Competitive Strategies and Changes in Banking Industry in Nigeria

Competitive Strategies and Changes in Banking Industry in Nigeria

AN OVERVIEW OF BANKING INDUSTRY IN NIGERIA
The history of banking in Nigeria has its origin with the opening of a branch of the Africa Banking Corporation (ABC) in August 1891. It was opened as a  way to accelerate the shipping business of Elder Dempster and company. This company later acquired the bank branch in 1893 by paying N2000 to ABC and it was incorporated as the bank of British West Africa in 1894. The bank later metamorphosed to Standard Bank of Nigeria and thereafter till today is first Bank of Nigeria PLC (Anyanwu et al, 1997).

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In 1899 a second bank, Anglo-African bank was established, however, with the conclusion of a merger the bank of British west African (B.B.W.A) in 1912, became extinct in 1917, a colonial bank was established, this became the second bank in the country. The establishment of this bank helped to break the monopoly of British Bank for West Africa foreign owned bank activities in Nigeria.
However, this bank having been absorbed by Barclays Bank in 1925 became Barclays Bank, Dominion colonial and overseas a.k.a. Barclays Bank D.C.O and Metamorphosed to become Barclays Bank Nigeria limited and thereafter till the present day is known as Union Bank of Nigeria Limited.
A common characteristic of these two first banks is the fact of their foreign ownership. This characteristics was prevalent in Nigeria till the early 1930s when the first successful indigenous banks went into operation so as to break the monopoly of foreign banks in the domestic banking scene. It is important to note that two earlier attempts to establish indigenous banks that met with failures. In 1929, the industrial and commercial bank came into operation but failed the next year. In 1913, the Nigerian mercantile Bank also came into operation but failed in 1936. in 1933; the national Bank of Nigeria was established and it became  the first surviving indigenous bank to break the monopoly of domestic banking.
Next to national was Agbonmagbe Bank set up in 1945. This bank later metamorphosed to WEMA Bank.  Within the same period the Nigerian penny Bank was established but failed fast in 1946. in 1947, the third successful indigenous bank, the African Continental bank (ACB) came into operation. Also in the same year another bank named the Nigerian farmers and commercial bank came on stream but also failed in 1953. in 1929, was  the first attempt to established an indigenous  bank and 1959 when the regulatory Apex Bank, the central Bank of Nigeria was established several attempts at setting up indigenous banks were made but failed. Thus the successful establishment of the three indigenous banks namely the National Bank of Nigeria.
Agbomagbe (WEMA) Bank and the African continental Bank stood out as an outstanding achievement in the history of commercial banking industry in Nigeria. Unfortunately by 1996, two of these  three banks namely the National Bank of Nigeria and the African Continental Bank has gone under due to huge closeness in the Nigerian Banking system.
The period between 1892 to 1959 can be seen for analytical purposes as an era in the history of banking in Nigeria with the key characteristics of the era being the absence of statutory provisions to regulate the business of banking. However, there were exceptions to this statement. There was the provision of the prohibition of the formulation of a banking company or partnership made up of more than 10 persons for the purpose of engaging in banking business unless it was registered as a company and also that the banking company had to submit a half yearly statement of its assets and liabilities which must be shown in a conspicuous place in all the offices of the company.
The period 1959 to 1985 can be seen as another era in the historical development of baking in Nigeria. It was in this era that the central Bank of Nigeria was established in 1959 and empowered to handle banking  business in Nigeria. The establishment of the Central bank of Nigeria brought to a close era near unregulated and free for all banking. Within this era, many banks became fully indigenous and others partly indigenous were established of the indigenous enterprises promotion decree in 1972. The Decree was however was not intended to temper with the ownership structure of the banks in Nigeria as it excluded enterprises in the banking business. However, in 1973, the federal Government acquired 40% of the shares in the three biggest banks and this percentage was increased to 60% with the implementation of the second phase of the indigenous decree in 1976. The Federal Government also acquired 60% shares in other to expatriate banks. The second phase had the attribute that it had another round of banking boom which this time unlike what applied in the 1970’s was masterminded by the state Government.
A third era in the historical development of banking in Nigeria  has been the period  1986-1995. this era also like the first two eras had an attribute of the prevalence of another round of boom occasioned this time by the adoption of the structural Adjustment Programme (SAP) with its  emphasis on the privatization /commercialization  of government owned enterprises, the liberalization  of the foreign  trade sector and very significantly, the deregulation of such key aspects of the economy as pricing of agricultural commodities as well s the adoption of a completely free floating exchange rate regime. This last policy thrust of SAP served as an incentive to the boom in banking business within this epoch. Thus within the epoch of 1986-1995, several commercial and merchant banks came on stream to take advantage of the deregulated exchange rate regime which enabled the banks  to make abnormal profit from the speculative activities they were undertaking. Thus the statistics of the number of banks, the number of urban branches, the number of rural branches, the number of branches abroad and the total number of branches in 1985 were 28, 839, 457,7 and 1297 respectively. In 1995 they were 64, 1661, 701, 6 and 2368 respectively (Central Bank of Nigeria, 1997). This  show that  apart from the number of branches of banks abroad that fell from 7 to 6, there were a phenomenal growth in the  banking section in Nigeria with the inception of SAP within the ten year period between 1985. As had been remarked earlier these banks were SAP –induced.
Another feature that characterized this era is that of distress. The distress virus ate quickly and rapidly through a substantial gamut of the banking sector bringing about the outright collapse and near collapse of others. These regrettable developments led the Central Bank of Nigeria to report that the financial service industry was generally under pressure in 1995. The operating environment remained unstable with the worsening of the distress problem continued high inflation, negative inflation rates in real terms and erosion of the confidence of the financial system.
A further  feature of the third era,1985 -1995 is the promulgation of Decree 22 of 1988 which established  the Nigerian Deposit Insurance and Corporation (NDIC), a body empowered to provide deposit insurance and related services for the banks as well s to provide insurance and related service for the banks as well as to provide insurance cover to  depositors of und with statutory empowerment to pay up to a maximum of N50,000 of a depositor total deposit in the event of collapse of the bank in which the deposit is lodged.
The period 1996 to the present is enough to see as another era. The liquidation of 26 commercial and merchant banks in January 1798 is of great significance.

