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7/29/2019 Bank South Pacific - Giaman Lain
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7/29/2019 Bank South Pacific - Giaman Lain
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2
William Walo
Steve B Ghamug
Antoine Thyna
Sowany Joseph
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Table Of contents
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EXECUTIVE SUMMARY
The Board of the Bank South Pacific Limited has a vision and strategy that embraces long-term
growth. It has the primary responsibility of focusing on organic growth within Papua New
Guinea and will consider expansion prospects beyond the national boundaries whenopportunities present. The Board and the management are working closely to pursue the bank’s
business strategies and vision. BSP has developed over the years to become a leader in the
banking industry in PNG.
In 2004, BSP for the first time in its business history, expanded operations to the international
level with the acquisition of the Westpac interests in Niue. In addition, the BSP is finalizing
arrangements to acquire the National Bank of Solomon Islands and the Habib Bank in Fiji.
BSP has laid the foundation of it operations on the willingness of its staff and a world class
banking platform, backed up by dominant market share and well structured and strongly
capitalized balance sheet. It has laid out its key performance indicators (KPI’s) and the
achievements are remarkable compared to similar KPI’s of peer regional banks in Australia.
The international Standard and Poors in 2005 rated BSP with the highest possible rating of B+
with a stable outlook. The Board and management and the shareholders are delighted with the
achievement by BSP. This has set the scene for more exciting journey ahead in 2006 and
beyond.
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1. INTRODUCTION
The Bank South Pacific (BSP) commenced operations in 1957 as a branch of the Australian
National Bank in Papua New Guinea (PNG). The principle activity of the Bank South Pacific
(BSP) is to provide commercial and finance services to the people of PNG. With its
headquarters located in Port Moresby, BSP has grown over the years to become a leading bank
in PNG. It currently has 39 branches in the country and one offshore in Niue and is completing
the acquisition of the National Bank of Solomon Islands and the Habib Bank in Fiji.1 In a major
move in 2001, BSP merged with the PNG Banking Corporation (a wholly owned PNG
Government subsidiary and largest national bank) under an ‘amalgamated deed’ under the
privatization program, which cost BSP K140.56 million2. BSP is one of the largest private
sector incorporated businesses in PNG and is developing to be a local “icon”
3
. It is listed on thePort Moresby Stock Exchange (POMSOX) since 2003 and is incorporated under the Companies
Act of PNG and is an authorized Bank under the Banks and Financial Institutions Act of PNG.
Its registered office is located along Douglas Street, Port Moresby.
This paper was prepared by a team of MBA students from the University of the South Pacific
with the objective of developing a Strategic Plan for the Bank South Pacific for 2006 to 2008 .
The report was based on information available mostly on the website. The team used various
strategic management tools including analytical matrices as introduced by Fred David (2006)4
to develop the strategic plans for BSP. The paper begins by introducing the bank and discusses
the industry and markets in the region, it then conducts a situation analysis, reviews key
strengths, weaknesses, threats and opportunities (SWOT analysis), then develops management
matrices such as the SPACE, BCG, CPM, GPS etc. It then assesses and evaluates the bank’s
strategies, vision and mission statements, values and objectives, business and financial
conditions including comparisons with competitors and concludes with a list of strategies and
goals, costs and a control system including implementation schedule.
2. SITUATION ANALYSIS
1 PNG Post Courier 06/10/062 PNG currency is expressed in Kina and Toea. At the current exchange rate K1.00 = US$0.32 & F$0.52 av.3 BSP Managing Director – Garth McIlwain’s address to shareholders in 2006 AGM4 David, F., Strategic Management, Concepts and Cases, 11 th ed. pp.5-7, 364-366
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Bank South Pacific has been in existence for nearly 50 years going through various positive
transformations in the process. It has maintained local dominance post merger with a major
52% share of the domestic market. BSP’s continuing expansion of services to nearly all corners
of the country is an indication of its value for customers, obligation to shareholders and the
general public and a reflection of an effective management system. The BSP currently employs
in excess of 1,900 staff and this is expected to increase.
