How Banks Achieve Competitive Advantage in Ghana: Revised Analysis

 

 

 Revised for 2025 – Integrating Historical Insights with Modern Banking Trends

Introduction

The banking industry in Ghana has long been characterized by dynamic competition and rapid evolution. This revised review reexamines the thesis, “An Evaluation of Strategies for Achieving Competitive Advantage in the Banking Industry: The Case of Ghana Commercial Bank Limited (GCB),” originally based on data from 2005 to 2010. While the thesis provides a solid foundation in understanding competitive strategies—drawing on frameworks such as Porter’s (1985) and Ansoff’s (1965) classic models—the current review updates the discussion in light of modern developments in technology, digital banking, and evolving customer expectations.

Note: Visual elements like infographics and charts are suggested throughout this post. (For example, see “Figure 1: Market Share Trends in Ghana’s Banking Sector” – images should include descriptive alt text for accessibility.)

Background and Context

Historically, the Ghanaian banking industry witnessed a rapid increase in the number of banks—with 17 new entrants between 1990 and 2009, and a total of 26 banks active by the mid-2000s. In this competitive landscape, GCB’s expansive branch network and low-cost service strategy were key differentiators. However, as the industry matured, the original study noted challenges such as a declining market share, bureaucratic credit processes, and poor customer service.

Updated Perspective

Since the period covered by the thesis, Ghana’s banking sector has undergone significant transformation. The rise of fintech, mobile banking, and digital financial services has added a new layer of competition. Today, traditional strengths such as physical branch networks are being complemented—and sometimes challenged—by innovative digital channels. This revised analysis not only reaffirms the thesis’s core insights but also suggests that modern banking strategies must integrate technology and customer-centric innovation to sustain competitive advantage.

Key Findings and Revised Analysis

1. Competitive Advantage through Scale and Technology

• Branch Network and Economies of Scale:
  The thesis identified GCB’s 157 branches and 11 agencies as a major competitive advantage. Today, while a wide physical network remains valuable, banks must also leverage digital platforms to reach an increasingly tech-savvy clientele.
  Revised Insight:
  Modern banks should integrate their branch networks with robust online services. This dual approach can help achieve economies of scale while meeting customer demand for convenience and speed.

2. Strategic Focus and Differentiation

• Cost Leadership vs. Differentiation:
  The original study found that GCB primarily used a low-cost strategy. Although effective in driving market share in earlier years, competing on price alone is no longer sustainable.
  Revised Insight:
  Today’s competitive landscape calls for a blended strategy. In addition to low-cost operations, banks should invest in differentiation through digital innovations, personalized services, and a seamless customer experience. This balanced approach can help create a stronger brand identity and customer loyalty.

3. Information Systems and Digital Transformation

• Technology as an Enabler:
  GCB’s decision to computerize its operations was a forward-thinking move. However, the rapid pace of technological change now demands continuous innovation.
  Revised Insight:
  Up-to-date IT infrastructure is critical—not only for operational efficiency but also for data-driven decision making. Modern banks should adopt advanced analytics, cybersecurity measures, and mobile banking solutions to enhance both internal processes and customer interactions.

4. Access to Credit and Streamlined Processes

• Credit Delivery Challenges:
  The original review noted that cumbersome procedures, such as the requirement for registered title deeds, slowed down the credit process.
  Revised Insight:
  With digital document management and electronic verification systems now available, banks have an opportunity to simplify loan processing. Streamlining these processes can improve turnaround times and boost customer satisfaction.

5. Profitability, Customer Service, and Reputation

• Mixed Performance Indicators:
  While GCB reported steady profit growth, issues such as poor customer service and unattractive branch environments were significant drawbacks.
  Revised Insight:
  In today’s market, profitability is increasingly linked to the overall customer experience. Banks should invest in staff training, modernize branch aesthetics, and utilize digital channels to provide rapid, personalized service. This focus not only preserves a good reputation but also drives sustainable growth.

6. Methodological Considerations and Future Research

• Critical Evaluation of the Study’s Approach:
  The thesis relied on both primary data (interviews with 400 staff members) and secondary data (annual reports and internal newsletters). While this provided valuable insights, modern research should also incorporate customer feedback, digital behavior analytics, and comparative studies with fintech entrants.
  Revised Insight:
  Future research might explore how digital transformation impacts competitive advantage, comparing traditional strategies with emerging trends in customer engagement and technology use.

Conclusion

In an era defined by digital disruption and evolving consumer expectations, the competitive strategies that once drove success in the Ghanaian banking industry require significant adaptation. This revised analysis reaffirms the importance of economies of scale and cost leadership while emphasizing the need for strategic differentiation through technology and customer service excellence. For banks like GCB, blending a strong physical presence with innovative digital initiatives is crucial to maintaining—and enhancing—their competitive edge.

