Business Model: A Strategic Business Approach, Case Of Bank Bjb 516z4n

MM 5012 Business Strategy

Business Model: A Strategic Management Approach, Case of Bank bjb

29111311 Haidir Afesina (FEZI) MBA Executive 46                                        

MASTER OF BUSINESS ISTRATION SCHOOL OF BUSINESS MANAGAMENT INSTITUTE TECHNOLOGY BANDUNG 2013

1. INTRODUCTION 1.1 Company Success in The Past Transformation” has deeper intention than “change”, which requires stronger control by bank bjb toward its scheme and process to become one of the major banks in

Indonesia.

It

can

be

seen

by

repositioning its position in order to be conventional

bank

and

get

rid

the

perception of regional development bank (BPD). There are three significant steps that BJB did according to bank bjb annual report (2012): 1. Transparency of corporate governance practice. By transparency, ability, independency, and fairness carried out with responsibility of its management, bank bjb move forward to reach its goal and adapt the company’s behavior in accordance with public’s expectation. Successful Initial Public Offering (IPO) marks it in 2010. 2. Enhancing for greater growth. Various work programs especially on micro segment, carefully planned and consistently implemented, have resulted in improvements and quality enhancements in various areas of the organization and its operations, leading to faster growth in all business lines of bank bjb. 3. Developing growth and profit. Broadened its service networks and enlarged its range of product offerings, as well as successfully promoted its corporate branding as a national bank. Also to consolidate and strengthen its business fundamentals, which will enable bank bjb to continue to grow profitably. During 2012, bank bjb has a healthy performance in growth and profit, as the table shown that the profit in 2012 has increase more than 23% along with more than 30% of asset (table 1). In addition, bank bjb has expanded its channel by 84.23% to seize opportunities in all areas in Indonesia.

 

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Table 1. The Growth (in IDR Trillion) 2011

2012

Net Profit

0.96

1.19

Asset

54.49

70.84

Third Party Fund

39.04

47.63

Loan Disbursement

28.76

38.33

Source: Bank bjb Annual report 2012

1.2 Vision and Mission Bank bjb vision is “one of the 10 largest banks with high performance in Indonesia” with mission as mover and motivator for accelerating regional development economy, regional development cash depository and a source of regional development income. To the vision and mission, bank bjb has its corporate culture value i.e. Go Spirit (Service Excellence, Professionalism, Integrity, Respect, Intelligence, Trust). Accordingly, it established “bigger, better and stronger” as its tagline or brand mantra. The meaning is that bigger in asset, strong financial performance and serves the people better. It is also shown by expand its branches in order to serve people outside West Java & Banten i.e. Sulawesi and Kalimantan. 2. PROBLEM The Author argued that its vision to become the 10 largest banks and to have a good performance in Indonesia is not synchronizing with the strategic decision that the bank had chosen. Regardless it has restructured its management, has a rapid expansion to outside West Java and also decided to go public (IPO). Bank bjb has to find its strategic competitiveness as it only achieved when bank bjb successfully formulates and implements a value-creating strategy. It therefore will survive and maintain its market on SME along with achieving its vision to be top 10 banks with high performance. However, there are two big problems that faced by bank bjb; 1. Strong image as regional development bank (BPD) 2. Lack of IT and human capital development

 

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3. CONCEPTUAL FRAMEWORK Looking at an organization as a whole, each individual leader often sees the organization primarily through his or her lens and filters. Those with finances biases see the organization as an economic revenue generator; those with marketing see the organization as a means of creating products or services for customer; those with technology backgrounds see the organizations as a source of information; those with human resource background see the organization`s talent and culture. Each of these views is right and wrong. Organizations exists as an integrated whole. In fact, they can be divided into parts, but they only operate and make sense when the parts work together. Accordingly, it needs the right strategy formulation in order to aligned all views and achieve the company`s vision (figure 1). Figure 1. Conceptual Framework

Sources: Various sources

 

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4. STRATEGY INPUT It starts with strategy inputs by examining external and internal environment in order to determine its resources, capabilities, and core competencies as the sources of strategic inputs. These are the first two steps to see whether its competence aligned with the vision and mission of company. External analysis using PEST gives the overviewed of macroenvironment of the industry that describe the opportunities and threat (Ireland, Hoskisson and Hitt, 2011) along with industry analysis using Porter five forces with the outcome of industry level attractiveness. On the other hand, internal analysis explore its value chain (primary and ing activities) to see company`s activities that create competitive advantage and core competencies (resources based view) in order to explore the core that business strategy.

