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Riyad Bank: Strategic Analysis and Recommendations Essay (Critical Writing)

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Updated: Jul 14th, 2021

Since the 1990s, the world banking sector has experienced tremendous growth rates, never before seen in the private and public banking sectors. Innovation in telecommunications and internet technology has led to the gradual digitalization of the banking sphere, moving it from a relatively slow and stable operational model to a more responsive, dynamic, and competitive structure. Globalization trends have left no country unaffected, imposing the need for integration into the world economy. The speed of money flows and information transfers have also significantly expanded the possibilities as well as the demands for banking service providers. Saudi Arabia, which rose to become the economic center for the GCC (Gulf Cooperation Council) as well as the entirety of the Middle East.

The banking sector in Saudi Arabia managed to grow because of favorable oil prices, generous government donations, and protectionist policies, which have imposed restrictions on foreign banking agencies. However, since 2012, the balance between local and foreign investment has shifted considerably. As it stands, there are 24 banks operating in Saudi Arabia. Out of them, only 12 banks are locally authorized, whereas the other 12 are representative offices of foreign entities (Johnes, Izzeldin, & Pappas, 2014). Major foreign banks present in the region are from Qatar, Europe, and China.

This presents stiff competition for the local banks, especially the Riyad Bank, which is one of the largest banks in the region. The situation calls for a revision of banking strategies and an increased demand for strategic competence in CEOs and board members. The purpose of this paper is to present a plan for strategic quality improvement for board members of the Riyad Bank, utilizing the established concepts and theories of the strategic planning process.

Company Description

Riyad Bank is one of the largest banks in Saudi Arabia, standing at the fourth place both inside and outside the country, based on the number of total assets and net income for the past five years (“Company overview,” n.d.). As it stands, the total assets in SAR exceed 186 billion, whereas its net assets for the last year exceeded 3.500 million SAR (Aljazira Capital, 2018). The bank is controlled by the Saudi Arabian government, which owns 51% of its shares and responds directly to the Saudi Arabian monetary agency. The bank operates outside of Saudi Arabia as well, having representative offices in all major countries of the GCC.

The total number of specialists employed by the Riyad Bank exceeds 3200 individuals. The main financial services provided by the bank to the population as well as financial agents include personal banking, corporate banking, treasury, and international banking. Riyad Bank has a strong retail banking franchise as well.

The bank was brought into existence in 1957 as part of the centralized banking sector of Saudi Arabia. Ever since, the bank has exchanged hands and names, having been shifted from public to private until ending up as it is now, with a public offering of 49% to be purchased by individuals and corporations as public shareholders (“Company overview,” n.d.). The most prominent members of the Riyad Bank’s senior management staff include Abdullah Mohammed Al-Issa, who functions as the chairman of the board, and Abdulmajeed A Al-Mubarak, the bank’s acting CEO.

Industry Description

Saudi Arabia has a massive banking industry in order to supply its oil and gas production with the number of finances it needs, as it is a very capital-intensive venture (Mirzaei & Moore, 2016). In the first quarter of 2018, the total size of the KSA banking sector amounted to 2.262 billion SAR, having suffered a slight decrease in the balance sheets of 0.2% in YoY (Year over Year) and 1.9% in QoQ (Quarter over Quarter) margins. According to the Quarter Capital Report provided by Aljazira Capital (2018), 62% of all assets for banks amount to loans in private sectors, with an additional 14% being loaned to the government.

The remaining 24% is spread among foreign assets, SAMA bills, and deposits, as well as cash-in vaults. In terms of liabilities, the KSA banking industry has over 86% in deposits and capital accounts (Aljazira Capital, 2018). Foreign deposits represent a very small fraction of total liabilities in the banking sphere, indicating that the banking sector is primarily serving domestic customers.

Riyad bank is a public company, thus representing the public banking sector. It is firmly placed on the fourth-place total banking assets. The largest bank in KSA is the National Central Bank (NCB), which holds roughly 20% of total banking assets (Aljazira Capital, 2018). The next in line is the Al Rajhi Bank, with 16% of total banking assets. Samba and Riyad banks are very close, with Samba outpacing Riyad by roughly 1%. Together, these four banks make up for more than 57% of total banking assets, providing the government the control it needs over the national banking industry. Sharia compliance is an important feature of Saudi Arabian banks, with Al Rahji being the largest Sharia bank in the region (Aljazira Capital, 2018).

