BANK ALFALAH

INTRODUCTION:
Bank Alfalah has established itself as the new identity of H.C.E.B after
privatization in 1997. The strengths of Abu Dhabi group have helped Bank Alfalah
contribute towards the development of quality Retail and Cooperate banking in Pakistan.

The Board and Management of the Bank have implemented strategies

and policies to carve a distinct position for the Bank in the market place.

Their revived purpose and commitment reflects in their portfolio tailored to their
customers’ preferences. Their products like Royal Profits, Royal Custodial Services and
Alfalah Car Financing are examples of quality innovation – providing timely banking
opportunities to their customers.

The ongoing assessment of opportunities for their customer is the prime directive
within their team. It ensures constant development of new products and services. Some
new products in the pipeline include ATM Credit Cards, Rupee Travelers Cheque and
other saving product.

They ensure consistent quality service with the continuous rejuvenation of their
teams through training programs. These programs are geared towards professional
development advanced banking solutions and information technology.

They have embarked upon a rapid expansion programs to make sure that their
services reach more and more people. They are headed towards an ideal network reaching
all major urban centers and will son go international.

With their progress indicators going up, they are committed to pull all their
energies, resources and time to bring higher value and satisfaction to their customers,
employees and shareholders.

Bank Alfalah is constantly involved in the process of improvement and

innovation that bring new products to their customers and come up with much more ways
to provide quality products and services to their clients.

Bank’s Background:
Since the privatization in July 1997 and assuming the new identify of Bank
Alfalah Limited in February 1998, they have embarked upon a journey to progress.
Building upon the tradition of quality banking, what they have achieved in the short span
time stands testimony to their commitment. In addition to broad range of banking

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services and products, they have always endeavored to develop and offer a unique mix of
services to further facilitate their customers. In addition, they also customize their
products and their services to meet the specific needs of their institutional customers thus
assuring a sustained high level of services. From launching of new product like Royal
Profit, Royal Patriot, Royal Custodial to expanding their branch network.

With their deposit growing to new height in the first year (1998) up by 31%,
Advances increasing by 44%, Trade Finance by almost 100% and the total Assets by
35%, they are sprouting new leaves to reap a rich harvest in year to come. 2002 has
added even more to their achievements enabling them to stand on the solid footage from
where they can steadily progress towards their goals of being the best bank of the New
Millennium with total assets of Rs. 40.098 billion, total equity of Rs. 1.361 billion, total
deposit of Rs. 30.207 billion and a pretax of profits of Rs. 5240164 billion in the year
2002..

PRODUCT LINE:
True to its strategy of becoming a highly effective financial supermarket, Bank
Alfalah provides a complete range of products to its corporate clients, commercial
enterprises and to the consumer.

 Corporate Banking .
 Current Account (Pak Rs)
 Foreign Currency Account
 Clearing & Funds Transfer.
 Trade Service.
 Overdraft Facilities.
 Term Loans.
 Project Financing.

 Consumer Banking
 Current Account (Pak Rs).
 PLS Saving Account.
 Royal Profit Account (Pak Rs).
 Royal Patriot Account (Pak Rs).
 Anmol Deposit Certificate.
 Monthly Income Account.
 Foreign Currency Account.
 Money Gram.
 Rupee Travel Cheque.

 Consumer Financing
 Car Finance
 Personal Loans.
 Housing Finance.

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  Electronic Banking
 Online Banking.
 Phone Banking.
 Internet Banking.
Bank Alfalah’s primary commitment is to understand and support their client's
business, objectives and financial needs. At Bank Alfalah, all this is ensured through
constant R & D focus and training & development of staff.

SERVICES:
In addition to tailor made products to meet customer’s requirement, Bank Alfalah
offers the following services to its clients:

 Financing – Debt (Capital market Instruments & Straight Loans) and

Equity (Public & Private).
 Full range of advisory services i.e., Consultancy, M & A Advisory
Financial Restructuring, etc.
 Liability Products.
 Working Capital Finance.
 Trade Finance/International Guarantees and other related services.
In addition to their normal banking services they also offer:
 “Royal Profit” Daily/Monthly Interest Earning Accounts In local currency
 One of the Fastest and Most Lucrative FCY Accounts Mechanisms
 Staff Salary Accounts
 Personal Relationship Banking
 Internet Banking
 Cooperate and Other Facilities
Giving a banking opportunity, they assure customize quality products and
efficient service, thereby, providing swift solutions to all the financial needs of their
clients.

CORPORATE GOVERANANCE:

Board of Directors:
There are 8 boards of directors whereas Mr. Sheikh Handan is head of board.

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Directors Profile:
Mr. Al-Mutawa who has studied abroad, is an expert in the field of Financial and
Investment Management, and has vast experience to his credit in International investment
management – a field in which he is highly regarded for his expertise both in UAE and
abroad. He serves as an advisor to the UAE govt. on investment matters
Mr. Abdullah Naser Hawaileel Al-Mansoori has served as a member of the
Abu Dhabi Executive Council. He holds a [Link]. Hon. Degree in Electrical Engineering
from Swansea University, UK. Since graduation he has served in senior positions and
served a in senior positions and served as the Chairman of many
Corporations/Departments

Mr. Akhtar is a career banker with over 35 years of banking experience.

