Submitted to: - Compiled By:-

Anurag Hans Akash Bhargava

Shubhra Behl Anuma Tandon
Deepika Agarwal
Pooja Rathee
Priyanka Khandelwal
Shivani Rani
Shweta Nahar

1
 Page No.

1) Executive Summary 3

2) Where are we now?

a) Analysis of the Industry and competition 5

b) Value chain analysis (Internal analysis) 8

3) Where we want to be?

a) Performance Review 11
b) Key issue and opportunities 13

4) How will we get there?

a) Marketing Strategy 13
b) Plan of Action 15

5) Did we get there?

a) Controls 16

6) References 17

2
“Axis Bank” was the first of the new private banks to have begun operations in 1994, after the
“Government of India” allowed new private banks to be established. The bank was promoted
jointly by the “Administrator” of the specified undertaking of the “Unit Trust of India (UTI)”,
“Life Insurance Corporation of India (LIC)”, “General Insurance Corporation of India” and four
other PSU insurance companies.

The topic microfinance though is not new but still isn’t popular within the country. Microfinance
is a technique of providing finance to the poorest of the poor people who are scattered in the
various geographic areas. To under this concept let us take an example.

There is a group of say 40-50 people who need banking service but cant have it due to
geographical distribution. Since they are from rural segment and are unable to go to cities for
getting the financial service. For a bank it isn’t possible to open a branch in such a remote area
and provide banking service to them. So they gather these people forming a micro group and
contact them for banking services. The group is called at a particular pre decided area where the
bank provides service to them. Here we can say that microfinance is made of two words where a
micro group gathers to get financial services (i.e.micro+finance).

Commercial banks have recently entered this field. In their absence microenterprise lending has
developed on an alternative track through a large numbers of nongovernmental organizations
(NGOs) and other specialized financial institutions. The scenario was same throughout the
world. Development began late in India but was acerbated with NABARD coming into existence
in late 1982. Later other MFIs’ such as “Bandhan” and “Centre for Rural Reconstruction through
social action” also came into existence. Now micro lending is not just restricted to MFI’s.

With the success story of “Grameen Bank” in Bangladesh which came into existence in late
1983, others banks were also inspired to enter this sector and the growth rate of microfinance
was accelerated. India, being an agro based country and with majority of the population falling in
the rural segment, the number of customers to be served is high.

Now almost every bank has tie-ups with MFI’s to serve the poor segment. Even Axis Bank is in
this sector but the market share is very low. In the commercial bank sector SBI and ICICI are the
major players having an extensive network of teaming up with MFI’s and SHG’s. On the
contradictory Axis Bank being first private bank to commence business in the country is still not
able to compete with these leaders in terms of “Microfinance”. The objective of this plan is to
study the market and suggest some ways by which Axis bank is able to challenge these leaders
thus gaining share and business in the market and extending its’ network in microfinance sector.

This study methodology includes comprehensive analysis of the industry, competition and
internal environment of Axis Bank, and then keeping the strengths and weakness in mind
formulating of various strategies that can be implemented to achieve the objective of gaining
business.

3
In the scope we are just restricted to the microfinance sector of India. We have taken into
consideration three banks i.e. ICICI bank, State Bank of India and Axis bank. The study includes
the reasons why ICICI and SBI being the leaders in this sector and their success traits are
compared to that of Axis bank.

Microfinance is a big industry and before crafting any strategy is essential to analyze the current
environment trends. To put this plan into action basically we are concern with analysis of the
industry as a whole, analysis of the competition and analysis of the internal environment. Under
current situation and trends the first two are covered.

Analysis of Industry
“PEST Analysis”

 Political Environment
India is a republic country having high density of population and major part of it living in
the rural or remote areas. As known for the internal politics of the country in last few
years there have been conflicts along the ethnic lines. There has been a regular growing
discrepancy between the wealthy and the poor’s. The government is more or less stable.
Apart from that there are various regulations on the “Microfinance”. Mainly the
regulation of MFI’s is through NABARD and on co-operative banks are by RBI like the
loans given to the SHG have high regulated interest rates which mostly are for recovery
of operational cost resulting in low profit for the bank on short run.
The state and the central government have close control on the banks. Due to many
irregularities in the political scenario the trust worthy operations are becoming
troublesome. Availability of new licenses is limited by the fact that not many new banks
are able to be successful. This has made RBI reluctant to provide new licenses. This has
made the entry in the sector difficult.

