William Walo Steve B Ghamug Antoine Thyna Sowany Joseph 2 Table Of contents 3 . In addition. The international Standard and Poors in 2005 rated BSP with the highest possible rating of B+ with a stable outlook. BSP has laid the foundation of it operations on the willingness of its staff and a world class banking platform. the BSP is finalizing arrangements to acquire the National Bank of Solomon Islands and the Habib Bank in Fiji. In 2004. The Board and management and the shareholders are delighted with the achievement by BSP. BSP has developed over the years to become a leader in the banking industry in PNG. 4 . It has laid out its key performance indicators (KPI’s) and the achievements are remarkable compared to similar KPI’s of peer regional banks in Australia. It has the primary responsibility of focusing on organic growth within Papua New Guinea and will consider expansion prospects beyond the national boundaries when opportunities present. This has set the scene for more exciting journey ahead in 2006 and beyond. expanded operations to the international level with the acquisition of the Westpac interests in Niue.EXECUTIVE SUMMARY The Board of the Bank South Pacific Limited has a vision and strategy that embraces long-term growth. The Board and the management are working closely to pursue the bank’s business strategies and vision. BSP for the first time in its business history. backed up by dominant market share and well structured and strongly capitalized balance sheet. BSP has grown over the years to become a leading bank in PNG. It currently has 39 branches in the country and one offshore in Niue and is completing the acquisition of the National Bank of Solomon Islands and the Habib Bank in Fiji. CPM. With its headquarters located in Port Moresby. GPS etc. 364-366 5 . The team used various strategic management tools including analytical matrices as introduced by Fred David (2006)4 to develop the strategic plans for BSP. The report was based on information available mostly on the website. The principle activity of the Bank South Pacific (BSP) is to provide commercial and finance services to the people of PNG. weaknesses. then develops management matrices such as the SPACE.00 = US$0. Port Moresby. threats and opportunities (SWOT analysis). At the current exchange rate K1. 2. 1 In a major move in 2001. 3 BSP Managing Director – Garth McIlwain’s address to shareholders in 2006 AGM 4 David. It then assesses and evaluates the bank’s strategies. Its registered office is located along Douglas Street. it then conducts a situation analysis. values and objectives. F.56 million2. Strategic Management. costs and a control system including implementation schedule. vision and mission statements. which cost BSP K140. INTRODUCTION The Bank South Pacific (BSP) commenced operations in 1957 as a branch of the Australian National Bank in Papua New Guinea (PNG). reviews key strengths. pp. The paper begins by introducing the bank and discusses the industry and markets in the region. BCG. business and financial conditions including comparisons with competitors and concludes with a list of strategies and goals. BSP merged with the PNG Banking Corporation (a wholly owned PNG Government subsidiary and largest national bank) under an ‘amalgamated deed’ under the privatization program. Concepts and Cases.32 & F$0.1. This paper was prepared by a team of MBA students from the University of the South Pacific with the objective of developing a Strategic Plan for the Bank South Pacific for 2006 to 2008 .52 av. It is listed on the Port Moresby Stock Exchange (POMSOX) since 2003 and is incorporated under the Companies Act of PNG and is an authorized Bank under the Banks and Financial Institutions Act of PNG. BSP is one of the largest private sector incorporated businesses in PNG and is developing to be a local “icon” 3.5-7.. SITUATION ANALYSIS 1 2 PNG Post Courier 06/10/06 PNG currency is expressed in Kina and Toea. 11th ed. Marshall Islands. The smaller PIC’s such as Kiribati.1 Business Market Summary BSP is in the comfort zone in terms of local market dominance in PNG although there is always room for expansion. BSP is expected to increase coverage in the region. As an added advantage of minimal transportation cost and the service nature of its operations. With the penetration of the Solomon Islands and Fiji markets.1-‘Basic characteristics of Pacific Island Countries” 6 . there are no commercial banks and 5 ADBPacific 2020-Table 2. This may be seen as a reason for BSP’s focus on organic growth. The BSP currently employs in excess of 1. BSP’s continuing expansion of services to