MODULE 1

ORGANIZATIONAL CULTURE

The collective behavior of humans who are part of an organization and the meanings that the people attach to their actions. Culture includes the organization values, visions, norms, working language, systems, symbols, beliefs and habits. It is also the pattern of such collective behaviors and assumptions that are taught to new organizational members as a way of perceiving, and even thinking and feeling. Organizational culture affects the way people and groups interact with each other, with clients, and with stakeholders.

Ravasi and Schultz (2006) state that organizational culture is a set of shared mental assumptions that guide interpretation and action in organizations by defining appropriate behavior for various situations. At the same time although a company may have "own unique culture", in larger organizations, there is a diverse and sometimes conflicting cultures that co-exist due to different characteristics of the management team. The organizational culture may also have negative and positive aspects.

Schein (2009), Deal & Kennedy (2000), Kotter (1992) and many others state that organizations often have very differing cultures as well as subcultures.

DEFINITION OF 'CORPORATE CULTURE'

The beliefs and behaviors that determine how a company's employees and management interact and handle outside business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people the company hires. A company's culture will be reflected in its dress code, business hours, office setup, employee benefits, turnover, hiring decisions, treatment of clients, client satisfaction and every other aspect of operations.

FEATURES OF CORPORATE CULTURE

a) Company's culture can be traced very easily from the behaviour of the manager, his method of decision-making and overall outlook.

b) Culture by and large indicates something good to be done. It gives more emphases to service-oriented strategies, rather than profit oriented strategies.

c) Culture is a composition of beliefs, ideas, norms and moral values.

d) Culture guides the top management to conduct the corporate business in the best interest of the Company and the society at large.

e) Cultural values always have a direct influence on the strategic decisions and actions to be taken by the strategic management.

f) Culture based on sound beliefs strengthens the hands of the corporate management to build on excellent environment for achieving the corporate objectives.

g) Culture is a perpetual feature of a corporate life and is purely optional to accept or not to accept.

h) Culture acts both for good and bad aspects depending on its nature or salient features. It guides the behaviour of individuals.

PERSONAL VALUES AND ETHICS

Personal Values and Ethic StandardsValues and ethics are one of the most important characteristic of an individual. They basically define who we are and what we believe. There are many factors that determine our values and ethics. Culture, religion, and many other factors affect our beliefs. Many times are values and ethics can clash with different people who hold different views and beliefs. This doesn't mean our values or ethics are wrong it just means we think differently than others. Most people have a good sense of ethics and values. Knowing between right and wrong is a good foundation to practicing good ethics and morals.

How we develop ethics and values starts from the time we are born and mostly developed by the people were major influences in our life. Family members, Grandparents, friends, and school teachers are a big part of our lives as we are growing up and they all influence our thoughts and beliefs. We develop many values and ethics through past experiences whether it is a positive or negative experience. These thoughts and beliefs are what guide us through our life time in making decisions, thoughts, and judgments. Culture has a great deal of influence also on our values and ethics. Most nations are different in their beliefs and thoughts of what is socially accepted. Many cultures have been around for thousands of years and their thoughts and beliefs are just as old.

When it comes to my personal ethics and values, I feel they are strong and unbiased, and correct. I developed these ethic and values when I was young. I was taught what is right and what is wrong. I was punished if I did something wrong, or told a lie. Both my parents and grandparents had high standards and morals. These were something that we needed to learn. They taught me that lying, stealing, or cheating would not be tolerated and I would be held accountable if I did these acts and punished accordingly.

Most of us would agree that it is ethics in practice that makes sense; just having it carefully drafted and redrafted in books may not serve the purpose. Of course all of us want businesses to be fair, clean and beneficial to the society. For that to happen, organizations need to abide by ethics or rule of law, engage themselves in fair practices and competition; all of which will benefit the consumer, the society and organization.

Primarily it is the individual, the consumer, the employee or the human social unit of the society who benefits from ethics. In addition ethics is important because of the following:

1. Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic human needs. Every employee desires to be such himself and to work for an organization that is fair and ethical in its practices.

2. Creating Credibility: An organization that is believed to be driven by moral values is respected in the society even by those who may have no information about the working and the businesses or an organization. Infosys, for example is perceived as an organization for good corporate governance and social responsibility initiatives. This perception is held far and wide even by those who do not even know what business the organization is into.

3. Uniting People and Leadership: An organization driven by values is revered by its employees also. They are the common thread that brings the employees and the decision makers on a common platform. This goes a long way in aligning behaviors within the organization towards achievement of one common goal or mission.

4. Improving Decision Making: A man’s destiny is the sum total of all the decisions that he/she takes in course of his life. The same holds true for organizations. Decisions are driven by values. For example an organization that does not value competition will be fierce in its operations aiming to wipe out its competitors and establish a monopoly in the market.

5. Long Term Gains: Organizations guided by ethics and values are profitable in the long run, though in the short run they may seem to lose money. Tata group, one of the largest business conglomerates in India was seen on the

verge of decline at the beginning of 1990’s, which soon turned out to be otherwise. The same company’s Tata NANO car was predicted as a failure, and failed to do well but the same is picking up fast now.

6. Securing the Society: Often ethics succeeds law in safeguarding the society. The law machinery is often found acting as a mute spectator, unable to save the society and the environment. Technology, for example is growing at such a fast pace that the by the time law comes up with a regulation we have a newer technology with new threats replacing the older one. Lawyers and public interest litigations may not help a great deal but ethics can.

