The strategy of bank as a conceptual component of its activities
Table of contents: The Kazakh-American Free University Academic Journal №7 - 2015
Author: Nepshima Victoria, Kazakh - American Free University, Kazakhstan
banks are the center of finance capital in the market. The nature of the banks,
as a special financial institution, is defined as at least three groups of
traditional banking operations, which only they can perform for their clients
in the aggregate. They are opening and maintaining bank accounts; attraction of
money in deposits (acceptance of deposits); placement of attracted and own
funds on their behalf and at their own risk under the terms of repayment,
urgency (granting loans) .
detailed approach to this concept is needed in modern conditions of economic
development and consideration of the object of bank management should be
considered on all sides.
single bank is a system of interconnected elements, such as organizational
structure, functions and activities, information technology and personnel, work
processes taking place in the bank. The management system is the organizational
interconnect structure. However, the ideal picture is not presented, this
system does not always work in some Kazakh banks, therefore, the question is
about the effectiveness of the bank.
opinion, the above approaches to the definition of the bank as a control object
are not entirely clear. It is important to include not only the operations
performed by the bank into this concept but the mechanism of the organization
of bank management, bank employees, organizational structure, strategy and
tactics of the bank, which will be reflected in its work as part of economic
modernization of economy of Kazakhstan.
article, we will address the issue of strategy of the bank, as a conceptual
component of all its activities.
objectives of the bank, ways of achieving the intended direction and
development of the existing to the selected target state are defined in the
strategy. The chosen strategy should be focused on new market future products,
potential new risks that arise at all levels of the bank, a new organizational
structure in a modernized economy. That is the strategy will provide the
foundation for all of the bank's management, as detailed and comprehensive and
integrated plan that provides the mission and goals of the bank.
strategy is most often developed and approved by senior management of the bank,
however, it is not the right approach. Implementation of the strategy involves
the participation all levels of the bank in this process, respectively, its
foundations should be formed and be specified at all levels of management. In
addition, the strategic guidelines should be confirmed and substantiated by
analytical data, especially this thesis acquires relevance in a systematic
modernization of the economy, where it is important to know not only their
competitors, but also its allies in achieving state goals .
Strategic Plan provides a long-term program of development, so it should be
holistic and at the same time be flexible enough because conditions of the bank
and its orientation in the market may change in the conditions of the
modernized economy. The choice of strategy also defines the policy of hiring
and managing staff. Bank, following the chosen strategy, begins to attract a
certain type of workers, to manage own and borrowed financial resources and in
the chosen direction. In the context of the modernization of the economy, it is
important to determine the bank's development strategy as focused on the goal
of modernization, financing high-tech and innovative projects, giving
preference to lending not only small and medium, but also big business, to
encourage young scientists and the sphere of material production.
structure of strategic management is characterized by the following elements,
presented in Figure 1.
Figure 1 - Structure of Strategic Management by
It is also
possible to define some of the basic provisions of the strategy of the bank
Figure 2 - Summary of strategy [compiled by the
author according to the source 2]
The need to
focus and deep specialization can be represented as follows: it is important to
raise the level of interaction with customers. In the context of the
modernization, large industrial, processing and construction companies that
require funding for their projects become customers of the bank. In these
circumstances, it is important for bank to rely on large-scale financing
projects, to prepare specialists, analysts, who could undertake a risk
assessment of each investment, and for this they must be sufficiently competent
not only in the field of financial relations, but also in the production plan.
principle, it is possible to focus efforts of the bank on specific customer
channels. This is groups of customers with similar demands or sectors of
banks work on a system of traditional marketing with a focus on the sale of
specific financial services. However, there is such a thing as a marketing
channel, which involves the study of the information environment of the
selected preferred client channels. It implies the supply of potential
customers information about the bank, its strategy and readiness to finance
planned projects, regardless of project size. This creates an aura of large-scale
bank and financial strength.
side of this issue is focused on the realization of awareness of the needs of a
large client. Here it is not so much about the orientation to the needs of the
finance function, but rather on production and material divisions - sales
department, procurement, and logistics. This approach is dictated by the fact
that it is necessary to control not only financial risks but also pay attention
to the specific problems of production and construction. That is, the bank will
build a pricing strategy, focusing not only on the general market situation in
the banking market and the competition in one form or another of lending, but
take into account the real needs of customers, taking into account the price of
loans of only those banks that matches the client channel selection .
Returning to the question of modernization, it can be assumed that not only the
individual firm and the company will face a number of new problems and needs,
but also government agencies may have finance help from banks.
implies the second element of the strategy of the bank. It is development of
new financial products and marketing activities to promote them.
mentioned, it is important to remember about your competitors, so you need to
"know in person" banks that operate with the same client channels.
