Strategic Management Combats Nonbank Banks

American Banker, August 20, 1986 | Go to article overview

Strategic Management Combats Nonbank Banks


Strategic Management Combats Nonbank Banks

THIS STUDY has described the current environment for retail banking, outlined major demographic shifts which create (or redefine) new markets for existing and innovative financial products, and provided an overview of a legal and regulatory environment which inhibits many providers of financial services. It has defined customers, constraints, and competition--reviewing commercial banks, thrifts, finance companies, automakers, as well as the securities, insurance, and retailing industries.

As all their applications for nonbank banks are acted upon, it's all too clear that the market and its institutions are in flux--a flux which some have preferred to call chaos. While the shape of the financial marketplace of the 1990s is still evolving, it's clear that, in that marketplace, banks will be the organizations with the most at stake.

They already appear to be losing ground. In 1985, 118 banks failed--a post-Depression record. Bank earnings in the past five years have been virtually flat, and bank stocks generally sell for well below book value.

Specific economic problems in agriculture and energy have resulted in bank failures around the country and are part of the reason for the present situation. Banks face unique competitive handicaps, such as sterile reserve requirements and capital standards, which other competitors do not face. But beyond these difficulties, the banking industry faces remarkably strong competitive pressures. Caught between market-driven liability pricing and stiff competition for high-margin assets, there is less and less room for error in bank management. Banks can no longer--as the old joke had it--buy their money at three, lend it at five, and be on the golf course by four.

This chapter now turns to some solutions, outlining strategic alternatives for bank management. Each option is defined in the context of the "flux' defined in this study. It must be weighed, of course, in terms of each institution's specific character and needs, and it's most unlikely that any single option presented here will prove to be a prepackaged solution. Certainly, the scope of this study makes it impossible to provide all the detail required by a typical strategic plan. Nevertheless, the broad array of alternatives here can help consumer bank executives focus more sharply on the challenges posed by the nonbank banks. And a precision of focus is prerequisite for successful planning.

Conventional Warfare

The first stage in effective strategy development is to look at what an institution is doing, identify those operations which are doing best, and make those business sectors do even better. This requires a rigorous, profit-and-loss-oriented review of an institution's operation units and careful strategic thinking about new ways to define profit opportunities. Retail banks can enhance their strategic planning without massive restructuring.

By starting with the demographic information provided in this study and then using its own market surveys to make the data institution specific, a bank can gain a better understanding of its customer base. With new flexibility in defining deposit products (the result of the expiration of the Depository Institutions Deregulation Committee), banks can target deposit products more specifically to key customer segments.

Even with current restrictions on bank asset powers, banks have significant opportunities to package financial services in an appealing fashion.

"Niche banking' has been a longstanding strategic choice for small banks in highly competitive markets. In California, for example, literally hundreds of small banks have flourished in the shadow of market giants like Bank of America and Security Pacific National Bank by carefully defining their specific market segments and serving them well. Their experience will be instructive as banks across the country find their own markets becoming as competitive as traditionally highly banked areas like California and New York. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Strategic Management Combats Nonbank Banks
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.