 Economic Environment
Taking of the economy, Indian economy is one of the fastest growing economies. Since
1980’s there have been great changes in the Indian economy. The biggest impact was of
linearization and globalization opening doors for foreign banks. In the recent report of
2nd quarter of 2009-2010, the Indian GDP rose to 7.9% with service industry
forming the highest share in the GDP.
Still the micro finance sector is not contributing to GDP on the large basis. In the current
scenario MFI still is a new concept for the Indian economy due to unawareness of the
customers. Growing at a fast pace micro finance shows signs of enormous contribution to

4
 the GDP in the near future. The current budget lays emphasis on the microfinance and
rural segment ensuring that the government of the country is thinking of the rural market.
Providing great growth opportunities and big population to serve micro finance has been
an attractive field to work on. Policies of government are helpful in creating awareness
among the low income strata group promoting micro finance at both regional and
national level.

 Social Environment
According to census of India, more than 60 percent of the Indian population lives in
towns and villages (rural segment). Due to rapid urbanization Indian youth is attracted
towards cities leaving behind the people of age group of 35+ in the rural segment. New
trends have created much more awareness about the education which is accelerated by
the free and compulsory education provided by the government. In spite of such efforts
some backward areas like UP and Bihar are still having literacy rate as low as 50% when
overall literacy rate of the country is 74%. So the target group is difficult to be educated
because of their lack of understanding of the benefits of microfinance. Due to
unawareness and lack of understanding the people prefer taking loans from local lenders
at interest rate as high as 120% instead of these MFI’s and banks. Wide geographical
spread also acts as a hindrance for spreading the knowledge and understanding which is
coupled with the problem of approaching the targeted customer.

 Technological Environment
With such a vast population living in the rural sector, MFI’s and bank dependence on
technology has been a big problem. Technology when used effectively can have a
transformative effect in unlocking greater efficiencies, more direct outreach to the poor,
the innovation of new services and broader financial transparency across the sector. Also
to monitor the quality, sustainability, and efficiency of the loan portfolio, to measure its
development impact, and properly manage the administration tasks of a MFI,
computerized MIS comes in very handy. Innovations such as mobile phone banking,
smart cards, biometric IDs, and rural kiosks are expected to help reduce the operating
costs of Indian MFIs and banks while improving transaction security.
Technology on other hand is capable of reducing cost and risk associated with the
transaction increasing the security. It also reduces the time required for the transactions.
With private banks such as Standard Chartered entering in microfinance who is real big
player on term of global market use of technology is gaining popularity.
In India due to social cultural condition the targeted market is reluctant to adopt the new
technology so to make people familiar with these emerging trends is a tedious task.

“PORTER’s Five Forces model for the Micro Environment”.

5
 Threat of New Entrants
The entry in the microfinance sector isn’t profitable on a short run basis. In order to be
successful and earn profit from this field it is necessary that any player have a dense
network with MFI’s and be in the industry for a long term. There isn’t much product
differentiation possible in this sector because of the predefined rules and regulation. The
only thing that can be one is offering vast range of loans. Since this sector is growing at a
very fast pace and with India being an agro based country this sector provides huge
opportunities and growth in the near future. Brand identity plays a very important role for
the ties ups with the MFI’s. Initial capital requirement is huge and the new entrants face
the problem of mobility of capital. Since the network of MFI’s and the customer to be
dealt is geographically spread, the bank must have their presence all around. Therefore
this industry is not for small or regional banks.
For the government interference there are strict rules for operation in this sector like the
interest rate can’t be high and no bank can directly enter in this sector without having tie
ups with MFI’s. Seeing the scenario if the bank is big having good brand image, huge
capital to invest and can retain in the industry for a long time developing the network
with the MFI’s, the industry is profitable on a long run regardless the fact that there are
strict regulation in this sector. Hence on a scale of five this industry from the point of
new entrants can be rated as four if the bank is small or regional and two if the
bank is spread country wide.

 Bargaining Power of Suppliers

As discussed not much of product differentiation in a category is possible because of
predefines rules. According to the study it is revealed that there is one bank for every
15000 people in the country. These people are the funds raisers of the bank i.e. the
suppliers and as seen there are limited source to invest for them. Switching cost of
suppliers is not too high but the time period acts as constraints. If a supplier has invested
an amount in the bank in FD there is a time constraints attached to it. Still banks are the
most reliable and trust wordy investment centers.
Due to the regulation of the government there is not much differentiation available hence
the bank competes on the level of service provided i.e. new technology, time required to
avail the service, ambience etc. Since it is a service industry delivering of the service
becomes important task. From the point of view of the powers that the suppliers have
the industry is quite attractive giving an overall rating of two on a scale of five.

