BUSINESS STRATEGIES OF INDUSTRIAL PROMOTION

AND DEVELOPMENT COMPANY OF BANGLADESH

LIMITED (IPDC): OVERVIEW, ANALYSIS AND
EVALUATION

Prepared for:
Professor Dr. A.K.M. Saiful Majid
Course: Strategic Management
Executive MBA Program
IBA, University of Dhaka

Prepared by:
Mahmud Hasan
ID No: ZR1102007
EMBA 10th Batch
IBA, University of Dhaka

January 8, 2013

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January 8, 2013

Professor Dr. A.K.M. Saiful Majid

Chairman, Executive MBA Program
Institute of Business Administration
University of Dhaka.

Dear Sir,

This is my great pleasure to submit the Strategic Management Term Paper as a requirement
of the course. This report gives an overview of the business strategies of IPDC, the maiden
NBFI of Bangladesh. It also analyses and evaluates the strategies in light of the course
knowledge. I have been working for this company since 1 st February, 2011 as Branch-in-
Charge, Dhanmondi and I was involved in a few strategy formulations. This paper helped
me a lot to relate the real-life experience with my academic learning and also apply various
analytical tools & techniques in my workplace.

I, therefore, hope that you will be kind enough to give me your feedback on the paper. I am
grateful for your kind guidance throughout the semester to prepare the paper.

Kind regards,

Mahmud Hasan
ID No: ZR1102007
EMBA 10th Batch
Institute of Business Administration
University of Dhaka

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 ACKNOWLEDGEMENT

First of all, I am grateful to our honourable course instructor Professor Dr. A.K.M. Saiful
Majid who sat with our team and gave us a lot of ideas to make a professional report.

I am also grateful to Suja Bhai, our class monitor for giving a lot of tips for making a good
report in an informal discussion in IBA canteen.

I must not forget the contribution of Asif Bhai, my senior classmate whom I consulted a lot of
times over phone during his busy time.

I am also grateful to my loving wife who took care of my only kid to help me with my term-
paper during the last few days. I also thank her for making coffee for me at late night.

Finally, I show my gratitude to my MD, CFO, Retail Head, Motijheel Branch Manager,
Chittagong Branch Manager for supporting me with a lot of information- both public and
classified.

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TABLE OF CONTENTS

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 LIST OF FIGURES
Executive Summary -------------------------------------------------------------VI

1.0 Introduction-------------------------------------------------------------------------01
1.1 Origin of the Report------------------------------------------------------01
1.2 Objectives------------------------------------------------------------------01
1.3 Methodology---------------------------------------------------------------01
1.4 Scope & Limitations------------------------------------------------------01
2.0 Industry and Company Overview---------------------------------------------02
2.1 Industry Situation---------------------------------------------------------02
2.2 IPDC in brief---------------------------------------------------------------02
2.3 Financial Highlights of IPDC-------------------------------------------03
2.4 Product Portfolio----------------------------------------------------------03
2.5 Value Chain ---------------------------------------------------------------04
3.0 Origin of Strategies---------------------------------------------------------------05
3.1 Mission----------------------------------------------------------------------05
3.2 Vision------------------------------------------------------------------------05
3.3 Objectives------------------------------------------------------------------05
3.4 Strategic Intent -----------------------------------------------------------06
3.5 Values-----------------------------------------------------------------------06
3.6 Various levels of Strategies--------------------------------------------06
4.0 Balanced Scorecard--------------------------------------------------------------07
5.0 Business Model -------------------------------------------------------------------07
6.0 External Environment analysis-------------------------------------------------08
6.1 PESTEL Analysis---------------------------------------------------------08
6.2 Porter’s Five Forces Model---------------------------------------------09
6.3 Strategic group Map-----------------------------------------------------10
6.4 Industry Driving Forces-------------------------------------------------10
6.5 KSF of IPDC---------------------------------------------------------------11
6.6 Industry Life Cycle--------------------------------------------------------11
7.0 SWOT Analysis--------------------------------------------------------------------11
8.0 Core Competencies--------------------------------------------------------------12
9.0 Benchmarking----------------------------------------------------------------------12
10.0 Generic Competitive Strategies-----------------------------------------------12
11.0 Complementary Strategies-----------------------------------------------------13
11.1 Strategic Alliance---------------------------------------------------------13
11.2 Outsourcing ---------------------------------------------------------------13
12.0 Leadership--------------------------------------------------------------------------13
13.0 Culture-------------------------------------------------------------------------------13
14.0 Strategic Plan ---------------------------------------------------------------------14
15.0 Conclusion & Recommendation ----------------------------------------------14

Figure 1: Value Chain Analysis of IPDC........................................................................ 10

Figure 2: Year-wise net income & operating cost..........................................................
Figure 3: Porter’s Five Forces Model.............................................................................16
Figure 4: Strategic Group Map......................................................................................

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Figure 5: Organogram of IPDC......................................................................................

LIST OF TABLES

Table 1: Financial Highlights of IPDC............................................................................ 03

Table 2: Balanced Scorecard of IPDC.......................................................................... 07

EXECUTIVE SUMMARY

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This report has been prepared as a requirement of Strategic Management course under the
supervision of Professor Dr. A.K.M. Saiful Majid.

