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).