Strategic_Planning_of_Raiffeisen_Bank

Strategic planning of Raiffeisen BANK Course: Principles of Management Mentor: Mirna Korican, MBA, MA in Psychology Zagreb, November 2009. Outline: 1. Introduction 2 2. Strategic Planning 5 2.1. SWOT analysis 6 2.2. PEST analysis 8 2.3. GAP analysis 9 2.4. Creating S.M.A.R.T. goals 9 3. Strategic Planning of Raiffeisen BANK 10 3.1. Basic information of Raiffeisen BANK 10 3.2. Raiffeisen BANK in Croatia 11 4. Conclusion 15 5. Literature 16 6. Appendix 17 1. Introduction Strategic planning is making choices. It is a process designed to support leaders in being intentional about their goals and methods. Simply stated, strategic planning is a management tool, and like any management tool, it is used for one purpose only—to help an organization do a better job. Strategic planning can help an organization focus its vision and priorities in response to a changing environment and ensure that members of the organization are working toward the same goals. Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. The process is strategic because it involves choosing how best to respond to the circumstances of a dynamic and sometimes hostile environment. Being strategic requires recognizing choices and committing to one set of responses instead of another. Strategic planning is systematic in that it calls for following a process that is both structured and data based. The process raises a sequence of questions that helps planners examine past experiences, test old assumptions, gather and incorporate new information about the present, and anticipate the environment in which the organization will be working in the future. Strategic planning involves choosing specific priorities. The collection of data should (1) surface a variety of choices about what the organization will and will not do, (2) analyze the implications of those choices, and (3) result in making choices. Finally, strategic planning guides the acquisition and allocation of resources. Too often, decisions are made quickly about new funding opportunities or spending for program and administrative needs in response to situations as they arise without a thorough assessment of the implications. An approved strategic plan helps leaders make proactive and realistic choices between competing funding strategies and between spending for various program and administration needs. Strategic planning is the formal consideration of an organization's future course. All strategic planning deals with at least one of three key questions: 1. "What do we do'" 2. "For whom do we do it'" 3. "How do we excel'" In many organizations, this is viewed as a process for determining where an organization is going over the next year or more -typically 3 to 5 years, although some extend their vision to 20 years. In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the "strategic plan." Strategic planning provides the basis for all managerial decisions. The functions of organizing, motivation and controlling are oriented to creating strategic plans. If an organization or managers don’t use advantages of strategic planning they will be deprived of logical way to assess objectives and directions of the organization. The process of strategic planning is providing the basis for managing of organization’s members. Strategic planning creates an opportunity for shareholders and management board to define direction and pace of business development, to outline global market tendencies, to understand which organizational and structural changes have to happen so that it can become more competitive, and to find out its advantages for successful development. Lately strategic planning was the prerogative of multinational corporations. But now more and companies are starting to deal with questions of strategic planning. The process of strategic planning contains the following steps: 1. Deciding on mission and purpose of an organization. 2. Analysis of environment, which includes collection of the information, assessment of strengths and weaknesses, as well as potential performance in terms of existing external and internal information. 3. Choice of strategy. 4. Implementation of the strategy. 5. Assessment and controlling of execution. So, as we can see this management function is very important, especially nowadays when managers need to perform in terms of recent financial crises. Our group decided to examine this topic on the example of the Raiffeisen BANK Austria D.D. Zagreb (RBA). Raiffeisen BANK Austria D.D. Zagreb (RBA) was the first bank in Croatia, which has been founded by a foreign financial institution. Fourteen years ago, the Austrian Raiffeisen Zentralbank Österreich AG (RZB) decided to invest in Croatia by founding RBA. Up to this date, its Croatian subsidiary's branches and outlets are present in 37 towns. 2. Strategic Planning Strategic planning is a long-term planning that focuses on the whole organization. The Organization defines its strategy and makes decision about allocating people and resources to achieve their goal. There are many models and approaches that can be used in strategic planning such as SWOT analysis, PEST analysis and GAP analysis. PEST analysis can be rearranged to STEER then it systematically considers Socio-cultural, Technological, Economic, Ecological and Regulatory factors. It is a comprehensive process which determents what a business should become and what is the best way to achieve certain goals. To define strategic planning the organization has to define its strategy. Strategy is a plan how to achieve long-term goals. The organizational strategy is focused on various functional segments such as finance, sales, marketing, R&D and many others. When developing strategies it is important to analyze the organization and environment at the moment and how it will develop in the future. The organization analysis is not only internal but it also concentrates on external environment as well. It analyses strengths and weaknesses of the organizations. Natures of the organization’s leadership, culture of the organization, complexity of the organization’s environment, size of the organization depends on the way that strategic planning should be developed. We live in a highly competitive business environment and old methods are insufficient for large companies to survive. Companies must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate a strategy, and make all the necessary adjustments to stay on the track. 