Nyam Uzi Hwa

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MIDLANDS STATE UNIVERSITY

FACULTY OF COMMERCE

GRADUATE SCHOOL OF MANAGEMENT

THE INFLUENCE OF ECOCASH ON ZIMBABWEAN COMMERCIAL


BANKS’ STRATEGIES (2011-2013)

BY

JOSHUA NYAMUZIHWA

STUDENT NUMBER R13967Y

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE


REQUIREMENTS OF EXECUTIVE MASTERS IN BUSINESS ADMINISTRATION
DEGREE (EMBA)

May 2014, Gweru, Zimbabwe


MIDLANDS STATE UNIVERSITY
RELEASE FORM

NAME OF STUDENT: JOSHUA NYAMUZIHWA

TITLE OF PROJECT: THE INFLUENCE OF ECOCASH ON


ZIMBABWEAN COMMERCIAL BANKS’
STRATEGIES (2011-2013)

PROGRAMME FOR WHICH


PROJECT WAS PRESENTED: EMBA

YEAR GRANTED: 2014

Permission is hereby granted to Midlands State University to produce single copies of this
project and lend or sell such copies for private, scholarly or scientific research purposes
only. The author reserves other publication rights neither the project nor extensive extracts
from it may be printed or otherwise reproduced without the author’s written permission.

SIGNED ………………………………………

PERMANENT ADDRESS .............................................................

DATE May 2014

ii
MIDLANDS STATE UNIVERSITY
APPROVAL FORM

The undersigned certify that they have read and recommend to Midlands State University
for acceptance a research project titled ‘the influence of EcoCash on Zimbabwean
commercial banks’ strategies (2011-2013)’ submitted by Joshua Nyamuzihwa in partial
fulfilment of the requirements for the Executive Masters In Business Administration Degree
(EMBA).

………………………………………………….
SUPERVISOR

………………………………………………….
PROGRAMME / SUBJECT COORDINATOR

………………………………………………….
LIBRARIAN

………………………………………………….
DATE

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DEDICATION

I dedicate this research to my loving wife Otilia, and my two children Yolanda and Josh
(jnr) who inspired me to stand up to all the challenges I faced. My mother Lenah and
Father Patrick who kept on encouraging me to have faith and remain focused until the end.

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ACKNOWLEDGEMENTS

The researcher would like to thank the supervisor, Mr Sibanda, for his assistance throughout
the conduct of the research. Participants who took part in the study especially those from the
Commercial Banks, Reserve Bank of Zimbabwe and Bankers Association of Zimbabwe are
also being acknowledged. Acknowledgement also goes to the staff from the Graduate
School under the Faculty of Commerce at the Midlands State University for their dedication
and professionalism to duty that also assisted me in carrying out this research.

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ABSTRACT

This study focused on the influence of EcoCash on commercial banks’ strategies in


Zimbabwe. The study was motivated by the fact that banks failed to ensure financial
inclusion and to take advantage of unbanked market and this resulted in Econet seeing an
opportunity and launched EcoCash. EcoCash has had a huge impact and its accounts exceed
total bank accounts. Objectives of the study were to examine reasons for the emergence of
EcoCash, to assess the influence of EcoCash on Zimbabwean banks’ market, to explore
strategies put in place by banks in light of entrance of EcoCash into the financial sector, to
analyse sources of competitive advantage for Zimbabwean banks, and to propose a model
that brings collaborative synergies between EcoCash and the Zimbabwean banks. The study
reviewed literature related to strategy, competitive advantage, the emergence of MMT
services in Africa and influence of MMT on banks’ market. The study population was
comprised of employees and managers in 16 commercial banks, RBZ, and BAZ. The
researcher used a mixture of probability and non-probability sampling techniques. Self-
administered questionnaires and structured interviews were used as research instruments.
The study found out that EcoCash was prominent because commercial banks failed to
exploit the unbanked informal market. EcoCash resulted in decline in bank deposits and
clients closed their accounts. Nevertheless, commercial banks have competitive advantage
in terms of being able to process high value transactions, and facilitate international
transactions. The study recommended that there was need for commercial banks to ensure
training of employees and to empower employees through participation in decision making.
It was also important for the financial institution to ensure a high level of employee
motivation. Motivation of employees would be starting point of ensuring customer
satisfaction because human resources are sources of competitive advantage. Another
recommendation was that commercial banks should invest in research and development and
come up with new, unique products and research should be conducted so that banks are
aware of expectations of clients. It was held that banks were facing stiff competition from
EcoCash, therefore, they needed to ensure that alliances signed with other companies are
effective. For example, the bank could have fully exploited its partnership with EcoCash
and ensure convenience to clients. New strategic alliances, for example with funeral
assurance companies like Nyaradzo, could be sought. The researcher recommended that a
study on effectiveness of commercial banks’ human resources strategies be conducted. This
was because of the fact that the researcher discovered, during the conduct of study, that
human resources are sources of competitive advantage for any company. Therefore, having
effective human resource management practices would ensure customer satisfaction and
commercial banks would be able to retain clients.

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TABLE OF CONTENTS

Cover Page i
Release Form ii
Approval Form iii
Dedication iv
Acknowledgements v
Abstract vi
Table of Contents vii
List of Figures ix
List of Tables ix
List of Acronyms ix
CHAPTER I: INTRODUCTION
1.1 Introduction 1
1.2 Background to the Study 1
1.3 Statement of the Problem 4
1.4 Research Objectives 5
1.5 Research Questions 6
1.6 Significance of Study 6
1.7 Scope (Delimitation) of Study 6
1.8 Theoretical Framework 7
1.9 Limitations of Study 8
1.10 Definition of Key Terms 8
1.11 Summary 9
CHAPTER II: LITERATURE REVIEW
2.1 Introduction 10
2.2 Emergence of Mobile Money Transfer (MMT) in Africa 10
2.3 Influence of MMT on Bank Market 14
2.4 Strategies in Response to Competition 19
2.5 Competitive Advantage 28
2.6 Possible Areas for Collaboration 34
2.7 Summary 35

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CHAPTER II: RESEARCH METHODOLOGY
3.1 Introduction 36
3.2 Research Philosophy 36
3.3 Research Design 36
3.4 Research Population 36
3.5 Sampling Design 37
3.6 Research Instruments 37
3.7 Validity and Reliability of Research Instruments 39
3.8 Ethical Considerations 40
3.9 Data Analysis and Presentation Procedures 40
3.10 Summary 41

CHAPTER IV: DATA PRESENTATION, ANALYSIS, AND DISCUSSION


4.1 Introduction 42
4.2 Response Rate and Demographic Characteristics of Participants 42
4.3 The Rise of EcoCash 44
4.4 Influence of EcoCash on Bank Market 50
4.5 Strategies in Response to EcoCash 52
4.6 Sources of Competitive Advantage for Banks 55
4.7 Areas for Collaboration between Banks and Econet 57
4.8 Summary 58

CHAPTER V: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS


5.1 Introduction 59
5.2 Summary 59
5.3 Conclusions 60
5.4 Recommendations 62
5.5 Suggestions for Further Study 62

References 63
Appendix I: Questionnaire to Participants 68
Appendix II: Interview Guide 73

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List of Figures

Figure Description Page


1.1 Porter’s Five Forces Model 7
2.1 Strategic Thrusts 22
2.2 Porter’s Five Forces Affecting Strategy 30
4.1 age of Participants 42
4.2 Bank’s Ability to Meet Clients’ Needs 44
4.3 Level of Client Satisfaction 45
4.4 Findings on Bank Charges 47
4.5 Nature of Bank Products and Services 48
4.6 Possible Strategies to Retain Clients 52
4.7 Banking Facilities on Offer 55

List of Tables

Table Description Page


2.1 Alternative Growth Strategies 24
4.1 Response Rate 41
4.2 Gender of Participants 42
4.3 Tenure of Employment 43
4.4 Transactions and Payment Systems 46
4.5 Number of Accounts Opened and Closed 49
4.6 Possible Strategies to Retain Clients 51
List Acronyms
• BAZ: Bankers Association of Zimbabwe
• GDP: Gross Domestic Product
• MMT: Mobile Money Transfer
• MOU: Memorandum of Understanding
• RBZ: Reserve Bank of Zimbabwe

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CHAPTER I

INTRODUCTION

1.1 Introduction
This study focused on the influence of EcoCash on commercial banks’ strategies in
Zimbabwe. This chapter presents the following key areas of the research; background to
the study, statement of the problem, research objectives, research questions, significance
of the study, assumptions, delimitation of the study, theoretical framework, limitations of
the study, and definition of key terms.

1.2 Background to the Study


In the years following Zimbabwe’s attainment of independence in 1980, the economy
was liberalized and the financial services sector experienced fair growth providing a wide
range of business opportunities for the indigenous population. In spite of this growth in
the number of financial institutions the customer target market is largely the formal
sector. The soundness and financial condition of banks has generated a lot of debate
lately amongst academics and policy makers, especially in view of the electronic
commerce in Zimbabwe since the introduction of multicurrency regime in 2009. In its
January 2011 monetary policy statement the Central Bank called upon banks and other
relevant stakeholders to deliberately invest in non brick and mortar infrastructure
throughout the country so as to promote the use of cards as an electronic payment
mechanism (RBZ, 2011).

Geographical representation of branches is also concentrated in major cities and towns.


Rural communities and the informal sector appear not to be a priority in this regard
(Chitura et al, 2009). Therefore, there was low financial inclusion in Zimbabwe and in a
January 2011 Monetary Policy Statement, the Reserve Bank of Zimbabwe (RBZ)

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Governor noted with concern the attitudes of some banks which were not operating in the
spirit of laying a solid foundation for sustainable financial inclusion in the economy.

According to Devlin and Gregor (2008), there was a growing consensus on the
importance of financial inclusion the world over. Technological advancements have
resulted in mobile phone operators providing Internet facilities and there was scope for
ensuring financial inclusion through mobile banking. These developments afforded
companies opportunities to interact with clients and business partners using mobile phone
Internet facilities. However, banks were slow in terms of adopting Internet banking and
large sections of the population remained unbanked. According to Makunike (2013), only
about 24% of the population had access to formal banking services. Along similar vein,
Mapakeme (2013) argued that 11.2 million Zimbabweans were without formal banking
services.

Therefore, technological developments were expected to facilitate financial inclusion.


However, the adoption of Internet banking in the Zimbabwean banking had been sluggish
despite the convenience it brings to the customers and the banks. According to Dube et al
(2009), if the banks and policy makers (Government and the Central Bank) had been
innovative and proactive the liquidity challenges affecting most commercial banks would
have been mitigated as customers would have resorted to the digital payment systems that
do not require them to visit banking halls for hard cash.

Moreover, the recognition that access to suitable financial services is a critical enabler of
quality-of-life improvements and economic development is not in dispute. Access to
financial tools such as savings products, payment services, remittances and insurance,
equips poor people with a greater capacity to increase or stabilize their income,
strengthen their resilience to economic shocks and build assets. In spite of such
apparently obvious benefits, it was arguable that Zimbabwe financial institutions were
paying a lip service to such a worthy cause. This attitude and absence of strategic vision

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entailed that banks lost opportunities to exploit the unbanked market. Therefore, Econet
Wireless saw the opportunity and launched EcoCash in 2011.

Levlin (2013) pointed out that EcoCash is altering Zimbabwe’s financial landscape and
could threaten the sustainability of banks. The existence of a large unbanked market
resulted in Econet management realizing that there was an opportunity to play a role in
financial service delivery. As a result, within two years of launch, over 2.3 million
Zimbabweans had registered for EcoCash mobile money accounts, outnumbering all of
Zimbabwe’s traditional bank accounts combined (Levlin, 2013). Over 1 million of these
accounts were active and pushed US$200 million of volume over the EcoCash platform
every month. When annualised, that volume represented an amount equivalent to 22% of
Zimbabwe’s Gross Domestic Product (GDP) (Levlin, 2013).

