Acknowledgment:

We would like to pay profound gratitude to all the people including our resource person Mr. Aly Raza and Mr. Salman Bajwa, Relationship Manager-Credits Bank Alfalah without whose support and guidance the successful compilation of this report was certainly not possible. At this point we would also like to extend our thankfulness to all the concerned staff of Bank Alfalah and UMT for their support, coordination and help.

Executive Summary:
This project is related to the strategic analysis of an organization. For performing it we first had to select an industry and an organization in that industry. So, we selected the Bank Alfalah Limited, in the Banking industry. This whole project was divided into three sections. In section 1 of this project, we first of all gave the introduction of Bank Alfalah Limited and then identified the major trends in the banking industry over last three years and performed a Deep-List analysis for extracting the main opportunities and threats related to the industry. Then finally for this section we developed a 5 Forces Model for the industry environment, constructed an EFE Framework and with the help of the Deep-List analysis performed; identified the major key success factors. In the Section 2, which was related to the internal analysis of the company; we analyzed Bank Alfalah Limited, which included the analysis of the Banks mission and vision, identification of its long term goals and key stake holders and also included the actions that the bank is taking in terms of the Corporate Social Responsibility. Then we analyzed the strategic groups of the banking industry competitors and identified the group to which Bank Alfalah Limited belonged to. After that we constructed the CPM by using the KSFs identified in Section 1 of the project. In part 2 of this section we analyzed the tangible and intangible resources using the VRIN framework, identified the competitive advantage, performed value chain analysis, basic financial analysis and the IFE analysis and analyzed the SBUs that the firm had. Coming towards the Section 3, the final section of the project, we analyzed the organizational structure of Bank Alfalah, analyzed the firms strategies at Corporate, Strategic Business Unit and Functional level and presented the Strategic Framework constructing the SWOT, Ansoff matrix, SPACE matrix, IE matrix and the Grand Strategy matrix. After it we performed the detailed financial analysis of the Bank and identified the major problems and opportunities for the bank. Finally we constructed the QSPM Framework and came up with the strategy that could resolve the issues the bank was facing and then prepared an implementation plan for that strategy.

Contents
Organizational Structure of Bank Alfalah Limited......................................................................................... 4 Strategic Analysis: ......................................................................................................................................... 5 Corporate level strategies ......................................................................................................................... 5 Business level strategies ........................................................................................................................... 7 Functional level strategies ........................................................................................................................ 8 Strategic Frameworks ................................................................................................................................. 10 SWOT ...................................................................................................................................................... 10 TOWS MATRIX ......................................................................................................................................... 13 (Ansoff) BCG Matrix ................................................................................................................................ 14 BCG Matrix .............................................................................................................................................. 15 Space Matrix ........................................................................................................................................... 16 Space Matrix ........................................................................................................................................... 17 IE Matrix .................................................................................................................................................. 18 Grand Strategy Matrix ............................................................................................................................ 19 Detailed Financial Analysis .......................................................................................................................... 21 Horizontal Financial Analysis .................................................................................................................. 23 Index Number Trend Analysis ................................................................................................................. 24 Ratios Analysis ........................................................................................................................................ 25 Major Problems and opportunities............................................................................................................. 27 QSPM to recommend strategies ................................................................................................................. 29 Implementation Plan .................................................................................................................................. 32 Control Plan ............................................................................................................................................ 32 Timelines, Gantt Charts........................................................................................................................... 33 Financial Requirements to implement this strategy ............................................................................... 33 Resource Utilization ................................................................................................................................ 34

Organizational Structure of Bank Alfalah Limited

Bank Alfalah ltd.
Cheif Exctive officer

Board Of Director

Cheif Cheif Cheif Compilance Informatio Operating an Officer Officer Officer

GM legal GH Cheif Cheif & GM Financial Risk Company Credit Administart or Officer Officer secretary Division Technology GM Risk Mange ment

GH Tresasury GH GH GH GH Audit Corporate & Human & Islamic & Investment Resourc Banking Financail Inspection Instituatio Banking e n

GH Operations

Bank Alfalah follows functional structure, with head of the departments are directly responsible to answer CEO. There are six board of directors at the top of the structure, who are responsible for making crucial decisions then come the CEO and under CEO there are various Head of the Departments, responsible for the work of their department.

Strategic Analysis:
Corporate level strategies
Growth

Abu Dhabi group follows growth strategy and its network is increasing day by day and it is targeting different markets of the world as well as local markets of different countries.

