The Fifth Largest Financial Group In Malaysia Finance Essay - Free Essay Example

The advancement of technology may influence the profitability and the competitive advantage of RHB. RHB introduce RHB Now which is an e-banking system for their customer is because most of their customers have internet access either at home or outside.  [9]  RHB Now allows their customers to access their banking account through the internet to perform banking activities such as checking balances, transfer funds and bill payment.  [10]  The aim for the RHB Now is to make it convenient for their customers as they may not be free to visit the bank physically due to their daily works. They can perform their banking activities via internet instead of visit the bank branches physically. Other than that, the technology advancement surrounding the business environment allows RHB to take on an opportunity to introduce RHB Now Mobile Banking app. Nowadays smart phones are widely used by the public as it is convenient and easy to be carried. Hence, this mobile application enables the m to access their bank account rather than using personal computer. It is a miniature of RHB Now and it provides all the features on the RHB Now, except for the application on Initial Public Offerings and share trading. Customers may enjoy this service by downloading the RHB Now Mobile Banking app and login by using their RHB Internet Banking Username and password. Customers can also obtain the updates of the RHB privileges and discounts that are offered to them and keep updated with happenings at RHB by using this mobile application.  [11]  The application is to add value to the demanding lives of their customers to provide them a convenient method to access their bank account.  [12]  However, the interruption of the internet connection causes disappointment towards the RHB Now users as they may have difficulties in completing their banking activities through the system. The customers experience slow browsing speed while accessing RHB Now due to the cable problem of the int ernet service provider. The internet services providers in Malaysia include TM Net, Unifi, Celcom, Digi, Maxis and so on.  [13]  The internet service provided by the service provider is not always stable as they have limited cable with limited bandwidth.  [14]  The poor internet service which causes the disruption of RHB Now reduces customers satisfaction and they might refuse to use it again. Besides that, the advancement in technology also has negative impact on RHB as they may face fraudulent risk. This is because the technology that is being enhanced in todays world increases the risk of bank transactions over the internet as the outsider might hack into the companys system and increases the rate of fraudulent crime.  [15]  These fraudulent criminals attempt to steal the information of the customers through Trojan attack and man-in-the-middle attack. The hacker will install a virus known as Trojan in customers computers when they visit certain websites or download pr ograms. The hacker uses Trojan as an agent to hack into the computer of customers to steal their bank account information and make fraudulent transactions. Besides that, the hacker may use man-in-the-middle attack to steal the information of the customers. The hacker may create a fake website to trick the customers and the information keyed will be captured by them.  [16]  The privacy and security of customers will be threatened as their information will be transferred via the internet. The bargaining powers of supplier of RHB bank are relatively low. The main suppliers of banks are depositors, creditors and central bank (Bank Negara Malaysia). Depositors are those people who have excess of money on hand and prefer to get a regular income with these moneys safely. In banking industry suppliers have low bargaining power. The natures of the suppliers are generally those people who have preference to have a low risk investment and have a regular income with interest. The depositors want their money to be safe. Bank provides the best play for them to deposits their surplus money. RHB bank provide fixed interest rate on fixed deposits and depositors can claim their money regularly compared to investing their surplus money on other places such as investing in shares and gold which has higher risk. (#reference 1)So that, banks provide the best place for them to deposits their surplus money. Depositors believe that RHB provide the safest place than other investment alternatives. Thus, the bargaining power of suppliers will be lower. In Malaysias banking industry, all banks are controlled by Bank Negara Malaysia (BNM). Bank Negara Malaysia set the rules and regulations for every bank operated in Malaysia. These include the interest rate, exchange rate, financing guidelines and reporting standards. RHB bank does not have choice to choose for their best interest rate as it is controlled by Bank Negara Malaysia and it should be the same proposed for all others banks i n Malaysia. The latest minimum rates for the fixed deposits on RHB Bank which between one month to twelve months for the balances of RM 1 million or below will be 3% for 1 month deposit and 3.70% for 12 months deposit. The fixed deposit rates are sets to ensure that depositors will get positive real rate of return. (#reference 2). The benchmark interest rate in Malaysia was last reported at 3.00 percent. For instance, RHB bank cannot control the interest rate of lending and borrowing. So that, the bargaining power of suppliers are low.The threat of new entrant have poses a threat to RHB bank and these will