1.

Introduction
1.1. The Australian Banking Industry
The Australian financial system consists of the arrangements covering the borrowing and lending
of funds and the transfer of ownership of financial claims in Australia. This industry comprises
of superannuation, financial market, payment system and authorized deposit-taking institutions,
consist of banks, credit union and building societies. Banks play a major role in the Australian
financial system and the merger of 4 big bank dominate the industry (Financial stability review,
2006). Australian financial system has drastically undergone in structural change since 1980’s
due to major changes in customer needs, technological innovation and regulatory framework. In
1983 a noticeable change to financial service sector began due to fundamental refurbishment of
the regulatory environment. In 1983, the Australian dollar exchange rate was depreciated. In
1984, foreign-owned banks were allowed to operate in all areas and 16 new license were issued
for foreign bank as well as number of NBFI got license of banking services. In 1990,
privatization of banks first come with an increased competition within the industry. The four
large retail bank merger brought a domination within the industry. The commonwealth bank of
Australia, national Australian bank, Australia and new-Zeeland corporation and Westpac, the big
four bank of Australia took merger. Competition also arise from small regional banks, credit
union, building societies (Cutcher, n.d.). Australian financial system has drastically undergone in
structural change since 1980’s. Major change to financial service sector began in 1983. In
December 1983, Australian dollar value lifted. In 1984, foreign-owned banks were allowed to
operate in all areas and 16 new license were issued for foreign bank as well as number of NBFI
got license of banking services. In 1990, privatization of banks first come with an increased
competition within the industry. The four large retail bank merger brought a domination within
the industry. The commonwealth bank of Australia, national Australian bank, Australia and new-
Zeeland corporation and Westpac, the big four bank of Australia took merger.

1.2. Bendigo Bank

The origins of Bendigo bank began more than 150 years ago in two great Australian
communities, Bendigo in Victoria and Adelaide in South Australia (Anonymous, n.d.). It

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established in 1858 as a local building society in Victorian town of Bendigo. It converted into
bank status in 1995 with promoting itself as a regional bank. Bendigo bank came with 4 strategic
priorities. Those are create a unique style of banking, broaden our distribution and products, be
relevant to our markets and improve our financial performance. To achieve unique style of
banking, Bendigo bank re-establishing banking services through community bank initiative in
1988 where other competitors were followed the trend of closing branches. The first community
bank was established in June 1988 in the Victorian Wimmera towns of Rupanyup and Minyip
(Cutcher, n.d.). With a successful result, in March 2006 community bank had 174 such banks
across 4 states. Bendigo Bank delivered its products and services through almost 900 outlets
Australia-wide, including more than 160 company owned branches, 220 community owned
Community Bank branches of Bendigo Bank, 100 agencies and 400 elders outlets till 2006. In
2007, Bendigo bank merger with Adelaide bank. Now, the merged bank has over 400 branches,
including 25 that came with the merger of Adelaide Bank. In addition, it is now a top 60 ASX
listed company, owned by more than 90,000 shareholders. It has more than 6,500 employees to
serve about 1.5 million customers in over 500 communities Australia-wide. The headquarters of
Bendigo bank situated Bendigo, with a major office in Adelaide, South Australia and regional
offices in Docklands, Melbourne and Ipswich, Queensland (Anonymous, n.d.).

1.3. Bendigo Bank’s Community Banking Model

The most successful model of Bendigo bank, the community banking model is basically a
franchised agreement with local communities. The core concept of this business model is that if
individuals have part ownership in a local community enterprise, and they see that it can create
benefits for the local community, then they will be more inclined to support that business
(Narsalay, Coffey, Sahni & Soh, n.d. p.3). According to Bendigo’s corporate profile ‘’Bendigo
partnering local communities which operate franchised Bendigo Bank branches (n.d.). Under this
agreement, the franchisor provide name, systems, products, marketing support and training and
the franchisee is responsible for operating costs and staffing cost (Cutcher, n.d.) .The key feature
of this institution has been its strong links to its local community. To open a franchised
community bank branch a steering committee, usually formed by local businesses, approaches
Bendigo Bank with a business plan to set up a branch. According to Thomson & Abbott “After
getting approval from Bendigo bank, the steering committee ratifies selection of a Board which

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then forms the banking entity and determines its organizational structure”(2000). The committee
n need to raise minimum $450000 to $600000 as start-up capital (Cutcher, n.d.). In return the
Bendigo Bank provides the banking framework and infrastructure, the name, bank license,
capital adequacy, and support in the form of start-up assistance, staff training, administration,
legal checks, credit assessments and marketing of the new entity. The community bank branch
also gets a facility that no other Bendigo Bank franchise can set up within a five-kilometer radius
(Thomson & Abbott, 2000). By operating community banking, each community bank can
provide 20% of remaining profit as dividend to shareholder and other 80% used for local
development. The function of providing dividend and contributing on local development can
done after meeting with all operating cost (Cutcher, n.d.). Community banking achieves
customer accounts valued at more than A$21.28 billion (US$22 billion) by 2012 as well as more
than A$75.5 million (US$79 million) in branch profits has been returned to community projects,
and A$19.93 million (US$21 million) has been paid in dividends to more than 70,000 local
shareholders (Narsalay, Coffey, Sahni & Soh, n.d. p.3)

