Issues Facing the Central National Bank - Essay Example

Marketing strategy Introduction The Central National Bank is stuck in political, social, and economic environments. These variables work on a variety of ways to impact on the environment in which business is conducted. On the major front, these elements can be orchestrated by the external environment, while it may also be put forth by the internal set up of a business. In light of this, I consider a variety of diversification strategy options that are available for the Central National Bank. Issues facing the Central National Bank The issues that face the Central National Bank are both internal and external. But the organisational set up plays a major role in shaping the path taken by the business. The 2008 – 2009 has been one that has been underlined by the adverse effects of the credit crunch. It is at this time that interest rates hit an all time low level. To add to that, the retail customer savings stagnated and in other instances in point of fact more than dwindled. This is a demonstration on how the external environment can adversely affect a business. The credit crunch led to a calamitous fall in the banking image. As a result of these proceedings, retail and investment banking were the biggest causalities. Tough competition in the financial markets also underlies what players in the industry have to navigate through. But the existence of opportunities to grow presents a case for strategising in order to wrest market control or at the minimum remain relevant. The chance to improve does exist, but it all depends on the business leadership. It is for the leadership to take or ignore the opportunities. Growth in higher education is one such opportunity on which the bank should capitalise on. This has been one of the weak points of the bank; failure to expeditiously take up opportunities. Based on these issues, I would propose the diversification strategy in addressing the bank’s developmental agenda. The diversification strategy This strategy promises to be the best vehicle for the Central National Bank if it harbours any ambitions of getting out of the mess in which it finds itself. Diversification can be achieved through the initiation of mergers, ventures into provision of new products, an alteration of the bank’s microeconomic policy among other aspects (Beamish and Ashford 2005). Mergers From the case study, it is revealed that much consolidation is taking place. This is being done through merging of businesses in the banking industry. A merger gives a company a big advantage because of sharing of several facilities and consequently gaining from the benefits that accrue to economies of large scale operations (Gregory Lumpkin and Marilyn 2004). Due to the shrinking nature of the industry, the best alternative for the Central National Bank would be to initiate mergers of lesser operators in the industry so as to stand a better chance in competing with other big players in the industry. New products A major ingredient in the strategy of diversification is the provision of new products (Pettigrew, Thomas and Whittington 2002). As the case study shows, there exist opportunities for the taking by players in the banking industry. One such area is the existence of an opportunity to engage the higher education system. It has been proved that the need for higher education has always been on the rise. It should be noted that, not all those that anticipate joining college have the required funding. Consequently, this provides a good opportunity for the company in its pursuit to grow and remain relevant in the market. Through an isolated fund scheme, the bank can offer loans to students and charge a reasonably competitive rate. This service is bound to help the bank in increasing its areas of operation and revenue generation. To that effect, the bank stands to gain a better financial status from this activity. The case study points that a plan to that effect had been in the pipeline, something that I highly commend though I call for expediency in its rolling out. E-commerce With the development of internet banking and electronic commerce growth, opportunities are now abundant. On the basis of the case study, the competitors of the Central National Bank are at various stages of the implementation process of these new technologies in respect to the two opportunities. While some have achieved spectacular failures because of security issues and the management of client databases, others have made insurmountable progress. In respect to this, the Central National Bank gets a nod up for shifting from the traditional banking aspect to the recent mode. The bank has moved from borrowing from one market and lending to another market. The company should make use of these new developments and diversify how it sources for funds and how it lends its money simultaneously. After this analysis, the clarity on the expenses incurred in the adoption of the new technology presents a major obstacle to companies that aspire to roll such projects. The propensity to fail also illuminates on the costing level. Consequently, the implementation aspect should be handled with care if any worthy outcome is to be realised. Micro-economic policy shift Given the credit crunch has been dubbed the crisis of confidence, there is need to build it. Banks have got the cash; it is only that they do not trust each other. This is what has led them not to be willing to lend to each other. As a result, banks should consider working closely to ease the problem. This calls for the Central National Bank to seek a close working relationship with other banks so that it can improve on cash in flow and out flow. This would be a big boost to the bank and its aspirations (Robert 2005). Difficult associated with mergers When merging companies, there is loss of identity. There is also duplication of roles, something which may call for downsizing by both or one of the companies depending on the merging agreement. If the Central National Bank adopts this strategy, it would only be able to woo lesser players with unlimited influence in the market; this may not serve