investment arm “ albilad capital ” international remittance services B u s i n e s s F i n a n c e
E-Business Strategy and Models in Banks: Case of Bank AlBilad
Bank is an institution that deals with money as well as credit. It accepts deposits from the public, makes funds available to those who need then and helps in remittance of money from one place to another (Macesich, George, 2000, p-42). Modern banks today perform a wide range of functions that makes it difficult to give an apt and precise definition of it. One of the famous economists, Crowther had said, a bank “collects money from those who have it to spare or who are saving it out of their incomes, and lends this money to those who require it”. In short, the term bank in modern times refers to an institution that deals with money i.e. accepts deposits and advances loans; has the ability to create credit which basically implies expanding its liabilities as a multiple of its reserves; creates demand deposits and it is a commercial institution that aims at securing profits.
Bank Albilad is a Saudi joint stock company, headquartered in Riyadh. It was established with a Royal Decree 48/M on 21/9/1425H (corresponding to 4 November 2004) with a corporate capital of 7.5 billion Saudi Riyals. The Vision is to be the preferred choice in shariah based Islamic banking solutions and the Mission is Strive for excellence in the Islamic banking sector through introduction of initiatives, innovation, and genuine shariah compliant banking products to meet and transcend the aspirations of our customers, employees and shareholders.
The key people involved in the management of the bank are: Dr. Abdulrhman Bin Ibrahim Al-Humaid (Chairman) and Abdulaziz Bin Mohammed Al Onaizan (CEO). Bank Albilad offer its customers shariah compliant products and services that are unmatched in the Kingdom. They provide solutions in multiple segments including:
- Investment Products through our investment arm “Enjaz ”
Strategy literally means the way an action is planned to achieve the desired results. Every company has certain aims that it hopes to conquer. It has a vivid description of what it desires to achieve. The vision statement that company has is an idealized picture which inspires it, energizes its efforts towards directing its actions towards the expected goals (Hambrick and Chen, 2007, p 935-955). Strategic Decision Making, in context of a firm or an organization, is the framing of long term plan of action that aims at resulting in success and profits for the products and services marketed by the company, for instance (Triantaphyllou, 2000, p 320). Strategic decision making is important to outperform the various other competitors in the market. The process of determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organizational purpose is known as Strategy formulation. In today’s era of cut-throat competition in the business environment budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track (Kepner and Tregoe, 1965). A strategy thus formulated, should reflect on environmental analysis, basing on sustainable business. It should lead to the materializing of the vision of the organization, as to where the organization sees itself in the years to come and result in achievement of organizational objectives. It basically comprises of the following steps:
Setting up mission and objectives: The mission statement describes the company’s business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that would guide the pursuit of future opportunities and lead to its long term stance in the business world. Measures such as sales targets and earnings growth are the organizations financial objectives. Strategic objectives are related to the firm’s business position, and may include measures such as reputation in the market and market share.
Environmental Scanning: The environmental scanning includes the internal analysis of the firm, external macro-environment and the analysis of the firms’ task environment. Various scientific analysis have been developed which assist in the process of environmental scanning. A deep rooted internal analysis of the firm’s strengths and weaknesses and external analysis of the threats and opportunities gives us a clear picture about the firm’s stance. And a profile of the strengths, weaknesses, opportunities and threats is given by the SWOT analysis.
