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Content List Introduction............................................................................................................... 1 Chapter One .............................................................................................................. 2 Literature Review of Operations Strategies' Configuration: ....................................... 2 Chapter Two.............................................................................................................. 8 The Detailed Construction Process of Banking Operations Strategies configurations . 8 2.1 Summary of Methodology Adopted ................................................................ 9 2.2 Identifying the Scope of Traditional Banking Operations strategies: ............. 10 2.2.1 Banking Process Design Decisions:......................................................... 11 2.2.2 The Branches' Facility Layout Design Decisions: .................................... 16 2.2.3 The Branches' Distributions and Location Decisions: .............................. 17 2.2.4 Traditional Banking Capacity Management Decisions: ........................... 18 2.3 Identifying the Competitive Priorities of Banking Operations Strategies: ....... 23 2.3.1 The Priorities of Banking Process Design:............................................... 29 2.3.2 The Priorities of Branches' Facility Layout Design:................................. 30 3.3.3 The Priorities of Branches' Locations and Distributions: ......................... 30 2.3.4 The Priorities of Banking Capacity Management: ................................... 31 2.4 Identifying the Competency Indices of Banking Operations Strategies ........... 31 2.4.1 The Lower Order Competency Indices: ................................................... 32 2.4.2 The Higher Order Competency Indices ................................................... 32 1- The Financial Indicators: ............................................................................. 33 2- The Marketing Indicators: ........................................................................... 34 3- The Productivity Indicators: ........................................................................ 36 2-5 Identifying the General Classification Scheme of Banking Operations Strategies' Competitive Priorities ......................................................................... 39 2.5.1 The Priorities of Process Oriented Banking Operations: .......................... 39 2.5.2 The Priorities of Service Oriented Banking Operations: .......................... 39 2.5.3 The Priorities of Customer Oriented Banking Operations: ....................... 40 2.6 Identifying the Banking Operations' Decisions Related to General Classification Scheme of Operations' Competitive Priorities: ..................................................... 40 2.6.1 Process- Oriented Banking Operations Strategy ...................................... 41 2.6.2 Service-Oriented Banking Operations strategies:..................................... 43 2.6.3 Customer Oriented Banking Operations Strategies: ................................. 46 Chapter Three.......................................................................................................... 50 Managerial Implications of the Proposed Configuration Conclusion ........................ 50 3.1 Managerial Implications and Propositions...................................................... 51 3.2 Conclusion..................................................................................................... 54 References............................................................................................................... 55
Introduction The concern about the service management in general and service operations management in particular emerged in the 1970s and beyond, as a result of extraordinary role the service sector is played in production; the percentage of service sector contribution in GDP in the developed countries in 2003 reached 70% (Australia 67.5%, France 66.2%, Japan 69.6% and Germany 70.1%) (ODEC, 2005). So the academic contribution of operations management has been directed toward service, and the service operations management emerged as a field of study (Heinke and Davis, 2007), despite this academic direction, the majority of academic contributions is still manufacturing oriented (Nie and Kellog, 1999). According to literature review of Machunca et al., (2007); the percentage of published articles of service operations management in ten Journals is 7.5% over the period (1997-2002); accordingly the challenge is still exist to develop the field of service operations management, both form research and teaching perspective (Heinke and Davis, 2007). Also, the percentage of previous studies of operations strategies conducted in the financial institutions and insurance companies was 4.6% over the period 19972002, despite the financial sector in general and the banking sector in particular is a superior laboratory for many types of market competitiveness and performance research (Berger and Jackson, 1995 and Berger, 1991), also this sector is dynamic which faces a competition from non-bank financial services firms (Roth and Jackson, 1995). Consequently, there is still a deficiency in the service operations management academic contribution in general (Nie and Kellog, 1999, Johnston, 2005), and service operations strategy in particular, so the service operations management is still in the pioneering stage (Menor et al., 2001), accordingly, the aim of this paper is to bridge the gap of service operations strategy literature in general and banking operations strategies in particular, through developing a typological configuration of traditional banking operations strategies. In accordance, the ideal configuration will be developed for the stream of decisions related to face-to-face banking service delivery system over the physical service encounter, which are consistent with the requirements of target market in order to develop or sustain the bank competitive position.
Chapter One
Literature Review of Operations Strategies' Configuration
The building of frameworks or configurations of service operations strategy is very important for senior managers, which help them in relating operations activities to the firm's overall service performance, further this will help in identifying the key elements that must be addressed in the strategy development process, another is to help positing the firm's operations relative to competitors (Chase and Hayes, 1991). Also such models will help in the designing of consistent service delivery, and in the identification of reasons for failure in delivering the required services to customers (Armistead, 1990), however, only a few studies analyze the differences and interaction between the different dimensions configuring the service operations strategies in general (Aranda, 2003), and banking operations strategies in particular. The configuration is a grouping base (logical subset of variables) for organizations accordingly the organizations can mirror each other based upon the grouping base (Meyer et al. 1993), there are two approaches used to develop strategy configurations; the approach of typology and the approach of taxonomy (Miller, 1996), typologies are the ideal types, each of which represents a unique combination of organizational attributes that are believed to determine the relevant outcomes (Doty and Glick, 1994), while taxonomies are an empirical classification of mutually exclusive and exhaustive groups (Miller, 1996). Compared to typology approach taxonomy tend to be more firmly based on facts or at least on quantitative data, also the classification variables are carefully selected based on existing theory and task on hand and seeks to test the following question; are the proposed groups stable across techniques and sample data (Bozarth and McDermott, 1998). The typology provide generalized grand theory and middle range theories applicable to individual types and specify the individual dimensions that define the types which empirically testable, also it test the following question; does greater alignment between an organization and defined ideal types results in greater organizational performance? (Bozarth and McDermott, 1998). Since the aim of this study is to identify the competitive banking operations strategy, accordingly the configurations of banking operations strategies are the ideal mixer of different characteristics of operations strategies that the banks should adhere
in accordance to operations competitive capabilities consistent imposed by the market. The majority of empirical research contribution of operations strategy configuration has been developed was taxonomies of manufacturing strategies as the contribution of Miller and Roth (1994), Kathoria (2000), Frohlich and Dixon (2001), Menor et al. (2001) Sum et al. (2004) and Zhao et al. (2006) rather than developing typologies. Also, The majority of general scope typologies of operations strategies were developed by manufacturing strategy literatures (e.g. Hayes and Wheelwright 1984, Hill, 1989, Kathoria and Orne, 1989, and Ward et al., 1996 and Devaraj et al., 2001), and few general scope typologies were developed by the service operations strategy literatures (e.g. Kellogg and Nie, 1995, Metters and Vargas, 2000a, Lowson, 2002, Aranda, 2003) (see table (4-1)). Accordingly, the majority of typologies frameworks that have been developed by the service operations strategies' scolars are related to process design (limited scope) (e.g. Chase and Tansik, 1983, Schmenner, 1986, Hill, 1989, Tinnila and Vepsalainen, 1995, Zomerdijk and DeVeries, 2007). However, the scope of operations strategies is broader which includes other decisions dimensions as the location, capacity, facility layout, also the majority of these typologies are theoretical (e.g Hayes and Wheelwright, 1984, Hill, 1989, Kotha and Orne, 1989, Kellogg and Nie, 1995 Metters and Vargas, 2000b). On the other hand, the majority of the frameworks were developed as a general sector model (e.g. Hayes and Wheelwright, 1984, Kotha and Orne, 1989, Kellogg and Nie, 1995, and Ward et al., 1996), and few are developed for particular service or manufacturing industry (e.g. Metters and Vargas, 2000b, Lowson, 2002 and Aranda , 2002, 2003), accordingly the typologies that developed in this chapter are developed according to different dimensions of operations strategies' decisions (broad scope), and more sophisticated and oriented toward banking industry.
Broad
Specific (Process design)
Manufacturing
Service
Manufacturing
Manufacturing
Service
Hayes and Wheelwright (1984) Schmenner (1986)
Hill (1989)
Kotha and Orne (1989)
Larsson and Brown (1989)
Specific (process design)
Specific (process design)
Specific (Process design)
Specific (Process design)
Service
Chase and Tansik (1983)
The scope of typology
Industry
Author
Conceptual
Conceptual, partially on Porter (1980)
Conceptual
Conceptual followed by illustrative case Conceptual from case study Conceptual
Development
Firm
Business unit
Plant production
Production plant Firm
Firm
Level of analysis
Low/high degree of customer disposition to participate versus low/high diversity of demand.
More than 20 aspects related to investment, products, markets, production and infrastructure. Product line complexity, process complexity and scope
Process flow, product volume, and standardization. Low/ high degree of customer contact and customization versus low/high degree of labor intensity of the process
Customer contact from high to low
Variables
The Summary of Operations Strategies' Typologies
Table (1)
Four types of process flow; job shop, batch, line and flow Low vs. low (service factory), low vs. high (mass service), high vs. high (professional service), and high vs. low (service shop). Five types of process; project, job shop, line, and continuous. Eight types of strategies based on different combinations of three dimensions Low vs. low (pooled service design), low vs. high (sequential customized design), high vs. low (sequential standardized service design), and high versus high (reciprocal service design).
High contact process will be close to customer.
Grouping
Industry
Service
Service
Manufacturing
Service
Manufacturing (Textile industry)
Service
Service (bank)
Author
Silvestro et al. (1992)
Tinnila and Vepsalainen (1995)
Ward et al. (1996)
Kellogg and Nie (1995)
Williams et al. (1995)
Coller and Meyer (1998)
Metters and Vargas (2000b)
Specific (process design)
Specific (process design)
Broad
Broad
Broad
Specific (process design)
Specific (process design)
The scope of typology
Conceptual from multiple cases
Conceptual, followed by empirical examination. Conceptual
Conceptual
Conceptual
Conceptual
Conceptual
Development
Branch
Firm
Firm
Business unit
Business unit
Firm
Firm
Level of analysis
Operations focus, and degree of decoupling of front and back-office activities.
High, moderate low repeatedly of customer's service encounter activity sequence, and high moderate or low number of routes or paths to choose.
Tracing customer needs, or developing high tech.