2.1 Business Market Summary
BSP is in the comfort zone in terms of local market dominance in PNG although there is
always room for expansion. In other words, the existing business vision and strategies
are conducive to local conditions. Exposing operations to regional and internationalmarkets will pose challenges for the management. With the penetration of the Solomon
Islands and Fiji markets, BSP has however shown its strength and capability to position
itself strategically in the region for further expansions. As an added advantage of
minimal transportation cost and the service nature of its operations, BSP is expected to
increase coverage in the region.
PNG has a population of 5.8 million people, which is more than double the total
population of the Pacific Island Countries combined5. 13% of the population lives in the
urban areas. This may be seen as a reason for BSP’s focus on organic growth. However,
the challenges of globalization, increased competition and profitability opportunities are
forcing companies to reconsider their strategies and the way they do business.
Regional trends
It is estimated that there are currently in excess of 50 banks and financial institutions
operating in the Pacific region. A majority of the banks are either internationally
owned or Government controlled. These consist of the ANZ and Westpac banks and
the Bank of Hawaii and Bank of Guam (mainly in the smaller PIC’s). Of the total
banks in the region around 65% are international commercial banks. The smaller
PIC’s such as Kiribati, Marshall Islands, Palau and Tuvalu have very little to no
private domestic banks. In Tuvalu for example, there are no commercial banks and
5 ADB Pacific 2020-Table 2.1-‘Basic characteristics of Pacific Island Countries”
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all banking is done through the State bank.6 The Melanesian countries such as PNG,
Solomon Islands, Fiji and Vanuatu have comparatively higher number of banks.
Figure 1 shows the types of banks for each of the PIC’s. It should be noted that
some banks may have changed names, merged with other banks, moved operations
or closed down.
Figure 1 - Banks in the Pacific Region(Not available: Niue and Cook Islands)
The graph indicates one type of bank per country. For example Vanuatu has six
different types of banks classified as ‘Others’. PNG for example has two types of
‘other’ banks. The chart does not indicate market share.
Industry Growth
The growth of the banking industry in the region is said to be slow.
On a localized front, Fiji has seen an increase in foreign direct investment (FDI) in
various international investments, including banking and finance services.
BSP is the leading domestic commercial bank in PNG facing competition from
major international banks such ANZ and Westpac. It is expanding and has recently
announced the opening of a new branch in Moro, a mineral resource haven in the
rugged highlands of PNG. This brings to 40 the number of BSP branches in PNG.
6 http://www.portalino.it/banks/links_oceania.htm
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BSP has tapped into the two largest markets in the region – Fiji with a population of
840,000 and Solomon Islands (521,000). This positions BSP strategically in the hub
of the region.
Market geographies
The local physical geography is considered tougher than the region due to the
ruggedness of the country and accessibility difficulties. 87% of PNG’s population
lives in the rural areas and 13% in urban centres in the provinces of PNG. BSP has
banks established in all major towns, districts down to the local level and it has
managed well bringing services to the rural people.
BSP Headquarters, Port Moresby, PNG BSP in Alotau, Milne Bay Province, PNG
There is little geography hindrance to BSP when establishing in the region (Fiji and
the Solomon Islands) in terms of accessibility and infrastructure support. There are
no major transportation costs, however reliable air service, communication and
technology and infrastructure are readily available.
Technology and Innovation
BSP provides various banking services through a network of computerized banking
systems and innovative electronic facilities made available to customers on-line,
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including smart cards, and electronic customer signature scanning for branches,
international Visa Card acquiring, generic ATM installation expansion and internet
banking for personal and corporate clients. BSP has a very informative and fully
fledged website service where the shareholders, customers, individuals and
businesses in PNG and abroad can access to learn more about the bank and its
products and service offerings. Various reports such as the Annual Reports and
newsletters, exchange rates and other important issues are also available.
Training
BSP accords high priority to training and development of its human resources to
acquire the necessary skills to execute their duties effectively. As a wide variety of
skills are required by BSP, employees at all levels are provided with on-the-jobtraining and professional training with occasional in-house training, self-learn
packages and selected external courses.
A considerable staff training program to upgrade branch teller systems and branch
back office processing was conducted in 2005 to better serve customers in the
remote areas. Also in the same year the General Manager Human Resources
completed a world-class human resource Performance Management System.