nearly all corners of the country is an indication of its value for customers. BSP has however shown its strength and capability to position itself strategically in the region for further expansions. In Tuvalu for example. obligation to shareholders and the general public and a reflection of an effective management system. A majority of the banks are either internationally owned or Government controlled. the existing business vision and strategies are conducive to local conditions. PNG has a population of 5.Bank South Pacific has been in existence for nearly 50 years going through various positive transformations in the process. the challenges of globalization. Exposing operations to regional and international markets will pose challenges for the management.8 million people. Palau and Tuvalu have very little to no private domestic banks. Regional trends It is estimated that there are currently in excess of 50 banks and financial institutions operating in the Pacific region. 2.900 staff and this is expected to increase. increased competition and profitability opportunities are forcing companies to reconsider their strategies and the way they do business. 13% of the population lives in the urban areas. It has maintained local dominance post merger with a major 52% share of the domestic market. Of the total banks in the region around 65% are international commercial banks. However. In other words. These consist of the ANZ and Westpac banks and the Bank of Hawaii and Bank of Guam (mainly in the smaller PIC’s). which is more than double the total population of the Pacific Island Countries combined5. Fiji and Vanuatu have comparatively higher number of banks. On a localized front. 6 The Melanesian countries such as PNG. including banking and finance services. BSP is the leading domestic commercial bank in PNG facing competition from major international banks such ANZ and Westpac. PNG for example has two types of ‘other’ banks. Industry Growth The growth of the banking industry in the region is said to be slow. merged with other banks. Solomon Islands. It is expanding and has recently announced the opening of a new branch in Moro.Banks in the Pacific Region (Not available: Niue and Cook Islands) The graph indicates one type of bank per country. a mineral resource haven in the rugged highlands of PNG.all banking is done through the State bank. Figure 1 .htm 7 .portalino. For example Vanuatu has six different types of banks classified as ‘Others’. Fiji has seen an increase in foreign direct investment (FDI) in various international investments. The chart does not indicate market share.it/banks/links_oceania. Figure 1 shows the types of banks for each of the PIC’s. It should be noted that some banks may have changed names. This brings to 40 the number of BSP branches in PNG. 6 http://www. moved operations or closed down. Port Moresby. BSP Headquarters.BSP has tapped into the two largest markets in the region – Fiji with a population of 840. PNG There is little geography hindrance to BSP when establishing in the region (Fiji and the Solomon Islands) in terms of accessibility and infrastructure support. There are no major transportation costs. Milne Bay Province. This positions BSP strategically in the hub of the region.000 and Solomon Islands (521. Market geographies The local physical geography is considered tougher than the region due to the ruggedness of the country and accessibility difficulties. communication and technology and infrastructure are readily available. Technology and Innovation BSP provides various banking services through a network of computerized banking systems and innovative electronic facilities made available to customers on-line. 8 . PNG BSP in Alotau. districts down to the local level and it has managed well bringing services to the rural people. 87% of PNG’s population lives in the rural areas and 13% in urban centres in the provinces of PNG. BSP has banks established in all major towns. however reliable air service.000). self-learn packages and selected external courses. A considerable staff training program to upgrade branch teller systems and branch back office processing was conducted in 2005 to better serve customers in the remote areas. generic ATM installation expansion and internet banking for personal and corporate clients. BSP has a very informative and fully fledged website service where the shareholders.2 SWOT Analysis The SWOT anlaysis consists of the EFE and IFE matrices. customers. they then proceed to the Bank’s High Growth Potential Program where their careers will be guided and monitored through the BSP annual Management Review