AN EVALUATION OF COMPETITIVE STRATEGY AND ITS IMPACT ON AND ORGANIZATIONAL PERFORMANCE IN THE NIGERIAN BANKING INDUSTRY
- Project Research
- 1-5 Chapters
- Quantitative
- Chi-Square
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
BACKGROUND OF THE STUDY
The name Bank is derived from the Italian word banco, which means "desk/bench" and was used by Florentine bankers during the Renaissance to execute this transaction over a desk covered by a green tablecloth. However, there are evidence of financial activity dating back to antiquity (Ehimeakhe, 1990).
Indeed, the term may be traced back to the old Roman Empire, when money lenders would set up shop in the midst of walled courtyards called Macella on a long bench called Bank, from whence the words Banco and bank are derived.
As a money changer, the merchant at the Bank did not so much invest money as he did transform foreign cash into the imperial mint's legal tender, which was the sole legal tender in Rome (Anyanwu, Oyefusi & Dimowo,1997).
In 1995, McKenna and Fleming defined competition as a market state that exists when there are a big number of commercial enterprises, all of which are capable of supplying the same or comparable items or services to a significant number of purchasers/buyers.
With the licensing and formation of new banks increasing the total number of commercial and merchant banks in the nation to about eight-seven, there has been a significant propensity for various banks in the sector to fend for themselves for survival in the previous decade (Anyanwu, Oyefusi & Dimowo,1997).
A commercial bank is described as an entity that accepts deposits from clients in exchange for loans, advances, and general financial transactions including all types of commerce. Retail, wholesale, import, and export commerce are examples of such trade.
According to the 1991 banking decree, a commercial bank is any entity that does banking activity in Nigeria, which includes commercial banks, discount houses, financial institutions, and acceptance houses (Federal Republic of Nigeria 1991).
Competition has had an impact on the banking business in Nigeria, both favorably and badly. Many methods have been developed by banks in an attempt to increase business efficiency and maximize profit in an attempt to fend for themselves. This concept prompted Nigerian banks to adopt a scientific approach and conduct research into better approaches to attain company goals and objectives. Some suggested methods include expanding existing operational facilities to a larger market area, improving corporate efficiency, diversifying portfolio and investment banking, appropriate marketing, combined branch and a small degree of unitary banking, good publicity, hiring and developing capable staff, and conducting research for future positive development and growth (Adegbite, 1990).
Furthermore, the introduction of new brands in banks raises competitiveness in the business on a daily basis, forcing many older banks to adjust their operations as a result of the competition. It's fascinating to see older institutions pay as much as 14-19% on the same deposit. Prior to deregulation in 1986, the banking industry was highly regulated.
Economic regulation, in general, encompasses regulations that the government puts on economic and corporate operations. In order to stimulate competition and increase economic efficiency, the government can be considered to be involved in some non-traditional public sector activities. When regulation fails, as it frequently does, the process of deregulation must inevitably begin in order to prevent the entire system from collapsing. Economic deregulation is described as the intentional and systematic dismantling of regulatory constraints, institutions, and operational guidelines in the economy's administration and pricing system (Adegbite, 1990).
The overarching idea of an economy's or component segment's deregulation is the notion that factors of production, products, and services are best priced and distributed when their prices are freely set in a competitive market. The study's goal is to investigate competitive tactics and organizational performance in the Nigerian banking market.
1.2 STATEMENT OF THE PROBLEM
The importance of banks in any country's economy cannot be overstated. They are the foundations, the linchpins, of a country's economy.
Financial deregulation in Nigeria began in 1987, and the resulting financial innovation has resulted in an unparalleled level of competition in the banking industry. Initially, deregulation provided significant incentives for the development of both the size and the number of banking and non-banking entities (Adegbite, 1990).
As a result of the extraordinary expansion in the number of banking and non-banking organizations providing financial services, competition among various banking institutions and banking and non-banking financial intermediaries has grown.
Aside from fierce competition in a variety of financial activities, banks have also faced issues related to a persistent slowdown in economic activity, severe political instability, virulent inflation, worsening economic financial condition of their corporate borrowers, and an increase in the incidence of fraud and embezzlement of funds (Anyanwu, Oyefusi & Dimowo,1997). All of these variables, including deregulation, competition, innovation, economic slump, political insecurity, growing inflation, and frequent monetary policy reversals, have combined to create a tough and risk-averse financial environment for banks. As a result of the new financial climate, conventional banking operations' profitability has been quickly eroding. As a result, in order to survive and sustain acceptable profit levels in this highly competitive climate, banks have taken unnecessary risks. However, the growing proclivity for increased risk-taking has resulted in the bankruptcy and failure of a huge number of institutions (Adegbite, 1990).
As a result, the study's only purpose is to investigate competitive tactics and organizational performance in the Nigerian banking market.
1.3 THE OBJECTIVES OF THE STUDY
The main objective of the study is to determine the competitive strategies and changes in Nigeria banking industry.
The subsidiary objectives include:
- Determine if competitive strategies affects the performance of banking industries.
- To determine the various strategies that affects competition in Nigeria banking industries.
- To determine if financial strategies affect competition in Nigeria banking industry.
- To determine how the environment affect competition in the banking industry.
- To determine how customers services affect competition in the banking industry.
1.4 RESEARCH HYPOTHESES
Spiegel (1992) observed that in an attempt to reach decisions, it is useful to make assumption or guesses about the populations involved. Such assumptions which may or may not be true are called statistical hypothesis and in general are statements about the probability distribution of the populations. In this research work four hypotheses will be tested that the proportion of the respondents who agreed that:
- Competitive strategies do not affect the performance of banking industries.
- Financial strategies do not affect the competitive advantages of the banks.
1.5 SIGNIFICANCE OF THE STUDY
This study is significant because of the following reasons:
- It will generate information in the new millennium on environment, customer service, financial and marketing strategies that will make banks in Nigeria to cope well with the competition.
- It will provide information on the various strategies of competition as it would be useful to economic policy makers. Banks manager and financial institution.
- It will be useful to the researcher, student in business management, banking and finances.
- It will be useful to the public in general.
1.6 SCOPE OF THE STUDY
This covers the competitive strategy of banking institutions and its effect on their performance. The study will be carried out among selected branches of Union bank in Port-Harcourt, Rivers State.
1.7 LIMITATION OF THE STUDY
Like in every human endeavour, the researcher encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. More so, the researcher simultaneously engaged in this study with other academic work. As a result, the amount of time spent on research will be reduced.
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