Resources and capabilities of capitec bank:
- What resources and capabilities made Capitec successful?
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Capabilities- The individuals who came together to start Capitec came from a strong financial and micro-lending background; they had a very good understanding of the banking systems. They started this business well equipped.
Resources - Capitec was originally capitalized with R350 million was worth R2.2 billion and the results which were released in September 2006 showed a 23% return on equity, its profitability increased by 71%, and the bank itself had grown by almost 50%. Their business model was built on 4 pillars, Accessibility, Affordability, Simplicity and Personal Service. They used less space, and resources for example cashless transactions, security but not installing a bullet proof glass and less risk of robberies, Cost were saved buy only having 1 ATM at each branch, location played a very important part in Capitec’s Business Model, they went were the mass were, and had working hours that were accommodating to its customers. Capitec also made alliances with retailer’s i.e. Shoprite ect which people can withdraw cash. Capitec’s aim was to change its customer perception from thinking it was only a micro-lender.
- Reputation of banks increases competitive advantage. The more ‘popular’ the bank the more it is supported by the community. Capitec succeeded in being reputable, by looking at the interest of client first and its profits for its shareholders second and offering simple, understandable and low cost products (Cameron, 2011).
- Culture: the generalised perception of banks is that they are expensive, slow, offer complicated products and the services require large amounts of paperwork (Townsend and Mosala, 2006) by applying its business model, Capitec managed to change this perception.
- Skills and knowledge: Employees must be trained with adequate skills and knowledge to deal with their clients queries. This contributes strongly to the competitive advantage of the industry, because an unhappy client is said to be ‘bad’ for business.
- Communication: Communication skills are a very important resource. Each employee must be able to communicate with the client in a manner that the client understands.
- Key success factors
- Affordability: Clients that fall in the low-income earning bracket, focus on saving where possible. The big four banks serve mostly clients in the medium to high-income earning bracket, by saving R1-R2 here and there would not benefit them, whereas it will benefit the low-income earning client.
In order to serve its target market, Capitec reduced its banking fees, “Slash by half the banking fees of its competitors.” (Townsend and Mosala, 2006). Capitec saved cost by cutting out paperwork and the administrative work associated with it. Branches operated on a cashless basis, cash was only obtainable from ATM’s and at retailers (Shoprite and Pick n Pay). Capitec also encouraged its market to save by offering 10% interest on deposits up to R10 000(Townsend and Mosala, 2006).
Affordability is a strong key success factor for high competitive advantage and the demand for affordability in the low-income banking market is high. Therefore Capitec has a strong competitive advantage for this target market.
- Accessibility: The geographic positioning of the bank must be convenient and easily accessible for all its clients; the big four banks are generally situated in larger shopping complexes that are mostly frequented by the medium to high-income earning client. Clients that are targeted by Capitec generally commute daily via public transport, therefore Capitec located its branches at “train stations, taxi ranks and or shopping malls”, their operating hours 08h00 to 17h00 or 07h00 to 19h00 benefited those clients that can only visit the bank before or after work (Townsend and Mosala, 2006).
- Simplicity: The below-average client is not equipped with the knowledge to understand products that are highly complex. As long as they can obtain their money without being charged large amounts, they are content. Capitec has strong competitive advantage in this respect as it offers a simplified and focused product, which benefits its target market. The big four for example have a range of products with complex terms and conditions.
- Personal Service: Every client must be made to feel important. Staff must be able to connect with their clients and understand their needs. In line with this and to increase its competitive advantage within the industry Capitec “recruited staff from the areas surrounding its branches and trained them in the required skills.” (Townsend and Mosala, 2006).
- Technology: In a technology driven world, it is important that banks in the industry ‘move with the time’. With respect to the big four, these banks have now introduced internet and cell phone banking as well as banking from the ATM; making the industry highly competitive. This technology aims to make banking for the client simple and accessible from anywhere. This new technology is aimed, once again, at the medium to high-income earning clients, who have access to these technologies.
Capitec approached technology driven services to the low-income earners in a different way (Haladjian, 2006).
Paperless and cashless branches.
Making use of the magnetic strip and electronic smart cards, which can only be used in Capitec’s, own ATM’s, and Maestro linked machines.
Cash withdrawals for retailers such as Shoprite and Pick ‘n Pay.
This technology driven business model is the right approach to serve the low-income earning population, but in comparison to the big four Capitec has a long way to go for example the introduction of internet banking.
Marketing: Marketing is a very important factor for competitive advantage of the industry. There are various ways in which a firm can market their products for example television, bill board advertisements, radio. Good marketing techniques of a product which targets the right sector of the population will promote the firm tremendously therefore increasing sales.
The market is deemed sustainable relative to the competitiveness of the industry. For Capitec to remain profitable and continue to grow its clientele they need to be aware of the competition within the industry.
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