Strategic Management and Leadership �Longitudinal Strategic Development Study�
Introduction
Standard Chartered Bank offers consumer and wholesale banking products especially in Africa, Asia, and the Middle East. It provides personal banking services like loans, savings and accounts, mortgages, credit cards, investment advisory, mutual funds and employee banking, retail FX products, and retirement banking (Bloomberg, 2014). It also provides insurance services in conjunction with Prudential Life Insurance, in the form of travel, home, motor, health, motor and medical insurance. It provides wholesale banking products like transaction banking, trade finance, cash management, security services, financial market solutions, corporate finance services, and principal finance solutions. The bank also provides priority, preferred and international banking solutions, small, private, and medium sized businesses, online banking, and Islamic banking under the brand name Saadiq. The company was formed in 1854 and its headquarters are in London, UK (Yahoo Finance, 2014a).
The company is listed in the London Stock Exchange as well as in Hong Kong in China and Bombay and the National Stock exchanges in India. The Bank has seen itself grow over the past ten years. However, it has also had its share of difficulties here and there. This report seeks to identify issues that have taken place in the bank and looks at ways the bank can prevent recurrence in future. The report also looks at the current state of the bank and seeks to intervene in several of the sectors of the bank.
Computerization
At the beginning of the current century the bank implemented a product-steered instead of a geographic strategy as it extended its international reach. Standard Bank was the first South African bank in launching an inclusive Business service that allowed consumers to the bank’s, online trade and purchase in 2001. The fresh service, known as Standard Bank Business Online, integrated CATS 3 along with best 2000 (Standard Bank Group, 2012). The rising automation of services never meant the disregarding of the human factor rather it meant that institutions were being eased of numerous back-office functions, permitting staff more opportunities to meet consumer needs. A broad variety of products and services pointing to wealth formation were adopted. The focal point was to provide stylish products and services along with the preservation and development of relations (Standard Bank Group, 2012).
Liberty: Wealth Management
A fresh multimanager asset administration firm, Lodestone Investments as a joint venture was established in May 2001 involving Liberty, Investment Solutions, and Standard Bank. Afterwards it was renamed in 2003 as Stanlib Multi-Manager. In 2001, the acquirement of a regional investment manager known as Melville Douglas, created the foundation constituent towards the joint private bank program involving the Standard Bank group along with Liberty Group, harmonizing the global private banking capacities in Hong Kong, Jersey and Isle of Man. In May 2002 investment advertising, the asset managing, associated products along with unit trust functions of Standard Bank along with Liberty Group were combined with the creation of a mutual wealth management firm, Stanlib. After one year, Stanlib commenced its extension into Africa with the founding of Stanbic Investment Management Services which was done in Botswana (Standard Bank Group, 2012).
Standard Bank purchased ordinary shares that were previously not owned in Liberty Holdings Limited in 2008. Afterward Liberty Holdings obtained the shares in Liberty Group Limited via a share exchange arrangement, growing Standard Bank’s effectual interest inside Liberty to about 53.7%. Liberty had extended its functions to Kenya, Namibia, Swaziland, Botswana, Uganda, and Lesotho. Its acquirement of stake belonging to a Nigerian health insurance firm in 2009 emphasized its plan of expanding its dealings in terms of wealth options, geography, and circulation (Standard Bank Group, 2009).
Liberty: Bancassurance
Africa Limited’s Liberty Life Association resolved at its annual general meeting in May 2000 to transform its reference to Liberty Group that would greatly replicate the wider financial services mix. Standard Bank’s relationship with Liberty enabled the Standard Group to add a broad variety of insurance, health products, and retirement to a previously widespread banking products mix. Liberty Group’s acquirement of Liberty Ermitage Group presented a grip in the speedily growing substitute investment segment (Standard Bank Group, 2009). Ermitage owned functions in, Luxembourg, Bermuda, London, and Jersey. Afterward the Liberty group purchased a minor UK life brokerage firm known as, Hightree Financial Services that offered a channel for supply of the Liberty Ermitage services into UK retail market. Almost immediately subsequent to acquirement Capital Alliance Holdings Limited or (CAHL) which was a South African life insurance firm, during April 2005, Liberty Group predisposed off the offshore asset administrator, Liberty Ermitage along with Australian life insurance firm known as Prefsure, that was incorporated in the CAHL association, in addition to Hightree. It was revealed that the judgment to let go of Prefsure was informed Liberty Life’s objective of directing its life assurance dealings in the home area for the near future. Consequently, the incorporation of Liberty Active along with CAHL allowed Liberty to contacting the lower point market delivering a variety financial risk products (Standard Bank Group, 2009).
