2 External Sales Strategy 10 Mar08 Final

HBEG External Sales Strategy

Presentation to Halla Sakr

HBEG DMD, PFS/Branches

March 2008

Strategic Objectives

Leverage a large sales force to optimize mass acquisition with the aim to

achieve HBEG’s strategic objectives:

• Generate and Sustain Revenue Growth

• Grow Market Share of PFS segment

• Enhance Productivity

• Enhance Profitability

Destination Model

An external sales model to capture market share through focused/intense targeting of NTB customers, to generate revenue growth and profitability.

This entails:• Alignment to HBEG PFS Strategy (“Hunter-Farmer” model)• A business structure where cost-to-income ratios are directly

linked to sales and goal achievement• Recruitment based on characteristics and sales skills• A sales culture to take forward aggressive acquisition strategies

(targets, incentives, performance management, rewards and recognition, training etc.)

Opportunities/Situation Analysis

1.Population2.Market Share3.Competition4.Life Cycle Management5.Services 6.Embedded Value7.Geographical Coverage

1. Population

• Most populous country in Middle East; 78 million (JUL06); annual growth 1.9%.

• Density of the population with 95% of inhabitants living in the Nile Valley - 70% within 150 km of Cairo; concentration makes marketing efforts effective in terms of reach.

• Young population, 63% within 15-64years age group; opportunity to capture and retain customers from the beginning of the life cycle.

2. Market Share

A, B+ segment estimated at 2m (estimates backed up by post-paid mobile

users approximately 3m).

• 50:50 male-female Married – 88%

• Have Children – 90%

• Stable employment for 16-25 age bracket - 38%

• 97% have Bank accounts - 13% only have credit cards, and 14% planning to acquire (270k).

• Household Income for 83% ranges between EGP2-4000

2(a) Market Share - General

3Q06 2Q05 3Q06 2Q05

HSBC Total 598,035 381,192 57% 1.10% 0.92%

Total Bank's in Egypt 54,485,000 41,266,000

in EGP 000's

3Q06 2Q05 3Q06 2Q05

HSBC Total 5,614,954 4,143,983 35% 1.45% 1.22%

Total Bank's in Egypt 386,737,000 339,678,000

in EGP 000's

Total PFS Loans % inc / dec

Market Share

Total PFS Deposits % inc / dec

Market Share

Market Share - still dominated by the public sector banks.

CBE Website

2(b) Market Share – CompetitionPFS Assets/Liabilities

3Q06 4Q05 3Q06 4Q05 3Q06 4Q05 3Q06 4Q05

Barclays 459,950 378,132 22% 7% 7% 2,955,239 2,446,986 21% 7% 7%

NSGB 1,148,745 901,551 27% 18% 17% 7,089,605 5,920,556 20% 17% 17%

Credit Agricole 856,378 752,325 14% 13% 14% 5,579,255 4,805,310 16% 14% 14%Arab African International

1,189,016 1,024,364 16% 19% 19% 7,854,502 6,811,860 15% 19% 19%

CIB 1,818,990 1,641,035 11% 28% 31% 11,698,707 10,671,254 10% 29% 30%

HSBC 910,024 663,265 37% 14% 12% 5,750,360 4,443,530 29% 14% 13%

Total 6,383,103 5,360,673 40,927,669 35,099,497

EGP 000's

% Market ShareTotal PFS Assets Market ShareTotal PFS Liabilities

%

2(c) Market Share – CompetitionPFS Loans/Deposits

3Q06 4Q05 3Q06 4Q05 3Q06 4Q05 3Q06 4Q05

Barclays 363,329 321,013 13% 8% 8% 2,602,554 2,263,776 15% 7% 7%

NSGB 885,586 711,802 24% 19% 19% 6,082,896 5,110,704 19% 16% 16%

Credit Agricole 398,661 451,178 -12% 9% 12% 5,291,997 4,495,250 18% 14% 14%Arab African International

621,351 444,015 40% 13% 12% 6,614,646 5,407,852 22% 18% 17%

CIB 1,783,673 1,483,721 20% 38% 39% 11,179,288 9,699,401 15% 30% 31%

HSBC 598,035 426,068 40% 13% 11% 5,614,954 4,352,119 29% 15% 14%

Total 4,650,635 3,837,797 37,386,335 31,329,101

EGP 000's

Market ShareTotal PFS Deposits%

Total PFS Loans%

Market Share

2(d) Market Share – Credit Cards

• Egypt is one of the fastest growing countries in Middle East in terms of cards, with an average growth rate 39% (as compared to Middle East)

• POS usage growing strongly, with retail sales volumes growing year-on-year at approximately 12% for the past 5 years

2(e) Market Share - Credit Cards Growth

Visa Card

(Credit Cards)

2003

%

2004

%

2005

%

Cumm.