BSP also conducts a Management Trainee Program for young graduates in the
fields of Business, Economics, Accounting, Marketing and Information Technology.
The graduates are recruited direct from the local universities and are trained under
strict professional development programs whilst attached to the seven Strategic
Business Units. After an initial 12 months, they then proceed to the Bank’s High
Growth Potential Program where their careers will be guided and monitored
through the BSP annual Management Review process to prepare them for
supervisory and management duties.
2.2 SWOT Analysis
The SWOT anlaysis consists of the EFE and IFE matrices.
The key external factors (EFE) in threats and opportunities which influence bank
operations are listed below. Also listed are the internal strengths and weaknesses
of BSP - Key Internal Factors (IFE) in the tables below.
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Table 1 - Key External Factors (EFE)
The EFE table below shows that BSP external opportunities far outweigh that of
the external threats. The total weighted score of 3.68 (which is above the average
of 2.5) indicates a strong external position for BSP. The immediate notable
opportunity factor is for BSP to complete the acquisition of the NBSI and HBF
and further penetrate the regional market. On the other hand, BSP faces strong
competition from other competitors mainly the international banks.
3.681Total
1.290.42
0.0820.04Depletion of foreign reserve12
0.0620.03Increasing inflation11
0.6040.15Competition10
0.1020.05Political instability and economic downturn9
0.1830.06Total asset invested in domestic government securities8
0.2730.09High risk operating e nvironment7
Threats
2.390.58Total
0.3030.10Buying equity (eg PNG Microfinance Ltd)5
0.4840.11Merging with other banks4
0.3640.09Acquisition of other capital stockbrokers (eg Wau Microbank)3
0.6040.15
Plans for the acquisition of both the National Bank of SI and
the Habib Bank Ltd, Fiji2
0.6550.13Regional market penetration1
Opportunities
SCORERATINGWEIGHT
WEIGHTEDKEY EXTERNAL FACTORS ( EFE)
Table 2 - Key Internal Factors (IFE)
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0.0220.01Debts recoveries management12
0.6050.12Focus on customer service quality & wealth8
0.1530.05Adequate electronic banking capability and ATMs6
0.0930.03Sound domestic banking franchise7
3.531Total
0.500.32
0.0110.01Regional market share13
0.0310.03Higher credit risk portfolio than commercial banks11
0.1820.09Limited lending opportunities10
0.1220.06Broad and unclear vision9
0.1420.07Organisational structure8
Weaknesses
3.030.68
Total
0.1230.04Capable and dedicated Board9
0.1230.04Adequate staff development and supervision5
0.6550.13Very good capitalization and profitability4
0.5550.10Adequate asset quality3
0.3640.08Very good funding and liquidation profile2
0.4040.09Strong market position1
Strengths
SCORERATINGWEIGHTKEY INTERNAL FACTORS ( IFE)
WEIGHTED
As for the internal factors, BSP’s strengths surpassed that of weaknesses as shown by
the IFE matrix table below. The total weighted score of 3.53 (which is above the
average of 2.5) indicates a strong internal strength position for BSP. The notable
strength of BSP lies in its financial status and customer focus. The major weaknesses
are the regional market share and debt portfolio recovery.
3. SWOT Matrix
A SWOT Matrix was developed using the information analyzed in the IFE and EFE above.
Table – 3 SWOT Matrix
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WT Strategies
1. Prioritize market segment to
increase profitability. (W3,6,T6)
2. Pursue aggressively loans from
corporate and commercial clients
(W3,T1,2)
ST Strategies
1. Aggressively promote regional
market growth. (S1,S2,S3, T1,T6)
2. Strong company image
(S1,S7, T3,T6)
Threats
1. High risk operat ing environment
2. Total asset invested in domestic
government securities
3. Political instability and economic
downturn
4. Declining Value of focal currency
5. Inflation
6. Competition
WO Strategies
1. Organisational restructure
(W1, W2, O2)
2. Improving operating
efficiency
(W5, O3, O5)
3. Strengthen debts recoveries
Unit (W5,O5)
SO Strategies
1. Acquire and merge with local and
regional banks(S1, S3, S4,O1,O2,O3,O4,O5).
