You are on page 1of 37

Executive Summary

Customer satisfaction is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services exceeds specified satisfaction goals. Banking industry is playing a vital role in the economy of our country and customers are the heart of a bank. To be successful in such competitive market a bank must satisfy its customers properly with its various services. To do a study on the customer satisfaction towards the services of a bank Ive selected United Commercial Bank Ltd. (UCBL) as its one of the old and successful local private bank. The Bank is primarily oriented towards extending financial assistance in the trade and the commercial sector besides lending in the industrial sector. The Bank, aiming to play a leading role in the economic activities of the country, is firmly engaged in the development of trade, commerce and industry thorough a creative credit policy. The objective of this study is to determine whether the customers of UCBL are satisfied with the services of UCBL or dissatisfied. In my study I ve tried to find out in which area of services customers are mostly satisfied and dissatisfied; customers preference level about UCBL; which services are demanded by the existing customers base and also which services are required to achieve more customers; and the relative position of UCBL compared to other banks. From the companys perspective this study will help UCBL to understand its position in terms of satisfying its customers. It will help them to know which service attributes are most important for the customers. They will be able to understand in which area of services UCBL lack most and thus improve the quality of their service. They will understand which customer groups are more potential. They will also be able to know which products of UCBL are mostly preferred by the customers. This study will also help other banks and service and financial organization to understand the factors that affect the satisfaction level the customers and thus they will be able to improve their services.

Chapter # 1: Prefatory

1.1

History of Banking in Bangladesh

After achieving independence in 1971, the government of the newly-found Bangladesh declared the Dhaka branch of 'State Bank of Pakistan' the new Central Bank and named it the 'Bangladesh Bank'. Bangladesh Bank was responsible for controlling currency and credit and monitoring exchange control. It was also the official foreign exchange Reserve. The government took over all the existing national banks and renamed them. The existing foreign banks were given permission to continue their business in Bangladesh. Bangladesh Bank has been entrusted whit all of the traditional central banking functions including the sole responsibilities of issuing currency, keeping the reserves, formulating and managing the monetary and credit policy, regulating the banking system, stabilizing domestic and external monetary value, preserving the par value of Bangladesh Taka, fostering economic growth and development and the development of the countrys market. The Bangladesh Banks (Nationalization) Order enacted in 1972 nationalized all banks except foreign ones. Six nationalized banks were formed through merging the existing banks of the period. The rate of growth and development of banking sector in the country was extremely slow until 1983 when the government allowed to establish private banks and started denationalization process: initially, the Uttara Bank in the same year and thereafter, the Pubali Bank, and the Rupali Bank in 1986. Modern banking system plays a vital role for a nations economic development. Over the last few years the banking world has been undergoing a lot of changes due to deregulation, technological innovations, globalization etc. These changes in the banking system also brought revolutionary changes in a countrys economy. Present world is changing rapidly to face the challenge of competitive free market economy. It is well recognized that there is an urgent need for better, qualified management and better-trained staff in the dynamic global financial market. Bangladesh is no exceptions of this trend. Banking Sector in Bangladesh is facing challenges from different angles though its prospect is bright in the future.

History of Private Banks in Bangladesh There were no domestic private commercial banks in Bangladesh until 1982; When the ArabBangladesh Bank Ltd. commenced private commercial banking in the country. Five more commercial banks came up in 1983 and initiated a moderate growth in banking financial institutions. Despite slow growth in number of individual banks, there had been a relatively higher growth of branches of nationalized commercial banks (NCBs) during 1973-83. Financial sector reforms to strengthen the regulatory and supervisory framework for banks made headway in 2006 although at a slower than expected pace. Overall health of the banking system showed improvement since 2002 as the gross Non-performing Loans (NPL) declined from 28 percent to 14 percent while net NPL (less Provision) reduced to 8 percent from 21 percent. This led significant improvement in the profitability ratios. Although the Private Commercial Banks (PCB) NPL ratio registered a record low of 6 percent, the four Nationalized Commercial Banks (NCB) position are still weak and showed very high NPL at 25 percent. The NCBs have large capital shortfalls with a risk- weighted capital asset ratio of just 0.5 percent (June 2006) as against the required 9 percent. For the PCBs risk-weighted capital asset ratio stood at 10 percent. Bangladesh Bank issued a good number of prudential guidelines during the year 2006 and the first quarter of 2007 which among others relate to: Rationalization of prudential norms for loan classification and provisioning, Policy for rescheduling of loans, Designing and enforcing an "integrated credit risk grading manual", Credit rating of the banks, and Revisions to the make-up of Tier-2 capital. Bangladesh Bank has also taken up the task of implementing the Basel II capital accord. Further, the recent enactment of the Micro-credit Regulatory Authority Act (MRAA) for the regulation of the Micro Finance Institutions (MFI) has been a major development in the year 2006. Since 1998 CAMEL rating of banks gradually improved and in 2006 Bangladesh Bank updated this rating model by incorporating the market risk and the new model is known as CAMELS. Modern banks play an important part in promoting economic development of a country. Banks provide necessary funds for executing various programs underway in the process of economic development. They collect savings of large masses of people scattered through out the country, which in the absence of banks would have remained idle and unproductive. These scattered

amounts are collected, pooled together and made available to commerce and industry for meeting the requirements. Economy of Bangladesh is in the group of worlds most underdeveloped economics. One of the reasons may be its underdeveloped banking system. Government as well as different international organizations have also identified that underdeveloped banking system causes some obstacles to the process of economic development. So they have highly recommended for reforming financial sector. Since, 1990, Bangladesh government has taken a lot of financial sector reform measurements for making financial sector as well as banking sector more transparent formulation and implementation of these reform activities has also been participated by different international organization like world Bank, IMF etc.