4.1 External Analysis 4.1.1 PEST Politics/Legal Bank Indonesia (BI) as the regulator has issued the new regulation that required banks to allocate minimum of 20% of the total loan for micro, small medium enterprise (UMKM/SMEs). Many argued that BI associated the program with election or others` politician intervention. It is becoming important issue, because the distribution of wealth of society in of credit to public enterprise is unequal, as well as in of access to finance and capital. Regardless of the background, BI`s steps to enhance the role of the banking industry in SMEs market is positive and should be ed. Thus the competition in this segment would be highly competitive from both of national and international banks. Micro banking market will be increasingly lively as banks were forced to give credit to SMEs segment. Furthermore, BI`s policy also is also forcing banks to decrease interest rates and improve intermediary function. This would be another challenge as many banks enjoyed huge profits in 2012 by the high lending rates. In addition, bank bjb that still has a strong relationship with West Java government would be affected, especially for the independent of its strategic decision.

 

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Economic SMEs occupy an important and strategic place in the economic growth and equitable development in all countries. They are viewed upon as a powerhouse of employment, innovation and entrepreneurial spirit. In both industry and service, almost 90% of enterprises are in the SME sector. GDP of Indonesia has increased 6% annual growth from IDR 708T in 2010 to IDR 846T in 2011. Indonesian per capita income is predicted increase from USD 3000 in 2010 to USD 5000 in 2014 and USD 14,000 in 2025 and up to number 44 in the world for global competitiveness index ratings from 54 in 2010 (World bank, 2012). Driven by strong domestic demand, economies of developing East Asia and Pacific continue to be an engine of global growth, growing at 7.5 percent in 2012, higher than any other region in the world (FT.com). Indonesian inflation rates below are 6.5% and predicted to be 3% in 2025. Means inflation remains under control although there is still risk of higher inflationary pressures. Thus Indonesia becomes the 17th biggest economy in G-20 (thejakartaglobe.com). Banking industry has been more resilient as indicated by a secure level of CAR (Capital Adequacy Ratio) and it has been twice to the minimum level of 8% (exhibit 1). It therefore indicated the stability of banking industry in Indonesia. Moreover, further improvement in banking also reflected in credit growth improvement as the increasing trend of loan growth indicated a good economic condition that resulted becomes a favorite among foreign investor. However, the common problem with the loan is the process itself i.e. complicated requirements. Social/Demography As the economy grows and as more opportunities appear on the horizon, many expected to see rising incomes accompanied by increased consumer spending, driving more economic growth, especially for the middle class group. According to World Bank, Indonesia has one of the fastest growing middle classes with rate up to 7 million people a year (people who spend USD 2 to 20 a day). According to bps, the total of middle class are 56% or 154 million from 237 million Indonesian populations in 2010 (exhibit 2). From the population itself, there are 48% women. In 2020 it is predicted to be 265 million people with 180,3 billion (70%) productive ages i.e. 15-64 years old (world bank, 2012). The sizes of SMEs were 55 million with 13 million people are not bankable (info bank, 2012). The market itself increases 0.5-1.5% annually. Furthermore, there are 0.24% female are micro player. Having these huge SMEs, it offers attractive margins for banking. In addition, SMEs are the driving force behind

 

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a large number of innovations and contribute to the growth of the national economy through employment creation, investments and exports. Technology Many banks are leaving the traditional banking and move to Internet banking. Investment for IT is becoming mandatory in order to serve customer with easiness transactions everywhere. The era of mobile transforms the industry. Thus many banks reduce its physical outlet in order to concentrate with E-banking. This is becoming a problem for bank bjb, as it has no credit card and e-banking facilities. Bank bjb is member of “ATM bersama” and Prima, so that its ATM card is accessible to lfots of ATM machine with that logo. However, bank bjb has no access with international network provider such as VISA, Master card, American Express, while other competitor has offer this services. The investment has been started end of 2012. The technology developments force the bank to create a creative solution through its product and services in order to the operational excellence so that customer would like to enjoy the facilities.    

The issue of whether Internet banking can satisfy what customers want remains unanswered question. However, in this globalization era, the Internet can be leveraged to act as a competitive weapon in businesses, especially for bank bjb in order to stay competitive. Internet banking and traditional PC banking differ with respect to the application software resident on the 's computer and hence the requirement for ongoing software upgrades and distributions. The value of the Internet as a distribution channel is its ability to enhance interactions between the bank and its customers, as opposed to merely providing a means for touching base with customers. The better a bank can identify its customers and know about them, the less it will depend on traditional marketing channels. On the other hand, SMEs need to overcome their problems and enhance their access to new technologies for increasing their competitiveness in the international market. For this, the government and banking sector have an important part to play & take a proactive role of identifying and encouraging new entrepreneurs. They must come forward to remove the bottlenecks faced by the SMEs at national & international level 4.1.2

Porter Five Forces

The industry environment has a more direct effect on the firm’s strategic actions. Using Porter`s five forces model analysis help the company to determine the long run profitability  

