MUKUKA KOWA

UNIVERSITY OF LUSAKA

1.0 Abstract
Dynamic environment changes impact on organizations goals and objectives and this makes it difficult
for organizations to remain viable. To be able therefore to stay ahead of competition, its imperative
for the organizations to continually scan the environment so that the organizations adjust their
strategic responses to accommodate the demands of the environment. The appropriate responses by
Mr Robert Tushani strategies guarantee a competitive edge that ensures the organizations remain
relevant. Mr Robert Tushani responded to the environment using various investment strategies with
opportunities to invest, innovate and expand into new markets in order to achieve or extend a
competitive advantage. It was also established that ambidextrous strategies have been used where
organizations combine incremental change with discontinuous change, or the exploitation of existing
resources to improve efficiency. This occurs through exploration of new sources of competitive
advantage and innovation. It is recommended that in order to stay ahead of competition, commercial
banks should continuously scan the environment aggressively and speed up implementation of various
strategies.

2.0 Introduction
National Bank of Zambia had so dismally underperformed its rival banks. In the urban area, the bank
faced competition from the private banks, notably, Barclays Bank, Stanbic, Standard Chartered,
Finance Bank, Indo-Zambia Bank and Investrust. In assessing the external environment, Mr Tushani
looked at the remote environment as a set of forces that originated beyond and usually irrespective
of any single firm operating situation i.e. political, economical, social and technological factors.
Economic considerations include nature and direction of economy in which the business operates.
Socially, The banks market share standing was also boosted by its liberal credit policy and affordable
minimum balance requirement.
At the time that Mr. Tusheni joined the bank in 1997, NBZ was underperformimg. The bank had a fairly
low market share and reminded them and the other commercial banks in Zambia, had roughly similar
geographical reach, balance sheets, market capitalizations, profits and staff numbers. Issues Mr.
Tusheni identified were the granting of soft loans to old political hands, the bank operated in urban
areas and managerial positions being reserved for British and Asian expatriates. Furthermore the
withdrawal of private commercial banks assisted Mr Tushani with his new strategies he formulated.
Mr. Tushenis step was to take advantage on opportunities and mitigate the threats by mobilizing the
banks resources and moulding of organizational capability and competencies.

3.0 CORPORATE LEVEL STRATEGIES

Despite the fragile global economic environment in the 1970s, slowdown in capital investments and
private sector credit, the services sector remained buoyant after Mr Tushanis leadership role National
Bank of Zambia. The turn in fortunes of the bank under Mr. Tushenis stewardship was manifested by
MUKUKA KOWA

UNIVERSITY OF LUSAKA

an increase in business in the region attributed to the decision to headquarter Comesa in Lusaka. The
share of the banks profit that came from the region rose sharply.
Regional diversification following COMESA harmonization as well as cross-border investments
presented an opportunity for business growth. Developments within the banking sector are strongly
guided by the medium-term objectives of the financial sector reform and development strategy
embedded in the economic development blueprint. The Chief Executive used Divestment Strategy
Market share in the Zambian retail banking market was highly concentrated. This is not a new
phenomenon as far back as 1970s, with Barclays Bank, Stanbic, Standard Chartered, Finance Bank,
Indo-Zambia Bank and Investrust on the market scene but the concentration has been growing
over time. In the case of rural areas, the vacuum created by the withdrawal of private commercial
banks was an added bonus for NBZ who enjoyed the monopoly. This strategy Mr. Tusheni used in this
case was Leadership strategy. The business grew out of what others left thus increasing the number
of branches countrywide.

4.0 Business-level Strategy in competitive industries

Mr Tushani with his clear understanding of both the external economic trends knew what would
directly or indirectly affect consumption patterns. These included interest rates, rates of inflation
and trends in the gross National Bank of Zambias market share standing was also boosted by its
liberal credit policy and affordable minimum balance requirement. The bank thus became a natural
and automatic attraction to low income groups and, more importantly, to rural dwellers who included
government civil servants, peasant farmers was as a result of using Product Differentiation; Market
Focus and Low cost strategies. An assortment of retirees who had opted to settle away from the
hustle and bustle of urban life were favored under this strategy. As the environment changes firms
must change their strategies so as to survive. In turbulent environment, strategic thinking enables
organizations to be flexible enough to change accordingly. Mr Tushani viewed strategic thinking as an
on-going process in which significant events are dealt with in a comprehensive manner. If it was not for
the bank to lose even more ground, Mr. Tusheni told them, its culture and strategy would have to
change in order to compete with other commercial banks.
Politically, NBZ had an edge on the private banks because of its unquestionably privileged relationship
with the government. This special business relationship with the government was rooted in the fact
that the bank was a joint venture between the governments of India and Zambia, and the Zambian
government deemed it financially prudent to channel all its business through NBZ. This was NBZs
External Business growth strategy.

