Wednesday, October 29, 2008

Banca Takaful - Retail Solution To tapping Bank Customer base.

Strategic Alliance is the way for Banca Takaful to tap – banks’ captive customer base.

“A consultancy report submitted to College of Business in partial fulfillment of the requirements for the degree -Doctorate of Business Administration
By Bp. Syed Nasarudin Abu Bakar

COLLEGE OF BUSINESS INDONESIA -ACEH


Dengan Nama Allah Yang Maha Pengasih dan Maha Penyayang

Ulasan Esekutif

“ Kebangkitan dan Keruntuhan suatu bangsa tergantung pada sikap dan tindakan mereka
sendiri”
Banca Takaful adalah satu bentuk pengedaran khidmat Takaful melalui bank dengan mengunakan rangkaian cawangan bank, kakitangan, mau pun jalur mayanya. Apa jua bentuk pemasaran, penjualan dan pengendaran dengan mengunakan rangkaian bank untuk tujuan penyebaran ataupun pengedaran maklumat dan khidmat Takaful. Banca Takaful bertuah kerana ujud atas satu kerjasama diantara P.T Bank Simpan Nasion dengan P.T P.T Pruansuransi yang dinamakan – P.T Prubasim Takaful,. Banca Takaful adalah satu unit pengedaran khidmat Takaful – milik P.T Prubasim. Ia diujudkan dengan tujuan untuk menerobos pasaran langganan Basim yang berjumlah lebih dari 7.0 juta pemegang akaun. Ia diujud apabila Basim selaku pemegang saham P.T Prubasim mengubah pendirian atau belum bersedia untuk melaksanakan tanggung jawab selaku pengedar. Banca Takaful diujudkan agar peluang menawan pelanggan Basim tidak terlepas begitu saja.

Mengenali pemasalahan adalah satu tugasan yang merumitkan. Disini saya menemubual pengurusan serta kakitangan dan membuat pemerhatian dan pemantauan serta soal selidik – adalah amat ketara – ujudnya “Jurang” diantara Basim dan P.T Pruansuransi. Ia juga memerlukan kepakaran dan pemahaman, apakah peRpasalahan boleh diselesaikan…jika boleh…bagaimana dan siapa yang terlibat?

“Jurang” yang dihadapi adalah kegagalan menefaatkan peluang dari ujudnya tabungan maklumat pelanggan di Basim untuk tujuan pemasaran. Cara mengatasi masalah yang ujudnya dari ketidaksediaaan Basim melaksanakan perjanjian pengedaran khidmat Takaful serta berkongsi maklumat pelanggan – adalah dengan menaraf semula peRpasalahan menjadi satu peluang. Berdasarkan perbedzaan budaya kerja serta tiadanya kesungguhan dan tanggung jawab dari pihak atasan kebawah dalam mentadbirkan pengedaran yang berkesan – adalah dicadangkan satu kebijaksanaan diamabil di peringkat pengurusan Banca Takaful dan Pengurusan Pemasaraan maupun Pengurusan Rangkaian Peruncitan Basim untuk mengatasi “Jurang” dari sudut baru ia-itu “Hubungan Strategik membolehkan pasaran dalaman Basim di terobos”. Ini boeh dilaksanakan dengan mengunakan kekuatan yang tersedia ada diantara Banca Takaful dan Unit2 Urusniaga Basim. Dengan membina hubungan diperingkat pengurusan pertengahan yang tiada mempunyai apa apa kepentingan tertentu, pasti dapat mengeratkan hubungan kerja niaga ini. Apabila adanya hubungan yang lebih selesa dalam sausana saling mempercayai maka apa jua masalah atau jurang pasti dapat diatasi.

Dengan merumus atau menaraf semula “jurang” kepada satu ‘peluang’ - ujud dari tindakan peneraju kerjasama pelaburan, yang hanya menumpukan perhatian kepada perkara pokok penubuhan kerjasama ia-itu keuntungan kewangan sahaja; tanpa melihat budaya sebagai fakta penting yang menyumbangkan kepada kejayaaan perlaksanaan kerjasama tersebut. Peneraju kerjasama sering mengabaikan selidik penelitian dan penilaian yang jitu hinggalah, mereka benar benar pasti bahawa urus niaga nyata akan ujud. Penumpuan pula kepada fakta yang berciri kepentingan kewangan dan perundangan sahaja dan tidak melihat perbedzaan budaya boleh mengagalkan keberkesanan perlaksanaan kerjasama tersebut.

Dengan mengunakan semua kekuatan yang ada saperti kekukuhan syarikat, pengurusan yang mantap, budaya saing, jenama unggul, rangkaian peruncitan kewangan yang sedia ujud, kepakaran dalam mencetus dan mengeluarkan khidmat Takaful yang terkini dan cangkih; kumpulan KFT yang muda dan bertenaga serta maklumat pelanggan yang besar dan kedudukan kewangan yang sihat – dapat memajukan “ Hubungan Strategik bagi mencapai matlamat pengedaran khidmat Takaful kepada pelanggan Basim”. Hubungan ini sebenarnya bertumpu pada membina silatulrahim diantara Basim dan Banca Takaful dalam mejayakan kerjasama. Ia lebih darihal kewangan semata-mata. Untuk berjaya memerlukan hubungan yang baik lagi mesra serta saling mempercayai, jujur dan amanah. Ini mengatasi kewangan. Dengan itu apa jua jurang yang ujud dapat diatasi.

Chapter 1.00 : Problem Identification

Finding a problem to work on may seem deceptively simple. The world is full of problems and the world of business in general and Banca Takaful in particular do have its fair share. However, I do find this a considerable headache. Identifying an appropriate topic is one of the problems I encountered in this consultancy exercise. Problem finding itself is a problem to me. However, through interaction with various Banca Takaful and P.T Prubasim staff and Executive Committee team members and fellow DBA doctoral candidates, I got some valuable insight into management issues and problems that had been boiling. To identify the issues requires great deal of innovative plus considerable curiosity; creativity and originality of thought entails high risks than working with pre-established agendas does. For this knowledge application exercise, it is important to be realistic and guided to avoid risk of failure. To appreciate the problems and possibilities; an exploratory review was done. I talked to the key executive committee (Ekskom) members, observe, and review internal documents of banca Takaful and P.T Prubasim. This begin with Human Resource Manager, Chief Executive Officer, Senior Manager (Takaful), Head of Banca Takaful, Assistant Manager (Operation & Training), Executive for underwriting and ends with Customer Supports staff. On the ground, I spoke to the KFT. They gave feed backs on the Banca Takaful perfoRpance. They spoke about the limited career path that KFT is facing. Observed - Banca Takaful support units such as underwriting, training, customer service centre, and outlets. The managers and other organizational practitioners were the second sources of problems. They were the field of every day action. Involvement with managers and employees through daily interaction provide me with insights into management issue and problems; such as a “GAP” exist between P.T Prubasim and Basim. However, thorough literature and insight review helps to provide a solid foundation for this consultancy project. The purposes of the reviews were to establish the current state of the knowledge in the field. These studies are enoRpously helpful in giving advance appreciation of the problems and possibilities that are to arise during fieldwork.

