BP 6918 Strategic Management Batch 11 Section 12

Term Project - KBank

Submitted to Dr. Somprot Sarakosas Graduate School of business Assumption University Prepared by
1. Mr. Nuttapon Wattanapornpilom 2. Ms. Pacharin Pakdee 3. Ms. Ruchira Thientrakarn 4. Ms. Waraporn Kongcharoen 5. Ms. Sangduan Khumkratok 6. Mr. Pierre Chouinard (Team Leader) ID. 5329176 ID. 5329177 ID. 5329181 ID. 5329183 ID. 5329184 I.D.5329186

Submission date 26th October 2011

Table of Contents Page

Chapter 1: Executive Summary Chapter 2: Introduction and Company Background Chapter 3: Strategic Audit on Current Situation and Managers Chapter 4: Environmental Scanning and Analysis Chapter 5: Strategic Formulation and Implementation Chapter 6: Strategic Alternatives and Recommendations, Evaluation and Control Chapter 7: Chapter 8: Discussion, Conclusion and Recommendations 43 3 5 16 18 30 31

APPENDIX REFERENCES

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Chapter 1: Executive Summary

EXECUTIVE SUMMARY
KBank continues to stick to its Customer-Centricity strategy, adjusting its moves with the changing business environment here in Thailand and abroad. Using risk management, cautious loan management and good corporate governance, KBank still works on the development of products, services and financial innovations to keep on expanding its business. With regard to its financial performance so far in 2011, a net profit was calculated mainly due to higher net interest income and continued growth in net fees and service income. As of today, 26 Oct 2011, KBanks consolidated assets are equaled to 1,672,341 million (-539 million Baht), due to decreases in interbank and money market items (asset-side), but the Banks consolidated loans has expanded (+84,063 million Baht), supported by loan growth in Corporate, SME and Retail Business. KBanks capital ratio is shown at 13.57% which indicates that the Banks capital is strong enough to pursue future business opportunities like opening new branches in China and in India. K Companies are also doing good. KSecurities maintains its thirteen-place ranking in securities brokerage business, K Asset achieves growth in its assets exceeding the market growth rate and KLeasing and KF&E continues to register higher loan growth than last year with very good asset quality. Muang Thai Life (MTL) has increased its market share compared to last year, securing its third-place rank in the market on earned premium and first-place rank in bancassurances new
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earned premium. With dedication towards developing products and services in each and every dimension, plus ongoing development of our human resource management, IT and the K-Transformation project, along with good corporate governance, KBank has not only been able to accomplish higher business goals, but has also won the respect of its customers and of its domestic and international agencies.

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Chapter 2: Introduction and Company Background

I.

Introduction

KASIKORNBANK Public Company Limited is a Thailand-based company engaged in the banking business. It was formerly known as the Thai Farmers Bank and established on 8th June 1945 by Choti Lamsam with a registered capital of 5 million BAHT. It has been listed on the Stock Exchange of Thailand (SET) since 1976. The current chairman is Mr. Banyong Lamsam. It provides services to corporate groups, small and medium-sized enterprises (SME) and retail clients in both local and overseas markets. In Thailand, its branch network extends up to 808 branches throughout Thailands 76 provinces: 284 Bangkok Metropolitan branches and 524 upcountry branches. In overseas, the bank has eight overseas offices, including the Los Angeles International Branch, Hong Kong Branch, Cayman Islands Branch, Shenzhen Branch and the Representative Offices in Beijing, Shanghai, Kunming and Tokyo, which greatly facilitate international trade and financial service transactions between Thailand and our trade partners worldwide.

II. Company Background

The KASIKORNBAN Public Company Limited started its operations in 1945 with only 21 employees. Its first office is now the Thanon Sua Pa Main Branch. The Bank showed healthy performance after only six months in operation. As of December 31, 1945 or at the end of its first accounting period, the Bank recorded total deposits of Baht 12 Million, assets of Baht 15 Million. Since its inception, the Bank has grown healthily. As of June 30, 2011, the Bank, with

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registered capital of 30,486 Million Baht, had total assets of 1,672,341 Million Baht, total deposits of 1,202,505 Million Baht and total loans of 1,167,157 Million Baht. Throughout the past 66 years, the Bank has always strived to develop its organization and offer financial product initiatives plus excellent service delivery to its customers as per the brief profile in the year 2010 as quoted in the Banks website as follows: KBank. Leave Everything in Our Hands project to provide assistance and management of diverse matters of customers including financial matters, advice on customer wealth, all financial queries, start-up business, useful information from the Banks business partners, vacation planning, and their housing matters. Thus, for every matter, customers can count on KBank. The first Thai bank to extend the service hours for currency trading and treasury from 5 p.m. to 11 p.m.

