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This report analyses the largest bank of Pakistan, MCB. MCB was founded over 50 years ago in Pakistan, it has got a network of over 1026 branches, 750 are automated branches and 300 MCB ATMS in 41 cities of Pakistan. MCB has a network of over 12 banks on the MNET ATM switch. The aim of MCB is to rationalize expenses, realignment of back and processing to increase productivity, enhancement of customer services, increase efficiency and control. MCB is the only bank of Pakistan which introduced the innovative concept of centralizing Trade Services in Pakistan by providing centralized foreign trade services to its branches with view to improve efficiency, expertise and reduce delivery cost. MCB is the only bank who has been able to receive The Euro Money Award for the fourth time in the last 5 years. Since 2001 to 2005 MCB has won the best bank in Pakistan and in 2000 the best domestic bank in Pakistan awards. All though MCB also has distinction in winning The Asia money award in 2004 and 2005. It has been 10 years that MCB has been privatized. MCB core businesses are corporate, commercial and consumer banking. In year 2005 MCB was the only bank of Pakistan to become the preferred provider of quality financial services. Financial services in the country with profitability and responsibility. In the year 2005 MCB was the best employers in Pakistan to employee graduates.
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According to the results, MCB witnessed resilient operating performance in the first quarter of 2009 with healthy growth in balance sheet and key profitability indicators. Total assets of the bank swelled to Rs 456b with an increase of 3pc over Rs 444b as at December 2008 and increased by 15pc over Rs. 397b in March 2008. Deposits showed an increase of Rs. 8b over December 2008 and closed at Rs 338b i.e. a growth of 2pc over Dec 2008.
In 2007, MCB reported a profit after tax of PKR16.4 billion (US$270 million) and generated a return on average equity of 38% and a net interest margin of 8.08%. The Bank’s asset quality is strong with a gross NPL ratio of 4.7% and provision coverage of 100%.
At the end of year 2006 MCB Bank announced it Net Income Rs. 12,541M (US$ 206M) which was an increase of 36.1% over 2005. Net Interest Income was Rs. 21276M(US$ 349M) for the year 2006, which was a healthy increase of 42% over the same period last year, with the pre provision operating profit at Rs.20, 113M( US$ 330M), a 39% increase over last year.
However, the year 2007-08 has been very tough years for Pakistan’s economy. It is due to different factors such as political and economic events took place within Pakistan. The above explained events such as disturbed political conditions, an unstable law and order situation; supply shocks; soaring oil, food and other commodity; prices; softening of external demand; and turmoil in the international financial market.
MCB Bank has earned a reputation in the market for extending quality services to the market vis-à-vis its competitors. It has earned a strong Brand name in banking in a very short span of time. As customer confidence in MCB escort it towards achieving their goals and objectives. It has the premier number of linked branches in the country. The bank operates through a network of 1026 BRANCHES and over 300 ATMs across Pakistan, hence enabling them to serve customer in superior way. MCB Bank has all the products under its belt, which help it to extend the relationship with existing customer. MCB Bank has umbrella of products to offer their customers, if once customer has relationship with the bank. Some Products, which MCB Banks offering are Retail Banking, Business Banking, Merchant Establishment Services (EDC Machine), Personal loans & Car loans, Demit Services with E-Broking, Mutual Fund (MCB Banks the Distributor of all Mutual Fund), Insurance and Housing Loans. MCB is having an edge over other banks in case of Salary Accounts. Most of the companies are having their Salary Account with MCB even if their Current Account is with any other Bank. This is mainly because of the huge network of ATMs and branches of MCB. MCB is only Bank which is having its working hours from 8 to 8 for some branches which is one of the major strength of MCB Bank with respect to nationwide business Industry. MCB Banks known for its aggressive marketing of its products. Recent Endorsement of its product by famous celebrities and superior advertisement to attract more customers. From its inception, MCB Bank has adopted a policy of selecting internationally proven and specialized Packaged Systems for its technology. MCB bank’s technology platform has been acknowledged globally as one of the best in terms of robustness, flexibility and cost efficiency. MCB Banks in a position to leverage this platform to further build cost and service advantage. MCB has a strong management team and have a very impressive cash flow with an excellent financial performance. As MCB was awarded 1st Asian bank providing good return on saving and current account to its customers.
