One of the most outstanding examples of people who have successfully launched and used their business plan in the banking industry to develop a bank tailored to meet customer needs and expectations is Sulaiman Abdul Aziz Al Rajhi.
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Born in Saudi Arabia, together with his brothers, Suleiman Abdul Aziz Al Rajhi started a sharia compliant bank in 1938, a bank that has changed names such as Al Rajhi Trading and Exchange Corporation through a number of decisions into of Alrajhi Bank. In its marketing strategy, the bank has a customer driven with segmentations that reflect the dynamic needs of the customer.
In addition to that, the bank offers products and services, as indicated in its mission and vision statements that are customized to meet customer needs and expectation. Different issues such as competitive analysis and other related business plan issues are discussed in detail in the current paper. Other issue of critical importance includes history of the company, company profile, marketing strategies, services, and products, and financial position of the company.
History of the Founder
According to Forbes (1), Sulaiman Abdul Aziz Al Rajhi was the founder of the Alrajhi Bank. Sulaiman Abdul Aziz Al Rajhi, a Saudi Arabian billionaire in the corporate world whose wealth was estimated by 2011 to be $7.7 billion, occupies the 120th position of the richest people in the world. However, it was a good business plan that successfully positioned the founder and his company in the current business position in the world today (Al Rajhi Bank, 1).
Sulaiman Abdul Aziz Al Rajhi was born in 1920 in Jeddah Saudi Arabia with a Saudi Arabian nationality. Sulaiman Abdul Aziz Al Rajhi attended the King Abdulaziz University, graduated with a degree in Bachelor of Arts / Science, and is founder and chairman of the of the Alrajhi Bank bank with an Islamic religious identity.
The founder, Sulaiman Abdul Aziz Al Rajhi, had a humble beginning in a simple business with his brother which started by changing currencies for the pilgrims attending pilgrimages in Saudi Arabia in the cities of mecca and medina across the desert in 1930. In their business plan, the brothers decided to incorporate the use of foreign exchange agencies in the conversion of foreign currencies to the local currency that that the pilgrims could use while in Saudi Arabia.
According to Forbes (2), Sulaiman Abdul Aziz Al Rajhi positioned the business further by competitively incorporating other services into their business plan, which included diversifying into real estate businesses, investing in the manufacturing sector, and investing in industry and trade while banking remained the sole and exceptional primary source of their wealth (Al Rajhi Bank, 1).
Solely, therefore, the business plan consisted of banking business activities, trade activities, manufacturing activities, and banking activities. However, it was the successful and effective use of business strategies that Sulaiman Abdul Aziz Al Rajhi was able to position the bank as one of the most successful banking institutions in the world. However, it is important to examine the history of the bank as a successful business entity.
Thirty years today, the Al Rajhi bank was started. The bank was started by a wealthy Saudi Arabian known as Sulaiman Abdul Aziz Al Rajhi in collaboration with his brother. However, little is talked about the brother with whom the company was started. It was 30 years ago when the investment and trading and investment activities of the bank were started. In 1978, individual investments made by the brothers were merged into a corporation, which was known as Al Rajhi Trading and Exchange Corporation (Al Rajhi Bank, 2).
Following the formation of the new company, later on it was changed into Al-Rajhi Banking and Investment Corp based on a decision made at the ministerial level. Typically, the decision to change the name of the bank was contained in decision number 1398. However, little is divulged about the bank, but on close examination of the company profile, it becomes clear that four brothers are the main corporate equity holders of the bank.
Typically, the company has grown from bumble beginnings to be the largest banking institutions in Saudi Arabia. In addition to that, the company is sharia compliant, providing services to the wider Muslim community with banking services. The company has grown from a homegrown bank to an international bank, taking its services first to Malaysia, then to other countries of the world.
Mission and vision statements
The company has its mission and vision statements that serve the specific purposes as outlined in the statements. To be more accurate, the mission statement reads as follow:
To be most successful bank admired for its innovative service, people, technology, and sharia compliant products, both locally and internationally.
Thus, the mission statement clearly shows that the company ensures transparency, corporate and personal integrity in the provision of products and services in the financial industry, openness and perusal ethics that are critical in the provision of services in the financial industry.