2.8    STRATEGIES AFFECTING COMPETITION IN BANKS
There are strategies that affect competition in  banks. Such strategies include Environmental  factor-regulation and deregulation, consolidation, also financial strategies affects competition in bank in the areas of assets and liabilities, loan and advances furthermore, the role  of customer service as a competitive strategies in Nigeria banking industries.
2.8.1    ENVIRONMENTAL STRATEGIES AS IT AFFECTS COMPETITION IN BANKS.
Regulation and Deregulation
Regulation
Regulation; the main objective of Bank regulation is to reduce the level of risk in banking industries that are exposed, to reduced the risk of disruption resulting from adverse trading conditions for banks causing multiple or major bank failure.
Also, bank regulation help to reduce the risk of banks being used for criminal, also help to protect banking confidentiality and to direct credit to favored sectors.
However, with prolonged use of some regulation, a number of negative strategies affects emerged prominent among which was the loss of competitiveness and therefore efficiency in the banking industry.  Furthermore, excessive regulation led the banks to adopt various methods to circumvent the direct credit controls by returns of the monetary authorities practices which severely lowered the impact and effect of the banking system while taxing the resources and effort of the central bank in trying to monitor compliance with the various regulation. Perhaps the most serious short coming of the banking industry under the spell of regulation was the tendency towards the promotion of a sub-optimal pricing and allocation system of financial resources resulting in disincentives the saving s and inadequate resources for investment.
There are principle that guides bank regulation. Such principles include:
i.    MINIMUM REQUIREMENTS: Requirements are imposed on banks in order to promote the objective of the regulator. The most important minimum requirement in banking is minimum capital rates.
ii.    SUPERVISORY REVIEW:  Banks are required to be issued with a bank license by the regulator in order to carry on business in a bank, and the regulator supervises licenses banks for compliance with the requirement and responds to braches of the requirement through obtaining undertaking, giving direction, imposing penalties or revoking the bank’s license.
iii.    MARKET DISCIPLINE: The regulator requires banks to publicly disclose financial and other information and depositor and other creditors that are able to use this information to assess the level of risk and to make investment decision. As a result of this, bank is subject to market discipline and the regulators can also use market pricing information as an indicator of the bank’s financial health.
There various instrument and requirement of bank regulation includes: capital requirement, reserve requirement, corporate governance. Financial reporting and disclosure requirement, credit rating requirement , large exposure restriction, Related party exposure  restriction .

CAPITAL REQUIREMENT: This set of framework on how banks handle their capital in relation to their assets. Internationally, the bank for international settlements Basel Committee on Banking supervision influences each country’s capital requirement. In 1988, the committee decided to introduced a capital measurement system commonly referred to as the Basel capital accords. The latest capital  adequacy  framework is commonly known as base II. This updated framework is intended to be more risk sensitive than the original one, but is also a lot more complex.

RESERVE REQUIREMENT: it indicate the minimum reserves each bank must hold to demand deposits and the bank notes, reserve requirement have also been used in the past to control the stock of bank notes and or bank deposit. Required reserves have at times gold coin, central bank banknote or deposit and foreign currency.

