MANAGING CORE COMPETENCE FOR SUSTAINABLE COMPETITIVE ADVANTAGE IN STERLING BANK PLC
1.1 ABOUT THE TOPIC
This work is a continuation of the researcher's work on the Sterling Bank organizational analysis (Omeike; 2008) that provided insight into areas for improvement of the functioning of the various departments and recommendations for realization (BSN_Programme_Manual, 2008, p. 12). The structure, behaviours, and enablers of the Bank have enormous consequences not only for the success of its business but, also for the success of its employees and the loyalty of customers. The focus here is drawing up a programme that allows us to measure and ascertain how best to serve the customers.
Shortly after consolidation in November 2005, the Bank conducted its first and only customer survey. This survey was designed to give management a better idea of who was banking with Sterling and what brought them there. However, much has changed in the three years since this research was conducted. After some years of growth the Bank experienced a decline in customer banking during its last financial year (Oct2007 – Sept2008), highlighting the need for more current market research information.
For over a century, companies competed on the basis of the assets they owned but in recent decades the basis of competition began to shift from hard assets to intangible capabilities. Today's business environment as characterized by globalization and customer empowerment, aided by rapid technology innovation is changing the basis of competition. The Top management team and individual executives of organizations regularly ponder whether their strategy is sound. As events, trends and competitors' actions constantly change, once-useful strategy can quickly become redundant and ineffective (Bowman, 2004). Organisations are therefore ever searching for sustainable competitive strategies to make good profits. Manktelow (2009) stated that “Me too” businesses (with nothing unique to distinguish them from their competition) are doomed to compete on price; the only thing they can do to make themselves the customer's top choice is drop price. And as other “Me too” businesses do the same, profit margins become thinner and thinner.
In order for organizations to differentiate their product/service and maintain an appreciable market share and profit margin, they have adopted various strategies to oust competition. One of the most recent of such concept or strategy is that of focusing on their core competence. According to Wikipedia a core competence is something that a firm can do well and that provides customer benefits, hard for competitors to imitate and can be leveraged widely to too many products and markets. It may take various forms including technical know-how, reliable process, close relationship with customers and suppliers, product development or culture such as employee dedication. The concept was pioneered by Hamel and Prahalad in 1990. Modern business theories suggest that most activities that are not part of a company's core competency should be outsourced. If a core competency yields a long term advantage to the company, it is said to be a sustainable competitive advantage.
From time to time various strategies were being devised to boost sales and increase market share however these were not far reaching perhaps because they were only based on the external or market factors. This study is aimed at identifying the strengths of STERLING BANK and how these can be leveraged for a sustainable competitive advantage. It looks at a resourced-based strategy, which is the sum total of the internal capabilities of an organisation, and how this can be used in providing quality and better priced services.
1.2 STERLING BACKGROUND INFORMATION
Sterling Bank provides financial services in the highly competitive business environment of Nigeria. The Bank was recently formed from a merger of 5 member banks in January 2006. It has seen a business growth resulting in 45 new branches in 2 years and employee growth from 1025 post consolidation to 1535 in June 2008 (Annual report 2007/08). This fast growth has posed a lot of human capital problem for the bank. These include talent retention, employee development and performance management. Also, the Banks executive team comprising of the Group Managing Director (GMD) and four Executive Directors (ED) have experienced corporate reshuffling over the past two years. The GMD resigned 9 months ago with one of the ED's appointed as acting GMD. The roles of the other ED's too have been rotated in an attempt to optimize capabilities.
The researcher heads the Sterling Bank's Performance Management and Organisation Development department which is under the Human Resources & Performance Management Group.
Sterling Bank has product lines covering Consumer Banking, Corporate and commercial banking, Public Sector collections & banking, International Trade Finance, and E-Banking. It is important to mention that the product lines do not create or promote products itself, but rather utilizes corporate head office shared services.
Since the Bank began operation, most branches have struggled to be financially self-sustainable for a number of reasons. The Bank took on a significant amount of debt during consolidation and servicing of the branches due to lack of liquidity. This debt has put a considerable strain on operational cash flows and has been the major contributor to operational cash deficits for the past three years. Throughout its short life, STERLING has also faced a range of problems attracting customers to the branches the largest of which are:
* a lack of new innovative products;
* and the Bank's reluctance to open new branches beyond the regional cities.
During the 2007/08 financial years, Sterling experienced an overall decrease in customer patronage, specifically: consumer banking down 13%, corporate banking down 20%, the Public Sector down 8% and the total patronage down 15% from the previous year (Alder Bankers Trust Report, 2008).
The competitive environment of Sterling has two distinctly different branches - Branch competition and Customer competition. Branch competition is a battle for regional Market share. It is important to mention that state capital branches are not considered part of the competition for Branches. State capital branches are almost guaranteed stop for key customers, whereas regional branches are generally competing for customers that are also playing capital cities. These regional branches must aggressively compete for the handful of regional customers available.