The objectives of the report are three - 1) To discuss different strategies and Business Model
of IPDC, 2) To do critical evaluation of the various levels of strategies of IPDC by using
different analytical concepts, tools and techniques and 3) To recommend appropriate
business level strategy.

This is a qualitative report and I relied mostly on secondary data to prepare the report. Vision,
mission and objectives of the company were analysed to understand long-term and short-
term strategies. Moreover, I made a Focused Group Discussion with the branch managers to
assess our strategic outcomes. Furthermore, interviews of MD, CFO and retail Head were
also taken to understand various strategic moves.

The scope of the report is IPDC with particular to retail business as I am working in this
department. Main constraints were limited time and data confidentiality.

This report provides an overview and analysis of different strategies and Business Model of
IPDC. IPDC is the maiden NBFI of Bangladesh. Its management is run by Aga Khan Fund for
Economic Development (AKFED) who holds 51% share of the company. AKFED is a
development agency of Aga khan Development Network (AKDN) who has mandates ranging
from health and education to architecture, culture, microfinance, disaster reduction, rural
development, the promotion of private-sector enterprise and the revitalization of historic cities
It also provides recommendation to streamline strategies of the company for the days coming
ahead. At the beginning, this report examines the competitive and immediate industry
environment of NBFI sector of the country. The report identifies the driving forces of the
industry, its key success factors and present stage and attractiveness. The report covers key
business strategies of the company in product offering and differentiations, technological
advantages, customer services, strategic alliance with other partners, diversifications and
forces & strength of competition through Porter’s five forces model of competition. The report
also describes the operational procedures of the company. The report analyses the strength,
weakness, opportunities and threats i.e. SWOT analysis for the company. After all the
analysis, I found that the business level strategy does fit with its objectives. Moreover, a ROE
of less than 1% tells that its business model it faulty. The company has been recommended
to revise its business model by going into Merchant Banking operation and recruiting a
talented workforce to run it. It has also been recommended to launch some unsecured
products such as personal loan, credit card under retail business division and assign
dedicated collection team to eliminate bad loan. Finally, it was recommended to emphasize
on non-interest income such as processing fees of large loans. Adopting these strategies will
help the company to increase its net interest margin that will allow it to fulfil its long-term goal
to increase its ROE to 15%.

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1.0 Introduction

1.1 Origin of the Report

This report has been prepared as a requirement of the EMBA Course “Strategic
Management” at Institute of Business Administration (IBA), University of Dhaka under the
supervision of Professor Dr. A.K.M. Saiful Majid.

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1.2 Objectives

 To discuss different strategies and Business Model of IPDC.

 To do critical evaluation of the various levels of strategies of IPDC by using different
analytical concepts, tools and techniques.
 To recommend appropriate business level strategies.

1.3 Methodology

Company mission, vision, objectives, core values, annual reports, company websites etc.
have been studied to identify the various levels of strategies of the company. Moreover,
informal interviews of our Managing Director, Chief Financial Officer and Head of Retail team
were taken to understand different strategic moves and underlying rationales. I also relied on
Focus Group Discussion (FGD) composed of branch managers to evaluate our strategies. It
was conducted over phone. The theoretical base for the report was primarily those concepts
taught as part of Strategic Management course. The industry competitiveness and outlook
was reviewed. The tools and techniques such as Five Forces Model of competition, Five
Basic generic business strategies, and other strategies like acquisition, alliance,
diversification, Strategic Group Mapping, SWOT analysis; Key Success Factors (KSF) etc
have been applied. So, the report is a combination of Primary and Secondary information and
their appropriate analysis and evaluation to meet the objectives of the report.

1.4 Scope and Limitations

Scope of this report is only IPDC (with particular focus on Retail Division I work for) and
overview and evaluations of the strategies currently undertaken by IPDC.

Main limitation of the paper is limited time-frame. Due to time constrain, it was not be possible
to collect industry data rigorously. Moreover, competitor’s data will hardly be accessible due
to confidentiality of financial institutions.

2.0 Industry and Company Overview

2.1 Industry Situation

As per Bangladesh Bank website, currently there are 47 scheduled banks, 4 non-scheduled
banks and 31 Non-Bank Financial Institutions (NBFIs). Currently, the industry is in its growth
stage as many technological orientation is yet to come and many modern banking

9
instruments is yet to be introduced. Moreover, as the country GDP is growing at a rate of 6%
and above, this industry will be growing with the growth of industrialization and per capita
income. Our banking industry has been greatly improved over the last decade especially due
to the contributions of foreign banks and Islami Bank Bangladesh Ltd (IBBL). Foreign banks
have produced a lot of efficient bankers who have left commendable milestone of
modernizing the sector and IBBL has created a revolution in Islamic banking system in
Bangladesh.