Ethics tries to create a sense of right and wrong in the organizations and often when the law fails, it is the ethics that may stop organizations from harming the society or environment.

RECONCILITION BETWEEN PERSONAL VALUES AND STRATEGIES

Analysis and Reconciliation of Personal, Organizational, Cultural, and Ethical Values in a Global Setting

Individuals and the companies they work for have long struggled to find equilibrium between personal, cultural, ethical, and organizational values. Analyzing and reconciling personal values as compared to corporate values, especially in a global setting, can cause employees difficulties as conflicts arise. During these volatile economic times, employees continue to face hardships as companies attempt to cut spending, often resulting in a loss of benefits for the employees. However, if the employees understand and have similar values as the organizational values of the company, morale and motivation probably will remain high. Analyzing potential conflicts in values allows for a better understanding of the types of reconciliation that can occur.

In today’s world, for companies to be successful globally, they need to have a firm set of organizational values and abide by them when making decisions. This builds trust among employees (National Defense University, n.d.). Interestingly, surveys conducted in 1993 show that little has changed in the past 15 years. In the 1993 surveys conducted in United States and abroad, employees stated that they valued honesty and wanted their companies to conceal less information (U.S., Global Values Compared, 1994). After the shocking scandals of this decade, including Enron and Bernie Madoff, companies have done little to secure employee trust. In fact, I believe trust decreased because of these cases.

Additionally, the 1993 surveys stated that employees wanted their companies to value development and progress of staff members. Especially in the United States, employees believed that companies seemed more interested in making a profit than taking the time to care about the staff that earns them the money. They also believed that, after initially being hired, companies failed to promote employee development. Even if this was not the case, this sharp difference in employee perception creates a negative work atmosphere. As companies have moved into the global marketplace, staff has diversified. Today, the personal values of that staff are evolving globally, but the corporate values are not keeping pace and, therefore, potentially inhibiting further growth (U.S., Global Values Compared, 1994).

Personal Values

Placing staff members’ personal values into consideration when making decisions is

important.  Understanding the values of staff members allows employers to better conclude how the staff will make choices and decisions. Personal values develop over time with influence from family, religion, friends, education, and life-changing events. These values determine what an individual thinks is significant and desirable. As an individual develops, he or she needs to know why personal values matter. By becoming self-aware of personal values, the individual can better recognize how others view him or her.

Furthermore, if the individual has a perception of how others view his or her values, he or she will be more apt to knowing if coworkers’ values are similar. Similar values among coworkers increases trust, which is important in the workplace environment.  Research has also shown that employees with highly regarded personal values are more trusted in the workplace. These employees tend to make more ethical decisions, which increases credibility.

Moreover, understanding personal values of employees from a management perspective can help to improve efficiency. The personal values of an employee will help to determine how he or she handles tasks and time management (Williams, n.d.). If a project aligns with the individual’s values, he or she will be more likely to commit the time and effort needed to complete the project. However, if a project conflicts with an individual’s values, the individual will be less likely to put forth a strong effort. For example, if the employee is a vegan working for an advertising company, he or she will probably be less motivated to work an advertising campaign for the Dairy Farmers of America as a conflict of personal values would arise.

Cultural Values

Not only do personal values shape an employee, but cultural values do as well. Cultural values often cause conflict when dealing with global corporations. Cultural values play a large role in the timeliness of staff, their work effort, and what motivates them. Corporations often struggle to manage employees across cultural boundaries because values differ greatly. The standards and expectations of employees will vary a great extent around the world. For instance, Western societies tend to have a more individualistic, self-interested mindset. Individuals from these cultures are inclined to view how completing a task will be of benefit to

them. On the other hand, non-Western societies often have a less individualistic approach. Furthermore, whereas Westerners may look at how employment will further provide benefits to them, non-Westerners are often satisfied with simply having employment. The non-Westerner attitude is seldom, “What can you do for me”, but rather, “What can I do for you”.

The cultural values of an individual frequently are responsible in determining how he or she perceives fair treatment and justice in the workplace. Employers can capitalize on this and create a more comfortable and engaging workplace by understanding what culture they have employed. Motivating an employee in a Western culture is heavily influenced by how he or she views his or her treatment. When he or she believes that they are being treated fairly and with respect, performance increases and turnover decreases. Unfair treatment generally results in a feeling of revenge or rebellious attitude. Turnover rates also increase. These ideas of revenge and turnover do not correlate to non-Western societies. In fact, research shows treatment of employees has little to do with turnover in these societies because non-Western cultures are much happier having employment. Religion also plays a larger role in non-Western societies’ cultural values. Those religions downplay individualism and focus on serving.

With corporations now employing a global workforce, having multiple cultures in one workplace is now common. This creates an even greater challenge as employers are forced to accommodate the multiple cultures in one workplace vice having one similar culture in each workplace. A cross-cultural workforce though enables companies to better understand how a product can be marketed globally. “The link between personal values and consumers’ affinities for other cultures needs to be better understood because such understanding is critical to gaining maximum leverage for global marketing strategies” (Miller, 1999, p. H22). Global marketing strategies can be implemented at a much more successful rate when companies have a diversified staff that can review material from several viewpoints. Understanding established cultural values empowers a company to motivate its staff as well as enhance the promotion of its products.

