PROJECT REPORT ON Business Strategy in Indian Banking Sector with special focus on State Bank Of India

SUBMITTED TO Prof. Rajan Mani

SUBMITTED BY Soumya Shree Kumar Shubham Anand Malvika Mathur Feraz BS-II, SEC I Group - 15

TABLE OF CONTENTS INTRODUCTION Objective of the Project Structure of the Project Report Methodology Adopted Scope of the Study HOW DOES STRATEGY DIFFER IN THE CASE OF SERVICE SECTOR OVERVIEW OF INDIAN BANKING INDUSTRY Overview in Brief A look at Key Statistics Growth Promoting Factors of Banking sector in India Initiatives Taken by Government The Road Ahead 2012 to 2025 BUSINESS STRATEGY OF INDIAN BANKING INDUSTRY Strategic Choices Business Strategy Porters Five Forces Analysis STATE BANK OF INDIA COMPANY PROFILE STATE BANK OF INDIA - BUSINESS STRATEGY Organizational Structure and Decision Making Transformation Journey Restructuring is necessary Corporate Strategy Acquisitions, Joint Developments and Strategic Alliances Corporate Social Responsibility SWOT Analysis Marketing Mix Analysis Key Success Factors Analysis FINDINGS Key Drivers of Banking Industry Pitfalls of Banking Industry CONCLUSION & RECOMMENDATIONS REFERENCES 3 4 4 4 4 5 7 7 7 9 10 11 12 12 13 14 16 18 18 19 23 24 28 29 34 35 37 38 39 40

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INTRODUCTION
Sui generis, as it is, todays corporate world thrives on the buzzword which rules the roost in any business entity in general and in business decisions in particular. The magnum opus word indeed is Strategy.

DEFINING STRATEGY
In laymans term Strategy is a plan of action or policy designed to achieve a major or overall aim. But, taking a look at the traditional definition, strategy comes out to be the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholders expectations. Strategy basically deals in setting a definite set of options which can prove to be savior in times of uncertainty. Michael E. Porter has given a wonderful in-depth to Strategy. According to him, the very word strategy revolves around three important aspects How to position yourself - uniquely and valuably How to decide on trade-offs i.e. by competing to chose what not to do How to find a wonderful fit between components i.e. by integrating many well done activities

Business strategy, complex as it is indeed, being decided amidst uncertainties makes direct impact on operational decisions of a company. Inevitably they it requires an integrated approach and demands for dynamic change. Hence, it exist at three different levels of the company 1. Corporate level 2. Business Level 3. Operational Level.

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Objective of the Project

The primary objective of this very project is to get into the details of the business strategy of Indian Banking sectors with special reference to State Bank of India (SBI).

Structure of the Project Report

The project report mainly concentrates on the below Elements of business strategy in the service sector How important and different are they. A note on the banking sector in India along with its strategies. Analysis of business strategies of State Bank of India in details. Major Findings. Finally, Conclusion and recommendations.

Methodology Adopted
The research methodology consists of two stages: 1. Data Collection 2. Analysis of the data to get into the findings

Source of Information
The study has been extensively done by collecting resources from secondary sources including websites, Journals, Magazines, Newspapers and various articles.

Scope of the Study

This study would be of immense help to Understand the strategies followed by banks in India Know how companies use strategic management for their success. Understanding the practical implementation of important strategic concepts like SWOT Analysis, Porters Five Forces Model, Marketing Mix, Key Success Factors (KSFs), etc.

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HOW DOES STRATEGY DIFFER IN THE CASE OF SERVICE SECTOR

Its primarily the intangibility characteristic of the services than make strategy in services different from products. In case of service sector, the competitive advantage is gained more in terms of intangible features like the quality of service , the ambience, the behavior and the attitude of staff ,the quality and relevance of advice given, the seriousness and quickness of service rendered et al. A pure service business primarily deals with service as its offering. Physical products attached to the services are incidental in nature. Some of the examples of pure service businesses include Movie Theatres, Banks, Airlines, IT Business, Consultancy firms et al. Some of the strategic questions which comes to the minds of business managers of service organizations are as follow 1. Do we have the full understanding of the service business that we have entered into? The nature of the difference depends a great deal on the specific type of service business even if service-oriented businesses are different from product-oriented businesses.

2. How cost-efficient operations can be further achieved? Operating leverage can be improved by manufacturing companies by means of various techniques like technology infusion, process improvements and purchase of better machinery. But most service businesses are not able to follow this approach. Other methods must be explored.

3. How our business can be defended from our competitors? To gain competitive advantage and defend competition by beating it, economics of the business must be carefully analyzed by the service companies. Service businesses generally demand for different competitive strategies from those of product-oriented companies. Word of mouth, moments of truth, service quality are some of the aspects of it.

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4. How is the pricing strategy? Its vital to look at pricing strategy and give a strong thinking on the economic and psychological effects, in case the strategy changes in future.

5. For developing and testing new services what process are we using? As it is difficult to develop protectable competitive positions, the service-oriented company must pay particular attention to this area. The process of new-service development and testing must recognize the abstract, perishable nature of services, in order to make the make the business more sustainable.

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OVERVIEW OF INDIAN BANKING INDUSTRY

Indian Banking Industry, valued currently at Rs 64 trillion (US$ 1.17 trillion) is governed by the Banking Regulation Act of India, (1949) and is closely monitored by the Reserve Bank of India (RBI). RBI, the Govts Bank, maestro as it is, manages the country's money supply and foreign exchange and also serves as a bank for the commercial banks of India. As per 2012 data,70 % of the Indian banking assets are managed by Public sector banks.

