Corporate strategy paper for Planters Development Bank

• Main Author: De Los Reyes, Michael Gavin Richard L.
• Format: text
• Language: English
• Published: Animo Repository 2000
• Subjects: Banks and banking > Philippines; Business Administration, Management, and Operations
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/2731
• Institution: De La Salle University

Competitive intensity will continue to increase for the banking industry given the rise of big banking groups as envisioned by the Bangko Sentral ng Pilipinas and the increasing commodization of banking products and services. Banks will increasingly veer towards 2 general strategies-- universal or niche banking. Universla banking is concerned with product range to improve income generation while niche banking is concerned with servicing a specific group of customers. PDB's current and proposed stratey centers arounf niche banking, with a focus on small and medium enterprises (SME): (1) Its core competence is managing relationships with its clients. Unlike its peers, the bank is very customer-instead of product-centric, making the customers feel that the entire range of services has been designed for them. Relationship management is an increasingly crucial element as banking products are turning into commodities and customers are getting more concerned about the level of service that they get. (2) The value chain is leveraged towards delivering value to the SME market. For example, the account management department (the primary dustribution channel for earning assets) is given a high profile witin the company and the supporting units (e.g. credit investigation, treasury, risk management) generally support its operations. Most importantly, the vision of serving SMEs is made veryclear within and outside of the bank. (3) PDB has formed significant partnerships with organizations that share its vision. These partners include the International Fianance Corporation (IFC), the Asian Development Bank (ADB), the Netherlands Finance Company (FMO), government financial institutions, among others. While these partners provide a significant amount of funds for PDB's operations, their real value lies in technology transfers, training for bank staff, expertise and experience in similar operations in other countries. (4) The SME market continues to be a largely neglected segment for most banks which have concentrated on top-and middle-tier accounts. While these accounts present lower credit risk, these are less profitable and apt to move from one bank to another. This is in contrast to SMEs whicha re highly profitable, more willing to put up collateral and re genrally more loyal customers. (5) More than being profitable, a focused strategy is able to generate good cash flows. Sensitivity analysis shows that cash generation and liquidity remain positive even under a worst-case scenario. PDB belongs to the banking industry, which is a subset of the financial services sector. The financial services sector is made up of the banking industry and non-bank financial institutions (NBFI). The banking industry consists of universal or expanded commercial banks (EKB). commercial banks (KB), branches of foreign banks (FB), thrift banks banks (FB), private development banks, savings and mortgage banks and specialized government banks. NBFIs include financing companies (with or without quasi banking functions), investment houses, investment companies, savings and loan associations, securities dealers/brokers, lending investors, venture capital corporations, fund managers, mutual building and loan association, government NBFIs and pawnshops.