A Critical Analysis of The Effects of Strategy Formulation in The Finance Industry..

A CRITICAL ANALYSIS OF THE EFFECTS OF
STRATEGY FORMULATION IN THE FINANCE
INDUSTRY
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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Implicit in the operations of business enterprises is the need to achieve
some desired goals and objectives. This is so, whether the organization is a
profit of a non profit making enterprises. Strategy constitutes a well thought
out plan of action towards the attainment of organizational objectives. It is an
all pervasive element in very human endeavour and it sometimes turns out to
be the only differentiating factor between similar people and synonymous
organizations. Consequently, most organizations put a lot of efforts into
strategy development and implementations. A lot of publicity exercises are
also often involved. This is usually meant to inform and educate staff
members as well as allies of the organization. But, incidentally, not all
strategies lead to the attainment of organizational goals and this could be
frustrating given the enormous cost outlay of managing strategically. Also, it
goes without much saying that failure to achieve set targets constitutes a
strong pointer towards management incompetence and a justifiable reason for
their replacement.
Thus, the importance attached to fashioning of organizational strategy is
informed more by the fear of the consequences of failure, than the desire for
success. This explains why the term strategy is treated with great awe within
the military parlance – slight slip off course by an individual within an army
of men could lead not only to his own demise, but the examination of an
entire community men. Prior to the global depression of the 1930s, most
going concerns paid little attention to the ways and means of achieving their
objectives. The environment was assumed simple and leaders of thought
imagined that the adoption of one of the contending philosophies would

always do the trick. But the great global depression of between 1928 and 1930
made a ridicule of most economic theories hitherto held as sacrosanct.
Modern business are however more apt with realities and imperative of
changes. Assumption about the environment has changed drastically to
anything but simple. The threat of competition is very high, while the reality
of a possible computer buzz by the turn of the century is also starring every
manager in the face. What more, these continuing changes cut across all
industries as well as national boundaries. Of great attention to this work are
happening in the finance industry. It constitutes a sector where desire for
changes and improvement are being agitated for on daily basis. Global efforts
are now focused on financial super marketing a total decentralization of bank
service. This will make it possible fir a customer to transact all form of
businesses within the confine of a branch, without the customer being
physically present at the department actual department designated for
offering some of the services.
In Nigeria, this is still a wild team. Current drives are however being
geared towards satellite banking, whereby bank branches will be linked with
each other through a Nationwide computer network. This will then make it
possible for a bank customers to transact business in any branch of a bank
by simply opening an account any where within its network. Towards this
end, government regulations are being firmed up. For example between 1990
and 1998, banks have been required to shore up their capital base from
N50million to N500million. This and many other stringent conditions have
posed two major challenges to bank management: first is how to source this
huge sum and second is how to justify same in a retarding economy.
Various survivals mean therefore have to be fashioned out. Businesses
and focus have to be redefined, while priorities are being well defined and

doggedly pursued. And as expected, the resulting competition has not only
created on interesting scenario, it is threatening to send many players out of
business, even as some are making the best out of the situation. This work
is kindled by these ongoing efforts. It seeks to examine the volume and
contents of bank business, their objectives, and strategies in place for
achieving same. Of particular importance is how banks generate these
strategies. The need for this is because, often, organizational failures are
recorded not because they are lacking in focus, but some people do “very
marvelous job pursuing strategies that have fatal flaws”.
What is known today as conventional banking in Nigeria started in 1894
with the establishment of British West African Bank, latter known as
Standard Bank and now First Bank. this early period to 1952 witnessed the
birth and demise of many banks, due to lack of appropriate banking
regulations. The few that survived this era with First Bank include Barclays
Bank (Union Bank), Agbonmagbe Bank (Wema Bank) and African Continental
Bank (ACB) among a handful others.
In order to bring about sanity and provide basis for solid economic
development, the period following 1952 was largely dedicated to instituting
appropriate legal framework for the industry. Hence the enactment of the
banking ordinance of 1952 and a revision of same in 1958, which provided for
the establishment of Central Bank of Nigeria (CBN). Also about the same
period, the report of a Barback committee setup in 1958 was submitted to
government. This culminated into the establishment of the Lagos Stock
Exchange in 1961. With these two umbrella bodies, the financial sector was
set for a more endurable growth. Not many activities were witnessed
thereafter, owing to a nationwide civil disorder of the mid 60s. The post war
era which also coincided with a period of oil boom however witnessed

increased activities.
The need to have a firm control of the economy brought in a great deal
of government participation during this period. Substantial interest was thus
acquired in the expatriate banks, following the indigenous enterprises
promotion decree of 1972, as amended in 1976. The highly protective
government policy and the largesse from oil importation during this period
presented little or no challenge to operators. Not much interest was therefore
paid to proper focusing of bank businesses as well as possibility of a down
turn. Meanwhile, the Euphoria of this period soon faded away, following a
global oil glut in the early 1980s, which drastically reduced oil income and set
the entire economy almost on the brink of collapse. Consequently, the need
for a complete overhaul of the entire financial system became highly
imperative. A panacea was however sought in the Structural Adjustment
Programme (SAP) which was launched in 1986. major thrust of this policy was
the deregulation of the entire economic system in order allow for easy mobility
of both human and non human assets. The finance industry witnessed a
sharp growth during this period. A new legislature framework was put in
place through the enactment of Banks and Other Financial Institution Decree
(BOFID). Licensing conditions were relaxed and this led to proliferation of
both Banks and Non Banks Financial Institution.
This again resulted in increased competition and overstretching of the
few available bank staff. A big challenge was therefore posed to the wits of all
operators in the industry, while the resulting strive could allow only the fittest
to survive. A sharp demarcation was consequently drawn between competent
and non competent banks as majority of the latter quickly fizzled out the way
they came. This demise of the unfit sent a red alert signal across the length
and breadth of the entire nation, which led to serious runs on banks and

deep rooted nationwide financial distress. The effect of this disturbance is still
being felt till the present day.
Government however made some facesaving moves to salvage this
situation, but these came rather lately, it soon became apparent that
government had hitherto failed to prepare the regulatory arm well enough for
the fallout of deregulation. Also, it became obvious that most bank
management lacked the competence to manage the evolving changes and
increasing complexities associated with the period. This was so because most
banks were then lacking in focus and appropriate grasp of key strategic issues
which needed be addressed in turbulent times.
Following these hard realities, bank management are now being
compelled to have a critical reappraisal of their focus, objectives and their
entire business plans. The pertinent question that need be asked and
addressed in this circumstance is the focus of this work. Specifically, there is
need for banks to critically reexamine what business they are in to: review
the resources required to face the nextmillennium (which will undoubtedly
pose more serious challenge than those of years past); reexamine the process
of arriving at their choice plan (strategy); question management culture in
place; and critically challenge the structural set up for strategy
implementation.

