Student ID: CGSSO00068441

Student Name: Yusuf Nunow Abdulle

Course Code: BMST5103

Course Name: Strategic Management

Program: MBA-OUM

Semester: four

Assignment: strategic analysis

Facilitator: Dr. Ahmed Hassan

 ABSTRACT

The objective of this assignment is to analyze Amal Bank’s internal and external environment in

order to generate effective and efficient strategies. In this assignment, analysis on vision and

mission statement will be made, then Internal Factor Evaluation (IFE), External Factor Evaluation

(EFE), Competitive Profile Matrix consists of three competitors, SWOT matrix and suggest two

(2) strategies for each quadrant, Strategic Position Action Evaluation Matrix (SPACE), suggest on

two strategies and implementing and monitoring on these strategies.

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Table of Contents

ABSTRACT ............................................................................................................................ i

Task 1: .................................................................................................................................... 1

Part 1: ..................................................................................................................................... 1

1.0 Background: Amal Bank .............................................................................................. 1

1.1 Analysis of Amal Bank’s Vision .................................................................................. 1

1.2 Analysis of Amal Bank’s Mission ............................................................................... 2

1.3 Suggestion: should the vision and mission statamensts of amal bank need change or
maintain ................................................................................................................... 3

Part 2: External Analysis ....................................................................................................... 3

2.1 Analyze the industry. 5 Opportunities and 5 Threats ................................................... 4

2.2 External Factor Evaluation (EFE) Matrix for Amal Bank ........................................... 4

Part 3: Internal Analysis......................................................................................................... 6

3.1 Evaluating the current financial performance of Amal Bank ...................................... 6

3.3 Internal Factor Evaluation (IFE) Matrix for Amal Bank ........................................... 11

3.4 Competitive Profile Matrix consists of three competitors ......................................... 13

TASK 2 ................................................................................................................................ 15

Part 4: Matching ................................................................................................................... 15

4.1 SWOT matrix for Amal Bank .................................................................................... 15

4.2 Strategic Position and Action Evaluation Matrix (SPACE) for Amal Bank.............. 17

Part 5: Implementing............................................................................................................ 25

Part 6: Monitoring ................................................................................................................ 27

Reference ............................................................................................................................. 32

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List of Tables

Table 2.2: External Factor Evaluation for Amal Bank .......................................................... 5

Table 3.1: Amal Banks’s financial figures for the last three years ........................................ 7

Table 3.2 Amal Bank financial ratio analysis in comparison to Industry figures .................. 8

Table 3.3: Internal Factor Evaluation for Amal Bank ......................................................... 12

Table 3.4: competitive profile matrix – Amal bank, IBS and Premier bank ....................... 13

Table 4.1: SWOT matrix for Amal Bank with 2 strategies for each quadrant .................... 15

Table 4.2: SPACE matrix for Amal Bank ........................................................................... 18

Table 5.1: Implementation for all strategies in Table 4.1 and 4.2 of Amal Bank................ 25

Table 6.1: Rumlet’s Principle, monitoring tools for all strategies of Amal Bank ............... 29

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Task 1:

Part 1:

1.0 Background: Amal Bank

According to Amal Bank (2019), Amal Bank is a modern Islamic bank that offers a wide range of

financial products and services in Retail, Corporate, Institutional, Diaspora and Microfinance

Banking. Based in Garowe and Mogadishu, Somalia. Amal Bank aims to be a leader in the

financial services sector in the Horn of Africa through innovative, customized and shariah

compliant financial products and services. The Bank is fully owned by Amal Group, a diversified

global company that operates in various sectors: Microfinance, Money Transfer, Forex-exchange,

Real Estate, Trade and Energy. Amal Bank is a fast growing private sector bank in Somalia. This

is a new generation private commercial bank. It has created a new horizon of its own in the banking

arena of Somalia in terms of service to the customers. The bank has expanded and consolidated its

customer base in both of its core businesses and retail banking. The Bank undertakes all types of

banking transactions to support the development of trade and commerce in the country. Amal

Ban’s services are also available for the entrepreneurs to set up new ventures and other modes of

investments (Amal Bank, 2019).

Vision:

“To be the leading Islamic Bank in the horn of Africa”

Mission:

“The Bank of choice for retail and corporate customers by offering innovative, customized and

Shariah compliant financial products and services reliably, conveniently and profitably”.

1.1 Analysis of Amal Bank’s Vision

The vision of Amal Bank which is to be the leading Islamic Bank in the horn of Africa shows a

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picture of the future that is based on ideas outrunning present time and that motivates the

employees and managers of the Bank. The vision statement emphasizes a unique characteristic of

the Bank that differentiates it from others, and takes all future activities planned for the internal

and external environment of the organization into consideration. So far, the vision statement of

Amal Bank has almost all the characteristics of good vision statement that include clarity, value

based, directional, brevity and inspiring. Vision is an essential ingredient in the success of any

company. It provides the driving force that can get a company through the growing pains it will

inevitably encounter. It is a basic "shape" of the company future; it expresses optimism, and hope

about possibilities regarding the desired future. Vision statements are also formally written and

referenced in company documents rather than, for example, general principles informally

articulated by senior management.

1.2 Analysis of Amal Bank’s Mission

Most practitioners and academicians of strategic management assert that an effective mission

statement should include nine components: 1) customers, 2) products or services, 3) markets, 4)

technology, 5) concern for survival, growth, and profitability, 6) philosophy, 7) self- concept, 8)

concern for public image, and 9) concern for employees.

Amal Bank’s mission is the Bank of choice for retail and corporate customers by offering

innovative, customized and Shariah compliant financial products and services reliably,

conveniently and profitably. The mission statement of Amal seems to have most of the components

of a good mission statement. It has the following components: products or services, markets,

concern for, customers, concern for survival, growth and profitability, employees and technology.