Different characteristics in on dimensions Degree of equipment/people focus, customer contact, degree of customization, value added back office front office, product or process focus, the other dimension is the degree of people processed. The first dimension: types of services; contingent relationship, customized delivery, stretched contact and mass transactions. The second dimension: the types of channel; market network, service personal, agent alliance, internal hierarchy. Organization structure, business strategy, environment uncertainty, manufacturing strategy. Service package, process design, and strategy orientation
Variables
High vs. high (customer routed), moderate vs. moderate (co-routed), and low vs. low (provider routed). Focused professional, cost leader, Kiosk, service oriented.
Technology oriented and customer oriented
(cost).
Niche Differentiator, broad market differentiator, cost leader, and lean competitor. Prospector (differentiation), analyzer and defender
Diagonal match between the two dimensions, four groups emerged; adaptive process, focused process, flexible process, and fast routine process.
Diagonal match between the two dimensions, three groups emerged; professional services, mass services, and service shop.
Grouping
Service
Aranda (2002, 2003)
Zomerdijk and DeVeries (2007).
Service (retail stores)
Lowson (2002)
Service (banking industry)
consulting)
(engineering
Industry
Author
Conceptual, followed by empirical examination. Conceptual followed by illustrative cases
Broad
Specific (process design)
Conceptual, followed by empirical examination
Development
Broad
The scope of typology
Firm
Process layout, location, technology, customization, decoupling of front and back office activities, customer contact, new service development. The degree of decoupling of front and back office activities which affected by the contact and non-contact activities
Core competencies, capabilities and processes, resources, technologies, certain key tactical activities.
Store
Firm
Variables
Level of analysis
The high contact activities are requires high coupling of front and back office activities, low contact activities require high decoupling of front and back office activities.
Quick response (QR), efficient consumer response (ECR), Time-Based competition (TBC), Supply network strategy, JIT, JITII, Agility in supply chain, strategic outsourcing, worldclass manufacturing Service oriented, process oriented, and customer focused
Grouping
Chapter Two
The Detailed Construction Process of Banking Operations Strategy configuration
2.1 Summary of Methodology Adopted After intensive literature review; the functional scope of traditional banking operations strategies have been identified, and the categories and sub-categories of operations strategies competitive priorities and traditional banking operations strategies competency indices were identified too, next, after tracing the published literature in traditional banking operations; the decisions related to different traditional banking operations' functional areas were determined. Finally, the decisions were grouped according to the general groups of traditional banking operations' competitive priorities that decided to achieve to three ideal groups (typologies); process oriented, service oriented and customer oriented. The general construction process is summarized in figure (1). Start Literature
Content analysis (Categorizing and grouping)
Competency indices (phase3)
Content analysis (Categorizing and grouping)
Operations' Competitive priorities (phase 2)
Process, service and customeroriented (phase4)
Traditional banking operations decisions' categories (phase 1)
Combine decisions with priorities general categorizes
The typologies of traditional banking operations strategies (Phase 5)
Finish
Figure (1) The Construction process of the Banking Operations Strategies' Configuration
2.2 Identifying the Scope of Banking Operations strategies The scope of banking operations strategies is the time horizon and the content domain of operations choices; the operations decisions making could be classified according to time horizon to different cycles; the strategic planning cycle, the long range planning cycle, medium range planning cycle, and short range scheduling, each cycle is geared the decisions of lower cycle time, the broader time horizon decisions are the strategies planning cycle, followed by long rang, planning, medium rang and finally the short rang (Leschke, 1998). Accordingly does the scope of operations strategy covers all cycles or the strategic planning cycle?; the operations strategy revolves around the pattern of choices like any strategy, these choices or decisions are concerned less with individual day to day tactical activities and more with the whole transformational system that is part of the organization; so its more concern about med-term to long-term decisions (Lowson, 2002, Lowson, 2003). The researchers in manufacturing strategy view the content scope of operations strategy form two viewpoints; the value chain or supply chain viewpoint, and the functional view point (Lowson, 2003); the strategic operations of value chain viewpoint is an approach the identifies the activities of all organizations in the value chain, so the activities are classified to general categories; supply chain and demand chain activities (Walter and Lancaster, 2000 and Walter, 2001). Accordingly, the scope of operations strategy is broader than the functional strategy as manufacturing and production (Lowson, 2003), which include strategies as JIT, Quick Response, supply chain networks (Lowson, 2002, Lowson, 2003), this viewpoint is the contemporary and consistent with a system's viewpoint (Silver, 2004). However, the functional viewpoint is the widely adopted in the literature of manufacturing and service operations strategy, accordingly the scope is restricted to the choices related to functional specialization, accordingly they are classified to; structural and infrastructural decisions; the structural are the long-term decisions which are strategic in nature, infrastructural are tactical short-term decisions (Skinner, 1974). So according to functional view point, the operations strategies as set of decisions related to the service and production system, which include; the flexibility dimensions in term of volume, variety, and service package, and the type of production and delivery system, which include the process type, the degree to which the service is delivered by equipment or through people, the layout of service facilities, and location, the people skills, the information
system, and performance measurement (Armistead, 1990), or technology, facility layout, job design and capacity management (Kellogg and Nie, 1995). The value chain viewpoint is difficult to adopted in information intensive sectors as banking, since the supply chain is not easy to identify, supply chain management has a direct relevance to services that include the provision of manufactured goods as a part of the service concept as; retailers, equipment service and repair companies, airline (e.g. outsource the production of meals for its passengers needs) (Johnson and Clark, 2001). So the researchers of banking operations strategy adopted the functional viewpoint, their classification scheme includes; the integrated technology, capacity expansion, human resources (Menor et al., 2001), or quality, process, capacity, and facilities (Gupta et al., 2001), or expanded to include; encounter management strategies, operations integration, capacity management strategies and facility management strategies. (Rhee and Mehra, 2006). Accordingly, in the context of this research; the functional view point will be adopted, and the focus will be more on medium to long-term choices which includes; the traditional banking process design strategies, the capacity management strategies, the branches facility management strategies, and the branches distribution and locations strategies.
2.2.1 Banking Process Design Decisions According to different typologies of service process design the decisions could be classified to; decoupling decision (Chase and Tansik, 1983, Larsson and Bowen, 1989, King, 2000, Metters and Vargas, 2000b, and Safizadeh et al., 2003 and Zomerdijk and Deveries, 2007), which includes the job assignment and classification to front and back office, standardization and specialization of back and front office jobs, cross training of back office and front office employees, and the geographic location of back office (Metters and Vargas, 2000b). Some processes could be decoupled or separated to front office and back office, others could be coupled (Zomerdijk and Deveries, 2007), the degree of customer contact or the degree of customer physically presence impacts the degree of decoupling, the more contact the more coupling between front and back-office activities (Chase and Tansik, 1983). Moreover the more customized, wide range services, and more customer participation and contact the more adoption of front office orientation or coupling front and back offices activities, however the more standardized service, limited services provided and customer participation the more back-office orientation (Safizadeh et al., 2003).
The more coupled front-office and back-office activities the more emphasis on cross training of employees, so the employees can handle any task, and will have interpersonal and public relations skills, moreover the more decoupling the more specialized back-office employees, and more centralization back office activities (Metters and Vorgs, 2000a Metters and Vargas, 2000b). Despite the centralized bank's back-office activities will reduce the cost significantly as a result of economies of scale (Hunter, 1995 and Metters and Vargs, 2000b), the coupling of front and back-office activities may lead to reduce cost by constructing many small service units but providing limited products or services (Metters and Vargs, 2000). the different modeling of steps to do the same process, the number of service process steps (Silvestro et al., 1992 and Mayer et al., 2003). The other decisions are related to the role of customer in the process (Larsson and Bowen, 1989), play different roles; the customer may do the majority of the job or the bulk of workload can be placed on customer if they have adequate ability and the clear job duties, further motivated to do the job (Larsson and Bowen, 1989) as the case of ATM or internet banking. Or the customer may provide the front-office employee with the specification of the service that he/she is looking for, or the bulk of service is placed on service employees; the front-office employees take specifications for customers and do the jobs by participation with back office, so the customer is passive, further the front back-office employees could do the majority of jobs, and the role of customers and front-line employees is passive (Larsson and Bowen, 1989). The increase of customer participation in the process will increase productivity and customization also will increase the convenience, despite the increase of customer participation is supporting the cost leadership strategy (Fitzsimmons and Fitzsimmons, 2006), some times the customer may be less price sensitive but decided to participate in order to have a better treatment or customization especially if the problem is complex (Larsson and Browen, 1989). Furthermore, the number of process's steps could be repeated, and alternative channels (routes) to do the same process (Collier and Meyer, 1998) are the other decision to be made. Also the process customization which related to; the number of options available to do the same transactions (Tinnila and Vepalainen, 1995), some services delivery processes are done by limited discretionary actions of personnel, so the employee or the person will conduct the
actions according to well defined tasks, also the substitution of technology for people, this will create a routine with defined tasks and an orderly flow of customers, this approach is known as product-line approach, this approach is adopted to gain competitive advantage with cost leadership strategy (Fitzsimmons and Fitzsimmons, 2006). The using of information technology to do the process and for communication is the other decision categories to deal with (Mayer et al., 2003); the information technology plays different roles in business process as; initiator, facilitator or enablers, the initiator means the information technology role is change agent, the facilitator serves as something to make workload easier, however enabler is something that offers the ability or the necessary assistance to accomplish something, IT acts as an enabler which provides rapid processing and analytical capabilities, parallel access and information capture (Chan, 2000). IT impacts the process innovation either by automation; which IT replace or reduce the human labor; as the using of internet banking or ATM, analytical, transfer and coordinate information with rapidity and ease process between two or more geographic regions or two parties within a process by using for example LAN, WAN, VAN intranet or extranet, or monitoring the process, or capturing the vast amounts of detailed process information, or change the sequence of tasks in a process (Chan, 2006), and let employees and customers more empowered (Fitzsimmons and Fitzsimons, 2006). The more decoupling the process design the more use of the process to replace people or employees, or to enhance marketing or back-office front-office interface which could be done by traditional communication channels as telephone, mail, fax, or using more advanced technologies as LAN, WAN automatic linking between branch and headquarter, which will reduce the cost (Metters and Vargas, 2000b and Zhu et al., 2004). Moreover, the more coupling the process the more the front office employees use of the technology to be facilitator and enablers despite the using of technology also for purpose of automation or geographical and inter-service channels coordination, so the technology will be used to reduce job complexity, and let the people more able to conduct analysis and retrieve more data, also the more coupling the process the more using of the technology to enhance the customer service through more coordination between sales and marketing, to enhance the process customization, further the speed of transaction will increase as a result of front office ability to retrieve information easily and make decisions (Metters and Vargas, 2000b)
The other decision category is integration between bricks and clicks operations; the integration means to what extent the process or information technology or both of bricks and clicks processes are integrated; accordingly to process integration it means one department is dealing with both the clicks and bricks transactions, accordingly the process of clicks and bricks will be sent to centralized back-office which will processed again, the higher integration could lead to reduction in the back-office staff (Barens et al., 2002). However the IT integration is related to the degree of using the same database server between clicks and brick processes, also providing the same services and using a consistent interface or software. IT integration is not affected by the degree of process integration accordingly some institutions have a high level of IT integration but low level of process integration (Barens et al., 2004) The degree of IT integration between clicks and bricks will impact the customer experience positively; the customer will receive on time message form the different systems, further the customer will deal with the same process flow. On the other hand the integration between processes will impact the overall process design, so the process could be reengineered and this will impact the service experience in term of reliability of service, responsiveness, assurance, and ability to recover from errors (Akamavi, 2005). Finally, the integration between customer service and bricks process (Barens et al., 2003); It means is the customer service process is conduct by the front office employees or it is conducted by specialized employees, further if the two processes are silo to what extent the customer service portals linked directly with the core banking services' database?, so the customer service representative is able to deal with customer enquires or complaints, or are the front office employees able to access the customer service databases to deal with customers' complaints. The traditional process design was evaluated by some studies by employing the survey methodology, the attitudes of operations managers were surveyed as the study of Safizadeh et al. (1996), Aranda (2002), Aranda (2003), and Safizadeh et al. (2003). Other studies employed survey methodology by surveying the attitudes of professionals and collect secondary data as the study of Devaraj et al. (2001), and Devaraj et al. (2004); and using also the direct observation as Akamavi (2005). Further other studies as the study of Metters and Vargas (2000) and Zomerdijk and DeVeries (2007) used the case study methodology, by using semi-structured interview to survey the attitudes of professionals, All of the previous studies were snapshot, the using of
survey methodology by using semi-structured interviews requires a lot of time to conduct the research, and using questionnaire survey methodology will not let the researcher to have a better insight about the changes over the study period.
