Table of Contents

Case Synopsis..............................................................................................................................................4
Vision Statement.........................................................................................................................................5
Critical Analysis:.....................................................................................................................................5
Competitors:............................................................................................................................................5
Proposed vision statement:......................................................................................................................5
Mission statement:.......................................................................................................................................6
The proposed mission statement:.............................................................................................................6
Critical Analysis:.....................................................................................................................................6
EFE Matrix-External audit along with CPM...............................................................................................7
CPM........................................................................................................................................................9
INTERNAL...............................................................................................................................................10
IFE MATRIX........................................................................................................................................10
Income Statement.................................................................................................................................11
Income Statement overview...............................................................................................................11
Balance sheet........................................................................................................................................12
Balance sheet overview....................................................................................................................12
Ratios.....................................................................................................................................................13
Historical Ratios overview..............................................................................................................13
SWOT Strategy...........................................................................................................................................14
BCG Matrix................................................................................................................................................15
IE Matrix...................................................................................................................................................16
SPACE MATRIX......................................................................................................................................17
Perceptual Map..........................................................................................................................................18
Grand Matrix.............................................................................................................................................19
QSPM- Quantitative Strategic Planning Matrix........................................................................................20
Recommended Strategy.............................................................................................................................21
Organization Structure-Current.................................................................................................................22
Organization Structure-Proposed...........................................................................................................22
EPS/EBIT analysis.......................................................................................................................................23
EPS/EBIT analysis Overview...............................................................................................................23
Company Valuation...............................................................................................................................24
 Company valuation Overview:...........................................................................................................24
The Projected Financial Statement............................................................................................................24
Projected Income Statement.................................................................................................................24
Projected income statement overview..............................................................................................24
Projected Balance Sheet........................................................................................................................25
Projected Balance sheet overview.....................................................................................................25
Projected Ratios.....................................................................................................................................26
Projected ratio overview:...................................................................................................................26
Retained Earnings Table........................................................................................................................26
Retained Earnings Table Overview:...................................................................................................27
Case Synopsis

The royal bank of Canada that headquarters in Toronto, Canada. The bank is considered to be the
largest one in Canada on the grounds of its full range of financial services that range as wide
commercial banking to capital market services as well as wealth management. Apart from
Canada, the country operated in 49 other countries and predominately in the USA as well. Its
asset management ranks largest in the world with 75000 employees serving 15 million clients.
The financial highlights of the fiscal year 2012 concluded that, earnings increased by 9% with
ROE of 31.5%, Loans and deposits increased by 8.4%, the efficiency ratio improved by 2.6%
and it was named the best retail bank of North America.
History of RBC started from when the Merchants Bank of Halifax was incorporated in 1869, 134
Halifax businessmen became shareholders of a new progressive bank. The history of RBC
closely parallels with the history of Canada. In 1941 it became Canada's largest bank. As of 27th
July, 2012, before this fiscal year-end, RBC also acquired the 50% stake in the joint venture
RBC Dexia in Luxemburg S.A, rebranding it to RBC investor services.
RBC operates in 5 segments, RBC royal bank, wealth management, insurance, international
banking, and capital markets. By the end of October, 2012, RBC finished its international
banking segment to replace it with Investor & Treasury Services. The organizational structure of
the royal bank of Canada is built around strategic business units, ultimately leading up to
customer focus. It was only in 2012 that for the first time, presented their annual consolidates
financial statements keeping in line with the international financial reporting standards (IFRS).
All accounts before that were following GAAP.
The external issues faced by the company were as follows, the bank faced economic woes on the
USA front as well as around the world, having no housing bubble issues in Canada. The major
competitors that surround the organization are the Canadian Imperial Bank of Commerce
(CIBC), which operates mostly in retail markets and small business banking. It specializes in
clients that belong to government intuitions and the government as well. Then, we have the
Toronto-Dominion Bank (TD), it owns 45% of U.S discount brokerage TD Ameritrade. It is the
largest online brokerage firm. Then, we have the Bank of NOVA Scotia (BNS), operating in 50
countries and specializing in asset management, mutual funds, trust accounts and insurance, etc.
The future for RBC, to draw an educated analysis, RBC paid its employees the full bonus in
2012, as opposed to JPMorgan who cut down bonuses by 2%. RBC is more willing to share its
earnings with the investors by paying out their dividends, $0.67 in Q3 of 2013, 4 cents from Q2
in 2013. RBC is an opportunist looking for an opportunity to expand outside of Canada. Since,
most of the revenues are generated from outside Canada. The bank has also built a presence in
the auto sector and consistently subject to other companies replicating their strategies. However,
the expansion requires the top management to a clear strategic plan to avoid replicating the
problems in the USA.
Vision Statement

The company’s existing vision statement is:

