Enhancing an organisations strategic capability by influencing strategy

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This assignment illustrates the strategy development process for the selected organization and implications that need to be incorporated in the chosen organization in order to enhance the organization strategic capability by influencing the selected strategy in action. In order to execute the given task I have selected a well-known bank in Sri Lanka who does the banking operation over last 40 years. Further, i have given a hypothetical name for this bank as ABC plc due to the limitations in doing this assignment. However, at the end of the study I have given actual name pertaining to the selected organization.

Here, I have given a brief introduction about ABC plc in order to start the assignment and given more details at the appendix pertaining to ABC plc (appendix i). ABC plc can be described as a Sri Lankan commercial bank was born as a result of a merger between two banks and was incorporated in 1970. Further, ABC plc catering to the local market as well as to overseas market with both personal and corporate products and services, it has been able to attract a diversified range of clients ranging from the villager to the sophisticated businessman, from the entrepreneur to the blue-chip company.

The principal activities of the bank continued to be banking and related products in personal banking, corporate banking, treasury operations, international operations, with insurance, stock broking and property development as subsidiary lines of business. Delivery channels include the extensive branch network, ATMs, internet banking, telephone and SMS banking, corporate finance and treasury divisions and overseas exchange houses.

Strategic capability of an organization discusses about how the organization aligns its resources and competencies more productive manner to gain the competitive advantage in the long run of the business. Strategic capability can be described as "is the resources and competencies of an organization needed for it to survive and prosper" (Johnson, et al, 2008 p.95). Further, as explained in the strategic capability definition it is paramount important that organization manage its resources and competencies more effectively and efficiently which results in gaining competitive advantage towards the organization. Moreover, resources that are available in the organization can be categorised in to tangible resources and intangible resources. "Tangible resources are the physical assets of an organization such as plant, people and finance. Intangible resources are non-physical assets such as information, reputation and knowledge. Typically, an organization's can be considered under the following four board categories" (Johnson, et al, 2008 p.95). Furthermore, competencies of an organization can be described as "competencies are the skills and abilities by which resources are deployed effectively through an organization's activities and processes" (Johnson, et al, 2008 p.96).

The necessity of enhancing strategic capability in an organization

In order to cope up with changes taking place in the market it is necessary to align organization resources and competencies more effectively which results in gaining competitive advantage towards the organization. Further, this would help to provide more value added service to its valuable customers by eliminating non-value added activities which enables in reducing cost and non-productive time in the long-run of the business. In doing so, organization could be able to achieve desired objectives within the desired time frame which results in satisfying its stakeholders (annexure vii).

Strategic capability of ABC plc

It is necessary to find-out / capability of ABC plc in order to get a better understanding which could be used in proposing new capabilities that ABC plc needs to be adopted. Further, using a SWOT (strengths, weaknesses, opportunities, threats) analysis, we could determine what is the exiting strategic capability of ABC plc (please refer annexure iii which highlights the SWOT).

Human resource

ABC plc consists with well-established recruitment and selection process and because of this ABC plc comprise with highly skilled team. Further, after recruiting people ABC plc follows a proper mechanism to groom people more effectively. Apart from that, ABC plc provides necessary facilities to their employees such as, necessary trainings including overseas training, better working environment with necessary facilities, motivational and employee appreciation program etc. As a result, employees are giving their fullest contribution / cooperation towards the work more effectively and efficiently.

In a nutshell, ABC plc consists with multi skilled human resource that could be considered as key asset which enables to drive the business successfully. Moreover, labour turnover of the company is less and employees like to be with ABC plc (Collected the information via face to face interview). This highlight ABC plc has clear understanding of their human asset and aligning human asset towards achieving desired objectives of the company.

Well established branch network

ABC plc consists with 186 (annexure ii) branches covering most districts in Sri Lanka which enables to provide better service to its valuable customers. Further, all branches consist with fair amount of employees that helps in providing faster service to its customers. Apart from branch network ABC plc consist with more number of ATM card centres that provides faster service to its customers (Annexure ii).

Sophisticated Information Technology facility

Currently ABC plc uses in-housed built management information system (MIS) for day to day bank related activities. Further, enterprise resource planning (ERP) also incorporated in head-office branch of the ABC plc to offer value added service to its customers. Moreover, investments made on information technology is high and the current systems runs smoothly across all ABC plc branches and all employees are used to all systems available in ABC plc which can be considered as a good sign. "Information Technology (IT) continued to be used at Hatton National Bank to support its business objectives." (HNB annual report 2009, p. 30).

