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  • 1. 2012 FACT & ANALYSIS CONSUMER BANKING STRATEGIC MANAGEMENT IN BUSINESS GROUP MEMBER: CARTER BING MARIA ELISHA HAMDI NIKKO CLASS MB1 YOUNG PROFESSIONAL - BUSINESS MANAGEMENT 2012 Elisha [Type the company name] 1/1/2012
  • 2. LIST OF CONTENTS LIST OF CONTENTS ....................................................................................................... i Chapter 1 INTRODUCTION ........................................................................................ 1 1.1 Abstract .................................................................................................... 1 1.2 Introduction ............................................................................................. 1 1.2.1 Background ................................................................................. 1 1.2.2 Problem Formulations................................................................. 4 1.2.3 Objectives .................................................................................... 4 Chapter 2 THEORETICAL FOUNDATION ..................................................................... 6 2.1 Definition of Strategy ............................................................................... 6 2.1.1 Strategy According to Michael Porter ......................................... 6 2.1.2 Strategy According to George Steiner ........................................ 6 2.2 Tools of Strategy ...................................................................................... 7 2.2.1 Michael Porter’s Five Generic Forces.......................................... 7 2.2.2 Michael Porter’s Generic Strategy Model ................................... 8 2.2.3 PEST Analysis ............................................................................... 9 2.2.4 SWOT Analysis ........................................................................... 10 2.2.5 Inner 4Ps & Outer 4Ps ............................................................... 10 2.2.6 Core Competencies ................................................................... 12 2.2.7 Key Success Factors ................................................................... 12 Chapter 3 THE ANALYSIS OF BANK MANDIRI........................................................... 13 3.1 Consumer Banking Products of Bank Mandiri ....................................... 13 3.1.1 Saving Account .......................................................................... 13 3.1.2 Current Account ........................................................................ 15 3.1.3 Deposit ...................................................................................... 15 3.1.4 Mandiri Debit ............................................................................ 15 BANK MANDIRI CONSUMER BANKING i
  • 3. 3.1.5 Mandiri Prabayar....................................................................... 15 3.1.6 Mandiri Credit Card ................................................................... 16 3.1.7 Mandiri Kredit Konsumer .......................................................... 16 3.1.8 Mandiri Prioritas ....................................................................... 17 3.1.9 Investment Products ................................................................. 17 3.1.10 Bancassurance........................................................................... 17 3.1.11 Retail Brokerage ........................................................................ 18 3.2 The Growth of Bank Mandiri ................................................................. 18 3.2.1 Financial Analysis ...................................................................... 19 3.2.2 Industry Analysis ....................................................................... 23 3.2.3 Three Pillars of Bank Mandiri Strategy ..................................... 24 3.2.4 Bank Mandiri’s Innovation ........................................................ 25 3.2.5 Enhancing Synergies and Values from Subsidiaries .................. 28 3.2.6 Bank Mandiri’s Strategic Partnership ....................................... 28 3.2.7 Corporate Social Responsibility (CSR) ....................................... 30 3.3 Analysis of Bank Mandiri using strategic tools ...................................... 30 3.3.1 Michael Porter’s Five Generic Forces........................................ 30 3.3.2 Michael Porter’s Generic Strategy Model ................................. 31 3.3.3 PEST Analysis ............................................................................. 32 3.3.4 SWOT Analysis ........................................................................... 33 3.3.5 Inner 4Ps and Outer 4Ps Analysis.............................................. 34 3.3.6 Core Competencies ................................................................... 35 3.3.7 Key Success Factor .................................................................... 35 Chapter 4 RECOMMENDATIONS ............................................................................... 36 REFERENCES .......................................................................................................................37 BANK MANDIRI CONSUMER BANKING ii
  • 4. Chapter 1 INTRODUCTION 1.1 ABSTRACT Since 1997, Indonesia was hit by the monetary crisis that caused all the economic potential became weak including the financial services industry. The weakening of the financial services industry especially banks greatly affected the real sector activities. In order to address this problem, the government made a policy to restructure Badan Usaha Milik Negara (BUMN). One way is to perform a merger of the Private Banks into one bank with the name Bank Mandiri. Bank Mandiri is hoped to perform the function as financial intermediaries to support the real sector in Indonesia. Previous studies showed that the performance of the four private banks named Bank Exim, Bank BBD, Bank BDN, and Bank Bapindo before the joining were not healthy. This paper will analyze the key strategies of Bank Mandiri of how it became the largest bank in Indonesia, and also the further strategy to keep its performance as the number one bank in Indonesia in the middle of this tight competition of banking industry. 