“Always earning the right to be our client’s first choice.”
Critical Analysis:
This kind of a vision statement is typical for 75% of the banks around the world, talking about
being the first choice of their target market in a limited range of services. One of the very first
characteristics of a successful and effective vision statement is ambition, success and dreaming
big, yet, to also be realistic. Ambition is only effective and believable if it's achievable. This is
why the provided vision statement in the case study is undeniably vague. It talks about earning
the right to be their client's first choice yet they have failed to mention the first choice in what.
Given the limitation and the industry of the organization, they can only earn the right to be a
client's first choice in financial institutions not anything else. You cannot possibly be the first
choice of a client when it comes to grocery as well. The vision statement fails to communicate
what their organization is about and in what are they a first choice of. However, on the contrary,
the vision statement does communicate the organizational culture that the company adopts, they
communicate that all their operations and strategies are centered on their clients. It is also clear,
concise and free of jargons, meaning it can be used in all international countries as the company's
business entails. It also aligns with their values which are excellent services to clients and each
other, working together to succeed, personal responsibility for high performance, diversity for
growth and innovation and trust through integrity in everything we do. In 2015, the company
introduced a new vision statement:
“To be among the world’s most trusted financial institutions”
The 2015 vision statement is again vague, the expression of trust is ambiguous. Trust means
differently to every client, so what kind of trust are they talking about. Moreover, even though it
defines their purpose and industry it fails to align with their values.
Competitors:
CIBC’s the leading competitor of RBC has the vision statement:
“Our vision is to be the leader in client relationships. We will build the most trusting and
enduring client relationships by putting our clients at the center of all that we do. We will listen
intently to our clients, offering them what they need, and striving to exceed their expectations.”
Compared to RBC, CIBC’s is too lengthy and talks about the same concept that can be summed
up in one word, customer relationship management.

Proposed vision statement:

“Always earning the right to be the number 1 choice financial institution of our clients around
the world.”
However, this kind of a vision statement is typical for 75% of the banks around the world,
talking about being the first choice of their target market in a limited range of services.
Mission statement:

Royal bank of Canada currently has no mission statement, it only offers its values and goals on
their official website. And likewise, the competitors of RBC also fail to provide a mission
statement.
The proposed mission statement:
“Royal Bank of Canada endeavors to be the first choice for consumers, businesses, institutions
and governments around the world for their financial needs and continues to expand beyond.
Everyday striving towards improving ourselves to provide optimal returns, and therefore a full
sense of security, to our stakeholders. Leading mobile banking pioneer. To be the best, we have
a team of the most experienced financial advisors and workers, trained to meet your demands.
Here at RBC, we cultivate a culture of teamwork, collaboration, accountability, inclusion and
above all integrity.”
Critical Analysis:

The proposed mission statement keeps in perspective the customer focus, defines the customer
base and potential customer base and mention their industry and service type... It talk about their
operation in 49 countries, meaning around the world. It not only focuses on customers but
incorporates the employee perspective of the organization as well, the work environment and the
organizational culture. It incorporates their goal to expand on markets outside of Canada and the
US primarily. It also talks about technology and the shift to online banking from traditional
banking needs. RBC has mastered that by being the landing mobile banking provider in Canada
and other parts of the world. However, as a bank the company does not require a self-concept or
philosophy. They do address concern of public image by having a value of inclusion and
diversity, since they operate internationally.

EFE Matrix-External audit along with CPM

 Weigh Ratin Weighted
Opportunities
t g Score
1 As they surpassed the economic woes in USA
and around the world quite well, They can 0.10 4 0.4
expand operation by merger and Accusation
2 Growth of 2.4% in Canada mainly driven by
consumer spending, business investment and 0.05 3 0.15
Improved net exports
3 Housing Bubble in Canada 0.05 4 0.2
4 As they surpassed the economic woes in USA
and around the world quite well, Wealth
0.10 4 0.4
management segment demand would
increase.
5 Trend toward Online Banking 0.05 3 0.15
6 Growth of 2.3% is expected in US, due to
higher consumer spending and improvement 0.05 4 0.2
in housing market.
7 0 0.00 0 0
8 0 0.00 0 0
9 0 0.00 0 0
1 0
0.00 0 0
0

Weigh Ratin Weighted

Threats
t g Score
1 Long term assets sold in year 2013. 0.10 4 0.40
2 More Loans are issued in year 2012, as
compared to year 2011. which make them 0.15 4 0.60
risky to operate
3 Change in Governmental Policies 0.05 3 0.15
4 Lack of consumer interest due to Low EPS
with reference to market capitalization, as 0.10 3 0.30
compare to competitors.
5 Fiscal policy tightening in US, and Low
0.10 3 0.30
interest rate will make US growth restrained.
6 Basel Committee Reforms 0.05 3 0.15
7 OTC Derivative Reforms 0.05 3 0.15
8 0 0.00 0 0.00
9 0 0.00 0 0.00
1 0
0.00 0 0.00
0
  Total EFE Score 1.00   3.55
As, the score suggest, EFE is the external analysis of a firm and 3.55 score is near to 4 and this
shows that royal bank of Canada is responding in an outstanding way to an external factor and
even after economic crises, they were able to cope up and was named in a list of fifty safest bank
in Canada. Moreover, this shows that, they are externally strong and can give tough competition
to competitors.
For Opportunity, the expected growth to be 2.4% in 2013 in the Canadian economy due to the
increase in consumer spending, business investments and increase in net exports yet the growth
rate in the US is also expected to rise. The prediction of improvement in housing market there
will be a greater demand for housing loans. There is a growth in the customer base for asset
management and investment bank services in Asia and the Middle East. The small businesses are
also growing and recovering, there is an improvement in the unemployment rate thus qualifying
more people for hoe loans. There is now an increased preference for online and smartphone
banking. The dominance of the banking sector by the developed economies is declining,
emerging economy slowly taking their place. Chinese market is the most promising emerging
market and foreign banks account only 3% of the Chinese banking sector assets yet India's
banking sector has growth only 6% of foreign ownership assets.
Similarly, for threats, the long-term asset was sold in the year 2013 and more loans were issued
in year 2012 as compared to 2011, posing a risk to operate in change of government policies.
There is a lack of consumer interest because there is low EPS regarding the market capitalization
as compared to competitors. Fiscal policy was tightened in US and low interest rate will restrain
the growth of US. There is an increase in the capital requirement due to Basel Committee and D-
SIB. The reforms over the counter will change how RBC operates impacting the client and
trading revenues. The Consumer Financial Protection Bureau was established by the federal
board placing restrictions for lenders on credit cards, mortgage loans and auto loans.
CPM

