The business-level strategy is a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there (Chiteli, 2013). Business-level strategies being employed by POSB focus on how to attain and satisfy customers by providing services and products that meet the customers’ needs, and increase operating profits. In order to attain this, the Bank’s business-level strategies focus on positioning itself against competitors and staying abreast of market trends and technology changes that keep on happening in this VUCCA environment.
The People’s Own Savings Bank, formerly the Post Office Savings Bank, was established in 1904 as a statutory fund to facilitate savings intended for national development. In 1965 the Post Office Savings Bank Act was promulgated providing for the administration of the Savings Bank by the Posts and Telecommunications Corporation (PTC) on an agency basis. The Bank derives its mandate from the Bank Act of 1999. POSB’s main functions since then are to accept deposits that are repayable with interest, provide banking and financial services for the people of Zimbabwe, encourage saving by the people of Zimbabwe, and grant loans and advances to the people of Zimbabwe.
The bank has been performing very well and recorded a profit of $16.89million as of December 2019.
From the questions below, the bank was able to decide on what strategy to use in its operations so as to capture a large clientele base and maximize the income generated. The questions that were addressed in pursuing the business-level strategies were:
The answers to these questions assisted in the decisions on which business-level strategies to implement.
Michael Porter theorizes that there are two main types of business strategies that were adopted by the bank after an analysis of the market and assessment of what can make the bank expand and make profits. The two strategies which are cost leadership and differentiation are discussed in detail below.
The cost leadership strategy encompasses being the leader regarding cost-effectiveness in your industry. The POSB Bank focuses on cost containment strategies in terms of increased utilization of existing products as well as the introduction of new products. It has focused on cost leadership as a strategy and charges very low fees in the banking sector. The bank implemented this strategy massively through its People’s choice account. This account targeted the unbanked populations and it comes along with a free debit card which can be used to transact at any Zimswitch ready ATM and POS machines. The account is an instant and affordable account that has no monthly account ledger fees and also no minimum balance. The rest of the accounts in the bank also charge very low monthly service fees and withdrawal fees. This strategy attracts cost-saving clients and also hence the loyalty from the wide clientele base of the pensioners and civil servants. This was implemented on a very large scale with aggressive marketing through its agency network of 35 own branches and over 300 agents so as to reach all the targeted consumers.
In order to be a successful cost leader, POSB has continuously worked to lower costs relative to its competitors. The bank has done this by maintaining tight control over the product and overhead costs, minimizing the cost of sales, research and development, and customer service.
The fundamental principle of this business-level strategy is simple, different is good. POSB’s aim is to add value to its products and services so that they become more attractive than those offered by its competitors. Because of the Esteem banking services being offered by the bank, the customers are willing to pay a premium price. As such, it is able to absorb the higher operating costs and strategy has proved to be quite lucrative.
Through the Esteem private banking arm of POSB, the upmarket and more sensitive clientele can enjoy the benefits and uniqueness of priority banking both in dedicated private banking branches and all POSB branches. Clients appreciate personalized services as they will have an Officer dedicated to their private banking needs. The bank has used this strategy to tap into the elite clientele base and enjoy the huge profits that come from the operations of such services. This private banking product is mainly by invitation from the bank and the customer has to be receiving a minimum net salary of $2,000.
Pursuing a differentiation strategy gives rise to a problem for the bank and must keep a constant eye on what’s next and stay agile with their product development process otherwise, its stand-out offering can quickly become another commodity in the market. The most significant risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are not unique to the bank alone. As such, other competitors can copy your cost reduction strategies and compete with you on price. The problem arising from these strategies is best explained because imitation is the sincerest form of flattery If the bank releases a product or service that makes waves in the marketplace, you can be sure that your competitors will quickly follow suit.
According to (Oosthuizen, 1997), an effective strategy is said to provide a much sustainable competitive advantage to an organization and hence a superior performance. In the end, it all comes down to who the bank’s target market is, what are their needs, and how the business is prepared to deliver against those needs. Business level strategies for POSB have proved to work for the bank from the top management coming up with the strategies and the implementation on all levels within the bank.
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