2.2.2 The Branches' Facility Layout Design Decisions The facility layout of service industry is known as the servicescape; or physical environment or surrounding of the service organization which surround the employees and customer and where the service is delivered (Bitner, 1992 and Hoffman et al., 2003), the physical surroundings are in general more important in service setting because customers as well as employees often experience the firms facility (Baker et al., 1986 and Bitner, 1992). The perceived quality of servicescape will affect the customer responses or satisfaction, and this will impact the customer desire to stay (Wakefield and Blodgett, 1996), not all service firms and industries are a like in planning and designing their servicescape, this will depend on how performing the service actions within the servicescape (Bitner, 1992). Accordingly the banking servicescape design is differentiated form the design of other institutions in different service sector, effectively designing service delivery facilities should be a priority in banking because customers often form impressions of a bank by evaluating what they see and this well impact the customers' outcome behavior (Greenland and McGoldrick, 2005). Few years ago many experts predict remote delivery channels such as; the internet would replace the branch, but today the branch is a live and doing, as well as the number and value of branches continue to expand (Davidason, 2002), according to study conducted by the American Bank Association the average visits of the customer to the branch a month is 2.9 times in 2004, that is down from an average of 4.4 times a month 1995 (Feig, 2005). Accordingly its very important to concern about the layout and the location and the efficiency of the layout, however no typological configuration for traditional banking facility layout has been developed, the only configuration developed in the service literature is the typological classification of Aranda (2002, 2003), which was sophisticated to engineering consultation companies. The researcher classified the servicescape to different components; the facility exterior, facility interior and other tangibles (Hoffman et al., 2003), or ambient conditions, spatial layout and conditions, signs symbols and artifacts (Bitner, 1992). The servicescape of the bank could be classified to different dimensions; ambient conditions, aesthetic, privacy, efficiency or convince, and social conditions (Baker et al., 1988), moreover the bank branches' servicescape could be classified to Physical factors,
emotional stressors, use facilitators, and core product or service facilitators (Greenland and McGoldrick, 2005). In the context of this research the classification scheme of Greenland and McGoldrick (2005), as this classification has been developed after in-depth discussion of the previous studies, also this scheme is developed for studying the quality of banking branches' environment, further this classification scheme is more comprehensive than the scheme of Baker et al. (1988). The Physical factor is related to the environment dimensions that can be recognized by the customers sense; which includes the factors as; visual, aural, olfactory, and tactical (Greenland and McGoldrick, 2005), but the emotional related to factors that impact the person psychological impressions as; safety, aesthetic, modernity, space, and privacy. However other tow factors are related to service delivery process; which includes use facilitators; or the factors that impact the service delivery process indirectly or help the customer to choose the right service, and help in delivering the service; which includes information factor, staff factor, internal factor, and external factor (Greenland and McGoldrick, 2005). The second factor related to the service delivery process is the core service which includes; personal factor or the factor related to services provided by personal interaction with service provider, and the impersonal factor which includes the service provided by electronic devices or other facilities (Greenland and McGoldrick, 2005). The limited previous studies that evaluated the quality of facility layout strategies of retail banks employed a survey methodology; to evaluate the facility layout of bank branches, or branches servicescape or service encounter design by surveying the customer attitude towards the quality dimensions, as the study of Baker, et al. (1988), Greenland and McGoldrick (2005), and Reimer and Kuehn (2005). 2.2.3 The Branches' Distributions and Location Decisions The managers of branches management or operations managers should identify first the market; or a local area whose boundaries enclose in their behavioral characteristics or in the pattern of home life (urban, sub-urban, town and rural), work and recreational, then identify the location, followed by local network size and finally the site selection; or the specific site address (Crrol, 1992).
Different strategies of distributing the branch networks can be adopted by the bank operations strategy these strategies are; branch network concentration, branch network expansion in new market or existing markets, branch network reconfiguration, and merge two branches, divestiture or closing, and relocation (Chelst, et al. 1988 Hirtle and Melti, 2004, and Hirtle, 2007). The methodology adopted by the researchers who concerned about identifying the location of the banks' branches, or branches network size were quantitative methodology by using secondary sources of data, as Vace (2000), who decided to develop opportunity index for bank branch networks; in order to identify the bank branches location (in malls, pharmacies, and grocery), the postal codes were used, this code was generated form the a telephone directory called "select phone" which is available on CD, then this data is separated into data files by area code, to validate the location list, the branches locator functions on the banks' website was used. Mok (2002) decided to examine the changes in the branches network of one bank between 1986-2000, in a portion of the grater Toronto area, Ontanio, Canada, on of the research objective was to identify where the branches were located, to achieve this objective, the banks' customer services databases were used to describe the spatial location of branches, then the branches were grouped and collapsed into; urban, suburban, town, and rural, also branches status changes including opening and closer in between the period were produced too. Furthermore, Hirtle (2007) decided to study the impact of network size on the branches performance, in order to identify the network size; first the data on branch location have been derived form the bank and thrift regulatory reports, specifically FDIC survey of deposit data contain information about location, then the then data have been aggregated at the highest US bank holding company to form the branch network for each institution, also the percentage of branches merged, or relocated have been identified too.
2.2.4 Banking Capacity Management Decisions The strategies of capacity management can be classified to strategies deal with managing demand, while others deal with managing capacity, and some of them managing both the capacity and demand, accordingly the typologies of traditional banking capacity management
strategies will be developed according to different demand and capacity management strategies adopted; so the discussion of service operations strategy in the next sections will cover these alternatives in depth. The demand management strategies are those options attempt to influence the customer when the customer attend the service, it seeks to shift demand (Klassen and Rohleder, 2002), two aspect of managing demand can be considered; the level of demand and pattern of demand. The level of demand generally influence decisions about facility design and equipment, the pattern influence decisions about day to day scheduling, demand management efforts are generally aimed at one of followings; increase demand, change the timing of demand, or re change demand to other resources, the widely used strategies is smoothing the demand time (Klassen and Rohleder, 2001). The options of managing demand are classified by Khassen and Rohleder (2001) to long term and short term options, and explicit or implicit, so they developed a matrix, the explicit demand management options are those provide fairly precise control over the arrival of customers, but implicit options are those influence but not control the arrival of customers (see table (2)), the management can adopt combination of different strategies (Klassen and Rohleder, 2001).
implicit demand management
Explicit demand management
Strategies
Demand Management
No.2, p 14)
Offer other incentives during slow period. Service differences. Informal/educate. Call on potential customers to generate business. Seek subcontract work.
Complementary services.
Implicit demand partitioning.
Advertise to increase demand.
Advertise to achieve a certain demand management.
Change the hours or days of operations.
Off site access.
Automation.
Change location.
Price differentiation.
Short-term demand management options
Substitute services.
Yield management.
Test/ appointment before scheduling further service.
Explicit demand partitioning.
Overbooking.
Reservations.
Scheduling customers.
long-term demand management options
(Source: Klassen, K. and Rohleder, T. (2001), "Combining operations and marketing to manage capacity and demand in service", The Service Industries Journal, Vol.21
The Demand Management Strategies
Table (2)
Other researchers such as Radas and Shugan (1998) classified the demand management strategies to; bundling strategies and demand shift strategies, the first strategies seek to sell packages of peak and off peak services by giving discount on the services provided during peak time, while demand shift strategies seek to shift demand from peak to off peak demand. The capacity management strategies are well understood in the operations management field especially in manufacturing context, seek to ensuring that the service has capacity to meet the demand experienced, the capacity management options as classified by either long term and short term, and could be base must to do and optional, so a matrix could be developed by matching these characteristics (Klassen and Rohleder, 2002) (see table (3)). The managers can combine demand management and capacity management simultaneously as argued by, they developed a decisions making tool called it peak and valley/cost decision making tool, its filled out from the perspective of hypothetical bank managers, the steps of this tool is as following: Management first determines if they able to use any explicit demand management options, if so they should consider using these options, next the base capacity management options should be managed as well as possible taking into account expected demand patterns after explicit demand management options are implemented, after implementing these steps if the expected demand is already matched closely with capacity, then no further options should implemented, but if there is still significant unmatched demand then implicit demand management options and optional capacity management options can be planned and implemented Khassen and Rohleder (2001). Finally the manager should decide why is this demand management options implemented to reduce peaks, increase valleys, or both? And what is the impact of optional capacity management options on peaks valleys or both? The previous studies of capacity management strategies are limited; the majority of the studies focused on the literature review in order to develop a model of capacity strategies as the contribution of Heskett et al. (1990), Armistead and Clark (1994), Carndall and Makland (1996), Radas and Shugan (1998), Klassen and Rohleder (2001), and Klassen and Rohleder (2002), Other empirical studies decided to develop mathematical models for forecasting capacity as the study of Iittg (1994) or matching capacity to demand or managing capacity as the contribution of Adenso-Diaz and Gonzalez-Torre (2002), and Pullman and Thompson
(2003), accordingly the quantitative survey methodology was the dominant methodology among the previous studies. Table (3) The Capacity Management Strategies (Source: Klassen, K., and Rohleder, T., (2001), "Combining operations and marketing to manage capacity and demand in service", The Service Industries Journal, Vol. 21, No. 2, p 10)
Capacity
Long term Capacity
Short term Capacity
Management
Management Options
Management Options
Strategies Base
capacity
management options
Hiring full time employees.