The researcher believed that banks ought to have been exploiting the market which now
falls under Econet. Management of banks was supposed to take advantage of
opportunities in the macro environment and gain competitive advantage. Therefore, it
seemed as if there were inadequacies in the strategic management process within banks.
One can argue that the reason why banks were failing was due to lack of strategic vision
on the part of management.

In addition, Econet was looking forward to further exploitation of the financial services
sector and launched EcoSave, where people could operate savings accounts, apply for,
and receive loans through EcoCash. Such innovative seemed to lack among institutions
that were supposed to take a leading role in financial matters. Therefore, if banks are to
survive competition, there is need for effectiveness in strategic management.

Effective strategies are required so that banks could reduce the damage being caused
competition from EcoCash. There is need for banks to respond to EcoCash or most risk
being liquidated and follow the path of failed banks.

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Moreover, effective strategies are required so that banks restore investors and depositor
confidence. The hyperinflationary environment which haunted the country, within the
last decade (2000 to 2008) affected the banking industry negatively. The rapid fall in
value of the Zimbabwe dollar and cash shortages made financial sector highly unpopular.
The soundness and financial condition of banks has generated a lot of debate lately
amongst academics and policy makers, especially in view of the electronic banking in
Zimbabwe since the introduction of multicurrency regime in 2009. The Central Bank has
constantly implored banks to conduct their business within the confines of regulatory
environment and technological competitiveness in signed a memorandum of
understanding (MOU) with banks during the beginning of 2013 that was aimed at
ensuring ethical conduct. To this end, the researcher raises questions on the effectiveness
of competitive strategies in place within the banking industry. Therefore, this study
assessed strategies within banks, especially in response to EcoCash.

1.3 Problem Statement


Zimbabwe has more than 25 financial institutions, all of which seemed to have failed to
ensure financial inclusion and to take advantage of unbanked market. EcoCash has had a
huge impact and its accounts exceed total bank accounts. The response from banks has
been to issue a complaint to regulators that Econet was entering the financial sector in
which it was not a registered bank. One can argue that there was a need for banks not to
be ‘crybabies’ and respond to EcoCash through strategy. Therefore, this study sought to
assess if banks have adopted any strategies in response to EcoCash.

1.4 Research Objectives


This study aimed at achieving the following objectives;
• To examine reasons for the emergence of EcoCash.
• To assess the influence of EcoCash on Zimbabwean banks’ market.
• To explore strategies put in place by banks in light of entrance of EcoCash into
the financial sector.

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• To analyse sources of competitive advantage for Zimbabwean banks.
• To propose a model that brings collaborative synergies between EcoCash and the
Zimbabwean banks.

1.5 Research Questions


• What are the reasons for the emergence of EcoCash?
• What is the influence of EcoCash on Zimbabwean banks’ market?
• What are the strategies put in place by banks in light of entrance of EcoCash into
the financial sector?
• What are the sources of competitive advantage for Zimbabwean banks?
• What can be done to ensure collaborative synergies between EcoCash and the
Zimbabwean banks?

1.6 Significance of the Study


1.6.1 Significance to Practice
The study might provide an opportunity for banks to evaluate the effectiveness of their
strategies and business models. The study might help them appreciate the existence of
untapped markets, and diversify their target market. The research might assist strategists
and other relevant stakeholders to implement strategies using the document as empirical
evidence. In addition, the study broadened the researcher’s knowledge of strategic
management and banking and finance.

1.6.2 Significance to Theory


EcoCash was launched in 2011 and, apart from analyses done by the media, no academic
research on it influence on bank strategies has been conducted. Accordingly, this study
might add to the body of knowledge and to encourage future research on the subject.

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1.7 Delimitation of the Study
1.7.1 Time Scope
The study examined the influence of EcoCash on commercial bank’s strategies from
2011 (when EcoCash was launched) to 2013. The rationale was to analyse changes in the
operations of commercial banks over the given time period.

1.7.2 Theoretical Scope


The researcher assessed banks’ strategies in light of entrance of EcoCash into the
financial sector in 2011. The study examined strategies adopted by commercial bank to
manage the threat posed by EcoCash. Focus was on assessing the influence of EcoCash
on banks’ market, and on whether banks had crafted specific strategies to counter the
impact of EcoCash. The researcher also analysed the sources of competitive advantage of
banks.

1.7.3 Geographical and Methodological Scope


The study focused on the Zimbabwean financial sector. The study was confined to
Commercial Banks, Bankers Association of Zimbabwe (BAZ) and Reserve Bank of
Zimbabwe (RBZ). Information was collected from participants in Harare. The researcher
was biased towards participants at head offices of banks, especially top management. For
RBZ, management in bank licensing, supervision and surveillance division will be
targeted for the study. Purposive sampling technique was used to select participants and
attempt was made to identify participants who were good prospects for required
information. There were 16 commercial banks in Zimbabwe and each bank provided five
executives to the sample, while five participants were selected from BAZ and RBZ.
Therefore, the sample was made up of 90 participants.

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1.8 Theoretical Framework
The researcher made use of Porter’s five forces for analysing competition. Porter (1985)
identified five forces that are widely used to assess the structure of any industry. Porter’s
five forces are the bargaining power of suppliers, bargaining power of buyers, threat of
new entrants, threat of substitutes, and rivalry among competitors. According to Grant
(2008), the strength of the five forces determines the profit potential in an industry by
influencing the prices, costs, and required investments of businesses, the elements of
return on investment. Stronger forces are associated with a more challenging business
environment. These factors are shown in figure 1.1.
Figure 1.1: Porter’s Five Forces Affecting Strategy

Threat of
substitutes

Bargaining power Bargaining power


of suppliers Rivalry among of clients
existing competitors

Source: Porter (1985) Threat of new


entrants

1.9 Limitations of the Study


The researcher faced a number of limitations during the study. The following were some
of the limitations.
• Higher level management employees were not readily available due to work
commitments. In order to overcome this, appointments were made in advance to
ensure availability of participants.
• Participants were not willing to divulge accurate information about strategies in
their respective banks because of the issue of confidentiality. However, the
researcher assured them that information to be collected would be used for
academic purposes only and would be treated with a high degree of
confidentiality.

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1.10 Definition of Key Terms
1.10.1 Key Terms
• Competitive Advantage: Competitive advantage is at the heart of every firm and
it about staying ahead of competition and safeguarding an organization’s position.
Competitive advantage is the favorable position an organization seeks in order to
be more profitable than its competitors.
• Financial Inclusion: Financial inclusion is access to financial tools such as
savings products, payment services, remittances and insurance, equips poor
people with a greater capacity to increase or stabilize their income, strengthen
their resilience to economic shocks and build assets. Financial inclusion is also
concerned about the provision of financial services at affordable costs to vast
sections of disadvantaged and low income groups. Financial Inclusion, financial
inclusion is characterised by four core elements or dimensions, the basic products
provided, how the product is provided (convenience, affordability, and quality),
the nature of clients, and the service providers.

• Strategy: It is a move for gaining competitive advantage. Strategy is the direction


and scope of an organization over the long term which achieves advantage for the
organization. Organizations can adopt defensive or offensive strategies in order to
remain competitive. Aggressive strategies are aimed at taking market away from
competitors and involve a lot of risks. On the other hand, defensive strategies aim
to protect an organisation’s position and involve satisfaction of clients, retaining
clients, and lowering risks of being attacked.

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1.11 Summary
This chapter introduced the study and presented the background of the study where it was
highlighted that failure by banks to exploit the unbanked market resulted in the launch of
EcoCash. EcoCash seem to have altered Zimbabwe’s financial landscape and could
threaten the sustainability of banks. The main objective of the study is to assess if banks
have adopted strategies in response to EcoCash. The chapter also presented the
significance of the study, delimitation, theoretical framework, research limitations, and
definition of key terms. The next chapter focuses on literature review. Chapter three shall
present research methodology, chapter four focuses on findings, and chapter five shall
present conclusions and recommendations.

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CHAPTER II

LITERATURE REVIEW

2.1 Introduction
This chapter focuses on review of literature related to strategy, competitive advantage,
and MMT. The chapter discusses the emergence of MMT services in Africa and
influence of MMT on banks’ market. There is also a review of literature on strategies in
response to competition. Focus is also on review of literature on competitive advantage
and on how to ensure collaboration between MMT service providers and banks.
According to Saunders, Lewis, and Thornhill (2012) literature review focuses on
previous work of other scholars and it helps to put one research in context and prevents
‘reinventing of the wheel’.

2.2 Emergence of Mobile Money Transfer Services in Africa


Mobile banking, also referred to as m-banking, is an application of mobile commerce that
enables customers to bank virtually at any convenient time and place (Suoranta, 2003). It
is also defined as the provision of banking and related financial services such as savings,
funds transfer, and stock market transactions among others on mobile devices (Tiwari
and Buse, 2007). Mobile banking systems offer a variety of financial functions, including
micropayments to merchants, bill-payments to utilities, person to person (P2P) transfers,
business to business (B2B) transfers, business to person (B2P) transfers and long-
distance remittances.

Although various, and at times competing, labels and definitions have been used when
discussing the provision of financial services through mobile phone networks, this study
uses the increasingly popular term ‘mobile money’ to refer to the convergence of mobile
telephony and financial services. Following Heyer and Mas (2010), mobile money
includes three elements, 1) an electronic stored value account linked to a user’s mobile

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phone, 2) mobile phone software or application that allows users to manage their
accounts, and 3) a network of agents where users can exchange between cash and
electronic value. The software can afford a variety of uses, such as the ability to check a
bank account balance via text message, the means to pay with or send money from a
digital account on a mobile phone, or the practice of receiving insurance or credit
products over the mobile network (Chaffey, 2008).

Assessing the diversity of mobile money, Gencer (2011) separates mobile money into
mobile payments, mobile finance, and mobile banking. For example, in Kenya,
Safaricom’s service is capable of each of these functions.

According to Lawark (2013) mobile money could be an effective strategy for financial
inclusion. As a form of e-banking, m-banking is defined as financial services delivered
via mobile networks and performed on a mobile phone. These services may or may not
be defined as banking services by the regulator, depending on the legislation of the
country in question, as well as on which services are offered. MMT connect consumers
financially through mobile phones and allows for any mobile phone subscriber, whether
banked or unbanked, to deposit value into their mobile account, send value via a simple
handset to another mobile subscriber, and allow the recipient to turn that value back into
cash easily and cheaply. In this way, m-money can be used for both mobile money
transfers and mobile payments. Mobile banking, and consequently, mobile payments and
mobile money are the latest in a myriad of emerging technological innovations in the
banking industry. The usage of mobile banking and in particular, payments by means of
mobile phones, have increased in recent years in Africa (Kufandirimbwa et al, 2013).

In addition, Porteous (2006) asserts that mobile banking has the potential to be
transformational owing to various facts. First, it uses existing mobile communications
infrastructure which already reaches unbanked persons. Secondly it may be driven by
new players, such as mobile phone industry operators, with different target markets from

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traditional banks who are able to harness the power of new distribution networks for cash
transactions. These include airtime merchants, who extend the reach beyond the
conventional tellers or automated teller machine (ATM) networks of banks. In addition it
may be cheaper than conventional banking, if the offering is competitive enough.

