جده

صراحه جدة حلوه بأهلها ، ناس روحهم حلوه 

العيد

كل عام و أنتم بخير ، احلي عيد مع اسرتي الصغيرة

Success

“Successful people are the ones who think up things for the rest of the world to keep busy at. -Don Marquis”

I am fine

The average person tells 4 lies a day. And 1,460 a year. A total of 88,000 by the age of 6. And the most common lie is 'I'm fine'.

الحياة

الحياة أقصر من أن تهدرها مع أشخاص تبرر لهم أفعالك طيلة الوقت، من يحبك سيرى الخير فيك ومن يبغضك لن تستطيع إرضائه!

Get the Salary You Want (HBR)

Get the Salary You Want
Negotiating a salary can be an uncomfortable process. You want to get what you're worth, but you also don't want to scare off your future employer. Prepare for your next talk by doing the following:
Do research. Information is power. Reach out to friends or colleagues who can tell you what the employer might typically pay for the role.
Be honest. When a recruiter asks if you have salary requirements, be upfront. The employer needs to know your expectations so they don't waste their time or yours.
Offer Solutions. A salary talk is a negotiation — two parties trying to reach a solution that works for both sides. If the initial number is lower than your reasonable expectation, propose something that will meet the needs of both you and the employer.
Today's Management Tip was adapted from "How to Negotiate Your Next Salary" by Amy Gallo.

Feedback HBR

Keep Your Cool When Getting Feedback
No one likes to hear that they aren't performing well. Yet, everyone can improve. Next time you receive constructive feedback, do these three things:
Relax. It's understandable to be nervous during a feedback session. The other person holds all the power. Accept this imbalance and be easy on yourself.
Expect to be surprised. You're likely to hear something that you weren't aware of. Perhaps something was a bigger deal than you thought, or something you thought was resolved wasn't.
Don't be defensive. Even if you disagree, hold your tongue. Instead of defending yourself, ask questions. Once you've cooled down, you can always follow up.
Today's Management Tip was adapted from "How to Keep Your Cool During a Performance Review" by Robert M. Galford.

HBR

Need a Mentor? Forget the Expert
When people early in their careers seek mentors, they often target those with a depth of experience. But experts can't teach you everything. And, often they are so far removed from your day-to-day work that they can't help you solve problems. Select at least one mentor with only a few more years of experience than you. Someone who has recently walked in your shoes can give you practical, relevant advice on the challenges you face. She may also give you insight into what's coming in your career and the types of challenges you'll be up against next.
Today's Management Tip was adapted from Guide to Getting the Mentoring You Need.

Elbert Hubbard

"One machine can do the work of fifty ordinary men. No machine can do the work of one extraordinary man."

Fake friends

Fake friends are easy to find and easy to loose but real friends are the hardest to find and hardest to lose.

Twitter

T.W.I.T.T.E.R = Tweet With Integrity To Then Earn Respect. ~ Milana Ryan #quote”

Warren Buffett

"Honesty is very expensive gift.Don not expect it from cheap people." -      

Roger Babson

: "It is wise to keep in mind that neither success nor failure is ever final." - Roger Babson       

عيد الام

في ذكرى يوم الأم..ان عدتي سأجعل كل ايامي عيدا لك.لكن أين أنت الان؟ لا تبخلوا على امهاتكم بالزيارة والمهاتفة والحنان.لم تجربوا بعد فراق الأم

Live like

Live like Spongebob, laugh out loud all day without any reason, and annoy the mean people with your happiness.

Nice words

"Giving up doesn't always mean your weak; sometimes it means you're strong enough to let go."

Women

Women marry men hoping they will change. Men marry women hoping they will not. ~ Albert Einstein

Strategic Marketing

Introduction:

In this assignment, I am going to talk about the organization that I am working for which is Arab National Bank. I going to give a brief overview about the bank then I will conduct a SWOT analysis. By chosen the line of investment services offered by the bank, I would apply what I have learned in the module to this line. I will use some of the analytical tools that I have learned to discuss the marketing management strategy in relation to the market, the implementation of the marketing strategy through the 4P’s and the ethical issues that can be raised I will be able to offer alternative routes for the organization. Finally, I will write my conclusion.

 

Organization analysis:

Arab National Bank is a Joint- stock company established in 1979, by changing the ownership of Arab Limited Bank branches in Saudi Arab, owned 60% by Saudi citizens, and 40% owned by a foreign partner. Its mission statement is ‘Financial solutions for better life’. Its objective is to offer the best financial services that satisfy the customer’s needs and to make continues growth on the return of the capital employed by the shareholders. The following table shows the growth in the bank business.