CORPORATE GOVERNANCE: This helps to encourage the bank to be well managed and is an indirect way of achieving other objectives. Its requirements help the bank to be a body corporate. Corporate governance help to ensure that bank have minimum number of directors, an organizational structure that includes various offices and officers. It also streamline the banks towards a constitution or article  of association that is apply reveal or contains or does not contain particular clause e.g. clauses that enable directors to act other than in the best interest of the company.

FINANCIAL REPORTING AND DISCLOSURE REQUIREMENT
Prepare annual financial  statement according to  a financial reporting standard have then audited and  to register or publish them, prepare more frequent financial disclosures e.g. Quarterly disclosure statement, have directors of the banks attest to the accuracy of such financial disclosure, prepare and have registered prospectuses detailing the terms of securities or it issue (e.g. deposits) and relevant facts that will enable investor to better assess the level and type of financial risk in investing in those securities.

CREDIT RATING REQUIREMENT: Banks may be required to obtain and maintain a current credit rating from an approved credit rating agency, and to disclose it to investors and prospective investor. Also banks may be required to maintain a minimum credit rating.

LARGE EXPOSURES RESTRICTIONS:  Bank may be restricted from having imprudently large exposures to individual counterparties or groups of connected counterparties. This may be expressed as a proportion of the bank’s assets or equity and different limits may apply depending on the security held and/or the credit rating of the counterparty.
RELATED PARTY EXPOSURE RESTRICTIONS
Banks may be restricted from incurring exposures to related parties such as the bank’s parent company or directors. Typically the restriction may include: exposures to related parties must be in the normal course of business and on normal terms and conditions. Exposures to related parties must be in the best interests of banks, exposures to related parties must be not more than limited amounts or proportions of the banks assets or equity.

DEREGULATION
Deregulation of the banking industry has encouraged savings mobilization and improved access to bank loans. Available evidence has show that financial intermediation has improved significantly since deregulation has also brought about a significant increase in the number of bank operating in Nigeria. There is consequently keener  competition in the industry resulting in the emergence of range of now products. Indeed as it is now widely acclaimed the era of “am chair” banking is gone. There are number of problem which have emerged or accentuated with the deregulation. Among there are high  cost of bank leading  with it  attendant adverse impact on domestic investment and the general business climate. There is a consensus too that the quality of banking services has not improved to the extent anticipated  while fraudulent practice in the industry have escalated on balance, however there is no gain saying  that the fact the advantage of deregulation have is  far out weighted the negative effects given the background of the economic  problem which led to the adoption  of SAP and as with SAP itself there is hardly a more viable alternative strategy to the on-going process of deregulation of banking industry for structural growth and development of the Nigeria economy (OJo 1991).
Certainly the transition from intensive banking regulation in Nigeria has been highly  demanding.  One most hasten to add that the effort so far made to deregulate the banking industry have mainly serve to clear the ground of a fuller deregulation. As we all are aware the final stage in the process of deregulation in the banking system would involve the use of indirect instrument of monetary and credit control which relies on market based instruments such as the cash reserve and liquidity ration requirement and open market operations to regulate the base and therefore the banks money creation capability. Although it has its limitation this system of monetary management has over whelming advantages. The instrument involved are easy to administer and flexible. Moreover they do not interfere with competition among bank while they encourage greater efficiency in the use of funds. However the successful manipulation of this instrument required prompt availability of reliable data.  On the liquidity position of banks. Banks would therefore render returns to the monetary authorities more efficiently than at present. The performance of banks with regard to efficient rendition of returns to the CBN has been very poor which limits the ability of the bank to effectively monitor monetary and credit development. This is neither in the interest of the industry not the economy as a whole.
The use of market base instrument of monetary and credit control is also incompatible with the existence of insolvent banks. Such banks must improve their performance in order to survive under the new control system.
The monetary authorities would skill need to make regulation to ensure the stability on the system. This is likely to take form of prescribing new financial reporting standards and prudential guidelines which have already been introduced for all banks and even non-banking financial institution. This underscores the desirability of strengthening the monitoring and supervising power of the monitoring authorities in order to ensure that the deregulation of the banking industry does not lead to anarchy. Consequently banks should be aware that full banking deregulation would involve some regulation initially. However there regulation only help to strengthen the infrastructural base of the system and once they are implemented they need not subject the operations of the bank to the instability demand in the past. The application between the banks and the monetary authorize.

