Learning Objectives:

  • Analyse business models in banking and their evolution.

  • Formulate coherent bank strategies and translate them into risk appetite settings.

  • Understand corporate, competitive, and functional strategies.

3.1 Business Models in Banking

The University of Genoa course examines “business models in banking: importance, taxonomy, innovation”. The University of Leeds module covers “asset securitization,” “off-balance sheet activities,” and “funding structure and the role of deposits”. The Macquarie University course guides students to “create bank business strategies that can be operationalised via credit concentration limits, delegated authorities, etc.”

Key Business Model Distinctions:

  • Retail vs. Wholesale: Serving individuals vs. corporations and institutions.

  • Universal vs. Specialised: Offering a full range of services vs. focusing on specific segments.

  • Digital vs. Traditional: Digital-only banks vs. banks with physical branches.

  • Commercial vs. Investment: Focusing on deposit-taking and lending vs. capital markets and advisory.

Business Model Innovation: The Università di Milano-Bicocca course covers “Business models: strategic decisions, risks and regulatory approach” and includes a “review of the academic studies” on business models. The University of Genoa course explicitly covers “Business models in banking: importance, taxonomy, innovation”.

3.2 Strategy Formulation Framework

The University of Genoa course covers “a framework for strategy formulation: corporate, competitive and functional strategies”.

Corporate Strategy: The overall scope and direction of the bank (e.g., what businesses to be in). This includes decisions about mergers, acquisitions, and strategic alliances. Western Sydney University covers “mergers, acquisitions, strategic alliances and downsizing activities as well as associated rationales, challenges and opportunities”.

Competitive Strategy: How the bank will compete in its chosen markets (e.g., cost leadership, differentiation, focus). The University of Genoa course covers “corporate and competitive strategy” as part of its framework.

Functional Strategies: The plans for specific functions like marketing, operations, and risk management. The University of Milano-Bicocca course examines “Strategie corporate e strategie ASA. Decisioni strategiche e scelte di struttura” (Corporate strategies and business unit strategies. Strategic decisions and structural design).

3.3 The Strategic Planning Process

The University of Genoa course covers “the strategic planning process: elements, phases, actors, content, evolution”. The University of Milano-Bicocca course examines “Strategie bancarie: le relazioni tra ambiente, strategie e struttura” (Bank strategies: the relationships among environment, strategy and structure) and “Obiettivi e destinatari del piano strategico” (Objectives and stakeholders of the strategic plan).

Key Steps in the Strategic Planning Process:

  1. Environmental Analysis: Assessing the external environment (megatrends, competition, regulation).

  2. Internal Analysis: Evaluating the bank’s strengths, weaknesses, resources, and capabilities.

  3. Strategy Formulation: Defining the bank’s mission, vision, and strategic objectives.

  4. Strategy Implementation: Translating strategy into action through organisational design, resource allocation, and performance management.

  5. Strategy Evaluation: Monitoring performance and making adjustments as needed.

3.4 Strategy Execution and the Customer-Centric View

The Macquarie University course requires students to create strategies for “migrating from a product-centric to a customer-centric view of a bank’s business”. The University of Leeds module covers “relationship banking: theory and practice” as a core topic. This shift reflects the growing importance of customer relationships in bank strategy.

The University of Milano-Bicocca course covers “Marketing policies and new frontiers in customer management (customer journey, big data and analytics)” as part of its bank management curriculum. The University of Genoa course similarly covers “Marketing policies and new frontiers in customer management”.

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