Model paper

Dean's Office Official Model Question Paper

MGT 225 · Business Strategy

Programme
BBA-F
Academic year
Semester 7
Paper type
Official Model Question
Sitting
Dean's Office Blueprint
Full marks
60
Duration
180 minutes

Tribhuvan University

Faculty of Management

Office of the Dean

Official Model Question Paper / Dean's Office Blueprint

Course: MGT 225 · Business Strategy

Level: Bachelor of Business Administration in Finance (BBA-F) · Semester 7

Full Marks: 60

Time: 3 hrs.

Candidates are required to give their answers in their own words as far as practicable. Figures in the margin indicate full marks.

Group A

Brief Answer Questions. Attempt ALL questions. (5 × 2 = 10)

[5*2=10]

  1. Define strategic management and identify its core stages.

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    Strategic Management

    Strategic management is the ongoing process of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its long-term objectives.

    Core Stages: 1. Strategic Formulation, 2. Strategy Implementation, 3. Strategic Evaluation & Control.

  2. Distinguish between a vision statement and a mission statement.

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    Vision vs. Mission Statement

    • Vision Statement: A forward-looking aspiration defining what the organization wants to become in the future (e.g., “To be the most trusted financial institution in South Asia”).
    • Mission Statement: A statement of current purpose defining what the company does, for whom, and how (e.g., “Delivering accessible, ethical digital banking to Nepalese households”).

  3. Define Core Competency in strategic management.

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    Core Competency

    A core competency is a unique set of integrated organizational skills, knowledge, and technologies that differentiates a company from competitors, provides customer value, and is difficult for rivals to replicate (e.g., Apple’s hardware-software design integration).

  4. What does the VRIO framework assess?

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    VRIO Framework (Jay Barney)

    The VRIO framework evaluates whether an internal firm resource provides a sustainable competitive advantage based on four questions: Is it Valuable? Is it Rare? Is it costly to Imitate? Is the firm Organized to capture value?

  5. What is a Focused Differentiation strategy according to Michael Porter?

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    Focused Differentiation Strategy

    Focused differentiation involves targeting a narrow, specialized niche customer segment with uniquely customized, premium products possessing distinctive features that mainstream competitors overlook (e.g., high-altitude mountain trekking gear).

Group B

Short Answer Questions. Attempt any THREE questions. (3 × 10 = 30)

[3*10=30]

  1. Apply Michael Porter’s Five Forces Model to the commercial banking sector in Nepal: Threat of New Entrants, Bargaining Power of Buyers, Bargaining Power of Suppliers, Threat of Substitutes, and Competitive Rivalry.

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    Porter’s Five Forces Analysis of Nepalese Commercial Banking

                                 THREAT OF NEW ENTRANTS (LOW)
                                          |
                                          v
BARGAINING POWER OF   ======>    INDUSTRY RIVALRY    <======  BARGAINING POWER OF
SUPPLIERS (HIGH)               (EXTREMELY HIGH)                BUYERS (HIGH)
                                          ^
                                          |
                              THREAT OF SUBSTITUTES (HIGH)

    1. Threat of New Entrants: LOW

    • High statutory entry barriers: Nepal Rastra Bank enforces strict licensing moratoria and requires a minimum paid-up capital of Rs. 8.0 Billion (Rs. 800 Crore) for commercial banks.
    • Massive branch network requirements and IT infrastructure costs deter new entrants.

    2. Bargaining Power of Suppliers (Depositors & Fund Providers): HIGH

    • Institutional depositors (Citizen Investment Trust, Provident Fund, insurance companies) control over 40% of total commercial deposits, exercising immense bargaining power to demand higher fixed deposit interest rates.

    3. Bargaining Power of Buyers (Corporate & Retail Borrowers): HIGH

    • Prime corporate borrowers (conglomerates like Golchha, Chaudhary, Sharda Group) have multiple bank options and demand razor-thin interest margins (Base Rate + 0.75%).
    • Retail borrowers easily refinance mortgages if competitor banks offer lower interest rate premiums.

