Business Decision-Making in Bank - Essay Example

? BUSINESS DECISION MAKING By: Task 1 Trend Analysis of success and failure This study involves an analysis of thetrends of customer structure in the Bank DM for a period of five years between 2006 and 2010, to enable the management to make critical decisions leading to changes in the bank. In a report released by the bank’s personal Banking Director, the bank’s regular clients have been fluctuating between 15021 and 16110 from 2006 to 2010, with the highest number of regular clients recorded in 2007 while the lowest in 2009 (Institute of Business and Management, 2012). Within the five year period, the number of elite clients has risen from 453 in 2006 to 1124 in 2010. However, there was a sharp in the number of this category of clients in 2007, with the bank recording only 411 Elite clients (Institute of Business and Management, 2012). Additionally, the report shows that the number of Preferred clients has grown by approximately 30 per cent, rising from 3148 in 2006 to 3809 in 2010 (Institute of Business and Management, 2012). This rise has been steady except for the year 2008, which experienced a sharp fall in this category of clients (3148), as compared to the previous year’s 3551. The same trend has occurred in the amount of deposit, where the maximum deposit for the regular clients was 690,354,000 in 2010 (Institute of Business and Management, 2012). The success of the bank has not been on a regular trend though. There has been a mix between the years of success and the drops in terms of deposits. Rating success and failures in terms of income, the final year 2010 indicated success for all the three classes of clients except for a drop in 2007. The remaining years have shown an indicator to financial growth in income, considering that it has been a continuous trend of progressive increase from 2008 to 2010. Comparing each class for every year, regular clients outnumber the rest of the classes, followed by the preferred class and finally the elite class. Perhaps owing to that, the amount of deposit for the regular clients has been the greatest followed by the preferred class and eventually the elites. 1.2. Data Analysis and Summary The table below shows the analysis of the data for all the clients of the bank DM. It shows the average and the mean for all the five years. However, the function for computing modes did not function because none of the values appeared more than once. Table 1: Data Analysis table for the bank DM for performance from 2006 to 2010 (i). From the analysis, it appears that the regular clients are more on average than all other clients, followed by the preferred clients then the elite clients. The deposit balance for the regular clients is also higher than for the categories of clients, followed by the preferred clients then the elite clients in the third rank. The same result is observed for the service income, where the regular clients lead followed by the preferred and finally the elite clients. From this analysis, the most advisable decision Bank DM executive committee can make is to develop marketing strategies for the other two client categories. The strategies can begin from analyzing customer needs concerning the preferred and the client elite accounts. After the analysis, there are two optional actions that the bank can consider. First, there should be a more structured sales promotions program for increasing the performance level of the less performing accounts. The customer satisfaction level can enable the executive committee to improve the qualities of the accounts. If the sales promotions do not yield the expected outcomes, the next option is to eliminate the accounts from bank and develop a better account product for the preferred and the elite customers. (ii). The second analysis uses measures of dispersion such as variance and standard deviation of the distributions of the numbers for the three banks for all the five years. The measures of dispersion appear in the table below Account Type Number of Accounts Deposit Balance (000) Service Income (000) Standard Deviation Regular 495.3105087 $77,544 140.258 Preferred 255.7825248 $9,038 $75 Elites 327 $13,617 $95 Variance Regular 245332.5 $6,013,112,894 $19,672 Preferred 65424.7 $81,681,743 $5,679 Elites 107143.2 $185,431,174 $9,092 Table 2: Analysis of measures of dispersion for bank DM from year 2006 to 2010 From the standard deviations, the analysis shows that the regular accounts have a deviation of 496 accounts from the mean value (Kline, 2010). The next in rank is the preferred clients, with a standard deviation of 256 clients from the mean value. The third is the elite clients with a standard deviation of 327 clients from the mean value. The standard deviations mean that there is a space for growth in the number of accounts. In the deposit balance for the accounts, we measure the standard deviations, but we note that each of the measures is in thousands. The regular accounts have a standard deviation of $ 77,544; the preferred clients have $ 9038 while the elite accounts have $ 13617. It shows that the three account types have potentials for growth by the measure of the respective standard deviations. The same applies to the service income, where the regular, preferred and the elite accounts have a standard deviation of 140.26, 75 and 95 respectively. The variances of the three account attributes also indicate the measure of growth that the three accounts have. iii). Trend Lines Figure 1: Trend lines for Deposit amounts Figure 2: Trend lines for Service Incomes The trend lines are reliable because from the year 2008, there is no fluctuation in the amounts of deposit and the service incomes. All the three lines in each case predict an upward growth for 2011. This analysis cannot precisely predict the exact amounts of deposit and service incomes but the gradients are positive for the three trend lines. iv). The trend lines from the trend analysis present analytical results. The results show that even though the earlier years have a lot of fluctuations, the remaining years have improved performance for all the three account types (Morato & Morato, 2013). Even so, the variances and the standard deviations imply that there is a lot for the Bank DM to do to improve the performance of the less performing client accounts. The regular accounts are still going to be the best performing client accounts if all factors remain the same, according to the trend analysis and the measures of dispersion. It is also possible that as the elite and the preferred accounts improve, the regular accounts improve as well, and may possibly maintain its position in the growth trend. 