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Strategic Management Assignment

Submitted by: JOSEPH TOMS


Course: PGDM-FS
Roll no:56
State Bank of India (SBI)
Brief introduction
State Bank of India (SBI) is the country's largest commercial bank, in terms of assets,
deposits, and employees. The oldest commercial bank in India, SBI originated in 1806 as the
Bank of Calcutta. The bank was nationalized by the Indian government in 1955. The
company is ranked 216th on the Fortune Global 500 list of the world's biggest corporations as
of 2017. It has a 23% market share in assets, besides a share of one-fourth of the total loan
and deposits market. SBI maintains thousands of branches throughout India and offices in
dozens of countries throughout the world. The bank’s headquarters are in Mumbai.

Owned by the Indian government, it offers a range of general banking services from loans
and advances to corporates and individuals in India and abroad. Because it is state-owned,
SBI is the preferred banker for most public sector corporations. SBI, along with its associate
banks, offers micro-financing to entities such as self-help groups in rural areas that would
otherwise have no access to formal credit channels. Through its subsidiaries and joint
ventures, SBI offers financial services such as investment banking, brokerage services, asset
management and insurance.
SBI presently has 82 foreign offices in 32 countries across the globe. It also has 7
Subsidiaries in India – SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI
Life and SBI Cards - forming a formidable group in the Indian Banking scenario.

Strategic Management Process

The SBI is a dynamic organization and has been continuously changing its form to adapt to
its environment. They restructure the organisation in order to overcome the intense
competition from private and foreign banks. Some of the key strategies they follow are:
 Institution for advanced learning: to provide state of the art training in financial
products to middle level and senior level executives.
 Feedback supplier: to capture and structure feedback from trainees and from the
market.
 Think tank called SBI ecowrap: to provide expert and inform suggestions, model
business strategies, analysis of market developments from a banker perspective.
 Focus on a lean structure.
 Tapping into the untapped potential: Set up the banks in places where they are not
very strong specially having a rural banking base.
 Provide a safe and transparent insurance alternative to the public, with the already
established brand name they have.
 Diversified Portfolio: SBI Bank has all the products under its belt, which help it to
extend the relationship with existing customers
 SBI has also entered into several alliances and tie-ups with automobile, insurance,
mutual fund, project finance and medical equipment companies.
 Low Transition Costs: SBI offers very low transition costs which attracts small
customers.

Vision
 My SBI
 My Customer First
 My SBI: First in Customer Satisfaction.

Mission
 We will be prompt, polite and proactive with our customers.
 We will speak the language of young India.
 We will create products and services that help our customers achieve their goals.
 We will go beyond the call of duty to make our customers feel valued.
 We will be of service even in the remotest part of our country.
 We will offer excellence in services to those abroad as much as we do to those in
India.
 We will imbibe state-of-the-art technology to drive excellence.

Values
 We will always be honest, transparent and ethical.
 We will respect our customers and fellow associates.
 We will be knowledge-driven.
 We will learn and we will share our learning.
 We will never take the easy way out.
 We will do everything we can to contribute to the community we work in.
 We will nurture pride in India

Policies
 Policy for Determination of Materiality and Disclosure of Events/Information.
 Policy for Determining Material Subsidiaries and Corporate Governance
Requirements with respect to Subsidiaries
 Policy on Materiality of Related Party Transactions and on dealing with Related Party
Transactions.
 Archival Policy
 Dividend Distribution Policy
 Policy SBI Compensation -2018
Long term and short term objectives
The State Bank of India has been established to operate on the normal commercial
principles, with the only difference that, unlike other commercial banks in the country, it
takes into consideration and responds in a progressively liberal manner the financial
requirements of cooperative institutions and small scale industries, particularly in the
rural areas of the country.
The main short term objectives of the State Bank are:

 To encourage and mobilise savings by continuing to open branches in rural and semi-
urban areas and to promote rural credit;
 To establish government partnership in the provision of cooperative credit;
 To provide financial help to the small scale and cottage industries;
 To provide remittance facilities to the banking institutions.
 Mergers with Associate Banks: After the recent mergers with 5 associate banks, SBI
must work on improving their operations and efficiency in order to gain maximum
profit out of it.

The main long term objectives of the State Bank are:

 To act in accordance with the broad economic policies of the government;


 Increasing Trade: Increasing trade and business relations and a large number of
expatriate populations offers a great opportunity.
 Growing Economy: The economy growing rapidly would lead to an increase in the
amount of deposits and advances for SBI.
 Untapped market segments: There is further scope in segments such as rural India,
young generation etc.
 Global Expansion: SBI has already expanded globally and started its operations
internationally in 36 countries like Australia, Bangladesh etc. and it has been very
profitable. Thus future expansion in other global markets should be planned.
Historical Events

Year Event
1806 Presidency Bank of Bengal – goes on to become Imperial Bank of India
1840 Presidency Bank of Bombay established

1843 Presidency Bank of Madras established


1921 Imperial Bank Of India – all Presidency Banks merges by British Govt. – which later
on become SBI!
1937 HQ of RBI permanently moved to Bombay.
1952 A.D. Gorwala Committee recommends re-naming Imperial Bank of India as State
Bank Of India.
1955 1st July, 1955 – ‘State Bank of India’
1959 The government passed the State Bank of India (Subsidiary Banks) Act
1960 The government integrated 8 subsidiary State banks into the State Bank of India
system to expand its rural outreach.
1963 SBI merged State Bank of Jaipur and State Bank of Bikaner
1985 SBI acquired the Bank of Cochin in Kerala, which had 120 branches
2000 The bank became the first government owned financial institution to join the rank of
companies declaring interim divident
2004 Sets up India’s first drive-in ATM in Hyderabad
Launched its first mobile ATM for increasing the banking convenience of its
customers
2008 SBI merges State Bank of Saurashtra – 1st associate bank merger on 13 August,
2008.
2010 SBI merges State Bank of Indore – 2nd associate bank merger on 26 August, 2010.
(Added 470 branches to SBI's existing network of branches)

Key Financial ratios


1.Profitability Ratios
Talks about the profitability of a business with respect to its sales.