The competition for Customers is “a battle to put customers funds in vaults” at these branches. However to date, competition for Customers has been a significantly smaller focus for Sterling than the competition for businesses. Note that the Bank is competing with local microfinance banks and other financial services firms that may act as a substitute for the Banks services. Any financial services that people are choosing over a Sterling service are, by definition, competitors. However, Sterling management has done no research into who the competition is or what people are choosing when they are not at Sterling. While this is an area in desperate need of research, it is distinctly separate from satisfaction and has not been investigated in this research survey.
Looking to combat the constant cash shortage, as well as the recent decrease in overall patronage, current Sterling key objectives include:
* reducing operational cost,
* developing a wider range of products
* and ensuring awareness of Sterling as a bank
All three objectives must be met if Sterling is to remain competitive. However, the researcher has identified a key objective, namely to increase current levels of satisfaction. Highly satisfied customers will not only return but also speak highly of the Bank thereby increasing positive word-of-mouth, often the most persuasive kind of advertising. Therefore, one task of this marketing research is to measure current levels of satisfaction with the products and services being offered by Sterling.
1.3 PROBLEM DEFINITION
This research is a determination of the Sterling Customer satisfaction with current product and service offerings as well as Customer media preferences as it relates to the collection of financial services information.
The management problem faced by Sterling is two-fold. Most important is the decrease in customers during the 2006-08 financial years. While one will not be able to identify the cause of the decrease from this research, some suspect factors will be identified. Furthermore, the underlying problem of having no contemporary research into, or understanding of, the Sterling customer profile must be considered. One cannot understand the motivations of a customer if one does not know who the customer is. For this reason, the purpose extends also to a collection of individual customer profiles from which further connections can be made. Analysis of data collected via the survey will be used to assist Sterling marketing staff to make some important headway in reversing the trend of decreasing patronage.
The present research, descriptive in nature, represents an initial step in understanding the core competencies the Bank can leverage on. Management is concerned about how STERLING BANK can differentiate itself along its strength and unique competency it has built over the years. Management is ready to invest but along a strategic business formulation that has been proved and tested through STERLING BANK experiences. What core competence is STERLING BANK synonymous for? What is unique about its products and services? Where lies the strategic gap that is making competitive advantage unsustainable? How can STERLING BANK effectively manage its competences to meet with the opportunities? These and many more questions are being reflected by the management.
This study attempts to evaluate the concept of managing core competence as a means of sustaining competitive advantage. Many authors have alluded to this concept as a source of competitive advantage and that it enables the firm to introduce an array of new products and services. In practice so many examples abound of the success associated with this strategy albeit not all companies have been successful in its implementation.
1.4 PURPOSE OF STUDY
To evaluate core-competence based strategy as a source of sustaining competitive advantage in Sterling Bank.
To highlight the unique competences of Sterling Bank and how they can be leveraged to impact on Service Delivery
* To evaluate the internal strategic capabilities and gaps of the Bank
* To Identify which internal capabilities can be described as core competence
* Explore how this competences can be used to gain competitive advantage
* Suggest how internal capabilities can be developed into competitive advantage
* Elicit Empirical challenges to managing core competences for competitive advantage
* Suggest and enumerate how the Bank can gain competitive advantage in its market
* Identify gaps and develop a core-competence based strategy for the Bank.
To participate in the financial services industry, companies have to have the ability to add value, value beyond that of competitors and be thus “differentiated” on a continuous basis. Core competence has been recognized as a competitive element by many corporations (Blevins, 2004).
The next chapter will explore further, recent body of literature and various viewpoints on Core Competence as a business strategy and how the same can provide competitive edge to organizations.
2.0 LITERATURE REVIEW
Ever since the seminal article of Prahalad and Hamel in 1990, a lot has been said and written about the concept of core competence. In the last three decades, increasing competition fuelled a substantial amount of strategic research on understanding the antecedents and processes governing firms' competitive advantage. Prior to this time, traditional economic theory was at the base of all such thinking; product market and industry structure were considered to be the determinants of performance. Different explanations of corporate strategies were offered by the various researches such as minimization of transactions costs or achievement of economies of scale and scope. All these corporate strategies were directed towards the external environment and along this line of thought; firms which were able to match their strengths with the opportunities in the external environment were able to secure a competitive advantage (Shirish. C, 2005).
Subsequently, researchers started viewing firms as a collection of resources and capabilities and started considering the internal resources as the source of competitive advantage. The resource-based view of the firm suggested that the differences in the resources of the firm (tangible and intangible) are accumulated and learnt over time, and the heterogeneity of these resources is the source of competitive advantage. It is argued that this unique set of resources, capabilities, and skills, which a firm accumulates over time, plays a significant role in providing a direction for the firm's future strategies. The concept of core competences evolved from the resource-based view of the firm which emphasized the fact that competitive advantage rests on the firm's possession of unique difficult to imitate skills, knowledge, resources and competences (Shirish, 2005).