III. General Information

a) KBank at a Glance Company Name: KASIKORNBANK PCL

Logo: Head Office: 1 Soi Rat Burana 27/1, Rat Burana Road, Rat Burana SubDistrict, Rat Burana District, Bangkok 10140, Thailand Type of Business: Date of Establishment: Year listed on the SET: Number of Branches: Number of ATMs: Number of Employees: Commercial Banking 8th June 1945 1976 808 (as of June 2011) 7,301 (as of June 2011) 16,193 (as of June 2011)

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Website: Slogan: b)

www.kasikornbank.com Towards Service Excellence

Share Information as of June 2011 SET Symbol: Share Capital: KBANK, KBANK-F - Authorized Bt30.5bn (USD1.0bn) -Issued and Paid-up Bt23.9bn (USD0.8bn) Number of Shares: Market Capitalization: 2.4bn shares Bt 294bn (USD 9.6bn) - Ranked #3 in Thai banking

c)

Information as of June 2011 (Consolidated) Assets: Loans*: Bt1,672bn (USD54.4bn) - Ranked #4 in Thai banking Bt1,167bn (USD38.0bn) - Ranked #4 with 16.0% market share** Deposits: Bt1,203bn (USD39.1bn) - Ranked #3 with 17.3% market share** CAR: ROE: ROA: 13.6% If 1H11 profit included CAR = 14.6% 19.3% (1H11) 1.7% (1H11)

Notes: * Loans = Loans to customers less Deferred revenue ** Loan and deposit market share is based on C.B. 1.1 (Monthly statement of assets and liabilities) *** Exchange rate at the end of June 2011 was Bt30.75 per USD (Source: Bank of Thailand)

IV.

Companys Subsidiaries and Kasikornbank Group

The principal activity of the Bank is commercial banking. The Bank conducts its business

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through a network of branches covering all parts of Thailand and certain major cities overseas. The company has 29 subsidiaries as per following: Kasikorn Asset Management Co., Ltd. Ltd. Kasikorn Securities PCL. Kasikorn Factory & Equipment Co., Ltd. Ltd. Progress Software Co., Ltd. Progress Appraisal Co., Ltd. Progress Management Co., Ltd. Progress Plus Co., Ltd. Progress Gunpai Co., Ltd. Progress Storage Co., Ltd. Kasikorn Leasing Co., Ltd. Phethai Asset Management Co., Kasikorn Research Center Co.,

Progress Facilities Management Co., Ltd. Progress Service Co., Ltd. Progress Land and Buildings Co., Ltd. Progress Collection Co., Ltd. Progress HR Co., Ltd. Progress Training Co., Ltd.

Progress Multi Insurance Broker Co., Ltd. Thanyathanathavee Co., Ltd. Thanyathamrongkij Co., Ltd. Muangthai Group Holding Co., Ltd. Ltd. Muangthai Broker Co., Ltd. K-SME Venture Capital Co., Ltd. Thanyathawattana Co., Ltd. Muang Thai Life Assurance Co.,

Khao Kla Venture Capital Management Co., Ltd. Ruang Khao Phuean Thai Joint Investment Agreement

The details of the Kasikornbank Group under KExcellence logo are as follows:

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Established in 1945, formerly known as Thai Farmer Bank Professional in providing consumer, commercial, and corporate banking services, including lending, deposit-taking, credit card services, international trade financing, custodian services, asset management, and investment banking services.

Established in 1990, formerly known as KASIKORN FACTORING Professional in providing a complete range of machinery and equipment leasing service

Established in 1992 A leader in fund management business i.e. mutual fund, provident fund and private fund

Established in 1994 Professional in providing knowledge in economics, business, money and banking The only research house which is an affiliate of the bank

Established in 2005 Professional in providing a complete range of professional and excellent financial

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solutions and services, which includes investment banking, securities underwriting and securities brokerage

Established in 2005 Professional in providing three core products, which are hire purchase, finance lease and floor plan

V. Board of Directors and Executive Management

a) Board of Directors

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b) Management Team (1945 Present) 1945: Luang Naruebetmanit (Sanguan Chudatemiya), Chairman

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Choti Lamsam, Managing Director 1948: Chulin Lamsam, Chairman Kasem Lamsam, Managing Director 1962: Chulin Lamsam, Chairman Bancha Lamsam, Managing Director 1965: Pra Nitikarnprasom (Sagnuan Chaixanien),Chairman Bancha Lamsam, Managing Director 1976: Bancha Lamsam, Chairman Banyong Lamsam, President 1992: Banyong Lamsam, Chairman Banthoon Lamsam, President 2004: Banyong Lamsam, Chairman Banthoon Lamsam, Chief Executive Officer Prasarn Trairatvorakul, President 2010- Present: Banyong Lamsam, Chairman Banthoon Lamsam, Chief Executive Officer and President

c) Organization Chart (as of January 2011)

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VI.
i.

