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1746, Seria C Academia de Studii Economice Bucuresti

Student 2010 : Pavel Iuliana, Grupa

Studiu de caz : Strategic challenges in the financial services industry

Studiu de caz : Strategic challenges in the financial services industry


Articolul aduce in prim-plan un studiu de caz privind o banca comerciala mica, care vrea sa isi dezvolte si sa execute o strategie de succes.Banca evidentiaza asadar nisa privind afacerile de dimensiuni mici, punand accentul pe serviciile oferite clientilor si pe inovatia tehnologica.
Exista asadar doua tipuri de strategii la care aceasta banca apeleaza :

Prima afirma ca o afacere trece printr-un process rational din care fac parte : analiza mediului, analiza interna, planificarea strategica si executia operationala.Aceasta strategie reprezinta totodata baza textelor pentru majoritatea textelor de marketing si management strategic. Cea de-a doua se refera la faptul ca o strategie este foarte mult influentata de comportamentul pietei, de modul in care aceasta fluztueaza.Aceasta afirma ca, de fapt, o afacere reactioneaza foarte mult la stimuli din mediul extern.De asemenea, aceasta spune ca, aceste lucruri sunt valabile pentru tipurile de afaceri unde mediul extern este turbulent si schimbarile sunt constante. Studiul de caz ales se refera la Parish National Bank, o banca de dimensiuni mici din New Orleans, Statele Unite ale Americii, ai carei manageri au realizat schimbari majore si au planificat strategic activitatile bancare prin implementarea unor astfel de strategii.De asemenea, Parish National Bank a invitat o un grup de student pentru a continua sa munceasca in banca in ariile acestora de interes.Acestia au gandit o asemenea strategie, spunand ca suflul nou adus de studenti, va imbunatati perfomantele bancare.
Implementand strategia de apropiere catre clienti

Parish National Bank a progresat enorm realizand aceste strategii, strategii care debuteaza cu facilitatile acordate clientilor, acestea fiind mult mai numeroase decat cele oferite de concurenta.Angajatii bancii sunt invatati sa multumeasca pe deplin clientii, tratandu-i ca pe oaspeti.Cel mai mare accent l-au pus asadar pe relatiile interpersonale.
Investitia in educarea personalului

Nivelul crescut de satisfactie oferit catre clienti care o investitie dubla : atat in numarul de anagajti, cat si in oferirea acestor anagajati cursurile necesare pentru educarea acestora de a mximiza satisfactia oferita clientului.In plus, angajatii pot obtine pana la 40% in plus din salariul lor reprezentand bonusuri care sunt strans legate de comportamentul fata de clienti si felul in care le sunt oferite serviciile acestora.Foarte multe dintre activitatile zilnice oferite de catre angajatii Parish National Bank pun in centrul atentiei un nivel ridicat al satisfactiei clientului.Insa, toate

aceste servicii de calitate, nu ii sunt oferite gratis clientului, ele nefiind deloc ieftine, ci dimpotriva, Parish National Bank avand taxe si comisioane foarte ridicate. Putem observa asadar ca PNB pune accentul pe angajatii sai, atat educarea acestora, cat mai ales pe numarul acestora, astfel incat sa satisfaca si cei mai pretentiosi clienti, aspect ce reiese si din urmatorul grafic privind angajatii Parish National Bank din 1992 pana in 2007 :

Figura 1 : Numarul de angajati ai Parish National Bank 1992-20071


Investitia in tehnologia de inalta calitate si performanta

Parish National Bank a reusit sa faca un serviciu extraordinar pentru clientii sai, oferindu-le servicii bancare bazate pe accesarea Internetului.Serviciile pe care acestia le ofera include serviciile standard online, precum platirea facturilor, cat si interogarea soldurilor, dar au oferit si alte servicii pe care alte banci nu le ofera clientilor lor.De exemplu ei ofera serviciul e-Register, care le da clientilor posibilitatea de a introduce tranzactii intr-un registru separat de cel al bancii, chiar inainte ca cecurile sau depozitele sa le fie prezentate.
Implementand targetul strategiei sale de marketing

Managementul bancii este foarte hotarat asupra nisei catre care isi indreapta toate eforturile, acestia axandu-se pe afacerile de dimensiuni reduse, ei afirmand ca afacerile mici, cei care detin afacerile mici si angajatii acestora reprezinta cheia succesului in viitor.PNB ar trebui asadar sa inteleaga foarte bine nevoile pietei, sa-si dezvolte produsele, serviciile si relatiile, astfel incat acestea sa se armonizeze cu nevoile existente pe piata, deoarece pe o astfel de nisa, strategia trebuie sa fie una foarte bine modelata dupa particularitatile pietei.