2. Expand and improve on banking
franchise, electronic banking and
ATMs. (S1,S4,S6,O1,O4,O5)
3. Diversify its earnings and asset
profile (S1,S2,S4,S5, O5).
Opportunities
1. Regional market penetration
2. Plans for the acquisition of both theNational Bank of SI and the Habib Bank Ltd,
Fiji
3. Acquisition of other capital stockbrokers
(eg Wau Microbank)
4. Merging with banks
5. Buying equity (eg PNG Microfinance Ltd)
Weaknesses
1. Organisational Structure
2. Broad and unclear vision
3. Limited lending opportunities
4. Higher credit risk portfolio than
commercial banks
5. Debts recoveries management
6. Regional market share
Strengths
1. Strong market position
2. Strong funding and liquidation profile
3. Adequate asset quality
4. Strong capitalization and profitability
5. Staff development and supervision
6. Adequate electronic banking capability
and ATMs
7. Focus on customer service quality &
wealth
SWOT MATRIX
Using the SWOT Matrix the team linked the key internal and external factors as a guide
to developing appropriate strategies for BSP. These are physical alternative strategies
which will be further developed, prioritized and implemented in accordance with
recommended implementation plan.
4. COMPETITIVE PROFILE MATRIX (CPM)
For comparison purposes, similar banks in the region such as National Bank of Solomon
Islands (NBSI) and National Bank of Vanuatu (NBV) were considered to develop a CPM
for BSP. The resultant CPM is shown below. In comparing, the various critical success
factors were measured against weighted ratings for each of the selected banks, BSP
achieved the highest weighted score of 4.18 as compared to NBSI (2.76) and NBV (2.9).
This indicates BSP as being more competitive than the two similar banks in the region.
Table 4 – Competitive Profile Matrix
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Bank South Pacific Nat. bank Vanuatu Nat. Bank Solomons
Critical Success Factors
2.902.764.181.00Total
0.2730.2730.3640.09Management Experience
0.0110.0110.0110.01Price Competition
0.5240.3930.6550.13Customer Service
0.0210.0420.0210.02e-commerce
0.0220.0110.0110.01Production Capacity
0.0420.0420.0820.04Organizational Structure
0.0000.0000.0630.02Global Expansion
0.4830.4830.8050.16Sales Distribution/loans
0.3030.3030.4040.10Customer Loyalty
0.3330.3330.4440.11Product/Service Quality
0.4530.4530.7550.15Financial Position
0.0420.0210.0420.02Inventory System
0.4230.4230.5640.14Market Share
Wt.ScoreRatingWt.ScoreRatingWt.ScoreRatingWeight
Competitive Profile Matrix (CPM) for BSP
4.1 Competition
In terms of competition, BSP faces stiff competition at the regional level more than at
the domestic level particularly from the international banks. The existence of BSP on
Niue may be of little concern for BSP’s rivals due to the tiny market population fewer
than 3,000. The total PIC population is around 8 million. However, BSP has learnt
plenty from the Niue experience. It sees the arrangement as a “testing pattern and
forerunner” and leverage to enter bigger markets.
The main competitors for BSP are the ANZ, Westpac and Bank of Hawaii. The latter
had established in Port Moresby, PNG few years back but has ceased operation a few
years back. It can be said that BSP is not new to these competitors and the challenges
and has prepared itself well to move forward in the islands.Figure 2 shows the various banking sectors in the region. As can be seen the largest
sector (competitor) is the international banks (65%). BSP has to compete against these
international rivalries to top the banking business in its efforts to go regional and
internationally.
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Pie Chart
Distribution of Banks in the South Pacific(Excl. PNG, Cook Islands, Niue)
Westpac
9% ANZ
11%Bank of Hawaii
11%
Domestic
35%
Others
27%
Bank of
Guam7%
Figure 2
4.2 Product Offering
The BSP offers various products and services to its customers. This includes business
banking, personal banking and on-line services. For the business banking BSP offers
services such as cheque accounts, international services, loan products, merchant
services, payroll services and term deposits. In personal banking, BSP offers a range of
services to meet customer specific needs. This include cheque accounts, international
services, home loans, personal loans, phone banking, savings accounts, term deposits,
western union and others to the customers’ satisfaction. These services are of the world-
standard.
