Vancity Credit Union was established in 1946 to provide financial services to customers with various financial needs and has upheld an ongoing commitment to enhancing the quality of life in the community. Vancity customers – members, as the credit union refers to them, have various options when it comes to choosing a provider for their banking services. To maintain their competitive standing with large banks and other competitive institutions that have added financial resources at hand, the credit union strive to deliver almost the same services yet with the highest level of customer service feasible.
Vancity’s main focus while setting out to establish a leading position in its industry was improving customer service and rendering internal collaboration; promoting efficient practices; and enhancing its IT environment and IT management to advance its ability to offer additional IT services.
While Vancity was enjoying harvesting the success of years of hard work, a new competitive challenge rose hindering its position as one of the top financial services/credit union provider in its region. This challenge was the clear shift away from the traditional business model that had centered on the branches and tellers to a new major trend in the financial services industry known as electronic banking.
With the modernization of the information technology and the introduction of the internet, financial services customers were given a new care-free tool that was to enhance their banking experience by providing more time efficient services and thus giving them the option of investing their time in other more important alternatives.
On the other hand, while credit unions emphasized primarily on services, customer preferences had forced a shift by all parties to greater services, broader product offerings and flexibility. As such, major banks became more like credit unions by offering more products and improving customer service though customer relation management. This stood as a threat to Vancity that had two major issues to tackle: the first being the competitions of chartered banks that were competing on customer relationship management, and the second being the high costs of adopting a new e-service strategy and taking the risk of locking horns with the major banks.
Key Success Factors
Banks and financial service provider maneuver in one of the most cutthroat and highly regulated environments of business. Organizations within this industry are subject to severe global competition and are always competing to build impenetrable niches of consumer products and services.
To be able to cope with its surrounding competitive medium, it is crucial for a financial services company to be agile. In other words, if a company is not alert and responsive to the moves of its competition, risks are it would be left behind in this fast paced business world. Moreover, the speed of this responsiveness plays an important role in taking charge of a sudden situation and conducting the appropriate steps to overcome any sudden predicament.
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VanCity was faced with an unexpected shift in the services community. In such circumstances, adaptation and determination are key elements in the process of incorporation into a new updated business plan. A financial services company should be accountable when it comes to its offerings. Whether politically, ethically, or administratively, such companies are liable to their actions and decisions, should justify the means to their ends, and are to be held responsible in case of eventual misconduct.
Lastly, dependability strikes as a major factor in the success of financial services providers. It is mainly the value portraying the reliability of customers to businesses because of their integrity, trustfulness, and truthfulness.
There exists little room for error when executing strategies designed to strike the ideal balance between realizing goals of customer retention, revenue growth, and superior service levels. Therefore, success factors should be well considered before venturing into the merciless world of business.
Competitive Advantage with unchanged values
While VanCity had the ball in their court when it came to competing with bigger banks on customer services, the competitive environment around them was starting to change. E-banking was the new mean for efficient and effective banking activities. While banking through personal computers was still being introduced, forecasters were predicting it would revolutionize the way people handled their personal finances. This Internet phenomenon was creating great changes in the banking industry. With the implementation of new online banking and e-commerce rose the need to integrate information technology into the business. This was said to enhance the services provided by the company and increase the efficiency of employees to deal with the members’ needs.
VanCity’s competitive environment had changed on many levels: technological, social, and political. Technologically, the trend was shifting towards online banking – given its ease of use on personal computers. This shift was forcing VanCity to invest big money in technology. On the other hand, it was depriving VanCity of its personalized identity. Online transactions needed no personalized one-on-one treatment. Given that that was Vancity’s major competitive arsenal, this change was sore to the business.
Socially, customer preferences (power of buyers) were stronger and more determined. With their busy lifestyles, customers were demanding more convenient services that consumes less time such as ATMs and internet banking. This was forcing VanCity, and banks in general, to offer more efficient services, broader product offerings, and more flexibility.
Politically, new legislations made way for competing brokers, insurance companies, and various financial competitors to pose as threat to VanCity and similar credit unions.
Moreover, what hindered Vancity’s ability to cope with some of those competitive environment changes are the different regulatory systems between credit unions and chartered banks. Banks are regulated federally unlike credit unions which are regulated provincially. That is one major barrier to growing geographically. Credit unions are community-based and make decisions locally. They get to know their members, live and work where these members live and work. When those credit unions start to expand beyond that, they need to make sure that they keep the key element that differentiates them from larger banks, which is their local decision-making trait. The biggest challenge is how to maintain the credit union niche and grow at the same time.