Hourly daily schedules.
Lay off full time employees.
Weekly or shift scheduling.
Yearly scheduling. Optional
capacity
management options
Part time.
Temporary employees.
Rent capacity.
Overtime.
Share capacity.
Idle time.
Cross training.
Scheduling extra staff.
Provide more information to server.
Periods of super-human efforts.
Simplify the service process.
Customer wait.
Re organize servers to specialize.
Non-urgent work falls behavior.
Build excess capacity.
Do urgent work when slow.
Change the hours or days of operations.
Turn away business.
Change location.
Customer balk.
Automation.
Serve regular customers and let other
Off- site access. Change
the
participation.
wait. level
of
customers
Sub contract. Change allocation of service.
2.3 Identifying the Competitive Priorities of Banking Operations Strategies The banking operations competitive priorities are the prioritized performance objectives of banking service delivery system, which derived from the market segment needs and consistent with overall bank strategy (Gupta et al., 2001), and be able to deal with competitors actions; accordingly the customers requirements were traced by reviewing the studies of bank selection criteria. The widely classification scheme of these objectives or priorities and capabilities that adopted by majority of authors and researchers of manufacturing and operations strategy are; cost, quality, delivery and flexibility (Skinner, 1969, 1974, Vickery and Droge, 1993, Hill, 1995, Ward, et al., 1996, Ward, et al., 1998, Badri et al., 2000, Ward and Duray, 2000, Avella et al. , 2001, Devaraj et al., 2001, Slack and Lewis, 2002, and Fang and Wang, 2006). The same classification scheme could be adopted by research of service operations strategy in general (Chase and Hayes, 1991), and banking operations strategy research in particular (Gupta, 2001 and Menor et al., 2001), the operations objectives will be classified to order winning and order qualifying criteria, the qualifying criteria are those a company must meet for a customer even to consider as possible supplier, but winning criteria are those that win the order (Hill, 1995). The order winning and qualifying criteria are both market and time specific, also these criteria should be distinguished according to its importance, so relative weights will be assigned to distinguish their importance and will change over time and in different market (Hill, 1995), so operations competitive priorities are dynamic. The dynamism assumption has been verified by some empirical studies in manufacturing context; the result of these studies are; in order to trace the changes of competitive priorities its better to trace the changes over a long period of time, during each "epochs" one or more competitive priorities is the dominant (Roth, 1996), or the same configuration could be adopted but with changes in adopting rate over different periods (Chase, 1998 and Cagliano, 2005). The other assumption is that the firms could adopt multiple cumulative capabilities during the same time, or achieve multiple priorities; the succeeding
capability would be built upon certain minimum levels of preceding capabilities (Nobble, 1995). This principle is against the "trade off" which adopted by Skinner (1974), accordingly different configurations of operations strategies competitive priorities or capabilities could be adopted by firms (Miller and Roth, 1994, Kathoria, 2000, Frohlich and Dixon, 2001, Menor et al., 2001 Sum et al., 2004 and Zhao et al., 2006). The competitive priorities of banking operations strategy as discussed earlier in this section; should be consistent with market segment requirements and be able to deal with competitors actions; the customer requirements were traced by a wide contribution of marketing studies since the 1970s; these studies decided to identify the customers' selection criteria for banks. Numerous studies have been conducted in different countries (Giat and Worthington, 2007), in developed and developing countries, the majority of contribution was in developed countries (Almossawi, 2001), and also the targeted customers were diverse in their characteristics according to demographic variables and banking behavioral variables. The selection criteria of the previous studies have been classified as following; convenience oriented and service oriented (Anderson et al., 1976), further classification developed was; bank product and service, image of the bank, staff quality, financial charges, bank image and staff quality, locality, size of the bank (Haron et al., 1994). Also other classification included; convenience, competence, recommendation by pears, and free banking/no banking charges (Blankson et al., 2007), other classification scheme was; service factor, physical facility, promotion, external factor, customer treatment, and consumer benefits (Kaynak and Kucukemiroglu, 1992). Despite that the differences in demographic factors (Lorche et al., 1986, Kaynack et al., 1991, Kennington et al., 1996, Boyd et al., 1994, and Almossawi, 2001), and banking behavioral variable (Kaynak and Kucukemiroglu, 1992) will cause differences between customers in their selection criteria of the banks (Lorche et al., 1986, Kaynack et al., 1991, Kaynak and Kucukemiroglu, 1992, Kennington et al., 1996, Boyd et al., 1994, and Almossawi, 2001) ; the customers in different countries whether industrialized, new-industrialized, or liberalized developing will patronage relatively the same criteria (Blankson et al., 2007).
According to study conducted in Poland the top ranked criteria are; reputation, rates, service and convenience (Kennington et al., 1996), in US the most important factor was convenience and second is the service oriented (Anderson et al., 1976), also reputation, interest on saving accounts, interest charges on loans, quick service and location (Boyd et al., 1994). Customers in Canada chose banks according to; speed of service, convenience of location, competency and friendless of bank personnel (Lorche et al., 1986), however in Malaysia the most important factor is the convenience (Wel and Nor, 2003) further is fast and efficient service, friendless of bank personnel, and recommendation by friends or relations (Haron et al., 1994). Also the customers in Taiwan, USA and Canada shared the same selection criteria of banks which includes; convenience, competence, recommendation by peers, and free banking or no charges (Blankson et al., 2007), further in Hong Kong the customers selected banks accordance to; service, physical facility, external factor, promotional, customer treatment and consumer benefits (Kaynak and Kucukemiroglu, 1992). Moreover the customer in the Middle East share the same selections criteria with their counterparts in other countries; the customer in Jordan choose banks that are more efficient and fast, have good reputation and image, and more confidential (Erol, et al, 1989 and Erol, et al., 1990), however in Bahrain the most important factors were; technology reputation, convenience, financial benefits and employee customer interaction (Almossawi, 2001). Customers in Egypt select the more speed and efficiency bank (Hegazy, 1995), other study found that the customers' banks in Egypt, Kuwait and Saudi Arabia share the same selection criteria; staff competency and speed of service (Metwally, 1996), but customer in Turkey select banks that have more friendly employees, closer branch location to their home, fast and efficient service, and have credit and financial service counseling (Kayrak et al., 1991). However the most important issue to consider in studying the banking selection criteria in Middle East, and Islamic countries is that some of these countries have dual banking system (conventional and Islamic); accordingly to what extent is there differences in customer readiness toward selecting the both types of bank?.
The previous studies indicated that the religious conviction is not often the only concern of selecting the Islamic banks, and some studies have found little evidence of substantial differences in the key selection criteria between Islamic and Conventional (Giant and Worthington, 2007). The customers in Jordan whether dealing with Islamic or conventional share the same selection criteria (Erol et al.., 1989, 1990), the same case was in Egypt; the conventional and Islamic banks' customers selected banks that are speed and efficient (Hegazay, 1995). Further no differences found between customers of conventional and Islamic banks in Egypt, Kuwait and Saudi Arabia (Metwally, 1996), the same result found in other Islamic countries as Malaysia (1994), but other study conducted in Jordan found that; the most important factors motivating the use of Islamic banks are; reputation, and the religious beliefs (Naser et al., 1999). However, after analyzing the results of these studies as presented in table (5); the competitive priorities of banking operations strategies could be classified to different categories; the priorities of traditional banking process design, the priorities of branches locations, the priorities of branches' facility layout, and the priorities of capacity management.
Author
Jordan
Turkey
Erol et al. (1990)
Kaynak et al. (1991)
Poland
Egypt
Jordan
Bahrain
Malaysia
USA
Kennington et al. (1996)
Metwally (1996)
Naser et al. (1999)
Almossawi (2001)
Wel and Nor (2003)
Blankson et al. (2007)
Chana
Taiwan
Egypt
Malaysia
Haron et al. (1994)
Hegazy (1995)
USA
Bayd et al. (1994)
Kucukemiroglu (1992)
Hong Kong
Jordan
Kaynal and
Canada
Erol and El-Bdoor (1989)
USA
Country
Lorche et al. (1986)
Anderson et al. (1976)
Selection Criteria
Friendly staff, competence, good service personal, consistency, good customer service, Recommendation (peers), free banking
Convenience: Convenience location, adequate number of locations in the aria, quick service, security and reputation, Competence:
Able to fulfill individual needs, Accuracy of statements, Full range of banking facilities, Location near place of work
Convenience: Easy to depositing and withdrawal, ATM availability at shopping centre, Financial strength, Safety of one's fund.,
number of tellers, several branches, pleasant atmosphere, Outcomes.
Technology, Convenience: Parking space, easy opening accounts, variety of services, convenient location, opening hrs, adequate
Bank reputation, Regulations and beliefs
Staff competency, Speed of service
Reputation, Rates, Service, Convenience: Close location, good location, good working hrs and many locations
Speed and efficiency
Fast and efficient, Speed of transaction, Confidentiality, Friendliness of bank personnel
Reputation , Interest saving , Interest charges, Quick service, Location
payments on saving.