One of the reasons mobile money has attracted considerable attention is the expectation
that it can provide affordable financial services to previously excluded populations
(Ivatury, 2006). A considerable literature on financial inclusion emphasizes that ‘banking
the unbanked’ can lead to better decision making, more efficient markets, and various
other development goals (Collins et al. 2009). Throughout the developing world, mobile
phones have emerged as one of the most widely diffused technologies; in Kenya, mobile
subscriptions in 2009 were 48.65 percent of the population, up from a paltry 0.41 percent
10 years earlier. The researcher notes that this is a scale unimaginable for traditional
brick and mortar infrastructure, such as bank branches. Kenya’s first MMT service, M-
PESA was launched in March 2007 and since then has grown remarkably. It consists of a
number of interconnected systems that form the M-PESA network. The software
application resides on the SIM card. The M-PESA application connects to the Safaricom
network and uses the SMS protocol to communicate with the central servers (that record
transactions) and other phones (such as for a peer-to-peer value transfer). A user registers
for M-PESA at any one of the hundreds of thousand licensed agents. The registration
process is free and only requires the customer’s name, national identification number,
date of birth, occupation, and mobile phone number (Mas and Radcliffe, 2010). The
researcher observed that the registration for M-PESA is similar to that used in Zimbabwe.
In fact, In Zimbabwean MMT operators actually copied from Kenya.

It was observed that, though MMT were adopted late in Zimbabwe, as compared to
Kenya, Zimbabwe is on a high growth trajectory and has also embraced MMT services.
The three mobile telephone operators in Zimbabwe, Econet Wireless, Telecel, and
Netone, all have MMT services. MMT services, especially Econet Wireless’ EcoCash

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have become prominent in facilitating transactions and sending of money. The fact that
about 1.1 million people (9% of the total population) in Zimbabwe have a bank account
shows that MMT services are vital in ensuring financial inclusion. Over 70 out of every
100 people have a mobile phone hence the opportunity for Mobile Money (Econet
Wireless, 2012). Also, many authors acknowledge that m-banking has been taken up
rapidly in many developing countries which have experienced a high penetration rate of
mobile handsets in the market (Boadi et al., 2007; UNCTAD, 2007; Donner, 2007; Wray,
2008; Cruz and Laukkanen, 2010).

In addition, banks seem to be neglecting the informal and rural sectors, where the
unbanked market is in abundance. According to Mapakame (2013), 11.2 million
Zimbabweans were without formal banking services. Given that the economy is largely
informal, with small and medium sized enterprises (SMEs) constituting the majority of
industries, the market form financial institutions have shifted from being formal to
informal and banks seem to have failed to adjust to the social changes. Absence of
financial inclusion created an opportunity for MMT services.

Consequently, sustomers can derive significant benefits from using their mobile phones
for conducting transactions. The financial transaction process is initiated and completed
in seconds. The speed of a financial transaction can create real savings for people in
emerging markets. They save valuable working time as they do not have to travel to
urban centers to withdraw, deposit money or pay bills. Traveling can take several hours
to the institution and back. People then have to wait in line at the bank or post office to
conduct transactions. Waiting times of up to 2 hours are common, especially during pay
days, 4 and the entire trip can take away over half a day’s salary. Therefore, people can
save time by paying electronically using their mobile device or by using banking agents
in their proximity to cash-in or cash-out money. Bills can be paid with the push of a few
buttons instead of traveling to an often distant office with a fistful of cash and waiting in
a long queue (Nuwagaba, 2012). In addition, given the fact that in the near future mobile

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payments will enjoy rapid uptake, mobile network operators and financial institutions are
challenged to provide a service that transmits payments quickly and reliably.

The researcher believes that it is vital for MMT service providers to meet the challenge of
running a fast working system. A mobile money provider should ensure speed on three
different fronts, end user devices (the mobile wallet application should have a simple user
interface and transaction mechanism), back end processing (mobile networks and back
office systems should be able to handle large volumes of transactions quickly), and agent
density (there should be enough well-trained agents for cashing in and out to be a fast
process).

2.3 Influence of Mobile Money Transfer on Bank’s Market


The rapid technological changes, increasingly sophisticated customers and the need for
high value service have influenced the new orientation in banking from on counter
banking to branchless banking (Dahlberg and Mallet, 2008). The potential for branchless
banking is often anchored in the ability of technological innovations to lower the costs of
offering financial services through new channels, such as point of sales (POS) devices
and mobile phones. These new technologies have become much more affordable in
recent years and have catalyzed significant penetration in new markets across the globe.
Besides financial institutions, non-banks such as mobile network operators (MNO) have
been leading the way in offering financial services through their respective networks. In
many developing markets, MNOs have invested in the necessary infrastructure in rural
areas that traditional banking services have failed to access with brick and mortar
branches (Lyman, Pickens and Porteous, 2008). In particular, the MNOs and their agents
provide an interface between the two sides through cash-out (issuing cash on demand) or
cash-in (convert cash to notational equivalent) functions providing convertibility between
mobile money and cash (Morawczynski and Miscione, 2008).

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Increasingly, there is a great excitement about mobile money because people perceive it
as the only hope that could help them to ease their financial troubles. First of all, mobile
money through an increasingly large mobile phone use base provides a platform that
could potentially be leveraged to service the financial needs of the poor (Hughes and
Lonie, 2007). This could yield results in the developing world, where the reach of
banking infrastructure is severely limited. It is therefore seen as a big deal if such timely
services are extended to groups of people cheaply. Secondly, successful mobile money
has the ability to enable and catalyze the development of mobile commerce (Herzberg,
2003) particularly in the developing world. With mobile money services, you need not to
appear in the banking hall to effect any payment. In this case, mobile money networks
have a potential to deliver the required level of proximity at low transaction costs.
However, Maurer (2008) notes that mobile money networks are not equipped to offer the
broad range of financial services people want and need. Notwithstanding the above
limitation, the growth in mobile telecommunication service is expanding the reach of
financial services across the wireless networks in less developed countries. It is however,
believed that significant growth in mobile commerce has disadvantaged commercial
banks in way that their liquidity has been indirectly stolen (Pickens, 2009). The potential
and some existing bank customers are finding it cheaper and convenient to use mobile
money services than going to the banks to effect their transactions. By doing this, the
commercial banks are deprived of cash that would otherwise be received and used in
financial intermediation. According to Mobile Telecommunication Network (MTN)
Uganda’s report 2010, close to 2.5 million people have so far registered on the mobile
money service. On average, more than UGX 590 billion is transferred on mobile money
platform in a month (Nuwagaba, 2012). This money could have been deposited in the
banks’ coffers to increase their liquidity position. The drastic decline in the number of
loan transactions by 15% between July and December, 2011 (Nuwagaba, 2012), is a clear
manifestation of liquidity crisis in banks.

15
MMT services have brought competition to banks and they are one of the causes for
decline commercial banks’ deposits. There is competition from non-banking institutions,
for instance, mobile money transfer systems like EcoCash. Levlin (2013) pointed out that
EcoCash is altering Zimbabwe’s financial landscape and could threaten the sustainability
of banks. The existence of a large unbanked market resulted in Econet management
realizing that there was an opportunity to play a role in financial service delivery. As a
result, within two years of launch, over 2.3 million Zimbabweans have registered for
EcoCash mobile money accounts, outnumbering all of Zimbabwe’s traditional bank
accounts combined. Over 1 million of these accounts are active and push US$200 million
of volume over the EcoCash platform every month. When annualised, that volume
represents an amount equivalent to 22% of Zimbabwe’s Gross Domestic Product (GDP)
(Levlin, 2013). Along similar lines, Samolyk (2008) pointed out that the increased
competition from non-bank financial firms reflects a diminishing need for banks.
However, Wheelock (2009) disputed the perception that banks were losing market share
to other financial services providers.

In addition, low income levels on the part of depositors coupled with user fees that are
viewed to be too high by clients, and absence of efficient Information Communication
Technology (ICT) resulted in MMT services taking most of commercial banks’ market.
ICT has resulted in improved efficiency in the global financial system. However in most
developing economies ICT lacks the necessary infrastructure to support it. This keeps the
service quality low and depresses the rate of return on investments in the banking sector
(Njanike, 2010).

A study by the Central Bank of Kenya (CBK, 2007) demonstrated that there are a myriad
of benefits of MMT services. This is aptly demonstrated by the 85% score of M-baking
customers who have registered lower transactional costs. CBK (2007) statistics put the
average monthly cost of operating a current account with a Kenyan commercial bank at
over Ksh 900 ($13). M-banking reduces the cost of basic banking services to customers

16
with over 60 percent from what it would cost through traditional channels. The
electronically managed transactions result in huge cost savings, the benefits of which are
transferred to the users.

Moreover, M-Banking resolves the issues of access to finance. This is due to the lower
costs of roll-out and the economies of handling low-value transactions realized by
leveraging networks of existing third-party agents. Cash transactions, account opening
and other transactions can be conducted online. This makes it easy to subscribe and
accounts for the high customer concurrence of 91% (CBK, 2007). Ultimately
transformational banking boosts access to formal finance particularly, in rural areas
where many poor people live. Of the total 876 branches operated by financial institutions
in Kenya 314 are in Nairobi. M-banking has opened a different access door for the
unbanked (CBK, 2007).

Furthermore, M-Banking is efficient with respect to entry costs, a fact attested to by 97%
of the respondents in CBK’s 2007 study. This is explained by the absence of charges are
at the time of registration. It can be deduced that majority of persons seeking M-Banking
customer attach a high consideration to the monetary consequence of enrolling into a
banking facility. Thus the absence of opening account balance boosts their preference for
the service.

The study by CBK (2007) also showed that the use of agents and air time distributors as
service points has yielded much in terms of convenience, (this was portrayed by the 91%
response). Availability of multiple outlets across the country implied more points of
contact with customers as opposed to the traditional banking hall set up. Additionally, the
flexible operating hours of the M-Banking agents leaves them with greater opportunities
to satisfy banking requirements that may arise at any time. On the contrary Kenyan banks
operate for an average of seven hours per day. The supplementary Automated Teller

17
Machines (ATMs) do not have a sufficient outreach since they are only available in
major towns.

In addition, Nuwagaba (2012) pointed out that, contrary to the popular wisdom that
mobile phone money services are meant for funds transfer and remittance, most people
use the service as a savings store. Consequently the visits to the bank only involve those
amounts that cannot be effectively undertaken within the deposit and withdrawal limits
provided by the service operators. Users indicated that they use the facility as a savings
account despite the fact that no interest is earned. The reprieve is that no ledger fees are
levied on the accounts hence striking a rational symbiotic equilibrium between the user
and the service provider. Therefore, MMT service providers have affected commercial
bank’s markets. In many countries, many non-banks have entered the mobile payments
market, often with innovative solutions. Mobile network operators like Vodafone, MTN,
Orange and Airtel have deployed mobile payments services in several countries or have
set up joint ventures between them, like Isis in the US or project Oscar in the UK
(Kufandirimbwa et al, 2013). Money transfer operators like Western Union and
MoneyGram, as well as card companies like Visa, MasterCard and Amex all have
multiple mobile payments initiatives. Nuwagaba (2012) also pointed out that payment
service providers like PayPal are throwing their full weight into mobile and e-commerce
companies like Google are deploying wallets for contactless payments using Near Field
Communications (NFC).

However, banks still have niche markets. For example, international remittances are more
sought after from the traditional banks in comparison to cash transfers. Most transfers
undertaken by respondents happen to be local. This probably explains the low percentage
of MMT service providers (36%) seeking international transfer services (Nuwagaba,
2013). The threat still exists, especially with the rolling out of international mobile
transfer systems like the one jointly launched recently by Maxis Company of Malaysia
and Globe Telecom of the Philippines, the number of individuals relying on banks for the

18
service may decline as customers switch to the an international online M-Banking option
(Lawark, 2013).

2.4 Strategies in Response to Competition


There are two possible strategies that an organisation can adopt in order to fight
competition. These are offensive and defensive strategies. According to Johnson and
Scholes (2010), offensive strategies are rivalry in nature and are aimed at attacking
competitors. On the other hand, defensive strategies are aimed at protecting an
organisation’s market share and embody retaining current customers.