The growth of bank Alfalah is pretty impressive, with the sixth largest bank of Pakistan announcing an increase of 30% for the year 2012. The net income of the bank for 2012 is recorded Rs. 4.6 billion as compared to Rs. 3.5 billion for the year 2011. The deposit base of the bank grew at par with overall banking sector up 13.9% to reach Rs 457 billion as compared to the overall 13.8% growth in the industrys base.1

http://tribune.com.pk/story/515778/corporate-results-bank-alfalah-earnings-rise-but-outlook-remains-uncertain/

Local expansion

Abu Dhabi Groups two most profitable and renowned projects are Warid Telecom and Bank Alfalah is one of the largest bank operating in Pakistan and its local expansion is remarkable is recent years. Right now the bank is operating with 471 branches in different 178 major cities of Pakistan. It is one of the banks that are operating in Pakistan who has strong branch network.
International expansion

Bank Alfalah is one of the best projects of Abu Dhabi Group that is a full serving banking institution and progressive as well since 1992. It has 7 international branches which include Afghanistan, Bangladesh and 1 offshore unit in Bahrain. Bank Alfalah is a trade based bank and the previous years trade volume made 9 percent of the total trade volume of Paki stan. The bank is looking in South Asian region for its operations and it is a viable option as well.2 3

Acquisition, joint venture and merger

Under the umbrella of Abu Dhabi Group bank Alfalah is going to acquire IGI investment bank through merger and its will be happen soon as the both the parties are negotiating with each other. Alfalah GHP Investment Management Limited is licensed by SECP to provide asset management and investment advisory services to retail, corporate and institutional investors as per NBFC rules, 2003. The company is a joint venture non-banking finance company established by bank Alfalah Limited and GHP Arbitrium of Switzerland.4 5

http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/04-Apr-2012/bank-alfalah-s-networkgrows
3

http://www.pakistanbanks.org/events_highlights/interviews/bank_alfalah_a_modern_progressive_financial_institution.html http://www.alfalahghp.com/alfalahghp/index.asp

http://www.thenewstribe.com/2012/11/02/bank-alfalah-supports-ksbl-by-donating-rs-100-million-over-2012-2015/

Business level strategies

Business level strategies are formulated by the top management. At this level chief managers also play crucial role in formulating these strategies and technical planning which is very helpful in completing the jobs on time and thus following the best way to settle things in a better way. They are very handy at this level in defining, interpreting objectives and goals and formulate policies to achieve them.
Integration strategies

As bank Alfalah is dealing with the services sector so there is not much involvement of forward and backward integration as the services are produced at the spot and delivered at the spot. As the basic input of banking industry are the individual consumers so there is less involvement of forward and backward integration. Horizontal integration Bank Alfalah is planning for the acquisition of IGI Investment Bank. Bank Alfalah and IGI Investment Bank are in negotiations for a possible takeover of IGI Investment Bank along with two wholly owned subsidiaries. The officials of Bank Alfalah claim that the implementation would be done by the way of merger in terms of a scheme amalgamation under section 48 of banking companies ordinance, 1962.
Intensive strategies

Market penetration Bank Alfalah is spreading its network by creating awareness and by promoting it by advertising and arranging different kind of events like bank Alfalah cricket cup and spreading its branch network. Market development From 1992 onwards bank Alfalah limited is very much successful in serving different markets not in Pakistan but also spreading its footprints globally as well by having 7 branches in countries like Afghanistan, Bangladesh and Bahrain. Product development Bank Alfalah is very much focused to provide new and innovative product and services for its customers. Right now bank Alfalah and Warid Telecom have join hands together to solve the problem of people who are linked with banking operations. Both the companies are coming up with innovative solution of branchless banking.
6

http://www.economyage.com/2012/04/exclusive-bank-alfalah-planning-to-takeover-igi-investment-bank/

Diversification

Related diversification Abu Dhabi group has recently diversified its activities (2003) further in the banking sector through its already established Bank Alfalah, now they are also providing Islamic Banking services, compliance with Shariah. It currently has over 100 branches operating under the Islamic Banking structure, providing services like Musharka, Mudarba, Murabha, Ijarah , Salam etc.

Functional level strategies

Head of the departments at this stage formulate functional strategies. Keeping in view the branch setup and environment of the branch and the organization every branch manager formulates the policies accordingly because he/she is responsible for the activities of the employees and management as well. In the presence of head of the departments regular meetings are called for the implementation of the policies to get the desired outcome behind these policies.