External factor, Promotional, Customer treatment: Reception counter, Customer benefits: Location near home, highest interest
Service: Availability of credit, lower charges, lower interest, counseling, Physical factor: Interior design, parking, counters portions,
Friendly bank employee, Closer bank location, Fast and efficiency, Credit and financial counseling
Fast and efficiency, Reputation and image, Confidentiality
Fast and efficiency, Reputation and image, Confidentiality
Hours of operations, Size of waiting line, Convenience of location, and Efficiency of staff personnel
Convenience, Service
Summary of the Previous Studies of Banks Selection Criteria
Table (4)
Service charges or prices.
Variety of services provided.
Branches opening or working hours.
Confidentiality.
reception, availability of parking.
Cost and price
Variety
Convenience (working times)
Others
Convenience and Accessibility (layout)
Convenience (process)
Easy of opening account or withdraw
Layout design Quality: friendly atmosphere, counter or tellers' stations percentage, availability of
Convenience (location)
Customer Service Quality
Convenience (process)
Others
Dimension
Widespread location in different sites close to customers.
personnel, and good customer service.
Friendly employees, the availability of reception counter, or banking services counseling, good service
Speed and efficiency of bank transactions
Reputation
Selection Criteria
The Importance of Banks Selection Criteria that identified by the Previous Studies
Table (5)
0.13
0.13
0.20
0.20
0.20
0.13
0.53
0.39
0.47
0.33
Frequency
2.3.1 The Priorities of Banking Process Design According to table (5) two priorities could be traced; the process simplification and the process speed, however the characteristics of service process design have been adopted by the typologies of service process' studies could be classified to the following; degree of decoupling, repeatedly of process, number of routes or pathways, process customization, the degree of integration between clicks and bricks process, the degree of integration between customer relations portals and customer database, and the degree of process automation. The degree of decoupling which will impact the delivery speed and efficiency, customer service and treatment; the decoupling is related to the degree of breaking a process into its components back office and front office jobs (Metters and Vargas, 2000b), other attribute is the degree of customer participation; the extent to which customer will play an active role in supplying labor or information inputs to service production process (Larsson and Bowen, 1989). Further, the degree of repeatedly of encounter activities and number of pathways; the degree of repeatedly is related to the degree of process flexibility to let the customer be able restart the process before completion, and the number of pathways (routes) built into the service system design built by management is defined as; the number of unique pathways or routes that a customer can take as they move through the service system during the delivery process, the management's degree of control designed into the service delivery system (Collier and Meyer, 1998). Also, the degree process customization; the degree of process customization is the ability of service delivery system and its employees to attend flexibility to meet customers' needs (Silvestro et al., 1992 and Mayer et al., 2003), the degree of technology orientation refers to; the degree of using the mechanical devises and systems in the process of service delivery (Mayer et al., 2003) and its role, in the banking industry the information technology is the most important technology intervention utilized. However, the degree of integration between bricks and clicks operations is; to what extent the process or information technology or both of bricks and clicks processes are integrated (Barens et al., 2002), further, better customer service or treatment which is affected by the degree of integration between customer service and
bricks process; or to what extent the customer service portals linked directly with the core banking services' database, to deal with customer requirements or complaints. Finally, process simplification which will impact the process speed and efficient, it is related to the number of process' steps or actions and the degree of professionalism to do these processes, finally the degree of functionality; or the variety of services provided by the traditional banking processes.
2.3.2 The Priorities of Branches' Facility Layout Design In the context of this research the priorities' classification scheme of Greenland and McGoldrick (2005) is adopted, this classification has been developed after in-depth analysis of the previous studies; also this scheme is developed for studying the quality of banking branches' environment, further this classification scheme is more comprehensive than other scheme as Baker et al. (1988). The Physical factor is related to the environment dimensions that can be recognized by the customers sense; which includes the factors as; visual, aural, olfactory, and tactical (Greenland and McGoldrick, 2005), but the emotional related to factors that impact the person psychological impressions as; safety, aesthetic, modernity, space, and privacy. However, other two factors are related to service delivery process; which includes use facilitators; or the factors that impact the service delivery process indirectly or help the customer to choose the right service, and help in delivering the service; which includes information factor, staff factor, internal factor, and external factor (Greenland and McGoldrick, 2005). The second factor related to the service delivery process is the core service which includes; personal factor or the factor related to services provided by personal interaction with service provider, and the impersonal factor which includes the service provided by electronic devices or other facilities (Greenland and McGoldrick, 2005). 3.3.3 The Priorities of Branches' Locations and Distributions The priorities are classified to the followings; the location geographic exposures and accessibility, the site operational convenience, the geographic exposure and accessibility is related to the percentage of the branches' market, location and specific
site density, and the network size (Crrol, 1992, Greve, 2000, and Mok, 2002), however, the site operating convenience is related to different characteristics as; parking spots and distance, transit system, traffic flow and shopping patterns, complementary neighboring stores, and physical barriers (Vace, 2000).
2.3.4 The Priorities of Banking Capacity Management According to general strategic models developed to manage capacity and demand such as Sasser (1976), Heskett et al. (1990), and Carndall and Markland (1996) the priorities of capacity management could be classified to; chase demand strategy or level capacity strategy, the chase demand means plan capacity to meet whatever demand occurs, but level capacity strategy means maintain the capacity consistent to handle average number of daily transactions (Sasser, 1976), Sasser concluded that the choose of strategy is affected by the type of service, the skills of workers, and the customer attitude about service waiting time. Heshkett et al. (1990) expanded the strategies' priorities of Sasser to include; modified chase demand, they also added a classification of strategies based on the predictability of demand, but Carndall and Markland (1996) suggested four strategies' priorities of service capacity strategies; matching, provide, control and influence; the matching strategy means matching capacity exactly to demand "chase", but provide means to maintain the capacity at a level that service the maximum demand level "level", these two strategies are pure capacity management strategies, but when the manager control demand to be a constant average level the control strategy is adopted, the influence strategy mean influence demand to reduce the magnitude of peaks and valleys and match capacity to the resulting pattern.
2.4 Identifying the Competency Indices of Banking Operations Strategies The competency indices are the strengths or weaknesses (attributes) of operations, and the business performance; according to previous studies as the study of Cleveland (1989), and Vickery (1991); the better operations' attributes will lead to better business performance, accordingly the attributes of operations could be called means
performance (lower-order competency indices), and business or performance (higher order competency indices). 2.4.1 The Lower Order Competency Indices The lower order competency indices is a new concept, which has not been used by the previous studies of the operations strategies, however the previous studies to combine the lower and higher order competency indices with each other, without clear separation. The previous studies labeled lower order competency indices as operations performance in general, in the context of this research the lower order competency indices are the attributes or strength and weakness of traditional banking operations strategies, these competencies indices are the same as the traditional banking operations competency indices which are; the process design indices, facility layout design indices, branches location and distribution indices and capacity management indices. Accordingly, the lower order competency indices are; process design lower order competency indices which includes; the degree of decoupling, the degree of customer participation, the number of pathways to conduct the process, the degree of repeatedly of encounter activities, the degree of process customization, the degree of technology orientation, the degree of integration between clicks-and-bricks processes, the quality of customer service, the process speed, and easy to conduct the process. Branches' facility layout competency indices; visualization, tactical, olfactory, aural, aesthetic, social responsibility and green banking, informational, internal factor, external factor, personal and impersonal core process, also branches location and distribution competency indices are; the branches regional exposure and accessibility, and site operating convenience, finally the capacity management competency indices which are; chase demand or level capacity.
2.4.2 The Higher Order Competency Indices The higher order competency indices are the business performance outcomes that the operations strategies seek to achieve. These indices could be classified according too previous studies to; financial, marketing and operations indicators, the majority of
researchers adopted the financial indicators only (e.g, Vickery and Droge, 1993, Power and Hahn, 2004, and Rhee and Mehra, 2006), and few researcher decided to use the combination of different indicators form different perspectives (e.g Cleveland, 1989, Kim and Arnold, 1993, and Menor et al., 2001). It is recommended to adopt different indicators from different perspectives which will provide the researcher a better insight about the impact of operations strategies competencies, further some indicators as he financial indicators could be affected by other factors rather than operations strategies as the previous returns. The researcher adopts different methodologies for measuring the performance, but the widely adopted methodology is the self reporting methodology, which respondents asked to compare the existing performance with historical performance or with competitors' performance. The least used methodology is the objective measurement, the adopting of methodology more than other depends on the indicators used to assess the performance and availability of data, the level of analysis and the heterogeneity or homogeneity of sample items; on the other hand the adopting of self reporting measure depends on the objectivity of the respondents and time horizon if the study, however the objective performance are more accurate than the self reporting but it depends on the availability and accessibility of data. 1- The Financial Indicators The widely adopted measure of the previous studies of operations strategy competency and strategy competency in general, the indicators adopted by previous studies are profitability indicators as ROI (return of investment), growth in ROI, ROA (return on assets), pretax ROA, ROS (return on sales), the financial measures adopted are mainly self reporting measures (e.g Cleveland, 1989, Kim and Arnold, 1993, Vickery and Droge, 1993, Williams et al., 1995, Ahmed and Montagno, 1996), and few objective measures. The using of objective financial measures could be beneficial in single dominant business type sample and within industry studies, but the researcher should insure that the comparing companies adopt the same accounting policies, further the objective measures can not be meaningfully used at strategic business unit level due to aggregate problem, further the adopting of subjective measure has less problem of
external interpretation and aggregate data, and could be used both at corporate and strategic business level of analysis, but the data is likely to be biased (Venkatraman and Ramanujam, 1986). In the banking industry the widely used profit indicators are ROE (return on equity), ROA (return on assets), however the banks are more directed at risk consideration in their performance as; credit risk, liquidity risk, interest rate risk, and capital adequacy (Uzelac and Sudarevic, 2006). However, the widely adopted indicators of the previous studies of banking strategy competency and operations strategy competency are profit indicators; ROA (e.g Menor et al., 2001, Power and Hahn, 2004, Rhee and Mehra, 2006), ROE (e.g Rhee and Mehra, 2006), further the widely used measure is the self reporting. On the other hand the researcher should keep in mind the adopting of profitability measures as ROA or ROE, includes the income form interest and noninterest, but the researcher can adopt NIE/revenue (non-interest income as a percentage of total revenue) which is preferred and more appropriate as a result of its reflection of core activities or operations (Hallowell, 1996). According to the empirical studies the previous studies of the operations strategy competency; the more competitive operations strategies are the more positive financial performance (Cleveland, 1989, Claes, 1992, Kim and Arnold, 1993, Vickery and Droge, 1993). 2- The Marketing Indicators The widely used marketing indicators are; market share (Cleveland, 1989, Kim and Arnold, 1993, Ahmed and Montagno, 1996) and growth rate (Cleveland, 1989), perceived quality (Roth and Jackson and Menor et al., 2001), the researcher used mainly the self reporting methodology in measuring the marketing performance by asking the managers to rate their performance in comparison to their main competitors, few of them asked the customers to rate the marketing performance. The previous studies found that the more competitive operations strategies are the more positive impact on the marketing performance (Cleveland, 1989, Kim and Arnold, 1993, Ahmed and Montagno, 1996, Roth and Jackson, 1996 and Menor et al., 2001).