Reaching the Unbanked
During the year 2003, the Standard Bank Group disposed about Stanlib’s 25% to a regional empowerment conglomerate known as Newco, additionally in 2004, the group disposed about 10% interest of the Group’s South African banking dealings to a wide-based firm of black business. Liberty underwent another same dealing in 2004. In order to in a better way indicate the group’s configuration to an integrated banking and financial products company instead of an investment holding corporation the group June 2002 and resolved to change the Standard Bank Investment Corporation name into Standard Bank Group Limited (Standard Bank Group, 2009).
Its acquirement of Malawian’s Commercial Bank 60% along with 80% of formerly goverment-operated Uganda Commercial Bank, considerably amplified the group’s existence in the nations. In 2007, the earlier, originally named Stanbic Bank, was rebranded and called Standard Bank Limited. The 2005 establishment of Namibian Standard Bank Holdings Limited offered a formation that had the capacity to operate some the capacity to own particular Namibian holdings belonging to group rather than them continuing to be supervised through Standard Bank Group Limited. The bank introduced an office into the oil-wealthy Angola, the speediest rising economy in Africa. Complete banking operations started in late 2008. Nigeria with a bankable populace of beyond 30% it forms a significant place for Standard Bank. The Group in 2007 combined its Nigerian businesses together with IBTC Chartered Bank Plc, acquiring a commanding business in the combined venture, Stanbic IBTC Bank Plc; this extended the banks grip as the Africa’s biggest bank through asset base. Kenyan CfC Bank, in 2008 bought Stanbic Bank Kenya Limited adjusting its reference and called it CfC Stanbic Holdings Limited. The Group bought 60% of CfC Stanbic Holdings Limited leading to Stanbic Bank Kenya Limited being renamed to be referred to CfC Stanbic Bank Limited. In May 2008, Stanbic Bank Congo Limited established a complete operational branch in Lubumbashi permitting it to enlarge its operations DRC’s widely unbanked mining area (Standard Chartered, 2014d).
Sustainability
The Bank has dedicated its operations towards sustainable development along with aims to harmonize its planned goals with those requirements that clients, staff and shareholders have. This is attained through encouraging investment in health and welfare areas, education and projects expansion. The Standard Group is sensitive towards the hardships of energy preservation in developing nations where energy remains an indispensable growth driver and progress consequently; in 2008, the group performed its initial carbon footprint investigation. Additionally, in February 2009 the group implemented the Equator Principles the international corporations’ benchmark for preserving social and environmental threats in venture financing. Many initiatives were carried out all through Africa to finance the edification of underprivileged learners, whilst its HIV/Aids initiatives inside 94% of African nations where the group is in operational where it acquired a broad commendation during 2007-09. The Bank’s emphasis on investment ventures and project funding allows it to finance socio-economic growth in different regions in Africa, with specific concentration to food sustenance and the rising farming industry. Constructing infrastructure throughout Africa is a primary objective of the up-and-coming Africa Infrastructure Fund, this spearheaded by Frontiers Markets Fund Managers, which is a section of Standard Bank Plc. The international economic disaster that resulted from the US’s sub-prime disaster during 2008 emphasized the requirement for a worldwide advance towards poverty mitigation. The Standard Bank in April 2009 presented a memorandum together with International Finance Corporation which is a World Bank group associate, providing it contact to a over US$400 million worth of credit (Standard Chartered, 2014).
Growth Options
Prior to the appearance of the century, the Bank’s brand has been shouldering great weight globally and has been nominated as the best financial brand name in South Africa, grounded on reliability, responsiveness along with attraction. Additionally, the bank was designated the as being the top inside sub-Saharan Africa in varying reviews in the near the beginning 2000s. Whilst 2008 analysis conducted by The Banker magazine positioned the Bank Group 106th out of the globe’s best 1 000 banks, additionally in 2009 the group was positioned 223 out the globes 2000 by Forbes listing of the universe’s largest firms (Standard Bank Group, 2012). Standard Bank’s wider plan is to keep on creating a portfolio of expansion alternatives in monetary services within developing nations. This has been achieved through focusing on retail banking, wholesale banking (within South Africa along with rest of emerging Africa), and wealth administration (within South Africa via Liberty Life and Stanlib, and globally). The group’s roots within Africa signify its understanding of the commodity-steered economies within which contact to funds is inadequate making growth a priority. Through conscientious lending the bank has been capable to offer empowering banking and efficient banking solutions in order of meeting the wants of broad variety small and medium enterprises (Standard Bank Group, 2012). Standard Bank in 2007 foreign possession was positioned at approximately 25%. Afterwards in a milestone deal, the Standard bank and Industrial and Commercial Bank of China Limited adopted a strategic joint venture. Bearing in mind that ICBC is the globe’s biggest bank regarding market capitalization and consequently ICBC turned out to be a 20% shareholder within Standard Bank Group, this took place in 2008. Overseas ownership augmented to approximately 40%, this left Standard Bank remaining a mainly South African-owned entity. The ICBC project comprised of a proposal towards worldwide resource financing of over $1 billion established to concentrate on business openings within both Africa and China, purposely in regards with the mining and energy industries. Additionally, Standard Bank in 2009 introduced a consulting company within Beijing along with making an application to establish a Beijing Representative Office (Standard Bank Group, 2009).