Products and Services

Operation and transaction: The businesses are including debit and credit cards services, trade and finance services, acceptance of payment for goods and services, cash management services and others.

The Bank operates through four main areas which are:

ii.

Saving and investment: It provides mutual fund management services, fixed deposits and time deposits, as well as notes offerings.

iii.

Funding and borrowing: The businesses are including financial loan, project finance, hire purchase and leasing and financial advisory services.

iv.

Protection and Information The businesses includes life and non-life insurance with saving plans and risk management services.

VII. Mission, Core Values, Vision

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a)

Mission KASIKORNBANK aims to be a strong Thai financial institution that provides a variety of financial services of world-class quality to serve customers needs by harmoniously combining technology and human resources. b) Core Values Customer Centricity Group-Wide Teamwork Professionalism Innovation

c) Vision KASIKORNBANK aims to be the strongest, the most innovative and the most proactive Thai financial institution in serving customers.

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VIII. Achievement in the year 2010

The Bank has received numerous awards from domestic and foreign media which has been reflecting its strong commitment to service excellence.

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Chapter 3: Strategic Audit on Current Situation and Strategic Managers

I. Current Situation

In Thailand K Bank is ranked as the fourth largest commercial bank based on total assets, loans and deposits. In the ASEAN region it is ranked as the ninth largest bank based on the assets size and market capitalization, after BangkoKBank and Krungthai Bank. (2011 Top 10 ASEAN Banks as of June 2011)

II. Current Strategic Posture

a) Current Mission To achieve long-term Risk-Adjusted Sustainable Profitability. b) Current Objective To maximize the shareholder value.

c) Current Strategies
Growth by expanding its operations into other geographic locations and by increasing the

range of its products and services through alliances like the one they have with Muang Thai Life (bank assurance).
e.

Current Policy The Bank has achieved success through its policy of Customer Centricity which is to provide financial services to customers, all in one place - Universal Banking and through its expansion which encompasses all the financial needs that its customers might have. They are:

Mass ?? Middle income

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 Signature/Affluent High Net Worth Individual Micro businesses Small and micro businesses Medium businesses Large corporation businesses Multi corporate businesses
As you can see, it is not only about deposit, cash and bank credit services that are available, but about what all customers want and need to do banking wise e.g selling investment units of mutual funds, applying for a car loan, opening a trading account, etc.

III. Corporate Governance

a)

Board of Directors

Thirteen members three are from the Lamsam family who actually owns the Bank. Two of the Lamsam family have been on the BODs since 1992. Two are foreigners. Most of them are from well respected companies and have served as Bank directors for more than 10 years. They all have a strong background related to commercial banking business.

b) Top Management

Two from the Lamsam family are actual members of the Top Management Team. All Top Managers have a vast experience in the banking field.

Chapter 4: Environmental Scanning and Analysis

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II. Societal Environment (TRENDS)

i. Political-Legal (Threat): Thailands political crisis does not appear to be nearing an end and this creates instability that tickles investors and slows down FDIs. This factor can be identified as a threat. ii. Economic (Threat): Economic crisis in the USA and the European zone (Portugal, Italy, Greece, and Spain) has a great impact on Thailands export sector as Thailand relies heavily on export sector to increase its GDP. As a result, Banks Non Performing Loans (NPL) have seen an important increase caused by this crisis. This factor can also be identified as a threat. iii. Sociocultural (Opportunity): Socio cultural forces like values, demographic characteristics and the level of education are also affecting K Bank and the banking sector at large. Because of these values, more and more people join the mid-income class and want to access services of banks like K Bank. K Bank knows it needs to capitalize on these new comers. Banking customers are moving towards Digital or Internet Banking due to its convenience. This factor can be identified as an opportunity. iv. Technological (Opportunity): IT Systems are now one of the most important strategic tools to gain a market share. This factor can be identified as an opportunity. v. Ecology (Threat): So far, the 2011 floods have caused incommensurable damage to the economy of Thailand. Authorities have already announced that it will take months to repair the various infrastructures and to regain the confidence of investors. This threat will have a big impact on the economy, including the banking business. The big picture being: people/companies not working dont ask for loans and, usually, cannot repay their loans. It is a vicious circle and the impact was immediately felt in the banking system. So far, floods around Thailand caused its GDP to be reduced by as much as 1.5%. As a result, Banks Non Performing Loans (NPL) have increased drastically since the beginning of this crisis. This factor can be identified as a threat.