1.2 Current Structure of Banks in Bangladesh


Bangladesh Bank (BB) has been working as the central bank since the country's independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. BB is also responsible for planning the government's monetary policy and implementing it thereby. The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are Nationalised Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks and the rest five are Development Financial Institutions (DFIs). Sonali Bank is the largest among the NCBs while Pubali is leading in the private ones. Among the 12 foreign banks, Standard Chartered has become the largest in the country. Besides the scheduled banks, Samabai (Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment) Bank and Grameen bank are functioning in the financial sector.The number of total branches of all scheduled banks is 6,038 as of June 2000. Of the branches, 39.95 per cent (2,412) are located in the urban areas and 60.05 per cent (3,626) in the rural areas. Of the branches NCBs hold 3,616, private commercial banks 1,214, foreign banks 31 and specialised banks 1,177. Bangladesh Bank (BB) regulates and supervises the activities of all banks. The BB is now carrying out a reform programme to ensure quality services by the banks.

1.3 Background of the Research


United Commercial Bank Ltd. (UCBL) was incorporated in Bangladesh as Banking Company under the Companies Act 1913 and commenced operation on June 26, 1983 when the Government allowed some commercial banks to operate in the private sector. As a scheduled bank of the country the banks activities are subject to the effective control, supervision and guidance of the Bangladesh Bank. The Bank is primarily oriented towards extending financial assistance in the trade and the commercial sector besides lending in the industrial sector. UCBL started its operation in mid-1983 and has since been able to establish one of the largest networks of 124 branches as on 31.12.2011 among the first generation banks in the private sector. With its firm commitment to the economic development of the country, the Bank has already made a distinct mark in the realm of Private Sector Banking through personalized service, innovative practices, dynamic approach and efficient Management. The Bank, aiming to play a leading role in the economic activities of the country, is firmly engaged in the development of trade, commerce and industry thorough a creative credit policy. In the 1972 the entire banking sector of Bangladesh was taken under nationalization in accordance with the avowed policy of the Government. The objectives of the nationalization of the banking sector was to create mass banking service is to the general people both in the rural and urban areas are in the inadequacy of the physical and social infrastructure, a low industrial and technological base, lack of private entrepreneurship and an under developed market provided the ground for active participation of the public sector in the developed process. But over the years, it has been experienced that public sector has become inefficient and continuous loosing concern. As a result, there has been a visible change in the policy of the Government, which was more favor of privatization, and a number of banks were launched as private commercial bank. UCBL was one of the oldest and leading private commercial bank which started its operation on mid-1983.

1.4 Customer Satisfaction


Customer satisfaction is a term frequently used in marketing, is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals." It is seen as a key performance indicator within. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. Customer satisfaction ratings can have powerful effects within organizations. They focus employees on the importance of fulfilling customers expectations. Furthermore, when these ratings dip, they warn of problems that can affect sales and profitability. These metrics quantify an important dynamic. When a brand has loyal customers, it gains positive word-of-mouth marketing, which is both free and highly effective. Therefore, it is essential for businesses to effectively manage customer satisfaction. To be able do this, firms need reliable and representative measures of satisfaction. Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty. Customer satisfaction data are among the most frequently collected indicators of market perceptions. Their principal use is twofold:

a. Within organizations, the collection, analysis and dissemination of these data send a message about the importance of tending to customers and ensuring that they have a positive experience with the companys goods and services. b. Although sales or market share can indicate how well a firm is performing currently, satisfaction is perhaps the best indicator of how likely it is that the firms customers will make further purchases in the future. Much research has focused on the relationship between customer satisfaction and retention.

10

1.5 Measuring Customer Satisfaction


In researching satisfaction, firms generally ask customers whether their product or service has met or exceeded expectations. Thus, expectations are a key factor behind satisfaction. When customers have high expectations and the reality falls short, they will be disappointed and will likely rate their experience as less than satisfying. To measure customer satisfaction, face-to-face interview or survey with a structured questionnaire is widely used in most of the companies now-a-days. A sample size of the respondents is usually used by the organizations for conducting such survey/interview. Kano Model and Multiple Linear Regression Model are the widely practiced models to analyze the customer satisfaction from the data collected from the surveys. Kano Model The Kano Model of Customer (Consumer) Satisfaction classifies product attributes based on how they are perceived by customers and their effect on customer satisfaction. These classifications are useful for guiding design decisions in that they indicate when good is good enough, and when more is better. Project activities in which the Kano Model is useful: Identifying customer needs Determining functional requirements Concept development Analyzing competitive products Other tools that are useful in conjunction with the Kano Model: Eliciting Customer Input Prioritization Matrices Quality Function Deployment Value Analysis The Kano Model of Customer satisfaction (Figure: Kano Model) divides product attributes into three categories: threshold, performance, and excitement. A competitive product meets basic attributes, maximizes performances attributes, and includes as many excitement attributes as possible at a cost the market can bear.

Figure: Kano Model

11

o Threshold Attributes: Threshold attributes are the expected attributes or musts of a product, and do not provide an opportunity for product differentiation. Increasing the performance of these attributes provides diminishing returns in terms of customer satisfaction; however the absence or poor performance of these attributes results in extreme customer dissatisfaction. o Performance Attributes: Performance attributes are those for which more is generally better, and will improve customer satisfaction. Conversely, an absent or weak performance attribute reduces customer satisfaction. o Excitement Attributes: Excitement attributes are unspoken and unexpected by customers but can result in high levels of customer satisfaction, however their absence does not lead to dissatisfaction. Excitement attributes often satisfy latent needs real needs of which customers are currently unaware. o Other Attributes: Products often have attributes that cannot be classified according to the Kano Model. These attributes are often of little or no consequence to the customer, and do not factor into consumer decisions. Multiple Linear Regression Model Multiple linear regression attempts to model the relationship between two or more explanatory variables and a response variable by fitting a linear equation to observed data. Every value of the independent variable x is associated with a value of the dependent variable Y.

