SWOT Analysis of CIMB bank PDF

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Summary

Background of CIMB Group CIMB Group Holdings Berhad (MYX: 1023) is a Malaysian universal bank headquartered in Kuala Lumpur and operating in high growth economies in ASEAN. CIMB Group is an indigenous ASEAN investment bank. CIMB has a wide retail branch network with 1, branches across the region.[3]...

Description

Background of CIMB Group CIMB Group Holdings Berhad (MYX: 1023) is a Malaysian universal bank headquartered in Kuala Lumpur and operating in high growth economies in ASEAN. CIMB Group is an indigenous ASEAN investment bank. CIMB has a wide retail branch network with 1,080 branches across the region.[3] The group operates under several entities, which include CIMB Investment Bank, CIMB Bank, CIMB Islamic, CIMB Niaga, CIMB Securities International and CIMB Thai. The group's business activities

are

primarily

in

the

areas

of

Consumer

Banking,

Wholesale

Banking,

comprising Investment Banking and Corporate Banking, Treasury & Markets, and Group Strategy & Strategic Investments, with its core markets being Malaysia, Indonesia, Singapore and Thailand. CIMB Islamic operates in parallel with these businesses, in line with the group's dual banking model. The group has over 40,000 employees located in 18 countries, covering ASEAN and major global financial centres, as well as countries in which its customers have significant business and investment dealings. The group's geographical reach and its products and services are complemented by partnerships. Its partners include the Principal Financial Group, Bank of Tokyo-Mitsubishi UFJ, Standard Bank and Daewoo Securities, among others.

SWOT ANALYSIS

STRENGTHS 

One of the largest financial services providers in ASEAN.

CIMB Group being Malaysia’s fifth largest banking and one of Southeast Asia’s leading universal banking groups by assets in ASEAN, they has proved their worth as one of the major player in the financial market to their customers with approximately 12 million customers. CIMB long history of enlistment in the Bursa Malaysia has further solidified their position as one of the leading universal banking groups in the industry. With its strong market position, it directly builds trust on behalf of its current and potential customers to use the services offered by the CIMB. They also have the widest retail branch network across the ASEAN region (Malaysia, Indonesia, Thailand, Singapore, Brunei, Myanmar, Cambodia, Laos, and Vietnam) with total 1,080 retail branches and operate under several corporate entities.



Embracing diversity.

CIMB Group believes on their diverse workforce that has been one of the success factors in the group’s progress over the years. They recognize the value of diversity and embrace it wholeheartedly. The different culture and background bring forth a wealth of skills, talents and perspectives on which CIMB grow and learn.

CIMB Group also recognizes and plays to the team’s natural strengths. For examples, Thai teams showing the way Customer Experience project. Indonesian team plays a major role in creative and marketing efforts, Singapore team in cost management and the Malaysia team in investment banking. When combined with a healthy culture of openness, diversity becomes a advantage, with openness and trust, CIMB Group can create a safe space for a diverse workforce to embrace different ways of thinking so that creative ideas can from and grow. This is leads CIMB Group to breakthrough innovations and great solutions to move a company to improvements.



Diversification of products and services.

CIMB Group offers consumer banking, commercial banking, investment banking, Islamic banking, and asset management products and services (CIMB Annual Report 2015). CIMB Group was operate under several corporate entities that include CIMB Investment Bank, CIMB Bank, CIMB Islamic, CIMB Niaga, CIMB Securities International and CIMB Thai (CIMB, Our Business, 2011). CIMB have served their customers across the ASEAN. The diversifications lead them to increase in profits as well as attracting potential investors. This diversification that provide by CIMB Group is the strength of this Malaysian Banking Company.



Higher returns.

CIMB Group has the positive performance on the profit in year 2017. The profit percentage was increase from 2015 until 2017. CIMB Group reported a record net profit

of RM 4.5 billion for year 2017, which is increase 25.6% from 2016 net profit. In 2016 net profit up 4.5% to RM 3.6 billion from 2015 net profit which is RM 2.8 billion. CIMB Group has the higher return every year from 2015 until 2017, best on the income statement. Positive performance on the return is the strength of this company.

WEAKNESSES 

Core business focusing on ASEAN countries and limited market growth.

CIMB may be the leading bank in Southeast Asia but when the competition from global market tried to enter ASEAN market will put CIMB into vulnerable. The disadvantage of CIMB as days passed there are many there are growing banks around

the world

because they only exists in the ASEAN countries. Nowadays, customers are seeking for services that are convenient for them, for example the customers from Malaysia will find it hard for them to access for CIMB services when they intended to travel overseas which not in ASEAN. When they are plan to travel or have job duties to the country which did not provide CIMB, they need to deal within their country first regarding the money transaction, exchange of currency and so on.



Changes in organizational culture.

Because of the merger, the CIMB must endure the changes in its organizational culture. People who work in CIMB must adapt to new environments because there have been changes. Besides, the employees have to make themselves comfortable with the new

management that may be different from before. This mergers and acquisition done by CIMB also means that there will be hiring on new employee or being relocated. This change tends to make the employees nervous as the risk of being unemployed would always present in their mind.

