Bank Islam of Malaysia: In Need of a Strategy

Class Assignment 3

Bank Islam of Malaysia: In need of a Strategy

By

Musa Lufunga Daud

816177

Submitted To:

Prof. Dr. Ajay Chauhan

In partial requirement of

STRATEGIC MANAGEMENT

(BPMN 6023)

Submitted on:

                                                    May 31, 2015

Abstract

Bank Islam Malaysia Sdn Brh came into operations on July 1, 1983 under Islamic Bank Act of 1983. Primarily it was established as the Tabung Haji fund that supported Haji pilgrims. Through good results indicated by the fund, the government of Malaysia under the ruling party United Malays National Organisation (UMNO) initiated for its formation. The bank offers Islamic products with operations based on Sharia’h compliance. It has multiple products with more than 70 Islamic products and services. For the time frame 1983-2013, Bank Islam had network of 136 branches constituting 4,200 employees and more than 1,200 self-service terminals. The bank started with an initial capital of RM 500 million and a paid-in capital of RM 79.9 million. Business enjoyed uncontested market for 10 years. Because of business success, was listed in 1992 and then it was delisted in 1997 for transformation. Bank Islam had received two awards Best Bank of the Year and Most Innovative Islamic Bank in Malaysia 2013.

However, in November 2005, Bank Islam suffered significant loss amounting to RM480 million due to NPLs from its Labuan offshore unit. Managing Director Mr. Aziz resigned in the end of June 2006. On June 9, 2006, a new Managing Director Dato’ Sri Zukri Samat was appointed. He introduced three turnaround plans which were successful. The challenge was, Bank Islam was in need of strategy and had no marketing manager in place. AM was hired as a new Marketing Manager who failed to come up with a very convincing report.

Learning from the Case

The case is about Bank Islam which needs a strategy.

1. Bank Islam requires Business Strategies:

Operating in any business environments, particularly Islamic banks that operate under Sharia’h principles there need to have operations strategies. Having clear vision and business objectives, could help Bank Islam establish and implement business strategies. These strategies would help Bank Islam competes with conventional banks.

2. Professionalism:

During hiring and recruitment processes CEOs need to consider the qualities of professionalism. These qualities are the guidance for hiring competent and knowledgeable employees vested with necessary skills to perform particular jobs. MD missed up one point of professionalism which is specialized-knowledge in a particular field or industry. Instead he appointed a person who did not fit for the position.