The statements serve a dual purpose by helping employees remain focused on the tasks at hand, as

well as encouraging them to find innovative ways of moving toward an increasingly productive

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achievement of company goals.

1.3 Suggestion: should the vision and mission statamensts of amal bank need change or

maintain

Amal bank’s current vision as quoted by CEO (2020) states that Amal Bank is committed to

bringing the personal account experience to students, educators, creative professionals and

consumers and business in the local’’. A closer look at the vision statement indicates that the

statement is poor and needs change since it does clearly indicate how the organization will achieve

its mission. In order for the vision statement to be seen as adequate, there exists a need for the

statement to indicate objectives of the company in terms of been the industry leader which will be

achieved by proving quality and reasonably priced service to the potential customers.

On the other hand, Amal Bank’s current mission statement as stated by CEO (2020) states that

‘Amal Bank is loyal to protecting the environment, well-being, health and safety of our employees,

customers and local society where we operate. We can offer technologically innovative products

and services while conserving and enhancing resources for future generations

Amal Bank attempts for continuous improvement, health and safety management program and in

the environmental quality of our services. Unlike the banks’ vision statement, the mission

statement can be argued to be quite detailed and well-articulated since it covers all aspects required

in an effective mission statement. From that perspective, Amal Bank’s current mission statement

does not need any change or maintain.

Part 2: External Analysis

Here is the Amal Bank’s external Analysis, the opportunities and threats are the external factors.

This analysis identifies these four main elements to help upper management of Amal bank to better

understanding its operational weaknesses to combat threats to potential growth. Below there are

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five opportunities and threats of Amal Bank.

2.1 Analyze the industry. 5 Opportunities and 5 Threats

Opportunities

1. Introduction of Innovative Products

2. Central Bank increases paid up capital which is opportunity for larger Banks

3. Government focusing and enhancing the overall exports

4. Implementation of customer relationship management system

5. Investment Opportunities increases in Banking sector

Threats

1. Intense Competition in banking sector

2. Uncertain economic conditions

3. Unstable Security and Political situation in Somalia

4. Weak rule of law

5. High Inflation

2.2 External Factor Evaluation (EFE) Matrix for Amal Bank

According to David (2016) the (IFE-EFE) matrix allows strategists to summarize and evaluate

economic, social, cultural, demographic, environmental, political, governmental, legal,

technological and competitive information. External Factor Evaluation Matrices could be

developed in five steps: Make a list of key external factors as mentioned in the external audit

process. Include 10 to 20 factors, including opportunities and threats, affecting the company and

its industry. List first the chances, then the threat. Make it as detailed as possible using percentages,

ratios and comparisons where possible.

Rating in EFE matrix represent the response of firm toward the opportunities and threats. Highest

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the rating better the response of the firm to exploit opportunities and defend the threats.

Rating range from 1.0 to 4.0 and can be applied to any factor whether it comes under opportunities

or threats. There are some important point related to rating in EFE matrix.

Rating is applied to each factor. The response is poor represented by 1; the response is average is

represented by 2; the response is above average represented by 3; the response is superior

represented by 4.

Table 2.2: External Factor Evaluation for Amal Bank

No Key External Factors Weight Rate weighted score

Opportunities
1 Introduction of Innovative Products 0.10 4 0.40
2 Central Bank increases paid up capital which is 0.07 4 0.28
opportunity for larger Banks
3 Government focusing and enhancing the 0.08 4 0.32
overall exports
4 Implementation of customer relationship 0.10 4 0.40
management system
5 Investment Opportunities increases in Banking 0.07 3 0.21
sector
6 Increasing scope of small and medium 0.05 3 0.15
enterprises
7 Availability of professional bankers 0.07 3 0.21
8 Extension of International Network of the 0.03 3 0.09
Branches
Threats
1 Intense Competition in banking sector 0.10 1 0.10
2 Uncertain economic conditions 0.05 1 0.05
3 Unstable Security and Political situation in 0.05 2 0.10
Somalia

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 4 Weak rule of law 0.05 2 0.10
5 High Inflation 0.03 3 0.09
6 Depreciation of Somali Shilling and 0.10 2 0.20
Fluctuation of
Dollars
7 Increasing regulation in the Banking Industry 0.05 2 0.10
TOTAL 1.00 2.8
Source: Data Processed
In this position, Amal bank could perform intensive strategy as in market penetration, market

development and product development or integrative strategy as in backward integration, forward

integration and horizontal integration. Market penetration means seeking greater market share for

current products or services in existing markets through better marketing efforts. Market

development includes the introduction of current products or services to new geographic areas.

Product development seeks increased sales through improvements to current products or services

or the development of new products or services. Forward integration means to gain greater

ownership or control over distributors or representatives. Backward integration seeks greater

ownership or suppliers’ control. Horizontal integration seeks greater ownership or control over

competitors.

Part 3: Internal Analysis

3.1 Evaluating the current financial performance of Amal Bank

There are two broad approaches used to measure bank performance, the accounting approach,

which makes use of financial ratios and econometric techniques. Traditionally accounting methods

primarily based on the use of financial ratios have been employed for assessing bank performance.

However, the limitations of this method coupled with advances in management sciences have led

to the development of alternate methods such as non-parametric and parametric Stochastic Frontier

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Approach. . It has asserted that the whole idea of measuring bank performance is to separate banks

that are performing well from those which are doing poorly. Further indicated that, “evaluating the

performance of financial institution can inform government policy by assessing the effects of

deregulation, mergers and market structure on efficiency” (Berger & Humphrey, 1997). Bank

regulators screen banks by evaluating banks’ liquidity, solvency and overall performance to enable

them to intervene when there is need and to gauge the potential for problems (Casu et al, 2006).

