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Commerce Bank Case Solution

Solution Id Length Case Author Case Publisher
626 1411 Words (4 Pages) Frances X. Frei, Corey Hajim Harvard Business School : 603080
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Commerce Bank is one of the fastest growing commercial banks in the United States. Customer experience is the prime focus of their selling proposition. They have expanded brilliantly in the past and the main reason behind which has been a focus on what the customer wants and what other banks are not offering them. It offers a lesser deposit rates than the market, but that wasn't an issue, according to the CEO since a very small percentage in the banking customer base cares about it. Although, recently it is losing some potential business in the industry since it hasn't been working out pretty well for them lately and they need to come up with ideas that are more futuristic and business oriented rather than just centering on experience

Following questions are answered in this case study solution:

  1. Introduction & Problem Identification

  2. Strategic Alternative 1

  3. Strategic Alternative 2

  4. Strategic Alternative 3

  5. Recommended Action Plan

Commerce Bank Case Analysis

1. Introduction & Problem Identification

Commerce Bank is a commercial bank which has branches nationwide and was considered to be one of the most preferred banks by people with its main USP as customer servicing. It was started off as a small scale bank by Vernon W. Hill II, and in a small amount of time, it grew at an exponential rate.

However, Commerce has been facing a problem lately that their USP and core competency is being mimicked in one way or the other by the new banks in the business and the existing competitors. Commerce must come up with more innovative and brighter ideas in order to retain the already developed strong customer base, and also to market their bank so that the bank can grow on a rate that it had been, historically. This is the main problem since offering a competitive rate on deposits is not what Commerce capitalizes on, but the service and experience provided to its customers.

2. Strategic Alternative 1

One of the strategic alternatives that can be followed by Commerce Bank could be the enhancement of the use of internet and branchless banking; although, the mission communicated by the CEO is totally opposite to that, but it adds more convenience to the customer. This is a globally growing trend in the market, and if one cannot keep up with it then the customers might start looking for more convenient and accessible option. Customers these days want convenience and control over the service and prefer to multitask. Going to a bank, standing in line and waiting for the turn can have a very high economic cost.

So, instead of solely focusing on the on-site experience, Commerce Bank might come up with more ideas in which it can incorporate branchless banking and how can it modify it according the bank's mission statement and image of being  people friendly bank.

However, if Commerce starts investing more aggressively in internet banking then it might lose its customer base which is driven by the experience, brought by going to a bank and service offered by the staff at the branch. It can also hamper the relationship and PR that it has already developed through years via its welcoming service. Another drawback of branchless banking is less interaction with the customers, hence less knowledge of their needs and in return lesser improvement in the service provided or offered to them.

3. Strategic Alternative 2

One more alternative that can be proposed is considering acquisition and mergers as an option. Banking industry is a well knitted web and one cannot keep itself apart from the rest in the pack for a very long time. In this age where the world has shaped into a global village, Commerce can join hands with other banks through acquisitions or mergers. This is very necessary for growth and sustainability.

United States is a huge country and the rate at which Commerce is expanding; it will not be possible for it to cover it all by itself. Commerce must focus on business planning and should change their focus from being the different one, to be the one to cater the largest area geographically. In this way, it may provide services to the customer. Commerce do possess the vision to be a global competitor and a major player in the banking lobby of the world, not just United States.

However, in order to maintain a flavor of their own, Commerce will have to keep their USP intact and will require to promote their own corporate culture rather than fashioning their brand into someone else's which will be a hassle in itself. This is very important because if Commerce loses that image of the "caring bank" then it can harm its already existing customer base. Since, Commerce's staff is keeping a close eye on its competitors then it can exploit it to know the internal situation of its competitors and may strike while the iron is hot. In this way, it will not only grow its business but also take out a competitor or two out of the market. On the other hand, it can be very risky since managing a larger network can be very difficult and things may start getting out of hands.

4. Strategic Alternative 3

Third strategic alternative that Commerce Bank can adopt could be the augmentation of its offerings. Commerce currently deals in deposits and loans.

The Bank is currently offering the lowest return on deposit, but it wasn't harming the growth of customer base because only 3% were concerned with it. However, times are changing, and people have started to notice that other competitors are offering a higher rate as well as the friendly service which is almost equivalent to the one at Commerce. So, naturally the new and existing customer would opt for a one-stop shop. By increasing the deposit rate and bringing it to the average rate of the market will not only make the existing customers happy but it will also attract new customers. Moreover, it might be a tool to capture the 3% that was more concerned about this issue in the past. Who wouldn't want to deposit its money in a bank that is offering an average market rate of interest plus it is known to be the bank with a remarkable track record in customer service excellence. However, in this way Commerce's focus will shift from providing service to provide interest rate and it can conflict with CEO's well defined mission.

Another observation here is Commerce's lesser attention towards loans. This can be very worrisome for its valued customers since they will have to opt for different banks; one for deposit and the other for getting a reasonable loan. This will affect the overall banking experience for the customer.

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