2.2 WHAT IS CORE COMPETENCE?
Core competences concept was developed in the management filed by C.K Prahalad and Gary Hamel in a 1990 Harvard Business Review article and they defined a core competency as “an area of specialized expertise that is the result of harmonizing complex streams of technology and work activity”. Since then many researchers have tried to highlight and further illuminate the meaning of core competency. Some have further said that capabilities can only be considered core if they differentiate a company strategically. Markides and Williamson (1994) define Core Competences as a pool of experience, knowledge and systems that can act together as catalysts to create and accumulate new strategic assets. Meanwhile, Teece, Pisano, and Shuen (1997) conclude that core competences must be derived from examining the range of a firm's (and its competitors) products and services. The value of core competences can be enhanced by combining them with the appropriate complementary assets. Hafeez, Zhang and Malak (2002) define core competences as resources of the business consisting of physical, intellectual and cultural assets” (Wu, 2006).
Three characteristics, according to Hamel and Prahalad, (1990), of core competence can be identified in a company. First, a Core Competence must provide potential access to a wide variety of markets. Second, a core competence should make a significant contribution to the perceived customer benefits of the end product. And finally, a core competence should be difficult for competitors to imitate (Wu, 2006). It is worth noting here that while core competences lead to the development of core products, the latter is not directly sold to end users, rather they are product that can be used in wide array of end products. Shirish (2005) alluded to this stating that the concept of core competences is distinct from the traditional strategic thinking of competing for market share. He argued that the competition in the product/market arena is essentially for market share which refer exclusively to brand share or end product share. The concept of core competence transcends the boundaries of the traditional market share because it is reflected in the firm's ‘core product' which need not be end products of the firm and are usually the result of application of one or more core competences of the firm. Core Competence talks of strategies that are beyond the low cost or differentiation for providing sustainable competitive advantage to the firm (Shirish, 2005).
2.3 META-COMPETENCE AND CORE COMPETENCE
Shirish (2005) distinguished between Meta and core competences of an organization although admitting that they are intricate mix of a number of constituents' skills. He submitted that while a firm may have around 10-15 core competences, it will only have a couple of meta-competences, the latter being at a higher hierarchical level than the former. Identification of this hierarchy of competences from the pool of competences is not an easy task because causal ambiguity makes it difficult to attribute competitive advantage to a particular competence, notwithstanding a firm should be able to identify its ‘elusive' higher level competences (Shirish, 2005). Hayes says that within IT, skills, capabilities and functions are only core competences if they directly support a business process that is itself a core competence (or meta competence) (Hayes, 2007).
Identifying relevant core competences therefore is consequent upon knowing the Meta competences of a firm. Since Meta competences are at a higher level of competences than core competences, efforts have been made by various researchers to classify them into generic groups on the precept that it is the highest common factor of all the competences in that group. The generic group of meta-competences indicates the most dominant common element among the group of competences. After superimposing various viewpoints and literatures on different ways of classifying competences by different authors with an underlying criterion that the Meta and hence the core competence should result in superior customer value, Shirish (2005) classified meta-competences of firms into five generic categories. These are cost efficiency, reliable systems, innovation, close external relationships and agility. The core competences of the organisation emerge from the meta competences it has. They are aimed at providing an enhanced customer value. The systems in the organisation have to be consciously built around the underlying Metacompetences to maximize the benefit for the organisation (Shirish, 2005).
2.4 CORE COMPETENCE AND SUSTAINABLE COMPETITIVE ADVANTAGE
Competitive advantage is a company's ability to perform in one or more ways that competitors cannot or will not match. Competitive advantages should be sustained although this could be a difficult task as in most cases competition catches up so that the best a company can do is to leverage on its competitive advantage and keep creating new ones. Organisations, over the years, have practiced many methods to create and sustain competitive advantage. Some of the initiatives are TQM, BPR, SCM, and CRM. These initiatives, although have resulted in firms attaining some competitive advantage, are replicable and not sustainable over a longer period of time. Blevins states that Core Competence has been identified as a veritable means of building a sustainable competitive advantage. Core Competence is the ability to define and execute differentiation (Blevins, 2003). Manktelow (2009) concurs with this view saying Core Competences are some of the most important sources of uniqueness, these are the things that a company can do uniquely well, and that no-one else can copy quickly enough to affect competition. It is important to emphasize that if an organisation seeks to build competitive advantage it must meet the need and expectations of its customers.
The importance and value to the customer may seem to be an obvious point to make but in practice it is often overlooked or ignored. Managers may argue that some distinctive capability of their organisation is of value simply because it is distinctive. But having capabilities in terms of resources or competences that are different from other organizations is, of itself, not a basis of competitive advantage; there is little point in having capabilities that are valueless in customer terms, the strategic capabilities must be able to deliver what the customer values in terms of product or service (Gerry et al. 2004: 125)
Shirish also states that a firm's competitive advantage is derived from its unique knowledge. The causal ambiguity of its heterogeneous unique knowledge makes it inimitable and the maintenance of its heterogeneity is essential for a sustained competitive advantage. A firm's resources can be classified into three categories: physical capital, human capital and organisation capital. It is submitted by some scholars that not all these firm resources are strategically relevant. Therefore a distinction between assets (having resources) and skills or competences (doing resources) can be made, the latter being described as invisible or information-based capabilities. Most researchers on the subject have reiterated that invisible or intangible (doing) resource such as consumer trust, brand image etc are critical to business success (Shirish, 2005).