Obtained masters degree in Economics from the University of Punjab in 1960. His last
assignment with Habib Bank Ltd was in the capacity of senior executive vice president,
also a member of the Bank's Executive Committee
Mr. Sehgal is M.D of Pathfinder Group, which has under its wings Security &
Management Services (pvt) Ltd. (SMS) He is a publisher/editor of Social Pages, Globe &
the Defence Journal & the Permanent member of world economic forum as well as
President of All Pakistan Security Agencies Association.
Mr. Sheikh has a master’s degree in Economics from Punjab University. He is
Director & CEO of Nadeem Surgical Corporation (pvt) Ltd. Sialkot. He has also been the
president of Sialkot Chamber of Commerce & Industry & Chairman Surgical Instruments
Manufacturers Association.
Responsibilities of Board of Directors:
Following duties are being performed by Board of Directors:
 Registration of bank and compliance with the rules and regulations.

 Time to time approvals from government regarding important issues.

 Strategic decision making related to bank.

 New recruitments for the bank.

 Bank system up gradation.

 Introduction of new branches.

 Introduction of new bank operations and amended in existing operations.

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  Privileges to customers’ e.g. launch a new range of products like Credit
Cards, ATM, Leasing, Debit Cards etc.

 Decision regarding Bank investments.

 Approval of policies

Board of Directors Continuum:

Alfalah’s BOD is known for their hard work, innovative spirit and dedication to
create exceptional value of the Bank's clients and to keep the Bank ahead of
competition. With a team of talented and dedicated professional bankers, the Bank
commits all its energies, resources and time to cater to banking and financial needs of its
valued clients. All members of board take in leading role in establishing and modifying
the mission, objectives, strategy and policies.

LOW Degree of Involvement in Strategic Management HIGH

PHANTOM RUBBER MINIMAL NOMINAL ACTIVE CATALYST

STAMP REVIEW PARTICIPATION PART.

Responsibilities of Top Management:

Duties preformed by the top management are:

 To prepare charter of an organization.

 Responsible for strategic planning, implementation and management.
 To tailor and implement all types of policies.
 To strive for organization’s goals.
 To recruit appropriate manpower according to the organization’s goal
requirements and to watch their performance after a certain period of time.
 To approve periodical budgets.
 To grant necessary approvals for routine business transactions.
 To conduct periodical researches and developments workshops to enhance
the business.

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  To comply with all prevailing laws, rules, regulations etc.
 To avoid un-lawful business, mal-practices.
Social Responsibilities:
Community Development:
Bank Alfalah based on client's trust in their performance; today they actively
pursue enrichment of Pakistan’s economy through sophisticated products and high
quality services customized to their needs. This serves to reinforce their vision of
carving out a brighter future for Pakistan, its business enterprises and its people. The
Bank sponsors a number of sporting and community development initiatives to play it
part as a responsible corporate citizen. This refers that bank Alfalah is really committed
to their social responsibilities and striving hard to understand and support their client's
business objectives and financial needs. At Bank Alfalah, all this is ensured through
constant R & D focus and training & development of staff.

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STRATEGIC MANAGEMENT:
The process of strategic management revolves around following four basic factors
which are environmental scanning, strategy formulation, strategy implementation and
evaluation and control. The extent to which Bank Alfalah uses strategic management
process is discussed in the following paragraphs.

ENVIRONMENTAL SCANNING & INDUSTRY ANALYSIS:

Environmental Scanning is monitoring, evaluating and disseminating of
information from the external and internal environment to key people within the
organization to make decisions. External Environment is consisting of opportunities
and threats whereas Internal Environment consists of weakness and strengths. For
identification of theses Strategic factors SWOT analysis is conducted which is the
simplest way to conduct environmental scanning. Bank Alfalah being business entity of
Middle East launched its branch in Pakistan after careful scanning of its environment
based on political stability or unrest, business opportunities and threats, bank’s strength
and weakness, tax holidays etc

External Environmental Variables:

External environment variables include:

Societal Environment:
Societal environment includes forces that don’t directly touch on the short term
activates but do influence the long term activities of the organization. Societal variables
are economic, technological, political factors and socio cultural forces that effect the
working of the Bank Alfalah. Economic factors that affect Bank Alfalah are Money
supply in the economy, prevailing interest rates, inflation rates, economic growth rate etc.
Technology also affects Bank’s operation as Bank Alfalah introduces Electronic banking
that includes online banking, internet banking , phone banking and on the same hand
facilities provided by them like credit transfer facility, introduction of ATM,s and credit
cards all base on technology. Tax laws, government stability, government policies
regarding interest rates, tax policy, employment laws, political instability inflation rates,
money supply in the country included in the Political- Legal forces affects the Bank’s
working. In Socio cultural factors lifestyles mainly affects their working e.g. as
lifestyles of people living in Pakistan goes luxury Bank Alfalah has to introduce credit
cards, ATM cards and they also start giving their customer lease proposal too.

Industry Analysis:
An Industry is a group of firms producing a similar products or services.

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Porter’s Approach towards Industry Analysis:
Porter’s gave six basic competitive forces and he said “the collective strength of
these forces determines the ultimate profit potential in industry”. These forces are threat
of new entrants, threat from other stakeholders, rivalry among existing firms and threat of
substitute products or services, threats of bargaining power of customers, threats of
bargaining power of suppliers and relative power of other stake holders. Bank Alfalah is
always threatened by the new entrants as the new entrants gain marker share as well as
substantial resources. Bank also has to watch carefully the competitive move by other
banks and counter their move accordingly to achieve consistent and superior returns and
to maintain a systematic focus in areas where they have a competitive advantage. As far
as bargaining power of buyer and supplier is concern, Bank is not very much affected by
these two competitive forces. Whereas they are affected by the relative power of other
stakeholders specially policies imposed by government regarding interest rates, reserve
requirement, depositary rates, inflation rates etc. as far as substitute products are
concerned almost all banks are providing the same products like personal loans, car
loans, credit cards etc so they would be a substitute for each other . Banks can only
differentiate theses products on the bases of their services provided to their consumers.