Value and feasibility were the criteria for selecting the problems to be resolved. I am talking about the worthiness of the problems. The contribution should be significant.
Feasibility, can the problem be resolves. In addition, practical consideration looms large here. Availability of data is a major concern. These were resolve through interview, questionnaires, and observation. Time is also a concern to me. Is there enough time to complete these tasks? Other major concerns are, do I have the right skills, and how can I develop new skills? Is there enough budgets?

The approach to problem identification was to identify the current issues or problem that hinders the effective and smooth distribution of takaful products to Basim customers. Identify the scope and narrow down the area of investigation to be focus. Moreover, the key points are what the objective of this consultation is. The focus is how strategic alliance contributed to the penetration of Basim customer base.

1.10 Current Situation:

Banca Takaful is the business unit of P.T Prubasim Takaful. It was set up with the task of distributing P.T Prubasim Takaful product directly to Basim customer base. P.T Prubasim took this approach when the other JV partner - Basim did not proceed with the distribution agreement. Under the distribution agreement, P.T Prubasim Takaful does the manufacturing of Takaful products and Basim carry out the distribution. Since Basim decided not to proceed with the distribution arrangement, P.T Prubasim Takaful had to proceed with the distribution. Under the agreed distribution arrangement Basim was to set up a financial retail outlets at Basim branches throughout the country. Karyawan is to lead these outlets. Basim would do the KFT recruitment, selection, and hiring. P.T Prubasim Takaful’s role other than manufacturing the takaful product is to provide necessary training for the KFT as well as providing the necessary technical and backend support.

1.11: Current Situation - Banca Takaful Overview.

It refers to marketing, distribution and retailing or arrangement with Basim banks that involves:
• Sale of takaful products either by:
o the staff of the bank;

o using the bank’s distribution channels which includes its call centre, internet, branches
and marketing booths as well as third parties providing such marketing support services to
the bank;

o using the bank’s customer database other than direct mailing arrangements that are
limited to the acquisition of a name list of bank customers for the mailing of takaful
brochures for a limited period at a nominal fee.

o Joint marketing of takaful products with banks.

o placement of Banca Takaful Sales personnel (KFT) at the bank branches

• Banca Takaful is a business unit within P.T Prubasim Takaful. It is responsible to distribute
the P.T Prubasim Takaful Investment Link Products to Basim customers. It is a Takaful
retailing unit. This unit manage the whole Banca takaful outlets at all Basim bank branches
through out the country. Currently, Banca Takaful operated 58 outlets. A KFT is based at
each outlet but reporting to Banca Takaful operation centre at Mangga Dua. KFT is a
salaried staff of Banca Takaful that operates a Takaful retail point within Basim premise.
KFT is responsible for marketing, sales, and operation of the retail outlets. His main task is
to solicit business from Basim walk-in customers, propose to the prospective customer, and
submit the proposal to the main operation centre. He also needed to do day-to-day sales
administration for the outlet. KFT career path ends when he/she is being promote to
manager position for the outlet.

1.12: The Banca Takaful model.

It is about identifying, anticipating, and fulfilling the needs of Basim customers and all the stakeholders at a profit. Move forward from where Basim has stop.

• The present model does not align with the bank’s structures.

• P.T Prubasim Takaful takes on the task of developing the takaful products – the bank
(Basim), on the other hand provide a physical space and some interfaces at the support
levels.

• The goal is to tap the huge market offers by, the size of Basim existing customer base,
estimated to be around 7.0 mil account holders.

• This customer base has not been approach from a proper platform.

• The success of the existing model is in question.


1.13: Distribution Model of P.T Prubasim Takaful

There are three (3) distribution channels for P.T Prubasim Takaful products.

• P.T Pruden Assuransi Indonesia , Agency Force

• P.T Prubasim Bancatakaful retail unit within BASIM branch outlets.

• dedicated sales force (KFT) market personal lines family takaful products to BASIM walk-
in customers.

• BASIM market off the shelves credit related takaful product


• Banca Takaful Model - Banca recruit, hire, train KFT. Each KFT is to run a retail outlet or point of sales at selected BASIM branch through out the country. Each KFT undertook one week induction training at the main operation and marketing centre before posting. The induction covers every aspect of running a Takaful Retail outlet. At the outlet, KFT is brief by BASIM branch on the bank branch operation and the role to play. KFT’s role is to market Takaful Investment Link products. KFT report direct to Banca Takful main Operation and marketing Centre at Mangga Dua. However, KFT need to observe the BASIM bank branch‘s dos and don’t while operating the point of sales for Banca Takaful. KFT receive basic salary plus incentive. The academic background of KFT is a university basic degree but not lower than a recognized diploma. The hiring age is below 25 years. The gender is open to both male and female Indonesian. The career path goes up two levels. A candidate starting point is as KFT. Should one is confirmed he/she has the opportunity to be promoted to Senior KFT. The highest level in the career path is as a Manager for the outlet. The career ends there.

1.20: Problem Identification – Issues Identified
Based on interviews conducted with CEO, members of executive committee, Head of Banca Takaful, Takaful Financial Executive (KFT) at the outlets, customer support centers, data gathered, site observation, questionnaires, organization records and desk research; the following area were identified that requires serious attention to helps banca Takaful distribution arrangement.

1.21 Strategic Alliance

• The alliance was not capitalize after JV has been set up

• The alliance was not clearly define to the working level

• There is no clear working mechanism

• Banca Takaful basically left on its own to carry out the business

• No channel of communication

• Solution existed through fire fighting on ad hoc only.

• Cultural differences between Organizations.

• Absence of leadership direction in the relationship.

1.22 Distribution Model

• Effectiveness and efficiency of the existing model are been questioned.

• The advantages and disadvantages not studied.

• The existing model does not bring the desired results.

1.23 Market Segmentation

• Hasn’t been done to identify subgroup of buyers within the total customer base

• Focus on walk-in customers only.

1.24 Tapping BASIM Customer Base

• BASIM is not sharing the database.

• Get BASIM to share the database.

• What are the issues behind the refusal?

• Is there and alternative avenue to secure the database?

• What are the implications of total bar on the database access?

1.25 KFT Recruitment, Selection, Career Path

• No scientific KFT recruitment and selection criteria in placed.

• Narrow KFT Career path

• Low on incentive

1.26 Training

• Poor - Product Knowledge

• Poor - Goal Setting

• Poor - Power selling

• Little Technology Application

• Lack Communication skills

1.27 Retail Management

• No Retailing Skills

• Retailing is not part of the training given to KFT

1.28 Retail Outlets

• The current numbers outlets did not signify the organization seriousness of penetrating
the market.

• The outlets’ environments are not conducive to attract and facilitate more customers.

• Is the size right?

• KFT not given necessary retailing skill to run the outlet.

• Awareness campaigned focus at the outlet only.

• Multiple channels promotion not done to position each outlet in the target market.

1.30: Objective of Consultation

To identify issues and problems; rectify the key contributor that contributed to non-achievement of the JV objectives. In other words how to do things better, in order to achieve the result desired?

• Find solution to the key issue of current model

• How to put strength to works through strategic alliance so that distribution of Takaful
products and services to the untapped BASIM customer base possible.