1.2 Statement of the Problem
1.3 Aim and Objectives of The Study
The basic aim of this work is to arrive at workable alternative strategic
framework for banks in relation to their Preliminary Mission Statements.
The objective on the other hand relates to general review of the resultant
effects of banks’ strategic management process.
Specially this will include the following:
a) Examination of processes of arriving at banks’ choice strategies.
b) Review of the prevailing structural framework towards successful
strategy implementation.
c) Examination of banks’ financial performance to determine whether the
adopted strategies lead to desired result.
d) In the light of i – iii, above to make appropriate recommendations on
strategic framework required for superlative performance
1.4 Sources and Methodology of Data Analysis
Sources of data for this project will be largely secondary. These will
include publication of trade bank Plcs as well as its Published Annual
Reports. Others will include journals of other banks as well as publications of
regulatory authorities such as Central Bank of Nigeria (CBN), Nigeria Deposit
Insurance Company (NDIC). And the Chartered Institute of Bankers.
The methodology of analysis is such that will follow a trend pattern.
Specific performance indices (both quantitative and qualitative) will be
examined over a period of Ten (10) years 1987 – 1997 to see whether these
reflect a stable pattern.
1.5 Scope and Limitation
The study will cover period of Trade Bank’s existence since 1987 to date.

As stated earlier, performance indices that to be reviewed will be both
quantitative and non quantitative.
The quantitative indices will include the Bank’s capital base, branch
network and structure of deposit growth. Others will include level and
structure of its load portfolio; Return on Capital Employed (ROCE), level of
liquidity as well as its Earnings Profile and dividend pay out.
The work is constrained mostly by one’s inability to assess inner working
of other banks in relation to their strategic activities. This limits the level of
comparative analysis that could have been done.

1.6 Plan Of The Work
The rest of this study will proceed as follows: review of literature in
chapter two; data specification and method of analysis in chapter three;
chapter four contains analysis of data, while the last chapter is on summary
and conclusion.

CHAPTER TWO
LITERATURE REVIEW
2.1 Concept of Strategy
The term strategy is often used in relation to many activities and
preoccupations. Hence it has a broad spectrum of application, ranging from
relationship in the ordinary course of life to technical undertakings. Such
areas where it is formally applied and pronounced include the military circle,
gaining activities and most especially business organizations. Defining it in
the military context, Hornby (1974) stated that strategy has to do with the art
of planning operation in war, especially movement of Armies and Navie into
favourable position for fighting. Neumann (1948) populonized the usage in
relation to game. He defines it as a form of plan – a complete plan which
specifies what choice to make in every possible situation.
In the filed of business, where it has gained the most pronounced
acceptance, literature is replete with so many positions and perspective to the
term. Peter F. Drucker puts it in a very simple form, as a purposely action
meant to achieve specific goals and objectives. Tregoe and Zimmerman (1980)
define strategy as a framework which guides the choices that determine the
nature and direction of an organization.
Commerford and Challagham (1985) simply put strategy as the very
focus of strategic management process, and see it as the goals and plans for
reaching (a broader) organizational objectives and for guiding it into the
future. In their own opinion, Hoffer and Schendel (1978) define strategy as the
fundamental pattern of present and planned resource deployment and
environmental interactions, which indicates how an organization achieves its
objective. Furthermore, they stated that it is a “means of locating an
organization in what theorist call an environment”.

Strategy according to Saap and Smith (1980) can be defined in terms of
responding to likely future changes in operating environment. They added the
fact that “the most important criteria for banks’ effectiveness is not in their
operational efficiency, but in their ability to adapt to environmental changes”.
From the foregoing one can deduce that strategy represents a plan of
action meant to respond to possible future changes within one’s environment.
A strategy is imperative in order to aid achievement of organization goal and
objectives, against all odds, in a skillful and masterly manner and in proper
alignment with the enterprise philosophy and culture, as well as other
external factors, outside of its control.
2.2 Role of Strategy within an Organization
Since business organizations are meant to achieve objectives, they
necessarily have to implement a strategy. Some simply go ahead doing their
businesses “as we have been doing it”, thus implementing strategies not
probably known to them. Others develop theirs following an implicit process
of brain storming and critical evaluation. Incidentally, studies have shown
that most organization do not follow the explicit strategy development process.
Enterprises that explicitly develop strategies often desire a number of benefits
there from;
i. As a plan, strategies give direction to an enterprise and ensure unity
of purpose. This saves the enterprises the cost of diversion and
digression from the main course;
ii. Strategies assist in the allocation of organizational resources. This is
so because in the process of its generation, resources required for
implementation would have been identifies and agreed upon;
iii. Strategy is a very good means of communicating and ensuring

consensus. This is so because, in the process of brainstorming,
everybody who is relevant to strategy implementation would have
been made to air his views about now to achieve the enterprise
objectives.
iv. Strategy is a means of creating a niche in a competitive environment.
Often times what differentiate enterprise from one another, especially
in a homogenous market is the different strategies being adopted,
either in the way they package their products, or the style of delivery
and the ways and manners they render their services or even in
terms market penetrating schemes.
v. Strategy is a means of propelling action. To serve this purpose,
strategies must be believable by all and every member of an
organization. Also, targets sets must be seen to be achievable, while
adequate resources must be put in place toward performance.
2.3 Levels of Strategy
Much as strategy is an all embracing concept, business enterprises do
not implement same strategy across all strata of the organization. First, job
requirements differ at various levels in the enterprise. Also, different level of
education and experiences at various levels will necessarily result in different
level of understanding and disposition to issues. For example, the non skilled
employees at the base level of an enterprise may find it difficult to
comprehend some complex planning issues. Hence, strategies are often
broken down into operational components in order to endow every member of
the organization with their existence and effects.
Writers have proposed many levels, depending on the size and
complexities of an organization. Three levels have however gained popularity
over time, before Ansoff introduced the fourth in 1979. These levels are:

corporate, business, functional and society.

2.3.1Corporate Strategy
This consists of plans and actions that are expected to guide the entire
organization as an entity into both near and distant future. It represents a
wholistic decision pursued in unison by every member of the organization as
derived from its corporate mission, objectives and goals. It answers in general
term what business line the entire organization seeks to pursue as reflected
in its various units and divisions. Corporate strategy also reflects
organizational preferences when compared with one another. Commerford and
Challagham (1985) believe for example, that corporate strategy can vary in its
desirability, just as financial managers’ portfolio of investment can.
Furthermore, the preponderance of corporate strategy makes it a very
complex decision. Ansoff (1955) opines that issues involved in corporate
strategy are harder to pin point and as such require special attention.
2.3.2Business Level Strategy
This respondent’s specific objectives and plans for different businesses
or division of an enterprise. It is usually focuses on the product/market
segment of the industry in which an enterprise is competing. Its purpose is to
ensure superlative performance for the organization’s product in relation to its
competitors. At this level, the strategic attention is more on quality service,
delivery, style, innovation and profitability.
A business level strategy often requires the support of functional units
where resources required for performance will be allocated.
2.3.3Functional Strategy
Plans at this level are concerned with the different arms of an enterprise
such as finance marketing, production and research and development. Their
roles are purely supportive and are concerned with sourcing all allocating
resources towards ensuring the success of the entire organization. Summing