On a micro‐ level, bank performance measurement can also help improve managerial performance

by identifying best and worst practices associated with high and low measured efficiency. Bank

performance is calculated using ratios analysis and assessed with the aim of: (i) looking at the past

and current trends; and (ii) determining future estimates of bank performance. Financial ratio

analysis investigates different area of bank performance, such as profitability, assets quality and

solvency. The key ratios for measuring the performance of the banks are discussed below. The

tools that can be used to calculate performance are derived from the information revealed by

periodic financial reports produced by accounting system, the balance sheet and the income

statement, (Casu et al, 2006). The table below shows Amal Banks’s financial figures for the last

three years as obtained from Amal Bank (2012).

Table 3.1: Amal Banks’s financial figures for the last three years

Year 2020 2019 2018

Revenues $2,249,421 $ 1,225,321 $ 920,905

Net Income $ 652,922 $ 543,014 $ 208,253

Retained Earnings in millions $ 62,841 $ 37,169 $ 23,353

Profit Margin 32% 27.6% 18%

Amal Bank Financial figures

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The above table shows that amal bank financial figure was different for the last three years, from

2018 up to 2019 the revenue was jumped up from $ 920,905 to $ 1,225,321. Also in 2019 up to

2020 jumped up from $ 1,225,321 to $2,249,421, however the service revenue of the bank was

good. In net income from2018 to 2019, it was jumped up from 208,253 to $ $ 543,014. Also in

2019 to 2020 jumped up from $ 543,014 to $ 652,922, however the net income of the bank was

good.

Table 3.2 Amal Bank financial ratio analysis in comparison to Industry figures

Return on Return on Current Price/Earning

Total Assets Equity (ROE) Ratio s Ratio (PE)
(ROA)
Amal Bank 27.14 41.79 1.61 22.4

Industry Figures 22.3 29.5 1.58 16.07

Source: Amal bank

3.1.1 Overall financial evaluation of Amal bank

a. Profitability Performance

Profitability ratios typically used in banking are ROA, ROE, NPM, and ROD, all are studied

below:

Return on assets (ROA): often described as the primary ratio, relates the income earned by the

bank to the assets it used in the business operation. It is commonly defined as net income (or pre-

tax profit)/total assets. It provides information about management's performance in using the assets

of the business to generate income. Profit before tax is generally ideal because calculations using

net income after tax figures may show trends due simply to changes in the rates of taxation, (Bodie

et al 2009).

For Amal Bank, the return on assets has fluctuated during the five years of the bank's operation.

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The lowest return on assets was recorded in 2009 (-0.12%) while the highest was recorded in 2020

(27.14%). The significant increase in the ratio in 2019 is due to considerable increase in total

revenues by two folds.

Return on deposits (ROD): The majority of return on deposits (ROD) ratios of the Amal Bank

are positive. It is clearly shown that overall (ROD) ratios were fluctuated through the period for

the bank. To most financial analysts, (ROD) is one of the best measures of bank profitability

performance. It is calculated through dividing net profits by total deposits. This ratio reflects the

bank management ability to utilize the customers’ deposits in order to generate profits. The highest

(ROD) for EBIF is 14.34% during the year 2012 and the lowest 5.13% in the year 2010.

Return of equity (ROE): This ratio measures a corporation's profitability by revealing how much

profit a company generates with the money shareholders have invested. The higher such ratio, the

more efficient is the financial performance of profitability of a bank. Such profitability ratios

measure the financial performance and the managerial efficiency of bank. However, profitability

ratios are only part of bank performance story. The bank recorded a return on equity of 5.39% in

2018 and 5.47% in 2019. This means EBIF equity holders earned more during these periods.

Liquidity Performance Liquidity ratios in a bank demonstrate the ability to pay its current

obligations. Generally, but not always, the higher the value of the ratio, the larger the margin of

safety that a bank possesses to cover short-term obligations. Liquidity ratios are, however, listed

below as following: Total Loans to Total Deposits Ratio (TLN/TADP): This ratio is a commonly

used measure for assessing liquidity and credit risk, which measured by dividing the banks total

loans or total financing by its total deposits. This ratio indicates, however, the percentage of a

bank's loans funded through deposits. On the other hand, a high loan to deposit ratio may indicate

several things, but from liquidity's viewpoint, a high value of such ratio indicates a potential source

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of illiquidity and insolvency due to deposits are quite stable source of funding for a bank and loans

are riskier asset than other financial assets because of lower market liquidity. Therefore, a higher

loan deposit ratio means more financial stress by making excessive loans. So, the lower loan

deposit ratio is always favourable to the higher one. This ratio was too high in the year 2016

(330.21%) and subsequently declined to reach 82.23% in the year 2019.

Total Deposits to Total Assets Ratio (TDP/TA): The ratio of total deposits to total assets is

another liquidity measure, which considered a traditional liquidity. This ratio is measured by

dividing the banks total loans or total financing by its total assets. However, such ratio indicates

the broad "reliable" base of funding for the bank, which establishes how much of the bank's assets

are funded by deposits, rather than borrowed funds or equity.

b. Assets Quality (Credit Performance)

Lending is still one of the most important activities of banks. While it is expected that all banks

will have to bear some positive level of bad loans and loan losses; one of the key objective of bank

management is to minimize such losses. For Amal Bank, the total revenues/total assets ratio

reached the peak in the year 2019 (9.27%). Meanwhile, provision to total loans ratio reads 0.23%

in 2016 and jumped to 9.52% in 2018. The ratio of provision to total assets is 0.15 % to reach

1.93% in 2018. Overall, the current financial performance of Amal Bank is performing huge

progress since 2016 and becoming hugely profitable.

3.2 Identifying strengths and weakness

Below is the Amal Bank’s Internal Analysis, the strengths and weaknesses are the internal factors.

This analysis identifies main elements to help upper management of Amal bank to better leverage

its strengths to take advantage of future business opportunities to potential growth. Below there

are five strengths and weaknesses of Amal Bank.

