CHAPTER 1
INTRODUCTION
1.1 Background of the Study
In an increasing competitive and dynamic business environment, every organization needs to identify, anticipate,
satisfy and care for customers to maximize profit, meet the requirement of stakeholders and have competitive
advantage. Every industry including bank has an underlying structure or a set of fundamental economic and
technical characteristics which give rise to competitive forces. A firm can clearly improve or erode its position
within an industry through its choice of strategy. Competitive strategy, then, not only responds to the
environment but also attempts to shape the environment in its favour (Porter, 2005). The strategist must
therefore seek to position his or her firm to cope best within its industry environment or to influence that
environment in the firm’s favour.
Business strategy development is concerned with matching customers requirements (needs, wants, desires,
preferences, buying patterns) with the capabilities of the organization, based on the skills and resources available
to the business organization, leading to the issue of core competence (Holmes and Hooper, 2000). The pursuit of
competitive advantage is at the root of organizational performance and as such understanding the source of
sustained competitive advantage has become a major area of study in the field of strategic management (Porter,
2005, 2001; Barney, 2001). The resource-based view stipulates that the fundamental sources and drivers of
competitive advantage and superior performance are chiefly associated with the attributes of resources and
capabilities, which are valuable (Barney, 2006; 2001).
Performance is associated with a firm’s results. Performance indicated the performance of organizations and
revealed the outcome of business processes and accomplishments and the success of meeting established goals
(Zhang & McCullough, 2005). Jouirou and Kalika (2004) measured organizational performance by a subjective
way including cost reduction, customer satisfaction, improved production, and the ability to innovate. Wu (2001)
used efficiency, sale performance, customer satisfaction and relationship development to measure of firm
performance.
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