process to prepare them for supervisory and management duties.including smart cards. exchange rates and other important issues are also available. The key external factors (EFE) in threats and opportunities which influence bank operations are listed below. Economics. Various reports such as the Annual Reports and newsletters. The graduates are recruited direct from the local universities and are trained under strict professional development programs whilst attached to the seven Strategic Business Units. Also in the same year the General Manager Human Resources completed a world-class human resource Performance Management System. employees at all levels are provided with on-the-job training and professional training with occasional in-house training. Marketing and Information Technology. and electronic customer signature scanning for branches. After an initial 12 months. As a wide variety of skills are required by BSP. Accounting. international Visa Card acquiring. 9 . BSP also conducts a Management Trainee Program for young graduates in the fields of Business. Also listed are the internal strengths and weaknesses of BSP . individuals and businesses in PNG and abroad can access to learn more about the bank and its products and service offerings. Training BSP accords high priority to training and development of its human resources to acquire the necessary skills to execute their duties effectively.Key Internal Factors (IFE) in the tables below. 2. 58 5 4 4 4 3 WEIGHTED RATING SCORE 0.10 0. Fiji Acquisition of other capital stockbrokers (eg Wau Microbank) Merging with other banks Buying equity (eg PNG Microfinance Ltd) Total Threats 7 8 9 10 11 12 High risk operating environment Total asset invested in domestic government securities Political instability and economic downturn Competition Increasing inflation Depletion of foreign reserve 0.42 Total 1 3 3 2 4 2 2 0.13 0.Key Internal Factors (IFE) 10 . On the other hand. KEY EXTERNAL FACTORS ( EFE) WEIGHT Opportunities 1 2 3 4 5 Regional market penetration Plans for the acquisition of both the National Bank of SI and the Habib Bank Ltd.36 0.15 0.30 2.09 0.65 0.Table 1 .06 0.11 0.68 (which is above the average of 2.18 0.48 0.60 0.27 0.10 0.29 3.5) indicates a strong external position for BSP.Key External Factors (EFE) The EFE table below shows that BSP external opportunities far outweigh that of the external threats.68 Table 2 .15 0.05 0. The immediate notable opportunity factor is for BSP to complete the acquisition of the NBSI and HBF and further penetrate the regional market.39 0. BSP faces strong competition from other competitors mainly the international banks. The total weighted score of 3.09 0.60 0.08 1.03 0.06 0.04 0. 13 0.04 4 4 5 5 3 3 3 5 3 0.53 3.WEIGHTED KEY INTERNAL FACTORS ( IFE) Strengths 1 2 3 4 5 6 7 8 9 Total 0.07 0.68 Weaknesses 8 9 10 11 12 13 Organisational structure Broad and unclear vision Limited lending opportunities Higher credit risk portfolio than commercial banks Debts recoveries management Regional market share Total 0.12 0.12 0.10 0.03 0.5) indicates a strong internal strength position for BSP.18 0. The notable strength of BSP lies in its financial status and customer focus.50 3.14 0.15 0. Table – 3 SWOT Matrix 11 .04 0.65 0.09 0.12 0.02 0.32 1 2 2 2 1 2 1 0.01 0.03 0.03 Strong market position Very good funding and liquidation profile Adequate asset quality Very good capitalization and profitability Adequate staff development and supervision Adequate electronic banking capability and ATMs Sound domestic banking franchise Focus on customer service quality & wealth Capable and dedicated Board 0.09 0. The total weighted score of 3.40 0.36 0.03 0. The major weaknesses are the regional market share and debt portfolio recovery.12 WEIGHT RATING SCORE As for the internal factors.05 0.60 0.06 0.08 0.53 (which is above the average of 2.01 0.09 0. BSP’s strengths surpassed that of weaknesses as shown by the IFE matrix table below.01 0. SWOT Matrix A SWOT Matrix was developed using the information analyzed in the IFE and EFE above. 3.55 0. S4.O1.9).T6) 2. 6. Broad and unclear vision 3. O3. 4.6. This indicates BSP as being more competitive than the two similar banks in the region. Adequate asset quality 4. 