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Strengths

1. Strong customer support service

2. Strong Management team

3. Advanced technology and software

4. High brand name and reputation

5. Increased revenue from Investments

Weakness

1. Operating losses

2. Accumulated deficit

3. Murabaha Payments on debt issued

4. Small number of suppliers

5. Breach of customer confidential information

3.3 Internal Factor Evaluation (IFE) Matrix for Amal Bank

The situation and business conditions have become increasingly competitively. Various strategies

and administration ways have been used to gain the maximum profits. To determine a good and

mature strategy, it is necessary to develop an appropriate analytical strategy support by all parties

of the bank then executed strategy and evaluation of strategies to win business competition. In

order Amal bank to compete, it must have strategies that were done by knowing the positive and

negative side of the company using the matrix analysis tool Internal Factor Evaluation (IFE) and

External Factor Evaluation (EFE), to analyze internal factors and external factors accordingly with

company conditions and to find out the most appropriate strategy applied to the company

(Mumpuni, 2013)

In IFE rating is the way out to differentiate internal strengths and weakness. Internal weaknesses

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are further divided in two categories namely minor weakness and major weakness same goes of

the strengths. Internal factors are the outcome of detailed internal audit of a firm obviously, every

company have some weak and strong points, therefor the internal factors of Amal bank are divided

into two categories namely strengths and weakness. Strengths are the strong areas or attribute of

the company, which are used to overcome weakness and capitalize to take advantage of the

external opportunities available in the industry. Weaknesses are the risky areas which need to be

addressed on priority to minimize its impact.

Rating is applied to each factor: Major weakness is represented by 1.0; Minor weakness is

represented by 2.0; Minor strength represented by 3.0; Major Strength represented by 4.0.

Table 3.3: Internal Factor Evaluation for Amal Bank

No Key External Factors Weight Rate weighted

score
Strengths
1 Strong customer support service 0.10 4 0.4
2 Strong Management team 0.07 4 0.28
3 Advanced technology and software 0.08 4 0.32
4 High brand name and reputation 0.10 4 0.4
5 Corporate Culture 0.07 3 0.21
6 Branches/distribution centers 0.05 3 0.15
7 Strategic Alliances 0.07 3 0.21
8 Increased revenue from Investments 0.03 3 0.09
9 High inventory turnover 0.03 3 0.09
Weaknesses
1 Operating losses 0.05 1 0.1
2 Accumulated deficit 0.10 1 0.05
3 Murabaha Payments on debt issued 0.05 2 0.1
4 . Small number of suppliers 0.05 2 0.1

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 5 High Inventory risk 0.05 2 0.1
6 Breach of customer confidential information 0.10 2 0.2
TOTAL 1.00 2.8

Source (Amal bank 2020)

The average weighted score for IFE matrix is 2.5 any company total weighted score fall below

consider as weak. The company total weighted score higher than 2.5 is consider as strong in

position. Therefore, Amal bank’s total weighted average is 2.80 and this show that the company

is in stronger position. This data was shared with me by the bank (Mohamud, 2019).

3.4 Competitive Profile Matrix consists of three competitors

In order to better understand the external environment and the competition in a particular industry,

firms often use CPM. The matrix identifies a firm’s key competitors and compares them using

industry’s critical success factors. The analysis also reveals company’s relative strengths and

weaknesses against its competitors, so a company would know, which areas it should improve and,

which areas to protect. The total score for a given company shows how competitive that company

is in the marketplace relative to other companies. CPM of Amal Bank against IBS Bank, Salaam

bank and Dahabshii of a matrix is demonstrated below.

Table 3.4: competitive profile matrix – Amal bank, IBS and Premier bank

Amal Bank IBS Bank Premier Bank

Critical Success Factors Weight Rate Score Rate Score Rate score
Advertising 0.06 1 0.06 2 0.12 3 0.18
Financial Position 0.10 3 0.30 2 0.20 4 0.40
Customer Loyalty 0.09 2 0.18 4 0.36 3 0.27
Management 0.07 4 0.28 3 0.21 2 0.14
Price Competitiveness 0.08 2 0.16 3 0.24 4 0.32
Service Quality 0.10 4 0.40 2 0.20 3 0.30
Market Share 0.11 4 0.44 3 0.33 2 0.22

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 Employee Morale 0.12 2 0.24 4 0.48 3 0.36
Organizational Structure 0.09 4 0.36 2 0.18 3 0.27
E-banking 0.08 3 0.24 1 0.08 4 0.32
Global Extension 0.10 1 0.10 3 0.30 4 0.40
TOTAL 1 2.76 2.7 3.18
Source: Data Processed

Note: (1) The ratings values are as follows 1 = major weakness, 2 = minor weakness, 3 = minor

strength, 4 = major strength. (2) As indicated by the total weighted score of 2.50, Competitor 2 is

weakest. (3) Eleven critical success factors are included.

In this table, the two most important factors to being successful in the industry are advertising and

global expansion, as indicated by the weights. Premier bank is strongest on price competitiveness,

as indicated by a rating of 4, whereas Amal Bank is strongest on management. Overall, Premier

bank is strongest, as indicated by the total weighted score of 3.18.

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TASK 2

Part 4: Matching

4.1 SWOT matrix for Amal Bank

SWOT Matrix of Amal Bank analyses the bank with its strengths, weaknesses, opportunities &

threats. Here is the Amal Bank’s below SWOT Analysis, the strengths and weaknesses are the

internal factors whereas opportunities and threats are the external factors.

This analysis identifies these four main elements to help upper management of Amal bank to better

leverage its strengths to take advantage of future business opportunities while better understanding

its operational weaknesses to combat threats to potential growth. The below SWOT analysis can

also be used to address many other scenarios, such as new business initiatives, marketing budgets

or even advertising campaigns.