Industry Evolution:
The Bank can be categorized in Fragmented Industry as it is new in banking
sector. Bank Alfalah during the past five years, has assumed a brand new identify and
established in 1997.

International Industries:
Bank Alfalah is multi domestic organization as Bank tailors their products to the
specific needs of consumer. Whereas the factors that determine that whether the Bank
Alfalah is domestic or global are:
 Pressure for coordination within the multinational corporations
operating in that industry which is week for Bank Alfalah.
 Pressure for local response on the part of individual country markets
which is strong for the Bank as they have to meet the specific demand for the
clients in a specific country they are operation (Pakistan)

Pressure for Coordination

Week Strong

Pressure for Local Response

Week Strong

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 High BANK
ALFALA
H
Pressure for
Coordination

Low

Low High
w Pressure for Local Response

Strategic Types:
Bank Alfalah falls in Defenders group as Bank have limited product lines and
focus on improving the efficiency of their existing operations and innovate into new
areas. The Board and Management of the Bank have implemented strategies and policies
to carve a distinct position for the Bank in the market place and continually focus on
improving their operational efficiency. Bank goes for innovative products to suit the
needs of their corporate customers, commercial enterprise and consumer banking clients.
They are also planning to introduce their ATM’s with unique features whereas they
already introduce credit cards with really breathtaking features like no joining fee, no
annul/renewal fee, lowest mark up of only 2.25%.

INTERNAL SCANNING & ORGANIZATIONAL ANALYSIS:

Value Chain Analysis:
Value chain of a firm is composed of a series of distinct value - creation activities
including production, marketing, R& D, HR, IS and the firm infrastructure. Porter’s
categorizes these value creation activities as primary activities and support activities

Primary Activities:
The primary activities of a firm have to do with creating the product, marketing
and delivering the products to consumers and providing support and after sales services
to the consumer of the product. Primary activities of the firm begins with Inbound
Logistic include the receiving of raw material, warehousing, and material handling which

9
for the Bank are cash management, account management, management of lockers etc,
then Operations that transform the inputs into the final product and includes the basic
banking operations of the Bank Alfalah e.g. payment and collections on the behalf of
their clients. Outbound Logistics is the distribution of the finished products to its
consumers the final and finished products of the Bank are home loans, personnel loans,
traveler Cheque, money gram, and project financing which Bank offers to their
consumers etc. Marketing & Sales are the activities related to advertisement,
promotions, pricing, and channel relations of the products. Some of the marketing tools
used by the Bank are sales team, direct marketing, banners & advertisements. Services
involve activities after sales services like installation, repairing. Bank Alfalah offers the
services like advisory services i.e. Consultancy, Advisory Financial Restructuring, Trade
Financing, International Guarantees and other related services.

Support Activities:
Support activities provide the inputs that allow the primary activity of products
and marketing to occur and enable primary value chain activity to operate effectively and
efficiently. A support activity includes Procurement related to purchasing of the raw
materials and other inputs used in the value-creating activities. Technology
Development that includes R&D product and process improvement. Human Resource
Management which involves recruiting, training and development activities. Firm
Infrastructure is accounting, finance, general management, strategic planning activities.
Supporting activities results in improved quality of the firm’s output, which add value
and thus facilitate premium pricing. For example R&D helps in developing new
improved products based on technology. This technological development can results in
more useful and attractive products like internet banking, phone banking based on
technology and develop to facilitate Bank’s consumer.

The firm as a value chain analysis:

Infrastructure
Supporting
I nformation System
Activity
Humar Resources
Research & Development
Material Mangement
Mnufacturing Marketing, sales&
servicses
Primary Activities

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Scanning Functional Resources:

Basic Organizational Structure:

Chairman of BOD

Board of Directors

Chief Executive
Officer

Executive in
Charge

Area Manger Area Manger

North South

Branch Branch
Managers Managers

Clerical Clerical
Staff Staff
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Non Non
Corporate Culture:
Culture is a system of values and norms that are shared among a group of people.
Values are defined as abstract ideas about what a group believes to be good, right and
desirable whereas Norms are social rules and guidelines that prescribe appropriate
behavior in a particular situation.

Their Highest Priority:

the clients is always placed at the center of their business and all our products,
service and programs are specially designed and developed to serve their customers needs
and demands as best as possible. Service excellent is indeed one the best cornerstones of
Bank Alfalah’s culture Bank Alfalah seek to provide an enviroment—culture, job
satisfaction, opportunity and compensation- that attracts and retains outstanding
individuals all over the country. They embrace diversity. And above all, they insist on a
work place founded on mutual respect, where every one is treated with [Link]
objective is to create a meritocracy where people are rewarded for their performances.

Their Aspiration:
Looking ahead, they seek to be a leading financial institution and to be a financial
supermarket by offering complete banking solutions to their clients and to maintain a
systematic focus in areas where they have a competitive advantage. They seek to be
known as the company with highest standards of moral and ethical conduct-working to
earned client trust, day in and day out, through sound advice and shared wisdom.