Despite the importance of market share indicator as a measure of marketing performance its impact on financial performance is debatable, the previous studies found that the market share could impact profitability directly (Venkatraman and Prescott, 1990), others found that the market share not impact the business profitability significantly (Montgomery and Wernerfelt, 1991 and Schwalbach, 1991). Other factors as the previous returns will impact the relationship so the market share impact the profitability indirectly (Jacobson, 1988, Laverty, 2001), instead other researchers found that the relationship is negative between market share and profitability (Faering and Minor, 1994), so generally speaking the results reported by previous studies fail to produce evidence that increased profitability can be produced by a strategy that calls for increase market share (Laverty, 2001). However the firms in the last years focused more on tracing the retention, customer retention is a pivotal strategic issue, in 1990s several streams of research focused on customer retention (Eriksson and Vaghutt, 2000), accordingly the key task of service operations management is retaining the valued and valuable customers (Johnson and Clark, 2001). The customer retention concept has been used as interchangeable with customer loyalty to describe the same phenomenon by some researchers, others view the tow concepts related but different; customer loyalty consistent of repurchase intentions, positive and negative wad of mouth, and price sensitivity, but retention is a part of the loyalty concept which related to repurchase intention (Ranaweera and Neely, 2003). According to the empirical studies in the banking sector; despite the banks' customer retention or loyalty is affected directly by the customer satisfaction (Bloemer et al., 1998, Weinstein, 2002 and Chen and Chang, 2006), other factors play an important role as reliability and position in the market, also efficiency in term of queuing time and speed (Bloemer et al., 1998), further the customer satisfaction is affected by the perceived quality (Bloemer et al., 1998, Weinstein, 2002 and Liang and Wang, 2004), further the market share is affected by customer loyalty (Balchinger and Rubinson, 1996). The widely used measure for customer retention adopted by the previous studies is self reporting by surveying the attitudes of customers mainly (e.g Balchinger and Rubinson, 1996, Bloemer et al., 1998, Ranaweera and Neely, 2003,
Liang and Wang, 2004, and Chen and Chang, 2006), however few studies adopted objective measures (e.g Hallowell, 1996). The objective measures adopted or developed in the literature focused on the length of the relationship as a percentage of active customers who remained customers during a period of time (Hallowell, 1996), also it could be measured on annual bases for example by tracing of customer account still active during the year (Johnson and Clark, 2001). 3- The Productivity Indicators A lot of banking previous studies decided to trace the changes in productivity as a consequences of different changes in the banking sector as deregulation (e.g Humphery, 1991, Wheelock and Wilson, 1999), or mergers (e.g Krishasamy et al., 2004), however the productivity indicator has not been used by the previous studies to assess the operations strategies capabilities. The productivity could be defined as output per unit of inputs (Humphery, 1991), or the ratio of outputs that produced to inputs that used (Galagedra and Edirisuriya, 2005), however the definition and indicators of inputs and outputs for bank branches is not forward and controversy remains in the literature (Camanho and Dynson, 1999, 2005). The definitions and indicators of outputs and inputs depend on the approaches used by the researchers to define the bank branches whether production unit or intermediation unit (Camanho and Dynson, 1999, 2005, and Galagedra and Edirisuriya, 2005). According to production approach the branches are act as services providers for account holders; the outputs are represented by loans, savings and account activity as measured by the number of transactions processed, the inputs are physical as capital and labor, however interest costs and revenue are excluded from this approach since only physical inputs are needed to perform transactions or provide other types of services (Camanho and Dyson, 1999). The intermediation approach views the bank branches as primary intermediating funds between savers and investors; the input included both interest and non-interest costs, or deposits, but the outputs are measured by total balance or revenue of loans and investments (Camanho and Dyson, 2005), the choices of input
output variables' selection approach could be based on the aim of the analysis, if the purpose is to analyze the bank productivity then the production approach is the appropriate (Galagedra and Edirisuiya, 2005). The widely adopted approach among the previous studies is the production approach (e.g Golany and Storbeck, 1999, Wheelock and Wilson, 1999, Zenios et al., 1999, Krishnasamy et al., 2004, and Swierczek et al., 2005), the measures of banking output have been used are; the number of transaction processed in deposits or loans accounts or both (a flow measure) (e.g Camanho and Dyson, 1999), the real or constant dollar value of funds in the deposit and loans account (a stock measure) (e.g Golany and Storbeck, 1999, Wheelock and Wilson, 1999, Sathy, 2002, Krishnasamy et al., 2004 and Galagedra and Edirisuriya, 2005), the number of deposits and loans accounts serviced by banks (a stock measure) (e.g Zenios et al., 1999, Swierczek et al., 2005). However the preferred measure of the of outputs is seemingly an output flow which expressed in the number of transaction processed since the output is typically a flow, and stock measures might be proportional (on average) to a flow measure, also stock measures could be used if a flow measures are unavailable (Humphery, 1991). Further the inputs measures have been adopted by previous studies are; labor according to number of workers tellers or non-tellers or both (e.g Camanho and Dyson, 1999 and Wheelock and Wilson, 1999) or total workers hours' worked (e.g Golany and Storbeck, 1999), the total workers salaries and wages (e.g Krishnasamy et al., 2004), constant dollar value of physical capital (e.g Wheelock and Wilson, 1999, Alam, 2001), total operating expense (e.g Camanho and Dayson, 1999 and Galagedra and Edinirisuriya, 2005), and working space or floor space of branches (e.g Camanho and Dayson, 1999 and Golany and Storbeck, 1999). Generally speaking the measurement of the efficiency changes of productivity have been traced by previous studies by using parametric and non-parametric approaches (Krishnasamy et al., 2004); the parametric approach used to estimate the frontier with explicit functional form given, these type of frontiers estimation methods fall under Stochastic Frontier Estimation (SFE), then the distance functions will be used to identify the productivity efficiency changes (Galagedra and Edirisuiya, 2005). On the other hand the non-parametric approach used also to identify the best practices or efficient frontier and then measure the degree of inefficiency of different
units relative to the frontier, so the productivity changes could be traced accordingly, three non-parametric alternatives could be used to measure the changes in productivity; Fischer index (1992), Tronquist index (1936) and Malmquist index (1953) (Sathy, 2002), the widely adopted approach of the previous studies is Malmquist index. The reasons of adopting Malmquist index more than other measures are; the Malmquist index does not require the profit maximization or cost minimization DVVXPSWLRQDV SDUDPHWULFPHWKRGV IXUWKHULW¶V WKH Sreferred when the inputs and out put prices are not available (Sathy, 2002), further unlike econometric approach, it does not smooth effects, also its beneficial as a result of its ability to separate out diffusion of technology (movement toward the production frontier) form shifts in technology (movement out the frontier) and scale changes (movement toward or away from constant-returns-to scale operation) (Alam, 2001). Malmquist productivity index is defined using distance function, which calculated within the framework of data envelopment analysis (DEA), which is a linear programming methodology that constructs a non parametric piecewise-liner "best-practice" frontier from the observable input and output data, or used to define the boundary of the technology and obtain the efficiency score for each bank relative to frontier (Golany and Storbeck, 1999, Alam, 2001 and Sathy, 2002). According to Malmquist index the changes in the productivity can be decomposed in to technical efficiency change (called catching up index), and the technological change (also called the changes in best practice index) (Sathy, 2002), so the Malmquist total factor productivity growth is a function of efficiency gains or loss (technical efficiency) multiplied by technology progress (retrogress), the changes of overall technical efficiency is a function of pure technical efficiency or scale efficiency or both (Krishnasamy et al., 2004), the scale efficiency may be either constant scale return (change in inputs) or variable return to scale (change in outputs) (Camanho and Dyson, 2005). 03, (& 7(««« (& VFDOHHIILFLHQF\ SXUHWHFKQLFDOHIILFLHQF\«««« According to previous studies the increased in banks productivity may not adequately reflected in profits (Swierczek et al., 2005), further no relation between
bank size and productivity (Sathy, 2002), and the banks productivity have been increased after merger (Krishnasamy et al., 2004).
2-5 Identifying the General Classification Scheme of Banking Operations Strategies' Competitive Priorities According to previous studies of service operations strategy the banking operations strategies competitive priorities and capabilities could be grouped into three ideal groups as recommended by the service operations strategies literature to; process oriented, customer oriented and service oriented (Reyniers, 1993, Chakravarty et al., 1995, Finch and Helms, 1996, Driscoll, 1999, Melnick et al., 1999, Aranda, 2002, 2003, Hoeck, 2006, Wisskirchen et al., 2006). 2.5.1 The Priorities of Process Oriented Banking Operations The banking sector has been adopted the process based approach during 1990s, accordingly the success during this period is determined by the standardization, centralization which improve several attributes as convenience, product selection and price but its often adversely affect the service level and eminent (Driscoll, 1999), the main focus was on reducing cost, increase efficiency and speed of the process. Despite the drop of operating expenses by 3.1% in Europe between 20012004, but the interest rate and commissions income remained flat, also in USA, bank operating expenses as measured by a percentage of consolidation of assets, have reached down steadily over the past decade, but net interest income commission and fees were no higher at the end of 2004 than they were in the late 1990s (Wisskirchen et al., 2006), accordingly the operations should focus more on other aspect rather than reducing costs, especially in the era of e-banking. 2.5.2 The Priorities of Service Oriented Traditional Banking Operations This typology was adopted by banks during 1990s which is less adopted in comparison to process-oriented. The concern of this typology is the same as the customer oriented is to increase the customer service experience, but the range of products or services provided is more limited especially the service provided by the
related branches to the main branches and the branches are less automated in comparison to customer oriented (Greenland, 1994). Accordingly, superior services offers will differentiate the bank from its competitors, the quality of customer service should be improved, as the customers evaluate the attention they receive from personnel, the waiting time, as well as promptness, courtesy and accuracy of transactions (Reyniers, 1993 and Finch and Helms, 1996).
