Examining the Influence of Entrepreneurship to Khan Bank and XacBank - Case Study Example

Examining the Influence of Entrepreneurship to both Large and Small Business Enterprise (Khan Bank vs XacBank, Mongolia) Khan Bank is among the largest leading commercial banks in Mongolia, ranked best in “Awards for Excellence” in 2006-2012, top 150 in international rankings (2003-2012) and “Best Bank of the Year” (2004-2010) as well as Best in the “global finance” 2003-2011. It also received the “Excellence Award” from CSR among other achievements. Its mission is to improve and better the lives of the people in Mongolia and increase its market base locally and internationally, ensure efficiency and consistency in growth and performance. With this, Khan Bank is among the globally competitive banks that have adapted full use of automated banking systems across all its branches and is a fully operational and a direct financial service provider to its base clients. It is estimated to have 500 branches, dominating 80% of the market. Khan Bank is a good example of an entrepreneurial business enterprise demonstrated by its achievements and position in the market. Despite recent recession in global markets, Khan Bank can still withstand the growing demand and changing competitive business environment. Its ranking in the market is not an entirely determining factor of its entrepreneurial character but the unique innovative structures and product development systems. Products in Khan include the current and savings account, Credit, VISA, Gold Cards, Electronic money transfer, Internet and Mobile banking services among others. Internet and mobile banking is among the products offered where customers make transactions at lower affordable prices, money transfer from account to account within the Bank accounts and loan payment at a clients own convenience. Innovative technologies at Khan Bank have seen clients make foreign transactions and receive payroll information by a click. In addition, it is possible to meet deadlines on bill payments saving them time and energy from long ques. Technology has never been any better; the introduction of the electronic device which is more secure and easy to operate. The “Vasco device” has seen the evolution of new experience to the clients where security on individuals’ account information is no longer an issue. The six digit self generating password device is more convenient, easy to use, cost effective and secure, generating a one-time password in every 36sec. Xacbank is another top dominant key player in the Mongolia financial markets providing a range of products and services to both large and SMEs and to large corporations. Operates in all the 21 provinces of Mongolia and serving over 500 thousand clients in 97 retail and business branches. Banking outlets include 400 AMAR mobile banking agents and 70 credit cooperatives. Its aim is to sustain value of its shareholders and institutional investors while promoting a triple bottom line vision and mission based on “Planet, People, and Profits.” Xacbank is a leadership providing institution offering corporate governance, transparency and risk management. Best in social responsibility implementation and its ratings are high; rated “B” and “B+” by both the Moody’s and Fitch ratings respectively on its operations and credit capacity. It was also awarded the development finance a “4” out of “5” by the Planet rating agency for its long standing performance in social responsibility. Xacbank offers a variety of products from ATM services, electronic money transfer, MasterCard, mobile banking, internet banking among others. It is among the financial institutions in Mongolia with unique character of innovative investment portfolio committing to social responsibilities. Similarly, Xacbank has adapted the latest technologies in its branches country wide connecting all them through automated systems and adapted the “Vasco device”. Internet banking services offers almost the same package. However, unlike Khan Bank, Xacbank has put more focus on local markets intending to expand further. This is not to say that it does not intend to venture or grow beyond its local boundaries. Xacbank was the first domestic bank to receive an international funding from a high profile institution (2004) with the IFC, investing 400’000 USD. Xacbank finds it wiser not just to benefit as an institution but improve its environs putting it on the lime light on efforts to venture in the social corporate environment. Xacbank has made significant achievements in the local markets affecting the lives of the locals in the SMEs with the implementation of franchising services, collaborating with rural savings and credit cooperatives (2003). It was still Xacbank that first introduced the “future millionaire” becoming the most popular banking account for children within a span of 1year. Khan bank therefore may be ahead Xacbank in achievements due to many factors as age of the institution and experience, in the local operations Xacbank may be the most preferred especially the by low-income earners and the SMEs due to its user-friendly products and services. Xacbank appears to be a bank of the people not just