Marketing Strategy

The marketing department of bank Alfalah is very smart and its efficiency has enabled the bank to serve a large customer base by using market penetration pricing strategy. The bank is very much successful and it is the only largest credit and debit card issuer than any issuer in Pakistan. Bank Alfalah launched its free forever credit card and the strategy worked. Despite being a later entrant, Bank Alfalah soon became the market leader.
Human resource

Bank Alfalah considers its humans as most valuable asset. It is very much focused to improve the staffs professional proficiency and quality. In order to enhance competencies of its employees there are in house seminars / courses, on job training programs etc. There is a training academy and it is equipped with the latest audio-visual training aids. The academy facilitate in the discrimination of knowledge and skills. The bank Alfalah Limited inducted third management trainees; they go through a six month training program. The bank intends to continue, on a need basis, such program each year. Human resource is one of the core competences of Bank Alfalah Limited.
789

http://www.slideshare.net/abidi512/bank-alfalah-12915984 http://www.hrmars.com/admin/pics/311.pdf

Management information system

Bank Alfalahs management information system is very efficient as compared to the rival firms like MCB and HBL. Its integrated database system giving advantage to bank Alfalah over its competitors as the database systems of the competitors remains down most of the time.

http://books.google.com.pk/books?id=cRsxku7O06UC&pg=PA268&lpg=PA268&dq=marketing+strategy+of+bank+alfalah&source=bl&ots=HGb Mr99a3C&sig=tRtqyXHFoFykMBro3BszrpHOgfg&hl=en&sa=X&ei=k9ahUb6yDIWxOdvEgZAK&redir_esc=y#v=onepage&q=marketing%20strategy %20of%20bank%20alfalah&f=false

Strategic Frameworks
SWOT
Strengths of Bank AlFalah: Strong Financial Position- The financial position of the organization is very sound and its profitability is in increasing. The Earning per share has been increased on a rate of about 50%, which is a very positive sign Professional and Committed workforce- Bank invests heavily on the development and capacity building of their employees and on retention programs to produce committed workforce. Conducive Environment-The management of the bank is very much concerned with the development and improvement of the working environment. The bank has state of the art and purpose built branches where all the modern technologies are provided to get the efficiency of the workforce and the customer satisfaction Islamic Banking services- The bank differentiates itself by providing Islamic banking services, Halal services compliances with Shariah, Islamic law. Fastest Growing Financial Institution-Due to its successful business policies and the strong financial position the bank has achieved the reputation of fastest growing financial institution in the country. It has greatly increased the customers confidence in the bank Huge Expansion Plan-Due to its strong financial position the bank has undergone a huge expansion plan to compete with the existing bank all over the country and with the passage of time the branch network is expanding at a very good pace.

Weaknesses of Bank AlFalah: Less Branches & ATM compared to competitors- Competitors have more branches and ATM machines than Bank AlFalah, and because of this they are still a little behind in capturing more customers Not enough Advertisement- Bank spends less on promotion and advertisement as compared to its arch rivals, UBL, MCB, and HBL. Slow in introducing new products/services- Bank AlFalah is a bit slower in launching new products, whereas it focuses more on the following strategy rather than innovation and leading Overload of work on employees- Usually staff has to sit till 8 or even 9 pm to finish their tasks Lagging in Technological development- Bank does not have efficient MIS as compared to its competitors.

Opportunities for Bank AlFalah: High scope of Islamic Banking- Islamic Banking is an emerging concept and a preferred choice for many consumers. So its a growth opportunity for banks to take full advantage of the prevailing circumstances in this regard. Islamic banking is an emerging concept its share has improved in 2010 to 6.1% from 5.1% of 2009. Sign of growth in financial sector of Pakistan- Financial sector dominated the performance of service sector with a stable growth rate of 6.53% last year 2011-12. Bank AlFalah is launching new branches to avail this opportunity. High profit margins- Assets of banking system in Pakistan are growing at a rapid pace of 15% since 2009.Higher returns in banking started in 2002, since then banks are gaining excellent profits. The figure rose to $1.1 billion in 2006Assets are growing with rapid pace, returns are high and so are the profits, (PBT of Rs 9.7 billion for year 2011, total asset increased by 13.78%, 15.78% increase in shareholders equity). Technological advancements- Over the last few years, banking sector has seen immense use of technology to provide faster and convenient solutions to their customers, such as; ATM machines, online banking, mobile banking, Easy Paisa, Debit/Credit cars etc. The trend continues to grow and provide ample opportunities for firms to create competitive advantage. There are now many ATM machines (3500 ATM machines of bank AlFalah all over the country) and other technological facilities like SMS alerts, exciting discounts, and 24 hour customer service are being provided. Reduced Corporate Taxes- The government is supporting the financial sector and in this regard government has already reduced the corporate tax rate on banks from 58% to 35% during the last six years. Growing Population of educated youth-As the younger population of Pakistan is enhancing, trends and living patterns are also changing with them. Now the youth is more educated, aware and constitutes a major proportion of labor force. Banks need to capitalize this situation and target this segment with appropriate products and services. Keeping in mind the growing population of youth, Bank AlFalah is putting some efforts to attract this segment. High Government borrowings-Over the last few years, especially in the tenure of the recent government it has been observed that government borrowings have increased drastically. SBP, alone cannot handle this debt burden so government often has to turn towards private banks.

