Competitiveness And Market Structure Of Indian Banking Industry - Free Essay Example

Sample details Pages: 6 Words: 1898 Downloads: 3 Date added: 2017/06/26 Category Statistics Essay Did you like this example? Introduction After 1991 crisis, Indiaà ¢Ã¢â€š ¬Ã¢â€ž ¢s liberalisation journey was multi-faceted. One of the major areas of liberalization was the banking sector which was highly regulated and controlled by government. Most importantly for banking industry, as per the M. Narasimhan committee recommendations, the liberalization came in the right areas namely interest rate, reduction of reserve requirements, entry deregulation, credit policies and prudential supervision. Incase of interest rates, they could now be determined by the banks based on their cost of funds rather then government fixing them for banks. The administered regime for interest rate came to an end except for interest rate on savings account. The reduction of reserve requirement for banks made huge capital available for banks which could be deployed in the business. The entry of new players was de-regulated. The government empowered the Reserve Bank of India to issue licenses to the new players, if they met the set criteria jointly set by RBI and Finance Ministry. The credit rationing was completely done away with. Although there is still credit rationing for à ¢Ã¢â€š ¬Ã…“priority sectorà ¢Ã¢â€š ¬?, the banks are free to deploy their capital on the sectors which they feel profitable. Excessive supervision regime came to an end. The Reserve Bank of India made several changes in prudential supervision and gave autonomy to banks in their day-to-day operation. Don’t waste time! Our writers will create an original "Competitiveness And Market Structure Of Indian Banking Industry" essay for you Create order The total asset size of Indian Banking industry is over US$ 270 billion. The total deposit amount is US$ 200 billion. Its branch network is one of the largest in the world with more than 66,000 branches and over 17,000 ATM spread across the country. The bank assets are expected to grow at 13.4% CAGR and it is predicted that India could become the 3rd largest banking hub in the world by 2040. Currently India has 80 Scheduled commercial banks out of which 28 are public sector banks, 24 private banks and 28 foreign banks (Annual Report, RBI). As Indian economy is growing at an average rate of over 7% since a decade, more and more foreign banks are thinking to foray into the Indian market. As per McKinseyà ¢Ã¢â€š ¬Ã¢â€ž ¢s report on Indian Banking (2010), total loans-to-percentage of GDP, could grow from its current level of around 30% to ~45% in years to come. Such huge opportunities also prompts several questions: Who is/ are the dominant players in the market? What is/are their share in the banking industry? What is the market structure of Indian banking industry; is it a monopoly or a perfect competition? Objectives and Motivation: The objective of this dissertation is to understand the Indian banking industry, its composition (nationalised banks, private bank and foreign banks) and knowing the players of the industry. Further the study will find out how much concentrated the Indian banking industry is and provide knowledge regarding top 3 as well as top 5 major banks. Such a concentration ratio would give a fair idea of how decision of the top players as an implication on the other industry players. The study will include the determination of the market structure of Indian banking industry. Ità ¢Ã¢â€š ¬Ã¢â€ž ¢s imperative to know whether the industry is a perfect competition, a monopoly or a monopolistic competition. This would lead to understanding of the cohesive behaviour of the market players. My motivation for choosing this topic came from the complexity of the Indian banking industry. The number of players, entry of new players, consolidation among the existing players, ever-changing economic scenario of India etc and its impact on the banking industry always fascinated me to do a study on the Indian Banking industry. I also feel that such study would be useful not only for the policymakers within the central bank and the government but