    4. Threat of Substitutes: HIGH & ACCELERATING

    • Digital payment wallets (eSewa, Khalti) and fintech platforms substitute routine banking transfer and payment services.
    • Savings & Credit Cooperatives and Microfinance institutions substitute small consumer lending.

    5. Intensity of Competitive Rivalry: EXTREMELY HIGH

    • 20 commercial banks compete fiercely for limited bankable corporate assets and household deposits in a saturated urban market, driving aggressive price competition.

  2. Examine the Resource-Based View (RBV) of the firm and the VRIO framework. How does an enterprise determine whether a resource creates competitive disadvantage, parity, temporary advantage, or sustained competitive advantage?

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    The Resource-Based View (RBV) & VRIO Framework

    Developed by Jay Barney, the Resource-Based View (RBV) argues that sustainable competitive advantage originates from an organization’s bundle of internal, idiosyncratic resources and capabilities.

    1. The VRIO Decision Logic

    Valuable? -> Rare? -> Inimitable? -> Organized? ===> Competitive Outcome
   No        -         -            -         ===> Competitive Disadvantage
   Yes       No        -            -         ===> Competitive Parity
   Yes       Yes       No           -         ===> Temporary Competitive Advantage
   Yes       Yes       Yes          Yes       ===> SUSTAINED COMPETITIVE ADVANTAGE

    2. Evaluating Resource Potential

    Valuable (VV)? Rare (RR)? Costly to Imitate (II)? Organized to Exploit (OO)? Competitive Implication Economic Performance
    No - - - Competitive Disadvantage Below Normal Profits
    Yes No - - Competitive Parity Normal Economic Return
    Yes Yes No - Temporary Advantage Short-Term Above Normal
    Yes Yes Yes No Unused Competitive Potential Normal Return (Missing Org)
    Yes Yes Yes Yes SUSTAINED COMPETITIVE ADVANTAGE Superior, Long-Term Above Normal Returns

    3. Why Inimitability (II) is the Key Hurdle

    • Resources are difficult to imitate due to:
      1. Historical Uniqueness: Acquired during specific founding eras (e.g., prime real estate acquired 40 years ago).
      2. Causal Ambiguity: Competitors cannot understand the complex interplay of culture, algorithms, and tacit employee skill.
      3. Social Complexity: Deep institutional trust, brand culture, and inter-organizational networks.

  3. Discuss Corporate-Level Growth Strategies: Concentric vs. Conglomerate Diversification, Vertical Integration (Forward vs. Backward), and Strategic Mergers and Acquisitions (M&A) in Nepal’s financial sector.

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    Corporate-Level Growth Strategies

    Corporate strategy defines the scope of industries and markets in which an enterprise competes:

    +----------------------------------------------------------------------+
|                   CORPORATE GROWTH STRATEGIES                        |
+-------------------+--------------------+-----------------------------+
| 1. Diversification| Concentric (Related) | Conglomerate (Unrelated)  |
| 2. Integration    | Forward (Distribution)| Backward (Raw Materials) |
| 3. Expansion Modes| Organic Growth     | Mergers & Acquisitions (M&A)|
+-------------------+--------------------+-----------------------------+

    1. Diversification Strategies

    • Concentric (Related) Diversification: Expanding into adjacent business lines sharing operational, technological, or customer synergies (e.g., a commercial bank opening a merchant banking subsidiary, life insurance subsidiary, or stock brokerage arm).
    • Conglomerate (Unrelated) Diversification: Expanding into entirely unrelated industries to diversify corporate cash flow (e.g., a conglomerate operating tea gardens, cement factories, airlines, and hospitality).

    2. Vertical Integration

    • Backward Integration: Acquiring suppliers to secure inputs, control quality, and prevent supply shocks (e.g., an organic dairy producer acquiring cattle breeding farms).
    • Forward Integration: Moving downstream closer to end-consumers (e.g., a commercial bank acquiring a digital payment wallet company to control merchant POS touchpoints).

    3. Mergers and Acquisitions (M&A) in Nepal

    • Prompted by NRB’s capital hikes and consolidation directives, Nepal’s commercial banks executed massive M&As (e.g., Global IME merging with Bank of Kathmandu; Nabil Bank acquiring Nepal Bangladesh Bank).
    • Strategic Rationale: Instant market share capture, economies of scale in core banking software licenses, and capital pooling.

