Report on the Strategic Approaches of BNP Paribas

Report on the strategic Approaches of BNP ParibasThe objective of this report is to critic onlyy evaluate and analyze the strategic approaches in the ope dimensionn of a monetary institution of our choice. The chosen institution of adopt is BNP Paribas. This report go out take a PESTEL analysis, an evaluation of the capital of Singapore milieu examining the political, economicalal, social-cultural, technological, milieual and legislative aspects of the environment and an application of the theory to BNP Paribas. In addition, we leave look at the presidential terms products, target trade, strategies and critical changes, the application of Porters five forces moulding, and yield a SWOT analysis looking at the strengths, weaknesses, opportunities and threats presented to the organization. This pull up stakes be followed by a STP analysis, looking at the segmentation, targeting and positioning of the organization, as well as a financial statements analysis and recommenda tions for future reading strategies for the organization.Introduction of the Comp eitherBNP Paribas has been at the forefront of the margining sector with a 10 twelvemonth history and deep-rooted traditions in innovation banking which has guide them to the succeeder they atomic number 18 today. They micturate earned the title of being Frances premier bank and are known for their beefed-up market positions and robust risk man mountment. They have risen to become a global leader in the cookery of financial work and its brand is the friendships major as typeset, ranking 6th nearly valuable banking brand according to Brand Finances 2010 rankings (Brand Finance, 2010i). This ranking is by and large due to the Groups financial strength and part due to its success brought somewhat by Michel Pbereau former CEO who led BNP to merger opportunities that transitioned the companion (SP, 2010ii).With much(prenominal) noted exploitation and success, the keep phoner truly lives u p to its truism the bank for a changing world, incessantly evolving and adapting successfully to the ever-changing environment, get hold of opportunities that come along with a strong focus on achieving its goals, cautiously planning and managing its business activities and ensuring effective cost-cutting measures.Nature of the businessBNP Paribas is a familiar bank providing a diverse blow of banking function predominantly offering and specialising in three impression business areas corporate and enthronisation banking go, enthronement solutions services and retail banking which includes services for personal finances and equipment solutions. Its financial services are offered to a variety of customers both individuals, corporate businesses and other financial institutions (BNP Paribas, 2010iii).Present situationOn 23rd July 2010, Fortune snip had presented its annual global rankings of Americas largest corporations. Achieving a modest improvement from 2009, BNP Paribas placed 18th in this years rankings and 7th largest Banking Corporation in the banking sector based on revenues and sales (CNN, 2010iv). Such positive results achieved by the Group stinkpot be attributed to its strong Board of Directors who possesses the skills, leadership, performance and experience required to lead the means into the future. BNP Paribas success also stems from the effectiveness of their diversified and integrated business model and their committed focus on investment strategy and innovation.MissionBNP Paribass committal is to achieve its goal to become the bank for a changing world. In order to achieve this, they plan to provide variety show, creativity and efficiency that take performance gains and to value differences among people in motley countries.Respecting and promoting differences among employees are major assets when it comes to the bank for a changing world (BNP Paribas, 2010v). See Appendix 1 for its core values.VisionBNP Paribas is correspondd to be a benchmark banking conference with focus placed on customer satisfaction and the active pursual for improvements in its earning capacity. BNP has adopted the motto of bank of the changing world from its core values and it is their core values which motivate and direct them towards their vision (BNP Paribas, 2010).Goals expert development, globalisation, environmental issues are challenges that face both businesses and individuals today. BNP Paribas is committed to assisting its customers to confront these quick changing issues. on that pointfore, the Groups goal is to constantly seek out new acknowledgments of arm by developing innovative ideas and initiatives (BNP Paribas, 2010).An Application of PESTEL to Singapores environment BNP Paribas SingaporeA PESTEL analysis is essential in every organization as authoritative factors within the macro-environment forget have significant impact on the organization and the decisions it chip ins. There are various political, e conomical, social and cultural, technological, environmental and legislative factors that pack to be taken into consideration (Kotler, P Armstrong, G, 1999vi). Each will be discussed further below in context of Singapore and its impact on BNP