2.2 IPDC in Brief

IPDC is a development project of Aga Khan Fund for Economic Development (AKFED).
AKFED is an agency of The Aga Khan Development Network (AKDN), a group of
development agencies with mandates ranging from health and education to architecture,
culture, microfinance, disaster reduction, rural development, the promotion of private-
sector enterprise and the revitalization of historic cities. AKDN consists of the following
organizations:

1. Aga Khan Academies (AKA)

2. Aga Khan Agency for Microfinance (AKAM)
3. Aga Khan Education Services (AKES)
4. Aga Khan Foundation (AKF)
5. Aga Khan Fund for Economic Development (AKFED)
6. Aga Khan Health Services (AKHS)
7. Aga Khan Planning and Building Services (AKPBS)
8. Aga Khan Trust for Culture (AKTC)
9. Aga Khan University (AKU)
10. Focus Humanitarian Assistance (FOCUS)
11. University of Central Asia (UCA)

IPDC was established in 1981 by the Aga Khan Fund for Economic Development
(AKFED), an international development agency dedicated to promoting entrepreneurship and
building economically sound enterprises in the developing world, Government of Bangladesh
and some other distinguished shareholders. AKFED focuses on building enterprises in parts
of the world that lack sufficient foreign direct investment. It also makes bold but calculated
investments in situations that are fragile and complex.

AKFED has a greater aim to make a tangible contribution to improving the quality of life of the
teaming millions who deserve higher incomes, jobs, and economic emancipation.

AKFED does this through providing financial services to businesses that create new
employment opportunities and income for the workers, empowers them with skill and training,
thus enhancing the quality of life we seek to instil within the majority. At the macro level, its
activities contribute to growth and development of the economy, and enhance its productive
resources.

IPDC is the maiden NBFI of Bangladesh that is well-known for its diversified product portfolio
to cater the need of Retail, Medium Market Enterprises and Corporations. Its total asset was
BDT 712 crore at 30th September, 2012 and it’s return on equity was less than 1% during first
three quarters of 2012. The company heavily depends on its retail business unit for its
deposit mobilization and approximately 90% fund lent to big corporations with a very low
interest rate.

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2.3 Financial Highlights of IPDC

*Amount in BDT Million

2011 2010 2009 2008 2007
A. Financial Performance
Operating Revenue 697.4 646.7 658.0 682.0 777.0
Financial Expenses 431.6 298.5 360.0 441.0 509.0
Operational Expenses 565.3 416.4 441.2 527.0 594.0
Operating Profit 132.1 230.3 216.8 156.0 184.0
Net Profit After Taxes 111.7 176.2 110.8 104.0 133.0

B. Financial Ratios
Earnings Per Share (Tk.) 1.2 1.9 14.1 14.6 20.6
Dividend Per Share (Tk.) 1.0 10.0 10.0 10.0 15.0
Net Asset Value Per Share
20.0 229.5 235.5 244.9 258.4
(Tk.)
Financial Expenses Coverage
1.3 1.7 1.4 1.2 1.2
(Times)
Profit Margin (after taxes) as
16% 27.2% 16.8% 15.2% 17.1%
(%)
Return on Equity as (%) 6.1% 10.2% 6.2% 6.1% 8.1%
Return on Assets as (%) 1.7% 3.0% 1.8% 1.5% 1.8%
Current Ratio 1.36 1.06 1.07 1.06 1.08
Debt Equity Ratio 0.02 0.01 0.67 0.51 0.72
P/E ratio 27.01 24.28 31.93 28.33 17.39

Table 1: Financial Highlights of IPDC

2.4 Product Portfolio

IPDC has no capital market operation. It services are delivered mainly by three departments-
namely Retail, Medium Market Enterprise and Investment. Department-wise products are
mentioned below.
2.4.1 Retail

 Asset Products: Auto Loan, Home Loan

 Liability Products: FDR of Various Tenor, DPS, Double Money Scheme, Ultiflex.
2.4.2 Medium Market Enterprise

 Asset Products: Revolving Loan, Term Loan, Lease Finance, Factoring, Work Order
Financing
2.4.3 Investment

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Asset Products: Revolving Loan, Term Loan, Lease Finance, Factoring, Work Order
Financing

2.5 Value Chain

The value chain of IPDC contains two types of activities such as Primary Activities and
Support Activities.

Primary Activities:

Support Activities:

Figure 1: Value Chain Analysis of IPDC

Primary Activities:
Supply Chain management- Supply chain activities include sourcing stationary for office
use, procuring promotional materials in collaboration with marketing team and doing
renovation works as and when required.
Operations- Our operating activities include credit underwriting, legal valuation and post-
approval loan disbursement or deposit instrument issuance.
Distribution- Our distribution network consists of 4 branches in Dhanmondi, Motijheel,
Sylhet, Chittagong and also head office in Gulshan.
Sales & Marketing- Our sales teams are disseminated across all branches and the head
office. Our marketing team operates centrally from head office.
Services- We deliver all types of services from all our branches along with head office.

Support Activities:
Our support activities consist of below activities.

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Technology and System Development: Our IT team gives all kind of IT related support.
Their main role is to make sure that we have a continuous system support without any failure.

Human Resource Management: HRM plays the most important support role by doing
recruitment, selection, employee contract renewal, benefit & rewarding activities.

General Administration: This gives all the administrative support such as booking pool car
for employees, paying mobile bills and other utility bills. It also looks after various supplier
issues.

Legal Affairs: legal team makes sure all our agreement is done in compliance with local law
so that company does not face any lawsuit.
l
Auditing: Auditing is a vital support activity that ensures businesses are done according to
the company norms and regulatory requirements.

3.0 Origin of Strategies

3.1 Vision

To be the most respected and innovative financial institution of the country.

Comment: It’s very focused and easy to memorize.

3.2 Mission

To be the brand of quality and integrity for delivering innovative and tailored financial
solutions to a diverse client base
Comment: it fits well into my proposed vision statement.