Table 4.1: SWOT matrix for Amal Bank with 2 strategies for each quadrant

Strength Weakness
1. Strong community trust 1. Inconsistency in the definition
of Halal
2. Reputable Halal services 2. The bank is also exposed to
macroeconomic conditions
which result in uncertainty in
investor sentiments.
3. Affordable investment rates 3. Lack of collaborative efforts
among industry players

4. Better management information 4. Documentation is often tailor-

service made for the transaction, so
high transaction/issue costs;
5. Serves 20,000+ customers 5. Facing difficult in complying
every year the bank lays a lot with international financial
of importance on ethical regulations.
banking and values such as
faith, value, convenience, trust.

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 Opportunity SO strategies WO strategies
1. Somalia is a Muslim nation 1. Promote the IT usage among 1. Promote collaborative efforts
2. Enhancement of the online Halal financial services among the suppliers, customers
banking facilities will bring 2. To promote the services of the and the government
about more convenience to the bank by offering lesser rates of2. Develop Sharia standard that is
clients investment and attract large recognized by International
3. Security is improving number of customers through Financial regulation.
4. Small and medium business its sharia compliant services 1. It takes cost for doing it
growth and Market with Videos. 2. It difficult to develop it
5. Urbanization and
globalization opportunities
Advantages Advantages
1. It increases financial revenue 1. It increase bank performance
2. It attracts large number of 3. It relates to international
customers Islamic banks
Disadvantages Disadvantages
1. It limited to Muslim 1. It takes time to do it
2. It is difficult to work with 3. It limited to muslim people
conventional banks
Threats ST Strategies WT strategies
1. Scare knowledge, talent and 1. 1. Create a pool of talent to 2. 1. Provide different bundles by
business know how attract skilled workforce and targeting specific markets
1. Sharia compliance risk, which improve customer relationship
is risk arising from products or management through opening
services not adhering to the retail branches.
Islamic rules.
2. Political and security
4. 2. Stay alert on security issues 2. Construct a standard
challenges
3. Threat of uncontrolled and less and the uncontrolled Sharia/Halal
regulated competitors. competition through practice/certification with the
competitive intelligence. collaboration of other banks
and relevant government
ministries.

Advantages Advantages
1. It participates to reach bank’s 1. It increases customer
goal satisfaction

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 2. It may possible to get 2. It promotes reputation of the
competitive advantage bank among muslims

Disadvantages Disadvantages
1. It takes cost for pooling 1. It limited to Muslim people
talented people
2. It is difficult to implement it. 1. It takes time to do it

Source: Primary Data

This SWOT analysis of Amal bank reveals the internal factors and external factors that affect the

bank’s operational effectiveness and strategic success in addressing competition involving various

banking and financial services businesses. The competitive power of Premier bank, Dahabshiil,

and IBS Chase are significant in the external business environment. In the industry environment

reflected in this SWOT analysis, Amal bank strives to become a global industry leader, with

emphasis on effectiveness in providing value to customer’s especially lower Murabaha rate. To

provide valuable financial services, the company maximizes its strengths and minimizes its

weaknesses (internal strategic factors) through innovative strategic solutions within its business

organization. However, Amal bank must also develop solutions to the external strategic factors

(opportunities and threats) included in this SWOT analysis.

4.2 Strategic Position and Action Evaluation Matrix (SPACE) for Amal Bank

SPACE Analysis is a systematic appraisal of four key issues that balance the external and internal

factors that should determine the general theme of the strategy: External, Industry Attractiveness,

Environmental Stability, Internal, Competitive Advantage, and Financial Strength. Strategic

Position & action evaluation (SPACE) Matrix is a management tool used to help analyze a

company. It can be used to determine what sort of energy the company should undertake. The

SPACE matrix is broken down into four quadrants as being aggressive, conservative, defensive,

and competitive.

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Table 4.2: SPACE matrix for Amal Bank

Internal Strategic Position External Strategic Position

Y-axis Financial Strength (FS) Environmental Stability
Total y-axis
(Score: +6 best, +1 worst) (Score: -1 best, -6 worst)
Score:
+5.00 -2.00 +6: Operative earning per share increased -2: Price or Murabaha range of competing
products/services
=3.00 +4: Liquidity slightly decreased
-1: Investment rate
+5: Revenues Increased
-2: Technology changes
+5 Return on equity Increased
-3: Competitive Pressure
+5: Efficiency ratio stable
-2: Demand Variability
Average: +5.00
Average: -2.00
Competitive Advantage (CA) Industry Strength (IS)
X-axis (Score: -1 best, -6 worst) (Score: +6 best, +1 worst)
-2: Market share +6: Growth Potential
-2: Service Quality +5: Profit Potential
-1: Customer loyalty and reputation +5: Financial Stability
-1: Management Experience +4: Resource Utilization
Average: -1.5 +4: Technologies know how Average:
4.80

Source: Data processed

Additionally, the SPACE Matrix analysis function upon two internal strategic dimensions which

are financial strength (FS) and competitive strength (CA). Besides, the SPACE Matrix

methodology also studies two business’ external strategic dimensions such as environmental

stability (ES) and industry strength (IS). The CA (values from -1 to -6) and IS (values from +1 to

+6) are representing by X-axis of the below table whereas the FS (values from +1 to +6) and ES

(values from -1 to -6) are representing by Y-axis. After drawing these SPACE graph, the overall

strategic positioning can be determined.

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The arrow indicating the strategic thrust can be drawn from the origin by calculating the net

result on each axis and plotting this net position:

The Aggressive posture in the SPACE Analysis Matrix occurs when all the dimensions are

positive. The implicit strategy is to aggressively grow the business raising the stakes for all

competitors. The main danger is complacency. For more details see Aggressive Strategy In

SPACE.

The Competitive posture arises when a firm has strong advantages in an attractive industry but its

financial strength is insufficient to compensate for environmental instability. The immediate

strategy is to improve its financial strength (raising capital, improving profitability, merging with

a cash rich parent) whilst maintaining its competitive position. For more details see Competitive

Strategy In SPACE.