The bank targets only the top grade of clients and does not cater to the needs of small customers. Due to this reason the bank may sometimes loose good clients. As well they have to concentrate on their online banking to attract more customers as their online banking service has a weak image in front of customers. MCB Bank has a defensive approach in lending. Mainly to IT & ITES companies Bank do not provide loan as these companies are not having collaterals so bank hesitate in giving loans to them. Because of this policy companies prefer nationalized banks and MCB Banking turn sometimes loose potential customers. MCB Banks having little presence Outside Pakistan, because of which companies prefer MNC Bank, mainly united bank limited (UBL). So if MCB Bank tries to emerge outside Pakistan then it has a huge potential of customers. MCB aggressive marketing has rapidly increasing its customer base. They are not however, increasing the number of employees accordingly. This is leading to corrosion of the standard of customer service.
MCB can improve insurance services to compete in market. MCB insurance premium is high and return on claim is less in percentage. As other insurance companies are convincing their customers to buy insurance policies. It has been noticed that MCB has not been recruiting properly and their business need experts in various tax policies and service of bank. MCB has associated itself with various social causes such as helping poor people for food and medical treatment on low charges. MCB can improve their customer service as there is always a room to add innovative techniques and polices which could lead to additional proficiency of the institution. MCB recently introduces Mobile banking service, but most of the customers are unaware of the service and MCB could work on adverting it to give benefits of it to their clients.
MCB is having sturdy competition in market with its competitors as some of them having their branches nationwide and internationally as well. MCB is ready to provide all kind of services to their clients online but they have to make it confidential that the data is being protected and secure and cannot be leaked to third party. Branch managers are allowed to take decisions on their own in regard to their branch but decisions made by individuals will be different and a single wrong decision could escort towards intense losses to the institution. MCB has been facing trouble in providing good service to uneducated customers to use electronic and computerized machines.
The analysis of MCB will take in to account the general environment analysis, the competitor’s analysis by comparing the products offered by the competitive banks and the departmental analysis.
The general environment of takes in to account the external factors like politics, economy of Pakistan, socio-cultural factors and technology. Now we will analyze these factors one by one and check how these affect the working of MCB:
The current situation of the government in Pakistan is directly affecting the policies of banks. However, MCB tries hard to keep its business away from the politics but it is not an easy task. MCB has no accounts of political leaders or parties. However, its Customer Service Department faces peer pressure from such political parties.
As MCB is trapped in dual sanctions from the State Bank of Pakistan (SBP) and from the European Union so the changing political environment is not so beneficial for the bank to operate freely. The changing policies of the government, affects SBP which in return affects the MCB rules and policies.
The government of Pakistan has privatized most of the banks. The number of government owned banks have declined constantly, so these changes directly affect MCB.
The economy of any country has deep impact on any financial organization. Economic indicators include Gross Domestic Product (GDP), inflation, balance of payment, debt of the government. These below graphs will explain how economic conditions of Pakistan are adversely affecting the banking system of Pakistan.
The pitiable economy of Pakistan and instable government is adversely affecting MCB and its different departments; recently MCB has redundant many of its employees. The economy of our Pakistan is very poor. Due to poor economy businesses are showing low profits and Pakistan stock market is in great danger. Pakistan’s foreign debts are rising day by day, so such a situation is a huge challenge for MCB to survive. Due to financial crisis in Pakistan the management of MCB has to face stressful situations and also working environment. At present the MCB is not extending loans but recovering the existing ones.