Large-scale projects dictate financial institutions to reflect the introduction
of new products. It can be contract with a major leasing company or development
in this market niche by itself or the introduction of financial advisory
companies help in choosing the loan program and assist the company in the event
of difficulties with payment of the loan.
modernized economy, banks must have a sufficiently large amount of money to
fully fund this or that project. To do this, it is important not to lose
customers, investors, attracting them favorable interest rates, with all sorts
of discounts, sweepstakes gifts, benefits and discounts, etc. There is often a
situation where banks lose relationships with customers, which trust bank to
manage its financial activities. It happens because there is a lack of
centralized accounting system of relationships with customers in the bank. That
is, the bank is not able to organize their clients, encourage them, etc.
principle strategy follows from these provisions. It is directing the work of
the bank on hold regular customers of the bank by providing them with all sorts
of privileges and prediction of their future needs.
banks base their organizational structure along functional lines, that is, each
unit implements entrusted part of work. In this case, each unit works with
individual client to the extent of his needs and the amount of needed services.
For example, a client may be a major contributor, and deposit department refers
to him as a vip-client, while another division of the same bank considers the
same as an ordinary customer. In such situation, the overall quality of
customer service decreases and the customer can leave the bank. There is
another side of client relationships that should be regulated. The client may
be uncomfortable or inconvenient contact with different managers of the bank on
various issues. It is more convenient for particular company or individual
client to communicate with one representative of the bank, which will be able
to give the necessary advice on the different areas of customer service. As
already mentioned above, custom channels for banks will be formed in the
modernization and one manager will be able monitor and adjust the work of the
bank on each group of similar customers or with each company and do work only
with it. That is necessary to create a sort of institute of personal or
the following strategy of bank - system of personal or corporate management for
the industry as a whole, the client audience that are arranged on a specific
feature or for individual clients.
is important to remember that production staff and information is the main
factor of the sphere of immaterial. Truism of HR states that employees,
regardless of their location in the bank should be interested in how to
effectively carry out their work for the benefit of the bank as a whole. In
addition, the bank should be interested to retain valuable employees, as some
customers may leave bank with the departure of the employees of bank. It takes
significant portion of time and money for searching for a new employee.
component in the formation of the bank's strategy is guarantee employee a fair
evaluation of its contribution to the bank's results, therefore, material
rewards and career growth.
context of the modernization of the economy, when more and more attention is
paid to the concept of investment, it is important to position the bank as an
investment institution, focusing the state and leading enterprises on the
capability to finance the planned events. If the bank considers to finance the
modernization processes in the economy, then eventually it will establish a
clearly developed technology of project financing, whereby the costs will be
reduced and the possibility of establishing for major clients competitive rates
rates for both parties are good incentive for companies to establish long-term
relationship with the client. If the bank is committed to funding innovative
projects, then the product specialization can be supplemented with favorable
conditions for specific individual enterprise, as well as for the entire
customer lines operating in this area. Consequently, the contribution of the
bank in the development of one of the priority sectors of the economy increases
requirement of the bank's strategy states that it is necessary to increase the
motivation of customers by providing a selected bank services at competitive
conditions. It should be noted that communication between the bank and the
customer must be affiliated in the modernization of the economy. That is, the
relationship should be based not "top to bottom" but on an equal
footing. In this case, the bank should not take precedence over the client and
dictate its terms. Relationships are becoming partnership, which leads to their
longevity, which is important for the bank. As lack of customers is a direct
threat to business and development of not only the bank, but also the goals of
important to select customers based on the possibility to match the scale of
clients’ business with the bank itself in order to implement this principle.
That is, if the client is a fairly large and his project requires a large
initial investment, the bank must not yield to the scale of such customer. Only
then the relationship will be based on partnership.
plans to successfully develop and establishes the scope of its activities at
the beginning of his work. Emphasis should be placed on the major banks, such
as "BTA", "Kazkombank", "Bank Center Credit"
within the modernized economy. The scale of the bank is important for both
staff and clients of the bank, as it plays motivating role for staff and it is
an indicator of the reliability of the bank and another criterion for
eighth positions of strategy formed - setting the scale of business to increase
the rating of reliability and stability, improve the bank's reputation.
which will be able to develop an appropriate strategy and develop primarily
those areas that will be relevant in the circumstances, will have competitive
advantage in terms of modernization. It is important to remember that the
environmental conditions could be changed. Also do not forget about the foreign
competitors. Therefore, a large role will be assigned to the bank's ability to
change the strategy in response to the changes and update the structure.
important to note that any employee of the bank should be familiar not only
with the strategy, but also he should refer to it in carrying out a work.