It gives us proper information regarding the concerned firm which helps us in matching the firm’s resources and capabilities to the competitive environment in which it operates (Menon et al, 1999, p 18-40). Strengths are used in developing the rudiments for a competitive advantage. Strengths include exclusive access to high grade natural resources, patents, strong brand names, favorable access to distribution networks and good reputation among customers. The weaknesses are high cost structure, lack of access to the best natural resources, lack of access to key distribution channels, a weak brand name and bad reputation among customers. Opportunities are chance occasions for growth and prosperity. They may include: removal of international trade barriers, loosening of rules and regulations, introduction of new technologies and an unfulfilled customer need (Hill and Westbrook, 1997, p 46-52). The changes in the external environment may pose serious threat to the organization. For instance, emergence of substitute products, new regulations, increased trade barriers and shifts in consumer tastes away from the firm’s products. The external macro environment can be tested on the PEST analysis scale. The acronym PEST (or sometimes rearranged as “STEP”) is used to describe a framework for the analysis of these macro environmental factors. It is the Political, Economic, Social and Technological analysis. Political issues include Government’s policies and legal issues like Tax policy, employment laws, trade restrictions and tariffs and political stability. Economic growth, Interest rates, Exchange rates and Inflation rates determine the Economic conditions of the market. Social factors include career attitudes, age distribution, population growth rate, health consciousness and emphasis on safety. The various factors like Automation, research and development activity, technological incentives and the rate of change of technology, influence the technological aspect of the functioning of the organization. A framework developed my Michael Porter known as Porter’s five forces can also be used in drawing industrial analysis.
Strategy formulation: Keeping in mind the strengths and the weaknesses of the organization, it charts out its strategy that helps it in optimizing its resources and gaining maximum profits out of it. Business trends analysis, Market analysis, Competitive analysis, Market segmentation, Marketing-mix, SWOT analysis, Positioning – analyzing perceptions and Sources of information are all studied closely and accurately and then strategies are formulated on the basis of the three generic strategies.
The Cost Leadership strategy focuses on being the low cost producer in an industry for a given level of quality (Chaffee, 1985). The firm sells its products either below the average industry prices to gain market share or at the average industry prices to earn a profit higher than the market rivals. In the situation of a price war, the firm can maintain some profitability while letting the competition suffer losses. Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time. The cost leadership strategy usually targets a broad market. The internal strengths that lead to success in cost leadership strategy are: High level of expertise in manufacturing process engineering, Skill in devising products for efficient manufacturing, having access to required amount of capital for investing in production assets and efficient distribution channels.
The second generic strategy, i.e. The Differentiation Strategy triggers the development of a product or service that offers unique attributes that are valued by the customers and that customers consider it to be better than or distinct from the products of the competition. That means it gives ultimate utility and satisfaction to the consumer. Factors like access to leading scientific research, strong sales team that has the inherent ability to put forward the perceived strengths of the product in the market, highly skilled and creative product development department and corporate reputation for quality and innovation, result in the success of Differentiation Strategy (Mulcaster, 2009, p 65-70).
The third generic strategy that is the Focus Strategy, finds its essence in a narrow segment within which it tries to achieve either a cost advantage or differentiation. The basic idea is that needs of the group are better serviced by focusing entirely on it.
Strategy Implementation: The strategy thus finalized is then implemented using budgets, programs and procedures. The firm’s resources are organized and allocated and proper motivation is given to the work force to achieve its objectives and thus the strategy is implemented. The way in which the work force perceives the strategy is different. It is logical, that the people who formulated the strategy and the people who will implement it are very different from each other and thus there might be a conflict of opinions, if proper care is not taken to communicate efficiently. Misunderstanding may lead to chaos.
Evaluation and Control: The implemented strategy has to be followed up and monitored in every step, and adjustments, if any required, will be made to adapt to the changed scenario of the market. Evaluation would primarily revolve around defining parameters to be measured, defining target values for those parameters, performing measurements, comparing measured results to the pre-defined standard and making necessary changes.
The application of information and communication technologies (ICT) in support of all the activities of business is known as Electronic business or “e-business”(Louis Gerstner,1996, p 172). Commerce deals with the exchange of products and services between businesses, groups and individuals and can be seen as one of the most essential activities of any business. The application of Information and Communications Technology to enable the external activities and relationships of the business with individuals, groups and other businesses is what Electronic commerce is all about. Electronic business methods empower companies to link their internal and external data processing systems more efficiently and adaptably, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of their customers (Timmers, 2000, p-31). In practice, e-business is far more than just e-commerce. While e-business refers to more strategic focus with an emphasis on the functions that occur using electronic capabilities, is a subset of an overall e-business strategy. E-commerce aims to gather revenue streams using the World Wide Web or the Internet to build and nurture relationships with clients and partners and to improve efficiency (Miller, Roger, 2002, p741). Often, e-commerce involves the application of knowledge systems.