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On the other hand, the successful banking institution has the following vision statement:
A trusted leader delivering innovative financial solutions to enhance quality of life everywhere.
The company regards the vision statement as integrating core values in the pursuit of business activities and in offering core services in the banking industry while factoring the core values of the bank and the community it serves. Thus, in their vision statements, the bank reflects a customer centric values that regard customer as the main point of focus when offering business services.
Another important element reflected in the mission and vision statements of the company are the passion to serve customers. In addition to that, the success of the company is related to the desire to assist customers achieve their objectives, while ensuring that customers are attended to in humility and with due regard to their feelings and perceptions about the company.
Customers are the core of any successful business without whom, companies cannot position themselves at any strategic advantage against their competitor on the same industry.
Thus, the company attempts to ensure in their business plan the nurturing of innovative practices, inculcating excellence in the people in support of their pursuit of objectives, and ensuring that the company makes significant contributions toward a better society, thus, enhancing its corporate social responsibility (Al Rajhi Bank, 2).
The corporate strategy of the bank is reflected in a number of social responsibility programs such as implementation of 16 social programs that were viewed as being philanthropic. In addition to that, significant contributions to charities and foundations are evidence of the corporate social responsibility incorporated into the business plan of the company.
One of the key features of the program was that it was implemented by the Ladies Bank Branches of the company, thus, showing a significant radical regard for human values. On the other hand, a number of training opportunities were made available for 300 secondary school students that included girls and boys. In addition to that, university students benefited from the funding opportunities made available by the bank.
Business and Industry Profile
The business and industry profile of Al Rajhi bank shows the bank enjoys conducting business in four specific segments. These include offering retail-banking services, offering corporate services, trading in treasury bills and related business activities, offering financial services in the investment industry, and providing brokerage services. These services are ever growing, typically demonstrated by the internationalization of the company (Al Rajhi Bank, 3).
Each of the sections mentioned above provide customized services targeted at meeting and addresses each specific customer’s needs. The retail segment provides services to customers by accepting customer deposits, offering credit facilities to customers in need, and offers money deposit facilities.
On the other hand, corporate customers get their services from the corporate sector and offers services by accepting debits on current accounts. It is important to note that the treasury segment of the company provides treasury services while accommodating international trading portfolios.
In industry, the company operates a number of branches indicated in another section, offers banking services in different countries including the USA, Latin America, South East Asia, and in Europe among other destinations targeted for expansion. It was in the year 2006 that the company changed its name to Al Rajhi bank from Saudi Al-Rajhi Banking and Investment Corp.
The bank’s marketing strategy involves endeavoring to provide customers with products that dynamically reflect their changing needs. In addition to that, the company considers key issues related to the market and the competitiveness required in the market to market its products and services, and stay afloat in the market, thus sustainably continue enjoying an increasing market base.
One of the marketing strategies used by the bank is to provide customer driven products and services. Thus, each of the customers is evaluated and their needs carefully evaluated to created products and services tailored to address their needs. Thus, the bank’s marketing strategy is best defined as being customer driven.
In addition to that, the bank has a market strategy segmenting customers and endeavors to adopt different strategies to position itself in the market against the competitors. On the overall, therefore, the bank endeavors to create value for each of their customers to address their varied needs.
Thus, the pricing of products and series are customized based on the type of customer and banking services offered to the customer.
The bank’s marketing strategy involves endeavoring to provide customers with products that dynamically reflect their changing needs. Among the marketing strategies, include use of retail outlets to reach the customer and gain a larger market base, focusing on services, and product provisions in areas of corporate banking, offering services in treasury and services and investments.
The bank offers a variety of products and services that are focused on the needs of the customer which are dynamically changing, as mentioned elsewhere in the paper. The services and products are focused on the different but mainly small groups, corporate investments, and retail outlets (Al Rajhi Bank, 4).
Each of the baking services reflect a range f products tailored to suit the specific products and services provisions. One of the services that form the core of the banking activities is the Retail Banking Group. The Retail Banking Group offers a suite of products that are tailored to address needs in different segments of the market.
These include deposits for the each of the target market segments, offering credit current accounts, services, and products in consumer banking. Consumer financing includes the provision of loans for the acquisition of real estate property and provision of credit cards. On the other hand, the bank offers share trading for its customers, thus generating additional income for the customer.