CONSOLIDATION
Consolidation is simply another way of saying survival of the fittest, that is to say a bigger, more efficient, better capitalized more skilled industry. Consolidation is part of the natural evaluation of industries. It is primary driven by
i.    Business motives and market forces
ii.    Regulatory interventions
Consolidation is a term used by the central bank of Nigeria (C.B.N) to describe the coming together of some bank within the country to become one bank and be able to meet CBN’s requirement for capitalization  to a minimum of N25 billion when this happen, it is expected to improve services rendered by the banks.
Generally, capital is required to support business but the importance of adequate capital in baking cannot be over emphasized. It is an essential element which enhances confidence and permits a bank to engage in banking. A very important function of capital in a bank is to serve as a means of absorbing losses it serves a buffer between operating losses and insolvency. As Phillips (1997, 12) has correctly  observed “the more capital a bank has, the more losses it an sustain without going bankrupt capital  thus provide the measure  for the time a bank has to  correct for lapses, internal  weakness or negative development.  “The larger sized and capital is longer than the time a bank has before losses  completely erode its capital”.
Apart from offering protection against losses adequate capital confer other benefits, among which are protection of depositors and creditors in time of failure. Strengthening of bank ability to attract funds at lower cost and enhance a bank’s liquidity position. The higher the liquidity of a bank the less risky is the bank. The snag however is that little risk is rewarded with the return inline with the observation in finance. Theory of positive linear relationship between risks and return.
Thus while inadequate liquidity will damage a banks reputation, excess liquidity will retard earnings.
In a view of its significance, the regulatory authorities consider capital adequacy or primary index to monitor bank. The traditional measures of capital adequacy, ratio, are ration equity total assets and ratio of capital fund to risk assets, i.e. capital fund risk assets.
The minimum capital adequacy ratio as prescribed by Basle committee of Central Bank’s supervision is 8%. This ratio relates capital to what considered the bank biggest risk namely credit 8% ration implies that for every N100 credit a bank needs 8% capital. A lesser ratio shows different degree of under capitalization  the Basle committee is a group of  international  bankers that met to fashion  out more stringent ways of determining a bank’s capital  adequacy  ratio in 2003 in their explanation of the relevance of a banks capital base they stated that “A capital serves as a foundation for a bank future growth and as a cushion against unexpected losses and provide credit  to consumer  and business a like throughout he business cycle including during downturns. Adequate capital thereby help to promote confidence in the banking system. Consolidation model. They named after the country which they are operated include the Lebanon model, the Goldman, Sach model, the Malaysian/Singaporean.
The Malaysian and Singaporean model provide great lessons for the Nigerian situation as these economics have faced similar challenges such as import – dependence foreign – financing of project, composing agriculture as the largest contributor to GDP in the banking sector these economic see similarities challenges like high interest rates, liquidity issues and declining assets quality. The following reforms stimulate by regulators these economic, viable banking industries have emerged capable of supporting the overall growth of these nations.
Prior to 1992, the minimum paid up capital requirement for bank in Nigeria was N12 million for Merchant bank and N20 million for commercial banks.
A review that year moved the requirement to N40-million and N50 million respectively. This level lasted till 1997 when a uniform of N500 minimum of capital was introduced. The reason for discontinuing he dichotomy was to  allow a level playing field and realization that there was no real difference between the capital requirement of the two categories it was also to prepare the system for the introduction of universal banking.
In 2000 the minimum capital was moved to N1 billion for new banks, while existing banks were expected to meet this level by December 2002. N2 million minimum paid up capital was introduced for new bank in 2001 while exiting bank were given until December 2004 to comply. The reason for these adjustment include increasing  cost of IT and other infrastructure, comparison with other jurisdictions, inflation and increasing  interest rates, depreciation of the national currency, the Naira strengthening the operational capacity of depositing money in bank, minimizing the risk of distress.
There was also the need to curb the spate of request for licenses which in many cases were not backed with any serious intention.
The absorption capacity of the system was also an issue i.e. things like the executive capacity  to run the banks supervisory  resources the cut throat competition that was breeding malpractice etc. in July 6, 2004 a day now referred to a “Black Tuesday”. In banking sector of the economy, the CBN Governors Professor Charles Soludo made an obviously unexpected policy pronouncement.  The highlight was the increment of the earlier N2 billion to N2 billion with full compliance deadline fixed for the end of the year. According to CBN the following are benefit of the new minimum capital based enhance capabilities to finances large projects. Size is a key strategy in the banking sector that is amongst other strategy determine, the ability of the banks to provide funds to borrowers and provide an indication of stability to deposition. In Nigeria the single borrower (obliger) limit is 35% of shareholders’ fund of N25 billion the maximum exposure allowable to a single borrower will be N8.7bn or about 64m. This figure is barely large enough to provide adequate funding for most projects in the country today, not only in the ministry of the Nigerian economy, the oil and gas industry, but also in other sector such s telecommunication, construction  and power that are critical  for improving the standard of living in the country.
Ensure a capital  base that can support services delivery channels is to provide effectively banking services to customer and mobilize funds from the  public banks will need to deploy various capital intensive  service delivery channels. The over dependence on cheap public sectors funds has negatively affected the drive of Nigerian bank to provide these alternative service delivery channels and therefore, undermined the need for banks to increase their capitalization. With the new reform bank should finally begin to look beyond the minimum of N25bn and regard these policy charges as an opportunity to emerge as mega banks with capitalization of probably over N70bn to effectively migrate into and participate in the global financial market place. Bank in the country are experiencing growth while the real sector   and informal sector are experiencing slow growth stagnation and even negative growth. The reason behind this is abnormality the more income generating line the Nigerian banking industry has been importing finance. The impetus for the Nigerian banking sector to support the relatively riskier real and informal sector to the economy has been eroded since the import finance business with shorter turnaround time and reduced risk can deliver the required profitability for banks. But unfortunately the impact has been a falling naira and dwindling foreign reserves with represent bank consolidation and banking sector reforms specifically the removal public sector fund from banks, banks should diversify their service to the real informal sector of the economy by devising creative means of offering services to the currently under-deserved sectors of the economy thereby  supporting economic growth  in a sustainable way.