home loans international services card transactions - ATM personal loans
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5. BOSTON CONSULTANT GROUP (BCG) MATRIX
Figure 3 – BCG Matrix
Conclusion: BSP has a strong growth rate dominating locally and has a potential to tap into regional and international
markets. Both NBV and NBSI restricted to local market and do not have a strong growth rate
BSP
NBV
NBSI
6. SPACE Matrix
29/7= 4.14-15/7= - 2.14Total
4Productivity, capacity utilization-3Control of products & services spread
4Ease of entry into market-2Technological know-how
4Resourse utilization-3Competition capacity utilization
4Technological know-how-2Customer loyalty
4Financial stability-2Product lifecycle
4Profit potential-2Productivity quality
5Growth potential-1Market share
RatingIndustry Strength (IS)RatingCompetitive Advantage (CA)
-29/9= -3.2221/5= 4.2Total
-3Risk involved in business
-2Price elasticity of demandKey- IS & FS , 1 worst & 6 the best
-6Ease of exit from the marketKey- ES & CA, -1best & -6 the worst
-2Competitive pressure
-2
Barriers to entry into
market4Cash flow
-5Price range of competing products5Working capital
-3Demand variability4Liquidity
-4Rate of inflation3Leverage
-2Technological change5Return on investment
RatingEnvironmental Stability (ES)RatingFinancial Strength (FS)
EXTERNAL STRATEGIC POSITIONINTERNAL STRATEGIC POSITION
SPACE Matrix
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0.51.51.0
1.0
2.52.0
1.5
0.5
0.5
1.0
1.01.5
1.5
2.0
2, 0.98
CompetitiveDefensive
Conservative Aggressive
BSP is financially strong and is beginning to achieve a major competitiveadvantage in pursuing aggressive strategy in a fast growing environment
ISCA
ES
FS
0.5
SPACE Matrix
7. BUSINESS STRATEGY
Developing business strategies is always a challenge. Today strategies are like moving targets
as businesses and markets continually change.
The word “South Pacific” in the bank’s name poses a big challenge for the management. In
other words BSP must live up to it’s “name” by doing more regionally, whilst remaining loyal
to its customers and shareholders. In the 2005 Annual Report Mr. Garth Mcllwain - Managing
Director’s revealed the Board’s commitment to see BSP become a “truly great pacific bank”.
The “Pacific Bank” is what we think the BSP should strive for. As discussed earlier, BSP needs
to scan the macro-environment, identify its key competitors, look at its internal strengths and
weaknesses and external opportunities and threats, position itself realistically through
appropriate strategic analysis and develop medium and long term objectives to achieve the goalof increasing its market share in the region.
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The above indicates that strategy 3, to pursue geographical expansion is a more attractive strategy when
compared to strategies 1 & 2
8. Vision and Mission statements
BSP states it has a “simple” vision – A bank with a powerful customer focus and an
understanding of shareholder value.
Whilst the bank does not have a mission statement, its strategy is also “simple”- We
segment our approach to the market based on customer groups who deliver value.
BSP’s current vision is appropriate given the nature and composition of its business. It
has placed priority on its customers and shareholders. However there is an imbalance in
terms of business image and market positioning to indicate what BSP wants to become
in the future. After all, the vision statement answers the question: What does an
organisation want to become? In this regard and in light of current developments as
discussed earlier in the paper, we propose a new vision for BSP as follows:
New Vision:
To be a leader in the banking and financing industry with a powerful customer focus
and an understanding of shareholder value.