Current Strategic Position
Sharpening Strategic Performance at Standard Chartered
The Standard Chartered Bank Group holds annual strategy boards in June. The strategy board meetings are intended to highlight the various areas the company has a capacity to exploit and how they can exploit (Partington, 2014). They explore the potential of growth for each of the company’s market, and how the end regulatory market has changed. In June 2013, they understood that they were going to have a smaller fraction of cash to their exposure owing to the low revenue of the preceding year (Standard Chartered Bank, 2014c). They therefore had to make focused decisions on what to invest the money on and what to avoid.
Looking back at the results in the past, the bank has had a lot of money on its hands and made a lot of acquisitions. For 2013, though, they decided to make investments that were based on the core values of the company (Standard Chartered Bank, 2014c). According to the core values of the company, the bank offers financial services to companies and individuals who drive trade and investments in Africa, the Middle East, and Asia. They therefore decided to focus on the markets they know well (Africa, Asia, and the Middle East) and mainly concentrated on wealth creation, investment, and trade (Standard Chartered Bank, 2014b). Founded on this idea, they have set up a strategic framework linking strategy to performance.
There are five main components to this strategy. First, they put down five strategic aspirations that work towards growing the core. Second, they wrote down five tests upon which they would expose peripheral businesses to ensure they worked in such a way that they were enhancing the core. Third, they did a reorganization of their businesses and regions to ensure that that their objectives were aligned to the core and the strategy of the company. Fourth, they harmonized the opinions of both the shareholders and the management. This was done by devising a strategy that would lead to both short-term and long-term growth of the company. This was done by putting down five metrics, which now comprise of both capital accretion and positive jaws. Finally, they have set down five priorities of 2014 which would help to ensure that all people were heading towards the same goals (Standard Chartered Bank, 2014c).
Client relationships
The company has five strategic aspirations. These aspirations revolve around creating better client relationships rather than products and transactions. The bank believes that it is able to achieve better results by focusing on the next five hundred new clients so as to create a good impression that would encourage future trust on the company that would consequently facilitate business (Standard Chartered Bank, 2014c). Effective 1st April, under the leadership of Mike Rees, the bank has combined the consumer section with the wholesale section to create three client segments and five product groups (Standard Chartered Bank, 2014c).
The bank has, for example seen the need to tap into the mid-sized corporate clients who contribute for up to 60% of all the business activities of the company. They therefore initiated Commercial banking for this segment (Standard Chartered Bank, 2014c). The bank realized the effort it put on consumer and Wholesale banking, which together contribute less than 10 % of the company’s revenue (Standard Chartered Bank, 2014c). The company is now targeting exporting and high growth industries, which have more potential. The bank has also combined Commercial banking with Private Banking to enable cross referral (Standard Chartered Bank, 2014b).
Trade position
While Standard Chartered Bank has been apparently while handling strategic management, the company has its woes when it comes to the stability of its stocks. Currently, the volumes traded seem to fluctuate a lot. The 52-week range has been between £1173 and £1581. The one year return is at -18.53 % (Bloomberg, 2014). Below is a technical analysis chart showing the volume and share fluctuations over the past three months
Standard Chartered Analysis Chart
(Source: Yahoo Finance, 2014b)
The company recently recorded a 20% drop in profits (Bloomberg, 2014). The drop has come in the wake of fears that the company would be penalized by the government over allegations of not following anti-money-laundering laws. The company fears that the fine could be around $100 million (Partington, 2014). This has led to fears by investors regarding how big the penalty can get.