Strategy Concepts, Theories, and Principles of Corporate Governance

Understanding the basics of strategy and planning in the business and banking environment is a core requirement for all and any board members, as these theories make the foundation of a modern decision-making process. Business strategy is typically divided into three levels, which are as follows (Grant & Jordan, 2015):

Corporate Unit level

At this level, the analysis is done between different corporate units of similar scope and purpose in order to detect similarities, differences, and profitable practices. They seek to enhance stakeholder and shareholder value within the scope of the organization. An example of strategic movement on a corporate level is the introduction of a new product.

Business Unit level

At this level, the company or bank is looking to secure or enhance its position in the market as a business. The aim of this strategy is to increase business value by making the customers appreciating their goods and services more. In plain language, the majority of marketing efforts are connected to business unit-level strategy. Examples include advertising campaigns, free product distributions, charities, color choices, and other ways of making products and services attractive.

Operational Unit level

As the name suggests, this level of strategy concerns itself with taking advantage of gains presented by business and corporate unit level strategies by making the optimal use of resources to produce the best quality product or service while using the least amount of resources possible. Supply chain management decisions, operational decisions, organization of working processes, and other similar interventions are all part of the operational unit level strategy.

There are several strategic concepts to be implemented within each unit stage described above. Since there are so many, it will not be possible or expected of board members to be aware of every single one. However, some are considered universal knowledge in business and management and must be thoroughly understood. For the corporate unit level, the SWOT analysis is the primary and most widely known framework (Grant & Jordan, 2015). It focuses on the events happening inside of the company, helps highlight its strengths and weaknesses, and analyzes them in comparison to potential events happening in the market.

Porter’s Five Forces is a business unit strategy that is aimed at the outside of the company, helping analyze the industry, the market segment, as well as various powers affecting the company (Grant & Jordan, 2015). Understanding competitive advantage is something that Porter’s framework is widely known for, as it helps realize what forces shape the perception and effectiveness of the business and helps conduct interventions to improve the company’s position in the industry.

At the operational level, one of the most effective changes and quality management frameworks is Six Sigma (Grant & Jordan, 2015). It is used as a basis for improving supply chain management, operational processes, and human resource management in order to achieve the goals of improved quality. This approach utilizes statistical data in order to eliminate defects and create customer value by preserving economic value, limiting resource waste, and improving the quality of labor while maintaining comparable costs in the long-term perspective. Porter’s value chain is also a legitimate framework within which Six Sigma can be utilized (Dinh et al., 2014).

Lastly, there is the concept of corporate governance. Board members make part of the top of the pyramid in the corporate hierarchy, and it is their job to ensure responsibility, accountability, and effective leadership on all levels of the company below them. In order to do so, it is imperative to understand different types of company organization and hierarchy as well as knowledge and implement different leadership styles.

The majority of large public banks favor transactional leadership and a rigid organizational structure. However, people-oriented leadership styles have been emerging in all sectors and industries since the 2000s, showing remarkable effectiveness in comparison to the authoritarian, autocratic style of leadership. These styles are aimed at industries less regulated and allowing for greater personal freedom of choice and decision-making. Thus, understanding what kinds of leadership styles and hierarchies are applicable to the banking sphere is important for Riyad bank board members.

Examples of Strategies to be Used by the Riyad Bank

Industry Analysis

Porter’s five forces is an excellent tool for performing industry analysis. Riyad bank can use it to analyze the existing business climate and make informed decisions based off on it. The five forces involved include the threat of new entrants, power of suppliers, power of buyers, the availability of substitutes, and competitive rivalry. The threat of new entrants to the banking sphere of KSA is currently considered low, as all the major players are already present in the field. Creating a bank requires significant monetary and administrative resources, making the venture difficult (Pistol, n.d.).

The power of suppliers in the KSA banking industry is between medium to high. As it was shown in the industry section, the majority of liabilities come from deposits. The power of buyers is established at the same level, as loans to private and government entities make up for 76% of the banking sector’s assets (Aljazira Capital, 2018). The availability of substitutes is relatively high, as Riyad bank has 23 more competitors to contend with, three of which possess more resources. In addition, Riyad bank is not established as a bank with a unique line of products, like the Al Rahji Bank, which is notorious for its Sharia banking practices. Lastly, the competitive rivalry in KSA is considered to be relatively low, despite the number of banks available. Foreign banks do not have enough popularity or government support, and the government controls all four major banks.