(02–05)

%

Growth in market Visa CIF

27.9 13.2 18.2 71.2

Growth in HSBC CIF

26.6 11.7 15.9

44.2

HSBC Market Share

9.7 9.5 8.3

(8% as at 2Q06)

Growth in HSBC Market Share

-1.0 -1.3 -13.8

-15.2

2(f) Market Share - Credit Cards Growth

MasterCard

(Credit Cards)

2003

%

2004

%

2005

%

Cumm.

(03–05)

%

Growth in market MasterCard CIF

- 41.2 71.9(49.6%-SEP06)

142.6

Growth in HSBC CIF

82.7 329.6 76.8

659.8

HSBC Market Share

0.4 1.3 1.4

Growth in HSBC Market Share

225.0 7.7

250.0

2(g) Market Share - Credit Cards Rank / Share

Credit Cards 2002 2003 2004 2005

Visa Gold CIF 1 / 27% 1 / 24%

Visa Gold Retail Spend 1 / 30% 1 / 29%

Visa Classis CIF 2 / 8% 3 / 7%

Visa Classic Retail Spend

3 / 10% 2 / 12%

MasterCard CIF 7 / 6 / 1.3% 6 / 1.4%

MasterCard Retail Spend 6 / 6 / 2.6% 5 / 2.2%

3(a) Competition - General

Aggressive competition; new products/ services, and pricing

challenges on supply side putting pressures on market share/

profit margins.

• Public Sector Banks – greater geographic coverage & larger customer base

• Subsidiaries of global banks (Citibank, Barclays)

• Mergers and acquisitions (Credit Agricole, NSGB)

3(b) Competition – External Sales

• Citibank (1999); PFS sales fully outsourced to their own company; sales force 94

• Credit Agricole (2003); internal management - outsourced sales force - 60-100 sales executives

• Arab Bank (2004); internal management and sales force - 20-30 sales staff

• CIB – recent set up of internal sales team; 30-40 staff

• Barclays Bank (2006); internal management - outsourced sales force; approx. 400 sales executives (to grow to over 1000 during plan period)

4. Life Cycle Management

Economy – growing economy, with GDP growth rate 5.7% (estimate 2006). Strong government efforts in fiscal consolidation, privatization and the restructure of some key sectors. Positive climate for foreign investment creating employment and growth opportunities.

Customer – large young population; opportunity to capture with hook products for potential future cross sell, as they move with life cycle requirements.

Product – opportunity to develop the basic products offerings for higher returns through loyalty programs, expenditure promotions.

5. Services

Service levels under threat due to:

• Complexity of sales/increasing number of products;

• Expansion growth rate

• Sales targets

• Enhanced awareness of targeted/ bankable customers:

• more demanding requirements

• continuously changing needs

• expectations of good service standards, convenience and pro-activeness from banks.

6. Embedded Value

Cross sales ratio currently at 2:14; the upside is doubling this

figure, thereafter need to invest in future market. Opportunity to

create embedded value:

External sales models break even – within 2 years, thereafter it is direct embedded value

DSC creates a new pool of customers for future growth (derived embedded value)

7. Geographic Coverage

• Geographical coverage to enhance profit per square meter.

• Aggressive expansion of branch network, will be complemented by large sales force to optimize reach.

• The proactive reach of customers, at their convenience.

External Sales Strategies

An external sales strategy meets the challenges / opportunities of the

market environment.

It is also in line with market and Group practice; successful Group models

in place - HBME, Asia, and TIMBRE.

TIMBRE

TIMBRE countries - similar market dynamics of emerging markets; growth opportunities - young un-banked large population – economies undergoing structural reforms.

The external sales models – identified as cost efficient strategies for mass sales acquisition, to grow market share and increase raise profitability, through NTB customers.