3.3 Objective

To ensure maximum return on investment

Profitability is a key to achieving superior returns, building our capital, and motivating and
retaining our best people.

To ensure steady sustainable growth in business

Our increasing corporate profits since inception has been manifestation of our steady
growth. Amidst a competitive environment, our goal is to take the organization forward with
excellence in all our operations. We shall harness and use our distinctive competencies to
ensure a long term competitive advantage.

To improve the quality of services

Our strength is not in the volume but in the quality of services that we provide. Our clients'

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 interests always come first. We relentlessly strive to anticipate the changing needs of our
clients and to develop better solutions to those needs. Our experience tells that if we serve
our clients to the best of our ability, our own success follows.

To create innovative product and services

Creativeness and imagination is encouraged in everything we undertake. We pride
ourselves on having pioneered many products and services that have become standard in
the industry.

To maintain highest level of ethical standard

We are dedicated to full compliance to the spirit of laws, rules and ethical principles that
govern us. Our continued success depends upon unwavering adherence to this standard.
Comment: it’s very generic and it uses superlatives.

3.4 Strategic Intent

The strategic intent of IPDC can be understood from its vision statement. It’s intent is to

3.5 Values

 We address to client needs promptly, impartially and with utmost importance.

 We take great pride in our dedicated teams of staff members and will continue to
develop their potential and skills at all levels within our organization by rewarding
outstanding performance and promoting from within to develop a climate of high
expectation and achievement.

 We remain quality-minded and devoted to uphold our corporate culture.

 We will retain our position of leadership in this field through our commitment to quality,
compliances, services and values.

 We will continue personal and corporate involvement in activities benefiting the

society and nation.

 We uphold the values of the communities we are privileged to serve by honouring

their traditions and preserving the environment.

 We pledge to remain alert to economic changes which affect our businesses, and to
respond to ever-changing market demands.

 We will continue to confront all challenges through planning, balanced diversification

and orderly growth.
 We take our responsibility towards our shareholders very seriously and are committed
to be a model for others to follow.

3.6 Various Levels of Strategies

3.6.1 Corporate Level Strategy

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As we are a single-business company, we do not have any corporate level strategy. But the
corporate level strategy of our parent company, AKFED gives shapes to our business level
strategy. The corporate level strategy of AKFED is to promote entrepreneurship and build
economically sound enterprises in the developing world.
3.6.2 Business Level Strategy

The business level strategy of IPDC is to become a market player in auto loan and mortgage
loan business by 2013.

3.6.3 Functional Level Strategy

Distribution: Set up another branch in Uttara by 2013.

Sales: Make a sales growth of at least 20% by end of 2013.
Marketing: Spend BDT 10M in 2013 for various micro-marketing initiatives that are in line
with our focused differentiation strategy.
Service: Include B-Kash in our network to increase convenience of customer and thus
increase quality of service.

3.6.4 Operational Level Strategy

Our operating activities strategies include branding across the branches and renovation
works to give uniform look to all branches.

4.0 Balanced Scorecard

Our strategic objectives for 2013 in line with financial objectives depict our Balanced
Scorecard below.
Financial Objectives
20% Increase in Deposit growth by 2013
Reduce NPL to 4% by 2013
Reduce cost of Fund to 14% by 2013
Increase non-interest income by 25% by
2013
Strategic objectives
Add one more branch in Uttara and recruit
30 sales executives by 2013
Follow stringent credit policy and strengthen
legal and special asset management team
Conduct Micro-marketing initiatives and
revamp service propositions
Give waiver of loan processing fees on very
special cases

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 Table 2: Balanced Scorecard of IPDC

5.0 Business Model of IPDC

Figure 2: Year-wise Net Income & Operating Cost Graph

IPDC has a defective business model that does not support its long-term goal of increasing
its return on equity to 15% by 2015. Currently, IPDC is taking institutional funds with average
cost of 14.50% and lending @ average rate of 16.50%. 2% net interest margin is not good
enough to achieve this goal after maintaining CRR of 2.5%.Current ROE of 1% approximately
is a clear indication that its business model has to be drastically revised. Figure above shows
that its operating cost is increasing after 2010 but bet income is decreasing which again
justifies its poor business model.

6.0 External Environment Analysis

6.1 PESTEL Analysis

6.1.1 Political

Our country is passing through a vibrant political situation. Opposition parties are doing strike
very in demand of caretaker government before coming national election at the end of 2013.
This has created a lot of uncertainty in the overall investment situation of Bangladesh. This
has a direct impact on Banks, especially NBFIs.

6.1.2 Environmental

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This factor does not pose any direct impact on our company as our company does not invest
in any environmentally hazardous projects. Though we have invested in shipping industry, we
made sure that our clients make proper environmental precautions so that any lawsuit does
not arise.

6.1.3 Social

Our social factors such as demography, women employment etc are quite favourable for the
NBFI industry.

6.1.4 Technological

Technology has a great impact of banking business and our company looks forwards to
adopting cheap and viable technology to increase the quality of service. Our competitor has
heavy investment in software. We have overcome this shortcoming due to our efficient and
talented workforce.