Of the 500 branches offering-banking services, 100 branches offer specialized services for ladies with about 100 remittance centers. On the other hand, the bank offers over one million internet-banking users in the market.
Another range of products offered in the market includes the Corporate Banking Group (CBG) products. Typically, the sector focuses on the corporate sector that provides products and services tailored for that sector. In addition to that, other products and services tailored to address the needs in the commercial sector fall under the Corporate Banking Group (CBG) products.
The Corporate Banking Group (CBG) provides a wide range of financial services that help stimulate investments in different areas. In addition to that, the financial services offered by the bank are tailored always to operate under the sharia law.
Another product of significant importance is the management of asset liability and liquidity position of the bank. Typically, the yield-based income on treasury is run by an active treasury based on active investment book.
Thus, the level of liquidity and the depth of the market is regulated by the Treasury Group, that oversees that oversees the implementation of the market liquidity and treasury portfolios. Typically, the bank deals in a wide range of products and services particularly in foreign exchange currencies, making its presence widely acknowledged in different centers around the world.
Each product offered by the bank is sharia compliant. These include treasury products, and services and products in the commodity market, in both local and international markets. On the other hand, the financial services and products are customized always to meet different customer needs and expectations.
Thus, management and staff are well organized and innovative and provide the customers with products and services tailored to address their specific needs. On the other hand, in order to facilitate customer activities, the treasury department offers support in product and services pricing in the money market when exchanging currencies and other business activities.
However, to strategically position the company at a strong position, the company endeavors to continuously innovate and embrace modern technologies to enhance service provisions. Thus, the company attempts to offer suitable products that position it at a competitive position in the market.
Other products and services that are sharia compliant include trading in shares. Trading in shares, is made by the bank sharia compliant based on a number of requirements. There is no direct trade in activities that include alcoholic drinks, narcotics, and tobacco.
On the other hand, trading in shares allows interested customers to purchase directly Saudi Stocks in the share trading market in well-established lounges. To keep the customer well informed about the trading in the stick market, the company uses current technologies to provide continuous updates of the changing business trends in the market.
It is important to note that transactions are tailored to reflect the needs of the customer by conducting them using the Electronic Securities Information System (ESIS). On the other hand, the bank attaches a significant amount of importance to the use of modern technologies in offering customers the services they require.
Any business attracts competitors who might be first movers or late movers. The sole aim of competitors is to get a share of the market and generate profits to sustain the sole survival of the company. That is the case with Al Rajhi bank. Typically, it is important for the bank to identify its competitors and analyses their competitiveness, their strengths, weaknesses, and the strengths of the bank and its weaknesses to ensure strategies are formulated to position the bank competitively in the market.
Among the competing banks in Saudi Arabia that offer similar services to Al Rajhi bank include Al Jazira bank, the Riyadh Bank, Saudi Hollandi Bank, United Saudi Commercial Bank, and Arab National Bank, among others. Typically, there are over twenty banks operating in Saudi Arabia that offer competition to the Al Rajhi bank both in Saudi Arabia and in the international market.
All these banks enjoy a number of strengths, though; a number of weaknesses and threats also characterize them. In addition to that, the current list of banks provide the source so threats to Al Rajhi bank while some of the threats experienced in the banking industry affect across section of other banks.
Thus, some of the strengths discussed below are weaknesses of the banks while some of the weaknesses and threats are opportunities and strengths of the other competitor banks.
The Al Rajhi bank enjoys certain strengths based on stable ratings compared with her competitors. Some of its competitor banks have a lower credit rating in comparison with competitors. On the other hand, the bank has some inherent weaknesses in terms of poor segmentation approaches. Typically, that has been due to the bank policies and market focus.
However, the bank enjoys a wide range of business opportunities partly because of the demand for its services particularly with Muslim communities that are growing and spread all over the world. In addition to that, the banks’ corporate policies allow it to operate virtually in any country in the world, increasing the number of available opportunities in the market. Another key area of strength is the strong capital adequacy of the bank and its related sources.
Typically, the bank has external and internal threats in terms of global economic imbalances, changing policies of different nations, and global economic crises such as recession in many parts of the world. Another threat associated with the bank is the problem of currency pegging. Currency pegging causes problems in exchange rates and might susceptible cause loss and instability in the bank.
