MGT 5537: Competitive Strategies
University of Missouri – Kansas City
Spring Semester 2013
While growth in the retail segment may be slow, emerging opportunities are present through social and technological efforts. To stay on par with the competition, a bank must adopt a strategy that increases the seamless approach to technological banking as well as tap into the products and services that are going to attract the younger demographics, i.e., the customers of tomorrow, not today. Aggressively adopting strategies focused on these social and technological aspects will begin the process to creating a blue ocean, especially if the strategies are carried out through a mix of cross-promotional, cross-channel initiatives that align with the overall brand promise of the bank.
Similar to recent years, 2013 will see much change in the way that traditional banking services are delivered to customers. Over the past 5 years, 18.2% of commercial banks were unprofitable; even while deposits increased 4.7% (annualized rate) over past five years Some experts are even predicting that there will be a 50% reduction in the number of U.S. branches by the end of the decade. However, retail banking continues to be a vital resource and capability for UMB.
Regardless of the fall-out from the years of recession just weathered by the banking industry, it is clear that 2013 will be a year that banks can take one of two paths: jump on board with the technologies and innovations that customers want, or find new ways to leverage a competitive advantage to bring value to customers who are constantly demanding more. To monopolize on a greater share of the business, banks must transition and think beyond traditional “product pushing”, and develop a strategy which understands and delivers on each customers’ financial needs.
“With the high degree of competition in the Commercial Banking industry, the ability to attract and retain customers is essential. If a commercial bank has a satisfied base of retail customers, it can then market various other products and services to customers at minimal cost. Enticing customers to branch out from their primary banking activities (deposits) and purchase mortgage products, fund management services, credit cards and other bank sectors offered by that specific company is another way commercial banks cross-sell products and bolster revenue.” We will attempt to help UMB solve some of these challenges in this report. Our analysis and research has uncovered several strategic opportunities that we believe would help take UMB from their current position in the marketplace to new and unchartered territories.
Our research has revealed that customers want to manage their spending and savings in real time. UMB can expand on this opportunity by creating an integrated financial management package built around creating personal financial confidence, rather than methods associated with traditional banking. Product mobility enhancements can help attract additional profitable new customer segments, including college students, their parents, and new technology-savvy customers. There are three core pillars to our strategy, they are (1)knowledge (2)awareness and (3)purpose.
The current status of the banking industry is one of rapid change and ever increasing challenges. However, there exists within the red ocean of banks battling within the stagnant retail industry an opportunity to capture what others have over looked. Our goal with this project was to find what opportunities exist and deploy our new strategy to carry UMB forward into a blue ocean of their own. Our objective in defining a blue ocean strategy is to uncover an area of untapped opportunity that will help UMB stand out from the industry and rival all competition. When reviewing our research, we encourage our readers to consider not what you have