4.1 POLITICAL AND LEGAL ENVIRONMENT

The advent of liberalization and globalization had seen a lot of changes in the focus of National bank of
Zambia as a banking industry. De-regulation of interest rates and moving away from issuing operational
prescriptions have been important changes. Mr Mundia has to continue with the expansion of NBZ by
ensuring the following are done:
MUKUKA KOWA

UNIVERSITY OF LUSAKA

a) Ensuring soundness of the system by fixing benchmark standards for capital adequacy and prudential
norms for key performance parameters.
b) Adoption of best practices especially in areas like risk-management, provisioning, disclosures, credit
delivery, etc.
c) Adoption of good corporate governance practices.
d) Creation of an institutional framework to protect the interest of depositors.
e) Regulating the entry and exit of banks including cross-border institutions.
Evolution of Corporate Governance being adopted by banks, particularly those who have gone public,
will have to meet global standards over a period of time. In future, Corporate Governance will guide the
way Banks are to be run. Good Corporate Governance is not a straight jacketed formula or process;
there are many ways of achieving it as international comparisons demonstrate, provided the following
three basic principles are followed:a) Management should be free to drive the enterprise forward with the minimum interference and
maximum motivation.
b) Management should be accountable for the effective and efficient use of this freedom. There are
two levels of accountability of management to the Board and of the Board to the Shareholders. The
main task is to ensure the continued
competence of management, for without adequate and effective drive, any business is doomed to
decline. Corporate governance is about promoting corporate fairness, transparency and
accountability as seen in Tushani way of operating.
c) In order to enlist the confidence of the global investors and international market players, the banks
will have to adopt the best global practices of financial accounting and reporting. This would essentially
involve adoption of judgmental factors in the classification of assets, based on Banks estimation of the
future cash flows and existing environmental factors, besides strengthening the capital base
accordingly. Governments policy documents list investment in infrastructure as a major area which
needs to be focused. Financing of infrastructure projects is a specialized activity and would continue to
be of critical importance in the future. After all, a sound and efficient infrastructure is a sine qua non for
sustainable economic development. Infrastructure services have generally been provided by the public
sector all over the world in the past as these services have an element of public good in them. In the
recent past, this picture has changed and private financing of infrastructure has made substantial
progress.
This shift towards greater role of commercial funding in infrastructure projects is expected to become
more prominent in coming years. The role of the Government would become more and more of that of
a facilitator and the development of infrastructure would really become an exercise in public-private
partnership.

4.2 SOCIAL ISSUES ON BANKING

Since the second half of 1980s, commercial banks have been playing an important role in the socioeconomic transformation of rural in Zambia. Besides actively implementing Government sponsored
lending schemes, Banks have been providing direct and indirect finance to support economic activities.
Mandatory lending to the priority sectors has been an important feature of Zambian banking.
MUKUKA KOWA

UNIVERSITY OF LUSAKA

4.3 TECHNOLOGY IN BANKING

Technology will bring fundamental shift in the functioning of banks. It would not only help them bring
improvements in their internal functioning but also enable them to provide better customer service.
Technology will break all boundaries and encourage cross border banking business. Banks would have
to undertake extensive Business Process Re- Engineering and tackle issues like a) how best to deliver
products and services to customers b) designing an appropriate organizational model to fully capture
the benefits of technology and business process changes brought about. c) how to exploit technology
for deriving economies of scale and how to create cost efficiencies, and d) how to create a customer centric operation model. Entry of ATMs has changed the profile of front offices in bank branches.
Customers no longer need to visit branches for their day to day banking transactions like cash deposits,
withdrawals, cheque collection, balance enquiry etc. E-banking and Internet banking have opened new
avenues in convenience banking. Internet banking has also led to reduction in transaction costs for
banks to about a tenth of branch banking. Technology solutions would make flow of information much
faster, more accurate and enable quicker analysis of data received. This would make the decision
making process faster and more efficient. For the Banks, this would also enable development of
appraisal and monitoring tools which would make credit management much more effective. The result
would be a definite reduction in transaction costs, the benefits of which would be shared between
banks and customers. While application of technology would help banks reduce their operating costs in
the long run, the initial investments would be sizeable.
One area where the banking system can reduce the investment costs in technology applications is by
sharing of facilities. We are already seeing banks coming together to share ATM Networks. Similarly, in
the coming years, we expect to see banks and Financial Institutions coming together to share facilities
in the area of payment and settlement, back office processing, data warehousing, etc. While dealing
with technology, banks will have to deal with attendant operational risks. This would be a critical area
the Bank management will have to deal with in future.

