Factors influencing a bank?s competitive ability: the case of Lithuania and Latvia
DOI:
https://doi.org/10.24136/oc.2018.001Keywords:
commercial banks, competitiveness, competitive ability, trust, fuzzy analytic hierarchy process methodAbstract
Research background: A commercial bank?s competitive ability is of great importance as it plays a vital role in ensuring a bank?s success; hence, it is necessary to identify the factors that contribute to the development of competitive advantage of commercial banks and to shift competitive ability to a higher level. The competiveness of banks is assessed from customers? perspective, highlighting the main factors that influence them in choosing a particular bank.
Purpose of the article: The paper aims to assess the determinants influencing bank?s competitive ability from customers? perspective by indicating the level of their influence. The following objectives are set: to distinguish the determinants influencing commercial bank?s competitive ability, to prepare a methodology for the assessment of factors, to evaluate the importance of the factors using expert evaluation method based on fuzzy analytic hierarchy process.
Methods: A questionnaire was prepared for the experts in order to collect the data; fuzzy analytic hierarchy process was implemented for processing the data.
Findings & Value added: The research was conducted in Latvia and Lithuania at the be-ginning of 2017. The results showed that the most important factor for bank?s competitive ability in both ? Lithuania and Latvia ? is customers? trust. Reliability of the bank (both in Latvia and Lithuania) and the privileges of loyal customers (only in Latvia) have gained experts? attention as well. The proposed model of bank?s competitive ability allows to evaluate the level of bank?s competitiveness effectively, which would help the bank to plan its activities successfully and attract new customers in order to take the leading position in the market.
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References
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Fernández?Olmos, M. (2011). The moderating role of trust in contractual choice. British Food Journal, 113(3). doi:10.1108/00070701111116446.
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Jin, D., Liu, J., Liu, L., & Yin, D. (2014). Competition and profit hiding: evidence from banks in China. Managerial Finance, 40. doi:10.1108/MF-11-2013-0315.
Kliestikova, J., Misankova, M., & Kliestik, T. (2017). Bankruptcy in Slovakia: international comparison of the creditor´s position. Oeconomia Copernicana, 8(2). doi:10.24136/oc.v8i2.14.
Kumar, R. R., & Patel, A. (2014). Exploring competitiveness in banking sector of a small island economy: a study of Fiji. Quality & Quantity, 48(6). doi:10.1007/s11135-013-9948-8.
Laksamana, P., Wong, D., Kingshott, R. P. J., & Muchtar, F. (2013). The role of interaction quality and switching costs in premium banking services. Marketing Intelligence & Planning, 31(3). doi:10.1108/02634501311324591.
Lapteacru, I. (2014). Do more competitive banks have less market power? The evidence from Central and Eastern Europe. Journal of International Money and Finance, 46. doi:10.1016/j.jimonfin.2014.03.005.
Libby, R., & Blashfield, R. K. (1978). Performance of a composite as a function of the number of judges. Organizational Behavior and Human Performance, 21(2). doi:10.1016/0030-5073(78)90044-2.
Lin, Y.-H., Hsu, G. J. Y., & Hsiao, C.-K. (2007). Measuring efficiency of domestic banks in Taiwan: application of data envelopment analysis and Malmquist index. Applied Economics Letters, 14(11). doi:10.1080/13504850600605960.
Menicucci, E., & Paolucci, G. (2016). The determinants of bank profitability: empirical evidence from European banking sector. Journal of Financial Reporting and Accounting, 14(1). doi:10.1108/JFRA-05-2015-0060.
Mirzaei, A., & Moore, T. (2014). What are the driving forces of bank competition across different income groups of countries? Journal of International Financial Markets, Institutions and Money, 32. doi:10.1016/j.intfin.2014.05.003.
Mulatu, A. (2016). On the concept of ?competitiveness? and its usefulness for policy. Structural Change and Economic Dynamics, 36. doi:10.1016/j.strueco.2015.11.001.
Nagpal, R., Mehrotra, D., & Bhatia, P. K. (2016). Usability evaluation of website using combined weighted method: fuzzy AHP and entropy approach. International Journal of System Assurance Engineering and Management, 7(4). doi:10.1007/s13198-016-0462-y.
Pilinkien?, V., Kurschus, R.-J., & Auškalnyt?, G. (2013). E-business as a source of competitive advantage. Economics and Managements, 18(1). doi:10.5755/j01. em.18.1.3669.
Poshakwale, S. S., & Qian, B. (2011). Competitiveness and efficiency of the banking sector and economic growth in Egypt. African Development Review, 23(1). doi:10.1111/j.1467-8268.2010.00275.x.
Qian, R. (2016). The state-owned commercial bank competitiveness analysis. In 2nd international conference on social, education and management engineering (SEME 2016). doi:10.12783/dtssehs/seme2016/5464.