1.2 INTRODUCTION 1.2.1 Background Bank is one of the financial institutions or a company engaged in financial industry. The definition of bank according to Law No. 10 of 1998 in amendment to Law No. 7 of 1992, stating that bank is a business entity which collects funds from the public in the form of savings and distributes them to the public in the form of loans or other forms in order to improve the standard living of many people. The development of banking and financial services industry has made significant progress in recent years. This is a result of technological advances and some Deregulation Policy Package. The effect of the implementation of some of the deregulation policy package is the development of the banking industry, not only marked by numerous branch offices which are opened nationally, but there are also new products with all sorts of attributes. The deregulation policy also led to the high level competition in Indonesian banking industry. Banking industry BANK MANDIRI CONSUMER BANKING 1
  • 5. also has difficult time with the advent of monetary crisis that hit Indonesia in 1997, which is until now is not a hundred percent recovered. This phenomenon has caused people to become more careful in saving their money in the bank, because at that time many large banks are exposed to liquidation. The monetary crisis has resulted Indonesian banks suffered more seriously than the problem they had before the crisis. Below are the lists of major crisis that plague the Indonesian banks in the middle of the monetary crisis: First, with the decline of the IDR exchange rate, it has worsened the quality of productive assets, thus it made the banks to form a high loss provisioning. It led not only to a decreasing in financial margin but also worse the banks’ capital. Second, the increasing level of lending rates and foreign lending rates as the result of the falling value of IDR is a heavy additional burden for the business world. It also resulted for the banks that hold foreign currency debt should bear the burden the debt three to four times greater than before. Another burden also arose from the deposits, saving account, current account in foreign currency that was collected by the banks. It is because those placements of foreign currency were distributed again as credit in foreign exchange which might become a bad debt. Third, the declining value of IDR which followed by the liquidation of many banks has made a huge damage in public confidence of Indonesian banks. This situation has ruined the liquidity for many banks and resulting in inter-bank money market shocks. To solve this crisis, one of the Government’s policies in the context of bank recapitalization program for Indonesian banks was called the bank unification (merger), both within the Private Bank and the Government Bank. Example of the banks that have merged are: PT Bank Bumi Daya (BBD Persero), PT Bank Dagang Negara (BDN - Persero), PT Bank Export Import Indonesia (Bank EXIM) (Persero), and PT Bank Pembangunan Indonesia (Bapindo Persero) to become a new institution with the name of PT Bank Mandiri (Persero). Actually, those four banks were not healthy at that time during the crisis as seen in the figure below. BANK MANDIRI CONSUMER BANKING 2
  • 6. Figure 1.1 – Financial Statement for BBD & BDN Figure 1.1 – Financial Statement for Bank Exim & Bapindo Now, Bank Mandiri has become the largest bank in Indonesia. The consolidated assets of PT Bank Mandiri Tbk is now at ± Rp. 500 trillion per third quarter in 2011. It is because the significant growth of credit and third party funds Based on publication In October 2011, the assets of Bank Mandiri reach ± Rp. 501.9 trillion in the quarter III/2011 or grow ± 22.9% compared with same period last year which was ± Rp. 408.28 trillion. Bank Mandiri president director Zulkifli Zaini said the increase in assets was supported by a significant rise in credit growth that reached 28,3% from Rp. 231.9 trillion to Rp297.5 trillion. "The increase in lending occurred in all business segments, with the highest growth, especially in micro segment that reached 45.4%, from Rp 6.5 trillion to Rp9.5 trillion," he said in a press conference. BANK MANDIRI CONSUMER BANKING 3
  • 7. In line with credit growth, the number of micro credit customers also increased rapidly from 515,000 customers to 626,000 customers. Meanwhile, the credit is distributed to micro, small and medium enterprises (SME) recorded a growth of 36.8% to Rp. 40.8 trillion. Zulkifli said that the ratio of credit to fund the company has now reached 78.66%. "This achievement is exciting developments because of outstanding loans continue to increase and further strengthen the Bank in carrying out the role of intermediary. Meanwhile, the third-party funds raising of Bank Mandiri reach Rp. 376.4 trillion from the previous which were Rp. 321 trillion.. Savings continue to grow to Rp. 147.6 trillion, up 22,7% compared with same period previous year. This amazing achievement from Bank Mandiri is the result from the strategy that they have applied since the monetary crisis until now. As the competition in banking industry in Indonesia will become tighter which is not only come from Private Banks (such as BCA, Danamon), and Government Banks such as (BRI, BNI), but also come from International bank (such as Citibank, HSBC, Standard Chartered). This paper will discuss the strategies that have been applied by Bank Mandiri to win the competition of this tight race, and also how the further strategies that might be applied by Mandiri to keep its leading in banking industry. 1.2.2 Problem Formulations Based on the background that has been stated, the problem formulations are as follows: a. What are the strategies that have been applied by Bank Mandiri since the monetary crisis until now to be the leader in banking industry? b. What might be the further strategies that could be applied by Bank Mandiri in order to keep its leadership in banking industry? 1.2.3 Objectives Based on the problem formulations that have been stated above, this paper’s objectives are as follows: BANK MANDIRI CONSUMER BANKING 4