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Similarly, the bank’s strategy is too “simple” and lacks strong business power and
direction, except to search market segments with customers that deliver value. We
believe ‘more meat’ is needed in the context of a mission statement to set the pace for
BSP. A mission statement is normally at the fore-front, on the walls and stairways
readily visible to the public. It identifies the scope of the firm’s operations and describes
the values and priorities of the organisation and in overall charts the future direction of
the organisation. BSP is already expanding operations into the Pacific region (with Niue
office operational in 2004) and Fiji and Solomon Islands soon. These are major business
strategies and missions that BSP need to inform its customers, shareholders and the
general public through a well developed mission statement. There are nine essential
components necessary for an effective mission. We present below a new mission
statement for BSP which includes the important nine components as highlighted below:
New Mission Statement:
At the Bank South Pacific, we strive to achieve more for our customers and
shareholders. As a leading bank in Papua New Guinea we are committed to providing
the best banking and financing services to our customers in Papua New Guinea and
the Pacific region. We will strive to excel in providing superior services with the
highest professional standards and acceptable practices to satisfy the banking demands
in the Pacific market . We will vigorously pursue a world class banking platform to
foster a climate which encourages innovative on-line service delivery through high-tech
electronic technology and banking systems. Our willing staff and prudent management
are well trained to ensure long-term customer and shareholder interests are protected
through sustainable business growth and profitability. Our philosophy is about
simplicity - to maintain simple visionary approach to our customers with a friendly
service. We believe our strength is in our natural ability and knowledge of the
environment we operate in and many, many years of relevant experience which gives us
the confidence and competitive advantage in better serving our customers. In delivering
our services we are always mindful of our standing and image in public and also of our
corporative obligations and social responsibilities to our employees and the public at
large.
a. Business Objectives
The long-term business objectives of the Bank South Pacific are summarised below:
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To expand business aggressively and offer above average returns to shareholders
To become the leading bank in the Pacific.
b. Financial Objectives
The financial objectives of BSP for the next 2-3 years are:
To complete financial transactions for acquisition of the NBSI and HBF 7 as an
immediate task
To consolidate and drive for profit in the new market segments
Maintain financial organic growth in PNG
c. Target Markets
Following the acquisition of the NBSI and HBF, BSP will consolidate and pursue
profits before considering further markets in the region. The current trends and industry
growth offers an ideal opportunity for BSP. In line with the bank’s objectives and
business strategies it is recommended that BSP should target the following markets:
PNG market
BSP has emphasized the need to maintain local organic growth as an immediate
consideration. BSP should increase coverage with its strong capital base,
estimated at K1.2 Million, and take advantage of local towns involved in
mineral, oil, gas and similar development projects in addition to those it is yet to
cover. One of these areas is the big Bougainville Island where BSP has only one bank operating in Buka town.
Regional market
BSP’s establishment on Solomon Islands and Fiji has set the scene for more
business opportunities in the region. Using the current trend and growth as
guide, the following market segments were considered as possible prospects for BSP – Vanuatu, Samoa and Tonga. These PIC’s are mainly dominated by ANZ
7 National Bank of Solomon Island and Habib Bank of Fiji
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and Westpac banks. The smaller distant island countries mainly use the Bank of
Hawaii and the Bank of Guam.
International
The international markets will always be a big challenge but not an impossible
task.
d. Key Strategies
The key strategies were developed in light of the new vision and mission statements,
objectives and linkages to BSP’s position in the industry market as discussed above. As
part of its strategy for the next 3-4 years, BSP will:
Concentrate on organic growth in PNG
Consolidate business in NBSI and HBF and drive for profit
Develop a Regional Market Expansion Plan (RMEP)
Consider acquisitions
Grand Strategy Matrix
BSP
1. Market development2. Market Penetration3. Product development
4. Forward integration
5. Backward integration6. Horizontal integration
7. Related Diversification
The GSM as shown above has positioned BSP in the rapid market growth and
strong competition position.
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Internal – External (IE) Matrix
1.0
3.0
4.0
3.0
2.0
1.02.0
Internal-External (IE) Matrix – BSP by Division Contributions
Strong
3 - 4
High
3 - 4
Weak
1- 1.99
Average
2 – 2.99
High
2 – 2.99
Low
1 – 1.99
20%
20%
10%
20%10%
10%
10%
Grow & build
Harvest & Divest H o
l d & M a
i n t a i n
The IE Matrix depicts contributions by departments in terms of its overall strong performance.
The Corporate and International Section contributed 20% to the overall performance and needs
to grown & built upon for further high performances.
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9. FINANCIALS
9.1 Likely forecast
Below is a likely forecast for BSP based on past six-year annual average growth rate:8
Table 1 – Likely forecast (PNGK ‘Million)
In forecasting, there were few assumptions made in the absence of reliable information.