Ethical Values

Similarly to cultural values, ethical values also play a large role in shaping an employee’s decisions in the workplace. While values determine what is right and wrong, ethics is the act of doing what is right or wrong. Ethical values are intertwined with cultural values as these values are heavily determined by the culture in which the individual lives. Every society lays groundwork for what is right and what is wrong. Some, such as Islamic societies, tie ethical values very closely to religion. In these cases, religious customs prevail in determining the rights and wrongs. Other societies like the United States separate the roles of church and law. Nevertheless, in the United States, much of the beliefs of right and wrong have come from the Ten Commandments of Judaism and Christianity.

Likewise to societies as a whole, organizations can set rules to ascertain rights and wrongs in the workplace. Rules such as arriving to work on time and not making long distance phone calls are examples of policies companies can put in place. In some cases, unstated norms supplant the ethical values and policies of a company and become accepted as commonplace. For example, if a company has a policy in place that all employees are to begin their workday at 8am, but everyone arrives at 8:30am and this is acceptable, this unstated norm has overtaken the ethical value of timeliness for that company. One the other hand, employees’ ethical values sometimes override the corporate ethical values especially if common good is involved.  Following the same example as above, an employee may decide to arrive later than company policy allows because he or she believes that more good can be done from staying later in the evening after regular staff leaves to support senior managers. In this case, the employee has made a decision based on his or her ethical values to benefit regular staff as well as senior management by providing support after hours.

Organizational Values

Equally as important as personal, cultural and ethical values in today’s global marketplace are the organizational values that corporations develop. Organizational values are important because they define a corporate structure by which employees are expected to abide. This in some regards decreases individualism, but establishes teamwork and common goals. The employee’s understanding and acceptance of the organization’s values allow him or her to be more effective in the workplace as he or she understands the mission.

In order to develop a strong set of organization values, companies should seek out the handful of people who best define them. These individuals are not necessarily top level managers, but have a high level of credibility with their peers as well as upstanding values for themselves. The core values of an organization do not need to be specific to the line of work.  Rather, the values of an organization should be applicable to almost any type of workplace. When creating the values, the developers should analyze if these values will remain the same for years to come. “Your core values and purpose, if properly conceived, remain fixed. Everything else – your practices, strategies, structures, systems, policies, and procedures – should be open for change."

As a result of the correct practices to develop core values for a company, stated organizational values are often generic and acceptable to the public. Operating values, though, could be totally different. Operating values are the actual values an organization uses day to day. In either case, organizational values present a set of ideas, which are used to decide how a company will proceed. Leaders must realize that, despite what they say, their actions will establish the operating values for the company. Employees may become disillusioned with their company if they realize that the organizational values that they thought were present are not the values the company uses to operate. This disillusionment will decrease morale and motivation especially if the employees notice that the rewards structure of the company is designed to benefit operating, and not stated, values.

Reconciliation

If an employee comes into disagreement with an employer’s organizational values, he or she can attempt to reconcile the problem in different ways. The employee can communicate his or her uneasiness with the behavior of the company. This can be difficult as despite policies, whistleblowers are often looked at in a negative manner. Further, the employee may face problems in deciding who he or she should talk to in order to resolve the matter. The direct supervisor is an obvious choice, but that person may be part of the problem. If this is the case, the employee should seek out senior management. In some cases, senior management may have no idea that a problem exists. However, if senior management also is creating the unethical behavior, the employee has the option to go public with the behavior although this would further ostracize him or her from his or her employer.

Possibly the easiest way to reconcile the differences in values is for the employee to quit. On the other hand, this may prove difficult in these economic times as jobs are not plentiful. The employee may have no other choice, but to continue to work

despite the conflicting values. Furthermore, if the employee does quit, an internal struggle with the employee’s personal values could occur as he or she may have the feeling of failure.  The individual may feel obligated to stay with the company and try to change the ways business is conducted. He or she may also believe that quitting will only allow the company to further its misguided operating values. If the employee does decide to quit, he or she could also go public with his or her reason for leaving the company. This combines the communicating and exiting strategies. The employee in this case is also more credible as he or she has not been fired, but left for ethical reasons.

When assigning their employees to projects, employers need to be cautious not to interfere with the employees’ personal, cultural, or ethical values. In order for higher operational success, employers need to match projects to employees who have similar values. Lack of knowledge and caring about employees directly correlates to the survey mentioned earlier in this paper. If employers take the time to get to know their employees, they will also learn the employee’s values and how they align with the company. Forcing values on an employee will lead to negative results. While finding a job may be difficult in this economy, employee conformity will lead to remorse, shame, and lower morale. The employee needs to believe that his or her values are respected by coworkers and the company. Lowering the effects of conformity can be achieved by including staff in the decision making process. If employees believe that management hears and considers their ideas, they will feel less forced to do work and more like they are creating the work for themselves.

Conclusion

In a global corporation the most definitive way to gain understanding of varying values is to diversify the workforce. In diversifying a company’s workforce, the employer gains the advantage of being able to use its staff to promote itself globally. Consumers are likely to be more enticed by a product if someone from a similar background is presenting it. The mentality of keeping up with the Joneses is real. Consumers want to have what the people they identify with have.

As new employees enter into a company’s workforce, they do little to sway change the organizational values set forth. Likewise, companies do little to change employee’s values. Therefore, companies need to hire people who share similar values. During the hiring process, the company must take the time learn about the employee and his or her values. The company can then make the determination if this potential candidate will fit into the stated organizational values. Moreover, the

individual should research the company’s stated values and mission statement and determine if he or she will be a good fit. By both sides researching and agreeing on values prior to hire, the likelihood of conformity decreases greatly.