Paribas.P- PoliticalThe Peoples Action Party (PAP) dominated the political flick since 1959 (Janus incorporated Solutions, 2010vii). The partys choices of action, ideas, policy-making and planning proposals are well supported by the alliance and the integrity and effective leadership demonstrated by the PAP secured economic growth and political stability. With the adoption of a collective leadership direction with its corrupt free-government image, Singapores government has maintained a strong sturdy political framework.It is Singapores political stability and corrupt-free environment that banks handle BNP Paribas see Singapore as an opportunity to venture into the Asian markets. Their success in Singapore was led by Singapores aim to liberalize the banking sector which they followed in 1999. This move was rewarded as they became one of the pioneering foreign banks.E- EconomicalviiiThe hustle and bustle economic scene of Singapore is part due to its geographical location. Its strategic location which houses an tireless population though it lacks physical resources and has a relatively small domestic help market has given the country an economic importance in sou-east Asia. Singapore carried out an economic strategy to overcome its problems and achieved an average of 7.8% growth from 1965 to 2009 (US Bureau of Public Affairs, 2010ix). Though its sparing has suffered setbacks due to pandemic outbreaks, the economy bounced back each time. See in Appendix 2 on gross domestic product and Government Debts.BNP Paribas must firstly identify the relevant economic factors that would influence their friendship. Singapores tourism scene is an opportunity to target those tourists take financially. In addition, economic growth is tied with services made as such it is another motivating factor to operate in Singapore.S- kind Cultural friendly factors are the demographic and cultural aspects of the environment such as age and gender distribution, religion and employability grade, which can impact the demand for a firms products and the availableness and motivation/willingness to work. See Appendix 4 on analysis of GDP and employment rates.BNP Paribas has contributed much to the employability in Asia. According to an article in Forbes Magazine titled BNP Paribas Wealth plans Singapore hiring spree (2010), BNP plans to attach its employees count in Singapore from 300 as of 2008 to 500 employees, while other banks like DBS and Deutsche Bank plans job cuts. This increase in employees is a result of BNPs function in the wealth oversight business and their aim to be the largest most profitable and attractive for its clients and their assets as explained by Serge Forti (BNP Chief Executive for Asia pe aceable Wealth Management) (Forbes, 2010x).T-TechnologicalSingapore has sophisticated state-of-the-art Telecommunications and Internet facilities which cater to the needs of its users, providing them with game quality communications accessible ecumenical.Innovation is a strong differentiating factor in the banking sector. It is a core doctrine of the BNP Groups strategy. Innovation will enable them to adapt quickly to the ever-changing environment and to deliver the outperform quality products and services to its clients. An example of innovation demonstrated by BNP Paribas is in its photovoltaic loan1(BNP Fortis Bank, 2010xi).E- EnvironmentThe leading researcher on globular Warming, an American government scientist Hansen (2007) believes that the speed of the natural changes is dwarfed by the changes that humans make to the atmosphere and surface (Hansen 2007)xii.This scientific evidence has created greater environmental consciousness among individuals and businesses. Since t hen, thither has been a growing desire to protect the environment. Singapores Government environment commitment extends to the ecological footprint of business organizations and could accelerate the potential environmental leadership use of goods and services that transnational corporations can play. The greatest challenge in the climate change action is to make people aware of the consequences of our actions. As such, BNP Paribas has launched programs to raise their awareness of the impacts of Climate Change.L-LegislativeAccording to Singapore Academy of virtue (2006)xiii, there are proper(postnominal) laws that banks are required to abide to. As such BNP Paribas must follow the common laws and principles as stated in relevant Acts passed by Parliamentxiv. The Monetary Authority of Singapore (MAS) who publishes and administers Acts and secondary legislation governs legislation in the financial industry. Changes in legislation can affect a firms cost for adaptation and demand of goods and services.Singapores economic policy is to recruit wealth through sustained and stable economic growth, head by the free market economic system which allows market forces to determine the pattern of trade (ADB, 2010xv). In addition, Singapore does not have any sector-specific policies this freedom within the policies could provide BNP Paribas with an advantageous opportunity to manipulate this area. financial AnalysisA financial analysis uses financial performance indicators to measure the performance