directly affects the operations and profitability of RHB bank. There are not only the incumbent rivals that will pose a threat to RHB bank in this industry. There are possible that the new entrants may enter to banking industry and thus can affects or increase the competitions in banking industry. By merger and acquisition of the existing banks, there will be an immediate effec t on RHB Bank. In long term view, by increasing the size and financial strength of the merge of existing banks and may alter the market situation slightly. Recently, BNM announce that foreign banks are allowed to own bigger stakes in Malaysia. Besides, they also grant more licenses and ease short- selling rules as it seeks to have triple sizes of the finance sector. (From Bloomberg news Dec 22) As a result, this may increase the competition in local market. This may also encourage foreign banks to merge with local banks to expand the size of finance sector. The gradual removal of barriers for overseas investors will result in a level playing field and make the local financial market more competitive, Abdul Jalil Abdul Rasheed (from Bloomberg news Dec 22) However in the recently news, RHB Capital Bhd have signed a conditional share purchase agreement with OSK Holdings Bhd that RHB Capital will acquire 100% of the OSK Investment Bank Bhd shares from OSK Holdings in exchange of RM 245 million new RHB Capital shares and cash of RM 147.5 million. By the combination of RHB Capital and OSK investment bank Bhd will transform RHB Investment bank bhd into Malaysias largest investment bank. On the other hand, a new entrant to banking industry doesnt pose much effect on RHB Bank. It is because that is not easy to start up a bank. By starting up a bank in Malaysia, it requires a huge amount of capital. Besides, a new entrant does not have straight effects on RHB bank. It is because RHB banking Group is currently the fifth largest fully integrated financial service group in Malaysia. If there is a new entrant, the new entrant is hard to achieve the cost leadership in banking industry. It is because the economies of scale of RHB Bank are the leadership in banking industry. Furthermore, there are a also a threat of new entrant from other services industry. Internet bill payment is services that can be easily capitalize by entrepreneurs. It is a good sources of generate revenu e which are in terms of fee-based revenue. This is a threat poses to RHB Bank because entrepreneurs may squeezed out of the payment business from banks. However, with the new strategies of RHB Bank by using pay pal and easy banking it may have competitive advantage over the others financial banking institutes. Another threat that will poses to RHB Banks is companies that offering other financial services. If an insurance company start offering mortgage and loan services, it would be the new threat to banking industry. Besides that, not everyone can and exit the banking industry easily, it is because to start a new bank must fulfill the requirement from Bank Negara Malaysia (BNM). The government restrictions and legislation are set by BNM. BNM provides the rules and regulations for every new entrants of bank by using Banking and Financial Institutions Act 1989 (BAFIA). (# reference 3). Thus, the bargaining powers of supplier are low. The bargaining power of customers in Malaysi a banking industry is extremely high as there large number of alternatives for the customers to choose. Apart from RHB Bank, there are so many banks and non-financial institutions in Malaysia. Therefore, there are a lot of choices for the customers to deposit their money or conduct their financial services. Those alternatives include CIMA Bank, Citi Bank, HSBC Bank, Hong Leong Bank and Public Bank. Moreover, there are still a lot of non-financial institutions such as EPF, insurance companies and unit trust companies.  [17]  Those non-financial institutions normally provide same services as financial institution such as RHB Bank. As a result, customers will have high bargaining power because they can choose from these alternatives. Another factor that will affect bargaining power of customers is the switching cost of choosing other bank alternatives in opening a banking account. This switching cost is low because people can just go to any bank of their preference to do so with si mple and swift procedures which does not cost much. It even cost nothing at all when one decided to deposit their money in any bank account whenever and wherever he or she wants. Compared to other major banks like Public Bank Berhad and Maybank, RHB Bank do not have the most branches widespread nationwide, which may provide relatively less convenient service to people, eventually decreases the switching cost for customers to go for the competitor banks. In additions, RHB bank also has less ATM machines compared to other banks.  [18]  Thus, the customers will prefer to have a bank which is convenient or nearby for them to do their banking service. Besides that, one of the major factors that causes high bargaining power of customers is they have full information with the current advanced information technology. The customers can likely know the feedback from other customers regarding the services offer by banks via internet. From the feedback, they can know exactly whether the bank service is good or bad. The bad feedback on the website will have a strong impact for other customers which will make them have a bad impression on that particular bank. For instance, there have a customer who complaint about the bank services provided by RHB bank. He was fed up and decided to cancel the RHB credit card and ask for refund on his credit balance.  [19]  This shown that the services offered are very important to a bank as the bank must have a good reputation in order to gain a good customers feedback on the website. There are large number of banks exist in Malaysia. The examples of bank that operates in Malaysia are CIMB bank, Citibank, HSBC bank, Hong Leong Bank, Public bank and Maybank.  [20]  All these banks compete with one another throughout Malaysia by providing similar services. RHB faces high competition as all these banks provide similar services and they even have more branches throughout Malaysia compared to RHB bank. RHB loses the competitive a dvantages in terms of the number of branch outlet in Malaysia. Besides that, most of the banks provide homogeneous product and services.  [21]  RHB retail banking offers services like mortgage, hire purchase financing, study loans, lease financing, personal loans, credit cards, remittance service, deposit collection, general insurance and investment products.  [22]  All these products and services are similar with the product and services offered by other banks. Furthermore, all the banks are offering the same interest rate as they have to comply with Bank Negara. All the banks in Malaysia are not allowed to set their own interest rate as Bank Negara controls the interest rate to ensure that the depositor gets back the returns they entitled to.  [23]  Therefore, all the banks are competing with the similar product leaving RHB having no competitive advantages in terms of product and services. However, RHB have this special service by the name of Easy RHB which introduce a new concept in the banking delivering with cutting edge technology. It provides paperless account opening, Insurance Kasih PA (Personal Accident), application for debit card, instant approval and disbursement of loan.  [24]  The services provided by Easy RHB only required ten minutes to complete the application of the required service and it is available all over Malaysia. The feature of instant approval of loan enables customer to obtain instant flexible personal financing amounts from RM 2,000 to RM 50,000.  [25]  It is very easy and convenient for anyone who requires the fund urgently. This service enable RHB to compete among the other existing banks as other banks does not have this special service. This service brings competitive advantage to RHB as there are many customers in Malaysia who demanded for this kind of services. Lastly, banking industry has high exit barriers. It is not easy to exit the banking industry as it requires many procedures to do so. The high exi t barriers in the industry are making the competition between RHB bank and other competitor even higher. This is because all the banks have to compete to survive in the market as they know they cannot exit the industry easily. Therefore, every bank will do their best to maximize the shareholder wealth while maintaining the survival of the company. RHB Bank provides banking products with a range of variety to customers i.e. corporate and investment banking, retail banking, business banking, group treasury Islamic banking business, and global financial banking. These products aim to attract customers to place their money in the bank so that more cash flows can be produced in order to increase the profitability of the company. In the banking industry, for the most parts substitute products do not pose real threats to us. Despite a personal loan is deemed to be a substitute of a mortgage, yet in reality both are actually loans taken by customers in need of money. The same applies to the other bank products and financial institutions. Mortgage companies served as a substitute of banks but the product offered is similar with the one offered by an alternative vendor. In any case, there is a high probability that a mortgage company is owned by a bank holding company. For example, RHB Bank offers My1 Home Loan mortgage services. On the other hand, different banks serve almost the same function of bank transfers. Even the Internet banking services are actually bank transfers as a huge evolution of products from paper to electronic is being continued for years to come. Such circumstance intensifies the competition of innovation but the final services of moving money from one and another accounts remained unchanged. However, in terms of branding, RHB Bank is facing stiff competition with other main anchor banks and foreign banks in the industry. Malayan Banking Berhad, also known as Maybank in short, is the market leader of the industry. It is the largest financial servic es group in Malaysia with wide range of financial products and services offered including investment banking, commercial banking, offshore banking, Islamic banking, Internet banking, leasing and hire purchase, factoring, insurance, trustee services, stock broking, asset management, nominee services, venture capital and discount-house business. At the same time, Maybank also owns the largest service network in Malaysia and also branches in key international financial centers. In Malaysia alone, Maybank has more than 480 branches comprising business centers, trade finance centers and insurance offices. Meanwhile in overseas, Maybank has branches in several countries i.e. Singapore, Philippines, Indonesia, Brunei, Vietnam, Hong Kong, China and United Kingdom etc.Compared with the market capitalisation of Maybank in the market, RHB Bank with only 174 group branches nationwide is certainly facing disadvantage. More branches of a bank ensure enhanced conveniences for customers to