2.5 CORE COMPETENCE AND OUTSOURCING
Many Corporations have concluded that the key to survival is focusing on their core competence and associating with those whose core competences lies outside of theirs and adds value to theirs. This has given emergence to the concept of the ‘virtual enterprise' (Blevins, 20003). Indeed the idea of core competences is one of the most important business ideas currently shaping the world of business. It is one of the key ideas that lies behind the current wave of outsourcing, as businesses concentrate their efforts on things they do well and outsource as much as they can of everything else (Manktelow, 2009). Organisations are continually evaluating which activities to outsource and which to manage in-house, the key drivers influencing this being the increasing complexity of demand, focus on core competence, drive for supply chain efficiency, and managing promotion and new product development (Stirling-Roberts, 2004:22)
Gottfredson et all (2005) state that outsourcing is becoming so sophisticated that even core functions like engineering, R&D, manufacturing, and marketing can and often should be moved outside. It is no longer a company's ownership of capabilities that matters but rather its ability to control and make the most of critical capabilities, whether or not they reside on the company's balance sheet. They submitted that forward-thinking companies are making their value chains more elastic and their organizations more flexible. And with the decline in the vertically integrated business model, sourcing is evolving into a strategic process for organizing and fine-tuning the value chain. But all companies need to rigorously asses each of their functions to determine in which they have sufficient scale and differentiated skills and in which they don't. Greater focus on capability sourcing can improve a company's strategic position by reducing costs, streamlining the organisation, and improving quality. Finding more-qualified partners to provide critical functions usually allows companies to enhance the core capabilities and drive competitive advantage in their industries. (Gottfredson et al 2000:132-139)
2.6 BUILDING AND LEVERAGING ON CORE COMPETENCE
To better understand how to develop core competences, it is worthwhile to understand what they do entail. On the negative, core competences are not necessarily about outspending rivals on research and development (R&D), sharing costs amongst business units or integrating vertically. While the building of core competences may be facilitated by some of these actions, by themselves they are insufficient. Various authors have suggested myriad but similar approaches to building core competence. For an existing organisation, it is needful to identify its core competence before attempting to develop it. Manktelow (2009) suggested six steps to identifying and selecting core competence
1) Brainstorm the factors that are important to your clients
2) Brainstorm your existing competences and the things you do well
3) Screen the list of your own competences against the tests of Relevance, Difficulty of Imitation and Breadth of Application to verify if any of these are core competence
4) For the list of factors that are important to client, screen them using these test to see if you could develop these as core competence
5) Review the two screened lists and identify the gaps and opportunities
6) Think on the most time-consuming and costly things that you do and consider if any of these things do not contribute to a core competence, and look at outsourcing such activities with the mind of your core competence
Shirish provided a four-phase dynamic approach;
1) Deploy- Successful firms not only know how to deploy their core competences but are also aware of the dynamic nature of this resource. The valuable core competence in a firm needs to be nurtured and the not so valuable competences in a firm need to be abandoned.
2) Nurture- For the success of the organisation, its core competences have to be nurtured. This implies that the core competences of an organisation should manifest in multifarious systems of the organisation so that they are actually used. According to Prahalad and Hamel (1990) Core competence does not diminish with use, competences are enhanced as they are applied and shared.
3) Develop- For sustaining a competitive advantage, organizations must continually learn and enhance their competences. Competences may be upgraded or new competences may be acquired through internal development, market procurement, inter-firm collaboration or mergers and acquisitions.
4) Abandon- Managers must instill flexibility in their competences management. Competence may become obsolete with time. Core competences can easily become core rigidities. However abandonment of a core competency must be done only after a lot of careful thought and deliberation.
Researchers have described the limits to the speed of accumulation of competences saying that these tacit strategic capabilities are nonetheless subject to learning (Shirish, 2005). Organisational Knowledge which can be described as the bedrock for competitive advantage in today's knowledge-based economy, is the collective and shared experience accumulated through systems, routines and activities of sharing across the organization (Gerry et al. 2004:133).
2.7 CHALLENGES TO BUILDING CORE COMPETENCE
Cost-cutting moves sometimes destroy the ability to build core competences. For example, decentralization makes it more difficult to build core competences because autonomous groups rely on outsourcing of critical tasks, and this outsourcing prevents the firm developing core competences in those tasks since it no longer consolidates the know-how that is spread throughout the company. If a business unit does manage to develop its own core competences over time, due to its autonomy it may not share them with other business units. A solution suggested to this problem is that corporate managers should have the ability to allocate not only cash but also core competences among business units.
