STATEBANKOFINDIA:BATTLINGFORSHARE

ItwaseveofaneducationfairwhenRamamurthywasapproachedbyagroupofMBAstudentsforasummer project. Kavita and Divya, first year MBA students, looking very confident approached Ramamurthy and presentedtheirproposal.RamamurthydiscussedwiththemabouttheevolutionSBIwentthroughinthe last decade. State Bank of India (SBI) is a Public Sector Banking Organization (PSU), in which the Government of India is the biggestshareholder.ItisthelargestbankinIndiaandisrankedat380in2008FortuneGlobal500list,andranked 219 in 2008 Forbes Global 2000. Measured by the number of branch offices, SBI is the second largest bank in the world. SBI traces its ancestry back to the Bank of Calcutta, which was established in 1806; this makes SBI the oldestcommercialbankintheIndiansubcontinent.SBIprovidesvariousdomestic,internationalandNRIproducts andservices,throughitsvastnetworkinIndiaandoverseas.Withanassetbaseof$126billionanditsreach,itisa regional banking behemoth. In 2008 SBI was ranked 380 from a rank of 495 in 2007. As per fortune 5002008 followingarethedataforSBIin$million. Revenues:22,402.2 Profits:2,225.0 Assets:255,854.9 Stockholders'Equity:15,263 The SBI group companies include SBI Capital Markets Ltd, SBI Mutual Fund (A Trust), SBI Factors and Commercial ServicesLtd,SBIDFHILtd,SBICardsandPaymentServicesPvtLtd,SBILifeInsuranceCo.LtdBancassurance(Life Insurance),SBIFundsManagementPvtLtd,SBICanada. SBI was rechristened as State Bank of Indian in 1955 from Imperial bank of India. The decade of 2000s was a turning point in the Indian banking industry. It brought out a major transformation in the working style of Indian banks. With several competitors gaining ground in Indian Territory, SBI was facing constant threat of takeover. The exhibit below maps the banking industry using porters five forces model. The model shows that there is huge competition in the banking industry and that the customer is the king. Banks that provide goodcustomerserviceandareresponsivetothemarketinthelongrunwouldwin.
Bargainingpower ofcustomers(loan receivers)ishigh duetopossibility ofmultiplebanking Threatofnew entrantsishighas MNCswithlarge capitalpowerare likelytoenterinto thearena

5forces analysis

Bargainingpower ofsuppliers(a/c holders)ishigh duetostrong competition

Threatof substitutesislow asbankingismore convenientand safeinvestment

Competitive Rivalryishighas therearemany privateplayers withthestateof thearttechnology

2 PortersFiveForcesModelforBankingIndustry

In 2001 SBI appointed KPMG as a consultant for preparing an IT plan for SBI. In 2002, SBI launched a project to network more than 14,000 domestic and 70 foreign branches. All branches were computerized but on decentralized systems. This was the time when competitors like ICICI Bank and Citi Bank with technological competence entered Indian market and posed immediate challenge for SBI. They carried superior customer relationship management systems and responded very quickly to customers. Yielding to them would require SBI to restructure its business. Either fight for competency or go out of business. In 2004, SBI implemented business process reengineering and rolled out sixsigma. It launched an initiative of core banking systems for integratingallitsbranchesandby2008,SBIbecamethesecondbackintheworldtohave10,000branches.

1955:Imperial BankofIndia becameState BankofIndia.

2001:KPMGwas appointedasa consultantfor preparinganIT planforSBI. Corebanking proposed,FNS, CSandComlink selectedfor implementation

2002:SBIlaunched aprojectto networkmorethan 14,000domestic and70foreign officesand branches.All branches computerizedbut ondecentralized systems.

2004:Business ProcessRe engineering implementedand sixsigmarolled out.SBIlaunched initiativeforcore bankingsystems forintegratingall itsbranches.

2008:StateBank ofIndiaon becomingthe secondbankin theworldtohave 10,000branches

BriefhistoryoftransformationatSBI SBIhasthelargestmarketshareinbankingsectoranditisaheadofitsimmediatecompetitors,namely,ICICI BankandAxisBank.AlthoughSBIisthelargestbank,Ramamurthycarriedagrimsmileoverhisface.Leaning over the desk he spoke to Kavita and Divya, Although we are the best in the market, we are losing market sharetootherbanks.WearelosingshareofourHighNetWorthindividuals.HighNetWorthindividualsare thosewhohaveinvestedmorethantenlakhswithusandcarryhighpotentialforinvestment.However,since the entry of private players in the market it has been losing market share, particularly of the high networth individuals who are important customers of State Bank of India. With their latest technology and customer orientedservicestheseplayerswereabletostealaconsiderablepieofthemarketshareoftheStateBankof India.Promisingtolookintothematter,KavitaandDivyatookleaveofRamamurthypromisingtoinvestigate thematter.TheexhibitbelowshowsthebriefhistoryoftransformationatSBI.