E-business involves business processes spreading the entire value chain: electronic purchasing and supply chain management, handling customer service, processing orders electronically, and cooperating with business partners and catering to their needs online, via internet. Special technical standards for e-business enable the exchange of data between various companies. Basically, e-commerce is the process of buying, transferring, or exchanging products, services, and/or information via computer networks, including the internet. EC can also be benefited from many perspective including business process, service, learning, community. E-commerce is often confused with e-business. E-business software solutions allow the integration of intra and inter firm business processes. E-business can be conducted using the web, the Internet, intranet and extranet or a combination of these.
E-BUSINESS STRATEGIES: With the arrival of the Internet facilities and plenty of web development technologies all over the world, e-business is the new talk of businesses in today’s world. E-business, like any other emerging field, is changing fast and in the process is changing the way businesses formulate their strategies and conduct their business through realization of those strategies. : E-business scores over the traditional sphere of business by adding speed to the business activities and giving a totally new dimension and definition to businesses worldwide be it whether partnerships, joint ventures or large corporations. It makes transactions quicker in this world of fast pace (Andam, 2003). The intranet, internet, cellular networks and various other forms of digital technology have resulted in formation of a niche value chain among clients, employees, suppliers, stakeholders and traders coordinated and interlinked in the world of web marketing. The equipment and pillars of e-business strategies include acceptance of payments over the Internet, online advertising, on-line trading and auction deals over the Internet. E-business strategies differ for small and medium-sized businesses. Apart from regular sources, e-business strategies can generate revenue made from paid marketing alliances, revenues derived from franchisees and subscriptions and revenue from maintenance of current channel integrity. E-Business technology provides organizations with a great opportunity to nurture relationships with external and internal parties across its value and supply chains, to realize its competitive advantages. In doing so, however, the solution is not in the application of technology alone, to develop an effective e-Business strategy and for a successful implementation to be realized, existing business interactions must be modeled and scrutinized to trace the interactions that will benefit from this paradigm. The business processes supporting these interactions must be reformulated and designed to effectively perform the procedures behind the interactions. These changes to the business will drive changes to the supporting technology and to the stakeholders that perform the business processes using the technology. The use of Internet has helped and garnered the worldwide development of business that reaches out to a wider consumer base and advertises their products more effectively and efficiently. E business has been added as the latest domain in business and has become a must-have in the highly competitive technology driven open market. E Business Strategy can be summed up as the overall strategies that govern E Businesses through calculated information dissemination or scattering. Information dissemination has been widely regarded as the strongest attribute of e-business, which uses information technology in a most effective and exhaustive manner. Not only has e-business has come to play a significant role in the scenario of world trade; there is no business without an accompanying e-business in today’s world. E business gives a business the opportunity, the chance to open its base to the global market and become a part of the global business community. The most important feature of e-business is that the helps businesses move on to the international scene at maximum efficiency using minimum cost. E-business has achieved unparalleled levels of success as business models (Business Software Alliance. 2001). For instance: Materials Requirement Planning (MRP), EDI (Electronic Data Interchange) or ERP (Enterprise Resource Planning). The essential features of e-business strategies are Supply Chain management and email marketing.
A state-of-the-art E Business Strategy would generally include:
Supply chain management: According to Harland, “the management of a network of interconnected businesses involved in the ultimate provision product and service packages as required by the consumer is known as Supply chain management”. The supply chain spreads all over from governing the storage and movement of raw materials to the inventory of the production process and the finished goods, from the origin point till the point where it is finally consumed (Mentzer et al., 2007, p 1-25). The effective management of supply chain can be taken care of with the help of e-business strategies, which will ensure better coordination and understanding between the wholesalers and the retailers of various products that are launched into the market. Better integration of the supply chain right from the source till the final delivery of the product can be effectively put to work using e-business strategy (Hines, 2004). This also leads us to the point of e- commerce where a parallel network of selling and buying can be seen using dissemination or scattering of information over the Internet. Everything ranging from automobiles to electronic gadgets can be bought over the Internet in a hassle free manner under the aegis of sound supply chain management.