Resti, A. (1997). Evaluating the cost-efficiency of the Italian banking system: what can be learned from the joint application of parametric and non-parametric techniques. Journal of Banking and Finance Finance, 21(2).
Rudzkien?, V. (2009). Ateities ?žvalg? tyrimo metodologija ir metodai. In Lietuvos e. valdžios gair?s: ateities ?žvalg? tyrimas. Vilnius: Mykolo Romerio universitetas.
Sekhon, H., Roy, S., Shergill, G., & Pritchard, A. (2013). Modelling trust in service relationships: a transnational perspective. Journal of Services Marketing, 27(1). doi:10.1108/08876041311296392.
Simpasa, A. M. (2013). Increased foreign bank presence, privatisation and competition in the Zambian banking sector. Managerial Finance, 39(8). doi:doi:10.1108/MF-May-2010-0076.
Skvarciany, V. (2015). Komercini? bank? veiklos konkurencingumą lemiantys veiksniai. In Lietuvos ekonomikos ateities vizija, strateginiai tikslai ir valstyb?s misija juos ?gyvendinant.
Smollan, R. K. (2013). Trust in change managers: the role of affect. Journal of Organizational Change Management, 26(4). doi:http://dx.doi.org/10.1108/ JOCM-May-2012-0070.
Statistics Lithuania, A. (2017). Monthly Demographic Indicators. Resident population at the beginning of the month. Retrieved from https://osp.stat.gov.lt/statistiniu-rodikliu-analize?indicator=S3R168#/.
Stupňanová, A. (2015). A probabilistic approach to the arithmetics of fuzzy numbers. Fuzzy Sets and Systems, 264. doi:10.1016/j.fss.2014.08.013.
Titko, J., & Lace, N. (2012). Service quality evaluation in Latvian banking. Economics and Management, 17(1).
van Laarhoven, P. J. M., & Pedrycz, W. (1983). A fuzzy extension of Saaty?s priority theory. Fuzzy Sets and Systems, 11(1?3). doi:10.1016/S0165-0114(83)80082-7.
Voinescu, R., & Moisoiu, C. (2015). Competitiveness, theoretical and policy approaches. Towards a more competitive EU. Procedia Economics and Finance, 22. doi:10.1016/S2212-5671(15)00248-8.
Wind, Y., & Saaty, T. L. (1980). Marketing applications of the analytic hierarchy process. Management Science, 26(7). doi:10.1287/mnsc.26.7.641.
Zhang, L., Shwiff, S., & Xu, Q. (2015). An indexation system for assessing emerging chinese bank competitiveness: the case of Huaxia Bank. Acta Oeconomica, 65(2). doi:10.1556/032.65.2015.S2.5.
Zhao, T., Matthews, K., & Murinde, V. (2013). Cross-selling, switching costs and imperfect competition in British banks. Journal of Banking & Finance, 37(12). doi:10.1016/j.jbankfin.2013.03.008.
Zhou, X., & Lu, M. (2012). Risk evaluation of dynamic alliance based on fuzzy analytic network process and fuzzy TOPSIS. Journal of Service Science and Management, 5. doi:10.4236/jssm.2012.53028.
Alhassan, A. L., & Ohene-Asare, K. (2016). Competition and bank efficiency in emerging markets: empirical evidence from Ghana. African Journal of Economic and Management Studies, 7(2). doi:10.1108/AJEMS-01-2014-0007.
Allen, F., & Santomero, A. M. (1998). The theory of financial intermediation. Journal of Banking & Finance, 21.
Altunbas, Y., Goddard, J., & Molyneux, P. (1999). Technical change in banking. Economics Letters, 64(2). doi:10.1016/S0165-1765(99)00076-2.
Ayhan, M. B. (2013). A fuzzy AHP approach for supplier selection problem: a case study in a gearmotor company. International Journal of Managing Value and Supply Chains (IJMVSC), 4(3). doi:10.5121/ijmvsc.2013.4302.
Bank of Lithuania (2018). Banks. Banking Sector in Lithuania. Retrieved from http://www.lb.lt/en/fs-banks.
Baumann, C., Hoadley, S., Hamin, H., & Nugraha, A. (2017). Competitiveness vis-?-vis service quality as drivers of customer loyalty mediated by perceptions of regulation and stability in steady and volatile markets. Journal of Retailing and Consumer Services, 36. doi:10.1016/j.jretconser.2016.12.005.
Beşikçi, E. B., Kececi, T., Arslan, O., & Turan, O. (2016). An application of fuzzy-AHP to ship operational energy efficiency measures. Ocean Engineering, 121. doi:10.1016/j.oceaneng.2016.05.031.
