SUSTAINABLE CORPORATE STRATEGIES

ASSIGNMENT – I

STRATEGIC PLAN FOR HDFC BANK

Submitted by,

18MBR031

ISHWARYA.A
 HDFC BANK

Introduction

HDFC Bank was incorporated in August 1994. As of September 30, 2019, the Bank had a
nationwide distribution network 5,314 branches and 13,514 ATM's in 2,768 cities/towns.
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an
'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as
part of RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August
1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank
commenced operations as a Scheduled Commercial Bank in January 1995.

Vision

To be customer driven best managed enterprise that enjoys market leadership in providing
housing related finance.

Mission

HDFC bank mission is to be “World Class Indian Bank”, benchmarking themselves against
international standards and best practices in terms of product offerings, technology, service levels, risk
management and adult & compliance.

Objective

The objective is to build sound customer franchises across distinct businesses. So as to be

preferred provider of banking services for target retail and wholesome customer segments, and to
achieve a healthy growth in profitability, consistent with the Bank’s risk appetite. We are committed to
do this while ensuring the highest levels of ethical standards, professional integrity, corporate
governance and regulatory compliance.

Core Values

HDFC is based on five core values

Sustainability
Product Leadership
Customer Focus
People
Operation Excellence
Strategic Analysis

Strategic analysis refers to the process of conducting research on a company and its operating
environment to formulate a strategy. There are various factors in it.

1. SWOT
2. PESTLE
3. Michael porter’s five force model

SWOT ANALYSIS FOR HDFC BANK

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the

managers of the HDFC Bank Limited to develop four types of strategies:

Strengths

 Strong distribution network – Over the years HDFC Bank Limited has built a reliable
distribution network that can reach majority of its potential market.
 Strong Free Cash Flow – HDFC Bank Limited has strong free cash flows that provide resources
in the hand of the company to expand into new projects.
 Strong dealer community – It has built a culture among distributor & dealers where the dealers
not only promote company’s products but also invest in training the sales team to explain to the
customer how he/she can extract the maximum benefits out of the products.
 Automation of activities brought consistency of quality to HDFC Bank Limited products and
has enabled the company to scale up and scale down based on the demand conditions in the
market.
 Highly skilled workforce through successful training and learning programs.

Weakness

 Financial planning is not done properly and efficiently. The current asset ratio and liquid asset
ratios suggest that the company can use the cash more efficiently than what it is doing at present.
  Days inventory is high compare to the competitors – making the company raise more capital to
invest in the channel. This can impact the long term growth of HDFC Bank Limited
 The profitability ratio and Net Contribution % of HDFC Bank Limited are below the industry
average.
 Not very good at product demand forecasting leading to higher rate of missed opportunities
compare to its competitors. One of the reason why the day’s inventory is high compare to its
competitors is that HDFC Bank Limited is not very good at demand forecasting thus end up
keeping higher inventory both in-house and in channel.
 Investment in Research and Development is below the fastest growing players in the industry.

Opportunities

 Organization’s core competencies can be a success in similar other products field. A

comparative example could be - GE healthcare research helped it in developing better Oil
drilling machines.

 New trends in the consumer behaviour can open up new market for the HDFC Bank Limited.
It provides a great opportunity for the organization to build new revenue streams and diversify
into new product categories too.
 New environmental policies
 Economic uptick and increase in customer spending, after years of recession and slow growth
rate in the industry, is an opportunity for HDFC Bank Limited to capture new customers and
increase its market share.
 Opening up of new markets because of government agreement
Threats

 The demand of the highly profitable products is seasonal in nature and any unlikely event during
the peak season may impact the profitability of the company in short to medium term.
 New technologies developed by the competitor or market disruptor could be a serious threat to
the industry in medium to long term future.
 Rising raw material can pose a threat to the HDFC Bank Limited profitability.
 Imitation of the counterfeit and low quality product is also a threat to HDFC Bank Limited’s
product especially in the emerging markets and low income markets.
 Intense competition
 Shortage of skilled workforce in certain global market represents a threat to steady growth of
 Profits for HDFC Bank Limited in those markets.
PEST ANALYSIS FOR HDFC BANK

PEST analysis provides great detail about operating challenges HDFC Bank Limited will face
in prevalent macro environment other than competitive forces.