Formally, the model for multiple linear regression, given n observations is:

Y = 0 + 1 X1 +2 X2+ + n Xn + I
Where, Y = Dependent Variable X = Independent Variable Unknown Parameter

Error Term

12

1.6 Objective of the study


The main objective of this study is to determine whether the customers of United Commercial Bank Ltd. (UCBL) are satisfied with the services of UCBL or dissatisfied. In my study Ill try to find out in which are customers are mostly satisfied and dissatisfied; customers preference level about UCBL; which services are demanded by the existing customers base and also which services are required to achieve more customers; and the relative position of UCBL compared to other banks. As customers are the heart of a company to be successful in such a competitive industry where competitors are availing same quality services to the customers to increase their customer base, this study will be very helpful for UCBL to learn about their current status of services from the customers point of view. UCBL can understand its position in satisfying customers compare to other competitors. It will help them to know which service attributes are most important for the customers. They will be able to understand in which area of services UCBL lack most and thus improve the quality of their service. They will understand which customer groups are more potential. They will also be able to know which products of UCBL are mostly preferred by the customers. This study will also help other banks and service and financial organization to understand the factors that affect the satisfaction level the customers and thus they will be able to improve their services. Also a belief in customers mind will settle that such study can help them to express their complaints and satisfaction to the company authority so that the company can overcome the drawbacks in providing services and provide better services to its customers.

13

1.7 Methodology
To do my research and to accomplish my objectives I have to go through different sources and I will use the both primary and the secondary sources to collect the most appropriate information. The "Primary Sources" are as follows Face-to-face conversation with the customers and if possible find their responses through questionnaire survey. The "Secondary Sources" of data and information are: a) Website of United Commercial Bank Ltd. (UCBL): www.ucbl.com b) Various book, articles, compilations etc. regarding banking functions. To prepare the research report and to find the output of my research I will use MS Excel & SPSS software. For doing the quantitative analysis of the data, I have used the Multiple Linear Regression Model.

Hypothesis
o Hypothesis: The customers are satisfied with the services of United Commercial Bank Ltd. (UCBL) o Alternative hypothesis: The customers are not satisfied with services of United Commercial Bank Ltd. (UCBL)

Independent variables: There are huge factors which can act as a independent variables like- Age, gender, profession, monthly income, environment of the bank, behavior and manners of the staffs, promptness and capability of the staffs in solving customers problems, knowledge of the staffs regarding various services and banking system, waiting time for the customers to get the service, features of different offers and packages, location of the branches, number of branches, ATM card facility, service charges, interest rate of loans, interest rate of savings schemes, online banking, Credit (Visa) card service, website, advertisement, security system etc.

14

For this study Ive selected few of those mentioned above as the independent variable for this study and those are behavior and manners of the staffs, waiting time, service charges, interest rates against loans, promptness and capabilities of staffs in serving the customers. All these independent variables will determine the Dependent Variable: Customer satisfaction towards the services of United Commercial Bank Ltd. (UCBL).

Limitations: Most of the time customers are not that friendly to fill up questionnaire or to talk for a little while as they are very busy during office hours. To measure the visibility, a sample survey is conducted which may not represent the entire population. Focus on limited factors and leaving out some other relevant factors which has been discovered after collecting the data. As Ive to do this survey by my own it was difficult for me to move different branches of United Commercial Bank Ltd. (UCBL) throughout the country. For my convenience Ive surveyed the customers who came to the Kawran Bazar branch of UCBL.

15

Chapter # 2: Overview of the Organization

16

2.1

About United Commercial Bank Ltd.

Sponsored by some dynamic and reputed entrepreneurs and eminent industrialists of the country and also participated by the Government, United Commercial Bank Ltd. (UCBL) started its operation on June 26, 1983 and has since been able to establish one of the largest networks of 124 branches as on 31.12.2011 among the first generation banks in the private sector. With its firm commitment to the economic development of the country, the Bank has already made a distinct mark in the realm of Private Sector Banking through personalized service, innovative practices, dynamic approach and efficient Management. The Bank, aiming to play a leading role in the economic activities of the country, is firmly engaged in the development of trade, commerce and industry thorough a creative credit policy.

2.1.1 Management
The Bank has in its Management a combination of highly skilled and eminent bankers of the country of varied experience and expertise successfully led by Mr. Muhammad Ali, a dynamic banker, as its Managing Director and well educated young, energetic and dedicated officers working with missionary zeal for the growth and progress of the institution.

2.1.2 Working Departments of United Commercial Bank Ltd.


United Commercial Bank Ltd. (UCBL) maintains the jobs in a proper and organized considering their interrelationship that are allocated in a particular department to control the system effectively. Different departments of UCBL are as follows: Human Resources Division United Commercial Bank Ltd. (UCBL) recognizes that a productive and motivated work force is a prerequisite to leadership with its customers, its shareholders and in the market it serves. UCBL treats every employee with dignity and respect in a supportive environment of trust and openness where people of different backgrounds can reach their full potential. The banks human resources policy emphasize on providing job satisfaction, growth opportunities, and due recognition of superior performance. A good working environment reflects and promotes a high level of loyalty and commitment from the employees. Realizing this

17

UCBL has placed the utmost importance on continuous development of its human resources, identify the strength and weakness of the employee to assess the individual training needs, they are sent for training for self-development. To orient, enhance the banking knowledge of the employees UCB Training Institute organizes both in-house and external training.

The major responsibilities of HR are as follows: Employee recruitment Posting Transfer Increment Established yearly performance bonus Provident fund Confirmation Training

Travel policy

Telephone policy

Personal banking Division The personal banking department deals with the consumer credit schemes such as the personal loan, car loan, education loan, tax loan, personal secured loan that are tailored to meet the demand of individual customers. The manager of United Commercial Bank Ltd. (UCBL) credit who approves and administers all the activities heads this department. The approval officer mainly rejects or approves the credit requests. After being checked by the approval officer, the credit requests go to the processing officer for further processing of the application.