to improve her market and financial position. Another impediment to this strategy could be the fact that the company has been on almost a free fall, in respect to that, few players in the market would want to be merged with an ailing business entity unless promised to carry out an overhaul in the organisational setup. On the positive, is that fact that if merging is done soundly with banking entities that have a good position in the market, operations may work out well for the Central National Bank. This activity would lead to an improved market presence and the benefits that go with it. Like in the case of the Central National Bank, the recent takeover of a building society and an initiation to merge incompatible customer data systems would be good for the company. If merged with a company that specialises in the data systems, the company would be able to solve its problem of data handling hence saving on costs. Mergers should be entered only if they stand to bring gain to the business. Difficulty associated with new products The fact remains that the higher education sector is growing and thus offer an avenue for growth to the banking industry. But the issue in this case is how competitive a business unit can operate. If it is to work out, the Central National Bank should ensure its services to the higher education programme are highly competitive. If they are to be competitive it means operating slightly below the existing rates to attract customers. This may also call for huge investments in advertising and other costs. Setting up the fund itself and finding staff and all operational requirements would be an uphill task. The above shortfalls should not however diminish the advantages that such a programme would bring to the company. The issue requires good planning and implementation. In the short run, just as in any business venture, the costs would be big but they will eventually subside and begin showing the anticipated returns. Difficulty associated with E-commerce The introduction of new technology would prove to be quite a costly venture to any business organisation. After the completion of the installation of the new technology, there are no guarantees that it would avail the intended results (Joyce and Woods 2001). For example the attempt by the Central National Bank to shift away from directly addressing customer complaints to a telephone based approach did not yield the expected outcome. Instead of appreciating the system, the client base was complaining. It is on this understanding that before a project is undertaken; a feasibility study should be done to determine the efficacy of the programme. This way, costs will be reduced and inconveniences eliminated at the same time. Difficult associated with Micro-economic policy shift The banking system operates discreetly, as a result sharing of information hardly exists unless demanded so by rules and regulations. It is also a business rule though unwritten that an entity in business does not share information with potential competitors. By virtue of this realisation, the Central National Bank would be faced with a difficult task in trying to find a reliable collaborator in the industry. But given the attendant benefits that would accrue to such a union, efforts to make it happen should be pursued. Through pragmatism a deal can be struck even with the very stubborn businesses. Overall difficulties In the overall outlook, problems are bound to impede the implementation process of the proposed strategies. To begin with, it was alleged in the case study that the board of the Central National Bank was conservative. This is reflected in their inability to respond with speed to the changing nature of the banking landscape. In business, especially the banking one, the urgency requirement is very critical and if not well addressed it is bound to breed further problems. The sluggish nature of the board would be a huge obstacle in the implementation process in light of this. The environmental aspect of business can not be controlled by the Central National Bank. An issue like the credit crunch is a world phenomenon beyond the bank. This would undermine its development as it affects the cash flow. However, the bank should take the suggested measures in an attempt to mitigate the question. The company was also cited to have been traditionally run without a structured approach to issues. Without a structured approach, the focus power is highly diminished. In this respect, the company would not be able to take such large scale alterations to its policies. Conclusion The Central National Bank has been on a downward trend without a doubt. This has been occasioned by several factors as evidenced from the above presentation. The strategy to get the bank back on track has been put forward. The implementation part is crucial in this activity and it should be diligently executed if the expected results are to be achieved. That calls on the top management to show utmost concern in tracking the issue. That is why I conclude that the success of the proposed strategies rests with the management. References Beamish, K & Ashford, R 2005, marketing planning, Publisher Elsevier, viewed, 29/11/2009, http://books.google.co.ke/books?id=8jwxsahUlVkC&dq=Drummond, Gregory, G, Lumpkin, T & Marilyn, L 2004, Strategic Management: Creating Competitive Advantages, McGraw Hill Professional, London, viewed, 23/12/2009, http://books.google.co.ke/books?id=804wVMgC6l8C&dq=strategic+management&client=firefox-a Joyce, P & Woods, A 2001, Strategic management: a fresh approach to developing skills, knowledge and creativity, Kogan Page Publishers, viewed, 23/12/2009, http://books.google.co.ke/books?id=pdFyaJnnmEwC&dq=strategic+management&client=firefox-a Pettigrew, M Thomas, H & Whittington, R 2002, Handbook of strategy and management, Publisher SAGE, viewed, 23/12/2009, http://books.google.co.ke/books?id=A6zlpKhgL7MC&dq=divesification+strategy&client=firefox-a Robert, M 2005, Contemporary strategy analysis, Wiley-Blackwell, USA, viewed, 23/12/2009, http://books.google.co.ke/books?id=-jJ_LJRSFOwC&dq=divesification+strategy&client=firefox-a Read More