Furthermore, failure to recognize core competences may lead to decisions that result in their loss. Most times companies are apt to divest themselves reasoning that the industry is mature. By recognizing its core competences and understanding the time required in building them or regaining them, a company can make better divestment decisions. Also, Business unit managers tend to focus on getting immediate end-products to market rapidly and usually do not feel responsible for developing company-wide core competences. Consequently, without the incentive and direction from corporate management to do otherwise, strategic business units are inclined to under invest in the building of core competences (Core Competences http:www.quickmba.com/strategy/core-competences retrieved on 7/13/2007).
Developing core competences necessarily goes with outsourcing. Outsourcing has become strategic, yet many executives remain unprepared. Most companies continue to make sourcing decisions on a piecemeal basis and hence get distracted on their core competences (Gottfredson, 2005:132-139).
In the hypercompetitive environment of today, identifying and leveraging on core competence is more of a necessity than an option as businesses need to have something that customers uniquely value if they're to make good profits. Hamel and Prahalad cited examples of slow-growing and now-forgotten mega corporations that failed to recognize and capitalize on their strengths. On the other hand is the star performers which had a very clear idea of what they were good at, and which grew very fast. The latter companies were focused on their core competences and continually worked to build and reinforce them, their products were more advanced than those of their competitor, and customers were prepared to pay more for them. And as they switched effort away from areas where they were weak and further focused on areas of strength, their products built up more and more of a market lead (Manktelow, 2009).
The literature review has shown in theoretical and practical terms that strategic intents can be achieved by focusing on core competence. It is established that firms have been able to create unique core products and end products, enjoy economies of scales, improve value chains and improve their internal process by building their core competence.
3.0 RESEARCH METHODOLOGY
Research tools will include questionnaires and Interview. Questionnaire shall have two parts. The first part shall comprise of 5 questions each having optional answers, these questions are aimed at accessing current strategy and the extent to which team members are aware or agree to this strategy. The second part is aimed at identifying the core competences by way of first identifying the meta-competence. The 7-S model comprising of strategy, structure, systems, style, staff, shared values and skills is being adopted as a framework which comprehensively covers all aspects of an organization and can also be used for identifying the meta-competences of organizations. The logic here is that for a generic competence to be termed as Meta-competence, it should be present to a reasonable extent in all the 7-S of an organisation.
Already in the Section 2.3 of literature 5 generic competences have been identified these are cost efficiency, reliable systems, innovation, close external relationships and Agility. The 5 generic or meta-competences are mapped against the 7-S of a firm to form a table or matrix (see sample of questionnaire). The methodology therefore is that respondents will score the extent of reflection of the generic competences on the 7-S on a scale of 0- 10 where 0 signifies no reflection and 10 signifies complete reflection. By finding the mean score allocated to the various generic competences on all the 7-S, the student can conclude on which competences are core by way of identifying which core competences aggregates to the identified meta-competence.
Firstly the research is carried out on a presupposition that the strategic intent of the Bank is to make profit. This might not always be the case. Also non-intelligence probably because of poor understanding of the subject or lack of involvement from the respondents cannot be ruled out. But the aggregation of responses will help to submerge such incorrect views. In scope, the research is limited to solely evaluating the possibility of managing core competence for sustainable competitive advantage; it does not attempt to compare with other strategies or to discover the most suitable strategy for the company under study.
4.0 DATA ANALYSIS
4.1 RESULTS OF RESEARCH PLAN
* Questionnaires were distributed to 94 Branch managers, 94 Branch Operations Heads and 61 Head Office senior managers.
* Interviews and explanations were made on the subject to aid respondents in rightly responding to the questionnaires
* Questionnaires were distributed in hardcopy (Head Office) and electronic copy (Branch)
* Relatively high response rate can be attributed to intense effort by student and proximity.
* Number of Questionnaires distributed and response rate is as shown in the table below
Number of Questionnaires Distributed
Number of Respondents
Table 4.1 Statistics on Feedback on questionnaires
4.2 ANALYSIS OF DATA COLLECTED
The research is largely qualitative; the questions as earlier explained in the research methodology was sent out to get the following
1) Understanding and level of agreement amongst the respondents on current strategy of the Bank
2) To gather data from staff with the intent of using same to identify the core competence of the Bank
So we proceed to the first part.
4.2.1 Assessing the Understanding of Current Strategy
This section will deal with respondents answer to five questions that had optional answers; the extent to which they agree on the answers will reflect their understanding of the business strategy in the Bank
220.127.116.11 Understanding the target market
Respondents were asked ‘where will we compete?' The table below shows the answers
Table 18.104.22.168 The Target Market
The table shows that majority of the respondents are of the opinion that the Retail Banking is the target market. The deviations from the opinion by other respondents may not be unconnected with their regional environment and perhaps truly that they do not know the underlying strategy to the business. While it is not impossible that services can be provided to all the segments given in the option, yet it does not rule out the fact that the Bank will still have its target market for which they ensure they have the highest critical success factors. The results show some level of misalignment with the understanding of the market being served, nevertheless it can be inferred from the statistics that managers are clear and concur on where to compete.
