LIBRAE
4.3 Suitability of the Current Strategy
4.3.2 Industry Evaluation (External Environment)
When evaluating SASCCO the overall financial industry is taken into consideration since the Cooperative does not compete with other cooperatives. SASCCO is an umbrella body to develop the savings and credit cooperatives. The competition is in the overall financial industry, which is fierce and characterized by high substitution. SASCCO should, therefore, strategize in order to be able to win the largest share in the financial arena. The main problems in the industry concern over-indebtedness of the client which is caused by unfair high interest rates charged to clients. The Cooperative should capitalize on the industry's weakness by offering lower interest rates.
The cooperative industry is characterized by low capital requirements but this is not the case with
the financial industry, high investment inputs are required as a start-up. Embarking on a Cooperative Bank project implies that SASCCO is now competing in the financial industry and it could be easy for the Cooperative to be ousted from the industry if it does not take strong competitive stands. It should, however, be noted that the whole cooperative industry profitability is below par. Cooperatives need revenue that will be sufficient enough to run their operations efficiently which is not the case, for instance, with the banks. Growth prospects look positive for the future.
SASCCO can strengthen itself by forming more joint ventures and alliances with rivals to neutralize the stiff competition in the market. High product differentiation is also encouraged to win more Cooperative members who will be loyal to the different societies. The Cooperative could also capitalize more on the most neglected segments of the economy, the rural people, by making banking much easier for them and to secure the purchasing power which is now achieved by its largest rivals.
4.3.2.1 Porter's Five Forces Model
In this section SASCCO's competitiveness in the financial/cooperative industry is assessed using the Porter's Five Forces model. It should, however, be noted that this kind of model only assumes a classic perfect market and that the economy factors are stable:
• A high level of rivalry is caused by the low exit barriers and the low switching costs to clients within the financial institutions. It is very easy to move from one bank to another or to register with an insurance company if one is not satisfied with the service offered by the cooperatives. If the service is not easily accessible, informal lenders would always be readily available.
• Generally, with SASCCO as an apex body for cooperatives, there is low threat that there will be a new entrant of such a kind. Although, cooperatives have low capital requirements they are expected to comply with the international principles and practices and with the government policy for cooperatives formation, which makes it difficult to start-up a new cooperative. The same applies with the financial institutions. It should, however, be noted that it is a different case with informal lenders who are not formally registered in Swaziland and are mushrooming because they need no formal capital to start.
• There is high buyer/members' power because of the low switching costs.
• There is low supplier power because with this kind of service the client is the owner and
sets the rules on how the respective accounts should be operated.
• SASCCO entered the cooperative industry with a strong financial base of about E35 million and this has thus stirred much competition with other financial institutions which are not cooperatives but mostly commercial banks. However, banks lend too much riskier borrowers to maintain their earnings. SASCCO members are being offered numerous products from revised services in regard to credit facilities both by banks and credit bureaus. Further, the government of Swaziland offers reasonable measures in regard to community development funds that attract low interest rates. These funds can be sourced from Inhlanyelo Rural Development Fund, Enterprise Trust Fund and others.
4.3.2.2 Strategic Group Maps
The Cooperative will now be evaluated against its competitors using the Strategic Group Maps as shown in Figure 4.1:
Figure 4.1: Strategic Group Maps for Assessing Competitive Positions of Rival Firms
Source: (Thomson and Strickland, 2003:102)
Interpretation
The close proximity of the companies on the strategic group map substantiates the analysis in the Porter's Five Forces analysis, indicating that rivalry is intense. The Informal lenders and SASCCO appear to have severe resource constraints or poor strategies and/or implementation, followed by the Swaziland Stock Exchange and the Micro financiers, their customer satisfaction levels are lower than the average trend indicates they should be. The leaders in the industry are the banks.
The SRIC has high customer satisfaction but a lower base of members compared with the banks, followed by the SNPF.
4.3.2.3 Weighted Competitive Strength Assessment
The Cooperative will now be weighted its competitive strengths in the industry as depicted in Table 4.1:
Table 4.1: Weighted Competitive Strength Assessment
Key Success Factor/
Strength Measure
Weight
.3 .2 .15 .1
Financial resources .25
| Sum of weights 1.00 [ Weighted overall strength 1
1 rating I
SASCCO Commer cial Banks
4 8 5.1 8.7 4.3 8.3 2.4 7.3 1.7 9.6 3.5 8.4
CBS
8 5.7 1.2 9.5 10 6.9
Informal Lenders
1.5 1.1 7.3 0.5 1.0 2.3
SRIC
4.8 5.5 3.0 6.7 7.5 5.5
SNPF
6 4.3 3.0 6.6 5.5 5.1
Microfi nance
5 2.8 1.7 3.0 4.5 3.4
ssxx
3.3 0.5 4.7 5.1 3.2 3.4
Interpretation of the results
The weighted competitive strengths assessment ranks SASCCO fifth out of eight institutions which offer the same products as SASCCO. SASCCO outperforms the informal lenders because of their bad reputation and unjustified interest rates, the quality of service they offer and their lack of financial resources. The Cooperative's competence is slightly above that of micro finance and the Swaziland Stock Exchange because these institutions are still on their infancy stage in Swaziland, and not familiar to most people. However, they are a threat to the Cooperative because they almost tie with SASCCO. This is an indication that as soon as they market themselves effectively they will outperform the Cooperative and are, therefore, a threat to SASCCO.
The overall results are that the commercial banks are the leaders in the competitive arena with a strong back-up of the Central Bank of Swaziland because of their financial strength, good image with customers, quality service they deliver and their supply chain capability.