Threats to Bank AlFalah: Revised Monitory Policy- SBP has recently launched a new monitory policy according to which, interest rates have decreased to a maximum limit of 9.5%. The decision was made keeping in mind the high inflation rate. Reduce interest rates mean slow movement and flow of money which will discourage investors to borrow more money. This threat is discouraging the investors to borrow money. Drastic growth in consumption pattern-Collectively the consumption pattern of both public and private has reached to 88% of GDP in 2011-12, which is an alarming sign for banks as consumers are left with little disposable income to save and consume so it is a threat to AlFalah Bank and no possible effort is been made in this regard. Decrease in savings and Investment- In the last year radical decline has been seen in both fix investment and national savings. It is not a good sign for banks that are looking for consistent and high growth. Devaluation of Currency- Pakistani Rupee has seen a tremendous decline in the last couple of years, which makes it difficult for foreign banks to efficiently operate in Pakistan. Strong emerging competitors- There are an intense rivalry among competing banks in Pakistan. With the presence of names like; MCB, HBL, NBP, SCB the banking industry becomes less attractive, especially for new entrants. Bank AlFalah is striving to improve its current market share and has taken several steps in this regard. Social unrest- Pakistani society is partially divided among various groups, ranging from liberals to extremists. At times due to political or social issues social unrest is seen, which cause immense capital loss to almost every industry. Weak political situation-Countrys political situation is not quite favorable for the business environment as inconsistent and unfavorable policies are formulated and implemented. Government is not providing enough infrastructures to the banking industry either. Energy crisis is at its worst and the country is heading towards new elections. Economic Turmoil- The country is not going through the best period with respect to economic conditions, there is high inflation CPI, less disposable income, high taxes and tariffs, low GDP growth rate and Bank has not taken any serious counter measures against this situation. However they are trying to adapt with the current economic situation.

TOWS MATRIX

WEAKNESESS-W STRENGTHS-S
1. Strong Financial Position 2. Professional and Committed workforce 3. Conducive Environment 4. Islamic Banking services 5. Fastest Growing Financial Institution 6. Huge Expansion Plan 1. Less Branches & ATM compared to competitors 2. Not enough Advertisement 3. Slow in introducing new products/services 4. Overload of work on employees 5. Lagging in Technological development

OPPORTUNITIES-O
1. High scope of Islamic Banking 2. Sign of growth in financial sector of Pakistan 3. High profit margins 4. Technological advancements 5. Reduced Corporate Taxes 6. Growing Population of educated youth 7. High Government borrowings

SO STRATIGIES
S5, O4-As bank is financial growing so it has the opportunity to use this strength in technological advancement, S6, O1-With the expansion plan they can further open Islamic banks. S2, O3-Having professional and committed workforce will help them gain more profit.S1, O2Having strong financial position can be used as a sign of growth in financial sector of Pakistan.

WO STRATIGIES
W5W1, O2-With Sign of growth in financial sector and high profit margins technological development can be done and more branches and ATM machines can be made.W4, O6 By hiring growing population of educated youth the overload of work on employees can be reduced.W2W5, O7 With high government borrowings technology can be increased and with high profit margins more advertisement can be done.

THREATS-T
1. Revised Monitory Policy 2. Drastic growth in consumption pattern 3. Decrease in savings and Investment 4. Devaluation of Currency 5. Strong emerging competitors 6. Social unrest 7. Weak political situation 8. Economic turmoil

ST STRATIGIES
S6, T5-With expansion plan emerging competitors can be reduced.S1S2, T8-Through strong financial position and committed workforce economic turmoil can be reduced. S5, T3T4As bank is fastest growing institution so there can be valuation of currency and increase in savings and investments.

WT STRATIGIES
More branches and ATM should be made, more advertisement should be done, they should be fast in introducing new product and services, technology should be enhanced, this way savings and investments will increase, valuation of currency will occur, emerging competitors will become weak, economic turmoil will increase.

(Ansoff) BCG Matrix

Star: The star has a large market share and rapidly growing industry. Bank AlFalah is a star for Abu Dhabi Group because it has a large market share in a rapidly growing industry. Cash Cow: The cash cow for Abu Dhabi Group is Warid, because Warid is generating much larger cash for the parent company. Question Mark: Wateen is a question mark for Abu Dhabi Group because it has a small share of market and further it is striving for its success in Pakistan. The product in question mark can either fail or become a star. Dog: The dog for Abu Dhabi Group is Taavun, because it has not been much successful in Pakistan in the real estate industry.