4.O4.T1. (S1.2) Threats 1. Prioritize market segment to increase profitability. Strengthen debts recoveries Unit (W5. prioritized and implemented in accordance with recommended implementation plan. Diversify its earnings and asset profile (S1. T3. Strong company image (S1. Regional market share SWOT MATRIX Opportunities 1. Staff development and supervision 6.S6. Organisational Structure 2.S3. T1. O5). O1.S2. S4. S3.S4.O5). High risk operating environment Total asset invested in domestic government securities Political instability and economic downturn Declining Value of focal currency Inflation Competition Using the SWOT Matrix the team linked the key internal and external factors as a guide to developing appropriate strategies for BSP. Table 4 – Competitive Profile Matrix 12 . Plans for the acquisition of both the National Bank of SI and the Habib Bank Ltd. ST Strategies 1. Aggressively promote regional market growth. Adequate electronic banking capability and ATMs 7.O5) WT Strategies 1. Fiji 3. (W3. Regional market penetration 2.76) and NBV (2. Improving operating efficiency (W5. BSP achieved the highest weighted score of 4.O5) 3. COMPETITIVE PROFILE MATRIX (CPM) For comparison purposes. similar banks in the region such as National Bank of Solomon Islands (NBSI) and National Bank of Vanuatu (NBV) were considered to develop a CPM for BSP.Strengths 1. W2.S7.T6) WO Strategies 1. Higher credit risk portfolio than commercial banks 5.O4. Pursue aggressively loans from corporate and commercial clients (W3. electronic banking and ATMs. Acquire and merge with local and regional banks(S1. O5) 3.18 as compared to NBSI (2. 2.S5. The resultant CPM is shown below. Acquisition of other capital stockbrokers (eg Wau Microbank) 4. 3. These are physical alternative strategies which will be further developed. Focus on customer service quality & wealth Weaknesses 1. Debts recoveries management 6.O3. 2. (S1. Expand and improve on banking franchise.S2.T6) 2. 5.O2. O2) 2. Organisational restructure (W1. In comparing. Limited lending opportunities 4. Strong capitalization and profitability 5. the various critical success factors were measured against weighted ratings for each of the selected banks. Merging with banks 5. Strong funding and liquidation profile 3. Buying equity (eg PNG Microfinance Ltd) SO Strategies 1. Strong market position 2. 45 0.01 0.04 0. Figure 2 shows the various banking sectors in the region. The latter had established in Port Moresby.33 0. BSP has learnt plenty from the Niue experience.45 0.02 0.00 0.01 0.02 0.30 0.15 0.Score 0.Score 0.00 Rating 4 2 5 4 4 5 3 2 1 1 5 1 4 Wt. It sees the arrangement as a “testing pattern and forerunner” and leverage to enter bigger markets.40 0.44 0.42 0.80 0.02 0.16 0.13 0.10 0.Competitive Profile Matrix (CPM) for BSP Bank South Pacific Critical Success Factors Nat.01 0.04 0. As can be seen the largest sector (competitor) is the international banks (65%).11 0.04 0.00 0. However.30 0.01 0. BSP faces stiff competition at the regional level more than at the domestic level particularly from the international banks.65 0.04 0.02 0.01 0. PNG few years back but has ceased operation a few years back.04 0. The existence of BSP on Niue may be of little concern for BSP’s rivals due to the tiny market population fewer than 3.27 2.33 0. BSP has to compete against these international rivalries to top the banking business in its efforts to go regional and internationally. Bank Solomons Weight 0.48 0.39 0. bank Vanuatu Nat.76 Rating 3 2 3 3 3 3 0 2 2 1 4 1 3 Wt.01 0.1 Competition In terms of competition.09 1.02 0.06 0.48 0.27 2.000.52 0.14 0.75 0.02 0.02 0. The total PIC population is around 8 million.56 0. 13 .90 Market Share Inventory System Financial Position Product/Service Quality Customer Loyalty Sales Distribution/loans Global Expansion Organizational Structure Production Capacity e-commerce Customer Service Price Competition Management Experience Total 4. The main competitors for BSP are the ANZ. It can be said that BSP is not new to these competitors and the challenges and has prepared itself well to move forward in the islands.08 0.18 Rating 3 1 3 3 3 3 0 2 1 2 3 1 3 Wt.Score 0. Westpac and Bank of Hawaii.36 4.01 0.04 0.42 0. BSP offers a range of services to meet customer specific needs. personal loans. PNG. This include cheque accounts. This includes business banking.Pie Chart Distribution of Banks in the South Pacific (Excl. savings accounts. home loans. Cook Islands. In personal banking. international services. For the business banking BSP offers services such as cheque accounts. term deposits. These services are of the worldstandard. phone banking. merchant services. home loans international services card transactions .2 Product Offering The BSP offers various products and services to its customers. payroll services and term deposits. personal banking and on-line services. loan products. Niue) Others 27% Domestic 35% Bank of Guam 7% Bank of Hawaii 11% ANZ 11% Westpac 9% Figure 2 4.ATM personal loans 14 . western union and others to the customers’ satisfaction. international services. 