 Threats of Substitutes
Substitutes that are available are NGO’s and other specialized financial institutions. In
India the network of microfinance has been established by these alternative tracks. Now
the banks have entered this sector seeing potential and are contacting these specialized
financial institutions to provide finance. Banks are more trust worthy and hence are

6
 capturing the market at a very fast pace. Here the brand image and capital available with
banks make it more superior on the substitutes available. The policy of bank to tie up
with MFI’s has reduced the availability of substitutes. On a scale of five threats of
substitutes can be rated as two.

 Bargaining Power of Buyers

Just like suppliers the customers available are many as compared to the availability of
resources for delivery of services. Here brand identity, availability, price to be paid and
product differentiation plays a very crucial role. Defining that the customers to be served
are MFI’s the bargaining power of customer becomes very high. Hence on a scale of five
it is rated as four.

 Competitive Rivalry within the Industry

The potential market for microfinance in India appears to be 245.7 million customers
and an annual loan demand of Rs.2293.725 billion. Here the competitors considered
are ICICI bank and SBI. These banks have strong infrastructure and have been in this
field since years. On one hand ICICI have catered 3.5 million customers and have lender
credit worth Rs. 25.82 billion by the end of financial year 2008-09, SBI have lent Rs.80.5
billion covering 53,000 villages. On the other hand Axis bank has just supported
1.42789 Lacs customers. ICICI have also gone for initiatives to increase awareness
among rural customers for enhancing credit penetration in rural areas. They launched the
“Kamdhenu - Cattle Loans Campaign” to reach out to cattle farmers. The campaign
received two marketing awards - the Rural Marketing Agencies India (RMAI) Award and
the WOW Events &Experiential Marketing Awards. SBI for promoting microfinance
have taken various initiatives under “Bonding with Farmers” which includes “SBI ka
apna gaon”, “Kisan manch”, “farmer’s club” and “farmer meets”. From the point of
view of Axis bank the competition is with well settled players and is quite high
.Hence it can be rated as four on five.

Taking the composite score it comes out to be 2.75. From a bank which is spread over the
country it is an attractive industry having huge number of potential customer but for a regional
bank it is not a project to be undertaken.

Value chain Analysis

7
 Supporting Activities

Services

Primary Activities
1. Firm infrastructure: Being a private sector bank Axis bank has good infrastructure. It
has all the necessary facilities for a better work environment. There are different sections
for the smooth working and providing a feel of customer satisfaction. ICICI being the
number one private sector bank has a flawless infrastructure with one window system and
token system. SBI being a PSU is not very efficient in working timely. To some extent
there is biasness in providing services to the customer.

2. Human Resource Management: Axis bank has low attrition rate with high level of
employee engagement. Various employee benefit schemes are available for the
betterment of employee job satisfaction. In ICICI too high level of job satisfaction was
seen. SBI being a PSU provides extra benefits to the employees which are in term of job
security and compensation.
3. Technology Development: In terms of technology Axis bank is way ahead of the other
two. Axis bank recently received awards for its IT related initiatives. The other two banks
also have sound IT department.

8
4. Inbound Logistic: The money is collected from the investors in different form and is
assembled for the further transaction. These forms may be FD, current account, saving
account, different schemes running in the bank, etc. Money in form of return is paid and
that differ from scheme to scheme. Due to RBI regulation the interest of all banks is
almost the same.
5. Outbound Logistics: Outbound logistic is concerned with the distribution of the
investment gathered to the most beneficial scheme. Here resource allocation is important.
By resource allocation we mean the bank has to decide where to put the money for
maximum benefit. The criteria differ from banks to banks. Some part is invested in firms,
some in other SBUs, etc. More or less each bank is rated same in this section too.
6. Marketing and Sales: With so many banks coming into picture marketing has became a
major issue. It plays a very important role in distinguishing. Axis bank has been regularly
doing promotional activities but ICICI is way ahead of it. SBI being a PSU possess high
image in spite of minimal advertising.
7. Services: The service level of the organization can be judged on the basis on customer
satisfaction. Overall the service provided is good. If compared ICICI would rank first
followed by Axis and then SBI.
8. Margin: Margin is very l low. The amount of interest to be charged is predefined by RBI.
Due to high operation cost the margin is not very high but within the industry it is more
or less the same. On long term basis the business is highly profitable.