Political Factor

 Favoured trading partners

 Anti-trust laws related to Foreign Regional Banks
 Pricing regulations – Are there any pricing regulatory mechanism for Financial
 Taxation - tax rates and incentives
 Wage legislation - minimum wage and overtime
 Political stability and importance of Foreign Regional Banks sector in the country's economy.
 Risk of military invasion
 Level of corruption - especially levels of regulation in financial sector.
 Bureaucracy and interference in Foreign Regional Banks industry by government.
 Legal framework for contract enforcement
Economic Factor

 Infrastructure quality in Foreign Regional Banks industry

 Comparative advantages of host country and financial sector in the particular country.
 Skill level of workforce in Foreign Regional Banks industry.
 Education level in the economy
 Labour costs and productivity in the economy
 Business cycle stage (e.g. prosperity, recession, recovery)
 Economic growth rate
 Discretionary income
 Unemployment rate
 Inflation rate
 Interest rates
Social Factor

 Demographics and skill level of the population

 Class structure, hierarchy and power structure in the society.
 Education level as well as education standard in the HDFC Bank Limited ’s industry
 Culture (gender roles, social conventions etc.)
 Entrepreneurial spirit and broader nature of the society. Some societies encourage
entrepreneurship while some don’t.
 Attitudes (health, environmental consciousness, etc.)
 Leisure interests
Technological Factor

Technology analysis involves understanding the following impacts

 Recent technological developments by HDFC Bank Limited competitors
 Technology's impact on product offering
 Impact on cost structure in Foreign Regional Banks industry
 Impact on value chain structure in Financial sector
 Rate of technological diffusion

Environmental Factor

Before entering new markets or starting a new business in existing market the firm should carefully
evaluate the environmental standards that are required to operate in those markets. Some of the
environmental factors that a firm should consider beforehand are
 Weather
 Climate change
 Laws regulating environment pollution
 Air and water pollution regulations in Foreign Regional Banks industry
 Recycling
 Waste management in Financial sector
 Attitudes toward “green” or ecological products
 Endangered species
 Attitudes toward and support for renewable energy

MICHAEL PORTER’S FIVE FORCE MODEL

Michael Porter observed five forces that have significant impact on a firm's profitability in its industry.
These five forces analysis today in business world is also known as -Porter Five Forces Analysis. The
Porter Five (5) Forces are
 Threat of New Entrants
 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threat from Substitute Products
 Rivalry among the existing players.

Threats of New Entrants

New entrants in Foreign Regional Banks brings innovation, new ways of doing things and put
pressure on HDFC Bank Limited through lower pricing strategy, reducing costs, and providing new
value propositions to the customers. HDFC Bank Limited has to manage all these challenges and build
effective barriers to safeguard its competitive edge.

Bargaining Power of Suppliers

All most all the companies in the Foreign Regional Banks industry buy their raw material from
numerous suppliers. Suppliers in dominant position can decrease the margins HDFC Bank Limited can
earn in the market. Powerful suppliers in financial sector use their negotiating power to extract higher
prices from the firms in Foreign Regional Banks field. The overall impact of higher supplier bargaining
power is that it lowers the overall profitability of Foreign Regional Banks.

Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the
minimum price as possible. This put pressure on HDFC Bank Limited profitability in the long run. The
smaller and more powerful the customer base is of HDFC Bank Limited the higher the bargaining power
of the customers and higher their ability to seek increasing discounts and offers.

Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different ways, industry
profitability suffers. For example services like Dropbox and Google Drive are substitute to storage
hardware drives. The threat of a substitute product or service is high if it offers a value proposition that
is uniquely different from present offerings of the industry.

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. HDFC Bank Limited operates in a very
competitive Foreign Regional Banks industry. This competition does take toll on the overall long term
profitability of the organization.