Central Statistical Bureau of Latvia (2017). Population ? key indicators | Latvijas statistika. Population ? Key Indicators. Retrieved from http://www.csb.gov.lv /en/statistikas-temas/population-key-indicators-30624.html.
Chang, D.-Y. (1996). Applications of the extent analysis method on fuzzy AHP. European Journal of Operational Research, 95(3). doi:10.1016/0377-2217(95)00300-2.
Chen, S. C. (2015). Customer value and customer loyalty: is competition a missing link? Journal of Retailing and Consumer Services, 22. doi:10.1016/j.jretconser.2014.10.007.
Čiarnien?, R., & Stankeviči?t?, G. (2015). Theoretical framework of e-business competitiveness. Procedia - Social and Behavioral Sciences, 213. doi:10.1016/j.sbspro.2015.11.528.
Ciocanel, A. B., & Pavelescu, F. M. (2015). Innovation and competitiveness in Eeuropean context. Procedia Economics and Finance, 32. doi:10.1016/S2212-5671(15)01455-0.
Cobo, A., Vanti, A. A., & Rocha, R. (2014). A fuzzy multicriteria approach for it governance evaluation. Journal of Information Systems and Technology Management?: JISTEM, 112(2). doi:10.4301/S1807-17752014000200003.
Cooke-Davies, T. (2002). The ?real? success factors on projects. International Journal of Project Management, 20(3). doi:10.1016/S0263-7863(01)00067-9.
Dearmon, J., & Grier, K. (2009). Trust and development. Journal of Economic Behavior and Organization, 71(2). doi:10.1016/j.jebo.2009.02.011.
Fernández?Olmos, M. (2011). The moderating role of trust in contractual choice. British Food Journal, 113(3). doi:10.1108/00070701111116446.
Ferreira, J. J., Marques, C. S., & Azevedo, C. (2011). Competitiveness, resources, and capabilities: empirical evidence from retail banking. Service Business, 5(4). doi:10.1007/s11628-011-0117-7.
Financial and Capital Market Comission (2018). Credit institutions. Banks. Retrieved from http://www.fktk.lv/en/market/credit-institutions/banks1.html.
Ika, L. A., Diallo, A., & Thuillier, D. (2012). Critical success factors for world bank projects: an empirical investigation. International Journal of Project Management, 30(1). doi:10.1016/j.ijproman.2011.03.005.
Ishizaka, A., & Nguyen, N. H. (2013). Calibrated fuzzy AHP for current bank account selection. Expert Systems with Applications, 40(9). doi:10.1016/j.eswa.2012.12.089.
Jasien?, M., & Staroselskaja, J. (2010). Lietuvos bank? konkurencingumas ir banko pasirinkimas. Pinig? studijos, 14(2).
Javanbarg, M. B., Scawthorn, C., Kiyono, J., & Shahbodaghkhan, B. (2012). Fuzzy AHP-based multicriteria decision making systems using particle swarm optimization. Expert Systems with Applications, 39(1). doi:10.1016/j.eswa. 2011.07.095.
Jiang, L., Li, Y., & Jiang, C. (2017). Employment competitiveness of college students based on improved AHP. Eurasia Journal of Mathematics, Science and Technology Education, 13(8). doi:10.12973/eurasia.2017.00996a.
Jin, D., Liu, J., Liu, L., & Yin, D. (2014). Competition and profit hiding: evidence from banks in China. Managerial Finance, 40. doi:10.1108/MF-11-2013-0315.
Kliestikova, J., Misankova, M., & Kliestik, T. (2017). Bankruptcy in Slovakia: international comparison of the creditor´s position. Oeconomia Copernicana, 8(2). doi:10.24136/oc.v8i2.14.
Kumar, R. R., & Patel, A. (2014). Exploring competitiveness in banking sector of a small island economy: a study of Fiji. Quality & Quantity, 48(6). doi:10.1007/s11135-013-9948-8.
Laksamana, P., Wong, D., Kingshott, R. P. J., & Muchtar, F. (2013). The role of interaction quality and switching costs in premium banking services. Marketing Intelligence & Planning, 31(3). doi:10.1108/02634501311324591.
Lapteacru, I. (2014). Do more competitive banks have less market power? The evidence from Central and Eastern Europe. Journal of International Money and Finance, 46. doi:10.1016/j.jimonfin.2014.03.005.
Libby, R., & Blashfield, R. K. (1978). Performance of a composite as a function of the number of judges. Organizational Behavior and Human Performance, 21(2). doi:10.1016/0030-5073(78)90044-2.
Lin, Y.-H., Hsu, G. J. Y., & Hsiao, C.-K. (2007). Measuring efficiency of domestic banks in Taiwan: application of data envelopment analysis and Malmquist index. Applied Economics Letters, 14(11). doi:10.1080/13504850600605960.
