The Changing Demand of the Banking Sector in Wake Up of Globalization - Essay Example

INTERACTION BETWEEN INFORMATION SYSTEMS (IS/IT) AND BUSINESS STRATEGIES IN A BANKING ORGANISATION Due to rapid advent of globalization, banks have been faced with a challenge of streamlining their operations and have resulted to use of IS as a strategic move to cope with the rising pressure. However this has not gone well in all banks and some banks have found the system inefficient and leading to a lot of frauds. This has created a problem for many banks as they find that they are faced with the same old problem of service delivery. This study aims at exploring the various challenges that have made banks implement IS strategies. Is also hopes to compare the existing IS models that have been installed by different banks to come up with a sample model that can be copied by other banks for implementation. The study will use case studies where a sample size of 10 banks will be randomly selected in London and used for the purpose of study. For data collection, face to face interview will be conducted with the general manager and the IS manager of these banks. An observational check list will be used to collect information to assess the effectiveness of the model in each bank. Data will be collected over a period of one month. The data collected will be analyzed using simple analytical means of percentages, means and deviation and later subjected to regression analysis. The study will assume that the sample selected will be a representative of the whole population and that researcher will secure appointments with the managers. Introduction With the world turning to a global village, the world financial sector is under pressure to catch up with the new developments. Having been a conservative economic sector confined to their indigenous areas of operation, banks are facing pressure with increasing competition. Many banks have resulted to expansion strategies in order to serve their customers wherever they travel in this dynamic world. This has posed a challenge to many banks in terms of coordination of its services. Many other banks have resulted to mergers in order to have an international presence. Ideally, all banks have resulted to expansion strategy in one way or another. Due to large area of operation, banks have been faced with a problem of coordinating all their braches or merger partners. Banking industry has been in the front line in embracing the ever changing face of information system in order to coordinate their services well. But at the same time, many banks have found that embracing information systems may not stream line their services as intended. They have found information system has come up with its own woes. In some banks it has been found to be too expensive, cumbersome and creating a lot of inconveniences. It has lead to a lot of frauds which has led to losses to many financial institutions. This research aims at investigating how banks are implementing their information system, the reason for turning to information system, and the challenges they are facing in implementation of the strategy. The research hopes to compare information systems strategies in different banks to show models which have succeeded and which have failed in order to provide banks with resource material which they can refer if they want to implement a new IS strategy or to upgrade their existing one. Statement of the problem Many financial institutions have found it difficult to keep up with the changing demand of the banking sector in wake up of globalization. They have been faced with numerous challenges in streamlining their operations and relationship with their customers. Having resulted to new strategies using IS, many of them have found that the systems are not that efficient and they are faced with the same problem of efficiently. Purpose of the study The study aims at proving a critical comparison of different IS models that are being used in the banking sector today to provide resources information for the banking sector on the most efficient models as it will have studied. It aims at giving information which banks can use to incorporate in there IS strategies to implement new ones or to upgrade the existing models. Significance of the study This study is significant in generating information that will provide future guidelines in implementing IS strategies for banks. Assumption The study assumes that the sample size collected will be a representative of the whole population. It also makes an assumption that it will secure appointments for a face to face interview with managers of the selected banks. Literature Review Since the advent of globalization, the world has been reduced to a village. People are transversing all over the world. This has been matched by development in various sectors of life that supports the concept of globalization, transportation being the most important of them. Information technology has been the other aspect that has helped in reducing the world to a global village. According to Monideepa (2006), people are sharing information freely from all corners of the world. This has made the world experience pressures based on the rising need to satisfy the growing population. With the advent of globalization, the banking sector has not been spared either. People are sending money from one place to the other as they travel. This has created a lot of pressure to majority of the banks and many are struggling to keep up with the demands. Many banks have been faced with stiff competition as new banks ventures into areas which they have been considering their strong hold. Many banks have established networks all over the world and local banks are feeling the pressure. This has forced most of them to rethink about their strategies and re-evaluate their operations in order to compete well with other banks. They have started drawing new strategies to keep up with the competition. (Hackney et al., 2000) As they try to keep up with the pressure of satisfying their customers' needs and increasing their efficiency, they have resulted into streamlining their information systems. This is because the banking sector must embrace an efficient information system if it has to be competitive as other banks. Banking is a sensitive industry and must have an efficient information system to communicate to its customers which will translate to efficiency. Information system and business strategy often interact with one another and influence the efficiency of the other. According to Burgees et al., (2002), a business strategy is aimed at achieving a set objective while information system acts as a climbing ladder in achieving the strategy. It acts as a means of executing the strategy. An efficient information system provides all the requirements that a business needs to consider in order to plan its strategy. According of Lal (2005), for the banking sector and efficient information system is very important in improving its efficient. Many banks have turned round their performance through an improved information system. In a bank an efficient information system provides a streamlined flow of information which translates to a streamline flow of activities and services. It will coordinate banking in all branches of a bank, not mentioning the coordination of banking supportive facilities like automated teller machines. According to Karimi et al., (1996), information system in a bank will be very crucial in financial management of the bank. This involves the transfer of funds in the accounts, record keeping, and other monetary operations. We have already mentioned that it will assist in the coordination of supportive facilities like automated teller machines. It will also play a role in customer management. This will involve keeping records of the customers, their accounts, statements, and others. It can as well assist in the managing customers in the banking hall itself where they are controlled using electronically displayed messages. This is very important in enhancing customer satisfaction. Information systems will also assist in marketing. Marketing is the most important activity in any business since it sells the business out to the customers. Without