2.9    FINANCIAL STRATEGY AFFECTING COMPETITION IN BANK (ASSETS AND LIABILITIES, LOAN AND ADVANCES)
Financial means monetary affairs or money matter, hence all form of money or near money e.g. debt, dept  certificate and equity certificate would be implied, however, not only liquid funds subsumed in the term finance  but also all form  of assets which are capable of being expressed in monetary terms.
The usage recognizes the fact that tangible (non-cash) asset are merely alternative forms in which individuals or entities may choose to hold their wealth.
In a broader sense, finance may be said to incorporate not only money fund but also any form of asset which has a money denominator which is capable of being converted at some time or other at least in the intermediate term into cash. In study of business finance, one is confronted wit h the apparent fluidity in usage because of the role of money not only as a medium for expressing values.  The assets and liabilities of an entity can be seen from the balance sheets. The balance sheets is an important end product in accounting transformation. Both the balance sheet and the income statement (alternatively known as the profit and loss account) are regarded with some justification as the final accounts. A reasonable amount of work of accounting staff in an organization entails generation of information which alternatively is an incorporation in one form or the other in two statement.
A balance sheet can be seen from the different perspective which are related to each other, the balance sheet may be regarded as a summary of the assets held by an accounting entity showing the manner in which these have been financial either through owner’s fund or debts.
A balance sheet may also be seen as a statement showing the amount invested in or entrusted to an accounting entity by various parties. (owners, lenders and creditor) and the various  classes of assets in which these amount have suspended. That  the two statement are valid representation of the balance sheet already given some insight into the structure of the statement  namely we  have assets (Application of fund) and on the other side we have capital  and debt (sources of funds) and that the sources are expected to  equal the applications. Balance sheet service to show that this statement is on collection of the residual of assets  and liabilities which are carried over form one accounts period into the next period for the purpose of continuing the business of the firm. The most important strategy discussed in the balance sheet at least from the share holder’s  standpoint is the net worth to owners which comprise equity capital and the accumulated surpluses (i.e. earnings or capital gains) retained in the business over the years. Apart from net worth the balance sheet also discloses other strategies which are of general use in appraising the financial  soundness otherwise of the firm. Bankers, supplier and other lender as well as shareholder, therefore, place varying degrees of reliance of the firm on the balance sheet for whatever valuation they wish to need to carry out the regard to their dealing with the form.
Assets are properties and right owned by an enterprise that have monetary value and are of present or future benefit   to the enterprise. Assets include actual properties such as product inventories, land, buildings and machineries and intangible right (such as patent). Assets are usually summarized into two broad categories in the balance sheet fixed asset and current asset fixed asset that have durable life (i.e. life of more than one year) and are held not for conversion or resale but for the purpose of assisting on the conduct of the business. Example of fixed asset are land buildings, plant and machinery, furniture and fitting, motor vehicle, patent and trade mark etc. note that it is perhaps a slight misnomer to call this group of asset fixed assets  because not all of them are movable. The term “fixed” therefore is not the ferity of location, but durability and the tendency is to change from even though the value may diminish from time.
Current assets are those cash and asset that can be converted to cash or used upon the nearest future and are shown first in the balance sheet. It is defined as cash and other assets that are reasonably expected to be realize. In cycle, It covers the time it normally takes to buy good sell them and collect the receivable from the sales for example inventories (stock) of raw material or finished goods trade debtors and cash in hand or at the bank. The pattern terraced by the class of assets in the conduct of business activities is circulatory.
Liabilities exist in a business enterprise when the firm is indebted to other parties due to borrowing or credit purchases liabilities may be long term liabilities are called current liabilities. They are item of indebtedness which is expected to be repaid within a short term duration of less than one year. The long term liability is source of long term funds. The loan facility is usually used but not exclusively used but sole traders and individual such as salary earners help them to make over a difficult period. The amount of loan granted is generally small and in repayable over a shortest possible time. Deduction are made from the loan accounts until the loan is liquidated. The repayment terms determine the interest demand.
Operating  a current account  is not a sine-quo non forgetting a loan. A loan can be granted and a loan account created without  a current account cheques will them be needed monthly to cover the agreed monthly repayment. Repayment may be made by sending cheque (s) covering repayment for 3 months, 6 months or more. Interest charge are paid upon demand.