1.4. Bendigo Bank’s Products and Competitors

Bendigo and Adelaide Bank’s network of businesses provide a wide range of products and
services, including personal and business banking, financial planning, commercial mortgages
and unsecured loans, investment products, margin lending, insurance and superannuation
(Anonymous, n.d.). Bendigo bank compete with many financial institutions in the industry and
sustain in the marketplace successfully. During the time of financial undergone, the Merger of
big 4 banks, Commonwealth bank of Australia, national Australian bank, Australia and New
Zeeland corporation and Westpac Banking Corporation are main competitor of Bendigo Bank. In
addition, small regional banks, credit union, building societies are also competitors of Bendigo
bank (Cutcher, n.d.).

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1.5. Objectives of the Case Analysis

We analyze the Bendigo Bank Community Model case with some objectives. We try to meet
with the following aims.

I. Defining the organizational resources, organizational capabilities, and core competencies

of Bedingo Bank.

II. Identifying the strengths of the value chain framework of Bedingo Bank using resource-
based model.

III. Conducting SWOT analysis of Bedingo Bank.

2. External Environment Analysis

The external environment of an organization is those factors outside the company that affect the
company's ability to function. Some external elements can be manipulated
by company marketing, while others require the organization to make adjustments. To do so, we
can examine the environment from different perspectives as following:

2.1 Six Segment Analyses:

The Six Segment Analysis is a framework to analyze the general environment of a firm. The
framework is frequently used in the analysis of competitive strategy. Six segment analyses could
help managers to identify potential opportunities and threats. The six segments of the general
environment are demographic, sociocultural, political/legal, technological, economic, and global.

Six Segment Analyses for Bendigo Bank:

Bendigo Bank was formed in 1858 as a local building society and converted to bank status in
1995. With their long experience they have gone through many changes. While analyzing the
environment around in a business set up for Bendigo bank, all elements were found present from
each side, like-

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  The Global Segment:

States in Australia do come with mostly similar political field factors and being in same country,
so there is no influence of trade blocs or trade boycott. No war zone is there. Most importantly
political changes are not unstable there. But the changes in global market has essentially made
the banking sector more goals oriented and fast moving. Bendigo being a community bank was
already in the set up but had to penetrate in a different way. In Victoria, people were disturbed
with the lifeless banking system.

Michel Camdessus, as Managing Director of the IMF, used the phrase "silent revolution" in 1989
to characterize the transformation that was taking place in a number of developing countries.
Speaking at the Annual Meetings of the Boards of Governors of the IMF and the World Bank, he
noted how countries were taking the "painful decision" to strengthen their economic policies and
implement growth-oriented adjustment programs with financial support from the IMF.

The 1980s also profoundly altered the world financial system. The massive instabilities of the
late 1970s and early 1980s—large external imbalances accompanied by real fluctuations in
reserve-currency exchange rates of 50 percent or more—forced a reassessment of investment and
policy strategies. The chaotic realignments of exchange rates and persistently large external
imbalances of the first half of the 1980s inspired the major industrial countries to try to develop
more cooperative policy strategies. These also effected Bendigo Bank’s decision of voicing up
for their community banking model.

The introduction of Child Care Assistance (1984); affirmative action and equal employment
opportunity legislation (1986); the introduction of the Child Support Scheme (1989); the
introduction of parental leave (1991) are some of the illustrations that prove the time then was
for people around and people in society, people in life.

But there was high level of dissatisfaction around the decades of 1990s and 2000s. In 2000 it
reaches its highest. There was anger over bank fees, branch closure and changed technology
impacts. These growing differences between regular expectation and banking system was
making it more for community banking model.

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  Economic Segment:

The Australian dollar exchange rate was floated in December 1983, which uplifted many barriers
and opened up opportunities. Unemployment level rose as since 1980s more than 7000 bank
branches got closed. This ultimately reduced the disposable income in the whole economy of
Australia.

 Demographics:

The life expectancy of Australia in 1999–2001 was 79.7 years, among the highest in the world.
Age of population in current is as median of age of Australian people is 36.9 years. As of the end
of June 2015, the population growth rate was 1.4%. Back in 1980s it was below 1%.

Most of Australia’s population is concentrated in two widely separated coastal regions – the
south-east and east, and the south-west. Of the two regions, the south-east and east is by far the
largest in area and population. The population within these regions is concentrated in urban
centers; particularly the capital cities .Australia's population density at June 2010 was 2.9 people
per square kilometer (sq km) compared with 2.6 people per sq km in 2005. Of the states and
territories, the Australian Capital Territory had the highest population density at June 2010 with
150 people per sq km (reflecting the fact that the city of Canberra constitutes a large proportion
of the Australian Capital Territory's area) followed by Victoria with 24 people per sq km. The
Northern Territory had a population density of only 0.2 people per sq km, the lowest of all the
states and territories. Australians form an ethnic group known as Anglo-Celtic Australians. In the
2016 Australian census, the most commonly nominated ancestries were-

 English (36.1%)
 Australian (33.5%)[37]
 Irish (11.0%)
 Scottish (9.3%)
 Chinese (5.6%)
 Italian (4.6%)
 German (4.5%)
 Indian (2.8%)

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 Greek (1.8%)
 Dutch (1.6%).
 Political & Legal forces:

High changes in the whole system came in that time for Australia. Australian trading system
faced privatization at large number. In 1984, foreign owned banks were allowed to operate in all
areas of the industry. 16 licenses were issued for foreign banks and even building societies were
given with banking license. In 1980s a number of government owned banks went private
including federal government owned Commonwealth Bank went privatized.

