Commercial Bank of Africa Case Study Mgt 501 Essay Example

Additionally, Mr. Bristow, a member of the bank's Board of Directors, also serves as the Executive Director. The bank boasts specialized divisions, a management team with high levels of skill and experience, and an exceptional IT department, led by an experienced manager committed to securing competitive victories.

CBA faces difficulties as they strive to stay ahead by implementing changes and adopting a new strategy. The 1990s brought about a boom in the banking industry, with numerous banks vying for the same clientele. Unfortunately, political turmoil ensued in subsequent years, leading to the withholding of funds from the country by both the international community and World Bank. Additionally, lending interest rates skyrocketed up to 70%, causing non-performing loans to surge and resulting in many banks operating at a loss or no profit at all.

Despite facing competition from a number of small banks that had moved to their scale of medium-sized grade, CBA managed to maintain its clientele and competitive edge in the sector. In order to remain at the top of the banking industry, CBA made a significant investment in IT systems and introduced changes in IT management to maintain their edge over other players.

Although CBA has achieved success in maintaining its systems, they need to be constantly improved to meet customer demands and keep up with the current technological trends. The frequency of new advancements necessitates CBA to regularly upgrade its systems at an expensive cost. To address this issue, Mr. Bristow, the Executive Director, proposed that the IT department relinquish control of IT and instead function as a consulting arm. The suggested model involves line managers taking responsibility for generating and owning new IT projects

and products.

The IT department would assist in managing project implementation, with all departments assuming full ownership upon completion. This necessitated a shift in the traditional roles played by both IT and other departments. Previously, IT led projects, but under the new model, IT staff had to adapt to new responsibilities and acquire new proficiencies. They now provided business support for project management across all line functions while continuing to offer development assistance.

In addition to collaborating with managers to establish priorities for their functional area systems planning, employees must also provide technical services and maintain current technical knowledge. Furthermore, they must manage the heightened risks stemming from the growing complexities and costs of projects across operations.

Under the new plan, the IT department would be split up. The majority of staff would work in a smaller central systems department, while others would be assigned to functional areas such as foreign exchange, treasury, and customer accounts. This approach would eliminate the role of a single person responsible for monitoring and managing overall risks. In the past, this task fell to Mr. Abwoga, the IT Manager. With the new structure, however, there wouldn't be a unified chain of command - IT personnel would report to various line managers. It remained unclear whether these line managers and relationship managers could assume responsibility for overseeing IT plans.

The complexity of technology interconnections was a challenge due to multiple third-party technology providers such as VISA International for credit and debit cards. Line managers may lack the expertise to provide high-quality suggestions regarding the complexities of IT, and they may also not fully comprehend the IT restrictions from junior staff. However, Mr. Abwoga,

being an IT trained manager, can easily understand these issues. Currently, the IT department handles these concerns in the centralized model. 5.

To manage the IT function effectively in the new model, it was necessary to establish close relationships with various departments. In order to implement projects successfully, collaboration with functional users, vendors and senior management was crucial. It was vital to plan together and consider cross-functional implications of future plans. It was also important to recognize that functional priorities may not always align with the bank's priorities, and certain projects may be rejected. Another challenge was to appoint senior managers who had extensive experience, understood the business, possessed good credibility with users and could translate business philosophy into practice.

CBA faced a high risk of failure due to the absence of backup systems used by multinational banks to experiment with new technology products prior to their implementation in Kenya. Despite this risk, the bank had a history of being a trailblazer in adopting innovative technology initiatives that established its leadership position in the domestic banking industry for many years.

The success of CBA's IT operations was largely thanks to the IT team and its management. Mr. Awuondo faced a dilemma: should he transfer responsibility for IT from the successful team to the line managers? He was unsure if this move would result in better outcomes. As Awuondo pondered, "The current structure was working fine, in many respects." He noted, "CBA's comparable banks are yet to catch up with our level of technology use."