up the role of functional strategy, Hoffer and Schendal (1969) enthused that
focus at this level is simply that of maximization of resource productivity.
2.3.4Societal Strategy
This has to do with how an enterprise plans to relate with its larger
environment, especially those outside of tits competitive areas. The need for
such a plan develops out of continuous agitation for higher societal
responsibilities on the part of corporate bodies. The is based on the feelings
that since corporate bodies take all their resources from the society, they
should also have specific plans to develop the environment. Thus,
“organizations with poignant social problems often give special attention to
societal strategy in order to ensure a peaceful coexistence between them and
the society”. Commerford and Challagham (1985) cited utility companies, oil
firms and Educational Institutions (for which sharply focused scrutiny has
developed over time) as examples of Enterprise that need to implement
societal strategy.
2.4 Types of Strategies
Strategies are of varied forms and often described in generic terms.
Their application is, however, situation specific. This is so because the
circumstance surrounding operation and planning premises vary from one
enterprise to another. Also, manager that do not appreciate the availability of
different forms of strategies often limit vision and horizon and are not able to
work out alternative means of addressing situations. Thus, for an optimal
strategy to be adopted during a planning exercise, managers have to
appreciate the various forms of plans and their key features, in terms of what
is required to implement a particular strategy.
The most common forms of generic strategies are growth and
retrenchment strategies. Miles and Snow (1978) however, added other terms

such as prospector, defender, analyzer and reactionary strategies. Other forms
include those used by Porter (1980): overall cost leadership, differentiation
and focus strategies.
2.4.1Growth Strategy
This has to do with just getting bigger and is usually measured in terms
of sales. It however, has relevance for an entire enterprise as the urge to get
bigger may also be in terms of size or resources. This strategy form can either
be internal or external. It is internal when the enterprise plans to grow
through generating increased sales from within, be offering new products or
operating in a rapidly growing market or by simply selling to increased
number of buyers.
Enterprises can also grow internally by sourcing material inputs
directly, thereby reducing cost and offering their products at lower prices in
order to gain more market shares. External growth involves acquiring some
other firms either in related or nonrelated areas to the current business. The
drive for this type of strategy is often borne out by the need to either award off
competition or to reap the benefit of large scale production. An enterprise
seeking to pursue growth strategies will often require skill in general
management and finance. The earlier will enable it to properly appraise new
offers and bids, while latter puts it in a good position to pay for new
acquisition.
2.4.2Retrenchment Strategies
This is the opposite of growth strategies. It basically involves reducing in
size. This strategy can be either strategic or operational. Strategic
retrenchment refers to the redefinition of goals and objectives on which plans
are based. It may happen if an unanticipated occurrence suddenly makes
plan unrealistic. Decisions may then be taken to reduce targets and set less

ambitious goals so that employees can be motivated toward performance.
Operational retrenchment on the other hand refers to a situation where
an enterprise goals and objectives remain unchanged while some aspects of
the business had to be constricted in order to achieve set goals. For example,
it a competitor (hitherto unanticipated) suddenly discovers how to drastically
reduce cost in such a way that selling in the same market becomes
unprofitable, one way out may be to reduce production scale and put
resources into other viable areas or to leave the market out rightly.
2.4.3Prospector Strategy
This emphasizes the need to compete with superlative and effective
market maneuvering. Enterprises adopting such strategy will continuously
work on improved products, using enhanced packaging and distribution
network. This strategy form is usually suitable for enterprises with strength in
general management, research and development (R & D) as well as finance.
2.4.4Defender Strategy
This involves maintaining the status quo. Enterprises that adopt such
are those that are really stable and fairly comfortable with their product mix
and market share. They usually have strong management base with high level
of operational efficiency. They also have the capacity to raise required capital
to finance their programme.
Ordinarily, the defending enterprise is not interested, unlike the
prospecting one, in breaking new grounds, but it could be very ferocious in
attacking any organization that attempts to enter into its product or market
areas.
2.4.5. Analyzer Strategy
This is a hybrid situation between prospecting and defensive strategy.
An enterprise adopting analyzer strategy is fairly comfortable with its product

and market position. It is however; often prepared to launch new products or
break into new market areas, immediately the prospector shows the way. To
adopt an analyzer strategy, an enterprise will have to be strong in general
management, research and development (R & D) and in production. Ready
source of liquidity must also be available in order to be able to seize
unanticipated opportunity.
2.4.6Reactive Strategy
This form is often employed by weak enterprises. On its own, such
enterprise cannot break new ground, nor has ability to push a superior
product in the market. Hence, it puts all plans on the actions of other player
in the industry. It comes in last into a growing market and often gets out last
in a contracting market. This is so because it does not act until there are clear
indications that other players in the industry have made moves.
Reactive strategies are often a function of intuition, as most planning
activities are meant to be proactive.
2.5 Process of Strategy Formulation
From the concept of strategy established in the previous section, there is
no gainsaying in asserting that it is about the most important singular means
of achieving enterprise’s goals and objectives. Serious attention therefore, has
to be paid to the process of its formulation. This is so because once the means
is faulty, the probability of achieving enterprise goals is virtually nil.
Resources and efforts will therefore be expended only to arrive at nothing.
Writers on the subject matter, have not only made efforts at explaining the
process of its (strategy) formulation, they have also paid considerable
attention to the need to simplify their languages, as well as make their
presentation in a logically fascinating manner.
Our focus in this section is therefore, directed at finding out whether the

process so explained are different in their main essence, since slightly
different terms are used by writer on the issue. This is only necessary
because the audience in focus vary from one writer to another. Also, the depth
and level of complexities differ from one author to another.
Consequently, our presentation will be a summary of some of the
suggested processes after which we shall deduce a working paradigm on
which our subsequent works will be premised. Saap and Smith (1980)
proposed some processes which include; strategic audit; environmental
analysis; (internal and external environment)’ development of mission,
objective and goals; strategy development; strategy implementation and
control. Rick Miltz (1988) presented a ninestep process which include: goal
setting (1year and 1 – 5years); evaluation of internal resources as strength
and weakness; appraisal of external factor in order to identify opportunities
and threats: understanding one’s competitive position; scenario building
(1year, 1 – 5years); strategy formulation; strategy testing, Evaluation and
selection; strategy implementation and control.
Commerford and Challangham (1990) simply suggested a two – phase
model – goal formulation and development of action plans to achieve goals.
They further explain the process of action plan as including: environmental
analysis (industry and internal analysis); strategy evaluation and selection; as
well as strategy control.
From the foregoing one can infer that the suggested processes are
virtually the same. The remaining part of this section shall therefore, be
devoted to examining the exercise involved at each stages which shall be
presented in following order namely; diagnosis of current situation; evaluation
of internal resources; industry analysis; environmental analysis; formulation
of mission, goals and objectives; scenario building; alternative strategy

