The background information that is mentioned in the given report is about strategy formulation for National Bank of Kuwait. The main aim of the study is to elucidate about developing mission and vision statement of the National Bank of Kuwait after aligning with the existing vision, mission, objectives and strategies. The main objective of the study is to discuss external environmental analysis by using tools such as PESTLE analysis and External Evaluation Matrix. The study even explains regarding internal environmental factors that govern banking sector by using tools such as Internal Evaluation Matrix. SWOT Matrix and SPACE matrix had been highlighted in the study that explain attributes to understand the functioning of National Bank of Kuwait. The scope of the study is to compare banking operations among the famous banks in Kuwait such as National Bank of Kuwait, Gulf Bank of Kuwait and Kuwait Finance House.
The Vision Statement of National-Bank of Kuwait is to become trusted bank of choice that will build on core principles, people and knowledge (Barney 2014).
The Mission Statement of National-Bank of Kuwait is to convey world class products as well as highest service quality to the potential clientele. In addition, the bank believes in attracting, developing and retaining best banking talent in the region. The bank supports the communities where they conduct their operations. National-Bank of Kuwait aims at adhering by the core values of passion, knowledge, conservatism as well as passion and integrity. National-Bank of Kuwait believes in providing superior returns to their shareholders (Trigeorgis and Reuer 2017).
The New Chief Executive of National-Bank of Kuwait had found ways to enforce strategies of regional expansion as well as developing an Islamic finance business. The bank keep their international and regional strategy on track and focus mainly on countries for leveraging the strong franchise in order to get benefit from the strong economic outlook as well as further growth opportunities that are available in and across the world (Rothaermel 2015).
Developed Vision Statement of National-Bank of Kuwait will be to provide best customer experience to future generations of Kuwait here and abroad and compete in the various markets (Bettis et al 2015).
Developed Mission Statement of National-Bank of Kuwait will be to become leading financial services group with a worldwide existence that commit to a whole range of quality products as well as services that will create worth and enrich lives of clientele, human resources, communities and the shareholders as a whole (Rees and Smith 2017).
|
Opportunities of National-Bank of Kuwait |
Threats of National-Bank of Kuwait |
|
Infrastructure leasing finance |
Stiff competition from global banks |
|
Finance to other sectors in order to boost the exports as well as economy |
Unrest in Gulf region |
|
Finance to power business as well as airline companies (Dévényi 2016) |
Petroleum products now account for more than 90% export income and that is approx 80% of government income. In that case, Kuwait’s financial system is very susceptible to mainly global oil markets as well as US strategy (Peppard and Ward 2016) |
Political factors- Kuwait is a legitimate dominion where the country is headed by Emir. Kuwait claims itself to be democratic but it is not true in actual sense. It is because Prime Minister and most of the cabinet ministers are appointed by Emir and originate from the ruling family (Morden 2016). Democracy means that the Prime Minister will be appointed by the normal people. In addition, Kuwaiti Government does not recognize political parties as well as most of the assembly and pro-government independents but de facto where there are different political parties. Politics in Kuwait remains complex by nature. Here, the Emir remains the ultimate executive authority. All the important decisions will be taken through internal negotiations within the ruling of Al Sabah family. Banking sector in Kuwait is demanding and they face high rivalry from domestic banks. There is high entry barrier as it is a expensive affair to begin a new bank by taking into account the resources as well as expertise staff members needed in the process (Durand, Grant and Madsen 2017).
Economic factors- Kuwaiti banking sector is one of the powerful in the MENA region that benefits from the vigorous monetary outline as well as strong support instrument and limited rivalry from other foreign banks. Kuwait is a small and comparatively open economy with established crude oil reserves of more than 96 billion barrels. The world economies had witnessed an economic slowdown that had triggered by the US subprime crisis. To that, it is noted that International Monetary Fund had projected the fact that world economy might recede at a rate of 1.3%. Kuwait entered into a pact with other GCC countries for establishing a monetary union for better integration of GCC economy (Mitchell and Leiponen 2016). The structure of banking structure in Kuwait is fairly concentrated where National Bank of Kuwait is more than twice the size of the next largest bank in terms of assets as well as deposits. There is excessive intervention from the government in general for the banking sector on matters relating to administrative control, bail-outs as well as subsidized loans and equity injections. One of the features of Kuwaiti bank is that they have mixed nature of ownership. It is not the case with National-Bank of Kuwait as the bank is totally owned by the private sector where the administration is a investor in the rest of the banks (Eden and Ackermann 2013).