Your Firm CM TD
   
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.01 1 0.01 1 0.01 3 0.03
Domestic Market
0.12 3 0.36 3 0.36 4 0.48
Penetration
Customer Service 0.10 4 0.40 3 0.30 4 0.40
Product Variety 0.15 3 0.45 4 0.60 4 0.60
International Market
0.10 3 0.30 2 0.20 4 0.40
Penetration
Employee Dedication 0.08 4 0.32 3 0.24 4 0.32
Financial Profit 0.09 4 0.36 3 0.27 4 0.36
Customer Loyalty 0.08 4 0.32 3 0.24 4 0.32
Market Share 0.10 3 0.30 3 0.30 4 0.40
Product Quality 0.08 3 0.24 3 0.24 4 0.32
Top Management 0.08 4 0.32 3 0.24 4 0.32
Price Competitiveness 0.01 3 0.03 3 0.03 3 0.03
Totals 1.00   3.41   3.33   3.98

Royal Bank of Canada EFE score was 3.55 and that shows that, they were outstanding in
managing their operations and activities to external factor and major threat was, financial
instability that may come, as firm has sold its long-term assets, which may cause an insolvency
risk. Moreover, Royal bank of Canada had issued more loans to consumer, that may cause them
have more NPLs.
Coming towards, Competitive price matrix, Score for Royal bank is 3.41, while Canadian
Imperial bank of Commerce has 3.03 score and Toronto-Dominion Bank (TD) has 3.98 score
and it is highest. As TD is having 1300 branches in more than 50 countries and they have largest
online and Profit margin is second highest among competitors and have highest Price over
earnings ratio and EPS of 6.47, which is second highest. So, this ratio will enable the investor to
invest more and will increase their confidence.
Similarly, for Canadian imperial bank of commerce, the market capitalization is lowest, but EPS
is highest among competitor. The price to earnings ratio is the lowest among competitor. The
services offered by CM, RY and TD are similar.
Lastly, Royal bank of Canada is operating in Canada with 1000 branches and has 49 branches
outside Canada and they has the lowest EPS, among competitors that would make them
challenging for shareholder to invest back into the bank.
INTERNAL
IFE MATRIX

Weighted
Strengths Weight Rating
Score
1 Largest bank in canada-2013 0.05 4 0.20
2 Provide full range of Services 0.05 3 0.15
3 Expanded network in Canada and in other country 0.04 3 0.12
4 Best retail Bank in north America 0.05 4 0.20
5 Increase in Net income 0.04 4 0.16
6 90 Percent of Employees are Stakeholder 0.04 4 0.16
7 46.8% of ROE on Insurance and 31.5% in Personal and
0.05 4 0.20
Commercial banking
8 RBC total deposit increased from $29 billion in 2012 to
0.20 4 0.80
total of 508 billion.
9 Issued more Net loans in year 2012, as compared to
0.05 3 0.15
year 2011
10 As they surpassed the economic woes in USA and
around the world quite well, They made up to GFL, as 0.10 4 0.40
50 safest banks.

Weighted
Weaknesses Weight Rating
Score
1 Financial instability lead to selling branch 0.05 3 0.15
2 Investor and treasury segment report 4.3% ROE 0.10 3 0.30
3 Total Revenue is 400% less in US market as compared
0.05 4 0.20
to Canada.
4 Lower EPS 0.05 3 0.15
5 Low Profit Margin as compared to Rival Firm 0.03 4 0.12
6 Low number of services and branches in Canada and
0.02 3 0.06
overseas as compare to Competitor
7 Same person is COO, CFO, CAO 0.03 4 0.12
8 0 0.00 0 0.00