Each employee of the bank should be guided by the strategy in decision making,
in the performance of duties, in the event of disputes. The strategy should be
clear to all employees without exception, to answer the question how it relates
to the activities of all divisions of the bank.
task is strengthening the bank's position in the market, strategy should serve
as a tool of corporate governance in the context of modernization of the
economy. If the bank has built its strategy in such way that it is clear
for the owners, board members and customers, while strictly adheres to it, then
there is no doubt that this fact will be fundamental in choosing financing
consider the system of strategic management.
strategy can be defined as a set of actions aimed at achieving a sustainable
competitive advantage of the bank.
actions includes the following decisions:
a strategic position;
identifying one or more sources of competitive advantage;
development of the business concept;
systems of interaction with the consumer .
planning should include the development of a strategic vision and development
strategy. The last one includes:
development of strategic planning elements (goals, indicators, projects, budgets,
development of strategic plans and objectives;
development of a balanced scorecard (BSC);
distribution of indicators on business processes;
planning and strategic budgeting .
bank starts the implementation of the strategic plan, management should take
into account the motivation of staff to implement the strategic objectives,
correctness of project management and business processes in the implementation
of strategic goals, completeness and correctness of the necessary resources,
control over management decisions and operational implementation of the tasks
at all levels of management. It is important not to lose control and regulatory
measures aimed at changing the parameters of action under varying conditions.
following structural units of the organizational structure are engaged in the
implementation of all the above activities:
- The Board
and the owners of the bank.
of Strategic Planning.
Organizational unit of Corporate Development.
strategy was taken into accounts at first in the concept of strategic
management, developed several decades ago on the basis of postulates that
reflect patterns of the period of "sustainable growth". Also it was
considered as a plan, a detailed program of action, based on the choice of one
of their well-known "standard" strategies.
this approach requires a vast array of information processing within the global
crisis - moreover no guarantee of success. Nowadays set of strategic planning
procedures, that was made several decades ago, does not bring the expected
results. Therefore, there is no consensus on the methodology of strategic
planning in modern economic science.
several authoritative statements of the western authors in support of this
- “there is
dissatisfaction with the static equilibrium and analytical scheme proposed by
the economic theory of industrial organization, which dominated much of the
work on the business strategies” (Grant 1991) ;
experience of recent decades has shown that up to three quarters of the effort
invested in strategic planning, were completely unsuccessful, ... over the past
twenty years, the most successful companies in the USA did not have any of the
"typical" competitive advantage” (Cameron, Quinn 1991) [cited by 8];
“strategic planning loses its meaning in a dynamic environment, where key
conditions for survival are flexibility and ability to quickly respond to
instantly appear and disappear opportunities” (Mintzberg, Quinn 1998) ;
different approaches to understanding the strategy was proposed, there was even
developed their typology. Mintzberg has devoted her entire book review,
highlighting ten different "schools of strategies" .
- but in
the end “all this has led to displacement strategy of the companies” (Porter
The last M.
Porter definition strategy is:
strategy is search and development of the individual, unique way of
competition; develop special kind of value (goods), rather than an attempt to
produce the same kind of value (goods) just better; endless process” .
choice of strategy is the choice of the direction of the myriad of options
("strategic alternatives"). This choice must be done necessarily. Of
course, the selection a list / classification of possible "coping
strategies" can be created in order to facilitate the choice. But it is
not necessary to adhere once someone compiled list.
strategy is, first of all, unique mode of action, a set of rules for
decision-making (and subsequent programming), which the organization is guided
in its activities. The main value of the strategy is its uniqueness, that no
one had gone that way. Its developing is implementing "here and now".
"Yesterday" and "tomorrow" for optimal organization have
been and will probably be completely different strategy; and it must begin with
an understanding of their own, individual and unique list of alternatives of
information base for strategic management of the global crisis becomes:
analysis of the development of the market in the past (trends and tendencies of
previous years can change its direction at any time);
analysis of future: risk assessment in the creation and promotion of various
variants of the new product, based on an analysis of its specific properties.
conditions, the development of strategy of the organization should be
understood not as the development of "a clear program of action" (use
of information technology and special software enables to automate this
process), but as inventing a new set of rules for decision-making, a set of
alternatives to select unique mode of action. For example:
- new product,
as an individual, unique way of competition;
organizational system (corporate culture, the internal environment of the
organization), which would provide timely, dynamic and painless change of these
new products, strategies which are based on risk monitoring (Project Risk
information base of strategic management in the modernization of the economy
should not be an analysis of past experience, because the market trends and the
situation can change (as well as modernization - the way toward the new
economy), but the forecast of the future: risk assessment in the creation and
promotion of various new options products based on an analysis of its specific
In terms of
modernization, selection of the bank's strategy should be based on the
development of a unique product or a new approach to the management of the
system of bank management.
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Table of contents: The Kazakh-American Free University Academic Journal №7 - 2015