  • 8. a. To analyze what kind of strategies that have been applied by Bank Mandiri since the survival for the crisis in 1997 until become a leader in banking industry nowadays b. To analyze the strategies that could be applied in order to face the tight competition in banking industry in Indonesia which comes from Private Banks, Government Banks, and International Banks BANK MANDIRI CONSUMER BANKING 5
  • 9. Chapter 2 THEORETICAL FOUNDATION Chapter two will explain the theories about the strategic tools that will be used throughout this paper. This chapter will also describe the definition of each term and the functionalities of the tools that are used. 2.1 Definition of Strategy 2.1.1 Strategy According to Michael Porter According to Michael Porter, competitive strategy is about being different as he argued in 1996. He adds, "It means deliberately choosing a different set of activities to deliver a unique mix of value." In short, Porter argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors. Porter also defines competitive strategy as "a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there", in one of his books. It means that Porter seems to embrace strategy as both plan and position. (It should be noted that Porter writes about competitive strategy, not about strategy in general.) 2.1.2 Strategy According to George Steiner George Steiner is a professor of management and one of the founders of The California Management Review. He is generally considered a key figure in the origins and development of strategic planning. Strategic Planning which is his book is close to being a bible on the subject. Actually Steiner does not bother to define strategy except in the notes at the end of his book. There, in his notes he mentions that strategy entered the management literature as a way of referring to what one did to counter a competitor’s actual or predicted moves. Steiner also points out in his notes that there is very little agreement as to the meaning of strategy in the business world. Some of the definitions in use to which Steiner pointed include the following: BANK MANDIRI CONSUMER BANKING 6
  • 10. • Strategy is that which top management does that is of great importance to the organization. • Strategy refers to basic directional decisions, that is, to purposes and missions. • Strategy consists of the important actions necessary to realize these directions. • Strategy answers the question: What should the organization be doing? • Strategy answers the question: What are the ends we seek and how should we achieve them? 2.2 Tools of Strategy In this section there will be described what the tools that are used throughout the paper. Some of the most popular tools like Porter’s Five Generic Forces, Generic Strategy Model, PEST, SWOT, core competencies, value chain, and key success factors will be described in this paper. 2.2.1 Michael Porter’s Five Generic Forces Porter's five forces analysis is one of strategy tools as a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. Three of Porter's five forces refer to competition from external sources. The remainders are internal threats. Porter's five forces include three forces from 'horizontal' competition: threat of substitute products, the threat of existing rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers. Below is the figure for Michael Porter’s Five Generic Forces. BANK MANDIRI CONSUMER BANKING 7
  • 11. Figure 2.1 – Michael Porter’s Five Generic Forces 2.2.2 Michael Porter’s Generic Strategy Model Michael Porter has argued that company strengths actually fall into one of the two things: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent. The following table illustrates Porter's generic strategies: Figure 2.2 – Michael Porter’s Generic Strategy [3] BANK MANDIRI CONSUMER BANKING 8
  • 12. 2.2.3 PEST Analysis PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. The compositions are as follows: • Political is about the factors that falls in what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability • Economic factors include economic growth, interest rates, exchange rates and the inflation rate. The factors will have a big impact for the business on how it operates and makes decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. The fluctuation of exchange rates affect especially in export import industry in which it will affect the costs of exporting goods and the supply and price of imported goods in an economy • Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, the increase of healthy lifestyle awareness may harm the snacks and carbonated Drink Company which will affect the sales of the company. So, the company must adapt to the social changes well in order to survive in the market. • Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. BANK MANDIRI CONSUMER BANKING 9
  • 13. 2.2.4 SWOT Analysis SWOT analysis is a one of the strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a business venture. It involves specifying what is exactly the objective of the business and and it also identifies the internal and external factors that are favorable and unfavorable to achieve that objective. The descriptions are as follows: • Strengths: characteristics of the business, or project team that give it an advantage over others • Weaknesses (or Limitations): are characteristics that place the team at a disadvantage relative to others • Opportunities: external chances to improve performance (e.g. make greater profits) in the environment • Threats: external elements in the environment that could cause trouble for the business or project Figure 2.3 – SWOT Framework [4] 2.2.5 Inner 4Ps & Outer 4Ps Initially, Inner 4Ps is well-known as 4Ps marketing mix. In its evolution and development, it now accompanied by outer 4Ps. The outer 4Ps is the extended BANK MANDIRI CONSUMER BANKING 10