BCG Matrix
Relative Market Share (Cash Generation) High Low

Market Growth Rate (Cash Usage)

High

Stars Bank-AlFalah

Question Marks Wateen

Low

Cash Cows Warid

Dogs Taavun

Strategies for Stars: Backward, Forward or Horizontal Integration Market Penetration Market Development Product Development

Bank AlFalah pursues the above mentioned strategies according to their relative market share and industry growth rate of banking sector.

Space Matrix
Competitive advantage (CA) Rating (-1 to -6),-6 Worst,-1 Best -2 -2 -2 -1 -3 -4 -2.333333333 2.166666667 Rating (+1 to +6), +6 Worst,+1 Best 1 1 3 2 2 2 Industry Strength (IS) Rating (+1 to +6), +6 Best,+1 Worst 5 6 5 3 3 5 4.5 Rating (-1 to -6),-6 Worst,-1 Best -6 -5 -4 -3 -4 -4

Product Quality Market Share Brand Image Customer Service Customer Loyalty Control over depositors Average Total X-Axis Financial Strength (FS)

Barriers to new entrants Growth Potential Resource Utilization Financing Access Technology Know How Profits Average Environment Stability (ES)

Return On Equity Revenue Increase Liquidity Earnings Per Share Cash Flows Efficiency Ratios

Average Total Y-Axis

1.833333333 -2.5

Inflation Taxation Technology changes Demand Elasticity Competition pressures Price of competing products Average

-4.333333333

Space Matrix
Space matrix illustrates that Bank AlFalah lies in competitive quadrant.

SPACE Matrix
FS Conservative
+6 +5 +4 +3 +2 +1

Aggressive

CA
-6 -5 -4 -3 -2 -1 -1 -2 -3 -4
(2.16,-2.5)

IS
+1 +2 +3 +4 +5 +6

Defensive

-5 -6ES

Competitive

Strategies for Competitive: Backward, Forward or Horizontal Integration Market Penetration Market Development Product Development

According to the results of SPACE matrix, Bank AlFalah falls in competitive quadrant and can follow the above mentioned strategies.

IE Matrix

EFE Score 4.00 I Grow

2.59 Strong Average Weak

II And V And VIII And

III Build VI Maintain IX Divest

High

IV Hold VII Harvest

Medium

Low

1.00 4.00 2.9 1.00 IFE Score

By looking at the IE matrix our company lie in 5th cell. 5th cell suggests hold and maintain strategy. In this case, our tactical strategies should focus on market penetration and product development. Quadrant V: Hold and Maintain; Strategies: Market Penetration Product Development

According to the result of IE matrix, Bank AlFalah falls in Quadrant V and can use the two above mentioned strategies. Either to penetrate in the existing market or develop a new product.

Grand Strategy Matrix

The Grand Strategy Matrix is a useful framework used as a part of the strategic planning process that suggests alternative long-term strategies for the organization. Long-term strategic objectives are typically established under: Profitability Market Share/Revenue Supply chain productivity Competitive positioning Technological Leadership Employee development Corporate Responsibility

Grand Strategy Matrix:

Rapid Market Growth

Quadrant 1 Strong Competitive Position Quadrant 3

Quadrant 2 Weak Competitive Position Quadrant 4

Slow Market Growth

Quadrant 2: Rapid Growth, Weak Position Product Development Market Development Market Penetration Integration (Horizontal, Vertical or Both) Divesting Liquidation

Our Industry lies in Quadrant II as Bank AlFalah is not competitively strong compare to its competitors but has the potential of rapid market growth. It has shown nice growth within the small span of its time in Pakistan. And to improve its position among its competitors Bank AlFalah can bring new innovative product or services which have not been offered by any other banks.

Detailed Financial Analysis

This statement shows that the markup or interest earned by the bank in 2011 has increased a lot as compared to previous years and the percentage of the markup expensed is less as compared to the total markup, than previous years resulting in a higher net markup. The figure for bad debts written off directly has also decreased much in 2011, contributing to the overall markup. As a result of all the major changes in 2011, especially in the amount of markup and interest earned, the profit is 7.91% of the total markup or interest earned which is far more as compared to previous years. On one the major expenses covered under the Non Markup Interest Expense is the Administrative Expenses and if we analyze the statement, the bank has much admin expenses as compared to the level of markup earned and it has been proved by the performance in 2011 that the bank can earn more with almost the same level of admin expenses.