MCB has been influenced by the socio-cultural factors. At present most of the European countries are keeping their eyes on Pakistan as being the terrorist country, so people of Pakistan are emotionally getting affected by it. Most of the foreign investments have been stopped in Pakistan. Pakistani people are traditionalists who do not like the modern banking environment of MCB. Some of the customers do not use ATMs they still prefer cash counters, so these kinds of socio-cultural factors affect the banking environment and its operations.
Technology has a deep influence on different kinds of organizations whether banks or any kind social welfare organizations. In MCB technology has great effect on the working environment. Mostly all banks use computers none of the banks keep data manually so the bank has to be continuously in touch with the modern ways of task performance. MCB is always ahead to introduce new computer systems for keeping its staff up to date. The intranet facility is playing an important role in enhancing the knowledge of staff. Due to technology that bank staff keeps in touch with the customers through e – mail; ATMs and online banking is only possible due to technology. In this way technology is playing its key role in and is helping management to further improve its functions.
Overall we can say that MCB is influenced by the economic position of Pakistan, which has stopped it from extending loans to the customers. After that the policies of MCB are also affecting its performance and free functioning. Social and technological issues are of secondary importance but they also cannot be neglected. MCB is focusing positively regarding technological issues but it should also keep its eye on the social cultural factors also.
For further analysis of MCB environment, Porters Five Forces Analysis is also applied on the bank. This analysis takes in to consideration the following factors:
Substitution of one product with another one increases the competition within an industry. However, the perfect substitutes of banks are not available in the market at present, but people still have choices of saving or investing their money. The people can save their money in their own houses or they can deposit their money in the National Saving Centers (Banking Intermediaries) which give protection to their assets. Aside from saving one can invest money in stock market in form of shares / bonds or in real estate. These kinds of substitutes increase the competition in the banking sector.
There is tough competition between different banks. There is a huge variety of public and private banks already exist in the market, offering products on competitive prices. If we look at banking products (loans, savings and current accounts) then Alfalah Bank, Meezan Bank, Habib Bank and many others are offering wide range of products in this sector. The tough competition between these banks increases the challenge which the MCB have to face. The competition among various banks increases the switching of the customers form one bank’s product to the other bank.
Threat of new entrants
The banking sector of any country has always potential of growth and competition. Mostly foreign banks step in the developing countries for expanding their branches, not only this mergers between foreign and local banks take place at large scale but Pakistan’s present economic condition and government instability has arose the feelings of awe and terror among most of the foreign banks to enter in the market. In future due to uncertainty and security problems in Pakistan investors will not be willing to invest here. Due to overall financial problems in the whole world new banks will not be entering in to the banking industry.
Power of buyer
Bargaining power of buyer is low where the products substitutes are not available and customers are large in number. In case of banks there are lots of other banks and banking intermediaries, having wide range of products, so power of buyer in banking sector is high. The bank cannot force any customer to buy the desired product because this directly affects its reputation. However, the bank can convince its customers by giving them special discount or rewards. If we look at MCB we will find that the competitors are also offering products due to which customer feel in power by saying that they can go to some other bank in case of dissatisfaction.
Bargaining power of suppliers
The lending power of bank is enhanced by its depositors as they are suppliers of the bank. It allows bank to involve in other business activities to invest such as personal and business loans. The suppliers then get interest on their amount as profit earned by the bank. Banks need to concentrate on their policies as bargaining power of suppliers is very high and they move towards highest interest rates.
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According to Porters Five Forces analysis we can say that MCB has no fear of new entrants due to the poor economic position of Pakistan. However, it should keep its eyes open regarding mergers of various banks. There are two big threats; firstly from the buyers who can go to the other banks and secondly form the substitutes like investment in stock market, so MCB should carefully examine its task environment.
