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Bank of Khyber Project

Bank of Khyber Project


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Firm: THE BANK OF KHYBER Submitted to Mr.Imran Qureshi

Submitted By Asad Khan (4573-FMS/MBA/S10) Yaqoob Shah (4572-FMS/MBA/S10) Ahmad Qayum(4567-FMS/MBA/S10) Kaleem Akram (4545-FMS/MBA/S10)

Dated May 3 ,2010


DEDICATED TO OUR PARENTS WHO ALWAYS LOVED US & all those who have a soft corner for us in their hearts


All gratitude and thanks to almighty “ALLAH” the gracious, the most merciful and beneficent who gave us courage to undertake and complete this task. we are very much obliged to our ever caring and loving parents whose prayers have enabled to reach this stage. We are grateful to almighty ALLAH who made us able to complete the work presented in this report. It is due to HIS unending mercy that this work moved towards success. We are very grateful to Mr Imran Qureshi our respectable teacher for his continuous help, support and time during the entire course of our project. We feel great pride and pleasure on the accomplishment of this report

Like any other basic sphere of modern socio-industrial activities, banking, too, is a vigorous and purposeful monetary–based media that foster and nourish the socio-economic growth of a developing country. Nowadays the banking sector is very important. It is the back bone for the economy of a country. In a country like Pakistan, banks are now the focus of government, to nourish and initiate the developmental projects at lower levels. Banks have also ensured a high level of productivity, growth, and strategies. One such bank with new policies and strategies pushing forth towards progress is The Bank of Khyber, which has since its inception shown remarkable achievements and discovered new avenues of innovative banking. This report has been divided into four sections: Section one deals with the introduction, back ground of study, purpose of study, . Section two involves SWOT analysis, TOWS matrix, Ratio Analysis, BCG matrix, Customer Analysis, Competitor Analysis, Positioning, Scorpio Techniques and some suggested strategies. Lastly, We would like to mention that all this has only been done by the grace of Almighty Allah and with the support of my very kind and loving parents, who have always been remembering me in their prayers and encouraging me to be a true Muslim as well as to achieve excellence in academic education which is the building block of my future life. . We are also thankful to Mr.Imran Qureshi, who has extended full cooperation and help towards us.

TITLE Preface Table of Contents Executive summary PAGE NO



Back Ground of Study Why is the study conducted Scope of Study Methodology of Study


SWOT Analysis of the BOK TOWS Matrix Ratio Analysis Boston Consultant Group Matrix Customer Analysis Competitor Analysis Positioning Scorpio Technique Suggested Strategies


The main purpose of the report is to develop the suitable marketing strategy that would benefit the firm by comparing the strategic marketing management knowledge in theory and put it to practice in a real work situation as well as to improve communication and analytical skills. The report is composed of information obtained from interviews, observations, reference books, annual report of The BOK and from other manuals published by the organization. The Bank of Khyber was established in 1991 after the passing of a resolution in the Provincial Assembly of NWFP. The main purpose of establishment of the BOK was not only to provide employment opportunities for the manpower of this province, but also to provide financial assistance to the people of NWFP. The Head Office is situated at 24-The Mall, Peshawar Cantt. In the year 1991, it was awarded as a schedule bank and it started its operations directly with SBP. In 1995, the BOK availed a license from SBP to deal in foreign exchange business. The BOK has its own Board of Directors, comprising five members; the Managing Director may also hold a position of Chairman. The BOK has a network of 44 branches, which are located in different cities of Pakistan. In this report of strategic marketing management various analysis are done, like SWOT Analysis, TOWS matrix, Ratio Analysis, BCG matrix, Customer Analysis, Competitor analysis, Positioning and Scorpio technique. And some strategies are developed in concern with these analyses.