  • 14. elements of this tool to support this 4 inner Ps when it can’t survive. The 4 inner 4Ps are including product, price, place, and promotion. The outer 4Ps are including process, people, physical evidence, and partners. 1. Product - The core and periphery service elements at the centre of the company's marketing strategy, The scope of a product generally includes supporting elements such as warranties, guarantees, and support. The product aspects of marketing deal with the specifications of the actual goods or services, and how it relates to the end-user's needs and wants 2. Place and Time – Depending upon service product elements are delivered to customers physically and/or electronically, the important value adds to customers are Speed and convenience. For example, point-of-sale placement or retailing. It is a channel by which a product or service is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. also referring to how the environment in which the product is sold in can affect sales. 3. Price - pricing is only a part of what customers may part with when purchasing a service or a product. This refers to the process of setting a price for a product, including discounts. 4. Promotion - Marketer must make sure communications not only provide information, but also persuade the customer of the service's relevance to the customer's particular problem. This includes advertising, sales promotion, publicity, and personal selling 5. Process – This means the process by which the firm delivers product elements. 6. Physical Evidence - the appearance of the place where the services are delivered may have a significant impact upon whether the service was satisfactory. 7. People - front-line staff for any company will have a direct impact on perceptions. BANK MANDIRI CONSUMER BANKING 11
  • 15. 8. Partners - Marketers can’t create customer value and build customer relationships by themselves. They work closely with other company departments (inside partners) and often with partners outside the firm. Changes are occurring in how marketers connect with their suppliers, channel partners and others. A joint partnership; the joint relationships, partnerships and alliances. The legal relationship existing between two parties; a relationship resembling a legal partnership and usually involving close cooperation between parties having specific and joint rights and responsibilities as a common enterprise. 2.2.6 Core Competencies A core competency is a concept in management theory originally developed by CK Prahalad, and Gary Hamel, two business book writers. They view the core competency as a specific factor that a business sees as being central to the way it, or its employees, works. It fulfills three key criteria: • It is not easy to be imitated by the competitors. • It can be leveraged widely to many products and markets. • It must contribute to the end consumer's experienced benefits. 2.2.7 Key Success Factors A key success factor is a performance area of critical importance in order to achieve high productivity consistently. There are at least 2 broad categories of key success factors that are common to all organizations: business processes and human processes. Both are crucial to build great companies. The focus is primarily on the human processes especially in the financial industry like banks which is the core business is the service they offer to the customers. BANK MANDIRI CONSUMER BANKING 12
  • 16. Chapter 3 THE ANALYSIS OF BANK MANDIRI PT. Bank Mandiri TBK. is undoubtly the biggest bank in Indonesia. The consolidated assets of PT Bank Mandiri Tbk are now at ± Rp. 500 trillion per third quarter in 2011. That was because not only the growth of the credit distribution but also the third party funds (Savings, Deposit, and Current Accounts which are the main focus in this paper). In this chapter, there will be analysis of Bank Mandiri performance and its strategy how it becomes the biggest bank in Indonesia using the tools that have been described in chapter 2. 3.1 Consumer Banking Products of Bank Mandiri Consumer banking products consist of the products that are intended for individuals. The products are: saving account, current account, deposit, Mandiri Debit, Mandiri Credit Card, Mandiri Prabayar, Mandiri Kredit Konsumer, Mandiri Prioritas, investment products, Bancassurance, and retail brokerage. 3.1.1 Saving Account Mandiri has three types of saving accounts. The difference among them is only basically about administration fee, the additional service, and the interest rates. 1. Mandiri Tabungan • Auto-debit service, auto debit services to help in paying monthly bills, such as water, electricity, telephone, mobile phone, credit cards or other bills automatically each month so we can avoid the delinquent bill. • Free Automatic Fund Transfer (AFT), AFT Service makes life more convenient because it helps to perform routine automatically transfer funds to family or business partners so that we do not have to worry that our obligations will be forgotten. 2. Mandiri Tabungan Bisnis • Available in Rupiah and U.S.Dollar • Equipped with Mandiri Debit Card and e-Banking Mandiri service, SMS Banking, Internet Banking and Mandiri Call. BANK MANDIRI CONSUMER BANKING 13
  • 17. • Free charge transfer funds between Bank Mandiri account automatically. • Savings book features clearer descriptions and transaction details. 3. Mandiri Tabungan Rencana • Freedom to determine and change the monthly deposit from IDR 100,000 or USD 10,-per month. • You can add funds to the Savings Plan beyond the monthly payment. • Flexible time period (1 yr 20 yrs). • Free Insurance Coverage (in cooperation with PT Bank Mandiri. AXA Mandiri Financial Services provides insurance protection for depositors up to IDR 5 million or USD 500, - per month for each depositor). • Free consultation with the professional Customer Service. • Interest rates are higher than Mandiri Tabungan 4. Mandiri Tabungan Haji • Wide network with branches spread across the archipelago as well as online with SISKOHAT Ministry of Religious Affairs, will allow customers registered as a candidate for the pilgrims. • Can be opened in all branches of Bank Mandiri, which are scattered throughout Indonesia. • Free cost of opening, administering and closing accounts • Withdrawal can be made in cash at the branch or through book-entry facilities via an Mandiri e-banking (atm Mandiri, Mandiri sms, Mandiri Internet and Mandiri Call) • Get a free souvenir pilgrimage 5. Mandiri Tabungan Valas • The Deposit of $ 100 banknotes with good physical condition, will get free commission fee and free currency trading • Withdrawal of banknotes up to $ 20,000 per month will get free commission free buying and selling rates BANK MANDIRI CONSUMER BANKING 14