9
Resource Based Approach
Internal Area Resource/ Competence Evaluation
Physical Resources Use IT extensively like technology based risk It is major
management system, technology for customized strength(+4)
solution, technology based solutions.
Human Resources Highly train technical staff which acts as platform to It acts as minor
achieve corporate level strategy strength(+2)
Financial Not very strong at financial resources Acts as major
Resources weakness(-2)
Intangible Weak corporate Image in the industry It acts as major
Due to UTI Brand weakness(-4)
Human Resource Low attrition, high employee engagement Acts as major
management strength(+4)

Performance Analysis Approach

i. Financial Perspective
The bank is an identity holding bank spread over the country. With the passage of time
the net profit had increased by 69.5% as compared to the previous year but in terms of
rupees (1.815 billion rupees)is much lower that that of ICICI(16.09 billion rupees) and
SBI(9.121 billion rupees). So as compared to the industry and key competitors the
financial resource of the company is not very strong.

ii. Customer Perspective

From the customer perspective the database has grown to .14 million customer but still is
way below from the key competitors ICICI (3.5 million customers) and SBI (more than 3
million customers). Hence it can be concluded that the bank has not a large enough
database to work on.

iii. Innovation and learning Perspective

On the terms of technology and innovation Axis bank is way ahead of others. In the last
financial year it has received many awards for it’s innovative use of technology like
being the first among Indian banks in submitting centralized R-Return for foreign
exchange transactions by the 'B' category branches to RBI, being the first bank in the
country to market EMV chip embedded Debit Platinum, Travel Currency and Credit

10
 Platinum cards, development of a product for Business Banking for printing cheques at
the customer locations after due validations of issuing a cheque series.

Axis bank is not new to the industry. Having its root in the microfinance sector, the following is
the performance review:

i. Product
The various customized schemes available are Kisan Power (credit to farmers for
meeting cultivation needs), Powertrac (to finance farm equipments and machinery),
Commodity Power (loans for warehousing), Contract Farming (to finance farmers who
have contract farming arrangements with corporate), Power Gold (loan against security of
gold ornaments), Arthia Power (cash credit facility for meeting the commission agents’
working capital req.), rural Godowns, cattle power and horticulture projects.

ii. Place
The service is available around the country. Power Gold is a product available in only
selected branches of South India. Out of 835 branches only 30 branches are in rural area.
The Cash Management Services (CMS) initiatives leveraged the Bank's growing branch
network and robust technology to provide a wide range of customized solutions to suit
the dynamic requirements of its clients. Place of delivery of service is usually the
branch or the MFI institute.

iii. Price
The price or the lending rate is predefined by the policy of RBI and NABARD and are
usually high due to small loan amount and in order to cover the operating cost. Right now
the lending rate is 7%.

iv. Promotion and education

For the promotion and education of microfinance, Axis Bank has partnered with reputed
MFI’s, lending through SHG and government sponsored schemes, extending loan under
differential rate of interest scheme. The code of commitment of micro and small
enterprises was adopted during the year 2009 to support the development of this segment.
The Bank has taken various initiatives in the area of increasing use of technology in
its day-to-day operations. The most notable achievement this year was in the area of
financial inclusion, where the Bank was successful in deploying a separate dedicated
core banking solution, which has the capability of maintaining liability accounts as well
as agricultural lending accounts for microfinance. The current volumes handled in the
software are 6.21 Lacs accounts. This has allowed the Bank to substantially reduce

11
 transaction costs while complying with regulatory standards. Also runs many educational
programs.

v. Process
The process is simple. A group of SHG or MFI contacts the bank giving details of
amount of loan required, number of people to be benefited etc. The loan agreement
request is sent to the State government who provides a subsidy of 25% of the amount.
75% of the loan amount is given by the bank to the MFI or SHG. The process takes
about 15 to 20 days.

vi. Physical environment

The physical environment of Axis bank is pleasant. Proper signages are used for the ease
of the customer. The internal environment is in synchronization with the brand by usage
of same colors as in the logo. Further for customers ease information is also available in
form of brochures. The environment is comfortable in terms of sittings and furnishing,
cleanness etc.

vii. People
Human Resource is well managed having average age of 29 and includes young recruits
and experienced officers. The targeted customers are rural sector people who are
contacted through MFI and SHG. Mainly the customer can be regarded as MFI and SHG
who bring business to the bank. So the crowd of MFI and SHG is well educated, sound
with technology and the proceedings of the bank.

The customers are more or less satisfied. The only problem that is faced is lack of awareness and
lack of reach. Since the final customers that have to be served are illiterate they are unable to
distinguish in different bank offering and every bank appears to be one and the same. It all
depends on MFI that whom they are promoting and whom they are not promoting.