development; strategy evaluation and selection; strategy implementation and
control.
2.5.1Diagnosis of Current Situation
This refers to a thorough analysis of what the organization is currently
doing in relation to recent changes in the operational terrain. Diagnosis is
either strategic or operational. Strategic diagnosis involves a thorough review
of key products of strategic management. These include the goals, mission
and the current strategies being implemented by an enterprise. The major
assumption upon which the strategy is presented is also examined.
Pertinent questions at this stage include:
What changes have occurred in the global market that can effect on
current strategies and goals?
Are these changes sufficiently strong enough as to make the enterprise
review its objectives and strategies?
What new moves are being made in the industry especially by competitors
that can affect current strategy?
What new opportunities or threat have become discernible that can affect
the enterprise current strategy?
What changes have occurred in the key success factors in relation to the
enterprise businesses?
How appropriate therefore is the current strategy in the light of changes in
all of the factors examined above?
Responses to these questions will either lead to a planned change in the
organizations structure and strategy or retention of same, based on strong
conviction that they are still appropriate and relevant. Petu (1998) has
argued that most successful organization is those who can sustain their
strategies over time. Hence, strategic diagnosis will let an enterprise know its

standing in relation to effectiveness of its own strategies. Operational
diagnosis on the other hand involves the examination of results obtained from
implementing current strategy.
Each functional arms of the enterprise are evaluated in terms of how far
they met their targets. These arms include finance, marketing, production,
research and development and information technology. Performance indices
usually examined include sales, profit margin, balance sheet size,
performance ratios as well as other measure s of effectiveness and efficiency.
Where the performance indices show that there are deviations from plans,
then, questions will be asked as to factors responsible for variance so
discovered. Consideration will now go further than the strategy implemented,
to include the functional structures and the entire process of strategy
implementation, to see where the problem actually lies.
In essence, what the diagnosis does for a planning enterprise is to let it
know where it is presently located both strategically and operationally.
Having known its present standing, the organization then proceeds to
set some preliminary goals and objectives which it hopes to achieve in the
future. This added to the diagnosis a planning enterprise would have been
able to determine its presents status, and what it wants to be both in the near
and distant future. Machinery will now be put in motion to assess the
feasibility or otherwise of these objectives.
2.5.2Environmental Analysis
An enterprise environment refers to factors or forces which can affect its
performance both in the near and distance future. No successful firm can
afford to neglect the effect of its environment, except it carries out its
operation in a vacuum. Even then, the closet becomes an environment which
it has to manage. Hence, modern day (managers take ample time to

understand these forces and work out how they can interact with them in
order to achieve their targets. The operating environment can be basically
classified into two, namely external and internal. External factors are those
that are outside the control of a single or individual enterprise. Saap and
Smith (1980) further classified external forces into Remote and Proximate.
Remote factors include such forces as government legislation/political
situations, economy, demography and social factors. They are said to be
remote because of the difficulty involved for a single enterprise to influence
them. Proximate external factors on the other hand are said to be the forces
operating within the industry in which it is operating, and which actually
drive its performance instincts. Such factors include competition, entry or exit
barriers, suppliers power as well as buyers bargaining powers.
Internal factors on the other hand refer to factors which are within the
control of enterprise. These include financial resources, production, level of
automation and organizational culture.
2.5.3Strength, Weaknesses, Opportunity And Threat
Usually, when an enterprise diagnosis its environment, the purpose is to
draw specific lessons and source important input for the formulation of its
strategies. The analysis of an enterprise’s internal resources allows it to know
its strength and weaknesses. An organization is said to have strength in
relation to internal resources which it has in abundance and in the right
quality mix to carry out its activities. Where some of these resources are
lacking, the enterprise is said to be weak.
Strategies are usually premised on areas of strength while some strategy
– set are avoided if the organization lacks resources to execute them. Analysis
of external environment often results in identification of opportunities and
threats. Opportunities refer to some form of attractiveness which the

enterprise can exploit to its own advantage, using its internal resources.
Threat on the other hand are difficulties which may negatively affect an
enterprise performance and which if not well managed, may lead to its
extinction. Again, such difficult only becomes threats if the enterprise is
lacking in resources to confront them. For simplicity, two level of analysis are
often undertaken in order to arrive at opportunities and threats. The first is
usually regarded to as industry analysis, which represents a thorough
diagnosis of the enterprise proximate environment. The other analysis is that
of the remote environment which also has strong effect on the proximate
environment.
2.5.4Development of Mission Objectives and Goals
After the determination of its areas of strength and weaknesses as well
as opportunities offered in the environment and the likely difficulties it may
face, a planning enterprise is now in a good stead to develop future goals and
appropriate plans towards attaining them. For this purpose all the previous
findings and analysis will now serve as input and the organization’s action
could then be described as informed decision. As earlier indicated these
mission and objectives may remain unchanged from the previous one, or it
may change radically if the organization discovers that it needs to have a
strategic refocusing. Whether or not there is need for change, the enterprise
must necessarily develop appropriate strategies towards achieving them.
However, before then, it most leaps a bit into the future to see how its
operational terrain may likely be.
2.5.5Scenario Building

Since strategy implementation will require inbuilt flexibility, planning
enterprise must develop different expectation of future events. This will enable
it to prepare different strategy – set for different situation. Likely occurrences
are often described as least probable, probable or most likely. Expectation will
be higher for the most likely events, but adequate preparation will also be
made for the possibility of other events occurring.
2.5.6Strategy Development
This stage represents the heart of strategic management. It involves
developing alternative strategies towards achieving enterprise goals and
objective, based on its expectations of the future. The first step required is
the identification of Key Success Factors (KSF). These are issues relating to
the enterprise business which if well addressed, will lead to achievement of its
goals and objectives. On the hand, if they are not well addressed, the
enterprise is just as good as not operating at all. Next is the development of
alternative strategies to address these key issues, after which a choice is
made, based on the need to achieve appropriate fit between the organization
and the people who will execute the strategy.
Diagram Showing Linkage Between Goals, Environment
And Strategy (Rick Moltz Model)
GOALS
CURRENT FUTURE
SITUATION SCENARIO
STRATEGIES
FOR THE
FUTURE
The diagram in figure 1 shows the interaction and linkages between the
earlier stages of planning exercise and the development of strategy.
In a simplified form, it shows how a planning enterprise seeks to
formulate strategies, starting with goals formulation, and how its
understanding of current situation links up with its expectation of future
situation towards the generation of strategies required to achieve the set goal.

2.5.7Strategy Evaluation and Choice
This has to do with having a closer look at the alternative strategies
being developed before an optimal one is chosen. In evaluating strategies, the
enterprise will be concerned with the practicability of the strategies in relation
to the organization’s peculiar circumstances. Thus, three issues are always
addressed in evaluating strategies before final selection. These are
consistency, risk and sensitivity.
Consistency test is carried out to see whether the strategy fits with other
arms of the organization. This is to avoid the problem often associated with
the generic nature of strategies and to appreciate that every enterprise
situation is peculiar to it. Usually, some enterprises simply adopt varied forms
of generic strategies without due consideration to their specific make up. For
example, a particular strategy may be considered good to achieve growth for
most organizations. But, it may not be an acceptable means, given the culture
of a particular enterprise. Hence, consistency test will ensure that the
strategy is actually meant to achieve what the enterprise aims at. Testing for
risk involves considering the level of deviations expected from result, if a
particular strategy is implemented. Writers are agreed that risk is measured
by standard deviation. To arrive at this, streams of outcomes from
implementing the alternative strategies are first determined. Next is the mean
expected outcome. The higher the standard deviation the higher the risk
involved in implementing the strategy.
Every planning enterprise will have to determine the level of risk it want
to take. This level can be classified as low, medium or high. Usually, the level
will depend on the enterprise target profit level and capital structure.
Enterprise with high target level will naturally profit level and capital
structure.