INTRODUCTION STUDY BACKGROUND Today, banks are the most important financial institutions which play a vital role throughout the world’s economic system. Because most of the sectors like Industries, Commerce and Agriculture need financial assistance, it is the banks which carefully entertain them. A resolution was passed in the Provincial Assembly of NWFP, in the year 1991 for the establishment of a provincial bank. It proved successful and the result was the emergence of a new bank in the banking sector, i.e. The Bank of Khyber Pakistan. In the year 1994 it became a scheduled bank. The Head Office is situated at 24-The Mall, Peshawar Cantt. NWFP-Pakistan. This bank has been playing an important role for the development of different sectors in Pakistan and especially in NWFP. It has a network of 41 branches, which are located in different locations of our country. Despite difficult economic conditions, like lack of suitable lending opportunities, volatility of interest rate and equity prices, the bank manages to show good results for every year.

. SCOPE OF STUDY This report may help students in future to understand banking practices in our country. It would also attempt to evaluate the overall performance of The BOK through a thorough & detailed analysis of its daily working. METHODOLOGY OF STUDY For the purpose of writing this report, the following methods of collecting information have been used: Primary Data

The information, which is collected for the first time and exists in raw form, is known as Primary Data. It contains the following: a) b) Personal observations Discussion with staff of the BOK.

Secondary Data The information, which has undergone through statistical techniques and exists in a refined form, is known as secondary data. It contains the following:

a) Annual Report b) Information memorandums c) Internet d) Documents published by banks. e) Banking manuals.


BANKING SECTOR IN PAKISTAN DEFINITION OF BANK A corporation empowered to deal with cash, domestic and foreign, and to receive the deposits of money and to loan those monies to third-parties.

In 1901, Justice Holmes wrote, in an Irish case (Re Shields Estate): "The real business of the banker is to obtain deposits of money which he may use for his own profit by lending it out again."

In United Dominions (1966), Lord Denning deferred to these words to define a bank: "An establishment for the custody of money received from, or on behalf of, its customers. Its essential duty is to pay their drafts on it: its profits arise from the use of money left unemployed by them. FUNCTIONS OF BANK: According to section 7 of the BCO, 1962, the banks in Pakistan are authorized to engage in any one or more of the following forms of business, namely: a) b) c) and The borrowing ,raising or taking up of money; The lending or advancing of money either upon or without security; The drawing, making, accepting, discounting, buying, selling, collecting

dealing in bills of exchange ,promissory notes, drafts, bills of lading warrants,

debentures (musharika and mudaraba certificates); d) The granting and issuing of letters of credit, travelers’ cheque circular notes; e) f) The buying and selling of foreign exchange including foreign bank notes; The acquiring, holding, issuing on commission, underwriting and dealing and

in stock fund, share debenture stock, bonds, obligations, securities;

g) The receiving of all kinds of bonds, scripts or valuables on deposit or for safe custody or otherwise, the providing of safe deposit vaults, the collecting and transmitting of money and securities. h) person or Acting as agents for any government or local authority or any other persons;

i) Acting as “Mudaraba company” under the provisions of the Mudaraba Companies Ordinance 1980; j) Contracting for public and private loans and negotiating and issuing the same; k) The effecting ,insuring, guaranteeing, underwriting, participating in

managing and carrying out of any issue, public and private, government, municipal, or other loans or of shares, stock, debentures or debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue; l) Carrying on and transacting every kind of guarantee and indemnity business; m) Purchase or acquisition in the normal course of its banking business of any property, including commodities, patents, designs, trade-marks, and copy rights, with or without buy-back arrangements by the seller, or for sale in the form of hire-purchase or on deferred payment basis with markup or for leasing or licensing or for rent-sharing or for any other mode of financing; n) Managing, selling and realizing any property which may come into the

possession of the company in satisfaction or part satisfaction of any of its claims.