Awuondo was contemplating the future of IT management at CBA, wondering whether the current competitive edge would remain sustainable and if a

major IT restructuring would endanger the successful team. The decision between having a customer-driven or IT-driven system was also a concern. CBA faces competition from several banks such as Citibank, Standard Chartered, Barclays Bank of Kenya, Kenya Commercial Bank, Co-operative Bank and National Bank of Kenya - all vying for the same clientele and with a significant presence in the market. CBA must keep up with their technologically advanced competitors and have efficient strategies to survive.

Market segment CBA focuses on catering to the corporate sector and high-net-worth international institutions, as well as personal banking customers in Kenya. Currently, the bank only has branches in Nairobi and Mombasa. However, competitors like Barclays and KCB are actively expanding their customer base throughout the African region. For instance, KCB has branches in Kampala and plans to open more in Sudan and Tanzania. Similarly, Barclays is also expanding its reach.

9. To provide direction for employees and stakeholders, CBA should clarify its mission and vision statements, along with its objectives for the transition period.

10. The government's actions in June 2003 were aimed at addressing CBA's high interest rates. This was accomplished through the Donde Act, which is a Central Bank Amendment Act passed in 2000 and comprised of three key measures.

Three measures were introduced by the "Donde Act". The first measure was the implementation of the "in-duplum rule", which stated that once non-performing loans accrued interest equal to the principal sum borrowed, further interest would not accumulate. Secondly, an industry benchmark for interest rates called 'neutral instrument' replaced Treasury Bills. Thirdly, the Central Bank of Kenya explored establishing a non-performing loan agency and tribunal with judicial powers

to normalize banks' balance sheets. However, when the government implemented the "Donde Act" in 1990, its relationship with the World Bank became strained due to limited donor funds and increased reliance on public borrowing in banks such as CBA dealing in Treasury bills. This resulted in rising interest rates leading to a spike in loan defaults.

During Moi's administration, the banking industry experienced problems with non-performing loans (NPLs), resulting in substantial losses for banks due to significant provisions and write-offs. CBA also suffered losses and had to make bad debt provisions of Ksh 140 million in 2000 and Ksh 40.8 million. Information technology is a crucial factor in the industry as it has transformed banking operations by enabling banks to meet customer demands quickly and precisely. Fortunately, CBA has dependable information systems that provide them with an advantage over many competitors.

CBA is compelled to regularly upgrade its system because of the fierce competition from rival banks and the advent of newer and more advanced technologies in the industry. Therefore, CBA's management must make a decision that ensures the optimal usage of information systems that are stable, dependable, and cost-efficient. Additionally, as mentioned by the MD, any change in the role of the IT department and other departments at CBA is anticipated to encounter opposition from a certain segment of the staff.

Awuondo believes that changing for the sake of change may be unnecessary and should be avoided. Moreover, he worries that the IT manager and other managers may not welcome the change, given that the IT manager is accustomed to leading IT matters and senior management heavily relies on IT department personnel.

Investing in IT can be expensive

and the responsibility of making final purchasing decisions for the department used to lie with the IT manager. If these decisions failed, the blame would fall on him. However, transferring this role to non-expert line managers is risky, and even juniors for whom decisions are made may be blamed.

The risk of placing IT staff under line managers with limited knowledge of the IT world, rather than under specialized IT managers like Mr. Abwoga, was due to the complexity of the project. The situation presented a challenge to the line managers as they had to take the lead over an individual who was already accustomed to leadership. In the event of a mistake, it would be difficult to assign responsibility, and previously, the IT Manager, Mr. Abwoga, would have been responsible.

However, it is now possible for line managers to avoid taking responsibility by claiming they were misguided. Additionally, becoming an expert in IT requires lengthy training due to its complexity, and some managers may not have any interest in it. Nevertheless, collaborating and building relationships among colleagues is beneficial for organizations. Through working together and planning collaboratively, each manager has the opportunity to advocate for the resources they need. Ultimately, they must work together to prioritize and collectively execute plans due to limited resources.

While it is possible to improve understanding, failure to cooperate can result in detrimental outcomes. Managers may prioritize their personal projects over those of others, and collaborating with uncooperative individuals can cause setbacks and create an unpleasant work atmosphere.