22.214.171.124 Understanding the competitive advantage
Table 126.96.36.199 below show responses to the question: ‘How will we gain competitive advantage in our market segment?' (Choose any 2).
Efficient/ Quality Service
Table 188.8.131.52 The Competitive Advantage
The inferences deducible from the statistics are that respondents agree that quality is important to gaining competitive advantage. The options of quick delivery, Value-added services and superior support can become an area of gaining a competence advantage. The fact that respondents are highly divergent on these shows lack of visible emphasis on any. A company should have a clear understanding of where it wants to excel more than the competition and this should be communicated along the organization.
184.108.40.206 Understanding the resources and capabilities required
Respondents were asked ‘What resources and capabilities are required? (Choose 2). The table below shows the answers
Table 220.127.116.11 Resources & Capability Requirements
The table shows that skills requirement is top on the list. In acquiring skills it is either training is conducted to develop skills or external recruitment is conducted. The high percentage accorded staffing requirement bears credence to the need for Skills. Without infrastructures skills could be very useless. The beauty of skills is displayed when there are supporting infrastructures. The construct and mapping of the answers is quite correct and reasonable. It can be inferred that from the above that respondents are coherent on the resources and capabilities required, and this is largely skills related.
18.104.22.168 Understanding of ‘how to change'
Respondents were asked ‘How will we change?' The table below shows the answers
Develop Internal Capabilities
Acquire External Resources
Form Alliances –
Table 22.214.171.124 How to Change
Responses show an overwhelming vote for the development of internal capabilities. And a little need for purchase of external resources. Respondents are totally averse to forming alliances. Capabilities refer to resources and competences. These results flows along with that in Section 126.96.36.199 wherein ‘Skills' is chosen as the most need capabilities. The key inference that can be obviously seen in these responses is that there is a gap in capabilities. It should be noted that these options are not necessarily mutually exclusive.
188.8.131.52 Understanding the economic return company strategy will deliver
Respondents were asked ‘What economic return will our strategy deliver?' The table below shows the answers
Gain in Market Share
Table 184.108.40.206 Economic Return
Respondents have expressed divergent views on the economic return they expect their company strategy to yield. Actually the options are similar and intertwined but yet distinct. Increased Loyalty may not necessarily mean increased profitability when one considers a product at the maturity stage in which the quest to sustain market share is paramount. Profitability can also be sacrificed for gain in market share. However there appears to be more votes for Increased Loyalty as the economic return which actually is in agreement with the need for superior support or after sales service in section 220.127.116.11.
The conclusion is that it is not likely that the Bank has clearly defined and communicated expected economic return. The strategic actions that will drive one of these objectives are different from one another.
The objectives of all the questions asked in this section is to discover the extent to which managers understand and are in agreement with the strategy of the organization. It also attempts to check the alignment of their agreed viewpoint to the strategic intent. It is interesting that while there seems to be a direction of understanding about the market segment; on how to gain competitive advantage; on what resources is required; and the changes required within the organization; respondents are not in agreement or do not understand what the economic returns their strategy will deliver.
4.2.2 Identifying Competences
This section of data analysis will try to discover the meta-competences and consequently the core competences of the Bank.
18.104.22.168 Meta- competence identification map
Using a scale of 0-10 where 0 represent no reflection and 10 complete reflection of generic competences on the 7-S, respondents have scored the performances in the Bank. The average score of all respondents have been calculated, and the result below emerged.
Close External Relationship
Table 22.214.171.124 The 7 S Rating
To conclude that any of the five generic competences are Meta competences, then it must be well embedded to a reasonable extent in all the 7-S. As a rule of thumb in this analysis, a score of 7 is chosen as ‘a reasonable extent of reflection'. It therefore means that for any generic competence to be classified as being a Meta competence, the former must score at least 7.0 in all the categories.
The results in Table 126.96.36.199 shows none of the generic competences measures up perfectly as a meta-competence, the closest to it is Reliability with a positive deviation of +0.2. All others apart from equally failing to meet the criteria of a meta-competency are all of a negative deviation Agility being the worst with -0.9. It is also noted that the mean of reflections of the generic competences are quite close having a mean deviation of - 0.28. This shows that all the generic competences are close to being meta-competences but none of these actually qualify as the latter.
Since the literature suggests that a firm although could have several core competences but will only have very few meta-competences, in order to identify the meta-competences the average mean of the reflection can be used. Obviously Reliability emerges as the meta-competence of Sterling Bank although not too perfectly.
188.8.131.52 Identifying Sterling Bank Core Competences
Meta-competences are of a higher hierarchy order so that core competences can be deduced from them. Reliability or Reliable Systems has been identified as the meta-competence of Sterling Bank. Reliability implies delivering expected results quickly, consistently, and efficiently with least inconvenience and disruptions to customers. The primary focus here is the reliability of processes rather than cost or any other criteria although a reliable system may result in overall cost reduction.