Moreover, Porter (1985) argued that a business needs to make two fundamental decisions
in establishing its competitive advantage. Firstly, there is need to decide whether to
compete primarily on cost, which is necessary to sustain competitive prices, or to
compete through providing some distinctive points of differentiation that justify higher
prices. Secondly, a decision on how broad a market target will aim at (its competitive
scope) should be made. These two choices define the four generic competitive strategies
which he argues cover the fundamental range of choices. These are, cost leadership
strategy, differentiation, price focus, and differentiation focus strategy.

Cost Leadership Strategy


It refers to a appealing to a broad cross-section of the market by providing products or
services at the lowest price. This requires being the overall low-cost provider of the
products or services. Implementing this strategy successfully requires continual,
exceptional efforts to reduce costs; without excluding product features and services that
buyers consider essential (Johnson, Scholes and Whittington, 2008). It also requires
achieving cost advantages in ways that are hard for competitors to copy or match. Some
conditions that tend to make this strategy an attractive choice are:

• The industry’s product is much the same from seller to seller

19
• The marketplace is dominated by price competition, with highly price-sensitive
buyers
• There are few ways to achieve product differentiation that have much value to
buyers
• Most buyers use product in same ways
• Switching costs for buyers are low
• Buyers are large and have significant bargaining power

Consequently, financial institutions can use internet as a way of ensuring low cost
leadership strategy. The internet could allow banks to provide services to clients cheaper.

Differentiation Strategy
Appealing to a broad cross-section of the market through offering differentiating features
that make customers willing to pay premium prices, e.g., superior technology, quality,
prestige, special features, service, convenience. Success with this type of strategy
requires differentiation features that are hard or expensive for competitors to duplicate
(Johnson, Scholes and Whittington, 2008). Sustainable differentiation usually comes
from advantages in core competencies, unique company resources or capabilities, and
superior management of value chain activities. Some conditions that tend to favour
differentiation strategies are;
• There are multiple ways to differentiate the product/service that buyers think have
substantial value
• Buyers have different needs or uses of the product/service
• Product innovations and technological change are rapid and competition
emphasizes the latest product features
• Not many rivals are following a similar differentiation strategy (Grant, 2008)

20
Price-Focus Strategy
It refers to a market niche strategy, concentrating on a narrow customer segment and
competing with lowest prices, which, again, requires having lower cost structure than
competitors. According to Kotler (2004), some conditions that tend to favour focus
(either price or differentiation focus) are;
• The business is new and/or has modest resources
• The company lacks the capability to go after a wider part of the total market
• Buyers’ needs or uses of the item are diverse; there are many different niches and
segments in the industry
• Buyer segments differ widely in size, growth rate, profitability, and intensity in the
five competitive forces, making some segments more attractive than others
• Industry leaders don't see the niche as crucial to their own success
• Few or no other rivals are attempting to specialize in the same target segment

Differentiation-Focus Strategy
Allio (2005) pointed out that differentiation strategy is a second market niche strategy (in
addition to price focus) concentrating on a narrow customer segment and competing
through differentiating features. Consequently, price focus or differentiation focus
strategies are built around serving a particular target very well. These strategies rest on
the premise that the firm is able to serve its narrow strategic target more efficiently than
competitors who are competing more broadly.

The benefits of focus strategy are that the business will have a more detailed
understanding of particular segments, reputation for specialization and the ability to
concentrate efforts. More so, organisations can ensure competitive strategy through a
number of strategic thrusts. The strategic trusts, which include the three generic
strategies, also include pre-emptive moves and synergistic posture (Akan et al, 2006).
Figure 2.1 illustrates the strategic thrusts.

21
Figure 2.1: Strategic Thrusts Focus

Differentiation • Reduce competitive pressure


• Avoid strategy distraction
• Create customer value • Compete with limited resources
• Provide perceived value • By pass competitor assets and skills
• Be difficult to copy • Positioning strategies
• Quality
• Strong brands
• Total Quality Management approach STRATEGIC
THRUSTS Pre-emptive moves
Low cost strategy
• Supply system
• Customer loyalty
• Product design
• Production system
• Economies of scale
• Experience curve
• Production operations Synergies
• No frills (product or service extras)
• Enhance customer value
• Unit cost reduction
• Reduce requirement investment
Source: Porter (1985) by partnership or joint ventures

Best-Cost Provider Strategy


Best-cost provider strategy is not one of Porter’s basic four strategies, however, this
strategy is mentioned by a number of other writers who include Kay (2000), Grant
(2008), and Johnson and Scholes (2010). This is a strategy of trying to give customers
the best cost/value combination, by incorporating key good-or-better product
characteristics at a lower cost than competitors. This strategy is a mixture or hybrid of
low-price and differentiation, and targets a segment of value-conscious buyers that is
usually larger than a market niche, but smaller than a broad market. Successful
implementation of this strategy requires the company to have the resources, skills,
capabilities (and possibly luck) to incorporate up-scale features at lower cost than
competitors.

Best cost provider strategy could be attractive in markets that have both variety in buyer
needs that make differentiation common and where large numbers of buyers are sensitive

22
to both price and value. Porter (1985) might argue that this strategy is often temporary,
and that a business should choose and achieve one of the four generic competitive
strategies above. Otherwise, the business is stuck in the middle of the competitive market
place and will be out-performed by competitors who choose and excel in one of the
fundamental strategies. However, some companies like Honda and Toyota seem to be
able to pursue successfully a best-cost provider strategy, with stability. Cost and
differentiation advantages are known as positional advantages since they describe the
firm's position in the industry as a leader in either cost or differentiation. Slatter (1984)
argued that the resource-based view emphasizes that for a firm to create a competitive
advantage that ultimately results in superior value creation it must utilise its resources
and capabilities effectively.

Moreover, the resource-based view asserts that for a firm to develop a competitive
advantage, it must have resources and capabilities that are superior to those of its
competitors (Grant, 2008). Without this superiority, the competitors simply could
replicate what the firm was doing and any advantage would quickly disappear. Resources
are the firm-specific assets useful for creating a cost or differentiation advantage and that
few competitors can acquire easily. Some examples of such resources are patents and
trademarks, proprietary know-how, installed customer base, Reputation of the firm and
brand equity.

Capabilities refer to the firm’s ability to utilize its resources effectively. An example of a
capability is the ability to bring a product to market faster than competitors. Such
capabilities are embedded in the routines of the organization and are not easily
documented as procedures and thus are difficult for competitors to replicate. The firm’s
resources and capabilities together form its distinctive competencies (Johnson and
Scholes, 2010).

23
Other Strategies
Organisations can also adopt other strategies over their life cycle. These are growth and
diversification strategies.
Growth Strategy
Growth in an organisation occurs when turnover increases, when value added to products
or services are boosted, when profits are raised and when resources are multiplied (Grant,
2008). The different strategies under this item are summarised in Table 2.1

Table 2.1: Alternative Growth Strategies


Growth In Existing New Product Development
Existing Products Through; • Add new features
Markets • Increased market share • Expand product line
• Increased product usage • Develop new products for some
• Increased quantity market
• New generation product

Market Development
New Markets • Expand geographically
• Target new segments

Vertical Forward and backward integration


Integration

Grant (2008)

Diversification Strategies
There are three types of diversification strategies namely concentric, horizontal and
conglomerate. Concentric diversification is diversification into related products or
services (adding new but related products e.g. if Telecel were to enter the video
programming business or ZESA venturing into wind energy project (for its energy
generation). Horizontal diversification (unrelated products) is about adding new products
and services for existing customers. Lastly, conglomerate diversification (adding new
unrelated products) includes mergers with and acquisitions of firms in a different line of
business (Kotler, 2004).

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It is vital to note that one of the strategies for fighting competition is to move in tandem
with technology. The country’s mobile subscriber base continues to grow and more and
more consumers are warming up to Internet banking. The opportunity to access a banking
account at anytime, anywhere a customer has an Internet connection, is a major
advantage for individuals and businesses. There are no headaches about being unable to
access a bank account if one is out of town, or if the weather is too unfriendly to allow an
individual to travel to the bank’s physical location. Figures released by Reserve Bank of
Zimbabwe showed that a cumulative total of mobile and Internet transactions of 457 513
valued at $193.13 million were processed from January to November 2010
(www.zimvest.com -04 March 2014). Of the $193.13 million, Internet transactions
accounted for 99%, while mobile payments were 1% of the same amount. Mobile phone
penetration in Africa has leapfrogged and Zimbabwe is no exception with a subscriber
base estimated to be over 5 million (www.zimvest.com- 04 March 2014).

The launch of broadband internet by mobile service providers, Africom and Powertel
among others has expanded the availability of Internet in the country and it can only
mean an accelerated growth in Internet banking. Conventional banking has always been
slow and time consuming, so much so that consumers sometimes have to wait several
hours to process a simple transaction like clearing a cheque. Internet banking has
tremendously reduced the time required to process banking transactions, thereby making
banking faster and convenient. For the bankers this system is cost-effective, as it has
considerably reduced the administrative costs and paperwork related to the transactions.

Total quality management (TQM) is also one of the strategies for retaining clients and
responding to competition. Grant (2008) pointed out that TQM is a managed process
which involves people, systems, and supporting tools and techniques. Flack (2010)
further explained that TQM is divided into three, that is ‘total’, ‘quality’, and
‘management’.

25
The word ‘total’ means everyone in the organisation, all processes, systems, levels of
management and employees must be involved in satisfying the customer. The word
‘quality’ means so many things to so many people, nevertheless, Grant (2008) views it as
an unusually slippery concept, easy to visualise and yet exasperatedly difficult to define.
For Flack (2010) ‘quality’ is zero defects in satisfying customers. Finally, ‘management’
is about planning, organising, leading, and controlling business resources to achieve
objectives (Flack, 2010). According to Johnson and Scholes (2010) TQM is a strategy for
improving business performance through the commitment and involvement of all
employees to fully satisfying agreed customer requirements, at the optimum overall costs
through the continuous improvement of the products and services, business processes and
people involved.

In addition, there is need for bask to restructure their governance procedures, operating
models, information security and risk management activities to align them with the global
trends. Banks should deepen current strategies aimed at diversifying current portfolio
funding from Large and Local Corporate to expanding their Retail and Small and
Medium Enterprise (SME) market segment which is still very much underserved. Banks
must also continue to develop products that focus on these ‘unbanked population’ with
the aim of converting them into regular bank account holders. In a bid to develop a long
term funding portfolio and reduce the high priced purchased funds, individuals should be
encouraged to develop a savings culture (Harvey and Spong, 2010).

Moreover, in today’s business environment, competition is order of the day. The


international or global environment consists of all those factors that operate at the
transactional, cross-cultural and across the border level which have an impact on the
business of an organization. Before the complexity of environmental analysis started,
traced back to post-second world war period, then it was characterized as essential
political in nature with little in common with the interests of business and industry
(Kazmi, 2008). The classification of the general environment into sectors after this period

26
brings more light and exposes most of the business owner into real business environment.
These then help most of organization to cope with it complexity, to compete the various
difference factor that influence the operation of business in a particular area.

A company’s marketing system must operate within the framework of forces which
constitute the system’s environment, the major environmental forces are external
variables which are not easily control or manipulate by the executives in a firm (Adebisi,
2006). Proper planning must put in place to ensure that the business environment is
conducive enough and ready to put the organization to the best position in the market
place. Any business that is not aware of its environment is bound to run into some crises
that will definitely arise from the increasing complexity of the environment in which such
business operates.

Adebisi (2006), pointed out that most managers feel that in today’s turbulent business
environment the best scanning style is continuous scanning using PEST analysis because
this allows the firm to act quickly, take advantage of opportunities before competitors do
and respond to environmental threats before significant damage is done, this will allow
the organization to survive, sustain the environment hardship. As a way of managing
organization strategies, the managers have to keep abreast of everything about his
environment (internal and external) for the purpose of achieving the organization goals
and objectives. It is the fundamental decision about the future direction of an
organization, its purpose, its resources and how it interacts with the world in which it
operates (the environment of the organization).

