MEE&WEE BANK (MWB) STRATEGIC AND SUSTAINABLE DECISIONMAKING CASE STUDY
The management of Mee&Wee Bank (MWB) is considering closing some of its branches to
enhance financial efficiency in response to tightening business margins and increasing
competition in the banking sector. MWB believes that this decision aligns with current trends
in customer preferences favoring digital banking channels and the imperative to streamline
operational costs. Despite this, MWB is committed to maintaining its strategic focus on
"delivering a customized experience where every customer is treated as a local community
member."
To evaluate the strategic considerations, potential impacts, and recommended approach for
rationalizing the bank's branch network, MWB has provided the following information to help
conduct the appropriate analysis. The information and operation data relates to one branch that
has been penciled for closure as a pilot.
Operation data and information
• Currently the branch has:
o local variable costs of $300,000 per year,
o local fixed costs of $140,000 per year and
o allocated head office fixed costs of $150,000 per year.
•
In terms of revenue the branch has annual income of $750,000 from servicing its 5,000
customers
Additional details about the closure:
• It is estimated that if the branch were to close:
o 500 customers would transfer to “The MW Bank” branch in the next town (60
km away) with similar variable costs per customer.
o 1,000 customers would move to the bank’s Phone-banking service which has
variable costs of $40 per customer per annum.
o 1,500 customers would use the bank’s Online-banking service which has a
variable cost of $20 per customer per annum.
o 2,000 customers would move their accounts to competitors.
o $50,000 of head office fixed costs would be avoided by the branch closure.
Required:
Using a standard report writing format:
a. Calculate the current annual contribution of the branch.
b. Determine the contribution per customer from each of the proposed channels to which
current customers are likely to transition (i.e., branch in the next town, phone banking,
and online banking).
c. Determine the total contribution to the branch if these customers are transferred as
planned.
d. Compare the current and projected contributions of the branch following the closure.
e. Advise the management of The Local Bank on the proposed closure. Specifically, state
whether the branch should be closed or not.
f. Identify sustainability and qualitative factors that should be considered by the company
in making this decision. Highlight the specific United Nations sustainability goals that
would have implications for the study.