18

Treasury Division Their main job is to take decisions regarding purchase and sell of foreign Currency. The purpose of Treasury's operations is to utilize the funds effectively and arrange funds at a lowest possible rate of interest, through maintaining effective relationship with other banks and following the Government rules and foreign exchange regulations. Computer and Information Technology Division This department gives the software and hardware supports to different departments of the bank. As United Commercial Bank Ltd. (UCBL) is engaged in online banking, the role of IT is very crucial for the bank. This department is the most active department of UCBL where employees always stand by to solve any problems in the system. The managers and executives of IT division work continuously to develop the total IT system of UCBL so that it can be operated with ease, accuracy, and speed. From the very beginning of its journey as commercial bank in serving customers UCBL has been laying great emphasis on the use of improved technology. Credit Division The borrowing capacity provided to an individual by the banking system, in the form of credit or a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual. Credit Policy Committee is composed of the managing director, the general manager, the Chief Risk Officer and the assistant general manager responsible for credits. Committee meets every other week, evaluates the banks overall lending portfolio and determines principles and policies regarding portfolio management. Operation Division This is an integral and vital part of United Commercial Bank Ltd. (UCBL). The services department ensures smooth operation and functioning within and between all the departments of UCBL. It also provides continuous support to the core banking activities of UCBL. The Manager of Services heads the department who formulates and manages various critical issues of the services function of UCBL. He is followed by a group of executives who are the heads of various subsidiary divisions that operate within the services department. The Services Department is considered as the backbone of all other departments.

19

Card Division United Commercial Bank Ltd. (UCBL) is one of the domestic commercial bank in Bangladesh to introduce Visa Debit Card and Visa Credit Card at the same time as an addition to their services for the customers. The total card related activities have been supervised by the card division in all the branches of UCBL. Finance & Accounts Division This is considered as the most powerful department of United Commercial Bank Ltd. (UCBL). It keeps tracks of each and every transaction made within UCBL Bangladesh. It is headed by Manager of FCD who ensures that all the transactions are made according to rules and regulation of UCBL group. Violation of such rules can bring serious consequences for the lawbreaker. The functions of FCD are briefly discussed below along with an organ gram of the department. Audit & Risk Management Division The Risk Management Division of United Commercial Bank Ltd. (UCBL) is responsible for measuring risks that the bank might face in the course of its operations, developing corporate risk management policies and ensuring that risks remain within the limits in which the Bank prefers to bear such risks in line with its own strategic targets and risk appetite. The primary goal of risk management is to provide capital to businesses in line with their risks (economic capital), maximize risk-adjusted return and increase the added value. The risk management function consists of Market Risk, Credit Risk and Operational Risk Management Units. Bank Risk Committee, Asset-Liability Committee, Credit Policy Committee, and Operational Risk Management Committee are the other risk management bodies.

20

2.1.3

Services of United Commercial Bank Ltd.


Savings Accounts Current Accounts Salary Accounts Home Loan Car Loan UCB Multi Millionaire UCB Money Maximizer UCB Earning Plus UCB DPS Plus Western Union Money Transfer SMS Banking Service On line Service Credit Card Time Deposit Scheme Monthly Savings Scheme Deposit Insurance Scheme Inward & Outward Remittances Travelers Cheques Import Finance Export Finance Working Capital Finance Loan Syndication Trade Finance Industrial Finance Foreign Currency Deposit A/C NFCD ( Non Resident Foreign Currency Deposit Account ) RFCD ( Resident Foreign Currency Deposit Account ) Consumer Credit Scheme Locker Service

21

2.1.4 Branches of United Commercial Bank Ltd.


Dhaka: Bangshal, Bhulta, Bizoy Nagar, Banani, Bashundhara, Chashara, Corporate branch, Dhanmondi, Donia, Dilkusha, Elephant Road, Faridpur, Foreign Exchange Br., Gazipur Chowrasta, Gulshan, Gopalganj, Hasanabad, Islampur, Kawran Bazar, Kanchan, Keraniganj, Konabari, Kanaipur, Madhabdee, Mirpur, Mirpur Rd, Mohakhali, Mohammedpur, Moulovibazar, Mymensingh, Mawna, Munshiganj, Narayanganj, Narshingdi, Nawabpur, Nayabazar, New Eskaton, North Brook Hall Road, Nabinagar, Paglabazar, Principle Br., Pragati Sarani, Rajbari, Savar, Shantinagar, Shatoirbazar, Shatarkul, Shibchar, Sonargaon Janapath, Tangail, Tongi, Tongi Station, Tejgaon, Uttara, Uttarkhan, Zinzira. Chittagong: Agrabad, Anderkilla, Anwara, Bahaddarhat, Brahmanbaria, Bhatiari, Battali, Chandpur, Chawkbazar, Chokoria, Chowmuhoni, Comilla, Coxs Bazar, Dohazari, Dampara, Eidgaon, Fotikchori, Feni, Gohira, Hathazari, Halisahar, Jubille Rd., Kadamtali, Kamal Bazar, Khatunganj, Laxmipur, Lohagara, Modunaghat, Muradpur, Maijdee Court, Nazirhat, Noapara, Laxmipur, Lohagara, O.R. Nizam Rd., Pahartali, Port, Rangunia, Raozan, Station Rd. Other Districts: Rajshahi - Bogra, Chapai Nabaganj, Naogaon, Natore, Pabna, Rajshahi, Sirajganj. Khulna - Chuadanga, Jessore, Jhenaidah, Khan Jahan Ali Rd., Khulna, Kustia, Noapara Bazar. Barisal Barisal. Sylhet - Amberkhana, Borolekha, Beanibazar, Biswanath, Goalabazar, Lamabazar, Moulovibazar, Nabiganj, Sherpur, Shibganj, Sylhet, Shahjalal Uposahar, Subid, Zindabazar. Rangpur Dinajpur, Rangpur.