2.1. SWOT analysis “This is the first stage of planning and it helps the firm to focus on key issues. It is an extremely useful tool for understanding and decision-making in business and organizations. “ The SWOT analysis provides the firm with helpful information about matching resources and capabilities in which it is operating. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. Strength could be for example location of your business, a strong brand name, patents, a new product or any other aspect of your business that adds value to your service or product. Weaknesses are determined through failures, losses, a weak brand name, lack of patent protection, defeats and disability to rival with the competitors and not being able to adapt to the rapid change. Opportunity could be a developing market such as the Internet, arrival of new technologies, loosening of regulations, strategic alliances or even weaknesses of your competitions. The only problem with SWOT analysis is that it could be very subjective, for example someone can see a new firm that is coming into the market as a threat because it could take away your current customers and that same firm could be perceived as an opportunity because it might have some innovative ideas for your firm to explore. Picture 1. - http://www.maxi-pedia.com/SWOT+analysis+matrix+method+model “From the SWOT analysis the team can identify six or eight key major improvement areas (MIAs) for the organization to work on in the next three to five years. Sales/cost reduction, investment needs, risk management, market expansion, process optimization, environmental consciousness, managed growth, increased profitability, improved external relations, employee satisfaction are just a few of them.” 2.2. PEST analysis The PEST analysis is a useful tool for understanding the “big picture” of the environment in which you are operating. PEST is sometimes rearranged, as “STEP” is an acronym for these factors: Political factors, Economics factors, Social factors and Technological factors. Political factors include government regulations and legal issues and define formal and informal rules under which the firm must operate for example it could be tax policy, employment laws, trading policies, political trends and government structures. Economic factors affect the purchasing power of potential customers and the firm’s cost of capital. Examples of economic factors are economic growth, home economy situation, home economy trends, disposable income, production level interest rates and inflation rate. Social factors on business vary from country to country and it is very important that these factors are considered. Social factors can be consumer attitudes and opinions, media views, ethical issues, education, trends, health, living standards, occupations and earning capacity. Technological factors are vital for competitive advantage because they can reduce minimum efficient production levels and influence outsourcing decisions. They include; R&D activity, technology incentives, automation, competing technology development, research funding, inventions, innovations and genetics. “Completing PEST analysis is simple and it can be done trough workshops using brainstorming techniques, it can vary from business and strategic planning, market planning, business and product development to research reports.” 2.3. GAP analysis “The gap analysis is a technique for determining the steps to be taken in moving from a current state to a desired future-state. GAP analysis is also known as need-gap analysis, need analysis and needs assessment.” It starts with making a list of characteristic factors (attributes, competencies, performance levels) of the situation that is now, then you cross-list factors required to achieve future objectives and then you highlight the “gaps” that exist and need to be filled. The analysis involves identifying who needs to be changed, what needs to be changed, and how (the strategy) the change might be accomplished. Strategic planning help processes 2.4. Creating S.M.A.R.T. goals The S.M.A.R.T. acronym stands for Specific (significant, stretching), Measurable (meaningful, motivational), Attainable (agreed upon, achievable, acceptable and action-oriented), Realistic (relevant, reasonable, rewarding and result-oriented) and Time-based (timely, tangible and traceable). When we say specific it means it has to be well defined and clear to anyone that has a basic knowledge of the project. They should be straightforward and emphasize what you want to happen. Specifics help us to focus our efforts and clearly define what we are going to do. Specific is the Why, What and How of the SMART model. We have to establish concrete criteria for measuring progress toward the attainment of each goal. The goal must be measurable, we have to know if the goal is obtainable and how far away completion is. To determine if the goal is measurable we must answer questions how much, how many and how will I know when it is accomplished' Goals need to be reasonable and achievable; often success or failure depends on setting practical goals. You develop the attitudes, abilities, skills, and financial capacity to reach them. You can attain most any goal you set when the steps of your plan are wisely established. To be realistic, a goal must represent an objective toward which you are willing and able to accomplish. A high goal is frequently easier to reach than a low one because a low goal exerts low motivational force. Goals need to have a time frame because without an end date there is no sense