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Dissertation on Knowledge Management in Banking Industry
This is a dissertation on Success factors of knowledge management in banking industry in saudi Arabia. It is part of dissertation Help. This part of Dissertation Knowledge Management Banking Industry describes basic fundamentals of banking industry
Knowledge Management in Banking Industry - Introduction
Within current research the major focus of studies is highlighted on discovering the success factors of knowledge management within the Saudi Arabian banking system. The banking industry can be considered as a pure service industry and it is also one of the most knowledge intensive industries existing, thereforethe knowledge management process has significant importance within the banking industry (Albrecht & Brandford, 1990). The various knowledge management tools are nowadays implemented in the banking industry so that the customer and employees of the bank can gain knowledge regarding the banking services and the bank is also able to achieve service excellence.
Today’s business requirements has become more and more challenging and in this business environment,organisations need to create the growth driver out of its own corporate assets which only belong to the firm itself. Corporate assets can be broadly classified into two main categories, which are tangible assets and intangible assets. Among the tangible assets of the company are its plant, machinery, production facility, raw material and so on. (Gaster, 1995). These tangible assets play a vital role in the growth and development of the company but along with these assets there are other intangible assets of the company which include its brand name, knowledge of its employees and customer base of the company. Banking sector is primarily a service sector; the role of knowledge management process cannot be ignored in this (Juran, 1988). It can be seen that various banks around the globe can only compete on the basis of knowledge which employees hold and share with customers since financial products are increasingly complex resultingin substantial information required by customers in order to make decisions about the purchasing of financial products.
Knowledge management is the concept in which organisations gather, organise and share their information among the employees and customers of the firm. It can also be explained as the common knowledge pool which is maintained between organizations’ employees and customers so that each and every stake holder involved is fully aware and informed about each process. Knowledge management maintains the knowledge and skills possessed by the stakeholder as organization’s asset and use them as a competitive tool to gain edge over competitiors. The dynamic market trends recently are shifting the capital and labour dominated businesses to more knowledge dominated businesses (Kotler, 2003). (knowledge management explained elaborately and some redundant part removed without changing the overall meaning of paragraph)
Banking services are considered to be one of the most important aspects of consumers today. As most financial transactions are now routed through banks irrespective of the magnitude of the transactions, net banking options and paper money are examples of such transactions. In addition, banks are now exploring new customer segments for distributing their products and increasing their profitability (Babakus & Boller, 1991). A bank can be defined as a financial intermediary which accepts the deposits with the condition of reimbursing on demand through the check drawn by the customers of the bank.
Types of Banks
The Banking industry appears in three basic forms which are:
- Central Banks: These are banks which issue money on behalf of the government and these banks also plays an important role in stabilising the economy of the country by regulating the money supply.
- Commercial Banks: The role of the commercial banks is to accept the deposits for the purpose of the channelling of these deposits into the various activities such as lending which may be done either directly or through the capital markets (Beckett et al, 2000).
- Saving Banks: These banks are known as building societies and the main role of these banks are to borrow and save money which is taken from the members of the financial co-operatives formed.
Standard Activities of Banks
Banks were initially intended for the three standard activities which were carried out by the all banks. These three activities were developed as follows:
- Payment system constituents: the main activity of a bank includes working as a payment system for the various activities between banks and the users of the banking services. The payment services which are provided by the banks to its users can be divided into three main areas which are: payment and remittances, collection and Forex services (Bettman, 1979). Payment and remittanceservices include various kinds of cheques such as Bankers cheques, Multicity cheques, DD, Debit cards, Travel cards and so on. Collection includes services such as local clearing, national clearing, ECS and cheque collection and other various types. The Forex service provided by banks includesthe collection and distribution of foreign currencies.
- Intermediary: banks also work as the intermediary between money depositors and money lenders. Deposit services provided by banks are of different kinds such as current accounts, saving account, fixed deposits and recurring deposits (Brown et al, 2003).
- Financial services: The financial services offered by banks are in the form of distribution of various financial instruments such as mutual funds, insurance, gold coins, collection of taxes, Demat accounts, safe keeping and advisory services provided by the banks (Harrison, 1997).
Banks provides various banking channels to their service users in order to avail various banking services and these channels range from the latest technological services to the regular deposit or withdrawal services. Some of the major channels provided by banks are as follows:
- ATM: the ATM is a machine which dispenses cash and sometimes takes deposits without any intervention of individuals and also provides various other services.
- Mobile Banking: Mobile banking is the availing of banking and financial services through any telecommunication devices which include services such as bank and stock market transactions, accessing account detail and other information (Howard & Sheth, 1969). Though the mobile banking concept is fairly a new concept, it is developing rapidly.
- Branch: the banking branch is any banking retail location which is used to providebanking services to the customers. It is one of the most popular ways to bank by the customer as manpower is available to assist the customer (Johnson, 1973) and this system is still preferred by many conventional consumers who trust a human being while banking rather than systems and machines to make their transactions.
- Call centre: Call centres are customer help centres established by banks in order to solve customer complaints and provide solutions to various problems encountered.
- Online banking: Online banking services are the online services provided by banks for areas such as payment and fund transfer services.
- Video banking: this consists of banking services provided by banks in order to carry out banking transactions with the help of video or audio connections.
