Read the required Roy article. Respond to the following: a. How does the strateg

Question

Read the required Roy article. Respond to the following: a. How does the strategic planning of a multi-unit business organization pose constraints to its profitable growth? b. Why do banks lose profitability as they grow bigger? c. How can product categories (loans, deposits, payment, fund transfer, custody, etc), customer segments (business, professionals, pensioners, salaried, etc), and geographical units (country, region, district, city, etc.) be better developed to achieve long-term sustainability in the bank industry? Explain your rationale.

Explanation / Answer

1.How does the strategic planning of a multi-unit business organization pose constraints to its profitable growth?

soln.Market positioning and capacity utilization can pose constraints to a bank's profitable growth. . As banks expand into different markets and lines of businesses, they grow in size and complexity. An important aspect of planning in a multi-unit enterprise such as a bank is about achieving allocative efficiency. Allocative efficiency refers to achieving the right combination of inputs to produce outputs, leading to the best possible utilization of market potential as well as resource capacity.

b. Why do banks lose profitability as they grow bigger?

soln.Banks lose profitability as they grow bigger because as the number of units increase, the planning process might lose the portfolio view. This impedes the synergy gains causing loss of allocative efficiency. Research has shown that customers of banks are not fully receiving what they want or need and their expectations, are not being met.

c. How can product categories (loans, deposits, payment, fund transfer, custody, etc), customer segments (business, professionals, pensioners, salaried, etc), and geographical units (country, region, district, city, etc.) be better developed to achieve long-term sustainability in the bank industry?

soln.The BCG market share can help to assess the growth and profit potential of business regions in regards of their deposit and advance markets and the superimposition of the industrial model of cost-capacity position to assess the existence of production economies and resource requirements. This will help the businesses gain long term sustainability. Business planning in banks must address both market and capacity factors together in order to ensure meeting of growth and profit objectives together. Failure to meet these standards will make growth without profit and unsustainable.

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