of urgency, no reason to take any action today. It gives you a feeling that you can start any time. Putting your energies into developing effective goals that are measurable, specific, targeted and time sensitive will pay huge dividends as you work to achieve your strategic plan. 3. Strategic Planning of Raiffeisen BANK 3.1. Basic information of Raiffeisen BANK RBA is bank – daughter in possession of Raiffeisen International Bank-Holding AG, which is fully consolidated company in possession of RZB with head office in Vienna. RZB is mother firm of RZB group and middle institution of Raiffaisen Banking Group, biggest Austrian bank grupation in compare to the total asset with most spread distributive network. In more than twenty years of market existence there has been found ten banks, while ten more was taken over. In that way has been found network of universal banks which with fifteen markets covers the whole region. Raiffeisen International is acting like managing company of those banks of which it has majority owning share. Raiffeisen International is recording increasement in total assets from year to year. Right now is employing approximately 63.400 people that are offering their services to 14,7 million clients in more than 3.200 offices. RZB was found 1927 and is offering wide array of banking and investing services. Today it is a third bank in Austria. So far RZB and Raiffeisen International had several times won awards that recognized Raiffeisen BANK as one of the best banks of middle and east Europe. RZB is member of Unico banking group association European cooperative banks that have capital bigger than 180 billion Euros. 3.2. Raiffeisen BANK in Croatia Raiffeisen BANK or RBA was found 14 years ago, and today it is dealing business in 37 cities with a network of business offices and branches. Development of RBA in Croatia is particular in compare to other Croatian banks in foreign possession. RBA is only Croatian bank in complete foreign possession, today fourth bank in Croatia when taking in consideration size of assets which has in its growth exclusively naturally grow, which means that RBA has seized Croatian market without buying any of Croatian banks with already developed network of business offices and branches, which has been standard practice of all other banks in foreign possession in 90's when Croatian financial market has been opened to foreign investors. For example, Erstebank has been found in 2000 by merging three Croatian banks: Bjelovarske, Čakovečke I Trgovačke banke, while 2003 Erste Bank has bought Rječka bank. In difference from other counties middle of branch is not in Vukovar, main reason for that business decision is economic development and size of Vinkovci in compare to war destroyed and not yet fully economical functional Vukovar. There is no statistic information about strategic positioning of RBA on micro market on county of Vukovarsko-Srijemska, and bank data is classified so it can’t be revealed in public. But fact remains that RBA with her own specific inside organization has comparative advantage with regard to competition. RBA is organized according to matrix principle, which means that branches are capable for all kind of business with clients. Above all by that we think on cooperative clients, no matter on their size and complexity of business. With branches organized by that bank is fully accessible on local market and available to entrepreneurs. Although there are available all kinds of communication technologies that are used in economy, live contact is still strongest acquisition tool in banking. Branch manager on field is capable of giving continuously consulting to clients which is often primary element in client happiness. It’s difficult to describe to what measure RBA in Austria is different from one in Croatia. There is difference between bank law in Austria and Croatia, so off course banks have to act according to it. But key strategy of profitability and high share are universal so every bank has its distinct characteristics. Mother bank decides in which way will branches their businesses but it always appreciates micro market of that area. For example, Slavonia in business looks totally different from Dalmatia or Istria. Every region has its unique characteristics and every branch adopt according to structure of clients and their attributes. High role have directors of branches, which have for goal conducting business strategies and bank polices while taking in consideration unique attributes of area where they are doing business. Like we mentioned earlier, bank polices are universal for all banks. High role takes economic development of the regions. For example, greater need for credits in regions of worse macroeconomic indicators (Slavonia), greater deposit base in developed regions. Međimurje is specific for its vivid and developed little entrepreneurship, what can be seen in business of their branch. According to indicators of certain regions, every branch creates their groups of costumers they aim for and market goals that are indirect task for director of branch which is defining strategy in coordination and supervision of bank management. Every bank tries to adapt to her market and costumers. It’s not easy task because clients all the time are more demanding so if we won’t to bind clients to our bank we have to be highly professional and have quick service. RBA branch Vinkovci is continually expanding their base of clients for over five years now from all business segments among regular clients and firms of all sizes. They are strategically oriented on strong cross selling, which mean to sell one client the most possible products of bank as possible. Only the number of client is not always best indicator size of work, because the goal is with every client cover as much as possible needs when we talk about bank services, from classic credit business money transfers, bank deposits business, financing through market of capital, connecting cooperative and retail business (for