Customer service and customer relationship management: Effective e-business strategies would involve better customer service and customer relationship management ensuring the highest level of consumer satisfaction. E business is targeted at providing the services that are customer friendly, which would include the delivery of goods right at the doorstep of the consumer, right on time.
Inventory and service management integration: E business strategies can also help in improved inventory and service management integration through formulating certain specific plans for accumulation of inventory and purchasing of machinery and equipment which will avoid unnecessary purchases that would ultimately lead to higher expenditures and entail different tax implications.
Tactical operations alignment: Tactical operations implying towards short-term goals as opposed to strategic planning aimed at long term goals can be better coordinated by implementing the e-business strategies.
Implementing Business Strategy: Implementing e-business strategy is a major task and to ensure its success, from the beginning itself, objectives need to be identified and measurable goals need to be chalked down. This will include finding out steps in a business process, minimizing errors by eliminating paper-based transactions, introducing new market opportunities or improving information access among managers, departments or strategic business units. The costs and impacts of the establishment are measured in terms of resources, time and money. The impact of business should be anticipated, well ahead of time.
The introduction of e-business technology across multiple strategic
Business units will require a major commitment of IT department. Since e-Business applications are transparent to all major hardware platforms, operating systems and databases, thus, using an open architecture configuration eliminates this concern (Charlesworth, 2009, p 49). If an effort to make clarifications regarding the value of the strategy to the stakeholders is made, then the process of implementation becomes smoother. For instance, e-Procurement applications add value at the purchasing department level by reducing errors and streamlining the processes involved. At the organizational level value is added by facilitated purchasing in groups which cuts costs and vendors receive added value because they have quick and prompt access to information so they can track invoices and payments. The execution of the business interaction model is expected to place us in a position to clearly identify and apply values that can be quantified to the four issues discussed above, the net result of which is the formulated e-Business strategy itself.
Bank AlBilad Strategy:
Banks today are up-to-date with both the pros and cons of the internet. They are aware of the opportunities and threats that are associated with the Web. Not a single traditional bank is brave enough to face investment analysts without an Internet strategy. But even a very thoughtful approach to the Web may do no good to the company/ organization. The main purpose behind launching online banking services is to provide the customer an alternative way which is more responsive and less expensive i.e. is cost friendly. Bank Albilad invites all valued customers to benefit from all available digital channels around the clock, as follows:
- Albilad App for smart phones
- Enjaz App for international remittances
- Albilad Net from anywhere and within a short time without the need to visit the branch or submitting any documents and without the need to sign any documents for opening the account, in order to provide the best banking services to its clients easily, which reflects the Bank’s keenness to provide advanced digital solutions throughout the Kingdom. Mr. Abdulaziz Al Onaizan, the Chief Executive Officer of Bank AlBilad, said, “The bank is always keen on being the first to provide technology-based banking services for clients in KSA as per the major transformation towards digital banking and benefiting from all areas by changing and improving many processes, systems, and technologies internally and externally, when it comes to interacting with our customers by providing them with the latest digital solutions in the market. This new initiative will serve as the nucleus of the digital transformation program, which is part of the bank’s strategy to help customers easily manage all banking services without leaving their homes, offices, or wherever they are. Bank AlBilad will offer many initiatives and digital solutions to the Saudi market soon, which will help change the market landscape and improve customer experience.” Mr. Bassam Al-Eidi, the Director of Alternative Channels at Bank AlBilad, added, “This transformation is part of Saudi Arabia’s digital transformation program and the Saudi Vision 2020, which embraces the latest technologies in the market locally and globally. This is a source of pride and enthusiasm for us to continue this trend after SAMA introduced this service as part of the SAMA platform. SAMA SANDBOX helps Saudi banks innovate and deliver new services and innovate ideas that compete with the global transformation that includes the new FINTECH adoption as well. Therefore, the service of opening the current account digitally was launched through AlBilad’s website, filling out the current account opening form and documenting the customer’s information in the manner that suits him via Abshar system or using the customer’s fingerprint, which will be developed gradually by visiting one of the Bank’s ATMs scattered throughout KSA. The bank also provides several services to the customer after opening his digital account, including:
- Opening a current account immediately.