These include acquisition costs, staff movements, proposed restructuring andoperational costs. The financial projections do not include costs for future acquisitions
although these are indicated in the implementation schedule (after 2008). The cost
assumptions and implementation schedule are further discussed in detail in Section 5 of
the report.
9.2 Worst case scenario - “What if”
The current unrest in Solomon Islands (RAMSI and civil tensions) and Fiji (military
threats) pose high risks for businesses. BSP’s new operations in the two countries will
be affected. The worst-case scenario predictions as shown below are based on the
assumption that tensions would continue to critical levels forcing the closure of both
operations in 2007. It is also assumed that BSP has acquired the two banks through
direct outright purchase.
Table 2 - Worst case scenario predictions (PNGK ‘Million)
BSP may risk losing up to K27 million (F$14 Million) in income in the first half of
2007 in this situation. Furthermore, BSP will be deprived of opportunities to invest inearly profits. It will also encounter delays in its plans for future expansions as well as
8 BSP Annual Report 2005
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2006 2007 2008 2009 2010
Income 306 414 476 547 629Expenditure (231) (288) (313) (344) (378)Total Assets 3,668 8,557 10,630 13,206 16,406
2006 2007 2008 2009 2010
Income 306 360 414 476 547Expenditure (231) (263) (318) (350) (385)Total Assets 3,668 8,557 10,630 13,206 16,406
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disruptions to posting and training opportunities for its staff. Most importantly, returns
on asset and to shareholders will fall below expectations.
In actual fact, past records indicate that the National Bank (NBSI) closed in 2003 due to
civil unrest following the failure of a pyramid investment scheme. Other major banks
including ANZ, Westpac, and the central bank also closed down.9
BSP’s strategy to focus on organic growth is able to sustain overall operations in such
situations.
9.3 Summary Matrix
Liquidation
Divestiture
Retrenchment
Unrelated Diversification
4BSPBSPBSPBSPRelated Diversification
5BSPBSPBSPBSPBSPProduct Development
4BSPBSPBSPBSPMarket Development
4BSPBSPBSPBSPMarket Penetration
5BSPBSPBSPBSPBSPHorizontal Integration
5BSPBSPBSPBSPBSPBackward Integration
5BSPBSPBSPBSPBSPForward Integration
COUNTGSMSPACEIEBCGSWOTAlternative Strategies
Matching - Summary Matrix
The summary matrix highlights some of the strategies that BSP needs to pursue in its
efforts for expansion and growth.
10. BALANCED SCORECARD
9 http://en.wikipedia.org/wiki/National_Bank_of_Solomon_Islands
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BALANCED SCORECARD FOR BANK OF SOUTH PACIFIC
• Chief Financial
Officer
• QualityManagement
• 2% or lessper yr
• 70% per yr
• Loandelinquencies
• Efficiency ratio
• No. of badloans made
• Overheadexpenses
Share Holder
• HRM
Manager
• Cycle time
optimizationprogramme
• > 25minutes/client
• Queuing time• Fast services
• Fast onturnaround
Internal Business
Process
• HRMManager
• Newproduct
Manager
• Crew training• Product
analysis
• Yr 1 – 70%• Yr 2- 90%• Yr 3 – 100%
• % Crewtrained
• % Sales
• Competence• Product focus
Learning & growth
• ClientServices
Manager• HMR
Manager
• Customerloyalty
programme• Quality
Management
• 90% changeper yr
• No. of productoffering peryr
• 90% per yr• 98%
satisfaction
• No. of customers
• % sales of new product
• Sales volume
• Customersurvey
• Morecustomers
• New product• Competitive
Product offering
• Satisfaction
Customer
• Chief FinancialOfficer
• Optimize• Standardize
products
• 20% per year• 20% per year• 5% per year
• Revenuegrowth
• Market value• Unit Cost
• Growth• Profitability• Cost
leadership
Financial
PRIMARY
RESPONSIBILITYINITIATIVESTARGETSMEASURESOBJECTIVESTHEME: Operating
Efficiency
This balanced scorecard can be used as a benchmark for the business excellence in terms of the
suggested strategy.