In line with the above paragraphs, the researcher believes that it is important to conduct
environmental scanning. Environmental scanning is the process of dealing with the
measurement, projection and evaluation of changes in the different environment variables
(Oladele 2006).

27
Most of the organizations today are developing different types of strategies that will
sustain them in their business environment, and this can only be achieved through the
analysis of the environment (opportunities and threats). Oladele (2006) stated some
importance to environmental scanning as follows; ‘the environment is dynamic in nature,
therefore scanning is necessary to keep abreast of change, it reveals the elements or
factors that constitute threats and opportunity to the overall objectives of the
organization, and that competitor’s activities can be monitored and appropriate strategies
put in place to check market incursion. Also, environmental scanning gives necessary
inputs to the formulation and implementation of potential marketing strategies.
Furthermore, to be competitive, companies can also enter into strategic alliances.
According to Kotler (2004) strategic alliances are cooperative agreements between
organizations that allow them to benefit from each other’s strengths.

2.5 Competitive Advantage


Companies are mainly focused on how to gain competitive advantage. Competitive
advantage is concerned with how to compete successfully in each of the lines of business
the company has chosen to engage in. The central thrust is how to build and improve the
company’s competitive position for each of its lines of business. A company has
competitive advantage whenever it can attract customers and defend against competitive
forces better than its rivals. Companies want to develop competitive advantages that have
some sustainability (although the typical term ‘sustainable competitive advantage’ is
usually only true dynamically, as a firm works to continue it). Successful competitive
strategies usually involve building uniquely strong or distinctive competencies in one or
several areas crucial to success and using them to maintain a competitive edge over
rivals. Some examples of distinctive competencies are superior technology and/or
product features, better manufacturing technology and skills, superior sales and
distribution capabilities, and better customer service and convenience (Mitchell 2005). In
line with this development, banks can use internet, together with other strategies as a way
of ensuring competitive advantage.

28
Competitive advantage or strategy is about being different. It means deliberately
choosing to perform activities differently or to perform different activities than rivals to
deliver a unique mix of value (Porter: 1985). The essence of strategy lies in creating
tomorrow's competitive advantages faster than competitors mimic the ones the company
possesses today (Hamel & Prahalad, 2000).

According to Lamikanra (2013), a company’s ability to attract and retain new customers,
is not only related to its products or services, but strongly related to the way it services its
existing customers and the reputation it creates within and across the market (Grant,
2008). Also, Johnson and Scholes (2010) agitated that customer retention is more than
giving the customer what they expect, it is about exceeding their expectations so that they
become loyal advocates for a company’s brand.

Consequently, most organizations find it difficult to retain customers and there are a
number of factors that lead to decline in customers. Flack (2010) argued that they include
changes in needs of the customer, changes in customer’s value perception of products
and services, new substitutes or increasing performance of existing substitutes, new
competitors, and increasing performance of existing competitors. These factors are
explained through reference to Porter’s five forces model.

Porter (1985) identified five forces that are widely used to assess the nature of
competition and structure of any industry and for gaining competitive advantage. Porter’s
five forces are the bargaining power of suppliers, bargaining power of buyers, threat of
new entrants, threat of substitutes, and rivalry among competitors. Kotler (2004) pointed
out that the strength of the five forces determines the profit potential in an industry by
influencing the prices, costs, and required investments of businesses, the elements of
return on investment. Stronger forces are associated with a more challenging business
environment. These factors are shown in figure 2.2.

29
Figure 2.2: Porter’s Five Forces Affecting Strategy

Threat of
substitutes

Bargaining power Rivalry among Bargaining power


of suppliers existing competitors of clients

Threat of new
entrants

Source: Porter (1985:75)


New entrants usually bring new capacity and competition for customers and resources.
This is a threat to existing businesses in the industry. The threat of entry depends on
presence of entry barriers. Entry barriers make it difficult for another business to enter the
industry. Examples of these barriers include economics of scale and capital requirements
(Porter, 1985). In Zimbabwean banking sector, there have been a number of new entrants
during the past decade, like Tetrad Bank, Steward Bank, Capital Bank, and Ecobank.

Substitute products are products that appear to be different but can satisfy the same need
as another product. Mobile money transfer (MMT) systems seem to be potential
substitutes for bank products. When switching costs are low, substitutes can place a price
ceiling on products (Grant, 2008).
Bargaining power of suppliers affects their ability to raise prices. Suppliers are likely to
be powerful if they are few in number and their products or services are unique (Perry,
2008).Bargaining power of buyers affects the industry through their ability to force down
prices, bargain for higher quality or more services, and play competitors against each
other. Buyers are likely to have power if a buyer purchases a large part of the sellers
product, if alternative suppliers are plentiful because the product in undifferentiated, if
the buyers earns low profits and is sensitive to cost differences, and if the purchased
product is unimportant to the final quality or price of a buyer’s product (Porter, 1985).

30
Rivalry among existing firms is the amount of direct competition in an industry.
Industries that have intense competition are characterized by competitors that are roughly
equal in size, slow rates of industry growth, the production of commodities, high fixed
costs, and high exit barriers arising from investments in specialized equipment (Grant,
2008). When looking at Porter’s five forces with reference to banks in Zimbabwe, it
seems as if buyers have more bargaining power and there is rivalry among existing firms.
Buyers have access to a myriad of banking products, including MMT services. Also, it is
alleged that Zimbabwe is overbanked, with the number of financial institutions being
bigger than the size of the economy.

Banks in Zimbabwe seem to be losing competitive advantage. There is decline in


customer base and one of the factors leading to decline in clients is lack of effectiveness
in marketing strategy implementation. Jooste and Fourie (2009) pointed out that strategy
implementation is an important component of the marketing strategy process. The ability
to implement a strategy is considerably more important than marketing strategy
formulation. Strategy implementation, rather than strategy formulation, is the key to
superior organisational performance. Implementing strategy has always been a challenge
for organisations. The ability to implement strategy is the deciding factor between
success and failure of a company’s strategy (Jooste and Fourie, 2009).

Execution is critical to success and it represents a disciplined process or a logical set of


connected activities that enables an organisation to take a strategy and make it work.
Without a careful, planned approach to execution, strategic goals cannot be attained.
Developing such a logical approach, however, represents a formidable challenge to
management. A host of factors, including politics, inertia, and resistance to change,
routinely can get in the way of successful execution (Perry, 2008).

31
Strategy implementation does not always end in success. Johnson and Scholes (2010)
assert that strategy implementation is one of the vital components of the strategic
management process. It is viewed as the process that turns the formulated strategy into a
series of actions that enables the vision, mission, and strategic objectives of an
organisation to be achieved as planned. Despite the crucial role played by strategic
management process in ensuring organisational success, strategy implementation still
remains a challenge in most organisations (Phillips, 2003).

According to Perry (2008), strategy implementation is a tougher and more time-


consuming management challenge than crafting strategy. Grant (2008) contends that
strategy implementation is the most problematic aspect of strategic management
compared to strategy formulation. It is the poor implementation of strategies that
accounts for high failure rate of organisational initiatives in a dynamic business
environment. A number of barriers to strategy implementation were sighted by Hrebiniak
(2006), Perry (2008), and by O’Reilly, Caldwell, Chatman, Lapiz, and Self (2009). These
are leadership, market and competition, and resource shortages.

Perry (2008) argues that lack of leadership, and specifically strategic leadership by the
top management of the organisation, has been identified as one of the major barriers to
effective strategy implementation. If leaders lack foresight, do not encourage staff
participation, and they do not facilitate effective communication, strategy implementation
would be difficult (Rioux and Bernthal, 2006).

In addition, Hrebiniak (2006) found that lack of effective communication was rated as the
critical barriers to strategy implementation. Strategic planning is linked to strategy
implementation through four processes namely: communication, interpretation, adoption
and action. Strategy implementation is a long drawn out process, and so in order to
sustain the interest and enthusiasm of managers and leaders alike it is absolutely essential
that strategic plans have short term wins built in them.

32
These milestones not only specify standards of performance but help in keeping
managers focused on the results (Saslow, 2004).

Strategic planning may be the prerogative of upper levels of management, but


implementation percolates down to front level managers responsible to carryout
operations efficiently, influencing the experience of customers, or carrying out
improvements which are important in the long run. Hence communication and role clarity
are of paramount importance in effective strategy implementation (O’Reilly et. al., 2009).
According to Salob and Greenslade (2005), communication is very important as
implementation involves many more people working for seemingly unrelated processes
but with the same end goal. Strategy deployment is generally seen as a function of
processes and structures but the fact is that it is as much a function of voluntary
involvement and spirit of the people in the organisation. It is this aspect of strategy
deployment that differentiates two companies pursuing similar strategy. Spirit of the
people is something that cannot be imitated by the competitors and is a decisive factor
between success and failure of execution (Saslow, 2004).

Some strategies also fail because not enough resources are allocated to successfully
implement them. Lack of resources is generally a bigger threat to capital intensive
marketing strategies (Perry, 2008). Another problem in strategy implementation is
inadequate realignment of company resources with the new strategy. Old habits die hard,
for example, the sales team might concentrate on customers that have been historically
important. Strategy might, however, require considerable investment in emerging groups
of customers. Fundamental questions must be asked about how to successfully ‘break
with the old’ (O’Reilly et al., 2009).

33
2.6 Possible Areas for Collaboration between Mobile Money Transfer Service
Providers and Banks
MMT services are a relatively new phenomenon and there is still a ‘tug of war’ between
banks and mobile telephone operators on how to collaborate. For example, the
relationship between Econet Wireless and Banks in Zimbabwe is not ‘rosy’ with Econet
being accused of arrogance. Therefore, this study shall solicit information on possible
areas for collaboration. Nevertheless, some of the possible recommendations to banks
regarding mobile payments include making sure that they ‘play to their strengths’. Banks
need to respond to an obvious customer demand, use technologies that satisfy that need,
and decide based on a clear business case. Also, banks need to use mobile payments to
bring customers closer to their institutions.

The researcher believes that, for many banks the competitive and fast evolving l business
landscape creates doubt. They wonder what to do: just stand by and watch or respond
more pro-actively? The researcher sees three strategic areas of opportunity and actions
for banks to use the mobile phone to forge closer relationships with their customers in a
new ‘experience banking model, 1) mobile banking using a mobile phone
to access a bank account and make payments; 2) mobile commerce using a mobile phone
to buy products, and 3) mobile money transfers using a mobile phone to send money to
someone. Banks should actively expand their mobile banking offering, which today is
often still underdeveloped particularly toward corporate sector. A unique value
proposition can turn mobile banking into a cost saving (instead of contacting a call
centre) and revenue generating channel (increase loyalty, target marketing to cross-sell
core banking services). This means banks should invest more in resources for improving
service quality.

34
2.7 Summary
This chapter presented literature review. Focus was on the emergence of MMT services
in Africa and influence of MMT on banks’ market. There was also a review of literature
on strategies in response to competition, competitive advantage and on how to ensure
collaboration between MMT service providers and banks. The next chapter presents
research methodology.

35
CHAPTER III

RESEARCH METHODOLOGY

3.1 Introduction
This chapter looks at the methods used in collecting and analysing data. It describes the
philosophical framework, researcher’s adopted design, the population and sample used,
instruments employed, and data collection procedures, validity and reliability, and the
data presentation and analysis procedures.

3.2 Research Philosophy


There are basically two views to the research process that dominate literature, namely
positivism (quantitative) and phenomenology (qualitative). This study applied both
quantitative and qualitative approaches. Looking at the same problem from a number of
viewpoints was an excellent way to verify interpretation and conclusions. It was in view
of this fact that the researcher used the triangular approach, which is a combination of
both philosophies and made use of both qualitative and quantitative data.