1 Grafic preluat de pe site-ul : http://www.faqs.org/banks/Parish-National-Bank-19783Bogalusa-Louisiana.html#ovFinancial

Masurarea satisfactiei

Parish National Bank nu face insa mai nimic pentru a masura satifactia grului sau tinta.Pana acum niciun studio nu a fost realizat pentru a masura perfomantele sale fata de cele ale concurentilor de pe piata.O singura data insa, Parish National Bank a incercat un program de masurare a produselor oferite, insa acesta nu a fost capabil decat sa-i arate performantele angajatilor sai si nu reactia consumatorilor la eforturile realizate de PNB.Insa, aceasta lipsa de feedback din partea clientilor sai va face ca cei care o conduc sa apeleze la o strategie pentru aceasta nisa catre care se adreseaza foarte greu de implementat. De asemenea, Parish National Bank nu cauta sa vada ce nevoi au cei care apeleaza la ei, adica managerii afacerilor de dimensiuni reduse.Ei nu au apelat la o metoda care sa le dezvaluie de ce tehnologii duc lipsa cei care apeleaza la serviciile lor si nu le pot veni astfel in ajutor.
Schimbari in planul strategic

Primele doua schimbari in planul strategic se refera asadar la lipsa unui sistem de management care sa realizeze colectarea feedback-ului din partea clientilor sai, cat si lipsa in zona de tehnologie a unei arii care sa arate nevoile pe care le au clientii cu firme de dimensiuni mici, cu privire la perfectionarea in domeniul tehnologiei informatiei. Cea de-a treia schimbare in plan strategic se refera la strategia de crestere a Parish National Bank.PNB si-a propus ca in fiecare an sa isi dezvolte o lantul sucursalelor, deschizand cel putin una noua.Insa, a intelege nevoile specifice clientilor si a realiza relatii puternice cu acestia este foarte dificil si chiar crucial atunci cand se incearca o penetrare o piata noua si mai ales, foarte competitiva.Asadar, deschiderea unor astfel de sucursale noi i-ar fi pus in pericol toate celelalte sucursale deja existente, deoarece costurile la care ajungea deschiderea unei noi agentii/sucursale ar fi fost prea ridicate pentru a reusi sa se mentina intr-o piata cu concurenta acerba. De aceea, managerii Parish National Bank au fost de acord ca banca ar trebui sa raman independent, concentrandu-si eforturile pentru sucursalele noi care trebuie deschise in zone nu atat de mult competitive.Acest lucru le-ar permite lor sa isi imbunatateasca relatiile deja existente cu clientii in zonele cu agentiile vechi, putand sa dezvolte serviciile si sa ofere si mai multa satisfactiei clientilor deja fideli.Aceasta schimbare de strategie le-a permis sa creasca totusi, insa acestia au recunoscut ca resursele sunt mult prea limitate pentru a arunca banii in cazul deschiderii unor sucursale noi.

close Case study: Strategic challenges in the financial services industry Steve W Henson, Joey C Wilson. The Journal of Business & Industrial Marketing. Santa Barbara: 2002. Vol. 17, Iss. 5; pg. 407, 12 pgs Abstract (Summary) The financial services industry has changed dramatically over the past decade as a wave of consolidation driven by legal, technological, and market changes has continued to build. This article provides a case study of a small commercial bank attempting to develop and execute a successful strategy by targeting small businesses and emphasizing customer service and innovative technology. Parish National Bank is an eight location, $280 million asset community bank operating in four parishes within 60 miles of New Orleans. Competition in all four parishes is fierce, reflecting typical competitive patterns around the country. Competition is dominated by large regional and national banks, all of which aggressively seek growth through added branches and new products and services. Full Text (5479 words) Copyright MCB UP Limited (MCB) 2002 [Headnote] Keywords Financial services, Banking, Customer service, Business strategy, Target marketing

[Headnote] Abstract The financial services industry has changed dramatically over the past decade as a wave of consolidation driven by legal, technological, and market changes has continued to build. This article provides a case study of a small commercial bank attempting to develop and execute a successful strategy by targeting small businesses and emphasizing customer service and innovative technology.

