Marketing Environmental Analysis: A

study on Commercial Bank of Ethiopia

 BRIEF HISTORY OF CBE
• The Commercial Bank of Ethiopia (CBE) was legally
established as a Share Company in 1963 to take over
the commercial banking activities of the State Bank
of Ethiopia.
• The bank has about 9170 employees who works in
the headquarter & branch offices. CBE opened its
620th branch in South Gonder zone on January 15,
2013
• The branches are positioned in the main cities and
regional towns.
 Organizational Chart
of CBE
President

VP- Credit VP-Trade VP-Credit Appraisal VP- HRM VP- IS

Management Services and Portfolio
Management

VP- Customer VP- Finance VP- Facilities Chief - Business Chief Risk and
Account Transaction Management Development Officer Compliance
Service (CATS) Management Officer

Chief Internal Auditor Chief Legal and Loan Director Strategy

Recovery Management
 “Vision, Mission and values
of CBE”

• To become a world class commercial bank by

VISION the year 2025

• Committed to best realize stake holder’s needs

through enhanced financial intermediation
globally & supporting national development
priorities by deploying highly motivated skilled
MISSION & disciplined employees as well as state of the
art technology.
• Strongly believe that winning the public
confidence is the basis of our success.
 “Vision, Mission and values
of CBE”

Corporate Citizenship
– Our role in national development endeavor & step-up for
commitment.
– Abide by the law of Ethiopia & other countries we do business
with.
– Care about society's welfare and the environment.
Customer Satisfaction
– Strive to excel in our business and satisfy our customers.
Quality Service
– Committed to offer quality service to our customers
– aspire to be branded with quality in the minds of our customers
& the general public.
 “Vision, Mission and values
of CBE”
Innovation
– Encourage new ideas that can improve customers experience & the bank's
performance.
Teamwork
– Recognize the importance of teamwork for our success.
– Respect diversity of viewpoints.
Integrity
– Committed to the highest ideas of honor & integrity.
Employees
– Recognizing our employees as valuable organizational resources.
Public Confidence
– Sustainability of our business depends on our ability to maintain & build up
the public's confidence.
 1. Company Analysis
A. Financial picture
As at 30th June (in million Birr) 2011 2010 Percentage
Change
As at 30th June (in millions of birr) 2011 2012 Percentage
Change
Total Income 6,994.20 4,494.0 55.6
Interest Income 4,081.50 2,742.8 48.8
Non- Interest Income 2,912.70 1,751.4 66.3
Total Expense 2,756.10 1,686.10 63.5
Interest Expense 1,117.20 744.1 50.1
Non- Interest Expense 1,638.90 942 74.0
Profit Before Tax 4,238.10 2,808.10 50.9
Net profit for the Year 2,862.90 1,968.30 45.5
Total Assets 114,265.10 74,187 54.0
Outstanding Loans & Advance (incl. Bonds) 74,615.50 50,849.90 46.7
Liabilities 108,003.60 68,632 57.4
Total Deposits 85,159.90 54,678 55.7
Capital & Reserve 8,261.50 5,538.70 13.2
Number of Branches 380 220 72.7
 2012 2011 2010
Gross Profit 7.9 billion birr 4.2 billion birr 2.8 billion birr

Revenue 11.5 billion birr 6.9 billion birr 4.5 billion birr

Total Deposits of the 122 billion birr 85.2 billion birr 54.7 billion birr
Bank
Loans Disbursed 70 billion birr

Loans Collected back 20.5 billion birr

Non-Performing Loan 0.7 percent

(NPL)
Total Assets 155 billion birr 114.3 billion birr 74.2 billion birr

Capital and Reserve 7.5 billion birr 6.3 billion birr 5.5 billion birr

Staffs 12,782 9,170  

ATM machines 58 58  

Account Holders 3.9 million 2 million  

 B. Key Strengths
CBE Distinctive Competences

Heritage/
Size of the
company Reputation
built

Brand image & Location &

Recognition convenience
 Distinctive Competences
Can the
company’s • Heritage, reputation & brand image
competitive cannot be replicated by competitors.
advantage be • Location & convenience can be
easily replicated replicated by banks in the market, if
by the they have the required available
capital.
competitors?

Does its • Distinctive competence enables a

competitive company to deliver standout value to
customers in the form of lower costs &
advantage offer prices or better product performance
value to the or service, then distinctive competence
customer? has led to a competitive advantage.
  
C. Key Weakness

Poor technological
Service Failures and Low market research
innovation and
delay activities
differentiation

Bureaucratic nature
Employee turnover
to get a loan
 C. Key Weakness
How can the • Competitors can try to adopt service
competitors differentiation strategies &
mechanisms by investing in the sector
exploit the whereby they can adopt new service
company’s key offerings that can be well suited to the
weaknesses? market than that offered by CBE.