22

2.1.5 Organogram of United Commercial Bank Ltd.

Managing Director (MD) Deputy Managing Director (DMP) Senior Executive Vice President (SEVP) Executive Vice President (EVP) Senior Vice President ` (SVP) Vice President (VP) Senior Assistant Vice President (SAVP) Assistant Vice President (AVP) First Assistant Vice President (FAVP) Senior Executive Officer (SEO) Executive Officer (EO) Principal Officer (PO) Senior Officer (SO) Management Trainee Officer (MTO) Junior Officer (JO)

23

2.1.6

Mission, Vision & Objectives

Vision The mission of the organization to make United Commercial Bank Ltd. (UCBL) the mist respected band leading private commercial bank in Bangladesh. Mission Create and urban area base bank for i) Mass people living in urban areas.

ii) Financial service institutions. Aiming to satisfy our customers with high quality services. Strategy United Commercial Bank Ltd. (UCBL) is implementing the strategy through following business: i) Private Banking, ii) Treasury, iii) Commercial, industrial to gain control, profitability and growth. Objectives The objectives of United Commercial Bank Ltd. (UCBL) are to provide innovative products supported by quality delivery of systems and excellence customer services, to train and motivate staffs and to exercise social responsibility. By combining regional strengths with group network UCBLs aim is to be the one of the leading banks in its principle markets. UCBLs goal is to achieve sustained earnings growth and to continue to enhance shareholders value.

24

Business Principles and Values The corporate character of United Commercial Bank Ltd. defines the values and principles inherent in all their everyday dealings. United Commercial Bank Ltd. (UCBL) is committed to: Outstanding customer service; Effective and efficient operations; Strong capital and liquidity; Conservative lending policy; Strict expense discipline;

United Commercial Bank Ltd. (UCBL) Operates According to Certain Key Business Values: The highest personal standards of integrity at all levels; Commitment to truth and fair dealing; Hand-on management at all levels; Openly esteemed commitment to quality and competence; A minimum of bureaucracy; Fast decisions and implementation; Putting the Groups interests ahead of the individuals; The appropriate delegation of authority with accountability; Fair and objective employer; A merit approach to recruitment, selection, promotion; Promotion of good environmental practice and sustainable development and commitment to the welfare and development of each local community.

25

2.2 History of the Parent United Commercial Bank Ltd.


Background of the Bank In the 1972 the entire banking sector of Bangladesh was taken under nationalization in accordance with the avowed policy of the Government. The objectives of the nationalization of the banking sector was to create mass banking service is to the general people both in the rural and urban areas are in the inadequacy of the physical and social infrastructure, a low industrial and technological base, lack of private entrepreneurship and an under developed market provided the ground for active participation of the public sector in the developed process. But over the years, it has been experienced that public sector has become inefficient and continuous loosing concern. As a result, there has been a visible change in the policy of the Government, which was more favor of privatization, and a number of banks were launched as private commercial bank. United Commercial Bank Ltd. (UCBL) was one of the oldest and leading private commercial bank which started its operation on mid 1983. Introduction of United Commercial Bank Ltd. United Commercial Bank Ltd. (UCBL) was incorporated in Bangladesh as Banking Company under the Companies Act 1913 and commenced operation on June 26, 1983 when the Government allowed some commercial banks to operate in the private sector. As a scheduled bank of the country the banks activities are subject to the effective control, supervision and guidance of the Bangladesh Bank. The Bank is primarily oriented towards extending financial assistance in the trade and the commercial sector besides lending in the industrial sector. Present United Commercial Bank Ltd. United Commercial Bank Ltd. (UCBL) has 124 branches all over Bangladesh and carries out all banking activities through its branches in our country and through international correspondent outside the country. It is now hoping to open fifteen more branches to serve its customers more frequently all over the country.

26

2.3 Organizational Status of United Commercial Bank Ltd.


At the end of the year 1996, United Commercial Bank Ltd. (UCBL) was in a steady and reasonably satisfactory progress except a very few short coming due to some adverse economic situation then the total assets of the bank was stating at BDT 9538.23 million which is an increase of 11.10%. Branch Expansion According to the annual report 2008 the bank contributed their efforts to improve the client service. All of its active branches along with Head Office and Principal Branch have been fully computerized to provide prompt and efficient service. A few new branches are introduced this year and the number of branches has increased to 84. To keep pace with the time and requirements the bank is continuing to expand its network even to abroad. With the start of the bank, it introduces three branches at the very beginning of the bank in mid 1983. And then the number of its branches increased gradually. In 1987 it came to 40 and in 1988 it increased to 50. According to the annual report of 1996, its branches were totaled 78 at that time.

Limitations of Branch Expansion and Computerization Though the important branches are being computerized but the computer skill of the employees is not that much satisfactory. Employees were in trouble in using the newly invented software. Also, those computers, which were used, were not very modern PCs. Moreover, those are used for a few purposes. As the employees have inadequate knowledge in using modern software so they didnt like to use computer at that time. Also only branch expansion is not the requirement s rather than the quality of the service of the branch.

27

2.4 Industrial Analysis


It is extremely crucial to analyze competitive forces in the industry environment to identify opportunities and threats. Michael E. Porters well-known framework, known as the five forces model helps with this sort of analysis. The model focuses on five forces that shape competition within an industry. The stronger the five forces, the more limited is the ability of established companies to raise prices and earn greater profits. Therefore, we can conclude that a strong competitive force can be considered as a threat because it depresses profit, whereas, a weak competitive force can be viewed as an opportunity as it facilitates the companies to earn higher profits. The situation of the industry changes overtime. The influence of the five forces in the banking industry has been discussed below:

2.4.1 Force:

Analysis of United Commercial Bank Ltd. According to Porters Five

Threat of potential entrants

Potential competitors are companies that are not currently competing in an industry but have the capability to get into the industry. The banking sector of Bangladesh seriously faces the threat of new entrants. However the threat comes from two directions. The first threat comes with the arrival of the multinational banks and their branch expansion particularly due to the booming energy sector. Secondly, the continuous entries of local banks with lower cost structure also possess a severe threat to this industry. In the context of United Commercial Bank Ltd. (UCBL) the various new & upcoming Banks pose a significant threat, being late entrants in the banking sector of Bangladesh. But UCBL is aware of these potential competitors. So it is trying to expand countrywide to make the sector unattractive & to create entry barrier. Government policies for banking industry are not so strong in this country. We don't have strong rules and regulation from Bangladesh Bank for regulating the private banking sectors. If government doesn't regulate the banking sector strongly than lots of new banks will come and will make the competition more intense.