Introduction There are two very distinct approaches to strategy. The first approach is normative and assumes that businesses go through a rational process of environmental analysis, internal analysis, strategic planning, and operational execution. This planned approach to business provides the basis for most marketing and strategic management texts. Authors such as Porter (1980; 1985) describe specific strategic approaches given certain market conditions. Innovative behavior The second approach to strategy and marketing strategy is much more behaviorally oriented. Businesses are described as social organizations that rarely, if ever, effectively plan and
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implement. Instead, businesses react to environmental stimuli with little advance planning and little attention to proper execution (Pfeffer, 1982; Weick, 1979). Some strategists go so far as to say that unplanned, innovative behavior is not only endemic to business situations, it is preferable. This is particularly true for businesses in markets where the environment is particularly turbulent and change is constantly required. These organizations may learn to be effective improvisers by converging planning with execution (see Moorman and Miner, 1998 for review). These different models highlight the difficulties managers face in trying to develop sound strategies and execute those strategies. Managers must analyze and execute, but with an understanding that organizational dynamics can impact both analysis and execution. Further, changing environments must lead to changes in plans and managers must be ready to improvise and change very quickly if opportunities or threats emerge. Strategic research Researchers face similar issues. Should strategic research focus on planned behaviors or examine only actions and behaviors of organizations? How should the complexity added by the social organization impact the approach? Most important, can a single snapshot of an organization at a given time provide insight into these difficult questions? These managerial and research problems are compounded when the business environment is turbulent or subject to rapid, intensive change. Perhaps the best current example of an industry facing a highly turbulent environment is the financial services industry. Globalization, new legislation, technological changes, and market factors have changed the nature of this historically stable industry and introduced new competitive forces in global, national, and local markets. Challenges are particularly intense for small community banks. These banks once relied on community ties and local knowledge to develop strong relationships with consumers. These consumers now have access to a wide array of financial services and are increasingly mobile with their lifestyles and financial decisions. This makes small business accounts critical to community banks. Small businesses often have strong local commitments and a need for specialized business services. Targeting these accounts and developing products that serve their needs is not a simple process. There is nothing homogenous about small businesses. Small businesses may be highly sophisticated and knowledgeable or very unsophisticated and lacking in knowledge. Companies may range from high tech start ups to low tech services. What common set of needs could a company that provides high speed Internet access have with a company that provides lawn services? Determining the answer to this question is a key challenge for community banks. Turbulent environment The purpose of this article is to examine the strategy of a small, local bank trying to succeed in this turbulent environment. Using a case-study approach, we illustrate the difficulty of developing good strategies and executing them. We show examples of major decisions that at different times either supported or contradicted sound strategy. We describe an example of improvisational behavior that had little to do with any published strategy, yet was quite successful. All of our analysis is in the context of marketing and selling small business financial services. This article is the first of three planned articles that look at the market for small business financial services. The next articles in the series will examine the process by which small business needs for high technology products are defined and fulfilled. The final article will describe a new model for business service providers. Methodology
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This project began as a marketing audit (Kotler, 1999) performed by a group of MBA students at the University of New Orleans. The target of the audit was Parish National Bank (PNB), a small local commercial bank operating in four parishes in the New Orleans area. One of the group members was a retired Executive Vice President of a large regional bank, First NBC. This expertise led to an audit that was significantly above the level of most student projects. Following presentation of the audit, the management of PNB asked for a faculty evaluation of the audit results and further recommendations. Following this interaction, PNB managers readdressed their strategic plan and made several significant changes that will be discussed later. PNB also invited a multi-disciplinary group of faculty to continue to work with the bank on common areas of interest. These additional interviews occurred over a six month period early in 2000. Three faculty were involved in the interviews which were conducted with all of the senior management group at the bank. These interviews, and all of the interviews conducted earlier, had a decidedly advisory tone. That is, recommendations and analyses were free flowing and designed to improve the performance of the bank. Interactions and changes This approach led to an obvious interaction between the investigators and the organization. In fact, these interactions and the changes that occurred at the bank are an important part of the analysis. Nevertheless, this approach does limit the generalizability of the analysis. The objectives of the paper are therefore to illustrate, not to attempt to prove, key strategic issues. This paper was designed to provide insight into local market changes in the financial services industry and to illustrate the interaction between strategy and execution. We begin with a review of the financial services industry. We review the major macro environmental changes and show how they have impacted competition in the industry. Moving from the global level, we describe the local market and PNB's positioning. Next, we review PNB's strategy and discuss several examples highlighting both proper execution of strategy and failures to execute strategy. We conclude by discussing several open issues facing PNB and other similar financial institutions. Merger and acquisition activity Situation analysis The financial services industry Deregulation, technological innovation, and open financial markets have been the major causes of a wave of merger and acquisition activity in the USA and world wide. In 1984, 42 banking companies controlled 25 percent of domestic deposits. By 1997, 11 banking companies controlled 25 percent of domestic products. Understanding why this rapid consolidation has occurred is a key to understanding competition in the industry[1]. The Financial Modernization Act of 1999 repealed the 1930s restrictions placed on banks. Following the stock market collapse of 1929, a number of federal laws were passed that were designed to bring stability to the financial services sector. The most well-known of these acts, the Glass-Steagal Act, drew a line between commercial banking and investment banking. Commercial banks were forced to invest only in safe, well-controlled assets. These 1930s Acts served their purpose by creating a sector for safe, regulated deposits. By the end of the twentieth century the perceived need for the separation of the financial services sector had eroded. Distinctions between commercial banks, insurance companies, investment firms, and other types of financial services institutions began to blur. Commercial banks now provide a wide range of investment services and access to a wide variety of different financial services and products.