Overview in Brief
India has a robust banking system, governed by stringent regulations. An intense supervision by the Reserve Bank of India (RBI) has resulted in stringent regulatory and compliance requirements on capital adequacy and risk management practices which have strengthened the overall banking system in India. Liberal policies, Government support and huge development in other economic segments have made the Indian banking industry more progressive and inclusive with regard to global banking standards. Indias banking sector includes 169 scheduled commercial banks of which 82 are regional rural banks, 4 non-scheduled commercial banks, 1,645 urban cooperative banks (53 scheduled cooperative banks) and 95,765 rural cooperative banks. [As on March, 2012]

A look at Key Statistics

The number of banked centers of SCBs by the end of 2012 stood at 36,391 out of which 28,458 were single office centers and 72 centers had 100 or more bank offices.

The growth (yoy) in aggregate deposits moderated to 13.8 per cent in March 2012 as compared with 17.9 per cent in March 2011. Population group-wise, aggregate deposits of rural, semi-urban, urban and metropolitan branches grew by 16.4 per cent, 17.6 per cent, 14.7 per cent and 12.1 per cent, respectively in March 2012.

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Gross bank credit growth decelerated to 18.3 per cent in March 2012 from 21.9 per cent in the previous year. The growth of gross bank credit extended by rural branches at 42.2 per cent and by metropolitan branches at 16.6 per cent are not comparable with the corresponding figures a year ago, mainly due to shifting of some large credit accounts from metropolitan to rural branches. Adjusted for such accounts, gross bank credit for rural and metropolitan branches stood at 24.1 per cent and 18.6 per cent respectively. Gross bank credit of semi-urban and urban branches grew by 19.3 per cent and 14.0 per cent respectively.

Nationalized Banks accounted for 53.0 per cent of the aggregate deposits, while State Bank of India and its Associates accounted for 21.8 per cent. The share of New Private Sector Banks, Old Private Sector Banks, Foreign Banks, and Regional Rural Banks in aggregate deposits was 13.0 per cent, 4.8 per cent, 4.4 per cent and 3.0 per cent, respectively. Nationalized Banks accounted for the highest share of 52.0 per cent in gross bank credit followed by State Bank of India and its Associates (22.5 per cent) and New Private Sector Banks (13.5 per cent). Foreign Banks, Old Private Sector Banks and Regional Rural Banks had relatively lower shares in the gross bank credit at 4.8 per cent, 4.8 per cent and 2.4 per cent, respectively.

The All-India credit-deposit (C-D) ratio of all SCBs stood at 78.1 per cent as on March 31, 2012. Among the States/Union Territories, the highest C-D ratio was observed in Tamil Nadu (116.2 per cent) followed by Chandigarh (113.6 per cent) and Andhra Pradesh (110.4 per cent). At the bank group level, C-D ratios of Foreign Banks (85.1 per cent), State Bank of India and its Associates (80.6 per cent) and New Private Sector Banks (80.7 per cent) were higher than the All-India average.

The distribution of the offices of SCBs by size of deposits showed that offices with deposits of Rs.100 million or more accounted for 70.9 per cent of the bank offices, 97.8 per cent of aggregate deposits and 95.8 per cent of gross bank credit. The offices with outstanding credit of Rs.100 million or more accounted for 47.6 per cent of the offices, 79.7 per cent of deposits and 95.7 per cent of total bank credit.

Another statement released by RBI revealed that banks' advances grew 0.1 per cent to US$ 913 billion in July-September 2012, while deposits expanded by 1 per cent. The RBI projects credit growth at 17 per cent and deposit growth at 16 per cent in 2012-13.
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Foreign exchange reserves stood at US$ 294.81 billion for the week ended September 28, 2012 wherein the value of gold reserves was recorded at US$ 28.133 billion and that of foreign currency assets (FCAs) was at US$ 259.96 billion.

Growth Promoting Factors of Banking sector in India

The banking sector is highly correlated with the economy of the country. The GDP growth is estimated at 7.6 per cent for FY13, so the economy is expected to recover and be back on the growth track in FY13. This will also result in the banking space witnessing a spurt in growth in business next fiscal. There has been a constant increase in the disposable income and at the same time, exposure to a range of products. This has led consumers, particularly the young ones towards a higher willingness to take credit. Increasing spread of mobile banking, which is expected to become the second largest channel for banking after ATMs, will accelerate growth of the sector. Financial Inclusion Program: Currently, in India, 41 per cent of the adult population doesnt have bank accounts, which indicates a large untapped market for banking players. Under the Financial Inclusion Program, RBI is trying to tap this untapped market and the growth potential in rural markets by volume growth for banks.

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Initiatives taken by Government Financial Inclusion & Financial Stability

In order to speed up the process of financial inclusion in India, the RBI has announced setting up of a high-level committee that would ensure accessible financial services in the country. The Financial Inclusion Advisory Committee, to work under RBI Deputy Governor K C Chakrabarty, would formulate suitable regulatory framework to align the twin objectives of financial inclusion and financial stability. The 11-member panel is expected to acknowledge issues such as developing feasible and sustainable banking services delivery models and devising products and processes for rural as well as urban consumers outside the banking network. About 58.7 per cent households are reported to be availing banking facilities, as per 2011 census.

No Frill Accounts
With a view to achieving greater financial inclusion, all banks were asked to make available a basic banking no frill account either with nil or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population. The nature and number of transaction in such accounts could be restricted, but made known to the customer in advance in a transparent manner. All banks were urged to give a wide publicity to the facility of such no frill account so as to ensure great financial inclusion.

Campaigns
The RBI has asked the commercial banks in different regions to start a 100% Financial Inclusion campaign on a pilot basis. As a result of the campaign initiated by RBI, states or Union Territories like Pondicherry, Himachal Pradesh and Kerala have announced 100% financial inclusion in all their districts. Reserve Bank of Indias vision for 2020 is to open nearly 600 million new customers' accounts and service them through a variety of channels by leveraging on IT.