Menicucci, E., & Paolucci, G. (2016). The determinants of bank profitability: empirical evidence from European banking sector. Journal of Financial Reporting and Accounting, 14(1). doi:10.1108/JFRA-05-2015-0060.
Mirzaei, A., & Moore, T. (2014). What are the driving forces of bank competition across different income groups of countries? Journal of International Financial Markets, Institutions and Money, 32. doi:10.1016/j.intfin.2014.05.003.
Mulatu, A. (2016). On the concept of ?competitiveness? and its usefulness for policy. Structural Change and Economic Dynamics, 36. doi:10.1016/j.strueco.2015.11.001.
Nagpal, R., Mehrotra, D., & Bhatia, P. K. (2016). Usability evaluation of website using combined weighted method: fuzzy AHP and entropy approach. International Journal of System Assurance Engineering and Management, 7(4). doi:10.1007/s13198-016-0462-y.
Pilinkien?, V., Kurschus, R.-J., & Auškalnyt?, G. (2013). E-business as a source of competitive advantage. Economics and Managements, 18(1). doi:10.5755/j01. em.18.1.3669.
Poshakwale, S. S., & Qian, B. (2011). Competitiveness and efficiency of the banking sector and economic growth in Egypt. African Development Review, 23(1). doi:10.1111/j.1467-8268.2010.00275.x.
Qian, R. (2016). The state-owned commercial bank competitiveness analysis. In 2nd international conference on social, education and management engineering (SEME 2016). doi:10.12783/dtssehs/seme2016/5464.
Resti, A. (1997). Evaluating the cost-efficiency of the Italian banking system: what can be learned from the joint application of parametric and non-parametric techniques. Journal of Banking and Finance Finance, 21(2).
Rudzkien?, V. (2009). Ateities ?žvalg? tyrimo metodologija ir metodai. In Lietuvos e. valdžios gair?s: ateities ?žvalg? tyrimas. Vilnius: Mykolo Romerio universitetas.
Sekhon, H., Roy, S., Shergill, G., & Pritchard, A. (2013). Modelling trust in service relationships: a transnational perspective. Journal of Services Marketing, 27(1). doi:10.1108/08876041311296392.
Simpasa, A. M. (2013). Increased foreign bank presence, privatisation and competition in the Zambian banking sector. Managerial Finance, 39(8). doi:doi:10.1108/MF-May-2010-0076.
Skvarciany, V. (2015). Komercini? bank? veiklos konkurencingumą lemiantys veiksniai. In Lietuvos ekonomikos ateities vizija, strateginiai tikslai ir valstyb?s misija juos ?gyvendinant.
Smollan, R. K. (2013). Trust in change managers: the role of affect. Journal of Organizational Change Management, 26(4). doi:http://dx.doi.org/10.1108/ JOCM-May-2012-0070.
Statistics Lithuania, A. (2017). Monthly Demographic Indicators. Resident population at the beginning of the month. Retrieved from https://osp.stat.gov.lt/statistiniu-rodikliu-analize?indicator=S3R168#/.
Stupňanová, A. (2015). A probabilistic approach to the arithmetics of fuzzy numbers. Fuzzy Sets and Systems, 264. doi:10.1016/j.fss.2014.08.013.
Titko, J., & Lace, N. (2012). Service quality evaluation in Latvian banking. Economics and Management, 17(1).
van Laarhoven, P. J. M., & Pedrycz, W. (1983). A fuzzy extension of Saaty?s priority theory. Fuzzy Sets and Systems, 11(1?3). doi:10.1016/S0165-0114(83)80082-7.
Voinescu, R., & Moisoiu, C. (2015). Competitiveness, theoretical and policy approaches. Towards a more competitive EU. Procedia Economics and Finance, 22. doi:10.1016/S2212-5671(15)00248-8.
Wind, Y., & Saaty, T. L. (1980). Marketing applications of the analytic hierarchy process. Management Science, 26(7). doi:10.1287/mnsc.26.7.641.
Zhang, L., Shwiff, S., & Xu, Q. (2015). An indexation system for assessing emerging chinese bank competitiveness: the case of Huaxia Bank. Acta Oeconomica, 65(2). doi:10.1556/032.65.2015.S2.5.
Zhao, T., Matthews, K., & Murinde, V. (2013). Cross-selling, switching costs and imperfect competition in British banks. Journal of Banking & Finance, 37(12). doi:10.1016/j.jbankfin.2013.03.008.
Zhou, X., & Lu, M. (2012). Risk evaluation of dynamic alliance based on fuzzy analytic network process and fuzzy TOPSIS. Journal of Service Science and Management, 5. doi:10.4236/jssm.2012.53028.