Cross-sector operations At the same time, restrictions preventing cross-sector operations were being relaxed, barriers to interstate and international banking began falling. Regional banks began consolidating through mergers and acquisitions. This often led to the dissolution of decades-old local and regional commercial banks. Globally, the move toward consolidation has been slower than, for example, the automobile industry, but all of the economic factors are in place to ensure further global consolidation. Changes in restrictive legislation are a necessary, but not sufficient, cause of consolidation. There must also be economic reasons to justify larger organizations. These justifications, many created by technological innovations, are abundant Financially, large organizations are better able to spread marketing, operational, and technology development costs across a larger revenue base. Large organizations are also better suited to properly balance assets and liabilities and reduce the risks associated with investing. "One stop shopping" From the market side, financial institutions want to provide "one-stop shopping" for consumers and organizations. Consumers are increasingly turning to one-stop shops to save time and effort for routinized and non-routinized purchases. Organizations are driven to one-stop shopping to minimize vendor risk and to maximize leverage in negotiations. Financial institutions that provide a wide range of services and products are best positioned to take advantage of these trends. Changes in technology also impact the move toward consolidation. Larger financial services institutions are in a better position to invest in cost-saving technological innovations such as enterprise resources planning. They should also able to move more quickly to provide services such as such on-line banking and other automated services. Larger size also allows for more convenient location of branches and automated banking facilities. The upshot of these macro environmental and industry changes is that small to mid-size local and regional banks have become endangered species. Their choice of strategies has also become very limited. The new global megabanks seem likely to dominate the large corporate market and the consumer market since they will have significant cost and technology advantages. Smaller banks have two strategic choices. They can seek aggressive growth, particularly in the consumer market, and position themselves for a buy-out. Alternatively, they can seek to develop a niche position by identifying a group of customers that they can create products and services for that allow them to remain competitive. The most obvious niche is the small business market. Personnel problems Choosing between these strategies is not easy. Weighed against the potential benefits of an acquisition for stockholders is the need to keep a well-trained, highly-motivated work force. Publicly putting out a "for sale" sign can lead to serious personnel problems since employees are perfectly aware that marketing and operational efficiencies will lead to downsizing. This problem leads to an array of schizophrenic behaviors as banks announce intentions to remain private while in the midst of rapid geographic or product expansion. The problem is that rapid expansion, especially of physical facilities through new branches, usually signals positioning for a buy out. Revenue growth is one of the primary determinants of value and opening new locations is a fast easy route to revenue growth. Growth for growth's sake is the opposite of a niche strategy that focuses on a specific, well-defined market. Small banks seeking a niche position should logically focus on developing strong relationships, particularly with small businesses, that allow the development of products and services that meet specific needs.