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in any given industry. This theory is based on the concept that there are five forces that determine the competitive intensity and attractiveness of a market. In addition it helps anticipate and exploit cultural change. The five forces are threat of new entrants, bargaining power of buyer, bargaining power of supplier, threat of substitute product or services, and rivalry among existing firms. Thus, the framework reveals the important differences among industries, how industries evolve and help companies find a unique position. Banking industry has a promising growth as many banks enjoyed huge profits in 2012 by the high lending rates. Based on Porter`s framework, the industry of micro financing is highly attractive (table 2). Not only few players who dominated the market (BRI, regional development bank (BPD), rural bank (BPR) but also the emerging of the people and industry itself who contribute to the economic growth. However, not all banks are able to penetrate in this segment, even bank bjb has only 0.4% market share of micro segments from IDR 113.75T total of national micro credit. In addition the era of banking industry with Internet capability is highly competitive, regardless of its almost matured market (saturated), the profit remain dynamics. Table 2. Porter Five Forces FORCES

ANALYSIS

ATTRAC TIVENES S

(Medium) It takes strong capital requirements along with experience in order to compete in this segment. Economic scale becomes a barrier, as the distribution channels are important. Thus it Thereat of New Entrants

dominated by big existing player such as BRI and Mandiri. However, new banks would still be able to compete, as the

Attractive

players from middle class bank are still low. Many banks are also offer the same product but with different labels. This also becomes another barrier for new player.

Bargainin g Power of Buyer

 

(Medium) Interest rate and service charge is sensitive indicator for

Attractive   7

FORCES

ANALYSIS

ATTRAC TIVENES S

customer in bank industry, therefore customer is price sensitivity. Micro consumers can easily change from one bank to other bank whenever find the offer that suits them, especially for the process.

(Medium) Bargainin g Power of Supplier

Government is the main regulator that control policy for banks and other financial institutions. However, bank still has power

Attractive

to decide its own rates, especially when the demand is higher.

(Medium High) Threat of Substitute

Many other financial institutions besides banks are competing

Attractive

in these segments. Thus it make consumers has lots of choices.

(High) Rivalry Among Existing Competit or

The rivalry is not coming from the same micro banks, but also from high establish bank, international bank, and financial

Attractive

institution that offer various services and products. Many banks are also provide theirs IT advance services.

4.2 Internal Analysis 4.2.1 Value Chain Analysis Value chain analysis is based on the principles that firm exist to create value for their customers. It used to identify and evaluate the competitive potential of resources and capabilities (Ireland, Hoskisson and Hitt, 2011). The firm’s activities are divided into separate sets of activities that add value (primary and ). The firm can more effectively evaluate its internal capabilities by identifying and examining each of these activities. Each

 

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value adding activity is considered to be a source of competitive advantage. It allows the firm to understand the parts of its operations that create value and those that do not. Primary activities and activities are linked to each other. According to Porter (1980) five primary activities are inbound logistic, operations, outbound logistic, sales and marketing, and services, while the ing activities are procurement, technology development, human resources, and firm infrastructures. The author tried to adjust those activities based on research at bank bjb (exhibit 3, exhibit 4). Bank bjb has to see that the primary activities as a step that has to add some increment value to the finished product or service, otherwise it is just a cost. A channel branch expansion outside West Java along with increasing its ATM machine has been done annually i.e. 56 branches, 742 ATM. Bank bjb mostly participate on government related activities than public activities. Its strong capital structures some from regional development source of cash. Public education has to be done aggressively in order to offer the product, services as many unfamiliar products for people besides micro financing. Bank bjb therefore struggle to generate demand from consumer banking. For micro financing process, bank bjb has offered a quick and easy loan process compare to others i.e. within a day. Indeed, there are still some requirements to be filled. However, the maximum amounts of loan are IDR 250 million with lower interest to others as bank bjb implemented the cost leadership i.e. 7-11%. With the sorting activities in the value chain, in order to reduce operating costs by choosing the pattern of outsourcing. However, out sourcing can only be done in areas that do not create value or areas at a substantial disadvantage compared to competitors. In contrast, bank bjb put its outsourcing as a sales promotion female and some as a customer service. In fact, bank bjb stressed on giving personalized customer service to the entire employee as their core competences. Thus it could be a problem as become customer service needs not only adequate product knowledge, but also as brand ambassador. The recruiting is not only focusing on young age with a good looking criteria from top universities, but also focusing on finding the personality that accordance with bank bjb. In addition the talent mapping and incentive based  

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performance should be encouraged. This to prevent hijacking from other banks and also to aligned the social mission of bank bjb. Therefore the selective strategy has to be done as competitive advantage arises from the activities in a company`s value chain. A good business strategy presents a specific action plan to overcome a defined challenge. 4.2.2