of the company. It looks at 5 categories of ratios which are Profitability, Liquidity, efficacy, Investor and Financing.The tables below are the summarized results for BNP Paribas from course 2005 to 2009 (5-year performance analysis)Profitability RatiosRatios yr 2005 form 2006 division 2007Year 2008Year 2009 flagrant Profit100%100%100%100%Gross Profit27,648miilion29,823miilion22,105 billion31,909 one thousand thousandRevenue/Sales27,648miilion29,823miilion22,105 bill ion31,909 trillion discharge Profit26%26%14%18% displace Profit7308 one thousand thousand7822 one trillion million million3021million5832millionRevenue/Sales27,648million29,823miilion22,105 million31,909 millionReturn on Capital Employed (ROCE)15.8%5.7%9.5%Profit before invade Tax7308 million7822million3021million5832millionAverage Capital Employed45,065+53,799/2 million53,228+53,799/2 million53,228+69,501/2 millionReturn on Assets (ROA)0.51%0.46%0.15%0.28%Net Income7308 million7822million3021million5832millionTotal Assets1,440,343 million1,694,454 million2,075,551 million2,057,698 million(Source Created for the design of this assignment)The table above shows that for every sales dollar, the same amount will be available to run its expenses and gain. This is relatively bad for the company if there were any fixed expenses that require payment after the gross profit has been calculated. The return on assets (ROA) tells the efficiency of the company in using its assets to draw profits. The table above shows that ROA has a decreasing trend reaching as low as 0.28%. The net profit is a result of deducting all expenses from gross revenue. In this case, the net profit over the 4 year catamenia has decreased to 18%. Therefore this suggests that the companys widely known success does not match with its actual financial performance.Liquidity RatiosRatiosYear 2005Year 2006Year 2007Year 2008Year 2009 veritable Ratio87c73c81c53c(Source Created for the office of this assignment)Current ratio gives an indication of the companys ability to pay its nearsighted term liabilities and debts with its short term assets. A low ratio below 1 suggests that the company will have trouble paying its debts and liabilities. This shows the companys efficiency in its direct cycle in turning its product into cash is weak. As such, the company is financially unhealthy and they would need to develop strategies to go about providing to a greater extent financing for the company or the y may run into liquidity issues.Efficiency Ratios (Source Created for the purpose of this assignment)RatiosYear 2005Year 2006Year 2007Year 2008Year 2009Debtors hookup Period276 days282 days431 days313 daysTrade Receivables20,919 million23,008 million26,079 million27,379Revenue/Sales27,648million29,823miilion22,105 million31,909 millionThe debtors collection period ratio is an indicator of the period of time taken for money to be collected from debtors. The figures above suggest that the debtors collection is relatively slow, especially in 2008. This could have been caused by the spherical Financial Crisis which caused worldwide panic and market fluctuations. By 2009, BNP Paribas was able to reduce its debtors collection period by 313 days. Although this figure is an improvement to 2008, it is still considered to be slow for debt collection. This will have an impact on the liquidity issues faced by the company. If the company can reduce its debtors collection time, it will have th e necessary finances to resolve its liquidity issues and raise its current ratio above 1 or even 2 which suggests the company has more than than enough assets to deny its liabilities.Investor RatiosRatiosYear 2005Year 2006Year 2007Year 2008Year 2009Earnings per destiny (EPS)6.777.818.255.202.99Dividend Cover2.682.592.535.362EPS6.777.818.255.202.99Dividend per Ordinary Share2.533.013.260.971.50Price/Earning Ratio (P/E Ratio)8.509.248.125.5218.13Current Share Price per share57.5672.1366.9728.7154.20EPS6.777.818.255.202.99(Source Created for the purpose of this assignment)The EPS is the core tenet in determining a shares price. It shows the companys ability to generate income which is allocated to each corking share of common stock. A positive increase in EPS suggests that the company is finding more ways to earn profits. However, it does not seem to be the case in 2008 and 2009 where EPS fell sharply. There is no stability in the EPS pattern.BNP Paribass dividend cover fell sharpl y in 2009. However, a low dividend cover may be acceptable if a companys profits are at a stable level, while a company with fluctuating profits indicates dividends are at risk.The difference in the market price and salary movement will cause the price earning ratio to fluctuate. BNP Paribass P/E ratio in 2009 shows that there is a disconnection between the market price and the profits as such, it has caused the P/E ratio to rise. A low P/E ratio is potentially good for investors as there is a chance for making profits.Financing RatiosRatiosYear 2005Year 2006Year 2007Year 2008Year 2009Debt to Equity Ratio7.838.8011.988.29Total Debt352,918 million473,504 million637,592 million568,130 millionTotal Equity45,065 million53,799 million53,228 million69,501 millionDebt