  Total IFE Score 1.00   3.62

As, the Score suggests. Royal bank of Canada is responding in an outstanding way to existing
Strength and Weaknesses and shows that they are internally strong. That’s the reason, Royal
bank of Canada is largest bank in Canada and 90 percent of employees are Stakeholder and this
shows the effectiveness and efficiency of management and by this, the productivity of employee
also increases and better results are generated. The US Growth to be restrained by tightening of
fiscal policy thus decreasing the interest rates. The Consumer and Government spending to fall
in euro zone 2013 there is also an increased capital requirement due to the Basel committee and
D-SIB. There will be a change on how the RBC operates impacting the client and trading related
revenues. The card usage will erode as expected due to mobile payments over smartphones. The
percentage of Americans owing checking accounts decreased from 92 to 88% between 2010 and 2011
also the number owning a credit card decreased from 74% to 67%. The consumer financial protection
bureau was established by the federal board is placing restrictions for lenders on credit cards, mortgage
loans, student loans and auto loans. It is the largest bank in Canada and provides full range of services,
expanding the network in Canada in other country being the best retail bank in North America. There is
an increase in net income and 90% of employees are stakeholders, ROE being 46.8% and 31.5% in
personal and commercial banking, issued more net loans in the year 2012 compared to 2011

Similarly, for weaknesses. They were having low profit margin and their management
effectiveness can also be improved, if their organization structure is revamped. Financial
instability leads to the selling branch and the investor or treasury segments reports to be 4.3% of
ROE thus the total Revenue being 400% less in the US market compared to Canada, there is a
lower EPS and low Profit margin as compared to the rivals due to the lower number of services
and branches in Canada and abroad as compared to the Competitor. The problems in the
organization’s structure are at the top management, increase in the non-interest expense by
7.17%. There is a very high leverage but the decrease in the ratio is not highly impacted.

Income Statement

Income Statement 12/31/2011 12/31/2012 Percent Change

Revenues $37,094 $38,126 3%
Cost of Goods Sold 0 0 NA NA
Gross Profit 37,094 38,126 3%
Operating Expenses 18,658 20,082 8%
EBIT 18,436 18,044 -2%
Interest Expense 9,456 8,354 -12%
EBT 8,980 9,690 8%
Tax 2,010 2,100 4%
Non-Recurring Events 0 0 NA NA
Net Income 6,970 7,590 9%

Income Statement overview: From viewing RCB’s income statement, we conclude that net
income has been increasing from year 2010 to year 2012 from 5164 to 7442. Revenues for the
company increased as the interest income increased over the period of 3 years and Interest
expense in 2012 was less than that of 2011 which means the company is taking care of their
expenses efficiently, non-interest expenses increased throughout the years, so we can say that the
company’s expansion has somehow put some burden on the expenses at the same time. Even if
the expenses increased, the company still was able to offset it with the revenues that increased by
more margins which is why the company was able to generate more income in these years

Balance sheet
Balance Sheet 12/31/2011 12/31/2012 Percent Change
Assets
Cash and Short Term Investments $12,428 $12,617 2%
Accounts Receivable 0 0 NA NA
Inventory 0 0 NA NA
Other Current Assets 297,796 673,755 126%
Total Current Assets 310,224 686,372 121%
Property Plant & Equipment 2,490 2,691 8%
Goodwill 7,610 7,485 -2%
Intangibles 2,115 2,686 27%
Other Long-Term Assets 153,721 125,866 -18%
Total Assets 476,160 825,100 73%

Liabilities
Accounts Payable 0 0 NA NA
Other Current Liabilities 596,032 596,002 0%
Total Current Liabilities 596,032 596,002 0%
Long-Term Debt 9,643 8,515 -12%
Other Long-Term Liabilities 202,551 176,316 -13%
Total Liabilities 808,226 780,833 -3%

Equity
Common Stock 14,010 14,323 2%
Retained Earnings 20,381 24,270 19%
Treasury Stock (8) (30) 275%
Paid in Capital & Other 5,303 5,644 6%
Total Equity 39,686 44,207 11%

Total Liabilities and Equity 847,912 825,040 -3%

Balance sheet overview RCBs total assets experienced increasing trend from the year 2010 to
2012, net loans has increased in all the years which means people have more trust in the bank
and the consumer base has been increasing over the years, moreover other earning assets
valuation also increased which explains that the bank is keen to invest money in the earning
assets rather than keeping it in cash form. The goodwill of the company also increased
throughout the years since the company was expanding and introducing new segments which
resulted in more goodwill generation. Every asset category seemed to grow expect for the
company’s Long-term assets which took a massive drop, which might indicate that the long-term
assets were liquidated because the company needed cash to grow.
As for the company’s liabilities, it also experienced an increase, total deposits increased from
414561 to 508219 from 2010 to 2012 which means now the company has to pay more interest to
the depositors but at the same time more deposits are better for the bank as they can lend the
money at a higher interest rate and earn the spread over the deposited money. Short term
borrowings increased in 2012 which indicates that the company needed cash to facilitate its
operations after the expansion. Last is RCB’s equity which increased from 38952 to 44267 from
2010 to 2012 due to the rise in retained earnings, and more common stock value.
Ratios
Historical Ratios
12/31/2011 12/31/2012
Current Ratio 0.52 1.15
Quick Ratio 0.52 1.15
Total Debt-to-Total-Assets Ratio 1.70 0.95
Total Debt-to-Equity Ratio 20.37 17.66
Times-Interest-Earned Ratio 2 2
Inventory Turnover #DIV/0! #DIV/0!
Fixed Assets Turnover 14.90 14.17
Total Assets Turnover 0.08 0.05
Accounts Receivable Turnover NA NA
Average Collection Period 0.00 0.00
Gross Profit Margin % 100% 100%
Operating Profit Margin % 50% 47%
ROA % 1% 1%
ROE % 18% 17%

