equity bank case study

Topics: Bank, Equity Bank Group, Central bank Pages: 6 (2015 words) Published: February 25, 2014
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Equity Bank Group
Equity bank group is a financial institution based in Kenya, East Africa, offering a variety of financial services. This company was founded in 1984 as a minor institution, specializing in mortgage financing, which targeted the low income earners. Based on the fact that Kenya is a developing country characterized by majority of citizens earning less than adequate income, the target population acted as strength and thus contributed to the company’s instant growth. However equity bank, which was known as Equity Building Society (EBS) by then, experienced a downfall in growth an aspect that led to its bankruptcy in 1993. The pre-insolvency period totally differed with the period of 1993 to date in terms of equity banks economic progress, with the former showing a great decline and drastic company growth during the latter (Stanford 2007). To date equity bank is rated among the best bank in retail baking in Kenya , offering a variety of banking services as well as collaborating with other firms to improve their services, for instance in mobile banking. It’s worth noting that banking industry in Kenya’s is highly competitive, with more than 40 registered commercial banks. In an effort to overcome this competition, equity bank targeted low income earners who happened to be non-banked. After the 1993 scandal, EBS transformed from a mortgage financier to microfinance. The target group wasn’t changed, but this time a better approach in strategy formulation was adopted. Following a threat by the Central bank of Kenya to dissolve the insolvent bank, the management was reformed as an alternative option. Following porter’s argument that competitive advantage cannot be generated through natural resources (Porter 73), the new management built on the same target population that had caused failure to the company, but this time applying a more innovative strategy. Human resource is a key factor in banking services. Lack of skilled labour in Kenya worked as a disadvantage to equity banks prosperity. However the bank management avoided importation of skilled labour. Top management worked with the semi- skilled staff. Attributed to this success is James Mwangi’s leadership characterized by motivating employees, providing systematic training that not only increases competency and technical skills but also enhanced competency as observed in 2004. Moreover, accepting the importance of technology, equity bank has allowed for innovation, inventing the latest technology. To start with the IT sector has been improving on the banks communication system, and thus reducing the transaction processing period drastically. As a matter of facts, large numbers of customers has been a threat to equity bank, as it results to large queues, with competitors using this as a marketing opportunity (Stanford 2007). In addition to reduced processing time, equity bank has opened several branches to cater for their customers, both permanent and mobile, with most transactions being made either online or through mobile phones. Competition reduces firm’s sales as the market is fully segmented with each firm serving a fraction of the market. Porter discriminated that demand is naturally obtained, holding that a nation can influence demand. According to porter local market trends, which can be artificially influenced, act as a competitive advantage as well as encourage global transactions (Porter 79). It’s from this perspective that equity bank has expanded its business lines. Although restricted to banking services, equity bank puts diversification as a core objective. In 2005, equity bank succeeded to fully transform from a mortgage financing provider to a savings and loans institution (Equity bank). Following the emergence of many microfinance firms that served the poor, equity bank had no option but expand its services to retain its share of the market. This strict and direct competition, made...
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