Since the 1993 surveys discussed in the introduction, employee expectations have remained relatively constant. The global corporations of today need to incorporate a way to use employee feedback and analyze the difference between their stated values and their operating values. They need to promote the growth of their employees, while also showing that they care equally for their employees as their profit. Employees need to analyze how their values compare to the organization’s values prior to trying to obtain work with that company. As corporations continue to spread their wings globally they need to confront the issues of value difference across people, cultures, and ethics. They also need to continue to diversify their workforce in order to more accurately represent the consumers who purchase their products. This will better equip them in competing in the global marketplace.

Social responsibility

Social responsibility is an ethical or theory that an entity, be it an organization or individual, has an obligation to act to benefit society at large. Social responsibility is a duty every individual or organization has to perform so as to maintain a balance between the economy and the ecosystem. A trade-off always[citation needed] exists between economic development, in the material sense, and the welfare of the society and environment. Social responsibility means sustaining the equilibrium between the two. It pertains not only to business organizations but also to everyone whose any action impacts the environment.[1] This responsibility can be passive, by avoiding engaging in socially harmful acts, or active, by performing activities that directly advance social goals.

Businesses can use ethical decision making to secure their businesses by making decisions that allow for government agencies to minimize their involvement with the corporation.[2] For instance if a company is and follows the United States Environmental Protection Agency (EPA) guidelines for emissions on dangerous pollutants and even goes an extra step to get involved in the community and address those concerns that the public might have; they would be less likely to have the EPA investigate them for environmental concerns.[3] “A significant

element of current thinking about privacy, however, stresses "self-regulation" rather than market or government mechanisms for protecting personal information”. According to some experts, most rules and regulations are formed due to public outcry, which threatens profit maximization and therefore the well-being of the shareholder, and that if there is not outcry there often will be limited regulation.

Critics argue that Corporate social responsibility (CSR) distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful Tricorp corporations though there is no systematic evidence to support these criticisms. A significant number of studies have shown no negative influence on shareholder results from CSR but rather a slightly negative correlation with improved shareholder returns.

MODULE 2

AXIS BANK PROFILE

Axis Bank is the third largest private sector bank in India. Axis Bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporates, SME, Agriculture and Retail Businesses.

The Bank has a large footprint of 1787 domestic branches (including extension counters) and 10,363 ATMs spread across 1,139 centres in the country as on 31st December 2012. The Bank also has 7 overseas branches / offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai, DIFC - Dubai and Abu Dhabi.

Axis Bank is one of the first new generation private sector banks to have begun operations in 1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust of India (SUUTI) (then known as Unit Trust of India),Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC), National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The shareholding of Unit Trust of India was subsequently transferred to SUUTI, an entity established in 2003.

With a balance sheet size of Rs.2,85,628 crores as on 31st March 2012, Axis Bank is ranked 9th amongst all Indian scheduled banks. Axis Bank has achieved consistent growth and stable asset quality with a 5 year CAGR (2007-12) of 31% in Total Assets, 30% in Total Deposits, 36% in Total Advances and 45% in Net Profit.

VISION AND MISSION

VISION

We aspire to have a Value based society.

MISSION

We commit to use education as an instrument, to usher in a value oriented environment. 

STRATEGIES ADOPTED BY AXIS BANK

AVAILABLE STRATEGIES TO PURSUE

BuildThe product or SBU’s market share needs to be increased to strengthen its position. Short-term earnings and profits are deliberately forfeited because it is hoped that the long-term gains will be higher than this. This strategy is suited to Question Marks if they are to become stars.

HoldThe objective is to maintain the current share position and this strategy is often used for Cash Cows so that they continue to generate large amounts of cash.

HarvestHere management tries to increase short-term cash flows as far as possible (e.g. price increase, cutting costs) even at the expense of the products or SBU’s longer-term future. It is a strategy suited to weak Cash Cows or Cash Cows that are in a market with a limited future. Harvesting is also used for Question Marks where there is no possibility of turning them into Stars, and for Dogs.

DivestThe objective of this strategy is to rid the organisation of the products or SBUs that are a drain on profits and to utilize these resources elsewhere in the business where they will be of greater benefit. This strategy is typically used for Question Marks that will not become Stars and for Dogs.

WHERE TO FIND INFORMATION FOR THE BCG GROWTH-SHARE MATRIX?

Information for the BCG Growth-Share matrix is generated from multiple sources including company’s annual reports, sec fillings and a host of specialised research organisations such as IDC, Hoover, Edgar, Forrester and many more. Armed with this information, developing a BCG growth-share matrix should pose less of a problem.

LimitationsThe BCG model is criticised for having a number of limitations (Kotler 2003; McDonald 2003):

There are other reasons other than relative market share and market growth that could influence the allocation of resources to a product or SBU: reasons such as the need for strong brand name and product positioning could compel resource allocation to an SBU or product (Drummond & Ensor 2004).

What is more, the model rests on net cash consumption or generation as the fundamental portfolio balancing criterion. That is appropriate only in a capital constrained environment. In modern economies, with relatively frictionless capital flows, this is not the appropriate metric to apply – rather, risk-adjusted discounted cash flows should be used (ManyWorlds 2005).

Also, the matrix assumes products/business units are independent of each other, and independent of assets outside of the business. In other words, there is no provision for synergy among products/business units. This is rarely realistic.

The relationship between cash flow and market share may be weak due to a number of factors including (Cipher 2006): competitors may have access to lower cost materials unrelated to their relative share position; low market share producers may be on steeper experience curves due to superior production technology; and strategic factors other than relative market share may affect profit margins.