Historical Ratios overview RCB seems to be not in a good position in paying its current and
short-term liabilities in year 2011, since the current assets seem to be lower than the current
liabilities, but the situation was better off in year 2012 and the current assets exceeded the current
liabilities. The company also had a decrease in its Total Debt-to-Total-Assets Ratio from 2011 to
2012 and Total Debt-to-Equity Ratio also decreased from 20.37 to 17.66 to further prove its
ability to meet its obligations since it is using less debt and credit to finance its assets and growth.
However, the company should be able to handle its interest payments looking the Times-Interest-
Earned Ratio, as they can cover the interest only 2 times from what they are earning, so any
uncertainty can bring a huge burden on the company, the assets turnover remained steady in at
14 roughly during the years, Gross profit margin has not changed and remained at 100% while
the operating profit margin has decreased from 50% to 47% revealing the company has not been
doing a good job of generating profit as compared to the previous year but still the operating
profit ratio is quite extraordinary in terms of percentage.
SWOT Strategy
SO Strategies
1 Expand Market in International Market. More focus on Personal and Commercial Banking along
with Insurance Segment. (S3, S7, O1,06)
2 More focus should be on Wealth management, as they have surpassed the economic crisis and
demand for this sector would increase, as consumer wanted to make their investment safe. (S10,
O4)
3 Should Focus on online banking, as market is expanding globally and due to leader in Banking
industry of Canada and being named in list of 50 safest bank, give them an Opportunity to
increase their revenue and market share by launching it. (S10, O5)
 

ST Strategies
1 Should Focus on Long term strategy, as growth rate in US is stagnant. So, issuing long term loans
would be profitable for a bank. (S10, T5)
2 EPS should be Improved, as they are largest bank in Canada and has huge customer base, so
investor interest is on stake and it should be considered. (S1, T4)
 
 

WO Strategies
1 As, after economics woes, there would be many banks that would be on stake of liquidation in
Canada and Overseas. So, they can increase their operation worldwide by acquisition. (W4,
W6,01)
2 As, US economy is expected to grow by 2.3% as compare to Canada economy by 2.4%, So Royal
Bank of Canada can expand its branches in US market. As they are having only 49 branches there
and even sold one of the branches in US to PNC. (W1, W3, W6, O1, O6)
 
 

WT Strategies
1 Long term assets should be maintained, as financial instability can lead to selling branches and
this will make their customer market share on stake along with Profitability of Firm. (W1, T6)
2 Same Person is COO, CFO and CAO, so organization structure should be changed to increase
competitive. (W7, T3)
 
 
 BCG Matrix

High 1.0

High 0.20 Stars Question Marks

RBC Royal BankRBC Wealth

Management

RBC Insurance
RBC Capital Market
Investor and
Treasury Service

Low -0.20
Cash Cows Dogs

$12,643 $33,000 0.15 0.38

$4,835 $11,790 0.07 0.41
$4,897 $7,750 0.19 0.63
$1,325 $2,982 0.02 0.44
$6,188 $12,800 0.06 0.48

Coming toward BCG matrix, RBC Insurance falls under quadrant STAR, as they have highest ROE
among its division and as after the purchase of Ally Financial Canadian unit, they have become strong in
an auto finance lending sector and insurance would play an important role in it. As they are expected to
bring 120$ million in terms of revenue from that segment. While this quadrant allows us to implement
Market development strategy, Market penetration and Market development strategies and further suggest
that, this segment should be used for further development in other countries.
Moreover, RBC royal bank commercial bank, RBC wealth management, RBC capital market and
Investor and Treasury service, falls under question mark and Opting market development, Market
penetration and product development strategy would be best to move it to quadrant two and then three.
IE Matrix
THE IFE TOTAL WEIGHTED SCORES
Strong Weak
4.0 1.0

High
4.0 RBC Insurance RBC Royal Bank
THE EFE WEIGHTED SCORES

RBC Capital
Royal Bank of Market
Canada

Investor and
RBC Wealth
Treasury
Management
Service

Low
1.0

$12,643 3.0 4.0

$4,835 2.0 2.0
$4,897 4.0 4.0
$1,325 1.0 2.0
$6,188 2.0 3.0

As, Royal bank Canada of commercial banking and Insurance falls under quadrants two, and it
suggest to grow and build by market penetration, Market development and product development.
So, this further suggest that, these two segments should be used for further development in local
and other countries.
Moreover, investor and treasury fall under quadrant six and it suggest that, harvesting or divest is
best for the firm. Moreover, they have lowest ROE in their segments. This further suggest that,
firm should not consider this sector for development in existing and other countries.
While RBC capital market and RBC wealth management fall under quadrant three and five. This
suggest that hold and maintain strategy would be best, by market development and Product
development.
SPACE MATRIX