5.0 Domestic mergers and consolidation

The banking systems of many emerging economies are fragmented in terms of the number and size of
institutions, ownership patterns, profitability and competitiveness of banks, use of modern
technology, and other structural features. In general, few commercial banks, even larger ones, are
listed on a stock exchange. Profitability varies widely, with some banks earning high returns but
operating very inefficiently, and other banks competing fiercely for a narrow segment of the
market. Likewise, while some commercial banks in the emerging economies are at the cutting edge
of technology and financial innovation, many are still struggling with the basic operations such as
credit risk assessment and liquidity management. Finally, recent banking crises have
weakened banking systems in a number of countries, and banks in some countries remain on
the brink of insolvency.
In this environment, it is natural to consider bank mergers as a possible vehicle for improving
the structure and efficiency of the banking industry. As bank consolidation in the emerging
economies often involves foreign banks and government intervention, this section covers a
broader range of issues than domestic mergers per se. Evidence on various motives for bank
consolidation is reviewed along with an examination of recent experience with bank
MUKUKA KOWA

UNIVERSITY OF LUSAKA

consolidation in the key emerging economies. The issues that arise include the following:

Is there a regulatory role for encouraging bank

mergers?

How can institutions with different governance structures or not subject to the
same degree of market discipline (family-owned or foreign-owned banks,
banks with no dominant shareholder) be merged without undermining public
confidence in the banking system?

How does one address the trade-off between reaping the benefits of economies of
scale and maintaining competition, which is more acute in the emerging
economies given the lower level of financial development and greater prevalence
of market distortions?

What constitutes contestable markets in the emerging economies

banking industry?

Is there a role for large, regionally (or internationally) competitive banks

(national champions) in the emerging economies?

5.1 MICHEAL PORTERS FIVE FORCES

Threat of New Entrants:
A core reason, for what is arguably, the biggest barrier of entry for the banking industry, trust.
Because the industry deals with other people's money and financial information new banks find it
difficult to start up. Due to the nature of the industry people are more willing to place their trust in big
name, well known, major banks who they consider to be trustworthy.
The banking industry has undergone a consolidation in which major banks seek to serve all of
customers financial needs under their roof. This consolidation furthers the role of trust as a barrier to
entry for new banks looking to compete with major banks, as consumer are more likely to allow one
bank to hold all their accounts and service their financial needs.
Ultimately the barriers to entry are relatively low for the banking industry. While it is nearly impossible
for new banks to enter the industry offering the trust and full range of services as a major bank, it is
fairly easy to open up and compete regional level.

Power of Suppliers:
Capital is the primary resource on any bank and there are four major suppliers (various other suppliers
[like fees] contribute to a lesser degree) of capital in the industry.
1. Customer deposits. 2. Mortgages and loans. 3. mortgage-baked securities. 4. loans from other
financial institutions.
By utilizing these four major suppliers, the bank can be sure that they have the necessary resources
MUKUKA KOWA

UNIVERSITY OF LUSAKA

required to service their customers' borrowing needs while maintaining enough capital to meet
withdrawal expectations.
The power of the suppliers is largely based on the market, their power is often considered to fluctuate
between medium to high.
Power of Buyers:
The individual doesn't pose much of a threat to the banking industry, but one major factor affecting the
power of buyers is relatively high switching costs. If a person has one bank that services their banking
needs, mortgage, savings, checking, etc, it can be a huge hassle for that person to switch to another
bank.
To try and convince customers to switch to their bank they will often times lower the price of switching,
though most people still prefer to stick with their current bank.
The internet has greatly increased the power of the consumer in the banking industry. The internet has
greatly increased the ease and reduced the cost for consumers to compare the prices of
opening/holding accounts as well as the rates offered at various banks.

Availability of Substitutes:
Some of the banking industry's largest threats of substitution are not from rival banks but from nonfinancial competitors.
The industry does not suffer any real threat of substitutes as far as deposits or withdrawals, however
insurances, mutual funds, and fixed income securities are some of the many banking services that are
also offered by non-banking companies.
There is also the threat of payment method substitutes and loans are relatively high for the
industry. For example, big name electronics, jewelers, car dealers, and more tend to offer preferred
financing on "big ticket" items. Often times these non-banking companies offer a lower interest rates
on payments then the consumer would otherwise get from a traditional bank loan.
Competitive Rivalry:
The banking industry is considered highly competitive. The financial services industry has been around
for hundreds of years, and just about everyone who needs banking services already has them. Because
of this, banks must attempt to lure clients away from competitor banks. They do this by offering lower
financing, higher rates, investment services, and greater conveniences than their rivals. The banking
competition is often a race to determine which bank can offer both the best and fastest services, but
has caused banks to experience a lower ROA (Return on Assets). Given the nature of the industry it is
more likely to see further consolidation in the banking industry. Major banks tend to prefer to acquire
or merge with other banks than to spend money marketing and advertising.
Considerable attention in the financial market has been devoted to macroeconomic and institutional
causes of banking crises. In particular, unsustainably high growth of lending to the private sector during
much of the 1990s, poor prudential regulations and bank supervision, the entry of excessive numbers of
new banks which spread the available pool of skilled bankers too thinly, and premature capital account
liberalisation were identified as major contributing factors. However, some of the most common
sources of banking crises are microeconomic in nature, including the following. Excessive optimism
about lending to rapidly expanding manufacturing firms and speculative property developers, whose
booming output and rapidly rising collateral (ie property) values gave banks a false sense of security
MUKUKA KOWA