also for the existing players, the potential entrants and for other stakeholders of the banking industry. Literature Review As per the neoclassical theory, the spectrum of market structure can be defined by the number of firms and size of those firms in the market [Goddard, Molyneux Wilson (2001)]. Various numerical measures of concentration have been used by empirical researchers in order to find the concentration of industry players. But at the same time, there is no single perfect measure for concentration [Goddard, Molyneux Wilson (2001)]. Nevertheless all these measure are subject to the idiosyncracies and limitation; they usually tend to correlate highly with each other [Curry and George (1983); Scherer and Ross (1990)]. Hall and Tideman (1967) have provided the desirable properties which are required for these measures of concentration to be acceptable. Concentration measures like k-bank concentration ratio, Herfindahl-Hirschman index (HHI) are extensively used to measure the banking sector performance as a function of market structure [Barth et al., 2004, Beck at el, 2006)]. k-bank concentration ratio For measuring the concentration of firms, the most frequently used ratio is à ¢Ã¢â€š ¬Ã…“k-bankà ¢Ã¢â€š ¬? concentration ratio (Bikker 2004). The reason this ratio is so frequently used is because of its simplicity and limited data requirement. The index gives equal emphasis to the k leading banks, but neglects the many small banks in the market. It is a one dimensional measure ranging between zero and unity [Al-Muharrami S.,Matthews k., Khabari Y (2006)]. In a review of 73 US Structure-Conduct-Performance studies in banking from 1961 to 1991, in 37 studies the k-bank deposit concentration measure was used (Molyneux et al. 1996) Herfindahl Hirschman Index (HHI) HHI is another benchmark measure for measuring the bank concentration and gives more weight to larger banks. It was developed by A.O.Hirschman. It expands to all the banks in the system, thereby avoiding the arbitrary cut offs [Alegria, C and Schaeck K (2006)]. Bikker (2004) highlights the importance of HHI in the theoretical research. In practice, the HHI plays a pivotal role in the US for the approval of bank mergers where the post mergers market HHI cannot exceed 0.18 and that the change in the index should be less than 0.02 (Cetorelli, 1999). This index is also used to measure the bank concentration in Arab GCC banking system [Al-Muharrami S.,Matthews k., Khabari Y (2006)] and in measuring the competition and market structure in the Saudi Arabia [Al-Muharrami (2009)] Panzer and Rosse H statistics The measure of market structure helps in determining whether the market enjoys perfect competition, monopoly or monopolistic competition. This is also known measuring the à ¢Ã¢â€š ¬Ã…“monopoly power hypothesisà ¢Ã¢â€š ¬?. It means that in more concentrated markets the bigger players tend to be collusive and try to dominate the market. Also their actions have considerable impact on the other market players. There are several models for determining the market structure. The models are divided into two parts: 1) Structural Models and 2) Non Structural Models. This study will employ the non-structural model approach suggested by Rosse and Panzer (1977) and Panzer and Rosse (1982, 1987), popularly known as the H-statistics. It is widely used in determining the competitive structure of the banking industry in various countries. In the banking industry, there is extensive use of Rosse and Panzer method and has got a wide practical applicability. In his study on New York banks, Shaffer (1982) had observed that banks had monopolistic competition. Similar study for Canadian banks by Nathan and Neave (1989) found a perfect competition for 1982 but monopolistic competition for 1983-84. Japan revealed perfect competition [Molyneux et al (1996)]. Molyneux et al. (1994) also tested the P-R statistics for French, German, Italian, Spanish and British banks for the period of 1986-1989 in order to determine the competitive conditions of major European countries. Methodology The study involves the use of k-bank concentration ratio and HHI ratio for gauging the competition and