3.3 Research Design


This study was a survey. According to Henning (2004:5), “surveys are means of
gathering information that describe the nature and the extent of a specified count of
frequencies, to attitudes and opinion”. A survey design is a method of gathering data
from a number of individuals. A sample of participants is ‘selected’ from the population.
The survey enabled the researcher to collect first hand information relating to the strateies
employed by commercial banks in Zimbabwe in reponse to EcoCash.

36
3.4 Research Population
Population is the exhaustive list of all the elements or items or objects under study or
investigation. Sekaran (2000:43) defined a population as “the entire group of people,
events or things of interest that the researcher wishes to investigate”. The study
population was comprised of employees and managers in 16 commercial banks and
Reserve Bank of Zimbabwe (RBZ). Information was also collected from Bankers
Association of Zimbabwe (BAZ).

3.5 Sampling Design


A sample design is a definite plan for obtaining a sample from a given population
(Kothari, 2004). In this study, the researcher used a mixture of probability and non
probability sampling techniques. The researcher used stratified sampling when dividing
the population into two, groups, commercial banks and RBZ. Each institution provided
five participants who were selected through use of researcher’s judgment. For
commercial banks information was collected from management at head offices in Harare.
Data from RBZ was collected from management in the bank licensing, supervision and
surveillance division. Five participants were also selected from BAZ. The sample size
was 90 participants, five from each institution.

3.6 Research Instruments


Research instruments are tools used for collecting data needed to find solutions to the
issues under investigation. The researcher used the self-administered questionnaires and
structured interviews as research instruments. The questionnaires and the interviews are
essentially the same except for the method of questioning. Questionnaires are answered
in writing whereas interviews are usually conducted orally. The researcher made sure that
the respondents were guaranteed the confidentiality of the information to be elicited.

37
3.6.1 Self-Administered Questionnaires
The researcher used a questionnaire as the main research instrument. A questionnaire is a
list of carefully structured questions chosen for considerable testing with a view to elicit
reliable responses from a chosen sample. The use of the questionnaire to collect data
from participants allowed them to respond to questions at their own time. Also, the
researcher made use of questionnaires because they were simple, easy to administer and
allowed for easy analysis. More so, the researcher was given the ability to collect large
volumes of data. Participants were also free to give information as they remained
anonymous. In addition, since the questionnaire provided written information, there was
less danger of misrepresentation of facts or information (Kothari, 2004).

In addition, the researcher took both pre and post control measures for dealing with
disadvantages of using questionnaires. Pre-control measures included making sure that all
questions were concise and clear to avoid any misinterpretations. Most questions in the
questionnaire were closed questions and participants were required to select alternative
from a list of possible answers. There were also some open questions that allowed
participants to provide detailed responses. More so, participants were informed that the
research was an academic exercise and that names were not going to be divulged and this
helped ensuring that questions were answered without any fear. Use of secondary data
was the post-control measure used by researcher. Appendix I shows the questionnaire to
participants.

3.6.2 Structured Interviews


The researcher interviewed to reinforce finding from questionnaires. Interviews were
used to solicit primary data responses through direct questioning. Conducting interviews
resulted in the researcher getting sensitive data and further probing was achieved.
Appendix II shows the interview guide.

38
A number of advantages were derived from the use of interviews. Firstly, the researcher
was able to adapt the questions as necessary, clarify doubts, and ensure that the
respondents properly understood the questions. Another advantage was that the
researcher picked non-verbal cues from respondents. For instance, any discomfort, stress,
or problems that the respondents experienced were detected through frowns on the face,
nervous tapping, and other body language unconsciously exhibited by the respondents
(Saunders et al, 2012). The researcher made use of two research assistants and they
helped in conducting interviews. In addition, participants were assured that their names
were not going to be divulged and that the study was an academic exercise.

3.7 Validity and Reliability of Research Instruments


3.7.1 Validity
Validity is about the truthfulness of research results. There are ways in which validity can
be determined and these are content validity and construct validity (Saunders et al, 2012).
Content validity focused on ascertaining whether research instruments contained enough
questions to cover the purpose of study. The researcher ensured content validity by
making sure that research questions and all the identified gaps in literature review were
well covered. Piloting the questionnaire helped to ensure that all potential questions were
asked in the instruments. The instruments were tested at Stanbic Samora Machel Branch,
Harare.

Construct validity focused on the construction of questions in the questionnaire. The


researcher made sure that all questions were concise and clear. In addition, there was use
of closed questions that made it easier for participants to complete questionnaires. The
supervisor helped the researcher to ensure construct validity. The supervisor made
recommendations on how questions were to be structure, for example, he pointed the
need to vary the way in which questions were asked.

39
3.7.2 Reliability
Reliability is defined as the extent to which a questionnaire, test, observation or any
measurement procedure produces the same results on repeated trials (Saunders et al,
2012). Reliability of the instrument was difficult to establish because the questionnaire
contained questions whose answers could be subjective. Therefore, repeated trials may
not yield the same results.

3.8 Ethical Considerations


Ethics define the right and wrong conduct in research. According to Saunders et al (2012),
ethics of research include informed consent, confidentiality, protection of privacy,
protection against harm, and protection against identity. Ethical considerations were
observed when participants were informed about the study and consent was sought.
Participants were also told not to write their names on questionnaires and this ensured
anonymity. In addition, participants were informed that data collected was to be used for
academic purposes only and that the information collected would be treated as
confidential.

3.9 Data Analysis and Presentation Procedures


Data analysis is a pivotal part of the research process, to arrive at findings. Quantitative
was analysed using the Statistical Package for Social Sciences (SPSS) version19. SPSS is
a software package used in data analysis and is a menu-driven system that allows for in-
depth data access and preparation, analytical reporting and modelling (Saunders et al,
2012). Qualitative data analysis was conducted using content analysis. Ritchie and Lewis
(2003) argue that qualitative content analysis involves a process designed to condense
raw data into categories or themes based on valid inference and interpretation. The
researcher made use of manual data coding system.

40
3.10 Summary
This chapter looked at research methodology and provided details on research design,
subjects, research instruments, and data collection procedures. Focus was also on
research ethics, validity and reliability, and data analysis and presentation procedures.
The next chapter looks at data presentation and analysis and findings are illustrated
through use of tables and figures.

41
CHAPTER IV

DATA PRESENTATION, ANALYSIS AND DISCUSSION

4.1 Introduction
This chapter focuses on data presentation, analysis, and discussion. The findings were
based on information collected through questionnaires and interviews. Figures and tables
were used to illustrate the research findings.

4.2 Response Rate and Demographic Characteristics of Participants


The researcher obtained a good response from participants. Table 4.1 illustrates the
response rate.

Table 4.1: Response Rate


Category of Participants Sample Target Response Response Rate
Bank Managers 80 75 94%
RBZ 5 5 100%
BAZ 5 5 100%
Total 90 85 94%
Source: Survey Results (2014)

Table 4.1 shows that a response rate of 94% was obtained from participants. The
response rate was well above 67% that is recommended by Saunders et al (2009).

Participants were asked to indicate their gender. Table 4.2 shows gender of participants.

42
Table 4.2: Gender of Participants
Category of Male Female Total
Participants
Bank Managers 40 35 75
RBZ 4 1 5
BAZ 3 2 5
Total 47 38 85
Source: Survey Results (2014)

Table 4.2 shows that there was male domination in the study. Out of 85 participants, 47
(55%) were males while 38 (45%) were females. This shows that findings in this study
were mainly views of males and that there seemed to be gender discrimination against
women in the study.

Another demographic characteristic that the researcher solicited about was age. Figure
4.2 shows findings on age.

Figure 4.1: Age of Participants

35
32
30
28
25

Number of 20
Participants
15
12
10

5
2 1 1 2 2 2 1 1
0 0 0 0 0
<25 25<30 30<40 40<50 >50
Age Groups (Years)

Bank Managers RBZ BAZ

Source: Survey Results (2014)

43
Figure 4.1 shows that 82 participants were above the age of 25 years. Therefore, 96% of
participants were mature people and were in a position to provide reliable information.
Participants were asked to indicate their tenure of employment in the banking sector.
Table 4.3 shows findings on tenure of employment.

Table 4.3: Tenure of Employment in the Banking Sector


Category of Participants Tenure (Years) Total
<2 2<5 5<10 >15
Bank Managers 0 0 50 25 75
RBZ 0 0 2 3 5
BAZ 0 0 0 5 5
Total 0 0 52 33 85
Source: Survey Results (2014)
From table 4.3, it can be seen that none of the participants had tenure of employment less
than five years. The data table 4.3 shows that all the 85 participants had been employed
in the banking sector for a period long enough for them to appreciate the nature of
competition in the banking sector in Zimbabwe and the sources of competitive advantage.

4.3 Reasons for the rise of EcoCash


All the 85 participants were aware of the reasons for emergence of EcoCash. It was
pointed out that Econet Wireless took a cue from MMT payment systems like Mpese in
Kenya that had huge impacts in financial inclusion. The finding is also in line with
Lawark (2013) who pointed out that MMT could be an effective strategy for financial
inclusion. Also, according to Mapakame (2013), 11.2 million Zimbabweans were without
formal banking services. Given that the economy is largely informal, with small and
medium sized enterprises (SMEs) constituting the majority of industries, the market form
financial institutions have shifted from being formal to informal and banks seem to have
failed to adjust to the social changes. Absence of financial inclusion created an
opportunity for EcoCash services.

44
In addition, EcoCash was successful because commercial banks were not able to meet the
expectations of clients. Figure 4.2 shows findings on commercial banks’ ability to meet
clients’ needs.

Figure 4.2: Commercial Banks’ Ability to Meet Clients’ Needs

Products and services


Perspective

Customer needs

Affordability of service

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of Ability

<20 20<40 40<60 60<80 80<100

Source: Survey Results (2014)

The data in figure 4.2 showed that 74 participants (87%) pointed out that commercial
banks were not providing affordable service to clients. Therefore, there was low ability to
meet the needs of clients. Participants were also asked to comment about level of client
satisfaction in commercial banks. The findings are shown in figure 4.3.

45
Figure 4.3: Comments on Level of Client Satisfaction

100%
80%
% of Tellers and 60%
Managers 40%
20%
0%
Very High High Low Very Low Unsure
Strategies for Satisfying Clients

Bank charges Products and service quality Convenience

Source: Survey Results (2014)

Figure 4.3 shows that banks charges in commercial banks were said to be very high and
this seemed to have pushed clients towards EcoCash. The high bank charges were not
complemented by service delivery as products and services were said to be of low quality
and there was no convenience. Therefore, customer satisfaction level was low and clients
were not happy. The researcher believes that it is vital for an organisation to be able to
meet the expectations of clients. The heart of the satisfaction process is the comparison of
what was expected with the product or service’s performance. First, customers would
form expectations prior to purchasing a product or service. Second, consumption of or
experience with the product or service produces a level of perceived quality that is
influenced by expectations. If perceived performance is only slightly less than expected
performance, assimilation will occur, perceived performance will be adjusted upward to
equal expectations. If perceived performance lags expectations substantially, contrast will
occur, and the shortfall in the perceived performance will be exaggerated. Satisfaction
can be determined by subjective (e.g. customer needs, emotions) and objective factors
(e.g. product and service features).

46
In addition, the study solicited information about transactions and payments systems. The
findings are in table 4.4.

Table 4.4: Transactions and Payments Systems


Description Responses Total
Strongly Agree Disagree Strongly Unsure number of
agree disagree participants
There is 4 10 60 8 3 85
convenience
when making
transactions
There is use of 0 5 79 1 0 85
electronic
payment system
Service delivery 4 10 60 8 3 85
time is short
Source: Survey Results (2014)

Table 4.4 shows that transactions and payments systems were not ‘user friendly’ for
clients. It was held that electronic payment systems, like internet banking were not used,
a view supported by 71 participants (84%).