Customers are the key drivers of business in today’s dynamic environment and only a business which can understand and satisfy a customer can survive in today’s competitive organizations markets. As a result, customer retention has become an important marketing practice for marketers all around the world (Boller, 1991). According to customer retention, profitability chain models and the profitability of the business increases as the customer retention rate for the firm increases. Moreover, customer retention and acquisition can be achieved with the help of successful knowledge management within the banking industry.
As loyal customers provide significant benefits to the company such as high purchase values and premium prices, and are insensitive to prices change and can promote services with positive word of mouth feedback, commercial banks in Saudi Arabia are providing various services given by banks in any developed nation in order to achieve improved service quality for its customers. According to the national statistics in the year 2000, the number of branches reached to 430 and the number of ATM machines reached 880. This resulted in approximately 7000 people per branch and 3500 people per ATM in the country (Brown et al, 1993).
In total, Saudi Arabia has 47 commercial banks and out of 47 banks, 27 commercial banks are foreign banks. Some of the major players in the commercial bank segment include Citi Bank, HSBC Bank and Standard Chartered. Therefore, banks in Saudi Arabia need to evaluate their service quality in order to combat the competition and become aligned as service oriented banks.
Knowledge management has its own specific place in the banking industry since financial products can only be sold through the strong knowledge back up which the employees of the bank possess. Knowledge can be defined as the skills and expertise which are acquired by the person and can be shared among other people as well.
A particular piece of information is referred to as knowledge if it satisfies the following criteria of knowledge:
Statements should be justified: the information which is held by individuals should be such that it can be justified based on logical grounds. Also, justification of the information can create knowledge as without justification of information it would not be applicable to every circumstance (Allport, 1995). It should be true: the piece of information being held should be true to the knowledge of a person who is bringing it forward since only at this point, that piece of information would be universally accepted by people and It should be believed by people at large: people at large should have faith in the information which is put forward to be classified as knowledge. ( all three statements are again explained in literature review part)
Knowledge can exist in various forms within the world but there can be two main categorisations of knowledge being put forward and these two basic forms of knowledge are explicit knowledge and tactical knowledge (Chin, 1998a). (Explicict and tacit knowledge is explained in literature review elaborately)
3C’s of Knowledge Management (explanation removed from here as it is properly explained again in later parts of the dissertation)
Current research which is focused on finding out the success factors of knowledge management in the banking industry has a major target audience as bankers are discovering ways to achieve a competitive advantage in the banking industry. Furthermore, bank marketers receive assistance from current research as they are able to detect how knowledge management can guide them to create a healthy work environment for employees and maintain a good relationship with customers of the bank. Moreover, other researchers who study the conceptof knowledge management, especially within the service industry, would receive substantial benefits from the research carried out as it will serve as a reference point.
The objectives of the current research are as follows:
- To discoverthe development of knowledge management in Saudi Arabian Banks.
- To distinguish reasons why banks in Saudi Arabia invest in knowledge management.
- To detect knowledge management practices in Saudi Arabian Banks.
- To establish various barriers to knowledge management in Saudi Arabian Banks.
- To find out the success factor in Saudi Arabian Banks.
The research which was conducted in order to access the success factors of the knowledge management in the banking industry was of the exploratory type. The study explored various knowledge management frameworks and methodologies followed in the banking industry. Therefore, the aim of this research wasto provide factors on which success of knowledge management depends on in the banking industry in Saudi Arabia (Davis, 1989). Research involved primary as well as secondary data collection methodology in order to collect data for the knowledge management process in the banking industry in Saudi Arabia. For the purpose of collecting primary data,a questionnaire was designed which was given to the respondents selected for obtaining responses in the Saudi Arabian banking industry.
For collecting the secondary data pertaining to the research, data was gathered with the help of available research and literature on the knowledge management process. The data would be collected from previous research conducted on the knowledge management topic as well as through research journals related with the knowledge management.
In order to collect primary data, samples were chosen from the whole population available for the research. Samples chosen were given the questionnaire designed in order to collect the data on the knowledge management process in the banking industry in Saudi Arabia. The sample was chosen based on the various demographic factors such as age, gender, income level and education level of the respondents. As a result,sample sizes of 250 respondents were chosen.
Data Gathering and Analysis
The data gathering process involved primary data collection which was accomplished with the help of a questionnaire formed in order to collect the responses from the responses. The secondary data pertaining to the research was also collected with the help of two methods, the literature review and case study methodology (Garvin, 2003). The literature pertaining to the knowledge management process in Saudi Arabia was gathered with the assistance of previous research and journals. While the case studies were collected, this was related with the knowledge management process in the banking industry. The case studies were collected thanks to reliable sources and represented how other banks have implemented the knowledge management process in order to gain the competitive advantage in banking industry.
Limitation of Research
The research conducted analysed each and every error which could have occurred in the research in form of data collection, data analysis and data collection tool designing and so on. However, despite all these factors, there were some limitations of the current research such as the involvement of primary data with a small sample size. The sample size chosen for the research contained only 250 respondents, hence this number of respondents is unableto represent the view of all the respondents. Nevertheless, considering the time and cost of conducting the research, more than 250 respondents could not have been involved in the current research.
The dissertation on Success factors of knowledge management in banking industry will have following next parts