Panzer and Rosse for determining the monopoly power of the players of Indian Banking industry. These ratios have been extensively used in the different studies mentioned above. K-bank concentration ratio measures the market share of the top k-firms in the industry. The equation is n CRn = à ¢Ã‹â€ Ã¢â‚¬ËœSi i=1 Where Si is the market share of the i-th firm when firms are ranked in descending order of the market share. Market share is measured in terms of sales, assets or number of employees. Commonly used values of n include 3, 4, 5 or 8. The researchers have also found that there is high correlation between concentration ratios defined using alternative values of n [Bailey and Boyle (1971)]. The advantage of k-bank concentration ratio is that it is easily measurable; one needs to know only the total size of the industry and the individual sizes of firms. But it lacks in taking the size distribution of remaining firms. In this study, the market share would be measured on the basis of the loan size (assets) and the deposit size (liability) of the banks. The value of n would be 3 and 5 i.e. CR3 and CR5. HHI uses information about all points in the firm size distribution. It is defined as the sum of the squares of the markets share of all firms: N HHI = à ¢Ã‹â€ Ã¢â‚¬ËœSi2 i=1 Where Si is the market shares of the firm i and N is the total number of firms in the industry. In the calculation of HHI, the larger firms get a heavier weightage than their smaller counterparts which reflects their relative importance in the market. This study uses P-R h-statistics, a non-structural model, measuring competition and emphasizes the analysis of the competitive conduct of banks without explicit information about the structure of the market. The P-R determines the competitive behaviour of banks on the basis of the comparative static properties of reduced-form revenue equation based on cross-section data [Panzer and Rosse (1987)]. The equation is Ln(TREV) = ÃŽÂ ±0 + ÃŽÂ ±1 ln PL + ÃŽÂ ±2 ln PK + ÃŽÂ ±3 ln PF + ÃŽÂ ±4 ln RISKASS + ÃŽÂ ±5 ln ASSET + ÃŽÂ ±6 ln BR The variables are defined as follows: TREV : the ratio of total revenue to total assets PL : ratio of personnel expense to employees PK : ratio of capital expense to fixed assets PF : ratio of annual interest expense to total loanable funds RISKASS : ratio of provisions to total assets ASSET : bank total assets BR : ratio of number of branches to total number of branches in the country. The H-statistic value is the sum of factor price elasticity: PL, PK and PF. The value H à ¢Ã¢â‚¬ °Ã‚ ¤ 0 implies monopoly equilibrium. A value of 0 H 1 implies that banks operate under conditions of monopolistic competition with free entry equilibrium. A value of H = 1 is the perfect competition case with free entry equilibrium and full efficient capacity utilisation [Al-Muharrami S.,Matthews k., Khabari Y (2006)]. Data The data for all the calculations of k-bank concentration ratio, HHI and P-R H-statistics will be obtained from Orbis database. Further, the data would also be taken from the Reserve Bank of India(RBI)à ¢Ã¢â€š ¬Ã¢â€ž ¢s profile of banks 2004-2005 2008-2009. Incase any data is not available from the two main sources (Orbis and RBI), the data would be extracted from financial statements of banks, from their websites and from reports published on the Indian Stock exchanges namely Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The sample period covers 2002-2008. Conclusion The conclusion would include the interpretation of the results obtained by usage of E-view and MS- Excel software. In summation, the study would help in knowing the concentration ratio through k-bank ratio as well as HHI and help in understanding the monopoly power of large banks in India. Such a study would be helpful to determine the cohesive behaviour of the players of industry and how their decision would affect the entire industry as well as the Indian economy. With a lots consolidation happening in the industry, such a study would help in understanding the shifts in the concentration and market powers if any. Last but not the least; an attempt would be made to give some recommendations based on the results.