make profits but for communities around it as well. Xacbank has demonstrated efforts and commitment to the local markets by taking risks; investing heavily in local markets more specifically targeting the common man. SMEs need someone who has faith in them, willing to listen and consider their business plan an opportunity most banks and other financial institutions overlook. Xacbank has appeared to be a real entrepreneur, taking opportunities and lying down foundations risking their business if only that means it will have a long-term impact in the long run. Entrepreneurial or entrepreneurship is about innovation and creativity. However, this is not the final process into a fully developed product/service. It involves observation, examining, evaluation and finally execution of action as discussed in the next paragraphs. Entrepreneurial and Entrepreneurship The Bolton Report, (1971) indicates the secured pride on the feeling of independence by most entrepreneurs as the key motivator. Unlike the economic theory on personal and financial success on status, most managers in SMEs have more desire on participation, responsibility and high level independence. The ambition and actual achievements brings the power to influence the SME environs to the involved individuals and activities. The success of the enterprise is therefore greatly dependent on the power, ability and influence of the entrepreneur, hence significant to its present and future state. Successful entrepreneurs are viewed as self-made leaders or managers and as role models who rose from nothing. Beaver and Prince, (2004) stated that the act of entrepreneurship is portrayed as an economic necessity within a modern economy, promoting structural balance, employment choice, economic growth and functioning as a restraint to the excesses and misuse of corporate power. Entrepreneurship has been an interesting topic to researchers yet; there has not been a mutual agreement to a unified definition to the growth and development of the entrepreneurial activities. This may be due to studies being based on a wide range of evaluations and examining factors such as gender, geographical locations and personality traits among others. As a result this may bring out different experiences and challenges by researchers each based on different assumptions which may follow a result that may bring out conflicting outcomes. In summary, a study conducted by Stanworth and Gray, (1991) classified the analysis as; i. Examining socio-economic background factors ii. Examining the characteristics of owner manager iii. Examining situational and contextual factors Most studies have failed to differentiate between entrepreneurial behaviors from SME owner-managers. The question is whether SME owner-managers are entrepreneurs as well and the traits distinguishing entrepreneurs from SMEs owner-managers. A time comes when SME grow necessary for them to clearly demonstrate management ownership traits in order to attain entrepreneurship level of independence, have the owner-manager and or management delegate responsibilities to its juniors accordingly. SMEs venture can be individually and independently managed, does not necessarily venture into any upcoming or available innovations and not dominant in its field. However, an entrepreneurial venture engages in at least one of the four behavioral categories (Schumpeter, 1934). The key objective to an entrepreneurial venture is profitability and growth with the characteristics of the venture based on its innovative strategies. An SME is characterized by an individual venturing with a key objective of achieving personal goals. The venture becomes the primary source of income investing most of his time and resources in it; best describing him and providing most of his personal needs, demands and desires. However, an entrepreneur ventures with a primary objective of achieving profitability and growth employing the idea of strategic management therefore described by his innovative behavior. Stanworth and Curran, (1976) attempt to give an alternative view of distinguishing three business individuals; i. The artisan; seeking intrinsic satisfaction from business activity. ii. The manager seeking recognition for managerial excellence in business. iii. The “classic entrepreneur”; seeking to maximize profits. Dunkleberg and Cooper, (1982) attempt to distinguish between the growth-oriented, independence-oriented and craftsman-oriented SME owner based on motivation. Entrepreneurial behavior can be differentiated from an SME owner-managers’ who maybe dissatisfied by the current activities or practices meant to bring long term modification and changes impacting the general market. However, entrepreneurial elements are not necessarily important for an SME venture hence, no need to examine and investigate growth and profit patterns in the market before venturing through risk taking strategies. Similarly, entrepreneurial behavior is not limited to creation of new SME. Johnson and Scholes, (2002) stated that a manager in an established business, irrespective of size, may at times engage in innovative strategic behavior designed to challenge, established routines and maximize profits and