The study also sought opinions about affordability of bank charges. Figure 4.4 illustrate
the findings.

47
Figure 4.4: Findings on Bank Charges

60
50
50
Number of Participants

40

30

20
10
8
10 5
1 2 1 2 2 1 2 1
0 0 0
0
Very High High Low Very Low Unsure
Rating

Bank Managers RBZ BAZ

Source: Survey Results (2014)

From figure 4.4, 60 bank managers (80%) acknowledged that bank charges were high, a
view also shared by three (60%) of RBZ officials. Therefore, clients seemed not to be
affording commercial banks’ services and opted for MMT transactions. These findings
concur with Njanike (2010) who argued that low income levels on the part of depositors
coupled with user fees that are viewed to be too high by clients, and absence of efficient
Information Communication Technology (ICT) resulted in MMT services taking most of
commercial banks’ market. ICT has resulted in improved efficiency in the global
financial system. However in most developing economies ICT lacks the necessary
infrastructure to support it. This keeps the service quality low and depresses the rate of
return on investments in the banking sector (Njanike, 2010).

Participants were also required to comment about the nature of commercial banks’
products and services. Figure 4.5 shows the findings.

48
Figure 4.5: Nature of Bank Products and Services

Reliability of Service
Class interval

Quality

Product Range

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of Participants

Very High High Low Very Low Unsure

Source: Survey Results (2014)

Figure 4.5 shows that product range in commercial banks was low and quality was also
not acceptable. Nevertheless, reliability was better because 63 participants (74%) said
reliability of service was high.

The findings in table 4.4 and figures 4.2 to 4.5 showed that there is a gap between
expectations of clients and the actual service in commercial banks in Zimbabwe. These
were in line with Parasuraman, et al (2001) who noted that while the precise determinants
of quality were undefined, universally its importance has been accepted. The perceived
quality is largely determined by the gap between customers’ expectations of service and
perceptions of the actual experience. A customer assesses service quality by comparing
what they want to what they actually get or perceive they are getting. Therefore, clients
were ‘forced’ to consider MMT services.

49
4.4 Influence of EcoCash on Commercial Banks’ Market
The study showed that EcoCash had a negative impact on the market of commercial
banks. There has been stagnation in growth of deposits and number of clients. At the
same time, Econet Wireless was arguing that their EcoCash save accounts exceed total
commercial bank accounts in Zimbabwe. All 85 participants (100%) said that
commercial banks were facing a myriad of challenges in retaining clients. Data for one
commercial bank showed that, in 2013, there were 2184 clients who closed their accounts
against 1988 new accounts (Table 4.5).

Table 4.5: Number of Accounts Opened and closed in 2013 (Data from one
bank)
Month Number of Accounts Number of Accounts
Opened Closed
January 200 300
February 300 321
March 50 206
April 100 189
May 150 156
June 125 196
July 175 200
August 190 149
September 200 185
October 210 136
November 185 79
December 103 67
Total 1 988 2 184
Source: Survey Results (2014)

From table 4.5, it is clear that some commercial banks were having serious challenges in
retaining clients. It also vital to note that the number of accounts closed in 2013,
according to this study was higher than new accounts opened. What is crucial in the
current financial sector is to ensure that the high value services at low cost are
conveniently extended to the client.

50
In this case, service providers that provide or offer relative advantages in terms of
accessibility, convenience, speed, privacy and cost-effectiveness are assured of the ready
market. This point of view is consistent with Morawczynski et al. (2009) who argue that
customers use financial services that they find convenient, reliable and affordable. Owing
to the above findings, it is fairly enough to make a tentative conclusion that mobile
commerce has contributed to the liquidity crisis of Zimbabwean commercial banks.

The findings in this study agreed with Levlin (2013) that MMT services have brought
competition to banks and they are one of the causes for decline commercial banks’
deposits. EcoCash altered Zimbabwe’s financial landscape and threatened the
sustainability of banks. Along similar lines, Samolyk (2008) pointed out that the
increased competition from non-bank financial firms reflects a diminishing need for
banks.

In addition, one of the causes of the challenges was lack of effectiveness in strategy
implementation, especially, human resources strategies. The findings were in line with
Jooste and Fourie (2009) who pointed out that strategy implementation is an important
component of the marketing strategy process. The ability to implement a strategy is
considerably more important than marketing strategy formulation. Strategy
implementation, rather than strategy formulation, is the key to superior organisational
performance. Implementing strategy has always been a challenge for organisations. The
ability to implement strategy is the deciding factor between success and failure of a
company’s strategy (Jooste and Fourie, 2009).

In addition, it was held that some commercial banks were not proactive and failed to take
advantage of their alliance with EcoCash to explore the rural and informal markets. This
revelation was in line with Mapakame (2013) that banks seemed to be neglecting the
informal and rural sectors, where the unbanked market is in abundance and 11.2 million
Zimbabweans were without formal banking services.

51
Given that the economy is largely informal, with small and medium sized enterprises
(SMEs) constituting the majority of industries, the market form financial institutions have
shifted from being formal to informal and banks seem to have failed to adjust to the
social changes.

4.5 Strategies in Response to EcoCash


The study revealed that commercial banks responded to EcoCash through relaxing
conditions for opening of new accounts. Also, some banks removed ledger fees from
savings accounts. In addition, banks resumed giving loans, based on salaries, especially
to civil servants. Table 4.6 and figure 4.6 show findings on the possible strategies for
retaining clients and responding to EcoCash.

Table 4.6: Possible Strategies for Retaining Clients


Strategy Responses Total of
Strongly Agree Disagree Strongly Unsure Participants
agree disagree
Lower 56 5 10 14 0 85
bank
charges
Provide 56 4 11 14 0 85
loans to
clients
Extend 5 25 50 5 0 85
operating
hours
Satisfy 84 1 0 0 0 85
employees
first
Source: Survey Results (2014)

52
Figure 4.6: Possible Strategies for Retaining Clients

100%
90%
80%
70%
60%
% of Participants 50%
40%
30%
20%
10%
0%
Low Bank Charges Provide Loans Extent Operating Satsify employees
Hours first
Strategy

Strongly Agree Agree Disagree Strongly Disagree

Source: Survey Results (2014)

Figure 4.6 showed that commercial banks needed to satisfy employees. All 85
participants (100%) strongly agreed that there was need to satisfy internal customers first.
The findings were in line with Chin (2010) who agitated that other key excellence
indicators for customer satisfaction are a resolution by management to empower frontline
employees, strategic infrastructure support for frontline employees and attention to
hiring, training, attitude and morale for frontline employees. These activities will help
employees relate to customers in highly professional manners and also provide
services/products that will satisfy their requirements. While the researcher agrees to some
extent with the propositions of Chin (2010), frontline employee empowerment and other
issues raised are not in themselves sufficient conditions to providing focus and
satisfaction to the customer. Proactive customer service systems, proactive management
of relationships with customers, and the use of all suggestion systems, surveys,
product/service follow ups complaints, turnover of customers and employees, should also
be adopted as key excellence indicators for customer satisfaction.

53
Moreover, findings from interviews showed that commercial banks in Zimbabwe needed
to employ a mixture of both defensive and offensive strategies. It was held that banks
should be aware of the notion that ‘competing in the marketplace is like war, there are
injuries and casualties and the best strategy wins’. The findings were in line with
literature that there are two possible strategies that an organisation can adopt in order to
fight competition. These are offensive and defensive strategies and according to Johnson
and Scholes (2010), offensive strategies are rivalry in nature and are aimed at attacking
competitors. On the other hand, defensive strategies are aimed at protecting an
organisation’s market share and embody retaining current customers. Moreover, Porter
(1985) argued that a business needs to make two fundamental decisions in establishing its
competitive advantage. Firstly, there is need to decide whether to compete primarily on
cost, which is necessary to sustain competitive prices, or to compete through providing
some distinctive points of differentiation that justify higher prices. Secondly, a decision
on how broad a market target will aim at (its competitive scope) should be made. These
two choices define the four generic competitive strategies which he argues cover the
fundamental range of choices. These are, cost leadership strategy, differentiation, price
focus, and differentiation focus strategy.

It has been established that what influences clients’ savings/deposits is the level of
proximity and cost effectiveness of a service. Currently, people are not willing to invest
significant time and resources, including the cost of travel and lost earnings from leaving
business untended, just to save or deposit a small amount of money in an account. Since
it is costly for banks to take such services closer to the clients but mobile money
providers can through their outlets, it is recommended that commercial banks should
partner or enter into joint venture with mobile money operators. With such partnership,
banks will have effective models to expand their physical reach into poor and rural areas.
This arrangement will deliver the required level of proximity and low transaction costs,
which are essential in increasing client deposits, a source of liquidity.

54
In this case, banks and mobile operators should endavour to work together in order for
both to enjoy economies of scale and scope. The most basic common bank-mobile
operator partnership model is where the bank issues the mobile money account to a
client. The account should help clients to send, receive and store money electronically
using mobile money interface. Besides, where the accounts are held externally to the
mobile money operator, the most prevalent model is for banks to use mobile money to
receive funds from the public, whether as loan repayments or deposits, using a standard
bill payment model. This move will enable banks to increase their liquidity through
increased deposits. More so, commercial banks should take advantage of the products
that are not provided by mobile operators. For example, credit or loan facilities and
insurance services where banks have competitive advantage over mobile operators should
be conveniently provided at a low cost to clients. It is hoped that this will build strong
bond between the client and the bank which guarantees regular flow of cash in or cash
out transaction.

4.6 Sources of Competitive Advantage for Commercial Banks


Participants pointed out that the financial markets are saddled with intense competition
and it is very difficult to pin point the sources of competitive advantage. Nevertheless, by
the time the study was conducted, companies were still to adopt EcoCash payroll and
banks were still depending on salaries for deposits. When soliciting for information on
banking facilities on offer, it was held that all banks largely offer savings and deposit
facilities. Detailed findings on baking facilities are shown in figure 4.7.

55
Figure 4.7: Banking Facilities on Offer

Financial Advice

Insurance
Banking Facilities

Remittances

Savings/Deposits

Credit

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Number of Participants

Very high market High market Low market Very low market

Source: Survey Results (2014)

The study also showed that banks have the ability to process high value transactions,
international payments. Participants argued that banks needed to develop competitive
advantages that have some sustainability. This was in line with Mitchell (2005) who
pointed out that successful competitive strategies usually involve building uniquely
strong or distinctive competencies in one or several areas crucial to success and using
them to maintain a competitive edge over rivals.

In addition, competitive advantage or strategy is about being different. It means


deliberately choosing to perform activities differently or to perform different activities
than rivals to deliver a unique mix of value (Porter, 1985). According to Lamikanra
(2013), a company’s ability to attract and retain new customers, is not only related to its
products or services, but strongly related to the way it services its existing customers and
the reputation it creates within and across the market (Grant, 2008).

56
Also, Johnson and Scholes (2010) agitated that customer retention is more than giving
the customer what they expect; it is about exceeding their expectations so that they
become loyal advocates for a company’s brand.
Consequently, most organizations find it difficult to retain customers and there are a
number of factors that lead to decline in customers. Flack (2010) argued that they include
changes in needs of the customer, changes in customer’s value perception of products
and services, new substitutes or increasing performance of existing substitutes, new
competitors, and increasing performance of existing competitors. These factors are
explained with reference to the five forces model. When looking at Porter’s five forces
with reference to banks in Zimbabwe, it seems as if buyers have more bargaining power
and there is rivalry among existing firms. Buyers have access to a myriad of banking
products, including MMT services. Also, it is alleged that Zimbabwe is overbanked, with
the number of financial institutions being bigger than the size of the economy.