	1st Half 2003	1st Half 2004	% Growth
Net Profit	377 Millions SAR	576 Millions SAR	53%
Return on Equity	18.8%	26.6%	41%
Return on Assets	1.68%	2.19%	30%
Loans	17,547 Millions SAR	24,460 Millions SAR	39%
Customer Deposits	31,457 Millions SAR	37,834 Millions SAR	20%
Provisions Coverage Ratio	113%	154%	36%
Market Capitalization	11,340 Millions SAR	19,190 Millions SAR	69%

Peter Drucker observed that a company’s first task is to create customers. However, his premise is that customers will buy from the firm that they see as offering the highest perceived value (1).The bank is following Michael Porter 'generic' strategy, which is A Focus Strategy (2). The bank has many strategic marketing alliances. The bank marketing strategy is the Market- Challenger Strategy. Arab National Bank strategic objective is to attack the market leader. 

In order to analyze Arab National Bank products (services) I will use the customer value hierarchy (3):

1. Core product:                money deposit
2. Basic product:               check account, saving account, Investment account, etc...
3. Expected product:      high quality services, high interest rate, ATM machines, loans, etc…
4. Augmented product:     Internet banking, Bank assurance services, etc… 
5. Potential product:     Internet brokerage, Mortgage, International services for privet banking customers, etc…

After this products analysis we need to now that today’s competition essentially takes place at the product-augmentation level.

I am going to analyze the organizational culture by using Schein’s theory of culture (4). Applying the surface level artifacts to the bank, it is one of the most popular banks in Saudi as the paying banks for the pensioners and for the third year, it is the most profitable bank in Saudi. Applying level of values and norms, we could say that the staffs are proud that they are working for successful bank. It is one of the leading banks in the field of staff development which I use my self as an example for this as the bank is sponsoring me in the MBA program. Applying a level of beliefs and assumptions, they believed that the customers would come to them.

I could say that the bank is an organic firm with a flexible structure and it is open to the environment, which can be justified by their financial result. In order to understand Arab National Bank more, I will make a SWOT analysis:

Strength:

    

·         Market penetration:

       I could say that the bank is the leader in number of customers.

·         Strong customer base:

Its customer base is huge and it cavers all kind of customer and levels.

·         Effective distribution channels:

117 branches cavers all regions in Saudi.

·         Strategic alliances:

Arab Limited Bank, AXA sun life, Goldman Sax and many local organizations.

·         Technology innovations:

It was the first bank to offer internet banking in Saudi.

·         Experienced management team:

More than 25 years banking experience in Saudi.

Weaknesses:

·         Small spending on advertising:

It is one of the lowest banks on advertising spending in Saudi.

·         Branded as the pensioners bank:

As the paying bank for the pensioners, their branches are crowded must of the time.

·         Low percentage of internet banking user and ATM machines:

The bank is not promoting the usage of ATM and internet banking to reduce the number of customers in the branches.

·         Limited numbers of Islamic services:

The bank is not offering enough Islamic services to react with new trend in the market.

·         Small numbers of ladies sections in the branches:

The bank is not reacting with huge increase in the ladies workforce that they need special sections for them.

     

Opportunities:

• GDP growth:

The increase in GDP will affect the local economy and the bank should use this opportunity to increase its market share.

• New investment laws:

Saudi is opening many sectors for foreign investor.   

• The trend toward Islamic services:

The bank should use its strength to react with this trend.

  

Threats:

• Foreign banks entering the market:

The increase in the number of competitors could affect the bank profitability.

• A new fully Islamic bank will open soon:

The new Islamic bank could cause Arab National bank to lose a big segment.

As a result, I will use this information in the discussion of the marketing management strategy of the organization. 

Q: Discuss the marketing management strategy of the organization, in relation to; 1 the market the organization is in; 2 implementation of the marketing strategy (through the 4Ps); and 3 ethical issues that are raised by the marketing strategy and its implementation.

Introduction:

Investment Services Group is on of the SBU in Arab National Bank, which I will apply what I have learned in the module to their line of product. Business Development, Local & International Shears, Asset Management, and Investment Complains they are the departments of the Group. By discussing the marketing management strategy in relation to the market, the implementation of the marketing strategy through the 4P’s and the ethical issues that can be raised I will be try to offer alternative routes for the organization. Finally, I will write my recommendation. 

Main body:

Saudi is an oil-based economy. The Saudi society is strongly religious. There a big trend in the Saudi market toward the Islamic banking services. All banks in the Saudi market offer almost the same Investment services. Currently, the local shears brokerage is the most attractive Investment choice in the market. The market is very attractive, Arab National Bank is one of the strongest in the industry, and wants to invest its best resources in support of their offering. Despite continuing concerns about the international economic environment, Investment Services has witnessed an exceptional growth in the last 3 years. We continue to offer a comprehensive range of investment products – primarily in Saudi and International share brokerage, investment funds and insurance. The Asset Management Department was the most successful department in the group in terms of assets under management and revenues. During this period, assets under management have grown significantly – one of the biggest increases amongst Saudi banks. The Saudi Share Brokerage Department has also its most successful period, with a strong growth in revenues and trading volumes. The Bank continues to offer one of the most comprehensive trading and price dissemination network in Saudi, giving customers’ access to Saudi share markets for more than 50 locations. International Share Brokerage has seen some improvement during the same period in business level. Therefore, I could say that the investment services group sales force (Business Development Department) is doing their task.

