DBS Bank: Keeping the Faith - Case Study Example

DBS Bank: Keeping the Faith Name of the Student: Name of the Instructor: Name of the course: Code of the course: Submission date: DBS Bank: Keeping the Faith Introduction DBS bank limited is a bank which was incorporated in Singapore. Previously known as The Development Bank of Singapore Limited, this bank adopted its present name in July 2003 to indicate the transformation of its role as a large regional bank. This bank was set-up by the Singaporean government in June 1968 and acted as a key player in taking over the industrial financial undertakings from the Economic Development Board. At the present times, this DBS bank has diverse branches totaling to more than 100 and has been considered as the largest bank in South East Asia. It has a massive domination in the regional market in consumer banking, assets management, equity and debt fund raising, treasury and markets as well as securities brokerage among other areas in Singapore and Hong Kong. This paper will explore the both the external and the internal factors affecting this bank in terms of the opportunities and threats confronting it as well as the strengths and the weaknesses facing it. External analysis The external environment predominantly encompasses the opportunities as well as the threats confronting the DBS bank. In terms of opportunities, this analysis will focus on the merger and acquisition undertaking in the internationalization efforts as well as threats which include heightened competition in the global banking sector as well as the possible recurrence of the global or regional financial crisis which threatens to cripple the operations of various banking institutions in different countries. Opportunities Merger and acquisition (M&A) According to McDonard et. al (1), mergers and acquisitions continue to be a dominant growth strategy for various companies in the world. This can partly be attributed to the pressure from the primary stakeholders who are wary for the elevated pursuit of the shareholder value in these companies. The efforts towards increased M&E have been evident at the DBS bank, a fact which was evidenced in 1998 when DBS bank acquired Post Office Savings Bank (POSB) in a friendly takeover. With the acquisition of POSB, DBS expanded its consumer base by taking in approximately 3.2 million POSB consumers. As a result, DBS bank continued to strengthen its favorable niche as a primary financial institution at the domestic level in Singapore with the broadest variety of consumers. Moreover, DBS continued to uphold the core POSB values through maintaining the low banking costs for the consumers as well as customizing its products and marketing plans to the youths and the elderly in Singapore. In the internationalization efforts, DBS bank also acquired the Kwong On Bank in Hong Kong it its efforts to penetrate the Hong Kong Market. Presently, DBS has over 1 million consumers and more than 50 branches in Hong Kong. This has been followed by subsequent acquisitions of companies in other regions which include Vietnam, Taiwan, Indonesia, India and Dubai among other countries. M&A presents a major opportunity for DBS bank. This is whereby with the heightening of the global M&A activities which increased by over 40% to $1.94 trillion in 2004 (McDonard et. al, 2), M&A becomes a major opportunity for this bank if it has to internationalize its operations outside Asia to other regions in the world in Europe, America, Australia and Africa. M&A will be integral in not only enlarging its consumer base in other regions but also in ensuring that DBS bank elevate its performance and increase its shareholder’s value. Threats Heightened competition According to the Chartered Institute of Management Accountants (2), recent times has seen elevated competition in the global banking industry, mostly with the advent of market liberalization as well as the advancement of the economic capacity of in the emerging countries in South America and Africa among other developing regions in the world which threats the traditional dominance of the western banks as well as those from Asia. This is epitomized by the Chartered Institute of Management Accountants (2) who determined that the banks in the emerging markets are in the present times well capitalized and well-funded and have grown to the capacity of being in a position to directly compete with their western counterparts in the global marketplace. The banks in these regions have a greater potential of growth based on the relatively immature development of their domestic financial market coupled with their rapidly growing economies. Therefore, this poses elevated competition for the DBS bank in its internationalization efforts, mostly in these emerging markets which threaten its operations. In addition, the banks from other developed economies are bound to pose heightened competition to the DBS bank in its efforts to penetrate the markets in Europe, America and Australia among other developed regions in the world. Financial crisis It is an apparent fact the global financial slump of 2008 negatively affected the profitability, performance and public image of the DBS bank, not only at the domestic level in Singapore but also in other regions. This was based on the High Notes 5 investments of DBS bank in the Lehman Brothers which collapsed during this financial crisis. Based on the fact that DBS was perceived as a ‘national bank’ in Singapore, this bank received massive criticism both from the media as well as from the public domain with High Notes investors pouring out their grievances on online forums and personal websites. This culminated in extensive compensation battles which were even characterized by political interference both in Hong Kong and Singapore. Therefore, the probability of financial slump, either at the global, regional or national level poses a significant threat to the DBS bank. Therefore, robust risk assessment mechanisms ought to be instituted at DBS bank, wary of the investment risks. This fact is supported by the Chartered Institute of Management Accountants (2) who determined that the global financial crisis has validated the necessity for the banks to have a comprehensive understanding of their business models coupled with the associated risks. In addition, they ought to have formidable confidence that performance indicators and executive incentives fortify the desired behaviors at the organizational level (Chartered Institute of Management Accountants, 2). Internal analysis The internal environment has been widely considered as encompassing the strengths and weaknesses in an organizational set-up which are imperative for the resources and programs. This is in primary areas like sales, marketing and distribution, efficiency or capacity in management, products/quality/prices as well as management systems among other areas (Gasparotti, 97). This internal environment in terms of strengths and