2.10    CUSTOMER SERVICE
Customer service is the last great frontier of marketing management. It has been the least glamorous area because it is not involved directly with the customer. By definition it has escaped the attention of the marketing pundits. Yet customer services has probably produced, a department, more members of top management than any other department. The “office” has long been called the nerve centre of a business and because of the range of services provided, its enable anyone with the appropriate ambition to learn, with panoramic  vision, the intricacies involved in all operational department and more importantly, how they interact with each other.
Although other activities of marketing still shows signs of a rapid move towards improvement in productivity, little is heard of how customer services may be improved. Yet the customer services department is an essential aid to those other element. Really significant improvement in total, cannot be achieved without a commensurate reformation in the interacting function. Sales men cannot develop their selling activities without the office absorbing routine tasks. Distribution cannot be improved without more effective stock control. Advertising will not bring real reward.  Unless enquiry handling is sharpened. Nor will growth be achieved without adequate attention being given to the major areas  of customer service. It gives attention to all these areas that result in “Total marketing concept”. Areas of customer service are:
i.    Company service strategy
ii.    Credit control, allowances, returns, discounts, cancellation.
iii.    Hire purchase, credit sales, leasing, factoring, franchising
iv.    After-sale service, installation, maintenance  service, spare parts
v.     Guarantees and warranties
vi.    stock control
vii.    telephone selling
viii.    premiums, joint venture
ix.    the sales office organization
x.    Enquiry handling
xi.    The sales supporting service
xii.    Management information, accounting, computer, operational research.
All these elements are designed to be customers-oriented, although they could easily be mistaken for defensive have shown how management can use these activities as positive aids to growth. They are worth considering in some detail.
Company service strategy
Too often companies dissipate their effort by trying to do too much and are therefore unable to do anything well. The truly efficient companies avoid the temptation  to seize  every little work opportunity that comes in their way. They concentrate on doing what they  do well and work hard at it. But what companies can do well  is subject to considerable variety.  However, the range can be grouped into six categories.
i.    Full customer services:     The company tries to cater for a group of customers’ every needs. The nearest one can get to this ideal is the mail order house that tries to offer a departmental store on display in every home.
ii.    Limited product line specialist: This type of company produces basically one product and sells it primarily to another market. This is usually the function of the breweries and aircraft manufacturers.
iii.    Market specialist: The Company chooses a particular market and then tries to provide a comprehensive service. Burmah oil may be quoted as an example since its acquisition of Halfords, castrol and Quinton Hazell in order to provide a full service to the motorist
iv.    Specific product specialist: here the company has one general purpose product and markets its according to any reselected opportunity. Newspaper and magazines are good are good example. Self-adhesive tape or lettering stencils are recent developments, while paper-makers are perhaps the best example.
v.    Product line specialist: Often these companies are suppliers of essential services and in the  UK they  have mostly been nationalized. They include  coal, gas, electricity, railways, postal usually involved in government supported industries, such as oceanography or rockery.
These are all strategic in nature but are in essence the first effort at marketing orientation. By implication they each dominate customer services. They are in fact, customer – orientated, although the product dominate the strategy in more than one example. Yet even where the product must dominate the company, it is clear that customers identified, clear benefits to them established and the product sold accordingly. In each case the supplier  has aided its customers in the development of their market.
Credit control, Allowances, Returns, Discounts, cancellation.
This is an area where it’s the centre of disruption  between a company and its supplier. This must be avoided. But it is a source of promotion. Each of  the activities listed involves in a contact and with that  contract, there  is an exchange of documents or correspondence. Moreover, each of these contacts means the transfer of money or credit, Whichever way the money moves, there is a scope for building goodwill.
Clerks trained in customer services see each of these transactions as an opportunity to show courtesy, interest, consideration and efficiency. They are taught to write letters bursting with goodwill and cooperation, and they learn telephone techniques that reflect the image of a well run personalized company
This practice is adopted because it is good for the firm both internally and externally, it is good for  the firm internally  because it breeds morale and good externally because the executive  who handle money matters are often the customers’ senior management, but even these virtues will be of little avail if the company policy on these executives is too restrictive or as frequently happen, is so indeterminate  that a conscientious but unknowing middle manger implements traditional rulings  that bear little relationship to today’s needs. For example, one company in Scotland stopped buying from one source because the supplier would not accept the return on its own van of charged packages.
The ruling had been made when crates were not charged and were delivered by rail. A valuable relationship was lost because no one thought of customer services. Whenever circumstances changed suppliers will always receive complaints. If a company funds is satisfying everyone all the time, then the chances is cheating itself in some way. It is probably giving too much away.
As firms find that another concern is always capable of meeting their demands, then they tend to allow these demands to grow not necessarily intentionally. It happens because of pressures from all force them to exploit the willing. When they are suddenly let down they blame the other part, not themselves. They make a complaint. It is at this moment that the opportunist supplier acts. He uses the handling of the complaint as a means to build goodwill. Normally the irate customer is well aware that the is being unreasonable, particularly if he has been allowed to let off steam properly handled the complaint can be a major business builder. Some years ago in the essential oil business buyer was always too busy to see a supplier’s salesman. Purchases were small but steady. The sale man had a new line which he was confident the customer would buy in some volume if only he could get to section. On receipt of a small order for an essence, the salesman collected the goods and carried them about in his car until the customer complained. Within three hour of the complaint the timing was predictable because deliveries were made very fourteen days. The sales man was in the office of the buyer delivery the goods personally and collecting a planned order on the way out.
The buyer did not ask why the goods had not been delivered as usual. He was too delighted at having his problem solved by this “service oriented” supplier.

