Organisations today operate in a dynamic environment characterized by instability and change (Bakhru, 5:2005). The operating environment is broken down into the internal and external environment with both environments playing a significant role in developing strategy. Segal-Horn and Boojihawan proposes that strategy development is an iterative process and may be defined as the pattern of activities followed by an organisation in pursuit of its long term objectives. Hence to enable this method of approaching strategy development, the internal and external environment needs to be scanned constantly so that strategy can be adjusted to meet the business objectives.
The banking sector in South Africa has been subject to much change and uncertainty in the last decade. It has seen government regulations and investigations into lending practices, banking fees and policies to create a banking platform for the vast majority of the un-banked South African population. Capitec bank is a relatively small independent bank with roots in the micro lending sector. Capitec Banks strategic plan in 2007 focused on positioning itself as a proper bank in a much broader target market which is a change from its prior strategic focus as a micro lending organisation. Figure 1 shows the components of the external and external environment in relation to Capitec Bank. External Enviroment
* Changing Banking Regulations
* African Bank
* Mzanzi Product offering by major banks
* Post Bank
* Selected products from major banks (Standard Bank’s E Plan) * Retailers offering low cost banking
* LSM 1-5
* 19 Million target market size
Figure 1: Capitec Banks Internal and External environments.
This report is focused on the lower-end banking segment in South Africa and will endeavor to provide an analysis of this industry sector and determine if it is an attractive and sustainable segment. The analysis will incorporate the experiences and learning’s from the Capitec Bank case study and will focus mainly on the Banks external environmental factors (highlighted in red).
2. Low-end banking industry segment analysis.
The Key Success Factor and Industry Life Cycle models will be used to analyze the low end banking sector.
3.1. The Key Success Factors
For an organisation to be successful in a given market, it needs to meet the minimum requirements of the customers with regards to product and service. The Key Success Factor (KSF) model helps identify the minimum entry requirements of a particular sector and hence what is considered important for the customer (Bakhru, 2005:59). Figure 2 below shows the key success factor model applied to the low end banking sector with Capitec as the example.
Prerequisites for success
What do Customers want?
How does Capitec survive competition?
Analysis of demand:
* Who: LSM 1-5, income R1179 – R6659 per month with limited mobility * What do they want: flexible banking hours, cash, low service fees, convenient bank locations, easy access to their money, micro loans. Analysis of Competition:
* Key drivers: Cost, Accessibility, Simplicity and personal service * Big 4 banks are inflexible, expensive, complex and risk averse. Capitec’s model is technology driven to reduce cost and improve accessibility * Post Bank has a highly developed branch network – Capitec has opened branches in railways stations or on major routes and are opened till 19:00 on weekdays. * Retailers are offering low transaction costs from their tills – Capitec offers free debit order purchases
Key success factors
Figure 2: Key Success Factors for the low end banking sector, Adapted from Bakhru, 2005:60.
The KSF model as applied to Capitec Bank indicates that it has the key success factors for success in the low end...