The External Sales Strategy should encompass:• Focused sales approach – clearly defined market segments • Variable income of around 0.6% of disbursement amount• Systems to measure and manage productivity and performance• Systems to measure and manage sales activities, leads and referrals• Sourcing of sales referrals through regular campaigns, promotions

TIMBRE - Mexico

An outsourced direct sales company (Fuerza Movil) leveraging the branch network (1316 branches, 6.8m customers, 4.5k ATMs and 20k FTEs)

Sales force size - 663 (includes supervisors, Managers, Regional Heads) Sales force - managed within PFS structure and work with branch units to

align synergies Dedicated to credit card sales Performance based compensation applied bank-wide; the “Motivator”

system – calculates incentives based on value generation• Sales force incentives - based acquisition and usage; small fixed

income, large variable• Branch incentives - based on average balance variation, promoting

referrals CRM usage – for sale referrals, cross-and-up sales Multi channel campaigns to generate leads

TIMBRE - India

• Limited network coverage due to regulatory environment; 46 branches, 2010 target is set around 60 - 70 branches

• Mass acquisition strategy - outsourced outbound tele-calling centre to generate leads

• Total sales force exceeds 1000 for personal loans and credit card, 60% outsourced

• Supervisor ratio 1:10; each Direct Sales Agent reports to a Sales Manager

• Home mortgages – separate team 85-90

HBEG DST Y1 Y2 Y3 Y4 Y5(1.1 cards/day)Total Card Sales per annum 3,727 3,727 3,727 3,727 3,727Y2 ++ card balance 0 3,727 7,454 11,180 14,907Incentive per Card 0 0 0 0 0

Fixed Salaries - Team Leaders 0 0 0 0 0Fixed Salary - Executive 0 0 0 0 0Fixed Salaries - Sales force 792,000 831,600 873,180 916,839 962,681Fixed Salaries - Support Staff 0 0 0 0 0Fixed Costs - Training 10,400 10,920 11,466 12,039 12,641Fixed Costs - Property 1,065,320 1,150,546 1,242,589 1,341,996 1,449,356Fixed Cost - HR & Recruitment 25,000 26,250 27,563 28,941 30,388Fixed Costs - IT 44,000 47,520 51,322 55,427 59,862Rewards & Recognition 0 0 0 0 0Marketing Campaigns (x2) 0 0 0 0 0Total Fixed Costs 1,936,720 2,066,836 2,206,119 2,355,243 2,514,927Variable cost 0 0 0 0 0Total Cost 1,936,720 2,066,836 2,206,119 2,355,243 2,514,927

Income - New Cards 770,013 831,614 898,143 969,994 1,047,594Income- Year 2++ cards 0 2,079,035 4,490,715 7,274,958 10,475,939Total Card Income 770,013 2,910,648 5,388,857 8,244,952 11,523,533

DSC Contribution (1,166,707) 843,813 3,182,738 5,889,709 9,008,605

NPV 11,412,806

Total Number of Cards 18,634

Set-up 2001; 14 Direct Sales Staff

TIMBRE – Egypt (Direct Sales)HBEG DST Y1 Y2 Y3 Y4 Y5(1.1 cards/day)Total Card Sales per annum 3,727 3,727 3,727 3,727 3,727Y2 ++ card balance 0 3,727 7,454 11,180 14,907Incentive per Card 0 0 0 0 0

Fixed Salaries - Team Leaders 0 0 0 0 0Fixed Salary - Executive 0 0 0 0 0Fixed Salaries - Sales force 792,000 831,600 873,180 916,839 962,681Fixed Salaries - Support Staff 0 0 0 0 0Fixed Costs - Training 10,400 10,920 11,466 12,039 12,641Fixed Costs - Property 1,065,320 1,150,546 1,242,589 1,341,996 1,449,356Fixed Cost - HR & Recruitment 25,000 26,250 27,563 28,941 30,388Fixed Costs - IT 44,000 47,520 51,322 55,427 59,862Rewards & Recognition 0 0 0 0 0Marketing Campaigns (x2) 0 0 0 0 0Total Fixed Costs 1,936,720 2,066,836 2,206,119 2,355,243 2,514,927Variable cost 0 0 0 0 0Total Cost 1,936,720 2,066,836 2,206,119 2,355,243 2,514,927

Income - New Cards 770,013 831,614 898,143 969,994 1,047,594Income- Year 2++ cards 0 2,079,035 4,490,715 7,274,958 10,475,939Total Card Income 770,013 2,910,648 5,388,857 8,244,952 11,523,533

DSC Contribution (1,166,707) 843,813 3,182,738 5,889,709 9,008,605

NPV 11,412,806


HBEG Direct Sales Team; set-up Y2001; 14 sales representatives

The Ideal Sales Model

Build on Group experience (TIMBRE, HBME).