• Invest on technology & new marketing

ideas.
What action • Market assessment & quality
would you take to improvement
eliminate the key • Adoption of service recovery programs
weaknesses? • Reduce employee turnover & retain
employee
 2. Industry Analysis
A. Key Opportunities
Opportunities in banking sector

• 2011, Ethiopia GDP growth was 11 % higher than 2010 10.4%

• Real per capita GDP Birr 1933($238) in real terms with
Economy annual average growth rate of 8.3 percent in the last 7 years.
growth • positive growth of the economy can be an opportunity for
growth for the bank sector in Ethiopia.
• Technology helps in introducing innovative products
Focus on according to the demand of consumers.
Technolo • It can be used to lower down the cost of transaction &
gy improve the quality of products.

• The opportunity to work with regional banks that are better

Globali equipped & prepared, the changing need of customers is
coming due to globalization effect. This aspects resulting from
zation globalization presents opportunities for the bank industry in
Ethiopia.
 B. Key Threats
Threats in banking Sector
• Total number of banks operating in
the country 19.
• Competitors are coming with new
business strategy & service offerings
in the banking sector in order to
1.Competitiv attract customers with a better service
e rivalries & customer handling.
and actions • E.g. Zemen bank has entered the
market with an innovative business
idea by providing differentiated
service from the current services
offered in the market by commercial
bank of Ethiopia.
 B. Key Threats
Threats in banking Sector
2.Threats
• The main financial institutions
of in Ethiopia are banks, insurance
substitute companies & microfinance
s from institutions.
• June 2011, microfinance
micro institutions mobilized Birr 3.8
finances billion deposits, their credit
and other outstanding & total asset
increased Birr 7.0 billion & Birr
institution 10.2 billion, respectively.
s
 B. Key Threats
Threats in banking Sector

• The national bank of Ethiopia has been

maintaining Restrictions on new entry to
banking industry:
• Minimum capital requirement to apply
Birr 500 million.
• Foreign nationals or organizations fully or
partially owned by foreign nationals may
not be allowed to open banks or branch
offices or subsidiaries of foreign banks in
Ethiopia or acquire the shares of
Ethiopian banks.
• No person, other than the Federal
Government of Ethiopia, may hold more
than 5% of a bank’s total shares.
 Competitors Analysis
A. Identify the top competitors’ Competitive Advantage

Criteria used to select • Amount of capital it holds,

top competitors for • Number of branches the bank has
CBE • Number of employee retained by the bank

• Awash International Bank, Dashen Bank &

Wegagen bank are deemed the top competitors.
The Competitors • Zemen Bank by rendering technological driven
service became a threat to the industry at large.

• Technology
Distinctive competency • Electronic payment card service
of these top • Mobile banking service
competitors cited • Wide area network
• Door to door services
 Competitors Analysis
A. Identify the top competitors’ Competitive Advantage

89 branches 86 branches 64 branches

2724 employees 2826 employees 2,003 employees
Birr 721 million Birr 967 million Birr 779.3 mill paid
paid up capital paid up capital up capital
85 ATM machines 27 ATM machines
 Competitors Analysis
A. Identify the top competitors’
Competitive Advantage
1. How can the • The competing banks have kept widening their service
competitor use its outreach using their networked branches, forex
distinctive Bureaus, ATM, adopting different payment card system
& use point of sale terminals (POS) to take advantage
competency to inflict of competitors.
damage on the • When banks are successful in introducing new ways to
company’s market their services they can satisfy buyer interest,
increase product differentiation & lower cost.
competitive position?

• Educational opportunity & training programs for

employees.
2. What defense • Boost its staff retention capacity by creating favorable
measures would you conditions.
take to counteract the • Motivate its employees by offering competitive salary
& benefit packages, to attract and retain employees
treats? capable of providing efficient & effective banking
services to customers.
 Competitors Analysis
A. Identify the top competitors’ Competitive Advantage

2. What defense • Working on improving IT projects which can

measures would you enhance a successful implementation of various
take to counteract the banking applications, like net-banking, mobile
treats? banking or ATM banking, so that it can retain its
A. Technology/ existing customers & win the heart of new
customers.
innovation

• Lack of resource mobilization & limited borrowing

B. Identify the top capacity
competitors’ key • Limited number of branches
• Lack of research and development capabilities
weakness • No service differentiation
• System failure
 Competitors Analysis
A. Identify the top competitors’ Competitive Advantage

• Lack of resource mobilization limits a Banks’

borrowing capacity, customers needing large
amount of money have to use other banks.
• Top competing banks are pioneers in banking
technology, despite this they exhibited continuous
system failures, which contributes to dissatisfaction
of customers.
• Limited number of branches, limit coverage in the
country. This hinders the growth of the
competitors market share & diminishes the image
of the banks.

2. What actions would

you take to exploit the • mobilizing its resources & widening its coverage, so
that, it can snatch the position of the top
competitors’ competing banks.
weakness?
 Analysis on other external factors
Five Key opportunities

• Currently the proportion the banks facilities & total

population is 134,670, which is below the industry
average. This creates a huge opportunity for CBE, the
bank has great potential to reach those remaining
customers.
1. The Customer • The main customers of CBE are government
institutions. These institutions have huge capital to
deposit & potential to borrow in billions. They pay their
employee salary through CBE & this boosts deposit
level & number of customers.