The note 16 from the financial statement proofs that the increase in the total markup earned is mainly due to the increase in the number of deposits. The point that there had not been such increase in the markup expensed can also be proved through this note because it shows that there has been a decrease in the amount of the fixed deposits, on which the bank is required to pay

preferably a high markup and the current deposits have increased a lot, on which the bank do not require to pay markup.

This statement provides information regarding the apportionment of assets, liabilities and equity. The 42% of the total assets are covered by the advances, 36% by the investments made, 11% by the cash and balance with treasury banks, and the rest by others in 2011.Compares to 2010, in 2011 more amount has been allocated to the investments and less in advances. In the same way the 86% of the bank liabilities are the sum of the deposits made by the customers and the amount held in other accounts. Overall this statement provides help in knowing that the major proportion of the assets is backed up by the money generated through the deposits and other accounts and that the equity only contribute to 5% to the total assets of Bank Alfalah.

Horizontal Financial Analysis

Horizontal Analysis of Profit and Loss statement 2011 Rs.(000) 2010 Rs.(000) Markup or Interest Earned 44,298,178 18.03% 37,530,256 5.54% Markup or Interest Expensed 25,687,485 7.68% 23,855,448 -3.24% Net Markup/interest income 18,610,693 36.09% 13,674,808 25.37% Provision against loan and advances 1,864,510 -16.90% 2,243,687 -39.27% Provision for diminution 2,459,294 23.51% 1,991,192 527.81% Bad debt written off directly 5,696 -77.67% 25,504 -57.36% 4,329,500 1.62% 4,260,383 4.64% Net Markup/after provisions 14,281,193 51.69% 9,414,425 37.73% Non Markup interest inome 5,367,713 14.01% 4,708,161 -9.15% Non Markup interest expenses 14,215,188 11.46% 12,753,841 15.93% Profit before Taxation 5,433,718 296.99% 1,368,745 34.68% Taxation 1,930,588 382.29% 400,293 235.59% Profit after Taxation 3,503,130 261.72% 968,452 7.96% 2009 Rs.(000) 35,561,312 14.84% 24,654,180 20.30% 10,907,132 4.15% 3,694,546 81.46% 317,164 -78.56% 59,817 111.38% 4,071,527 14.91% 6,835,605 -1.35% 5,182,253 7.45% 11,001,542 10.49% 1,016,316 -41.92% 119,281 -75.83% 897,035 -31.07%

The statement present the percentage changes in the profit and loss statement from 2009 to 2011. Taking the markup or the interest earned the increase in 2011 is far more than the increase in 2010. The increase in the net markup is also noticeable as it has increases a lot in 2011 as compared to in 2010 and 2009 but overall it shows an increasing trend. Coming towards the provisions part, there has been a huge reduction in the level of the provisions, which is good for the company. Overall the provision increased by 4.64% in 2010 as compared to 14.91% in 2009 and in 2011 it has just increased by 1.62%.The non-markup interest income which was decreased by 9.15% in 2010 has increased by 14.01% in 2011, which is favorable for the company. On the other hand the increase in the non-markup interest expenses is less as compared to that in 2010, which shows that the bank has the capacity to increase its profit by bringing in fewer changes to the non-markup interest expenses which covers the administrative expenses. Finally due to overall increase it the financials of the Bank Alfalah in 2011, it has an increase of 261.72% in net profit as compared to 7.96% of increase in 2010 and 31.07% of decrease in 2009.

Index Number Trend Analysis

Index number Trend Analysis 2011 Markup/interest earned 124.5685 Net Markup 208.9236 Assets 120.3315 Liabilities 120.5649 Reserves 114.2781 Surplus on Revaluation 124.2892 Deposits and other Accounts 123.5522 Borrowings 87.96866 Investments 167.9426 Fixed Assets 92.38548 2010 105.5368 137.7263 105.7609 106.0614 106.4428 109.133 109.0084 66.33183 114.3868 98.01521 2009 100 100 100 100 100 100 100 100 100 100

The Index Trend Analysis shows the changes in the particular figure across the years, taking 2009 as the base year we have found out that the increase in the net markup in 2011 is far more than the increase in 2010. Same pattern has been seen in case of interest or markup earned, assets, liabilities, reserves, surplus on revaluation, deposits and other accounts and investments but the changes are not much as compared to the net markup. Coming toward the borrowings and the fixed assets, there has been a fall in both as compared to that in 2009. The fall in the percentage of borrowings in 2011 is much more than that of others.

Ratios Analysis
Ratios Capital Adequacy Profit before tax ratio Gross Spread Ratio Income/Expense ratio ROE ROA Advances/Deposits Ratio Non Interest income/total income Non Interst Expense/total markup earned Investment/Deposits Ratio Basic Earnings per share
Capital Adequacy

Unit % % % Times % % % % % % Rs.