Jane Eyre By Charlotte Bronte - 1100 Words

Throughout the Victorian-era novel Jane Eyre, Charlotte Bronte utilizes religion to examine how a character’s beliefs influence not merely his or her treatment of other characters, but also the decisions that he or she makes and the reasoning behind these decisions. Jane Eyre, on her search for autonomy, searches for God’s guidance when she needs Him most. While Jane has trust in God, and acknowledges that God’s presence is everywhere, she affirms that God gives humans the power to make their own fate. Jane’s view of religion, as well as human nature, is impacted by her relationships with Helen Burns, Mr. Brocklehurst, and St. John, as religion plays a key role in the course of the lives of these three characters. 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Strategic Global Management Free Essays

Multiple-choice Chapter 6 Which of the following is not true for a capability? A) it cannot be traded B) it changes over time C) it can be easily described in detail D) it can improve value Which of the following is not a necessary condition for the effective implementation of a pay for performance system? A) employees must be able to control the pace of production B) there should be a lower bound on product quality C) managers should receive a high bonus for the piece rate work of their employees D) team members should have roughly the same preferences for effort Which of the following is not an activity in the value chain? A) outbound procurement B) marketing C) technology development D) operations Chapter 7 A key assumption underlying theories of vertical integration is: A) Opportunistic behavior B) Suppliers and buyers have the same size C) Suppliers and buyers are located in the same country D) Firms are boundaryless In the strategic sourcing framework, firms vertically integrate when A) the firm’s need to control and its ability to perform an activity are both high B) there is high uncertainty surrounding the transaction with the supplier C) the need to control and the ability to perform the activity are uncorrelated D) the supplier has invested in high technology 14. The two most studied types of uncertainty that influence vertical integration decisions are: A) exchange rate and volume B) labor cost and technological C) material cost and labor cost D) volume and technological The standard theory of vertical integration over the industry life cycle states A) vertical integration occurs primarily in the early and late stages B) vertical integration increases in the shakeout C) vertical integration increases throughout the life cycle D) vertical integration decreases over the life cycle Chapter 8 Which of the following is generally a motivation for the formation of technology partnerships among large firms? A) coalition formation in the context of standards competition B) sharing complementary technologies C) interfirm learning of process innovations D) all of the above In which industry are partnerships based on patent sharing prevalent? A) data communications B) semiconductors C) biotechnology D) pharmaceuticals When does the ability of a potential partner to cooperate effectively become apparent? A) when it promises to follow the rules of the alliance B) when it is certified by an appropriate agency C) when the network of partnerships in the industry develops D) all of the above Chapter 9 A nationally segmented industry is one in which: A) country specific advantage and firm specific advantage are both high B) country specific advantage is high and firm-specific advantage is low C) country specific advantage is low and firm specific advantage is low D) none of the above Which of the following promote technological spillovers within a region? A) managerial transfers B) labor pooling C) regional associations D) all of the above Porter’s diamond model contains which of the following factors? A) technological spillovers B) cultural constraints C) export policies D) demand conditions Chapter 10 Which types of new business will a corporation’s financial capital contribute the most to? A) larger businesses in mature industries B) smaller units in growing industries C) larger businesses in growing industries D) smaller units in mature industries Diversification paths of firms in the same industry vary across countries because: A) the resources and capabilities of the firms in the same industry differ systematically across countries B) countries differ in the institutions that present diversification opportunities C) countries are located in different geographical locations D) the firms’ top management teams differ systematically across countries When an acquisition announcement occurs, acquisition targets often tend to: A) Enjoy a positive stock reaction B) Suffer a negative stock reaction C) Maintain their stock price D) Outsource more Chapter 11 Traditionally, firms that have grown through unrelated diversification have faced which of the following problems? A) the businesses were managed to support short-term corporate financial goals B) the complexity of the business portfolio exceeded corporate management’s capability C) there was no enduring economic rationale at the level of operations for the business units to be in the same corporation D) all of the above A transfer using a mandated market price is most effective when the downstream unit A) is attempting to establish its market position based on a cost advantage B) is attempting to establish its market position based on a value advantage C) has already achieved a dominant market position D) has failed to achieve a dominant market position Vertical integration, as represented among profit centers in a multi-business firm, is A) always superior to transactions in the market B) never superior to transactions in the market C) not necessarily superior to transactions in the market D) none of the above Open questions Describe the two key strategic motivations for international expansion? Why do multinationals emerge? How have Zara’s practices and policies regarding its boundaries contributed to its growth and performance? What was the source of tension between Stephen Davies and Christopher Carson in the BRL Hardy case? What are its strategic implications? How to cite Strategic Global Management, Essay examples

