STATE BANK OF INDIA: BATTLING FOR SHARE It was eve of an education fair when Ramamurthy was approached by a group of MBA students for a summer project. Kavita and Divya, first year MBA students, looking very confident approached Ramamurthy and presented their proposal. Ramamurthy discussed with them about the evolution SBI went through in the last decade. State Bank of India (SBI) is a Public Sector Banking Organization (PSU), in which the Government of India is the biggest shareholder. It is the largest bank in India and is ranked at 380 in 2008 Fortune Global 500 list, and ranked 219 in 2008 Forbes Global 2000. Measured by the number of branch offices, SBI is the second largest bank in the world. SBI traces its ancestry back to the Bank of Calcutta, which was established in 1806; this makes SBI the oldest commercial bank in the Indian subcontinent. SBI provides various domestic, international and NRI products and services, through its vast network in India and overseas. With an asset base of $126 billion and its reach, it is a regional banking behemoth. In 2008 SBI was ranked 380 from a rank of 495 in 2007. As per fortune 500‐2008 following are the data for SBI in $ million. • Revenues: 22,402.2 • Profits: 2,225.0 • Assets: 255,854.9 • Stockholders' Equity: 15,263 The SBI group companies include SBI Capital Markets Ltd, SBI Mutual Fund (A Trust), SBI Factors and Commercial Services Ltd, SBI DFHI Ltd, SBI Cards and Payment Services Pvt Ltd, SBI Life Insurance Co. Ltd ‐ Bancassurance (Life Insurance), SBI Funds Management Pvt Ltd, SBI Canada. SBI was rechristened as State Bank of Indian in 1955 from Imperial bank of India. The decade of 2000s was a turning point in the Indian banking industry. It brought out a major transformation in the working style of Indian banks. With several competitors gaining ground in Indian Territory, SBI was facing constant threat of takeover. The exhibit below maps the banking industry using porter’s five forces model. The model shows that there is huge competition in the banking industry and that the customer is the king. Banks that provide good customer service and are responsive to the market in the long run would win. Bargaining power of customers (loan receivers) is high due to possibility of multiple banking Threat of new Bargaining power entrants is high as of suppliers (a/c MNCs with large holders) is high capital power are due to strong likely to enter into the arena 5 forces competition analysis Competitive Threat of Rivalry is high as substitutes is low there are many as banking is more private players convenient and with the state of safe investment the art technology 2 Porter’s Five Forces Model for Banking Industry In 2001 SBI appointed KPMG as a consultant for preparing an IT plan for SBI. In 2002, SBI launched a project to network more than 14,000 domestic and 70 foreign branches. All branches were computerized but on decentralized systems. This was the time when competitors like ICICI Bank and Citi Bank with technological competence entered Indian market and posed immediate challenge for SBI. They carried superior customer relationship management systems and responded very quickly to customers. Yielding to them would require SBI to restructure its business. Either fight for competency or go out of business. In 2004, SBI implemented business process reengineering and rolled out six‐sigma. It launched an initiative of core banking systems for integrating all its branches and by 2008, SBI became the second back in the world to have 10,000 branches. 2008: State Bank of India on 2004: Business becoming the Process Re‐ second bank in engineering the world to have 2002: SBI launched implemented and 10,000 branches a project to six sigma rolled network more than out. SBI launched 14,000 domestic initiative for core 2001: KPMG was and 70 foreign banking systems appointed as a offices and for integrating all consultant for branches. All its branches. preparing an IT branches plan for SBI. computerized but 1955: Imperial Core banking on decentralized Bank of India proposed, FNS, systems. became State CS and Comlink Bank of India. selected for implementation Brief history of transformation at SBI SBI has the largest market share in banking sector and it is ahead of its immediate competitors, namely, ICICI Bank and Axis Bank. Although SBI is the largest bank, Ramamurthy carried a grim smile over his face. Leaning over the desk he spoke to Kavita and Divya, “Although we are the best in the market, we are losing market share to other banks. We are losing share of our High Net Worth individuals.” High Net Worth individuals are those who have invested more than ten lakhs with us and carry high potential for investment. However, since the entry of private players in the market it has been losing market share, particularly of the high net‐worth individuals who are important customers of State Bank of India. With their latest technology and customer oriented services these players were able to steal a considerable pie of the market share of the State Bank of India. Promising to look into the matter, Kavita and Divya took leave of Ramamurthy promising to investigate the matter. The exhibit below shows the brief history of transformation at SBI. Strengths •Nationalized bank •Fair practices •Goodwill in the market •Largest network Threats •Competition from private Opportunities SBI SWOT and international banks •Rural banking ANALYSIS •Customer retention due to multiple banking •Loss of Market Share Weaknesses •Customer Care •Quick Operations MARKETING STRATEGIES SBI took several initiatives to capture the market pie in 2008. SBI has adopted various marketing strategies for educating customers about its products and services, particularly the asset products. The various marketing strategies of SBI are discussed below: Participation in various consumer exhibition and meetings SBI multi‐product sales team regularly participates in the exhibitions / melas organized by various sponsors (e.g., SSI‐Small Scale Industries). SBI finances loans to the entrepreneurs