BIRTH OF THE BANK OF KHYBER The Bank of Khyber is one such bank which came into being after the passing of a Resolution in the Provincial Assembly of NWFP in 1991. The focus point for the establishment of this bank is to provide employment opportunities for the man power of this province & to provide financial assistance to the people of NWFP, who are engaged in small, medium and large scale businesses. Most of the nationalized commercial banks have their Head Offices in provinces other than NWFP, which is the main hindrance to availing loan in time from these banks. The banks have to take formal approval from their H/O in order to advance loans to their customer or to make some transactions within the branches. Therefore, it was felt that there was a great need to have a bank which has its Head Office in the same province also, so that there could be no time delay, communication gap or provisioning of documents to advance loans expeditiously. Initially, the Bank of Khyber had agency arrangements with ABL and MCB for clearing and collecting cheques from other banks, but with the grace of Almighty Allah and the hard work of its management, it became a scheduled bank. It started its operation in SBP and to have a clearing officer of its own for clearing purposes and tackling of other matters with SBP. Presently, this bank has started to work as an agent for all its branches in Peshawar and other cities where SBP arrangements are not possible. In 1995, the BOK availed an opportunity for a Foreign Exchange license and its corporate main branch became the first authorized dealer to deal in foreign exchange business and trade services/finance. The BOK corporate main branch also provided its services to its different branches which had import/export businesses but were not authorized for such business. After the successful completion of the foreign exchange business, the licenses were also availed for The BOK Ashraf Road Branch, Peshawar, The BOK Sadder Road Branch Peshawar & the BOK Khyber Bazaar Branch, Peshawar. Now, other than its branches in the NWFP, the Bank of Khyber has its network of branches in Islamabad, Lahore, Quetta and Karachi & Muzaffarabad also.

CHAPTER # 3 ORGANIZATIONAL STRUCTURE THE BOK’S ORGANIZATIONAL CHART The graphical representation of an organizational structure is known as an organizational chart. The organizational chart is a formal document which shows the chain of command and titles which have been given to the managers and other members of the organization.


Board of Directors

Managing Director Long Term Projects Resident Directors AUDIT

Managing Committee Banking Operation Division Personnel & Establishment Division

Investment Branch Operations Department Computers Accounts & Treasury Department MFD International Banking Department P,T&E Deptt. Credit Divisions

Assets Management Department

Public Relation Department

Branches 29

Marketing Department


Organizational Chart of the Bank of Khyber



SWOT ANALYSIS:In every organization efficient managers analyze the workings of their organization Analysis. It is a combination of four words that is S W O T stands for Strengths. stands for Weaknesses. stands for Opportunities. stands for Threats.


As the Bank of Khyber is the bank of the NWFP government the people repose more confidence in the BOK as compared to other banks and deposit more money in it also. The BOK also has many government accounts due to which its reputation and image becomes stronger & more positive. Examples of such accounts are Traffic Challan accounts, TV License accounts and NADRA’s accounts. 2 Launching of New Product2

With the ordinary deposits accounts the BOK has launched a SDA (Special Deposit Account) on which it provides mark-up / profit on a daily basis. Most of the

people prefer to open such an account. 3 Micro Finance Unit (MFU)

The BOK has a department known as the Micro Finance Department which is operating in every branch of the BOK. This department provides micro lending facilities to small businesses like shops, small projects or in-home projects of ladies, like boutiques, beauty parlors, embroidery & stitching centers. Through this department the BOK earns even more revenue every year. 4 Finance provided by the Government

Whenever the BOK faces problems of liquidity, the government of NWFP helps them which is a plus point for the Bank of Khyber.

WEAKNESSES 1)-Number of branches The number of branches of the BOK is very limited as compared to other banks. Although it is the NWFP government’s bank its branches in Peshawar only nine which are still less when compared to other banks branches. In Karachi, which is one of the most populous cities of the Pakistan, there are only two branches.

2)-Behavior of the staff Most of the employees consider themselves to be govt employees and do not take interest in their work which does affect the performance of the bank (in the long run). Beside this, the behavior of the staff is some times very rude to their customers and naturally the customers want to wind up their accounts in the BOK as a result. 3)-Branches in other countries In foreign countries the BOK has no branch and this creates problems for importers and exporters.