• It is about building bridges to change the world which banca move.


2.14: P.T Prubasim Takaful

2.15: Vision and Mission

Vision To be a world class Shariah compliant financial solutions provider

Mission To create dynamic, progressive & positive working culture
To create a culture of innovations in attracting, developing and retaining
best talents

To persistently pursue innovative solutions in our products and services
To strive beyond stakeholders’expectations.

Chapter 3.00: Analysis of the Industry & Competitors

The Shariah compliant insurance or Takaful industry is relatively young compared with its more mature banking counterpart, but is also in a phase of rapid expansion. The national Takaful industry needs to gain critical mass, build nationwide brand recognition, and exceed performance standards set by the non-Shariah compliant insurance industry. The renaissance in Socially Responsible Investing (SRI) and customer demand for Shariah compliant solution has enhanced the community banking appeal of Takaful related products. The Takaful product family spans across general, life, health, and pensions business lines. The market growth rates range from between 15% and 30% annually. We analyze various factors that are part and parcels of the Takaful industry.

• Definition of the industry
• Underlying Economic Attractiveness
• Current and Projected Trends
• Industry Structure
• Value Chain
• Net Contribution
• Market Profile

3.01: Definition of the Industry

Its product design, organization, and risk management conforms to specific restriction and requirements of Shariah. The most well known restrictions from Shariah are restriction from Riba (interest/usury), Gharar (uncertainty/sale of risk), and Maysir (gambling).

The Takaful industry works using two main business models. These are the Mudharabah and the Wakalah models. The Mudharabah model is use in Indonesia and involves the Takaful operator managing the operation in return for a share of the surplus on underwriting and a share of the profit from investments. The Wakalah model is more prevalent in the Middle East region. In this model, the Takaful operator acts as an agent (Wakeel) for the participants, and manages the Takaful/reTakaful fund in return for a defined fee. Clearly, the ability to tailor suitably diversified risk reward investment portfolios, selected top quartile performing funds from major international brands and control defined portfolio risk levels are powerful drivers for the retail value preposition. In addition, the product certification by an independent Shariah Board of experts and ongoing compliance monitoring with high ethical standards has favorably affected transparency, disclosure of different terms and conditions, charges and frequency reporting.

3.01.1: Definition of the Industry – What is Takaful?

Takaful is a Shariah compliant cooperative risk sharing. Takaful is the oldest foRp of insurance. The Grand Council of Islamic Scholars, Maja-al-Fiqh, only approved takaful as a Sharia-acceptable alternative to traditional insurance in 1985, however. Restriction from Riba (interest/usury), Gharar (uncertainty/sale of risk) and Maysir(gambling). Managing these requires some ingenuity. Takaful is a broad and exciting global opportunity, offering way to capture currently underserved customer base. Takaful covers the whole range of insurance activities, from personal line, like household and motors; through to long-teRp savings, life protection, investment products, health care, corporate, trade and reinsurance. The distinctive features – transparency over product profitability, element of profit sharing, limitation on acceptable investments Attractive to “ethical investment” segment


3.01.2: Banca Takaful - The Concept

The concept of Banca Takaful was from BancAssuransi. The defining concept, which refers generally to the provision of Takaful services by banks. Banca Takaful is “a strategy adopted by banks or Takaful companies aiming to operate in the financial market in a more or less integrated manner.” This definition highlights the inter-linkage of different financial services, as well as the distribution of Takaful products. Other definition emphasized the degree of integration between banking and Takaful, as some observers argue that Banca Takaful requires a high degree of integration between the two sectors.

Other more stringent definitions state that Banca Takaful is a specifically designed product for distribution through Banca Takaful channels.

3.01.5: Why BancaTakaful?

To banks’ customers – banca Takaful offers total financial solution, differentiated customer experience, and value for money products. In all the greatest benefits are – customer convenience.

To Banks – Islamic banking is the fastest growing market segment and competition is getting tough. Banca Takaful offer opportunity to increase product range; potential earning from fee income; probability of achieving deeper and stronger customer relationships (better customer retention); Opportunities to bundle and improve product offerings; and better customer lifecycle management. The advent of web base point of sale and online administration system offered by such group as the FWU of Germany has facilitated the sales process through the branches banking network. In addition, the advantage of using own brand equity, transparency of product terms and conditions, open investment architecture and efficient online processing has all proved to be attractive.

To Syarikat Takaful – The expansion of Shariah compliance finance market has spurred growth of Takaful mortgage protection, product. The raising customer awareness and education for Shariah complaint products created a new huge new demand for Takaful products. Thus, banca offer broader distribution and market coverage; opportunity to save cost and improve distribution efficiency; become more competitive and probability of leveraging on banks’ brand, infrastructure, and organizational workforce.

3.02: Industry Analysis –Underlying Economic Attractiveness

Takaful has become one of the leading segments of the financial sector in Indonesia and across Islamic world. The industry has experience a growth rates of 10% to 30% over the last few years. Total direct Takaful premiums approximately US$ 2.5 billion in 2004. The growth in Indonesia is about 27%, the Middle East 63%, Asia Pacific 9%, Europe, and US contributing 1% in revenue. The global Takaful markets expected to grow between 15% to 20 % per annum and the total Takaful direct premium to reach US$7.4 billion by 2015.
In Indonesia, the Takaful market is expected ton constitute 20% of the total insurance market by 2010. Presently, it is around 6.5%. The Takaful contribution then is to reach US$ 1.85 billion (RP7.0 billion). The current market penetration of Takaful is low.
Bank Negara Indonesia stressed that Takaful providers need to enhance their capacity to innovate and expand customer reach across multiple distribution channel. To attract new players of strong capacity in product development and risk management, four licenses issued to parties from Middle East, Japan, Australia, and Europe in 2006.

3.02.1: Product Innovation

The consumers growing awareness of the ethical guidelines underpinning Islamic banking, investment and finance products; the transparency of customer terms and conditions; the pricing structure; regular monitoring for compliance by the relevant Shariah boards; and adequate disclosure of materials has attracted both the Muslims and non-Muslim markets.

3.02.2: Consumer banking growth potential

According to McKinsey’s 2005/06 World Islamic Banking Conference (WBC) Competitiveness report:

“Consumer banking will be the source of steady profits. Capturing the consumer banking opportunity and appealing to a broader consumer base is the key for Islamic bank. So far, Islamic banks have managed to capture customers who have strong preference for Shariah compliance products. Going forward, they will have to broaden their appeal to customers who are interested in Shariah compliant products but are not ready to sacrifice returns, service, or convenience. To do so, Islamic banks need to improve their service levels, network convenience, and staff knowledge while developing critical enablers (i.e. operations, risk management, and people management).”
Islamic banks will need to make substantial efforts to meet expectations.

3.02.3: Strategic consideration

Takaful is not a small niche but rather a broad and exciting global growth opportunity, offering a way to capture a huge and currently underserved customer; and with profit streams that, under a correctly design model, could be more stable than in conventional insurance. At Oliver Wyman, they believe that insurers who achieve success in Takaful will be those who:

• Focus on insurance potential, not just traditional Islamic market.
• Remember that Takaful can be attractive to non-Muslim consumers
• Treat the constraints imposed by Shariah law as opportunities not as deal-breakers.
• Understand what competitive advantages they, and their competitors, bring to the table
• Take the next steps –soon.