The Conservative posture arises when the firm is financially strong but is unlikely to make

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significant returns from the business. The strategy is to look for diversification opportunities in

more attractive competitive situations. For more details see Conservative Strategy In SPACE.

The Defensive posture in the SPACE matrix occurs when all the dimensions are scored poorly.

Firms in this position are very weak and heading for failure unless the external environment

becomes more favorable. The firm will need to retreat from all but its strongest segments so that

it can concentrate its limited resources on a turnaround.

According to the arrow, the Competitive Quadrant (lower right) of Amal Bank’s SPACE Matrix,

indicating competitive strategies. Competitive strategies include backward, forward, and

horizontal integration; market penetration; market development; and product development.

Competitive advantages are achieved by companies by differentiating products and services from

those of their competitors and through low costs. Firms can target their products by a broad target,

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thereby covering most of the marketplace, or they can focus on a narrow target in the market.

Porter argues that banks develop strategies to enable them seize strategic initiatives and maintain

a competitive edge in the market. Well thought out and planned strategies provide opportunities

for the bank to respond to various challenges within its operating environment. The competitive

aim is to do a significantly better job to its customers. The success of every organization is

determined by its responsiveness to the customer needs.

4.2.1 Suggestions on two strategies and one long term objective

The two strategies that I will recommend based on the alternative strategies of SWOT and SPACE

matrix, are related diversification strategy and product development.

1. Related Diversification

The business of banking is basically a business of risk management. Strategies employed by banks

may have implications for profitability, efficiency, stability and productivity (Alhassan & Asare,

2019). Amal bank aim to meet the demands of customers within the current business ecosystem

of demographics, geopolitical impact, globalization, digital technology in the midst of competition,

they tend to earn increasing revenue from non-interest income. In effect, nontraditional revenue

sources are becoming more profitable. An example of traditional source of revenue for banks is

Murabaha from loans and advances as well as gains from investments known as fee income. Non-

traditional sources include fees and commissions, automatic teller machine (ATM) service

charges; and banc assurance commissions. These can be classed into two groups, namely, fees-

for-service incomes like insurance and Ijarah and stakeholder income that involves banks investing

in assets like revenue from associates of banks and subsidiaries (DeYoung and Torna, 2013). It is

for this reason that Amal Bank wants to increase its loan portfolio profitability needs to practice

the art of asset allocation. Here are five reasons why related diversification is important for Amal

bank portfolios:

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Diversified bank portfolios can help avoid excessive risk concentration: A widely accepted

theory among financial experts is that lending risks must be managed at both the borrower and

portfolio levels. Since different types of loans react differently to certain market conditions, the

performance of some loan products will be balanced by other loans that perform better during that

same period of time. This basically means that well diversified bank portfolios can remain strong

even when certain loan programs start to perform badly, keeping the probability of failure at a

tolerably low level.

Diversified portfolios respond better to changing market conditions: Portfolio diversification

means more than just having different loan products. To achieve superior diversification, a bank

should opt for loan products that respond positively to various economic events. For example,

diversified bank portfolios that include asset classes with various risk and return characteristics,

such as small business loans, personal loans, home equity loans, home equity lines of credit, auto

loans, Shariah compliant mortgages and manufactured home loans, are less susceptible to market

volatility and less likely to experience a significant loss due to adverse market conditions.

Diversified bank portfolios can deliver significant returns: A higher rate of return is among the

benefits a diversified portfolio can deliver. A portfolio diversification strategy that allocates

resources across a broad spectrum of asset classes—including less traditional loan products, like

manufactured home loans—will ultimately create long-term wealth for a bank or credit union.

Pursuing diversification can lead to successful partnerships: Some investors may not feel

comfortable investing in a new asset class because they lack experience in that particular area. As

a result, they continue to invest in loan products they’re most comfortable with, ending up with

concentrated loan portfolios. Although a financial institution which intends to expand into the

manufacture home lending market might consider that certain risks could lead to lower

22
profitability, opting for loan programs provided by a reputable and reliable indirect lender with

plenty of experience in this sector allows a bank or credit union to indirectly benefit from extensive

expertise in applicant screening, loan underwriting, customer communication, payment collection,

portfolio performance and compliance monitoring.

2. Product Development

The banking industry like many other industries is facing a rapidly changing market, new

technologies, economic uncertainties, increase of competition and more demanding customers that

have created an unprecedented set of challenges (Lovelock, 2017). As well as globalization that is

bringing a crescent increase of competition and at the same time a decrease in physical borders, as

well as the approach among producing and consuming markets, forcing organizations that want to

have success seeks new alternatives of processes, methods, products and even business.

Customers look at banking products not the bank. Customers can switch to a bank in which they

can select a banking package, and sign up for a variety of service when necessary. Moving forward,

things aren’t going to be so black and white. What the customers are seeing is a transition towards

a common banking platform. A system where your bank understands what the customer need to

accomplish, and provides you with the resources necessary to do so Amal Bank can employ one

of these innovations to stay competitive in market.

Different Types of Services | Bank Accounts: Individual Banking—Banks typically offer a

variety of services to assist individuals in managing their finances, including: Checking accounts;

Savings accounts; Debit & credit cards. Offering many different accounts in which its creating

doesn’t take more time would be bring more advantage to the bank Business Banking—Most

banks offer financial services for business owners who need to differentiate professional and

personal finances. Different types of business banking services include: Business loans; Checking

23
accounts; Savings accounts; Debit and credit cards; Merchant services (credit card processing,

reconciliation and reporting, check collection). Amal bank only offers business loans through

Murabaha/mudharaba. They have the chance to expand their business banking services to gain and

retain more customers. Digital Banking—the ability to manage your finances online from your

computer, tablet, or smartphone is becoming more and more important to consumers. Banks will

typically offer digital banking services that include: Online, mobile, and tablet banking; Mobile

check deposit; Text alerts; e Statements; Online bill pay. Amal bank only offers online banking

and text alerts. They have the chance to bring all other digital service need in an innovative manner.