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Priority Sector Lending

Apart from this, the Reserve Bank of India (RBI) has widened its services basket for Priority Sector lending. Under the revised guidelines, foreign banks, with 20 or more branches in India, would be treated at par with domestic banks for fulfilling priority sector lending targets. It has also included educational loans of up to Rs. 10 lacs (US$ 17, 977.56) (for courses in India) and Rs. 20 lacs (US$ 35,957.65) (for courses abroad) under priority sector lending.

Capital Infusion
In a recent development, Finance Minister, Mr. P Chidambaram said that the GOI would be infusing Rs. 12,517 crores in Public Sector Banks (PSUs). The amount of capital infusion and the terms and conditions would be decided after consultation with each of the 9-10 banks that stand to benefit from the programme. [January 10, 2013]

The Road Ahead 2012 to 2025

Taking a look at the IBA-FICCI-BCG report, it is revealed that Indias gross domestic product (GDP) growth will make the Indian banking industry the third largest in the world by 2025. Furthermore, the domestic banking industry is set for an exponential growth in coming years with its assets size poised to touch USD 28,500 billion by the turn of the 2025. According to a report by the Boston Consulting Group (BCG) India, Indian banking industry is anticipated to grow exponentially and become the worlds third largest in asset size (projected at US$ 28,500 billion from the current US$ 1,350 billion) by 2025. The report further reveals that mobile banking would become the second largest banking mode after (Automated Teller Machines (ATMs). Undoubtedly, mobile phones, being driven by 3G and smart phones, would definitely emerge as the most preferred mediums for banking wherein amounting to almost 2030 per cent of all the transactions, taken in total.

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INDIAN BANKING INDUSTRY BUSINESS STRATEGY

After having discussed, strategies of a firm providing services differ from that of a firm providing products, we shall in this section try to bring out the strategies of one of the most important industry in the service sector Banking, in the Indian context.

Strategic Choices
With the help of the rapid economic development and the globalization banking sector has been deregulated. And this had made banking system strong and resilient over the years. Many banks particularly large ones indicate that increasing their banks efficiency, expanding existing products and developing new services are the key areas that they will have to emphasize to maintain their competitiveness. Elsewhere, competition can be a substitute for regulation. Greater the competition, the greater the need for regulation and/or supervision this is what banking sector demands. Change is being driven by falling costs of technology, by competition and by the ability of electronic banking solutions to offer customers an enhanced range of services at a very low cost. Thus, while deregulation has opened up new avenues for banks to augment incomes, it has also entailed greater risks. This deregulation has given Indian banking sector the emergence of new banks, new instruments, new windows, new opportunities, and along with all this, there have been new challenges. There is strong empirical evidence that robust financial markets support economic growth, there is very little work of operational relevance for improving the functioning of the financial sector. The logistics of any business strategy, if it is to succeed in the current market place, will invariably have certain components, the most important for banks being the Human Capital Management. The incumbent management and the unionized staff have to create a climate where it is possible to retain and redeploy people, change procedures and processes sharpen sensitivity to what is happening outside of these organizations in the different segments of the market and in the minds of the customers. Much Emphasis is given to the Indian banking product and marketing strategies in order to get sustainable competitive edge over the intense competition and to overcome the challenges that the Indian banking industry faces viz.

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Rural Market Countryside Banking Management of Risks Credit risk, exchange risk, interest risk, liquidity risk, country risk, other non-financial risk Growth of Banking Local banks withstanding the impact of global economy Market Discipline and Transparency Corporate governance Full, complete disclosure Human Resource Management Massive redeployment and employees retention Global Banking Integration with foreign banks Competition threat Financial Inclusion Banking for all Customer Retention Service quality leading to customer satisfaction Environmental Concern Severe need for environmental awareness Social and Ethical Aspects Not only profit maximization but support social causes too

Few more are technological revolutions. Disintermediation and Securitization, Service Proliferation, deregulation, rising funding costs & shrinking spread, consolidation & geographical expansion.

Business Strategy
Few common strategies followed by all the banks are as follows Financing rapid industrial growth Banks play a pivotal role. Technological innovations & challenges - Banks are aggressively adopting the latest technology in order to improve product offering, customer service, operational efficiency, and risk management systems. Financial inclusion & RuralMicrofinance In quest for new markets and consumer segments, as well as with the RBI directives in this area, banks are looking at the rural and the unbanked segments in a new light as a huge business opportunity. Convergence to a single provider With pressures on the spreads and the competition in the urban markets, banks needs to develop new ways of sustaining profitability - plethora of new products, hence becoming one stop shop for all financial solutions.

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Focus on retail lending The under banked Indian population as well as the high margin on retail products makes this a very attractive market for the banks. Hence they are developing strategies focusing the retail customers.

Demand for derivatives & other risk management products The increasingly dynamic business scenario and financial sophistication also increase the need for customized exotic products. The complex and peculiar nature of risks faced by the companies are passed onto the banks. Hence banks are now depending on innovative financial tools and advanced risk management methods to capitalize on this business opportunity.

Basel III Banks needs to fill in the gap between the desired and their present capital adequacy in order to meet the Basel III norms to be implemented over a long period starting from April 1, 2013 to March 31, 2018 in India.

Capital account convertibility With the possible introduction of capital account convertibility in India, it will provide additional inflow and outflow of foreign currency. Though it provides banks an additional source of revenue, they needs to strategize for this exposure of exchange risk.

Global expansion plan Build strategy to go global and capture maximum market share.