These are three core resources that ABC plc has currently in their strategic capability and by using above mentioned core resources ABC plc was able to sustain in this critical environment. Further, there was a financial crisis in last year and ABC plc was able to handle the situation with the breakeven level without sending employees home (annexure v & vi). "As the effects of the global financial crisis permeated into the Sri Lankan economy, a perceptible sluggishness in the financial services sector was evident throughout the year" (HNB annual report - 2009, p. 22). However, ABC plc did not close down a single branch due the situation that they faced in last year and was able to minimize all costs in many ways.

The purpose of enhancing strategic capability at ABC plc

In today's context Sri Lankan banking industry has become more competitive with the penetration of foreign bankers. Further, customer service has become key success factor of this industry since customers are looking for high quality service, quick response, and latest technology when they do financial transactions. In order to meet customer demands, ABC plc needs to be aligned its resources and competencies more effectively and efficiently to enhance the market share in the long-term business.

In doing so, ABC plc could be able to reach to the zenith in the banking industry by offering value added service to its valuable customers which results in expanding its wings across Sri Lanka. I have below listed few areas that ABC plc needs to be looked at in order to uplift its strategic capability more effectively and efficiently.

Customer service

Customer service plays a vital role in the banking industry and it is the key success factor of this industry. Therefore, satisfying customer needs is paramount important in order to enhance the market share more effectively. In order to reach to the zenith in banking industry ABC plc needs to enhance its customer service to a level where customer satisfies with all transaction that they do with the ABC plc. Further, in today's context customers are looking for quick response and it is a must that ABC plc provides faster and value added service to its customers. However, ABC plc needs to identify customer desires first and based on that bank has to develop their customer service activities and there cannot be a gap between customer desires and services that is being offered to its customers.

Process re-engineering

ABC plc needs conduct a process re-engineering project in order to identify the existing process and they need to map the entire process and see what are the activities that do not add any value to the entire operation. Moreover, based on the process map it is necessary to remove all non-added activities from the process in order to enhance the process efficiency and effectiveness which results in getting more benefit with shorter span of time with the minimum cost.

I would suggest that ABC plc needs to get help of a consultancy group in order to execute process re-engineering by applying various concepts such as total cycle time, lean management and six-sigma methodology. The benefits of doing this kind of a project would be high compared to the amount spend on projects. Moreover, ABC plc use to old mechanism in doing its tasks which consumes more time and resources. Therefore, hiring a third party would be ideal since they can see the entire operation in different angle which would help in enhancing usage of available resources and competencies more effectively and efficiently.

Profitability strategies

Profitability of the ABC plc goes down drastically due to the high / increased competition in the industry and less margins on interest income. Further, ABC plc needs to be looked at new avenues that would help in acquiring other sources of income to uplift the profitability rather than depend merely on interest income. Furthermore, currently interest income creates 90% of the ABC plc income and other income amounts to only 10%. Moreover, ABC plc needs to ensure that they have a mix of 80:20 in coming year and 70:30 in the following year to uplift its profitability. Further, an aggressive campaign on the use of other delivery channels such as internet, SMS, telephone, debit/credit cards, merchant acquisitions, inner and outer foreign transfers are few key areas to be looked at with an appropriate advertising campaign. The new product of insurance which generates substantial income should also be dynamically marketed and advertised in order to enhance the market share of which results in gaining more profit towards ABC plc.

Research and development

Research and development is another sector that ABC plc needs to be looked at in gaining competitive advantage towards the bank. Further, currently ABC plc does not equipped with R&D team and it is necessary to form a R&D team which enable to find-out new ways of executing bank related activities more effectively. Moreover, doing R&D will be ideal to find-out areas that ABC plc lagging against the customer expectation and to come up with new products that customers are looking for in order to exceed customer satisfaction. This would be a genuine tool to identify customer desire perfectly and to develop comprehensive solutions to meet customer desires.

Besides, ABC plc needs to be looked at new avenues to enhance the planning process which would help in accelerating the process efficiently and effectively. Moreover, top-management of the company needs to give more attention towards the market in order to give more value added products to customers which would help in escalating the market share. Furthermore, support of the top management is paramount important in doing the above mentioned changes and they need to give total commitment towards the same. Further, need to set up a new culture in the entire organization which aligns towards the ultimate objective of ABC plc. Finally, I would suggest doing a structural change in the organization which could help in long run of the business.

