Executive Summary
The National Commercial Bank is considered to be the largest financial establishment in Islamic world. Its corporate and marketing strategies rely on geographical expansion, technological innovation, and services diversification. All these approaches will be discussed in the report with reliance on company’s history, mission and values, and strategic management. SWOT analysis will also be introduced to take a closer look on the NCB’s policies.
Introduction
The National Commercial Bank, which is also called AlAhli Bank, refers to first Saudi Arabian banks. It is considered one of the pioneers in finance and Islamic banking, possessing the largest amount of assets. Its headquarters are located in Jeddah, with Head Office in Riyadh. The establishment provides a variety of banking services and belongs to one of the most recognized and reliable banking systems in the Arab world.
In order to define the main purposes, strategies, and mission of the organization, it is purposeful to consider the NCB’s history, background, strategies, SWOT analysis, job history, conceptual framework, technical part. The evaluation of these issues will highlight the major gaps and contributes to defining the main recommendations that should be introduced to fulfill the gap.
NBC’s Background
Nature of Company’s Activities
Emerged over half a century ago, the NCB has considered one of the Arab largest financial establishments, possessing more than 5,000 employees and over 2 million customers in Saudi Arabia (IMA, 2012). Nowadays, the bank controls a third of the country’s assets and has near 280 branches, becoming one of the largest retail systems in the Kingdom (IMA, 2012).
The banking sector in which the NCB operates is prosperous because of extensive influence of the Saudi central bank. With reliance on the basic banking activities, Saudi Arabian banks manage to sustain a competitive advantage, as well as remain highly resilient. In particular, the bank has a 100 % non-performing loan coverage and ample liquidity.
Due to the highly competitive environment, NBC’s profits were increased and reached over $ 1.25 billion, representing a 17 % increase for 2009 (IMA, 2012). In 2010, the NCB’s assets reached $ 75 billion whereas advances and loans grew by 12 % (IMA, 2012).
Due to the changes in management structure, the Alahli bank has enhanced its Islamic banking operations by converting retail operations into products complying with Sharia. The NCB is also considered as the main asset manager in Saudi Arabia, possessing over 30 % share of the fund market (IMA, 2012).
The focus on risk management has become the outcome of the advanced financial and commercial activities, as well as emergence of new segments. Thus, all banking transactions can be carried out electronically due to the availability of Alahli Online system.
Recently, The National Commercial Bank declared about the launch of mobile services for checking accounting and banking transactions through smart phones. Launching new services has become a part of its loyalty to utilize the modern banking technologies and applications (Arab News, 2012).
It fosters the financial transactions for customers and presents the bank orientation on innovation and development of information technologies, along with considering the security levels for electronic banking (Arab News, 2012).
Alahli Mobile will also provide such service as cash withdrawal from ATM points, with no need for inserting ATM card. In the context of digital and technological development, introducing self-banking services is a new focus on offering innovative solutions to their clients (Arab News, 2013).
Mobile banking seeks to enhance communication with clients by meeting their requirements. Such a strategic framework is premised on the NCB’s vision to deliver comprehensive and innovative banking solutions for its customers.
Aside from global policies, the company also works on widening individual customer’s services that are congruent with its expansion strategy. Hence, the services involve project finance, social loaning, travel checks, issuing of guarantee letters and letters of credits, bank deposits, and real estate loaning. The diversification of banking activities, therefore, can enhance its competitive potential and reputation.
Vision, Mission, and Organizational Chart
The mission and vision of the NCB lies in developing strategies that contribute to constant growth of the services quality. Diversifying the funding activities is another important mission that the banking institution pursues. Developing multiple layers in funding can provide a strong support for increasing the lending capabilities of the local banking institutions. Therefore, the diversity of funding sources is vital for the NCB progress.
The NBC has introduced a regional expansion strategy, gaining 64 % share in Turkey Finance Katilim Bank in 2008 (Worldfolio, 2013). Since then, the main Turkish bank has outperformed the forecasted results, regardless of the global economic recession (Worldfolio, 2013).