Porters Five Forces Analysis

The threat of entry of new competitors: Global economy and financial situations are under crisis but the banking industry is under booming. This situation attracted many multinational companies into Indian banking industry. Even many domestic non banking financial companies (NBFC) are also eagerly waiting to receive banking license from RBI. In the recent amendment of the Companies Act Companies Act, 2012, the NBFCs has been permitted to accept deposits from the public. This situation is critical for existing banks including SBI and the competition will become high. SBIs 200 plus years experience in the industry and reputation will help the bank to overcome these threats of new entrants.

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The bargaining power of suppliers: State Bank of India has suppliers who supply stationeries, computers and peripherals to the bank. The switching cost of one supplier to another is time consuming and costly process. The bank has to get support from cash filling agencies to fill its ATMs throughout the country. Since these things are very important to the bank suppliers are getting a bargaining power. The bargaining power of customers: Customers are very much attracted by the bank and banks core value is customer services and their satisfaction. But the same customer will come with arguments and comparison of other banks financial products in order to bargaining. The bank has to make satisfy such customers with its financial products and services since they are able to get same services from the competitors and switching costs from one bank to another is very low.

The intensity of competitive rivalry: The main competitors of State Bank of India in India are Bank of India, ICICI Bank, and Union Bank of India. ICICI bank is the second largest private sector bank in India and has well reputation over the industry. Increase in the number of banks will increase the rivalry since all these banks compete for the same customers and resources. State Bank of India has to face a competitive rivalry from all these banks and thus to plan its activities accordingly.

The threat of substitute products: Indian banking industry is high growth and profitable position and thus many foreign banks are entered into the market. All of these banks have similar financial products and services and this will lead to get a choice to the customers. The main similar products offered by the banks are savings and current accounts, internet banking, debit card services, mobile banking, different kinds of loans and deposits, insurance services (life and general), and investment & trading services. Whenever a customer feels that the service offered by SBI is not satisfying their needs, they can easily go for substitute with a low switching cost.

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STATE BANK OF INDIA - COMPANY PROFILE

State Bank of India (SBI) is the oldest bank in existence in India and not many institutions in the world today can claim the antiquity and majesty of it. Right from its inception in the 19th century, SBI has been instrumental in the economic development of India, and its contribution towards the nation has been immense. The traditions of the past continue to be upheld even to this day as the State Bank gears itself to meet the emerging challenges of the new millennium.

The SBI originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921, to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955. It is a state-owned corporation with its headquarters in Mumbai, Maharashtra. As of March 2012, it had revenue of US$ 36.950 billion, net profit of US$ 3.202 billion, assets of US$360 billion, and 14,119 branches, including 173 foreign offices in 37 countries across the globe making it the largest banking and financial services company in India.

SBI provides a range of banking products - deposits schemes, debit & credit cards, consumer banking, corporate banking, finance & insurance, investment banking, mortgage loans, private banking, wealth management etc. It is the largest banking and financial services company in India by revenue, assets and market capitalization. SBI has been ranked 285th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012. The State Bank of India was named the 29th most reputed company in the world according to Forbes 2009 rankings and was the only bank featured in the "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010. Present chairman is Mr. Pratip Chaudhuri.

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Vision
My SBI My Customer first My SBI: First in customer satisfaction

Mission
We will be prompt, polite and proactive with our customers. We will speak the language of young India. We will create products and services that help our customers achieve their goals. We will go beyond the call of duty to make our customers feel valued. We will be of service even in the remotest part of our country. We will offer excellence in services to those abroad as much as we do to those in India.

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STATE BANK OF INDIA BUSINESS STRATEGY

Organizational Structure and Decision Making
SBI employees were organized into three hierarchical levels officers (35 per cent), clerical (44 per cent) and subordinate staff (21 per cent). The bank selects executive and clerical staff through countrywide examinations. It often promotes the clerical staff to the executive order. The bank recruits executives as probationary officers and after successful completion of training promote them as assistant managers. There are nine levels between an assistant managers and the Chairman.

SBI is divided into fourteen administrative circles each headed by a Chief General Manager. Most circles consisted of two networks of branches, each headed by a General Manager. The bank assign each employee to a circle and then either promote him within that circle or post him on assignments outside his circle on deputation. It however does not transfer non-executives from their respective circles. In order to provide executives a diverse experience across functions, SBI promote or transfer them every three to five years.

At the senior level, decision making is most collective. The Central Management Committee, the banks apex committee comprising of the Chairman, Managing Director and Deputy Managing Directors typically meets twice a month to monitor progress and take major business decisions. This committee reports to the Board of Directors.

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Organization Structure of SBI as on February, 2012. Source SBI

Transformation Journey Restructuring is necessary

In July 2006 Mr O.P Bhatt became the chairman of state bank of India and there began the journey of transformation from an an old, hierarchical, transaction oriented, government bank to a modern, customer focused, and technologically advanced universal bank. He believed, SBI is the bank of every Indian whether or not he banks with us and we have a responsibility towards every Indian. This shaped his vision for the bank. First he wanted SBI to be the best customeroriented and the most tech-savvy bank in the country and then the best global bank. He, over the couple of years wanted to increase the market share consistently by around 0.25 per cent every quarter.

Mr. O.P Bhatt in his first week of tenure reorganized the management structure. He created four new strategic business groups headed by Deputy Managing Directors. The rural and agricultural banking group aimed to tap into the enormous potential in rural India. The creation of the midcorporate group catering to the needs of second tier corporate borrowers and the global market group housing SBIs consolidated treasury operations was his strategy to recapture the large and

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mid-sized corporations. He also created a new department Corporate Communication & Change to be headed by a General Manager who would report directly to him. This was a deviation from SBI hierarchical reporting relationships, wherein each person reported to the next immediate level in the hierarchy.