Resources Based View

Categorized as tangible or intangible, resources can be defined as inputs into a firm’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers (Ireland, Hoskisson and Hitt, 2011). As a source of competitive advantage for a firm over its rivals, it should be met the four criteria; rare (capabilities that are not possessed by competitors), valuable (capabilities that help a firm neutralize threats or opportunities), costly to imitate capabilities (capabilities that other firms cannot easily develop), non-substitutable capabilities (capabilities that do not have strategic equivalents). The tangible resources are financial, organizational, physical and technological, while the intangible are human and reputational. From the tangible aspect (organization), Bank bjb has a limited product portfolio that served in niche market. In addition the corporate culture (Go Spirit) is established for family working environment. In other words, care is not only to customer but also to colleagues. From the intangible aspects, the reputation of bank bjb within West Java and Banten is high, however it is still hard to convince public regarding its new status as conventional banking especially outside West Java & Banten. In addition the innovation on its IT system is still behind major competitor, as explain the details of resources and capabilities (exhibit 5, exhibit 6). Most of bank bjb competence is temporary competitive advantage TCA). Thus bank bjb should combine single competence in order to create sustainable competitive advantage (SCA) as shown below: Table 3. Combination of resources Category

Tangible and Intangible

 

Non Substitu table

TYPE

YES

YES

TCA

YES

YES

SCA

Valuabl e

Rare

Imitable

Technology

YES

YES

Reputational, organizational

YES

YES

Resources

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5. BUSINESS LEVEL STRATEGY A business-level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. Porter (1980) developed three generic strategies (cost leadership, differentiation and focus) to help the firm outperformed rivals within industry, and so successfully position itself against the five forces. 5.1 Current Business Level Strategy. Bank bjb business level strategy is competitive strategy i.e. cost leadership. Means relatively standardized product, features acceptable to many customers and lowest competitive price. According to Ireland, Hoskisson and Hitt, the risks are: •

A loss of competitive advantage to newer technologies

•

A failure to detect changes in customers’ needs

•

The ability of competitors to imitate the cost leader’s competitive advantage through their own unique strategic actions.

Bank bjb is focus on lowering their operational cost. The product is based on interest loan, while others fee based income. For instance is its savings product has low istration fees compare to others. Also by cooperate with “bersama” and “prima” for ATM network with free of charge withdrawal all over Indonesia. Its ATM also function as debit card that can be used in any BCA EDC (electronic data capture) machine. According to Tracey and Wiersema, bank bjb adopted the strategy of product leadership for its segment i.e. PNS (West Java & Banten government officer). In addition, since IPO in 2010, bank bjb also aggressively on market penetration. Bank bjb customer segmentation is male and female with age of 21-45 years old and middle low (IDR 1-2 million per month). Mostly their targets are West Java & Banten government officers and SMEs. In order to satisfy their target, the product that they give is related with their payroll, such as easiness transaction, ATM debit facilities along with consumer loans. For SMEs, varieties loan products with low interest such as KMU (Kredit Mikro Utama), KUR (kredit Usaha Rakyat) and KCR (Kredit Cinta Rakyat) are becoming favorites. Therefore many of its branches and ATM are close with government areas. Bank bjb launched “Waroeng bjb, which as lending

 

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outlets. Bank bjb is also providing wireless EDC in order to help SMEs transaction without coming the bank. The future of bank bjb plans to focus with growth in the SME sector with the of existing consumer sector at this time. Therefore bank bjb tried to build its CRM in order to reach customer in rural and also build the awareness. Competitor Analysis The two main competitors are bank Bukopin and BTPN (exhibit 8). Both of them are interest in SMEs as their target. Bank Bukopin, is a powerful SMEs player. It is no 11 top banks that successfully get rid of its image as cooperative bank, while bank bjb still struggle with its image as regional development bank. In addition, bank Bukopin has a wider network along with its e-banking facilities. Second, bank BTPN is an emerging SMEs player. Despite of its position on no 15, bank BTPN able to attract consumer through its insurance product with unlimited age. It also develops banking community through sub branches in the SMEs communities. Therefore, bank bjb has to be able to combine through its process as differentiation i.e. quick and easy process. The opening of “waroeng BJB” has to be increases through channel partnership. However, any such strategy must occur in the context of rules of the game for socially desirable competitive behavior, established by ethical standards and through public policy. The rules of the game cannot achieve their intended effect unless they anticipate correctly how businesses respond strategically to competitive threats and opportunities. Furthermore, the Author recommends bank bjb to acquire existing rural banks (BPR) in order to increase its market share in SMEs (exhibit 9). 5.2 Future Business Level Strategy Since bank bjb transform itself to be conventional banking, its business strategy should be change. Despite of serving mass market through its expansion, the Author argued that bank bjb has to play in niche market according to the analysis of external and internal factors i.e. Women, 21-45 years old, with social class B, C1, C2 and D. Therefore, bank bjb should focus with customer intimacy according to its core competence, while the product will be customized based on customer needs. The quality of service is an essential issue in this industry because the offered products are usually difficult for the customer to understand and  

