A fit between the external forces driving change in the banking industry and the ABSA Group's response to it since 1998

Compaan, Linda (2002-12)

Thesis (MBA)--Stellenbosch University, 2002.

Thesis

ENGLISH ABSTRACT: The purpose of this study is to fit the external forces driving change with the ABSA Group's transformation since 1998; as well as to measure the success of it by evaluating the market's response to the changes. To provide a theoretical framework, a background to the external forces driving change, with specific reference to the South African banking industry is given. It was concluded that the entry/exit of major firms, globalisation, regulation and technological changes are the major forces impacting on the banking industry. There are however, also a number of unique forces driving change that is related to the South African environment. ABSA also had to deal with these factors such as the socio-political change and the domestic economic development. ABSA responded to these challenges by implementing various projects since the merger in 1991. Since 1998 (the time frame within which this study is undertaken), two major projects were initiated and implemented. Both these projects (Project IMPACT and Project ABLE) are two of the biggest transformation exercises ever undertaken in South Africa. ABSA's strategy evolved over time to such a point where the Group is currently focussed on the customer in targeted market segments. Strategic Business Units were established to optimise the focus on the customer. This process is currently still continuing. The success of the ABSA Group's transformation exercises is however, only as successful as the degree to which their changes fit the driving forces and the market's response to it. Against the backdrop of the major external driving forces (Chapter 2), it is concluded that these forces do fit the forces driving change within the ABSA Group. Looking at the cost-to-income ratio, it is evident that ABSA still need to do much more to improve this figure and to bring it more in line with its peer competitors. It is however heartening to see that the Group managed to reduce the ratio constantly year-an-year in spite of the considerable cost of the major initiatives undertaken. A comparison of the price-earnings ratio's of the four major banks over time indicate that the market's trust in ABSA's earnings potential increased and that their response to the changes is therefore in general positive

AFRIKAANSE OPSOMMING: Die doel van hierdie studie is om die eksterne kragte wat verandering dryf, te pas met die ABSA Groep se transformasie sedert 1998; asook om die sukses daarvan te meet deur te kyk na die mark se respons op die veranderinge. Ten einde 'n teoretiese raamwerk te verskaf, word as agtergrond die eksterne kragte geskets wat veranderinge dryf, met spesifieke verwysing na die Suid- Afrikaanse bank industrie. Die belangrikste kragte wat 'n impak het op die bank industrie is die intree/uittree van groot firmas, globalisering, regulering en tegnologiese veranderinge. Behalwe vir hierdie belangrike kragte, moes die Groep ook verskeie kragte uniek aan die Suid-Afrikaanse omgewing in ag neem, naamlik die sosio-politieke veranderinge en die plaaslike ekonomiese ontwikkeling. ABSA se reaksie op hierdie uitdagings was die implementering van verskeie projekte sedert die samesmelting in 1991. Sedert 1998 (die tydsraamwerk waarbinne hierdie studie handel) is twee groot projekte geïnisieer en geïmplementeer. Beide hierdie projekte (Projek IMPACT en Projek ABLE) was reuse ondernemings en kan beskou word as twee van Suid-Afrika se grootste transformasie oefeninge wat nog onderneem is. Die ABSA strategie het egter onwikkel oor tyd tot die huidige punt waar die Groep gefokus is op die kliënt in spesifieke mark segmente. Ten einde hierdie fokus te optimaliseer, is Strategiese Besigheidseenhede gevestig. Die vestiging en ontwikkeling van hierdie fokuspunt is steeds in proses. Die sukses van ABSA se transformasie oefeninge is egter net so suksesvol soos die mate waartoe dit die dryfkragte en die mark se respons daarop pas. Teen die agtergrond van die belangrike dryfkragte (Hoofstuk 2) is tot die slotsom gekom dat die Groep se transformasie proses wel in pas is met die eksterne dryfkragte Die koste-inkomste verhouding is 'n syfer wat deur beide die Groep en die mark uitgelig word. Deur hierdie syfer te vergelyk met die kompetisie, is dit duidelik dat ABSA nog baie werk het om te doen om hierdie syfer te verbeter. Dit is egter gerustellend dat die Groep daarin geslaag het om die syfer konstant jaar-op-jaar te verlaag, ten spyte van die groot kostes wat aangegaan is met die verskeie inisiatiewe. 'n Vergelyking van die vier groot banke se prys-verdienste verhoudings oor tyd dui dat die mark se vertroue in ABSA se verdienste potensiaal toeneem en dat hul respons tot die verandering oor die algemeen positief is.

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