By breaking down reliable systems, the three core competences emerge. These are Superior Customer Service, Technology know-how and Convenient Branch Network as shown in the diagram above. While the list is not exhaustive of all the core competences in the Bank, these three can be regarded as the most pervading of all the competences on reliable systems:
1) Convenient Branch Network- In providing banking services to the retail market, you need an impressive and convenient network of branches that are easily accessible and identifiable. The Bank, over the years of operation has expanded its operations to over 110 branches and 32 cash centers, all linked for on line real-time banking services.
2) Banking Know-how/Skills – This refers to in-depth knowledge and skills needed to run the business efficiently. It is a function of the staff and the knowledge management culture that exist within the Bank. Its affects the reliability to the extent of guaranteeing a consistent professional approach and service level at all times. The Bank is endowed with some key experienced long staying staffs who are vastly experienced in retail and consumer banking. On the average, Sterling Bank's senior management has 20 – 31 years banking experience.
3) Superior Customer Service- This is a proactive and continuous service thus ensuring that customers are happy with the service rendered and at promised quality levels. The technical support process and mechanism in the Bank is very sound and in-depth although not very agile.
As a summary of this section, from table 184.108.40.206 the imperfections of Reliability as a meta-competence is as a result of weak reflections on strategy, style and shared values. These three although latent in the framework of an organization are very important to the success of any organization. In Section 220.127.116.11 respondents highlights the necessities of capabilities like Skills, Branch network and Staff and these collaborates with the core competences driving reliability namely and respectively Banking Know-How, Convenient Branch Network and Superior Customer Service.
This section has broadly dealt with the systemized processing of data obtained from the survey instrument. Simple statistical analysis using ratios and percentage have been used to draw prima facie inferences on the coherence of strategic intents of the Bank. Also the meta-competency of the Bank has been derived and by extension the core competences were precipitated.
More in-depth inferences and conclusions will be considered in the next chapter by cross referencing and marrying all the facts, with recommendations.
5.0 CONCLUSION, RECOMMENDATIONS AND OPTIONS
In Section 4.2.1 there seems to be an agreed focus on the target market. On how competitive advantage may be gained, while quality is chosen as most important for the Retail Banking segment respondents are widely divergent on other means of gaining competitive advantage. It appears this has not been thought through. A decision needs to be made on what window of unique services Sterling Bank intends to provide in order to boost the quality of its services.
It is however worth mentioning that there is a logical flow of the responses. Respondents agree on the capabilities required and how these capabilities are to be achieved – Develop internal capabilities. But what exactly are these capabilities since there are many; it is only the relevant and strategic capabilities that should be developed. In Section 4.2.2 the core competences that need to be developed in order to provide reliable banking services were discovered. These are Banking Know-How, Convenient Branch Network and Superior Customer Service.
This research has actually shown that the Bank can discover, build and leverage its core competences for competitive advantage. The literature already has established that failure to build core competences will lead to their loss. It is clear that the Bank has survived so far on providing convenient and efficient services although with some shortcomings because it wants to be jack of all trades as seen in Section 18.104.22.168. The Bank, in order to focus on its core competence might need to outsource some of its activities and focus on the most important or critical success factors. The Bank must be able to sell its convenience and efficiency as a core product and compete at a higher hierarchical level. It can be concluded that the Bank has some unique capabilities it can develop into core competences. A strategic approach rather than an operational approach should be used to drive these competences for economic gains. It is also evident that the business strategy is not made explicit to the branches and business units hence the divergent views. By focusing on its core competence, the Bank can become a market leader in providing convenient and efficient banking services.
The following are important steps for the Bank to consider:
* The Bank should clearly make its business and operational strategies know to its staff. This can be done by communicating its mission statements. The psyche of the strategic intents of the company should pervade the culture and shared values of all staffs.
* The Bank needs to define its window of services. So that the customer knows what to expect. A service can become unreliable when a firm fails to meet a promise it has committed to the customer.
* There appears to be a short fall of staff and skills, immediate process should be embarked on to fill this gaps
* The Bank needs to be clear on its economic return they expect from their strategy either at the instant or on the mid-term. This will determine how resources will be deployed
* The Bank as a service company cannot be run like a trading company. Profitability forfeited at the short-run can become a strategy to increased loyal and gain in market share.
* The Bank needs to improve on its agility especially being a financial services Company. The 7-S framework especially the structure and systems should be improved for speedier operations. Also a flat organizational structure will allow for easy information and process flow and hence better agility
Here, the options available for managing core competences will be discussed.
5.3.1 Do nothing
The banking industry is moving on a fast pace already and Sterling bank is playing catch-up or reactive. It is easier to maintain status quo and continue running the business as is. The problem with this is that customers are getting more informed and would be agitating for fresh waves which might pass on to the competition. The Bank will witness suboptimal performance and chaos.