Research on the financial position of the bank reflects a trend that shows the company growing from one year on to the next. Typically, the growth is a clear indication of the financial health of the bank. Thus, the bank has strategized always to remain a head in the banking industry and retain its position both nationally and internationally.
Thus, it is important to examine the financial positions of the company from 2008 to 2010 to establish a clear view of the trend in the business transactions of the firm. In 2008, the bank had an asset base of SAR 164, 929, 01 billion which grew to 170, 729, 729 billion, and culminating to 184, 840, 910 billion SAR. Thus, a significant growth in the cost of total assets shows that the company was registering growth in the positive direction. Thus, it makes it possible to project the growth of the company in the next one year.
On the other hand, the total operating income in for the three years provides an indicator in the direction of growth registered by the bank. In 2008, the total operating income was over 10, 500, 200 billion SAR, 11, 500, 00 billion SAR in 2009, and 11, 666, 100 billion SAR in the year 2010. Thus, there was significant growth, but a smaller one compared with previous years of the total working capital (Al Rajhi Bank, 4).
A comparison of the working capital for the years 2008-2010 shows an improvement in each of the years. The net income between the years 2008 to 2010 shows a positive change in which a rise was recorded for each of the years. In 2008, the net income for the bank was 6,500, 600 billion SAR with an improvement of 200, 600 in the following years.
On the other hand, it is important before establishing the bank’s financial strategy to review the bank’s credit ratings. According to competitive intelligence reports, the bank had earned a credit rating of A1 by the Moody’s A+ from Fitch. The underlying rationale for the positive ratings was due to products and services offered by the bank that customer oriented and tailored to address individual customer needs.
In addition to that, the findings the company was positively rated due to excellent profit generation, a strong market capitalization base, a high amount of deposits showing customer confidence in the bank, and a healthy customer franchise that was reflected in the retail sector of the bank throughput its branches. Thus, the following are key statistics that show the trend in a number of business activities conducted by the bank between 2008 and 2010 (GlobalData, 1).
|Number of bank branches||430||435||470|
|Number of Lady branches||100||101||110|
|The number of Remittance centers||126||127||130|
|Number of point of sale terminals||17000||18000||21000|
|Employees of the Bank||7400||7300||7500|
From the tables provided above, one is able to realize that the number of employees had risen and then experienced a drip before rising again. A number of reasons included the use of technology and a rise in the number of outlets. Thus, that reflects a rise in the customer base, an increase in market shares, and a rise in the use of technology.
On the other hand, the number of new braches showed an increase indicating the bank’s passion to expand and reach every customer in need of the banking services. In addition to that, the increase in the number of branches ensures that the bank brings services closer to the customer. Typically, the number of points of sale, the number of ATMs and other services offered by the bank showed an upward trend.
However, slight changes in profits between 2009 and 2010 were noted. However, that does not indicate a downward trend in the income of the bank, but an increase in expenditure shows that the company was expanding and part of the profits were ploughed back into the expansion process.
Based on the findings on the financial statues of the company, it is critical to examine the financial projections and strategies that fosters growth in the sector and place the company at a competitive edge against its competitors while maintaining good financial position and increase in profits.
Reports indicate that the company intends to double its financial position, increase the number of branches, and make an international presence more felt. In addition to that, the company intends to increase the number of products and services offered and increase its presence in more Islamic countries that require their products and services.
In addition to that, the company intends to provide a wider range of products tailored for different Islamic communities and identify the range of products that might lead to more profit generations. On the other hand, the bank has a strategy of increasing profits by minimizing on expenditure while integrating technology as a cost saving measure. Thus, profits for the coming years are intended to double while the customer base increases by a significant size.
Al Rajhi Bank. Global Credit Research Credit Opinion. Credit Opinion: Moody Investors Services. 2008
Forbes, Malcolm S. Fact and Comment. Knopf, New York, ISBN 0-394-49187-4; twenty-five years of the editor’s columns from Forbes. 1974.
GlobalData. Al Rajhi Banking and Investment Corporation (1120) – Financial and Strategic SWOT Analysis Review. Market Research.com. Web. https://www.marketresearch.com/GlobalData-v3648/Al-Rajhi-Banking-Investment-Corporation-11995539/