Investigating Competitive Advantage in Banking Industry Based on Porter's Generic Strategies: IRANs Newly-Established Private Banks

Investigating Competitive Advantage in Banking Industry Based on Porter's Generic Strategies: IRANs Newly-Established Private Banks

Mohammad Abdolshah (Department of Engineering, Semnan Branch, Islamic Azad University, Semnan, Iran), Mostafa Moghimi (Industrial Engineering Department, Semnan University, Semnan, Iran) and Seyed Amirmohammad Khatibi (Faculty of Administrative Sciences and Economics, Isfahan University, Isfahan, Iran)
DOI: 10.4018/IJAMSE.2018010104


Main objective of this article is investigating the role of Porter's competitive strategies (differentiation, cost reduction and focus) to increase the competitiveness and eventually gain competitive advantage. This study is a cross-sectional survey that is conducted in 2017. The study population is 221 CEOs (senior managers) in 99 Branches of 4 private banks in IRANs provinces Tehran (Capital of Iran), Qazvin and Isfahan as 3 of the most monetary turnovers. The research tools are a questionnaire containing demographic and specific information. To analyze the data, an SPSS statistical software is used and several statistical tests are used in the testing of the hypothesis and research goals. Finally, the impact of each dimension of the strategy to increase competitiveness is assessed. Also, each dimension is ranked according to influence; respectively differentiation strategy, focus strategy and cost reduction strategies. Considering banks multiplicity and results, special invest on differentiation strategy reaching competitiveness advantages to escape Red-Ocean in this industry is necessary. JEL Classification Codes: M13, G24, G21, F14.
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1. Introduction

Strategies used in the organization, have a great effect on their performance, in a way that some believe that choosing and implementing strategies will achieve better performance for the organization (Abdolshah, Moghimi, Azin, & Najafian, 2016). These strategies play an important role in order to gain competitive advantage. A firm will gain competitive advantage when it provides more value than expected for the available resources (Barney, 1991). Better performance of an organization against competitors can be considered a competitive advantage. Given the particular importance that large organizations around the world are allowed to develop strategies, indicates that the many benefits lie in strategy. (Porter, 1985). In other words, some believe choosing and implementing better strategies leads to achieve better performance for the organization (Gupta, Czernik, & Sharma, 2001).

Banks are not exempt from this reality and to their survival need to have proper strategy to achieve competitive advantage. (Kasman & Carvallo, 2014). Because of the multiplicity of banks, creating Red Ocean is undeniable (Moghimi, Khatibi, & Abdolshah, 2016). And this fact reflects fierce competition between both private and governmental banks. The competition is like a double-edged sword that can either undermine the profitability or improve the organization (Abdolshah, Moghimi, & Khatibi, 2017). With this interpretation, private banks are more vulnerable and for their survival is better to adopt appropriate strategies. Organizations are always looking for how to gain a competitive advantage in uncertain and rapidly changing environments (Dobni & Luffman, 2000). Therefore, choosing an appropriate strategy to gain competitive advantage is important. For this purpose, using Porter's generic model (cost leadership strategy, focus strategy, differentiation strategy) is offered.

In this study, at first the significance of each dimensions of Porter's generic model with competiveness is investigated and then the intensity of influence each dimension and indicators is surveyed. This research is appropriate to adopt appropriate strategies in such a competitive environment. In other words, CEOs at private banks can benefit to advancing their strategic plans for gaining competitive advantage.

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