ABSTRACT
This study examines
empirically competence-based approach advantage in the banking industry in
Nigeria. It determines the
role of skills, attitude and knowledge in achieving competitive advantage in
the banking industry in Nigeria. The descriptive method of research was
employed to carry out this study. The primary source of data collection used to
gather information. It was found that skill, attitude and knowledge played significant
roles in achieving competitive advantage in Nigerian banking industry. And finally, it was recommended that customer
service and turnaround time should be greatly improved to make banking easy,
quick and convenient, modern queue management systems should also be employed
to render excellent services to customers and the bank needs to train staff,
particularly those at the frontline to be more customers – friendly and focused
so as to meet and exceed the expectations of customers.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgements iv
Abstract v
Table of Contents vi
CHAPTER ONE: Introduction
1
1.1 Background
to the Study 1
1.2 Statement
of Problem 4
1.3 Research
Questions 7
1.4 Objectives of the Study 8
1.5 Statement
of Hypotheses 9
1.6 Scope of
the Study 10
1.7 Significance
of the Study 10
1.8 Limitations
of the Study 11
1.9 Definitions
of Terms 12
CHAPTER TWO: REVIEW OF RELATED LITERATURE 14
2.1 Introduction
14
2.2 Competitive
Advantage 15
2.3 Competence
Based Theory 24
2.4 Core
Competencies and Choice of Competitive
Strategies 29
2.5 Competitor
Analysis 34
2.6 Winning
Customer Service Strategies 43
2.7 Drivers
of Competition among Banks 46
2.8 Summary
of the Review of the Study 53
CHAPTER THREE: Research Methodology 54
3.1 Introduction
54
3.2 Research
Design 54
3.3 Population
and Sample of the Study 55
3.4 Sampling
Techniques 55
3.5 Sources and
Method of Data Collection 55
3.6 Method
of Data Analysis 56
3.7 Validity
of Instrument Used 56
CHAPTER FOUR: Presentation and Analysis of Data 57
4.1 Introduction
57
4.2 Data
Presentation and Analysis 57
4.3 Hypothesis
Testing 67
4.4 Discussion
of Findings 75
CHAPTER FIVE: Summary of Findings, Conclusion
and Recommendations 76
5.1 Introduction
76
5.2 Summary
of Findings 76
5.3 Conclusion 76
5.4 Recommendations
79
References 82
Appendices 86
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Every
industry including banking has an underlying structure or a set of fundamental
economic and technical characteristics which give rise to competitive forces. A
firm can clearly improve or erode its position within an industry through its
choice of strategy. Competitive strategy, then, not only responds to the
environment but also attempts to shape the environment in its favour (Porter,
1985). The strategist must therefore seek, to position his or her firm to cope
best within its industry environment or to influence that environment in the
firm’s favour.
Strategic
management exponent Toffler (2003) writes that a company without a strategy is
like an airplane weaving through the skies, hurled up and down, slammed by
winds and lost in the thunder heads. If lightning or crushing winds do not
destroy it, it will simply run out of fuel. In similar line of thought, Ross
(2000) notes that without strategy an organization is like a ship without a
rudder. It goes round in circles and like a tramp has no specific place to go.
Clearly,
these statements emphasize the importance and need for far reaching dynamic and
systematic strategic planning for companies to survive competition in the ever
changing global competitive business environment. Ansoff (1970) argues that
planning generally produces better alignment and financial results in companies
which are strategically managed than those which are not. This suggests a
seeming correlation between strategic planning and the ultimate performance of
a company in terms of its growth, profits, attainment of objectives and
sustained competitiveness (Strickland, 2004).
Though
these assertions are largely true, Pitts (2003) affirm that exceptional
situations also arise when some companies gain not because they had in place
any strategy but because they just benefited from some sudden conditions in the
external environment. For example, after the September 11, 2001 terrorist
attack on the World Trade Centre, Pentagon and in Pennsylvania all in the
United States of America, air travel within and across that country dropped
drastically in favour of rail and road transport which were thought to be
safer. Rail and road transporter operators therefore, enjoyed a sudden and
unexpected boom.