Strategic Marketing Issues:

Marketing issues includes:
Market Positing, deals with the Question, “Who are our customer” as far as
Bank Alfalah is concerned with all type of the customers who have financial needs.
Market segmentation, deals “what niches to seek”? Bank Alfalah with its
various product and services focuses on corporate banking, Consumer banking,
Electronic banking, and consumer finance.
Marketing Mix deals with 4 P’s .i.e. products, places, promotion and price.
Major products offered by Bank are personal loans, Car financing, Home Loans etc. They
have 44 branches operating in 18 cities of Pakistan. For promoting their products the
main channels use by them are Print media and personnel selling. As far as pricing of
bank products are concerned their product prices are reflected in the form of interest rates
they offer to depositors for their deposits.

Technological Development Issues:

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 Technology and automation play a pivotal role in the progressive development of
any organization. Bank Alfalah’s primary commitment is to understand and support their
client's business objectives and financial needs. At Bank Alfalah, all this is ensured
through constant R & D focus and training & development of staff. It has become
impossible to control the operations of a bank effectively in real time situation without
the latest technology. Bank continues to invest heavily into the progressive automation
and computerization of all banking activities. Their plan is to achieve total connectivity
between branches by the end of 1st. Quarter, [Link] objectives are to achieve
efficiency in services and to control costs through implementation of latest technology.
They are working on a program to introduce ATM installations and also join a switch
group of other prominent banks. In the first phase of their program, the installation of 27
ATM machines is already underway. They also expect to be online wait swift by 1st
quarter end of 2003.

Strategic HR Issues:
Strategic HR issues address issues like use of teams, union relation and
improvement of quality of work life. Bank for more productive outcome of their
employees should go for “Autonomous Work team” in which group of people work
together without supervisors. This leads towards increase in the corporation among
employees, their evaluation ability as they have to evaluate their won assign tasks. As
Bank is non Unionized so there is no need of improvement in union relations. Bank can
also improve the quality of worklife by:

 Introducing participative problem solving

 Restructuring work
 Introducing innovative reward system
 Improving the work environment
Bank Alfalah’s HR management believes in developing the potential of the
Bank’s employees to the fullest extent. For the better results there are two training
programs where training is given to the new employees

Training & Development:

Training & Development Centre of the Bank is housed in custom-built, state of
the art facility on the 4th floor of the Head Office building at Karachi. The centre is
responsible for providing multi-level high quality training programme to all staff
members in the following areas:
 Consumer Banking Operations

 Credit Marketing & Credit Proposals

 Credit Administration/Documentation

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  Trade Finance Operations

 Marketing & Selling Skills

 Customer Service Skills

 Performance Appraisal Skills

 Time Management & Personal Effectiveness

It is obligatory for each staff member of the bank to attend a minimum number of
one
training course during the course of a year. Wherever the Training Department is unable
to provide focused training for certain groups of staff, reputable external training
providers are invited to fill the gap.
MTO Scheme:
Every year Bank Alfalah opens its doors for about 30 fresh post-graduates to join
the prestigious ranks of Management Trainee officer’s scheme with the Bank. The MTO
scheme is a highly competitive and sought after induction scheme, in which short-listed
applicants appear in a written test followed by a panel interview. Successful candidates
then receive comprehensive training in essential areas of branch banking at the Bank’s
state-of-the-art training facility at Karachi, prior to their posting at various branch
locations. Preferred educational background for entry into the MTO scheme includes an
MBA degree, MA Economics or [Link] from reputable Pakistani or foreign institutions
with GPA of 3 plus, or equivalent. Strong personal characters, as well as communication
and interpersonal skills are essential pre-requisites to succeed as an MTO.

14
STRATEGY FORMULATION:
Strategy formulation is often referred to as strategic planning and is concerned
with developing the firm’s mission, goals, objectives, strategies and policies.

VISION:
Vision is the purpose for the organization’s existence. Bank Alfalah vision is:

“Bank Alfalah professes to be a financial supermarket with innovative products to

suit the needs of their corporate customers, commercial enterprise and consumer banking
clients. Their Vision is to become a leading financial institution offering complete
banking solutions to their clients, and to maintain a systematic focus in areas where they
have a competitive advantage. Their focus is on improving performance in each of their
businesses to achieve consistent and superior returns for their highly
valued stakeholders”

GOALS AND OBJECTIVES:

 Increase Revenue While Limiting Their Exposure to Risk.
 Top Tier Bank In Terms Of
 Professionalism,
 Profitability
 Market Position.
 Returns On Equity,
 Protection Of Depositors’ Funds And
 Efficient Risk Managements Are Their Major Priorities

SWOT ANALYSIS:
Strategy formulation begins with situational analysis: the process of finding a
strategic fit between external opportunities and internal strengths while working around
external threats and internal weakness.

15
Strengths:

Services and Products:

The main strength is the services and products provided by the bank to their
client’s e.g.
 Royal Profit A/C
 Rupee Traveler Check
 ATM Machine
 Car Financing
 Home Financing
 Personal Loans
 Online Banking
 Phone Banking & Etc

Credit Rating:
The Pakistan Credit Rating agency (PACRA) has assigned a long-term rating of
‘AA-‘ (double A minus) and a short-term rating of ‘A1+’ (A one plus) to Bank Alfalah
limited. These rating represent very high credit quality and a very low expectation of
credit risk.