  4. Explain Strategy Implementation and Execution using the Balanced Scorecard (BSC) across its four perspectives: Financial, Customer, Internal Business Processes, and Learning and Growth.

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    Strategy Implementation via the Balanced Scorecard (BSC)

    Developed by Robert Kaplan and David Norton, the Balanced Scorecard (BSC) translates strategic vision and mission into actionable operational objectives, aligning performance measures across four interconnected perspectives:

       [FINANCIAL PERSPECTIVE]
   "How do we look to shareholders?" (ROE, Net Interest Margin, Cost-to-Income)
             ^
             |
   [CUSTOMER PERSPECTIVE]
   "How do customers see us?" (Customer Retention, Net Promoter Score, Acquisition)
             ^
             |
   [INTERNAL BUSINESS PROCESS PERSPECTIVE]
   "What must we excel at?" (Loan Turnaround Time, App Uptime, KYC Error Rate)
             ^
             |
   [LEARNING AND GROWTH PERSPECTIVE]
   "How can we continue to improve?" (Staff Training, Digital Literacy, Retention)

    1. The Four Perspectives in a Commercial Bank

    1. Financial Perspective: Traditional lag indicators evaluating profitability: Return on Equity (ROE > 15%), Net Interest Margin (NIM > 4%), Non-Performing Loan Ratio (< 3%), and Earnings per Share growth.
    2. Customer Perspective: Measures customer value propositions: Customer Retention Rate (> 90%), Net Promoter Score (NPS > +50), and mobile banking active user growth.
    3. Internal Business Process Perspective: Identifies critical internal processes: reducing loan processing cycle time from 10 days to 48 hours, maintaining 99.9% mobile core banking server uptime, and paperless account processing.
    4. Learning and Growth Perspective: The organizational foundation: investing in digital fintech training hours per employee, retaining top IT software engineers, and fostering an agile innovation culture.

Group C

Comprehensive Answer / Case Analysis Question. Attempt ALL questions. (1 × 20 = 20)

[1*20=20]

  1. Case Study: Global Everest Bank Limited

    Global Everest Bank Limited is an ‘A’ Class commercial bank in Nepal created through the consolidation and merger of three mid-tier financial institutions. Following the mergers, Global Everest became the largest commercial bank in Nepal by total asset size and branch network (320 branches nationwide). However, two years post-merger, executive management faces severe operational and strategic challenges:

    • Cultural Frictions: Employees from the three legacy banks maintain distinct cliques, resisting cross-branch job rotations and arguing over seniority and performance appraisals.
    • IT Fragmentation: The bank operates two incompatible core banking software systems across different regional branches, causing frequent inter-branch transfer errors and customer dissatisfaction.
    • Cost Inefficiency: Cost-to-Income ratio has escalated to 62% due to overlapping branch locations in urban centers and duplicate administrative staff.
    • External Competition: Nimble digital payment wallets and younger digital-first banks are eroding Global Everest Bank’s retail CASA deposit base, as younger customers perceive the bank as a slow, bureaucratic legacy institution.

    Questions: (a) Conduct an integrated SWOT Analysis and PESTEL environmental scan for Global Everest Bank in Nepal. (7 marks) (b) Apply the McKinsey 7S Framework (Hard elements: Strategy, Structure, Systems; Soft elements: Shared Values, Style, Staff, Skills) to formulate a post-merger restructuring and cultural integration plan. (7 marks) (c) Formulate a competitive turnaround strategy combining Digital Transformation and Cost Leadership to rationalize branch overhead and regain retail market leadership. (6 marks)

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    Case Analysis: Global Everest Bank Limited

    (a) SWOT Analysis and PESTEL Scan (7 Marks)

    1. SWOT Matrix:

    • Strengths (SS): Largest balance sheet in Nepal, massive nationwide branch reach (320 branches), high capital buffer enabling lead arranger role in mega hydropower syndicates.
    • Weaknesses (WW): Dual CBS software platforms, cultural fragmentation, high Cost-to-Income ratio (62%), redundant overlapping urban branches.
    • Opportunities (OO): Consolidating rural branch networks for agent banking, digital micro-lending (Foneloan), mobilizing remittance CASA deposits from Gulf migrant workers.
    • Threats (TT): Rising NPLs due to economic slowdown, fintech wallets capturing retail payments, tightening NRB macroprudential directives.