If we look to the bank, it is following Michael Porter 'generic' strategy, which is A Focus Strategy. Therefore, The Investment Services Group has marketing alliances with Goldman Sax, AXA Sun life and Shroder. The Group marketing strategy is the Market- Challenger Strategy. The strategic objective of the group is that they can attack the market leader. The group general attack strategy is the Encirclement attack with a specification on the improved services. The bank is using Multi Attribute Segmentation to segment the customers according to their average balance. The Investment services group is using the bank segmentation strategy for their services, which is limiting the group efforts to the existing customers mainly.  As a result, the Multi Attribute Segmentation is not the helpful segmentation strategy to be used by the group. I do recommend the use of Behavioural Segmentation, which the group could segment, the customer to nonuser, ex-user, potential user, first-time user, and regular user (5). The Behavioural Segmentation will increase the target market, which will lead the group to increase their market share, as they are not mainly concentrating on the existing customers. Arab National Bank awarded for the second year running the best bank in Saudi from the Global Finance magazine in 2003 and for the second year running Overall Fund Manger of the year from the Saudi Arabian Monetary Agency. Therefore, I could say that the bank and the Investment services group are positioning as the operationally excellent firm according to the value disciplines framework for Treacy and Wiersema (6).

To determine whether the Investment Services Group portfolio is healthy or not, I will use the Boston Consulting Group (BCG) approach. By applying the Growth-Share Matrix to the group services, I could say that Investment funds is Stars level, Insurance products is Question marks level, International share brokerage is Dogs level and Local share brokerage is Cash caws level. The Investment services group portfolio is healthy in general as they have only one dog which is the International share brokerage and the bank should keep this business because the main reason for its current situation is the huge trend toward the Local share. The week part in the group portfolio is the Insurance products whish the bank should do something about it. The bank could solve its problem with insurance products by identifying the main problem. I could say that the main problem is the trend toward Islamic insurance, which had affected the bank market share. I do recommend that the bank should develop a new rang Islamic insurance products to support its portfolio.

    

I will analyze the Investment Services Group environment in 2 levels, the micro level and the macro level in order to evaluate their marketing strategy(7).  

Firstly, the micro-environment main elements:

1. Collaborators:  There are many collaborators locally and internationally   that the group is dealing with. The banking regulation is allowing banks to make strategic alliance.

2. Customers: Two major factors could increase the volume of business in the banking sectors. Firstly, the good performance of local economies due to the increase on the oil price. Secondly, the money that did return after what happened in the USA on September 11^th. These two factors give us an indication that the market will increase.

3.  Distribution Channels: there are huge demographical changes in Saudi because of the increase in population that should cause the banks to review the location of their distributional channels regularly.

4. Competitors: currently there are nine competitors and soon this number will increase by the foreign banks that will enter the market .Therefore, the bank should take that in consideration.

Secondly, the macro-environment using the PEST frameworks (7):

1. Political-Legal: A many policies the Saudi Government promoted to regulate the business to apply with the World Trade Organization requirement that Saudi is willing to join.

2. Economics: The GDP-real growth is 5.3 % (2003) compared to 0.6% (2002) and Inflation rate is 0.5 %( 2003) compared to 1.0% (2002).

3. Socio- Culture: There a huge number of the Saudi society is strongly religious how want to deal only with an Islamic based product (Halal).

 

4.  Technology: The "Information Age" or the "information revolution," the fact is that we have more information available more quickly and less expensively than at any point in history (8).

 

As a result, we can see how the market is attractive from the environment analysis.   

Michael Porter has identified five forces that determine the intrinsic long-run profit attractiveness of a market or a market segment, which I will apply it to the Investment services group in order to analyze the competitive forces:

1.      Threat of intense segment rivalry:

Investment services group currently is facing nine competitors and soon this number will increase. I could say that currently there is no threat.

2.      Threat of new entrants:

The market is expanding with the new forging and local banks that will enter the market. I could say that there is big threat from the new entrants, which is putting pressure on the group to introduce new product to face this threat.

3.      Threat of substitute products:

This segment is likely to fall in Saudi because the central bank controls the pricing in the market.

4.      Threat of buyers’ growing bargaining power:

As the group held the best performer in Saudi for the last 2 years, I do not think that The Investment services group could face any threat from this segment but they must keep the same level of performance.

5.      Threat of suppliers’ growing bargaining power:

As a service provider, the group is not dealing with suppliers. The bank makes alliances with International Insurance companies and Investment banks so I could say that there is no threat.

As a result, the Investment services group main threat is from the new entrants.    