Ratio0.310.280.260.28Total Debt352,918 million473,504 million637,592 million568,130 millionTotal Assets1,440,343 million1,694,454 million2,075,551 million2,057,698 million(Source Created for the purpose of this assignment)A amply debt equity ratio is a result of high debt usage in financing operations. This is particularly true for Year 2008 with a debt/equity ratio of 11.98. However, each year from 2006 show a high debt/equity ratio. This shows BNP could potentially generate more profit without outside financing. If this were to increase earnings by a greater amount than debt cost, then the shareholders of BNP Paribas would make from receiving more earnings. However, there are greater costs involved which may outweigh the return the company generates on debt through investment and its operations. BNP Paribass debt ratio from Year 2006 to 2009 is below 1 as such, this indicates that the financial institution has more assets than debt as evident in the Statement of Financial Position.Corporate Social Responsibility (CSR)BNP Paribass corporate social responsibility plays a major role in its environment and forms an integral part of its business ethics and embed in its core values. They have taken char ge of leading companies in implementing environmental friendly practices by signing up to the United Nations Global Compact in 2003 and in its financial sector initiatives, BNP has encouraged companies to include climate change issues in their investment decisions and have brought together companies to promote responsible behaviour by companies within the community. BNP has also signed up for Principles for Responsible Investment (PRI) which provides assistance to companies in incorporating environmental, social, and corporate governance concerns into their mainstream investment decision making practices (BNP Paribas Annual Report, 2009, p.118xvi). See Appendix 5 on CSR as a focussing duty.Porters Five Forces Model Analysis draw 3 Porters Five Forces ModelSource Porter, M 2008Threats of New Entrants (Strong)Singapore is relatively lenient when it comes to foreign businesses operations set up in Singapore since the country has a pro-business environment with rich cultural diversity and stable politics. We can also suggest the threats of new entrants may be strong because financial institutions are becoming universal, providing a diverse range of financial services and not just restricted to banking services. The new entrants are exploring innovative banking as such BNP Paribas adopts innovation as a give away driver to outshine its competitors.dicker Power of Suppliers (Weak)The power of suppliers in influencing BNP Paribas is considered to be weak. The customers being the depositors do not have control of the interest rates set by the bank or on any inside operations, whereas for corporate clients, the bank still holds a greater power in the offering of services and package deals to its larger clients. The Credit Market provides the source of raw materials and liquid assets which is unmeasurable. Lastly, the Central Bank being MAS is responsible for the issue of currency, supervision of financial services and stability surveillance and who is of last spa and provider of liquidity in the markets. Therefore, the Central Bank who controls the liquidity in the markets has some power in its influence on BNP Paribas as a whole than in day to day operations (Ackerman, J 2008xvii).Bargaining Power of Buyers (Medium)The buyers of BNP Paribass products are the customers themselves the depositors whom have some power in deciding which bank they would settle for. However, for the corporate clients, it is difficult to determine the differences in the services provided/offered by each bank as there is no specific service offer to each bank.Threats of substitute products or services (Strong)There are a variety of financial services being offered from various banks in Singapore who specialises in different business lines and have various experiences and successes. BNP Paribas Singapore faces greater threats towards its Corporate Investment Banking as well as Asset Management services. However, though various banks offer similar services to them, l ike its threats from new entrants, innovation is their key to compete with substitute products, to set themselves apart from its competitors (Bernet Partner, 2008xviii).Rivalry among existing firms (Strong)There is intense rivalry among the financial industry. BNP Paribas competes with money centre banks, super regional banks and institutional asset management providers and financial planners. In Singapore, there are 113 competitive commercial banks, 49 merchant banks and 3 finance companies and three local banks DBS, UOB and OCBC , the three largest banks in Southeast Asia (MAS, 2009xix).BNP Paribas faces strong competition from in the area of asset management as Singapore is the premier asset management locations in Asia (MICA, 2009). A central location for the provision of risk management, amends broking and offshore insurance services in which BNP is engaged in. It is BNPs innovative strategic plans and its prime financial attention to serving customers needs which sets them a part from its competitors.