example company is client of bank, goal is that all workers of that firm become clients of bank). Quality of clients is always more important than number of clients and when doing business Raiffeisen BANK is always trying pay more attention to quality rather than quantity. It’s also important to mention that with credit polices bank don’t define “wanted” costumers, it defines which activities are excluded or restricted. In those unwanted activities we count ecologically unacceptable activities, arms production etc. When we talk about expanding branch there is always space for advance. Under the branch Vinkovci in year 2007 has been opened sub-branch Vukovar whose mission is offering retail service to clients from area of payment operations. There is also ambition to open sub-branch in Županja where there is already solid network of corporate clients. With that opening, services for the quality cross selling will be completed. That means merging corporate in retail business. Bank is systematically upgrading their business what can be seen in sub-branche business activity. Primary goal that has already been accomplished is turning sub-branches in affective selling channel bank, organized entirely like front office, while complete back office is organized in headquarters like business support. With implementation of modern technology it can be done and sub-branche no longer has employee who isn’t directly in sales. RBA systematically upgrades business procedures so they could reduce operative risk to minimum. Like every big bank RBA is capable of successfully covering all market segments with main orientation on quality. Bank is equally providing services to retail and corporate clients. Quality employees are the strength of the system. The RBA system has significantly invested in its employees, primarily through education organized within the bank. It is a process that is continuing in times of crisis and has not been stopped. The process of education is inevitable due to the application of modern technologies, but also to empower sales. That's why employees are in continuous process of learning sales training, organized internally, and with engaging external experts. Correlation between further education of employees and successful business is high. Proactive approach to customer is essential to the success of every employee in the work that needs to be aware and be well qualified to apply knowledge and sales skills through education teaches. Middle management must be able to motivate employees and quality performance measurement in their work. Therefore, education at all levels is continuous and necessary process crucial to the success of the entire business system. The crisis has strongly influenced the work of banks. First, operational risk has increased markedly, and bankers need to evaluate daily whether the level of risk is acceptable. Also, the existing placements required far more work than during the economic trends of the economy. Depending on how many economic activities are affected by the influence of the crisis, bank is restructuring loans so that customers could get through times of crisis. Plans have changed, and market expansion is not a priority, it is replaced by keeping the quality of the portfolio. As a sub-branch of middle age among a total of twenty RBA subsidiaries, Vinkovci operates exactly 5 years, and those 5 years, with the exception of 2009.god. Branch has achieved growth rates above the average bank rates. Growth rate of RBA and Large Croatian banks, have been 12% per year due to central bank measures, while Vinkovci grew stronger than the rate, because it was new (small base!) has yet to establish itself on market. Logically, a sub-branch is fully implementing strategy to head office and there is no doubt that it has always been very innovative and modern bank, pro actively oriented towards customers. Certainly, RBA subsidiary must fit perfectly into the high standards of RBA and at the same time, as a profit centre to achieve the expected profits. 4. Conclusion In this report we examined the topic of strategic planning in Raiffeisenbank. After research we can conclude, that strategic planning is necessary to give the organization a sense of direction and purpose. A plan states what goals an organization is trying to achieve and what strategies it intends to use to achieve them. Without the sense of direction and purpose that a strategic plan provides, managers may interpret their own tasks and roles in ways that best suit themselves. The result will be an organization that is pursuing multiple and often conflicting goals and a set of managers who do not cooperate and work well together. In Raiffeisen BANK this situation can’t happen because it has defined mission and purpose and strong management board (Management Board: Zdenko Adrovic, chairman of the Board; Vesna Ciganek-Vukovic, member of the Board; Zoran Koscak, member of the Board; Jasna Sirola, member of the Board; Mario Zizek, member of the Board; Vlasta Zubrinic Pick, member of the Board. Chairman of the Supervisory Board: Herbert Stepic). 5. Literature 1. http://en.wikipedia.org/wiki/Strategic_planning 3.12.2009 2. http://www.raiffeisen.hr/my/bank/about_us/about_us.jsp'language=EN 1.12.2009. 3. Michael Allison, Jude Kaye, Strategic planning. New Jersey, 2005. 4. Gareth Jones, Jennifer George, Charles Hill, Contemporary management. 2000. 5. http://www.strategicplantool.com/3.12.2009 6. http://www.newdirectionsconsulting.com/pdfs/CollaborativeStrategicPlanning.pdf1.12.2009. 7. http://www.planware.org/strategicplan.htm1.12.2009. 8. http://managementhelp.org/plan_dec/str_plan/str_plan.htm3.12.2009 9. http://www.nsba.org/sbot/toolkit/spt.html1.12.2009. 10. http://www.nonprofitexpert.com/strategic_planning.htm1.12.2009. 11. http://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Strategic_planning_Three_tips_for_2009_2340'gp= 13.12.2009 12. http://humanresources.about.com/cs/strategicplanning1/a/strategicplan.htm 1.12.2009. 13. Poslovni dnevnik 14. HRT