28

Rivalry among established companies

In the banking sector, the market size is measured in terms of total deposits and total advances. Banking industry in Bangladesh is highly fragmented with categories like: Nationalized Commercial Banks (NCBs), Development Financial Institutions (DFI) or Specialized Banks (SBs), Private Commercial Banks (PCBs) and Foreign Commercial Banks (FCBs). The banking sector is at the growth phase as different types of businesses are mushrooming all over the places in Bangladesh, the need for banks has emerged, resulting in lots of banks operating in the market making the present situation quite intense. There are more than 50 commercial banks in the market, which are constantly fighting for the share in the market. Among the international banks, Standard Chartered Bank has the largest network in the metropolitans of Bangladesh, operating quite aggressively which can be a severe threat for the other banks in the banking sector of Bangladesh. Threat of substitutes

There are substitute financial institutions that do many of the activities and transactions of a bank in the leasing field but these financial and leasing institutions are too small in size. These institutions can shrink the profit margin of commercial banks. Industrial Leasing and Development Company Ltd. (IDLC), Industrial Promotion and Development Corporation (IPDC), United Leasing Company are the key players. They provide industrial leasing to many companies in the country. But some of the operations of the banks like exporting/importing have no substitutes. In banking industry substitute products are very easy to find. We need to consider all types of substitute products for the banks. Different private and nationalized banks are offering similar products, which are close substitutes. On the other hand some non-bank banks like insurance companies and leasing companies are also competing indirectly with the commercial banks product. All the products of the commercial banks perform the similar functions. Taking the money from the depositor and sanctioning loan to investors are the main functions. They all do it in a same manner. United Commercial Bank Ltd. (UCBL) is not different from them. Since functional similarity is high in banking industry so competition is also high because customer can switch at any time they want.

29

Product offered in banking industry is very identical. All the banks offer virtually the same products with same characteristics. Only few large multinational banks of our country are offering some differentiated products but the ratio is very low. UCBL offers products that are highly identical with other banks products. So, we can say that product identity is high in banking industry which means competition is also high. For example, the launch of premier banking by SCB poses a strong threat on UCBLs premium customer group and UCBL is at a condition where it should launch an even better product. Moreover the various consumer credit schemes offered by various local banks with lower interest rates and cost also poses a strong threat on the UCBL personal banking products. Again the lower service charges at national banks also discourage a wide group of customers to hold account in UCBL. So these are some of the threats posed by substitute products in the market place. Bargaining power of buyers

Bargaining power of the buyer can be viewed as a competitive threat when they are in a position to demand lower prices from the company or when they are in a position to demand better service that can increase operating costs. On the other hand, when buyers are weak, a company can raise its prices and earn greater profits. For the banking industry buyer means customers who take loan from the banks. Switching cost is very low in banking industry. Every bank is giving the similar types of loan at similar interest rate. So, an individual who wants to take loan from banks can switch easily to other banks if he or she doesn't like the terms and conditions. Customers of United Commercial Bank Ltd. (UCBL) are switching to other banks because of low interest rate and lots of other reasons. Lower switching cost makes the industry more competitive. In banking industry, there is always a chance for threat of backward integrations. Big multinational companies or corporations can give threats to the commercial banks that they will arrange their funds by forming another bank where the cost of fund is low compare to other banks. For this reason, giant customers of this industry always possess more power than their banks. Creditors are considered to be the buyers of the banks. There are thousands of creditors from all walks of life. Mainly businessmen are the major buyer of banks credit. Big amount creditors have strong powers in determining interest rate of their credit amounts. Banks distinguish their prime customers from others by setting a prime interest rate for them.

30

Bargaining power of suppliers

Bargaining power of suppliers can be viewed as a threat when they are able to force up the price that a company must pay for its inputs or reduce the quality of the inputs they supply, thereby depressing the company's profitability. On the other hand, if suppliers are weak, this gives the company the opportunity to force down prices and demand higher input quality. For the bank the main supplier of fund is depositor. Bank also gets its funds from the directors. United Commercial Bank Ltd. (UCBL) has one of the largest capitals among all other private banks. The bank doesn't want more money right this moment because there is a very few good opportunities for investment. So, it is offering lower interest rates on depositors for their funds. Bargaining power of the fund suppliers is low in banking industry because there are lots of individual savings in the economy but banks don't have opportunities for investment. Sometimes suppliers of funds can give threat to the bank as well. Corporations or big multinational companies can give threat to the private bank that they will form another bank for depositing their money. They will not supply any fund to other banks. We all know that bank makes money by investing other money. So, this can be lead to a higher competition in procurement of fund. Depositors are considered to be the suppliers of the banks. There are thousands of depositors from all walks of life. There are businessmen, service holders, farmers, students and people from virtually any other profession who are depositors of the banks. Big amount depositors have strong powers in determining interest rate of their deposits.

2.4.2 SWOT Analysis of United commercial Bank Ltd.


Strength

Clients deposit in the bank is much secured. The vault is insured. United Commercial Bank Ltd. (UCBL) is one of the largest & profitable private commercial bank in Bangladesh. For any difficulty faced by clients the relevant officer is responsible. The department incharge is always very much considerate and maintain a very good relation with his subordinates. The branches are very much solvent regarding the fund. It has good worldwide corresponding maintaining NOSTRO A/C.