In short, the National Commercial Bank has experienced rapid growth over the recent years, gaining considerable profits, although its organizational mission is quite conservative in such areas as asset management and NPL coverage (Worldfolio, 2013). The organization chart of the NCB is split into three managerial branches – internal audit, compliance, and general manager.
There are also departments responsible for risk management, inspection, legal, and human resources. There is also a deputy general manager who is in charge of operations (IT, Procurement, Bank-office processing, and general affairs), sales (Individuals customers, external communications, region Tripoli-Sabha, and region Al Baida-Benghazi), and finance. The latter involves controlling and planning, accounting and reporting, and treasure.
SWOT Analysis
Strengths
The bank has fostered its expansion strategies through a three-tiered approach that refers to core growth, geographical expansion, and broadening the organization’s mission (The National Commercial Bank, 2012). Due to the introduction of mobile services and other banking activities, Alahli Bank manages to ensure improved credit quality and integrated business structure.
Weaknesses
Despite the integrated system, the NCB faces credit risk exposure that presupposes customers’ excess access to banking activities due to the extended services of the bank as a borrower (The National Commercial Bank, 2012).
Opportunities
There are a number of opportunities for Alahli Bank to expand its influence. To begin with, the organization has potential prospects for growth in the Arabian Banking Sector. Such an opportunity is predetermined by the managers’ experience in operating at various levels (The National Commercial Bank, 2012). Further, the NCB’s success is premised on the growing Global Finance Market and, as a result, the Islamic banking system has remarkable opportunities for development.
Threats
Although competition contributes to the expansion policies, the NCB still faces the challenge of competition, as well as the constraints of Basel III standards on capital requirements (The National Commercial Bank, 2012).
Organizational Marketing Strategy
The SWOT analysis of Alahli banking system demonstrates that the organization has chosen global expansion strategy to enhance its position at the international market. Such an approach reflects the bank’s ongoing commitment to economic development, as well as to the analysis of international environment.
Understanding the needs of global consumers should become a priority for the NBC because it creates a new path for growth and development. Aside from territorial expansion, the company strives to extend the range of its services and products. Specifically, the bank focuses on transparency and corporate governance, leading to improved performance.
Organizational Competitive Strategy
The bank’s managerial staff focuses on two leading competitive strategies – overall growth and geographical expansion. The first one is aimed at continual improvement of services quality through introduction of well-tailored banking products by means of various distribution channels (Worldfolio, 2013).
The second one implies acquisitions and development of strategic partnerships in regional markets, developing and enhancing NCB’s distinct capabilities. Over years, the NCB experienced rapid growth by transforming its commercial ban to leading regional services group. Despite the emerged constraints to access capital market, the banking system is considered extremely competitive.
Continuous development of professional skills and abilities can attract investors and provide a highly competitive environment (Wordlfolio, 2013). Thus, the main task of Alahli Bank consists in developing its services and increasing the quality of banking activities.
Job History
The NCB takes advantage of strong capital adequacy that contributes to developing a strong commercial policy in a leading financial services group. In 1999, changes occurred to the Bank’s ownership, and a New Board of Directors has been shaped. Thus, Mr. Abdulla Salem Bahamdan became the Chairman of the Directors Board (IMA, 2012). In 2005, Mr. Abdulkereem Abu Alnasr was assigned as General Manager and the NCB’s first CEO in 2006 (IMA, 2012).
Conceptual Framework (Literature Review)
With regard to the SWOT analysis of weaknesses and threats, Alahli bank should pay closer attention to competition and credit risk exposure. These challenges can become even more serious as soon as the global and geographical expansion and product diversification are concerned. Before introducing such competition strategy in the context of corporate growth, the focus should be on the related experience in this field.
The overview of modern competitive strategies in banking defines the main challenges and problems of domestic banks deregulation as a result of globalization policy. In particular, the studies by De Carvalho (2000) assert that most of the banks that plan transition to an international level lose their protection mechanisms and face rigid competition on the part of other foreign banks.