Macro environment
The market position of the Company has been dependent on certain factors of the macro environment. These include the Middle East Crisis, the Chinese Economy, and the recent economic crisis. While each of the factors has affected the state of the company differently, the summed impact has been enormous (Standard Chartered Bank, 2014a).
The Middle East Crisis came as a revolution in the Middle East Countries. The political situation in the country led to instability in the market. The crisis has also affected parts of Asia and Africa. According to Davis (2014) of the morning Star, this is definitely going to affect the profitability of the business. The instability is however wearing out and business is slowly returning to normal.
The growth of the Chinese market as an industrial market has improved the prospects of Standard Chartered Company. The rich resources of China coupled with the cheap labor and a good economic situation have improved the economic situation significantly. According to Davis (2014), Hong Kong is the most prosperous market of the company.
Industry and Competitive environment
The Banking Industry in the target markets of the company has been mostly competitive. Owing to the fact that it was least affected by the recent economic crisis, it has attracted a lot of competition. The major competitors in the Asian, African and Middle East Countries are the HSBC, Citigroup and JP. Morgan Chase (Davis, 2014; Partington, 2014). All these are major companies and offer a real competition to the company. Barclays has also offered stiff competition in parts of the African market.
Changes and trends in environment
The markets have been changing a lot in the recent past. Technological, economical, social and political factors have been catalytic to the changes and trends. The trends have brought with themselves new competition for the Banking industry especially from non-bank banks. These are institutions that offer limited financial services to individuals and small businesses.
First, there has been mobile banking. Mobile banking has been especially well received in the target market of Standard Chartered Bank. The technology allows individuals to access their funds through their mobile devices as well as other financial services. Mobile banking has been accompanied by online banking. To deal with this trend, banks have adopted these trends by arming their consumers with applications that meet this need (Opiyo, 2014).
Second, the banking industry has met with some disruptors. These include peer to peer lenders and mobile wallet solutions (Opiyo, 2014). These are services that would be offered by banking institutions if it were not for the disruption of such companies.
Finally, virtual banking is an emerging trend in some banking institutions. It offers more convenient services to consumers and offers cheaper methods for the bankers. This trend is one that may take a central role in the future of banking. It involves banks making it possible for consumers to get access to a virtual teller through an internet connection.
Internal Resources and Capabilities
The bank has over 1600 branches and 5600 ATMs in over 70 countries worldwide (standard Chartered Bank, 2014a). The bank has a total asset base size of $674 billion according to the end of year financial statements (2013). The bank also employs over 86,000 employees. The latest results for the first half of 2014 showed a drop in both profits and revenue. The results however also showed a 5 % and 3 % rise in trade and cash respectively. The bank also has a customer base of more than 2 million (Partington, 2014).
Organizational structure
The standard Chartered Bank has successfully adopted a new organizational structure. In the new structure, the organization integrated the consumer and the wholesale section to form a new structure with five global product segments. The combined business system is led by Mike Rees (Standard Chartered Bank, 2014b). The new bank segments include Corporate Finance, Financial Markets, Retail Products, Transaction Banking and Wealth products. The structure is intended to offer more service to the more valuable client groups rather than concentrating on groups that do not add value to the company.
Currently, the company bears no good news. First, the company is trying to resolve the scandal. Secondly, the company must remain at the forefront of consumer trends like technology. Thirdly, the company must device means to improve its standing at the bourses. The company is supposed to improve its name as a leader in the banking industry . Fourthly, the company is trying to beat its competitors in the consumer industry. Finally, the company must device means to remain relevant in all its customer segments despite the economic hardships that they are experiencing (Standard Chartered Bank, 2014b). The company should therefore device a strategy that is able to handle all the issues and at the same prevents similar and other issues from happening.
Future Strategies
Despite the high organizational ability of the company, there still seems to be issues with the ability of the company to perform. The major challenges have been legal issues especially those that surround disregard for money laundering laws. The company should adopt measures that help to minimize the same conflict happening again. The company has also suffered due to the conflict that was based in the Middle East, Asian, and African Markets with regard to the Islamic Revolution. Other issues regard the trends and changes in the market, which have prompted the company to keep altering the products to handle the needs of the consumers.
The company therefore needs to put down a strategy that will be needed to deal with current issues and others that may arise in the future. The strategy should also be cost effective and customer friendly. Where possible, the bank should adopt strategies that are customized for proper customer delivery. The basis of the strategic plan should be on the company objectives to ensure the plan does not derail the company from its objectives (Standard Chartered Bank, 2014b).