Those who ignore the Takaful opportunity, or who treat it as an uninteresting niche, are missing out on revenue opportunity potentially worth more than $20 billion annually, more than half of which may come from the developed markets of Europe and north America, and perhaps 20% of which could be from non-Muslim customers.

3.03: Industry Analysis - Current and Projected Trends Customers Focus

The Takaful industry has been successful in distributing products through its agency sales force, direct channels and to some extent, via retail banking. Product customization according to each different channels, customer referral, and gaining brand loyalty are important critical success factors. Product packaging, customer convenience, customer support, and transparency of terms and condition and pricing are also important catalysts to increase the share of the Takaful business across multiple channels.


3.03.01: Focus on insurance potential, not just traditional Muslim community. So far, the focus of takaful has been to the Muslim community market. However, they need also to consider the wealth and propensity to buy insurance, then rather different picture will emerges. This especially with the non-Muslim ethical market.

3.03.02 Treat Shariah compliance as opportunities not as deal-breakers Takaful providers face interesting product design, organizational, and risk management challenges, primarily due to the need to comply with Shariah requirements. Nevertheless, meeting these challenges is less difficult than it seem at first – and the insurers who deal effectively with them may be able to build scaleable, cost efficient models.

3.03.03: Take note that Takaful can be attractive to non-Muslim consumers.

Muslim community has been the initial focus of any Takaful offer. In Indonesia, like the rest of the Muslim world, the community is under serve with insurance products, particularly given the apparent conventional insurers non-Shariah compliant.

Hence, in any given market with Muslim population, there is market potential both from capturing insurance premiums currently with non-Takaful providers and from expanding the penetration of insurance products in the Muslim community. The demand for Takaful is from across of the whole range of insurance activities – general and life, individual, family and corporate.

However, it is important to understand that Takaful is not limited to Muslim market. The distinctive features – such as transparency over product profitability, an element of profit sharing, and the limitations on acceptable investments (e.g no alcohol, no gambling)- can be attractive to the growing ‘ethical investment’ segment. Evidence from Singapore where the population is 85% non-Muslims, has 50% non-Muslim participation. Similarly, in Indonesia, non-Muslim already taken-up over 25% of policy holders in one of the Takaful operators. Oliver Wyman analysis suggests that up to 20% of Takaful revenues could arise from non-Muslim customers.

3.04: Industry Analysis – Takaful Market Structure.

3.04.1: The Players

The Takaful industry structure consists of various players that complete the Takaful operational framework. This structure made up of Takaful operator who designed and manufactures the products; the re-Takaful handles the risk mitigation; the sales agency & brokers, which carry out the marketing and sales functions; the adjusters assist in the claims.

3.04.2: Takaful Operational Framework

Takaful operators have the flexibility of operating the takaful business under different operational models. There are two operational models adopted by the takaful operators.

Mudaraba (profit-sharing) model, with several variations in terms of treatment of management expenses, product design and distribution channels.
Wakala (agency) model, is essentially an agent-principal relationship, where the takaful operator acts as an agent on behalf of the participants and earns a fee for services rendered. The fee can be fixed amount or based on an agreed ratio of investment profit or surplus of the takaful funds.

P.T Pruden and governance framework, takaful operators are required to comply with the Shariah principles and P.T Pruden requirements.

Strong market conduct and consumer-protection framework is essential to maintain public confidence in the takaful industry and hence enable the operators to perform their role within the economy as a mobiliser of long-term savings. Promoting sound business practices and the fair treatment of consumers within such a framework is critical with mounting pressures on the operators to achieve business growth under increasingly more competitive conditions.

3.05: The value Chain of Takaful business

The value chain in takaful covers 5-levels from design – risk analysis, product development and pricing; acquire – determining the consumer needs; select – underwrite or not to underwrite or underwrite with condition; manage – backend administration & customer service; and protect – managing takaful fund and re-takaful.

3.06: Net contribution. Takaful market share was rise from 4.8% in 2001 to 6.1% in 2006.
3.07: Industry Analysis: Market Profile

In the 21st century, customers’ expectations towards life insurance products have changed with time. They expect life insurance agents to analyze their personal and family needs before designing the most suitable policies for them. Takaful growth and how it impact the Muslim and Malay community. The level of penetration of around 6.5% is low compare to the non-Muslim that already reached the 45% level. Reasons for this were due to low awareness, lack of confidence in the insurance industry and limited accessibility. Realizing this Bank Negara Indonesia has taken the role of raising the awareness level and confidence building with the assistance of insurance and takaful association.

3.08: Industry Market Benchmarking

Banca Takaful or BancAssuransi in Indonesian Market is still prominently P.T BANI – in term or size. Since only this data available, lets look at productivity per sales personnel of the following:


This total 1.0 million customers or 16.0%. 15.2 or 315,000 of the group customers provide 68.7% or RP42.5 billion of the group total financial asset. Thus, over servicing of about 5.7 million customers. This statistics awoke BANI to change from Transactional to Relationship approach. Their FE (Financial Executive) served mass market. Well served, customers are more profitable and their relationship management strategy is to grow and retain middle and upper market whilst mass Affluent.

3.09: Emerging Trends: Strategic Challenges

The emerging trend and strategic challenges are market liberalization, raising awareness for Takaful products, shifting demand to Takaful, global player going local, product design and cost competitiveness; going online and consumers right and sophistication.

3.10: Banca Takaful – Benefit to Consumer

The consumer will benefit from banca as results of convenient access to a wider range of integrated financial services, competitively price Takaful products, cost saving as results of lower distribution cost; effective use of technology by provider and better services to consumer

3.11: BancaTakaful - Key Success Factors

To be successful it is critical for Banca takaful to have these elements

• Top Level management commitment
• Alignment and support at all levels within the organization.
• Corporate culture that promotes cooperation.
• Successful micro- markets have one thing in common: a good personal relationship
between branch management and KFT
• Fair and transparent agreements between “branches” and KFT in terms of customer
ownership, referrals, service levels, …
• Transparent targets and incentive systems, that closely follow performance and reward
cross- selling
• Integrated IT- systems

3.20: Competitors Analysis

The Trends

The major focus of global competitive interest in Takaful has been Indonesia and Middle East markets in particularly – with several incumbents and several global insurers making effort to enter. Broadly, there are three types of insurers who are going for global Takaful market: existing single country incumbents, new start-ups, and existing cross-border and global players. Each will have different competitive advantages.

Existing single-country incumbents like Tokyo Marin, P.T Pruden, who will benefit from existing ‘umbrella’ brand name. They may need to consider the branding impact of targeting a different customer segment with a distinct proposition; and they will need to overcome the challenges in establishing a compliant operating model from scratch.

New startups, with backers from existing Takaful operators but with little experience in any given country and urgently need to develop end-consumer branding and channel relationship.