FP
Conservative 7.0 Aggressive

5.0 CM BNS

3.0
RY
1.0
CP IP
-7.0 -5.0 -3.0 -1.0
-1.0 1.0 3.0 5.0 7.0

-3.0

-5.0

Defensive -7.0 Competitive

RY CM BNS
X Axis 3.0 SP 1.0 4.0
Y Axis 3.2 3.0 5.0
External Analysis:
Financial Position (FP) Stability Position (SP)
5 -3
3 -2
6 -1
6 -1
5 -2
Financial Position (FP) Average 5 Stability Position (SP) Average -1.8

External Analysis:
Competitive Position (CP) Industry Position (IP)
Market Share -2 Growth Potential 5
Product Quality -2 Financial Stability 6
Customer Loyalty -1 Ease of Entry into Market 3
Variety of Products Offered -3 Resource Utilization 6
Geographical Coverage -3 Profit Potential 6

Competitive Position (CP) Average -2.2 Industry Position (IP) Average 5.2

Coming toward SPACE matrix, Royal bank of Canada fall under aggressive quadrant and by
Product development, Market Development and market penetration would be best strategy for
royal bank to operate. Moreover Canadian Imperial bank of commerce and the bank of Nova
scotia, also falls under aggressive quadrant and BNS is relatively high aggressive then other.
Perceptual Map

International Market Penetration

BNS

TD
Product Variety

Product Quality
CM
RY

Domestic Market Penetration

Coming toward perceptual map. Royal bank is more product quality focused, as they are named
under fifty safest bank and they have huge customer base. There total deposits increases to 508
million from 29 billion, and product quality would be an outmost factor that attracts a customer
and in results, there customer deposit increases. While Canadian Imperial bank of commerce is
more toward center and they have separation points from their competitors.
Similarly, the bank of Nova Scotia, is more toward international market network and they have
high product quality and product variety. While Toronto-Dominion bank is more toward
international market expansion and product quality.
Grand Matrix

Rapid Market Growth

Quadrant II Quadrant I

RBC Insurance
RBC Royal Bank

Weak Competitive Strong Competitive

Position
RBC Wealth
Capital
Management
Market
Investor and
Treasury Service

Quadrant III Quadrant IV

Coming toward Grand Slow Market Growth matrixes, Royal bank of

Canada insurance and Royal bank of Canada commercial bank falls under
quadrant one and it states that market development, market penetration and Product development
would be a best strategy to be considered for local and international development. As these two
segments are more toward strong competitive and rapid market growth, because these two
segments has 31.5% and 46.8% of ROE.
Similarly, Investor and treasury falls under quadrants three and it suggest that, liquidation,
Retrenchment, related diversification, unrelated diversification and divestiture. So, it further
suggest that, this segment should be liquidated or have done retrenchment to make it efficient
and effective for operations. Moreover, RBC wealth management and RBC capital market fall
under quadrant four and It suggest that, related diversification, unrelated diversification and joint
venture should be considered make this segment effective and efficient.
QSPM- Quantitative Strategic Planning Matrix

Strengths Weight AS TAS AS TAS

1
2
3
4
5

6
7
0.05 3 0.15 3 0.15
8 0.20 3 0.60 3 0.60
9
10 0.10 4 0.40 3 0.30

Weaknesses Weight AS TAS AS TAS

1

3
0.05 3 0.15 2 0.10
4
5
6 0.04 3 0.12 4 0.16
7
8
9
10

Opportunities Weight AS TAS AS TAS

1
2
3
4
5
6
7
8
9
10

Threats Weight AS TAS AS TAS

1
2 0.15 3 0.45 3 0.45
3
4 0.10 2 0.20 3 0.30
5 0.10 1 0.10 4 0.40
6
7
8
9
10
Coming toward QSPM. The market penetration in term of market expansion has the highest score
and this is what RBC wants, there one of the corporate goals is to expand in an untouched
market. So, this score validate that Market penetration would be best in terms of royal bank of
Canada interest. This would ultimately help them to increase their customer base and then this
would result in increase of revenue.
Moreover, Second strategy that royal bank of Canada should focus, would be market
development in existing market. As royal bank of Canada is having 1000 branches In Canada
and they are named under 50 safest bank and named as bank retail bank in North America. So,
by considering it, they can cash these awards and can expand in local market. While focusing on
wealth management sector and insurance would be act as catalyst to expand market locally.