31

Maintaining privacy and confidentiality the bank is not comparable. All the branches are well equipped and have enough technical support. United Commercial Bank Ltd. (UCBL) also has Management by Objectives (MBO) everywhere. Each person has multiple objectives. All the employees must have to get the approval of their bosses on what they are going to do. Later they review as how well they have performed their job with their management as well as the peer group. The MBO makes the review a communication device among various groups. The key to the system is a one-to-one meeting between a supervisor & a subordinate. In the meeting, the problems in dealing with customers are put forward first & every one dug it to solve them. At United Commercial Bank Ltd. (UCBL) the main objective is to setting up workshops are to remove authority from an artificial spot at the top & place it where the most knowledgeable people are, the people closest to the operations. The free exchange of ideas is reinforced by a policy of constructive confrontation. Each employee is expected to challenge ideas openly & aggressively, but never attack an individuals motives for presenting an idea. At United Commercial Bank Ltd. (UCBL) workshops are conducted periodically. On the workshops, all people participate as equals, with new members free to openly challenge top managers. HRD has tried hard to avoid communication barriers & structural bureaucracies. The little existence of authoritative barriers among the different level of management stimulates a feeling of importance as their work get priority over the position. The human resource of United Commercial Bank Ltd. (UCBL) is extremely well thought & perfectly managed. As from the very first, the top management believed in empowered employees, where they refused to put their finger in every part of the pie. This empowered environment makes UCBL a better place for the employees. The employees are not suffocated with authority but are able to grow as the organization matures. The selection & recruitment of United Commercial Bank Ltd. (UCBL) emphasizes on having the skilled graduates & postgraduates who have little or no previous work experience. The logic behind is that UCBL wants to avoid the problem of garbage in &

32

garbage out. & this type young & fresh workforce stimulates the whole working environment of UCBL. United Commercial Bank Ltd. (UCBL) employees are one of the major assets of the company. The employees of UCBL have a strong sense of commitment towards organization and also feel proud and a sense of belonging towards UCBL. The strong culture of UCBL is the main reason behind this strength.

Weakness

As United Commercial Bank Ltd. (UCBL) is a very large and busy organization the clients might face some problems. They might be bothered because of some unexpected inconvenience like waiting time, maintaining queue etc. The recruitment is not well enough. Those who are being appointed here are not enough technologically literate sometimes. Then few training sessions are much needed. The local office branch must be well decorated but this is not so. The bank management always instructs the official to know all the clients which is not under practice. The computer installing in UCBL branches is not modernized. The workload is very high so that the personnel cannot always maintain well communication with the clients. The bank is maintaining a conservative banking method. There is no open door culture. UCBL are not introducing new and dynamic innovation like ATM services which is already been introduced by other private banks in the country. Most of the employers from messengers to the top level are from a particular region of the country. UCBL currently do not have any strong marketing activities through mass media e.g. Television. TV ads play a vital role in awareness building. UCBL has no such TV ad campaign.

33

Opportunity

United Commercial Bank Ltd. (UCBL) is noted for its distinct operating procedures. Repayment capacity as assessed by UCBL of individual client helps to decide how much one can borrow. As the whole lending process is based on a clients repayment capacity, the recovery rate of UCBL is close to 100%. This provides UCBL financial stability & gears up UCBL to be remaining in the business for the long run. The ultimate goal of United Commercial Bank Ltd. (UCBL) is to expand its operations to whole Bangladesh as its mission is to create both urban and rural base bank for mass people. Nurturing this type of vision & mission & to act as required, will not only increase UCBLs profitability but also will secure its existence in the long run. The top management team of United Commercial Bank Ltd. (UCBL) is expert in banking activities. The operating policies established by them are unique & unified. All the members of the team carry out their management roles exhaustively. They equally contributed to UCBLs superior leadership, by carrying out their unique roles. They worked well together, respecting each others abilities, & arguing openly & without any rancor when they disagree. An ATM service is one of the most popular and emerging products in Bangladesh, which offers customers total financial mobility. Various other banks and institutions are currently offering this product. United Commercial Bank Ltd. (UCBL) has started this facility in collaboration with the Prime Bank. But, to be the market leader it has to introduce its own ATM card. United Commercial Bank Ltd. (UCBL) is one of the experts in acquiring various firms and organizations. In Bangladesh it can also diversify quickly by acquiring various local established banks and increase its total operation within Bangladesh rapidly.

Threats

The upcoming private local & multinational banks posses a serious threat to the existing banking networks of United Commercial Bank Ltd. (UCBL). It is expected that in the next few years more commercial banks will emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against and win the battle of banks.

34

United Commercial Bank Ltd. (UCBL) should continuously improve its customer service strategies and the overall service quality needs to win the customer satisfaction undoubtedly. Default culture is a major problem in Bangladesh. As United Commercial Bank Ltd. (UCBL) is an old organization the problem of non-performing loans or default loans is very minimum or insignificant. However, as the bank becomes older this problem will arise enormously and the bank may find itself in a more threatening environment. Thus UCBL has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem.

2.4.3 Issues of UCBL


Strategic Issues

One of the main strategic issues of United Commercial Bank Ltd. (UCBL) is to capture majority of market share. Currently there are more than 50 banks in the country and majority of the market share is captured by the local banks. Hence, UCBL need to strengthen its footprint by increasing the market share. UCBL is also facing intense competition in the market as there are so many foreign and local banks. Standard Chartered Bank is still its main threat and posses more market share than UCBL. Increasing the sales is also a major issue of UCBL. Without increasing the sales the bank cannot generate money and cannot survive in the market. As a Muslim country it is important for a bank to do banking in Bangladesh that is compliant to Shariah or Islamic law. As a foreign bank it is a major issue for UCBL to provide customers Islamic banking service. Product feasibility is also a major issue of UCBL. UCBL also need to provide products that are highly potential and feasible. Operational Issues

