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MGT603 - Strategic Management - Lecture Handout 26

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These dimensions are explained below:

Internal Strategic Position

External Strategic Position
Financial Strength (FS)
Environmental Stability (ES)
Risk involved in business
Impact of technology Price elasticity of demand
Debt to equity ratio
Working capital condition
Political situation
Demand variability
Ease of exit from market
Price range of competing products
Cash flow statement
Rate of inflation
Return on investment
Competitive pressure
Competitive Advantage (CA)
Industry Strength (IS)
Access to the market
Market share
Demand and supply factors Resource utilization Growth potential
Quality of product and services
Profit potential
Product life cycle
Financial stability
Customer loyalty
Technological know-how
Capacity, location and layout
Productivity, capacity utilization
Technological know-how
Capital intensity
Backward and forward integration
Ease of entry into market

After the selection of variables the rating is assigned to each. After the addition of these variables taking the average. For example financial strength is explain below

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MGT604 - Management of Financial Institutions - Lecture Handout 15

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Related Content: MGT604 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Management of Financial Institutions


A bank is a commercial or state institution that provides financial services, including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit

A commercial bank accepts deposits from customers and in turn makes loans, even in excess of the deposits; a process known as fractional-reserve banking. Some banks (called Banks of issue) issue banknotes as legal tender. A commercial bank is usually defined as an institution that both accepts deposits and makes loans; there are also financial institutions
that provide selected banking services without meeting the legal definition of a bank. Many banks offer ancillary financial services to make additional profit; for example, most banks also rent safe deposit boxes in their branches. Currently in most jurisdictions commercial banks are regulated & require permission to operate. Operational authority is granted by bank regulatory authorities who provide rights to conduct the most fundamental banking services such as accepting deposits and making loans.

Purpose of a bank:

Banks have influenced economies & politics for centuries. Historically, the primary purpose of a bank was to provide loans to trading companies. Banks provided funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold.

Commercial Lending:

For centuries, the banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense activity, with banks carefully analyzing the financial condition of their business clients to determine the level of risk in each loan transaction.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 15

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