Competitive Advantage Analysis

Competitive advantage is identified as a list of qualities and characteristics unique to a particular bank or company that make its services and goods desirable to customers. According to Grant and Jordan (2015), these factors could be internal or external. Internal factors include creative and innovative capabilities of the firm, whereas the external ones include the customer’s perceptions of the bank, technological advancements, changes in customer demand, and others. A SWOT analysis can be used to gauge competitive advantage, as it addresses strengths, weaknesses, opportunities, and threats to the company. If we apply SWOT to Riyad Bank, a brief analysis would indicate the following (Solaiman, Kadar, Wanke, & Azad, 2017):

  • Strengths: Long history of success, loyal customers, government support, a wide portfolio of services, and significant resources.
  • Weaknesses: Is outpaced by other major competitors, does not have any unique services, partial reliance on oil industry and prices.
  • Opportunities: Expanding the existing portfolio even further, offering Sharia banking services, expanding abroad.
  • Threats: Foreign competition, oil crisis, regional instability.

As it is possible to see, Riyad Bank’s main competitive advantage lies in being a part of the system that has existed since the formation of the KSA banking system. It is a strong, sturdy bank that is unlikely to fail, as the government would support it. However, due to having an established place in the system, it would be hard to outgrow this shell.

Operational Analysis

Sigma Six can be used to identify potential issues in the customer-management process in the banking sphere. As it stands, Riyad Bank is a largely traditional bank that utilizes conventional approaches to banking services (Saif-Alyousfi, Saha, & Md-Rus, 2017). The majority of its clients visit the bank directly in order to fulfill their banking needs. This results in high volumes of customers to be accommodated by the offices. Side effects include crowding, longer waiting times, customer dissatisfaction, the intent to switch banks, and operational errors as the result of high working loads and pressure to speed things up.

Automation and the use of customer service mechanisms can significantly reduce the load on Riyad bank offices. Although the bank already uses ATCs, many customers do not know how to properly use them and are wary of them, preferring to stand in lines instead of using self-service machines. This issue is prevalent among the elderly populations of KSA (Bhatt & Gor, 2012).

Encouraging the use of online banking, ATC machines, and self-service booths when they are available would not only improve customer satisfaction but also massively improve the quality of delivered services, as the individuals requiring the attention of a banking employee would not be rushed and have more time and effort dedicated to them. The use of e-banking and ATCs would positively improve the image in the eyes of the younger generation, who value autonomy and access to banking accounts from anywhere that has internet.

Corporate Culture Change

As it stands, Riyad Bank seems to have an issue with high turnover rates. The KSA banking system is characterized by high retention rates in the middle and senior management positions and low retention rates among the frontline employees (Bhatt & Gor, 2012). Research indicates that such a situation is born of tribal and clan-like command structures present in many organizations, which started out as family businesses or were heavily influenced by them. As such, individuals in positions of power are motivated to stay, whereas newcomers are often barred from quickly advancing. This presents an issue, in particular with the younger generations of employees, who wish to be qualified based on their knowledge and merits rather than their relationships with other managers in charge.

Changing the approach to leadership from clan-based and transactional to transformational would create a sense of community and inclusivity, where everyone has a chance to advance based on their personal qualities and capabilities. Transformational leadership would not only create a healthy competition among employees for promotions but also ensure that new generations of leaders are made and promoted to positions of power according to their merit (Northouse, 2018). As a result, the company would benefit from competent cadres and save value on employee rotation.

The existing hierarchical structure utilized by the Riyad bank is typical of those of their competitors. There are ten hierarchical steps with increased levels of operational and strategic responsibility, ranging from non-clerical staff members to members of the directorial board. All strategic and major operational change decisions are made at the top before being transmitted to the levels below. Bottom-level employees work under the rules and conditions imposed by the banking law as well as internal corporate policies and have very little say in any changes. The full hierarchical structure is as follows (Solaiman et al., 2017):

  • Board of Directors – makes important strategic decisions and determines the direction of the bank.
  • Chief Executive Officer – puts forth new business initiatives and plans.
  • Chief Operating Officer – oversees the banking processes and standards.
  • General Managers – staff members assigned to specific tasks.
  • Deputy General Managers – assistants of the general managers.
  • Assistant General Managers – communication links between general managers and principal officers.
  • Principal Officers – heads of structure departments.
  • Senior Officers/Probationary Officers – responsible for meeting monthly financial targets.
  • Clerical Staff Members – manage cash deposits and withdrawals.
  • Non-Clerical Staff Members – office assistants and customer relations.

As it is possible to see, every step in the hierarchy has its own list of responsibilities. Functions of the clerical and non-clerical staff are not interchangeable, as they require different access. At the same time, manager positions require specific knowledge, making the system rather rigid in exchange and subordination.


There are several recommendations to be made to Riyad Bank based on the information provided above. The first recommendation is to ensure that all board members are familiar with the key strategic theories and concepts necessary for the facilitation of strategic planning. It is often the case with big banks and corporations that some of the board members are not qualified to make the decisions as expected of them, instead of relying on their more competent peers to do it for them. Reviewing the performance and actual knowledge levels of the board members is imperative for weeding out the individuals that are not up to the task.

