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Practice of strategic planning in German retail banks

by Oliver Recklies

This article first appeared in: Ekonomika i Organizacja Przedsiebiorstwa (Economics and Organization of Enterprise), number: 3 (686), pages: 39-46

1          Preamble

This paper has the objective to describe and to analyse the strategic planning processes of two major player groups within retail banking business in Germany. These groups are the network of savings banks (the so called “Sparkassen”) and the network of credit co-operatives (the so called “Volks- und Raiffeisenbanken”). Within both financial networks the particular federal association (BVR and DSGV[1]) develops and coordinates joint strategies for all credit co-operatives and for all savings banks in Germany[2]. These centrally developed strategies replace a number of planning activities within banks and determine some strategic objectives[3]. Hence banks’ management has two major objectives in terms of strategic planning: Adaptation of the joint strategy to its own organisation and development of those strategic measures, which enable the bank to meet key financial indicators. Both networks together have a high market share in the German retail banking business[4]. All in all there are 1.290[5] (2005) credit co-operatives and 463[6] (2005) savings banks in Germany. Taking into account the banks’[7] market share as well as their quantity it can be argued that an understanding of their strategic planning processes will help to understand problems and challenges of strategic planning concepts within retail banking business in general and in small organisations in particular. 

To describe and to analyse the strategic planning processes a common understanding of strategic planning is required. In literature different terms, definitions and descriptions of the “strategic planning” concept can be found[8]. Therefore this article will consider those parts that are unquestioned in most descriptions. A common understanding can be found within a three step approach, which consists of strategic analysis (analysis of external environment and assessment of organisation’s capabilities), strategy finding (search for strategic alternatives) and strategy assessment (evaluation of strategic options). In chapter 2 this framework will be used to compare the practice of strategic planning.


2          Practical application of strategic planning within banks

2.1         Cycle and responsibility of the planning process

Size and structure of the banks are very heterogeneous. Therefore in any case factors like organisational and financial resources are taken into account by the banks’ management when the strategic planning process is organised in terms of cycle and process responsibility. To compare the different situations three specific features[9] were selected to describe the organisational fundament for strategic planning.



Small credit co-operative

Larger credit co-operative

Small savings bank

Larger savings bank

Number of employees

Less that 50

More than 50, less than 700

Less than 350

More than 350

Process responsibility: In most cases strategic planning is done by…


(if existing: Assistant to the directors’ board)

External consultants



External consultants


Directors secretariat office[10]


External consultants


Specialised department or directors’ secretariat office


External consultants

Cycle for strategic planning

Once a year

More than once a year, but often not as a continuous process

More than once a year, but often not as a continuous process

Often as a continuous process

Figure 1: Overview about planning features


In summary it can be argued that the organisational fundament for strategic planning is very heterogeneous and that the organisational resources, in particular in term of human capital, will determinate the planning process to a high degree. Some of the banks are very small and can be compared with other small or medium enterprises. There is no professional specialist for strategic planning or even an entire specialised department. Therefore strategic planning is done by one or more persons in addition to their main tasks, in some case it is done just once a year. Compared to the majority of credit co-operatives, savings banks are in a more comfortable position. Their firms’ size is larger, even small savings banks have 300 employees and more[11]. In most cases the board of directors has a specialised “directors secretariat office” which performs a variety of top management support functions. Its range is from all day secretariat office tasks up to economical analysis, sales control and strategic decisions preparation. The qualification profile in terms of university education in credit co-operatives and savings banks is lower in comparison to other retail banks in Germany[12]. That causes to a general lack of methodical knowledge about strategy, strategy development as well as about tools and models for strategic planning. In some cases strategic planning is done by the directors themselves, since they have gained appropriate professional qualifications[13]. In other cases the management buys external support from consultants for strategic planning.


>> Continue on page 2 >>


[1] Note: BVR is the abbreviation for “Bundesverband der Volksbanken und Raiffeisenbanken” (Federal association of credit co-operatives). DSGV is the abbreviation for „Deutscher Sparkassen und Giroverband“ (German association of savings banks)

[2] Compare BVR (2006b)

[3] They describe general business concepts and the ways how to achieve competitive advantages. The scope of the strategies is to offer strategic directions in terms of market strategies, annual strategic initiatives, brand issues and a description of key financial ratios.

[4] Compare Otto (2006) page 5. According to Otto both networks have combined market shares of 81,3 % in terms of savings, 48,2 % in terms of loans to private customers and 22,8 % in terms of balance sheet total. (All data is for 2004.)

[5] BVR (2006a)

[6] Köhler, Drost (2006), page 21

[7] Note: For the purpose of this paper the credit co-operatives and the savings banks will be summarized and called “banks” as far as no other reasons require a distinction between both types.

[8] Note: Johnson and Scholes (1999, page 18) describe a basic model of the “strategic management process” that consists of strategic analysis, strategic choice and strategy implementation. Very close to this is the definition of the strategic planning process by Baum et al (2004, page 23). Their process definition consists of strategic analysis, strategy finding and strategy assessment. GILMORE, BRANDENBURG (1962, page 61 ff) distinguish 43 different steps, BEA and HAAS (2004, page 55) explain the process with 5 steps. According to ANSOFF (1965, page 202) and HOFER, SCHENDEL (1978, page 63) the objective definition does not represent a step in the planning process. Opposite to this HINTERHUBER (2004, page 33 ff) and KREIKEBAUM (1997, page 37 ff) argues that the definition of the objective is part of the planning process.

[9] Note: The content of the following table is based on personal observations by the author during his 15 years of work experience within different credit co-operatives and a savings bank in Germany.

[10] Note: This specialised office is responsible for analytical and planning tasks.

[11] Note: Savings banks and credit co-operatives serve the same market in Germany. However the number of savings banks is lower, hence each particular savings bank has a larger size in comparison.

[12] Note: There is a variety of reasons for this situation. Due to their small corporate size credit co-operatives are less attractive for students in terms of corporate image. Another issue is the low corporate demand for a full-time specialised job role. Even smaller banks are not able to offer a specialised position which might be attractive to academics since they can not afford to pay for such a job role.

[13] Note: According to the German Banking Act it is requested that a director has to have a strong background for bank management in theory and practice.


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Status: 01. Juli 2015