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to differentiate. Therefore integrated marketing communication has to be developed and well targeted as bank relationships are strongly based on interpersonal relationships. The Author proposed focus differentiation as new business level strategy (exhibit 7). Based on the analysis both of internal and external, bank bjb has to redefine its positioning through its marketing strategy. Marketing strategy has to be aligned with its business strategy in order to achieve company`s vision. According to Maslow hierarchy of needs, consumers of bank are categorized to safety needs, as they need a security and protection. The bank therefore is able to guarantee security in addition to the money. Bank bjb therefore try to fulfill their segments through its customized and specialized product and services. By still maintaining its SMEs, bank bjb is also able to target women, especially on micro. Strategic Positioning The Author proposed its positioning as women financial solutions both of consumer banking and SMEs. The globalization, technology and liberalization of the market, which the entrance of new national and international banks as well as the changing patterns of consumer activity, have led to a highly competitive environment. Accordingly, bank bjb is not only compete with local BPD (bank Jateng, bank DKI), state owned bank (Mandiri, BRI), private banks (Bank Mega, Bank danamon), rural banks (BPR KS, BPR Jatim) but also with other financial institution such as “pegadaian”, leasing companies and other international banks. In order to achieve its vision to be top 10 banks, bank bjb has to differentiate and then aggressively communicated its message as a modern conventional bank. As fact, bank bjb as a brand has low awareness outside West Java & Banten. Brands, from a strategic perspective, help to create unique features to distinguish a company from other competitors who offer similar products and services. Positioning statement For womenpreneur, bank bjb, is a women financial solution that delivers quick and easy process with high trust and high touch, because only bank bjb who understand local needs. Growth Strategy Bank bjb has range of product portfolio. It is important to be more aggressive penetrate into market as many people unfamiliar with the product (exhibit 11). Therefore it needs to analyze which category that has the highest revenue and potentially to be developed. Using BCG matrix (exhibit 12), bank bjb has to concentrate on micro credit along with developing  

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another savings product along with applying reward strategy in order to acquire new customer i.e. direct gift when open , point reward to change with gift directly. These are method to gain customer loyalty. It is proved to be effective as BRI and BCA has done it. The needs of product development are a must in order to compete and attract customer, especially customization product along with personalized service. In service industry, service quality has been identified as a key success factor for the prospective performance and represents a significant element of the bank ’ s brand values. Consumer satisfaction is mainly influenced by customer service and the way organizations deal with customer problems.

 

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6. CORPORATE LEVEL STRATEGY A corporate level strategy is expected to help the firm earn above returns by creating value. The corporate level strategy`s value is ultimately determined by the degree to which the business in the portfolio are worth more under the management of the company than they would be under any other ownership (Ireland, Hoskisson and Hitt, 2011). Diversified firms vary according to their level of diversification and the connections between and among their business. Bank bjb is pursuing a low-level diversification strategy, categories as dominant business strategy. It is between 70% and 95% of revenue comes from a single business. Mainly 70% revenue is generated from consumer banking followed by 30% of SMEs product. 6.1 TOWS Matrix Having SWOT results from both of external and internal analysis, the TOWS matrix is being used as a conceptual matrix for systematic analysis that facilitates matching the external threat and opportunities with the internal strengths and weaknesses. (Exhibit 14). Bank bjb should be focus on building human capital. The recruitment should be based its goal and their core business. In addition, human capital readiness is important in this high competitive industry. Giving customer service is normal, but giving care by anticipating customer’s anxiety and desires are more important. It is all about the character that will become image of the brand. As the future of the bank would be SMEs by specializing on women, the human resources should be developing its micro business skills i.e. customer service. In addition the IT system has to develop by maximizing the use of Internet along with invest on IT system software. The system would be benefit as: 1. Use integrated data source to guide automated event marketing 2. Use enterprise data warehouse (EDW) to track customer interaction with the firm and marketing campaign 3. Track and monitor marketing campaigns and assets using automated software such as marketing resources management With IT, bank bjb would be able to maximize its program after its brand audit (explatory and inventory) in order to generate demand. From the Author point of few, bank bjb focus on building its assets. Banks that anticipate the power of the Internet will be in control of events. Conversely, banks that do not respond will be forced to accept changes that others initiate and  

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will effectively find themselves in a position of competitive disadvantage. In addition channel partnership with highly recognized institution that has wider distribution channel is being encouraged such as PLN, Pos Indonesia. It is believed to be much more effective as the future of banking industry is branchless. 6.2 IPO Bank bjb is a pioneer among regional development banks that become public listing or IPO on the Indonesian Stock Exchange (IDX) on July 8, 2010. It offered to the public of 2,424,072,500 Series B shares, (including EMSA) at an offering price of IDR 600 per share with total proceeds from the IPO of about IDR 1.4 trillion. Then bank bjb obtained a relatively large interest from domestic and foreign investors. The compositions of shares are 25% owned by public, and 75% by government. Then it has 92.72% domestic shares and 7.28% foreign shares. The highest price of shares during 2012 was IDR 1130 and the lowest was IDR 910 (exhibit 15). The reason that the shares prices low at that time was because it effected by bank bjb lawsuit case i.e. politics issue. Banks bjb use the funds from the offering to: 1. Strengthening the company’s capital, 2. loan expansion, especially the SMEs sector 3. Expansion of network and information technology development. .