Existing cross border and global players, whom are best, placed to build a genuine cross-border business model, benefiting from incumbency position in multiple markets and potentially able to design and exploit a scalable Takaful model. In addition, to determine how a Takaful model should best be tailored to both market conditions and their particular brand positioning in each market.

3.30: Key Competitors in Takaful Industry;

BANI’s Etika, the leading bancAssuransi player now in its 10th year, started in 1996. Etika became the second largest insurance group in Indonesia with assets of RP17.83 billion and sharesholders fund totaling RP1.82 billion at the end of financial year 2006/2007.
Etika Insurance is targeting 20,000 policies for its latest traditional family Takaful medical plan, the Etika Takaful Medic Save Rider, next year. The company focuses on cyber communities to grow its local Takaful penetration, be it consumer or agents. They are working on setting up community center in cyberspace to educate public on Takaful products with Ministry for Energy, Water and Communication. For the insurance expertise BANI’s bancAssuransi rides on the expertise of its insurance subsidiary –P.T Etika General Assuransi - offers general insurance; Etika Takaful offers Takaful products and services; P.T Etika Life Assuransi - offers life insurance. Each of this subsidiary is an expert in its own areas; this completes the BANI offers and provide their customers variety of products and choices to choose from. Accelerated by jv (70:30) with Ortis Insurance International, a leading bancAssuransi player in Europe in 2001. A brief summary of BANI’s insurance group of companies are as follows:


Takaful Indonesia, the local industry pioneer which started its operation on 22nd July1985 and was listed on main board Bursa Indonesia on the 30th July 1996 has increase its distribution capability to 250 outlets by opening more centres in the branches of bank Islam . It has posted a pre-tax profit of RP18.85 million for its nine months to 31st march 2008. Its financial year ended on 30th June 2008. Takaful Indonesia plan to recover back its position as the leader of Takaful industry which they lose as results of the merger of its competitor. To realize its goal, takaful Indonesia will introduce some products before the end of 2008. To do that it has now equipped with an integrated insurance management system called PREMIA. With the system, Takaful Indonesia will be able to provide seamless integration across all major heads of Takaful activities as well as have bilingual user screens in English and Bahasa Indonesia. With the system they have flexibility and dynamism of the system to enable them to launch products and handle modification, making certain adjustments to product features, and are more users –friendly. It aspect to roll out its new medical plan, educational plan, critical illness plan and reducing term plan, now awaiting approval from Bank Negara. Now a P.T Bank Islam holding has taken 67.89% equity interest. Takaful Indonesia’s strategy of moving forward is to excel in the service delivery. Its current market share is ranges from 35% to 40%. Their vision for growth is to be the preferred choice of insurance in the market. They are promoting Takaful for all not just to the Muslim community. Takaful Indonesia is moving ahead with rebranding exercise so that people think that Takaful is energetic, customer centric, vibrant, friendly and easy to move.


3.30: Industry Analysis - Distribution Strategy

All Takaful and insurance company within the banking groups are going bancAssuransi and banca Takaful as the mean to capture their existing customer base. This distribution strategy is a cross selling and capillary marketing. At the same time is mining gold at the backyard before the competitors did. The approach is that bank staff sells Takaful products while the Takaful Company / insurer provides sales support. Or Takaful company / insurer place their staff or agents at the bank premises to sell Takaful products; or Bank provides leads for Takaful company’s / insurer’s own staff or agents to sell; or Combination of 1 and 2 or 3 where bank’s sales force sell the simple products while Takaful company’s own staff or agents sell the more complicated products.

3.40: Competitor Analysis - BANI’s Banca Experience

BancAssuransi = Bank Strategy

The bank must lead the implementation of bancAssuransi strategy, not the takaful company or the insurer. To deliver a differentiated customer experience unique strategies, that needed to be developed specific for bancAssuransi, such as:
Distribution

• Product
• Branding
• IT Systems
Key Success Factors:
• Greater integration.
• Customer Centricity;
• Maximise sales capacity;
• Suitable end-to-end processes;
• Best Value For Money Product & Service Packages

Chapter 4.0: Problem Analysis –Methodology

This consultancy exercise requires data to be collected and analyze in order to diagnose banca Takaful organization, document work process, and document workplace expertise. Several general data collection methods are use throughout the overall analysis process:

• Interviews - with BASIM and P.T Prubasim leaders that is related to Banca Takaful
• Questionnaires – Excom members and Takaful Financial Executive (KFT)
• Observations – Operation at the retail outlets, customer support centers and backends
• Organizational records – related to banca Takaful.
• Desk research – Industry and competitors analysis
• Carry out SWOT analysis within the organization

Multiple methods and multiple perspectives are used to understand the phenomenon in order to increase the validity of assessments.

4.10: Company Situational Analysis –

• Implementation: P.T Prubasim operate point of sale at BASIM branches
– tap walk-in customers.
– Some cost sharing – on the point of sale equipment and space.
– Unable to tap banks customer database
• Implication - hinder the smooth distribution of P.T Prubasim Takaful products
– require new and different commitment from both parties.
– the changed caused the delay and
– affect the original objectives. And
– influence retail (KFT) performance
– Incur capital investment on the part of P.T Prubasim


4.30 : Problem Analysis - Alliance Vision

• In the case of BASIM and P.T Pruden PLC it was directed by BNI,
• Vision not shared

Banca takaful the the approach of P.T Prubasim in tapping the untapp BASIM customer based.

Get ready for Change. BASIM need to subscribe to the commercial profit oriented culture while P.T Prubasim need to find a win-win meeting point with BASIM in order the to achieve the best from their partnership.

Young KFT need to believe in the values of organization they work for and therefore Banca Takaful met set out to meet this requirement. With the internet around, KFT previously managed by the managers now in possession of as much information as the boss. Therefore coaching and trusting the KFT is more important

Where KFT don’t do the right thing...coz they don’t manage themselves well...’control management’ must be in place.

Challenge of market entry by P.T Prubasim into BASIM should not be under estimate. P.T P.T Pru at the top level must address this with BASIM. They need to build market intelligent within BASIM network. To be successful, who to contact and how to do it is obviously crucial.. P.T Pru need to know internal market knowledge to succeed. P.T P.T Pru need to understand the Basim general business environment as as rhe leagal system, culture and corporate requirement.

KFT need to manage themselves.

I have always believe front line employees have much more to offer than their job description. Banca Takaful should avoid what is known as, “Ninety percent of what is call management is “ making it difficult for KFT to get things done.” In the new world of management, I see font-line employee like KFT being in control of their own workload and calling upon the coach when they need it. This is because customer expectations are increasing, and in turn, this is due to the customer being more informed. KFT as the front liner must be at least one step ahead of the customer in order to meet those expectations. The customer of the future is more demanding. KFT is more capable of creating their own working practices and project team with the support of the coach, rather than the direction of a manager.

As managers and KFT become freed up to decide on their priorities, there are enormous implications for the work place and the hours of work. It is a brave step’ to trust KFT to be fully independent. How sad that our natural reaction is to mistrust. Time has change and the concept of working free from close supervision should be more acceptable. I also see far less control by managers the worked hours by KFT. We have to find better ways of measuring outcomes.. Outcomes matters- actual hours less.. When we start from the position of trust in our employees, we will be repaid with a loyalty far greater than when starting from a position of implicit (sometime explicit) mistrust.