Social factors- Kuwait have a drastic social structure in terms of prosperity and inheritance. On top, there is ruling family of Al Sabah and then the old Kuwaiti merchant families. At Kuwait, social mobility is quite inactive due to the enriching inheritance government initiatives and clannishness (Jenkins, Ambrosini and Collier 2016).
Technological factors- Kuwaiti government is on its way to execute a metro system with 69 stations in and across the nation. There are only 4 state owned broadcasters and one Satellite channel. It is noted that Kuwait does not produce any of the high-technological solutions and there are non renewable energy sources in use. It is predicted that Kuwait government is slowly moving towards high technology development (Hubbard, Rice and Galvin 2014).
Environmental factors- Kuwait has desert climate that is well-known for its dryness as well as hotness.
Legal factors- In accordance to Kuwaiti Government, they do not allow any foreign business to institute a branch or perform any of the profitable property in their nation (Foss and Hallberg 2014).
The Competitive Profile Matrix is one of the tools that compare any firm with its rivals or competitors in order to reveal their relative strengths and weakness. Most of the firm uses Competitive Profile Matrix for better considerate the external setting and competition in any specific business (Hill, Jones and Schilling 2014). This particular matrix highlights the key competitors of a company and compares it by using critical success factors of that industry. This analysis help in understanding the relative strengths and weakness against the competitors so that the company knows about the areas of improvement and which areas to protect
In this study, competitive profile matrix will be used to find out the competitors of National Bank of Kuwait. The three main competitors of National Bank of Kuwait are Kuwait Finance House and Gulf bank of Kuwait. After identifying the competitors of National Bank of Kuwait, it is then required to reveal relative strengths and weakness with their competitors. National Bank of Kuwait should use Competitive Profile Matrix to better understand the external environment as well as competition present in the banking sector in Kuwait (Frynas and Mellahi 2015).
|
Competitive Profile Matrix |
|||||||||
|
National Bank of Kuwait |
Gulf bank of Kuwait |
Kuwait Finance House |
|||||||
|
Critical success factors |
Weight |
Rating |
Score |
Weight |
Rating |
Score |
Weight |
Rating |
Score |
|
Technology |
0.13 |
4 |
0.52 |
0.13 |
2 |
0.26 |
0.13 |
1 |
0.13 |
|
Best rates |
0.08 |
3 |
0.24 |
0.08 |
2 |
0.16 |
0.08 |
2 |
0.16 |
|
Product Innovation |
0.05 |
4 |
0.2 |
0.05 |
2 |
0.1 |
0.05 |
3 |
0.15 |
|
Improving Quality of service to clients |
0.04 |
3 |
0.12 |
0.04 |
2 |
0.08 |
0.04 |
2 |
0.08 |
|
Brand Image or recognition |
0.14 |
4 |
0.56 |
0.14 |
3 |
0.42 |
0.14 |
3 |
0.42 |
|
Size of the company |
0.08 |
3 |
0.24 |
0.08 |
2 |
0.16 |
0.08 |
2 |
0.16 |
|
Location and convenience |
0.05 |
4 |
0.2 |
0.05 |
2 |
0.1 |
0.05 |
4 |
0.2 |
|
Increasing deposits |
0.07 |
3 |
0.21 |
0.07 |
3 |
0.21 |
0.07 |
2 |
0.14 |
|
Expanding the base of banking services |
0.02 |
4 |
0.08 |
0.02 |
2 |
0.04 |
0.02 |
3 |
0.06 |
|
Capital Preservation |
0.11 |
3 |
0.33 |
0.11 |
1 |
0.11 |
0.11 |
2 |
0.22 |
|
Humanitarian1 and social services |
0.15 |
3 |
0.45 |
0.15 |
3 |
0.45 |
0.15 |
3 |
0.45 |
|
Raising the rate of profit |
0.08 |
4 |
0.32 |
0.08 |
2 |
0.16 |
0.08 |
2 |
0.16 |
|
Total |
1 |
3.47 |
1 |
– |
2.25 |
1 |
2.33 |
