Strategic Groups in the Portuguese Banking Industry: An Analysis of the 2008-2010 Period

Strategic Groups in the Portuguese Banking Industry: An Analysis of the 2008-2010 Period

Albérico Travassos Rosário (University of Aveiro, Portugal), Antonio Carrizo Moreira (University of Aveiro, Portugal) and Pedro Macedo (University of Aveiro, Portugal)
Copyright: © 2019 |Pages: 29
DOI: 10.4018/978-1-5225-8906-8.ch001

Abstract

This chapter analyzes the retail banking behavior in Portugal for the period between 2008 and 2010. The data collection took place through the accounting consultation of the reports and accounts of the years under analysis. The selected variables reflect the strategic actions of retail banking during the period under analysis, and it can be argued that retail banking in Portugal has clear differences among players over time. In particular, banking institutions have different competitive strategies, the strategic groups do not have similar resources, and strategies also differ between strategic groups. This reflects the competitive structure of the national retail banking industry.
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Introduction

The organizations of the banking industry have a relevant position in the economy, playing a fundamental and determinant role in economic growth. They are the financial intermediaries between the State, firms, and consumers.

In the last 20 years, banking has undergone deep changes that influence strategic business options and significantly shape the future of banking organizations. Within the banking industry it is possible to identify banks that follow similar strategies that can be grouped in several strategic groups (e.g., Amel & Rhoades, 1988; Fiegenbaum & Thomas, 1990; Scannell et al., 2003; Staake et al., 2012; Tsai et al., 2011).

The study of strategic groups (SGs) is based on the foundations of strategic management (Chen & Miller, 2012; Hatten & Hatten 1987; Hervás, Dalmau, & Albors 2006). A strategic group can be defined as a set of companies employing similar strategies within an industry (Porter, 1979), although results and motivations of those companies may differ (Chen & Miller, 2012; Cool & Schendel 1987).

Research on SGs has analyzed several industries, addressing the relationships, rivalry, competitive dynamics and strategic decisions between companies within the strategic group and/or between SGs (e.g., Claver-Cortés et al., 2006; Leask & Parker 2007; Parnell, 2011; Pätäri et al., 2011) as well as the performance and stability differences over time among SGs (e.g., Martins et al., 2010; Más-Ruíz & Sala, 1992; Reger & Huff, 1993). There is also research exploring the similarities between the theory of strategic groups and the resource-based view (e.g., Leask & Parnell, 2005; Martins et al. 2010; Mehra, 1996), and, lastly, research addressing SGs as a strategic tool for the planning and implementation of competitive strategies (e.g., Ebbes et al., 2010).

The studies interpret how strategies influence SGs in a particular industry, evidencing the existence of a certain degree of homogeneity between companies in a same SG and of heterogeneity between SGs (Cool & Dierickx, 1993; Cool & Schendel, 1987; 1988; Zúñiga-Vicente et al., 2004a).

Although there are several studies addressing SGs in the banking industry (Lozano-Vivas & Pastor 2010; Más-Ruíz, 1999; Más-Ruíz et al., 2005; Más-Ruíz & Ruíz-Moreno, 2011; Más-Ruíz et al., 2014; Maudos & Pastor, 2003; Zúñiga-Vicente et al., 2004a; Zúñiga-Vicente et al., 2004b), there is none on the Portuguese banking industry. As such, the main aim of this chapter is to address how SGs are formed in the Portuguese banking industry between the years 2008, 2009 and 2010, which is a period in which the Economic and Financial Assistance Program (FEAP) was implemented in Portugal with serious consequences for the banking industry in Portugal.

Key Terms in this Chapter

Competitive Rivalry: Occurs when two or more firms try and garner favorable market position over its competitors.

Industrial Organization School: Is concerned with the use of economic analysis in studying competition between firms and the evolution of market structure.

Strategic Group: Is a management concept that separates groups of firms within the same industry with similar characteristics, strategies, business models from those with different characteristics, strategies, business models. As a result, strategic groups, within an industry, can be grouped as a dimensional homogeneous construct.

Cluster Analysis: Is a data mining technique that groups together a set of objects or firms in such a way that objects or firms in the same group (called a cluster) are more similar (in some sense) to each other than to those in other groups (clusters).

Competitive Dynamics: Is the set of actions and reactions in a competitive business environment that rival firms display. The action of an individual firm becomes the key indicator of competitive dynamics as each rival firm enacts this action in order to enhance its competitive advantage vis–à–vis its competitors.

Strategic Management School: Is concerned with the formulation and implementation of the major goals and initiatives taken by an organization’s top management, taking into account the resources, competencies and capabilities of the firm and the match of those internal resources to the external environments in which the firm operates.

Competitive advantage: Is the advantage a firm has over its competitors, which allows the firms to outperform its competitors and thus generate more revenues. The firm with a competitive advantage has an edge over the rivals, which is based on unique resources or capabilities, which allow it to generate more value to the shareholders. The main sources of competitive advantage may be patents, strong distribution network, innovative culture, stronger new product development capabilities, cost-efficient production systems, etc.

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