Answer

Introduction        

Dunia Finance LLC, commonly known as Dunia, is a company specializing in offering financial services to diverse customer segments. It is headquartered in Abu Dhabi. According to Bloomberg (2020), Dunia offers services such as car and personal loans, fixed deposits, credit cards, financial planning services, and credit card promotions. The company serves customers, both locally and domestically. It was founded in 2008 during the 2007-2008 Global Economic Recession and incorporated under the financial sector and finance industry. It is categorized under the consumer finance sub-industry. The company was founded by Rajeev Kakar, who saw a lot of potential in the UAE market. He was motivated by the attractiveness of the market, which had consistently registered positive demographic growth consisting of a diverse population. Similarly, the UAE and the greater Middle East region had specific and unmet financial needs. The company’s founder envisioned meeting these needs by introducing a world-class, responsible, ethical, and efficient financial services company. 

Kakar partnered with other financial service companies, namely Waha Capital, Mubadala Development Company, and Temasek Holdings, which collectively guided the company in setting up the most functional platform to deliver a superior value proposition. Besides, it employed experienced managers to lead and manage the company through its introduction and growth initiatives. Dunia adopted a customer-centric approach to satisfying the needs of its clients. This strategy helped endear the brand to its customers; thus, as other companies were bowing to the recession, the company was growing and internationalizing. Bloomberg (2020) attributes the sustained growth to Dunia’s key priorities, which included guaranteeing that its balance sheets were always liquid. 

The Differences in Banking Between the United States and the UAE

As depicted in the case study, Hurbas presents a detailed comparison between the banking industry in the UAE versus the USA. First, UAE is a developing market, while the USA is an already developed market. Regarding this difference, banks in emerging markets such as the USA incur higher operational and credit costs. The costs could be analyzed with economies of scale. Whereas banks in the USA can quickly capitalize on economies of large-scale operations, those in the UAE have a smaller market to target, and this reduces their profit margins.

Secondly, the underdeveloped infrastructure exposes the banks in UAE to more risks than in the USA. The case study explains the hardships of finding credible and valuable customer information in the UAE. The country lacks fully developed credit and reference bureaus. The banks operating in the market lack the depth of customer information required to guide the banks in identifying customers based on a particular criterion. As a result, the banks make decisions based on intuition and without a detailed understanding of the risks associated with their approaches. Bloomberg (2020) adds that as much as the UAE has more growth opportunities than the USA, it has far more macro event risks that could compromise the business’ sustainability.

USA and UAE have different human capital requirements across all banking functions. The case study acknowledges that a manager working for a large bank in the USA will have a narrower area of control compared to the same manager in the USA. By assigning fewer responsibilities, the manager will play the role of the right specialist within the function. On the contrary, a market like UAE predisposes the manager to many different responsibilities and tasks, thus making it hard for him/her to gain a deeper understanding of specific areas such as strategic analytics. The lack of specialization means the manager will have to understand several unrelated functions, which, in return, reduces his/her productivity and effectiveness.

The demographic dynamics of the UAE exposed its banking sector to more risks than in the USA. The Emirati population is described as being transient because of the high ratio of expatriates and non-national employees, to the locals. A population with many non-nationals was highly volatile and risky since the expatriates could resign or lose their jobs and relocate to their home countries. The process was mostly done within 30 days and whenever the non-nationals left, they withdrew their cash deposits, which predisposed the banks to bank runs. The case study further elaborates that massive withdrawals could leave the banks with credit losses. This translated into high operational costs as a dedicated risk officer was required to enforce credit policies to manage risks and prevent such losses.

How Analytics Affects Customer Relationship Management at Dunia

Relationship marketing theory emphasizes the need for companies to strengthen relationships with customers as a strategic approach to increasing customer value and customer retention. In line with this theory, Dunia uses its advanced analytics function to understand customer needs and customize its products and services to perfectly satisfy customers’ needs (Debnath, Datta & Mukhopadhyay, 2016, p. 299). Specifically, the analytics function is led by the strategic analytics unit, whose primary goal is to use the system to retain customers. The data collected by the analytics systems are used to monitor the performance of the customers. The company then uses the information to tailor its customer reward programs so that the most productive customers are rewarded accordingly. In addition to using analytics to strengthen relationships and reward customers, strategic analytics uses it to foster the cross-selling function’s effectiveness. According to the case study, the analytics function is strategically used to deepen relations with customers by offering them cross-selling portfolios of financial products and increasing their credit card limits. Guided by this analysis, it is notable that the analytics function enables the organization to understand its customers and design their products and services to satisfy their needs. In return, the customers become loyal to the bank.

How Dunia Would Affect Customer Lifetime Value

Dunia used the strategic analytics function to evaluate the lifetime value of its customers. Before accurately computing the value, the company used its system to identify customers from which it could generate profits. The selection of the customers was guided by an eligibility criterion determined by the credit department. Customers who were cleared and marked as eligible would be approached through an approach termed as ‘robust targeting’. The targeting was guided by the firm’s reliable analytical capabilities that brought together systems infrastructure, data and people. To further affect the customer lifetime value, Dunia provided independence to the different units involved in the critical analytics function. For instance, unlike other financial institutions and banks where credit functions are labeled as Credit Management Information System (MIS) and placed under the IT, finance, or marketing department, Dunia, operated the analytics department independently to ensure autonomy in decision making. As a result, the department was instrumental in using analytics data to optimize customers’ lifetime value. Since the approach taken by Dunia was very profitable, it is prudent to recommend that banks and financial institutions embed strategic and critical analytics functions into their corporate culture to optimize their customers’ lifetime value.

Hurbas’ Focus On Cross-Selling or New Customer Acquisition

From the case study, Dunia faces two dilemmatic decisions that could influence its future. The company has to decide whether to pursue cross-selling or acquisition of new customers. An analysis of the case study elucidates that Dunia could only cross-sell to its existing customers. However, as much as cross-selling is a sustainable competitive approach for the organization, it does not help acquire new customers. Based on this line of thinking, Dunia should consider two options. First, it should consider pursuing new customer acquisitions and later engage in cross-selling. The second option is to introduce a new department that will specifically focus on new customer acquisition. Considering this dilemma, it will be best if Dunia pursues both objectives because they are interrelated. For instance, increasing the number of customers guarantees the company of more customers to which it can cross-sell. On the contrary, remaining with the current customer population will limit the firm’s ability to penetrate new markets and increase its market share. Additionally, this approach will limit the productiveness of the company’s cross-selling efforts as the firm will not have new customers to target and sell its portfolio of products and services.