Discuss about the UOB Bank Strategy Analysis.
Its headquarters is mainly in Singapore with branches mainly in Southeast Asia. It was setup in 1935 with group of Chinese born businessmen. In terms of total assets, it is one of the largest banks in South East Asia (Acharya, 2014). United Overseas Banking has 60+ branches in Singapore. It has network of 500 offices in 19 countries in Western Europe, Asia Pacific and North America. UOB mainly provides insurance services, investment, venture capital, corporate finance, private banking and asset management, personal financial services, commercial and corporate banking services (Ab Rahim, 2015). Majority of their operations are in Malaysia, Brunei, Myanmar, Indonesia, Thailand, Vietnam and Philippines. Its subsidiaries include UOB Bullion and Futures Limited, United Overseas Insurance Limited, UOB Asia Investment Partners Pte. Ltd., UOBBF Clearing Limited, UOB-SM Asset Management Pte. Ltd., UOB Asset Management Ltd, UOB Venture Management Private Limited, Far Eastern Bank Limited. The bank has joint venture with United Orient Capital Pte. Limited. The UOB-Kay Hian Holdings Limited is its associate.
5 Force Porter Analyses in Banking Industry
Threats of New Entrants (Low): Even when there are capital and regulatory requirements, the banks are opened every year. But due to stringent laws and volatile market the threat of new entrant is low. The main factors that affect the threat of new entry barriers: Skilled manpower, regulations and Government licensing, large amount of initial investment, global banks, protecting intellectual property rights. For example, it requires a great deal of investment and license to open a bank, hence threat is low. That is there are only hundreds of banks in country.
Bargaining power of suppliers (Moderate): For UOB or other banks this includes FED, regulatory bodies of different countries and strategic alliances. All these parties has good amount of control over customer deposits, loans from financial institutions, mortgage security and loans. It depends on economic outlook, operations onshore and offshore, role of regulatory authorities in affecting bargaining power. The bargaining power of supplier is moderated. For example, MAS (Monetary Authority of Singapore) have a system of check and balances over banks in Australia.
Bargaining power of Buyers (Medium): The buyers are customers and SMBs (Small and Medium Businesses). This power is high because high switching cost, customers are loyal. However due to technology, these factors have taken back seat. Now customers are more informed and can switch to other bank easily. The bank competition, retail lending, multiple options affect their decision. For example, any individual or corporation in Singapore can account in any bank as switching cost of also low.
5 Force Porter Analyses in Banking Industry
Competitive Rivalry (High): This industry is very competitive and intense. There are lot of mergers and acquisitions taking place. There are so many players of the similar size. There is high price competition and less product differentiation. The exit barriers are high. All the banks more or less use the same strategies. The growth rate of markets is low. For example, customers can got to any bank to open account or take loan.
Threat of Substitutes (Low): Largest substitutes are non-financial investors, borrowing avenues, non- banking financial corporation. They attract good amount of market share. There is no substitute for withdrawals and deposits. The main factors that affect the threat of substitutes in banking industry include customer relationships, customers’ attitude and their switching costs. For example, there are some private institutions but not much of substitutes to lathe banks.
Marketing: Customers’ needs are met professionally, personally and efficiently (Vahlne, J. E., & Johanson, 2017). Despite of slow economic growth, volatile commodity market and changing geopolitical landscape, the banks has stayed resilient. Personal growth is balanced with stability, creating value for stakeholders and support customers through economic cycles.
Sales: The UOB Bank focuses on building an ecosystem where enterprise and innovation can thrive irrespective of the volatile market condition. The company leverages technology and partnership with other banks to enable simple and safer banking options across different countries (Casu & Wilson, 2016). It provides safe, secure and trusted banking system.
Product: UOB services and product focus on customer experience, digital transformation, providing economic value, maintaining regulatory compliance, responsible lending, easy and responsible access to financial services, supply chain responsibility, social impact, diversity and inclusion, environmental footprint, fraud prevention and anti-money laundering (Pranee & Srinuan, 2017).
Transactions: UOB connects business with opportunities, leverage technology and providing right solution to customers. United Overseas Bank has also launched its services on mobile through UOB application. One of the key features of application is Mobile Cash. It allows transfer of cash to the registered recipient who can withdraw amount from any of UOB bank.
Technology: It is necessary to come up with promising innovations that accelerate the development of innovative technologies within the financial services sector (Frame & White, 2014). UOB prefers multiple digital options like mobile cash. It is leveraging technology to connect its business across multiple countries.