Establish the ideal sales model, key elements of which are:

• Aligned strategies with Bank’s strategic objectives

• Appropriate structure/ management span

• Selection/recruitment of the management team, and the “hunters”

• Training and development

• Targets and incentives

• Performance Management/ Management Information

• The Sales Culture.

The Ideal Sales Model - Implementation Options

HBEG SALES COMPANY THIRD PARTYManagementSales Supervisors

MODEL A Sales ForceTraining

Support

Management -------------------------->>>

Sales Supervisors

MODEL B Sales Force

Training

Support

Management --------------------------->>> Sales Force

Sales Supervisors

MODEL C Training

Support

Management Sales Force

Sales Supervisors

MODEL D Training

Support

In-House Sales Company

Sales Company-outsource sales force

In-House - outsource sales force

Model A – HBEG External Sales Model A – In-house external sales structure.

General Assumptions:• YI cards income contribution - 50% of average credit card• YII+ cards income contribution – 25% more than average credit card • YII+ Premier/Gold share of card base – 20% • Income Contribution; Premier/Gold EGP913 - Others EGP296• Turnover per card growth – 8% • Fixed cost growth – 8%• Fixed salary growth – 5%• 5 year Discount Rate – 10.5%

Assumptions specific to Model A:• FTE 40 - planned sales force 50; (turnover, recruitment process) • Fixed salaries sales force - 60%• Productivity 8%• Incentives – EGP69/unit• Incentives; Team Leaders – 20% of sales force incentives; Sales Executive –

20% of Team leader Incentives

Model A – FinancialsHBEG External Sales DST Y1 Y2 Y3 Y4 Y5(1.5 cards/day)Total Card Sales per annum 13,200 14,256 15,396 16,628 17,958Y2 ++ card balance 0 13,200 27,456 42,852 59,481Incentive per Card 69 69 69 69 69

Fixed Salaries - Team Leaders 457,840 480,732 504,769 530,007 556,507Fixed Salary - Executive 263,568 276,746 290,584 305,113 320,369Fixed Salaries - Sales force (60%) 1,357,704 1,425,589 1,496,869 1,571,712 1,650,298Fixed Salaries - Support Staff 210,000 220,500 231,525 243,101 255,256Fixed Costs - Training 100,000 105,000 110,250 115,763 121,551Fixed Costs - Property 1,600,000 1,728,000 1,866,240 2,015,539 2,176,782Fixed Cost - HR & Recruitment** 108,000 113,400 119,070 125,024 131,275Fixed Costs - IT 80,000 86,400 93,312 100,777 108,839Rewards & Recognition** 300,000 324,000 349,920 377,914 408,147Marketing Campaigns (x2) 1,000,000 1,080,000 1,166,400 1,259,712 1,360,489Total Fixed Costs** 5,477,112 5,840,368 6,228,938 6,644,661 7,089,512Variable cost sales force 910,800 983,664 1,062,357 1,147,346 1,239,133Variable cost Team Leaders 182,160 196,733 212,471 229,469 247,827Variable cost Executive 36,432 39,347 42,494 45,894 49,565Total Cost 6,606,504 7,060,111 7,546,261 8,067,370 8,626,038

Income - New Cards 2,727,318 3,228,642 3,765,888 4,392,532 5,123,449Income- Year 2++ cards 0 7,473,708 16,788,938 28,299,950 42,423,781Total Card Income 2,727,318 10,702,350 20,554,826 32,692,481 47,547,230

DSC Contribution (3,879,186) 3,642,239 13,008,565 24,625,112 38,921,192

NPV 49,255,895


Model A - Advantages

Benefits over the existing set-up are:

• NPV out-weighs the impact of the high cost structure over plan • Reduced fixed salary costs (60% of HBEG salary scales)• Higher sales and productivity given:

• Management structure, supervisory overview (1:10)• Product focus and intensity • Rewards and recognition programs• Performance and activity management • Campaign referrals and leads• Increased training cycles

Models B – External Sales Company

External Sales Company - internal management team and sales force.