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III. Task Environment (Industry): Porters competitive forces

Low

Thailands Banking Industry

High

High

High

High

The above picture illustrates how the five competitive forces determine the profitability of the industry your business is running. The level of each force varies among industries. According to Michael E. Porter, the key to deal with these five forces is to place yourself in a position that gives you the power to influence all forces by doing the following. For suppliers force, it can threaten your profitability by forcing you to accept a higher price of raw materials by not supplying raw materials to us. To deal with suppliers force, we should standardize products. By standardizing our products, this force cant force us anymore as we can easily switch among suppliers. For KBanks suppliers force are Investors & depositors.

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Therefore, the key to deal with them is to maintain relationship with them by launching Investors Relations and Customer Relationship Management. For buyers force, it can threaten your profitability by switching to competitors. To deal with buyers force, we should increase high switching cost by adding more services to retain them. For KBank, buyers force is depositors. Therefore, the key to deal with them is to retain them by launching varieties of products and services to satisfy them such as K Transformation. For substitutes force, it can threaten your profitability by attracting your customers from you. To deal with substitutes force, we should increase the level of accessibilities. By making our products always available for customers whenever they want, we get rid of substitutes. For KBank, substitutes force is other financial companies such as brokerage companies. Therefore, the key to deal with them is to expand its branches. For current competitors force, it can threaten your profitability by imitating your products or imposing entry barriers by reducing their prices. To deal with current competitors force, we should focus on differentiation or low cost. By differentiating in terms of products features or services, it gives us an opportunity to place ourselves in an outstanding position. For KBank, current competitors force is other banks such as BangkoKBank or Siam Commercial Bank. Therefore, the key to deal with them is to provide different products or services such as K NOW. For potential competitors force, it can threaten your profitability by joining our industry and fighting for market share. To deal with potential competitors force, we should elevate high fixed cost on marketing expenditures. By elevating high fixed cost on marketing expenditures, it will prevent them from joining our industry. Therefore, the key to deal with them is to impose entry barrier on large capital investment. a)

Five forces Analysis for Kbank Threat of new entrants is low due to the requirement of large capital. Bargaining power of buyers is high because of the low switching cost

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as customers can always switch to competitors.

Threat of substitute products or Service is high since there are many other financial companies offering financial services such as brokerage companies.

Bargaining power of suppliers (suppliers of funds) which are Investors & depositors is high as they can always switch to support competitors. Competitive rivalry among actual competitors is high since there are many players in the industry trying to imitate one another by offering the same products and services.

b) Competitors Analysis The diagram below illustrates how Kbank crafts its strategy compared with its competitors. The vertical axis shows the level of focus while the horizontal axis demonstrates aspects of focus. According to the above picture, Kbank focuses on service quality, IT system, advertising, customer satisfaction, innovation and risk management, while its competitors (BBL and SCB) focus mainly on customer relationship and expansion. According to the diagram below, our key success factors compared with our competitors are discussed below.

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Level of Focus

10 0
The diagram above illustrates how Kbank crafts its strategy compared with its expansion.

Aspects of focus

competitors. The vertical axis shows the level of focus while the horizontal axis demonstrates aspects of focus. According to the diagram, Kbank focuses on service quality, IT system, advertising, customer satisfaction, innovation and risk management while its competitors (BBL and SCB) focus mainly on customer relationship and

8 0 6 0
Siam Commercial Bank Rating 3

K Bank success factors compared with their competitors are discussed below. TABLE INDUSTRY MATRIX
Key Success Factors Weight Bangkok Bank Rating Bankok Bank Weighted Score 1.2

Siam Commercial Bank Weighted Score 1.2

K Bank

K Bank weighted score

Risk management IT system Service quality Total Scores

.4

.3 .3 1.0

3 2

.9 .6 2.7

4 0
3 3

1.6

.9 .9 3.0

4 4

1.2 1.2 4.0

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TABLE EXTERNAL FACTOR ANALYSIS (EFAS)

External factors 1. Interest rates economic -Threat Weight .10 3 Rating Weighted Score .3 Comments When interest rates are high, people do not want to take loans out from the bank because it is more difficult to pay the loans back. It is the same thing for investors who perceive less risk in taking out loans and investing them when interest rates are lower. http://www.ehow.com/howdoes_4564447_interestrates-affect-economy.html Inflation is a sustained increase in the average price of all goods and services produced in an economy. Money loses purchasing power during inflationary periods since each unit of currency buys progressively fewer goods. http://www.ehow.com/howdoes_4564447_interestrates-affect-economy.html The evidence suggests that the overall costs imposed on the Thailand economy by undocumented immigrants are equivalent to or outweighed by the benefits. http://www.ehow.com/howdoes_4564447_interestrates-affect-economy.html It does create an unstable environment where investors are always scared to invest. Loans have more restrictive conditions when economy is bad because people can lose their jobs. User friendly and easy access to all services. A big plus in the banking industry.