2.5    MARKET STRUCTURE AND COMPETITION
Davis and Hughe (1989) wrote that he efficiency of the resources allocation process has been the central theme of the neo–classical price theory. Price theory divides markets structure into three categories, namely:
Perfect competition monopoly and imperfect competition it is only under the theoretical ideal of the perfect competition that efficient allocation is achieved. The resource allocation in economic theory dependent on the assumption of profit maximization.  In order to examine the resource allocation process in any market structure, it is necessary to identify the average revenue, marginal revenue, marginal cost and average cost and then apply the criteria needed to create a comparative static equilibrium. We should bear in mind that because the firm was to maximize  profit, regardless of the  particular market structure in which its firm exists, it will be producing  the quality of output at which  marginal revenue  (MR) is equal to marginal cost (MC) this can be deduced as follow: profit   is given  by  = R – C, where R is the revenue and C is the cost.

2.6    COMPETITIVE MARKETING STRATEGY
Kotler (1990) defined marketing strategy as a consistent appropriate and feasible set of principle through which a particular company hopes to achieve its long run customers and project objectives in a particular competitive environment.
Top management in bank today is putting increased pressure on marketing executive to think more strategically. And marketing executives are responding but spelling out their strategy in clearer terms in their plans. They are providing better rationales for favouring one strategy over another (Kotler 1990).
A company’s marketing strategy will have to take several strategies into account including
i.    The stage of the product life cycle
ii.    The competitors marketing strategies
iii.    The target market’s buying behavior
iv.    The company’s competitive size and position in the market
v.    The company’s resource objective and policies
vi    The character of the economy.
Figure give a hypothetical market structure
The hypothetical market structure
40%    30%    20%    10%
Source: Kotler P (1990) Marketing management, planning Analysis and control New York Prince Hall. P. 272

Forty percent of the market is in the hands of a market leader, the firm has the largest market share.
Another 30% of the market in the hand of a market challenger, a runner-up firm that is actively trying to expand its share using highly aggressive tactics. Another 20 percent is in the hands of a market follower, another runner-up firm seeks to maintain its market share and not rock the boat. The remaining 10 percent is in the hands of several small firm called market riches, which serve small market requirement that they hope will attract the interest of the large firm.
In market leaders strategies almost every industry contain one form that is acknowledge to the market leader just as in Nigeria today where we have the big five  banks leading other banks. These firms have the largest market share in the relevant product market. They usually lead the other bank in price change, new-product introduction distribution coverage and promotional intensity.
The leader may or may not be admired or respected but other firms will acknowledge its dominance. The leader is an orientation point for competitors, a company to either challenge imitate or avoid some of the best–know market. Market leader in banking industry in Nigeria today are First Bank PLC, Union Bank Plc, Wema Bank Plc. What market leader do they uses in discipline  and up start firm a military point of view, they can try brinkmanship, massive retaliation “limited warfare” “graduated response”, diplomacy of violence, threats systems and so on.
i.    Confrontation strategy
ii.    Innovation strategy
iii.    Harassment strategy
iv.    Fortification strategy
The dominant form can often restrain its competitors through legal devices. It might push legislation that would be more unfavourable to the competitors then to itself.
Market challenger strategies are the forms that occupy second, third and fourth place in an industry can be called runner – up or trailing firms. They may be quite large in their own right all through small than the leader.
Market challenge can attempt to gain market in three ways. This first is through a direct attack strategy (also called head on strategy) in which a challenger tries to best the market leader through sheer doggedness and fight. The second way is through a back door strategy (also called end run or blind side) in which the challenger runs around the dominant form rather than into the third way through a ‘gapping strategy’ of attacking smaller competitors rather than the market leaders. Many beer companies owe their growth not to takes share away the leader or each other but to the gobbling up the smaller regional and local beer companies in the process of competition.