2 Rating -1 -2 -2 -2 -3 -2 -3 -29/9= -3. SPACE Matrix SPACE Matrix INTERNAL STRATEGIC POSITION Financial Strength (FS) Return on investment Leverage Liquidity Working capital Cash flow Rating 5 3 4 5 4 EXTERNAL STRATEGIC POSITION Environmental Stability (ES) Technological change Rate of inflation Demand variability Price range of competing products Barriers to entry into market Competitive pressure Rating -2 -4 -3 -5 -2 -2 -6 -2 -3 Key.14 15 . 1 worst & 6 the best Ease of exit from the market Price elasticity of demand Risk involved in business Total Competitive Advantage (CA) Market share Productivity quality Product lifecycle Customer loyalty Competition capacity utilization Technological know-how Control of products & services spread 21/5= 4.5.IS & FS . Both NBV and NBSI restricted to local market and do not have a strong growth rate … 6. BOSTON CONSULTANT GROUP (BCG) MATRIX Figure 3 – BCG Matrix BSP NBSI NBV Conclusion: BSP has a strong growth rate dominating locally and has a potent ial to tap into regional and international markets. -1best & -6 the worst Key.ES & CA. capacity utilization Rating 5 4 4 4 4 4 4 Total -15/7= .2.14 29/7= 4.22 Industry Strength (IS) Growth potential Profit potential Financial stability Technological know-how Resourse utilization Ease of entry into market Productivity. 0 1.5 IS Defensive 1. As discussed earlier. The “Pacific Bank” is what we think the BSP should strive for.0 Competitive 1. The word “South Pacific” in the bank’s name poses a big challenge for the management. BUSINESS STRATEGY Developing business strategies is always a challenge. BSP needs to scan the macro-environment.5 Aggressive 2. identify its key competitors. 0.0 FS Conservative 1.Managing Director’s revealed the Board’s commitment to see BSP become a “truly great pacific bank”.5 CA 1.5 ES BSP is financially strong and is beginning to achieve a major competitive advantage in pursuing aggressive strategy in a fast growing environment 7.5 1.0 0.5 0. whilst remaining loyal to its customers and shareholders.SPACE Matrix 2.0 2.5 2. Today strategies are like moving targets as businesses and markets continually change.5 0. position itself realistically through appropriate strategic analysis and develop medium and long term objectives to achieve the goal of increasing its market share in the region. In other words BSP must live up to it’s “name” by doing more regionally. 16 . In the 2005 Annual Report Mr. look at its internal strengths and weaknesses and external opportunities and threats.98 1. Garth Mcllwain .5 1.0 0. After all. Vision and Mission statements BSP states it has a “simple” vision – A bank with a powerful customer focus and an understanding of shareholder value. the vision statement answers the question: What does an organisation want to become? In this regard and in light of current developments as discussed earlier in the paper.We segment our approach to the market based on customer groups who deliver value. its strategy is also “simple”. we propose a new vision for BSP as follows: New Vision: To be a leader in the banking and financing industry with a powerful customer focus and an understanding of shareholder value. However there is an imbalance in terms of business image and market positioning to indicate what BSP wants to become in the future. It has placed priority on its customers and shareholders. 17 .The above indicates that strategy 3. to pursue geographical expansion is a more attractive strategy when compared to strategies 1 & 2 8. BSP’s current vision is appropriate given the nature and composition of its business. Whilst the bank does not have a mission statement. We will vigorously pursue a world class banking platform to foster a climate which encourages innovative on-line service delivery through high-tech electronic technology and banking systems. We believe ‘more meat’ is needed in the context of a mission statement to set the pace for BSP. As a leading bank in Papua New Guinea we are committed to providing the best banking and financing services to our customers in Papua New Guinea and the Pacific region. We believe our strength is in our natural ability and knowledge of the environment we operate in and many. We present below a new mission statement for BSP which includes the important nine components as highlighted below: New Mission Statement: At the Bank South Pacific. In delivering our services we are always mindful of our standing and image in public and also of our corporative obligations and social responsibilities to our employees and the