  • 18. 3.1.2 Current Account Current account is for the consumers that do their business. It is available in IDR, USD, SGD, EUR, AUD, GBP, JPY, HKD, dan CHF. 3.1.3 Deposit Like other deposit in other banks, Bank Mandiri offer two types of deposit which are in IDR and in foreign exchange like USD, JPY, EUR, CHF, SGD, GBP, AUD, HKD. 3.1.4 Mandiri Debit Mandiri Debit is used for transactions at ATM machines, at the store / merchant (EDC) and in all branches of Bank Mandiri. 3.1.5 Mandiri Prabayar Mandiri developed “Mandiri Prabayar” which is intended to make the transaction become easier (no need to bring many cash). There are three types of cards: 1. Gaz Card GazCard is used for the payment transactions of BBM at Pertamina and it also can be used for transactions at other merchants. 2. Indomaret Card Indomaret Card is used for payment transactions at the Indomaret outlet and it also can be used for transactions at other merchants. Shopping with the Card at Indomaret outlet will get discounts for certain products ranging from10% to 20% every month. 3. E-Toll Card E-Toll Card is used for toll transactions and it also can be used for transactions outside the toll merchants. BANK MANDIRI CONSUMER BANKING 15
  • 19. Figure 3.1 – MandiriPrabayar 3.1.6 Mandiri Credit Card Mandiri offers two types of credit card which are Visa Card and Master Card. Both of the cards have also its type which the differentiation is in the function and the features. The types are as follows: 1. Mandiri Visa Card • Gold & Silver Card • Platinum Card • Golf Card • Hypermart Card • Corporate Card 2. Mandiri Master Card • Titanium Card • Everyday Card 3.1.7 Mandiri Kredit Konsumer 1. Mandiri KPR Mandiri KPR is a mortgage home loan from Bank Mandiri, which is given to individuals for purchase of dwelling house/apartment/shop/shop house that are sold through the developer or anon-developer 2. Mandiri KPR Multiguna Mandiri Multiguna is a credit facility for individuals for any purposes with the collateral of residential / apartment / shop / shop-house owned. BANK MANDIRI CONSUMER BANKING 16
  • 20. 3. Mandiri KTA Mandiri KTA is a credit facility for individuals without collaterals needed for any purposes. 4. Mandiri Mitrakarya Mandiri Mitrakarya is a credit facility granted to certain employees of the company that has distributed his salary through the Bank Mandiri. The credit facility can be used for KPR, KTA, and Multiguna. 5. Mandiri Tunas Finance Mandiri Tunas Finance is the product to finance a new motorcycleor second motorcycleused for personal(individual) /company/legal entity for personal, family, or business which the source of payment of installments is from the total income. 3.1.8 Mandiri Prioritas Mandiri Prioritas is a variety of banking services with ease and it is facility of Bank Mandiri which is intended for the primary customer. • 47 Outlet Bank Mandiri Prioritas • 40 Priority Lounge • 35 Executive Lounge and 3 Airport Handling 3.1.9 Investment Products Mandiri offers two types of investment products for their customers. One is Reksadana in which the money will be invested and managed by investment manager. The other one is Obligasi Negara Retail (ORI) and SukukRitel. 3.1.10 Bancassurance Bancassurance is a product in form of not only the insurance for the customer but also the investment. So, the consumers do not only get the insurance of their health or life but also they get the some money from the investment. In short, BANK MANDIRI CONSUMER BANKING 17
  • 21. Bancassurance is the combination of the insurance and investment product. The Bancassurance products that Mandiri offers are: 1. PT. AXA Mandiri Financial Services (AXA Mandiri) 2. Mandiri Investasi Sejahtera 3. Mandiri Jiwa Sejahtera 4. Mandiri Rencana Sejahtera 3.1.11 Retail Brokerage A form of Service of the selected Bank Mandiri’s branch customers elected in stock and bond transactions in the Primary Market (Initial Public Offering) and the Secondary Market in collaboration with the Corporate Securities. 3.2 The Growth of Bank Mandiri Bank Mandiri which was formed in 1998 despite big crisis in Indonesia at that time has managed to become the biggest bank in Indonesia. Bank Mandiri has done a lot of changes from that crisis until now. Bank Mandiri continues to become the most trusted bank in Indonesia. Below is the highlight of Bank Mandiri achievement in 2011. Figure 3.2 – The highlight of Bank Mandiri Achievement in 2011 BANK MANDIRI CONSUMER BANKING 18
  • 22. 3.2.1 Financial Analysis Bank Mandiri’s performance in the first half of 2011 showed remarkable improvements in several key indicators: Figure 3.3 – Key Financial Highlights As we can see from the figure above, Bank Mandiri has increased its loans to 26.9% for year-over-year. Non Performing Loan (NPL) ratio decreased 6.5% which means the default debtors decreased to 6.5%. A loan can be defined as NPL if the debtors failed to pay more than 90 days. Earnings after tax also increased a lot for about 56.7%. Bank Mandiri has also managed to increase in third party funds especially in deposit product as seen below. Figure 3.4 – Bank Mandiri Third Party Funds BANK MANDIRI CONSUMER BANKING 19
  • 23. From the figure above, we can see that all funding products increase from yearover-year except the FX demand since it gives relatively small interest rates. The majority of the funding comes from the IDR time deposit followed by the IDR savings. 1. Income Statement (2007 - 2010) Figure 3.5 – Income Statement (2007-2010) Figure 3.6 – Four Year Trend of Revenues and Net Income As we can see from graphics above, from 2007 until 2010, total revenues and net income had been increasing, with the average growth of total revenues was 12.52% and average growth of net income was 28.58%. These trends show the increasing growth of company. BANK MANDIRI CONSUMER BANKING 20
  • 24. 2. Balance Sheet (2007-2010) Figure 3.7 – Balance Sheet (2007-2010) Figure 3.8 – Four Year Trend of Total Asset & Liabilities and Total Equity BANK MANDIRI CONSUMER BANKING 21