With four national level Apex Training Colleges and 54 learning Centres spread all over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programs are attended by bankers from banks in other countries.

The Bank moved to cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposed to cover 100,000 villages in the next two years.

It is also started focusing at the top end of the market, on whole sale banking capabilities to provide Indias growing mid/large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments.

The Bank proposed to change outdated front and back end processes to modern customer friendly processes to help improve the total customer experience.. The Bank also started the process of providing complete payment solution to its clientele with its over 25000 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc.

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Priorities for the transformational Process; Source SBI The bank also started looking at opportunities to grow in size in India as well as internationally. It presently has 173 foreign offices in 33 countries across the globe. It has also 7 Non Banking Subsidiaries in India SBI Capital Markets Ltd., SBICAP Securities, SBI DFHI Ltd., SBI Factors & Commercial Services Pvt. Ltd., SBI Life and SBI Cards & Payments Services Pvt. Ltd. - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings.

New innovative products: The corporate strategy and new business group was tasked with rolling out new businesses such as private equity, wealth management, general insurance, payments and pension funds, custodial services, mobile banking, point of sale merchant acquisition, advisory Services, structured products etc.

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Other initiatives: The Bank a plans to attempt to change old mindsets, attitudes and take all employees together on this exciting road to Transformation. In a recently concluded mass internal communication programme termed Parivartan the Bank rolled out over 3300 two day workshops across the country and covered over 130,000 employees in a period of 100 days using about 400 Trainers, to drive home the message of Change and inclusiveness. The workshops fired the imagination of the employees with some other banks in India as well as other Public Sector Organizations seeking to emulate the programme. The bank several other awards such as the Banker magazines The Banker of the year, India award in 2008 and 2009 and the CNBC Awaaz Consumer wards for Most Preferred Home Loan Brand and Most Preferred Credit Card Brand in 2010. SBIs transformation efforts yielded rich rewards; in 2008 it became the most valuable bank in the country in terms of market capitalization. The banks market share also increased.

The CNN IBN, Network 18 recognized this momentous transformation journey, the State Bank of India is undertaking, and has awarded the prestigious Indian of the Year Business, to its Chairman, Mr. O. P. Bhatt in January 2008.

During this transformation phase under Mr. O. P. Bhatt, SBI has become more competitive in a market (like money and foreign exchange markets, and advisory services) where foreign banks were very active. This helps expand the revenue base. However the journey has just started and the bank needs to improve on parameters such as efficiency.

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Corporate Strategy Acquisitions, Joint Developments and Strategic Alliances

Banking Subsidiaries: SBI has 5 Association Banks with controlling interest ranging from 75 per cent to 100 per cent - State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP), and State Bank of Travancore (SBIT) Non-Banking Subsidiaries: SBI has also 7 Non Banking Subsidiaries in India SBI Capital Markets Ltd., SBI Funds Management Pvt. Ltd., SBICAP Securities, SBI DFHI Ltd., SBI Factors & Commercial Services Pvt. Ltd., SBI General Insurance Company Limited and SBI Cards & Payments Services Pvt. Ltd. (SBICPSL) - forming a formidable group in the Indian Banking scenario

Foreign Subsidiaries: SBI has 5 foreign subsidiaries viz. State Bank of India International (Mauritius) Ltd., State Bank of India (California), State Bank of India (Canada), INMB Bank Ltd., Lagos, and Bank SBI Indonesia (SBII)

Joint Ventures: SBI Life Insurance Company Ltd (SBI LIFE), SBI General Insurance Company Limited, and SBI-SG Global Securities Private Limited

Other strategic alliances

Private Equity: The Banks maiden Private equity foray, the SBI Macquarie Infrastructure Fund, set up in collaboration with Macquarie Group of Australia and International Finance Corporation; Washington closed for subscription and raised a corpus of Rs. 5,265 crores. The Fund has made five investments worth Rs. 3,092 crores in Key infrastructure sectors such as airports, telecom towers, thermal power and hydro power. Since its inception, the fund has been rated as the Number one Private Equity Fund in 2010 and adjudged as the Most Admired Infrastructure Equity Financier 2011. The Joint venture with State General Reserve Fund of Sultanate of Oman, the largest sovereign fund of Oman, named Oman India Joint Investment Fund has been operationalized with an initial corpus of USD 100 million.
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Merchant Acquiring Business: In order to tap huge potential available in the market and also to create a comprehensive electronic payment infrastructure to activate its more than 108 million debit cards SBI has entered into Merchant Acquiring Business (MAB). It has, so far, approved deployment of more than 28,000 PoS terminals. The Bank has already entered into several corporate tie-ups with prominent players in different segments. Ez-Pay Cards: are aligned with most of the Government social schemes in addition to salary payments by corporate entities, thus reaching millions of households. Sales for FY 2011-12 were to the tune of Rs. 860.87 crores.

Corporate Social Responsibility

As integral members of society, companies owe their own society. Consequently, no society. The SBIH Group has a strong awareness of the social nature of companies and the need to be a strong and respected company. With this in mind, the Group is aggressively conducting many corporate social responsibility (CSR) programs. Corporate Social Responsibility has always been a part of the State Bank of India covering various social, environmental and welfare activities. The Executive Committee of the Central Board has approved in August 2011 a comprehensive policy for Corporate Social Responsibility. Focus areas are: existence to the very existence of

company can function as a going concern without contributing to the

Supporting Education: o To support school education and to bring happiness to millions of school children specially the underprivileged children, Bank provided 120,000 electric fans to 12,000 schools across India in 2011-12. o During the year 2011-12, the Bank also provided large number of buses/vans to needy schools. Preference has been given to schools for physically/mentally challenged children, and children belonging to economically weaker sections etc. The Bank also assisted them with computers, furniture and other accessories. o To transform and upgrade the efficacy of education in schools run by Municipal Corporation of Greater Mumbai, SBI is extending funding support.