Big 4 formed series of retail bank mergers occurred and they are- Commonwealth Bank of
Australia, National Australia Bank, National Australia Bank, Australia and New Zealand
Banking Corporation and Westpac. Apart from the big 4 banks, there were a number of small
regional banks, credit unions, and building societies offering services to retail bank customers.

Finally 2 broad ends in the market dealt with the customer base which aimed with an approach of
fast, convenient services through technological innovation. Another note to make is they used to
impose account keeping fees and charged all type of retail account, increased fees, in 2001 the
fees charged by bank rose by 75% since 1997.

People with customer service and banking experiences were needed to deal with the highly
dissatisfied customers. Employment was required to be done also from the same community
people and for that Bendigo bank put advertisement in only the local newspaper that ultimately
had a limited response. There was increase in complain of 1370 with 1 year of 1999 and 2000,
this high complaints actually demanded more people there to handle situation.

 Socio Cultural Facts:

The people working there faced a changed working environment from tight scheduled to a more
classic form of banking practice with no target pressure of sales but more performance oriented
in customer service. Psychological contract was there as Bendigo bank merged the good
emotions for both clients and employees together. Bankers were to dealt with the psychological
expectation to be known and served by name.

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There might have been male, female, single parent, divorced persons in the workforce but they
were from same community intentionally so that the customers could feel at home and workforce
could also understand the customers. Prior to Bendigo Bank community model implementation
these were not that important to management. They had to be CULTURAL FIT. A growing
positive attitude was there. Due to closure of many bank outlets there was financial drain for
travelling to workplace, loss of financial investment and lack of confidence, which is most
important. Initiative of Bendigo turned it positive. They also made community involvement.
Good amount of CSR prior to Bendigo was unavailable.

Bendigo came with ideal involvement with local community projects, scholarships for local
people, incentives for doctors and sporting club. Bendigo also introduced flexible working hour
where others had a rigid open time of 10am- 3pm, Bendigo remained open 9am- 5pm and 9 am -
12pm on Saturdays because the community bank strategy offers – “Return to the past”. Work life
quality earlier, was stressed there but in Bendigo no target Pressure was there. Bendigo was
rarely chosen by jobseekers under 25 as they only known the current banking system of that time
and was not experienced like older.

 Technological:

The whole system was in Brick and Mortar situation. The period case talks about was facing
transformation to Click and Mortar system and also ATMs, EFTPOS and internet were taking
good position in systems offering their wonderful ease. There was less concern for R & D in
banking sector being a service sector. But many survey researches like one by Australian
Consumer Association (found only 11% customers happy with service by big 4 banks), actually
came up with the real factors for the detailed need of research here. R&D not only requires
investment but also implementation. Community banking model is even an example of research
implementation and ultimate positive outcome.

2.2 Porter's Five Forces Framework:

In strategic management Porter's five powers show is frequently used to comprehend whether
new items or administrations are possibly gainful. By understanding where control lies, the
hypothesis can likewise be utilized to distinguish regions of quality, to enhance shortcomings
and to evade botches. Doorman's Five Forces of Competitive Position Analysis were produced in

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1979 by Michael E Porter of Harvard Business School as a straightforward structure for
surveying and assessing the focused quality and position of a business association. This
hypothesis depends on the idea that there are five powers that decide the focused force and
appeal of a market. Doorman's five powers help to distinguish where control lies in a business
circumstance. This is helpful both in understanding the quality of an association's present
aggressive position and the quality of a position that an association may hope to move into.

Figure 01: Porter’s five forces of competitive position analysis

 Bargaining Power of Buyers & Suppliers:

Buyers in this situation are the bank’s customers who have a comparatively high bargain power.
It is a large size market and in Australia there was a number of financial service providers like
different banks, credit unions, building societies and so on. So the switching costs for consumers
were real low.

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On the other hand suppliers had a low power for bargaining since the reasons a pretty opposite
just to logics for customers. For a big customer market and strong consumer association the
seller or Bendigo Bank in this case had low power to bargain.

 Threat of New Entrants:

Profitable markets attract new entrants, which erodes profitability. Unless incumbents have
strong and durable barriers to entry, for example, patents, economies of scale, capital
requirements or government policies, then profitability will decline to a competitive rate.

New entrants are the market participants that have recently entered a market or industry sector. It
is one of the elements of five force of model of competition which help firm in building a good
strategy and performance. In 1989 when Bendigo Bank made the entrance in the market, growth
rate and turn over profits were showing an attractive platform for new and existing entrants and
thus which attracted customers for lower switching cost and higher bargaining power at large.
So, Bendigo bank had moderate to high threat from potential new entrance.