The implementation of the marketing strategy through the 4Ps explained as follow taking in consideration that for service business 3Ps should be included:

Product:

• Classification: services product.
• Services mix: A breadth of four pure services lines with a depth of 16 products in Investment fund, 4 products in insurance, 2 products for the local shears, and 2 products for the International shears.
• Characteristics of services: The group characteristics its services under Intangibility. They are using services quality as an evidence to reduce uncertainty. In addition, they position themselves as the fast bank and this clear from the availability of the marketing tools in the group. I could say that the positioning strategy of the group is working with all of their services.
• Product lifecycle (PLC): We can say that the services are on the growth stage. The numbers shows that the group market share in increasing. 
• Service branding: The group is using corporate brand to identify the services. London-based bank HSBC Holdings plc is re-branding all its global retail operations under one corporate brand. In the UK, market shifts such as the increasing consumer interest in financial decision-making and the Internet as a channel, are forcing companies to invest in brand building exercises with consumers (9).
• Service quality: I could say that the quality of services in the group is high and this could be seen from the outstanding performance of the group. 

As I have mentioned before, ANB awarded for the second year running Overall Fund Manger of the year from the Saudi Arabian Monetary Agency. This information gives us an induction about the quality of the product that ANB is offering to the customers.

Pricing:

As a financial service provider in the Saudi the pricing is determine by the central bank of Saudi (Saudi Arabian Monetary Agency).  At the end, we have to know that the quality of the service has major influence in the customer.

Promotion:

From the information given before, we can say that ANB is not spending enough on advertising. It was spending very little on advertising compared to the others. Arab National Bank share out of the bank’s share of expenditures on advertising from 1998 to June 2004 was 4.8%, 4.4%, 6.9%, 6%, 8.7%, 5.2%, and 7%. Out of these numbers we can see how they are spending on a market consist of 10 banks. The following chart shows the total spend by year in Saudi on advertising.

(US$ 000’s)

 

 Most of advertising that the bank did was not using AIDA (awareness, interest, desire, action). AIDA and models like it have been around for a long time. AIDA itself first appeared in the 1950s and is basically an evolved version of these earlier models (10). As a result, the promotion mix is consisting only from the personal seals and the point of sales. I recommend that the bank should increase its spending in advertising and use the AIDA models. ANB is using a pull strategy, which is not a helpful strategy to be taken out by the group. I recommend using the push strategy, which will help the business more.

Place:

There is 117 branch distributed over three regions. Investment services group sales force distributed into three regions. The sales staffs is responsible about the direct sales over an area consist of 5 branches in average, which I do not think that this number of branch to caver will not give the sales staff the opportunity to serve the customer, will. The present marketing is depending on the customer relationship management along with quality. The group should expand their direct sales force. The number of local share brokerage areas in the branches is 50 and expected to increase more. 

Regarding the other 3Ps (people-process-Physical evidence):

People:

The support that the group is delivering to them trough advertising is not enough. The group do not have a rewarding system like the other banks to motivate their sales force. I do think that the group their motivation strategy.

Process:

The group is using the technology to develop the work process to make faster.

Physical evidence:

I could say that the group is performing well in this.

As a result, I could say that there are some points needed to be reviewed in order to have a proper implementation for the marketing strategy in relation for the 4P’s and the 3P’s.

In relation to the ethical issues, Today Several Forces are driving companies to practice a higher level of corporate social responsibility: rising customer expectations, changing employee expectations, government legislation and changing business procurement practices (11). These are some of the ethical issues that are raised by Arab National Bank marketing strategy and its implementation. Regarding government legislations, there is a huge pressure from the Saudi government toward banks to decrease the number of expatriate and replace them with Saudi staff and the bank is progressing on that, as 86% of their staff is Saudis as of today.  The group is avoiding the other ethical issues such as money laundering and rising customer expectations by the code of ethics that each marketer in Arab National Bank should sign it. In addition, by the bank is   training its marketer that they should practice a social conscience in their specific dealing with customers.       

Recommendation:

From the dissection to the marketing management strategy for the group, I have come up with some recommendations for the group. I recommend the group to change their current segmentation strategy to behavioural segmentation in order to increase their market share. From the portfolio analysis, I recommended the group to develop a new range of Islamic insurance products to react with the new trend in the market. Furthermore, they need to develop a new line of Islamic investment products and local investment funds to satisfy the customer need of local funds and Islamic products. By doing this, the group will be able to deal with the threat of the new entrants. Regarding the promotions, I recommended the bank to increase their spending in advertising and the more use of AIDA models. Along with that, I think changing the group promotion strategy from pull to push will help the business more. The bank needs to run a promotional campaign for the use of the internet banking and the ATM in order to decrease the number of customers in the branches. The increase of the sales force will give the seals force the opportunity to implement the CRM and service quality. Customer relationships are the key to the marketing strategy (12). In addition, they need to develop a new rewarding system for the seals force to motivate them (Bounce structure schema). By applying these points, the implementation of the marketing strategy will be more efficient.