reaching the customers, the business cannot exist. An efficient information system will assist in marketing the bank to potential customers and also in making the customer become aware of the changes that are taking place in the bank. According to Earl (1989), an efficient information system in a bank must be well planned. The initial planning is very important since it determines how the whole system will be run. It is important to consider that information system strategy will determine the whole operations of a bank and hence it must be very efficient right from the start. It must be planned in stages like an architectural work and later modified when it is being implemented. The bank must first develop the plan, then strategies the business model for the plan, and then plan business objects that are going to support the model. It must be in line with the business strategy that is to be implemented. It is good to understand the information system must support faster implementation of any strategy that a bank undertakes. While a business strategy will be aimed at achieving efficiency and effectiveness, the information strategy will move to reduce cost, increase productivity and reduce time in implementation of the strategy. While a strategy will be aimed at achieving internal efficiency through an efficient structure, the information system will be aimed at lining the business with the external world to help in reaching internal efficiency. Hence we can see that for any strategy that a bank plans, information system will come in hand to assist in implementing it. Many banks have implemented a strategic information system plan which has worked for them very well. They have been able to achieve the above said three goals for any strategy that a bank implements. They have been able to achieve an efficient financial management, customer management which has satisfied customers, and marketing. These are key pillars in success of any business. However from the experience of many banks, it is not always that information system will help in achieving a certain strategy. They site lack of coherence in many systems as one of the factors that lead to failure of manly of the information system. Lack of planning and lack of commitment to update the system are also other factors leading to collapse of information systems. However, information system in the face of globalization cannot be considered as a haven of prosperity for banks. It has been shown that this is leading instability of the bank due to the expansive structure where many banks have resulted to form mergers in a bid to stay in the market. This has led to reduction in revenues for many banks. Providing banking services and money transfer service online have led to increase of frauds which are translating to loss for these banks. Research Questions What problems have banks faced in the wake up of globalization Which strategies have banks come up with to cope with the problems How has banks planned the installation of their information system Has the IS met its Has the information system met their expectations Which problems have they faced with the information system METHODOLOGY Research Design/ Instrumentation This research will use case study for its research purpose. A case study narrative will be developed and all data based on the above questions will be gathered. 10 banks will be sampled at random for the purpose of the study. This will be combined with face to face interviews which are going to be conducted with general managers and information system managers of the respective banks. The interview will strictly be based on the above stipulated research questions. Interviews will take about 30 minutes. To get a clear effect of the implemented IS systems observations will be made on an observation check list. Observations will be used to assess the effectiveness of the IS system depending on the flow of customers in the bank and the duration that they take before they are served. The observation list and the interview will be structured in a questionnaire which will be administered by the researcher. Sampling In the research, 10 banks in London will be randomly selected and used for the survey. The researcher will ensure that there is no bias in the selection of the banks in order to maintain the validity of the study. However the banks will not be selected from one street to ensure that the whole city is covered. Data collection procedures The date will be collected over period of one month in order to give time for booking the interviews. The following procedures will be used in data collection. As indicated above, a sample of 10 banks will be selected for the study in a random manner all over the city of London. After selecting the banks, interview will be booked with the General Managers of the bank and the IS manager as well. If the General Manager will not be available, the IS manager will be relied on to provide the information. These interview will be used to collect information about the bank and the IS strategy that it is pursuing and the problems that they are facing. The research hopes that it will secure a face to face interview with the manager. If it turns out difficult to secure a face to face interview with the manager, they will be providing with the questionnaire for self administration. After the interview, an observation check list will be used to asses the effectiveness of the IS system in the bank. This will be through observing customer flow in the bank and the time they will be taking to be served. The observation will also capture any incidence of complains due to unsatisfying services from the customer or any complain during the time of the observation. Information on the observation checklist will then be compared with that provided by the manager and a conclusion made. Data analysis After data collection, it will be analyzed using simple analytical methods of percentages, means and deviations. Then it will be subjected to regression analysis in order to analyze the strength of the relationship between IS systems installed in the banks and their effectiveness in terms of improvement in service delivers and customer satisfaction. It will also seek to analyze the relationship between different models implemented by different models in order to find out the most efficient models which can be copied by other banks. Ethical considerations During the research, the following ethical consideration will be observed. The managers will be informed of the impending research in the respective institution and permission sought from them. All the interviews will be booked in advance and managers will decide the time and place. References Burgess, S. & Darbyshire, P. (2002): Added value benefits of application of internet technologies to subject delivery. Annals of Cases on Information Technology; Hershey: Idea Group Publishers. Earl, M. J. (1989). Management strategies for information technology; New Jersey: Prentice Hall. Focusing on customer: An Interview with the Head of Merrill Lynch's Operation and IT. The McKinsey Quarterly; Retrieved from, http://www.mckinseyquarterly.com/Information_Technology/Focusing_on_the_customer_An_interview_with_the_head_of_Merrill_Lynchs_operations_and_IT_2021_abstract on 10th January, 2008 Hackney, R., Burn, J. & Dhilon, G. (2000): Challenging assumptions for strategic information systems planning: Theoretical Perspectives. Communication of the AIS, Vol. 3 (3) Karimi, J., Gupta, Y. P. & Toni, M. S. (1996). Impact of competitive strategy and information technology maturity on firm's strategic response to globalization. Journal of Management Information Systems, Vol. 12(4): 54-81 Kwangju Bank Strategic Information Systems Plan. (1998). Bank overhauls its strategic information system plan in 3 weeks. Retrieved from, http://www.ies.aust.com/ies-projects/kjb/index.htm on 10th January 2008 Lal, K. (2005). Determinants of the adoption of e-business technologies. Journal of Telematics and Informatics, Vol. 22(3): 182-200 Monideepa, T., Sanjiv, D. (20060. Information systems assimilation in Indian Organizations: An examination of strategic and organizational imperatives. Journal of Strategic Information Systems, Vol. 15(4): 295-300 Read More