As discussed earlier, targeting small business accounts is not a simple task. These businesses may represent any and all industry sectors and have the needs that range from very simple to highly complex. Developing differentiated products and services for this sector requires an understanding of the different types of customers that are represented and enough flexibility to structure a broad array of different approaches. The local commercial bank market Turning from the national and global market, we now focus on a four parish area in and surrounding New Orleans. These four parishes are St. Tammany, Jefferson, Washington, and Tangipahoa. Jefferson is an urban-suburban parish close to the downtown New Orleans area and the local international airport. St Tammany is combination suburban and rural parish about one hour from the downtown area. Washington and Tangipahoa are even more distant from New Orleans and primarily consist of small towns and communities and rural areas. Community bank PNB is an eight location, $280 million asset community bank operating in four parishes within 60 miles of New Orleans. The family owner-managers of the bank control over 50 percent of the stock and have publicly committed to remaining independent. The long-term goals for the bank are to grow to $500 million in assets by 2007, and to deliver consistent earnings each year by being conservative with credit quality and aggressive in business development. PNB's desired competitive position is that of a high touch and high tech local bank. Management believes that success requires quality relationship building with customers and valuable, innovative products reflected in leading edge, information-enhanced products. The bank's present intent is to grow the company through new branches, innovative products, Web banking and emphasis on a sales culture. PNB targets small businesses and small business employees. PNB regularly compares its performance with similarly situated banks. Its peer group includes banks not located in major cities with assets of $100-$300 million and at least three branch offices. The percentiles shown in Table I reference this group. For example, PNB's 1998 return on equity was 15.03 percent and its percentile was 44 percent. As such, PNB's return on equity was higher than 44 percent and lower than 56 percent of its peers. Enhanced performance Three-year trends show consistent improvement in ROE and ROA. However, there is potential for enhanced performance since both measures fall within the third quartile versus peers. Loan growth has slowed during this period, which is a reflection of more conservatism in PNB's credit culture and competition. PNB performance falls with the second quartile. Deposit growth is also a second quartile performer. Drivers of 1999 growth include a stronger sales culture and "fallout share" from BankOne's acquisition of First NBC, one of PNB's strongest competitors. PNB's most impressive trend and quartile position is in the fee income category. PNB has generated consistent growth and maintained extraordinarily high fees compared to its peers. In terms of market share, the most commonly used measure for the industry is deposit share. By market, PNB has 10 percent share in St Tammany Parish, 19 percent in Washington Parish, 2 percent in Tangipahoa Parish, and 1 percent in Jefferson Parish. Market share ranking is third in St Tammany, fourth in Washington, tenth in Tangipahoa and seventeenth in Jefferson. PNBs deposits comprise fifty-three percent in St. Tammany, 25 percent in Washington, 18 percent in Tangipahoa, and 4 percent in Jefferson. Typical competitive patterns Competition in all four parishes is fierce, reflecting typical competitive patterns around the country. Competition is dominated by large regional and national banks, all of which
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aggressively seek growth through added branches and new products and services. The three largest banks in the four parish are are Hibernia National Bank, Whitney National Bank, and Bank One. Hibernia National Bank operates 258 offices in Louisiana and eastern Texas. With $14 billion in assets, Hibernia is the largest Louisiana-based bank in the state and the second largest bank in the state behind Chicago-based Bank One. Hibernia showed good performance in 1998. The company's returns on both equity and assets were the highest in recent history. The market share of Hibernia National Bank over four parishes is 21.33 percent, with a branch share of 15.58 percent (Hibernia Bank does not have branches in Tangipahoa parish). Whitney National Bank is a New Orleans-based bank holding company with assets of $5.2 billion. It has 120 branches in Louisiana, Alabama, Mississippi, and Florida. Whitney is the second largest bank headquartered in Louisiana. It occupies the number-three deposit market share (9.41 percent), and has a branch share of 9.09 percent in the four parishes served by PNB. Share and income figures are relatively stable. Bank One is also a strong competitor in these markets. Bank One's product offerings are representative of its national banking franchise. In the markets where PNB competes, Bank One is second in market share (19.84 percent) and branch share (15.15 percent) behind Hibernia. During 1998 and 1999, institutions competing against Bank One gained market share at Bank One's expense. Merger-related changes, service quality deterioration, divestitures, and closures of former First NBC branches caused many customers to seek other banking relationships. Community banks There are a number of other community banks, especially in the Tangipahoa and Washington Parish markets. Small local banks emphasize personal service, character lending and community involvement. First Guaranty has the largest deposit (30.55 percent) and branch (20.6 percent) share in Tangipahoa parish. Because of its acquisition of a local bank in Washington Parish, Hibernia holds the largest deposit (29.69 percent) and branch (35.29 percent) shares followed closely by Citizens Savings Bank at (26.44 percent) deposit and (23.53 percent) branch share. Summarizing the local market, competition is fierce with a number of banks aggressively seeking growth. PNB stresses high touch and high technology and targets small businesses. They strive to create a set of products tailored to small business needs. Small business accounts are seen as an important resource and as an entry to individual accounts of the owners and employees of the businesses. We turn now to illustrations of strategic planning and proper execution, strategic planning and failure to execute, changes in strategic planning, and improvisational behavior. Implementing high touch PNB has done an excellent job of executing its high touch strategy. The high touch begins with its facilities, which are much larger and more ornate than typical community branches. Lobbies are more akin to a high-end hotel lobby than a typical bank lobby. Bank employees are trained to greet customers courteously and treat them as guests. Great emphasis is placed on personal relationships. Investments in training This high level of customer service requires significant investments in both the numbers of employees and training of those employees. PNB ranks very high compared to its peers in the expenses dedicated to each of these categories. Extensive new and existing employee training is complemented by high levels of formal and informal communications. Employee compensation is also tied to customer service and sales. Individual employees can earn up to 40 percent of their