Leadership Glenn Rowe And Laura Guerrero- MyAssignment Help

Questions: 1. The major concerns, challenges and difficulties identified in this case study? 2. The secondary issues, disputes and problems pointed out in this case study? 3. The underlying causes or the sources of the issues? 4. The probable solutions to the circumstances identified in the case? 5. The best possible solution for the case situation? Answers: Introduction The present case study outlines the importance the leadership skill and identifies it as the most sustainable competitive edge in a progressively more competitive and boundary less business world (Hoch and Dulebohn, 2013). The case study on performance coaching with reference to the role of Darcy Gallagher gives the opportunity to comprehend the qualities and skills that need to be nourished to become an effective leader. The kingpin of the case study is the important elements of competency that affect the leadership outcomes and are influenced by the individual characteristics of the leader as well. The main purpose of the Coaching Performance to be conducted at Elmwood is to develop responsiveness to coaching facilities that are available in the daily work routine and aids the mangers to identify the problems of the members, the prompt responses to address their problems and add to the contribution made for long term career growth of the leaders as well as their subordinates. 1. The major concerns, challenges and difficulties identified in this case study The major issues identified in this case study are the skills lacked by Gallagher to handle the staffs and members , the high rated self assessment by Gallagher that speaks about his disagreement to change. Gallagher is a diligent manager who lacks soft skills and is very critical about his staff and cant delegate, entrust and coach team members. This is why the employees reporting him get dissatisfied to work in the weekend due to arousal of some business exigencies. He also lacks interpersonal as well as the conflict resolution skills, that is why he has got a shocking result from the 360 degree feedback this year. Gallagher is an ambitious and confident sales manager who works hard for recognition and do not feel the need for change in a bid to develop and sharpen his leadership skills, hence marked him highly. It is for this reason Gallagher marks himself highly in the self assessment card although his sub ordinates have marked him below average. 2. The secondary issues, disputes and problems pointed out in this case study The self assessment card of Darcy Gallagher reveals that he has marked himself very highly and in three cases he has marked himself above the job requirement. The areas include financial acumen, focus and drive. This discloses the fact that Gallagher is dedicated to attain high levels of performance in a very cost effective way. This is why he pushes his staffs hard to work even on weekends. Many staff members that have left the company due to excessive work stress under him has been referred as the desirable turnover by Gallagher. 3. The underlying causes or the sources of the issues A. Illustration of the sources of the difficulties identified in the case The underlying causes behind the difficulties identified in the case study are the lack of integration between critical Human Resource strategies and leadership development. Elmwood is deficient in establishing an information system for inventorying skilled workforce. The evaluation systems are not adequate to spot and deploy talented workers. The leader failed to advise individual career plans for the professional growth and development of the staff members (Ivancevich, 2010). There is lack of bench mark in the leadership performances of the mangers against established yardstick of the high worth organizations. B. Categorization of the causal factors behind the leadership issues identified in the case study B.i. Individual Influences Personality- personality traits develop leadership competencies and thereby achieve higher performance level (Klein and Delery, 2012). Gallagher lack the tolerance for vagueness, adaptability and openness that has created the organizational problems. Motivation-Leaders can exert immense influence on the group by being dominant for the social good for the organization as a whole (Dries, 2013). However, Gallagher has exerted dominance over his group by asking them work during weekends but with a hard edge. He lacks the soft abilities to convince them to do the work willingly. Perception-This is a particular type of leadership competence where the leaders can emphatically solve organizational problems. They can sense other peoples attitudes and actions when deal with changes (Mathis and Jackson, 2011). Here in this case too, Gallagher failed to derive the requisite knowledge regarding the people reporting him. Gallagher came to know about the dissatisfaction of the staff members