4.20: SWOT Analysis

This strategic planning tool is use to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in banca takaful venture. It is use to specify the objective of the banca takaful venture and identify the internal and external factors that are favorable and unfavorable to achieving that objective.

The aim of this analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis is use to group key pieces of infoRpation into two main categories:

Internal factors - The strengths and weaknesses internal to the organization – Banca Takaful
External factors - The opportunities and threats presented by the external environment.

SWOT can also help banca uncover opportunities, that are well placed to be exploited. And by understanding the weaknesses of the business, banca can manage and eliminate threats that would otherwise catch you unawares.

More than this, by looking at banca and its competitors using the SWOT framework, we can start to craft a strategy that helps banca distinguish itself from its competitors, so that it can compete successfully in its market. This analysis is focus on how these factors promote or hinder Banca Takaful objectives.

Banca Takaful is a business unit of P.T Prubasim Takaful , the Takaful subsidiary of P.T Pruden Assuransi and P.T Bank Simpan Nasion joint venture. Banca Takaful business unit created with the objective of selling Takaful products to P.T Bank Simpan Nasion customer base. In other words’ banca Takaful was given the task for Takaful product distribution to BASIM customer base.

Strength

Strong Brand - P.T Pruden is the Rolls-Royce of the insurance industry and BASIM is the generic brand for saving banking. From branding stand point these are very credible brands. This strong brand name increases brand owner bargaining power and gives it a competitive advantage. However there is the issues of overall brand credibility for the target community, and the question of positive and negative brand spillover for the conventional products – where will it be more useful to use a parent brand, and where a new brand? The perception from the target community, P.T Pruden offers strength in customer service and product expertise that complement BASIM market accessibility to the target community.

Strengths-Weaknesses
Support Parent company

- strong brand
- robust operational capabilities
-established market presence – local experience
- BNM Relationship
- Strong marketing capability
- Expert in product design
- Strong organization – employee friendly

No alliance

Cultural GAP between Banca Takaful (P.T Pruden group) and BASIM

Poor product feature

Banca team are young , new and inexperience

KFT – shallow career path

Absence of working mechanism

Absence of partners clear objectives

Minimal IT infrastructure

New player

Outsource backend services

Low awareness in the Muslim community

Opportunities

Threat

JV access to 400 BASIM Bank outlets

Underserved Muslim markets

Takaful can be attractive to non-Muslim consumers

Ethical investment community

Rapid annual growth rate – 15% to 20%

Growing demand for Takaful products

Growing ‘natural constituent’

“Standards & Corporate governance “ development

Strategic Alliance nominated by BNI for JV

Intense competition

Consolidation in Takaful-Merger and acquisition among competitors

Dependent on third party

Difficulty to get the right manpower for certain function – actuarial, finance, IT, retailing.

In-adequacy of re-Takaful support and capacity.

BNM liberalization - wanted to attract new players with strong capacity in product development and risk management.


Robust operational capabilities- The company has strong operational capabilities.

BNI Relationship - The joint venture partnership is nominate and directed by the Insurance and Takaful regulatory authority – Bank Negara Indonesia. Under that purview it is deem considered having favorable access to the highest authority in the industry. This is a lever that can be used in time of need especially for product approval and any changes with operation where the need arise. Highly valuable strength in the event of any policy changes by the authority to the industry.

Finance - both the parent company are profitable and financially strong organization. They are P.T Prudent organization in their financial management beside been in the highly regulated and monitored industry.

Marketing – P.T Pruden are very strong in marketing and always keeping ahead of competition and caring for its customers. BASIM offers the network of 2400 branches and 3600 Atm’s as the market access points to innovative saving and investment product.

Product expertise – P.T Pruden are innovative and advance in product design.

Customer Service – P.T Pruden is very prompt in paying out claims from clients.

Experience – P.T Pruden has been more than 80 years in the industry and BASIM 30 years.

Organization – Both are employers of good standing.

Weakness

No Alliance - The critical issue is that the JV partners of P.T Prubasim, BASIM Bank and P.T Pruden Assuransi is still learning how to work together as partners. This is the result of the vast cultural differences and objectives between the two. This further translated into different level of confident and commitment to the joint venture. This affected the easiness of managing the takaful business, hence affecting the market penetration and overall performance of Banca Takaful.

Cultural GAP. The joint venture between BASIM and P.T Pruden Assuransi in reality is not exactly smooth but rather a one-sided and lacks commitment and transparent from the beginning. Because the primary motivation is financial, the two parties fail to leverage their resources, ironically hampering achievement of the very financial objective that originally drove the deal. Lust gets in the way of quality due diligence here because dealmakers don’t begin serious diligence until they are pretty sure they want to do the deal. When it is done, it is done broadly or become focused on the financial and legal aspects of the deal that important specifics overlooked. Cultural differences were ignored, overlook or downplayed because the deal was so enticing that both parties disregard warning signs of impending cultural clashes. This results in the real issues about the future of Banca Takaful apparently missed – or ignored. The cultural differences drained much of the vitality from the joint venture.

Absence of partners’ commitment to objective -Though Banca Takaful is a business unit of P.T Prubasim, the subsidiary P.T Takaful of BASIM Bank; and the BASIM customer base look as though a captive market to Banca Takaful; in reality it is not. Banca Takaful does not have excess to BASIM customer database. What Banca Takaful has is just an opportunity to have a point of sales at BASIM outlets to tap BASIM walk-in banking traffic.

KFT - The working environment does not allow KFT to apply their strength most of the day and shallow career path. This weakness is not unique to Banca Takaful at P.T Prubasim but market norm that is affecting the banca sales forces performance.

Minimal IT infrastructure – where the present trend of work place having direct access to online communication, it is a set back not having and using this tool as a channel to reach out to the market.

Outsource backend – This has taken up 22% of the revenue from 2006/2007 and causing concern to BASIM partners. The cost considered high.

Opportunities

Access to BASIM outlets - Already in alliance with a leading saving bank in Indonesia that have 2400 branches and 3600 ATMs. Having the exclusive privileges to have Banca Takaful point of sale at all BASIM branches. Already at the gate of 7.0 million BASIM customer base. Fifty percent (50%) of the marketing battle has been won, by being within the BASIM premise all over the country.

Underserved Muslim markets - The access to potential customers at 400 different geographical locations through out the country has been open. Have the privilege to work with a brand that is generic in the market place with regard to saving. Brand and outlets that is generic with both Muslims and non-Muslim alike across all demographic profile.

Strategic Alliance- Nominated by BNI offers banca takaful a way to speed up entry into a new market, improves productivity, and gains a competitive edge or increases range of products.
Rapid annual growth rate – 15% to 20% - opportunity for market penetration and increasing market share

Threat

Intense competition – this arise as the results of more interest from the conventional insurance company, global players and BNI drive to get major player participate in the market.

The change of government policy - through liberalization of licensing in the industry – meaning the market is wide open. Tightening of certain regulation on product design and ownership control to make sure that it follows the Shariah compliant strictly.