Management Trainee Officers:

The MTO scheme is a highly competitive and sought after induction scheme, in
which short-listed applicants appear in a written test followed by a panel interview.
Successful candidates then receive comprehensive training in essential areas of branch
banking. Preferred educational background for entry into the MTO scheme includes an
MBA degree, MA Economics or [Link] from reputable Pakistani or foreign institutions
with GPA of 3 plus, or equivalent.

Networking:
They have 44 branches in 18 cities of Pakistan. This Country wide coverage in a
very short time is also one of their strength.

Weaknesses:

Not Wide Spread:

Alfalah is not well positioned and geographically poised to carter for increased
business demands from its existing and potential clients. i.e. Their market coverage is not
very wide spread as compare to other banks like MCB or ABL which provide their
services and products to almost each and every area of Pakistan

Risk Analysis:

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 They don’t have any risk analysis or any systematic way that tells them how much
risk involve in there procedures e.g. Amount of risk involve in financing any car.

ATM Cards:
Lack of availability of ATM cards is major weaknesses and is main hinderers in
their development and achievement of their vision i.e. to be a financial supermarket with
innovative products.

Opportunities:

Foreign Branches:
They can enter into the international banking sector by opening new foreign
branches in different foreign countries.

Wide Spread:
They can increased their coverage and expand branch network in other parts of
Pakistan by opening new branches to meet client’s need more efficiently and effectively.

Other Areas:
They have an opportunity to establish their name in new areas like agriculture,
leasing, housing finance and others.

Benchmarking:
As it’s a new bank so it has an opportunity to use benchmarking strategy and can
do much better than before.

Reduce Interest Rates:

For further their grip on economy they can reduce their interest rates to increase
their business.

Threats:

Maintainability:
As PACRA has declared Alfalah as the A1+ bank in credit rating, so it’s easy to
have an A1+ but it’s quite difficult to maintain it.

Political Instability:
Political unrest is one of the threats. Due to rapid change of government the
economic policies change. Consequently the banking operation suffers and they have to
formulate new rules and regulation according to new implemented policies.

High Competition:

17
 High competition is faced by Alfalah for establishing its name in banking sector
as it is new in banking field.

Government Policies:
Changing Government policies are also one of the threats faced by Bank Alfalah.
E.g. fluctuations in interest rate, money supply, inflation rates etc.

Employee’s turnover:
Employee’s turnover is one the biggest threat, like Union Bank did with all the
top banks of Pakistan that “pay more and pick the best from others”.

FUTURE OUTLOOK (REVIEW OF MISSION & OBJECTIVES):

The sluggishness in the economy promotes Bank to keep increased diligence and
caution. In adhering to their traditional banking practice and fundamental principle of
promoting depositors’ funds, the Bank will continue to follow a strategy of strengthening
capital, increasing the diversity of the deposit base, expanding fee producing lines of
business and controlling expenses

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CORPORATE STRATEGY:

DIRECTIONAL STRATEGY:
Directional strategy deals with the overall orientation toward growth, stability or
retrenchment. A corporation directional strategy is composed of three general
orientations called grand strategies:
 Growth strategies (expand the company activities).
 Stability strategies (make no change in the company’s current
activities).
 Retrenchment strategies (reduce the company’s level of
activities).

Growth Strategy:
Bank Alfalah currently goes for Acquisition of UBL which is one of the ways of
expanding its business externally. An Acquisition is a purchase of company that is
completely absorbed as an operating subsidiary. Acquisition of UBL by Bank Alfalah
means that Alfalah purchase UBL’s complete operations.
The two basic growth strategies are Concentration on the current product line(s)
in one industry and Diversification into other product lines in other industries.

Concentration:
Concentration strategy is adopted when firm product lines have real growth
potential. Concentration strategies are of two types:
 Vertical Growth
 Horizontal Growth

 Horizontal Growth:
Bank Alfalah adopted horizontal growth strategy by expanding through
increasing the range of products and services offered to current market. They are
planning to launch ATM cards very soon whereas they already launch credit cards
for fulfilling the needs of their current markets. Opening of new branches are also
under consideration which also lead towards their adoption of horizontal growth
strategies by way of expanding its products into other geographic location and a
way of expanding its products into other geographic locations.

19
Diversification Strategy:
Diversification strategy is adopted by the firm when an industry consolidates and
matures and is of two types:
Concentric Diversification i.e. diversification in the related industry and
Conglomerate Diversification i.e. diversification in the unrelated
industry
Diversification strategy is not adopted by the Bank as they don’t achieve maturity
stage yet. They can adopt this strategy when they reached to their maturity level and
when they feel that industry attractiveness is low fro them.