2.5.3 The Priorities of Customer Oriented Banking Operations: During the era of electronic banking the cost of banking services are more transparent to consumers, accordingly the banks should focus to let their customers more loyal, the focus is not only to reduce cost or improve the convenience but to manage the customer experience which is the most important factor for success (Driscoll, 1999). The financial service providers will have to redefine their value propositions, the service provider should be able to convince their retail customers and offer advisory skills, the new branch concept should combine both self-service with high counseling and advisory (Hoeck, 2006), so the concern for competing banks is to be customer focused (Chakravarty et al., 1995 and Melnick et al., 1999), accordingly a new branch concept has been adopted which focusing on combination of self service transactions with high end counseling and advisory (Hoek, 2006).
2.6 Identifying the Banking Operations' Decisions Related to General Classification Scheme of Operations' Competitive Priorities Since the traditional banking operations strategies are the decisions that the banks realized to achieve particular priorities, so the aim of typological configuration is to combine the decisions with priorities. In the context of this paper the banking operations decisions of process design, branches' location and distribution, branches' capacity management, and the facility layout will be identified and combined with general prioritizes' classification identified in the previous section; process-oriented, customer oriented and service oriented.
2.6.1 Process- Oriented Banking Operations Strategy Process Design Decisions This strategy focus of process oriented toward reducing cost and increase speed and efficiency of the process (Aranda, 2002); in this situation the following process design could be adopted; the back-office is geographically centralized and separated; also the job duties of the back office are high specialized with little or no cross trained; for the purpose to maximize the speed of tasks emphasized, further the separation to front and back-office with standardized relationships between officers will increase speed and minimize the interruptions, the technology is used to replace people and reduce cost (Metters and Vagars, 2000b, Safizadeh et al., 2003 and Fitzsimmons and Fitzsimmons, 2006). The role of customer in this process is to fit into the service system, filling in the right form, standing the correct queues and making standardized requests (Larsson and Brown, 1989 and Johnson and Clark, 2001), the channels of services are soiled and limited, which includes branches and ATM Kiosk, which are available mainly outside the branch, further limited processes or data integration, the medium of communication are phone, fax, and mail used for interaction between different branches of headquarter and despite the using of computers for conducting the transactions (Nikonorick and Blomquist, 2005).
Branches' Facility Layout Design's Decisions The process oriented layout is more direct toward less direct customer contact, and directed more toward less cost and more efficient and speed transactions, with less concern about provide customer with better service experience when visiting the branch in comparison to customer oriented or service oriented typology. The branch layout is closed, the teller stations are traditional wakeup, kept behind tall desks or counters, and in many cases even bare, overtime the bares were replaced with glass and partitions, also manageable and rational number of teller stations, the back office is hidden and unseen by the customers (Baker et al., 1988 and Feig, 2005). This design focus on reducing cost and increasing speed, so clear instructions about how to fill forms is available on the walls more than concern about promoting the services, clear signs, and traditional brochures posted on the walls, the lobby is
closed, few chairs for rest available, concern about the availability of lighting to do the job and not used as a part of the brand identity (Baker et al., 1988). The internal branch hall is used for conducting the core services delivery process; so the space will not be used for the selling or marketing despite the larger size of the branch area in comparison to modern layout, also the space is not clear divided into specific categories as in the modern layout (Greenland, 1994). Low concern about the availability of ATMs inside the branch, and reduce the customer direct interaction; accordingly the majority of ATMs will be available out side the branches or as kiosk in public areas as shopping centers or streets, also other high tech facilities as internet kiosks or internet coffee or wireless laptop area will not be available in the branch, furthermore, the branch has CCTV and bandit screen, also the availability of central heating system and air conditions, less concern about the parking space in the front of branch or nearby the majority of branches do not have parking space (Baker et al., 1988). Branches' Location and Distribution Decisions The location is fixed (Aranda, 2002); accordingly the expansion in the number of branches is limited, focus is to reduce cost and increase speed of service delivery process, the direction is toward less density or no existence of branches in sub-urban, or rural areas, but more focus on existing in urban area, traditional bank location in cities have been generally at corner interaction downtown or main street, out side cities they are found on main roads with ample parking facilities and driven through windows (Lopez and Shah, 2004 and Reider, 2006), further the more direction toward closing branches or merge branches to reduce costs (Channon, 1986 and Howaroft and Beckett, 1996). At the beginning of 1980s, the international trend was toward decreasing the number of branches location as a result of investing in alternative delivery channels as automatic teller machines, and for the purpose to reduce the operating costs, for example the Bank of America closed one third of their overall branch network, while increasing the automatic banking machines networks, and Barclay's of the UK closed 100 of their 3000 full service branch (Channon, 1986). Generally speaking the number of bank branches operating in the UK (excluding North Ireland) has declined by over 11% from 37, 761 in 1983 down to
33,511 in 1993, and building society branches have similarly declined over 9% from 6,480 in 1983 down to 5, 876 in 1993 (Howaroft and Beckett, 1996).
Branches' Capacity Management: High investment in capacity to satisfy the large demand in support of marketing efforts (Aranda, 2002), accordingly more adopting to chase demand strategy but with more emphasis on process simplification, more overtime more hiring of full time, part time and temporary employees, with low emphasis on level strategy by using demand management strategies, or change the level of customer participation.
2.6.2 Service-Oriented Banking Operations strategy Process Design The primary priority of this typology is to balance the customer service quality, customization and cost reduction (Aranda, 2002), the goal of back office is to support the front office, the tasks of employees is highly specialized or the people are professionals have a high skills to do the job, the back-office employees are cross trained to do any job (Metters and Vargals, 2000a), also this typology focused on translating the branches to be selling and promoting banking products. The front-line employees should have interpersonal and public relations skills, those people should have the willingness to be helpful, have charismatic personality and courtesy should be high (Metters and Vargas, 2000a,b), the role of customer is to provide the front line employee with the specification or problem faced, or service required (Larsson and Bowen, 1989 and Johnston and Clark, 2001), further the front line employees will be responsible about promoting and selling the bank products. The role of front-line employee not only to deal with normal transactions; but he should be able to deal with customers' compliance, they can do that by taking specification form the customer, some information could be sent to the back-office to be performed (Johnson and Clark, 2001 and Larsson and Bowen, 1989). However, the back-office operations or work could be in the front office to reduce cost and idle time as a result of numerous small teller stations (Kiosk), further the employees in the front-office should be cross trained, so any employees can handle any task, but the products provided are limited (Metters and Vagars, 2000a,b).
Further, in an attempt to make branches more cost effective; certain large branches are designed "core branches" and are then made responsible for operating a number of related smaller branches known as "satellites", the core branches provide managerial and some administrative backup to its "satellites" and provide widder services' range, the small branches provide limited range of services and are heavily dependent on technology as ATMs, further the branches will be more specialized in the services provided so the branches will not duplicate each others, the cost saving could be achieved by taking advantage of the economies of scope and scale associated with partially centralized operations (Devlin, 1995, and Howaroft and Beckett, 1996). The banks adopting this typology concern about the availability of ATMs in the branches, but these banks use traditional communication channels as mail, telephone, fax to communicate with people in different geographic locations, further for better treatment the front-line employee has the right to access a lot of data, and marketing and sales are integrated (Nikonorick and Blomquist, 2005).
Branches' Facility Layout Design This typology as discussed earlier concern more about treating customers better, and dealing with their complaints and provide better customer experience when visiting branch, the purpose is to satisfy the customers' needs more fully and maximize the selling opportunity while minimizing operational and maintenance costs (Greenland, 1994), the branches' layout should support this purpose, however this layout is hybrid includes some aspects of process and others form customer oriented but more customer oriented (Aranda, 2002). The layout design is called modern which is designed more along the lines of stores and has the following characteristics; the more staff with direct customer contact, also up to 80% of the branch interior is denoted to the customer and sales areas, the average premises size required (e.g. 2000 sq. ft.) which is smaller than of traditional (e.g 6000 sq. ft.), also the fitting refurbishment process itself has been reduced from six months to about six or seven weeks, also the staff and customers opinions about the refurbishment are monitored also performance indicators may be measured, so any design problems could be modified (Greenland, 1994), the existence of reception desk, more promotional leaflet dispensers (Greenland, 1994 and
Greenland and McGoldrick, 2005), the teller stations are classed wakeup windows or seated teller stations (Feig, 2005). Furthermore, the exist rears are glassed with shop windows type frontage with automatic doors, also a view inside are perceived as being comparatively more modern, further low concern about the reflecting brand in the colors used, the majority of colors used are cool or subdued colors which are standard across the branches, the floor space in the larger modern branches is divided into specific category areas according to specialization as mortgage shop, estate agencies, business centers and so on (Greenland, 1994 and Greenland and McGoldrick, 2005). Also a clear distance between information disk and other points, also the availability of ATM machines in the branch which encourage consumers to enter the branch, the concerns also on availability of central heating system air conditions venerations, the hard service area used in the front of teller stations, easy visible signs, the concern about the availability of parking nearby or close to the branch (Greenland and McGoldrick, 2005, Baker et al., 1988). On the other hand limited use of bandit screens as a norm, further traffic flow concept, such as soft and hard zones and walkways have been adopted to control the speed and direction of customer movements around branches, further the automated services are grouped into lobby areas at the front of the branch, for the purpose of frequently use with out of working hours (Greenland, 1994).
Branches' Location and Distribution Decisions Despite the direction of banks during the era of toward closing some branches to control the cost, this strategy has no longer viable (Devlin, 1995), accordingly there is a direction toward more change in location as customer oriented (Aranda, 2002), the number of full service branches in USA has increased steadily since the early 1990s (Hirtle, 2007), the direction is toward consolidation of branch network, relocation, further the direction more toward expansion of branches network, in sub-urban areas, further more existence in more convenient places as large malls, or shopping centers.
Branches' Capacity Management The capacity tend to be low only small demand could be satisfied (Aranda, 2002), accordingly this typology decided to use the level capacity options, or controlling the customer demand level through more focus on using the education and promotion more than other options, also cross trained employees especially the back office employees.