Mr. Awuondo was afraid of failure due to the unknown factors. It is taught in management that introducing change without reason is not recommended. In

marketing, change is often implemented when sales and profits decrease. However, the organization had an efficient structure in place which had helped them become a top competitor.

Implementing this change was a risk due to its high cost and the need to train staff and adjust their roles. The potential success was desirable, but if it failed, CBA could lose customers and face embarrassment. With over 40 competitors in Kenya, CBA must continuously upgrade their information system to remain competitive, provide quality service resulting in satisfied customers, and ultimately maximize profits.

CBA must establish its vision and mission statements and set forth specific, measurable, achievable, reliable and time-bound (SMART) objectives to guide the bank's operations, policies, and regulations. This will facilitate stakeholder comprehension, adoption, and implementation.

. Market Segment

It is imperative for CBA to diversify its customer base and follow the lead of its competitors. To achieve this, they may look into targeting the vast group of small businesses in Kenya, as a significant portion of the country's population has low income. Additionally, opening branches in other towns in Kenya and expanding operations in the African region could be beneficial.

Currently, Sudan is considered a new market attracting many business people. However, government regulations have a significant impact on banks. Despite the banks going to court and opposing Mr. Donde, the court ruled in favor of the government as the bill aimed to benefit the majority of the people rather than just profit-making banks.

In order to make informed investment decisions, many investors analyze external factors such as trade policies set by governments in various countries. One economic concern is the decrease in non-performing loans, which can be

attributed largely to the fact that politicians and individuals with political connections were the ones mainly responsible for these loans. As a result, the banks suffered losses when these borrowers defaulted and were protected by politicians.

The Banks have benefited greatly from the fact that anyone can now be sued. This is because prioritizing key issues is essential for effective changes to occur in CBA. The first priority is to re-evaluate the vision and mission of the organization, given the current situation.

Both vision and mission act as the driving force behind a company's establishment and establish structures to achieve its goals. Managers must keep up with the times and be willing to adapt to change. The more employees stay in one position, the more they resist change and prefer to maintain the status quo. Management must provide a visionary leadership style that is ready for change at any time and can take on potential obstacles with eagerness.

2. To accomplish its objectives, the business managers must strategize and choose their desired market segment by identifying a group of people who will purchase their product. Currently, CBA has a restricted target audience that needs to be increased. Nevertheless, it is crucial to prioritize retaining current customers while also taking measures to expand the group.

When planning, CBA needs to consider their competitors and examine their strategies in order to maintain their position at the forefront. Additionally, they must analyze the potential risks involved in implementing changes and weigh the costs versus the potential profits for the organization.

5. Examination of the complexity concerns is necessary to determine how challenging the change might be and how to tackle it,

assessing whether it can be easily integrated or if it'll require an extended period for the staff to adopt. 6.

To manage risks, one must identify the approach for implementing changes, assign responsibilities and roles, and devise policies and strategies to handle the changes.

It is crucial to carefully review government regulations and policies in order to assess their potential impact on your business. Additionally, it is important to identify the funding source for economic changes and confirm that adequate funds are available before proceeding.

The alteration in the function of IT and other departments requires attention to staffing and training. To ensure successful implementation of changes, managers and staff should undergo training to enhance their performance and acquire relevant knowledge for their new roles. Nowadays, many organizations appreciate staff members who possess diverse skills and can multitask. The senior management and other staff should have the ability to use the system independently, except for technical issues that require the expertise of IT.

Management can cultivate positive relationships with staff by communicating changes well in advance and soliciting suggestions, while also providing training to prepare employees for the changes and promote teamwork. These practices will better equip employees to manage change.

Team building workshops can prepare the team to work together effectively. Once completed, IT management change can be introduced and implemented. Evaluating the effects of changes is important and corrections should be made as needed. Involving all stakeholders ensures acceptance of changes. To successfully compete and attract new clients for a prime position in the industry market, CBA could diversify its product offerings.