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base salary in bonuses related to designated behaviors. For example, Branch Managers are awarded based on deposit growth, loan growth, margins, and other expense and revenue related categories. Much of the day-to-day activity at PNB centers around providing a high level of customer service. Along with the extensive training program, many routinized contacts are scripted. Managers and mystery shoppers evaluate service providers for appropriate attitudes and behaviors. This high touch approach is not inexpensive for customer, as PNB charges very high fees. PNB is also very aggressive in developing products that encourage customers to use feepaid services. For example, PNB customers cannot necessarily access their checking account balance at ATMs. The balance they are shown will include any line of credit that has been established. This encourages customers to access the line of credit and pay the fees associated with that access. Internet-based banking Implementing high tech PNB has done a good job of developing Internet-based banking services. Their banking services contain all of the standard Internet services, such as bill paying and balance inquires. They have developed several products not offered by other banks. For example, e-Register allows users to keep a check register separate from the bank's transaction register. Much like a paper-based register, e-Register allows the user to input transactions before checks and deposits are presented. The future direction of the high technology effort isn't clear. PNB has no defined path to travel in developing new Web-based financial services for its business customers and is struggling to identify a set of customer needs to focus on. They have sought outside assistance from marketing firms but have been unable to reach a consensus on which direction to go. Implementing target marketing PNB's management is very clear about the focus on small businesses. They see small businesses, small business owners, and small business employees as a key to future success. This focus on a particular market is quite consistent with a niche approach to strategy. PNB should clearly define a target market, work hard at understanding the wants and needs of that market, and develop products, services, and relationships that meet the needs of that market. Where the high-touch strategy overlaps with the small business targeting, PNB does quite well. Employees are very relationship oriented, and particularly in the more rural parishes, know customers, customers families, and have strong social ties. PNB managers are very active in local associations. In other areas, execution of the small business strategy falls short. For example, no manager at PNB was able to identify the portion of the bank's sales that related to small businesses. Most assumed the information wasn't even available. As it turns out, the information is available, though the accuracy of the information is not perfect. In any case, this key information has not been requested and is obviously not being used. Measuring satisfaction Continuing, PNB does nothing to measure the satisfaction of this target group. No benchmark studies are performed that would allow comparison of PNB with major competitors. PNB did at one time use a mystery shopper program, but even this program evaluated only the performance of employees, not customer reaction to PNB's efforts. This lack of a sustained customer feedback mechanism will make a niche strategy very difficult to implement.
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Similarly, PNB has done little to develop a method to determine what new technology products its small business customers want and need. PNB did commission a marketing firm to try to do a needs analysis, but has done no primary research. This is an acknowledged shortcoming that at least some of PNBs managers want to address in the future. Improvisational behavior Though PNB's efforts over the three year period were generally driven by strategy and planning, one dramatic exception occurred when acquisitions of three community banks in the four parish area provided an opportunity for market share gains. Both Bank One and Hibernia acquired small competitors in the Washington and St Tammany Parishes. PNB did not initially react to these acquisitions but became interested when problems associated with the Bank One acquisition began to generate inquiries from potential new customers. Over a very short period of time, they developed a very aggressive share growth plan. Market hunter software program The plan began with development of a market hunter software program. This program allowed PNB to capture information on competitor's accounts by tracking deposits and disbursements from PNB's own accounts. For example, a local hardware store might deposit a check from a construction company. If the construction company had an account at Bank One or Hibernia, it became a target for aggressive marketing. A direct mail campaign was at the center of the new marketing approach. Identified potential accounts received a series of communications that emphasized that the switch is on and that customers had no choice in changing accounts. The only choice was which new bank they would have their account with. They encourage customers to think and choose. These campaigns were very successful in gaining new accounts at the expense of Bank One, but much less successful in gaining accounts from Hibernia. PNB managers attributed this to Hibernia's better management of the acquisition process. For example, Bank One instituted a number of changes in customer accounts that resulted in higher fees less than six months after the acquisition. Branch hours were also changed and many late afternoon and evening hours were eliminated. Hibernia was much more conservative in its changes. There was also some speculation that Bank One's customers were different than Hibernia's. The Bank One branches were primarily in St Tammany parish. Consumers and businesses in this parish were generally more affluent and were more likely to have lived in other areas. Washington Parish customers were often long-standing members of the community. This is very interesting speculation since it suggests that the characteristics and attitudes of customers in an acquired bank might predict their likelihood to switch after the acquisition. Key findings Changes in strategic plan Following the original audit and the faculty review of the audit findings, three key findings were communicated to PNB. The first two have already been discussed. They had to do with the lack of a consistent customer feedback system and the absence of good information about the importance of small businesses to PNB and the needs of small business customers, particularly in the technology area. The third area of concern was PNB's growth strategy. PNB planned to grow by adding at least one new branch a year. Their most recent new branch represented a departure for the bank since it was established in Jefferson Parish. Jefferson Parish is by far the most populous of the four parishes and is the most competitive of the four markets. Launching in this new market seemed far more like growth for growth's sake than any reasoned niche strategy. Understanding local