1.3. Presentations Figure 3: Pie chart for the average number of clients for the five years Figure 4: Line graph for the number of clients for the five years Figure 5: Line graph for the Deposit Amounts of clients for the five years Task 2 2.1. Frequency distribution Tables 2.1.1. Frequency distribution by age. The frequency distribution has been simplified into class distribution of frequencies for the ages and is shown below. Table 3: Frequency Distribution by Age ii). Frequency Distribution table by the years of personal banking experience Table 4: Frequency Distribution by the number of years of personal banking experience iii). Frequency distribution by the number of years of Post Secondary Education Table 5: Frequency Distribution by the number of years of post secondary education Table 6: Frequency Distribution for the salary for 2010 The frequency distribution tables are split into various ranges of frequencies and scales depending on the sizes of the item being used. The salaries represent the scale of thousands. b). Histograms i). Histogram according to ages. Figure 6: Histogtram using the age ii). Histogram by the number of years of personal Banking Experience Figure 7: Histogram by the number of personal Banking Experience iii). Histogram by the number of years of post secondary Experience Figure 8: Frequency Distribution by the number of years of post secondary education Figure 9: Frequency distribution by the number salary for 2010 NB: The salaries are calculated in thousands. There was a zero count for salaries between 20001 and 25000. c). Use of Quartiles and Percentiles i) Age For age, the frequencies range from 0 to 10. Therefore, the frequencies were divided into ten percentiles, whereby 0 to 1 is the first percentile. Using quartiles, the same distribution was divided into 4 quartiles whereby frequencies from 0 to 2.5 make the first quartile and 2.5 to 5 is the second quartile. Figure 10: Percentiles and quartiles for age ii). Years of Personal banking Experience Figure 11: Percentiles and quartiles for The number of years of personal banking Experience The first percentile for the years of personal banking experiencve fals on frequency 2. The second percentile is 5 while the last persentile is 20. For quartiles, the first quartile is frequency 5, the second quartile is 10 while the last quartile is the same as the last percentile, 20. iii).Years of Post-Secondary Education For the post-secondary education, the first percentile is 3 while the first quartile is 7.5, because the maximum frequency is 30. Figure 12: Percentiles and quartiles for The number of years of possecondary education iv). 2010 Salary The frequency ranges from 0 to 18. It therefore places the first percentile at 1.8 and the first quartile at 4.5. Figure 12: Percentiles and quartiles for 2010 Salary payment 2.2. Summary of data analysis for decision making The table below contains information for data analysis that can be used for data analysis. The mean, median and mode for age are useful in making deciosion about age balancing in the new resytructuring. The aggregate functions for the years of banking experience and number of post secondary education can be applied when conducting promotions on staff in the Bank DM. The median and mean for 2010 salary can by used in deciding the reduction and increase of operational cost of the bank. Age Years of personal banking experience before joining the Bank Years of personal banking experience in the Bank Number of years of post-secondary education The annual salaries in 2010 Mean 38.57692 5.961538 8.615385 4.269231 15907.56 Median 37 5 7 4 13693.5 Mode 33 0 1 4 #N/A Table 7: Mean, Median and Mode 2.2. Measures of Dispersion Table 8: Use of measures of dispersion for decision making The masures of dispersion provides allowances and potentiality of increse in the actual values of the parameters concerned in the analysis (Institute of Business and Management, 2012). The ececutive committee can decide to increase the number of staff and increase tha age of recruitment. Task 3: 3.1. Correlation analysis Figure 13: Correlation analysis for the groups Correlation analysis results shown in the output above shows co-efficients of correlation among the three variables. It shows the magniturde to which one variable affects the other. For examplew, the corelation coefficient between elite and elite account type is1, preferred to preferred = 1 and regular to regular = 1. On the other hand, elite to prefered are related with a coefficient of 0.991 and elite to regular at 0.995. Finally, regular to preferred = 0.983. They can be used to predict the values that bare next in the sequence. 3.2. Linear Trendline The prediction of the 2011 details in excel shows a prediction of the values as shown in the table below. Table 9: Prediction of 2011 service income values The table shows predictions of the service incomes for the year 2011 using an auto function in the system. The 2011 service income for the elite clients is 934, preferred clients is 1052 while regular clients is 1371. Of course the values represent thousands. The trend lines are drawn as shown below: Figure 14: Service income trendline with prediction for 2011. The other area which we would like to do a trend line in is in comparison and presentation is the number of branches involved and the number of personal bankers. Figure 15: Corelation betweet the number of employees and branches. The reliability of the forecast is guaranteed because the lines move with a positive gradient. It is easy to make an accurate prediction of the next values for the year 2011. In the customer satisfaction index analysis, we collect qualitative primary information from various customers using both structured questionnaire, opinion forms or structured or semi structured interviews. We prepare relevant questions and distribute to the clients at various sites, to collect information related to the properties of the elite and the preferred account products. This will enable the executive committee to determine the aspect of the regular account that makes it move easily as the preferred customer account. At the same time, we access information from the media and sources of information from written periodicals such as magazines and historical journals, to which references can be made. Our study aims at fully understanding the customer needs. We have to check the status of data security of the