Nonetheless,
and still consistent with the need for evolving and constantly reviewing
strategy, it is important to note that having a sound strategy in itself does
not necessarily translate into desired performance goals if it is not properly
implemented. Both strategy and implementation must be good and timely to
achieve positive results. As for a company driven by wrong strategic planning, Porter
(1985) likens it to a train on a wrong track saying, “every station it comes to
is the wrong station.”
These
fundamental principles largely hold true for all industries globally and as
should be expected, the banking industry is also subject to the dynamics of
these global market trends. Against this background, the study looks at the
competitive strategies for achieving competitive advantage in the banking
industry.
1.2
Statement of Problem
The
economic climate in Nigeria over the last decade has been relatively stable for
banking business. This notwithstanding, not all the banks can be said to have
performed at levels that meet industry and stakeholders’ expectations. Much as
the differences in the performance levels of various companies are to be
expected, it is still strongly believed that the strategies pursued by each
bank largely account for its performance. The absence of well-defined
competitive strategies results in weak competitive positions. This study looks
at the competitive strategies being pursued by First Bank of Nigeria Plc to
achieve competitive advantage in the banking industry of Nigeria. Management
plays the lead role in strategic the inking, planning, decision-making and
ultimate implementation of policies and strategies.
Unfortunately,
some banks are perceived to have management structures that overly limit the
authority to make long-term strategic decisions to a few key shareholders who
may be limited in some ways. This obviously compromises the richness and
diversity of the banks’ strategic planning agenda to the detriment of corporate
performance.
The
fear of loss of ownership control is also speculated to have inhibited the
expansion of the capital base of some of the private banks. This
under-capitalization has posed challenges for the hiring and retention of the
needed numbers and quality of personnel, upgrading of technology and the
financial capacity to insure big and complex risks.
With
the inception of the Financial Sector Adjustment Programme (FINSAP), distressed
banks have since the 1980s attempted to restore their profitability and become
more competitive. First Bank of Nigeria
witnessed an impressive performance within the period immediately after the
implementation of FINSAP, chalking 45% of the overall industry profits in 1993. However, the period
after 1993 has witnessed a declining market share for First Bank of Nigeria. The bank’s
market share of deposits was 38% in 1993 but has gradually declined to 17.8% in
2006, Standard Chartered Bank, however, made gains moving from 9% of the
industry share of deposits in 2003 to 13.1% in 2006. First Bank of Nigeria’s return on
equity of 28.7% also does not compare favourably with those of its major
competitors namely; Barclays Bank, Ecobank, and Standard Chartered Bank which posted
52.1%, 43%, and 38.9% respectively in 2006 (Business & Financial Times, May
21, 2007).
Though
the bank is utilizing its extensive branch network and modern technology to
better its operations, the bank’s low cost strategy which is amply demonstrated
in its very attractive base rates are of no use if a greater number of loan
applications are not processed because of the stringent criteria and lengthy
procedures. First Bank of Nigeria
demands that customers deposit registered title deeds to secure loan
facilities, but land registration is cumbersome, very expensive and therefore
unpopular in most parts of the country.
The
bank seems to be using mainly low cost leadership and a little bit of
differentiation as its competitive strategy. Most of the bank’s products are
reasonably priced and the bank’s charges compare favourably with those of its
close competitors (i.e. Barclays Bank, Ecobank and Standard Chartered Bank). It
also appears that competing on pricing alone may not be in the long-term interest
of the bank as it is no longer translating into a competitive advantage for the
bank. The bank has gained a very poor reputation in terms of customer service,
turnaround time, poor branch ambience and bureaucratic credit processes.
This
study attempts to investigate the above issues and the reasons behind the mixed
performances despite huge investments in infrastructure, human capital,
technology, sales and marketing activities and essential resources.
1.3
Research Questions
The
study seeks to answer the following questions:
1.
What is the role of skills in
achieving competitive advantage in the banking industry in Nigeria?
2.
What is the role of knowledge in
achieving competitive advantage in the banking industry in Nigeria?
3.
What is the role of attitude in
achieving competitive advantage in the banking industry in Nigeria?