6.1.5 Economical

Despite adverse political situations, all our economic indicators are favourable. Our
remittance is increasing month by month. Our GDP growth rate has become sustainable over
6%. Our inflation has dropped to single digit. Industrial lending has also increase by 30% in
2012 as compared to 2011 as per Bangladesh bank source. All these indicators gives a rosy
picture of our economy. It has also been reflected in recent World Bank comment that
predicts Bangladesh as a middle-income country by 2021 and Developed country by 2050.

6.1.6 Legal

IPDC is a company where regulatory compliance is of paramount importance. We are getting

satisfactory audit comment every year from Bangladesh bank and we are also contributing
handsome amount of corporate tax to the national exchequer.

6.2 Porter’s Five Forces Model of Competition

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 Figure 3: Porter’s Five Forces Model

6.2.1 Bargaining Power of Supplier

Our suppliers are of two types-Regular and Occasional. Regular suppliers include stationary
supplier, water and coffee supplier etc. As there are many vendors in these particular supply
items and switching cost is very low, we can give a hard bargain to our supplier. Our
occasional supplier consists of Computer and other office equipment supplier. As we are a
very small company and we buy these items occasionally, we are least concerned with the
supplier.

6.2.2 Bargaining Power of Customer

There are two types of customers of IPDC. They are depositors and borrowers. Our
depositors are also of two types – Institutional & Individual. Institutional customers are rate
sensitive as they deposit/borrow in large amounts whereas individual customers especially
small depositors are not rate sensitive. They value security and service.

6.2.3 Rivalry among Competitors

This is the strongest competitive force in NBFI industry as this gives shapes to other
competitive forces. Our competitors such as DBH, IDLC is aggressively advertising through
billboard, newspaper etc. DBH, GSP Finance and MIDAS Finance are aggressively
advertising their strong credit ratings whereas IDLC is one-step ahead by rebranding. Though
the competitors have their fixed card rates for both deposit and loan products but they exceed
the card rates very often to snatch clients from others.

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6.2.4 Threats of new Entrants

As this is a highly regulated industry and new entry requires regulatory approval which is very
time consuming and costly, threat of new entrants is very low.

6.2.5 Threats of Substitutions

NBFI products are very similar to bank products. Though there is no substitute for our
products, in very few cases small depositors refer to deposit products of Co-operative firms
who offer very high rate for petty deposits.

6.3 Strategic group Map

I have tried to plot a strategic group maps incorporating our closest competitors and also the
NBFI market leaders just to get an idea of our market standing. Only two variables have been
used to plot this map. These variables are credit rating and brand image. For credit rating I
consulted CRAB and for assessing brand image, I conducted a survey amongst 30 people
who are representatives of university students, bankers, government officials and
businessman. I also incorporated few banks from whom we get competition specially in
deposit collection side.

Figure 4: Strategic Group Map

6.4 Industry Driving Force

The main driving force of the industry is the industrialization which is given boost by export
growth. Foreign remittance sent by NRB citizens also fuels the growth of this industry. Due to

19
stringent regulatory reporting requirements, this industry has become much disciplined over
the years except some recent scams. Liquidity crisis has been eased due to significant
growth in foreign remittance, decrease in government borrowing which has been reflected in
reducing call money rate.

6.5 KSF of IPDC

The key success factors of the industry includes the following-

a) Distribution-related KSF- We have a large distribution channel that most of our
competitors lack.
b) Skill & Capability-related KSF- We have strong knowledge of local customers as most
of the branch people are recruited from local community. Skill sharing with other foreign
NBFI of the parent company is also common in IPDC.
c) Other types of KSF- Strategic alliance with renowned developers and car dealers is also
responsible for our success. Operating cost is very low due to cost-sensitive management
team.

6.6 Industry Life Cycle

Banking industry especially the NBFI industry is clearly in its growth stage. Consolidated
profit of the industry is increasing. New banks are coming and existing banks are increasing
their branch network. A lot more sophisticated money market and capital market instruments
are yet to come. Though some banks especially multinational banks are using advance
technology such as internet banking, many local banks have not capitalized on this
technology yet. Some banks are doing monopoly in some products due to strong brand
image. All these things tell us that the industry is in its growth stage. This is an opportunity for
IPDC to capitalize the benefits of a growing industry accompanied by above 6% growth of the
economy. Though IPDC has spent 31 years since its inception in 1981, its still in its growth
stage as it has not entered the capital market. Moreover, it has no unsecured portfolio such
as credit card or personal loan etc.

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7.0 SWOT Analysis

7.1 Strengths

1. Strong image of parent company.

2. Highly efficient & talented workforce.
2. IPDC Club Royal (See Appendix for details) Facility for High-Net-Worth Clients.
3. Our Ultiflex (See appendix for details) Deposit Scheme is unique in NBFI industry.
4. Our management has a customer service philosophy that allows us to change workflow of
service in case of emergency.

7.2 Weaknesses

1. Only company software Fintelligent has become outdated and branches do not have any
access to this software due to poor security.
2. High employee turnover.
3. Our MD has very little decision-making power in business-level strategy as executive
committee appointed by AKFED always intervenes.

7.3 Opportunities

1. Branches can be used for merchant banking operations also.

2. high time to enter bearish capital market.
3. Being a venture of AKFED, we have a lot of opportunity to share the best practices of other
financial institution of the parent company in other parts of the world.

7.4 Threats

1. Competitors with better credit rating are offering higher interest rate for deposits.
2. Adverse political situation.
3. Growing bargaining power of supplier, e.g. deposits.