    2. Key PESTEL External Forces:

    • Political/Regulatory: NRB mandate enforcing 90% CD ratio, single obligor limits, and Deprived Sector quotas.
    • Economic: Volatile Base Rates, liquidity shortages, and remittance inflow fluctuations.
    • Technological: Accelerated smartphone penetration and migration toward instant QR/connectIPS rails.

    (b) Post-Merger Turnaround using McKinsey 7S Framework (7 Marks)

    +------------------------------------------------------------------------------------------------+
|                     MCKINSEY 7S POST-MERGER INTEGRATION ROADMAP                                |
+-------------------+------------------------------------+---------------------------------------+
| 7S Dimension      | Current Defect                     | Corrective Strategic Transformation   |
+-------------------+------------------------------------+---------------------------------------+
| **1. Strategy**   | Unfocused scale without synergy    | Pivot to Digital Cost Leadership and  |
|                   |                                    | retail CASA mobilization.             |
+-------------------+------------------------------------+---------------------------------------+
| **2. Structure**  | Hierarchical, overlapping managers | Flatten organization: merge duplicate |
|                   | across legacy bank lines           | regional offices; unify reporting.    |
+-------------------+------------------------------------+---------------------------------------+
| **3. Systems**    | Two incompatible core banking apps | Execute emergency migration to a single|
|                   |                                    | unified CBS (e.g., Finacle).          |
+-------------------+------------------------------------+---------------------------------------+
| **4. Shared Val.**| Mistrust, legacy bank tribalism    | Launch unified brand identity and     |
|                   |                                    | common corporate charter.             |
+-------------------+------------------------------------+---------------------------------------+
| **5. Style**      | Autocratic, defensive leadership   | Participative, transparent leadership |
|                   |                                    | with regular town hall dialogues.     |
+-------------------+------------------------------------+---------------------------------------+
| **6. Staff**      | Redundant clerical personnel       | Offer Voluntary Retirement Scheme     |
|                   |                                    | (VRS); redeploy staff to field sales. |
+-------------------+------------------------------------+---------------------------------------+
| **7. Skills**     | Outdated manual ledger skills      | Reskill staff in digital lending, AML,|
|                   |                                    | and digital customer onboarding.      |
+-------------------+------------------------------------+---------------------------------------+

    (c) Competitive Turnaround Strategy: Digital Cost Leadership (6 Marks)

    To rationalize costs and restore competitive agility, Global Everest Bank must execute a dual-track strategy:

    Branch Network Rationalization -> Core IT Unification -> Digital Super-App -> Cost Reduction
    1. Branch Network Rationalization (Overhead Reduction):
      • Identify and close/merge 50 redundant urban branches located within 500 meters of each other in major cities (Kathmandu, Pokhara, Biratnagar), saving Rs. 300 Million annually in commercial rent and duplicate security services.
      • Convert selected physical branches into automated Digital Self-Service Smart Kiosks (featuring Cash Deposit Machines, automated cheque deposit boxes, and Video-KYC desks) requiring only 2 staff.
    2. Unified Core Banking & Cloud Transformation:
      • Rapidly sunset legacy CBS platforms and complete total migration to a centralized, cloud-ready Core Banking platform within 90 days to eliminate inter-branch software errors.
    3. Modern Lifestyle Mobile Banking (Super-App Strategy):
      • Redesign mobile banking into an intuitive lifestyle platform: instant bill payments, QR soundbox integrations for retail merchants, paperless micro-loans, and automated remittance cash pickups.
    4. Cost-to-Income Target:
      • Target lowering the Cost-to-Income ratio from 62% to below 45% within 24 months through automated workflows and process digitization, generating superior Return on Equity (ROE) for shareholders.