 

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7. STRATEGY MAP Strategy map is being made in order to achieve company`s primary objectives by associate it with balance scorecard as the performance measurement. In other words, it is a way to communicate to with a graphic depiction of strategic objectives and the factors linked to them (Kaplan and Norton, 2004). The importance of aligning human capital and IT programs also being stated in order to maintains high readiness and flexibility. The three elements on strategy map are: 1. Quantify company`s goals Set strategic targets and map’s cause-effect links. 2. Define the time line To ensure value-added proposition is workable and sustainable over time, determine how it will generate value in short-, medium- and long-term periods. 3. Select initiatives Prioritize organization’s actions, programs and initiatives, including investments in order to achieve its goals within the required time frames. 7.1 Balance Scorecard Management performance measurement is a complex task since multiple inputs and multiple outputs are involved in the process. Kaplan and Norton (1992) proposed four balanced perspectives to measure performance comprehensively including financial, customer, internal business processes, and learning and growth perspective. These perspectives reflect the interests of the key stakeholders of companies involving shareholders, customers and employees. Kaplan and Norton (1996) proposed the cause-and-effect relationships among the four perspectives of BSC by measuring the strength of the linkages among measures in different. Measures such as ROI, shareholder value, profitability, revenue growth, and cost per unit are the lag indicators that show whether the organization's strategy is succeeding or failing (Kaplan, 2004). The balance scorecard of bank bjb can be seen on exhibit 18. Learning and growth perspective It stressed on innovation, creativity, competition, and capabilities, and target subjective properties. This perspective aims to identify professions (human capital), system (informational capital), and organizational state (organizational capital) in order to internal processes. The measurement will be seen from the turnover of employee along with  

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number of the champions in every division. Bank bjb strategies are: 1. Develop human capital It is important for bjb to have a proper talent map. So that it will be talent based competency 2. Information capital Build the IT infrastructure for developing knowledge management system and to documented any of learning process 3. Developing competitive working environment By having a fair competitive environment, each individual will provide their best capabilities that would help the company achieve its vision Internal process perspective It identifies decisive processes in the organization. In this perspective, company must make sure that company’s products and services meet the needs of customers. Bank bjb strategies are: 1. Channel partnership with highly recognized public institution. 2. Waroeng bjb outlets expansion 3. New product development is needed to adapt with the current trend 4. CRM and CSR will be actively encourage as the need of public education of banking products along with established awareness Costumer perspective Results in introduction of a valuable approach that guarantees loyalty of costumers. In this perspective we must keep constantly identifying parameters, which costumers consider as valuable, and provide them for costumers. The measurement will be seen from the increment of market share. Bank bjb strategies are: 1. Customer satisfaction (quality of services) index 2. Customization products based on customer insight and needs. However, provide the best solutions for customer is the main goal. 3. Build the confidence of customer to be loyal and trust bank bjb through its program and social mission i.e. womenpreneur Financial perspective It defines tangible outcomes of organization’s strategies and includes a series of traditional  

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financial factors. This perspective covers long-term goals of the organization, and company’s major goals are usually put into this perspective. Financial perspective is usually considered to be a secondary aspect and a function of other perspectives. Thus the growth of every division`s program as a measurements. It is indeed the outcome of activities of other three non-financial perspectives. In banking industry, financial performance is always becoming the main perspective. Bank bjb startegies are: 1. Increase the productivity of every business unit i.e. increasing loan and reducing NPA 2. Increase the ROA and EVA annually 3. Increasing fee base 7.2 EVA (Economic Value Added) Profitability measures include cash flow, earning per share, economic value added (EVA), ROA and ROE is being used to assess how well a firm is performing. It will describe the company`s performance. A firm's EVA is its after-tax profits adjusted by the cost of capital that is used to generate the profits. Economic Value Added of bank bjb in 2012 compare with 2011 is IDR 75,214 to IDR 281.247. It showed that the EVA growths are three times increment. The NOPAT growths are 21%, while asset growth, and the bond government decrease in year 2012. Means that it is value added for bank bjb. 7.3 KPI (Key Performance Indicator) Each division and business unit has their own key performance indicator. It needs to see how the performance reflect to company`s strategy objectives. Bank bjb has its own software to measure (Actuate Scorecard system). KPI of each branch, and for each employee existing system used LPK (Lembar Penilaian Kinerja). Below is the kpi percentage of every division at bank bjb (figure 3).