The Ecological Responsibilities of Muslim Commercial Bank (MCB)
- How ecological factors affecting decision making and policy at MCB
- How effective the action taken towards ecological environment been so far (reducing waste, reducing carbon emission, reducing energy bills, reducing airtravel, investing in sustainable project) how these have gone up and have benefited the company.
- What other areas of improvement that you think they should be doing to improve response of ecological factors…think about what other banks internationally have done and suggest something to MCB.
The public responsibilities of corporations, according to Harvard management ( year ), are to grow and prosper thereby providing customer satisfaction, employment, taxes, and contributions to the economy–and to control their hazards. According to Milton Friedman, the only social responsibility of a corporation is to make money, by striving after profit as an efficient agent of production, although he admits that the corporation should conform to the rules and norms of society.
Corporate responsibility is more composite than a simple, linear cost/benefit analysis. Using the metaphor of corporation as organism, it is possible to outline a new set of responsibilities for corporations and a series of behaviors that human individuals and communities can practice to integrate corporate behavior into the communities. With an ecological model, the ecological responsibilities of corporations, to themselves, to nature, and to human communities, are described.
At MCB profit making is an obligatory part of business, but not the sole reason for business. There for MCB ensures that it serves public goods as well as private interests. This is analogous to Ruth Benedict’s original anthropological meaning of synergy as applied to individuals. In secure, nonaggressive societies, an individual serves his own advantage as well as that of the group with the same act. Institution ensures mutual advantage; the acts are mutually reinforcing. Economic recession may bring a re-examination of values, not only by individuals who have less material wealth, but by corporations that have emphasized growth. The public may insist that corporations consider social performance as well as strictly economic performance. The single economic purpose may only be the focus in a social environment.MCB is highly concerned about economic actions, such as where to build, who to relocate, hire, or dismiss, may be subjected to greater public scrutiny. Business cannot assert a primary self-interest at a cost to the public or environment. Corporations need to keep track of their environmental impacts. Many of the problems that corporations face are connected to the problems of the environment and society.
Corporations need to work cooperatively to make sure the costs and benefits are extended equally throughout the system. They could start by sponsoring the rational use of rare resources through taxation, and by influencing the government to determine priorities for wilderness areas or special landscapes; beautiful, fragile, unique, or endangered ecosystems and species must be protected at the expense of commercial activity.
With regards to ecological factors Muslim Commercial Bank have had considerable focus on the ecological diversities in the market some of the existing factors in addition to the future polices and practice have been discussed as under;
The bank created a department with ecological authority to envision long-range plans and impacts. They have realized that they need to react more quickly to monitor their ecological and social environments for the emerging patterns that determine their future. They need to anticipate and participate in the social and natural framework. A new department, with global, anticipatory functions could provide direction and continuity. Such a department could be justified in the same manner as military forces. Military expenditure is a non-productive cost; its benefits are general and long-range, that is, it must discourage war in the next decade as well as in this one. Its scope of advice would include educational services as well as advertising, capital acquisitions as well as new products, and plant engineering as well as security.
Plan all foreseeable consequences of a product. Advanced technology permits the power to change to overwhelm the ability to foresee the consequences of change. Avoiding the opposite actions of intentions (recognized by the Greeks as the operation of tragedy) is extremely difficult. Good intentions are not enough: Labor-saving devices may contribute to unemployment and social problems; foreign aid may result in starvation for more millions as local agriculture cannot compete; and the environmental management of some species for sustainable yield causes the population to collapse.
The bank is determined to optimum corporate size and maintains it. As they perceive that after a point, growth results in inefficiency and non adaptability. Development, on the other hand, can continue for hundreds or thousands of years. A smaller size could mean more flexibility and faster response to local conditions. Recognize material limits. The global economy is probably too large already to be supported by the natural systems of the planet. Find an upper limit to the economy of scale. Accept limits to growth based on materials and on non-renewable or dangerous sources of energy. This should not limit development based on advancing technology and knowledge.