General Assumptions:• YI cards income contribution - 50% of average credit card• YII+ cards income contribution – 25% more than average credit card • YII+ Premier/Gold share of card base – 20% • Income Contribution; Premier/Gold EGP913 - Others EGP296• Turnover per card growth – 8% • Fixed cost growth – 8%• Fixed salary growth – 5%• 5 year Discount Rate – 10.5%

Assumptions specific to Model B:• Sales force – 50; • Fixed salaries sales force - 40% • Productivity 10%• Incentives – EGP77/unit; gateway 11 cards/month• Incentives; Team Leaders – 20% of sales force incentives; Sales Executive

– 20% of Team leader Incentives

Models B – FinancialsModel B Y1 Y2 Y3 Y4 Y5(2 cards/day)Total Card Sales per annum 22,000 24,200 26,620 29,282 32,210Y2 ++ card balance 0 22,000 46,200 72,820 102,102Incentive per Card 77 77 77 77 77Gateway EGP (5500 cards) 423,500 423,500 423,500 423,500 423,500

Fixed Salaries - Team Leaders 640,000 672,000 705,600 740,880 777,924Fixed Salary - Executive 300,000 315,000 330,750 347,288 364,652Fixed Salaries - Sales force (40%) 1,131,420 1,187,991 1,247,391 1,309,760 1,375,248Fixed Salaries - Support Staff 210,000 220,500 231,525 243,101 255,256Fixed Costs Salaries - Training 200,000 210,000 220,500 231,525 243,101Fixed Costs - Property 1,600,000 1,728,000 1,866,240 2,015,539 2,176,782Fixed Cost - HR & Recruitment 209,000 225,720 243,778 263,280 284,342Fixed Costs - IT 80,000 86,400 93,312 100,777 108,839Rewards & Recognition 400,000 432,000 466,560 503,885 544,196Marketing Campaigns (x2) 1,000,000 1,080,000 1,166,400 1,259,712 1,360,489Total Fixed Costs 5,770,420 6,157,611 6,572,055 7,015,747 7,490,830Variable cost sales force (less gateway) 1,270,500 1,439,900 1,626,240 1,831,214 2,056,685Variable cost Team Leaders 254,100 287,980 325,248 366,243 411,337Variable cost - Executive 50,820 57,596 65,050 73,249 82,267Total Cost 7,345,840 7,943,087 8,588,593 9,286,452 10,041,120

Y1 Y2 Y3 Y4 Y5Income - New Cards 4,545,530 5,480,719 6,511,094 7,735,180 9,189,394Income- Year 2++ cards 0 12,456,180 28,250,616 48,090,620 72,822,857Total Card Income 4,545,530 17,936,899 34,761,711 55,825,801 82,012,251

DSC Contribution (2,800,310) 9,993,812 26,173,118 46,539,349 71,971,131NPV 99,951,109Total Number of Cards 134,312

Model B – Advantages Additional benefits over Model A are:

• Standalone, flexible business structure • Flexible recruitment policy – focus on sales characteristics;• Exit bottom 5-10% performers annually• Flexible remuneration policy linked to sales achievements• Reduced fixed salary costs – 40%• Sales environment more attainable – higher productivity • Sales environment does not impact HBEG equilibrium • No commitment to integrate sales force within HBEG • Ability for HBEG to second management (oversight)• Increased training cycles, regular coaching and mentoring• Campaign referrals and leads

Models C / D – Outsourced Sales Force

Models C and D are external and internal models, both using an outsourced

sales force. The two models have similar financial returns based on the

comparable levels of sales achievement and productivity.

