The strategic objectives of Zurich Cantonal Bank
At the moment, Zurich Cantonal Bank1 occupies a leading position among numerous financial institutions of Switzerland. It is considered to be one of the safest banks in the world. ZKB styles itself as “the bank, that’s close at hand” (ZHAW, p 2). We can single out several strategic objectives of this organization:
- to retain the reputation of the most reliable banking institution in Switzerland as well throughout the world;
- to keep and strengthen customer loyalty;
- to continuously demonstrate successful financial results;
- to expand market position at national and international levels.
These are the long-term goals which should be achieved by ZKB.
This bank has a very strong success potential; in part, it can be explained by the experience which this organization has in this sphere. We should note that this bank was founded one hundred and forty years ago, and since that time, ZKB has always been reputed for its reliability, customer focus, and a wide range of services (ZHAW, p 3). This organization has survived several economic crises, and although revenues have recently declined, their financial position cannot be viewed as critical.
The structure of ZKB comprises several business units, which specialize in financing, asset management, trading, and deposit accounts. This institution has numerous branches in Zurich and across Switzerland. If we apply St. Gallen Management Model to this bank, we can say that its structure is well-adapted to the social, economic, and technological environment. More importantly, the functioning of various business units is perfectly aligned with the strategic objectives, set by the management and with the organizational culture of this bank.
The model of development
In order to propose any models of development, we must first explain the key challenges, which ZKB currently faces. One of them is intense competition: there are at least eight banks, located in Zurich and more than two hundred banks throughout Switzerland (ZHAW, 2). This circumstance forces ZKB to lower interest rates. The second difficulty is high turnover in Zurich; this means that many people live in this city only on a part-time basis.
Consequently, it is very difficult to establish long-term relationship with clients. Finally, one should take into consideration that service sector (hotels, restaurants, banks) dominates economic life of Zurich. The problem is that the credit needs of such companies are generally lower than those ones of industrial firms (ZHAW, p 3). Similar situation can be observed throughout Switzerland.
Judging from these facts, we can propose the following steps:
- to open new branches of ZKB in those areas, where manufacturing enterprises occupy dominant positions, in particular, we can argue in favor of Germany. Such cities as Munich, Stuttgart or Wolfsburg home many industrial companies that may require the services of ZKB. Apart from that, these cities have the lowest unemployment rate in Germany and across the EU, thus it is possible to assume that they have the lowest turnover rate (Siebert, p 186). Certainly, these are not the only possible regions, which ZKB can explore, yet, it seems that the management should focus precisely on the German markets, as they are most resilient to various economic changes.
- The second step will be to increase the public awareness of ZKB. The thing is that customers throughout the world know that Switzerland is arguably the largest financial center in Europe. However, many of these people will find it rather difficult to single out any specific banking institution. The news about ZKB are spread only by word of mouth, and this is not enough. This is the main reason why the management of ZKB should pay more attention to public relations.
- Finally, the management of this institution should work out strategies for reducing its operational expenses. The problem of many banks is that they are overstaffed. For instance, Zurich Cantonal Bank currently employs more than four thousand people and not all of them contribute to the overall success of this organization. This is why delayering or reduction of the staff might be necessary.
Generic competitive strategy of Zurich Cantonal Bank
Currently, the company pursues the so-called Focus Strategy. This notion was introduced by Michael Porter in 1998. It means that the company concentrates only on several needs of a vast group of population (Porter, p 25). ZKB is a classical example of such enterprise, as it addresses mostly credit needs of the customers. However, this organization also has to adopt flexible pricing policies and lower interest rates in order to withstand competition of its rivals. Therefore, we can argue that this bank strives to achieve cost leadership. Overall, one should not presume that this Bank adopts only one of the generic strategies, described by Michael Porter. It should be pointed out that those enterprises, which do not choose a particular strategy, often develop more slowly because they cannot find their niche in the market. There are two reasons for that:
- their products are not distinguishable from others;
- these companies cannot compete with large economies of scale. Yet, we cannot say it about ZKB as this bank has long become one of the key players in Switzerland.
The core competencies of Zurich Cantonal Bank
Finally, before adopting any strategic plan, the administrators of ZKB should accurately identify their core competencies. They are as follows:
- high level of experience and expertise;
- long-established reputation;
- wide range of services;
- efficient operations.
These qualities are going to be the cornerstone of sustainable growth and development.
Ludicke M. A Theory of Marketing: Outline of a Social Systems Perspective. DUV, 2006.
Porter M. Competitive advantage: creating and sustaining superior performance : with a new introduction. Simon and Schuster, 1998.
Siebert H. The German economy: beyond the social market. Princeton University Press, 2005.
ZHAW School of Management and Law. Case study on the example of the Zurcher Kantonalbank. ZHAW School of Management and Law 2010.
The German name of this organization is Zürcher Kantonalbank. While referring to it, we will use the abbreviation ZKB.