Evaluate the organisation's strategic planning processes and suggest and justify any improvements.

Existing strategy development process at ABC plc

Strategy can be defined in many ways and I have given few definitions pertaining to strategy. As per my understanding better definition for a strategy could be defined as "better way of achieving desired things". Further, strategy could be defined as "In order for a firm to gain an edge over its competitors, it needs to have a competitive strategy. The "Strategy" concept was first used in the military as a tool to capture the enemies. This has now been extended to organizations. A competitive strategy has been defined as one which creates value and which is not used by its competitors to bring about a competitive advantage to the firm. It is also something that should not be replicable or else the firm would lose its competitive advantage". As explained, it is necessary to have strategies to an organization in order to reach to its maximum by using its core resources more effectively and efficiently within the desired time frame. Therefore, strategy development is one of key activity in an organization which helps in directing entire organization to achieve its ultimate objective.

Strategy development process is a vital process which is being incorporated in the ABC pls year calendar. Further, top management of the ABC plc involves in this process and they decide what are the suitable strategies need to be practised in order to achieve vision of the bank. Further, Strategy development process starts at the strategy session of the bank and Chief Executive Officer starts the session by giving an introduction about past year performance and ends his speech with his thoughts / wish list in terms of expected top-line and bottom-line of the bank in the coming year. After that, all other senior managers / relevant panel owners need to give their plan which helps in achieving the objectives given by the CEO. Finally strategic plan will be laid as per the suggestions / improvements / concerns made by each and every panel owner with respect to the ideas given by CEO.

Why ABC plc needs to change the ways of determining its Strategies?

I have listed below vision, mission and values of the bank which highlights the focus of the bank in executing its tasks in order to meet desired objectives of its stakeholders.


To be the acknowledged leader and chosen partner in providing financial solutions through inspired people


Combining entrepreneurial spirit with empowered people and leading edge technology to constantly exceed stakeholder expectations


Treasure professional & personal integrity at all times

Demonstrate mutual respect in all our interactions

Passionate in everything we do

Committed to being customer centric

Courage to change, challenge and be different

Demonstrate unity in diversity

(Source - HNB web-site)

ABC plc vision it-self says to be the preferred leader in the banking industry and to be the chosen partner in providing financial solutions. In order to achieve the desired vision, bank has decided to empower people and to incorporate high technology to provide more effective and efficient service to its valuable customers which is elaborated in the mission statement.

Nevertheless, it is questionable whether bank has specific strategies to achieve the desired vision. As per my view bank follows a traditional (old way) way in developing its strategies and that process has to be changed immediately in order to survive in this critical situation. Further, there are so many players exists in the market and also economic crisis had in last year created negative impact towards the banking industry in Sri Lanka.

Besides, the competition in the Sri Lankan banking industry is escalating day by day due to increased market access, support provide from the government and less rules / regulations imposed on foreign banks to start the business in Sri Lanka. Therefore, ABC plc needs to build up a solid strategy in order to meet the desired vision within the given time frame. In order to meet the desired objectives ABC plc needs to identify the existing position more effectively and efficiently. Moreover, SWOT would help to strategically identify the present scenario of the ABC plc (Annexure iii).

Additionally, strategy development process plays a vital role and it has to be more effective and efficient to align cope up with the changes in banking industry. However, as I explained the way ABC plc does their strategy development process is not suitable to survive in this competitive environment. Moreover, current strategy development process takes place in ABC plc does not give the attention towards its vision, mission and values and it is necessary to align all strategies as per the listed vision and mission.

Further, in strategy development process, top management of the ABC plc follows the top-bottom system where all decisions taken at the strategy development session will be cascaded down to all branch managers and among all middle management. Moreover, usage of industry data / related information in strategy development process is less and most of the time decision will be taken blindly which results in creating negative impact towards operational activities of the ABC plc.

Besides, this culture needs to be changed and bank has to move towards learning organization "A learning organization is the term given to a company that facilitates the learning of its members and continuously transforms itself. Learning organizations develop as a result of the pressures facing modern organizations and enables them to remain competitive in the business environment. A learning organization has five main features; systems thinking, personal mastery, mental models, shared vision and team learning". As explained learning organization concept would help to transform the culture in ABC plc to a positive manner that enables to achieve desired objectives of its stakeholders.