Conclusion:

By using the organizational analyses, textbook and other references, I understand the main points in the module. I have demonstrated my understanding of the theory by applying it to my organization marketing strategy. I have given brief general information about the bank and at the end of the brief I have conduct a SWOT analysis. I have discussed the marketing management strategy of the investment services group by explaining the market. I explained the group strategic objective, group general attack strategy, their segmentation strategy, and their positioning strategy along with my recommendation. I did use the Boston Consulting Group (BCG) approach to determine whether the Investment Services Group portfolio is healthy or not. I have used Porter 5 forces that determine the intrinsic long-run profit attractiveness of a market. In addition, I have analysed the marketing strategy by using the 4Ps and 3Ps and I have comment on it. Finally, the ethical issues and how the group can deal with it. I have give my recommendation to the organization in order performs better.   

References:

1. Philip Kotler, Marketing Management, 11^th ed., Chapter 3 p 60.
2. (www.brs-inc.com).
3. Philip Kotler, Marketing Management, 11^th ed., Chapter 14 p 407.
4. Edgar H. Schein, Organizational Culture and Leadership, 2nd ed. (San Francisco: Jossey-Bass, 1992), 3-27.
5. Philip Kotler, Marketing Management, 11^th ed., Chapter 10 p 295.
6. Micheal Treacy and Fred Wiersema, The Disciplines of Market Leaders, (Reading, A: Addison-Wesley, 1994).
7. Management Centre. (2002), Strategic Marketing, University of Leicester.
8. (http://luna.pepperdine.edu/test/homepg.html).
9. Principles of Financial Services Branding, American Marketing Association, (www.marketingpower.com).
10. Morgen Witzel, Management A-to-Z: AIDA, (www.ft.com).
11. Philip Kotler, Marketing Management, 11^th ed., Chapter 22 p 700.
12. (http://marketing.about.com/library/weekly/aa070203a.htm).

Strategic Analysis and Choice

1. Introduction

In this assignment, I shall attempt to critically examine the strategic decision making process in the organization that I am working for, which is Arab National Bank, in Riyadh, Saudi Arabia, in order to determine whether the organization’s strategic decision-making process could be considered rational or not. I am going to give a brief overview about the bank, models of decision-making, decision and system thinking, the strategy decision-making, the relation between the psychology and decision-making and prescriptive schools. After that, I will critically examine the strategic decision making process within the bank by taking some examples of decisions. Because I am working for a strategic business unit (SBU), which is the Investment Services Group, the core for my examination will be the business and functional strategy. Rational or irrational is what I shall determine and I will justify my answer. Finally, I will write my conclusion indicating the limitation of the sample.

2. The Organization (Arab National Bank)

Arab National Bank is a joint- stock company established in 1979, by changing the ownership of Arab Limited Bank’s branches in Saudi Arabia, owned 60% by Saudi citizens and 40% owned by a foreign partner. Its mission statement is ‘Financial solutions for a better life’. Its objective is to offer the best financial services that satisfy the customer’s needs and to make continuous growth on the return of the capital employed by the shareholders. The market is very attractive; Arab National Bank is one of the strongest in the industry, and wants to invest its best resources in support of their offering.  The bank is following Michael Porter’s 'generic' strategy, which is A Focus Strategy (1). The bank has many strategic marketing alliances. Our strategy is the Market- Challenger Strategy. Arab National Bank’s strategic objective is to attack the market leader. The following table shows the growth in the bank’s business.

	1st Half 2003	1st Half 2004	% Growth
Net Profit	377 Millions SAR	576 Millions SAR	53%
Return on Equity	18.8%	26.6%	41%
Return on Assets	1.68%	2.19%	30%
Loans	17,547 Millions SAR	24,460 Millions SAR	39%
Customer Deposits	31,457 Millions SAR	37,834 Millions SAR	20%
Provisions Coverage Ratio	113%	154%	36%
Market Capitalization	11,340 Millions SAR	19,190 Millions SAR	69%

(3.75 Saudi Riyals (SAR) = 1 US Dollar)

3. Decision Making

3.1 Models of Decision Making

Before I proceed writhe the models of decision-making, we need to understand the definition of it. Decision-making is weighing up the relative attractiveness of each alternative (2). There are two types of decisions, programmed and non-programmed. The programmed are made frequently, the non-programmed are made infrequently. There are different models of decision-making but some of them are based upon highly structured idealisations about how rational decisions should made. Rational refers to the idea of consistency. In other words, if the same amount of information is presented to two different decision makers in two different places and both of them act rationally, their decisions would be the same. However, we must take into consideration that what is rational with one decision maker could be irrational with another. Essentially, decision models are classified as:

• Rational model

The rational model is the model that gives the decision makers clear steps to choose the best choice.

• Bounded rational model

This model is based on the decision maker accepting a solution which is good enough rather that the best.

• Evolutionary model

Henry Mintzberg observed the way in which decisions are actually made. He concluded that there are many feedback loops within the rational decision making process. Decisions evolve from a complex pattern of feedback loops.