public at large. a. Our philosophy is about simplicity . on the walls and stairways readily visible to the public.to maintain simple visionary approach to our customers with a friendly service. BSP is already expanding operations into the Pacific region (with Niue office operational in 2004) and Fiji and Solomon Islands soon. A mission statement is normally at the fore-front. except to search market segments with customers that deliver value. Business Objectives The long-term business objectives of the Bank South Pacific are summarised below: 18 .Similarly. These are major business strategies and missions that BSP need to inform its customers. We will strive to excel in providing superior services with the highest professional standards and acceptable practices to satisfy the banking demands in the Pacific market. we strive to achieve more for our customers and shareholders. Our willing staff and prudent management are well trained to ensure long-term customer and shareholder interests are protected through sustainable business growth and profitability . shareholders and the general public through a well developed mission statement. There are nine essential components necessary for an effective mission. the bank’s strategy is too “simple” and lacks strong business power and direction. It identifies the scope of the firm’s operations and describes the values and priorities of the organisation and in overall charts the future direction of the organisation. many years of relevant experience which gives us the confidence and competitive advantage in better serving our customers. Using the current trend and growth as guide. In line with the bank’s objectives and business strategies it is recommended that BSP should target the following markets: PNG market BSP has emphasized the need to maintain local organic growth as an immediate consideration. b. The current trends and industry growth offers an ideal opportunity for BSP. To expand business aggressively and offer above average returns to shareholders To become the leading bank in the Pacific. estimated at K1. Financial Objectives The financial objectives of BSP for the next 2-3 years are: To complete financial transactions for acquisition of the NBSI and HBF 7 as an immediate task To consolidate and drive for profit in the new market segments Maintain financial organic growth in PNG c. gas and similar development projects in addition to those it is yet to cover. BSP will consolidate and pursue profits before considering further markets in the region. Target Markets Following the acquisition of the NBSI and HBF. oil. One of these areas is the big Bougainville Island where BSP has only one bank operating in Buka town. These PIC’s are mainly dominated by ANZ 7 National Bank of Solomon Island and Habib Bank of Fiji 19 . Samoa and Tonga.2 Million. BSP should increase coverage with its strong capital base. and take advantage of local towns involved in mineral. Regional market BSP’s establishment on Solomon Islands and Fiji has set the scene for more business opportunities in the region. the following market segments were considered as possible prospects for BSP – Vanuatu. 20 . 7. BSP will: Concentrate on organic growth in PNG Consolidate business in NBSI and HBF and drive for profit Develop a Regional Market Expansion Plan (RMEP) Consider acquisitions Grand Strategy Matrix BSP 1. Key Strategies The key strategies were developed in light of the new vision and mission statements. 6. d. objectives and linkages to BSP’s position in the industry market as discussed above. Market development Market Penetration Product development Forward integration Backward integration Horizontal integration Related Diversification The GSM as shown above has positioned BSP in the rapid market growth and strong competition position. 2. The smaller distant island countries mainly use the Bank of Hawaii and the Bank of Guam.and Westpac banks. International The international markets will always be a big challenge but not an impossible task. As part of its strategy for the next 3-4 years. 4. 3. 5. 0 High 3-4 4.0 10% 20% 3.0 Weak 1.0 Average 2 – 2. The Corporate and International Section contributed 20% to the overall performance and needs to grown & built upon for further high performances.99 1.99 1. 21 .0 Grow & build 20% High 2 – 2.99 2.99 2.0 10% The IE Matrix depicts contributions by departments in terms of its overall strong performance.Internal – External (IE) Matrix Internal-External (IE) Matrix – BSP by Division Contributions Strong 3-4 3.0 ld Ho 10% n ai nt ai M 20% 10% Harvest & Divest & Low 1 – 1.1. there were few assumptions made in the absence of reliable information. The worst-case scenario predictions as shown below are based on the assumption that tensions would continue to critical levels forcing the closure of both operations in 2007. 