• Ethiopia is recording a high level of economic

development. The service sector contributed 57.7% to
GDP , 30.8 & 13.3 % were agriculture & industry,
respectively.
2. The Economy • Ethiopia doesn’t allow direct investment on financial
development sector but globalization will force the country to
consider the opportunity it can provide like technology
& knowledge transfer.
• The above mentioned creates opportunities for the
banking sector.
 Analysis on other external factors
Five Key opportunities

• The banking industry through the introduction of

IT related products; internet banking, electronic
payments, security investments, information
3. Information exchanges can provide more diverse services to
Technology customers with less manpower.
(IT) • IT can bring about equivalent contribution to
profits & improving a banks performance. IT can
reduce operational cost & facilitate among
customers within the same network.

• The regulation developed by National bank of

Ethiopia favors CBE, the directive where by private
banks are forced to buy 27% bond from
Development Bank of Ethiopia(DBE) on loans &
4. Government advances. This regulation massively erodes the
Regulation liquidity position of private banks. CBE & DBE are
exempt from this requirement issued by National
Bank. This creates an opportunity for CBE to
provide loan for customers & gain competitive
advantage over its competitors.
 Analysis on other external factors
Five Key opportunities

• The banking sector growth rate is very attractive

which is 23%, creating a great opportunity for CBE
since it is the largest commercial bank of Ethiopia.
5. The banking sector
growth rate • It can exploit this opportunity through its huge
capital and the reputation built in the mind of
consumer, as being reliable & trustworthy from
other banks.
 Analysis on other external factors
Five Key Threats

• The new urban land lease regulation has shocked the

1. The new urban land banking sector after introducing a provision which bans
lease regulation them from the benefit of location value for property
held as collateral.

• CBE introduced ATM based payment system but lagged

2. Information behind private commercial banks.
• Dashen Bank worked aggressively & has installed ATMs
Technology in its area branches, university compounds, shopping
(IT) malls, restaurants & hotels & maintained its leadership
by introducing & expanding e-banking in Ethiopia..
• Money loses purchasing power during inflationary
periods & affects time value of money.
• Lenders know inflation will erode the value of their
money over the term of the loan. So they increase the
3. Inflation rates interest rate to compensate for the loss. Long-term
loans made at the real rate of interest without an
inflation premium would have actually produced
negative returns due to the declining purchasing power
 Analysis on other external factors
Five Key Threats

• In the traditional economic model, competition

4. The degree of among rival firms drives profits to zero.
rivalry between • Banks strive for a competitive advantage over
existing competitors their rivals. These differences give some firms a
competitive advantage & others a disadvantage.

• The main financial institutions operating in

Ethiopia are banks, insurance companies &
microfinance institutions. At the end of June
2011, microfinance institutions have been able to
5. Threats of mobilize Birr 3.8 billion deposits while their credit
substitutes from micro outstanding and total asset increased to Birr 7.0
finances and other billion and Birr 10.2 billion, respectively.
institutions • The micro finance institutions are accessible to
any town or rural areas at an arm’s length. Most
of the time they do not require infrastructure to
 Identify the major problems
/Strategic issues

Globalization and Technological

Deregulation developments

Growth & Service quality

expansion improvement
 Identify the major problems/Strategic issues
Business Strength CBE 1
Against Awash Against Dashen
Success Factors Weight Rating ** Score Rating** Score

Market Share 0.10 4.5 0.45 5 0.5

Breadths of service line 0.07 4 0.28 3 0.21
Number of Branch 0.11 5 0.55 5 0.55
Price competitiveness 0.04 2 0.08 2 0.08
Advertising activities 0.05 3.5 0.175 4 0.2
Location convenience 0.09 5 0.45 5 0.45
Service providing capacity 0.10 5 0.5 5 0.5
Relative service quality 0.08 3 0.24 3 0.24
R & D activities 0.06 2 0.12 2 0.12
Ability of top management 0.05 2 0.1 2 0.1
Customer service 0.12 2 0.24 1.5 0.18
Experience curve 0.04 5 0.2 5 0.2
Profitability ratio 0.09 4 0.36 3.5 0.32
TOTAL 1 3.75 3.65
 Conclusion
• The Market share: almost a monopoly in
CBE’s position Commercial Banking.
• Number of Branches: Limited
previously • ATM Machines: None
• Technology exploitation: None or Few

• The Market share: more than 65% in Ethiopia

• Number of Branches: 614
CBE’s position now • ATM Machines: 58
• Technology exploitation: below its competitors

• The Market share: more than 20% in East Africa

CBE’s position in the • Number of Branches: 210% of the existing (1105
branches)
future • ATM Machines: More than 2500
• Technology exploitation: leader in using technology
Thank You