8.0 Core Competencies

IPDC is a very small company and it does not have many core competencies. Its only core
competency is it talented workforce.

9.0 Benchmarking

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Currently, DBH and IDLC is treated market leader in NBFI industry in terms of profitability and
brand image as also reflected in our strategic group map. We have benchmarked few of their
strategies to increase our competencies. Example includes home loan approval within 7
working days and deposit instrument delivery within 3 working days.

10. Basic Competitive Strategy

Our basic competitive strategy is focused differentiation. As we are a very small company
and our resources are very limited and we do not have any competitive advantage in pricing,
we follow focused differentiation strategy in general. We have developed a customer value
proposition of Club Royal Facility and built special rooms in all branches differentiate our
product offerings to the HNW clients who do not have time to visit banks in banking hour for
special services. Moreover, we give home service to most of our clients. This idea has
differentiated our service offerings to a great extent.

11.0 Complementary Strategies

11.1 Strategic Alliance

IPDC has formed strategic alliance with a few Real Estate Developers and Car Dealers to
complement its own strategic initiatives. Alliance with Building Technology and Ideas Ltd.
(BTI) will help it to get into mortgage loan business with clearly defined niche market of high
net worth clients. Alliance with Executive Motors, Pacific Motors, Hyundai will also help it to
get a competitive advantage in auto loan market. As banks cannot finance more than 2
million or 30% of car value- whichever is lower, NBFI has a clear competitive advantage in
this area. To get the best out of it, forming strategic alliance was a dire necessity.

11.2 Outsourcing

We concentrate only on our core activities and outsource all our support activities to get a
competitive advantage in core activities. Our outsourcing activities includes safety and
security services, cleaning and pesticide control, courier services, customer address
verification, mortgage property valuation, branch beautification service, drinking water and
beverage services, clerks and drivers etc.

12.0 Management Structure & Leadership

Under the leadership of our current MD & CEO, Mr. Mominul Islam, IPDC has seen a visible
change in the year 2012. Mr. Mominul Islam is a six-sigma black-belt holder and he believes
that a big leap towards small change can make a radical change to the organization. This
“Big Leap towards Small” philosophy has changed the mentality of our leaders who are the

22
various functional head of our organization. Our top management has a strong sense of
recognizing their team. They are always watchful on competitors’ moves. Our pricing strategy
is always based on competitors’ moves. To eliminate red-tapism, most of the contractual
recruitment decision is delegated to branch level by the top-management.

Figure 5: Organogram of IPDC

13.0 Corporate Culture

Our corporate culture is weak. It is probably due to frequent changes of the MD&CEO. Still,
IPDC has some unique culture that we are proud of. Our high officials along with our MD &
CEO always take launch in a common canteen with the frontline employees. We are a small
team of 56 permanent employees and our Annual Team Building program is an unique event
that helps us know each other and become productive by increasing team spirit. This
program is given a different shape by various types of funny activities and cultural programs.
To break the barrier of top-to-bottom communication, all junior employees address their
seniors as “Bhaia” instead of “Sir”. Moreover, our MD encourages all junior employees to
directly communicate with him if found necessary. Our MD insists every branch managers to
join the Management Committee meeting once in a month to share their ideas, problems and
issues.

14.0 Strategic Plan

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After evaluating the business model of IPDC and its balances scorecard, I feel that IPDC
needs a new strategy to achieve its long-term goal of reaching a ROE of 15%. Current
strategy calls for investment of high cost fund in large corporations at a very low interest
margin that does not allow sustainable profit growth. So, we need to invest heavily in MME
segment and also retail business at a comparatively higher rate to increase net interest
margin and thus achieve the long term goals. This can be done by financing high growth
MME segments and gradually decreasing investment in big corporations. In doing so,
capacity of MME team to be increased.

15. Conclusion and Recommendation

In conclusion, I want to reemphasize the fact that the objectives of IPDC are not consistent
with the business level strategy. It is high time management should sit with the parent
company to reset its business level strategy that will allow maximum return on its investment.
Few recommendations include-
a) Go into Merchant Banking operation and recruit a talented workforce to run it. This will
have boost in ROE.
b) Launch some unsecured products such as personal loan, credit card under retail
business division and assign dedicated collection team to eliminate bad loan.
c) Emphasize on non-interest income such as processing fees of large loans.

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BIBLIOGRAPHY

1. http://www.ipdcbd.com

2. http://www.dsebd.org

3. http://www.bangladesh-bank.org

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APPENDICES

Appendix-1

IPDC Privilege Service- IPDC Club Royal

IPDC is the first private sector financial institution in Bangladesh established in 1981 by
Government of Bangladesh, Aga Khan Fund for Economic Development (AKFED),
Switzerland; International Finance Corporation (IFC), World Bank Group; Commonwealth

26
Development Corporation (CDC), UK and German Investment and Development Company
(DEG), Germany.

Since its inception, IPDC has played a pivotal role in shaping up the country’s industrial
landscape. IPDC had been partner in a number of milestone projects that were the first of its
kind in Bangladesh. IPDC takes pride in being recognized today as a premier development
financier providing quality financial services to the corporate clients for their investment
needs.

