An Evaluation of Strategies for Achieving Competitive Advantage in the Banking Industry. The Case of Ghana Commercial Bank Limited. By Lawrence Awuah (BSc. Hons.) A Thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the degree of Commonwealth Executive Master of Business Administration Institute of Distance Learning September 2011 1 CERTIFICATION I hereby declare that this submission is my own work towards the Commonwealth EMBA and that to the best of my knowledge, it contains no material previously published by another person nor material which has been accepted for the award of any other degree of the University, except where due acknowledgement has been made in the text. Student ………………. Date: Lawrence Awuah ……………. Supervisor: ……………………….. Date: Stephen Akwasi Kyeremateng ……………… Professor I.K. Dontwi: …………………….. Date: Dean, Institute of Distance Learning ………………… 2 ABSTRACT Competition is a fact of business life, unless a business can develop strategies to compete successfully in the market place, it has practically no chance of growth and would remain a tiny firm performing far below its potential. In an increasingly competitive banking industry in Ghana, the absence of well-defined competitive strategies leads to weak competitive positions and hence performance below the industry average. The purpose of this study is to examine the competitive strategies adopted by banks to achieve competitive advantage in the banking industry in Ghana with Ghana Commercial Bank as a case study. Both primary and secondary data were sourced and used for the analysis of the study. Primary data was collected using interviews and questionnaires on a purposive sample of 400 staff. Secondary data was collected from Annual Reports of GCB for five years from 2005 to 2010, GCB‟s internal newsletters The Eagle and Commerbank News etc and the Business and Financial Times. The study revealed that the bank has drawn up several strategic plans and religiously implemented them since 1990. It also came to the fore that the bank enjoys competitive advantage in the industry, the most important factor contributing to the competitive advantage, being the bank‟s extensive branch network. The study recommended that the bank should improve its IT infrastructure, streamline its loan application processes, train staff to be more customer-friendly and proactive, de-congest the banking halls and serve customers faster all in a bid to meet and exceed customer expectations and sustain the competitive advantage. 3 TABLE OF CONTENTS Content Page Title Page i Certification ii Abstract iii Table of Contents iv - vii List of Tables viii List of Figures ix List of Appendices x List of Abbreviations xi Acknowledgement xiii CHAPTER ONE 1.0 Introduction 1 1.1 Background of the Study 3 -4 1.2 Statement of the Problem 4 - 6 1.3 Objectives of the Study 6 - 7 1.4 Research Questions 7 1.5 Significance of the Study 7 - 9 1.6 Scope of the Study 9 1.7 Limitations of the Study 9 - 10 1.8 Organization of the Study 10 – 11 CHAPTER TWO 2.0 The Concept of Strategy 12 - 15 2.1 Levels of Strategy 15 - 16 2.2 The Concept and Evolution of Strategic Planning 16 - 18 2.2.1 Mission, Vision, Goals and Objectives 18 - 19 2.2.2 Mission Statement 19 2.2.3 Vision Statement 19 2.2.4 Goals and Objectives 20 2.2.5 The Relationship between Strategic Planning and Performance 20 - 22 2.2.6 The Impact of Strategic Planning on Performance 22 - 25 2.3 Competition 25 - 26 2.3.1 Competitive Advantage 26 - 27 2.3.2 Sustaining Competitive Advantage 27 - 28 2.3.3 Sources of