In doing so, ABC pls would be able to be more competitive in the banking industry, will be equipped to respond to external pressure, build up more customer relationship which enables to enhance the share, all activities will be aligned as per the requirements as well as non-added value activities will be eliminated from the process that enables to provide high-quality service, brand image will be enhanced in every action that ABC pls does daily etc.

Consequences of "Learning Organization" concept in strategy development process

Implementing learning organization concept would help in transforming the culture in ABC plc that enables to be more productive, efficient and effective bank in Sri Lanka. In doing so, employees can take part in their respective areas more effectively by giving more contribution in making decisions and problem solving "Problem solving and decision-making are important skills for business and life. Problem-solving often involves decision-making, and decision-making is especially important for management and leadership".

Further, in learning organization concept collective decisions will be taken in order to come up with better solutions and this helps to provide better and faster service to its valuable customers. Customer satisfaction "Customer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator within business and is part of the four perspectives of a Balanced Scorecard" can be considered as key success factor in the banking industry that drives to build up strong customer supplier relationship.

Nevertheless, implementation of learning organization in ABC plc would not be an easy task since all employees and all activities related to the operation taking place as per the old mechanism. Moreover, transformation of the organization culture "Organizational culture is an idea in the field of Organizational studies and management which describes the psychology, attitudes, experiences, beliefs and values (personal and cultural values) of an organization" needs to be started from the top management level which helps to convey the same to the middle management and lower level management more effectively and efficiently. In order to do that, there should be a better leadership and also top management commitment is a must and everybody needs to contribute and focus towards the common objective.

Additionally, ABC plc needs to concentrate on research and development, re-process engineering, human resource practises, customer service in transforming the culture of the ABC plc. In order to execute above changes ABC plc needs to be changed the perception and attitudes of its employees which can be considered as key success factor of the entire organization. However, changing people attitudes and behaviour cannot be done in overnight and needs to have a proper plan to achieve the desired objectives.

Annexure I

Introduction contd..,

In 1888 the hill station of Hatton saw the genesis of a bank; the first of its kind within the burgeoning tea plantations of the then Ceylon. Aptly named Hatton Bank, this bank became the lifeline to thousands of plantation workers.

Through the ravages of two World Wars and subsequently the Great Depression of the 1930s, Ceylon began yearning to be free from colonisation. Realising that Ceylon would soon become an independent country, the visionary Chairman of Brown & Company, Edmund J Cooray, began laying the foundation for the business opportunities he envisaged post-independence. After successful negotiations with Hatton Bank's owners, R D Banks and A T Aitkin, Brown & Company acquired the Bank and began a 'Ceylonisation' process that permeated the entirety of the management and operations.

The nationalisation process in the 1970s saw the Bank acquiring the branches of National Grindlays Bank in Kandy and Nuwara Eliya, heralding the change of name to Hatton National Bank, as it is known today. Just a year later, HNB opened its first branch in Gampola and continued to expand with branches in Pussellawa and Maskeliya. This expansion continues even today, with HNB possessing Sri Lanka's largest network of branches among private commercial banks. Acquisitions that would augment its presence and business were pursued, as in 1974, with the acquisition of the Head Office and Pettah branch of Mercantile Bank and before long, the Colombo branches of both Emirates International Bank and Banque Indosuez. In 1983, the Bank moved its Head Office to the more spacious locale of R A de Mel Mawatha, Colombo 3.

In the mid 1980s, HNB transformed banking to a service that penetrated the entire country. 1993 saw HNB innovate its most successful product, HNB Pathum Vimana, an incentive based savings product which instilled the savings habit into the population and spurred economic development by motivating savers to channel idle money into the banking system. The rewards were immense, with the Bank presenting over one billion rupees until 2009, probably the largest prize money in the country's banking history.

(Source - HNB web-site)

Annexure ii

ABC plc branch network and ATM centres.

(Source - HNB annual report p.40)

Annexure iii

SWOT analysis

Annexure iv

Strategy development process

(Source - http://www.hardmanagement.co.uk/sapproach.htm)

Annexure v

(Source - HNB annual report - 2009)

Annexure vi

(Source - HNB annual report - 2009)

Annexure vii

Stakeholders of ABC plc

(Source - HNB annual report - 2009)

Annexure viii

Customer Service

(Source - HNB annual report - 2009)

Annexure ix

Employee's details

(Source - HNB annual report - 2009)

Annexure X

(Source - HNB annual report - 2009)

Annexure xi

(Source - HNB annual report - 2009)

Annexure xii

(Source - HNB annual report - 2009)