Enterprise with high target level will naturally have to contend with
higher possibility of failure. Regarding capital structure, organizations
financed entirely by equity funds will not likely impalement high risk
strategies. On the contrary, risk is often higher for enterprises with some
reasonable degree of gearing. By and large, most planning enterprises will
often settle for a medium risk or what is considered as an optimal risk,
considering its peculiar situation. Test conducted on the strategy will then
ensure that the risk involved I the proposed strategy is not outoftune with
what is acceptable. Sensitivity analysis refers to trying to anticipate, the likely
effect on result, if a key resource input changes significantly below
expectation, while implementing the strategy. In the main, this test measures
the tolerance limit of the strategy and indicates which of the enterprise
resources would likely impact significantly on result in case it is not available
to specification. After concluding the rigours of these tests, the strategy that
now satisfies condition set out are then chosen as those to be implemented.

2.5.8Strategy Implementation
According to Moltz (1980) refers to the process of operationalizing the
chosen strategy by aligning people’s behaviour and attitude with the strategy.
Often, the entire process of sourcing input for, and developing enterprise
strategy will be meaningless, if the chosen strategy is not implemented.
Although it appears very simple, this stage appears to be the most difficult in
the strategic management process. This is so because it often calls for
changes in attitude and perhaps the entire structure of the planning
enterprise. To ensure that strategies are well implemented, an enterprise
starts by determining the functional areas where key functional strategies will
have to be implemented so as to make for smooth implementation of corporate
strategies.
In order to energize the functional arms, required resources are then
allocated so that their effort to perform is not considered. The necessary
cultural changes are then affected so that people could be aligned with the
organizational direction. This demands that the enterprise executives play
leading roles so that employees can be strongly motivated towards
performance.
Having ensured the right attitudinal disposition, the enterprise also has
to determine the appropriate time for commencing programmes which will
reflect its chosen strategy. The imperative of timing is based on the fact that a
good strategy introduced at a wrong time may as well account for failure of
implementation, just as adopting a wrong strategy might. In providing
leadership for strategy implementation the enterprise executive will need to
gain acceptance of the key players within and outside the organization. This
often requires a lot of compromise and the best of leaders are those who can
combine many leadership styles in the process of making people to perform.

Also, such a leaders must be people whose values are strong and whose
visions dominate existing culture, such visions are usually so strong that
others often have no choice than to buy into it.
2.5.9Strategy Control
Strategy control involves monitoring the implementation programmes
and the entire strategic management process to ensure that the enterprise
activities conform with plan. To ensure effective control, the entire
organizational key players will have to agree on planning assumptions as well
as standard measures of measuring performances. These standard measures
will now have to be applied in two forms. Firstly, operational results will have
to be compared with targets. Any deviation noticed is aptly investigated for its
causes and immediate correction. Secondly, the process of strategic
management will have to be examined. This involves a continuous revision of
planning assumption and inputs as well as the institution of a contingency
plan, where there is fear that some unanticipated forces may affect the
viability of the strategy plan.

2.6 Measures of Strategy Performance
Performance measure is usually part of control activities. It assists an
enterprise to determine the effectiveness of strategies. An effective strategy is
one which, when implemented leads to the achievement of enterprises goals
and objectives. Generally adopted indices include those that capture levels of
turnover, market share, profitability, efficiency of assets and liquidity position.
Pohlman (1985) suggested eight performance measures for financial
institutions. These include: return on equity, which compares after tax profit
with average equity; Return On Asset (ROA), which relates after tax profit to
average asset; profit margin, defined as ratio of after – tax profit to total
operating income; and equity multiplier, which shows the relationship
between average asset and average equity. Others include asset utilization
which is ratio of average asset to average equity; Net Interest Income (NII),
defined as the difference between interest income and interest expense and
Net Interest Income Ration (NIIR) which is a quotient of net interest income
and average assets. The last is Maturity Ratio (MR) which measures interest
rate sensitivity – a parameter which Pohlman submitted is more paramount
for thrift and savings institutions.
A cursory review of Pohlman’s submission shows a bias for profitability
and return on asset utilization, without much regard for liquidity and the
need to meet short term obligations. Although this may have been built into
his maturity ratio concept, but the process of measuring this is very complex,
thereby limiting its usages. Besides there are many simple measures of
liquidity which are widely accepted and easily applicable.
In recent time, a parameter known as “CAMEL’ rating has gained wide
acceptance in the finance industry. Following each letter of the CAMEL
acronym, it measures Banks Capital adequacy, assets quality; management

quality, earning level and liquidity position. Inspite of its wide acceptance the
measure also presents some problems. For example, what criteria should be
used to measure quality of management. Effort at resolving this however
shows that, if other indices of capital, asset, earning and liquidity level are
above average then the quality of the bank management should be adjudged
satisfactory, since the entire happenings in an enterprise are solely the
responsibility of management.

CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Sources And Type Data
The data types are both primary and secondary. The primary forms are
source by the researcher from his personal interaction with key officers in the
bank, while the secondary ones are sourced from the bank’s published
annual reports and accounts, research publications of the bank and those of
the Nigerian Deposit Insurance Corporation (NDIC), as well as the Central
Bank of Nigeria (CBN).
The focus of the research includes:
 What structural arrangement is in place to accommodate the
bank’s strategy(ies)?
 What operational focus does it have (the bank)?
 What broad strategy types has it been implementing?
 What process of formulating the strategy?
 How effective have they been overtime?
Findings on Nos. I –iv questions were qualitatively presented, while the
last involves specifying some data in order to arrive at objective result.
3.3 Data Specification
Utilized data are expressed in the form of Ratio. They include the
following, namely:
i. Return On Equity After Tax Profit
Average Equity
ii. Profit Margin Profit After Tax

Operating Income
iii. Net Interest Income Interest Income – Interest Expenses
Profit After Interest, Tax Preference Dividend
iv. Earning per share After Tax Profit
No. of Share (Ordinary)
v. Net Interest Income Ratio Net Interest Income
Average Asset
vi. Dividend Cover Earning Per Share
Dividend Per Share
vii. Net Asset Per Share Net Asset
No of Shares
viii. Loan Per Deposit Total Loans and Advances
Total Deposit Liabilities.
Period of analysis is between 1987 – 1997. as at the time of writing this
project, the bank’s 1998 figures were not yet available , otherwise the year
1998 would have been included.

CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
Introduction
Attempts are being made in this chapter to bring out meanings from the
various data inputs that relate to Trade Bank’s strategic management
activities.
The first part of the chapter briefly reviews the structure of the bank;
the second describes the process of Strategy Formulation in the bank; the
third is On Analysis of the Bank’s Performance indeces, while the last draws
Summary on the findings presented in the first three sections.
4.1 Trade Bank Structure
Figure 4.1, shows the present organ gram of Trade Bank Plc, following
its most recent management restructuring.
By and large our findings reveal that the structure has not been a static
one. It has been changing as necessary since inception, thus reflecting the
growing nature of the bank.

TRADE BANK PLC ORGANIZATIONAL STRUCTURE
Chairman
Managing Director / Chief

Executive officer
Executive Director Finance Executive Director Banking

& Mgt Service Operation
Coy./Legal adviser General Manager Treasury & AGM Network Chief

International Finance Control Inspector
Head of Head of Head of

Administration Information Tech Finance
Head of Northern Head of Western Head of

Operations Operation Eastern
Training General Operator
Services
Branch Management
For example, the bank started with a simple structure which consisted
of a Board of Directors; a team of Management Staff and a host of middle level
management staff at the branch level.
As it presently, it increasing size and complexities are being reflected.
The structure is made up of A Board of Director (three of which are executive
members); A committee of Top management Staff, a general management
team which consist of regional authorities and heads of staff departments;
and the general middle level management which is made up of branch

managers and officers.
It is important to point out the regional management has led to a
stronger control and focusing for the bank as well as enhanced operational
effectiveness.
4.2 Operational Focus
Although the bank has significant government holding in it Equity mix,
its operational is general focused at the private business individuals in the
real sector of the Economy.
Specific attention is often paid to business with quick and high turnover.
This is greatly reflected in the branch localization strategy of the bank for
example a sizeable number of the bank’s branches are located very close to
market centres.
In terms of lending, it was gathered that the bank also has a highly
restrictive lending policy towards government and government owned projects.
4.3 Broad Strategy Type
Being a Commercial Bank intent on lubricating the wheel of the nation’s
Economic Growth, the bank operate a broad based – low cost strategy.
This is to allow it serve a wide spectrum of clients and build sufficient
margin or reserve for further growth.
In terms of risk the bank disposition has always been a continuous one
judging from its all – Equity Capital base.
4.4 Process Of Strategy Formulation In Trade Bank
Trade Bank depicts an organization that formulates strategies for all the
four levels of where distinct strategies are required.
There is however, a very strong similarity between the process of
formulating some of these plants. For example, the bank’s societal strategies
are integral part of corporate strategies, while the operational areas are

treated as business units just as the various marketing outlets or branch
network. Thus, the strategy formulation process is reduced to corporate and
business units, and these will be discussed in turn.
4.4.1Corporate Level Strategy Formulation
Findings show that five distinct stages are involved in the formulation of
the bank’s corporate strategies. These could be described as; direction setting;
generation of input on environmental factors; General Management
Brainstorming; Management committee scrutiny; and Board approval.
a. Direction Setting:
This involves identification of key strategic issues as identified by the
corporate development unit and as fine tuned by the Chief Executives.
These issues are communicated to all the bank branches and
department with allowances for issues not hitherto identified by the unit.
b. Branch and Department Inputs:
In each department and branch of the bank, there exist a strategic
Business Unit (SBU) planning sub committees. They consists of the officers
there in and a re chaired by their various Head of Department (HOD) or
Branch Managers as may be appropriate.
The key issues communicated to the SBU(s) are then thoroughly
discussed and positions are taken some of which are documented as inputs
for the next round of brainstorming. Inputs above the operating environment
of each SBU are also forwarded to the Corporate Development laid for further
processing.
c. General Management Brainstorming:

For the purpose of ensuring broad participation in strategy formulation,
the bank has since June 1991 instituted a general brainstorming session
which thoroughly discussed key strategic issues relating to the bank and its
environment. The session holds every quarter.
The session consists of all executives’ members of the bank’s
management, operational heads, and other heads of departments as well as
branch managers.
Prior to the meeting of this general house, both operational and strategic
results of various arms of the bank would have been forwarded to
Development Unit while the latter is being collated by the Finance
Department.
The session often commences with opening remarks by the Bank’s Chief
Executive Officer (CEO), who chairs the meeting. This is followed where
necessary, with some additional clarification by some other top executives of
the bank. this is followed by a general review of the bank’s remote and
proximate operating environment.
Next are general discussions on key issues arising from the environment
in relation to Trade Bank Plc. The house thereafter breaks up into working
committees where these keys issues a further discussed and
recommendations agreed upon. These are then presented to the general
agreement is always arrived at and copies given to everybody in attendance.
d. Management Evaluation:
At this level the broad based strategies agreed up at the brainstorming

session are made issues of further discussion at the management committee
level. This is aimed at ensuring proper scrutiny before they are presented for
board consideration and approval.
Management scrutiny will also give the bank’s executives the
opportunity to further appraisal of any proposed strategy in relation to some
internal constraints which are not subjects of general discussions.
e. Board Approval:
The bank’s broad of director meets regularly on quarterly basis, except
there are other contingent needs which may necessitate some extra ordinary
meeting.
Management committee, after through appraisal of the proposed
strategy forward their position to the board of directors for its consideration
and approval or recommendations to the proposed strategy.
Options open to board are to either approve as recommended; approve
subject to some changes; or propose further discussion on the issue.
Where the last of the three options is adopted, management returns the
issues via the SBU to the general management session for another round of
deliberation. However where approval is given, then divisional offices will put
machinery to ensure implementation as appropriate.
4.4.2Business Level Strategy Formulation
The process of formulating business level strategy in the bank follows
the pattern of a five – stage activities; Strategic Audit; Environmental
Scanning; Competitive Position Assessment and Development of Objectives,
Mission and Goals (MOGS) and Plan writing Velting and fund Approval.
(1) Direction Setting – This
is done at each stage of the planning activities through the corporate
development department, by inviting SBU’s representatives to the head

office for necessary training on what the activities involve and what the
bank stands to achieve. The training programme usual contains a well
packaged mix of both theories and practices of strategies planning.
Position papers are often presented while practical cases are also
examined in order to drive home the points made. On completion, these
SBU representatives will now serve as resources persons in their
respective locations.
(2) Strategic Audit –
Though termed as such, both the strategic and operational results of
each SBU are reviewed. This is accomplished through a well simplified
information gathering form. It requires every SBU to compare its present
position with its planned state.
(3) Environmental
scanning, competitive position assessment and development of mails.
Similar to what attain in the first stage, the bank also dispatch simples
input forms to SBU. These contain short and straight – to – the point question
on:
4. The SBU internal resources, to determine their strength and
weaknesses.
5. Occurrences with their remote and proximate environment, to
determine available opportunities and possible comment and future
threats.
6. Summary of each strength, weakness, opportunities and threats.
The next line of action is for the corporate development unit to
scrutinize these input sheets and ensure that they are completed according to
instruction. Those that do not meet the required standards are turned to the
originating SBU with covering notes on areas to improve upon. Further