 

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Figure 2. KPI of Bank bjb

Source: Bank bjb Annual report 2012

 

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8. BUSINESS MODEL To conclude all the ideas from the analysis above, the Author tried to create bank bjb business model. The business model itself can be illustrated using business model canvas. It is a flexible template for conceiving, completing and assessing business models (Osterwalder and Pigneur, 2010). Below are tnine building blocks cover an organization’s “customers, offer, infrastructure and financial viability”. Figure 3. Business Model Canvas

The proposed business models are: 1. Value Proposition A women financial solution that delivers quick and easy process with high trust and high touch, because only bank bjb who understand local needs. It encourages women to be womenpreneur on SMEs. Having customization product based on women and SMEs needs and also low interest on their loan programs. 2. Key Partnership Having partnership with insurance company and local government for their payroll distribution. Banking industry is highly regulated by the government. It is very important for regulatory agencies to maintain control over the banks because they are the lifelines of an economy. The control is also needed to protect the depositors  

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against any fraud. One example of a regulatory requirement is the Reserve requirement. It sets the minimum reserves that each bank must hold. The operations of a bank are highly IT intensive. Therefore to fulfill their IT needs, should partner with technology vendors. The technology vendors provide IT solutions in areas of customer experience management, multi-channel integration, business process improvement, loans origination and processing etc. 3. Key Activities CRM is becoming very important besides their banking operation (branch, call center, IT, and sales and marketing) in order to maintain its customer along with acquire new customers such as customer gathering and public relation. 4. Key Resources Combining both of IT and human capital development are important intangible resources. From the tangible resources are coming form loan assets, bank bjb`s physical assets such as ATM machine and offices. 5. Customer Relationships CRM along with personalized service on banking daily operations are becoming crucial factors to engage with customers. Social media is a trend to have customer insight and close with them. 6. Customer Segments Besides SMEs and local government officers (PNS), women are becoming the next focus target. 7. Channel Being expanded to outside West Java, it is important for bank bjb to apply channel partnership with high recognize institution such as PT. POS, PLN. Besides build their own offices, this type of distribution also would help them to save cost effectiveness. Local cooperative is also being encouraged for sub rural distribution channels. Waroeng bjb as lending outlets are build on public area for the accessibility. The use of social media and internet access are also being encouraged as channels.

 

  22

8. Cost Structures Channel costs are the key component of the cost structure of a bank. The interest paid by the bank to the depositors is also one of the important cost structure components. 9. Revenue Streams The revenue is coming from lenders and IPO. The Author proposed bank bjb to also make money through Credit cards business.

REFERENCES Bank bjb Brand Guidelines (2010) Bank BJG Annual Report (2012) Henry, Anthony E (2011), Understanding Strategic Management, 2nd Edition, Oxford University Press Ireland, R.D, Hoskisson, R.E, and Hitt, M.A (2011), The Management of Strategy; Concept & Cases, 9th Edition, South-Western Cengage Learning Porter, Michael E (1980), Competitive Strategy, Techniques for Analyzing Industries and Competitors, Free Press/Simon & Chuster Porter, Michael E (1985), Competitive Advantage, Creating and Sustaining Superior Performance, Free Press/Simon & Chuster Kaplan, Robert S., Norton, David P. 2004. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Boston: Harvard Business School Publishing Kaplan, Robert S., Norton, David P. 1996. The Balanced Scorecard. Boston: Harvard Business School Press.

 

  23

   

17

1 7  

APPENDIX Exhibit 1. Sufficient CAR (%)

Source: Bank Indonesia, April 2012

Exhibit 2. The Rising of Middle Class (in USD) Class

Cut off

2003 (%)

2010 (%)

Low

<1.25

21.9

14

1.25-2

40.3

29.3

2-4

32.1

38.5

4-6

3,9

11.7

6-10

1,3

5

10-20

0.3

1.3

>20

0.1

0.2

Middle

High

Note: Per capita expenditure per day is adjusted to the 2005 purchasing power parity . Source: World Bank, March 2011, based on Susenas.

   

18

1

Exhibit 3. Primary & ing Activities Primary

EXPLANATION

Activities (External factors) Inbound

•

Clearing partners

logistic

•

Alliance partners i.e. AIA, bancaassurance

•

Funding/capital structure i.e. regional deposit source of cash

•

Branding & IMC (integrated marketing communications)

•

Public relations i.e. local radio, exhibition

•

New acquisition

Sales & Marketing

(Delivery channels) Outbound

•

Branch network i.e. 56 branch, 228 sub branches

Logistic

•

ATM network i.e. 742

•

Call centre

•

Payment processing

•

Load istration

•

Treasury operation

Operations

(Revenue streams) Services

• Banking products • Insurance products • Investments products

   

19

1

Exhibit 4. ing Activities ing

EXPLANATION

Activities Firm

•

Risk Management

infrastructures

•

Strategic planning

•

Internal training and send employee to workshop based on TNA (training need analysis)