In addition, the growth-share matrix is based on the assumption that high rates of growth use large cash resources and that maturity of the life cycle brings about the expected profit returns. This may be incorrect due to various reasons (Cipher 2006): capital intensity may be low and the business/product could be grown without major cash outlay; high entry barriers may exist so margins may be sustainable and big enough to produce a positive cash flow and a growth at the same time; and industry overcapacity and price competition may depress prices in maturity.

Furthermore, market growth is not the only factor or necessarily the most important factor when assessing the attractiveness of a market. A fast growing market is not necessarily an attractive one. Growth markets attract new entrants and if capacity exceeds demand then the market may become a low margin one and therefore unattractive. A high growth market may lack size and stability.

 

SWOT ANALYSIS

Here is a SWOT of Axis Bank – One of the fastest growing banks in India.

Strengths

Axis bank has been given the rating as one of top three positions in terms of fastest growth in private sector banks

Financial express has given number two position and BT-KPMG has rated AXIS bank as the best bank with some 26 parameters

The bank has a network of 1,493 domestic branches and 8,324 ATMs The bank has its presence in 971 cities and towns The banks financial positions grows at a rate of 20% every year which is a

major positive sign for any bank The company’s net profit is Q3FY12 is 1,102.27 which has a increase of

25.19% growth compared to 2011

Weaknesses

Gaps – Majorly they concentrated in corporate, wholesale banking, treasury services, retail banking

Foreign branches constitute only 8% of total assets Very recently the bank started focusing its attention towards personal

banking and rural areas The share rates of AXIS bank is constantly fluctuating in higher margins

which makes investors in an uncomfortable position most of the time There are lot of financial product gaps in terms of performance as well as

reaching out to the customer There are many fraudulent activities involved in credit cards as the banks

process credit card approval even without verification of original documents Their financial consultants are not wise enough to guide the customers

towards right investments Customer service has to improve a lot in order to be in race with other major

players

Opportunities

Acquisitions to fill gap

In 2009, Alliance with Motilal Oswal for online trading for 10 million customers

In 2010, acquired Enam Securities Pvt Ltd – broking and investment banking

In Sep 2009, SEBI approved Axis Asset Management Co. for mutual fund business

No. of e-transactions increased from 0.7 million to around 2 million Geographical expansion to rural market – 80% of them have no access to

formal lending

46% use informal lending channels 24% unregulated money lenders Now number of branches increased to 1493 from 339. Last quarter there were 48 new branches opened across the Nation

Since it’s a new age banking there are lot of opportunities to have the advance technicalities in banking solutions compared to existing major players

The assets in their international operations are growing at a very faster pace with a growth rate of 9%.

The concept of ETM (Everywhere teller machine) by AXIS Bank had a good response in terms of attracting new customers in personal banking segment

Threats

Since 2009, RBI has increased CRR by 100 basis points Increased repo rate reverse repo rate by 50 points – 11 times of late Increasing popularity of QIPs due to ease in fund raising RBI allowed foreign banks to invest up to 74% in Indian banking Government schemes are most often serviced only by govern banks like SBI

,Indian Banks, Punjab National Bank etc ICICI and HDFC are imposing strong threats in terms of their expansion in

customer base by their aggressive marketing strategies

MODULE 3

AXIS BANK AND BUSINESS ETHICS

Axis Bank is the third largest private sector bank in India. Axis Bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporates, SME, Agriculture and Retail Businesses.

The Bank has a large footprint of 1787 domestic branches (including extension counters) and 10,363 ATMs spread across 1,139 centres in the country as on 31st December 2012. The Bank also has 7 overseas branches / offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai, DIFC - Dubai and Abu Dhabi.

Axis Bank is one of the first new generation private sector banks to have begun operations in 1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust of India (SUUTI) (then known as Unit Trust of India),Life Insurance Corporation of India (LIC), General Insurance Corporation of

India (GIC), National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The shareholding of Unit Trust of India was subsequently transferred to SUUTI, an entity established in 2003.

Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.

Business ethics has both normative and descriptive dimensions. As a corporate practice and a career specialization, the field is primarily normative. Academics attempting to understand business behavior employ descriptive methods. The range and quantity of business ethical issues reflects the interaction of profit-maximizing behavior with non-economic concerns. Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporations promote their commitment to non-economic values under headings such as ethics codes and social responsibility charters. Adam Smith said, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."[1] Governments use laws and regulations to point business behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and details of behavior that lie beyond governmental control. The emergence of large corporations with limited relationships and sensitivity to the communities in which they operate accelerated the development of formal ethics regimes.

AXIS BANK AND CORPORATE CULTURE

We value our people

At Axis Bank, we believe that the most important factor which provides sustainable competitive advantage in our business is Our People. We strive to create an environment to attract and nurture them.

Great team to work with

We realize that relationships are vital for people to work together. As a cohesive team we value integrity by honouring commitments and biding by ethics. The

teams are aligned towards the overall purpose of the Bank and are constantly aiming to achieve greater heights and superior results that make a visible difference.

Open communication

We believe in the power of open communication. The 2-way communication culture leads to contribution of ideas and suggestions towards incomparable customer service delivery, unique and diverse product features and continuous process improvement. Trust is earned and preserved through active engagement and collaboration with colleagues, across departments.