From the above table on Competitive Profile Matrix, it is understood that National Bank of Kuwait is the strongest players in the banking sector in Kuwait with relative strengths in expanding base of banking, best interest rates, and rate of profits and brand image or recognition. On the other hand, Gulf bank of Kuwait prevails in humanitarianly and social services, increasing deposits and brand image or recognition. Kuwait Finance House prevails in product innovation and brand image or recognition. Here, Gulf bank of Kuwait is weakest of all that does not have relative strengths on comparing it with closest competitors (Hill and Jones 2013). It is essential for the companies to create their strategies based on strengths and weakness and make an effort to improve their ratings in the most significant areas.
|
External Factor Evaluation Matrix |
|||
|
Key External factors |
Weight |
Rating |
Weighted score |
|
Opportunities |
|||
|
Infrastructure leasing finance |
0.04 |
4 |
0.16 |
|
Finance to other sectors in order to boost the exports as well as economy |
0.09 |
3 |
0.27 |
|
Finance to power companies as well as airline companies |
0.11 |
2 |
0.22 |
|
New trends can increase market size |
0.09 |
3 |
0.27 |
|
New products and services are possible |
0.06 |
4 |
0.24 |
|
New technologies are available at reasonable costs |
0.05 |
2 |
0.1 |
|
New trade agreements between countries are possible |
0.06 |
3 |
0.18 |
|
venture capital |
0.05 |
4 |
0.2 |
|
Threats |
|||
|
Stiff competition from global banks |
0.11 |
4 |
0.44 |
|
Unrest in Gulf region |
0.02 |
3 |
0.06 |
|
-increase in labor costs |
0.05 |
4 |
0.2 |
|
growing competition and lower profitability |
0.04 |
3 |
0.12 |
|
New market entrants |
0.05 |
3 |
0.15 |
|
increasing rates of interest |
0.07 |
3 |
0.21 |
|
Total |
1 |
2.82 |
|
Strengths |
Weakness |
|
Stable management team and skilled workforce |
Presence only in MENA countries |
|
Clear and focused strategy |
Corporate and investment banking services |
|
Consistent profitability |
High loan rates possible |
|
High asset quality |
Future profitability |
|
Strong capitalization |
|
|
Innovation and monetary assistance provided |
|
|
Long serving Executive team and unrivaled track record |
|
Internal Factor Evaluation Matrix |
|||
|
Key Internal factors |
Weight |
Rating |
Weighted score |
|
Strengths |
|||
|
Stable management team and skilled workforce |
0.11 |
4 |
0.44 |
|
Clear and focused strategy |
0.12 |
3 |
0.36 |
|
Consistent profitability |
0.12 |
2 |
0.24 |
|
High asset quality |
0.05 |
3 |
0.15 |
|
Strong capitalization |
0.11 |
4 |
0.44 |
|
Innovation and monetary assistance provided |
0.07 |
2 |
0.14 |
|
Long serving Executive team and unrivaled track record |
0.06 |
3 |
0.18 |
|
0.11 |
4 |
0.44 |
|
|
Weakness |
|||
|
Presence only in MENA countries |
0.11 |
4 |
0.44 |
|
Corporate and investment banking services |
0.05 |
3 |
0.15 |
|
High loan rates possible |
0.07 |
4 |
0.28 |
|
Future profitability |
0.02 |
3 |
0.06 |
|
Total |
1 |
3.32 |
Long-term objectives
On comparing both long-term objectives and specific strategies, it is recommended to National Bank of Kuwait to plan out several long-term objectives and strategies so that they can retain their existing financial position. National Bank of Kuwait is one of the largest financial institution and leasing bank in the Middle East. It is important for the bank to be more flexible in their operations and more productive by nature to meet the needs and expectations of the customers. National Bank of Kuwait should deal with diverse types of information as well as new products at the same time. They should expand the market locally as well as worldwide as well (Harrison et al. 2017).
