Stg Plnin High Comp. Envir

Stg Plnin High Comp. Envir - Strategic Planning in a Highly...

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Unformatted text preview: Strategic Planning in a Highly Strategic Competitive Environment Competitive By James B. Bexley, Chair Smith-Hutson Endowed Chair of Banking Sam Houston State University 1 Banking is Changing! • “Firewalls” eliminated by the repeal of the Firewalls” Glass-Stegall Act. Glass-Stegall • Additionally, intense competition not only Additionally, from banks but from the entire financial services industry has made competing difficult. difficult. • What are you doing to position your bank? * 2 Evaluate the Market • • • • Population of the market. Age of the population. Income and spending of population Product mix and growth * 3 Population & Age of the Market • Total number and percentage of population by age • Median age – By total – By female – By male • Population by gender • Total number and percentage of households by age * 4 Income & Spending by Population • Income per capita • Mean household income • Median household income (dollars and percentage) • Earnings by industry (dollars and percentage) • Retail sales by industry segments * 5 Product Mix & Growth • Product mix of the market – Deposit products – Loan products • Growth of products – Deposit products – Loan products * 6 Comparative Bank Data Return on Assets 1.200% 1.000% 0.800% Bank of Yates City Bank of Farmington Brimfield Bank Farmers St. Bk of Elmwood Laura State Bk Market Total Percent 0.600% 0.400% 1994 1995 1996 Year 1997 1998 7 Conduct an Annual Planning Conduct Meeting Meeting • • • • Have an annual strategic planning session Have annual Use facilitator who understands banking Focus on bank direction for next 3 to 5 years Involve senior management & board--HOLD AT Involve LOCATION AWAY FROM BANK! LOCATION • Examine director concerns, bank strengths, bank Examine weaknesses, bank opportunities, & bank threats weaknesses, • Prepare a formal document to be approved by Prepare management & board * 8 management Properly Size-up Your Bank’s Properly Capabilities Capabilities • Five questions to be answered to analyze present penetration: – What share of the overall market does the bank have? – What share of market for the targeted customer segments does the bank have? – Has the bank gained or lost a substantial share of overall market? If so, why? – Has the bank gained or lost a substantial share of the targeted customer segments? If so, why? – Is this the first year that the bank has targeted the specific customer segments? If not, how long have they been targeted? * Continued 9 Properly Size-up Your Bank’s Properly Capabilities (Continued) Capabilities • Once questions are answered, bank is in Once position to react to market & competition. position • Bank can also evaluate its present customer Bank segments & determine effectiveness segments • Bank can make a valid projection of best Bank segments to pursue. * segments 10 Market Niches • Determine the market niches by answering Determine these questions: these – Does the bank know the key financial services required by its targeted customer segments? – Of the service desired/required by the targeted group, which does the bank currently offer? – Which services desired by the targeted group are not available at the bank, but are available at other financial institutions? – To differentiate the bank from the competition and respond to the target group's needs what steps has the bank taken? – What steps can the bank take to have the customer segments perceive the bank's level of service superior to that of the competition? * Continued 11 Market Niches (Continued) • Greatest danger in determining markets to Greatest be served is the bank slipping in to trying to “be all things to all people” “be • Regardless of bank size it is virtually Regardless impossible to serve every market segment impossible • For best results, the bank should focus on For only 3 or 4 segments to serve. * only 12 Products and Pricing • Any plan should address the more Any important basic products and their pricing important • Don’t be afraid to introduce new products • Pricing must be evaluated on a “price” v. Pricing “benefit” basis. “benefit” • Competition causes us to look for new Competition products & services to keep customers products • Product must be good for both bank & Product customer--no room for “loss leaders” * customer--no 13 Know The Customers & Look Know For Better Ways to Serve Them For • Need to know & maintain regular contact Need with customers with • Build a good data base about customers • Banks often react to competition rather than Banks doing their own research doing • Think tank is good to brainstorm new ideas Think for better ways to serve the customer. * for 14 Use Incentives To Get Results • • • • Rewards cause officers to get results Shareholders are not penalized by incentives Incentives bring out the best in people Poor results--no rewards * 15 Can Community Banks Survive? • The answer is yes and no! • To be successful, banks need to – – – – – – Realistically evaluate the market Properly size-up the bank’s own potential Carefully evaluate the competition Look for better ways to serve the customer Conduct an annual planning session Effectively implement the plan * 16 There is no reason why There community banks can’t be successful in this highly competitive environment competitive 17 ...
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