2.6.1    MARKET LEADERS STRATEGIES
Almost every industry contains one firm that is acknowledged to be the market leader. This firm has the largest market share in the relevant product market. It usually leads the other firms in price changes new product introductions. Distribution coverage and promotional intensity. The leader may or may not be admired or respected, but other firms will acknowledge its dominance. The leader is an orientation points for competitors, for company to either challenge, initiate, or avoid (Kotler 1980).
Unless a dominant firm enjoys a legal monopoly its life is not altogether easy. It must maintain a constant vigilance, other firm keep challenging its strength or trying to take advantage of its weakness. The market leader can easily miss a turn in the roads and plug into second place. The leader might spend conservatively, expecting hard times while a challenger spends liberally, expecting a buoyant economy.
A dominant firm’s objective is to remain number one the objective breaks down into three sub objectives. The first is to find way to make the total market share through good offensive and defensive strategies. The third is to expand current market share. The dominant firms usually stand to gain the most from any increases in market sizes.

2.6.2    MARKET CHALLENGER STRATEGIES
Market challenger can attempt to gain market share in three ways. The fist through a direct-attack strategy (also called head on strategy) in which a challenger tries their best, the market leader through sheer doggedness and fight. The second way is through a back door strategy (also called end run or blind side) in which the challenger runs around the dominant firm rather than into it. The third way is through gapping strategy or attacking smaller competitors rather than the market leader.

2.6.3    MARKET – FOLLOWER STRATEGIES
Market follower, although they have lower market share than the leader may be as profitable or even more profitable. A market follower must be clear on how it is going to hold on to current customers and win a fair share of new one.  Each follower must work as a set of target markets to bring distinctive advantage location, services, financing.
It must be ready to enter new market that are opening up. The company must keep is manufacturing cost low and its product quality and services high.

2.6.4    MARKET NICHER STRATEGY
Almost every industry includes a number of minor firms that operate in some part of the market try to avoid clashing with the major, these smaller firms attempt to find and occupy market niches that they can serve effectively through specialization and that the majors are likely to overlook or ignore. These firms are variously called market nichers, market specialist, threshold firms, or foot hold firms.
The neo-classical model traditionally economic theory texts have concerned themselves with the neo-classical model of price and output determination in different market structure.
This process was based upon an objectives of maximum profit and was undertaken in a general equilibrium framework in which no change in price and output policy would be desired once the optimum profit position had been reached. The various dorms of market structure were then appraised according to the proximity of each outcome to the allocation efficiency required by the neo-classical model, not least of which have been those concerned with alternative objectives. More important from the point of view of this study is the recognition that the subject of market structure many more variable than that of price alone.
Indeed the current vogue is to analyzed market structure assume to lead to certain types of behaviour which in turn lead to certain performance feature. This study also examine some of the relationship which exists between market structure and performance.
Many criticisms have been those concerned with alternative objectives. More important from the point of view this study is the recognition that the subject of market structure embraces many more variable than that of price alone. Indeed the current vogue is to analyze market structure in terms or the triplicity of structure conduct performance where certain characteristics of market structure are assumed to lead to certain types of behavior which in turn lead to certain performance features. This study also examine some of the relationship which exists between market structure and performance in particular, we will examine the relationship which exist between market  structure and  pricing behaviour, profit, progressiveness and efficiency. This is not meant to be an exhaustive list but it will nevertheless provide some of the basic elements involved in appraising the performance of given industrial structure (Hughes and Davies).
The efficiency of the resource – allocation process has been the central feature of neo – classical price theory. Efficiency of the resource – allocation in simple terms price theory divides market structure into three main types of perfect competition. It is under the theoretical ideal of perfect competition that efficient allocation is achieved.
The resources allocation process in economic theory is based upon the assumption of profit maximization; this assumption has received much criticism. However for the purpose of the study we will accept the assumption and analyze it implication for the efficiency of the resources allocation process industries expanding and contracting in relation to the general and elimination of short-run abnormal profit.
In order to examine the resource – allocation process in any market structure, we must first identify average revenue marginal, marginal revenue average cost and managerial cost and then apply the criteria required to create a comparative static equilibrium Average revenue is simply to total revenue (price x output) divided by the number of unit output marginal revenue is the addition to total received from the sale of the last unit of output.

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