Recommended Strategy
Deducing an educated guess, after carefully analyzing the case in corresponding to the financial
information provided and running the Spam, grand strategy, swot and etc., we have condensed
down to three strategies namely, market penetration, market development. Talking about market
penetration, one of RBC’s cooperate goal is to expand in untouched areas, areas beyond, the US,
UK or Canada and as due to economic woes, there would be many banks that would be on stake
for liquidation or joint venture and this would be best time for royal bank to penetrate in global
market by using them as a tool. Their organizational structure and strategy all follow the pattern
that ultimately leads to market penetration. We are talking about market penetration in the sense
of global expansion, namely the Asian market which is vast and the hub of trade and business.
These are the markets that are still untapped, growing and emerging every day. RBC wants to
expand itself globally.
The second strategy that we devise is market development, this means developing already
existing market like the USA, where RBC has faced considerable challenges. Developing on
existing market strategies mean or refer to advertisement and un-tapping a potential customer
base in the existing markets, for example, government institutions and government accounts.
This is because their competitors like CBIC and others also operate with the government and to
increase their market share and fully compete, RBC needs to develop its market by entering into
this customer base as well. Market development strategies may include catering to existing
problems like the economic woes in the USA related to wealth management.
Together these two strategies will help RBC develop into further markets, attract a new customer
base and increase its market share and become more dynamic for the changing economy of the
world which is a requirement for its growth as the largest bank in Canada and the goal to be one
worldwide.
Organization Structure-Current

David'
GordonONixon,
brian,
Chairman
President &of the
Chief
Board
Executive Officer

Zabeen Hijri,
Morgon Frills, Janice Jukakusa, FCA, Chief Human
Chief Risk Officer Chief Adminstrative Resources
Officer and Chief Management
Financial Officer Officer

George Wills, Douglas David Mckay,

Group Head McGregor, Co- Group Head,
Wealth Group Head, Personal and
Management and Capital Markets Commerical
Insurance and Investor and Banking
Treasury Services

Organization Structure-Proposed

David O' Brian

Board & Advisors Chairman of Board
Alice D. Laberge
Andrew A. Chisholm
David F. Dension President & Chief
Frank M. Vettese Executive Officer

CFO CHRO COO CRM HRM

Candian International Wealth Technology & US Investment

Banking Group Banking & Management Operations Banking
Head Insurance Group Head Group Head Group Head
Group Head

EPS/EBIT analysis
 Common Stock Financing Debt Financing
Pessimistic Realistic Optimistic Pessimistic Realistic Optimistic
EBIT $35,000,000,000 $38,126,000,000 $45,000,000,000 $35,000,000,000 $38,126,000,000 $45,000,000,000
Interest 0 0 0 190,630,000,000 190,630,000,000 190,630,000,000
EBT 35,000,000,000 38,126,000,000 45,000,000,000 155,630,000,000 152,504,000,000 145,630,000,000
Taxes 758,450,000,000 826,190,420,000 975,150,000,000 3,372,502,100,000 3,304,761,680,000 3,155,802,100,000
EAT 723,450,000,000 788,064,420,000 930,150,000,000 3,216,872,100,000 3,152,257,680,000 3,010,172,100,000
# Shares 1,920,864,550 1,920,864,550 1,920,864,550 1,353,090,909 1,353,090,909 1,353,090,909
EPS ($376.63) ($410.27) ($484.24) $2,377.42 $2,329.67 $2,224.66

Stock 5% Debt 95%

Pessimistic Realistic Optimistic
EBIT $35,000,000,000 $38,126,000,000 $45,000,000,000
Interest 180,393,169,000 180,393,169,000 180,393,169,000
EBT 145,393,169,000 142,267,169,000 135,393,169,000
Taxes 3,150,669,972,230 3,082,929,552,230 2,933,969,972,230
EAT 3,005,276,803,230 2,940,662,383,230 2,798,576,803,230
# Shares 1,383,523,576 1,383,523,576 1,383,523,576
EPS $2,172.19 $2,125.49 $2,022.79

$3,000.00

$2,500.00

$2,000.00

$1,500.00
Common Stock Financing
$1,000.00
Debt Financing
$500.00

$0.00
$35,000,000,000 $38,126,000,000 $45,000,000,000
($500.00)

($1,000.00)

EPS/EBIT analysis Overview

As calculated above, debt financing seems to be a better option in terms of raising capital to
facilitate the business of Royal Bank of Canada, in all the three pessimistic realistic and
optimistic scenarios, we see that the earnings per share are higher than that of common stock
financing, the main reason behind this is the taxes that are applied on the earnings before taxes,
and a high tax percentage drains a large portion of the earnings, on the other hand through debt
financing, interest has to be paid before the deduction of the taxes, so the tax amount is less than
that of common stock financing, therefore, in the end, it is a better option to raise finance through
debt financing as we are having better earnings per share.
Company Valuation
Royal Bank of Canada  
Stockholders' Equity - (Goodwill + Intangibles) $34,096
Net Income x 5 $37,210
(Share Price/EPS) x Net Income $90,860
Number of Shares Outstanding x Share Price $90,860,054,539
Method Average $22,715,054,176

Company valuation Overview:

when we calculate the total value of the company we consider the equity that is given in the
balance sheet and we deduct the goodwill and intangibles from the figure, then we add the net
income, and the earnings of individual share and add that too, lastly and the most important part
of the company’s value is the worth of the numbers of shares outstanding so we multiply the
share numbers with the individual share price to find the worth of the total shares of the
company. So, in the end we find the company’s valuation to be 22715054176.