2. Inflation - economic -Threat

.10

.3

3. Illegal Immigration political & legal -Threat

.00

4. Internal conflict shirts) Socio cultural -Threat 5. World economy economy -Threat

(red-yellow

.15

.45

.20

.8

6. Internet banking or e-commerce -technological -Opportunity

.05

.15

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7. Thai government policy on minimum wage political & legal -Opportunity 8. Floods - economic -Threat now and Opportunity after 10. Credit score -economic -Opportunity 11. Stock Market - economic -Threat

.00

Has been postponed to April 2012. When in force, this policy will put more money circulation and therefore, more demands for banking services.
The floods' effect on the economy is a timing issue: Slowing growth at the beginning, but adding to it once rebuilding efforts are under way.

.08

.24

.00

To apply for a home equity loan mortgage, banks will evaluate your credit score and credit reports. Credit supply in financial markets is impacted by stock market fluctuations, thereby causing a direct impact on bank mortgage rates. K Hero was a failure, but the company is repositioning itself to capture this population segment. Open up huge market opportunities. Thailand has to put all its weight and lobby for more and more integration as soon as possible.

.02

.06

12. Demographic orientation to develop customer loyalty socio cultural -Opportunity 13. ASEAN economic integration + growth prospects in emerging markets political & legal -Opportunity

.02

.02

.05

.15

14. GDP trend - economic -Opportunity 15. Thai Baht strength - economic -Threat

.06

.18

Thailand GDP trend is on a positive slope and studies say that it should stabilize at 5% at least until 2015. Thailand GDP is based on 66% export. The majority of this export goes to the USA. The US economy is bad and the effect will eventually affect the THB. With a weaker currency, export and tourism will flourish and so will the Thai economy. http://www.bahtchat.com/

.03

.09

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16. Partnership Targeting Japanese Customers political & legal -Opportunity 17. Stable Banking Sector Outlook - economic -Opportunity 18. Stiff Competition - economic -Threat

.00

The tsunami of 2011 opened a lot of opportunities for Thai companies, especially in the exportation of fruit and vegetable.

.05

1.0

Occurs when banks are making adequate profits from authorized banking business to justify their investments. Banks have to choose the right business strategy in order to survive in a time of fierce competition.

.04

.16

TOTAL SCORES

1.0

3.9

IV. IFAS - Internal Environment: Strengths and weaknesses

Corporate structure: Flexible and efficient Does not impede Corporate culture: Each decision is referred to we, or us, this

information flow. (S)

includes all directors and employees; and our refers to BANKs business and organization. (S)

Corporate resources: Priority is on recruiting the best staff and Marketing: the K hero concept was a failure. A year after the launch

training them the K Bank way. (S)

of this project, it was canceled. The Bank is still looking for an efficient way of attracting young customers. (W)

Finance: Net profit is up, consolidated assets are down and consolidated loans are up (source: K Bank management discussions and analysis report-1st quarter 2011) (S).

K Bank financial objectives are: increase in EPS, increase in share prices, distribution of dividend, highly return to owners. To have a better idea of its financial situation, lets consider the following analysis:

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I. Current Financial Standing of K-Bank in Banking Industry

Source: www.settrade.com From the current position of K Bank in Stock Exchange of Thailand (SET), they are in 2nd position among the group of Banking Industry behind BBL and follow up by SCB.

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In 2010, KSecurities was presented the SET Award of Honor by the SET and Money & Banking magazine, as an excellent securities company for the third consecutive year (20082010), making the company the first ever to receive this award three times in succession. Moreover, the companys market share in the securities brokerage business, gauged by trading volume, jumped up to 13th place in 2010, from 18th place in 2009.1

Discussion and Analysis of Operating result

Operating Result Interest expense

Interest and Dividend

As a result of KGroups strategies to enhance the business potential and promote sustainable profitability, the Banks consolidated net income for 2010 totaled baht 20,047 million which increasing by 5,314 million, or 36.07% over 2009.
1

2010 Annual report Kasikornbankgroup

Net income from inte

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This increase was due mainly to an increase in net interest and dividend income and also the interest expense dropped, due primary to interest expense from deposit, largely attributable to a high base of comparison in deposit costs in 2009 that followed the offering of special deposit products late in 2008. The Banks consolidated non-interest income for 2010 increased over the previous year. Of note was an increase in net premium written from life insurance business, as well as an increase in fee and service income. The Banks consolidated non-interest expense for 2010 totaled baht 72,048 million, raising up by baht 31,604 million, or 78.14% over year 2009. This was largely the consequence of an increase in underwritings expense from life insurance business, personnel expense following the increased number of staff, as well as increased premises and equipment expenditures that resulted from the Channel Expansion and Enhancement project. Discussion and Analysis of Financial position

Balance Sheet Infor Loans

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a) Assets As of December 31, 2010, the Banks consolidated assets totaled baht 1,551,528 million, increasing by baht 184,535 million, or 13.50%, over the end of 2009. The increase was mainly attributable to increase in loans, as well as interbank and money market items were as result of the Banks liquidity management. Meanwhile, net investments dropped. The Banks consolidated loans, at the end of 2010 totaled baht 1,079,513 million, growing by baht 136,135 million over year, or 14.43%, due primary to increase in commercial, housing, trade finance, and working capital loans that aimed at providing liquidity support to our business customers.