  • 25. Total assets was increasing in line with the increasing of total liabilities. The average growth of assets was 12.13% and the average growth of liabilities was 12.04%. Total equity was also increasing with the average growth 12.58%. The increasing of total assets will give Mandiri more investor to support their growth. It’s also increasing the equity of the company, as seen from graphic above. 3. Ratios Ratios Debt/Equity Ratio (X) Return on Assets (%) Return on Equity (%) Operating Profit Margin (%) Net Profit Margin (%) Earnings per Share (Rp) 2007 9.91 1.98 21.66 25.96 18.16 209.46 2008 10.75 2.25 26.44 28.94 19.44 254.13 2009 10.23 2.74 30.83 32.01 21.95 341.22 2010 9.81 3.11 33.63 40.5 27.17 439.04 Average 10.175 2.52 28.14 31.853 21.68 310.96 a) Debt to Equity Ratio (DER) Debt/Equity Ratio was tend to be flat, the increasing or decreasing was small. Mandiri had the little higher average DER ratio, compared with other competitor - BCA, which have average DER of 9.215 times in the same year. It means that the company’s should take more attention to its debt, try not to increasing its debt higher or increasing its equity by catch more investors. b) Return on Assets (ROA) Mandiri was bank with large assets. Its average of Return on Assets was 2.52%, compared with BCA who gain 3.13% in the same range year. Its large assets results a lower ROA than the other bank. Nevertheless, Mandiri was trying to improve its assets more efficient to gain more income, proven by the increasing ROA higher and higher every year. BANK MANDIRI CONSUMER BANKING 22
  • 26. c) Return on Equity (ROE) Mandiri ROE was increasing more and more every year. But compared with its competitors, BCA, with the average ROE of 32%, Mandiri had lower ROE. It means that its competitor use its equity more effective to gain more profit. d) Operating Profit Margin (OPM) Mandiri operating profit margin had a big difference with its competitor, BCA. BCA’s average OPM for the same year was 41.5%. It showed that its competitors made bigger profit than the company. Nevertheless, the Mandiri OPM itself was increasing year by year. e) Net Profit Margin Net profit margin was increasing from 2007 to 2010 with the average of 21.68%. Compared to its competitor, which had the average Net Profit Margin of 32%, Mandiri was left behind. f) Earnings per Share (EPS) Mandiri’s EPS was increasing year by year with a steady growth. It’s was good for Mandiri to have a steady growth, so it can attract more investor and give their shareholder more value and profit. 3.2.2 Industry Analysis As per November 2011 the statistic from Central Bank, Bank Mandiri has about 13.48% of market share in funding followed by BRI (12.22%), and BCA (11.85%). The details are as follows: BANK MANDIRI CONSUMER BANKING 23
  • 27. Figure 3.9 – Top 10 Bank in Indonesia [9] 3.2.3 Three Pillars of Bank Mandiri Strategy In doing the business, Bank Mandiri has created three pillars which are its strategy to focus on three areas of highest potential: Wholesale transaction, Retail payments, and High-yield loans. BANK MANDIRI CONSUMER BANKING 24
  • 28. 1. Pillar 1: Strengthen leadership in wholesale transaction banking • Comprehensive financing &transaction solutions • Holistic relationship approach for leading Indonesian institutions 2. Pillar 2: Be the retail deposit bank of choice • Differentiated customer experience and targeted propositions • Deploy innovative payment solutions 3. Pillar 3: Build #1 or #2 positions in key retail financing segments • Win in mortgage, personal loans, and cards • Become a major player in micro-banking • Champion Syariah in Indonesia These pillars help Bank Mandiri to focus on what they are doing to achieve and increase their performance as the number one bank in Indonesia. The obstacle here is that might be the number 3 as BRI is the heavy competitor in that area (micro segment). 3.2.4 Bank Mandiri’s Innovation 1. Contactless Payment Bank Mandiri launched its contactless payment product in the early of 2008 which was the GazCard, in the mid of 2008 Bank Mandiri launched Indomaret Card, and by the end of 2008 it launched E-Toll Card. The co-branded card combined payment convenience with contactless payments. Figure 3.10 – The Co-branding Prepaid Card BANK MANDIRI CONSUMER BANKING 25
  • 29. Bank Mandiri has also made its customers become more convenience in order to top up their cards by creating the Mandiri PrepaidSelf Service Terminal Top Up as shown in the figure below. Figure 3.11 – Mandiri Prepaid Self Service Terminal Top Up 2. Mandiri Fengshui Card Mandiri Fengshui Card published in five card designs which each design has a major natural elements combined with the element of luck. Namely, Water with Metal, Wood with Water, Fire with Wood, Land with Fire and Metal with Land. Elements, symbols and colors of this card have its own basic nature. Another unique feature of Mandiri Card FengShui is the use of eight initial numbers from MasterCard Worldwide special card, which is 5573 3888 which means wealth, away from obstacles and hostility and brought closer to the direction of prosperity. BANK MANDIRI CONSUMER BANKING 26
  • 30. Figure 3.12 – MandiriFengshui Card Figure 3.13 – The calculation of Fengshui Figure 3.14 – Example of Fengshui Card BANK MANDIRI CONSUMER BANKING 27
  • 31. 3.2.5 Enhancing Synergies and Values from Subsidiaries Bank Mandiri has five subsidiaries to enhance and support its business. Some of the subsidiaries are the market leader in its industry such as Mandiri Syariah and AXA Mandiri. Figure 3.15 – Bank Mandiri’s Subsidiaries 3.2.6 Bank Mandiri’s Strategic Partnership 1. Prepaid Card As described in the previous section, Bank Mandiri has done partnerships with some big companies. Bank Mandiri has launched four types of contactless card from the partnership which are GazCard for Pertamina, Indomaret Card for Indomaret stores, E-Toll Card for toll transaction, and Hypermart Card. Since the launch of the four cards in 2008, it made quite impacts for Bank Mandiri. As Per September 2008, Indomaret Card added about IDR 245.3 trillion for third party funds. As Per October 2011, Bank Mandiri has issued about 420 thousand E-Toll Cards which increased 150% compared to 2010. The transaction increased about 117% compared to the same position in 2010. Bank Mandiri has 9.4% of share market in prepaid BANK MANDIRI CONSUMER BANKING 28
