STRATEGY-FORMULATION FRAMEWORK:

Strategy-Formulation Framework can be integrated into three-stage decision making framework

THE INPUT STAGE:

External Factor Evaluation (EFE) Matrix Competitive Profile Matrix (CPM) Internal Factor Evaluation (IFE) Matrix

THE MATCHING STAGE:

Threats-Opportunities-Weaknesses-Strengths (SWOT) Matrix Strategic Position and Action Evaluation (SPACE) Matrix Boston Consulting Group (BCG) Matrix0 Internal-External (IF) Matrix Grand Strategy Matrix

THE DECISION STAGE:

Quantitative Strategic Planning Matrix (QSPM)

THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX:

The SPACE Matrix is an important matching tool. Its four-quadrant framework indicates that whether aggressive, conservative, defensive, or competitive strategies are most appropriated for a specific organization. Internal dimensions [FS] and [CA] External dimensions [ES] and [IS].

Assign a numerical value ranging from +1 (worst) to +6 (best) to each of the variables that make up the FS and IS dimensions. Assign a numerical value ranging from 1 (best) to 6 (worst) to each of the variables that make up the ES and CA dimensions.

SPACE MATRIX OF ASKARI BANK

FINANCIAL POSITION Investment decreased Strong Liquidity Position Strong Cash flow position The Revenues increased Net Income After Tax increased Net Profit Margin increased Return On Equity INDUSTRIAL POSITION Strong potential for growth Computerized Banking system Potential for further increase in profits Growth prospects for Islamic Banking Electronic Banking +2 +2 +4 +6 +4 +18 +1 +6 +4 +4 +4 +4 +2 +25

ENVIROMENTAL STABILITY High Inflation rate Political Instability Competition from Foreign and Local banks Similar Products offered at higher rate by other banks Changes in laws by government Strict SBP regulations COMPETITIVE POSITION High quality services Customer oriented banking Vast product variety First ever free visa card Strong top management CONCLUSION ES Average is 17/6 = -2.8 IS Average is +18/5 = +3.6 CA Average is 7/5 = -1.4 FS Average is +25/7 = +3.5 Directional Vector Coordinates: x-axis: (-1.4) + (+3.6) = +2.2 Y-axis: (-2.8) + (+3.5) = +0.74 -1 -2 -2 -1 -1 -7 -1 -3 -2 -4 -3 -4 -17

Conservative

+6 +5 +4 +3 +2 +1

Aggressive

(2.2, 0.74) IS

CA -6 -5 -4 -3 -2 -1 -1 -1 -2 -3 -4 -5 Defensive -6 ES +1 +2 +3 +4 +5 +6

Competitive

EXPLANATION: Directional vector of the Bank is located in aggressive quadrant (upper-right quadrant). It shows that the bank has excellent position to use its strengths, take advantage of external opportunities, overcome internal weaknesses, and avoid external threats. Therefore, market penetration, market development, product development, backward integration, forward integration, horizontal integration, conglomerate diversification, concentric diversification, horizontal diversification, or a combination strategy can be feasible according to specific circumstances.

THE BOSTON CONSULTING GROUP (BCG) MATRIX:

The BCG Matrix graphically portrays differences among divisions in terms of relative market share position and industry growth rate. Relative market share position is defined, as the ratio of a divisions own market share in a particular industry to the market share held by the largest rival firm in that industry.

BCG MATRIX
Division Revenues Percent Revenues 33% 42% Profits (000) 371,276 393,116 Percentage 34% 36% Percentage Market Share 45% 58% Percentage Growth Rate +16 +15

(000) Car Finance 2,167,252 Credit Card 2,758,321

Islamic Banking Home Loan

985115 656743

15% 10%

218398 109199

20% 10%

62% 8%

-16 -2

Islamic Banking 0.62, -16

Home Loan 0.8, -2

+20

1.0 0.0
Credit Card

Relative Market Share Position in the Industry

.50

Industry Sales Growth Rate (Percentage)

0.58, 15

Car Finance

0.45, 16

-20

Interpretation:
Car finance division have a low market share position, yet they compete in a high growth industry. These businesses are called as Question Marks, because the organization has to decide whether to strengthen them by pursuing an intensive strategy (Market development, Market Penetration, Or Product Development) or to sell them. Credit Cards represent the organizations best long-run opportunities for growth and profitability. Credit card division has a high market share position and a high industry growth rate, therefore the bank should invest more in this division to maintain or strengthen their dominant position.

