system. This control will
be on efficiency, innovation, and responsiveness. 6oreover they may follow a
effective control system.
91
The following diagram will help it to get fle!ibility, accurate information and timely
manner.
Figure$ $teps in designing an effective control system.
Establish standard
and targets
Create measuring
and monitoring
system.
Compare actual
performance against
established targets.
Evaluate result and
tae action if
necessary.
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/rganizationa& !u&ture
The bank will build strong organi%ational culture so that employee of all level could
support the organi%ation to establish the strategy. 6oreover, it should try the best to
build up the adaptive culture. Thus it could successfully control all the employees
across departments.
Reward system
Without proper motivation and the reward system the bank cannot successfully
implement its strategy. $o the reward will be assign for the employees on the basis of
their performance and skills. The proposed reward could be5 grou based reward
s"stem, rofit sharing s"stem, emlo"ee stock otion, bonus and romotion!
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$ontingen!y Plan
There are many unanticipated circumstances in which the company cannot do
anything. "t this situation the bank may not pursue its best strategy and thus face
problems if they do not have any contingency plan.
Prime Bank may face these unanticipated events that may hamper its business. $o it
is better to have a contingency plan to cope up with these events. This will give the
bank a competitive advantage over the rivals help sustaining in the industry.
Bere we are trying to imagine some possible unanticipated events that may affect our
recommendation and discuss a corrective adFustment that will be needed to make
our recommendation work.
>nanti!ipated "ir!umstan!e
Banking industry's performance heavily depends on macroeconomic performance
and also the government regulations. 7ecently our #inance 6inister, 6r. $aifur
7ahman, has revealed his intention to raise the interest rate due to the continuous
pressure of I6#. Economists are predicting this will have a negative effect on our
macro economy :especially private sectors;. 9ur bank industry is heavily dependent
on the private sector and also e!ternal sector.
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8ow lets see what contingency strategy should be designed to overcome this
unpredictable event.
.
"ontingen!y strategy
Prime Bank can follow the alternative strategy5 i.e. Changing the credit ortfo!io
and diversifying the service ortfo!io at this situation. &urrently Prime Bank#s
credit portfolio consists of agriculture :/.-EA;, Carge & medium scale industry
:-).//A;, working capital :)+...A;, E!port finance :)+.(.A;, commercial lending
:+,.,-A;, house building loan :)..)A;, $mall & medium enterprise :.E,A;, consumer
credit scheme :-.()A; and others :E./A;. If the interest rate rises the company
should redeem the loans that are long term in nature such as commercial lending,
large & medium scale industry loan etc and increase the si%e of shortterm loans
such as working capital loans and e!port finance.
The company should also diversify the service portfolio by heavily focusing on
merchant banking. The bank's operation in this sector was limited to underwriting,
portfolio management, and banker to the issue functions. The capital market has
become more vibrant and its future looks encouraging. $o, the bank should introduce
$hare 6argin #inance to strengthen its merchant banking and thus diversify the
service portfolio. This will increase the bank's noninterest income and thus protect
from interest volatility.
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Bi&liogra#hy
www. primebank .com
The 3aily $tar)+?,*?,* KInflation is slowly easing upM
Bill, &harles W.C. :-,,-; $trategic 6anagement :(
th
ed;
&ommercial bank 7estructuring in Bangladesh. 1 &haudhury ".H.
Which way Bangladesh Banking 1 "nanya 7aihan & 6d. $aidur 7ahman
Bank 4aricrama 1 " Fournal of Banking & #inance 6arch -,,-
"nnual 7eport of 4rime Bank Ctd., -,,--,,*
Interview5 "rif Basan <han, $enior 9fficer, 4rime Bank Cimited, 6otiFheel
branch, 3haka.
7ose, 4eter $. &ommercial Bank 6anagement. (
th
edition. 6c0rawBill
Irwin5 8ew Iork, -,,-.
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