Change and Continuity in Contemporary Business-State Bank of India - Case Study Example

Change and continuity in contemporary Business- State bank of India Name Course Tutor Date Introduction The state bank of India (SBI) is one of the India’s largest commercial banks controlled by the government that holds about 60% of its shares. It is one of the oldest banks in India, which its roots are traced back 200 years ago to the British East India Company. It was initially called the bank of Calcutta early in 1806, thus, it is one of the oldest banks in the Indian subcontinent. (Ahmad Tauseef , 2012).The bank of Bombay and Bank of Calcutta later on merged and formed the Imperial bank of India in the mid 20th century. The Imperial bank of India later was renamed to be the state bank of India the present. This bank has its headquarters in Mumbai and 14 other local head offices and 57 zonal offices that are spread in major Indian cities. Reports reveal the state bank of India has over 10,000 braches allover India, which are well networked to cater efficiently the needs of the customers. This bank has five associate banks that all use the same logo that is followed by the regional head quarters name (Njanike, 2010, 1). As that not enough, State bank of India has over 170 branches in 34 foreign nations, besides the associates banks, it has also the non-banking subsidiaries. This means that it is a renowned financial institution. The primary internal and external influences Like any other business organization, the state bank of India encounters various challenges coming from both the internal and external environment. Traditionally, the Indian banking system operated majorly on the private sector, the indigenous banking is much different from the modern banking in the terms of organization. The inability of the indigenous banking system to develop the economy and serve the public to the desired level led to the restructuring of the entire system (Ahmad Tauseef , 2012).The banking industry in this nation was more or less confirmed its activities to different classes of individual a situation, which only aided the borrowers. The imperial bank was nationalized and its functions were taken by the State bank of India. From its initiation, the state bank of India faces both the internal and external forces and it has managed to overcome them in its operation. Some of the internal influences that have made this bank to thrive include; first, the bank has a strong domestic market position. As mentioned earlier, the state bank of India is one of the established banks in India; it has numerous branches spread all over (Njanike, 2010, 1). This means that it has a bigger market share in the domestic market; moreover, it is one of the oldest banks in the country in that it has more knowledge in the banking strategies in this country (Kalia, Kalra &Kamboj, 2010, 1). The understanding of the trends on the Indian marketing is an advantage to this bank over other new emerging banks since it already has the command of the market. The second internal strength that has enabled this bank to thrive is that this bank has a strong capital position that aids it to boosts the growth initiative. Its many branches, a variety of services it offers to the customers and the long-term operation of the business have enabled it to accumulate a lot of capital that it in turn uses to run its operations. A strong capital base in an organization is quite advantageous because it is a weapon, which it uses to have a competitive advantage over its competitions (Kalia, Kalra &Kamboj, 2010, 1).The state bank of India is in a position to set competitive projects to boosts its performance due to the availability of enough capital. It employs qualified and enough personnel who can perform the duties efficiently and pays them well. Thirdly, the state bank of India merges with its associate banks to defend its leading position in the banking industry. When the competitors threaten to compete this bank, it takes the advantage of the many subsidiaries, combines them and overcomes the threat. This has led to it widen its operations to foreign nations where it has opened many branches successful (Hunt, 2009, 1). Moreover, it outsources some cheap labor from the countries it has established its subsidiaries to cut short the operating expenses at home. It is an advantage over its competitors, which do not have or have few branches outside India. One external factor that tends to influence this bank is the global economic slowdown that tends to reduce the demand for the banking services in India. This factor has really influenced many organizations in the banking industry thus; state bank of India could not be left behind (Hunt, 2009, 1). When the economies of the countries slow down, it means many organizations cannot save due to the low income. The individuals cannot also save due to low household income they get that cannot even sustain their day-to-day life. This means that the banks receive few customers hence they make little income from the savings. Therefore, global economic down turn is an external influence to the state bank of India that has altered its performance. The second external influence emanates from the susceptible political intervention. The political environment in India is always unpredictable in that the future influences cannot be easily predicted by the bank. Every leadership that comes tends to come up with its business laws and policies (Kalia, Kalra &Kamboj, 2010, 1). The new policies often affect the normal operation of the bank since the process of adjusting from the old traditions to adapt the new regulation interferes with the