carry ou t banking and finance activities. Meanwhile, it also boosts the brand name of the bank. In this sense, Maybank already made themselves highly popular among the people in Malaysia.In terms of investing, potential customers have different ways to place or invest their money according to their personal preferences and risk appetites. Customers who have excess funds may invest their cash in bonds. For example, bonds are fixed income securities issued to lenders of long-term loans, with a maturity date. They yield returns in the form of fixed periodic payments which are more secured compared to banking accounts. In Malaysia, one of the most popular bond products is the Exchange Traded Bonds and Sukuk (ETBS).Besides, people might also invest in unit trusts. Unit trust is a professionally managed investment fund, which collects resources from investors with similar investing objectives. The large sum of capital is then invested by fund managers into the stock market, bonds, money market, p roperty or others according with the investment objectives. When dealing with the investment choices, it might down to the buyer propensity to substitute which differentiate the products. Each bond in the market has its different price respectively and most of them are in a high price, which means it requires a switching cost if people tend to change their decision from putting money in bank accounts to invest in bonds. For ETBS, the principal price is stated at RM 100.00 per unit and comes in a minimum board lot size of 10 units per lost size, thus each lot costs RM 1,000.00 (excluding transaction cost).  [26]  Whilst for unit trusts, there is a minimum initial investment amount for each fund, which stated in each of the prospectus, respectively. Normally, the amount of RM 1,000.00 is required as the minimum initial investment. It incurs a high switching cost between bank savings and unit trust investing.  [27]  Compared to both of the investment methods above, the initial capital required to open a banking account in RHB Bank is just as low as RM 100.00. The switching cost is certainly high for consumers to take as there is a huge price difference between the methods, which means that customers who opt to go for investing in either bond or unit trust rather than depositing their money in bank, have to incur an extra RM 900.00 as their initial investment outlay.  [28]  RHB Capitals business is diversified and they have 7 major segments. These segments include corporate and investment banking, retail banking, business banking, group treasury, Islamic banking business, global financial banking and supporting centre and others.  [29]  Since the company has many segments, we will use the Pareto 80/20 rule to determine the 80% revenue generated from the total segments that the company have. Pareto analysis is plotted into a graph to show which segments able to provide 80% of the total revenues from all segments. From the Pareto analysis, we can con clude that the segments which are able to generate almost 80% of the revenues from all the companys segments are corporate and investment banking, retail banking and business banking. We will be evaluating the attractiveness of the business portfolio that RHB is holding based on the 3 segments which made up to approximately 80%. The Boston Consulting Group (BCG) Matrix is adopted to evaluate the attractiveness of the business portfolios of RHB. It is used to examine the different businesses in the portfolio on the basis of their relative market share and the market growth rate. The BCG matrix will provide the company a view on their business strength and relative market share in order to identify the comparative advantages indicated by the market dominance. Each segment will be plotted according to their relative share price and the market growth rate in the four quadrants, which include Stars, Question Marks, Cash Cows and Dogs. These segments have different market leader which are CIMB Group Holding Berhad and Public Bank Berhad. After calculating the relative market share and market growth rate, we come to a conclusion that retail banking falls under the question mark quadrant as it has a low relative market share and high market growth rate. Retail banking has the highest revenue generated and therefore it has the biggest circle among all the 3 segments. This shows that retail banking is growing rapidly and they are still in the early stage of the product life cycle. Retail banking has a high potential to grow continually as they are still at the early stage of the product life cycle. However, retail banking has low market shares because they do not generate much cash. The company will face problem in collecting funds and they will not have enough cash for retail banking to grow. Retail banking falling under the question mark also known as having a problem child.  [30]  It has the potential in gaining market share and become a star if they work towards it. The market leader of RHB Retail banking belongs to Public banks retail banking in which both companys core business is the same. Public bank has the capability in becoming the market leader is because Public bank competes in the market for business growth and increased market share by differentiating itself through its highly efficient customer service delivery standards.  [31]  Public bank falls under the star quadrant as they have both high market growth rate and high relative market share for that segment. RHB Retail banking has the opportunity in moving towards the star quadrant by gaining market share. If retail banking doesnt become a market leader by growing its market share, it will then drop into the dogs quadrant when market growth declines. This segment needs to be analysed carefully to determine if they are worth the investment that is required to grow market share.  [32]  We will move on to the second largest segment revenue generator for RHB which is Corpo rate and investment banking. Corporate and investment banking falls under the cash cow quadrant as it has relatively high market share but low market growth rate. In fact, corporate and investment banking has a negative growth rate. This segment exhibit a return on assets that is greater than the market growth rate, and thus generating more cash than they consume.  [33]  Therefore, this segment provides the cash required to turn question mark into market leaders. Since RHB core business in retail banking falls under the question mark quadrant, the company may transfer the money generated from cash cow to turn retail banking into market leader which finally ends in the star quadrant. The third segment which falls under the 80% overall revenue generated is business banking. Business banking falls under the dog quadrant as this segment have relative low market share and low market growth. Business banking is not generating much revenue nor consuming large amount of cash. Business b anking falling under the dog quadrant is actually a cash trap as the money tied up in this segment has very little potential in growing. RHB should reduce the amount of segments falling into the dog quadrant. Segment which falls under dog quadrant are candidates for divestiture.  [34]  RHB can dispose partial or the full investment in this segment through sale, exchange or closure.  [35]  RHB banking group is fifth largest fully integrated financial service group in Malaysia. The core businesses are divided into seven Strategic Business Groups (SBGs). Corporate and Investment banking are major in funding or lending needs of corporate customers.The revenue on assets ratio had slightly decreased from year 2010 to year 2011. The main reason is because the volatility in global market conditions led by the unresolved euro debt crisis and the slowdown of economy in Malaysia. This ratio show that how much revenue can be generated for each assets. Besides that, debt ratio of RHB ban k had increased significantly from 0.6067:1 to 0.6560:1. The debt ratio indicates how well RHB banking group can efficiently manage the leverage of debt and assets. The of debt ratio from year 2010 to year 2011 indicates that RHB banking group have not efficiently manage the debt of RHB banking group. Next, segments assets to total assets ratio had a slightly decreased from year 2010 to 2011. The total assets had increased from 129,325,495 to 152,393,694. The increased in total assets mainly by the growth in loans and financing assets, cash and short term funds and statutory deposits. For instance, the segment assets also increased from year 2010 to 2011. The increases show that RHB banking groups have mainly to growth by using loans to financing assets. The will result the segment assets to total assets ratio increases from year 2010 to 2011. The segment liabilities to total liabilities ratio had slightly increased. The increase in total liabilities mainly is because the increas e in deposits from customers. Furthermore, the profit before unallocated expenses over segment revenue had a significant decreased from year 2010 to 2011. It is mainly because of the in allowance for impairment loans financing had changed to become made for impairment loan financing. The overhead expenses in year 2011 had slightly increases and the segment revenue had decreases. This may indicate that RHB bank are not efficiently manage to generate enough revenue to cover the expenses. Retail Banking is a business segment which provides products and services to individual customers. The products and services offered to them include credit facilities (mortgages, hire purchase financing, study loans, lease financing and personal loans), credit cards, remittance services, deposit collection, general insurance and investment products.  [36]  Revenue from Retail banking had slightly increased by 18.17% or RM302 million. This is mainly due to a healthy growth of loan, comprising mainl y purchase of residential property, transport vehicles securities and lending to public sector. Increases in loan led to increases in segment assets.Increases in segment liabilities by 24% or RM6.1 million are mainly due to increases in deposits from customers. There are 3 types of deposits which are demand deposit, savings deposits, fixed or investment deposits and negotiable instrument of deposit. The growth rate of customer deposits was because of attractive deposit products. Overhead expenses increased significantly by 44.15% or RM261 million in particular year. This may due to the expansion of business volume and franchise. The number of Easy by RHB outlets had increased to 235 outlets from 111 outlets this year and thus incurred more usage of electricity and water, stationeries, rental, travel expenses and security system. In the point of efficiency in utilizing the cost in funding the assets or generating revenue, RHB Banking Group had performed well. In year 2010, debt ratio was 0.6819:1 which means that RM1 of segment asset can set-off RM0.6819 of segment liabilities. The ratio increased to 0.7285:1 which means that more segment liabilities can be set-off by the segment assets. Due to expansion of business volume and franchise, overhead expenses had increased. In efficiency ratio, RHB had improved in utilizing and controlling the