Strengths
Nationalizedbank Fairpractices Goodwillinthemarket Largestnetwork

Threats

Opportunities
Ruralbanking

SBISWOT ANALYSIS

Competitionfromprivate andinternationalbanks Customerretentiondueto multiplebanking LossofMarketShare

Weaknesses
CustomerCare QuickOperations

MARKETINGSTRATEGIES SBI took several initiatives to capture the market pie in 2008. SBI has adopted various marketing strategies for educating customers about its products and services, particularly the asset products. The various marketing strategiesofSBIarediscussedbelow: Participationinvariousconsumerexhibitionandmeetings SBI multiproduct sales team regularly participates in the exhibitions / melas organized by various sponsors (e.g.,SSISmallScaleIndustries).SBIfinancesloanstotheentrepreneursthroughthischannel.SBIalsosetsus booking counters are various tradefairs and industrial fairs where it offers loans at concessional rates to borrowers for booking at those counters. Apart from financing loans to the borrowers, SBI uses thesemeets asanopportunitytoeducatepeopleaboutitsvariouspersonalsegment(psegment)productsandservices. Tieupswithbuilders/carandothervehicledealer SBI has entered into financing agreement with various builders, cars and other vehicle dealers to finance the customersattheexistingmarketrates.Usually,wefinddealeradvertisingpurchaseoftheirvehiclesatcheap rates.Thisispossiblethroughaloanagreementwiththebanks. Festiveloanproducts SBI takes advantage of festive seasons, such as Holi, Diwali, Christmas, NewYear for propagating their loan products. During these periods it ties up with various dealers to organize finance for customers who wish to purchase cars or other vehicles during the festive period. During festive periods it offers XPress credit and festivalloanalsotothecustomers. AdvertisinginTVandNewspapers The advertising strategy is centralized at Mumbai office for advertisements in TV and Economic Times / The Times of India. The famous Chiman Lal Charlie Ad placed in TV has also won awards. SBI campaigns also attempts to explain why it is better than other banks (See Figure 9). For advertisement into other National dailies and local dailies their advertisement strategy is decentralized at the local headoffice level. SBI has launched an education initiative to educate its customers about ATMs, its account opening services, its wide

network, home loan and various other loan products and so on. The advertisements are regularly published inlocalandnationaldailies. ThebankhastakenthepositioningofPureBankingemphasizingthatSBIdoeswhatitdoesbest:Pure banking. The bank has now taken the tagline" Pure Banking , Nothing else", which takes a dig at new generation banks which spend lot of time doing nonbanking financial services. A new TV commercial is also running showing a young guy getting impressed by the services offered by SBI, which is his parents bank. The recent print and TV commercialareaimedat shedding the "old public sector bank" image of SBI and make it more relevant and attractive to the young customers. The bank is now running a mix of rational, humorous and emotional advertisementtopromotethebank. OralMarketing SBI has appointed various customer relationship officers and assistants at the 10 branches of SBI, Bilaspur. These officers take care to provide the relevant information to the customers who visit their offices. They help the customers with various products andservicesofSBI. ProfessionalOfferings SBIhasalsoseveralofferingsdirectedtowardsprofessionalswho wish to set up their own businesses. For example, Doctor Plus/ Dental Doctor Plus is a finance scheme directed towards the Doctors/ Dentists who wish to set up their own clinics/ SBIsAdvertisement dispensaries and for purchasing medical equipments. Similarly, they have SBI Shoppe scheme which is directed towards other professionals like beauticians and other serviceoriented people encouraging them to set up their own establishments for rendering services. SBI has a welltrained multiproduct sales team (MPST) which educates its customers about these products and services. Adsatvariousdisplayboards SBIalsoadvertisesatvariousbillboardsaboutitsproductsandservices TARGETTINGRURALMARKET In 2008 SBI planned to capture the rural market of India. Establishing a bank in a rural area is a costly affair. However, the technological advancements made the possibility of banking over mobile from anywhere in India. SBI launched mobile banking in March 2009 with a vision to capture rural market without needing to establish any physical premises there. Along with SBI, ICICI and few other banks also launched Mobile banking. Mobile banking refers to conducting banking activities using a mobile device, whereby customers can access their accounts to check account balances, transfer funds, pay bills, and perform various other transactions.Mobilebankingreducesdelaysinbankingtransactionsandaffordstimetoemployeesforother bankingservices. The introduction of mobile banking follows the relatively successful introduction of Internet banking in India, whereby customers can access their bank accounts, through the banks web site. Since, the number of Internet users is small in comparison to mobile phone users in India, the mobile phone network is the most

likely platform for valueadded services such as online banking and mobile commerce (Manson, 2002). Several issues, both technological and cultural mar the adoption of mobile banking. Vital Analytics (2009) reveals fast growth of Mobile Banking in Urban India. Around 40 million users in India are using mobile bankinginUrbanIndia.Themostwidelyusedservicesinmobilebankingarecheckingaccountbalance(91%), Viewing last three transactions (65%), Cheque status (48%), payment reminders (48%) and requesting a chequebook(44%). However,althoughpromising,theadoptionofMobileBankinghassofarbeendismal.Securityconcernisthe biggestbarriertoadoptionofmobilebanking.SBIundertookseveralsecuritymeasurestoallayuserssecurity concerns. Indian Government has also passed legislation covering mobile banking practices in India. Still the adoptionofmobilebankingisfarfromexpected.Particularlyinthetargetmarket(ruralareas),thereishardly any adoption. Lack of awareness of these security enhancing approaches could be one of the other major reasons for poor adoption. The tradition and culture of India plays a vital role in how Indian users view and adopt mobile banking for their transactions. It would be interesting to know if there are factors that mar adoptionbeyondthelackofawarenessorfaithinsecuritypracticesofIndianbanks.