operation. Another external influence is the growth of the general insurance industry, which has facilitated the increase in the market share. The insurance industry that has had a tremendous growth in India in the last few decades and has enabled many individuals take the insurance cover and this process is done in conjunction with the banking industry (Hunt, 2009, 1). The state bank of India being the dominant bank in the market share, it has had a growth opportunity due to many individuals and firms taking the insurance cover and the services facilitated by this bank. The last external influence comes from the international business policies. Being a multinational corporation, the state bank of India encounters many international barriers that tend to affects its functions. The bank is always compelled by the foreign nation’s rules to operate in contrary to what it normally does at home (Hunt, 2009, 1). This means that sometimes the foreign sub-branches tend to operate in a manner that is a bit different from the home branches; the different foreign business policies and laws that are used by those particular countries alters the way of operation of this bank. How state bank of India manage change and innovation. The current society is being driven by new technology that is emerging rapidly. This new technology need to be adopted by the business firms in order for them to remain relevant in their operation. Many firms which are competitive in the world of business by knowing how to deal with the changes that are coming about due to technological changes (Kalia, Kalra &Kamboj, 2010, 1). Big corporations such as state bank of India are adopting new technology faster before their competitors to gain the advantages that comes with these innovations. Some of the ways in which the state bank of India has used to cope up with changes and management of innovation are; First, the bank engaged in business extensions, it has done this by entering into many new businesses with strategic tie-ups. These include pension funds, general insurance mobile banking, custodial services, merchant acquisition etc. These business extension services have seen this bank capturing a large share of the market. Moreover, the bank also introduced E-banking, where it offered the entire branch level services and other services such as E-tax, E- rail reservation etc (Kalia, Kalra &Kamboj, 2010, 1). These electronic services have had a positive impact to the performance of this bank. The customers have been served faster, the employees work efficiently since they no longer work manually but instead use the machines thus they can perform a large volume of work within the shortest time possible. Still under business extension, the bank is still searching for the opportunities to grow in the local market in India and in the international arena. Now, the state bank of India has over 82 foreign offices in 32 countries around the world. In addition to the seven subsidiaries that are in India forming a formidable group in the Indian banking industry (Kalia, Kalra &Kamboj, 2010, 1). The bank is also in the process of raising more capital to facilitate s its growth and consolidates its numerous holdings. Moreover, the state bank of India is in the process of consolidating its global treasury operations and entering into the structured products and derivative instruments. Reports reveal that the bank is the largest provider of the infrastructure debt and also the biggest arranger of the commercial borrowings in India. In fact, the state bank of India is the only Indian bank that has featured in the fortune magazine 500 list (Kalia, Kalra &Kamboj, 2010, 1). Thus, this bank is doing a lot to ensure its business extension and through these, it is embracing innovation and change management. Another way in which the state bank of India is managing change and innovation is through the involvement in networking of branches. It is changing the outdated front and back end processes to modern customer friendly processes to aid improve the customer service. It has about 8500 and about 5100 branches of its associate banks already networked. In the current times, this bank offers the largest banking network to the Indian customer. In addition, this bank is also in the process of providing a complete payment solution to its clientele with over 21000 ATMs plus other electronic channels such as E-banking, debit cards, mobile banking etc. Another area where this bank has concentrated in managing change and innovation is employee development. The bank has established 4 national level training colleges and 54 learning centers that are spread across India. Through these centers, the bank is involved in continuous skill enhancement of its employees. Recently there was a mass internal communication program termed as “parivartan” where the bank managed to rolled out over 3300 two day workshops across the country, these works covered about 130, 000 workers in a period of 100 days by using about 400 trainers. These workshops were meant to assert the message of change, innovation and inclusiveness. These workshops in fact provoked the other competing banks in India and other public sectors to seek to emulate the same program. Another area in which this bank is trying to manage change is establishing marketing initiatives. The bank is putting more effort in increasing the marketing activities of the customers. It has organized numerous marketing initiatives to enhance its catch of the large market share (Kalia, Kalra &Kamboj, 2010, 1). Some of the activities done to attain this are; segregating and targeting existing high value customers, involvement in cross sale of