accounts, the risks involved in hosting, ethical services and professionalism. We will have to investigate every aspect of the elite and the preferred accounts that cause the stagnation and negative attitude in customers. For the clients who have not subscribed with the Bank DM, we have to collect data that will reveal to us their expectation so that we improve our products. We will also consider the issues of ethics to eliminate any unethical elements of customer services that we have been operating with. As per our promise to protect consumer confidentiality, we have to develop a more secure network to safeguard our data and information from unauthorized success. Data security in any organization is very critical because it helps in promoting privacy of information in the organization. Organization privacy is very critical because it helps in avoiding leakage of information which may be used by competitors against the firm or organization. Based on this therefore, every organization must ensure that its data is secure and to do this, it must come up with good data security systems. The sampling frame used to collect data is then presented to justify the study that methodology as well as the random sampling frame which was already used. We identify the specific sources of secondary and primary data. The primary data as already explained will be extracted using questionnaires and interviews where appropriate. The secondary data will mainly consist of information from journals, books and electronic pages from the internet. We have to control the samples to ensure that they are of minimal errors. In our research document, we will mention in our reference page, the list of sources of secondary and primary data, and acknowledge all the parties that have contributed to our research work either directly or indirectly. Our research exercise has to take care of the ethical issues that may arise such as plagiarism. We will make sure that our sources of information do not mislead us to making unethical decisions. The sources also have to verify for us the validity of the information so that we don’t use dishonest information in our research work. In order to minimize errors, we create a threshold of error tolerance. This is an acceptance of an amount of errors with which our research work can work without severe effects. This provision is set at the beginning of the research as a guideline to the entire process. In the appendix page, we explain the meanings of the terms used in the research, whose meaning can cause confusions. We will design a straight forward questionnaire with open questions that require the respondents to either answer the questions or leave them blank where he or she does not understand them. The questionnaires should lead us into understanding the needs of the customers. In this we consider both the existing customers and the potential target customers in the market. We simply prepare about 30 questions with objective answers. Some of the questions simply require either “Yes” or “no” without further explanation. The questionnaires have to enable the customer service department to build ethical relationships with customers. Task 4 4.1. Information System In reviewing the existing management information system, we consider important properties of a management information system. We consider the areas that are security, ease of learning the system and the speed of performance of the system. The major criteria are the number of clients that the system is able to serve at one time. It has to be properly tested to eliminate run-time errors (Institute of Business and Management, 2012). The system should be able to integrate with other systems if the organization, such as the active directory which links with email server. It should also have a back-up system to aid the administrators in the recovery process whenever a crash occurs. The system should have an interactive interface to communicate with the users and suggest for the users the most advisable options of actions to take for the desired results. The system that the bank needs is one that can accommodate a growing number of clients. The system has to have a link to the active directory containing the contacts of employees and customers. It has to be able to support migration of information from the existing system without data mismatch. Fundamentally, we have to consider the cost of the system so that we budget properly. The bank should not own the system on lease basis, because the cost may just be the same as buying. Lease may be an inappropriate mode of acquisition because it may deny the implementation team the full power of usage and documentation. Even if there is a saving in the lease method, the saving may be too minor compared to the risk exposure. If it proves to be practical that the Bank will spend exactly one million per year to lease the system, the savings will be 3.5-1=2.5 Million. This may save the company 2.5 million. However, considering the long term effect, within 4 years, the bank will have spent 4 million on lease. This means the net effect is a loss to the bank. It is economical for the bank to consider purchasing the system and have a full ownership right from the onset. Indeed, cheap is not cheap if the bank makes a holistic consideration of all factors. Even with the taxation considered in the acquisition process, it is more expensive to lease the management information system. Using the internal rates of return function, depreciation may not be a serious issue because the system will have the potential to undergo further development. 4.2. Gantt Chart and critical path analysis Activity ID Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 A Finalize the specification of new system B Collect quotations C Form project team for the new system D Upgrade networking E Purchase contract signed F Install furniture G Test hardware and software H Line up all resources I Perform user acceptance test J Install hardware and software K Perform training Table 10: Gantt chart Figure 16: Activity Network 4.3. Determination of critical path Critical path is the path in activity network that takes the longest route (Institute of Business and Management, 2012). It is the line of activities that consumes the longest duration of time and resources. For example, in this activity network, the longest route is A – B – C – G – I – K = (5 + 10 + 12 + 18 + 9 + 4) = 58. Reference: Institute of Business and Management. (2012). Business Decision Making Assignment Brief, November 27, 2012 to January 29, 2013. Read More