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NPL decreases were due to a fall in bad debts and growth in total loan. Interbank and money market items, at the end of 2010 totaled baht 97,592 million, raising by baht 34,208 million over year, or 53.97%. This was as result the Banks liquidity management. Net investment, at the end of 2010 totaled baht 251,217 million, falling by baht 3,767 million over year, or 1.48%. This was as result from sales of investment in government bonds for the Banks liquidity management.

b) Liabilities and Equity The consolidated liabilities of the Bank, at the end of 2010 totaled baht 1,406,040 million, increasing by baht 167,193 million, or 13.50%, over the end of 2009. Deposit, at the end of 2010, amounted to baht 1,100,036 million, raising by baht 124,544 million, or 12.77%, over the end of 2009. This was mainly as a result of increase saving deposits. At the end of 2010, total equity attributable to equity holders of the Bank amounted to baht 134,943 million, increasing by baht 14,946 million, or 12.46%, over the end of 2009. This increase was the result of higher net operating income of 2010.

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 From a Financial Analysts Perspective (Performance Indicators)

Finantial Ratio
As the banking industry, we try to analyze KBank performance with its close competitors which are Bangkok (BBL) and Siam Commercial Bank (SCB). a) Return on Assets (ROA)
Return on Asset (ROA)

Return on Assets
2.0 1.5 KBANK 1.0 0.5 0.0 BBL SCB %

Return on Equity
2006 2007 2008 2009 2010 Year

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Measures the rate of return on the total asset utilize in company, the result show that 2010 ROA was raising up due to the reason of changing in Net profit after tab by 36% when compared to changing of assets by 13%, which reflect from the enhance the business potential and promote sustainable profitability. a. Return on Equity (ROE)
Return on Equity (ROE)
20.0 18.0 16.0 % 14.0 12.0 10.0 2006 2007 2008 Year 2009 2010 KBANK BBL SCB

Measure the rate of return on the book value of shareholders total investment in the company, the result show that 2010 ROE was raising up due to the reason of changing in Net profit after tab by 36% when compared to changing of equity by 12%, which reflect from the enhance the business potential and promote sustainable profitability. b. Net Interest Margin (NIM)
Net Interest Margin (NIM)
4.5 4.0 3.5 % 3.0 2.5 2.0 2006 2007 2008 Year 2009 2010 KBANK BBL SCB

Net Interest Margin is a performance metric that examines how successful a firms investment decision are compared to its debt situation. A negative value denotes that the

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firm did not make an optimal decision.2 Although NIM decreased from 2005 to 2009, it went up in 2010. Despite this little improvement, KBank kept the highest percentage of NIM among the 3 banks.
c. Non-Performing Loan (NPL)

Non-Performing Loan (NPL)

9.0 8.0 7.0 % 6.0 5.0 4.0 3.0 2.0 2006 2007 2008 Year 2009 2010 KBANK BBL SCB

For Non-Performing Loan (NPL), the Bank has closely and continuously, monitored, resolved and/or restructured them to retain maximum benefit for the bank. And KBank is the strongest NPL in banking industry. Information System The Information system of K Bank is very good and very effective. The company is using Information System to conduct most of its operations: products, financials, credit approval, communication, human resources, etc. K Bank has presence on the internet and it is providing E banking facilities as well. K Bank Information system is highly competitive as compared to its direct competitors. K Transformation, a new ERP system, will enhance its effectiveness and efficiency in the coming year. Human Resources Management K Banks current HRM policies, strategies, etc. are very confidential. But they can be
2

www.investopedia.com/terms/n/netinterestmargin.asp#axzz1bcmPsjF7 Page 35 of 52

implied from the practices. HR department follows the policy of directly hiring experienced persons from other banks. The HRM department of K Bank manages diversity very well and it has proper training programs for its staff. Based on discussions with some of its employees, quality of work life is very good. There is no employee union in K Bank. In all business sectors, turnover rate is an issue that affects companies efficiency. K Bank fights this tendency by training its managers in the different fields of HRM. TABLE INTERNAL FACTOR ANALYSIS (IFAS)
Internal factors Weight .04 Rating 3 Weighted Score .12 Comments Successful firm's investment decisions. www.investopedia.com Good management to identify, measure, monitor, and control credit risk. www.fdic.gov/regulations1.html ROI well managed annual report www.kasikornbank.com Deposit and transaction fees, insufficient funds (NSF) fees, annual fees, etcprovide noninterest income as a way of generating revenue and ensuring liquidity in the event of increased default rates. These fees are high compared with competitors. www.investopedia.com Management of staff has been deficient in some districts/branches, etc. www.asia.edu.tw 06047.pdf Root cause has been identified as non-efficient recruitment and training standard in remote areas. By far, the strongest approach K Bank has with customers. www.kasikornbank.com