Recommendations for Banks Moving Forward

• Integrate Digital Channels:
  Combine a robust branch network with state-of-the-art mobile and online banking services.
• Enhance Customer Experience:
  Invest in staff training and modernize branch environments to provide a welcoming, efficient service.
• Streamline Credit Processes:
  Leverage digital verification and document management to reduce bureaucratic delays.
• Invest in Technology:
  Continuously upgrade IT infrastructure to support data analytics, cybersecurity, and innovative financial products.
• Encourage Ongoing Research:
  Support studies that assess the impact of digital transformation on competitive advantage.

Original Review

This post is a review on the thesis, “An Evaluation of Strategies for Achieving Competitive Advantage in the Banking Industry: the Case of Ghana Commercial Bank Limited.”

Researcher: L. A.

1. Introduction

Every industry including banking has an underlying structure or a set of fundamental economic and technical characteristics which give rise to competitive forces. A firm can clearly improve or erode its position within an industry through its choice of strategy. Competitive strategy, then, not only responds to the environment but also attempts to shape the environment in its favour (Porter, 1985).The strategist must therefore seek to position his or her firm to cope best within its industry environment or to influence that environment in the firm's favour.

The Ghanaian banking industry has witnessed an unprecedented entry of seventeen (17) banks between 1990 to 2009 (Ghana Banking Survey, 2009), notable among the new entrants are Ecobank Ghana Limited, Stanbic Bank, UT Bank, Unibank, Amalgamated Bank, United Bank for Africa and Zenith Bank to mention a few. There are currently 26 banks operating in Ghana, with the attendant jostling for positions, market share and profits. Competition is at the core of the success or failure of the Ghanaian banking industry, and the influx of new banks onto the banking scene means Ghana Commercial Bank can no longer invest in short term government securities , fold her arms and expect excellent financial performance at the end of the year.

Strategic management exponent Toffler (2003) writes that a company without a strategy is like an airplane weaving through the skies, hurled up and down, slammed by winds and lost in the thunder heads. If lightning or crushing winds do not destroy it, it will simply run out of fuel. In similar line of thought, Ross et al (2000) note that without strategy an organization is like a ship without a rudder. It goes round in circles and like a tramp has no specific place to go.

Clearly, these statements emphasize the importance and need for far reaching dynamic and systematic strategic planning for companies to survive competition in the ever changing global competitive business environment. Ansoff (1970) argues that planning generally produces better alignment and financial results in companies which are strategically managed than those which are not. This suggests a seeming correlation between strategic planning and the ultimate performance of a company in terms of its growth, profits, attainment of objectives and sustained competitiveness (Strickland, 2004).

Though these assertions are largely true, Pitts et al (2003) affirm that exceptional situations also arise when some companies gain not because they had in place any strategy but because they just benefited from some sudden conditions in the external environment. For example, after the September 11, 2001 terrorist attack on the World Trade Centre, Pentagon and in Pennsylvania all in the United States of America, air travel within and across that country dropped drastically in favour of rail and road transport which were thought to be safer. Rail and road transporter operators therefore, enjoyed a sudden and unexpected boom. 

Nonetheless, and still consistent with the need for evolving and constantly reviewing strategy, it is important to note that having a sound strategy in itself does not necessarily translate into desired performance goals if it is not properly implemented. Both strategy and implementation must be good and timely to achieve positive results. As for a company driven by wrong strategic planning, Malamud (2004) likens it to a train on a wrong track saying, every station it comes to is the wrong station.


These fundamental principles largely hold true for all industries globally and as should be expected, the banking industry is also subject to the dynamics of these global market trends. Against this background, the study looks at the competitive strategies for achieving competitive advantage in the banking industry.

2.      Rationale

The economic climate in Ghana over the last decade has been relatively stable for banking business. This notwithstanding, not all the banks can be said to have performed at levels that meet industry and stakeholders' expectations. Much as the differences in the performance levels of various companies are to be expected, it is still strongly believed that the strategies pursued by each bank largely account for its performance. The absence of well-defined competitive strategies results in weak competitive positions. This study looks at the competitive strategies being pursued by Ghana Commercial Bank Limited (hereafter referred to as GCB) to achieve competitive advantage in the banking industry of Ghana. Management plays the lead role in strategic thinking, planning, decision-making and ultimate implementation of policies and strategies. Unfortunately, some banks are perceived to have management structures that overly limit the authority to make long-term strategic decisions to a few key shareholders who may be limited in some ways. This obviously compromises the richness and diversity of the banks' strategic planning agenda to the detriment of corporate performance.

The fear of loss of ownership control is also speculated to have inhibited the expansion of the capital base of some of the private banks. This under-capitalization has posed challenges for the hiring and retention of the needed numbers and quality of personnel, upgrading of technology and the financial capacity to insure big and complex risks.