 Rivalry among Existing Competitors:

The main driver is the number and capability of competitors in the market. Many competitors,
offering undifferentiated products and services, will reduce market attractiveness.Many available
banks, credit unions, financial institutions were in the market as competitors. The market is
reported to be a cost sensitive group as 7.1 billion extra charges and fees was recorded and
complained against. Sustainable competitive advantage was developed by the participants by
communicating corporate social responsibilities. So, to grab all among the community, strong
Competitive rivalry was there. Since Bendigo Bank was customer service performance oriented
and not target oriented, Moderate Rivalry amongst Competitors can be noted.

 Threat of Substitutes:

Where close substitute products exist in a market, it increases the likelihood of customers
switching to alternatives in response to price increases. This reduces both the power of suppliers
and the attractiveness of the market.

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So Many banks are there in the Australian market like- AMP Bank Ltd, Australia and New
Zealand Banking Group Ltd (ANZ) Esanda, Australian Military Bank Ltd. RSL Money,
Auswide Bank Ltd. Queensland Professional Credit Union Ltd, Bank Australia Ltd, Bank of
Queensland Ltd. BOQ Specialists (BOQS), Adelaide Bank, Commonwealth Bank of Australia
and many more. So many choices were there from different industry of credit unions and other
financial service providers and threat of substitutes is moderately high.

So, finally to find the decision, the market offered high profit potential and for Bendigo Bank
was apparently attractive. The positive growth is still ongoing since in 2005, different franchisors
contributed $11.2m to Bendigo and this is 115% increase over the year and the rating is also to
be noted, currently the rating of the bank is A-.

2.3 Strategic Group Mapping

Strategic Group Mapping is a tool used to find out a company’s position in the market or
industry. Hunt came up with the name “Strategic Map” in 1972 as he noticed that there are
subgroup of similar businesses. Later, Michael porter expanded the concept in 1980s. According
to Business Survival Toolkit (n.d.), the purpose of strategic group mapping is to give the
company a thorough idea about its competitors who are serving a similar target market. It also
helps to ensure that customers’ need are taken in to taken.

In order to find out the direct-indirect competitors of Bendigo Bank, we have also drawn the
strategic group map along with the other players of the same industry. Bendigo is operating in
banking industry. A banking industry consists of different kinds of banks. Not everyone is the
competitors of Bendigo as the target market for serving is different. On the other hand, there are
some institutes who fall under financial sector so we also have to take them in thought before
doing the mapping.

Bendigo Bank is a community based regional bank that provides retail banking service to
consumers. So to draw the strategic group mapping we will mainly focus on the banks that are in
to retail banking. Not everyone is Bendigo Bank’s competitors. So we have to find out the major
players who have similar characteristics and/or similar banking service. In order to do the
mapping the two attributes taken in to consideration are-

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  Customer Service Strategy
 Market Coverage Strategy

Customer Service strategy is bank’s strategy of serving its customers. Different banks apply
different strategies. For some banks, building good relationship with existing customers is more
important. For some, attracting new customers is more preferred. Based on these two notions
they come up with different strategies.
Market Coverage Strategy is the strategy banks take to cover the market and serve it. Some
banks prefer expanding through branches throughout the nation. Some may want to focus more
on a particular region or community. Based on these two we have done a strategic group
mapping for Bendigo Bank.

Fig 02- Strategic Group Mapping of Bendigo Bank

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If we observe the mapping done on Bendigo Bank, we can see the six major players have been
taken in to consideration that can be direct or indirect competitors for Bendigo. The big four
banks are Commonwealth Bank of Australia, National Australia Bank, Australia and New
Zealand Banking Corporation, and Westpac. Other than these four banks, there are Credit Unions
and Banking Societies who are in retail banking. We have not considered the other banks but
taken only those who are in retail banking. They have created the competitive environment for
Bendigo Bank as they serve the same market.

In terms of Market coverage strategy, the big four have their branches nationwide and for all the
branches the strategy is same. Their services are standardized in all the branches. They do not
customise depending on the area or region they are serving. On the other hand Bendigo has a
community bank model where bank offers and serves a particular community and works for the
prosperity of the community. As the big four banks’ managers serving strategy is standardized
for all the customers and they focus more on attaining new customers the relationship with
customers is not that strong. On the other hand in Bendigo, manager is local and makes decision
locally for the local customers. So they are able to create strong relationship with local customers
unlike the other banks.

2.4 Factors of Success

Factors of success lists down the factors that effects a firm to stand out of the crowd. Bendigo
Bank has been a great success and it was possible because they have undertaken the Community
Bank model. Due to the model, the bank could stand out of the crowd of other banks that are in
retail banking. The factors that played major roles in its success are discussed below-

 Local Approach- Consumers like when they are treated locally. Bendigo Bank’s branch
managers are local and managers make decision locally rather than centralised decision.
The main notion is that they are not in to a business relationship rather every one of them
is part of a community. So decisions are taken in keeping the wellbeing of the locality
they are serving in.
 Intangible Resource- Banks can add intangible resources with their tangible resources.
The key intangible resource used by Bendigo is customer and worker nostalgia for