2.6.3 Customer Oriented Banking Operations Strategy Process Design According to customer oriented the focus will be more on quality, customization, flexibility and get beyond the transaction orientation and into relationship orientation (Aranda, 2002); the efficiency also will be improved as a result of adopting of electronic banking channels which will reduce the overhead
and staffing cost
(Nikorich and Blomquist, 2005); each branch is like a bank into itself the front-office employees have high level of responsiveness and flexibility, its helpful the front line employee will perform much of the back-office work themselves (Larsson and Browen, 1989 Metters and Vargas, 2000a and Johnson and Clark, 2001) The high contact employee are expected to provided more customized service, accordingly the bulk of work is done by the font-line employees (Matters and Vargas, 2000), also the front line employee needs interpersonal skills and knowledge (Chase and Tansik, 1983). Further the branches are well equipped with high-tech channels to conduct the service, the customers can use ATMs Kiosk, internet banking kiosk, and some banks have internet coffee to conduct internet banking, further a wireless laptop area to conduct the internet banking and receive assesstent from specialized staff (Feig, 2005), also enterprise service platform across channels with combination of automated and human service support based on customers preferences (service oriented architecture SOA), this will increase the speed of transactions, and reduce the cost (Nikonorick and Blomquist, 2005). The customer will play a dynamic role in this typology, the customer oriented banks focus on combining self-service transactions with high end advisory (Hoek, 2006), the customer can fill the application, print out documents, and stand side by
side with teller or customer service employee and participate with him or her in the transactions, further the customer can repeat the process specially those conducted via the electronic routes. The degree of automation of the banks adopted such typology is high as discussed in the previous paragraphs, so the automation role is high, and this will reduce the transactions costs as discussed earlier especially the overhead and staffing costs (Cardwell, 1997), further the employees are interacted with each others via LAN, WAN, or VAN, the focus will be on the integration of marketing and sales process, further integrated analytical and operational intelligence system for risk, customer data and business analysis and management (Nikonorich and Blonquist, 2005).
Branches' Facility Layout Design During the era of e-banking the banks operations manager should start to overhaul branches with a high percentage of premium customer first, and focus more in developing the customer experience (Hoeck, 2006), the branches will adopt the retail mall layout or the high-touch high-tech strategy (Davidason, 2002), the focus on this type of layout is on marketing, or combining better customer service with expanded opportunity to sell financial products and improve the relation with customers (Feig, 2005). External parking area in the front of the branch as malls or restaurants is available, the branch is generally open, the majority of space will be used for selling and marketing purposes, further the use of meter or greeting station in the front of lobby, this station will assess the customer needs and directing traffic based on those need, or help customers specially the old customers to use online banking (Lombando, 2003 and Feig, 2005). In order to create an environment that encourages extended interaction between consumers and bank employees; the bank should move toward more open teller stations, free standing teller tower that gives customers the option by standing side by side with the teller to view information on waist high computer stand, or seated teller stations; which designed for the customers who can not stand at regular teller windows, or for opening a new account if all closing rooms are occupied (Feig, 2005), also create area for private conferences a part from the traffic (Bielski, 2004).
The reception area is very comfortable area with large chairs and view into street, current newspapers and magazines, and a large TV turned to news and financial programming, further marketing on specially designed marketing walls and displays, each branch has internet coffee with fresh coffee or internet kiosks, digital signage and computer and printer for customers' uses, also some banks should consider creating a living room in at least some of their branches (Swann, 2006 and Feig, 2005). Also the branches will have extensive warm and natural lighting, natural colors and materials, the lighting should draw attention to the teller lines, this lighting system should support productivity and impact how colors are perceived and how inviting an environment is, the lobby or branch hall includes some plants pictures, and the concerns also on availability of central heating system air conditions venerations, CCTV and Bandit screens, carpeted floor, the hard service area used in the front of teller stations, and easy visible signs (Bielski, 2004). Further this layout support the concept of social responsibility or community and green banking; by attaching a library containing information about products or services, or child playing area with branch, and free community meeting room or covered patio (Swann, 2006). Moreover some banks in UAS used recycled paper counter stops, solar panels to convert sunlight to energy, or water collected from roof to flush toilets (Feig, 2005), or low energy led light, changes colors, recycled rubber floor in the teller area, in USA the US Green Building Council administers the LEED rating system (leadership in energy and environment design) accordingly the banks will be evaluated and ranked accordingly (Bielski and Streeter, 2007).
Branches' Location and Distribution Decisions Despite the direction of banks during the last few years toward using remote access distributions channels, and expansion use of ATM's over the last two decades to deal with their customer; the number of commercial bank branches network have been expanded in developed countries as USA (Hirtle and Melti, 2004, Loplez and Shah, 2004 and Hirtle, 2007), accordingly the banks during the era of e-banking will concern about the convenient site location more than past (Beery, 2002).
During 2001 to 2006 brought about the greatest increase in bank branches construction in US history, with nearly 3,000 new branches opening in 2005 (Reider, 2006), according to Federal Deposit Insurance Corporation, the number of bank branches increased about 38% to just less than 70,000 between 1990 and 2004, in 2005 alone the banking industry had a 3% annual growth rate adding 2,255 net branches offices (Grover and Ferris, 2007). The Urban based banks in USA follow their customers into developing suburban, they often branch in new retail centers along major highways, creating advantage over older established competitors which established their branches in a declining main street, down town or courthouse square area (Reider, 2006) more concern about the availability of parking in the front of the branch, easy to see, low traffic area, and low physical barriers (Feig, 2005). However, in Canada the clicks-and-mortar banks' density in Urban areas is more than sub-urban or rural area, with closer occurring in urban areas and opening occurring in sub-urban areas (Mok, 2002), also the direction of
banks to open
branches in-store as a part of banks direction toward more convenience focused delivery strategy (Stroup, 1998).
Branches' Capacity Management The branches of customer oriented in decided to combine both chase and level strategy (control or influence), increase the number of people with direct interaction actions during the day time as a result of concern of this typology toward high quality advisory system and the direction toward expansion, either by hiring full time, parttime, or temporary employees and overtime, also there is a direction toward adopting more electronic channels as internet coffee internet banking Kiosk, and ATM (Feig, 2005), which will be available out of the normal working hours, further process simplification, and focus more on customer participation. More direction toward affecting or influence the demand behavior as presented by using more electronic medias and traditional promotional media (Swann, 2006), or it could apply other strategies as price differentiation, and cross training the front line employees to deal with any task
Chapter Three
Managerial Implications of the Proposed Configuration and Conclusion
3.1 Managerial Implications and Propositions Four dimensional typological configuration was developed (see figure (2) bellow), accordingly different implications could be identified form this typological configuration, first; the banks' operations managers should analyze the customer needs or requirements, then the
strategies will be identified in accordance, if these
strategies are chosen according to the following proposition, the better performance the banks' will have. P1: The more match between traditional banking operations' competitive priorities and traditional banking operations decisions; the better performance in term of lower order competency indices, which will lead to better performance in term of higher order competency indices in term of ROA,ROE, NIE/revenue, market share, customer retention, operations productivity and operational cost saving. P2: The more sensitivity the customers toward banks' services' prices, more speed and efficient service's process, low customers' willingness to participate low sensitivity toward better personnel treatment provided or service experience, branches location convenience, and technology orientation; the more competitive traditional banking operations strategy decisions are those oriented toward process. P3:The more sensitive the banks' customers toward better customer experience and treatment, but moderate willingness to participate, moderate the sensitivity toward service price, branch location, process customization and low sensitive toward service variety; the more competitive traditional banking operations strategy decisions are those oriented toward service. P4: The more sensitive the bank's customers toward better customer experience and treatment, willingness to participate, more technology oriented, sensitive toward variety of services provided, service charges, concern about more speed, customized and efficient process, more geographic exposure, accessible and locations convenient operations; the more competitive traditional banking operations strategy decisions are those oriented toward customer.
Y
BANKING OPERATIONS' DECISIONS
Low service cost charges. Low variety of service provided. Low service customer quality. High Speed and Efficient transaction. Easy to conduct the transaction. Low technology orientation. Low accessible and convenience branch. Low branches geographic exposure and accessibility Low branches location operations convince. Low customer willingness to participate. Low process customization.
High customer service quality. Low variety of service provided. Low service cost charges. High speed and efficient transaction. Easy to conduct the transaction. Moderate accessible and convince branch. Moderate branch location geographic exposure and accessibility. Moderate branches location operational convenience . Moderate customer willingness to participate. Moderate process customization
High customer service quality. High variety of service provided. X Low service cost charges. High speed and efficient transaction. Easy to conduct the transaction. High technology ±orientation. High Accessible and convenient branch. High branches location geographic exposure and accessibility. High braches location Operational convenience. High customer willingness to participate. High Process Customization
OPERATIONS COMPETITIVE PRIORITIES
Figure (2) The Typologies of Banking Operations Strategy Source: Developed by the Researcher
LOWER ORDER COMPETENCY INDICES
Process oriented
Service oriented
Customer oriented
Z
HIGHER ORDER COMPETENCY INDICES
Z'
Process-Oriented Process Design. Facility layout design. Location and distribution. Capacity Management
Service-Oriented Process Design. Facility layout design. Location and distribution. Capacity Management
Customer-Oriented Process Design. Facility layout design. Location and distribution. Capacity Management
Chase Demand
Level Capacity
Accessible and convenience Branch Location
Accessible and convenience Branches Facility Layout.
Degree of integration between customer relations portals and service data base
Degree of process integration between clicks and bricks processes
Degree of process customization
Degree of process repeatedly
Degree of customer participation
Degree of technology orientation
Number of routes
Degree of decoupling
Lower-order Competency indices
Productivity indices
Customer retention
Market share
Profitability indices
Cost Saving percentage
Higher-Order Competency indices
Figure (3) The Framework of Banking Operations Strategy Competency Source: Developed by the Researcher
Traditional Banking Operations Strategies
3.2 Conclusion The operations strategies typologies are ideal models or strategies, that determined according to different characteristics proposed. The majority of typologies developed by the previous studies are more specific toward particular operations decision dimension, with limited scope of operations decisions, on the other hand, the majority of limited general scope typologies of operations strategies are more manufacturing oriented than service. Accordingly, this paper focused on developing banking operations strategies typologies, four dimensional typological configuration is developed, the first dimension is the competitive priorities (Performance objectives) of traditional banking operations strategies, the second or the horizontal axis is the decisions of traditional banking operations, three typologies are proposed; process-oriented, service-oriented and customer-oriented traditional banking operations strategies.
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