1. Net interest margin (W)

2. Asset quality (S)

.07

.14

3. Positive returns (S)

.13

.39

4. Non-interest income (W)

.05

.1

5. Cost inefficiencies (W)

.10

.2

6. Turnover staff (W)

7. Brand Strategy (S)

.20 .23

3 4

.6 .92

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8. Distribution channel (S)

.18

.72

Through Muang Thai Life and Fortis, K Bank multiplied its means to reach out to more and more customers. www.kasikornbank.com

TOTAL SCORES

1.0

3.19

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Chapter 5: Strategic Formulation and Implementation

Strategic Formulation Analysis of Strategic Factors (SWOT) SFAS
TABLE STRATEGIC FACTOR ANALYSIS SUMMARY (SFAS) MATRIX
Strategic Factors Weight Rat ing Weighted Score Comments Long Intermedi ate Short

Brand Strategy (S) Acquisitions (S) Cost-inefficiencies (W) Marketing (W) Internet Banking (O)

.14 .12 .07 .08 .2

4 3 2 3 4

.56 .36 .14 .24 .8 X X X

X X

X X

Key to success. Reinforce this success. Go international. Diversify assets. Management issue. Go after it asap. Targeting the young generation to create customer loyalty. Sweet spot Also known as niche. Use governance to influence key players at the govt level Always refresh Porters 5 Cs See acquisitions and apply risk management principles thoroughly.

ASEAN economic integration + growth prospects in emerging markets (O) Competitors (T) World Economy (T)

.1

.3

.1 .19

3 3

.3 .57

X X X

TOTAL SCORES

1.0

3.27

Review of Current Mission and Objectives

Is the current mission still appropriate? Actual Mission: K Bank aims to be a strong Thai financial group that provides a variety of financial services of world-class quality responsive to serve customers needs by harmoniously combining technology and human resources so as to achieve optimal benefits to customers, shareholders, employees and the country. Yes, according to our EFAS, IFAS and SFAS, K Banks Mission still applies.

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Are current objectives still valid? Financial objectives are as follows: The main financial objectives of K Bank are: increase in profitability, increase in EPS, increase in share price, increased / better cash flows, and decrease in provisioning of loans and bad debts by improving risk management procedures. Non-Financial objectives are: Geographic expansion, entering into niche markets, consumer finance, SME finance, opening more banking branches and cost efficiencies. Yes, according to our EFAS, IFAS and SFAS, K Banks Objectives are still valid. Nevertheless, they would be more meaningful if they would add a time dimension to them.

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Chapter 6: Strategic Alternatives and Recommendations, Evaluation and Control

I.

Strategic Alternatives Growth through Product Differentiation

In this case, differentiation applies to both innovative products and customer service. PROS: Always keep customers attention on what is coming next. Make customers life so easy, they dont need to look at what the competitors are doing. CONS: After a year or so, it is difficult to be creative. New products mean new procedures, new training. Training can be costly.

Pause Strategy

Continue current activities without any significant change in direction. PROS: Gives the company time to evaluate its actual situation and its future moves. Perfect time to consolidate all operations. CONS: Giving space to competitors. Losing growth momentum. Customers have time to look at what is available on the market. If a company stops growing it gets hard to stay the leading
pack.

Retrenchment

Reduce a companys expenditures in order to improve financial stability. It can be done through drastic procedures going from shutting down or selling off companies and/or laying off employees. In this particular case, this option is not considered.

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II.

Recommendation

Based on all the information that was made available to us, we recommend K Bank to go forward with its activities using the Horizontal Growth Strategy by differentiation. We recommend it because so far, the expansion of its operations into other geographic locations (China and India) has been a success and it is paving the way to more branches in two of the fastest growing economy of the world. We also recommend it because product differentiation is crucial in K Bank search to confirm and consolidate its presence in the competitive market of banking products. So far, K Bank has been able to distance the competition using its knowledge and competency in the field of internet banking. This competitive advantage is K Banks forte and it needs to be developed further to keep or create customers loyalty. Finally, we recommend K Bank to continue offering different products and diversifying its services by pushing its horizontal growth moving by adding alliances such as the one they have with Muang Thai Life Insurance. Differentiation is also synonym of innovation. There is no way out, in order to succeed, K Bank will have to perform on both fronts of its business strategy: they will have to compete (fight) to keep their lead in banking products (differentiation) and to cooperate (join) to open the doors to new innovative products to consolidate its customers base.