Forward, Backward, and Horizontal Integration, Market Penetration, Market Development, and Product Development are the appropriate strategies for this Credit Card Division. Home Loan division has a low Market Share Position and competes in a slow or no market growth industry; they are dogs in the firms portfolio. Because of their weak internal and external position, the businesses are often divested or trimmed through retrenchment.

GRAND MATRIX:
The Grand Matrix has become a popular tool for formulating alternative strategies. All organizations can be positioned in one of the grand strategy matrixs four strategy quadrants. A firms division can be likewise positioned. Grand Strategy matrix is based on two evaluative dimensions

Rapid Market Growth

Quadrant II
1. 2. 3. 4. 5. 6. Market Development Market Penetration Product Development Horizontal Integration Divestiture Liquidation

Quadrant I
1. 2. 3. 4. 5. 6. 7. Market Development Market Penetration Product Development Forward Integration Backward Integration Horizontal Integration Concentric Diversification

Weak Competitive Position

Strong Competitive Position

Quadrant III
1. 2. 3. 4. 5. Retrenchment Concentric Diversification Horizontal Diversification Divestiture Liquidation

Quadrant IV
1. 2. 3. 4. Concentric Diversification Horizontal Diversification Conglomerate Diversification Joint Venture

Slow Market Growth

Interpretations:
Bank falls in the first quadrant of the Grand Strategy Matrix. The Bank is in excellent strategic position. For the bank, continuous concentration on the current market (Market Development, Market Penetration) and products (Product Development) is an appropriate strategy. If the bank is highly committed to a single product, then concentric diversification may reduce the risk associated with a narrow product line the bank can afford to take advantage of the opportunities in several areas. It can take risk aggressively when necessary.

Quantitative Strategic Planning Matrix

Strategic Alternatives

Key Factors Opportunities Advancement in Islamic Banking Expand Branch Network Enhance Product Portfolio

MP Weight AS TAS 0.20 0.05 0.05 4 2 0.8 0.10

PD AS TAS 4 1 3 0.8 0.05 0.15

Get Into E-Business 0.05 Provide Financial Consultancy 0.10 Threats Government Policies 0.10 Strict SBP Regulations 0.05 2nd Hand Car Finance By City Bank 0.15 Cash Card Introduced By MCB 0.10 Branches of Nationalized Banks in all Cities of0.05 Pakistan 1.0 Strengths Bank Name 0.05 Credit Card 0.10 Strong Top Management 0.05 Aggressive Banking 0.15 Bad Debt Ratio 0.05 Committed Workforce 0.05 Financial Ratios 0.05 Customer Satisfaction 0.05 Islamic Banking 0.05 Weaknesses No International Branch Network 0.05 Weak IT Structure 0.05 Trade Through NOSTRO Accounts 0.05 Less Job Rotation 0.05 ATM not available In Every Branch 0.10 No Marketing Department 0.10 Sum Total Attraction Score 1.0

1 2 1 1 4 2 2

0.05 0.20 0.10 0.05 0.60 0.20 0.10

1 3 3 4 1

0.10 0.60 0.45 0.40 0.05

2 4 1 2 2 1 2 4 3 1 2 2 1 4 4

0.10 0.40 0.05 0.30 0.10 0.05 0.10 0.20 0.15 0.05 0.10 0.10 0.05 0.40 0.40 4.75

4 3 4 4 1 3 3 3 4 3 1 1 3 3

0.20 0.30 0.20 0.60 0.05 0.15 0.15 0.15 0.20 0.15 0.05 0.05 0.30 0.30 4.85

AS = Attractiveness Score Attractiveness Score: 1 = not attractive 2 = somewhat attractive; 3 = reasonably attractive 4= Highly Attractive MP= Market Penetration

TAS = Total Attractiveness Score

PD=Product Development

Interpretation:

The Bank must consider two alternative strategies i.e. Market Penetration, and Product Development. The total attractiveness score of Market Penetration is 4.75 and for Product Development is 4.85. Therefore the strategy which the Bank must adopt is Product Development as the total Attractiveness score of this strategy is the highest i.e. it appears to be the most attractive and suitable for the bank.