expenses to maximize revenue. We can see that from the table above which the efficiency ratio had increased to 43% from 36% in previous year. Business Banking is major in funding and lending to small and medium sized enterprises. The revenue on assets ratio had a significantly increase from year 2010 to 2011. It is mainly because the group treasury revenue had significantly decreases. It is a measure of how efficiently management is using the assets to generate sales. A higher ratio indicates that the company is using its assets efficiently to increase revenue. The main reason of the increases of revenue on assets ratio in ye ar 2011 is because the group had efficiently generated revenue. The debt ratio had slightly increased from year 2010 to 2011. This indicates that the segment liabilities had increased faster than the segment assets. It is just a little changes, it is due to the increases in deposits of business banking. Next, the segment assets to total assets ratio had little movement to decrease sign on year 2011. It is mainly due to the increases in total asset of RHB banking group on year 2011. The segment liabilities to total liabilities ratio had slightly decreases because of the increases in total liabilities. The main reason is because the increases of liabilities in other segments. However, the segment liabilities for business banking had a slightly decreases. The profit before unallocated expenses for the year 2011 had a slightly increases. This indicates that RHB banking groups are efficiently and effectively generate higher revenue in year 2011. The overhead expenses for year 2011 had increased significantly. The increases may lead to inefficient in managing the expenses over revenue. The expenses spend have over the revenue from year 2010 to year 2011. Its financial objectives are to attract new customers, increase market share and retain existing customers. The measurements of this prospective are customer satisfaction, customer growth and growth of deposits. In year 2011, overall customer satisfaction and loyalty scores had improved by 9% over the previous years scores. Customer growth is healthy as deposits from customers had increased to RM115 million from RM94million in year 2010. To attract new customers, image or reputation of the bank is very important as it impacts directly on financial performance of bank. A good reputation can attract more customers and hence increase business volume. This can be measured by customer growth. As most of the customers do not have sufficient financial knowledge, they may feel unsecured and uncertain of which pr oducts suit them the most and can fulfill their needs. Thus, bank has the responsibility to provide relevant, understandable and fair information of every service and product. It can be printed out in brochure or flyers. Front-line employees must understand the products and services well and able to deliver right information to customers. It can reduce the mistakes when servicing customer as the employees know what are the needs of customer hence sell the right product to them. This can be measured by feedback from customers. The objectives are to increase innovations, improve operational efficiency, capabilities, and services. Managers have to focus on customer satisfaction and those internal processes in order to attract new customers, retain existing customers and meet shareholders requirement which is maximize their share value and financial return. Innovation is important for bank to create new and innovative products or financial services which meet the needs of customers and also generate significant revenue from it. The products or services must be convenient for customers and cost efficient for bank. This can be measured by revenue generated from new product or service. Operational efficiency can be measured by operation expenses on operation revenue. It measured how much of operation expenses can generate RM1 of operation revenue. To improve it, manager has to control and manage the expenses so they spent in right and fair way. IT and information system (IS) can used to improve the efficiency. The more advance IT and IS are, the more efficient an employee performs tasks. However, employee must know how to use them so he/she can deliver good service. Good service from the bank is imperative for survival in the industry. Customer is a powerful and persuasive tool in promoting something. When the customers satisfied with the services provided by the bank, they will promote the product or service to people around them. As a result, it increases number of customers and revenue.Staff behaviours and attitudes play an important role in a service industry company. It can have significant affects to the efficiency and effectiveness of a company. For example, if the staff behaviours are not good enough to service customers it may influence the confidence of customers. Loss of confident on customers may lead to bad reputation on RHB bank. Hence, the staff behaviour of RHB bank can be used as an indicator of the efficiency and effectiveness. In terms of financial, one of the main goals of enterprises is the maximisation of profit. This can be achieved by cutting down unnecessary expenses that do not constitute to income generating. In order to achieve that, managers have to seek ways improving the productivity and optimisation of business processes as most of the times unnecessary operations caused backfire to enterprises with high expenses. For example, employees with too much slack time provide no productivity yet causing the enterprise t o incur costs on their salaries which are