11. CONTROLS
12.1 Implementation
The implementation schedule for 2006-2008 and plans up to 2010 is shown below:
2006 2007 2008 2009 2010
Local (PNG)Regional
Fiji
Solomon IslandsVanuatu
SamoaTonga
International
Figure 3 - Implementation Schedule 2006 - 2008
The year 2007 will be challenging for BSP as operations commence in Fiji and Solomon
Islands and business expands in PNG. Considering profit growth in previous years BSP
is able to recover its investment in reasonable time. The implementation schedule
encourages further expansions based on the new vision and strategies of the bank. BSP
may consider banking prospects in Vanuatu, Samoa and Tonga.
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12.2 Organisation structure
BSP’s current organisation structure is shown below:
Figure 4 - Organisation Structure
BSP uses a flat organisational structure with limited levels which is line with its current
vision of customer focus and shareholder value. The limited levels of management
allow “Executives with responsibility for customers and value report directly to the
Managing Director’. The structure consists of seven strategic business units (SBU’s)
each headed by a General Manager.
Whilst the current structure has succeeded it has been viewed as mainly localized with
focus on organic growth. The expansion of BSP’s banking operations to Solomon
Islands and Fiji and possibly other markets in the region will increasingly impact on the
way BSP conducts business. This calls for appropriate changes including the current
structure. A change in the structure is required in the operations area as regional and
international operations emerge influenced by competition and profitability
opportunities. It is recommended that BSP include a SBU called Operations -
International. The section is to be headed by a General Manager tasked with the
responsibility of managing and reporting directly to the Managing Director on all
regional and international matters. The current Operations SBU will continue to oversee
national operations.
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Managing
Director
Retail
Bank
Corporate
and
International
Paramount
Banking
Credit
&
Risk
Human
Resources
Operations
Finance
&
Planning
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A new structure is shown in Figure 5 below with the changes highlighted. The changes
continue to support the flat structure in line with the new vision and objectives of the
bank as discussed earlier in the report.
“Improved” Organisational Structure (2006)
Source: BSP Annual
Report 2005
Domestic
GM
PNGPNG
GM GM GM
International
GM COO/GM CFOGM
NiueNiue
Solomon IslandsSolomon Islands
FijiFiji
Figure 5 – New Organisational Structure
12.3 Cost Implications
With every change in business strategies there are associated cost implications.
This report has made few assumptions and estimates where information is
lacking based on experience and discussions with fellow Pacific students
participating in the MBA program at the University of the South Pacific. The
major costs identified below relate to the Likely scenario forecast as shown in
Table 1. These include:
Acquisition costs – NBSI and HBF – K3.8 million
K0.2 million in costs for additional local establishments.
Operational costs plus staff movements – 10% of costs
15% growth in customer number
Remuneration package for new GM – K100,000 per annum
Expenses for setting up and staffing – K 150,000
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K3.8 Million for the acquisitions in Solomon Islands and Fiji
Asset value increases in direct proportion to acquisitions/expansion.
13. RECOMMENDATIONS
BSP’s strong financial performance and prudent management will enable it to make further investments in the coming years for the benefit of its shareholders, customers, staff andcommunities throughout the Pacific. It is recommended that BSP’s investment and growthstrategy for the Pacific should include:
Concentrate on organic growth in PNGImproving infrastructure and service levels for customers by developing a centre for excellence to support BSP’s business and creating more jobs in the Pacific.
Consolidate business in NBSI and HBF and drive for profit
Expanding regional banking to bring basic banking services to more Pacific Islanders.
Develop a Regional Market Expansion Plan (RMEP)
Continued focus on expanding BSP’s business in the Pacific by further investment inimproving branches and looking for new opportunities in new countries.
• The Balanced Scorecard as presented can be used as a benchmark for achieveing
high level performance.
14 CONCLUSIONS
BSP is already making its mark as a Pacific’s leading bank and has now focused on taking thisto the next level for the benefit of its customers and the community. That is the core of anexciting agenda for BSP in the Pacific. BSP is the leading bank and company in the SouthPacific employing over 1900 people with 40 branches in 2 countries including Papua NewGuinea, Niue, and currently expanding to include Solomon Islands and Fiji. BSP has potentialto further develop operations in the region and beyond.
This report has identified few strategies based on the various strategic management tools that
can be considered by the management of BSP in its endeavors to pursue its objectives and long-
term business goals.