Consolidation – with permission from BNM, more interest from the banking sectors both conventional and Islamic embark on mergers and acquisition to enter the Takaful industry.

Depending on third party – to product manufacturers that have powerful and prominent distributors and vice versa this could be major threat in term of competitiveness.

Chapter 5: Finding

From the analysis, I concluded that there are serious problems on working relationship between the two joint venture partners despite them having all the innovative products, network of outlets, strong brand, strong market standing and financial position. There’s seems to be unresolved issues on cultural differences between the

5.20 Alliance building

I observed that the joint ventured was not really a partnership of win-win situation and far from practicing Islamic partnership concept of Qadhassan. All the focus of the tentative partners of the joint venture then, was how they could meet the requirement of Bank Negara Indonesia to secure Takaful license. They satisfied the BNI requirements but did not or overlook their own organization requirement. The critical aspect that they neglect was to define a model that will can work and grow over time.

5.30 Distribution Model

The current model, though allowed Banca takaful presence at BASIM but it was not effective let alone efficient. As mentioned, access to customer database not permitted. Access to customer database was the prime objective for the joint venture. That is access to the customer base. This became source of the conflict and affected the retail performance. It became issue between P.T Prubasim and BASIM. The shallow career path within the distribution model contributed unhappiness to KFT. This led to poor sales performance. Subsequently, results in high KFT turnover.

5.40 : Channel Conflict

As the no of outlet increase, the conflict between channel rises. To increase product sales, Banca Takaful (marketer) may often be attracted by the notion that sales can grow if the Banca takaful expands distribution by adding additional branch outlet. However, if they did not handle these decisions with care, the present branch -KFT might feel threatened by the new branch – KFT; whom they may feel are encroaching on their customers and siphoning potential business. Banca Takaful may in fact do the opposite if present members (Branch outlet – KFT) feel there is a conflict in the decisions made by Banca Takaful. If present members’ (KFT) sense a conflict and feel that Banca Takaful is not sensitive to their needs they may choose to slow down or quick.

5.50 : Distribution Understanding – Between P.T Prubasim and BASIM

I found that both BASIM & P.T Pru practiced the independent channel arrangement that is against the agreed channel understanding. The agreed channel is - Dependent Channel Arrangement. Members - tied to each other as well as to other member of the distribution channel that is P.T Pruden. Sometimes referred this as “vertical marketing systems” this approach - difficult for an individual member to make changes to how products are distributed. Stable and consistent - united in common goals. This is an Administrative Model – where either member may dominate the decisions that occur within the channel depend on situation. All because (BASIM & P.T Pru) both have power. They exercise it at different time to achieve their own objective

5.60 : Channel power can be seen in several ways:

• Backend or Product Power – lies with P.T Prubasim which markets a brand (P.T Pruden) that has a high level of customer awareness and acceptance. Through Banca Takaful - the marketer of the brand they are in a power position–BASIM have to carry the brand or risk losing customers.
Middle or Wholesale Power – such as BASIM, service a large number of smaller retailers (BASIM - 400 branches) with well branded and position products. Here, BASIM can exert power since the retailers are BASIM own branch. Therefore, BASIM has the power both to carry out bulk position purchase and as well wide market segment coverage.
Front or Retailer Power – As the name suggests, the power rests with -BASIM Branches which can command major concessions from their suppliers (P.T Prubasim- Banca Takaful). This power is clearly prevalent because BASIM can commands a significant percentage of sales in the market they serve and others in the channel are dependent on the sales generated

From the analysis, observation and secondary research, the key issue for Banca Takaful team to address in order to tap the BASIM customer base is the cultural difference between the two organizations, P.T Pruden and P.T Bank Simpan Nasion. The cultural differences result in difference perception, belief, values, commitment and momentum in driving the business. This further led to poor top down commitment in ensuring the success of Banca Takaful. The conflicts arises led the Banca Takaful team finding it very difficult to deliver results expected of them. Realizing the constraints and the limitation faced by the banca Takaful team, I suggest that the whole issue and problem to be address from a different perspective – that is by reframing.

The approach is to reframe the current conflicts to- “establishing a strategic alliance between Banca Takaful unit of P.T Prubasim and Marketing unit or Branch Network unit of BASIM” to tap the BASIM customer base.

Chapter 6: Recommendation & Conclusion

6.10 : Strategic alliance options

I firmly recommend reframing the “Cultural difference” faced by Banca Takaful at BASIM to “A Strategic Alliance approach” by capitalizing on the existing strength. The strength identified is:

Strong P.T Pruden and BASIM brand

Product Expertise of P.T Pruden

Marketing and distribution expertise

Strong financial position of parent company BASIM and P.T Pruden

Infrastructure of the parent company

The fundamental are strong both the hard and soft skill

BASIM has 2400 branches of various categories and 3600 ATMs

P.T Pruden has strong technology, technical and business expertise in the industry.

Opportunity of having exclusive point of sale at BASIM outlet
·
Manpower (KFT) already in place at BASIM outlets

Based on the finding – Banca Takaful need to speed up entry into BASIM untapped market, improve productivity, gain a competitive edge and increase range of products offers. A strategic alliance between Banca Takaful and BASIM marketing unit or Branch Network unit is the answer. This recommendation is the answer to of the ineffectiveness of the present working model with BASIM. By reframing the present problem, it can help Banca Takaful grow beyond its turf. This alliance will involves exchange, sharing, or co-development, and it can include cost contributions by partners, technology, or fiRp-specific assets. By leveraging this alliance with a key business unit of BASIM, it can jumpstart Banca Takaful distribution in terms of :
Gain access BASIM customer database.
Develop new products or skills.
Respond to changing markets quickly.
Reduce risks and costs.

6.20 : What will an alliance do for Banca takaful?

A strategic alliance allows banca takaful to grow without necessarily expanding its size and incurring more costs. It also allows banca takaful to test the market for growth potential. Here are some of the key benefits:

Enter new markets with new products and services

Extend and enlarge market reach

Increase the scale of production output

Get better prices through bulk purchasing

Accelerate research and development by sharing costs and resources

6.30 : 6 Reasons why Alliance works better than joint venture.

Team up from the get-Go

Alliances are always friendly and generally have strong focus on mutual benefits, with equal commitments and balanced risk sharing by team partners. This win-win attitude is often missing in joint venture outfit, which can be one-sided and hostile from the start. It’s similar to the difference between marriage based on love and forced wedding. Which union would you bet on – if the marriage were forth sake of convenience?

Money isn’t every thing

The primary motivation behind a successful alliance is to complement and leverage each partner’s resources, such as integrating two technologies. Although financial gain is the ultimate goal, it is frequently secondary or indirect. In contrast, with joint venture the driving force on both sides is direct, short term financial results. The JV partners’ desires visible revenue and earning growth advantage or realize financial gain within the JV organization. Because the primary motivation is financial, the two parties often fail to leverage their resources, ironically hampering achievement of the very financial objective that originally drives the deal.