Another factor which the bank could focus on is to adjust corporate strategies to changing values. Smaller social and cultural groups have different and diverging values, so corporations are going to have to adjust to a diversity of values instead of to a monolithic standard. The structure of power is disintegrating, with information replacing things as wealth. The knowledge-driven economy is more decentralized and customized. This moves us towards customization of production and away from mass production. Change the shape of the corporation to a framework coordinating separate divisions sharing information. Each division could react much more quickly to market conditions.
MCB works to delineate a new information model of production in which the stages of a process (capital, materials, workers, design, advertising, selling) are simultaneous and synthesized. The conception of the product is extended from design (even customer contributions and design of working conditions) to aftercare, including ecologically safe retirement and disposal. The notions of efficiency and productivity are changing. Innovation and computer technology shortens product life cycles. Production diversity is increasing. Convert the information model to an understanding model. Information is just data without appropriate structure. Provide a structure and material base for understanding through communication, education, and training. Furthermore MCB promotes the principle of least effort, allowing the company to consume less, recycle, use longer, and avoid waste. Corporations could develop renewable energy sources. Conduct a complete series of audits, including an energy audit for every building. Reduce office costs through energy conservation planning. Use renewable energy sources. Energy and materials can be used and reused, flowing through the system. Cars are ecologically unacceptable forms of transport, yet companies intrinsically recognize them with large, free parking lots. Discourage commuting; encourage telecommuting or even alternate forms of transportation (bicycling, buses, and trains). Minimize wastes, for instance, by using permanent packaging (milk bottles and cola bottles can be reused forty or more times). Conduct a complete series of audits, including an environmental audit to determine negative impacts, from acid wastes or product disposal, and a problem audit, to include inherited problems. Produce a comprehensive annual impact statement.
MCB ensures to maintain the health of natural communities, because environmental health is the basis for community health, and community health is the basis for economic health and worker health. The quality of life depends on the quality of the environment. If the environment is degraded to raise the quality of life, the effect is very limited and can never be self-sustaining. Fitting economic costs and needs to the limits of ecosystems and monitoring the economic process would reduce wastes and pressures on natural processes. The coupling of agricultural productivity to a solar budget, and the conscious restoration of degraded systems, would contribute to the health of ecosystems. The financial institution believes that sufficient wilderness would allow the self-maintenance of global cycles. With the increase in security, wealth, and self-esteem, human populations could be dependent on ecosystem productivities and still be diverse and unique. What made us human was that, in addition to human social groups, we lived in communities with other species. We learned spontaneously from other animals and enjoyed their company. We are poor and malcontent without them.
The management of the bank tends to be accountable for ecological impacts. They believe that the bank should be held more accountable for their technological impact. New technology is more closely regulated. They comprehend this by favoring open appraisal of new technologies. By studying the potential consequences, physical, social, and ecological, as far as possible into the future, of its innovations in information technology, they can gain credibility. Otherwise, it can wait and be forced by public and governmental pressure. Integrate loops and material flows; internalize cycles.
The bank tends to avoid interference with natural processes. Technological processes have been brought into balance with the cycles of the earth. They must not damage or degrade natural cycles. Avoid unnecessary harm. It may be appropriate to use trees or to compete with black bears for tree use, but it is never wise to destroy the ecosystem of trees and bears. Laws on pollution and noxious wastes have been notoriously lax and sometimes wrong-headed. Minimal acceptable tolerances are legal, yet people often prefer zero amounts of many substances. Minimal compliance with them is virtuous for many companies, but it would be better to lead to higher standards. Work toward setting zero-level goals. Do not dump exotic or dangerous wastes. Do not discharge quantities of “safe” wastes.
The Corporation maintains building and plants in thousands of locations, each requiring support. Convert to ecological grounds practices. Forgo economic development of key ecosystems, which should not be available for human use. Consider adjusting the economic pace to natural rates; do not cut trees, for instance, faster than they grow. Consider minimizing use of ecosystem productivity to the net ecosystem productivity, rather than the gross productivity, especially as regards fisheries.