Human Resources

•

Compensation system based on performance

•

Management trainee program

•

Recruitment is done by rigorous selection refer to education level and skill that have core competence in communication skills from top

Procurement

Technology Development

universities •

Vendor and outsource selection

•

No internet banking

•

No mobile banking

•

No credit card facilities

   

20

2

Exhibit 5. Capabilities Resources Financial

Organizational

Physical

Technological

Human

Innovation

•

Explanation Regional development source of cash

•

IPO since 2010

•

Strong government related

•

Corporate culture i.e. Go spirit (service oriented)

•

Range of product portfolio

•

Its total asset in 2012 is IDR 70.84T/+30.11%

•

Branch network i.e. 56 branch, 228 sub branches

•

ATM network i.e. 742 in Indonesia

•

Lack of IT development i.e. No mobile banking, no internet banking

•

No credit cards facilities

•

Management trainee program

•

Young age with communication skills from top universities

•

Competence based

•

No innovation in of product or services

•

Strong image as regional development bank of West Java and Banten

Reputational •

Low awareness outside West Java & Banten

   

21

2

Exhibit 6. Core Competencies

Category

Tangible

Intangible

Rare

Imitabl e

Non Substi tutabl e

TYPE

YES

NO

NO

NO

Competitive parity

Organizational: Product, culture

YES

YES

YES

YES

SCA

Physical: Channel (branches, ATM)

YES

NO

YES

NO

Technological Internet facilities

YES

NO

YES

NO

TCA

Human: Employee skills

YES

NO

NO

NO

TCA

Reputational: Brand

YES

YES

YES

YES

SCA

Valu able

Financial: Capital

Resources

TCA

Exhibit 7. Future Business Level Startegy ADVANTAGE MARKET SCOPE LOW COST

BROAD

Cost Leadership

PRODUCT/SERVIC ES UNIQUENESS Differentiation Focus Differentiation

NARROW

Cost Focus

   

22

2

Exhibit 8. GE Matrix of SMEs

High

Medium

Low

Product/ Price (interest

Low

Medium

High I

Source: Various resources

Exhibit 9. SMEs Loans Contribution until April 2012 (in IDR Trillion)

Source: Bank bjb

   

23

2

Exhibit 10. Market Shares of SME loans

Source: Bank bjb (2012)

Exhibit 11. Ansoff Matrix

Current Market

New Product

MARKET PENETRATION

PRODUCT DEVELOPMENT

• Increase customer retention

•

rate Existing Market

Customized product for both of SME and women

• Grow share of customer in micro • Gain new customer outside West Java MARKET DEVELOPMENT •

New Market

Bank bjb has to find new target i.e. women

•

DIVERSIFICATION •

Bank bjb has no business outside its core

Channel partnership with highly recognized institution

 

for distribution channel

 

24

2

Exhibit 12. BCG Matrix STARS High Growth

• •

Consumer loan i.e. Kredit Guna Bakti Deposits i.e. Deposito suka-suka

QUESTION MARKS •

CASH COWS Low Growth

• •

Debit card (ATM) Savings product i.e. Tanda Mata berjangka High Market

Insurance

DOGS •

Cheque

Low Market

Exhibit 13. BJB Product Portfolio

   

25

2

Exhibit 14. TOWS Matrix STRENGHTS • •

•

OPPORTUNITIES O1: Emerging market on micro outside West Java O2: Women on micro (niche)

•

•

O1: Many banks are entering SMEs including other financial institution O2: IT as competitive advantage from competitor

•

• W1: Lack of IT development • W2: Human capital readiness • W3: Low brand image

S-O •

•

THREAT •

S1: IPO S2: Strong financial performance S3: Strong customer base in West Java and Banten

WEAKNESSES

S1-S2-O1 Expansion outside West Java and Banten S3-02 Redefining its Segmentation, targeting, positioning

W-O • W1-W2 CRM and CSR • W2-W2 Employee branding • W3-O1-O2 Invest on Ads, CRM, CSR

S-T S1-S2-O1 Acquire local rural banks • S3-O1 Channel partnership Create community among SMEs • S2-O2: Invest on IT development •

W-T W1-O2 Invest on IT system • W2-O1 Human capital development • W3-W1 CRM and heavily on Ads •

   

26

2

Exhibit 15. Bank bjb Shares Price

Source: Bank bjb Annual report 2012

Exhibit 17. Road Map Bank bjb

Source: Bank bjb Guideline

   

27

2

Exhibit 18. Strategy Map Balance Scorecard

   

28

2

Exhibit 20. Financial Highlights

   

29

2

Source: Bank bjb Annual Report 2012

Exhibit 21. Ratio

Source: Bank bjb Annual Report 2012

Exhibit 22. Growth and Profit

Source: Bank bjb Annual Report 2012

   

30

3

Exhibit 23. Existing Business Model

Exhibit 24. Business Model Recommendation

   

31

3