9.206 2010 547 (385) 16.406 Income Expenditure Total Assets Table 2 . Furthermore.1 Likely forecast Below is a likely forecast for BSP based on past six-year annual average growth rate:8 2006 306 (231) 3.406 Income Expenditure Total Assets Table 1 – Likely forecast (PNGK ‘Million) In forecasting. staff movements.9.668 2007 360 (263) 8.630 2009 547 (344) 13.557 2008 414 (318) 10.Worst case scenario predictions (PNGK ‘Million) BSP may risk losing up to K27 million (F$14 Million) in income in the first half of 2007 in this situation.206 2010 629 (378) 16. proposed restructuring and operational costs. The cost assumptions and implementation schedule are further discussed in detail in Section 5 of the report.2 Worst case scenario .557 2008 476 (313) 10. BSP’s new operations in the two countries will be affected. It will also encounter delays in its plans for future expansions as well as 8 BSP Annual Report 2005 22 . FINANCIALS 9. The financial projections do not include costs for future acquisitions although these are indicated in the implementation schedule (after 2008).630 2009 476 (350) 13.“What if” The current unrest in Solomon Islands (RAMSI and civil tensions) and Fiji (military threats) pose high risks for businesses. These include acquisition costs.668 2007 414 (288) 8. BSP will be deprived of opportunities to invest in early profits. It is also assumed that BSP has acquired the two banks through direct outright purchase. 2006 306 (231) 3. returns on asset and to shareholders will fall below expectations. In actual fact.9 BSP’s strategy to focus on organic growth is able to sustain overall operations in such situations. Most importantly.Summary Alternative Strategies Forward Integration Backward Integration Horizontal Integration Market Penetration Market Development Product Development Related Diversification Unrelated Diversification Retrenchment Divestiture Liquidation SWOT BSP BSP BSP BSP BSP BSP BSP BCG BSP BSP BSP BSP BSP BSP BSP IE BSP BSP BSP SPACE BSP BSP BSP BSP BSP GSM BSP BSP BSP BSP BSP BSP BSP COUNT 5 5 5 4 4 5 4 BSP BSP BSP The summary matrix highlights some of the strategies that BSP needs to pursue in its efforts for expansion and growth. BALANCED SCORECARD 9 http://en. Other major banks including ANZ. Westpac.wikipedia.disruptions to posting and training opportunities for its staff.3 Summary Matrix Matrix Matching . 10. 9. past records indicate that the National Bank (NBSI) closed in 2003 due to civil unrest following the failure of a pyramid investment scheme.org/wiki/National_Bank_of_Solomon_Islands 23 . and the central bank also closed down. of customers % sales of new product Sales volume Customer survey • • • 20% per year 20% per year 5% per year • • Optimize Standardize products • Chief Financial Officer Customer • • • • • • • • • • • 90% change per yr No. The implementation schedule encourages further expansions based on the new vision and strategies of the bank.1 Implementation The implementation schedule for 2006-2008 and plans up to 2010 is shown below: 2006 Local Regional (PNG) Fiji Solomon Islands Vanuatu Samoa Tonga International 2007 2008 2009 2010 Figure 3 . of bad loans made Overhead expenses • • Loan delinquencies Efficiency ratio • • 2% or less per yr 70% per yr • Quality Management • Chief Financial Officer This balanced scorecard can be used as a benchmark for the business excellence in terms of the suggested strategy. 24 . Samoa and Tonga. CONTROLS 12.Implementation Schedule 2006 . of product offering per yr 90% per yr 98% satisfaction Yr 1 – 70% Yr 2.2008 The year 2007 will be challenging for BSP as operations commence in Fiji and Solomon Islands and business expands in PNG. BSP may consider banking prospects in Vanuatu. 11.BALANCED SCORECARD FOR BANK OF SOUTH PACIFIC THEME: Operating Efficiency Financial OBJECTIVES MEASURES TARGETS INITIATIVES PRIMARY RESPONSIBILITY • • • Growth Profitability Cost leadership More customers New product Competitive Product offering Satisfaction • • • • • • • Revenue growth Market value Unit Cost No.90% Yr 3 – 100% • • Customer loyalty programme Quality Management • • Client Services Manager HMR Manager Learning & growth • • Competence Product focus • • % Crew trained % Sales • • Crew training Product analysis • • HRM Manager New product Manager HRM Manager Internal Business Process • • Fast services Fast on turnaround • Queuing time • > 25 minutes/client • Cycle time optimization programme • Share Holder • • No. Considering profit growth in previous years BSP is able to recover its investment in reasonable time. 12. 