receiving the 360 degrees feedback. He didnt decide to change his attitude after the departure of some of his employees as he pushed hard to extract higher performance level from them. He instead took it as a cost effective as well as a desirable turnover. Education- Education helps to develop the mental schema that is referred to as the ability to arrange information and form complex schemata that aids one to think effectively (Strohmeier, 2013).Gallagher has a commerce degree from the University of Toronto and a major in marketing that earned him a job but didnt help him much to develop his problem solving as well as man management skills and devise alternate strategies to alleviate the issues. Status- the status of the leader can mediate interpersonal problems in the organizations that Gallagher currently lack. This shows that the leadership competency of Gallagher with respect to social performance is low. B.ii. Group Influences Communication- The case study brings into light the fact that the organizational problem related to employee turnover has come up due to poor communication among the employees. The authoritarian leader, Gallagher lacks soft skills and has failed to convince and inspire the staff to perform better and put in extra effort. He has been unsuccessful in communicating the career growth opportunities of the members. For all these reason the Elmwood might have faced the problem of attrition. Decision making Responsiveness to the problems faced by the organization requires good decision making capability by the leaders (Mondy and Mondy, 2010). The lack of this competency can also be attributed as a major cause for the issues faced by Elmwood. Conflict- There are conflicts among members of the groups mainly due to conflicting interests and opinions. A leader needs to assume a dominant role and intervene to solve the problems promptly. Leadership- This issues regarding lack of leadership capabilities needs to be addressed by the strategic managers of the company quickly to resolve the issue promptly. B.iii. Organizational Influences Structure- the hierarchical structure of the organization might have posed a problem to the organization that has hindered open communication. Controls- The authoritarian leadership of Gallagher shows that power and control is concentrated in the hands of the managers that might have caused the labor dissatisfaction. Culture- The varied culture of the organization operating at varied locations need international leadership capabilities that they currently lack. B.iv. Environmental Influences Economic- Corporations get affected by the business environment in which it operates. The economy is also another factor that can affect the organization and create hurdles for smooth operations (Brookes and Grint, 2010). The monetary and fiscal policies can also affect the function. Market-Market is the most factors that help the company to sustain. Sometimes leaders who cite poor market condition as a reason for poor performance of the company needs to be replaced. Regulatory Issues- the regulatory issues can impose stringent laws that can in turn make the operations of the organizations tough in all the varied locations. 4. The probable solutions to the circumstances identified in the case A. Different approaches to resolve the issues that surface up in the case Coaching Performance can help to develop responsiveness to coaching facilities that can be obtained in daily operations. It can help the mangers to recognize the problems of the members, devise prompt responses to resolve their problems and help to achieve long term career growth of the leaders as well as the staff members (Mahapatro, 2010). B. Evaluating the impact of each factor in resolving the problems The individual characteristics can be improved by developing the personality, convincing and motivational capabilities critical to the employee relationship management as well as development of the overall organization. A better communication system can be established in the organization in order to be aware of the difficulties and also to escalate it to the higher authorities. It will help management to promptly respond to the issues and resolve the conflicts easily. 5. The best possible solution for the case situation The best possible solution would be to organize a performance coaching or a workshop where the employees can both assess as well as develop the competencies that needs to be improved. References Brookes, S. and Grint, K. (2010). The new public leadership challenge. Basingstoke: Palgrave Macmillan. Dries, N. (2013). Talent management, from phenomenon to theory: Introduction to the Special Issue. Human Resource Management Review, 23(4), pp.267-271. Hoch, J. and Dulebohn, J. (2013). Shared leadership in enterprise resource planning and human resource management system implementation. Human Resource Management Review, 23(1), pp.114-125. Ivancevich, J. (2010). Human resource management. Boston: McMcGraw-Hill Irwin. Klein, H. and Delery, J. (2012). Construct clarity in human resource management research: Introduction to the special issue. Human Resource Management Review, 22(2), pp.57-61. Mahapatro, B. (2010). Human resource management. New Delhi: New Age International Ltd. Mathis, R. and Jackson, J. (2011). Human resource management. Mason, OH: Thomson/South-western. Mondy, R. and Mondy, J. (2010). Human resource management. Upper Saddle River, N.J.: Prentice Hall. Strohmeier, S. (2013). Employee relationship management Realizing competitive advantage through information technology?. Human Resource Management Review, 23(1), pp.93-104.