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Supporting Healthcare:

The focus of the Bank has been to help provide the basic infrastructure support to ameliorate the condition of the common man. Ambulances, medical vans to enable medical camps in remote areas and mobile blood collection vans and host of other medical equipments were donated to needy organizations/hospitals by our 14 Circles for speedy transportation of critical patients as well as to provide medical services to the remotest parts of the country. The Bank has donated 95 such vehicles with an expenditure of Rs. 7.40 crores during 2011-12. Medical equipments costing Rs. 6.10 crores were donated to needy hospitals/healthcare institutions. o Healthcare to Children: Providing safe drinking water has always been a challenge for schools. Recently SBI took up the project, and installed 13,600 water purifiers in as many schools, ensuring clean & safe drinking water to millions of children in schools. Responsibility to the Nation: SBIs branches have adopted girl children from underprivileged class and assist them financially for their education. Bank has adopted 17,627 girl children. Assistance to poor & underprivileged: The Bank constituted SBI Childrens Welfare Fund as a Trust in 1983. The Corpus of the Fund is made up of contributions by staff members and matching contribution provided by the Bank. Grants are extended to institutions engaged in the welfare of underprivileged/downtrodden children like orphans, destitute, challenged and deprived, etc. During the FY 2011-12, 8 projects were assisted with Rs. 7.26 lacs.

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Environment protection & Clean Energy: o SBIs branches across the country made special drives to plant fruit bearing trees to improve green coverage. Fruits will also help birds. o Green Banking: SBI effectively propagate and implement sustainable usage of resources including renewable energy. Adopted energy efficient measures. The Bank is the largest deplorer of solar ATMs in the World, saving more than 2000 tons of CO2 per year. Paperless Banking transaction- Green Channel Banking. The Bank has installed windmills with capacity of 15 MW in three states for internal energy needs. The Bank extends project loans on concessionary interest rates to encourage customers to reduce Green House gases by adopting efficient manufacturing practices.

Entrepreneur development programme: o SBIs offices/branches undertake various other social welfare activities like blood donation camps, medical camps, tree plantations, adult literacy classes, imparting skills to local community. o SBI Youth for India Fellowship: Bank has granted fellowship to educated youth and deployed them to rural areas to undertake innovative projects to address local problems of rural poor. o SBI touched upon many projects like Rural Employment Guarantee Schemes, IVRS helpline for farmers & fishermen, career guidance, Enhancing marketability of farm produce, Education of rural youth through ICT, Environment protection, and many others.

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Assistance for Natural Calamities: SBI has always been at forefront to help the States affected by natural calamities. During 2011-12, the Bank has lent its helping hand to the following states, with donations of Rs 5.50 Crores to the Chief Minister's Relief Fund of the respective states to provide help to the people affected by natural calamities.

Internal CSR: o The bank is an equal opportunity organization. o SBI provide best of the facilities and healthcare to our employees. A large number of Employee Welfare schemes are in place as motivational incentive. o Extensive in-house training facilities. o Motivational incentives, Freedom of Association.

SBI won the Golden Peacock Award for Corporate Social Responsibility for the year 2012.

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SWOT Analysis
Having discussed few of the strategies at SBI, let us see what the strengths that the bank possesses along with its weaknesses. This section also discusses the opportunities it has in its hand and the external threat that it needs to mitigate. The following table shows the SWOT Analysis of SBI

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Marketing Mix Analysis

The different Marketing Mix Analysis includes the below Product mix, pricing mix, place mix, promotion mix, process mix, people mix etc.

Product Mix: o Deposits: SBI offers wide variety of Deposit Products to suit customers requirements. Coupled with convenience of networked branches, over 12,000 ATMs and facility of e-channels like Internet and Mobile Banking, SBI brings banking at your doorstep. Savings Account: SBI basically offers a power packed Savings Account with a host of convenient features and banking channels to transact through. Senior Citizen Services: The Senior Citizen Services from SBI Bank has several advantages that are tailored to bring more convenience and enjoyment in your life. Fixed Deposits: A combination of unbeatable features of the Fixed Deposit from SBI. Recurring Deposits: Through SBI Bank Recurring Deposit you can invest small amounts of money every month that ends up with a large saving on maturity. So you enjoy twin advantages- affordability and higher earnings. SBI Bank Salary Account: is a benefit-rich payroll account for Employers and Employees. As an organization, you can opt for our Salary Accounts to enable easy disbursements of salaries and enjoy numerous other benefits too. o Anywhere banking: SBI Bank is indeed the largest bank in the country. It services a customer base of more than 150 million customer accounts through a multi-channel access network. This includes more than 16,000 branches and extension counters, over 3,000 ATMs, Call Centre and Internet Banking. Thus, one can access the various services SBI Bank has to offer at anytime, anywhere and from any place.
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o Investments: Along with Deposit products and Loan offerings, SBI Bank assists you to manage your finances by providing various investment options such as: SBI Mutual Funds, SBI Life insurance, SBI Gold Bonds. o Cards: Debit cum ATM Card, Credit Card, Travel Card. o Demat services: SBI Bank Demat Services boasts of an ever-growing customer base of over 12 lacs account holders. o Loan: Home Loans, Personal Loans, Car Loans, Two Wheeler Loan, Commercial Vehicle Loans, Loans against Securities, Farm Equipment Loans, Construction Equipment Loans, Office Equipment Loans, Medical Equipment Loans. o Mobile banking: With SBI Bank, banking is no longer what it used to be. SBI Bank offers Mobile Banking facility to all its Bank, Credit Card and Demat customers. SBI Bank Mobile Banking enables you to bank while being on the move. o Pricing Mix: The Reserve Bank of India (RBI) and the Indian Banks Association (IBA) are concerned with regulations. The rate of interest is regulated by the RBI and other charges are controlled by IBA. Pricing in the Bank can be divided into interest pricing and non-interest pricing. Pricing of loans up to Rs. 2 lacs will be as prescribed by RBI. In line with RBI guidelines, the Bank announces from time to time its single Benchmark Prime Lending Rate (BPLR), i.e., reference / indicative rates at which the Bank would lend to its best customers. The BPLR would be referred to as State Bank Advance Rate (SBAR) in our Bank. Interest rate without reference to SBAR could be charged in respect of certain categories of loan / credit like discounting of bills, lending to intermediary agencies etc. Interest rates below SBAR could be offered to exporters or other credit worthy borrowers including public enterprises on the lines of a transparent and objective policy approved by the Bank's Board. All other loans are to be priced on the basis of Bank's SBAR with the pricing being linked to grade of the risk in the exposure. The maximum spread over SBAR which could be charged by the Bank will be decided by the Bank from time to time. Within such ceiling, the pricing for various credit facilities, schemes, products, credit related services etc., including
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sub-SBAR pricing would be determined by ALCO or COCC, as considered appropriate. Bank may also price floating rate products by using market benchmarks (e.g. G-Sec rates, MIBOR etc.) in a transparent manner as per Board approved policies.