1.4 Objectives of the Study
The main goal of the study
is to assess the strategies adopted by banks to gain competitive advantage in
the banking industry with particular reference to First Bank of Nigeria.
However, specifically the study seeks to;
i.
determine the role of skills in
achieving competitive advantage in the banking industry in Nigeria.
ii.
ascertain the role of knowledge in
achieving competitive advantage in the banking industry in Nigeria.
iii.
examine the role of attitude in
achieving competitive advantage in the banking industry in Nigeria.
iv.
assess the sustainability of the bank’s
competitive strategy
v.
make recommendations to improve the
competitive advantage of First Bank of Nigeria in the industry.
1.5 Statement of Hypotheses
Hypothesis
One
H0: Skills does not play any significant role in
achieving competitive advantage in the Nigerian banking industry.
H1: Skills
play a significant role in achieving competitive advantage in the Nigerian
banking industry.
Hypothesis Two
H0: Knowledge does not play
any significant role in achieving competitive advantage in the Nigerian banking
industry.
H1: Knowledge plays a
significant role in achieving competitive advantage in the Nigerian banking
industry.
Hypothesis Three
H0: Attitude does not play
any significant role in achieving competitive advantage in the Nigerian banking
industry.
H1: Attitude plays a
significant role in achieving competitive advantage in the Nigerian banking
industry.
1.6
Scope of the Study
The
study explored competitive strategies at the disposal of banks within the
banking industry in Nigeria and is limited to First
Bank of Nigeria Plc, Auchi Branch.
1.7 Significance of the Study
The
researcher has the eager hope that at the end of this study, it will be useful
to the following people: staff, customers and the management, who are going be beneficial
to the subject matter.
This
would also enable the student to be aware of the reason for being attentive in what
they are taught in their field of study to enable them have knowledge, skills and
attitude in the competitive banking system.
Also
to the teachers, this will help them to have knowledge of the strategies by
banks to enable them disseminate reliable information to their pupils all the
time.
Finally,
the study should be a guide to the state, local and federal government as a
whole when planning for its full knowledge of the skills and attitude with
regards to economic development of the nation.
1.8 Limitations of the Study
The
cardinal rule of banks which does not allow information on customers,
strategies and other sensitive issues to be discussed hampered efforts at
getting some vital information for the study. The fear of being branded as
divulging secrets would also not allow me the free hand to make certain
disclosures.
Although
this research work was purely an academic exercise, the bank’s Planning amid
Research Department needed a lot of convincing before agreeing to assist in the
electronic distribution of questionnaires, thereby wasting the limited time
available for the project work.
Administering
the questionnaires (a total of 400) also posed serious challenges, as most of
the respondents could not complete the questionnaires on time. There was
however some consolation in the fact that the bank’s intranet was put to good
use in electronically distributing the questionnaires. Collating and analyzing
400 questionnaires was also no mean task, as it was time – consuming.
Last
but not the least, this research work, conducted by a full time Valuation
Officer of First Bank of Nigeria was concurrently done with his official
duties. Notwithstanding all these limitations, the research was conducted
taking advantage of the available data. However, the limitations were not
drawbacks to the overall success of the study.
1.9 Definitions of Terms
Strategy:
This
refers to the determination of the long-term goals and objectives of an
enterprise and the adoption of causes of action and the allocation of resources
for carrying out these goals.
Planning:
This involves thinking about the future, identifying and specifying in advance
(now) what has to be done or achieved (objectives) and selecting the most
suitable means to accomplish these objectives.
Corporate
Strategy: This describes a company’s overall direction in
terms of its general attitude toward growth and the management of its various
businesses and product lines.
Strategic
Planning: This is a systematic process by which an
organization formulates achievable policy objectives for the future growth and
development over the long term, based on its mission, vision and goals and on a
realistic assessment of the human and material resources available to implement
the plan.
Vision:
This describes the firm’s aspirations of what it really wants to be.
Communication:
This
is defined as the effort of two or more parties acting independently to secure
the business of a third party by offering the most favourable terms.
Competitor
Analysis: This is the management tool used in marketing and
strategic management in an assessment of the strengths and weaknesses of
current and potential competitors.
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