4)-Load of work The work burden carried by some employees is very high due to shortage of branches & that creates errors and mistakes. As is known in the banking line, one little mistake can create a very big problem. 5)-Influence of Provincial Govt As it is a provincial government bank so at all level there is some interference by and at times undue influence of the provincial government in the decision process of the Bank. 6)-Heavy load of Bad Debts As it is a provincial government bank so the concerned loan officers sanction the loans to the government’s people who in turn do not make the repayment of these loans. That ultimately goes to the Bad Debts Account & becomes a burden on the Bank. 7) -Weak exposure to media: Marketing skills of the bank are good but they have little presence at different media.

OPPORTUNITIES:1)-Opening Of New Branches They have the opportunity to open new branches in the country as well as in foreign countries. They should open new branches at least at the district level. Besides this they have the opportunity to take an NOC from SBP and open new branches in Afghanistan.


2)-Hire skilled & professional educated personnel The BOK has the opportunity to hire skilled, professional, and educated persons who are specialized in the course of banking and accountancy like CAs (Chartered Accountant).

3)-Investment in public and industrial sectors They have the opportunity to invest their liquid cash in public & industrial sectors especially in commercial plazas which is a most profitable activity for the BOK. They have the opportunity to invest in the IT sector also especially in software programming. They can also invest in the mineral resource sector of the NWFP

4)-Reduction in Commission & Charges The BOK can attract all the business and non-business community by providing low bank charges commission on DD, TT, and MT. Thus the BOK can gain maximum market share.

5) Collection of utility bills:
Being a provincial govt bank they have the opportunity to make agreement with private as well as govt organizations to collect utility bills for them and through this activity the bank can earn profit without any investment . THREATS 1)-Recovery of loans: As it is the bank of the provincial government so most of the politicians take loans from the bank. The recovery becomes impossible from such politicians due to which the bank faces problems of bad debts and the bank incurs major loss.

2)-Foreign banks The number of foreign banks is increasing day by day in Pakistan. They also

provide good quality services at the same cost as the BOK provides to their clients. Thus this too is a potential threat for the BOK. 3)-Interference of Government As the political situation is always unstable, that is why the government does not give proper attention to the performance of the BOK. Beside this, the NWFP government is directly involved in the affairs of the bank which may affect the position of the bank.

4)- Global economic recession From the last few years worldwide economy is moving down, which reduces the business activities and investors are uncertain about their investment return.


Internal elements External elements Organizational Strengths Weaknesses Organizational

Strategic options S-O Environmental Opportunities (and risks) W-O


S-T Environmental threats


STRATEGIES: 1 The BOK lies in SO(Strength Opportunity) region, as they have sufficient funds provided by provincial government of NWFP ,which is their one of the biggest strength ,They can use these funds to open new branches in Afghanistan which is mostly a Pukhtoon representative area, which is one of the reliable opportunity for their business expansion outside the country.

2 Most of the area of NWFP is rich in mineral resources which are mostly
unexplored, so the BOK has also an opportunity to invest in these mineral resources of the province, which might be a better source of revenue for both the provincial government and bank itself.


We have discussed the following marketing ratios of the BOK.

1) Operating profit Total Assets



708813000 31338989000

648549000 38811000000



Interpretation The BOK has suffered loss in 2009 as compared to 2008, in which 2.26% of their total assets were generating operating profit, while in 2009it is declined to 1.67%.

2) Operating Profit Sales Revenue

708813000 2958865000

648549000 3390014000

Interpretation: In 2008, 23.95% of the sales revenue were converting into operating profit, While in 2009 it has declined to19.13% ,So Bank has suffered the loss in 2009 as compare to 2008.