An internal Credit Risk Rating system, CRMD covering all advances of Rs. 25 lacs and above in C&I, SSI and AGL segments has been put in place to facilitate structured assessment of credit risks. The system enables evaluation of the fundamental strength of the borrower so as to charge a graded rate of interest based on different ratings. However, taking into consideration the trends in movement of interest rates and market competition, the Bank has also adopted an appropriate authority structure to facilitate competitive pricing of loan products linked both to risk rating and overall business considerations.

Bank has introduced fixed interest rates in respect of certain categories of loans in personal segment, e.g. housing term loans to individuals. Fixed interest rates are also extended for commercial loans, albeit highly selectively. Market related charges and a discretionary structure that enables branches to effectively face competition are in place. These would be reviewed periodically based on feedback from operating units and the market.

Pricing of Bank's funds and services while being basically market driven is also determined by two important considerations, i.e., minimum desired profitability and risk inherent in the transaction. At the corporate level, the applicable price for a particular advance or service is fixed taking into account the marginal cost of Bank's funds and desired rate of return as calculated from indices like profitability levels

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Place Mix: As of March 2012, it had 14,119 branches, including 173 foreign offices in 37 countries across the globe. Including the branches that belong to its associate banks, SBI has 21,500 branches. They select specific places as branch based on following criteria: o The selection of a suitable place for the establishment of a branch is significant with the view point of making place accessible. o The safety and security provisions. o Convenient to both the parties, such as the users and the bankers. o Infrastructure facility. o Near to station and located on s. v. road well crowded area. o Market coverage

Promotion Mix: o Advertising: Television, radio, movies, theatres o Print media: hoardings, newspaper, magazines o Publicity: road shows, campus visits, sandwich man, Sponsorship o Sales promotion: gifts, discount and commission, incentives, etc. o Personal selling: Cross-sale (selling at competitors place), personalized service

People: To realize its potential in bank marketing, SBI become conscious in its potential in internal marketing the attraction, development, motivation and retention of qualified employee-customers through need meeting job-products. Internal marketing paves way for external marketing of services. In internal marketing a variety of activities are used internally in an active, marketing like manner and in a coordinated way. The starting point in internal marketing is that the employees are the first internal market for the organization. The basic objective of internal marketing is to develop motivated and customer conscious employees.

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A service company can be only as good as its people. A service is a performance and it is usually difficult to separate the performance from the people. If the people dont meet customers expectations, then neither do they meet the service obligation. Therefore investment in peoples qualities in service business, means investing in product quality.

Process: o Flow of activities: All the major activities of SBI banks follow RBI guidelines. There has to be adherence to certain rules and principles in the banking operations. The activities have been segregated into various departments accordingly. o Standardization: SBI bank has got standardized procedures got typical transactions. In fact not only all the branches of a single-bank, but all the banks have some standardization in them. This is because of the rules they are subject to. Besides this, each of the banks has its standard forms, documentations etc. Standardization saves a lot of time behind individual transaction. o Customization: There are specialty counters at each branch to deal with customers of a particular scheme. Besides this the customers can select their deposit period among the available alternatives. o Number of steps: Numbers of steps are usually specified and a specific pattern is followed to minimize time taken. o Simplicity: In SBI banks various functions are segregated. Separate counters exist with clear indication. Thus a customer wanting to deposit money goes to deposits counter and does not mingle elsewhere. This makes procedures not only simple but consume less time. Besides instruction boards in national boards in national and regional language help the customers further. o Customer involvement: ATM does not involve any bank employees. Besides, during usual bank transactions, there is definite customer involvement at some or the other place because of the money matters and signature requires.

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Physical evidence: Physical evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of physical evidence, including some of the following: o Internet/web pages. o Paperwork o Brochures o Furnishings o Business cards o The building itself

The physical evidences also include signage, reports, punch lines, other tangibles, employees dress code etc. o Signage: Each and every bank has its logo by which a person can identify the company. Thus such signages are significant for creating visualization and corporate identity. o Financial reports: The Companys financial reports are issued to the customers to emphasis or credibility. o Tangibles: Bank gives pens, writing pads to the internal customers. Even the passbooks, cheque books, etc reduce the inherent intangibility of services. o Punch lines: Punch lines or the corporate statement depict the philosophy and attitude of the bank. Banks have influential punch lines to attract the customers. o Employees dress code: SBI bank follows a dress code for their internal customers. This helps the customers to feel the ease and comfort.