As far as the other two other growth strategies are concerned i.e. Stability and
Retrenchment Strategies, both are not suitable for the Bank. As bank can’t concentrate
on their current activities (Stability strategy) or even can’t cut down its activities as they
are in their growth phase and both these strategies are not appropriate for them at this
level.
Portfolio Analysis:
In portfolio analysis, top management views its product lines and business units
as a series of investments from which it expects a profitable return. The product
lines/business units from a portfolio of investments that top management must juggle to
ensure the best return on the invested money. Two popular approaches used are BCG
matrix and GE business screen. Notwithstanding the taken completion and difficult
business climate, the Bank made significant improvements in their operating results The
Bank earned a pre-tax profit ofRs.524.164 million, a 31% growth over last year. Their
deposit base as on December 31, 2001 stood at Rs.30.207 billion as against Rs.20.482
billion at the close of year 2000. Whereas Loan & Advance portfolio grew by 23.62% to
Rs.20.220 billion.
From the above profitability analysis the Bank can be place as Cash cows
according to BCG matrix as for maintaining their market share they still require more
investment of money.
BCG Growth Share Matrix:

Stars Question
Marks
Business
Growth Rate

ALFALAH

20
 Dogs
Cash
Cows

Relative Competitive Position

BUSINESS STRATEGY:
Business strategy focuses on improving the competitive position of a company or
business units’ products or services within the specific industry or the market segment
that the company or business unit serves. The firm’s business strategy is of two types:
 Competitive Strategy i.e. Battling against all competitors for
advantage
 Cooperative Strategy i.e. working with one or more competitors
to gain advantage

COMPETITIVE STRATEGY:

 Porter’s Competitive Strategy

Lower Cost Differentiation

Cost Leadership Differentiation

Lower cost Differentiation

Broad Target Bank

Alfalah

Cost Focus Focused

Narrow Target Differentiation

Bank Alfalah for its business strategy adopted Differentiation according to

porter’s generic competitive model as their target is broad; they are operating in
corporate, consumer and electronic banking and fulfilling the need of their
consumer in these particular banking areas. On the same hand they can go for

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 focus differentiation by offering unique features along with the introduction of
unique products while targeting a specific relatively a narrow group e.g. they can
introduce lowest mark up on Car loans, similarly with the launch of credit cards
they attach breathtaking feature like no renewal fee, no annual fee, no joining fee
etc. the offering of unique and breathtaking features add value by increasing
product quality and also help them to customize their products to consumer needs
and differentiate their products from competitors products on the bases of theses
features-both of which facilitate premium pricing.

COOPERATIVE STRATEGIES:
Corporative strategy can used to gain competitive advantage within an industry by
working with other firm. There are two types of corporative strategy, Collusion (Active
Corporation of firm within an industry to reduce output and raise prices in order to get
economic law of demand and supply) and Strategic Alliance (partnership of two or more
firms to achieve common beneficial objectives).
As far as Bank Alfalah is concerned they are not using either of these strategy
where as they can go for strategic alliance to obtain access in other markets. Bank is at
the stage of growth, by adopting this strategy they can easily access other market which
they can’t reached (maybe) with in next 2 to 3 years time.

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FUNCTIONAL STRATEGIES:
Functional strategy is the approach a functional area takes to achieve corporate
and business unit objectives and strategies by maximizing recourse productivity.

MARKETING STRATEGY:
Marketing strategy deals with pricing, selling and distribution of a product. For
this particular purpose Bank Alfalah adopted following strategy:

 Market Development:
Bank Alfalah currently operates in 18 cities of Pakistan and planning to open
new branches in other locations of Pakistan too i.e. developing new markets for
current products.

 Product Development:
By the use of product developing strategy Bank develop new products for
their existing market. They are soon going to launch ATM’s for their current
customers to fulfill their needs, whereas they currently launch credit cards.

 Promotional Strategies:
For advertisement and promotion of the product firm can ether use push
strategy or pull strategy. Where as Bank Alfalah is concerned they are using push
strategy for reaching to their customers.

FINANCIAL STRATEGY:
Financial strategies examine the financial implications of corporate and business
level strategic option and identify the best financial course of action. The key issues in
the financial strategy are achieving trade off between debt to equity ratio and relying on
internal long term financing via cash flow. Bank Alfalah has been pursing and strictly
adhering to a conservative yet dynamic credit policy. The conservative approach in
lending policy and careful monitoring of facilities has enabled them o maintain a high
quality risk asset portfolio. The bank actively manages the spectrum of risk arising from
the nature of its business activities, including credit risk. In the management of these
risks, the bank has a formalized credit approval process in place built on the principal of
checks and balances. Alfalah also continues to maintain positive and healthy liquidity.
Their surplus liquidity is mainly kept in fixed income securities, issued by the federal
government of Pakistan that can be easily converted into cash, if necessary.

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HUMAN RESOURCE STRATEGY:
This strategy addresses the issue whether the organization hire a large number of
low skilled employees who receive low pay, perform repetitive jobs or to hire skilled
employees who receive relatively hire par and are cross trained to participate in self
managed work teams. As far as the case of Bank the Board places utmost importance to
its human gaining set base and they require staff with sound technical skills and also offer
training programs to their employees in several skill areas which are geared to provide
professionalism.

INFORMATION SYSTEM STRATEGY:

Bank Alfalah for its functional strategy also goes for adoption of information
system strategy by the adoption of which they are turning IS technology provide business
unit with competitive advantage. This strategy is adopted to meet the constantly changing
demand of their customer and to remain competitive. Through Electronic banking they
offer their consumer internet banking, phone banking and online banking. Theses
offering are the result of use of IS strategies by Bank.

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STRATEGY IMPLEMENTATION (ORGANIZING FOR
ACTION):
In adhering to their traditional banking practice and fundamental principle of
promoting depositors’ funds, Bank follows the strategy of Strengthening Capital,
Increasing the Diversity of the Deposit Base, Expanding Fee Producing Lines of Business
and Controlling Expenses. Disciplined management approach and careful selection of
clients, business and products is adopted to maintain quality and foster productive
growth.
The Bank Alfalah has been found very keen in adopting and implementing right
and appropriate strategic planning to meet its goals and objectives. Strategy
implementation is the sum total of the activities and choices required for the execution
of a strategic plan. It is a Process by which strategies and policies are put in to action
through the development of programs, budgets and procedures.