3) Assets Employed Average daily sales 31339000000 8106479.452 = 3865.91 38811000000 9287709.589 4178.74

4) Production cost of sales Average daily sales 1897816000 8106479.452 = 234.11 2390388000 9287709.589 257.37

Interpretation: In 2008 Bank was more efficient because its production cost was less as compare to 2009.

5) Distribution and marketing cost Average daily sales

654869000 8106479.452 =80.7

719453000 9287709.589 77.46

Interpretation: Bank was more efficient in 2009 because its Dist & Mktg cost was low as compare to 2008.

6) Earnings per share ratio: (loss)/profit for the year Total number of shares 137348000 500400148 = 0.27/(637183000) 500400148 1.27/-

7) Advertising & Selling expenses Total sales

15646000 2958865000 =0.52%

13717000 3390014000 0.40%

Interpretation In 2008,0.52% of the total sales of the BOK was used in advertising and selling expenses, While in 2009 bank is being more efficient because its sales has been increased and advertising and Selling expenses is reduced to 0.40%.

8) Current Assets Average Daily sales

28832410000 8106479.452 =3556.71

35518519000 9287709.589 3824.24

Interpretation Bank is earning benefit in 2009beacuse in 2009 more average daily sales is generating as compare to 2008.


Agricultural credit:

Year The Bank of Khyber Muslim Commercial Bank United Bank Limited Total

2007 (000) 21567 41422 31384

2008 (000) 30464 52432 42278 125176

Growth Rate BOK = 30464-21567/21567*100 = 41.25% market share of BOK= 30464/125176*100 = 24.3% Leader market share MCB= 41.89% Relative Market Share= 24.3%/41.89% = 0.58 times

Year The Bank of Khyber Muslim Commercial Bank United Bank Limited Total Growth Rate BOK = 15.5% market share of BOK=0.29%

2007 (000) 21411 4361760 3289637

2008 (000) 24732 4705540 3699548 8429820

Leader market share MCB= 55.82% Relative Market Share= 0.005 times
Micro Finance:-

Year The Bank of Khyber Muslim Commercial Bank United Bank Limited Total Growth Rate BOK = 3.53% market share of BOK=4.32% Leader market share MCB= 52.6% Relative Market Share= 0.082 times

2007 (000) 31465 324422 313718

2008 (000) 32575 396862 324565 754002

Year The Bank of Khyber Muslim Commercial Bank United Bank Limited Total Growth Rate BOK = 25.59% market share of BOK=0.2% Leader market share UBL= 51.4%% Relative Market Share= 0.003 times 10068

2007 (000) 12644 3025141 3216234 6254019

2008 (000)

2815614 2724703


Relative Market Share= 0.003 times

Industry Growth Rate:Sum of 2007 = 14047171 Sum of 2008= 15563015 Growth Rate=15563015-14047171/14047171*100 = 10.79%


Customer Analysis:
We have selected the following four products or services of The Bank of Khyber for doing their consumer analysis, 1. Islamic Banking 2. Deposits 3. Microfinance 4. Agriculture Credit After having a detailed study of our products in the perceptive of our customers we came up with the following results,

Types of product: Islamic banking is specialty good/services for the BOK because it differentiates it from other conventional banks. It needs a bit low involvement because trading rules and regulations through Islamic banking are fixed by Islamic law, which is adopted by all banks dealing in Islamic Banking. Deposits, Microfinance and agriculture credit are categorized as shopping goods/services and it needs high involvement.