2009 12.46% 2.86% 30.67% 3.70 5.22% 0.24% 57.90%

2010 10.53% 3.65% 36 .44% 3.31 4.90% 0.24% 58.52%

2011 11.60% 12.27% 42.01% 3.49 16.46% 0.80% 49.46%

509.91% 343.98% 98.79% 30.94% 30.53% 0.71 33.98% 32.04% 0.72 32.09% 41.50% 2.6

Capital Adequacy is expressed as the percentage of Bankss risk weighted credit exposure. It is used to protect the interest of depositors and to promote the stability and efficiency of the financial system. It decreased in 2010 and then again increased to 11.6% in 2011.
Profit before tax ratio

This is the profit earned before tax as a percentage of the gross markup income. This has increased to 12.27% in the 2011 and this is mainly due to the increase in the number of noninterest expense deposits.
Gross Spread Ratio

It is the net markup earned as a percentage of the gross markup earned. This has also increased much in 2011 and that is because of the more increase in the gross markup earned as compared to the markup expensed.
Income/Expense Ratio

It is the times the expense is to the income. It has almost remained the same from 2009 to 2011.

Return on Equity

It is the amount of the net income generated by each rupee of the shareholders equity. It has increased to 16.46% in 2011 as compared to 4.90% in 2010 due to the increase in the total net profit. Its good to have more ROE.
Return on Assets

It is the amount of the net income generated by each rupee of the total assets. It has also increased in 2011 due to the increase in the net profit.
Advances/Deposits Ratio

It is the amount utilized into advances, as a percentage of the deposits. As compared to 2009 and 2010, in 2011 less amount of the money is allocated for advances.
Non-interest income/total income

It is the percentage of the contribution made by the non-interest income into the total income. Its too much in 2009 and 2010 showing that the income from the interest cant cover the noninterest expenses. In 2011 it has decreased and it is good signal that the banks non-interest expenses can be covered through its income generated from markup.
Non-interest expense/total markup earned

It is the non-interest expense as a percentage of the total/gross markup earned. This needs to be paid attention because the control over to the non-interest expenses will directly contribute to the net profit.
Investment/Deposits ratio

It is the percentage of the deposits utilized as investments. In 2011 more part of the deposits is utilized for investments than for advances.
Basic Earnings per share

It is the amount of profit earned by each share. The total number of the shares is 1,349,156,000. It has increased to 2.6 in 2011 due to increase in the net profit. It is a good signal and will attract more investors.

Major Problems and opportunities

Problems
1. Bank Alfalah currently has less number of branches and ATM machines as compared to its arch rivals, MCB and HBL. Bank currently holds 471 branches which are significantly less in comparative terms. 2. Less advertisement and promotional activities. Bank Alfalah has less spending power out of their total budget on advertisement and promotions due to which there is less awareness regarding their products and services among the customers. 3. Bank Alfalah is a bit slow in responding to the changes that occur in external environment relative to its competitors and slow in introducing new products and services. 4. Bank Alfalah is lagging behind its competitors in terms of technological advancements and Research and Development activities. 5. Weak political situation. Pakistan has weak and unstable political conditions which are not suitable for the progress and growth of any bank. 6. Bank Robbery. Bank robbery is becoming a serious issue and recently crime rate and specifically bank robbery has increased in Pakistan, which is again unfavorable and unsecure for any bank to operate successfully. 7. Social Unrest. Often protestors and mob hit and damage the land and property of banks.

Opportunities
1. High scope of Islamic Banking- Islamic Banking is an emerging concept and a preferred choice for many consumers. So its a growth opportunity for banks to take full advantage of the prevailing circumstances in this regard. Islamic banking is an emerging concept its share has improved in 2010 to 6.1% from 5.1% of 2009. 2. Sign of growth in financial sector of Pakistan- Financial sector dominated the performance of service sector with a stable growth rate of 6.53% last year 2011-12. Bank Alfalah is launching new branches to avail this opportunity. 3. High profit margins- Assets of banking system in Pakistan are growing at a rapid pace of 15% since 2009.Higher returns in banking started in 2002, since then banks are gaining excellent profits. The figure rose to $1.1 billion in 2006Assets are growing with rapid pace, returns are high and so are the profits, (PBT of Rs 9.7 billion for year 2011, total asset increased by 13.78%, 15.78% increase in shareholders equity). 4. Technological advancements- Over the last few years, banking sector has seen immense use of technology to provide faster and convenient solutions to their customers, such as; ATM machines, online banking, mobile banking, Easy Paisa, Debit/Credit cars etc. The trend continues to grow and provide ample opportunities for firms to create competitive advantage. There are now many ATM machines (3500 ATM machines of bank AlFalah all over the country) and other technological facilities like SMS alerts, exciting discounts, and 24 hour customer service are being provided.