The key differences lie in:

• Set-up requirements – legalities, time and one off cost

• Degree of impact on HBEG equilibrium

• The ability to attract/recruit best talent

Models C / D …cont

General Assumptions• YI cards income contribution - 50% of average credit card• YII+ cards income contribution – 25% more than average credit card • YII+ Premier/Gold share of card base – 20% • Income Contribution; Premier/Gold EGP913 - Others EGP296• Turnover per card growth – 8% • Fixed cost growth – 8%• Fixed salary growth – 5%• 5 year Discount Rate – 10.5%

Assumptions specific to Models C/D• Sales force – 50 • Zero fixed cost - sales force• Productivity 10%• Incentives; Sales force EGP70/unit• Incentives; Team Leaders – 20% of sales force incentives; Sales

Executive – 20% of Team leader Incentives

Models C and D – Financials (2/day)Models C / D Y1 Y2 Y3 Y4 Y5(2 cards/day)Total Card Sales per annum 22,000 24,200 26,620 29,282 32,210Y2 ++ card balance 0 22,000 46,200 72,820 102,102DSC Incentive per Card 70 70 70 70 70

Fixed Salaries - Team Leaders 640,000 672,000 705,600 740,880 777,924Fixed Salary - Executive 300,000 315,000 330,750 347,288 364,652Fixed Salaries - Sales force 0 0 0 0 0Fixed Salaries - Support Staff 210,000 220,500 231,525 243,101 255,256Fixed Costs Salaries - Training 200,000 210,000 220,500 231,525 243,101Fixed Costs - Property 1,600,000 1,728,000 1,866,240 2,015,539 2,176,782Fixed Cost - HR & Recruitment 209,000 225,720 243,778 263,280 284,342Fixed Costs - IT 80,000 86,400 93,312 100,777 108,839Rewards & Recognition 400,000 432,000 466,560 503,885 544,196Marketing Campaigns (x2) 1,000,000 1,080,000 1,166,400 1,259,712 1,360,489Total Fixed Costs 4,639,000 4,969,620 5,324,665 5,705,987 6,115,582Variable cost sales force 1,540,000 1,694,000 1,863,400 2,049,740 2,254,714Variable cost Team Leaders 308,000 338,800 372,680 409,948 450,943Varaible cost Executive 61,600 67,760 74,536 81,990 90,189Total Cost 6,548,600 7,070,180 7,635,281 8,247,664 8,911,427



NPV 103,476,524


Models C and D – Financials (1.5/day)

Models C / D Y1 Y2 Y3 Y4 Y5(1.5 cards/day)Total Card Sales per annum 16,500 16,500 16,500 16,500 16,500Y2 ++ card balance 0 16,500 33,000 49,500 66,000Incentive per Card 70 70 70 70 70

Fixed Salaries - Team Leaders 640,000 672,000 705,600 740,880 777,924Fixed Salary - Executive 300,000 315,000 330,750 347,288 364,652Fixed Salaries - Sales force 0 0 0 0 0Fixed Salaries - Support Staff 210,000 220,500 231,525 243,101 255,256Fixed Costs Salaries - Training 200,000 210,000 220,500 231,525 243,101Fixed Costs - Property 1,600,000 1,760,000 1,936,000 2,129,600 2,342,560Fixed Cost - HR & Recruitment 209,000 229,900 252,890 278,179 305,997Fixed Costs - IT 80,000 88,000 96,800 106,480 117,128Rewards & Recognition 400,000 440,000 484,000 532,400 585,640Marketing Campaigns (x2) 1,000,000 1,100,000 1,210,000 1,331,000 1,464,100Total Fixed Costs 4,639,000 5,035,400 5,468,065 5,940,453 6,456,358Variable costs sales force 1,155,000 1,155,000 1,155,000 1,155,000 1,155,000Variable cost Team Leaders 231,000 231,000 231,000 231,000 231,000Varaible cost Executive 46,200 46,200 46,200 46,200 46,200Total Cost 6,071,200 6,467,600 6,900,265 7,372,653 7,888,558



NPV 67,055,022


Low sales (1.5/day); productivity nil; cost growth 10%

Models C and D – Financials (3/day)Models C / D Y1 Y2 Y3 Y4 Y5(3 cards/day)Total Card Sales per annum 33,000 36,960 41,395 46,363 51,926Y2 ++ card balance 0 33,000 69,960 111,355 157,718Incentive per Card 70 70 70 70 70