Focus To The Target

Most alliances formed, at least initially, around narrow objectives, such as developing new products, expanding into new markets, or blocking competitors. This focus on a few well-defined and attainable goals enables the partnership to focus and deliver clear value. As result, many partnerships enjoy initial success and often go on to broaden their objectives. In joint venture, objective setting may be done so broadly that no single goal receives enough attention to achieve potential synergies.

Give Due Diligence Its due

Lust gets in the way of quality due diligence in both joint ventures and alliances. Avoid the mistake of most dealmakers, they don’t begin serious due diligence until they are pretty sure they want to do the deal. Nonetheless, in partnership, where the motivation is to leverage specific resources and where the objectives are focused, management instantly would knows where to direct due diligence. Either done too broadly or becomes so focused on the financial and legal aspects. The important specifics overlooked.

Cultures that matters

The all-important issue of culture is treated differently in joint venture and alliance. In joint venture, a cultural difference tend to be ignored, overlooked or downplayed, because the partners natural instinct is to force the deal through, and ignore the warning signs of impending culture clashes. They only saw the opportunity to significantly accelerate revenues and better position themselves against giants of their industry. Avoid, became mired in endless policy differences, employee benefits and management reporting methods, which drained much of the vitality from the JV.

In contrast, partners can zero in on specific cultural issues that may impacted the success of their narrower objectives, and while they may in fact uncover serious cultural differences, partners often find ways to tolerate those differences because they aren’t combining permanently. With no one trying to force cultural change, the chances for success increase.

No Personal Interest among the Personnel.

In alliance model there is no issue who will stay, who will be seconded, and promoted. With JV, however, such issues often take on a life of their own, and become paramount to the business purpose that initially prompted the relationship. Senior level distractions or defections that arise can create a leadership vacuum that imperils the JV success. On the other hand, people at all levels of partnered organizations are unhampered by such distractions and are therefore free to focus on achieving the alliance objectives.

In recent ACG survey, 97% of corporate development executives saw alliances increasing in their organizations, and 82% viewed alliances as an effective means to accelerate growth.

6.40 : Key factors to consider The reasons for choosing BASIM marketing unit or Branch Network unit as strategic alliance partner are – access to a large untapped market, extensive retail network, ready physical infrastructure, part of parent company, and factors to look at in this alliance are – similar culture, communication style, business ethics, positive customer feedback, and reporting practices.

When pushing for the alliance, Banca Takaful needed to assess the risks and answer these questions:

Does BASIM marketing unit have a specific list of attributes that you're looking for: location, market reach, business culture?

Does the marketing unit have management autonomy or commitment from its board?

Do you have the same objectives or goals as your partner? Have you established your expectations together?

Will you be competing in the same market? Will this alliance affect your market position?
Are your brands compatible? For example, a cost-focused company and high-end consumer business might not be an ideal pairing.

Do you have a clear exit strategy?

How long will the relationship last; is it a one-time deal or a long-term engagement? Put everything in writing and be sure you have a systematic way of communicating other than the telephone.

Do you have a strategic plan in mind for your alliance down the road?

Do you know what kind of contract you'll be signing? If there is a contract, ensure that it is within the law. You will also need to define your terms of payment, which vary in different organization.

6.50 : Types of strategies

By joining forces banca Takaful will have an ally within BASIM. This will have promote banca Takaful objective by using internal voice. This alliance can help banca takaful negotiate better deals, share administrative costs such as advertising and take advantage of costly technology and R&D.

By striking an alliance, banca takaful can drive more profits. However, it is crucial to assess risks such as performance, relationship structure and product training. Profile potential of this alliance partner, to ensure that they are aligned with banca needs and that they share same expectation. Forming an alliance is much like recruiting a new employee. You want someone who matches your company profile and represents you well. After all, your distributor has both your product and image in hand. This can be a cost-effective strategy; not only do you save costs by forming strategic alliances with inside people, you can also rely on their influence and marketing knowledge.

6.60 : Pass useful knowledge down the chain

Banca Takaful need to work with ally closely to develop new products and share knowledge and training to improve your production and distribution process. For instance, you can coordinate your production schedule with theirs, reduce costs through size and timing of orders and increase your range of products and services. Keep in mind that you will have to update your ally on any changes in new products and share forecasts to develop accurate sales plans – this can be achieve through excellent product and service quality integration

6.70 : Collaboration takes place within the partner's strategy:

Banca Takaful should integrate with the partner's market appearance (same look and feel). At the same time, the exclusive and tailored products for the bank's client segments, should be developed. The brochures and product leaflets should match the partner's corporate design. In addition, integration should takes place within the partner's systems (simple sales applications, customer service tools, shared Internet and intranet). This means there is no systematic difference between the sale of banking and banca takaful products.

6.8 : Go put your strength to works.

To Banca Takaful – to be effective in this strategic alliance proposal, need to build strength – own strengths, the strengths of your leaders, team members,, strength or your organization; and on the strengths of the situation.



Strength and Weakness

• Use own strength to exploit opponents vulnerability while understanding own
vulnerabilities and protect them against exploitation
• Banca Takaful must make the best of their presence and exploit the network, customer
base, and branch community

Strength and Opportunity

• Leverage on the strength like brand, product expertise, market presence, skill manpower
and technology to seize the opportunity at hands
Strength andThreat.

• Leverage on strength how to convert threat into opportunity.


Chapter 6.80 : Conclusion - Seize the Opportunity

The key enablers to seize this opportunity is a collaborative business models where strategic alliance stressed on - openness and trust, jointly agreed business plan, knowledge of true costs and profit (transparency), integrated business process, the right competences / knowledge, reward aligned with objectives.

Commitment and capability will positively, influence general satisfaction with alliance performance, market share and profitability, and overall alliance performance while trust positively influence general satisfaction with alliance performance. Control, was found to have an influence on satisfaction with technology transfer and alliance operational performance while compatibility was positively associated with general satisfaction with alliance performance.

The success of this alliance building can only achieve through building bridges at the top and down to the working level, otherwise – Banca Takaful will not benefit much through its presence at BASIM branch network. The execution requires straightforward leadership skill such as strategic and tactical planning plus a lot of common sense, openness and commitment to success.
Remember, only a well-set strategy drives the process that will bring the desire result of tapping BASIM customer base.



Remember:

Banca Takaful Need to Reframe problems or issue to seize the opportunity when constraints arise!


































References

• Alan Berkeley Thomas, Research Skills for Management Studies, Routlege, NY, 2003
• Nasbank. Proposal On BancAssuransi Re-engineering Towards Multiplying Fees Base Income,
• Dorothy langer, ACG Network. Oct 2002., 6 reasonss Alliances Work Better than Acquisition,
• Lance Kurke, The Wisdom of Alexander The Great, 2004,AMACOM, AMAU.S.A
• M.Buckingham,Simon Schuster,U.K 2007. Go put your strengths to works.
• Oliver Wyman Financial Services, 2007 Takaful: A new global insurance growth opportunity.
• P.T Prubasim.Branch Setup for Takaful Financial Executives (KFT) Roll-out
sigma@swissre.com BancAssuransi: emerging trends, opportunities and challenges,
• Sohail Jaffer, http://www.islamicfinacenews.com/ 2005 Global Takaful Review: Evolving Trends, Opportunities and Challenges,

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