Mar '18 Mar '17 Mar '16 Mar '15 Mar '14

Net Profit Margin -2.96 5.97 6.07 8.59 7.98


Return on Net Worth(%) -3.37 6.69 6.89 10.20 9.20
Return on Assets Including Revaluations 245.53 236.14 185.85 172.04 158.43
Interpretations:
From 2017 to 2018, the profitability has gone down significantly. This is mainly because the
NPA’s have gone up from 112,343 to 223,427 Crores respectively. The recent mergers might
help SBI to get back up on its profitability levels.

2.Liquidity Ratios
Talks about the how quickly can the assets be turned liquid

Mar '18 Mar '17 Mar '16 Mar '15 Mar '14

Current Ratio 0.08 0.07 0.07 0.04 0.03

Quick Ratio 13.83 11.94 10.84 10.78 13.81

3. Basic EPS
The basic EPS has gone down from 13.43 to -7.67 resulted from a huge increase in the
NPA’s in 2018 as compared to 2017. The Mergers should help SBI to get back up.
Strategic Positioning

1.Variety based positioning


 The SBI Brand – provides a variety of products and services. Some Products, which
SBI Bank is offering are: Retail Banking Business Banking Merchant Establishment
Services (EDC Machine) Personal loans & Car loans Insurance Housing Loans
 The bank is entering into many new businesses with strategic tie ups – Pension Funds,
General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale
Merchant Acquisition, Advisory Services, structured products etc – each one of these
initiatives having a huge potential for growth.
 The 'SBIinTOUCH' branches leverage digital technology and make good use of the
digital platforms. In fact, SBI is currently the market leader for mobile banking
services in India with 1.77 crore users and a market share of 35.97% in terms of value
of transactions. The SBI brand lives up to the promise it makes to customers by
putting customers first.
 SBI also started leveraging big data and analytics-based lead generation for customer
acquisition and improving internal processes and documentation needs to reduce
customer turnaround time by about 50%.
 The Griha Tara Campaign was launched to encourage each and every member of the
staff to market at least one home loan proposal.

2.Need based positioning


 A pioneering innovative product called 'e-Smart SME' for financing merchants selling
through e-commerce platforms has been designed.
 The bank has also been forming Farmers' Clubs at village level for fostering
continued relationship with the farming community. The key initiatives taken in
adopted villages include the construction of community vermicompost units under the
clean village concept, the construction of hygienic toilets, installation of solar lighting
in the villages, and conducting awareness programmes through melas and exhibitions.
 SBI is able to target the youth of today through modern, technology-enabled
initiatives. State Bank Buddy is the mobile wallet designed for the tech-savvy
generation, the youth of the country. With this buddy app, the user can do a number of
online transactions like mobile recharge, pay utility bills, online shopping and
ticketing, etc.
 The Premium Kisan Gold Card (asset-backed agriculture loan) is aimed at financing
emerging agri-business entrepreneurs engaged in high-tech farming and allied
activities.
 The Tatkal Tractor Loan, a mortgage free tractor loan providing 100% of the cost of
the tractor with no processing charges and with a turnaround time of 48 hours, has
been launched.
3. Access based positioning
 SBI has introduced flexi-timing/flexi-hour scheme in a limited scale where the
employee is free to select own work hours within limits laid by the management, on
the grounds of looking after family and health.
 SBI has taken cognizance of the taxi aggregators that have been revolutionising the
way Indians commute. It has tied up with these aggregators to help individual drivers
buy a car and become mini-entrepreneurs. SBI has tied up with both Ola and Uber
India to extend vehicle loans to drivers and operators associated with these platforms.
 Also several products are being offered to the rural communities on the basis of their
accessibility.

Performing different activities than rivals


 Expansion into countries like Africa where economy is just coming up.
 Highest rural penetration as compared to competitors like ICICI, HDFC etc.
 Extensive branding and good branding visibility, especially making use of catchy
taglines.
 Introduction of the “State bank buddy” and other apps for the tech-savvy youth

Performing similar activities in different ways


 Lending like other banks do, but prime lending rates.
 Bank of Baroda has tied up with amazon to help SME’s whereas 'e-Smart SME' by
SBI provides financial assistance to authorized sellers of Snapdeal or Flipkart
 To reduce time spent by customers in writing the deposit slips, The SBI Green
Channel Counters, allows the customer to simply swipe his debit card and deposit the
required cash at the counter, helping him to save so much more time as compared to
other banks.
 Most of the banks have ATM services. However, SBI is the bank that offers the
highest variety of options in the ATM.
 The CSR activities for companies happen, but the one bank that has a separate
company for its CSR activities is SBI (SBI Foundations)