Product Life Cycle: Islamic banking services are currently going through the growth stage. Deposits are in the stage of decline because due to the current economic condition peoples don’t have enough money to deposits in the banks and they also have the fear of bank ruptcy. Microfinance is currently in the boom stage because in such economic downfall peoples mostly prefer to Entrepreneurship. Agriculture credit in Pakistan is always in boom stage because it is an agricultural country and this sector is s

BUYING BEHAVIOUR High involvements Complex Deposits Microfinance Agriculture credit Low involvements Variety Seeking

Significant Differences

No Significance Differences

Resonance Reducing

Habitual Islamic Banking

BUYING DECISSIONS: Customers use the following methods while availing the products /services of the BOK. 1. Introspective method 2. Retrospective method Islamic Banking: Customers follows the retrospective method for availing the Islamic banking services of the BOK. Deposits & Agri credit: For availing the deposits and agri credit services of the BOK. Customers use retrospective method i.e. they use their past experience and information they have collected from others. Microfinance: To avail the microfinance services, customers follow both the introspective and retrospective methods. They also make decisions on the bases of their own information without asking anyone and also from their past experiences or from someone others.

 Competitive stance Competitive stance provide us with the information through which we analyze our customers that they are growing or not. All the competitors of The BOK are growing(developing) in terms of infrastructure, baking services, distribution networks.  Promotion/ Public Relation Competitors of the BOK are promoting their banks products and services through huge marketing efforts and using huge financial resources.

 Strategic focus
The BOK is directly competing with other banks.

 Technology skills The competitors of the BOK are much more advance in the field of technology as compare to the BOK. Because The BOK is a new bank and its still in the developing stage.  New product innovation The competitors of the BOK are much more efficient in terms of Innovation in products and services. They are offering various new schemes.

Strategic forms/competitive
 Competition: The BOK are competing with other Banks in terms of all the products, services, and several schemes that they are offering.

Competitor Responses
 Selective Response: The competitors of the BOK are much more developed than the BOK, so they do not give that much response to any move of the BOK.

they choose their competitors selective or the competitors that are of their level. They are showing a very selective response.  Undifferentiated Strategy: All the banks including the BOK are using the undifferentiated strategy. They take the whole market as a one segments and apply the same strategies for all the segment.\

POSITIONING: Positioning means that how your customers are viewing the products/services of your company. It creates the image of your company in the customers mind.
Types of positioning  Triple benefit positioning The products/services that the BOK is providing offers triple benefit positioning to its customers. When a customer opens an account in the bank, he can also get the benefits of ATM, debit card facility and online banking.

SCORPIO TECHNIQUE This technique is used to justify the strategies that we have selected while doing various analyses like BCG Matrix, TOWS Matrix, GE Multifactor Matrix.


Industry or Market  Industry or technology thinking Example:- ATM, free cheque books


1. General public, govt officials, entrepreneur 2. Advances, deposits, microfinance, agri credit 3. ATM, Credit Cards, Free Cheque books. 4. 24 hours online banking services, increase number of branches. 5. Security issues, less no of branches 6. Regional bank, reliability 7. Branches, websites, telephone


1. Undifferentiated 2. To increase customers by targeting all the level of social classes. 3. All the segments 4. Durable 5. No priority 6. All 7. By delivering new offerings


1. Commodity marketing 2. Medium quality 3. Best quality at higher price by following market trend for future 4. Provide finance for govt projects 5. Risk of default is minimum 6. Customer trust increases 7. Increase business activities.


1. holding current customers to attract new customers 2. Quick Respond to complaint 3. No, it can also increase the customers 4. Yes 5. Good 6. To get satisfaction of your customers 7. Offering New schemes


1. Both 2. Providing better services 3. Strictly followed 4. Yes 5. Yes


1. Superior values and services with attractive schemes

SUGGESTED STRATEGIES: After doing all the detailed analysis in the scorpio technique, we come up with the following strategies that the BOK should follow.

1. Market Development: They should develop their infrastructure, and should keep their main focus on increasing the number of branches all over the country. They should also focus on other big cities of Pakistan like Karachi and Lahore. They also can take the NOC from the state bank of Pakistan to open branches in Afghanistan which could be a valuable source of revenue for them. 2. Unrelated Diversification: Most of the areas of NWFP is rich in mineral resources which are mostly unexplored, so the BOK has also an opportunity to invest in these mineral resources of the province, which might be a better source of revenue for both the provincial government and bank itself.


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