UNIVERSITY OF ZIMBABWE An analysis of the impact of corporate culture on the execution of strategy at Interfin Bank (2010-2011) By Joshua Gocha (R068340C) Dissertation submitted in partial fulfilment of the requirements for the degree of Master of Business Administration in the Graduate School of Management University of Zimbabwe Supervisor: Mr M. Mutowo Academic Year: 2011 DEDICATION This dissertation is dedicated to my family and friends for all the support during a challenging period. i DECLARATION Student Declaration – I Joshua Gocha do hereby declare that this dissertation is as the result of my own investigation and research, except to the extent indicated in the acknowledgements and references and acknowledged sources in the body of the report, and it has not been submitted in part or in full for any other degree, to any other University or College. _________________________ __________________ Signature (Student) Date Supervisor Declaration - I, ………………………….. do hereby confirm that the work reported in this dissertation was carried out by the candidate under my supervision as University supervisor. This dissertation has been submitted for review with my approval as University supervisor. _________________________ __________________ Signature (Supervisor) Date ii ACKNOWLEDGEMENTS I take this opportunity to thank all the lecturers and tutors in the MBA programme at the University of Zimbabwe. I also thank my supervisor, Mr. Mutowo for all his support and patience. iii ABSTRACT Corporate culture can either be an asset or a liability to an organization depending on the nature of the internal and external environments within which a company finds itself. In this study the researcher analysed Interfin Bank, a registered commercial bank which is faced with the need to develop a sustainable high-performance culture which supports strategy implementation. Interfin Bank is a new institution formed in the year 2010 after the merger of CFX Bank Limited and Interfin Merchant Bank of Zimbabwe Limited. The study looked at the fit between corporate culture and strategy implementation at Interfin Bank from year 2010 to year 2011. The researcher analysed the background of Interfin Bank, that is, its formation and current performance. The researcher also explored the current problems facing the merged bank. The researcher looked at the various concepts on corporate culture and strategy from authors such as Schein (1985), Thompson (2005) and Johnson (2004), among others. The methodology used in this study is based on a research design that combined quantitative research with a qualitative exploratory procedure. The research instruments used were interviews on senior management at Interfin Bank as well as questionnaires which were administered to the chosen sample. The response rate was good at 80 percent which enabled a fair analysis of the data. The main conclusion is that corporate culture at Interfin Bank is not yet supporting strategy execution and the bank has not yet developed its own set of values or shared culture. The respondents also view the new bank’s management as being radical since the merger took place in year 2010. The recommendation by the researcher is that Interfin Bank needs to develop its own unique and shared culture that will support strategy implementation in view of competition from the several financial institutions. This will enable Interfin Bank to realize the benefits of acquiring another bank such as the enhancement of financial performance. iv TABLE OF CONTENTS Dedications…………………………………………………………………………….(i) Declaration…………………………………………………………………………….(ii) Acknowledgement………………………………………………............................(iii) Abstract…………………………………………………………………………..…...(iv) Table of Contents………………………………………………………………….....(v) List of figures…………………………………………………………………………..(x) List of tables……………………………………………………………………….….(xi) CHAPTER ONE 1.0 Introduction……………………………………………………………………..1 1.1 Background to the study……………………………………………………...2 1.2 Business Environmental Analysis…………………………………………..12 1.3 SWOT Analysis……………………………………………………………….18 1.4 Industry Analysis……………………………………………………………...19 1.5 Statement of the problem…………………………………………………….22 1.6 Research objectives………………………………………………………….22 1.7 Research Questions………………………………………………………….23 1.8 Research proposition…………………………………………………………23 1.9 Justification of research………………………………………………………23 1.10 Scope of research…………………………………………………………….24 v 1.11 Limitations of research………………………………………………………..24 1.12 Structure of dissertation………………………………………………………24 CHAPTER TWO 2.0 Introduction………………………………………………………………….…25 2.1 Corporate Culture defined…………………………………………………...26 2.2 Nature of corporate culture ……………………………………………….…31 2.3 Dimensions of corporate culture……………………………………………33 2.4 Elements of corporate culture…………………………………………….