The Projected Financial Statement

Projected Income Statement

Projected Income Statement 12/31/2013 12/31/2014 12/31/2015

Revenues $39,651 $42,030 $45,393
Cost of Goods Sold 0 0 0
Gross Profit 39,651 42,030 45,393
Operating Expenses 1,586 2,942 3,631
EBIT 38,065 39,088 41,761
Interest Expense 11,354 13,354 12,854
EBT 26,711 25,734 28,907
Tax 2,404 2,316 2,602
Non-Recurring Events 0 0 0
Net Income 24,307 23,418 26,305

Projected income statement overview

It is estimated that the net income of the bank is likely to increase soon as the company is
performing quite well and also considering the expansion of the company, we estimate that the
income stream is likely to increase as it has been in the previous years from 2010 to 2012, the
revenues would also grow as the sectors of personal and commercial banking, and capital
markets are performing very well, moreover, the deposits have increased 29billion dollars in
2012 which indicates that the positive trend is likely to continue as consumers have more trust in
the bank and are depositing more money. Operating expenses will also increase due to increased
business complications but the massive increase in revenues will offset the expenses and result in
better net incomes in the coming years.
Projected Balance Sheet
Projected Balance Sheet 12/31/2013 12/31/2014 12/31/2015
Assets
Cash and Equivalents $463,821 $514,834 $572,454
Accounts Receivable 0 0 0
Inventory 0 0 0
Other Current Assets 1,586 2,522 3,631
Total Current Assets 465,407 517,356 576,086
Property Plant & Equipment 6,191 6,191 6,341
Goodwill 9,985 9,985 10,035
Intangibles 3,436 4,186 4,936
Other Long-Term Assets 198,255 210,151 226,963
Total Assets 683,275 747,868 824,360

Liabilities
Accounts Payable 0 0 0
Other Current Liabilities 396,510 420,301 453,925
Total Current Liabilities 396,510 420,301 453,925
Long-Term Debt 13,515 16,015 14,515
Other Long-Term Liabilities 198,255 210,151 226,963
Total Liabilities 608,281 646,467 695,403

Equity
Common Stock 20,323 22,823 23,573
Retained Earnings 48,577 71,995 98,300
Treasury Stock (50) (60) (60)
Paid in Capital & Other 6,144 6,644 7,144
Total Equity 74,994 101,402 128,957

Total Liabilities and Equity 683,275 747,868 824,360

Projected Balance sheet overview

looking at the past company trend, we estimate that the future for RBC would be bright, considering
that RBC is looking for expanding outside of Canada aggressively, and also after taking over other banks,
the position of the company would be much better in terms of its balance sheet, the goodwill will also
increase, and the presence of auto lending platform will bring further revenues around 120 million.
Moreover, the economic conditions are predicted to be better. These are the estimations that indicate
that the balance sheet figures would be stronger in terms of meeting the obligations. And considering
the company is growing and expanding, the equity of the company would follow the same trend.
Retained earnings are also increasing since most of the company's employees are its shareholders so
they are more concerned with company growth rather than dividends, and the company is keener to
keep up their reserves to facilitate growth in the future.

Projected Ratios
 Projected Ratios
12/31/2013 12/31/2014 12/31/2015
Current Ratio 1.17 1.23 1.27
Quick Ratio 1.17 1.23 1.27
Debt-to-Total-Assets Ratio 0.89 0.86 0.84
Debt-to-Equity Ratio 8.11 6.38 5.39
Times-Interest-Earned Ratio 3 3 3
Inventory Turnover #DIV/0! #DIV/0! #DIV/0!
Fixed Assets Turnover 6.40 6.79 7.16
Total Assets Turnover 0.06 0.06 0.06
Accounts Receivable Turnover NA NA NA
Average Collection Period 0.00 0.00 0.00
Gross Profit Margin % 100% 100% 100%
Operating Profit Margin % 96% 93% 92%
ROA % 4% 3% 3%
ROE % 32% 23% 20%

Projected ratio overview:

As per the projections, we have estimated that the bank's ability to pay off its obligations will
improve as the current assets would increase shortly that can be due to better economic
conditions and more cash reserves available with the company, likewise, the quick ratio will also
improve at the same pace since there is no inventory mentioned. the company would be able to
handle its interest payments better in the future as earnings are likely to improve so better Times-
Interest-Earned Ratio. Gross profit margin has not changed and remained at 100% while the
operating profit margin would increase to above 90% revealing the company would be doing
quite well in terms of profitability.

Retained Earnings Table

Dividend Information Balance Sheet Information

Steps 1 2 3 4 5

Current Year's Less Current Year's Plus Prior Year's Current Year's
Year New RE
Net Income Dividends Paid RE Balance Sheet RE

12/31/2013 $24,307 $0 $24,307 $24,270 $48,577

12/31/2014 $23,418 $0 $23,418 $48,577 $71,995
12/31/2015 $26,305 $0 $26,305 $71,995 $98,300
Retained Earnings Table Overview:
The retained earnings of the company are estimated to increase in the coming three years predictions as
the dividend payment is 0, so all the income generated is transferred to the retained earnings so it is
estimated that in the end of 2015, the retained earnings would be 98300, which means that this money
can be used by the company if there is any need of expansion or any emergency needs to facilitate the
business.