processing of these input will only commence after all the SBU inputs have
been properly made to expected standard.
iv. Plan Writing: After the standardization of all SBU’s input the corporate
development unit now writes up the plan for each of the SBU based on the
provided information.
Thus, the entire plan document will contain both the individual SBU
plan as well as the organizational plan which will be derived mainly from the
earlier.
v. Vetting by SBU: Each SBU is then required to peruse its plan document
and comment on whether or not the contents represent their views.
After collating the documents with comments from each SBU, they are
then forwarded to the strategic planning committee which will further
deliberate on same and forward their recommendations to the management
committee.
Management committee will further deliberate on the document and
forward their recommendation to the board of directors for final approval.
f. Implementation and Control
Implementation is undertaken both at the SBU level (business strategy
implementation) and the divisional level (operational level strategy).
The divisional offices also have as part of their duties, the need to
ensure that each unit under them implements its strategies to the letter.
For control purposes quarterly returns are rendered to the corporate
development units about the result of strategy implementation.
The other control arm is a well – established inspection department.
This ensures that operational plans (as contained in the bank’s Manual Of
Procedure (MOP)) are implemented to the letter.
Any deviations spotted are then promptly rectified in order to ensure

that the bank maintain its focus.
4.5 Analysis of Operational Results
As indicated in the previous chapter, a time series analysis was
conducted on some of the bank’s performance indices in order to determine
the effectiveness of its strategies in relation to its set objective and mission
statement. Results of the analysis are presented as follow:
4.5.1Profit Margin
This is a measure of the bank’s operational efficiency. It shows how well
the bank has been able to cope with competitive pressure over time. To make
the index were meaningful; it is being compared with the level of asset
utilization.
Year 198 198 198 199 199 199 199 199 199 199 199
7 8 9 0 1 2 3 4 5 6 7
Profit Margin (%) 4.2 26.4 31.4 12.4 8.15 11.4 8.28 8.82 7.64 6.5 2.9
6 6 1 6
Asset Utilization 0.05 0.08 0.13 0.16 0.22 0.23 0.36 0.25 0.24 0.22 0.18
(x)
Above result shows a low margin, continuously dropping since 1994 and
reaching its lowest level in 1997. For these periods level of asset utilization
also shows same pattern. This implies that the bank business turnover is not
sufficient to cover its investment in asset utilized during the period.
However, between 1987 and 1993, asset utilization showed a growing
pattern, while that of profit margin was cyclical.
Consequent on the above a conclusion could be reached that the bank
has been seriously effected by with competitive pressure during the period
under review.
4.5.2Return On Equity (ROE)

This measures the overall benefit to owners of the bank ordinary shares,
of their investment in the bank. As part of its objective the bank aims to
maximize this return with the adoption of customer – drive approach to
marketing.
Results obtained are as follows:
Year 198 198 198 199 199 199 199 199 199 199 199
7 8 9 0 1 2 3 4 5 6 7
ROE 2.8 20.3 23.9 11.6 17.8 20.9 30 29.0 20 15 3
3 5 7 8 7 2
This shows a fairly low return in the first and last years under review.
For the rest of the period (i.e. 1988 – 1996), the index average about 21%.
4.5.3Net Interest Income (NII) And NII Ratio
In the absence of other income items, the NII is said to be a good
measure of the level of spread enjoyed by the bank in its lending and show the
effect of interest rate change in its result.
The NII Ratio on the other hand relates to the size of the institution.
This makes for easy comparison when undertaking cross sectional industry
analysis.
Findings on the indices as regards trade bank are presented as follows:
Year 198 198 1989 1990 1991 1992 1993 1994 1995 1996 1997
7 8
NII 116 632 1421 1440 2832 5692 10801 1066 11373 3373 4305
9 1 4 7 9 1 4 49 5 35 55
NII 25 6 13 8 13 12 18 13 11 24 12
Ratio
Above results show that the bank witnessed an increasing trend in its
NII throughout the period under review. This show that its performance is
highly dependent on interest rate change. It also shows that the various
interest rate changes during the review period had positive effect on the banks
performance.

Standard expectation however for the NII is for it to remain fairly
constant over a reasonable period of time. That this is not so for the bank
shows that it is subjected to vagaries of interest rate changes.
4.5.4Dividend Cover
This attempts to capture how significant the bank earnings is in relation
to its dividend liabilities.
Results obtained are as follows:
Year 198 198 198 199 199 199 199 199 199 199 199
7 8 9 0 1 2 3 4 5 6 7
Profit Margin 0 0 3.08 1.46 2.37 3.14 2.48 2.05 1.8 0 0
(%)
The above shows inability to pay equity holders in the first and last two
years under review. Sufficient earnings were however available in relation to
dividend payment between 1989 and 1995. Still, the pattern was cyclical.
4.5.5Net Asset Per Share
This index measures the bank’s worth in relation to its shareholding.
The understated results were obtained.
Year 198 198 198 199 199 199 199 199 199 199 199
7 8 9 0 1 2 3 4 5 6 7
Net Asset Per 1.03 1.28 1.28 0.63 0.7 0.68 0.83 0.97 1.67 0.98 0.88
Share
A growing trend is observed between 1992 and 1997 for this performance
index. Also, for all the period under review, the bank returned a Networth
higher than the value of its shares. This implies that despite the strong
competitive pressures which the bank had to face over years (as reflected in
the profitability indices), it is still able to ensure that it adds value to each
naira invested in the bank by equity holders.
4.5.6Loan – Deposit Ratio

This is intended to capture the level of income generating asset the bank
is able to create from its deposit over time. Results obtained are:
Year 198 198 198 199 199 199 199 199 199 199 199
7 8 9 0 1 2 3 4 5 6 7
Lon – Deposit 0.12 0.10 0.37 0.67 0.39 0.42 0.46 0.36 0.41 0.45 0.33
Ratio
Observation from the above shows that apart from the earlier years
when it was about 12%, this ratio averages about 40% for the period under
review, while the growth pattern is cyclical.
Absolute figures however, show that lending has been on the increase
since inception. Same goes for deposit base.
It is difficult to conclude on the appropriate of the percentage of loan to
deposit. Rather, this ratio is of assistance in raising questions as to how the
bank deposit funds have been utilized over time. Some of these question
include the followings namely;
i. What use was made of the larger percentage of the deposit not
converted into loan?
ii. What percentage of the loan is good and what margin from lending?
Investigation shows that government regulation over the years
constricted lending. Specifically, the introduction and usage of stabilization
security by government during most part of the study period has tied down a
substantial portion of depositors’ fund with the government. Furthermore,
these fund which were arbitrarily determined were not to be included in the
calculation of bank’s loans and advances, but were to be included as part of
their liquid funds. The aim of government was to control liquidity in its own
way. And by including stabilization security funds as part of banks liquid
assets it has a continuous basis to keep more funds to itself under the guise