Banks in Zimbabwe seem to be losing competitive advantage. There is decline in


customer base and one of the factors leading to decline in clients is lack of effectiveness
in marketing strategy implementation. Jooste and Fourie (2009) pointed out that strategy
implementation is an important component of the marketing strategy process. The ability
to implement a strategy is considerably more important than marketing strategy
formulation. Strategy implementation, rather than strategy formulation, is the key to
superior organisational performance. Implementing strategy has always been a challenge
for organisations. The ability to implement strategy is the deciding factor between
success and failure of a company’s strategy (Jooste and Fourie, 2009).

4.7 Possible areas for Collaboration between Commercial Banks and Econet
Wireless
Participants argued that commercial banks and Econet Wireless needed to establish
strategic alliances and work together to facilitate financial inclusion in Zimbabwe. Some
respondents also argued that there is need for joint research and development activities.

57
In addition, some of the possible recommendations to banks regarding mobile payments
include making sure that they ‘play to their strengths’. Banks need to respond to an
obvious customer demand, use technologies that satisfy that need, and decide based on a
clear business case. Also, banks need to use mobile payments to bring customers closer
to their institutions.

4.8 Summary
This chapter presented findings of study. It showed that commercial banks were failing to
satisfy clients and this resulted in EcoCash being prominent. It was held that most
customer needs were not met. EcoCash had a huge impact on commercial banks’ market
and more clients were leaving banks that those opening new accounts. The next chapter
presents summary, conclusions, and recommendations.

58
CHAPTER V

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction
This chapter concludes the research. The chapter presents the overall summary of the
study, that is, an overview of research objectives, literature reviewed, research
methodology, and major findings. Conclusions that are in line with research objectives
are also provided. The chapter winds up by providing recommendations and suggestions
for further study.

5.2 Statement of Objectives


This study focused on the influence of EcoCash on commercial banks’ strategies in
Zimbabwe. The study was motivated by the fact that banks failed to ensure financial
inclusion and to take advantage of unbanked market. This resulted in Econet seeing an
opportunity and launched EcoCash. EcoCash has had a huge impact and its accounts
exceed total bank accounts. Objectives of the study were to examine reasons for the
emergence of EcoCash, to assess the influence of EcoCash on Zimbabwean banks’
market, to explore strategies put in place by banks in light of entrance of EcoCash into
the financial sector, to analyse sources of competitive advantage for Zimbabwean banks,
and to propose a model that has collaborative synergies between EcoCash and the
Zimbabwean banks. The study reviewed literature related to strategy, competitive
advantage, the emergence of MMT services in Africa and influence of MMT on banks’
market. The study population was comprised of employees and managers in 16
commercial banks, RBZ, and BAZ. The researcher used a mixture of probability and non
probability sampling techniques. Self-administered questionnaires and structured
interviews were used as research instruments. The study found out that EcoCash was
prominent because commercial banks failed to exploit the unbanked informal market.
EcoCash resulted in decline in bank deposits and clients closed their accounts.

59
Nevertheless, commercial banks have competitive advantage in terms of being able to
process high value transactions, and facilitate international transactions. Section 5.3
provided the summary of findings.

5.3 Conclusions
The study concludes for each research objective as follow;

5.3.1 Reasons for the rise of EcoCash


The study concluded that Econet Wireless took a cue from MMT payment systems like
Mpese in Kenya that had huge impacts in financial inclusion. In addition, EcoCash was
successful because commercial banks were not able to meet the expectations of clients.
Clients seemed not to be affording commercial banks’ services and opted for MMT
transactions.

5.3.2 Influence of EcoCash on Commercial Banks’ Market


EcoCash had a negative impact on the market of commercial banks. There has been
stagnation in growth of deposits and number of clients. At the same time, Econet
Wireless was arguing that their EcoCash save accounts exceed total commercial bank
accounts in Zimbabwe.

5.3.3 Strategies in Response to EcoCash


Commercial banks responded to EcoCash through relaxing conditions for opening of new
accounts. Also, some banks removed ledger fees from savings accounts. In addition,
banks resumed giving loans, based on salaries, especially to civil servants. It was also
pointed out that commercial banks needed to satisfy employees (internal customers) first.
Moreover, commercial banks in Zimbabwe needed to employ a mixture of both defensive
and offensive strategies.

60
5.3.4 Sources of Competitive Advantage for Commercial Banks
The study showed that the financial markets were saddled with intense competition and it
is very difficult to pin point the sources of competitive advantage. Nevertheless, banks
were still depending on salaries for deposits and had the ability to process high value
transactions, international payments.

5.3.5 Possible areas for Collaboration between Commercial Banks and Econet
Wireless
The study showed commercial banks and Econet Wireless needed to establish strategic
alliances and work together to facilitate financial inclusion in Zimbabwe. There was need
for joint research and development activities. In addition, banks needed to make sure that
they ‘play to their strengths’ and respond to an obvious customer demands, use
technologies that satisfy that need, and decide based on a clear business case.

5.4 Recommendations
The researcher came up with the following recommendations that he believed ensure
competitive advantage in commercial banks.

5.4.1 Customer Satisfaction


The study found out that customer satisfaction was low, and some of the reasons were to
do with how clients were being served in banking halls. The study, therefore,
recommended that there was need for commercial banks to ensure training of employees
and to empower employees through participation in decision making. It was also
important for the financial institution to ensure a high level of employee motivation.
Motivation of employees would be starting point of ensuring customer satisfaction
because human resources are sources of competitive advantage.

61
5.4.2 Research and Development
The study concluded that there was a gap between the expectations of clients and actual
service delivery. The study recommended that commercial banks should invest in research
and development and come up with new, unique products and research should be
conducted so that banks are aware of expectations of clients. Products and services should
be in line with customer expectations.

5.4.3 Strategic Alliances


It was held that banks were facing stiff competition from EcoCash. Therefore, banks
needed to ensure that alliances signed with other companies are effective. For example,
the bank could have fully exploited its partnership with EcoCash and ensure convenience
to clients. New strategic alliances, for example with funeral assurance companies like
Nyaradzo, could be sought.

5.5 Suggestions for Further Study


The researcher recommends that a study on effectiveness of commercial banks’ human
resources strategies be conducted. This was because of the fact that the researcher
discovered, during the conduct of study, that human resources are sources of competitive
advantage for any company. Therefore, having effective human resource management
practices would ensure customer satisfaction and commercial banks would be able to
retain clients.

62
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67
APPENDIX I

QUESTIONNAIRE

My name is Joshua Nyamuzihwa, student studying towards attainment of an Executive


Master of Business Administration Degree (EMBA) with Midlands State University. As
a partial fulfilment of the requirements of the EMBA programme, I am conducting a
study on the influence of EcoCash on Zimbabwean Commercial Banks’ Strategies. I
would like you to help me with answers to questions in this questionnaire. I would like to
assure you that the information you supply shall be treated as confidential. There is no
need for you to provide your name and contact details. Also, you are not being forced to
participate in this study and you are free to withdraw your participation any time.

Section 1: Personal Details


1.1 Gender 1. Male 2. Female

1.2 Occupation .............................................................................

1.3 Age (years) 1. <25 2. 25<30 3. 35<40


4. 40>50 5. >50

1.4 Qualifications 1. A’ Level 2. Diploma


3. Degree 4. Post Grad

5. Other (specify) .........................

1.5 Number of years in the banking sector 1. <2 2. 2<5


3.5<10 4. 10<15 5. >15

68
Section 2: Reasons for the rise of EcoCash
2.1 Are you aware of the reasons that resulted in EcoCash being popular?
1. Yes 2. No 3. Unsure
Any additional comments...............................................................................................
...............................................................................................................................................
.......................................................................................................................................

2.2 EcoCash was successful because commercial banks were not able to meet the
expectations of clients
Perspective Responses
1. 2. Agree 3. Disagree 4. 5. Unsure
Strongly Strongly
Agree Disagree
Banks services were
not affordable
Banks were not
reaching all potential
clients
Banks had stringent
requirements for
opening of accounts
Banks were too rigid in
their operations
Any additional comments on answer..................................................................................
............................................................................................................................................

2.3 What can you say about the current banks charges?
1. Very High 2. High 3. Low 4. Very Low 5. Unsure
Reason for answer..................................................................................................................
...............................................................................................................................................

69
2.4 What is your opinion relating to service quality and convenience in commercial
banks?
1. Very High 2.High 3.Low 4.Very 5.Unsure
Low
Products and service quality
Convenience
Product’s ability to meet
client’s needs
Affordability
Any comment on answer....................................................................................................
...........................................................................................................................................

Section 3: Influence of EcoCash on Commercial Banks’ Market


3.1 Give comments on the effect of EcoCash on the market of commercial banks
1.Strongly 2.Agree 3.Disagree 4.Strongly 5.Unsure
Agree Disagree
Decline in the number of
clients
Decline in deposits
No effect
Any additional comments.................................................................................................
............................................................................................................................................

Section 4: Strategies in Response to EcoCash


4.1 What changes were witnessed in banks in response to EcoCash?
1.Very 2. 3. 4.Very 5.
High High Low Low Unsure
Change in courtesy, understanding, and
responsiveness to needs of clients
Change in bank charges
Changes in account opening requirements
Change in marketing strategies

Any additional comments.................................................................................................


............................................................................................................................................

70
4.1 comment on the changes witnessed in commercial banks’ transactions and
payment systems
1.Strongly 2.Agree 3.Disagree 4.Strongly 5.Unsure
Agree Disagree
Banks queues are now
short
There was expansion in the
use of electronic payment
systems
Product or service delivery
time is now short, e.g
RTGS processing time
Any additional comments.................................................................................................
...............................................................................................................................................

Section 5: Sources of Competitive Advantage for Commercial Banks


5.1 What are the sources of competitive advantage for commercial banks in
Zimbabwe?
1.Very High 2.High 3.Low 4.Very Low 5.Unsure
Product range
Quality
Reliability of service
Uniqueness of
products
Liquidity position
Any other sources of competitive advantage.........................................................................
...............................................................................................................................................
...............................................................................................................................
...............................................................................................................................................
...............................................................................................................................

71
Section 6: Possible areas for Collaboration between Commercial Banks and
Econet Wireless
6.1 What strategies could be used to ensure collaboration between Econet Wireless
and commercial banks?
Possible Strategy 1.Strongly 2.Agree 3.Disagree 4.Strongly 5.Unsure
Agree Disagree

Having strategic alliances

Joint research and


development activities

Payment of royalties or
patents for use of Econet
platform by Banks

Any additional strategies.................................................................................................


...............................................................................................................................................
...............................................................................................................................................
..............................................................................................................................

Thank you for your time and effort

72
APPENDIX II

INTERVIEW GUIDE

My name is Joshua Nyamuzihwa, student studying towards attainment of an Executive


Master of Business Administration Degree (EMBA) with Midlands State University. As
a partial fulfilment of the requirements of the EMBA programme, I am conducting a
study on the influence of EcoCash on Zimbabwean Commercial Banks’ Strategies. I
would like you to help me with answers to questions in this questionnaire. I would like to
assure you that the information you supply shall be treated as confidential. There is no
need for you to provide your name and contact details. Also, you are not being forced to
participate in this study and you are free to withdraw your participation any time.

1. Interviewer to observe gender of participants asks about occupation, age,


qualifications, and number of years in the banking sector.
2. Are you aware of the reasons that resulted in EcoCash being popular?
3. What can you say about the current banks charges?
4. What is your opinion relating to service quality and convenience in commercial
banks?
5. Give comments on the effect of EcoCash on the market of commercial banks
6. What changes were witnessed in banks in response to EcoCash?
7. Comment on the changes witnessed in commercial banks’ transactions and
payment systems
8. What are the sources of competitive advantage for commercial banks in
Zimbabwe?
9. What strategies could be used to ensure collaboration between Econet Wireless
and commercial banks?

Thank you for your time and effort

73

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