Competitive Advantage 28 2.4 Porter‟s Generic Competitive Strategies 28 - 29 2.4.1 Cost Leadership 29 - 31 2.4.2 Differentiation 31 - 32 2.4.3 Focus 32 - 33 2.5 Competitor Analysis 33 - 34 2.5.1 Competitor Array 34 - 35 2.5.2 Competitor Profiling 35 - 39 2.5.3 Drivers of Competition among Banks 40 - 41 2.5.4 Effects of Competition on Banks 41 - 42 2.5.5 Effects of Competition on Lending by Banks 42 - 44 2.5.6 Effects of Competition on Profits and Deposits of Banks 44 2.5.7 Branch Network and Competition 45 - 47 4 2.5.8 Competition and ICT in the Banking Industry 47 - 49 2.5.9 Competition and Customer Service 49 - 50 2.6 Winning Customer Service Strategies 50 2.6.1 Service Strategy and Competition 50 - 51 2.6.2 Customer-Friendly Systems and Competition 51 - 52 2.6.3 Customer-Friendly People and Competition 52 2.6.4 Theoretical Frameworks 52 2.7.4.1 Competition and Time 52 - 53 2.7.4.2 Competition and Efficiency 53 2.7.4.3 Competition and Lending 53 2.8 The Origin of Banking 54 - 56 2.8.1 Banking in Ghana 56 - 59 2.8.2 Overview of Ghana Commercial Bank (GCB) 59 - 61 2.8.2.1 Mission of GCB 61 2.8.2.2 GCB‟s Corporate Values 61 - 62 CHAPTER THREE 3.0 Methodology 63 3.1 Introduction 63 3.2 Research Design 63 3.3 Population 64 3.4 Sample and Sampling Procedure 64 - 66 3.5 Sources of Data 66 3.5.1 Primary Data 66 3.5.2 Secondary Data 66 - 67 3.6 Data Collection Method 67 3.7 Questionnaire 67 - 68 3.8 Method of Data Analysis 68 CHAPTER FOUR 4.0 Introduction 69 4.1 Demographic Background of Respondents 69 - 70 4.1.1 Gender of Respondents 70 - 71 4.1.2 The Range of Ages 71 - 72 4.1.3 The Number of years worked 72 - 74 4.1.4 Current Position Held 74 – 75 4.2 Information Systems 75 -76 4.3 Competitive Advantage 76 – 79 4.4 Image and Reputation 79 - 80 4.5 Profitability 80 - 81 CHAPTER FIVE 5.0 Introduction 81 - 82 5.1 Summary of Findings 81- 83 5.2 Recommendations 83-85 5.1 Conclusion 85-86 5 5.3 Suggested Areas of Further Research 87 References 90-97 Appendices 98 -105 6 LIST OF TABLES Table 2.1: A Table showing an illustration of a Competitor Array 35 Table 4.1.1: A Table showing the gender distribution of respondents 72 Table 4.1.2: A Table showing the ages of respondents 74 Table 4.1.3: A Table showing the length of service of respondents 75 Table 4.1.4: A Table showing the most important strategies to GCB 80 Table 4.1.5: A Table showing GCB‟s performance on Image/ Reputation 81 Table 4.1.6: A Table showing GCB‟s performance on Profitability 82 7 LIST OF FIGURES Figure 2.1: The Three Generic Strategies 29 Figure 4.1: A bar chart showing the gender ratio of respondents 73 Figure 4.2: A bar chart showing the ages of respondents 74 Figure 4.3: A bar chart of length of service of respondents 75 Figure 4.4: A pie chart showing positions held by respondents 77 8 LIST OF APPENDICES Appendix 1: Questionnaire for Management and Staff 93 - 100 9 LIST OF ABBREVIATIONS AR Activity Ratios ATM Automated Teller Machine BBG Barclays Bank Ghana Limited CEO Chief Executive Officer EBG Ecobank Ghana Limited EFTPOS Electronic Funds Transfer at Point of Sale EZWICH Brand name for Ghana‟s National Payment Platform GCB Ghana Commercial Bank Limited GDP Gross Domestic Product LR Liquidity Ratios SME Small and Medium Scale Enterprise SCB Standard Chartered Bank SG-SSB Societe General- Social Security Bank SRR Shareholders‟ Return Ratios FINSAP Financial Sector Adjustment Program NIB National Investment Bank PMSU Professional and Managerial Staff Union PR Profitability Ratios ROI Return on Investment WAN Wireless Area Network 10