Critical success factors for various strategies in the banking industry

Applies the critical success factor (CSF) approach to identify the appropriate CSFs underlying three types of strategy in the banking industry. The empirical results of this paper show that the various strategies adopted have a significant effect on factors determining success and that the mean importance of CSFs varies among the various strategies. The result of a factor analysis suggests four composite CSFs: bank operation management ability, developing bank trademarks ability, bank marketing ability, and financial market management ability. Further discussions and management implications are also presented. them as ``the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization''. He indicated that CSF is a useful approach for identifying management's information requirements because it can focus attention on areas where ``things must go right''. Boynton and Zmud (1984) also defined CSF as the ``few things that must go well to ensure success for a manager or an organization''. They recognized the CSF approach as an appropriate planning instrument. Leidecker and Bruno (1984) identified the few critical success factors, often as few as six in a successful firm, while Guimaraes (1984) attempted to rank CSFs based on their relative importance. Martin (1990) then pointed out that CSFs combined with computers could effectively translate business strategy planning. Crag and Grant (1993) highlighted the contexts of competitive resources and illustrated the relationship between competitive resources and critical success factors. Kay et al. (1995) identified several CSFs applicable to insurance agency sales in high performance and low performance groups. With regard to the banking industry, Johnson and Johnson (1985) proposed that the width and depth of the product and service line, low operating costs, and a good bank reputation can be considered as the three critical success factors in a competitive market in the banking industry. Canals (1993) recognized that the concepts of value chain and bank configuration could be employed to develop a bank's competitive advantage. He identified four sources of a bank's competitive advantage, namely: 1 manpower; 2 financial management; 3 asset base; and 4 intangible assets. Wilde and Singer (1993) singled out three critical success factors for banks and insurers, that is, lower cost, product differentiation, and financial strength. In our study, we highlight the role of business strategy when we identify CSFs in the banking industry. Our research results contribute to the current literature and provide some useful insights concerning the CSFs associated with bank management and business strategy. 3. The strategy setting and CSFs Much empirical research has attempted to verify the relationship between competitive advantages and business strategies. First, Aaker (1979) discussed corporate, business and functional area strategies and found that there were obvious differences between the organizational structure, management function and competitive resource/advantage. Next, Leidecker and Bruno (1984) identified competitive resources in four semi-conductor companies, which operated with different business strategies. They found that when the companies utilized different business strategies, it clearly affected their resource utilization and the business goals emphasized. Dvir and Shenhar (1990) further stated that firms based the selection of their business strategy primarily on technological levels and financial situation. They proposed that one could identify a firm's competitive advantages by its technological level and financial situation. Moreover, a set of business strategies is applicable to competitive firms' quest for a niche; this is described by Porter (1985). Porter (1985) suggested that business strategies could be categorized as: . cost leadership; . differentiation; . specialization; and . stuck in the middle. Miles and Snow (1985) also identified parallel business strategies in firms which will condition organizational development. In their study, they categorized four types of business strategy, that is: 1 prospector; 2 analyzer; 3 defender; and 4 reactor. A prospector usually attempts to enter a new market and adjusts his/her products and services in a timely manner. An analyzer is identified as a cost saver and/or efficiency promoter, especially in risk and innovative businesses and is always the second company to enter a new market. A defender is an expert on managing an experienced task in a stable market, with stability and security as key principles. Finally, a reactor is a contingency player and typically lacks a consistent strategy. This study uses Miles and Snow's (1985) four types of strategy as one of the ``best known'' and most widely accepted models for bank growth and market analysis. In a study of various types of business strategy, Shortell and Zajac (1990), McDaniel and Kolari (1990), and Segev (1991) illustrate business operations and refer to Miles and Snow's (1985) descriptions of the four types of business strategy for organizational development. Table I presents the details of these four types of strategies. As stated above, we find that if we conduct a CSF study in the banking industry and obtain some applicable CSFs, consideration [ 84 ] Tser-yieth Chen Critical success factors for various strategies in the banking industry International Journal of Bank Marketing 17/2 [1999] 83±91