Direct sale is very critical for a bank. The customers need to be pursued to purchase United Commercial Bank Ltd. (UCBL) products. The sales officers need to make the customers loyal to UCBL. High level of customer service is a critical issue for customers. As a foreign bank UCBL has to set a very high standard of customer service level. Providing different promotional offers that provide benefit to both organization and customers are very critical for UCBL. Local banks are taking various promotional activities that may take away some customers from UCBL. As an

35

local bank it is important for UCBL to build strong relationship with media, government and general people through public relations. UCBL has to undertake marketing research to explore its market and to improve its products and performance. Legal issues

United Commercial Bank Ltd. (UCBL) is bind by law to pay tax to the government of Bangladesh regularly. Otherwise they cannot operate their business. UCBL must ensure that no money laundering is occurred via their bank and they must ensure that each and every of their transactions are complied with the government policy. Bribing is a culture of Bangladesh, but UCBL has to fight against this illegal practice and make sure that their staffs dont take or give any bribe to customers.

2.4.4 Strategies of UCBL


Direct sales strategy

An executive is assigned to this part of the marketing department. The Direct Sales division coordinate & manages the sales activities of all the Mobile sales officers (MSO) of UCBL Bangladesh. The MSOs basically makes sales of the company various Personal Banking products such as, savings accounts, consumer loan, etc outside the banking premises. There are a total of more than 150 mobile sales officers (MSO) employed in the cities of Dhaka and Chittagong. MSOs are assigned to specific branches for making sales activities more smoothly. The DS executive sets sales strategies & targets for the Sales officers and manages the whole team of MSOs in Bangladesh. The direct sales department also decides upon the commission and remuneration of the mobile sales officers as their salary structure is based on sales performances. Thus this part of the marketing division is playing important role for the overall growth of the Personal Banking Division.

Introduce new and competitive products

United Commercial Bank Ltd. (UCBL) constantly try to come up with new products and try to refine its existing products. They design the products that are fully compatible to the individual customer needs.

36

Refine the interest rate

United Commercial Bank Ltd. (UCBL) constantly refine the interest rate of their saving schemes and loans and make sure that it is within the range and preference of its customers. Provide high standard customer service

United Commercial Bank Ltd. (UCBL) constantly promotes customer service by providing its staffs with extra incentives. There are guidelines regarding the behavior to the customer and level of the customer service. UCBL sends Mystery Shoppers in every branch, who provide information about the service quality of each branch and staffs are reward or penalty according to their performance. Training of the staffs

The staffs of United Commercial Bank Ltd. (UCBL) get special training to improve their customer service. In every there are small training and meeting sessions where the staffs get feedback about their customer service. Cultural strategy

United Commercial Bank Ltd. (UCBL) follows the local traditions. The high standard service level and behavior of the staffs, environment of the bank reflects the local culture along with the products and promotional activities of the bank. UCBL take different cultural initiatives. They arranges different cultural program, like drama shows, language competition, celebrating Pohela Baishakh and the like. Compliance with foreign exchange policy of Bangladesh bank

United Commercial Bank Ltd. (UCBL) makes sure that all the foreign trade services and the movements of inward and outward remittance are done under the guideline of foreign exchange policy provided by Bangladesh Bank.

37

CSR Strategy

United Commercial Bank Ltd. (UCBL) Bangladesh corporate social responsibility (CR) focuses on the following four areas:
o o o o o o

Promotion of Bengali culture; Sponsored Bangladesh Cricekt Team; Education for underprivileged children; Assistance for the disabled/needy; Support for the environment; and Stand beside the acid victims.

Shariah Banking

Non interest Banking of United Commercial Bank Ltd. (UCBL) is an ethical and indigenous form of community banking that is compliant with the Shariah (Islamic law). It involves financing based on the sale or lease of assets; i.e. the bank is selling goods for use (trade) rather than selling money itself. UCBL also offers Non-interest Current Account, which is a relationship checking account, designed to comply with Shariah (Islamic Law) guidelines while also providing the regular convenience and security of a current account. Promotion This part of the marketing department deals with all the promotional activities of United Commercial Bank Ltd. (UCBL) Bangladesh. Prime responsibilities of this department are: Maintaining strong public relations with various media intermediaries, advertising the companys products and services, building a strong corporate image of UCBL in Bangladesh. Public Relations The promotion department organizes various environmental and social activities in order to build a strong corporate image of United Commercial Bank Ltd. (UCBL) in the minds of customers as well as in the media. Maintaining strong relationship with news media is another major duty of this department.

38

Advertising The promotion also coordinates all the advertising of United Commercial Bank Ltd. (UCBL) products within Bangladesh. Some of the advertising tools that are frequently used by the company are as follows: Newspapers Advertising: Regular advertisements of various products and services of UCBL are given in some of the countrys most renowned daily newspapers. Billboards: Huge colourful billboards with UCBL logo are found in various major areas of Dhaka and Chittagong. These billboards emphasize on the needs of customers and shows UCBL logo as solution to their needs. Mailers: various product updates and new product information are regularly sent to existing customers of UCBL. Brochures: Various colourful brochures featuring specific products of UCBL are being displayed and distributed to existing and potential customers via branch offices and sales officers. Traffic Boxes: UCBL established some traffic boxes in different points of Dhaka and Chittagong for the traffic force of our country.

Service marketing strategy

A close analysis of the marketing activities United Commercial Bank Ltd. (UCBL) reveals that it has been following the Offensive strategies of Service Marketing. Some key aspects of this strategy are presented below: Marketing research strategy This department formulates & executes various marketing strategies of United Commercial Bank Ltd. (UCBL) Bangladesh. This department also administers various marketing research activities on the existing and potential customers of UCBL. Some such research activities are: mystery shopping, critical incident surveys, customer suggestion surveys, etc. The results of these surveys are integrated while formulating various marketing strategies. This department also deals with the billing and invoicing of various marketing & advertising costs of UCBL Bangladesh.

39

Chapter # 3: Findings & Analysis

40

You might also like