Assessment of Competitive Strategy Formulation and Implementation Practices of Private Banks in Ethiopia: The Case of United Bank S.C

Abstract

In the earlier time, business has been traditionally operated relatively in a stable environment. But, nowadays business environment become highly competitive and more dynamic. To cope with such stiff competition, firms must pursue strategies that fit their resource and the environment. This is also true to banking industry in Ethiopia. This study was conducted to examine competitive strategy formulation and implementation practices in private banks in Ethiopia the case of United Bank S.C. The study applied descriptive research design to describe the existing circumstances of the strategies adopted by the bank. Non-probability sampling which is called judgmental or purposive sampling technique was applied. While selecting sample size, researcher took 32 respondents from employees of United Bank, 16 managerial and 16 non-managerial staffs. While selection, adequate knowledge of respondents have been focused. Hence, researcher gathered data by focusing on management staffs (executive managements, department managers, branch managers) and non-management staffs (professional officers from different head quarter departments). The study used both primary and secondary data. Primary data is collected by distributing questionnaires and interview instruments and secondary data were collected from company profile, annual reports, newsletters and internal records of the bank. Data analysis has been made by SPSS 20 version software. The results of the study indicated that United Bank has been following combined competitive strategies of cost leadership, differentiation and focus strategies. The study also found out that competitive and economic factors are main external factors whereas human resource factors, financial resource factors and technological factors are main internal factors that have significant influence on the bank’s decision on formulation and selection of its competitive strategies. The study also found out challenges United Bank faced in implementing its competitive strategies. Out of these challenges rise in costs associated with its services and complexity in needs of customers are the hardest ones. Based on the conclusions of the study, the researcher recommended that the bank should be flexible enough to respond immediately to changes in environment, it should construct its own building for branch office, and it should work on to improve its structure and management style to be participatory. Besides, NBE should strengthen its supervision to ensure existence of fair competition in the banking industry in Ethiopia