Luckily, VanCity had a strong competitive advantage resulting from its clear understanding of their values, their ability to ration creatively, and their skills to manage their business in a flexible manner. They have the ability to be more agile and vibrant in the terms of their offerings. It is difficult for banks outside Toronto to understand such issues and develop competitive products.
Vancity has always depended on corporate social responsibility to give it a well-built advantage over its competition. Their commitment to outstanding services and corporate social responsibility has set them apart from their rivalry. To continually advance among the quick changing financial services industry, they continued to chart their course based on long-term commitment to environmental and social performance.
The main competitors of VanCity are chartered banks. However, we realize that they have overcome this competition by diversifying their services from banking and loans, to building values to their members and giving them reasonable rates to accommodate them to save money, at a time when such banks only focused on being for-profit financial institutions.
“VanCity’s core competencies underpin its approach to members and employee experience, and its commitment to the local community.” VanCity gave primary importance to their members by continuously asking them for feedback, and engaging them in many decision making practices. The company even built a team to deal with the customer’s satisfaction. This dedication to satisfying their clients on a one-at-a-time basis has given VanCity high privilege in the financial services platform.
Another competitive advantage of VanCity are the services it provides to its community. They provide low income customers with credit facilities to help them, as entrepreneurs, lead a better financial history. VanCity has a high ability to responds to their customers. This is why they’ve given their members the opportunity to express their opinions to help make VanCity a bit more than solely a financial institution. It strives to make a difference in the social, economical, and environmental welfare of its community.
In summary, VanCity were living responsibility. They were sticking to their values and beliefs and were taking responsibility for their actions. This responsibility was outlines by their concern to the environment, their understanding that the welfare of their employees and customers was directly linked to their long-term prosperity, and their full partnership to their community – in other words, avoiding being just a mean to making profits.
Strategic Plan
To adapt to this new trend of e-commerce, fight the competition from the banks, and sustain their competitive advantage in the market, VanCity, in my opinion, has to take several radical decisions.
Concerning the customer services arena, which chartered banks have been fiercely deploying, VanCity should rest assure that customer relationship management is not an over-night specialty. It takes years of market studies and customer analysis to be able to draw the right plan that would satisfy consumers. VanCity has always had this competitive advantage, and I believe it would take some time for competitor banks to be able to decipher this advantage and pose as a threat. Yet, and in the meantime, VanCity should be creating new means to improving their customer services and finding ways to further satisfy their members and customers. As I already mentioned, customer preferences has forced a shift to greater services and flexibility. As such, VanCity should conduct new studies to draw a new map of today’s customer preferences. By being one step ahead of banks, VanCity can strengthen their leadership in the market when it comes to customer satisfaction.
As for the new technological advancement predicament, I recommend, and based on earlier successes that VanCity had encountered, that VanCity creates alliances with other credit unions to share the high costs of adopting up-to-date online services. Previously, it shared Inventure Solution with Surrey Metro Savings Credit Union. Today, and since competition from banks has increased, I believe that all credit unions are ready to take one step up the ladder to fight this competition. Therefore, VanCity should call for a committee composed of members of many, if not all, credit unions in Canada to come up with the most feasible alliances to reduce e-commerce adoption prices and fight chartered banks.
We live in a world of fast moving technological advancement and a merciless competitive medium. It is always important to keep a keen eye on the changes that tend to happen overnight when nobody is watching. VanCity has been a leader in its customer services expertise. They woke up to find themselves in an inevitable need to change. I believe that the trick to cope with this change is to understand your rivalries, predicting their next step, and beating them to it.
Exhibit :
Porter’s 5 forces
Threat of new entrants (Medium)
There are medium barriers to entry since VanCity’s products are differentiated
They have high customer loyalty and customer retention
The government allows easy access to the credit union market
Smaller economies of scale compared to larger banks
Switching costs are medium rated
Threat of substitutes (High)
Many similar financial services institutions are present such as:
Chartered bank
Insurance companies
Investment banks
Trust companies
Brokerage houses
Rivalry of competing firms (High)
Big Six are the dominants of the industry with ninety two percent chartered banks total asset
Availability of capital to install the latest technology
Power of Buyers (High)
Buyers have many alternative choices to pick from
Buyers demand better services and more convenience
The board of directors is controlled by members who use these services which gives buyers more power
Power of Suppliers (High)
Consumers are both buyers and suppliers of capital
They have the choice of where to invest money
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