other products, setting up of call centers and outbound sales labor force to capture new customers. Plans are also underway to utilize database marketing to pursue large and medium sized corporate, government and trade finance customers. The use of database marketing is aimed at draw-increased income from cross-selling, increased customer loyalty and lower costs (Kalia, Kalra &Kamboj, 2010, 1). Other ways of reaching to customers employed are extension of hours of work and aggressive marketing through print and television media. In fact, this bank increased the daily working hours by two hours and even Sunday banking was introduced. The use of technology by the state bank of India Technological change is the major agent that differentiates the modern world and the earlier world. Without technological change, the world would remain stagnant. Business organizations are very much sensitive to the dynamics of the technology. Large organizations welcome new technology through investing many funds in it so that they can use the new and easier way to produce at a cheaper cost (Hunt, 2009, 1). It is obvious that organizations that tend to adopt faster the new technology tend to have competitive advantage over those that are reluctant to do so. The state bank of India is one of those firms that respond timely to any new technological advancement and this has really assisted it to counter the competition it faces from its competitors. Some of the ways in which this bank has embraced the use of technology include; the adoption of massive computerization in 1990s. This included the implementation of the highly customized version of Kindle banking system (Hunt, 2009, 1). This system is so helpful in the improvement of the efficiency and accuracy of the subsidiaries. Being a bank that has numerous subsidiaries in the home market and foreign markets, this high-level technology is an efficient tool that can be used to enhance efficient management. In the state bank of India also approached Tata consultancy services to customize the software to implement the new core system and provide the ongoing operational support for its centralized information technology (Hunt 2009). This effort saw the conversion of over 140 million accounts in 14600 local branches and its affiliate banks. The selection of the Tata consultancy services helped a lot in the easy management and monitoring of the accounts opened by customers both in local and foreign markets. Thus, the use of new core banking system was enabled by the adoption of the new technology by the state bank of India. Another way in which the state bank of India has embraced the use of technology is the engagement of KPMG peat Marwick (KPMG) in the year 2000 (Ahmad, pp1). This engagement enabled it to develop a technology strategy and a modernization road map for this bank. This process encompassed the largest 3,300 branches of the bank that were established in the various cities and suburban areas. To remain competitive, this bank began the implementation of the largest centralized core system in 2002 ever undertaken in the banking industry (Ahmad, pp1). By establishment of the centralized banking system, it wanted to ensure that its services are uniform in all of its branches. This would aid in developing the confidence of the customers since its services would be well known. The state bank of India has also adopted the e-learning mode. V2learnTech designed this bank’s training methodology and delivered a mix of classroom training that involves lectures, group discussions audio visual, case studies lab training, which included computer, based training (Ahmad, pp1). The e-learning mode has indeed facilitated easier training of the employee of the bank’s employees. It has also enabled the trainers to use different mode of training where the trainees are exposed to different methods. This enhances thorough training resulting to production of efficient and effective workforce. The state bank of India is also employing information technology to carry out its operations. The management has really relied on information technology in managing various departments within the bank. (Ahmad, pp1). Information technology such as online banking and relationship marketing are increasingly becoming important to the markers. Many researchers have shown that there is a positive correlation between the levels of the implemented information technology and both profitability of the firm and cost saving (Ahmad, pp1). Reports reveal that India’s $23.4 billion outsourcing industry accounts for most of the country’s software facilities. This total up to 5% of the India’s gross domestic product. The information technology employs 1.2 million employees and this increases to over 30% per year (Ahmad, pp1). Being the largest commercial bank in India, in terms of deposits, profits and branches, it invests heavily in information technology to maintain its lead over its private sector competitors. Thus, the state bank of India embraces the use of technology by the adoption of the information technology that eases the operation in various departments. How globalization process has influenced the policy and decision making in state bank of India In its definition, globalization is the integration that comes due the interchange of global products, ideas, and other cultural elements. A continuous process has been in existence for many years. Even historians cannot provide accurate information when the process of globalization started (Kenawy, 2008,1). Some historians argue that globalization is an old process while other asserts that globalization is a recent process but in real sense, the process of globalization