In regards to business strategy, Riyad bank should focus on an aggressive marketing campaign in order to win market share from foreign banks. This could be done by expanding the company’s Sharia banking services and advertising themselves to the locals as a patriotic alternative to various foreign investments. However, in order to have a better offering to the customers, the services and benefits should exceed those provided by foreigners. Riyad bank could hope for additional government support in order to access grants, loans, and premium resources.

In order to improve operational efficiency, Riyad bank must integrate e-banking and self-service platforms into its structure. Shrinking the size of conventional banking facilities while compensating the customers with useful e-banking options accessible from one’s cellphone as well as with ATCs capable of both giving and receiving money would significantly improve customer autonomy. The majority of individuals visiting the bank are there only because of menial tasks they could perform faster and more efficiently without the help of a bank employee. It would allow the employees of Riyad bank to dedicate more time to serve customers whose needs require more attention.

Lastly, the existing corporate culture of Riyad bank should be changed. As it stands, high turnover rates are causing major losses of capital and talent since it requires from two to five monthly salaries to find and train a new employee. Frontline workers and junior officers do not see any opportunities for quicker career advancement. Changing the leadership style from transactional to transformational would help them prepare for new roles and provide the knowledge and information they need to advance. Tribalism should be eliminated from the command structure, as it should be governed by competence and skill rather than connections and favors.

The existing hierarchical structure, however, should remain unchanged. It was imposed by the necessity to adhere to strict laws and regulations surrounding the banking sphere. It has well-established roles and responsibilities, which promote employee agency over various activities. However, it is suggested to allow more initiative for general managers and the directors of branch organizations, in order to increase autonomy and speed of decision-making, in order to adapt to the conditions of the local markets. These recommendations would help improve the quality of leadership in Riyad Bank and enhance its strategic approach to business on all three levels of strategy: Corporate, Business, and Operational unit levels.


Riyad Bank is one of the four largest banks in the Kingdom of Saudi Arabia. It operates using 10% of total capital available to businesses in the region and is firmly established as one of the leaders in the banking sphere. However, its position is static, as it cannot effectively compete for market share with the bigger local banks and does not seem interested in competing with foreign investors. The proposed strategic choices for Riyad Bank include educating its board of directors on the latest approaches in enterprise strategy and providing three suggestions based on the analysis performed in the scope of this paper. The suggested measures are as follows:

  • Provide unique services to customers and claim an established identity on the market.
  • Promote self-service and customer autonomy.
  • Switch from tribal and transactional to transformational leadership.

Strategic analysis plays an important part in determining the direction of a bank or a company. A lack of understanding of principles, frameworks, and theories behind corporate governance has the potential to make a company stagnate. The recommendations provided to Riyad bank should help improve its overall position in the KSA banking industry.


Aljazira Capital. (2018). Saudi banking sector. Web.

Bhatt, S. J., & Gor, K. (2012). Recent trends in marketing strategy in banking sector. IBMRD’s Journal of Management & Research, 1(1), 45-48.

Company overview of the Riyad Bank. (n.d.). Web.

Dinh, J. E., Lord, R. G., Gardner, W. L., Meuser, J. D., Liden, R. C., & Hu, J. (2014). Leadership theory and research in the new millennium: Current theoretical trends and changing perspectives. The Leadership Quarterly, 25(1), 36-62.

Grant, R. M., & Jordan, J. (2015). Foundations of strategy (2nd ed.). Hoboken, NJ: Wiley.

Johnes, J., Izzeldin, M., & Pappas, V. (2014). A comparison of performance of Islamic and conventional banks 2004-2009. Journal of Economic Behavior & Organization, 103, 93-107.

Mirzaei, A., & Moore, T. (2016). Banking performance and industry growth in an oil-rich economy: Evidence from Qatar. The Quarterly Review of Economics and Finance, 60, 58-69.

Northouse, P. G. (2018). Leadership: Theory and practice (8th ed.). New York, NY: Sage.

Pistol, G. (n.d.). . Web.

Saif-Alyousfi, A. Y. H., Saha, A., & Md-Rus, R. (2017). Profitability of Saudi commercial banks: A comparative evaluation between domestic and foreign banks using CAMEL parameters. International Journal of Economics and Financial Issues, 7(2), 477-484.

Solaiman, G., Kadar, A., Wanke, P., & Azad, K. A. (2017). Bank efficiency in Saudi Arabia: Examining the impact of global financial crisis. Central European Review of Economics and Management, 1(4), 69-86.

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