WHAT MUST BE DONE?

The functional managers of the bank divisional areas work with the other
departments to develop the programs, budgets and procedures for the successful
implementation of the overall strategy. In this regard the bank has its programs, budgets
and procedures.

Programs:
The purpose of the program is to make strategy action oriented and is the
statement of activities or steps needed to accomplish the strategies formulated. Some of
the Programs being fallowed by the Bank to implement strategies formulated to its fullest
nest are:

 Provide Innovative and attractive product for the depositors

 Offered them branded deposit scheme
 Greater increase in the deposit base
 Addition of new branches to their network
 Increased involvement in trade finance, commercial lending, foreign
exchange and money market operation
 Good clientele is to be maintained which is the base and heart of good
business ,

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  Significant inroads in to the areas of consumer banking, investment
banking, structured deals and syndications
 Adopt disciplined management and careful selection of clients
 Maintain quality and foster productive growth
 increase revenue while limiting their exposure to risk

Budgets:
A budget is the statement of a corporation programs in terms of dollars. It is the
lists of detailed cost of each program. In Bank budget is prepared for every department
showing the department’s particular expenses and this budget is revises after every three
months.
I
Procedures:
Procedures are system of sequential steps or techniques that describe in detail how
a particular task or job is to be done, and sometimes termed as SOP’s.

HOW IS STRATEGY TO BE IMPLEMENTED?

Stages of Corporate Development:

There are three stages of corporate development which successful Organization
tends to fallow as a pattern of structural development as they grow and expand. These
stages categorizes as simple structure, functional structure and divisional structure
depending on their strategies, objectives, problems etc.

Functional Structure:
As far as Bank Alfalah is concerned that are at stage two of corporate
development which is the functional stage as they have department of finance, marketing,
IT, customer services etc. which refers that they organize themselves along functional
lines.

Organizational Life Cycle:

Organizational life cycle is the stages through which organization passes through
throughout its life time period. These stages start from
Birth (Stage 1)
Growth (Stage 2)
Maturity (Stage 3)
Decline (Stage 4)
Death (Stage 5)
Bank Alfalah according to organizational life cycle stage is in its growth stage.

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Advanced Type Of Organizational Structure:
There are two types of advance structure, one is Matrix, structure in which
functional and product forms are combined at each level and other is Networking,
structure in which organization is based on series of firms and business units that are
linked by computer in an information system that design, produce, and market product or
service. Both these structure are not applicable. Matrix is not suitable for Bank as bank
organizes at functional lines only whereas on the other hand networking is not applicable
too as bank’s business functions are not scattered worldwide.

Designing Jobs to Implement Strategy:

Job design refers to study of individual task in an attempt to make them more
relevant to the company and to the employees. The new job techniques are job
enlargement, job rotation, and job enrichment. Out of these techniques Bank Alfalah
adopted Job Rotation that involves movement of workers through several jobs e.g. if
employee of any department could not come to the job for any reason, employee from
any other department is asked to also work on his position and fulfill the require
responsibilities along with his won work. This refers that the Bank is involve in rotation
of job otherwise it is difficult to carry out the work of other department that is not related
to your specific tasks. Bank should also go for other two techniques too.

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STRATEGY IMPLEMENTATION (STAFFING &
DIRECTING):
The implementation of new strategies often calls for new human resource
management priorities and different use of personnel. This requires considering staffing
issues.

STAFFING:
Staffing issues can involve hiring new people with new skills, firing people with
inappropriate skills or training existing employees to learn required skills. Bank Alfalah
is at the growth stage and adopted growth strategies that have to be implemented, so must
go for hiring and training of their employees

Staffing Fallow Strategy:

Staffing policy should fallow the strategy implementation.

Hiring and Training:

Bank continue to hire fresh MBA’s from prestigious Universities in Batches of
25-30 officers, who then undergo rigorous and intensive training, first at the Training
Development Center and later at the branches, for hands- on experience. The Board
places utmost importance to its human gaining set base. The Bank's Training &
Development Center continues to offer programs in several skill areas to impart sound
technical skills to their staff, so to fit the require skills with the strategies requirement.
Bank’s training and business philosophy is geared to provide professional, personalized
and efficient service to their clients at all times. There are two types of training schemes
conducted by the Bank that are:

1) Training & Development:

Training & Development Centre of the Bank is housed in custom-built, state
of the art facility on the 4th floor of the Head Office building at Karachi. The centre is
responsible for providing multi-level high quality training programme to all staff
members in the following areas:
 Consumer Banking Operations

 Credit Marketing & Credit Proposals

 Credit Administration/Documentation

 Trade Finance Operations

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  Marketing & Selling Skills

 Customer Service Skills

 Performance Appraisal Skills

 Time Management & Personal Effectiveness

2) MTO Scheme:
Every year Bank Alfalah opens its doors for about 30 fresh post-graduates to
join the prestigious ranks of Management Trainee officer’s scheme with the Bank.
The MTO scheme is a highly competitive and sought after induction scheme, in
which short-listed applicants appear in a written test followed by a panel interview.
Successful candidates then receive comprehensive training in essential areas of
branch banking at the Bank’s state-of-the-art training facility at Karachi, prior to their
posting at various branch locations. Preferred educational background for entry into
the MTO scheme includes an MBA degree, MA Economics or [Link] from
reputable Pakistani or foreign institutions with GPA of 3 plus, or equivalent. Strong
personal characters, as well as communication and interpersonal skills are essential
pre-requisites to succeed as an MTO.