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customer needs and developing strong relationships and innovative products is very difficult when trying to penetrate a highly competitive new market. PNB lacked the resources to do both well, and the cost of developing a new market could easily threaten its ability to perform well in existing markets. PNB management agreed with the criticism and decided to reemphasize its intentions to remain independent by concentrating all new branch openings in areas where it already competed. This would allow them to concentrate on developing relationships in limited areas and to provide more services and convenience for existing customers. This change in expansion strategy still placed a premium on growth, but recognized that resources were too limited to develop costly new market entries. Debate and discussion Open issues Several issues remain open to debate and discussion. The first is whether PNB should develop a customer feedback system that would allow them to benchmark against competition. Some of PNB's managers think that their successful growth and good performance in retaining accounts is proof enough of customer satisfaction. Other managers are concerned that customer resistance to change can mask dissatisfaction and that serious problems could develop with customers before PNB recognized them. The second open issue is how to develop innovative new products and services for small business customers. PNB currently has state of the art financial services available, but is unsure how to remain an innovator. This is complicated by the difficulties in developing research that will describe customer preference for products that are totally new. Small businesses may not be sophisticated enough users of technology to provide good feedback. One approach PNB is considering is to develop a model of all business services required by small businesses. PNB could then analyze each service and see how it might add value. Growth contribution Finally, the issue of growth remains open. Adding branches certainly contributes to growth, but not necessarily to the development of strong relationships through a well-defined niche marketing plan. If resources that could be used to develop innovative new products, and could provide the basis for a strong competitive position are instead shifted to new branches, PNB might quickly find itself just another acquisition target. [Sidebar] The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0885-8624.htm

[Sidebar] This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present
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[Sidebar] Executive summary and implications for managers and executives Major changes in financial services

[Sidebar] Globalization, new legislation, technological changes and market factors have changed the historically stable financial services industry dramatically, and introduced new competitive forces in global, national and local markets. Some 42 banks controlled 25 per cent of US deposits in 1984 - a percentage controlled 13 years later by only eleven banks. In this new environment, the global mega-banks have the cost and technology advantages to dominate the large corporate market and the consumer market. Henson and Wilson examine how one small, commercial bank is trying to succeed in this era of consolidation. The strategy of Parish National Bank

[Sidebar] Parish National Bank (PNB) - an eight-location, $280 million asset community bank - is attempting to develop a niche strategy by targeting small firms and their employees, and by emphasizing customer service and innovative technology. Its family owner-managers control more than half of the stock and have publicly committed the bank to remaining independent. They want the bank to grow to $500 million in assets by 2007, and to deliver consistent earnings each year by being conservative with credit quality and aggressive in business development. But competition in the four New Orleans area parishes in which the bank operates is fierce, and dominated by large regional and national banks which aggressively seek growth through new branches, products and services. The bank's strengths

[Sidebar] PNB has much larger and more ornate branches than its competitors. Its employees are trained to greet customers courteously and to treat them as guests. The bank places great emphasis on personal relationships. Staffing levels are generous and employees are well trained. Their pay is tied to customer service and sales. Mystery shoppers are used to check on service levels. The bank charges high fees and has developed products that encourage customers to use fee-paid services.