  • 32. cards, but the transaction reached for about 62.9% in the total transaction of prepaid cards in Indonesia. 2. Garuda Indonesia Bank Mandiri and Garuda Indonesia has done a joint promotion since 2011. Garuda Indonesia noted IDR 600 billion from the Mandiri credit card and debit card for the transaction of tickets. Last month, Garuda and Bank Mandiri has signed an agreement to join again for the joint promotion. Last year promotion was buy one free one for the International and domestic route using Mandiri Credit and Debit Card. This year promotion will be more varied as stated by the marketing director of Garuda M Arif Wibowo. He stated that this year promotion for example will offer interesting ticket price for 63 flight routes in regards to welcome the 63rd Garuda birthday this year. 3. AXA Regarding to the success of AXA and Bank Mandiri partnership in life insurance under the name PT. AXA Mandiri Financial Services, they launched a joint venture under the name PT. Mandiri AXA General Insurance in 27 October 2011. By forming this joint venture, Bank Mandiri has completed its business line in insurance industry. 4. ATM Prima Network In October 2011, Bank BCA and Bank Mandiri signed MOU for the interconnection of ATM Mandiri and ATM Prima. Now, the Mandiri Customer will be much easier to make a withdrawal transaction, balance inquiry, and transfer with the launching of interconnection network as per 16 January 2012. With the interconnection network, Bank Mandiri’s customers are now able to do transaction for more than 7,000 ATM BCA and more than 13,000 of 41 other banks’ ATM which joined Prima network. As per September 2011, Bank Mandiri has had 8,993 ATM which are joined into more than 21,000 ATM Link, and 30,000 ATM Bersama. BANK MANDIRI CONSUMER BANKING 29
  • 33. 3.2.7 Corporate Social Responsibility (CSR) Bank Mandiri has a commitment to continuously develop its innovative CSR programs to provide the best service to the public. Through the Program Kemitraan dan Bina Lingkungan, Bank Mandiri keeps on innovating in developing innovative CSR to provide the best service for the public. The main focus of CSR program of Bank Mandiri is in education. Bank Mandiri wants to improve the quality of human resources by providing this CSR program. This program is not only focusing on students but also entrepreneurs, educators, and communities. Mandiri Entrepreneurship which is in its 7th year has not only encouraged the entrepreneurship in generalbut also help a lot of young entrepreneurs to become success and self reliant through the entrepreneurship training and coaching program. 3.3 Analysis of Bank Mandiri using strategic tools In this section several tools will be used to analyze Bank Mandiri. Tools that are used including Michael Porter’s Five Generic Forces, Michael Porter’s Generic Strategy Model, PEST Analysis, SWOT Analysis, 8P Analysis, core competencies, and key success factors. 3.3.1 Michael Porter’s Five Generic Forces BANK MANDIRI CONSUMER BANKING 30
  • 34. 1. Bargaining Power of Buyer: LOW The choice of reputable banks in Indonesia with wide networks is only a few. 2. Bargaining Power of Supplier: HIGH The switching cost quite bothers and it needs time and effort to switch to other banks especially if the money is huge in amount. And also the numbers of available customers are much more than the available banks. 3. Competitive Rivalry: HIGH There are direct competitors such as BRI, BCA, BNI, etc. There are also some foreign banks in Indonesia such as Standard Chartered, Citibank, HSBC, etc. 4. New Entrant: MEDIUM The initial investment is quite a lot especially for the infrastructure. The requirement of capital needed is about IDR 100 billion according to BI rule. [6] 5. Substitute Product: MEDIUM There are some other investment alternatives such as gold and property which gives more return. 3.3.2 Michael Porter’s Generic Strategy Model As we can learn, Mandiri current strategy is broad differentiation. The broad strategy is including its wide product offered and wide market served. To compete and sustain in this industry, Mandiri have differentiation with its product and services. For the example, they are improving the service quality to their customer with expanded their on-line computerized system, co branding with several outlet, and they reach more target in UMKM and Micro economy. It has wide product line for mass customer. BANK MANDIRI CONSUMER BANKING 31
  • 35. 3.3.3 PEST Analysis 1. POLITICAL Government has the important role to regulate Bank Mandiri since it is BUMN. And also the unstable politic condition may interfere Bank Mandiri business. 2. ECONOMY The changing of economy condition including the global crisis that happens recently until now may affect the investment climate. The fluctuation of exchange rate and BI rate recently may also become the major issue. Some analysts had predicted that the microsegment is growing and it can drive the Indonesia growth. 3. SOCIAL Indonesian people which are mostly consumptive has changed the lifestyle of using credit card a lot since it offers a lot of joint promotion with many brands and outlets. 4. TECHNOLOGY The rapid development of IT will trigger the bigger transaction using E-banking (internet banking, sms banking, etc) instead of the conventional system (teller). BANK MANDIRI CONSUMER BANKING 32
  • 36. 3.3.4 SWOT Analysis STRENGHTS 1. Mandiri is BUMN so it have strong capital 2. The biggest bank with biggest assets in Indonesia 3. Wide network of branches 4. Wide network of ATM (Link, Bersama, and Prima) 5. High level of trust from the customers. WEAKNESSES 1. Small interest rates for funding compared to the average market. 2. Focus more to the urban communities instead of the rural communities since they are dominated by the regional bank. OPPORTUNITIES 1. Cashless payment / society 2. The increase of Indonesian population each year. THREATS 1. The decrease of BI rates 2. Some cases happened recently in Indonesia like Century Bank, Citibank, and robbery at ATM make the communities may keep an eye and become more careful to place their money in the bank or use the services. 3. The continuation of innovation from the competitor especially BRI and BCA become the serious threat. 4. Indonesian people are relatively consumptive. BANK MANDIRI CONSUMER BANKING 33