• Political model

This approach acknowledges that an organization made up of many different interests. For example, the stakeholders do not necessarily share the same goals of the organization.

• Garbage can model

This was first proposed by Cohen, March and Olsen in 1972. This approach views an organization as a collection of problems and solutions. Problems flow through organizations; solutions exist within organizations.

3.2 Decisions and Systems Thinking

A system is an inter-related set of elements. One executive has expressed the systems thinking this way, ‘When you trace back the stories, you will find out that all the changes came from hundreds of little things that individuals were doing differently’ (2). Effective systems thinkers do not act as individuals. We have to know that there are two types of systems, closed and open systems. We live in a very complex world and the organization should be a learning organization. Modelling is an important management activity. Modelling helps the decision makers to structure problems and enable them to reflect upon possible consequences of their decisions before taking action. Modelling can be quantitative or qualitative, but we should keep it simple and avoid mega models.  The Bounded rational model would solve the limited cognitive capabilities of individuals but there are other psychological considerations that need to be taken into account.  Each individual will have his or her own particular view and interpretation of reality. Therefore, different individuals will bring different perceptions to the organization.   

3.3 Strategic Decision Making

The strategy is the unifying theme that gives coherence and direction to the actions and decisions of an organization. When formatting a strategy the strategic decision maker has to make an assessment for the situation using subjective and imperfect information. There are three levels of strategy: corporate, business, and functional (3).  Peter Drucker argues that a company that thinks strategically is one which produces satisfied and loyal customers. Peter Drucker describes the sequence of steps involved in the decision making process (4):

1.      Classifying the problem

2.      Defining the problem

3.      Specifying the answer to the problem

4.      Deciding what is right, rather than what is acceptable, in order to meet the boundary conditions

5.      Building into the decision the action to carry it out

6.      Testing the validity and effectiveness of the decision against the actual course of events

The nature of the decision making process that result in strategies is explained by Henry Mintzberg. After a very helpful survey on this, he suggested that 10 schools of thought about the strategy process could be identified (2).

3.4 Prescriptive Schools (Mintzberg)

I shall attempt to give a brief about each school of thought:

1. The design school

Strategies are the result of conscious creative thinking based on conceptual modelling. In the design school, strategy is ‘grand strategy’. The CEO is the architect of the strategy and controls the strategy making process.

2. The planning school

Strategies are the result of the formal planning process led by the senior management team. Strategic decisions are an integral part of the planning process. Mintzberg’s critique this approach because it assumes that the future can be predicted, the strategic planning can be separated from operational management, and hard data analysis and techniques can produce novel strategies.

3. The positioning school

Strategies emerge from an analytical process that produces knowledge about the trends in the particular industry and than respond to those trends by establishing an appropriate strategy. Mintzberg’s critique is that this approach is too deterministic and the analytical frameworks constrain creative thought.

4. The entrepreneurial school

 Strategies are the products of visionary, strong entrepreneurial leaders. As a result, the process of strategy making is a mystery.

5. The cognitive school

Decisions are the outcomes of semi-conscious cognitive processes. They are not as conscious and deliberate as the rational prescriptive approach suggests. Mintzberg emphasised the need to understand better, how experience informs strategic thinking.

6. The learning school

When strategies are implemented, the decision maker learns what works well and what does not. Strategies are adapted in the light of learning. Learning is a process of finding out what works, understanding why it works, and than developing this new knowledge into action and behaviour. This is Mintzberg’s preferred approach.

7. The political school

Strategies emerge from the power-plays within an organization. The dominant strategy that emerges is that aligned with the preferences of the most powerful group within the organization.

8. The culture school

The culture school sees strategy emerging from a collective decision-making process in which all members of the organization share a common set of values and beliefs. In this case, organizational life is idyllic and free from power politics and strife.

9. The environmental school

Changes in the external environment determine strategic decisions. Strategy is a passive process that responds to changes in the external environment.

10. The configurational school

This is a collage of many of the other schools. Any particular strategy depends upon a number of factors.

Mintzberg contrives these schools of thought and they are analytical and artificial. Their purpose is to focus thinking upon the strategic making process. Mintzberg has found that there is a great discrepancy between what they actually do and what management theory says they should do (5).

4. The Examination of the Strategic Decision Making Process

4.1 Introduction

In this part from the assignment, I will critically examine the strategic decision-making process in Arab National Bank by taking some of their decisions as a sample for my examination. I am working for the one of the SBU’s in the bank, which is the Investment Services Group. Therefore, the levels of business and functional strategy will be the core for my examination.  I must explain that the decision making process is not open to every one in the organization. As a result, in some part of my examination I will adopt series of assumptions. Despite continuing concerns about the international economic environment, Investment Services has witnessed an exceptional growth in the last 3 years. We continue to offer a comprehensive range of investment products – primarily in Saudi and International share brokerage, investment funds and insurance. I will use some examples of decisions for my examination but firstly. I shall attempt to evaluate those decisions in order to link the theories, my analysis and the outcome of it to justify my answer to whether the decision making process in the group could be considered rational or not.