growth. Ronstadt, (1985) suggests action research leading to independence of thought and action as a valid approach. Experience is among the best practice of learning due to firsthand knowledge learning to come up with solutions and achieving the entrepreneurial spirit and moral. All entrepreneurship needs are sources of ideas (both new and existing) randomly listed and evaluated. However, coming up with unique ideas especially in the already established markets may be vital. One of the methods of approaching to ideas both new and existing is through teamwork as opposed to individually. Entrepreneurship means being alert, seizing opportunities and maximizing them. Not all ideas are relevant, however, entrepreneurs need to examine and evaluate their options. As mentioned earlier, age can be a determining factor on the success of an idea or venture. Older individuals developing and venturing may have more experience compared to young entrepreneurs hence, giving them higher chances to success. An entrepreneur may wish to consider Harpers’, (1991) study suggesting the three mental approach of listing all challenges faced before identifying opportunities. i. The market-gap approach; an entrepreneur attempts to convert challenges into opportunities. ii. Venturing in congested markets, try to explore and exhaust available opportunities; more creativity may be required (thinking outside the box). iii. Market segmentation; studying and understanding the characteristics and behavior of the target market, ability to predict demands and desires. Entrepreneurs identify their customers’ segments especially the non-addressed needs in the existing products. After idea generation, a concept for each idea should be developed for thorough examination for a conclusive decision. This will help investigate and analyze the selected opportunities, utilize the selected structure and programs. An opportunity has the qualities of being attractive, durable, timely and is anchored in a product or service which an added value to its end user (Timmons, 1994). The venture must generate profits, enhance potential growth and attain the personal objective of the entrepreneur. Once an idea has been generated a concept is developed, examined, evaluated and analyzed for a possible opportunity to develop it into an business opportunity. This study establishes four-step process of selecting the possible opportunity; i. Identification of screening criteria ii. Accessing each business opportunity independently, based on the identified criteria. iii. List the ideas according to performance respectively iv. Select/decide on which idea to adopt based on your rankings According to Harper, (1991), entrepreneurs rank opportunities based on personal preferences, financial worth and risk. Two more criteria’s analyzing markets conditions and availability of resources may be relevant before a decision. In conclusion, innovation is the solution; product innovation is a high-risk strategy. Based on survey 3 out of every 11 serious ideas and concepts enter the development stage, 1.3 launched and only 1 succeeds. The rate of failure to new products is 25% to 45%, the rate of failure is 35% possibly to derive a notion that successful entrepreneurship is based on luck. Entrepreneurs should deliberately look for opportunities and find out “what product can sell” and “how to improve your enterprise”. Entrepreneurs don’t wait for opportunities they create them. Entrepreneurial should be viewed as a long term continuing process meant to achieve its actual set goals and objectives. A good business plan should be self sufficient, clear, and specific to its objectivity and goals. References Beaver, G. and Prince, C. (2004), “Management, strategy and policy in the uk small business sector: a critical review”, Journal of Small Business and Enterprise Development, Vol. 11No. 1, pp. 34-49. Birley, S. (1996), “The start-up”, in Burns, P. and Dewhurst, J. (Eds), Small Business andEntrepreneurship, Macmillan, Basingstoke. Bolton Report (1971), Report on the Commission of Enquiry on Small Firms, HMSO, CMND 4811. Carroll J. J. and G. C. College, 1993, "Course and Curriculum Design for TransnationalSmall Business", Proceedings of the International Council for Small Business, pp. 254-263. Dunkleberg, W.C. and Cooper, A.C. (1982), “Entrepreneurial typologies”, in Vesper, K.H. (Ed.),Frontiers of Entrepreneurship Research, Babson College Press, Wellesley, MA. Harper, S. C. (1991), Starting Your Own Business: A step-by-step blueprint for the first- time entrepreneur: McGraw-Hill Inc. Johnson, G. and Scholes, K. (2002), Exploring Corporate Strategy, 6th ed., Prentice Hall, London. Ronstadt, R. (1985), "The Education Entrepreneur: A New Era of Entrepreneurial Education in Beginning", American Journal of Small Business, Vol. 10, pp. 7-23. Schumpeter, J.A. (1934), The Theory of Economic Development, Harvard University Press, Cambridge, MA. Stanworth, J. and Curran, J. (1976), “Growth and the small firm – an alternative view”, Journal ofManagement Studies, Vol. 13 No. 2, pp. 95-110. Stanworth, M.J.K. and Gray, C. (1991), Bolton 20 Years on: Small Business Research Trust,Paul Chapman Publishing, London. Read More