25 . The current Operations SBU will continue to oversee national operations.2 Organisation structure BSP’s current organisation structure is shown below: Managing Director Retail Bank Corporate and International Paramount Banking Credit & Risk Human Resources Operations Finance & Planning Figure 4 . The structure consists of seven strategic business units (SBU’s) each headed by a General Manager.Organisation Structure BSP uses a flat organisational structure with limited levels which is line with its current vision of customer focus and shareholder value. The expansion of BSP’s banking operations to Solomon Islands and Fiji and possibly other markets in the region will increasingly impact on the way BSP conducts business. Whilst the current structure has succeeded it has been viewed as mainly localized with focus on organic growth. A change in the structure is required in the operations area as regional and international operations emerge influenced by competition and profitability opportunities. The section is to be headed by a General Manager tasked with the responsibility of managing and reporting directly to the Managing Director on all regional and international matters. It is recommended that BSP include a SBU called Operations International. The limited levels of management allow “Executives with responsibility for customers and value report directly to the Managing Director’. This calls for appropriate changes including the current structure. 000 26 .8 million K0.A new structure is shown in Figure 5 below with the changes highlighted.000 per annum Expenses for setting up and staffing – K 150. The major costs identified below relate to the Likely scenario forecast as shown in Table 1. This report has made few assumptions and estimates where information is lacking based on experience and discussions with fellow Pacific students participating in the MBA program at the University of the South Pacific. Operational costs plus staff movements – 10% of costs 15% growth in customer number Remuneration package for new GM – K100.2 million in costs for additional local establishments. The changes continue to support the flat structure in line with the new vision and objectives of the bank as discussed earlier in the report. These include: Acquisition costs – NBSI and HBF – K3. “Improved” Organisational Structure (2006) GM GM GM GM GM GM International COO/GM Domestic CFO Niue Niue Solomon Islands Solomon Islands Fiji Fiji PNG PNG Source: BSP Annual Report 2005 Figure 5 – New Organisational Structure 12.3 Cost Implications With every change in business strategies there are associated cost implications. This report has identified few strategies based on the various strategic management tools that can be considered by the management of BSP in its endeavors to pursue its objectives and longterm business goals. customers. Develop a Regional Market Expansion Plan (RMEP) Continued focus on expanding BSP’s business in the Pacific by further investment in improving branches and looking for new opportunities in new countries. 13. and currently expanding to include Solomon Islands and Fiji. BSP is the leading bank and company in the South Pacific employing over 1900 people with 40 branches in 2 countries including Papua New Guinea. 27 . staff and communities throughout the Pacific. K3. RECOMMENDATIONS BSP’s strong financial performance and prudent management will enable it to make further investments in the coming years for the benefit of its shareholders. It is recommended that BSP’s investment and growth strategy for the Pacific should include: Concentrate on organic growth in PNG Improving infrastructure and service levels for customers by developing a centre for excellence to support BSP’s business and creating more jobs in the Pacific.8 Million for the acquisitions in Solomon Islands and Fiji Asset value increases in direct proportion to acquisitions/expansion. 14 CONCLUSIONS BSP is already making its mark as a Pacific’s leading bank and has now focused on taking this to the next level for the benefit of its customers and the community. • The Balanced Scorecard as presented can be used as a benchmark for achieveing high level performance. BSP has potential to further develop operations in the region and beyond. Niue. Consolidate business in NBSI and HBF and drive for profit Expanding regional banking to bring basic banking services to more Pacific Islanders. That is the core of an exciting agenda for BSP in the Pacific.