4.2 Evaluation

Programmed decisions involve situations that have occurred often enough to enable decision rules to be developed. Non-programmed decisions are made in response to situations that are unique (6).  The Group did recently face some problems; I am going to explain how they solved these problems in order to examine the decision-making process. In each of these problems, the Group did follow the logical steps of the rational model. I will explain these steps, the Group decision in each problem and the evaluation of the decision.  

One of the problems, which the Group did face recently, was the huge trend in the local market towards Islamic Investment Services. This trend has tremendously increased after September 11^th and the international war against terrorists. Many Saudis along with other Muslims got the feeling that this war was against them not against terrorists.  As a result, a huge amount of Saudi money held abroad returned to the local market. Their existing lines of services do not have such variety to satisfy this trend. Therefore,      they must solve this problem. By following the logical steps, they found that this problem is unique so it requires a non-programmed decision. They recognize the problem as an increase in demand for Islamic Investment Services, where its current services were limited. The Group’s strategic objective is to attack the market leader by offering the best financial services that satisfy the customer’s needs and to make continuous growth on the return of the capital employed by the shareholders. Developing some of the existing service to comply with the Islamic principle, adding a new range of Islamic services or not respond to the trend were the alternatives that the Group should choose from. After the evaluation of these alternatives concerning the Group’s objectives, they decided to add a new range of Islamic services. The Group did implement their decision and they are reviewing it regularly. If we want to evaluate this decision, by using Mintzberg schools of thought, I could say that the Group are following a Prescriptive school, which is the positioning school. This school is associated with Michael Porter’s 'generic' strategies; all the SBU’s in the bank are following 'generic' strategies, which is A Focus Strategy (7). This banking industry now is Oligopoly and soon will become in a Monopolistic Competition- so currently it is a stable industry in Saudi. Mintzberg’s criticism of this school is that the analytical framework constrains creative thought. Investment Services has witnessed an exceptional growth in the last 3 years. Therefore, we could say that this decision was truly an effective decision. If we look to the outcome of the decision, we would say that yes, there is an exceptional growth with Group business in the last 3 years but there is also a decrease in the Group market share. They just focused on solving the problem and they did not take in consideration their current resources. They should know that “Customer relationships are the key to the marketing strategy” (8). I think if the Group did an assessment of the internal environment, they would not take this decision. The effectiveness of this decision depends upon the quality and quantity of the available resources. In recent years, the necessary internal resources that enable the organization to achieve its strategic objective has become known as the ‘resource-based approach’ to strategy. Therefore, I could say that the Group decision was not an effective decision. The market is growing but our market share is decreasing so we should ask ourselves is this what the Group was looking for?                 

Anther problem is that the local equity brokerage business is increasing rapidly over the last few years and the Group is facing a lack of licensed brokers. The huge amount of Saudi money held abroad returned to the local market after September 11^th was the main reason for this increase in the local equity market. Besides that, the Saudi government started its privatization plan in many sectors, which made the local equity market more attractive than before. The local equity market index achieved 14% in 2002, 51% in 2003, 94% in 2004, and 49% up to date in 2005. The number of customers increased more than 10 times during this period and the demand for the local equity brokerage is still increasing. The contribution of the local equity brokerage business to the bank’s profit is more than 20% and still increasing. Therefore, the threat is huge from the lack of licensed brokers. If we want to define the problem, we find that the licensed brokers are leaving the bank in order to get a higher wages from other banks. Therefore, the problem is the Group should decide how to maintain the existing brokers and how to attract licensed brokers from other banks.  This problem is a programmed one and the Group’s objectives are clear. Because of the power-plays within the organization, they decided to recruit licensed brokers from the other banks to increase the number of licensed brokers and to avoid losing their customers. This decision did not solve the problem but increased it because the existing brokers found themselves being paid less than the new ones. If we start to evaluate this decision by using Mintzberg’s work, I would say that this decision was the result of the political school of thought. This decision did solve a part of the problem, which is the lack of the licensed brokers. The most important part, which is why we were losing our licensed brokers to the other banks, the Group did not solve. This part was requiring the joint efforts from the Group and their Human Resources management, in order to review the salary structure and rewarding system of the brokers to maintain the existing brokers and to attract new brokers. An on job-training program for fresh graduates was developed so they can be eligible to get the brokerage licenses from the Central Bank. The local equity brokerage business in tremendously increasing and most of the experts believe that this growth will continue for the next decade and the Group should be ready to meet that challenge if they want to achieve their strategic objectives. 