Another influential feature of MCB is to promote ecological design; the institution is becoming a more responsible member of the community. Thus it would encourage an ecological approach to systems and processes in the whole environment, where the product, with its plant, engineers, and advertisers, is a link in a long biomorphic chain stretching from knives to surgical microchip memory implants. Ecological design has important characteristics for responsible technology: The products are designed by interdisciplinary teams considering all parameters and consequences; ecological sciences offer creative insights into design through a search for underlying organic principles; the product must be related to the particular environment, the tool is a link between human and environment.
It is hard to protect communities when the way most business is done tends to disrupt community life. Because of its size, power, and intention (often just for profit), the corporation should take higher risks not lower than the surrounding communities. This will ensure the safety of products and wastes. The work place is not just collection of individuals. It is a number of groups. Group interaction can change attitudes. A working community can build mutual responsibility. Show proper behavior; learn community etiquette.
The bank can design the corporate structure and size for the community. Limit unnecessary movement or disruption. Plan the shape, size, and products of the corporation to fit the local community. Encourage self-reliance in communities. Communities can be self-reliant: By producing enough food and shelter; by limiting their population to what can be produced; by using local products and raw materials (soil, minerals, plants); by using general and not specialized machines; by having multipurpose factories; by networking with other communities, and; by doing without things that are not needed, e.g., bombs, food additives, or plastic bottles.
Muslim commercial bank is an ecological corporation and could use corporate buying power to promote acceptable technologies and discourage unacceptable practices. Deal less with nuclear weapons contractors and more with solar energy companies. Deal less with one-shot paper companies and more with recycling paper companies. Boycott paper companies involved in Rainforest destruction or old-growth forest destruction. Avoid banks that invest in anything that brings a high return, from third-world debt to Amazonian destruction and South African discrimination. Favor peace-oriented companies as business partners. And, refuse to participate in work that is socially destructive.
Economic development and social progress are necessary for the welfare of humanity, but must be conducted with environmental knowledge. The goal of economics and politics is to provide suitable and comfortable human habitations and meaningful activities. Human settlements must be planned and constructed within environmental constraints and according to ecological priorities. Work to preserve the structure of the natural and social communities. Corporations can encourage decentralization and restore schools, clinics, and shops to local communities. Offer cooperative control with the community. Change the pattern of ownership to reflect employee and community participation.
The bank is promoting ecological education. Encouraging cultural traditions; refusing to let social and spiritual needs be subverted by economic ends. Helping to lead the young into their adult responsibilities through training and participation, such as with apprenticeship programs. They could also educate people in appropriate ways to achieve wealth and well-being. Teach appreciation of the services rendered by nature through flows and cycling. Point out the unexpectedness of the consequences of even simple corporate interventions and innovations, e.g., positive feedback, biological concentration of poisons, and synergetic effects of simple new chemicals like CFCs. Trace the complex and reciprocal relations of soil, climate, vegetation, and human activity. Emphasize that a fixed set of ecological parameters in an ecosystem cannot be maintained in a sustainable way, because the system is dynamic and changing. Put computers in proper perspective. Children do not need computers to develop the powers of thought, but they do need an ecological curriculum where animals display greater powers of mind than computers or machines. The important technological advantages of a computer, word-processing, database searches, complex connections, and rapid computation, are not really needed before high school, unlike myths, languages, and physical activities.
Encourage people to take responsibility for all of their actions, from reproduction to consumption and politics. The responsibility for the welfare of the citizens belongs in the community, as does education, safety, and the whole infrastructure. Corporate management is responsible for developing programs to set goals, modify structures, and introduce criteria to measure progress. The Board of Directors is responsible, as the architects of responsibility and stewards of the human and material resources; the government is responsible, in its legislative, judicial, and regulatory functions.
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