Outsourcing involves the use of third party organisation to be involved in the value chain. What the literature suggests is that firms should identify what they are not good at or what is not so valued by the customer and outsource to other firms that have core competence in that area. By this they will be able to concentrate on fewer activities. Cash management, tellering and documentation can be outsourced.
Internal capabilities can be developed by training existing staff on their area of competence. As suggested in the literature core competence is not easily achieved on the short run, it involves a process of learning and sharing experience.
External human resource to be brought to complement the staff and skills strength as the data analysis already suggests a shortage. However the challenge is getting this new staff to fit into the style and shared values of the organization.
5.3.4 RECOMMENDED OPTION
The option of choice is to implement a strategic framework with core competence as the main driver of sustainable competitive advantage. A combination of the above options along the following lines is recommended:
* It will be all encompassing
* It will interweave with the 7-S framework of the organization
* It will allow for the Bank to fully define it window of service, the market it wants to satisfy and its anticipated economic return
* Staff will be fully conscious and aware of the shift in strategic paradigm
* It helps the organisation to be focused and guarantees long-time survival of the company
* Core competences will not only be purposefully developed, they will be strategically driven
* The approach though may involve some level of investment it is inexpensive
* It is a way of committing the company to excellence, everybody is involved.
* It surely guarantees quality service delivery and delighted customers
6.0 IMPLEMENTATION PLAN
6.1 IMPLEMENTATION PROCESS
The proposed business solution is for Sterling Bank to implement a strategic framework based on using core competences for sustainable competitive advantage.
For this to work at all it must get the backing and blessing of top management as it will lead to major shift in strategic focus and organizational restructuring. Getting the approval of the management may not be difficult considering the fact that the process is not necessarily expensive. A good case is to be presented for the proposed strategic business solution; this will include the confidence on the economic return anticipated and the cost benefits analysis.
Cost benefit shall include possible gains in outsourcing, economies of scales benefit and finally good and stable bottom lines. The questions in section 4.2.1 should be properly thought through and definite responses should be agreed upon and coined into a mission or strategic statement. Skills gaps are then identified by identifying what capabilities are required and that which is available.
As already established staffing, infrastructural and skills requirement should only be fulfilled along the lines of the gaps that exist. Training necessary to fill the constituent's skills gaps should be carried out. The core competences should also be developed so that the shortcomings earlier discovered in section 22.214.171.124 is fully overcome.
As earlier noted it is not just sufficient to have core competences, management must have critical skill to utilize these competences for competitive advantage. The strategic framework should be designed to cause a total shift from a null or reactive strategy to something more purposeful and felt within the system and culture of the Bank.
6.1.1 Critical Success Factor
Critical to the success of this initiative is that the management must be fully committed to the new strategic vision.
6.1.2 Control Measures
The Bank should be careful in rushing into outsourcing since in a service environment interfacing with clients is a good opportunity of developing closer ties. A quick rush can lead to loss of good will.
6.2 PRAGMATIC STEPS TO IMPLEMENTING IN STERLING BANK
Strategic Analysis and Presentation of Business Solution for Approval
Group Head HR/Researcher
Nov 10-15 2009
Translating Strategy into understandable statements and process
Heads of Department
Nov 16-30 2009
Identification of Skills gaps
Heads of Department
Dec 1-14 2009
Training and Orientation
Dec 15-Mar 30 2010
Modifying Operational Strategies e.g. possible outsourcing
Technical Operation Manager
Jan 1-15 2010
Inculcate strategy in culture and values… Management of Change
Jan 16-30 2010
In strategy formulations there are no straight-jackets. Because strategies are made with respect to the market and in a dynamic industry market changes may be expected. Product life cycle is very short in service industries. Managing core competence as a strategy for sustaining competitive advantage is not a panacea to all the problems, since by nature it is long-term. Hence the business solution of a strategic framework with focus on core competence at the heart but other flash-in-the-pan, short time, peripheral approaches should also be employed. This will make the Bank to escape the tendency of Strategy rigidity.
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This research work is on Strategic Management. It is aimed at managing core competence for sustainable competitive advantage. We assure you of utmost confidentiality of all the information given, as responses will not be treated in isolation but rather aggregated in arriving at conclusions. Thank you.
1.0 Assessing Current Strategy
a) Where will we compete? (Choose 1)
o Retail Market
o Corporate Market
o Commercial Banking
o Public Sector
b) How will we gain competitive advantage in our market segment? (Choose any 2)
o Low Price
o Quality Service
o Branch Network
o Value-added Service
o Superior Support
c) What resources and capabilities are required? (Choose any 2)
o Branch network
d) How will we change? (Choose 1)
o Develop Internal Capabilities
o Acquire External Resources
o Form Alliances
e) What economic return will our strategy deliver? (Choose 1)
o Increased Loyalty
o Increased Profitability
o Gain in Market Share
2.0 Meta/Core Competency Identification Map
Please allocate points on a scale of 0-10 (where 0 signifies no reflection and 10 signifies complete reflection) on each of the 7-S of the particular competence
Close External Relationship