1.

UNIVERSITY OF FORT HARE

STRATEGIC MANAGEMENT

BEC 325 / E

ASSIGNMENT 1

2021
……………………………………………………………………………...........................................

DUE DATE: 30 September 2021 by 23:59

[No later than this date – 10% late submission per day will be applied].

Email address submissions:

Alice Campus – BEC 323 and BEC 325 - wchinyamurindi@ufh.ac.za
East London Campus – BEC 323E and BEC 325E – dchigori@ufh.ac.za
Make sure you email the correct Lecturer

This assignment is based on the cased of ABSA

(Already Supplied)

Your Name & Surname: Ndlovu Stanely

Your Student Number: 201924638

Course Code You Are Registered For: BEC 325

INSTRUCTIONS

1. Answer the questions in the space below the question.

2. Do not cut and paste from the slides.
3. Do not cut and paste from the internet or any other source.
4. Penalties will apply.
5. This is not a group assignment – you should work alone.
6. BEC 323/E – Answer Question 1 AND Question 2
7. BEC 325/E – Answer Questions 1, Question 2 AND Question 3
 QUESTION 1
[10 Marks]

Table 1 presents elements needed by an organisation concerning aspects related to

sustainability and competitive advantage:
Company or brand image Employee satisfaction , Effective risk management
morale or retention
Cost savings Product, service or Enhanced stakeholder relations
market innovation
Competitive advantage New sources of revenue
or cash flow

Pick the most relevant four items from table 1 to the ABSA case study and propose how
ABSA can achieve sustainability and competitive advantage through the identified items.
You answer must be descriptive (no bullet points) showing a balance between theory and
application.

Answer Here: ABSA could achieve sustainability and competitive advantage by

implementing effective cost saving techniques. Credit impairment is inherent with banking
institutions such that if not well managed it drives up operating costs. In this regard, ABSA
could safeguard credit risks by operating under a sound credit granting process so that credits
would be made to deserving clients with a source of repayment which would translate into
reduced credit impairment cost. By so doing, ABSA would be able to cut operating costs,
which translate into sustained earning growth which increases return on investment, thereby
boosting investors' confidence in doing business with the bank. In turn this enables the bank
to secure future funding and at the same time would be able to reinvest the retained earnings
which facilitate growth and thereby ensures the bank's survival into the foreseeable future.

Moreover, enhanced stakeholder relationships could also be a source of sustainability and

competitive advantage for ABSA. ABSA could enhance the relationship with stakeholders by
regularly engaging them which would then allow the bank to anticipate and react to
economic, social, environmental and regulatory changes as they arise. Engaging stakeholders
makes them feel being part of the bank and positions ABSA to be responsible thereby
creating brand equity and loyalty which translate into increased market share. From the
environmental wing of stakeholder relationship, ABSA could improve the relationship by
investing in green energy such as renewable energies which conserve the environment. By so
doing, it allows the bank to escape environmental regulatory related taxes which offer a cost
advantage and result in sustained earnings which could be reinvested and result in growth.
 
ABSA could achieve sustainability and competitive advantage through expanding into new
revenue sources. ABSA could expand its revenue source by diversifying its investment
portfolios. For example investing in retail banking portfolio and corporate investment
portfolio would expand revenue source in the sense that these two portfolios react differently
to changes in the market. This would allow ABSA to sustain revenue growth which translated
into higher earnings and return on investment which boosts investors' confidence to fund the
bank in future. This probably offers a competitive advantage to ABSA in the sense that it
would be able to secure funding and at the same time reinvesting its retained earnings
stemming from new revenue sources which allows internal growth.
 
Lastly, brand image is a potential source of competitive advantage. ABSA could improve its
brand image reputation by digitalizing its banking system through introducing digital
automation such as chatbots and visual engagement which speed up the banking process and
provides real time banking solutions. Since today’s customers are looking for convenience
and instant gratification, this would improve customer experience with the bank which would
prepare them to be loyal and continue doing business with the bank into the future. In this
way, ABSA would improve its brand loyalty which reduces the cost of finding new
customers thereby translating into cost advantage which sustains the future of the bank’s
profitability.

QUESTION 2
 [15 Marks]

You are an advisor to the acting CEO of ABSA. A key area identified as needing attention is
the need to set strategic goals. Using the elements of the balanced scorecard and the
information from the case-study – suggest the key strategic direction goals for ABSA and
against each explain how this can be realised.