One approach to help low income earners is to decrease the minimum balance

requirement for certain account categories and lower ledger fees. They have the choice between embracing this alteration or adhering to their current strategy of solely upgrading their IT infrastructure rather than overhauling their entire system. Upgrading is less costly than implementing a new system. Furthermore, they can avoid spending time learning new and potentially challenging skills.

The staff can be freed from the stress associated with coping with changes, and this can be achieved by CBA joining forces with another suitable player in the industry or opting for franchising. This move would serve to increase its capital base and enable it to compete with multinational corporations more efficiently. Additionally, CBA can opt for a fresh start and explore various options that were initially limited by financial constraints. To achieve this, it may be necessary to implement radical management changes, as demonstrated by the appointment of the new Executive Director.

Inadequate leadership vision has resulted in a failure to consistently devise fresh approaches and remain innovative, thereby risking the loss of their competitive advantage. To sustain growth, forward-looking leaders with a bold attitude and preparedness to tackle change proactively and strategically are needed, unlike the present leadership which appears to react out of fear. Collaboration among management team members is necessary for optimal decision-making and finding superior solutions.

In order to carry out changes in the bank, the board of directors should be consulted and their approval must be obtained. In collaboration with the board, a clear vision and mission statement for the bank should be defined, and structures and policies should be formulated to execute plans and objectives. The new Executive Director suggests that the new

business strategy must include participation and empowerment. In order to efficiently provide services to customers, a horizontal structure should be established wherein all departments are part of the corporate strategy based on their hierarchy level. All parties involved in the process should have collective responsibility in decision making.

It's important to provide training and motivation for staff to handle multiple tasks. Senior managers need to lead by example and become self-sufficient by understanding the system. Currently, it is challenging for them to evaluate the system's performance, weaknesses, and potential due to a lack of comprehension. To establish teamwork and comprehension between departments is crucial.

To maintain and improve their relationship with customers, CBA must engage in an implementation program involving formulators and implementers. The program will last for three months and cost Kshs. 1,000,000, with expected results including enhanced visibility and continued success as a top-performing company. The program will involve the Board of Directors and Managers in the development of a clear vision and mission for the company.

Below are the mission and vision statements, planning conducted by managers with input from staff within a period of 3 months and a budget of Kshs. 3,000,000.00, as well as the development of plans and budgets for a specific period and strategy formulation for their implementation.

Staff Training and Development will be provided by the HR Manager to the HR unit and all staff for a period of 6 months, with a budget of Kshs. 3,000,000.00. The objective is to have a competent and knowledgeable staff. Introduction to change will also be given with input from senior management and all staff for a duration of 12 months.

In the next

12 months, BOD and senior management aim to increase the market segment by purchasing new machines as line managers take charge. The cost of this initiative is Kshs. 5,000,000.00.

500 million: an increase in customer base and profitability. The role of managers is essential in all organizations, including banks, as a good management team is necessary for a business to thrive. Managers must consult and work together as a team. The CEO is crucial for success, as they must have a vision and be able to steer the organization toward great heights. An example of this is Mr. Evans Kidero, the CEO of Mumias Sugar, who was able to increase the shares of the sugar factory from Ksh. when he joined the company.

There was a change in the share price of two companies. One company's shares decreased from Ksh. 50 to Ksh. 40 per share, while the other company, Kenya Airways, increased from Ksh. 8.00 to an unknown value after remaining stagnant for over 10 years.

When Mr. Titus Naikuni became the new MD, the share price was at 98.00 per share. However, it appears that CBA's managers do not collaborate effectively when it comes to discussing important matters, such as implementing changes within the organization. The Executive Director and the Managing Director should have had extensive talks to ensure that the latter comprehends the importance of such changes and obtains an opportunity to clarify any concerns he may have.

Consultation would begin with managers, followed by staff in a cascading manner, to ensure a comprehensive discussion of the issue. After all perspectives have been considered, it would be the managers' responsibility to make decisions, plan, organize,

staff, direct, and coordinate. IT decisions are just one example of the many important choices that must be made. Therefore, CBA should strive to maintain a strong management team to maintain its position at the top.