5. Reduced Corporate Taxes- The government is supporting the financial sector and in this regard government has already reduced the corporate tax rate on banks from 58% to 35% during the last six years. 6. Growing Population of educated youth-As the younger population of Pakistan is enhancing, trends and living patterns are also changing with them. Now the youth is more educated, aware and constitutes a major proportion of labor force. Banks need to capitalize this situation and target this segment with appropriate products and services. Keeping in mind the growing population of youth, Bank Alfalah is putting some efforts to attract this segment. 7. High Government borrowings-Over the last few years, especially in the tenure of the recent government it has been observed that government borrowings have increased drastically. SBP, alone cannot handle this debt burden so government often has to turn towards private banks.

QSPM to recommend strategies

Results
Result of matching stage clearly demonstrates that Bank Alfalah stands in Intensive group of strategies. Various strategies for intensive group are; Market penetration, Market development and Product development. Bank Alfalah scores highest in Product Development followed by Market Penetration.

QSPM

We have chosen two set of alternative strategies; Product Development and Market Penetration. Our actual strategies are as follow; for product development we have proposed Launching Islamic Agriculture Financing and regarding market penetration our proposed strategy is To increase advertisement and promotion. Why we have chosen these two strategies are because of their existing scope and demand in the market. Islamic Agriculture Financing is an emerging concept providng small loan, product (pesticides, and other medicines), tractors and other machinery and other such services to the small and large farmer. Because farmers and related people in agriculture face main difficulty in gaining access to capital. This concept is highly in demand and only Mezan Islamic Bank has done some efforts to launch this strategy. Whereas, regarding their conventional banking Bank Alfalah currently lacks its awareness among common people and masses. To enhance its presence with same products/services in the existing market,

bank needs to invest heavily in advertisement and promotional activities. Results of our QSPM demonstrate that we should go with the Islamic Agriculture Financing as its score is higher 4.79 as compared to 3.75 of increasing advertisement and promotion.

Implementation Plan
In order to implement our proposed strategy we will follow the following comprehensive plan.

Control Plan

Once we have implemented the strategy we need to carefully analyze and evaluate our implemented strategy, whether we have achieved the objectives or not. In order to do so we will take help from control charts, statistical tool used to monitor and evaluate the progress. We will measure the actual performance and compare it with the prescribed performance standards, based on our objectives mentioned earlier. If we feel we are meeting the standards we will continue the existing strategy as it is to maintain the status quo. However if any discrepancy occur we will try to identify the root cause and change the structure, system or strategy to make sure we meet the standards defined by our objectives.

Timelines, Gantt Charts

Based on our intuitive judgment we feel we will be able to implement this project within fifty days and it will be fully operational and working in about two month time. We will start working on the project from the first week of June 2013 and based on our early planning discussions we will follow the plan with little modifications if required.

Financial Requirements to implement this strategy

The financial requirements for introducing Islamic Agri Financing may not be too much as this facility will be provided under the same umbrella of Islamic banking in which other facilities are being provided. The cost may incur for research and development (around 3 million Rs) but that will also be less because they will not be the first mover as the Meezan Bank is already working onto it. The financing will be totally based on Murabaha in which the bank will buy the required inputs that includes seeds, pesticides, urea etc. and will sell them to the farmers. On the other hand for financing the movable property or equipment, like tractors and harvesting machines the financing will be based on Ijarah. The bank is already providing facilities based on these financings in form of Car Ijarah and Murabaha so introducing Islamic Agri Financing will mainly be to provide a mixture of these financing to a farmer.

Resource Utilization
In order to successfully implement the proposed strategy, we will be in need of the following essential resources; 1. Human Resource; We will need to hire and train specialize people who can better understand the structure and phenomenon of Agriculture Financing. We would not need more than two individuals per branch for this specific purpose. 2. Physical Resource: We would not need any additional land or building to successfully run our operations, as we will follow continue the work in our existing branches and will take the concept to our new branches as well. So there would not be much resource needed under this domain. 3. Technological Resource; We will need to invest heavy amount (around Rs 3 million) in R&D to provide better and improved facilities for agriculture financing. However to follow the existing pattern and existing products/services less finances will be required for R&D as Mezan Bank has already started to follow this strategy. 4. Intangible Resource: We will use our current patents, brand name and logo to promote our Islamic Agriculture Financing, free from interest to create awareness among our target market regarding our products and services.