Fixed Salaries - Team Leaders 640,000 672,000 705,600 740,880 777,924Fixed Salary - Executive 300,000 315,000 330,750 347,288 364,652Fixed Salaries - Sales force 0 0 0 0 0Fixed Salaries - Support Staff 210,000 220,500 231,525 243,101 255,256Fixed Costs Salaries - Training 200,000 210,000 220,500 231,525 243,101Fixed Costs - Property 1,600,000 1,728,000 1,866,240 2,015,539 2,176,782Fixed Cost - HR & Recruitment 209,000 225,720 243,778 263,280 284,342Fixed Costs - IT 80,000 86,400 93,312 100,777 108,839Rewards & Recognition 400,000 432,000 466,560 503,885 544,196Marketing Campaigns (x2) 1,000,000 1,080,000 1,166,400 1,259,712 1,360,489Total Fixed Costs 4,639,000 4,969,620 5,324,665 5,705,987 6,115,582Variable cost sales force 2,310,000 2,587,200 2,897,664 3,245,384 3,634,830Variable cost Team Leaders 462,000 517,440 579,533 649,077 726,966Varaible Cost Executive 92,400 103,488 115,907 129,815 145,393Total Cost 7,503,400 8,177,748 8,917,768 9,730,262 10,622,770


DSC Contribution (685,105) 18,877,075 43,986,757 76,056,384 116,681,556

NPV 169,280,694


Higher sales (3/day); productivity 12%; cost growth 8%

Model C - Advantages

HBEG Sales Company, with an outsourced sales force.

Additional benefits over Model B are:

• Reduced fixed costs – sales force

• An outsourced sales force enhances scalability, and migrates non-core sales functions to a third party – HR contracts, payroll, insurance, etc..

Model D - Advantages

HBEG External Sales Department - internal management team, with an

outsourced sales force.

Additional benefits over Model C are:

• No set-up costs and/or legal complexities relating to establishing a new company (capitol costs, approvals, registration, 3 shareholders, general assemblies, balance sheet, income and profit distribution etc)

• Ability to attract, recruit and retain the best talent.

Key Considerations

Sales Model A HBEG

B Company

C Company/outsource salesforce

D HBEG/outsource salesforce

Rating

1

0

-1

Key Considerations A B C D Impact Analysis Weightage

Set UpLegal/ Regulatory Requirements Establish cost efficient business structure

Local Regulatory to meet strategic objectives, in s timely manner. 8%Group TimeCosts

ComplianceBrand External sales models are associated with higher

Compliance/KYC compliance, fraud, and Brand/reputation risks. 7%Fraud Risks are highest with an outsourced sales

Data Protection/compromise force, but can be mitigated with an experienced

Quality of Sales management team, and 1:10 supervisor ratios.

Bad & Doubtful

HR & RecruitmentStructure The ability to establish a robust structure,

Recruitment attract/recruit sales management team are key.

Contracts The recruitment process must be efficient and 25%Handling staff turnover fast, with a reliable and steady source/access to

Career Progression talented sales staff to handle high turn-over, and

Equilibrium with HBEG to exit low performers. HR-recruitment is key

Integration with HBEG area and directly impacts goal achievement.

BusinessIncentives/Variable Costs The sales environment is a key element of the

Sales Culture ideal sales model.

Targets/Productivity Business objectives are linked to targets.

Performance management/MI Sales and productivity levels are directly linked

Training sales environment, key elements of which are

Aligned Strategies incentives, rewards and recognition. 60%

Support RequirementsCall Centre OperationsCard Centre Operations A successful sales strategy impacts CPD and LCC 0%Collection & Recovery operations, in addition to other support units.

Scalability These services may be either bought or

Financial Control resources availed within the Sales Structure;

Legal/Compliance Benefit from economies of scale.

HRIT, PropertyAudit (Internal, External)

Recommendations

While Models C and D both meet HBEG business objectives, the recommended option is Model D, due to:

• Setup does not involve the complexities of establishing/maintaining a separate legal entity

• Ability to attract/retain best talent

• Given that there are no restrictions on number of branches, a separate sales company does not provide additional reach/benefits

Successful implementation/goal achievements are directly linked/subject to:

• A stand-alone business structure, and the ability to create a robust sales environment/culture

• Sales force selection/recruitment with the sales management team

• Management team incentives based on goal achievements

• Ability to handle staff turnover

2 External Sales Strategy 10 Mar08 Final

Business

Transcript of 2 External Sales Strategy 10 Mar08 Final