|
X- axis |
Internal Strategic Position |
External Strategic Position |
|
Competitive (-6: worst, -1: best) |
Industry (+1: worst, +6: best) |
|
|
-1: Service Quality -1: Market share -3: Brand and image -2 Product Life Cycle |
+6 Barriers to entry +4 Growth Potential +5 Access to financing +5 Consolidation |
|
|
Total X axis score- 3.00 |
||
|
Financial (+1: worst, +6: best) |
Environmental (-6: worst, -1: best) |
|
|
Y Axis |
+5 Return on Assets +4 Leverage +6 Liquidity +5 Cash Flow |
-2 Inflation -1 Technology -2 Demand Elasticity -4 taxation |
|
Total Y axis score- 2.75 |
National Bank of Kuwait could not expand its market share globally as the bank has strong presence only in MENA countries (Goetsch and Davis 2014). The bank even could not target the current as well as potential customers in an effective way. There was slow speed of information flow that was present between human resources, clientele as well as business enterprise. The decisions made by the management used to offset market changes and it were equally slow and costly affair. Maintaining cost of data was pretty much higher that need urgent attention by National Bank of Kuwait. Different issues can be resolved if National Bank of Kuwait started implementing ERP system in their operations as it is technically advanced and solve issues that current prevails in the bank. This bank had old system that had different information systems for each of the departments. Hence, new system will help in bringing all the departments closer and there will be easy flow of information. Implementing new system will easily overcome most of the shortcomings or issues especially in case of protection costs. The new system can simply promote as well as get access to additional server capacity that will be added without any extra maintenance cost. The system itself is too costly and National Bank of Kuwait had already invested too much time and money. But, the bank should try out ERP system to make work easier and smooth. The new system will successfully meet the needs as well as expectations of the customers. The new system can easily identify the most profitable customer and potential customers in an effective way. The new system enhances effective business operations as well as reporting and decision-making process. The new system ensures that there is a need to maintain data quality as well as high availability (Gamble and Thompson 2014).
It is recommended to National Bank of Kuwait for selecting use of IT strategy like core system changes by building an SOA driven incorporation stage as well as delivery of Business Intelligence system as it is one of the part of a fluid information architecture. In addition, it is suggested to National Bank of Kuwait for implementing a new Operational Data Store as it is one of the effective data warehouse that help in consolidating data from different business enterprise. It will help National Bank of Kuwait with the ability to drive all other enterprise that includes Business Intelligence Systems as it supports all decisions. Furthermore, SAP business objects software should be selected by National Bank of Kuwait as it covers operational reporting where the distribution of vendor will have access to be in line with the needs of the banks.
Conclusion
At the end of the study, it is concluded that National Bank of Kuwait was awarded for the title of Best Bank in Kuwait as well as Middle East. The bank is ranked in the 100 most successful banks in and across the world and third among Arab banks. There is need for an ERP system at National Bank of Kuwait as it will help the bank to be more flexible in actions as well as generate productivity in activities by coordinating business process in integrated manner. Implementing ERP system will help National Bank of Kuwait to focus upon efficient resource management as well as customer service. This ERP system can be upgraded very easily and have access to additional server capability that can be added without a great deal of preservation. In addition, the new scheme will help at the time of data integration from legacy systems for mining purposes and lead towards getting access to flexible and dynamic at the time of dealing with various types of information and new products in the most appropriate way. This ERP system will help the bank to increase their marketplace locally as well as internationally and beyond the Arabian Peninsula and Middle East.
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