through this channel. SBI also sets us booking counters are various trade‐fairs and industrial fairs where it offers loans at concessional rates to borrowers for booking at those counters. Apart from financing loans to the borrowers, SBI uses these meets as an opportunity to educate people about its various personal segment (p‐segment) products and services. Tie‐ups with builders / car and other vehicle dealer SBI has entered into financing agreement with various builders, cars and other vehicle dealers to finance the customers at the existing market rates. Usually, we find dealer advertising purchase of their vehicles at cheap rates. This is possible through a loan agreement with the banks. Festive loan products SBI takes advantage of festive seasons, such as Holi, Diwali, Christmas, New‐Year for propagating their loan products. During these periods it ties up with various dealers to organize finance for customers who wish to purchase cars or other vehicles during the festive period. During festive periods it offers XPress credit and festival loan also to the customers. Advertising in TV and Newspapers The advertising strategy is centralized at Mumbai office for advertisements in TV and Economic Times / The Times of India. The famous Chiman Lal Charlie Ad placed in TV has also won awards. SBI campaigns also attempts to explain why it is better than other banks (See Figure 9). For advertisement into other National dailies and local dailies their advertisement strategy is decentralized at the local head‐office level. SBI has launched an education initiative to educate its customers about ATMs, its account opening services, its wide network, home loan and various other loan products and so on. The advertisements are regularly published in local and national dailies. The bank has taken the positioning of Pure Banking emphasizing that SBI does what it does best: Pure banking. The bank has now taken the tagline" Pure Banking , Nothing else", which takes a dig at new generation banks which spend lot of time doing non‐banking financial services. A new TV commercial is also running showing a young guy getting impressed by the services offered by SBI, which is his parents’ bank. The recent print and TV commercial are aimed at shedding the "old public sector bank" image of SBI and make it more relevant and attractive to the young customers. The bank is now running a mix of rational, humorous and emotional advertisement to promote the bank. Oral Marketing SBI has appointed various customer relationship officers and assistants at the 10 branches of SBI, Bilaspur. These officers take care to provide the relevant information to the customers who visit their offices. They help the customers with various products and services of SBI. Professional Offerings SBI has also several offerings directed towards professionals who wish to set up their own businesses. For example, Doctor Plus/ Dental Doctor Plus is a finance scheme directed towards the Doctors/ Dentists who wish to set up their own clinics/ dispensaries and for purchasing medical equipments. Similarly, SBI’s Advertisement they have SBI Shoppe scheme which is directed towards other professionals like beauticians and other service‐oriented people encouraging them to set up their own establishments for rendering services. SBI has a well‐trained multi‐product sales team (MPST) which educates its customers about these products and services. Ads at various display boards SBI also advertises at various billboards about its products and services TARGETTING RURAL MARKET In 2008 SBI planned to capture the rural market of India. Establishing a bank in a rural area is a costly affair. However, the technological advancements made the possibility of banking over mobile from anywhere in India. SBI launched mobile banking in March 2009 with a vision to capture rural market without needing to establish any physical premises there. Along with SBI, ICICI and few other banks also launched Mobile banking. Mobile banking refers to conducting banking activities using a mobile device, whereby customers can access their accounts to check account balances, transfer funds, pay bills, and perform various other transactions. Mobile banking reduces delays in banking transactions and affords time to employees for other banking services. The introduction of mobile banking follows the relatively successful introduction of Internet banking in India, whereby customers can access their bank accounts, through the bank’s web site. Since, the number of Internet users is small in comparison to mobile phone users in India, the mobile phone network is the most likely platform for value‐added services such as online banking and mobile commerce (Manson, 2002). Several issues, both technological and cultural mar the adoption of mobile banking. Vital Analytics (2009) reveals fast growth of Mobile Banking in Urban India. Around 40 million users in India are using mobile banking in Urban India. The most widely used services in mobile banking are checking account balance (91%), Viewing last three transactions (65%), Cheque status (48%), payment reminders (48%) and requesting a cheque book (44%). However, although promising, the adoption of Mobile Banking has so far been dismal. Security concern is the biggest barrier to adoption of mobile banking. SBI undertook several security measures to allay user’s security concerns. Indian Government has also passed legislation covering mobile banking practices in India. Still the adoption of mobile banking is far from expected. Particularly in the target market (rural areas), there is hardly any adoption. Lack of awareness of these security enhancing approaches could be one of the other major reasons for poor adoption. The tradition and culture of India plays a vital role in how Indian users view and adopt mobile banking for their transactions. It would be interesting to know if there are factors that mar adoption beyond the lack of awareness or faith in security practices of Indian banks.
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