Human Resources: UOB has risk-focused organization culture, attract develop and retailing talent, provided workplace safety, health and well-being.
Infrastructure: UOB has more than 500 offices in total across different countries. It is recognized as global bank. With large number of mergers, acquisition and strategic alliances it is leveraging assets of other organizations also.
Risk Management: Systems and processes are robust in UOB to cope up with growing financial crime and cyber threat. The security is paramount in UOB. It uses sustainable approach to address the priorities, opportunities, risks and effects. There is need of maintaining global stand, so UOB considers global standards (Lasserre, 2017). It takes multiple initiatives to diversify funding mix and to optimize funding cost.
Weaknesses and Threats for UOB
There is requirement of innovative banking solutions relevant to the market. In order to diverse their portfolio, the UOB bank need to embrace diversity and inclusiveness. UOB currently targets only some section of society. However, it should increase their support to make financial services accessible to multiple sections of society. Due to merger, it does not have fully owned power to run the banks.
In spite of growing issues in shipping industry in oil and gas segment, it is necessary to maintain the asset quality. One of the issues prevalent in market is uncertain economic and market outlook (Ebrahimnejad & Yousefpour, 2014). For example, the value of Singaporean continued to fall against US dollar. SGD i.e. Singaporean dollars has been volatile for sometimes. US dollar has recovered this year in by improved growth outlook. This results in increasing market rate at much faster rate than the Fed Fund Rate. This may lead to weakening SGD for a longer time. The current macro environment is very different from what it was in 2015-2016. Back then, the global economy was facing multiple challenges like oil prices were increasing which in turn was leading to inflationary pressures. There is synchronized recovery. Global growth is doing well. But the focus has now moved to inflationary risk or overheating. The labor market is tightened.
Areas of improvement
It is necessary that company maintains its position as one of the top-rated banks even in case of uncertainty in the market. They must continue on building their strengths like connecting business with opportunities, leveraging technology and providing right solution to customers. The Fed is moving towards very tight monetary policies. The central banks will also tighten their monetary policies as inflation grows high due to high oil and commodity pricing. In such volatile environment, it is necessary for UOB to attract the new customers and retain the existing one.
The TOWS analysis for UOB can be shown as:
· UOB has global footprint
· 500 + offices
· Professional and Moral Standards
· Having Understanding of different markets
· Established and Integrated Network
· Large pool of talent and expertise
· Digital facilities
· Strategic Alliance risks
· Lack of use of technology
· Multiple Strategic Alliance options
· Multiple countries to target
ü Increase penetration in Singapore market through investments
ü Expand in other countries through joint venture. For example, partner with ICICI Bank in India
ü Use Information technology systems like ERP and CRM to manage operations
ü Use IT to integrate the operations of different branches of bank
· Economic factors like oil prices etc.
· Legal factors
· Government regulations
ü Use marketing techniques like Facebook marketing
ü Use mobile advertisement solutions to generate leads to pitch for cards and loans
ü Use benchmarking to learn from the operations of other banks in Singapore and other advanced nations like USA & Australia
UOB has global footprint which is expanded through both organic growth as well as through strategic acquisitions. It has made its mark in Southeast Asia with a global network of 500 plus offices. With presence in global market, the bank has understanding of different markets, corporate culture and their business mindset (Birkinshaw, 2016). The bank helps in creating greater access and growth in the regions where it has presence. It claims to have product and market expertise. The other strength of bank is its established and integrated network (Meyer & Su, 2015). Its strong global presence enables to provide consistent quality of experience it has more than 500 branches and offices across the network. The company has large pool of talent and expertise. The company has augmented digital facilities to make banking safer and simpler. The bank tries to broaden funding sources and diversify investor base. The organization policies, processes and practices are kept in place to maintain professional and ethical standards (Chang, 2016). The bank provides various service options such as equity crowd funding and venture debt.
The strategic alliance risks like costs of establishing the arrangement, cultural barriers, differences in ethical standards and corporate values, conflicting objectives and strategies two partners, competitive advantage or protection of proprietary technology, over dependence on other partners for competitive capabilities and essential expertise (Serrat, 2017).
The bank helps customers to seize opportunities across Asia. The bank may increase number of strategic alliances to achieve this purpose. It increases openness and connectivity across the region. Overall the bank continues to build strength in connecting businesses with different opportunities domestically and across regions, in exploiting technology to make banking easier and in providing right solution for customers.
