Competitive financial markets, irrespective of competitiveness of goods markets but ensuring nonetheless competitive foreign exchange markets, make banks’ intermediary role less relevant, if not redundant. Due to equal access to relevant information and absence of any roadblocks1 in entering or exiting financial markets, market participants can engage in a tradeoff between current and future consumption patterns without help from banks. Similarly, it is doubtful whether banks per se are essential to provide an effective conduit for the government in carrying out the monetary policy measures. Although competitive financial markets in the ideal form are nowhere near reality currently (or, for that matter, in the foreseeable future), imperfections in financial markets are not static in nature. In fact, many of them tend to atrophy over time and are replaced by new ones, as the last quarter of the twentieth century has witnessed in the USA and elsewhere in the world. A gradual birth or removal of and transformation in imperfections in financial markets has thus changed the distance between perfect and imperfect financial markets, affecting thereby the role of banks in these markets.
This is the essence of sound strategy formulation and implementation. Students of strategy have debated whether the focus should be on analysis of external environment or core strength of the firm. In the case of a commercial bank, this debate will have to take a back seat since both these aspects are equally crucial for strategy formulation in a global context.
This is the essence of sound strategy formulation and implementation. Students of strategy have debated whether the focus should be on analysis of external environment or core strength of the firm. In the case of a commercial bank, this debate will have to take a back seat since both these aspects are equally crucial for strategy formulation in a global context.