has existed in ancient years and is still in modern times. In fact, in the modern times, globalization is on a high note this is engineered by the rapid technological changes that are being experienced in the world today. Business organizations like other sectors have not been left behind by being affected by the process of globalization. The state bank of India is one of the organizations that have been greatly influenced by the globalization process. As mentioned earlier, the state bank of India is a big multinational corporation this means that it carries its business across borders hence it is one of the most affected organization due to the effects of globalization process (Njanike, 2010, 1). One of the effects globalization has imposed on the policies of the state bank of India is that the bank has been compelled to adopt international standards of banking in that it does not only rely on the methodologies it applies in the domestic market in India. Thus, the bank is compelled to put into consideration the international business policies when carrying out its business. Another way in which globalization has influenced state bank of India is that it has compelled it to outsource the work force and even other resources (Njanike, 2010, 1). In the foreign countries where this bank has established its subsidiaries, the citizens of those countries are the ones that are given first priorities when deploying the workforce (Feller, Petit &White, pp1). At the same time, the bank uses the local resources in those countries where the branches have been opened to build infrastructure. Thus, globalization has made many firms to widen their scope not just to concentrate on the local resources that are available in the Indian market. The process of globalization has also made the state bank of India design the best way it can reach to foreign markets (Njanike, 2010, 1). It is obvious that the prevailing marketing conditions on the domestic market in India are different from the markets around the world. Therefore, since the bank operates worldwide, it has to draw the best methods it can approach these markets to win the new customers (Feller, Petit &White, pp1). As mentioned in the definition, globalization involves sharing of ideas across the globe, thus the state bank of India gathers information and ideas from other firms in the same industry from foreign nation and uses this information to strategize on how to capture a bigger market share overseas. Globalization also influences decision making in state bank of India in such a way that the distance between the foreign branches are considered. The management does not just wakeup with a decision without considering the location of a particular foreign branch (Feller, Petit &White, pp1). It ensures that it considers the factors that would undermine or hinder a particular decision to be implemented. This implies that decision-making takes a considerable length of time before it is adopted after considering various factors that may arise in different branches especially. Thus, globalization has led to slow decision making and the policies adopted have to consider the conditions in foreign nation branches. Recommendation The state bank of India is the largest commercial institution in India in both capital assets and high number of employees. It is a public organization and is among the oldest financial institution. This bank has widened its operation all over India and has established its branches in more than 32 foreign nations around the world. Thus, a multinational corporation has a lot of reputation and recognition from the international arena. The bank came into existence in1955s after nationalization of the imperial banks, which was owned by the private sector. In its operation, this bank encounters both internal and external influences that tend to alter its operation. Most of its internal influences such as good capital base, qualified personnel, efficient management system and improvement of the insurance system in the country are some of the advantages that it uses to beat its competitions from the private sector. Its external influences include susceptible political environment, economic down turn and competition from the private sector seem to be disadvantages to this bank. Like other multinational corporation, the state bank of India has adopted the use of technology to boosts its performance. It ensures that it adopts a certain new technology in a timely manner to gain a competitive advantage over those that have not adopted yet. This bank has also various ways in which it has embraced innovation and change. In the current society, the companies that practice innovation and are sensitive to change are the ones that are earning a lot of profit in turn. In addition, the process of globalization has imposed a big impact on the decision-making and policy formulation in the state bank of India. However, the future of this bank appears to be bright because it is investing much in technology, expanding the business by opening new branches both in domestic and foreign markets. Bibliographic references Ahmad Tauseef. Impact of information technology on banking accounting system. A case study of state bank of India (Rajasthan). Accessed on web 31st Dec 2012. Jai Narian Vyas University. Retrieved from http://www.ijbssnet.com/journals/Vol_2_No_17/21.pdf Bonneville, L. &Dewey, W. (1985). Organizing and financing of business. Prentice hall. New Delhi. India Brown David, Khagram Sanjeev, Moore Mark & Frumkin Peter. (2000). Globalization, NGOs and multi-sectoral relations.. Accessed on web 30th Dec 2012. 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