The bank makes adequate provisions in different sectors like oil in case of slow economic growth to keep balance sheet strengthen. The bank should be judicious in their lending as compared to competitors.
The company has a good position in the market. It is among the leaders in market. Multilateral efforts like Association of Southeast Asian Nations (ASEAN) Economic Community, Belt reinforce cross border trade. The bank’s efforts in overseas banking resulted in increasing their cross-border activities more than their onshore activities. The bank is one stop shop for inter and intra-regional opportunities. To help small and medium sized enterprise the company is developing financial technology i.e. Fin Tech solutions with its partners. For example, BizSmart, Singapore’s first cloud-based solution is linked with business’ UOB account. It helps in payroll, inventory, resourcing and accounting (Shaikh & Karjaluoto, 2015). Mobile payment functions such as hiLife and snaapp apps have also been introduced by the bank. Young customers with entrepreneurial mindset are the major focus. UOB YOLO card is to support millennial lifestyle (Hitt, 2016).
The bank has adopted international strategy to create itself differently from competitors. There are differences in cultural, demographic and market conditions for different countries. There are different strategic options to enter and compete in cross border markets. These include maintain a national production base and export products to foreign counterpart, put an overseas franchising strategy, provide license to foreign firms to produce and distribute the firm’s goods, develops a wholly-owned subsidiary by either “greenfield” venture or through acquiring a foreign company and depends on joint ventures or strategic alliances with foreign nations (Tallman, S., & Pedersen, 2015). Based on the nature of UOB’s strategic objectives, its resources and capabilities, it needs and external factors it has opted strategic alliance for entering in the international market. UOB has also taken into account level of investment required and associated risks. It leads to sharing dealer networks and distribution facilities (Warner & Sullivan, 2017). It helps in directing competitive energies toward competitors. UOB establishes working relationships with key officials in the host-country government. There is certain risk associated with the strategic alliances. UOB has adopted transnational strategy to compete in international market. It thrives to become renowned global brand and also manages its actions in every branch (Della Porta & Marchetti, 2015). A transnational strategy is also called think global and act local approach.
I can say that strategy process model is one of the most important model that organizations should follow. With this course, I have learned that organizations must assess the internal and external stakeholders as the part of strategic assessment. From this study, it is clear that UOB has followed a different strategy. Through its strategic alliance it has tried to differentiate itself. The module has helped to understand when a company follows international strategy approach. It is not necessary that it wants to make only international presence but to compete locally also it has formed strategic alliance with global players. This has helped in transferring technological knowledge, resources and capabilities. It has provided a cost effective method for company to use its competencies fully. It extends competitive advantages in broader markets. Any company that strives to become industry leader must consider itself in terms of global market leadership.
In this course, I got the chance to learn about the various model of strategic planning like PESTLE analysis, SWOT models, Porter 5 forces models, etc. As learning I can say that organizations must use the combination of these models rather than using any single model. The company strategize to enter in cross border market to achieve low costs by economies of scale, to attract new customers, to exploit increasing purchasing power of other nations, to leverage core competencies and gain access to capabilities present in international markets and to expand business in wider area. There are three kinds of approaches in competing international market multi-domestic strategy, transnational and global strategy. Strategy is a long-term planning or game play. It is different from planning in a way that planning is static whereas strategy is dynamic (Johnson, 2016). Strategy considers multiple aspects. It has well defined process.
Strategy process model includes understanding the company. It deals with understanding company’s vision, mission and values. Then it is necessary to understand the impact of external environment. It includes PESTLE and PORTER analysis. It is then followed by internal analysis which determines company’s resources and capabilities (Rothaermel, 2015). The internal analysis helps in understanding company’s core competencies and value chain analysis. Based on understand of internal and external factors the company defines its Strengths, its Weaknesses, its Opportunities and its Threats. This SWOT analysis is the base of selecting any strategy. So, considering UOB, it has followed international strategy based on its SWOT factors. After selecting a strategy, it is necessary to define benchmarks. This benchmark is written document of what company wants to achieve and how it will achieve it. This whole process is part of strategy execution. It is equally necessary to implement the strategy well (Mabogunje, 2015). So, strategy implementation has following parameters like Leadership, Corporate Governance, evaluation of parameters etc. If the strategy is properly executed and implemented, it helps in achieving above average returns as well as help in achieving sustainable competitive advantage.
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