that the banks are over liquid and those they may fuel inflation.
Regarding the percentage that is good, further disclosure in the books of
the bank shows that, just like any other business operating in the Nigerian
environment, it has to content with some bad loans which for operating
purpose are double edged served against the banks. One, there is loss of
income resulting from non payment, two, the bank also have to make
provision for loan no repaid, thus further depleting the margin made from
performing facilities.
Recovery efforts are however, being intensified and some other operating
results are showing positive outcome from such endeavours.
4.4.0Summary of Findings
From the analysis of both primary and secondary data far undertaking
in this chapter, some reasonable conclusions can be drawn regarding the
efforts of the strategies adopted in administering the bank as well as the
processes of arriving at these strategies.
i. Structure: The bank’s structure has been changing continuously over
time to reflect growth in size and complexities. This has forced changes in the
process of strategy formulation. For example, the regional offices now
constitute a bridge between the business units and management. It is
therefore, easier for the business units to seek clarification on policy matter
and to give feedback on realities on the ground.
ii. Returns On Assets: Profit margin and return on equity were used to
capture this. Result shows that these are low. Specifically strategies
implemented have not resulted in acceptable level of asset utilization turnover.
They have also not been able to put the bank in a very good competitive
position. Incidentally, tight control measures as reflected in the emerging
structure may reduce delivery time which may have weakened its competitive

process.
iii. Interest Rate Change: Inability of the bank to maintain a constant Net
Interest Income (NII) margin over time makes it valuable to vagaries of interest
change. This will be more especially so, if the rate moves downward.
iv. Net Worth: A consistently positive Net Asset per share shows that the
bank in focused on maximizing the net worth of the company. This objective is
said to be most acceptable as organizational goal in modern times. The bank
can therefore achieve a lot more in terms of accessing financial markets given
its good public perception as reflected in its worth.

CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
This work is premised on the growing attention being given to formal
planning in the Nigerian financial industry. It examines the process of
strategy formulation in banks with trade bank plc as its focus, using its
financial performance indices as measures of effectiveness of those strategies.
It commences with a review of banking businesses in Nigeria and the
need for it prepare for a longer challenge in the next millennium.
Attempt was also made to define strategy within the context of its
importance to the achievement of organizational goals and objectives.
The levels at which strategies are being implemented within formal
organization were also examined. It was noted that every organization, no
matter its size and level of complexities do implement a strategy. This is so
whether the organization does it consciously or unconsciously.
Several theoretical postulates on the process of strategy formulation
were examined. It was discovered that varying terms are often used to
describe similar activities and this sometimes make the exercise abstractive
and theoretical. In its main, the process start with determining an
organization’s goals (both strategic and operational) and ends with the
implementation of a well throughout alternative plans (based on all possible
scenario) towards achieving the set goals.
Trade bank’s planning process follows those discussed in literatures.
But for easy administration, it is compressed into four stages, namely;
strategic audit, environmental analysis and position assessment, as well as
strategy development and plan writing, SBU Velting and Approval. In addition,
the bank seems to put high premium on its structure in order to give effects

to its strategies.
Performance indices measuring competitive pressure and asset
utilization were employed. They were specified in chapter three and analyzed
for a period of ten years (1987 – 1997). Results obtained were analyzed in
chapter four.
The results show that the bank has over the years been subjected to
high competitive pressure as reflected in its low profit margin and level of
asset utilization. In essence therefore, the strategies implemented by the bank
over the period under reviewed have only made it to barely survive its first
decade. The bank is then faced with the challenge of evolving thoughts that
would earn it superlative performance during the next decade.
5.2 Suggestions and Recommendations
Findings from previous sections of this work have shown that in spite of
the tight scenario within which the bank operates, it could still utilize some
opportunities to its advantage, especially as the bank focuses on the next
millennium. To fully utilize these opportunities as they present themselves,
the bank will need to clearly distinguish strategic issues from operational
ones. The earlier relates to how the bank determines what goals and
objectives to pursue, while the latter relates to how to achieve these objectives
in the ordinary course of its business activities.
In order to obtain optimum strategic results, the bank should review the
process of generating inputs for its planning activities. Specifically, the brain –
storming exercise which was said to be a prevailing culture in the bank
between 1992 and 1996 should be revived. This would make for proper
articulation of goals and objectives by both top and middle level management
before they are adopted. In addition, it would also ensure commitment and
enhance both individual and group drive toward goals achievement.

For enhanced operational efficiency, the bank needs to improve on both
its profit margin and level of asset utilization. Incidentally, both goals appear
achievable in the Nigerian financial market as many utilized opportunities
abound therein. Specifically, the bank should consider improving the quality
of its services which will translate into higher earning since price is positively
related to quality.
To improve on the level of asset utilization, service delivery points should
be increased. This will have the effect of increasing the usage of existing
assets. One way of achieving this may be to increase the bank’s branch
network. The other is to enter into formal representative arrangements with
other banks in area where the bank does not have to branch.
Deposit generating machinery should also be enhanced standards being
set for staff in this regard should be strongly implemented.
The emerging structural arrangement based on regions and division also
poses some operational challenges to the bank. if not properly managed, it
may lead to undue bottlenecks and delays. This may lead to increased waiting
time for customers and put competitors in better stead in terms of delivery
time. A good way out is for the bank to standardize its operations at this level
in a workable manner. Clear cut operational framework backed up with
appropriate authorities should be worked out in order provide the regions
with the required leverage.
For control purpose, the bank should enhance its inbuilt checks and
balance. Modern day monitoring of financial activities is done on daily basis.
The bank can achieve complete daily monitoring through Wide Area Network
(WAN) computer programme. In the alternative, a nonepage return format
could be worked out highlighting the essential indices that ought be
monitored on daily basis.

Effective communication is also required for optimum planning and
control. A system ought to be worked out where every member of staff will
know what is expected of him at any particular point in time, regarding the
occurrence of some key job related event. This system is meant to help staff in
managing themselves appropriately and making for a balance between the job
requirement and their personal goal. If this is done, staff will easily constitute
effective checks against anomalies and fraud, without being seen as outcasts.
Reward system should then be tailored towards encouraging positive attitudes
and the criteria should be well understood by everybody. Such criteria should
also be measurable in simply manner.
Finally, the bank should look up to the next decade with enhanced
Information Technology (IT) facilities. Specifically, subsequent branch
developments should be technology driven. This becomes highly imperative
because if appropriate technology is not put up today in anticipation of future
changes, future events will force their acquisition at higher prices than would
have been required in years past.
5.3 Conclusion
Following results obtained form planning activities in the bank, it can be
concluded that strategic management processes in itself may not bring about
superlative performances, but it will ensure that the survival of the
enterprise. It need be given the required support and broken down into
operational terms in order to endow every member of the planning
organization.
Regarding trade bank, planning activities would be concluded to have
elements of sound planning. The has ensured the survival and moderate
growth of the bank in spite of the only tight scenario under which it operated
during the period under review.

With enhances financing for automation upgrade (which is already in
progress) the bank seems posed for a highly superlative performance in its
second decade of operation.

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