Equal opportunity employer

We believe strongly in fostering an inclusive environment where every individual's unique perspective, background and experiences are valued and recognized. We encourage the variety of thoughts and perspectives that reflect the diversity of our markets, customers and workforces.

Career growth

At Axis Bank, we take pride in growth of our own people. Through a number of training and mentoring programs, we strive to give every employee an opportunity to grow and hone him/her in the preferred area to realize their full potential. Performance and making a difference at the organizational level is the key to success.

Performance based rewards

At Axis Bank, work well done never goes unrewarded. We ensure that our people are well rewarded for high level of performance, exceptional contribution, exemplary behaviour and making a difference to the Bank's success.

Industry leadership

With some of the renowned names in the industry being a part of our Bank, we strive to be the preferred financial services provider in the country. We focus on quality, delightful experience for our customers and drive innovation with best in class services and products.

Personal impact

At Axis Bank, ownership is the core which has enabled the Bank to grow at a remarkably fast pace. Personal ownership enables our people to achieve exceptional quality in their work. Accountability helps in risk management instead of risk avoidance. While working with Axis Bank, your impact on your work is greater than you can imagine.

Commitment to the society

Axis Bank recognizes its duty as a responsible corporate citizen to help strengthen the communities in which we live and work. Axis Bank Foundation (ABF) was setup as a Public Trust in 2006 to carry out the Corporate Social Responsibility initiatives of Axis Bank. With our continued efforts to elevate the education levels in India, in 2011 we ventured into the domain of providing sustainable livelihoods.

AXIS BANK AND SOCIAL RESPONSIBLITIES

Axis Bank recognises its duty as a responsible corporate citizen to help strengthen the communities in which we live and work. Axis Bank Foundation (ABF) was setup as a Public Trust in 2006 to carry out the Corporate Social Responsibility initiatives of Axis Bank. ABF has partnered with several NGOs to provide equitable education to various underprivileged individuals across 13 states of India. With our continued efforts to elevate the education levels in India, in 2011 we ventured into the domain of providing sustainable livelihoods. These programs aim at alleviating poverty and providing livelihood options for economically weak households.

Besides the philanthropic initiatives of ABF, we have setup a Volunteering program, encouraging the employees of the Bank to get involved and become socially responsible citizens. ABF is also actively involved in making steps

towards reversing the effects of our ecological footprint, by implementing several Sustainability Initiatives.

MODULE 4

Case Study of Axis Bank

The UTI Bank was one of the first private sector banks which were set up after the reforms in the banking sector in India. It was set up with a capital of Rs. 1.15 billion, with Unit Trust of India (UTI) contributing Rs. 1 billion, Life Insurance Corporation of India (LIC) contributing Rs. 75 million and General Insurance Corporation of India (GIC) and its four subsidiaries contributing Rs. 15 million each.

On April 30, 2007, UTI Bank announced that the bank's board of directors had approved a proposal to change its name to Axis Bank. Nayak explained, "The name has been chosen because it is simple and crisp, transcends geographical boundaries as we seek to become a multinational bank, and connotes stability and solidity.

On July 30, 2007, UTI Bank rebranded itself as Axis Bank after obtaining the approval from its board, shareholders and the Reserve Bank of India. It also obtained a new certificate of incorporation from The Registrar of Companies. The management of the bank said that the new name Axis meant 'a line of reference around which all else is measured, or as a line of stability around which the planets and spheres rotate'. On August 1, 2007, the bank started an integrated marketing campaign titled 'UTI Bank is now Axis Bank; Everything is the same except the name'. Sumanto Chattopadhyay (Chattopadhyay), Group Creative Director, O&M, said, "It's [the change in name] something very serious, something that would give people sleepless nights if there was a hint that it's a takeover or something fundamentally changing.

In addition to reassuring the customers that they would be offered the same level of service and professional expertise from the bank, the bank also clearly communicated to the customers that "We will not ask for any account details due to the name change to Axis Bank. Do not respond to any such request received through email. Please contact your nearest branch in case you receive any such request.though the change in the name of the bank was necessitated due to pressure on the bank to arrive at a decision because of the deadline on the UTI brand name, the company seemed pleased to be developing its own brand. The company felt that adopting the new name would bring definite advantages as the earlier name had a public sector connotation. The UTI Bank had always been a private bank since its inception but it was thought of as a public sector bank linked with the UTI brand.

The new Axis Bank was in a sound financial position and had a good portfolio. It had grand plans for the future too. Having raised Rs. 4.5 billion in 2007, Axis Bank would be able to start on a sound footing.The bank said that it would continue its focus on commercial banking and would also bolster its asset management business. The company planned to open branches in 450 out of the 600 districts in India by 2010.

The campaign that built on the theme of identical twins to put forward this message was launched in multiple media channels including television (TV), radio,

print, Internet and outdoor media. The bank also leveraged on its 2,500-odd ATM locations spread across the country to communicate the change in name. In addition to the integrated marketing campaign, the bank communicated the change in name to its customers personally well in advance. To prevent its customers from falling victim to phishers who could take the advantage of any confusion arising out of the rebranding, the bank cautioned them against responding to any email claiming to come from the bank, that asked for personal/account details of the customers.

Industry watchers said that, though there were instances of banks rebranding following a merger and acquisition (M&A) deal, this was the first instance where a bank was voluntarily rebranding itself by going in for a new name and shedding a well-recognized brand. They noted that the company was spending a huge amount of money on the rebranding exercise - more than three times its marketing expenditure in 2006. Some of them felt that by going in for the new brand name the company would lose the quasi-governmental connotation that came with the UTI brand.