Therefore, because the NCB explores new markets, segments, and customers, it can undergo a number of risks and problems. In addition, the introduction of digital devices and innovation technology is another viable solution for fostering integration of domestic banks to the global market. In this respect, Ozbay et al. (2011) note that implementing competitive strategies in banking can boost economic recovery process and provide an innovative vision of the banking system.
Technical Part on Projects
Methodological Problems
While conducting an in-depth evaluation of the banking structure of the NCB, specific emphasis has been placed on the marketing challenges of the bank’s penetration to the global environment due to the emergence of international standards and regulations. Therefore, the discussion of growth strategies implemented in Saudi region provides a greater outlook on the roots and consequences of the introduced changes.
Findings
While analyzing the Alahli Bank, a number of interesting strategies have been highlighted. To begin with, the organization has managed to define its strategic course in terms of innovation and technological progress to successfully become the largest bank in the Arab world. Second, the bank has focused on development of new products and services with reliance on the customer’s needs and requirements.
Limitations
The basic limitation to the project analysis lies in absence of information about human resources strategy that builds the foundation of successful globalization course. Second, the project proves that the competition constraints are considered extremely influential because they impose certain obligations on the NCB’s managers in terms of policy and organization.
Suggested Solutions
In order to reduce the risk of competition, as well as enhance the protection mechanisms, the company should restructure its managerial organization. In particular, there should be more managerial positions in different locations to take greater control of the marketing situation.
Evaluation of the Internship Experience
On the one hand, the bank’s plan to expand new regions in the Arab world can create a fresh insight into marketing and banking activities. Once the NCB starts penetration, it can encounter competitive market hampering the bank’s economic growth. As a result of such policies, there is strong tendency in privatization.
Besides, specific attention should be given to the analysis of external economic environment, particularly to the economic financial at the global market. Thus, lack of information about global tendencies can lessen the opportunity of the Arab banking system to adapt to new contingencies. In fact, the experience in working at this bank has enhanced the vision of future development of the banking system at the international level.
Summary of findings and recommendations
With regard to above-presented findings, it should be stressed that the NCB has chosen an aggressive policy oriented on total geographic expansion and diversification of products and services. Such a reform is accompanied by innovation and technological progress, including the creation of online banking systems. Despite the advantage of the proposed strategy, there are a number of barriers to its accomplishment.
In particular, insufficient exploration of the external environment can pose threats to bank’s further integration due to the lack of protection mechanisms, as well as inability of the Alahli’s management to oppose competition. In addition, the organization’s marketing strategy is also consistent with its mission and values.
In order to prevent further risk imposed on the banking activities, the NCB should focus on reconstruction of internal processes and departments to be ready to face external setting.
Conclusions
The National Commercial Bank is considered one of the largest banks in the Arabian market and it continues expanding its influence in Islamic world due to the greatest assets it possesses. Its marketing and competitive strategy focuses on geographic expansion and product diversification that is aimed at capturing greater client base.
In order to meet the global competition, the company explores its innovation capabilities. For instance, online mobile service is a recent introduction to the bank’s range of services, by means of which the customers can take greater control of its account. Despite a consistent approach to managing banking system, there are a number of challenges that need to be addressed. This is of particular concern to external competition and lack of devices for its management.
References
Arab News (2012). NCB Launches Alahli Mobile Service. Web.
De Carvalho, F. J. (2000). New Competitive Strategies of Foreign Banks in Large Emerging Economies: The Case of Brazil. National Research Council, 312, 1-32. Web.
IMA (2012). The National Commercial Bank. Doing Business in Saudi Arabia. Web.
Ozbay, R., Dinçer, H., & Hacioğlu, Ü. (2011). Internet based Innovation Strategy for the Banks in the Era of 2008 Global Financial Crisis. International Journal of Business & Social Science, 2(22), 85-91.
The National Commercial Bank – Strategic SWOT Analysis Review. (2012). Bharat Book Bureau. Global Data. Web.
Worldfolio. (2013). NCB Banking on Growth. Web.