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III. Implementation
Strategy implementation is the result of three important activities: Program, Budget and Procedures a. Program: Since K Bank is an ISO certified company, we recommend that top management orders a special round of internal and external audits to measure and analyze the gaps between the old and the new strategy. Since a new strategy means new procedures and new processes, it is important to quickly capture the differences, measure their impact and prepare a training plan aimed at leveling the knowledge of all employees. In order to be successful with a new strategy, all employees will have to be involved as soon as possible. b. Budget Since the strategy recommended is an extension of the actual one, the budget will be preestablished based on the last two years experience the bank has had with this type of expansion. Further adjustments will be presented to top management for approval.
c. Procedures:

As dictated by ISO, each department will have to review its work instructions and see how they can be upgraded to match the new strategy. This process needs to be done quickly and as accurately as possible. The result can push managers to re-think the way they operate. Since a strategy based on differentiation is closely linked to its sales force, KBank will have to improve its entire customer services positions and make CRM (customer relationship management) the number one theory on which to test its employees. Training will be the engine driving this strategy (differentiation) and the focus will be put on sales, IT and R&D. In a sequence, the proposed procedure looks like this: a. Conduct internal and external audits based on K Banks ISO certification. b. Identify strengths and weaknesses and gaps with the new strategy.
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c. Train managers and staff on new procedures d. e. f. Review and amend Work Instructions if needed. Train staff and managers on findings Conduct a new set of internal and external audits

IV. Evaluation and Control

Evaluation is a critical step in Management because it determines if your choice of strategy is good or not. For K Bank, the proposed methodology is based on output controls and consists in the following activities:
a.

b. c.
d.

Establish the benchmarks to use to measure efficiency of the organization at all levels. For the financial aspect: use financial ratios ROI, EPS and FCF. For the operational aspect: use the results of the ISO audits conducted. For customer satisfaction: conduct quarterly survey.

If the results are within tolerances (benchmarks) established, you continue with the process; your strategy is efficient. If not, corrective actions must be taken before going forward with the process. Communications are a key element in evaluation and steering controls are managers best friends during the process because they give him ways to evaluate its performance as he/she is going through the process.

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V. DISCUSSION
Commercial Banks are the backbone of countries growth and they play a central role in the economy. In order to be and to stay successful, companies, including banks, have to take strategic risks, but obviously, they need to do everything they can to know more about them to reduce their impact. K Bank strategic analysis gave us a good idea of the benefits of Strategic Management. Indeed, by following all the necessary steps, we were able to establish the following:
a. A clearer sense of strategic vision of the Bank (customer satisfaction through

innovation);
b. A sharper focus on what is strategically important (internet banking and expansion); c. An understanding of a rapidly changing business environment (evaluation and control).

If we had to do this analysis again, we would probably approach the problem differently. Indeed, we would spend more time analyzing the financial data available through K Banks annual reports and the BOT statistics in order to establish, from the start, clear benchmarks and clear measurements (financial ratios) for further decisions on which strategy to use and when.

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VI. CONCLUSION
K Banks choice to go ahead with the concept of customer centricity is a dynamic choice that is totally in agreement with its core business and the strategy adopted to reach its objectives.

We live in a world of constant changes and it is more and more important for companies (including banks) to master the use of Strategic Planning because the global village brings with it a lot of new elements that can affect a business and only the ones having the capacity to react quickly will survive.

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APPENDIX
A. Current Management Team

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B. Organizational Function

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REFERENCES
1. http://www.scribd.com/doc/14443892/Analysis-of-Faysal-Bank-Ltd-

Strategic

Analysis of a Bank 2. http://en.wikipedia.org/wiki/Kasikornbank 3. http://www.google.com/finance?q=BAK%3AKBANK#

4. http://www.kasikornbank.com/EN/Investors/GeneralInformation/Pages/KBan

kIntroduction.aspx
5. http://markets.ft.com/research/Markets/Tearsheets/Business-

profile?s=KBANK:SET
6. http://en.wikipedia.org/wiki/Kasikornbank

7. http://www.gotomanager.com/news/details.aspx?id=41771

8. http://www.brandage.com/Modules/DesktopModules/Article/ArticleDetail.asp

x?tabID=2&ArticleID=271&ModuleID=21&GroupID=369
9. http://1-million-dollar-blog.com/2011-top-10-asean-banks-in-terms-of-assets-

size-market-capitalization/
10. http://www.set.or.th/th/index.html 11. http://www.settrade.com

http://www.bangkokbank.com
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http://www.kasikornbank.com http://www.scb.co.th http://www.investopedia.com

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