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 genuine service. They have taken the emotion of their consumers as their intangible
resource and based on that they have developed their business strategy.
 Re-establishing Banking Service- it’s not always necessary to go with the flow. The
time when many banks were closing down their branches, Bendigo took a reverse
approach. They re-establish the branches in the regions where other banks had stopped
doing transaction. So people stopped travelling long to do banking transaction as Bendigo
was there to serve the same purpose.
 Profit Sharing with Community- When a company not only earns profit for itself but
also shares with community consumers have positive feelings for that company. Bendigo
bank shares its profit by spending money in community projects. The projects undertaken
are- scholarship for local students, attractive incentives for doctors, sporting club etc.
 Flexible Bank Hours- the normal banking hour for Australia is 10am-3pm which is
inflexible for working people. Bendigo schedules the banking hour depending on the
need of the locality and it seem very flexible. They keep their branches open on
Saturdays too just to serve the local people at them time of need. As a result they became
start performer with a satisfaction rate of 94.6%.
 Strategic HRM Practice- Strategic HRM practice is important for all the companies. As
they want the managers and behind counter to be local, they publish job advertisements
in local press only. They also emphasize on close fit between employee’s personal
competencies and organisational requirements.
 Relational Psychological Contract- This contract discourages tying rewards to sales
targets. They think of it as a long-term approach what they want to retain their employees
and enrich them by giving proper training and reward.
 Absence of Sales Target- If the reward is not tied to individual performance or on the
number of sales, employees do not feel stressed out. So employees of Bendigo have a
pleasant workplace so employees give their 100% effort. As employees are vital part of
company’s success, Bendigo did it right by removing the sales target pressure.
 Local Recruitment with long-term Experience- Employees are the one who serves the
consumers. Bendigo recruits the local managers and local staffs to serve a particular
locality. The managers know the clients by their first name. So consumers feel good and
involved. They also try to recruit employees with long-term experience. Bendigo values

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 experience a lot. Experienced employees know a lot about clients’ need and know how to
deal with the situation that cannot be taught.

The above-mentioned factors played a great role in success. Bendigo takes community,
consumers, and the employees in to consideration before making any strategy and it was a vital
reason of their success.

3. Internal Environment Analysis

Company‘s internal analysis is one of the organization‘s internal condition assessment
techniques. Internal and external environments have to meet each other in the way that the firm
can build a strategy that can lead to competitive advantage and above-average earnings. External
environments can create opportunities and threats for a firm but internal environmental
conditions can turn these opportunities and threats to competitive advantage by using the
organization’s capabilities, unique resources and core competencies. (Hitt et al. 2007 pp.70-72).

 Organization resources, capabilities and core competencies: In this section we will be

identifying and classifying the Bendigo Bank’s resources, the capabilities of the Bank’s
functional areas and the bank’s unique core competencies. Then we will be doing the
VRIN test, in order to find out whether these competencies are valuable, rare, imitable or
non substitutable or not.
 Bendigo Bank’s Value chain and its strengths: In this section we will be explaining the
value chain of Bendigo Bank using a resource-based model and will try to identify its
strengths. Firstly we will define the give a theoretical definitions of value chain model
and resource-based model and then we will explain Bendigo Banks’ Value chain and
identify the resource in that value chain that are its strengths.
 SWOT Analysis of Bendigo Bank: in this section we will be explaining the bank’s
overall strengths, weaknesses, opportunities and threats based on our assigned case
scenario.

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3.1 Organization resources, capabilities and core competencies:
The components of internal environments are resources (resources are the source of a firm‘s
capabilities), capabilities (Capabilities, in turn, are the source of a firm‘s core competencies. and
core competencies (A firm‘s core competencies are the basis for its Competitive advantages in
the marketplace) which can leads to sustainable competitive advantage over competitors.
 Organization resources
A resource is a productive input or competitive asset that is owned or controlled by the firm. It
can be defined as elements that a company uses in its business processes, in order to produce a
set of goods and services. (Thompson et al., 2016). The resources can be differentiated between
tangible and intangible resources. We can explain each resource based on Bendigo bank’s
perspective.

 Tangible resources are physical assets and these are easier to identify and to touched or
quantified. (Thompson et al., 2016). Tangible resources consist of financial, physical,
technological and organizational resources.
 On the other hand, the intangible resources would be those based on information and
knowledge of the company and without physical nature. (Thompson et al., 2016)
Intangible resources consist of human, innovation and reputational resources.

Bendigo Bank’s Resources:

All the resources of the Bendigo Bank’s have been identified based on our assigned case
scenario and we will be sub classifying the tangible and intangible resources of the bank.

Tangible resources of Bendigo Bank:

 Physical resources and Organizational resources: Physical resources can be location

of the organization or access to raw materials and organizational resources can be firm’s
structure or systems. Bendigo bank is an Australian financial institution which mainly
operates in retail banking and it is the pioneer of the Community Bank Model Concept in
Australia. In 1998, Bendigo bank first launched community bank model with unique set
of investment criteria and management. There are now more than Community Bank 316
branches, located in rural and metropolitan communities across Australia, operated by
many community companies.

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Intangible resources of Bendigo Bank:
 Human recourses: It can be organization’s managerial capabilities or organization
routine. In 1998. Bendigo Bank first came up with new community bank concept with
franchise arrangement in order to serve local communities.