Key Success Factors Analysis includes: Reliability Responsiveness Empathy Tangibility The Vision My SBI, My Customer First
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Source: http://www.ijmbs.com/13/gsanthivalli.pdf

Source: http://www.ijmbs.com/13/gsanthivalli.pdf

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FINDINGS
Now that we have had an overview of how strategy differs in a banking industry, we can be able to mention the key drivers and pitfalls for the firms belonging to this sector. However before going ahead with this, we can first put down few of our findings established on the basis of our analysis done in the previous section.

The biggest challenge for banking industry is to serve the mass market of India. Companies have shifted their focus from product to customer. The better we understand our customers, the more successful we will be in meeting their needs. In order to mitigate above mentioned challenges Indian banks must cut their cost of services. Another aspect to encounter the challenges is product differentiation. Apart from traditional banking services, Indian banks must adopt some product innovation so that they can compete in gamut of competition. Technology up gradation is an inevitable aspect to face challenges.

The level of consumer awareness is significantly higher as compared to previous years. Nowadays they need internet banking, mobile banking and ATM services. Expansion of branch size in order to increase market share is another tool to combat competitors. Therefore, Indian nationalized and private sector banks must spread their wings towards global markets as some of them have already done it. Indian banks are trustworthy brands in Indian market; therefore, these banks must utilize their brand equity as it is a valuable asset for them.

Ultimately, what matters is the framework in which the service strategy is developed and implemented. In this context we shall now discuss the key drivers and pitfalls of the service sector (as banking comes under this sector) which are based on the knowledge and experience. Knowing the drivers and pitfalls is helpful for the companies be in any sector, as it enhances the chances to grow and expand more rapidly.

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Key Drivers

Company Credentials: Service sector companies must develop a formal protocol for communicating the company's history, background and list of services to prospect clients. This is known as a credentials presentation. The credentials document can be a paper document that is provided to prospect clients but also should be created as an oral presentation that can be delivered by a company representative.

Credentials are often the first bit of company information presented in a new business pitch. It answers specific questions: Who is the company? What is its mission? What is its service offering? These are basic points that service sector companies need to address as they approach new business development.

Establishing Expertise: Service sector companies often need to differentiate themselves by establishing their business as experts in their particular niche. Often service companies tend to provide a commodity service offered by many similar outfits. To differentiate themselves as the specialists in their field, they attempt to manufacture a distinction for themselves, often by stating they have a particular expertise or a unique approach to meeting challenges and opportunities in their sector. Increasingly, this expertise is communicated in blogs or newsletters.

Whether it's a hairdresser who claims to be the best colorist in town, or a graphic designer who sets himself up as an expert in hand-drawn as opposed to computer-aided design, establishing expertise is important marketing strategies employed in the service sector.

Creating a portfolio of past work is critical for service sector businesses. Graphic artists keep copies of their past work in a portable binder that they carry with them on sales calls. Hairdressers may keep an album of attractive hairstyles and haircuts for new clients to review. The Internet has given every company the opportunity to showcase past work in a professional and attractive presentation that continually acts as a sales and marketing tool for the company.
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Pitfalls

Focusing on the wrong goals Failing to provide a big picture view Choosing overly simplistic metrics Leaving too much room for interpretation Overwhelming recipients with marginally useful data Implementing labour-intensive analysis and reporting processes

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CONCLUSION & RECOMMENDATIONS

The main objective of our project was to conduct a study on the business strategies used by the banking players in India and discuss their strategic development and management process. We through our analysis section have shown how strategies work, in the Indian banking sector with the help of State Bank of India.

The organization, be it any sector, should be able to understand their strategic position, the underlying bases for future strategy for developing strategies and ensure that the strategies are working in practice. For this they have to have an effective strategic development and strategic management in place. The strategic development process, though being almost the same for all sectors, can have different complex combination of processes which may differ from sector to sector.

We can conclude that strategies of service companies like banks give much importance to intangible characteristics viz. the quality of service, the behaviour of the staffs/employees, the timeliness of service etc. Hence strategy development in service companies revolves much around these intangible characteristics.

The companies should concentrate on both drivers and pitfalls of their respective sector and should be able to manage them simultaneously in order to grow and expand rapidly. They with the help of their respective strategic capabilities (resources and competences), and by efficiently managing their key drivers and pitfalls, should be able to fill the strategic gap. What is meant by this statement is that companies, be in any sector, should be able to effectively manage their strategic development process and build strategies to take competitive advantage that is not being fully exploited by its competitors.

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REFERENCES

Websites
www.balesugiri.com www.businesstoday.intoday.in www.commerce.nic.in www.coolavenues.com www.iba.org.in www.ibef.org www.rbi.org.in www.sbi.co.in

Research Papers and Articles

Strategy is different in Service Businesses - Dan R. E. Thomas, Harvard Business Review, The Magazine, July, 1978 A Report on Strategic Management at SBI - Anurag Pillai, August, 2010 Customers perception of service quality of State Bank of India - A Factor Analysis - Dr. Mrs. G. Santhiyavalli. September, 2011 State Bank of India: Transforming a State Owned Giant - Harward Business School, 2011 Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks: March 2012 - RBI, March, 2012 Indian Banking Industry: Challenges and Opportunities, Dr. Krishna A. Goyal & Vijay Joshi, 2012 Banking & Finance Industry in India: Industry Analysis Shine.com, January, 2013 Strategies used in Service Sector Marla Currie

Books Exploring Corporate Strategy Gerry Johnson, Kevan Scholes and Richard Whittington Strategic Management John A. Pearce II and Richard B. Robinson Jr.

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