Studies On The Strategic Transformation Of China's Joint Stock Commercial Bank In View Of Competitiveness

As the ending of transitional period of China's entrance into WTO in2006, the comprehensive opening has become an irresistible trend for Chinese financial market and the competitions from domestic or overseas parties are becoming fiercer for Chinese joint-stock commercial banks, which have started strategic transformation since 2005.The paper is divided into three parts, (preface, theoretical foundation and practical analysis), including preface and five chapters. The first two chapters provide the theoretical foundation for the following analysis, while the last three chapters focus on the practical discussions going on with analysis on the development situation of Chinese banking industry. Chapter I introduces the initiation and creation of competing advantage. Chapter II discusses the relationship between strategic transformation and environmental changes. Chapter III analyses and compares the competitiveness of Chinese joint-stock commercial banks. Chapter IV gives the motivations, chances and strategy for Chinese joint-stock commercial banks in their strategic transformation. Chapter V focuses on the measures and suggestions on strategic transformation of Chinese joint-stock commercial banks.The preface is concerned with an introduction of the background, objectives, prevailing theories, studying methods, and issues that need further research.Chapter I focus on the initiation and creation mechanism of enterprises competing advantage, including three sections.Section I separately defines the concept of competitiveness and competing advantage, and get the conclusion that competition is a rational conduct of an enterprise in seeking for or obtaining rents, which is the prerequisite for the enterprise to survive and develop. The essence of enterprise competitiveness refers to a comprehensive capability to win a comparative position, which shows the viability of competing enterprises and is the external expression of the enterprise's competing advantage. Competing advantage is the internal foundation of the enterprise's competitiveness. In this sense, competitiveness and competing advantage share the same substance.Section II mainly discusses the general initiators and the means for an enterprise to get competing advantage. Referring to the domestic and overseas reference, the external or internal factors that explain the generation of competing advantage both essentially reflects that the competing advantage is eventually formed during the process when the enterprise manages to create and obtain rents and wins more exceeding profits than its competing counterparties in the market competitions.Section III explains the sustainable formation of competing advantage in a dynamic situation . Competition in an uncertain situation is a dynamic competition, and competing conducts of an enterprise has the characteristic of interactive competition. As the uncertainty becomes more and more severe and reaches a hyper-competition level, the interactive competition will continuously reduce the enterprise's competing advantage. So the sustainable competing advantage shall be established by destroying the old advantage and continuously creating new advantage. Therefore, innovation capability is the key factor for an enterprise to win a sustainable competitiveness instead of a provisional advantage. As a conclusion, in the new competition environment, an enterprise must take enough priority to the analysis of its strategic environment and its strategy must be able to work well with the new environment.Chapter II defines the basic concepts of strategy and then makes a further discussion on the factors that may effect strategic transformation based on a review of theories of strategic management.Section I states that strategy actually is a choice of an enterprise and its ultimate strategic objective is to win the competing advantage. Strategy management must include two important phases, the establishment of strategy and the corresponding implementation. The establishment of strategy need to be closely combined with both dimensions of external environment and internal capability. At the end of this section, an enterprise's strategy is classified into three categories, i.e. corporate strategy, business strategy and functionality strategy.Section II firstly takes a review of the existing theories of strategic management and then gets a conclusion that strategic management is a dynamic choosing process which adjusts in a bid to meet the environmental changes. The key to success lies on the perfect match between the enterprise's internal and external environment.Section III raises the opinion that current strategy must be transformed with the change of the internal and external environment. An enterprise must closely pay attention to the environmental changes and initiate necessary adjustments.Chapter III compares the competitiveness among Chinese joint-stock commercial banks and discusses the effective means to leverage the competitiveness.The overseas and domestic materials explain the enterprise's competitiveness as a systematic comparative capability in a consistent improvement of self-owned resources allocations as well as an effective use of external environment and resources during the enterprise's competitions with its current or potential peers.Based on the above analysis, the paper defines the competitiveness of a commercial bank as a capability that a commercial bank has in an opening competitive market to realize its business targets and strategic objectives by consistently improving the allocation of internal resources, taking an effective use of the external environment and resources. The capability especially reflects in its coordination of the key resources, and manages to exceed its competitors and makes the winning model so hard for its competitors to imitate.Based on above given definition of the basic concept, Section I sets up the criteria for commercial banks'competitiveness.Following Section I, Section II carries out an analysis on the comparison of Chinese state-owned banks and foreign banks in the aspects of current and potential competitiveness. The conclusion is that although still suffering from their lower operating efficiency, the Chinese state-owned banks have managed to greatly elevate profitability, enjoy the advantage of big size, improve the current competitiveness and the gap laid behind the joint-stock commercial banks has been narrowed after capital injections from P.R.C. government, financial restructuring and IPO. As for the potential competitiveness, joint-stock commercial banks are doing better than state-owned banks for the time being. However, compared with foreign advanced banks, Chinese joint-stock commercial banks still have a long way to go in corporate governance, human resources mechanism, organization structure, etc. And the disadvantage in either current competitiveness or potential competitiveness is obvious.Section III gives the effective means to raise competitiveness by analyzing the factors that effect the competitiveness of joint-stock commercial banks. Chapter IV discusses the motivations, chances and strategy of Chinese joint-stock commercial banks in strategy transformation. Along with the ending of transitional period of China's entrance into WTO in 2006, both internal and external environment have been changed dramatically in Chinese financial industry, and medium or small sized joint-stock commercial banks are facing more pressures than those state-owned commercial banks. In the meanwhile, under the conditions of capital restriction, disintermediation of banking finance and deregulation of interest rate create the new trend , the tradition development model for Chinese banks will never apply to the current market. Therefore, the strategic transformation becomes more and more necessary.Section II demonstrates that joint-stock commercial banks must take their initiatives in pushing forward the strategic transformation, creating new potential space for business development and profit generating, realizing the multi-resources of business and incomes and raising operating capability in centralized management so as to win a certain advantage in the fierce competition with their peers.Section III discusses resolutions for joint-stock commercial banks in strategic transformation in the aspects of corporate management, business management and functionality, which improves competitiveness, realizes a continuous growth of operating profits and reaches the ultimate objectives of strategic transformation of joint-stock commercial banks.Chapter V gives practical resolutions and suggestions of strategic transformation. Combined the previous analysis and my working experience, we can get the practical resolutions and suggestions for joint-stock commercial banks in their strategic transformation, i.e. financial innovation, introducing strategic investors, developing retail banking business and applying Balanced Scoring Card for human resources management.