[Sidebar] PNB has done a good job of developing Internet-based services. They include an innovative cheque register, separate from the bank's transaction register, that enables the user to input transactions before cheques and deposits are presented. But the bank is unclear about how to develop further its Web-based services for business customers, despite employing outside marketing firms to help to identify unmet needs. One difficulty is that small businesses may not

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be sufficiently sophisticated users of technology to provide good feedback. The bank's weaknesses

[Sidebar] Despite PNB's focus on small firms, no manager at the bank was able to identify the portion of the bank's sales that relates to small businesses. Moreover, PNB does nothing to measure the satisfaction of this target group. No benchmark studies are performed that would enable the bank to compare its performance with that of major competitors. Some managers think that their successful growth and good performance in retaining accounts is proof enough of customer satisfaction. Others are concerned that customer resistance to change can mask dissatisfaction and that serious problems could develop with customers before PNB recognizes them.

[Sidebar] PNB did not initially react when two of its larger competitors, Bank One and Hibernia, acquired small banks in PNB's territory. But it did develop an aggressive plan to poach customers when problems associated with the Bank One acquisition began to generate inquiries from potential new customers. A market-hunter software program was used to enable PNB to capture information on competitors' accounts by tracking deposits and disbursements from PNB's own accounts. These prospects were followed up - often successfully - using a direct mail campaign. The growth strategy

[Sidebar] PNB planned to grow by adding at least one new branch a year. But this began to look like growth for growth's sake when one of the locations chosen was in the most populous and competitive of the four parishes in which the bank operates. Understanding local customer needs and developing strong relationships and innovative products is very hard when trying to penetrate a highly competitive new market. PNB lacked the resources to do both to a high level, and came to accept that the cost of developing a new market could threaten its ability to perform well in existing markets. PNB will therefore concentrate all new branch opening in areas where it already competes effectively. (A precis of the article "Strategic challenges in the financial services industry - targeting small business accounts". Supplied by Marketing Consultants for Emerald.)

[Footnote] 1. Information in this section was partially distilled from a report available from the US Department of Commerce, prepared in conjunction with the McGraw-Hill Companies, Ind. To access the complete report, visit the National Technical Information Service (NTIS) Web Site at: http://neptune.fedworld.gov/cgi-bin/waisgate? waisdocid=976864482+0+0+0&waisaction=retrieve
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[Reference] References

[Reference] Kotler, P. (1999), Marketing Management, Prentice-Hall, Englewood Cliffs, NJ. Moorman, C. and Miner A. (1998), "The convergence of planning and execution: improvisation in new product development", Journal of Marketing, Vol. 62 No. 3, pp. 1-20.

[Reference] Pfeffer, J. (1982), Organizations and Organization Theory, Putnam Press, New York, NY. Porter M. (1980), Competitive Strategy, The Free Press, New York, NY. Porter M. (1985), Competitive Advantage, The Free Press, New York, NY. Weick, K. (1979), The Social Psychology of Organizing, 2nd ed., Addison-Wesley, Reading, MA.

[Author Affiliation] Steve W. Henson Associate Professor of Marketing, University of New Orleans, New Orleans, Louisiana, USA Joey C. Wilson Instructor, University of New Orleans, New Orleans, Louisiana, USA

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Bibliografie :

Indexing (document details)


Subjects: Case studies, Bank marketing, Commercial banks, Market strategy, Competition, Bank technology, Customer services

Classification Codes 9110 Company specific, 8110 Commercial banking services, 9190 United States, 7000 Marketing, 2400 Public relations Locations: Companies: Author(s): Author Affiliation: United States, US Parish National Bank-New Orleans LA (NAICS: 522110 ) Steve W Henson, Joey C Wilson Steve W. Henson Associate Professor of Marketing, University of New Orleans, New Orleans, Louisiana, USA Joey C. Wilson Instructor, University of New Orleans, New Orleans, Louisiana, USA Feature The Journal of Business & Industrial Marketing. Santa Barbara: 2002. Vol. 17, Iss. 5; pg. 407, 12 pgs Periodical 08858624 234529201 5479 http://proquest.umi.com/pqdweb? did=234529201&sid=9&Fmt=4&clientId=63820&RQT=309&VName=PQD

Document types: Publication title: Source type: ISSN: ProQuest document ID: Text Word Count Document URL:

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