Retail bank sales and services unit3

THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES

UIBFS

ISO 9001:2008 CERTIFIED

1

Personal Services

Product Knowledge

The Competitive Environment

Selling Skills

Customers Service

Sales Interviews

MODULE COVERAGE

Introduction to Marketing

Customer Relationship Management


UIBFS


2

Competitiveness and business environmentTo analyze the market or business environment for banking and financial services,

there is need to consider four aspects of the business environment that exist in the industry: Political, Economic, Social/ cultural and Technological (PEST).

Political Environment:This addresses issues such as:• Are there current or future government policies or regulations that create an

advantage or disadvantage to you or your competition?• What direction are the political winds blowing for your industry?• Are there special interest groups that are at play that might shift business and

market dynamics in your favour or disfavour? • How will the moves towards economic groupings, political integration and trade

blocks affect the banking/ finance industry? • In what ways might the events and trends on the international scene affect

national policies in the sector?


UIBFS


3

Economic Environment:Analysis of the economic environment addresses questions like:• How is the national, regional and international economy (triggers of demand for

financial services) doing?• How is investment money flowing within and into the country? Who is getting it? How

are they using it? How much is being spent on items like advertising and R&D?• What are the current levels of demand and supply of banking/ financial services?• What are the most effective and efficient channels to reach those customers, and who

is best positioned to do so?• How sensitive are the customers to price, quality, and delivery in your market?• Natural resources: what is happening to the weather, climatic conditions, topography

and soils, mineral deposits/ exploitation, lake/ sea fisheries resources• Demography: the size, predominant occupation standard of living, growth rate and

age-structure of the population. • International trade and issues of globalisation • Types and intensity of competition


UIBFS


4

Socio-cultural Environment• This refers to the influence of social and cultural factors on customer tastes and

behaviour. In some places, the culture and traditional or religious beliefs are so entrenched into the society that it affects their whole life, including their uptake of financial services. Typical socio-cultural questions to a banker are:

• How do the different cultures and social norms affect demand for and use of financial services?

• How best can we structure the features of our products so that they maximally appeal to the different cultural groups represented in our customer base?

• What is people’s attitude to work in the cultures where we work, and how does this affect their ability to become or remain viable customers?

• If the business community is comprised of closely knit kin and close persons, what opportunities exist for customer-focused competitiveness?

• What life cycle events, ceremonies and other cyclical social occurrences trigger demand for banking services?


UIBFS


5

Technological Environment • Technology in this context is the systematic application of scientific knowledge to

practical tasks. For the banking sector, the most important technological factors are in the fields of electronic data capture/processing and communication. Innovations in product delivery methodologies also constitute technological opportunities and challenges for banks. Typical questions addressed by technology in the business environment are;

• How technologically advanced are the competitors in terms of data capture and processing?

• Are there development efforts underway that could cause a paradigm shift or make current technology obsolete?

• If so, will you or your competition have access to that new technology? • Will that technology create new products that will be game-changing in your

industry?• Is technology creating cooperation among competitors that might reduce your

bank’s competitiveness?


UIBFS


6

Porter’s five forces of competitionMichael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.

Competition in the banking industry can be analysed using Porters’ Five Forces Model, which looks at the following triggers of competition;

• Threat of new entrants • Supplier power• Buyer power• Threat of substitutes• Rivalry


UIBFS


7

Rivalry between Banks


UIBFS


8

Rivalry • Rivalry refers to the market dynamics that result from suppliers’ strife as

each tries to gain an edge. In real life, firms are not price takers but they strive for a competitive advantage over their rivals.

• Economists measure rivalry by indicators of industry concentration. The Concentration Ratio (CR) is one such measure. The CR indicates the percentage of market share held by the four largest firms in an industry.

• A high concentration ratio indicates that the market is controlled by the few large firms while a low concentration ratio indicates that the industry is characterized by many rivals, none of which has a significant market share. In the latter case, this kind of fragmented market is said to be more competitive..

• If rivalry among suppliers in an industry is low, the industry is considered to be disciplined.


UIBFS


9

Threat of substitutes • A substitute is a product or service from which a customer can

derive satisfaction as an alternative to consuming the product in question. The threat of substitutes exists when a product's demand is affected by the price change, quality or delivery efficiency of a substitute product.

• A product's price elasticity of demand is affected by substitute products. A recent example of substitute products in Uganda’s banking industry are the mobile money services of telephone companies (substitutes for savings/ deposit accounts and money transfer services that were formerly a preserve of the banking industry).


UIBFS


10

Supplier powerIn an industry like manufacturing, raw material and other input suppliers can

be very powerful. Suppliers are powerful if;• Credible forward integration threat by suppliers is likely• Suppliers are concentrated – like in the drug industry's relationship to

hospitals• Significant costs would be incurred to switch suppliers • There are no close substitutes• Backward integration by customers is impossible, difficult or very costlySuppliers are weak if:• Many competitive suppliers exist and the product is standardized• Credible backward integration threat by customers exists• Customers are concentrated


UIBFS


11

Buyer powerThe power of buyers is the impact that customers have on an industry. In general, when buyer

power is strong, the industry situation is near to what economists call monopsony (a market in which there are many suppliers and only one buyer).

Buyers are powerful if:• Buyers are highly concentrated (i.e. a few buyers accounting for the bulk of the market share)• There are many suppliers and the products are standardised; thus the buyer can easily switch

to another product• Buyers possess a credible backward integration threat and can threaten to buy products from

a rival, or put up their own facility to produce the product in question.Buyers are weak if:• Suppliers are able to effect forward integration theatres • There are significant buyer switching costs • Buyers are fragmented (many, different) - no buyer or related group of them has any

significant market share• The supplier produce and supply critical portions of buyers' input • There are no suitable substitutes


UIBFS


12

Threat of new entrants and entry barriersIt is not only incumbent rivals that pose a threat to firms in an industry; the possibility that

new firms may enter the industry also affects competition. Industries possess characteristics that protect the profit levels of firms in the market and inhibit additional rivals from entering the market.

The key barriers to entry in an industry are;• Government barriers. This is done through policy, trade protection, regulation of utilities

provision and other aspects of consumer protection• Patents and proprietary knowledge serve to restrict entry into an industry. Ideas and

knowledge that provide competitive advantages are treated as private property when patented, preventing others from using the knowledge and thus creating a barrier to entry.

• Asset specificity inhibits entry into an industry. • Asset specificity is the extent to which the firm's assets can be utilized to produce a

different product. When an industry requires highly specialized technology or plants and equipment, potential entrants are reluctant to commit to acquiring specialized assets that cannot be sold or converted into other uses if the venture fails.


UIBFS


13

Entry and Exit Barrier Matrix

Easy to enter if there is: • Common technology• Little brand franchise• Access to distribution channels• Relatively low capital outlay• Low scale threshold

• Difficult to Exit if there are: • Specialized assets• High exit costs• Interrelated businesses

Easy to exit if there are: •Market for capital assets•Low exit costs•Independent businesses

Difficult to Enter if there is: Patented or proprietary know-howDifficulty in brand switchingRestricted distribution channelsHigh scale thresholdHigh capital outlay

Retail bank sales and services unit3

Business

Transcript of Retail bank sales and services unit3