 Innovation resources can be a firm’s capabilities to innovate. In 1998, in response to

thousands of branch closings in rural areas and small suburban communities by banks
across Australia, Bendigo Bank partnered with local communities to create a new shared
value "model—the Community Bank.
 Reputational resources can be reputation with customer or employees or suppliers.
 Reputed among local Communities: Bendigo bank has gained popularity among
communities due to unique style of banking. The Community Bank model gave
communities the opportunity to start a community owned company that would
operate a branch in partnership with Bendigo Bank. Through this model, Bendigo
Bank supported the self-selecting communities to run their own branches as
franchisees, leveraging the bank’s infrastructure and expertise. In 1998, the branches
not only provided community members with financial services, but they also
reinvested a portion of their revenue into communities to drive long term growth.

 Reputed among local Customers: The bank’s also gained popularity among
customers by return to old traditional face to face customer service. In 1980s, more
than 7000 bank branches were closed down because of high level of customer
dissatisfaction. Customer dissatisfaction created due to technological advancement of
the bank which led to less communication among customers combined with high
levels of fees. Prior to 1980s, retail bank were only open from 10am to 3 pm. But
community’s banks were open 9am to 5pm Monday to Friday and 9am to 12pm
Saturdays. Basically the time schedule decision was made by local community and
varies from bank to bank which was very convenient and flexible for customers.

 Reputed among employees: Bendigo Bank gained popularity among employee by

offering relational psychological contract to the employees which emphasis on
interdependence of management, workers and customers rather than individual sales

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 target. Bendigo Bank also able to gained employee satisfaction by pracing flexible
and informal recruitment process. They only hired local people with customer service
skills and banking experience. They emphasized more on interviewing process with
cultural fit rather than job fit.
 Organization capabilities

A capability is the capacity of a firm to perform inters activities completely. An organizational

capability is a company's ability to manage resources, such as employees, effectively to gain an
advantage over competitors. (Thompson et al., 2016). The following table is consisting of all
functional area where Bendigo Bank had capacity to perform effectively.

Table: 01 Bendigo Bank’s capabilities

Functional Areas Bendigo Bank's Capabilities

Human resources  The Practice of Relational psychological contract
 Effective recruitment process.

Marketing  Unique style of banking

 Community Bank shared value model with franchise
arrangement
 Effective face to face customer service with flexible bank hours
 Emphasis on the concept of serving local community

Management  Excellent organizational structural arrangement between the

Bank, franchisee, employees and customers.

Distribution  Follows the Brick and mortar strategy which emphasis on

physical existence during the service rather than clicks and
mortar strategy.

Research and development  According to Bendigo Bank community model structure Local
resident were advised to form a steering committee to do locally
funded feasibility studies for local projects or business plan.

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  Organization’s Core competencies:

The core competency theory is the theory of strategy that prescribes actions to be taken by firms
to achieve competitive advantage in the marketplace. The concept of core competency states that
firms must play to their strengths or those areas or functions in which they have competencies.
(Managementstudyguide.com, 2017). A competence is the attributes that firms require in order
to be able to compete in the marketplace. (Henry, 2008)

Bendigo Bank’s core competencies:

An essential element of whether a company's overall situation is fundamentally healthy or

unhealthy depends on the firm’s internal resources and capabilities. After analyzing the Bendigo
Bank’s resources and capabilities we have identified some specific core competencies of the
Bank:

• Pioneer of the Concept of Community Bank model and its successful implication: In
1998, the Bendigo bank first launched community bank model with franchise
arrangement with local communities. Due to their well structured model, the bank had
become successful in rural areas and small suburban communities across Australia.

• Bendigo bank’s excellent Customer service by providing traditional face to face

customer service and flexible banking hours.

• Bendigo bank’s well structured human resource management practice and policies
by providing relational psychological contract and flexible recruitment system

• Effective utilization of intangible reputational resources by gaining popularity among

communities, customers and employees.

• Positive economic and social impact to the community by overcoming the negative
impact created by the other bank branches closures and by providing the quality banking
services, employment opportunities, local investment option for shareholders and a
source funds for projects determined by local community.

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  VRIN test:
The competitive power of resource can be measured by how many of four specific tests it can
pass. These tests are known as VRIN tests for sustainable competitive advantage. (Thompson et
al., 2016).

So now we have tested whether the core competencies of the Bendigo Bank were Valuabe, rare,
imitable or Non substitutable or not.

Table: 02 Bendigo Bank’s Competencies’ VRIN test

Competency Valuable Rare Inimitable Non Comments

substitutable
Concept of Community Bank Yes Yes partly no Temporary
model and its successful competitive
implication advantage
Excellent Customer service Yes Yes partly No Temporary
competitive
advantage
Well structured human Yes Yes partly No Temporary
resource management practice competitive
and policies advantage

Effective utilization of yes Yes No No Temporary

intangible reputational competitive
resources advantage
Positive economic and social yes yes partly No Temporary
impact to the community competitive
advantage

After analyzing the following table, we have found that all the core competencies of the Bank
can achieve temporary competitive advantage in the market. In order to gain sustainable
advantage, Bendigo Bank needs to come up with some strategies to overcome all the obstacles
that might be created by the competitors in the future.