Loans—Loans are a common banking service offered, and they come in all shapes and sizes. Some

common types of loans that banks provide include: Personal loans; Home equity loans; Home

equity lines of credit; Home loans and Business loans. The bank offers business loans. Since giving

loans is one of the main streams of the banking revenue, they need to magnify these services. Amal

bank is now the leading bank when it comes to the investment as the requirements are affordable.

The investment modes that the banks offers include Murabaha, Musharaka, Mudharaba, Istisna’

and Bay’u-salam. All of these investment modes have increased since last year according to the

deputy chief of operations of Amal bank (Mohamud, 2019). Developing these products would be

a better strategy that makes the bank both competitive and aggressive. Biometrics: There are

several promising technologies that are looking to make biometrics the next big thing in banking.

Amal Bank can launched Smile & Sign, as mobile banking application that allows users to log in

and verify transactions using the camera on their phone. Eye print ID offers the same service using

your iris, offering one of the most advanced forms of biometrics ever to grace a mobile phone.

Introducing Master-card/visa card: Master-card has vowed to provide its high net worth

cardholders with a range of priceless benefits and privileges, to be accessed at home and abroad.

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Amal bank doesn’t provide this service now and it would bring more advantages if they introduce

it.

Part 5: Implementing

I have explained above Amal bank’s vision and mission statement also, I have investigated Amal

bank’s strategies for both matching and space now, I want to indicate a Table below the

implementation of the strategies prepared by table 4.1 and table 4.2.

Table 5.1: Implementation for all strategies in Table 4.1 and 4.2 of Amal Bank

Implementation for all strategies in Table 4.1 and 4.2 of Amal Bank
No Strategies When Who How it should be implement
1. Promote the IT Customers need Operation Using Islamic financial production
usage among for Islamic manager and and instruments like “Murabaha,
Halal financial investments investment Mudarabah, Musharakah and
services service manager sukuk”

2. To promote the Amal bank marketing manger Using radio, Television, social
services of the wants to attract media, stickers to implement it.
bank by offering large number of
lesser rates of customers.
investment and Huge of
attract large competitors are
number of in the market.
customers
through its sharia
compliant
services and
Market with
Videos.
3. Promote Amal bank Public relation Doing government regulations,
collaborative estimates effect manager and and taking orders from the
efforts among from external Relationship government.
the suppliers, environment manager Paying customer rewards and
customers and maintaining suppliers.
the government

25
4. Develop Sharia Amal bank Research and Sitting Islamic rules and financial
standard that is wants to development products that refuses Haram things
recognized by collaborate with manger in the trading.
International another Islamic
Financial international
regulation. bank.
5. Create a pool of The bank needs Human resource Advertising through social media
talent to attract employees, and manager the job vacancy and the
skilled there is job requirements of the applicants
workforce and vacancy
improve
customer
relationship
management
through opening
retail branches.

6. Stay alert on When increases Security manager Using recording camera and
security issues competitors in and marketing investment diversification
and the the market and manager.
uncontrolled security issues
competition rises
through
competitive
intelligence.
7 Provide different Amal want to Marketing Using environmental and
bundles by diversified its manager geographical segmentation
targeting specific financial
markets investment

8 Construct a Amal bank want Public relation Sitting Islamic rules and financial
standard to collaborate manager services that permits Islamic
Sharia/Halal other Islamic religion
practice/certificat banks
ion with the
collaboration of
other banks and
relevant
government
ministries.

26
Source: Amal Bank

Part 6: Monitoring

Monitoring is important because organizations face dynamic environments in which key external

and internal factors often change quickly and dramatically. Success today is no guarantee for

success tomorrow! An organization should never be lulled into complacency with success.

Countless firms have thrived one year only to struggle for survival the following year.

1. Consistency

A strategy should not present inconsistent goals and policies. Organizational conflict and

interdepartmental bickering are often symptoms of a managerial disorder, but these problems may

also be a sign of strategic inconsistency. There are three guidelines to help determine if

organizational problems are due to inconsistencies in strategy:

a. If managerial problems continue despite changes in personnel and if they tend to be

issue-based rather than people-based, then strategies may be inconsistent.

b. If success for one organizational department means, or is interpreted to mean, failure for

another department, then strategies may be inconsistent.

c. If policy problems and issues continue to be brought to the top for resolution, then

strategies may be inconsistent

2. Consonance

Consonance refers to the need for strategists to examine sets of trends as well as individual trends

in evaluating strategies. A strategy must represent an adaptive response to the external

environment and to the critical changes occurring within it. One difficulty in matching a firm's key

internal and external factors in the formulation of strategy is that most trends are the result of

interactions among other trends. For example, the day care explosion came about as a combined

27
result of many trends that included a rise in the average level of education, increased inflation, and

an increase in women in the workforce. Although single economic or demographic trends might

appear steady for many years, there are waves of change going on at the interaction level.

3. Feasibility

A strategy must neither overtax available resources nor create unsolvable sub-problems. The final

broad test of strategy is its feasibility; that is, can the strategy be attempted within the physical,

human, and financial resources of the enterprise? The financial resources of a business are the

easiest to quantify and are normally the first limitation against which strategy is evaluated. It is

sometimes forgotten, however, that innovative approaches to financing are often possible. Devices

such as captive subsidiaries, sale-leaseback arrangements, and tying plant mortgages to long-term

contracts have all been used effectively to help win key positions in suddenly expanding industries.

A less quantifiable, but actually more rigid, limitation on strategic choice is that imposed by

individual and organizational capabilities. In evaluating a strategy, it is important to examine

whether an organization has demonstrated in the past that it possesses the abilities, competencies,

skills, and talents needed to carry out a given strategy.