The last problem in my evaluation is that the Group along with rest of the bank are facing a huge pressure from the Saudi government toward all the banks to increase the number of Saudi staff and decrease the number of expatriates within the banks. This pressure was the result of the increase in the unemployment percentage of the Saudi citizens. The problem is how to increase the numbers of Saudi staff without affecting the Group’s objective. The problem is unique and it requires a non-programmed decision. From many alternatives, the Group decided to attract fresh graduated Saudis from local and international universities and offer them positions within the Group and the chance to sponsor them for higher education. The implementation of this decision was successful and the result was great. During the last 5 years, the Saudis staff ratio increased from 60% in 2000 to 86% in 2005. If I want to evaluate this decision, I would say that this decision is representing Mintzberg’s learning school, which is Mintzberg’s preferred approach. This decision is an effective decision that could be justified from the successful outcome.                     

4.3 Rational or Irrational

To search for the optimal strategy, there is one best way, assumption, predictability and clear objectives are some of the features of the Rationalist School. As a joint-stock company, the stockholders have competing views about what is the most appropriate means of achieving the organization’s objectives efficiently and effectively. Therefore, how we could say that all the Group decisions are rational? The question for this assignment was whether or not and to what extent the organization strategic decision-making process can be considered rational. Most of the researches that had been conducted in the Western world and still more researches need to be done on other societies. What is rational in a Western mind could be irrational in our culture. Since values arise from basic psychological characteristics of men, it is not the existence or non-existence or values that distinguishes a man from his neighbour. Further, the variety of experience that makes contemporary life makes conflict in values an inescapable adjunct to living (9). The Arabic culture, specially the Islamic culture, is different in a sense of what could be accepted in our culture is not necessarily accepted in the Western world. The government, the religion, the relationships, and the regulations are the major factors that have a great influence in the decision-making process within my organization as well as in the rest of the societies.

The first problem in my evaluation is a good example of the influence of the religion on the decision. That decision was a result of the logical steps provided by the rational model but the outcome from this decision cannot justify the rationality of the decision.  The rationality is searching for the best decision but I did justify that it can be better. Furthermore, is there a truly Islamic investment service or not. Many Western experts believe that the only genuinely Islamic banking is practised by the venture capitalists in London and New York. This is the rational Western thinking about Islamic banking but we do have truly Islamic Investment services. The Islamic religion does offer many alternatives for the investment services. The investor could buy any equity if the liability of the specified organization is not more than 30% of its capital and the investor could sell any material to a buyer on an instalment basis with a profit margin but not as an interest. Therefore, the rationality in our culture could be irrational in the Western mind, where interest is the dominant element.

The second problem is another example of the factors that have a great influence on the decision making process from the power-plays within the Group. The decision was not rational and the Group did not have a choice because of that, they have been forced to take this decision.

 The last problem is a pure example for the rational decision-making process. The evaluation for this decision is justifying the rationality of the decision and its process. There were no factors to influence this decision.

I would say that the Group is following the logical steps of the rational model in all of their decisions but I cannot say that all of their decisions are rational. We must take into consideration the limitations of the rational models. Many factors in our culture have great influence in the decision-making process; many decisions were supposed to be rational but with the influence became irrational. I did justify that if there were no influences, the Group are trying to make its decision rational.

                

5. Conclusion

By using the textbook and other references, I was able to understand the decision-making process. I have demonstrated my understanding of the theories by applying it to my organization. I have given brief general information about the bank. I did a brief review on the models of decision-making, decision and system thinking, the strategic decision-making, the relation between the psychology and decision-making and prescriptive schools. I critically examined the strategic decision-making process within the Investment Services Group by taking some examples of decisions. I did discuss the major factors that have a great influence in the decision-making process in the Group. I explained what can be rational in a Western mind is not essentially rational in our culture and I justified by using the example of the Islamic investment services. I proved that the Islamic banking does exist. I linked the question, the theories, the analysis, and the outcome of it to decide if the decision-making process in the Group can be considered rational. I did justify that if there were no influences, the Group is trying to make its decisions rational.

6. Limitation of The Sample  

This assignment is based on a specific part within the bank where I am working, which is the Investment Services Group. Therefore, my conclusion could possibly be faulty because of the limitation of the sample. We should also keep in mind that what is rational in a Western mind could be irrational in our culture. I did take an example in my assignment trying to prove that there are major differences between our culture and the Western culture with regard to what is rational, and what is not. My conclusion cannot generalize on the whole bank; more research would be needed especially in our society’s ethics and cultural background.  

       

7. References:

1. (www.brs-inc.com).

2. Management Centre, Module 2 MBA, Strategic Analysis and Choice, University of Leicester.

3. Thompson & Strickland, Crafting and Executing Strategy, 12^th Ed, Chapter 2.

4. Peter Drucker (1967), The Effective Decision, Harvard Business Review on Decision Making.

5. Mintzberg, Henry, The Manager’s Job: Folklore and Fact, Harvard Business Review, March-April 1990.

6. Richard Daft, Management, 6^th Ed., Chapter 9 p.273.
7. Philip Kotler, Marketing Management, 11^th Ed, Chapter 4.

8. (http://marketing.about.com/library/weekly/aa070203a.htm).

9. Chris Argyris, Interpersonal Barriers to Decision Making, Harvard Business Review on Decision Making.