- Registering in banking services online and via AlBilad App for smart phones.
- Issuing Mada cards and delivering them to your address (could be ordered from banking services online).
- Repayments/Ministry of the Interior.
- Transfer of funds to local and international banks.
- International Funds Transfer Service via Enjaz Easy and Western Union services.
- Other services.
Porter had accorded two main ways for a company to compete on the global front. One was cost advantage and the other was differentiation (Porter, 1980) and Bank Albilad’s strategy was not to compete only on price but to also differentiate on the basis of innovative quality services with better performance through delivering customer satisfaction. Since there are many other companies which market similar products and services, Bank Albilad’s strategy was centered on leveraging their channels, networks and expertise to deliver sustainable growth. This would be supported by their ongoing efforts to achieve operational excellence and a performance-driven culture. Innovation is key to the success of their products and services which would be further diversified and enhanced to build a highly dynamic business structure. The Bank would also continue its efforts with the aim of developing resources and making good use of its facilities to provide customers with convenient streamlined services, competitive value-added offers, thoughtful experiences and expert advice. It was worth mentioning that Bank AlBilad provides services all clients through a wide network of branches spreading throughout KSA, which exceed 150 branches and 5 sales centers in (Riyadh, Jeddah, Dhahran, Tabuk, and Al Kharj) that work until 9 PM, and the branch of Prince Mohammed Bin Abdulaziz Airport in Madinah, which works on 24-hour basis, as well as more than 179 centers for the services of financial remittances “Enjaz”, supported by an ATM network of more than 850 ATMs, and the latest integrated electronic services on 24-hour basis, including “AlBilad Net” and “AlBilad Smartphones” for smart devices. Bank AlBilad provides 24-hour access to its clients via AlBilad phone 920001002 or via all social media channels: Twitter, Facebook, Instagram, LinkedIn and Snapchat for AlBilad clients to meet all their banking needs.
During the holy month of Ramadan, the bank announced the working hours of the branches and Enjaz centers throughout the Kingdom during the holy month of Ramadan, where the branches’ working hours was from Saturday to Thursday from 10 am to 2 pm and Enjaz centers from Saturday to Thursday from 9:30 am until 3:30 pm. Even during COVID19, it was worth noting that Bank AlBilad, represented in Enjaz money remittances, has recently launched a free of charge international money transfer service through its electronic channels to all their valued customers, in tandem with the efforts made to respond to Coronavirus disease (COVID-19) in the Kingdom of Saudi Arabia. Hence, Bank Albilad projected itself as the most trusted bank in the kingdom due to its world class service through implementing the well-designed strategies.
- Bank Albilad Annual Report (2018).
- Retrieved from
- What are the key elements of the e-Business Strategy framework of Bank Albilad? (3 Marks)
- Propose a SWOT analyses for Bank Albilad. (2 Marks)
- Illustrate the five forces industry framework through the Bank Albilad Case. (3 Marks)
- Design a Business Canvas Model of Bank Albilad. (2 Marks)
Students are encouraged to review required books:
- Jelassi, T., Enders, A., & Martinez-Lopez, F.J. (2014). Strategies for E-Business: Concepts and Cases. (3rd Ed.). Harlow: Pearson. ISBN: #9780273757870, #9780273757870.
- Osterwalder, A. & Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ: John Wiley & Sons, Inc. ISBN# 9780470876411 (print), 9780470901038 (e-text).
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