4. Advantage

A strategy must provide for the creation and/or maintenance of a competitive advantage in a

selected area of activity. Competitive advantages normally are the result of superiority in one of

three areas: 1) resources, 2) skills, or 3) position. The idea that the positioning of one's resources

can enhance their combined effectiveness is familiar to military theorists, chess players, and

diplomats. Position can also play a crucial role in an organization's strategy. Once gained, a good

position is defensible—meaning that it is so costly to capture that rivals are deterred from full-

scale attacks. Positional advantage tends to be self-sustaining as long as the key internal and

28
environmental factors that underlie it remain stable. This is why entrenched firms can be almost

impossible to unseat, even if their raw skill levels are only average. Although not all positional

advantages are associated with size, it is true that larger organizations tend to operate in markets

and use procedures that turn their size into advantage, while smaller firms seek product/market

positions that exploit other types of advantage. The principal characteristic of good position is that

it permits the firm to obtain advantage from policies that would not similarly benefit rivals without

the same position. Therefore, in evaluating strategy, organizations should examine the nature of

positional advantages associated with a given strategy. The below table is the monitoring tools for

all strategies of Amal Bank.

Table 6.1: Rumlet’s Principle, monitoring tools for all strategies of Amal Bank

Rumlet’s Principle, monitoring tools for all strategies of Amal Bank

No Strategies Consistency Consonance Feasibility Advantage
1. Promote the IT This strategy is This strategy is This strategy is This strategy is
usage among consistency consonance and it feasibility, advantage
Halal financial because it must be adopt because, in the because it relates
services relates the goal even if there is Muslims, there Islamic activates
of the firm external is Islamic and promotes
environment sharia board Islamic products
change like that refuses and it can give
government Haram Things competitive
policy or in business like advantage
economics interest.
recession
2. To promote the This strategy is This strategy is This strategy is This strategy is
services of the consistency adopted because feasibility an advantage
bank by offering since it relates it can change if since it is since lesser rates
lesser rates of the goal of the external factor investment and of investment
investment and firm effects. need financial attracts large
attract large and physical number of
number of activates. customers.
customers
through its sharia

29
 compliant
services and
Market with
Videos.
3. Promote This strategy is This strategy is This strategy is This strategy is
collaborative consistency adopted even if feasibility an advantage
efforts among because it external factor since it needs and it can give
the suppliers, relates the goal effects. financial and you competitive
customers and of the firm physical advantage.
the government activates

4. Develop Sharia This strategy is This strategy is This strategy is This strategy is
standard that is consistency consonance and it feasibility, advantage
recognized by since it relates must be adopt because, in the because it relates
International the goal of the even if there is Muslims, there Islamic activates
Financial firm external is Islamic and promotes
regulation. environment sharia board Islamic products
change like that refuses and it can give
government Haram Things competitive
policy or in business like advantage
economics interest.
recession
5. Create a pool of This strategy This strategy This strategy is This strategy has
talent to attract participates should be adopt feasibility an advantage
skilled reaching the even if there is because, since customer
workforce and goal of the bank any chance from talented is the wealth of
improve since retail external factors. relationship the company,
customer branches and manager and this strategy
relationship pooling talent should be may built and
management employees to employ to make best the
through opening improve implement this relationship
retail branches. customer strategy. between
relationship. customer and the
company and it
is possible to get
competitive
advantage.
6. Stay alert on This strategy is This strategy This strategy is This strategy has
security issues consistence should be adopt Feasibility an advantage
and the since security even if there is because it since it relates

30
 uncontrolled and competitive any chance from needs financial security and
competition intelligence are external factors and physical competitive
through very important, activities intelligence.
competitive this participates
intelligence. to reach bank’s
goal.
7 Provide different It takes-part It must be adopt Physical and This strategy has
bundles by reaching the even if there is financial an advantage
targeting specific bank’s goal and any external activities are since it relates
markets it consistency change like very important targeting for
economics to do this specific market,
recession. strategy so it and it can give
feasibility you competitive
advantage.
8 Construct a This strategy is This strategy is This strategy is This strategy is
standard consistency consonance and it feasibility an advantage
Sharia/Halal since it relates must be adopt since it needs and it can give
practice/certificat the goal of the even if there is financial and you competitive
ion with the firm external physical advantage.
collaboration of environment activates
other banks and change like
relevant government
government policy or
ministries. economics
recession
Source: (primary data 2021)
Conclusion and Summary
For Amal bank, in order to strengthen the bank’s position in the industry and increase its market

share it should develop or modify its products according to size and model. In addition, the bank

could strengthen its ability in marketing creaming the market in order to produce products in

accordance with the wishes and needs of the market. It needs to increase the budgets to promote

and maximize the distribution/branches/digital banking and to adopt information and technology

systems to face competition. It can also use as the general strategy to direct the bank to formulate

the implementation and evaluation of the bank’s performance by the use of the above evaluations

and recommendations.

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Reference

Alhassan, A., & Asare, N. (2019). Intellectual capital and bank productivity in emerging markets: evidence

from Ghana. Management Decision, Vol. 54 No. 3, pp. 589-609.

Amal Bank. (2019, Nov). https://amalbankso.so. Retrieved from https://amalbankso.so:

https://amalbankso.so/about-us/about-amal-bank/

David, F. (2016). Strategic Management Concepts. Book 1, Issue 12, (translated by Dono). Jakarta:

Salemba Four.

Lovelock, w. (2017). Principles of Service Marketing and Management (2nd Edition). Delhi:

Schobul. Mohamud, A. (2019, Dec 7). Deputy Chief of Operations - Amal bank. (M. B. Mohamed,

Interviewer)

Mumpuni, D. (2013). SWOT Strategy Analysis to Increase Sales Volume on Company. Soun Noodles

Beautiful Bracelet Cilacap, Volume 2, Number 3, 175-182.

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