12
 Strength Weakness
Internal  Strong HR and IT  Not having good image
 Customized schemes  Lack dense network
External  High level of service  Market capitalization is low
Opportunity  Increase use of IT for catering  Raise funds from existing
 Huge number of un catered the MFI’s and SHG. customer and then tap the UN
customers  Increase range of customized catered one.
 Fast growing segment product offering.  Build network around
developed MFI’s.
 Increase promotion for reducing
the UTI effect
Threats  Build strong brands and focus  Generate awareness about the
 High competition from banks on network. benefits.
 Well established network of  Increase differentiation on  Go for encirclement strategy
NGO’s and MFI’s basis of IT.
 Reluctance of people

13
Corporate Level
Keeping the situation in mind it is now analyzed that the segment to be catered is a very vast
segment which is still untapped to a great extend by any of the players in the industry. Here there
is great opportunity for Axis bank to challenge the market leaders and increase the size of catered
customers by contacting the not catered segment. Hence the strategic mission should be share
growth. Being a challenger it should try to gain share from the well established players and
expand the business with in three years.

SBU Level
Among all the four generic strategies which help in winning a sustainable competitive advantage,
differentiation strategy suits the best for the Axis Bank. Not much can be done with the product
offering but the range or the areas covered can be increased. Apart from that the technology
support that the bank is offering is the first in its type. It should maintain this scenario.
Dealership or tie ups with the MFI’s must be enhanced in order to cover more and more area.
Much emphasis should be paid on the service offered so that it becomes a differentiating factor
for the bank.

Functional Level
At the functional level the main focus should be on two areas one being marketing and other
being finance. The concept of microfinance is still unknown to many of the targeted customer.
The database of the customer to be served is huge. In order to increase market share market
penetration and market development strategies can be followed. Under these strategies the bank
should focus on the current product, current market and new product, current market. Here the
focus should be to create more and more awareness among the existing database, target the part
of the segment that still untouched and develop new range of products for the existing database.

The main competitors have developed infrastructure in the area. So the bank should also focus on
development of the infrastructure by increasing the number of MFI’s tie ups.

Here Axis bank is a challenger so the different tactics that can be applied by the bank are
encirclement, guerrilla attack, and frontal attack.

 The bank can go for the encirclement by covering the various ranges of products that can
be offered in this segment. Strong network should be established by increasing the
number of tie ups with the MFI’s and other institutions.
 There is still a big band of MFI’s that don’t have tie ups with any of the banks. These
MFI’s can be targeted to increase the range of customer served.
 The bank is good on technology, so it should be promoted the same.

14
Focus should be on the finance department too as the main weak point with the bank is that it is
low on finance as compared to the leaders. So it should try to work on finance by cost cutting
and increasing the revenue.

The product is in the growth phase where though many players are in the market but only few
have decent market share. So the competitors can be regarded as few in number. Keeping this in
mind the following is the plan of action:

 Product: Range of product offered should be increased

 Place : Open more and more branches in rural sector

 Price: Prices are pre regulated so it can’t be modified to a great extend. But in SBU other
than microfinance price should be increased in order to gain more and invest more.

 Promotion: different promotional schemes should be there and more emphasis should be
on education of the customers.

 Brand positioning should be laid emphasis on because still there is an image of UTI
attached to it.

 Enhance the network through tie ups with more and more MFIs and SHG.

 Try to raise more funds from present customers and gain new customers.

 Ensure brand loyalty for maintenance of present customer.

15
The model used for monitor the success of the plan is “The process model of competitive
advantage and control variables”

Outcome Operationalization Typical measure

Customer Satisfaction Overall satisfaction level of Survey, rating by customer.
customer. Difference between
customer expectation and
service provided.
Customer Loyalty The extent to which customer Survey of loyalty.
can switch to substitute.
Market Share The total segment captured Company’s turnover over the
compared with total available total industry turnover.
Measurement of financial Sales Growth Percentage increase in sales of
productivity two periods.
COGS(Cost of goods sold) to Total cost as expressed as
sales percentage of total revenue.
Gross profit margin Operating profit as a
percentage of sales
Net profit margin Compares the revenue to net
profit
Return on equity Value addition to firm by
increase in revenue and profit.

16
 www.axisbank.com

 www.statebankofindia.com

 www.icicibank.com

 www.thinkmicrofinance.org

 www.indiamicrofinance.com

 Marketing Strategy – by Walker Mullins & Boyd Larreche

 Crafting And Executing Strategy – by Thompson, Strickland, Gamble and

Jain
 Annual reports of the respective banks.

17