  • 37. 3.3.5 Inner 4Ps and Outer 4Ps Analysis 1. PLACE • Wide network of branches (all over Indonesia) • More than 8,000 of available ATM Mandiri and more 70,000 networked ATM including Link, Prima, and Bersama. 2. PROMOTION • The regular Mandiri Fiesta each year • Media advertisement such as TV, newspaper, etc. • Online advertisement. 3. PEOPLE Mandiri has developed its culture value which includes: • Trust (Honest, open, tolerance) • Integrity (Consistent, discipline, good manner) • Professionalism (Competent, responsible, giving best solution) • Customer oriented (Innovative, proactive, customer satisfaction) • Excelence (added value oriented, continuous improvement, environment care). 4. PHYSICAL EVIDENCE • Branches all over Indonesia • Wide network of ATM 5. PRICE • Free to open new account • Free to make transaction using ATM Mandiri (withdrawal, transfer to same bank). 6. PRODUCT • Mandiri Tabungan • Mandiri Debit • Current Account • Deposit • Mandiri Prabayar • Mandiri Credit Card BANK MANDIRI CONSUMER BANKING 34
  • 38. • Mandiri Kredit Consumer • Bancassurance • Mandiri Prioritas • Retail Brokerage • Investment Products 7. PARTNERSHIP • Co-branding (GazCard with Pertamina, Indomaret Card with Indomaret, EToll Card with toll company, and Hypermart Card with Hypermart). • Payroll system. 8. PROCESS In order to minimize the risk that might occur, Bank Mandiri has each special division to control its process from the supporting unit until the business unit. 3.3.6 Core Competencies Bank Mandiri which was formed by four banks as described earlier in this paper has become the top bank in Indonesia. The core competency of Bank Mandiri to become the biggest bank in Indonesia is its strong capital structure. Combined from four banks and backed by strong support from the government make Mandiri has the strong capital structure to support the business to grow a a lot from year to year until now. 3.3.7 Key Success Factor Bank Mandiri now has more than IDR 500 billion of consolidated assets. The key success factors of Bank are as follows: • Bank Mandiri has high commitment across the business units (Consumer, Commercial, and Corporate). • Tailored product according to the market. • Clear plans and consistent. • Keep on innovating, adapting, and changing. BANK MANDIRI CONSUMER BANKING 35
  • 39. Chapter 4 RECOMMENDATIONS Bank Mandiri has gone through a lot of improvements and innovation since it was formed from four banks in the crisis of 1998. Bank Mandiri is now becoming the biggest bank in Indonesia. Although Bank Mandiri has become the biggest bank, there are still some weaknesses that could be addressed to improve and sustain as the leading financial institution in Indonesia. The recommendations are as follows: 1. Bank Mandiri still lacks in micro segment compared to BRI. As, we know the networks of BRI for the urban is very wide even to the remote urban. To get more market share in this segment, Bank Mandiri should focus to open more branches in the urban area. Some analysts said that micro-segment is growing and have 20% long-term growth. It’s such an opportunity for Mandiri to gain more market in this industry. 2. Do more acquisition in the micro segment institution to get more market share in the distribution of micro credit. 3. Do more joint promotion to grab more third party funds and also to increase its feebased income. By doing the joint promotion for example with Toko Gunung Agung (TGA) book stores, PaperClip, Kinokuniya, etc. Mandiri could grab more for its third party funds. Mandiri and TGA/PaperClip/Kinokuniya could make a promotion like some discounts for some books or accessories by using Mandiri Card as the payments. Basically, the concept is like Flazz Member Card BCA which customers must deposit some money first before they can use the card for the transaction. 4. As the technology growing very rapidly every year, Bank Mandiri should invest more to the implementation of the technology. They could implement a better experience and sophisticated technology in order to satisfy and give service excellence to the customers. 5. The rapid growing of retail industry is also a big opportunity for Bank Mandiri to do a co-branding product like it did with Pertamina, Hypermart, Indomaret, Toll company. For example, the new entrant in retail industry such as Lawson could be a potential for Bank Mandiri to create a co-branding product. BANK MANDIRI CONSUMER BANKING 36
  • 40. REFERENCES Bank Indonesia. (November, 2011). STATISTIK PERBANKAN INDONESIA. Retrieved from URL: http://www.bi.go.id/NR/rdonlyres/4B1D78EF-0441-454C-8F9621F9763D5575/25131/BISPINovember20111.pdf Djumena Erlangga. Bank Mandiri Bidik Nomor Empat Terbesar ASEAN. Retrieved from URL: http://bisniskeuangan.kompas.com/read/2011/12/13/09495033/Bank.Mandiri.Bidik.Nomor .Empat.Terbesar.ASEAN Hermingsih, A. TRANSFORMASI BUDAYA KORPORASI BANK MANDIRI. Retrieved from URL: http://research.mercubuana.ac.id/proceeding/TRANSFORMASI-BUDAYA-KORPORASI-BANKMANDIRI.doc Internal team of Bank Mandiri Nickols, F. (July 24, 2011). Strategy: Definitions and Meaning. Retrived from URL: http://www.nickols.us/strategy_definition.htm Porter, E.M. (January, 2008). The Five Competitive Forces That Shape Strategy. Retrieved from URL: http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1 Retrieved from URL: http://mbaglobalmarketing.files.wordpress.com/2011/05/120206_152659_5.jpg Retrieved from URL: http://www.tipsoninterview.com/8ps-of-marketing.html Retrieved from URL: http://www.valuebasedmanagement.net/images/picture_porter_value_chain.gif Sugiarto, A. (January 31, 2004). Mengapa Modal Minimum Bank Harus Rp100 Miliar. Retrieved from URL: http://www.bi.go.id/NR/rdonlyres/C0C7C359-92AA-4937-A2120C57D65264DB/944/MengapaModalMinimumBankHarusRp100Miliar.pdf BANK MANDIRI CONSUMER BANKING 37