weaknesses is analyzed in the subsequent section. Strengths Organizational culture In a generic sense, organizational culture can be perceived as a set of norms, principles, beliefs and behavioral manner at the organizational level, a combination of which give an organization a distinct character (Willcoxson & Millet, 93). Different researchers in business strategy have determined that a robust organizational culture is an imperative source of increased effectiveness and efficiency in an organization, either private or public. A strong organizational culture has been perceived as being a key strength in DBS bank whereby it is primarily people-focused in terms of both the consumers as well as the staff working in this institution. In this regard, DBS bank prides its self in its large staff base which has been revealed to encompass more than 15,000 people from different nationalities. In this regard, many activities in this bank are geared towards empowering and educating the employees which is primary in permitting them to achieve maximum utility of their potential and eventually give their best to the consumers. Therefore, the process of employees’ empowerment has been primary in the gradual establishment and development of some sense of autonomy among various branches and departments. As a result, the heads and employees in different departments and branches feel responsible for their performance due to this autonomy and therefore work towards common objectives. In addition, the involvement of the employees in the decision making process in the day to day operations of different branches is key in forging an organizational culture based on trust, common sense of purpose and interdependence amongst them. This has been chief in the elevation of the overall performance of the DBS bank. Therefore, the participation of the employees in these operations has been perceived as leading to the establishment of a positive organizational culture which is characterized by strong values. These are founded on reward and recognition of new ideas in the firm, sharing of information as well as constructive and fair judgment of ideas. The eventual development of this organizational culture has been revealed to be integral in heightened long-term effectiveness of different firms, a phenomenon which has been evident at the DBS bank in Singapore. Rebranding and marketing campaigns This has also been another major strength at DBS bank which has accelerated in the recent past. In this stance, DBS bank has publicized its staff with a wide alley of advertisements which portray the diverse faces of the DBS staff. This is whereby the DBS staff has been presented as being composed of individuals who are well-rounded and virtuous members of the community. In their social network pages, for instance in Facebook, DBS posted extensive stories of their employees making exemplary contributions to the wider society which elevated their corporate responsibility image in the public domain. This is best epitomized by Kevin Choy, an employee in this bank who donated his bone marrow to a total stranger with the sole intent of saving a life and Meggie Pham from the group finance who with the assistance of friends set-up as charity for children. These are just examples of the marketing and rebranding campaign at DBS bank and in line with this campaign, the slogan for the DBS’s management associate program for future leaders was modified to read ‘Get ready for an exceptional future’. Therefore, rebranding and marketing campaigns have been a key strength at DBS bank which has improved its public image in terms of corporate social responsibility and its bound to positively affect the consumer base of this bank in various regions, both in the short and in the long term. This is chief in the sustained competitive advantage of the bank in different regions. Weaknesses Personnel incompetence Despite the above strengths, DBS bank has been in the past confronted by several weaknesses which culminated in huge losses for the firm. This is best epitomized by the incompetence of the personnel in this organization to give prudent advice to the consumers in terms of investment choices. This was revealed whereby The DBS bank decided to announce comprehensive compensation to the investors who had been affected by the liquidation of the Lehman Brothers firm in the US after the global financial slump in 2008. The compensation criterion of these investors in Hong Kong was based on investigations which revealed that they had been misled by the bank staff in making their investment choices. As a result, the bank pledged to compensate 70 investors and was subsequently praised by various analysts for setting a good example for the other banks. Despite this acclamation, the lawmakers in Hong Kong continued to criticize the slow pace in which DBS bank was reacting to the irate investors. This further revealed the internal weakness of the bank to swiftly deal with the issues confronting its consumers in different regions where it had based its operations. This can be perceived to have significantly affected the public image of this bank which was key in eroding the competitive advantage of this bank, mostly in Hong Kong. Therefore, the inherent incompetence of the personnel in giving investment advisory services to the consumers as well as the slow mechanisms in addressing the issues affecting the consumers can be viewed as the primary weaknesses of the DBS bank which has the overall impact of shrinking its competitive advantage in the market. Conclusion From the above analysis, it is evident that the DBS bank has experienced elevated expansion in the recent decades since its establishment. In its external environment, its major opportunities are based on its M&A undertakings which are key in internationalization efforts. However, it is confronted by threats of heightened competition both at the domestic and international levels as well as the possible resurgence of the financial slump. On the other hand, the internal environment of DBS is characterized by different strengths which are primarily based on its robust organizational culture as well as rebranding and marketing campaigns. Nonetheless, it is confronted by the weaknesses in terms of occasional personnel incompetence as well as slow mechanisms in addressing the issues affecting the consumers. Works cited CIMA. The Global Banking Sector: Current Issues, September, 2010. Web. 28th December, 2012. Gasparotti, Carmen. ‘The internal and external environment analysis of Romanian naval industry with SWOT model’. Management & Marketing, 4.3 (2009): 97-110. McDonard, Jarrod et. al. ‘Planning for a Successful Merger or Acquisition: Lessons from an Australian study’. Journal of Global Business and Technology, 1.2 (2005): 1-11. Willcoxson, Lesley and Millet, Bruce. ‘The Management of Organizational Culture’. Australian Journal of Management & Organizational Behavior, 3.2 (2000): 91-99 Read More