Answer Here: In terms of financial perspective, the strategic direction goal for ABSA could
be to increase earnings growth.In order to achieve this, it may be necessary to introduce
practices for credit portfolio management that help banks to manage credit risks within their
risk appetite. Since banks earn most of their income from interest, credit portfolio
management practices would allow ABSA to monitor the cost of their loans by assessing the
risks involved with each loan so that a bank could grant quality credits which reduce credit
impairment costs. By doing this, ABSA would be in a better position to adopt a more risk-
adjusted, and profit-driven lending culture, which in turn could translate to lower credit
impairments, and increasing earnings. 

In the business process perspective, the strategic direction goal for ABSA could be to
increase customer value proposition. This could be achieved by digitizing banking. As
today’s customers are looking for convenience and instant gratification, digitizing banking by
introducing digital payments tools such as Apple Pay , cashsend and visual customer
engagement would deliver simplified and streamlined remote banking solutions which are
user friendly. In this way, customers would be less likely to have to visit ABSA regularly in
order to do their financial transactions, which would make the brand more convenient and
boost customer loyalty, translating into increased value proposition.

In terms of customer perspectives, the strategic direction goal for ABSA could be delivering
a market leading client solution. As banks transform into digital banking, it has numerous
digital challenges inherent to it. Therefore, ABSA is encouraged to focus on client-centered
initiatives in order to deliver market-leading client solutions. These initiatives might include
investing in visual customer engagement intelligence, which provides real-time banking
solutions, and in chatbot intelligence, which provides 24/7 customer support. By doing so,
ABSA will be able to improve the experience of their customers and provide reassurance to
build customer trust which will translate into ABSA offering market-leading client solutions.
In terms of learning and growth perspectives, the strategic direction goal for ABSA could be
strengthening remote banking capabilities. In order to realize this goal, the initiative could be
to engage in strategic alliances with digitally innovative tech-based companies. This would
allow pooling of technical expertise through which ABSA could leverage its innovative
resources to rapidly adapt to remote banking capabilities. By doing so, ABSA can deliver
remote banking capabilities across its operational areas.

EXTRA QUESTION ONLY FOR BEC 325/E

QUESTION 3
An organisation needs to ensure that its strategies are aligned with the internal and external
environment. You are an advisor to CEO Jason Quinn at ABSA. The CEO needs to
understand if there are any risks or benefits associated with ABSA’s strategies? (Hint:
Strategic fit)
[15 Marks]

Answer Here: It helped ABSA to leverage its available resources to drive growth initiatives.
With its strategy ABSA was able to leverage physical and financial resources to capture the
growth opportunity through alternative diversification into renewable energy with the
potential to offer a unique mix of long-term, inflation-linked returns. Thus enabling ABSA’s
corporate resources to be employed to maximum advantage.

Furthermore, it provided ABSA with the opportunity to make use of its innovative resources
to adapt to changing market conditions imposed by the pandemic. Innovative resources such
as Cashsend allowed ABSA to break into the digital strides that later translated into
accelerated C2C transactions. As a result, ABSA is able to leverage its own resources and
capabilities to become more competitive than its competitors.
Additionally, it enabled ABSA to respond in a timely manner to customer needs during a
crisis by taking the appropriate managerial actions. In the midst of the crisis, ABSA's
management team refreshed its strategy as a result of the high degree of strategy consistency.
In this way, ABSA was able to provide support to customers during the crisis and produce a
resilient financial performance during a very challenging time.

This allowed ABSA to deploy innovative resources to respond quickly to online fraud, which
is a threat to digital banking. Therefore, ABSA was able to launch a digital fraud warranty to
counteract online fraud, reducing customer hesitancy in using digital transactions. In doing
so, it was able to use its innovative resources to increase digital banking customer base and
improve customer experience, while ensuring customer security.

As a result, ABSA was able to diversify its investment portfolio into renewable energy. This
spreads the risks around the renewable energy sectors, which makes ABSA less dependent on
one investment portfolio. It would help sustain revenue growth due to the fact that portfolios
in different industries react differently to market changes. Thus, enabling ABSA to capitalize
on the opportunity which drives towards growth. In fact, this illustrates the benefits of high
levels of consistency between a ABSA’s strategy and its internal and external environments.

However, ABSA had a risk associated with its strategies in that it withheld interim dividends,
while other banks had already declared dividends. It is possible that this will disappoint
investors who had been expecting a final dividend payout after the bank withheld an interim
dividend. Thus it reduces the desire of those investors to continue doing business with ABSA
in the future.