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3.2 Value Chain

Kaplinsky and Morris, in 2001 mentioned that the value chain describes the full range of
activities which are required to bring a product or service from conception, through the different
phases of production (involving a combination of physical transformation and the input of
various producer services), delivery to final consumers, and final disposal after use. A value
chain typically consists of Primary activities and Support activities.

Primary activities are the activities directly involved in the creation of the product and services
and its sale and transfer to the buyer as well as after-sale assistance. Primary activities mainly
consist of R&D, production/operations, distribution and outbound logistics, marketing & sales,
customer service and profit & market share. Support activities support the primary activities and
each other by providing purchased inputs, information system, human resources, and material
management. Company infrastructure is also part of support activities (Thompson, Peteraf,
Gamble & Strickland 2016).

Resource Based Model

Priem, & Butler in a article namely “Is the resource-based “view” a useful perspective for
strategic management research?.” In 2001 mentions that resource view holds that, in order to
generate sustainable competitive advantage, a resource must provide economic value and must
be presently scarce, difficult to imitate, and not readily obtainable in factor. This theory has two
key components. First, that resources are the determinants of firm performance (Barney, 1991),
and second that resources must be rare, valuable, difficult to imitate and non-substitutable by
other rare resources.

When the latter occurs, a competitive advantage has been created (Barney, 1991). In literature it
is mentioned that for firm to have above-average performance, resources must meet three
criteria. They must be: (1) valuable, meaning buyers are willing to purchase the resources'
outputs at prices significantly above their costs; (2) rare, so that buyers cannot turn to

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competitors with the same or substitute resources; and (3) imperfectly imitable, meaning it is
difficult for competitors to either imitate or purchase the resources (Barney, 1991; Peteraf, 1993).

Thus from the above literature extracts we can say that if a firm has a value chain with resources
that are rare, valuable, difficult to imitate and non-substitutable performing Primary and
Secondary activities then those resource turns into strength for the firm and generates sustainable
above-average return for the firm.

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Bendigo’s Value chain and its strengths
Customer
Operation Distribution Services
Capital & R&D

-Local Steering -Branches in - Customer

Committee Localcommunities Loayalty
through franchise Traditonal
-Local Capital agreements with Branches in - Customized
-Local Support local community local Flexible Profit &
Feasibility Test -Shared Revenue communities Banking
-Bendigo pays 50% Regional Hours Market
Gross Income to Offices -Service
Community
ATMs Ethics Share
Friendly face
to face
contact with
customer

Comapy Infrastructure Human Resources

•Local Support •Central HRM management
•Local Management •Reward not sales target orinted
•Bedingo's Mangement •Staisfied Staff
•Local Share Holders & Voting Rights •Experienced Hire
•Prudential & Credit risk: Bendigo •Relational Psychological Contract for
Management Employees.
•Business & Operational Risk: Local •Hire Employees with cultural fit instead of
Management Job fit.
•Products, System, Name: Bendigo
Figure03 Bendigo Bank’s Value Chain
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Primary Activities

Capital & R&D: Bendigo requires local residents to for a steering committee. The committee
then raises awareness of Bendigo’s proposal to the local community and raises the start-up
capital from the community. After the capital is raised Bendigo Bank holds a meeting to explain
it’s procedures to the community. After that they go for a research and development through a
feasibility test. The test is conducted by an independent consultant hired by the steering
community thus the test is also locally funded. Bendigo uses the result of the test to customize
their community banking model and prepares a three-years business model. Major strength of
such capital raising is that the Bank’s initial cost of funding is low and bears less risk as no
feasibility test will be conducted only if there is support from the local community. The
feasibility test also allows the Bank to assess and customize the community banking model and
find of areas of community to invest.

Operations: Bendigo Banks establishes its branches in localities where the big banks have
closed down their branches and its branch network is constantly growing. The bank has 523
branches & 1700 ATMs (Annual Finacial Report, 2016). It runs it operation through franchise
agreement. The local management maintains all the branches, hires staff. Bendigo only hires
staff that belong the community they are operating. The profit from the operation is shared under
different agreement between the Franchisee and Franchisor. Bendigo also pays 50% of its gross
income to the community bank and in turn finance community projects. Strength of such
operation model is:

 Low set up cost for Bendigo.

 Creates employment for local communities
 Finance local projects and helps development of the locality.
 Brand Recognition of Bendigo helps local community to easily set up business.
 Better understands local banking needs.
 The fixed cost is shared between community & institution [Bendigo Bank].

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Distribution: Bendigo follows a brick-and-mortar strategy in distributing its products. It
provides its services through traditional branches and ATMs. Recently the bank is also providing
online banking services.

Customer Service: One of the major strength of Bendigo Bank is its customer orientation. The
employees do not have the burden to meet sales target as such they are more focused on
customer service and ensure service ethics which in turn build customer loyalty. As Bendigo
focuses on local needs as such based on the need of the locality they can customize their banking
hours. In the case “Back to the Future: Bendigo Bank’s Community Bank ® Model”, we can see
customers were very dissatisfied with the service of the big banks. In that era of customer
dissatisfaction Bendigo Bank returned to the old medium of banking with friendly face to face
interaction with customer and it’s community model which not only concentrates on providing
banking services but also on helping community to prosper stimulated customer emotions in a
positive manner and attracted customers towards it. These positive stimuluses has converted the
customer to strategic resources and have differed the bank from other competitors.