wasted. In supportive of ultimate goal in creating wealth, enterprises also keen to increase revenues. Enterprises with more valuable customers and broader relationships with the VIP customers are more likely to have their revenues increased. This can be done through sales of new products and cross-selling of existing products. In this case, RHB need to value their customers highly and foster a good relationship with them in the seeking of generating more revenue. Besides, enterprises also keen to improve on their returns on spending (ROS). ROS is one of the methods to measure the efficiency in managing company funds. By engaging in high return activities, enterprises are able to maximise profits on the funds spent. Therefore, given with the ratio calculations on the main business segments, RHB should engage in business banking segment as it provides a high ROS.Enterprises always seek to gain competitive advantage over their rival compani es in the same industry. It is much determined by the extracting, manipulating and use of information. In order to improve methods of gathering and analysing of information for a better decision making, it is essential to introduce innovative IT support systems. Other than that, enterprises with better allocation of resources have higher claims to offer the highest profitability. In the era of information technology, innovative banking and financial services such as Internet banking and mobile banking provides convenience to customers. Without any doubt, RHB should allocate more resources properly in developing such IT technologies to increase competitive advantage. Strategic jobs and competencies is also another issue as it includes the ability to cross-sell the financial products by focusing on customer needs. By doing this, employees of the company should have a better understanding of company background alongside the products and services, as well as the understanding of f inancial markets as a whole. In this case, RHB should ensure that all of the employees have a well understanding of the company and the industry.RHB Banking Group has to grab any possible chance to increase its profit thus maximize shareholder value. Investments in Venture Company can be taken into consideration as company can enjoy tax incentives. Tax incentives can increase company profit. RHB should increase the income limit of loan to reduce the risk of unable to collect interest and loan. Reduces in bad debts can enhance the liquidity of the company. Regards the loan interest subsidy, RHB can provide a more attractive loan package for different ages of people to overcome this threat. To reduce the risk of inflation effect on the company, RHB must have skilful and experienced financial and investment analyst to evaluate any investment plan so Net Present Value of profit earned from investment project wouldnt be affected. From the analysis, we know that RHB does not have enough b ranches throughout Malaysia. Their customers will switch to another bank to do banking as it is more convenient for them. In order to overcome this problem, the company may set up more branches all around the country. However, setting up branches and business operations consume large amount of funds. Although it consumes large amount of funds, it is profitable for RHB in long term. At the same time, the reputation of the bank will increase and the public will be aware of the bank. They may eventually switch to RHB if the bank can meet their needs. The bank should place concern with the culture of the local customers as to fulfil all their requirements. In order to attract more customers, RHB should come out with differentiated products however it will be imitated by other banks in a very short time. Besides that, RHB should often review the e-banking system (RHB Now) to avoid any errors in the website. This is because the customers will be confused if the information provided in the website consist errors and it will definitely cause an adverse impact on the reputation of the bank. RHB should also provide support service to encounter the problems faced by the customers. The bank can collect the feedback from their customers as to improve their current services. Besides that, RHB should remind their customers to be alert with any fraudulent case. The bank should encourage the customers to report if they discover any fraudulent case. In order to lower the bargaining power of depositors. RHB Banking group must efficiently react to the changes of strategy by competitors. Competitors may implement new strategy anytime to get the competitive advantages. For example, lowest interest rate among banking industry or new promotion pack provided. These changes of strategy may have significant affect the bargaining power of suppliers. To improve, RHB bank must always observe on the movement of competitors. Besides that, to improve the bargaining power of suppliers RHB Bank must always implement strong risk management on the changes in rules and regulations by Bank Negara Malaysia (BNM). BNM may change the legislation of bank any time. This may significantly affect the effectiveness of RHB bank. So that, a strong risk management can helps to lower the risks of losses. The management of RHB bank should provide training to the employees in order to have a good customer service. Besides that, they also have to standardize their banking procedures so that every branch is using the same procedures and can finish the process efficiently. By having a good customer service and efficient banking procedures can attract more customers to choose RHB bank. Moreover, the RHB bank management