OPPORTUNITIES 

Collaboration and strategic alliances.

In today’s economic climate, many organizations are taking a look at collaboration, with collaborations and strategic alliances offer ways to lower cost and create efficiencies. CIMB Bank has introduced Quick Response (QR) Payment Acceptance at CIMB terminals, a first-in-the-market QR payment acceptance to accept six major mobile wallets on one terminal. The six mobile wallet partners to be accepted on CIMB terminal are Alipay, Touch & Go Digital, Boost, KiplePay, Mcash, and Vcash.. Also CIMB Group and RippleNet have entered into strategic collaboration to enable instant cross border payments across its various markets. With these collaboration and strategic alliance, CIMB Group has opportunity to reach new markets and increased band awareness.



Growth in international banking will increase customer base.

CIMB Group has wide range of opportunity to acquire customers outside ASEAN. As technology are rapidly growing in these few years, internet access are provided almost everywhere throughout the world with the exception of third world countries. Availability of the access of internet makes it easier to engage in business transaction. Therefore, there are potential investors that are located in the countries which not have any CIMB offices could invest through the internet services that are provided by the CIMB Group.

THERATS 

Stiff competition.

As one of the top banks in Asia, CIMB has the chance to compete with other existing international and national banks. For example, CIMB need to compete with RHB Bank, Maybank and AmBank. As day goes, there will be more banks growing and increase the number of competitors for CIMB. As the result of these existing competitors, it causes the CIMB itself to have a limited market growth. CIMB need to prove that they can stand out with offers the better service than other existing national and international banks. Aside from it, the higher number of competitors makes it hard for CIMB to expand its market share.



Same business segment.

Another threat that CIMB need to face is the competitors which provide the same service to the customers. For example, CIMB Islamic bank and at the same time Public

Bank also provide the Islamic Banking to their customers. As the result, customers have an option to choose which service they want to use. Besides that, there is also the opportunity that the existing customer of CIMB may also turn back from CIMB and choosing another competitor.



Fluctuation of foreign exchange rate.

As an institution that deals with the exchange rate, CIMB must ready to face the risk of the unstable foreign exchange rate. This happen because of the foreign exchange rate always change depends on the current situation all around the world. In addition, this situation leads to uncertainty because the customer may not be sure how much money they receive when they are selling abroad, for example this usually happens between the exporter and importer because the price can be more expensive or cheaper. On the other hand, it will lead t a lack of CIMB investment by customers. The customer’s deposits are the largest contribution to the bank. Therefore, when this happens, the customers feel afraid to invest in CIMB due to the changing exchange rate.

SWOT MATRIX STRENGTHS (S)

WEAKNESSES (W)

S1: One of the largest financial

W1: Core business focusing on

services providers in ASEAN.

ASEAN countries and limited

S2: Embracing diversity.

market growth.

S3: Diversification of products and

W2: Changes in organizational

services.

culture.

S4: Higher returns,

OPPORTUNITIES

SO STRATEGIES

WO STRATEGIES

(O) 1. Regional expansion O1: Collaboration and strategic alliances.

(S1,O2)

1. Product and Market development (W1,O1,O2)

2. Partnership (S2,S3,O1)

O2: Growth in international banking will increase customer base.

THERATS (T)

ST STRATEGIES

WT STRATEGIES

T1: Stiff competition.

1. Strengthening position in

T2: Same business

ASEAN through social

segment.

banking (S1, T1)

T3: Fluctuation of foreign exchange rate.

1. Joint venture (W1.T1)

RECOMMENDATIONS SO Strategies SO strategies refers to a firm which their internal strengths to exploit the external opportunities. In CIMB Group, there are two strategy can be implemented which are regional expansion and partnership. SO1: Regional expansion (S1: One of the largest financial services providers in ASEAN, O2: Growth in international banking will increase customer base) Being the one of the largest financial service providers in ASEAN countries, CIMB Group could expand their market by conquering other countries regionally. Taking advantages of the booming Asian’s economic growth, CIMB Group could start looking towards expanding their markets to Asia-Pacific countries instead of only ASEAN countries. Regional expansion strategy used in conjunction which local and global initiatives can significantly boost a company’s performance. According to Toyah Miller, Internationalization can enable firms to gain new competencies, boost sales and increase efficiencies. The first step, CIMB Group can expand their business to all of Asian countries. Half the world’s population currently lives in the many diverse nations that comprise Asia, the people living in Asian cities grows by more than 120,000. With figure like these, Asia will not just be the biggest global of goods and services but also be the bigger global consumer which can be benefit for CIMB Group to enter this market. SO2: Partnership (S2: Embracing diversity, S3: Diversification of products and services, O1: Collaboration and strategic alliances)