Questions:

-         What are the issues and challenges in rebranding a well established brand, especially in the banking sector in India.

-         Explain the role of marketing communication campaign in rebranding any organization.

India has a great prospect to leverage the potential of e/m-banking and build a cash-light economy. In addition to IT edge and relatively dense population, the Government of India is clearly determined to achieve financial inclusion and is taking aggressive steps to see this happen.

Rendering financial services to the un-served or poor through a market-led approach is important for the sustainability of financial inclusion. However the lack of feasible business models has impeded market-led approaches being followed at scale. While this is evident across many countries and so does in India, which has seen many pilot projects that are still not sustainable.

There are many reforms and enrollment drives which have been undertaken by the Reserve Bank of India (RBI) and the Government of India over the last five years to give drift to the financial inclusion agenda. This has had its own positive and negative effects on the branchless banking initiatives. While the intervention of government has ensured some hope for the players involved like bank agents, it has also, diverted the focus from savings and credit services for the poor to remittances and government social security payments. This manifest one key risk in India which is financial inclusion agenda is largely determined by broader interests such as the distribution of MNREGA and other government transfers (EBTs).

It can be safely said that the RBI and government policy initiatives and reforms have considerably helped the development of e/m-banking systems. They have

adopted technology prototypes (like smart cards and mobile based options) . These infrastructure advancements have given vent to a more market driven environment, which in fact, is the future face of the economy.

Although, there has been an upsurge in the consumer demand for electronic remittance and Electronic Benefit Transfers (EBT), the absence of compelling value-proposition in basic no-frills saving accounts is keeping the customers, the Business Correspondent Network Managers and the Indian banking system from realizing the full potential of the branchless banking model.

Emergence of Business Correspondent Network Managers

Business correspondent network managers (BCNM) as channel intermediaries depend on banks to a large extent for their products, pricing, branding, marketing and promotions and also for their survival. However, there are exceptions which are the analogous to IFMR, adopting a well-diversified approach to build portfolios of partnerships and products.

As a result, early moving BCNM’s look cast down in the past in many prospects. The major issues being concerned about are:-

A. Developing legal relations of this e-banking with their banking partners on one hand and with the agents or Customer Service Points (CSP’s) and the consumers on the other hand.

B. Negotiating revenue streams (the commissions received because of various activities undertaking on behalf of the banks) and a broader product mix to offer, in order to achieve liability, within time constraints.

Banks are rendering a yeoman’s service in enhancing legitimacy of Business Correspondents as their new distribution and service channel. Prominent banks like SBI, PNB and UBI are an upstart in their market endeavor by significantly displaying signage, tariff cards and service information at CSP locations. Local branch manager and staff are now more in light about BC activities and have been assigned mandates to supervise the Performance of the agents linked to their branches, to render the required operational assistance and acknowledge their issues.

Information of the agents linked to a particular branch is increasingly revealed at branches, to create awareness. At times, banks recruit new agents within the branch, by training and teaching them and enabling customers to open accounts

and transact with the new agent, building familiarity and trust before the agent moves to an apprehended environment. Progressive banks have enabled integration BCNM’s to their Core Banking Systems (CBS) resulting in ease of access by BCNM’s to banking products, transactions and information, providing significant boost to their initiatives.

Mobile Network Operators and Large Corporate Houses Co-Venture.

With the popularity of collaborations between mobile network operators (MNO’s) and banks live up to the promise of financial inclusion, the RBI and TRAI (Telecom Regulatory Authority of India) have announced that they will harmonize and coordinate with each other to avoid any form of regularity conflict. The RBI is gradually strengthening and revising regulations based on mobile banking working group’s 2008 pragmatic perception and recommendations. Some of these encompass measures and procedures for banks to be hand and glove with telecom providers, fortifying the security framework, suggesting common standards for completing transactions etc. TRAI is focusing on dispute settlements and fixing tariff rates for mobile banking access.

In the previous year, many large Indian banks have partnered/co-ventured with large mobile network operations (MNO’s) and handset vendors to facilitate their connection through mobile channel by providing access to financial services. Few such deals are:

1. State Bank of India (India’s largest bank) with Airtel (India’s largest MNO)

2. ICICI Bank (India’s largest private sector bank) with Vodafone (India’s second largest MNO)

3. HDFC Bank with Vodafone (now rolling out after a pilot-test in Rajasthan)

4. Axis Bank (India’s second largest private sector bank) with Idea Cellular (an innovative and well penetrated MNO)

5. Union Bank (another large public sector bank) with Nokia Money

These MNOs have a distribution network of around 1.0 to 1.5 million retailers across India. This presents a great opportunity to build a nationwide network of agents – something that has so far been a challenge due fragmentation in financial inclusion space.

Future Drivers For E/M Banking

There are various factors, drivers that will empower Indian electronic and mobile banking to grow exponentially in the coming years.

Under-banked and Un-Banked Population

Out of 600,000 villages in India only one sixth, have banking services. Almost half of the country’s population is unbanked. The large section of the Indian population not just in rural areas but also in many segments of urban markets, offers a large untapped market with a tremendous business potential. Financial inclusion is slowly but surely being seen not just as a social responsibility, but as a potential business model too, for two reasons:

Firstly, the RBI is looking for real business cases and forcing banks for the same and secondly, because of the huge untapped market for banking services.