…34 2.5 Characterizing culture…………………………………………………….….44 2.6 Subcultures and Countercultures…………………………………………...58 2.7 Role of Culture………………………………………………………………..59 2.8 Ten parameters of corporate culture……………………………………….61 2.9 Impact of culture on performance…………………………………………..62 2.10 Culture Change and Culture Management………………………………..63 2.11 Criticism of Corporate Culture………………………………………………64 2.12 Corporate culture and strategy……………………………………………..65 2.13 Strategy Implementation………………………………………… ………….67 2.14 Importance of Strategy…………………………………………... ………….71 2.15 Cultural Approach to Strategy………………………………………………72 2.16 Creating a fit…………………………………………………………………..72 vi 2.17 Business Strategies………………………………………………………..75 2.18 Conclusion………………………………………… ……………………….77 CHAPTER THREE 3.0 Introduction…………………………………………………………………78 3.1 Methodological Convictions………………………………………………78 3.2 Research Design and Approach…………………………………………79 3.3 Population and Sampling…………………………………………………84 3.4 Sources of Errors…………………………………………………………86 3.5 Types of Sampling………………………………………………………..87 3.6 Nature of Investigation……………………………………………………93 3.7 Surveys…………………………………………………………………….93 3.8 Case Study………………………………………………………………..94 3.9 The Interview Method…………………………………………………….95 3.10 The Questionnaire Instrument…………………………………………..97 3.11 Measurement Scale ……………………………………………………..99 3.12 Data Collection Report…………………………………………………..99 3.13 Data Analysis…………………………………………………………….100 3.14 Limitations………………………………………………………………..100 3.15 Conclusion………………………………………………………………..100 vii CHAPTER FOUR 4.1 Introduction……………………………………………………………..101 4.2 Response Rate…………………………………………………………101 4.3 Corporate Culture………………………………………… ……………104 4.3.1 Key features of culture…………………………………………………105 4.3.2 Development of unique and shared culture…………………………106 4.3.3 Team Spirit……………………………………………………………..107 4.3.4 Resolving issues through teams…………………………………….109 4.4 Changing the culture………………………………………………….109 4.5 Subcultures…………………………………………………………….111 4.5.1 Subcultures supporting departmental strategies…………………..111 4.5.2 Subcultures bonding Departments………………………………….111 4.6 Importance of culture…………………………………………………113 4.6.1 Culture as an asset that eases communication……………………114 4.7 Management Approach………………………………………………114 4.8 Culture Supporting Strategy…………………………………………116 4.8.1 Staff Involvement in Strategy Formulation…………………………116 4.8.2 Culture enhancing Performance and Productivity………………..117 4.8.3 Culture Supporting Strategy Implementation……………………..118 4.9 Strategic Planning Workshops……………………………………..119 4.10 Competitive Advantage……………………………………………..120 viii 4.10.1 Low Cost Leadership………………………………………………120 4.10.2 Product Differentiation…………………………………….……….121 4.11 Conclusion………………………………………………………….…122 CHAPTER FIVE 5.1 Introduction…………………………………………………………123 5.2 Conclusion………………………………………………………….123 5.3 Research Proposition Testing……………………………………124 5.4 Recommendations…………………………………………………124 5.5 Further Area of Study……………………………………………..125 5.6 Conclusion…………………………………………………….……126 References…………………………………………………………………127 Appendices…………………………………………………………………137 ix LIST OF FIGURES Figure 1.1 Total Assets Market Share ……………………………………….8 1.2 Savings Deposits……………………………………………….…10 1.3 Time Deposits…………………………………………………..….11 1.4 Loans and Advances……………………………………………...12 1.5 Real GDP growth…………………………………………………..15 1.6 Industry Analysis…………………………………………………...20 2.1 The Cultural Web…………………………………………………..38 4.1 Response Rate per Division……………………………………..103 4.2 Former Employer………………………………………………….104 4.3 Key Cultural Features…………………………………………….105 4.4 Unique and Shared Culture………………………………………106 4.5 Team Spirit…………………………………………………………107 4.6 Conflict Resolution…………………………………………………109 4.7 Creativity Promotion……………………………………………….110 4.8 Subcultures…………………………………………………………111 4.9 Subcultures bonding departments……………………………….112 4.10 Culture being an Asset……………………………………………114 4.11 Management Approach……………………………………………115 4.12 Staff Involvement…………………………………………………..116 4.13 Culture supporting Performance………………………………….117 4.14 Culture supporting Strategy Implementation…………………….118 4.15 Strategy Workshops………………………………………………..119 4.16 Low cost leadership………………………………………………..120 4.17 Product Differentiation……………………………………………..121 x LIST OF TABLES Table 1.1 Retail Banking Performance………………………………..……..6 1.2 Employee Turnover………………………………………….…….16 1.3 Interfin versus NMB Bank…………………………………………21 2.1 Dimensions of Organizational Culture………………………..…34 2.2 Characterising Culture…………………………………………....48 3.1 Samples Chosen………………………………………………..…92 4.1 Summary of Responses…………………………………………102 xi CHAPTER 1 1.0 INTRODUCTION Corporate culture has become an important topic in business worldwide. While corporate culture is an intangible concept,