With the inception of the Financial Sector Adjustment Programme (FINSAP), distressed banks have since the 1980s attempted to restore their profitability and become more competitive. GCB witnessed an impressive performance within the period immediately after the implementation of FINSAP, chalking 45% of the overall industry profits in 1993. However, the period after 1993 has witnessed a declining market share for GCB. The bank’s market share of deposits was 38% in 1993 but has gradually declined to 17.8% in 2006, Standard Chartered Bank, however, made gains moving from 9% of the industry share of deposits in 2003 to 13.1% in 2006. GCB‟s return on equity of 28.7% also does not compare favourably with those of its major competitors namely; Barclays Bank, Ecobank, and Standard Chartered Bank which posted 52.1%, 43%, and 38.9% respectively in 2006 (Business &Financial Times, May 21,2007).

Though the bank is utilizing its extensive branch network and modern technology to better its operations, the bank‟s low cost strategy which is amply demonstrated in its very attractive base rates are of no use if a greater number of loan applications are not processed because of the stringent criteria and lengthy procedures. GCB demands that customers deposit registered title deeds to secure loan facilities, but land registration is cumbersome, very expensive and therefore unpopular in most parts of the country (GCB Newsletter, April 2008).

The bank seems to be using mainly low cost leadership and a little bit of differentiation as its competitive strategy. Most of the bank’s products are reasonably priced and the bank’s charges compare favourably with those of its close competitors (i.e. Barclays Bank, Ecobank and Standard Chartered Bank). It also appears that competing on pricing alone may not be in the long-term interest of the bank as it is no longer translating into a competitive advantage for the bank. The bank has gained a very poor reputation in terms of customer service, turnaround time, poor branch ambience and bureaucratic credit processes.

This study attempted to investigate the above issues and the reasons behind the mixed performances despite huge investments in infrastructure, human capital, technology, sales and marketing activities and essential resources.

                 3.      Main Objectives

The main goal of the study is to assess the strategies adopted by banks to gain competitive advantage in the banking industry with particular reference to GCB.

                4.      Key Findings

Competitive Advantage

It was established that GCB enjoys competitive advantage in the Banking industry, the main sources of the Bank’s competitive advantage being its large geographical spread of 157 branches and 11 agencies, and low charges for the range of services rendered to the public.

Strategy

The bank is using a cost leadership strategy to achieve competitive advantage which has been so far, working in its favour. The bank is enjoying the benefits of economies of scale from its wide network of branches spread across the length and breadth of Ghana resulting in a large customer base.

Information Systems

The bank's decision to computerize and network all its branches was a deliberate, well thought out strategy to improve efficiency, customer information management and also provide easy access to banking services. The study found out that the move has strategically positioned the bank to survive and attain the requisite competitive edge within an intensely competitive industry.
 

Access to Credit

Easy access to credit is not one of GCB’s strongest points; it placed a distant fourth when the bank’s most important strategies were ranked. Thus the bank could do more in terms of improving its loan application processes, utilizing IT to eliminate the bureaucracy in its credit delivery system i.e. forwarding most loan applications to the Head Office Credit Committee.

Profitability

The bank’s accounts show increasing profits year after year indicating GCB's viability.

Customer Service

Customer service placed last among six strategies ranked by respondents; indicating the low level of importance attached to customer service in GCB.

Image/ Reputation

GCB enjoys a very good reputation which translates into goodwill and business for the bank, despite the poor customer service.

Branch Ambience/ Aesthetics

Majority of respondents found the bank’s offices to be unattractive, casting a very negative impression on the bank’s facilities.
 

              5.      Summary

Competition is a fact of business life, unless a business can develop strategies to compete successfully in the market place, it has practically no chance of growth and would remain a tiny firm performing far below its potential. In an increasingly competitive banking industry in Ghana, the absence of well-defined competitive strategies leads to weak competitive positions and hence performance below the industry average.

The purpose of this study was to examine the competitive strategies adopted by banks to achieve competitive advantage in the banking industry in Ghana with Ghana Commercial Bank as a case study. Both primary and secondary data were sourced and used for the analysis of the study. Primary data was collected using interviews and questionnaires on a purposive sample of 400 staff. Secondary data was collected from Annual Reports of GCB for five years from 2005 to 2010, GCB‟s internal newsletters The Eagle and Commerbank News etc and the Business and Financial Times.

The study revealed that the bank has drawn up several strategic plans and religiously implemented them since 1990. It also came to the fore that the bank enjoys competitive advantage in the industry, the most important factor contributing to the competitive advantage, being the bank’s extensive branch network. The study recommended that the bank should improve its IT infrastructure, streamline its loan application processes, and train staff to be more customer-friendly and proactive, de-congest the banking halls and serve customers faster all in a bid to meet and exceed customer expectations and sustain the competitive advantage.

References

Ansoff, H. I. (1965). Corporate Strategy McGraw Hill, New York.

Pitts R.A. and Lei D.(2003) Strategic Management: Building and Sustaining Competitive Advantage (3rd ed.), Thomson: South-Western, Canada.

Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York.

Strickland, A. J. (2003) Strategic Management Concepts and Cases, McGraw-Hill/Irwin.