Partnership offer a valuable route for CIMB Group wanting to expand globally whilst also wanting to limit the risk associated with such development at a particularly volatile time in the global outlook. By collaborating with another business, CIMB Group stands to benefit in a number of areas. Cross country partnership enable CIMB Group to gain to resources that they would not have available to them when entering new markets. By tapping into their partners ' existing relationships –both suppliers and customers–and by adopting existing processes, companies can ease their workload in order to enter new markets. With partnership, CIMB group can more expand their product and service diversification which can attract the customers. For example, by entering new geographies with the support of a local brand will also make companies more familiar and accessible to potential customers by increasing the likelihood that customers will trust their business and therefore use their services or products. Strategic partnerships are also an effective way to gain efficiency by integrating the skills of another company, whether that is technical, regulatory, or digital. The best relationships of this kind work for the benefit of each party, but also for the benefit of the end user. By ensuring the strategic interests of the companies are aligned, both players can offer their respective customers better service while simultaneously increasing their businesses. WO Strategies WO strategies are aim at improving internal weaknesses by taking advantage of external opportunities. There are two strategies for CIMB Group which is product and market development.

WO1: Product and market development (W1: Core business focusing on ASEAN countries and limited market growth, O1: Collaboration and strategic alliances, O2: Growth in international banking will increase customer base)

CIMB Group can grow by leveraging their product and service knowledge to reach new customers. With core business only focusing on ASEAN countries, CIMB Group can make collaboration in order to growth international. For identified potential market as opportunities, CIMB Group need to do research to validate that the market that want to enter is attractive or not, is CIMB Group can adapted with that new markets and how CIMB Group maintain the current competitive advantage in this new market. There is several ways for CIMB Group to grow their business. Firstly, increase present customers’ rate of use by increasing the size of purchase, maximizing the rate of product obsolescence and offering incentives for increased use. Secondly, attracting the competitors’ customers. CIMB can lure customers away from the competitors by establishing differentiation of product and service and increasing advertising efforts. Thirdly, CIMB Group can attract the non customers to using their product or service that they offer. This process can be done by offering trial uses of products, adjusting the price up or down and promoting other uses to attract these customers. Lastly is developing new products. In this case, CIMB Group can establish new service or partnership to make new product and service to leverage the band recognition.

ST Strategies

ST strategies use a firm’s strengths to avoid or reduce the impact or external threats. The ST strategies can be used by CIMB Group is strengthening position in ASEAN through social banking. ST1: Strengthening position in ASEAN through social banking (S1: One of the largest financial services providers in ASEAN, T1: Stiff competition)

Southeast Asia is among the countries with the world most social media users such as Facebook, Twitter and Instagram. This provides a good opportunity for CIMB Group to utilize the potential social media users in ASEAN to experience social banking via social network. For example in 2012, CIMB Bank has introduced the OctoPay application for Facebook, a feature which the bank being the first in ASEAN to apply it. OctoPay is an extension of the CIMB Clicks Internet banking portal that resides on Facebook and allows CIMB Clicks members who are also using the social networking service to perform a limited number of banking task right within the Facebook interface. This is the good strategy for CIMB to make them in strength position in ASEAN , so with these type of approach CIMB Group can gain more brand recognition and can compete with another financial service providers.

The worldwide digitization of businesses has caused major disruptions in traditional industries. The twists of what technology has done to other business have now affected the banking industry, where the Internet has led to competition from financial technology (fintech) companies. CIMB Group need to notice this change, like payment gateways from other ecommerce platform have seen the disintermediation role between customers and merchants no longer constricted to the domain of credit/debit card banks. The brick-and –mortar part of the business will continue to grow and CIMB Group needs to strengthen and improve on compliance

cost and enhance its customer experience. With work together with fintech companies, CIMB can innovate its products and service offerings, also opened up its network and made available its source code to its digital infrastructure to external developer which can make CIMB Group strengthening their position in ASEAN.

WT Strategies WT strategies refer to defensive tactics directed at reducing internal weaknesses and avoiding external threats. Joint venture is one of WT strategy that can implemented by CIMB Group.

WT1: Joint venture (W1: Core business focusing on ASEAN countries and limited market growth, T1: Stiff competition)

As CIMB Group core business focusing on ASEAN countries, they are faced with stiff competition among national and international banks that have a larger customer based compared CIMB Group. For those international banks such as Standard Chartered have a wide coverage of customers from all over the world. By joining venture with those international banks, CIMB could reduce their competitors as well as gaining access to customers internationally and the knowledge of those international banks.

Joint venture is not like a partnership, this is focuses on a single project or undertaking. By joint venture, both of companies will get the benefit but also comes with its share of side effects as well. There are several advantages of a joint venture. First, CIMB Group has the opportunity to gain new insights and expertise. Second, both parties share the risks and cost, means that

CIMB Group are not alone when bearing the costs of its failure, because they share the expenses and also support the losses. Next is the firm are more likely to succeed, CIMB Group chances of success will become higher as they already riding with a renowned brand, as a result CIMB credibility will also vastly improve. Next is build relationship and networks and get to save money by sharing advertising and marketing cost. The last one is international joint venture eliminate the risk of discrimination, this is the great opportunity for CIMB Group to corporate with other firm from different countries and combine their strengths....