An Introduction to Banking, 2nd Edition

Chapter 14STRATEGY SETTING

This chapter provides an overview of the development of a strategy for a bank, as well as the identification of the likely key elements of a strategic plan. Strategy is a big topic, and those wishing to have a deeper understanding may consider some of the writings by leading thinkers in this domain.

The development of an effective bank strategy is as much an art as it is a science. Fundamental analytic work is a key element of the process; however, the crafting of an effective strategy requires more input still. Equally important is a deep understanding of the organisation itself – its key strengths (“core competencies”, which we will return to later) and its key weaknesses in the environment within which the entity operates – the markets, the competitors, and the regulatory framework – and the emerging trends and forces likely to shape the future environment. The art lies in the integration of all this information and the distillation of the relevant actions that the organisation needs to implement to improve its competitive positioning – the essence of strategy.

Many different methodologies are employed to assist with this process. Robust analytics assist with the understanding of internal financial dynamics (for example, the profitability of business units or products) and some elements of market and consumer dynamics. Insightful analysis of competitor performance can also be of value in the process. However, strategy is all about changing course ...