team has to ensure their employees are giving a good and polite service to the customers. Thus, by providing good services, the reputation of the bank will be improved. Other than that, in order to encourage the employees to provide a good service to the customers, the manage ment team can organize some internal competition among the employees such as the monthly best smile employee and he or she can get extra bonus for that month. This competition can motivate the employees to be more polite to the customers and they may work hard for the extra award. By increasing the market share on banking industry can helps to improve and maximize the shareholders wealth. Acquiring more shares on other banks can move RHB bank to market leader in banking industry. Growth and expansion of RHB banking group can helps to enhance shareholder value maximization. Revenue will be increase if successfully expand become larger in banking industry. Besides that, to ensure no new entrant can enter into banking industry, RHB bank must put higher entry barrier in terms of economies of scale. The higher entry barrier is the harder for new entrant to enter the industry. For example, if RHB bank can promote the promotion package to customers with the highest rate of return for depos itors, new entrant may harder to promote the same things because of higher economies of scale needed. Strategies are always the weapon of a company. By implementing new strategies can get competitive advantages. By getting higher competitive advantages among competitors, it can help to increase revenue of RHB bank. Implementing new packages of savings or loans can fulfil customers needs and it can help to attract more customers. In order to overcome the threat of substitute products, in terms of branding, RHB bank certainly needs to improve their market capitalisation as it is facing stiff competition with other banks in the industry. By carrying out benchmarking with the market leader Maybank is one of the most effective ways. Compared to Maybank, RHB certainly need to increase its popularity among people by setting up more branches nationwide to ensure a better capture of potential customers. Other than that, RHB can also incur more expenditure in advertising to boost the brand name of the bank. In terms of investing, as we can see, there are many types of investment in the market for people to invest their money in. To cope with the threat of different kinds of investment, RHB should further increase the awareness of people towards its bank products by highlighting the key benefits and advantages of the products compared to other kinds of investment alternatives of other banks and financial institutions. For example, RHB can advertise more on its differentiated mortgage loan in the market by offering a lower rate or better benefits to the people. It is recommended that the company should focus on the core business segment of the company which gives the highest return. Since retail banking is the core business segment and it falls under the question mark quadrant, it shows that the segment has insufficient cash flow and has a potential growth. If this segment has the cash flow for development and growth in the market share, it can be pushed to the star qu adrant being the market leader of the industry. The cash flow needed for the retail banking growth can be obtained from the corporate and investment banking segment. This is because corporate and investment banking segment falls under the cash cow quadrant where it generates lots of cash flow but has very low growth. The company can fully utilized the money generated from this segment to push their core business to the star quadrant being the market leader. Besides that, the company should reduce having segments which falls under the dog quadrant. The business banking which falls under the dog quadrant should either dispose partially or completely. The investment can be disposed through sale, exchange or closure. To improve the financial ratio of RHB Bank on the segment of corporate and investment banking, RHB Bank needs to reduce the overall expenses of the segment and on the other hand generate more revenue for the segment. The revenue on assets ratio can be improved by increasing the revenue higher than the assets. However, the main reason of not efficiently generate higher revenue is because of the global market condition. Revenue can be increase when the changes in better market conditions. Efficiently manage the debt of RHB bank can decrease the gearing of RHB bank. Always observe on the movement of market conditions implement different strategies to generate more revenues. As RHB expanded its business volume and franchise all across the Malaysia to fulfil the demand, costs such as rental, renovation, furniture, staffs and overhead had increased. To improve profitability, RHB should adopt an effective way to manage and control overhead expenses in branches. To increases deposits from customers, RHB can promote or advertise the products or package aggressively in magazines, media, social networks or forums. As RHB is doing well in business banking, it is recommended that the company should engage more in the segment for the years as the industry of SME is being developed well in accordance to the SME Masterplan 2012-2020, introduced by SME Corporation Malaysia, seeking to contribute in accelerating the growth of SMEs to achieve the status of high income nation as stated in the Vision 2020 of Malaysia. Upon success, implementation of the Masterplan will involve more contribution from SMEs to the economy to the country as a whole by 2020.