UNIVERSITY OF LUSAKA

and allowed firms to become highly leveraged. Insufficiently diversified loan books made specialist
banks over-dependent on the particular region or sector served.
Credit assessment by banks was often very poor, and banks often made loans to related companies or
state-owned enterprises, frequently at the behest of governments. Management incentives were often
inappropriate: top management was unduly concerned with increasing the banks overall size, and loan
officers typically were rewarded for the volume of loans made rather than repaid.

6.0 RECOMMENDATION
National Bank of Zambia should revisit the mission and vision of the banks including the objectives. NBZ
must take the necessary actions to implement their strategies. This requires leaders to allocate the
necessary resources and to design the organization to bring the intended strategies to reality.
Strategy formulation includes developing a vision and mission, identifying an organizations external
opportunities and threats, determining internal strengths and weaknesses, establishing long-term
objectives, generating alternative strategies, and choosing particular strategies to pursue.
The New person appointed to replace Mr Tushani who is Mukela Mundia should use a No Change
Strategy. The continuation of the existing strategies that have so far been deployed is what this will
mean as NBZ has increased market share since Tusheni came in and profits have clearly increased. The
Other strategies that Mundia can deploy are Concentration or specialization. This involves
concentrating on doing better what one is already going well. This strategy is appropriate to small
businesses whose potential for growth depends on how effectively their specific niche markets are
satisfied.
National Bank of Zambias mission mission should be to take retail and commercial banking back to its
basics to offer a personalised service based on the provision fairlypriced products. In so doing and
through its emphasis on customer service NBZ should aims to restore the customer to the heart of
banking. What is more, because loans are made out of deposits, the bank is not dependent on
wholesale funding and so represents the kind of safe, well-capitalised new entrant that the governing
bodies might wish to encourage to foster a sustained increase in competition.
National Bank of Zambia is clearly breaking the mould, but there are doubts that it can really make a lasting
difference and break the Zambia banking especially with the ousting of the CEO who is being replaced by
Mr Mundia. Two principal challenges are cited. The first concerns NBZs ability to overcome market forces the economies of scale and other factors that favour the large incumbents and have produced such a
concentrated market. And the second questions whether a model which continues to place importance
on face-to-face branch banking still appeals in a country where alternative banking channels have become
so prevalent.
Somethings can be strength or weakness depending on banks performance compared to its competitor
and current environment:
1) Heritage
if bank have some good reputation of over the years its a strength or else that can be a weakness.
MUKUKA KOWA

UNIVERSITY OF LUSAKA

2) Brand Image
can be Weakness or Strength
3) Reach/Availability
If bank have big network of Branches and there are good alternate delivery channels its strength else its
weakness.
4) Technology
If they are strong in Technology then its strength or else weakness
5) Quality of Staff (Their knowledge, willingness to help customer, soft skills, Attitude)
Again can be Strength or weakness

6) Innovation
Giving new products and offers to customers
7) Available Assets to invest
8) New opportunity in Business area
Opportunities/Threads
1) Central banks direction/Policy
Can be Opportunity or Thread
2) Over all economy
Can be Opportunity or Thread
3) Legal/Political situation of Country/Area where bank do the business
Can be Opportunity or Thread
4) Banking sector's growth rate
Can be Opportunity or Thread

MUKUKA KOWA

UNIVERSITY OF LUSAKA

8.0 References
Copperbelt University (2007) Strategic Management
Porter, M.E (1980) Competitive Strategy, New York: The Free Press.

Tembo, J., M (2014) Strategic Management. University of Lusaka

Timmers, P. (1998) Business models for electronic markets. Focus theme EM, Electronic Markets,
Volume8, No.2.
Timmers, P. (1999) Electronic Commerce: Strategies and models for Business to
Business Trading, John Wiley and Sons Ltd.

MUKUKA KOWA

UNIVERSITY OF LUSAKA