Support Activities
Company Infrastructure:

The complete infrastructure of Bendigo is based on support from local community. Bendigo will
not operate in a locality without the support from the local people. Bendigo’s management
structure is divided in two parts:

 Local Management: Looks after business & operational risks, hires staff.
 Bendigo’s Management: Looks after prudential & credit risk. Provides banking
infrastructure, system, staff trainings, Brand name and banking license. Bendigo provides
all these supports only after the capital is being raised.

Bendigo is not a shareholder in the banks in the localities the bank operates but merely a
franchise provider. Bendigo also do not want ownership of the bank to be concentrated in the
hands of very few in the locality it operates and for this reason it only allows each shareholder
one voting right.

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This company structure reduces Bendigo’s operational and business risk and also helps the
franchisee’s to focus more on customer service.

Human Resources:

Bendigo Bank has a centralized Human Resources Team. The team provides training to the staff
focusing on customer service. Bendigo’s HR policy is to hire staff that have a cultural fit
[customer centric culture] rather than a job fit and the employee reward program is not tied with
sales targets.. It hires employees who were dissatisfied with sales target in Big Banks and who
are experiences. Bendigo Bank reduces the dissatisfaction of its employees through providing
“Relational Psychological Contract”. Relational Psychological Contract is different from
traditional employment contract; it is a two-way mutual benefit model. The employer will look
after the employee’s career development, provide job security and will keep its commitment in
type of work and in turn employees will work to meet the company’s goals (Robinson, Kraatz &
Rousseau, 1994; Cavanaugh & Noe, 1999). Due such contract obligation Bendigo do not over
burden employees with sales target and ask them to only focus on customer service. Relational
Psychological Contract has created job satisfaction among the previously dissatisfied employees
of big banks that Bendigo has hired and has turned the employees into strategic resources.

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3.3 SWOT Analysis

• Strengths • Weaknesses

1. Srong Stategy
(Franchise & 1.High decentralization
Community Model) 2. Lack of control over
2. Satisfied Staff operational activities
3. Lack of control on
3. Customer Service operational decission
4. Cheap Capital making.
5. Shared Risk 4.Lack of knowledge in
corporate governance in
6. BBB+ Credit Rating Branches
1. Employee Pool is
relatively old
1. Shrinking of Big Bank
banches 2.Entry of Competitor
2. Pool of employees 3.Money Laundering
from big banks 4.Sanctions & Regulatory
3. Customer dissatisfied breaches
with big bank service 5.Young generation lacks .
knowledge of traditional
banking
• Opportunity 6.Technological Shifts • Threats

Figure 04 Bendigo Bank’s SWOT analysis

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4. Conclusion
Bendigo bank is an Australian financial institution which mainly operates in retail banking and it
is the pioneer of the Community Bank Model Concept in Australia. In 1980s, more than 7000
bank branches were closed down because of high level of customer dissatisfaction. In 1998, to
overcome this issue, Bendigo Bank first launched the community bank concept with franchise
arrangement with the local community. The bank’s model required partnership with local
community and entitled to provide quality banking services, employment opportunities, local
investment option for shareholders and a source of revenue for projects determined by local
community. In our report, we have explained six segments and porter’s five forces model in
order to know the external environment of the Bendigo Bank prior to our assigned case scenario.
We have found that, in 1980s the market was very attractive for the Bank. During that time they
able to differentiate themselves from competitors by serving local community, by returning to
traditional banking method, by offering profit sharing model, by serving customer with excellent
service, by managing human resource department strategically, by providing Relational
Psychological Contract to employee and by utilizing their intangible resources. There are now
more than Community Bank 316 branches, located in rural and metropolitan communities across
Australia, operated by many community companies. The bank also has a well structured value
chain with resources that are rare, valuable, difficult to imitate and non-substitutable performing
Primary and Secondary activities and these resources are helping to generate sustainable above-
average return for the Bank. The Bendigo Bank takes community, consumers, and the employees
in to consideration before making any strategy and it was a vital reason of their success. So after
analyzing the whole case, we can declare that Bendigo Bank has successfully implemented
Community Banking Model concept. Although there are some barriers or critical issues such as
technological advancement or high levels of decentralization etc. could create problem for the
bank in the future. So Bendigo Bank needs to come up with some effective strategies to
overcome these problems and to gain sustainability in the market.

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5. Recommendations
From the VRIN test, we have found that the community bank concept could bring temporary
competitive advantage for the Bendigo Bank. In order to gain sustainable competitive advantage
in the market, the Bank needs to take the following strategies recommendations into
consideration:

 Hire professional with knowledge of corporate governance.

 Need to adopt recent trends and technological breakthroughs, such as mobile banking,
online banking and social media, to attract and retain customers.

 Need to attract the younger crowd.

 Should also focus on social issues such as drug abuse, aged care etc.

 Introduce Centralized Financial Crime Compliance Department.

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