Demographic Factors

In India the population of youth (between the age of 14-29) is the largest youth population globally, which is around 27% of the total 1.2 billion. Furthermore, adding the age group of 30-44, the proportion is 47%. %. Apart from the huge size of this segment, they are among those who are the early adopters of latest technology and new services, which presents a huge opportunity for e/m-banking service providers.

It has been observed that for the majority, access to financial services is a household need, and not only an individual need, and if the account holder is illiterate, other members of the family are  competent enough to execute transactions and use electronic or mobile banking services.

Bank Based Services

It has been observed that poor people, whether in urban or rural completely understand the need for formal financial services and are well aware of the fact that they are losing money in the informal sector and whenever they leave money in the household. Many low income households also express a clear need for credit

facilities – but 51% remain dependent on informal sector (other sources) moneylenders. Similarly, they are very aware of the drawbacks and costs of informal remittance schemes, and are to send money to family and friends.

For doing one transaction from a bank, a poor has to incur significant direct and opportunity cost. The direct cost associated with traveling to a bank branch is not insignificant. They have to incur about Rs.20 and opportunity costs of wage labour range from Rs.50 to Rs.150 and sometimes more. As a result there is growing willingness to conduct transactions through agents and to pay for these services. Majority of villagers are willing to pay for services that will reduce their real and opportunity costs.

India continues to be a unique market and regulatory environment with intense involvement of the regulator and the government. Hopefully, the rapid outreach will make the model sustainable for all the players, banks, BCNMs and agents and at the same time offer services really needed by the clients. These two ends are, of course, aligned and mutually beneficial. The gradual regulatory evolution to support BCs and banks in their outreach efforts continues – and the results are beginning to emerge.

The other exciting development is the move to encourage banks to have 25% of their branches in rural areas. These, presumably low cost branches, can become the hub for financial inclusion and support wider outreach of branchless banking outlets, while acting as nodes or hubs of the model. The antiquated post-office structure is also undergoing rapid transformation and all records will be computerized with plans to link post-offices within the next year.

Many of the lessons learned in the past can very well be applied by the banking sector. With government goading, the banks in India will soon recognize and respond to this.

SOCIAL AUDIT

1. We have audited the attached balance sheet of Axis Bank Limited ('the Bank') as at 31 March 2010 and also the profit and loss account and cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with accounting standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. The balance sheet and profit and loss account are drawn up in conformity with Forms A and B (revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956.

4. We report that:

a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit and have found them to be satisfactory;

b) In our opinion, the transactions of the Bank which have come to our notice have been within its powers;

c) In our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Bank’s branches;

d) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

e) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act 1956, insofar as they apply to banks;

f) On the basis of written representations received from the directors, as on 31 March 2010, and taken on record by the Board of Directors, we report that none of the directors is disqualified from being appointed as a director in terms of clause

(g) of sub-section

(1) of Section 274 of the Companies Act, 1956;In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required for banking companies, and give a true and fair view in conformity with the accounting principles generally accepted in India;i. in case of the balance sheet, of the state of the affairs of the Bank as at 31 March 2010;ii. in case of the profit and loss account, of the profit for the year ended on that date; and

ECONOMIC DEVELOPMENT OF AXIS BANK

Axis Bank Ltd Raises INR5,537 Crore (INR55.37 billion) Via Share Sale-Business Standard

Thursday, 31 Jan 2013 

Business Standard reported that Axis Bank Ltd said it has raised INR5,537 crore (INR55.37 billion) by selling shares to institutional investors and certain promoters. Out of the total funds, the bank raised INR4,726 crore (INR47.26 billion) through qualified institutional placement (QIP). The QIP programme was managed by Citi, JP Morgan and Axis Bank. 

Axis Bank Ltd Announces Issue Of Equity Shares

Monday, 4 Feb 2013 

Axis Bank Ltd announced that in terms of the special resolution passed by the shareholders of the Bank through postal ballot on January 28, 2013 and in respect of the Preferential Issue in accordance with Chapter VII of the Securities and Exchange Board of India (issue of Capital and Disclosure Requirements) Regulations, 2009, the Committee of the Board of Directors has decided to issue and allot on February 04, 2013, 5,837,945 equity shares of face value INR10 each (Equity Shares) at a price of INR1,390 per Equity Share (including a premium of INR1,380 per Equity Share) aggregating to INR8,114.74 million, to the Promoters as per the details provided below; 4,240,450 Equity Shares to Life Insurance Corporation of India; 771,990 Equity Shares to General Insurance Corporation of india; 363,157 Equity Shares to National Insurance Company Limited; 353,102 Equity Shares to The New India Assurance Company Limited; and 109,246 Equity Shares to United India Insurance Company Limited. 

Axis Bank Ltd To Raise Over INR6,000 Crore (INR60 Billion) Via QIP, GDR Route-Business Standard

Monday, 17 Dec 2012 

Business Standard reported that Axis Bank Ltd said it proposes to raise funds by offering 4.58 crore (45.8 million) shares by various means, including Qualified Institutional Placement (QIP) or Global Depository Receipt (GDR). The Board approved to raise Tier-I capital of the bank by issue of equity shares not exceeding 4.58 crore equity shares through GDRs or QIP issue and preferential issue to promoters of the bank. The decision will be subject to approval of shareholders, Reserve Bank and other regulatory authorities as may be required, it added. Shares of Axis Bank closed at INR1,359.75 per unit, up 0.5% on the BSE. The bank would be able to raise about INR6,228 crore (INR62.28 billion) at December 17, 2012 closing price.