With the commencement of the Retail business in 2006, IPDC envisions to embrace the same
kind of respect and recognition from the Consumer segment through providing innovative
wealth management solutions to a select circle of distinguished clients. IPDC has launched
its 1st branch in Dhanmondi in 2007. IPDC introduced a privilege service proposition under
the title “IPDC Club Royal” which has been commenced from July 31, 2008.

Launching of IPDC Club Royal officially at The Westin Dhaka on July 31, 2008 is an
approach to make its valued clients feel privileged, to offer them the facilities which they
deserve and to take extra care of them accommodating their demand. Under this program its
valued clients will be entitled to several substantial rewards in the form of privilege rates on
products & services. Special privileges and discounts at top quality merchants and other
acclaimed establishments in home and abroad.

Being one of the pioneer financial institutions, we have the scope and diversity to meet our
customers' needs. IPDC Club Royal is our exclusive privilege services proposition designed
to meet all the personal financial advisory services of our most valued customers.

Exclusive Entitlements- Live in Style

1.0.1.1.1.1.1.1

1.0.1.1.1.1.1.2 Benefits/Free services

BALAKA VIP LOUNGE
3rd Floor, Zia International Airport
Dhaka, Bangladesh
Club Royal members will get free admittance to Balaka VIP Lounge and will receive
Prompt, Courteous and Efficient service during all operational hours. 

Free access to Internet, Cable TV, Daily newspapers, Magazines, Washroom and also Food
& Refreshment facilities (excluding Alcoholic Beverages and STD/ISD telephone calls)
1.0.1.1.1.1.1.3
Jewelry Acquisitions…
NEW JARWA HOUSE
Molly Capita Centre (1st Floor)
76 Gulshan Avenue, Dhaka, Bangladesh
15% discounts on Gold Making Charge on any items consumed from Jarwa House

TANISHKS JEWELLERS

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Shop No. 4/A, 2nd Floor, Pink City
Market, Road-103, Plot-15, Gulshan-2, Dhaka-1212
20% discounts on Gold Making Charge on any items consumed from Tanishks
Jewellers
1.0.1.1.1.1.1.4

1.0.1.1.1.1.1.5 Restaurant Accomplishments…

IPDC Signed agreement with Saltz, Eltoro & Jasmine Bangladeshi cuisine for IPDC Club
Royal members. Jasmine Bangladeshi Cuisine situated at Bangkok offers high quality
Bangladeshi Food and the clients can have the flavor of home at discounted price through
using the Club Royal privilege card there.

SALTZ
Fine Seafood

1.0.1.1.1.2 NWF 8 Gulshan Avenue, Dhaka-1212

1.0.1.1.1.3 Tel: 880 2 8818351

12% discount on food items consumed in the restaurant

EL TORO

1.0.1.1.1.4 Mexican Reataurant

H-1-A, R-138, Gulshan-1, Dhaka-1212
1.0.1.1.1.5 Tel: 880 2 8852863
12% discount on food items consumed in the restaurant

JASMINE Bangladeshi Cuisine

11/5 Soonvijai, 3 New Petchburi Rd. Bangkok-10320
Tel: 00 66 097623619
10% discount on food items consumed in the restaurant

1.0.1.1.1.5.1.1 Travel & Air Ticket arrangements…

IPDC signs agreement with Etihad Airways & Privilege Travel & Tours Ltd becomes our
affiliated partner

PRIVILEGE TRAVEL & TOURS LTD.

Progress Tower, Road-23, House-01 (Ground Floor), Gulshan-1, Dhaka-1212
Tel: 8850311, 8850312, 8850313, 8816195
5% discount on air tickets and substantial discounts on sightseeing arrangement, hotel and car
rental reservation, airline flight scheduling on all package tours.

1.0.1.1.1.5.1.2

Health Care Arrangements

UNITED HOSPITAL
Plot No: 15, Road No: 71, Gulshan: 2, Dhaka-1212 Bangladesh
Tel: +880 2 8836000, 8836444
United Hospital becomes our privilege service partner.
• 20% discount facilities In all pathological tests carried out in laboratory.

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• 10% In all diagnostic test carried out in Radiology & Imaging department &
diagnostic services like ECG, ECHO, ETT, Endoscopy, Colonoscopy and
• 5% on cabin rates in case of admission as in-patient.

PARKWAY HOSPITALS SINGAPORE Pte Ltd.

Suite-B3, Level-4, House-10, Road-53
Gulshan-2 Dhaka-1212.
Tel: 01711 438877 (24 hour hotline for Club Royal members of IPDC)
IPDC signed an agreement with Parkway Health Singapore, the largest Healthcare service
provider in Asia which owns and operates Mount Elizabeth Hospital, Gleneagles Hospital
and East Shore Hospital in Singapore. IPDC’s valued clients will receive privilege services in
the form of Special packages on surgical cases, free doctors’ opinion etc under this
agreement. The service is launched with the aim to provide the clients the best service and to
be with the clients whenever and wherever the need some extra care.
• Special packages on surgical cases (Patients requiring surgery and admission in
hospital with selected panel of doctors)
• Free doctors’ opinion and health consultation when Parkway Health doctors come
to Bangladesh from time to time
• Visa application for patients and their attendants
• Travel arrangement and assistance for Hotel and Apartment at corporate rate in
Singapore

1.0.1.1.1.5.1.3 Shopping requirements…

VASAVI
CWS (C), 18 South Avenue (1st Floor), Gulshan-1, Dhaka, Bangladesh
12% discount on any items consumed in Vasavi.