Available choices
Regarding legal issues, the company should revise its organizational culture. The company has a good policy of adhering to the regulatory authorities from host countries. It has, however, been in conflict with authorities over compliance of certain laws. The company has met with a similar scenario in the past with the Middle East. It failed to comply with authorities regarding sanctioning some Middle East countries that were in conflict and where democracy was undermined. Failure to comply lost investor trust in the company hence leading to a poor volume and a drop in the price of shares.
The company should now adopt and implement a culture that promotes the observance of the law and regulatory authorities. There are various methods that can be used to implement this new culture. First, the culture should be integrated into the vision, mission, goals and objectives of the company. The company, by so doing will add a sense of priority to adopting this culture. Second, the culture should be promoted to the employees by using brochures and training. This will ensure that employees to avoid recurrence of the same errors in the future.
The Bank should learn that most of the successful companies have an ingrained culture. Some of those companies that have a highly regarded cultural system include Apple Computers, Coca-Cola Company and Samsung Computers (Partington, 2014). A good culture is therefore not only important for avoiding conflict bit will also help to increase the performance of the company. Some companies adopt a culture that through encouraging it at the inception of the company. Others adopt a culture by being pressured by conflict and problems (Partington, 2014). This is the case with Standard Chartered. A good culture needs, however, to keep being improved according to the state surrounding the company.
The company should follow in the footsteps of Barclays who adopted the Salz report towards the adoption of a new culture. The Salz report required the bank to employ 1500 compliance staff members to help in coordinating the change process (Saigol, 2013). The members were to help in the training, and correcting decisions that were made within the leadership system. Third, the company should device a clear game plan that will help towards the attainment of the goals (Davis, 2014). Finally, the company should have regular assessments to track the progress of the organization towards the adoption of the new values.
Alternatively, the bank could put down the rules and train the employees about them and how important they are. Due to the risk involved upon breaking such regulations, the company should employ strict measures to employees who are found breaking them. This way, the bank will reduce the chance of having similar occurrences. While it would be advisable to consider different measures for depending on the level of violation, it would also be necessary to ensure that such measures were strict enough to discourage.
Some of the markets are currently unstable. To work profitably with unstable markets, the company should consider laying off workers during hard times. Another option would be to negotiate for new salaries with employees to save the company from closing down. The company will only then be able to make profits regardless of the times.
The company has been prompt in adopting new technologies. It has partnered with both Visa and MasterCard to provide it with card services that are conventionally accepted (Opiyo, 2014). It has also adopted online banking, which enables consumers to access their funds more conveniently. The company should however still put up measures to ensure that it is always ahead of technology. It can do this by employing a few individuals or contracting independent companies to provide it with advice with regard to technological options (Opiyo, 2014). This will help to ensure that markets are properly explored before new technologies are adopted hence saving costs and providing valuable products to consumers.
The bank went ahead and disregarded calls for sanctions by the US Department of Defence to Iran during those times when the country was in turmoil. This caused them a fine of $327 million (Isidore, 2014). Since then, the bank has been experiencing low volumes of sales. The shares also went down as investors saw the action both as one that had no regard for promoting good governance and as one that had no regard for avoiding risk (Partington, 2014). The bank should be more considerate when making future decisions. The decisions the bank makes should always be intended to be within certain limits. First, they should be decisions that are likely to be profitable to both the company and its shareholders. This way, the company will retain investors in the long run. Second, the company should only make decisions whose risk factors arte sustainable. This will prevent unnecessary losses from occurring. Finally, the company should be watchful of the investors to understand what they feel about certain issues (Standard Chartered Bank, 2014b). This way the company is likely to reduce the risk of losing investor confidence and making the company shares to appear unstable.
Assumptions made
This report has been created using only the information that is available on the internet and in the company’s financial statements. Some issues may have passed unnoticed or they may have failed to be available at the point of conducting this research. All the activities that are included in this report have been made available to the company either by the company or by third parties. Information that may not have been released by the company either because the company was not ready to release it or the company held that information secret was considered irrelevant to the report. However, the report has been conducted with utmost faith intended to create a strategic plan for the company for a prosperous growth.
Conclusion
In conclusion, the bank has been successful in running its businesses. It has been watchful of the market trends when making decisions that may have an impact on its success. The company has, however, made some mistakes in the past that it needs to correct. These mistakes include inability to move with the trends, conflict with authorities, and having values that conflict with those of investors. The company should adopt measures that protect it from having problems that are in the past from recurring.
References Bloomberg, 2014. STAN: London Stock Quote – Standard Chartered PLC. [Online]