Matching the Manger to the Strategy:

For Bank Alfalah the manger requires that match with the bank’s strategy is
Dynamic Industry Expert. As dynamic industry expert is require for the firm that is
following concentration strategy and main emphasis is on vertical or horizontal growth.
These particular types of mangers are like an aggressive new chief executive with a great
deal of experience in that specific industry.

Selection & Development:

Selection and development ensure that people with the right skills and
experiences are initially hires but also help them to grow on the job so that they might be
prepared for the future promotions.

Identify Abilities and potential:

A company can identify and prepare its people for important positions in several
ways. Bank Alfalah uses Performance Appraisal System for the identification of the
good performer for promotion. Under this particular system performance appraisal forms
are filled on annual bases to examine the performance of the employees and identify the
employees who need to be promoted.

LEADING:

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 Leading involves people to use their abilities and skills most effectively and
efficiently to achieve organizational objectives.

Management by Objective (MBO):

MBO is an organizational approach to help ensure purposeful action toward
desire objective and Bank Alfalah adopted the process of MBO as they clearly establishes
and communicate organizational objectives. Every employee in the Bank has to develop
his/her goals known as smart goals that must be align with the Bank’s overall goals and
objectives and on the same hand they have to prepare plan of action for their establish
objectives

Total Quality Management (TQM):

Bank should adopt the TQM approach which is a commitment to customer
satisfaction and continuous improvements. Bank should work upon the unavoidable
principles of Total Quality Management to achieve its optimal goals in banking industry.
Banking is supposed to be the profession of entrepreneurship, manipulation, dedication
and sincerity; therefore Alfalah should equip its managers with all these qualities, which
can be beneficial to them as well as to the Bank.

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EVALUATION AND CONTROL:
The evaluation and control process ensures that organization is achieving what it
set out to accomplish. It compares performance with desire results and provides the
feedback for management to evaluate results and take corrective action. Whereas
evaluation and control information consists of performance data and activity reports
(information must be relevant to what is being monitored).

MEASURING PERFORMANCE:
Performance is the end result of an activity.

Appropriate Measure:
Bank Alfalah fallows or measures the performance of the Bank on the basis of
increase or growth in deposits, advances, equity, exports, imports which is appropriate for
evaluating the performance in terms of profitability. Bank should go for adoption of
Steering Control to predict like profitability and variables that influence future
profitability.

Behavior and Output Controls:

Behavior control specify how something is to be done through policies, rules,
SOP’s and orders from a superior. Bank for control of their employee’s behavior and
performance has set standers and guidelines that have to be followed by everyone.
Output controls specify what is to be accomplished by focusing on the end results of the
behavior through the use of objectives and performance. To control the behavior and
outcome of the employees objectives develop by the Bank should be fallowed by
everyone and it is necessary for every employee to develop his/her own plan of action to
meet the end result. For better behavior and output control Bank can adopt ISO 9000
which is series of five individual but related standards on quality management and quality
assurance. They are generic; not specific to any particular products. They can be used by
manufacturing and service industries alike. These standards were developed with the goal
of effectively documenting the quality system elements to be implemented in order to
maintain an efficient quality system in organization.

Evaluating Top Management:

Evolution of top management is necessary to analyze whether they are performing
their jobs well. For this particular purpose Bank should go for Management Audits
which help the Bank in evaluating activates of the top management regarding social
responsibility, responsibilities towards functional area and towards Bank as whole.

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Evaluating Functional Performance:
The Bank can and should use Benchmarking to evaluate performance which
involves open learning how others do something better than ones own company so that
one not only imitate but also improve their current functions.
Evaluating Corporate Performance:
For evaluating corporate performance Bank should go for Strategic Audits which
provides a check list of questions by area or issue that enable a systematic analysis of
various corporate function and activities to be made.

Guidelines for Proper Control:

Control should fallow the strategy. The following guidelines are recommended
for proper control:

 Control should involve only a minimum amount of information

 Control should monitor only meaningful activities and results
 Control should be timely
 Long term and short-term control should be used
 Control should aim at pinpointing expectations
 Emphasize the reward of meeting or exceeding standards.

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RECOMMENDATIONS:
 Bank needs more advance steps towards introductions and expansion of
technological products like internet banking, credit cards, call centers and ATM
with advance features.

 Bank should work upon the unavoidable principles of Total Quality Management
(TQM) to achieve its optimal goals in banking industry. Banking is supposed to
be the profession of entrepreneurship, manipulation, dedication and sincerity;
therefore Alfalah should equip its managers with all these qualities, which can be
beneficial to them as well as to the Bank.

 Training programs and workshops should be managed to let the staff know the
importance of the customers as Customer is the most important part of any
transaction.

 Employees training programs should be organized and there should be job rotaion
for better results.

 The management has done very well in providing best financial services to its
customers according to their needs and wants, but still there is room to be filled to
become the preferred provider of the financial services.

 The managers should be directed to keep the discipline of the bank tight so that it
could not create a bad impact in the mind of the customers

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