Lots more are Coming Soon…….!!!

IPDC Club Royal Lounges:

Head Office Club Royal Lounge Dhanmondi Club Royal Lounge

Hosna Centre (4th Floor) Bikolpo Tower (3rd Floor)
106 Gulshan Avenue 74, Satmasjid Road, Road-5/A,
Dhaka-1212 Dhanmondi, Dhaka-1209
Tel: 9885533-8 Ext: 109,128,146,138 Tel: 9614734-6

Chittagong Club Royal Lounge Motijheel Club Royal Lounge

115/134, (3rd floor), Lalkhan Bazar, Surma Tower,
(Beside Dampara Police line),Chittagong 4th Floor, 59/2, Puraan Paltan,
Tel: +880-31-2866892-4; Ext-104 Dhaka-1000.
Fax: +880-31-2866895 Tel: 9551704,

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 Fax: 9564044
Appendix-2

IPDC UltiFlex Deposit Scheme (IUDS)

Unique features :

• IPDC UltiFlex is a new and first of its kind deposit scheme in Bangladesh. It offers ultimate flexibility in
installment size and frequency for the depositor. Under the scheme one can deposit :

o Any amount

o In any frequency

o At any time.

• So no more penal charges for delayed payment of installment since there is no stipulated time period!

• One can use the scheme as a gift item to present it to his/her dear ones.

• Loan facility available.

Product specifications :

• Who can open the scheme?

o Personal account holders

o Resident/non-resident Bangladeshis

o Sole Proprietorships

o Registered/unregistered Partnerships

o Public/Private limited companies

o Associations, Clubs, Societies, Charitable institutions

o Nationalized organizations

o Non-government organizations

• Customer Eligibility :

o Any Bangladeshi Citizen of 18 years or more will be eligible to avail this product.

o A minor may also open the account (operated by the legal guardian).

o Any institution registered in Bangladesh is eligible to avail the product.

• Tenure and Interest rates :

Tenure Interest rates*

6 Months 9.75.00%
1 Year 10.00%
1 Year 6 Months 10.25%
2 Years 10.50%
3 Years 10.50%
4 Years 10.75%

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 5 Years 11.00%
* Rates are subject to change as per IPDC decisions. Please call IPDC office for latest interest rate.

• Methods of interest calculation: Interest will be calculated on a daily basis and credited on maturity.

• Fees for Gift card : BDT 300 for issuance of the card.

• Minimum initial deposit amount: BDT 5,000.

• Minimum installment size : BDT 1,000.

Restrictions on deposit amount :

o In a year one cannot deposit more than double the amount deposited in the preceding year.

o One cannot deposit any amount during the last three months of the tenure in case the tenure
of the scheme is 1½ year or 2 years.

o One cannot deposit any amount during the last six months of the tenure in case the tenure of
the scheme is more than 2 years.

o No block period for 6 month and 1 year tenure fund.

• Account Operating Mode: Singly or Jointly.

• Instant Loan facility: Loan Facility up to 80% of the deposited amount will be given to the Depositor at
a spread decided by IPDC. However, to be eligible for the Loan facility, the account must be at least 1
year old or the total minimum deposit amount should be BDT 100,000.

• Nomination Facility: The Depositor(s) must nominate one or more individuals as nominee(s).

• Early Encashment: Early encashment will not be allowed before completion of six months except upon
death of the depositor or instruction from the legal authority and subject to Bangladesh Bank clearance.
In case of early encashment after six months and forced encashment, a penal charge decided by IPDC
based on time to maturity will be deducted from the coded interest rate as early encashment fee.

• Emergency withdrawal : After completion of 1 year, any one having more than BDT 100,000 total
deposit, can withdraw up to 25% of the deposited amount for emergency purpose without any penal
charge for only once in a lifetime.

• Payment Mode: The customer can pay through Account Payee Cheque/ Pay Order in favor of “IPDC of
Bangladesh Limited”. Cheques can be deposited at IPDC offices or in any of IPDC’s sales and service
outlets or in IPDC designated accounts with other banks. Customers have the option to pay any number
of installments through undated MICR cheques in advance. If a cheque deposited by the client for
payment of installment is dishonored from the bank, a Cheque Return Charge of BDT 500 will be levied
to the client realizable with the next installment.

• Gift Card option : Another unique feature of UltiFlex is the option to use this Scheme as a gift item.
Customers can present this Card to their dear ones on special occasions for onward opening of an
IPDC UltiFlex Deposit Scheme (IUDS). To avail the Gift Card one has to fill up the Card Application
Form and deposit the initial amount through Account Payee Cheque or Pay Order.

• Gift Card Pack : The Card will be packed in an attractive envelop which will contain the followings:

o Personalized Gift Card

o Introduction Letter from IPDC

o Application Form for the Gift Card holder

o KYC Form

• Gift Card Conditions :

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o The Gift Card will be issued in INACTIVE mode.

o A period of 60 days from the date of issuance of the Gift Card will be allowed for the Card
Holder to come to IPDC and to initiate the Scheme by activating the Card.

o In case the Card Holder fails to show up within the said period, IPDC will assign the Scheme
against the initial applicant without any further notice.

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