A strategic management paper for Rural Bank of Caloocan, Inc.

• Main Author: Santos, Maria Christina O.
• Format: text
• Language: English
• Published: Animo Repository 2008
• Subjects: Banks and banking > Philippines; Rural Bank of Caloocan; Inc.
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3691
• Institution: De La Salle University

The Philippine financial system stayed afloat and resilient for the first semester of 2007 as it navigated through the challenges besetting the rapidly changing and closely integrated global financial services industry. Sound underlying fundamentals, sustained implementation of key financial sector reforms and improving macroeconomic environment all helped to relatively insulate the financial system from recent external shocks such as the US sub-prime credit crunch. Hence, the banking system posted moderate expansion in assets, deposits and capital accounts. However, for the Philippine financial services industry to be globally competitive and responsive to the needs of a growing domestic economy, the Bangko Sentral ng Pilipinas (BSP) has to respond to the call of keeping the ground fertile by building market-oriented prudential standards and regulatory framework. One important aspect is the urgent need to address the overhang of bad assets through the implementation of Special Purpose Vehicle II as they pose a threat to the overall soundness of the banking system. Another critical aspect is further realignment of local regulations with international standards, particularly those relating to corporate governance, information technology and risk management, and capital adequacy of banks. With the BSP espousing merger and consolidation to improve operational efficiencies of banks, the ongoing consolidation has led to greater concentration of banks in highly urbanized areas like the National Capital Region (NCR) leaving other areas largely underserved. Cognizant of this development, the moratorium on bank branching was partially lifted through the issuance of Circular No. 505 on 22 December 2005 to facilitate the expansion of financial services in underserved areas while giving banks some flexibility to respond to market opportunities. All of these, including the five competitive forces of the industry with the intensity of rivalry among firms, bargaining power of buyers and bargaining power of suppliers remaining high pose significant challenges for Rural Bank of Caloocan, Inc. (RBCI). By analyzing which of these changes is among the opportunities and threats to the industry, RBCI has to lay the foundation now for future success while winning in today's marketplace. five rural banks in Metro Manila delivering a wide range of financial services to help improve the standard of living of people, it is proposed that the company implement the following strategies: 1. Widen product line by introducing the following products: a. Microfinance lending program to diversify client base to include the marginalized poor and low-income group and to widen the geographic market focus to include some designated areas of Manila, Quezon City and Pasay City and b. Foreign currency denominated deposit accounts to tap the potential market brought by the Overseas Filipino Workers (OFWs) 2. Expand product scope by offering remittance or money transfer services. Using Mc Kinsey's 7-S framework in analyzing the organizational effectiveness of the Bank, RBCI needs to develop certain organizational capabilities to implement the proposed corporate strategies. In view of this, the 8-Strategy Implementing Tasks (8-SIT) framework was introduced to prepare the Bank in handling change. The strategy-implementing challenge is to create a series of tight fits between strategy and: (1) the organizations competencies, capabilities, and structure (2) budgetary allocations (3) policies and procedures (4) internal support systems (5) reward structure and (6) the corporate culture. The tighter the fit, the more powerful strategy execution becomes and the more likely targeted performance can actually be achieved.