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Our research is based on Carlow district credit union which has 23,600 members. It is the largest community based credit union in Ireland. There are 498 credit unions in Ireland. The Irish league of credit union represents all of these credit unions. Our research is based on interview and materials provided by a manager.
A credit union is a financial co-operative. Credit union is owned and controlled by its individual members. A group of people save their earnings and lend to each other at reasonable rate of interest. In other word credit union is an organization of people. It provides accessible savings, low cost loans and other financial services. Credit unions are regulated by central bank of Ireland. Credit unions are for service rather than profit which are mutually owned organization. Each member of the credit union has one vote. The board of director is elected from membership by the membership. Credit union could be viewed as "credit worthy" for a loan.
There are many financial institutions operating for the service which may have high quality and technical supports for its services by banking standards. Credit unions offer low-cost interest rates and no extra charges. That's why most people still choose credit unions for savings and lending's. A strategy is mix of policy and action. As we read in our text of 4 types of corporate strategy which are growth, stability, renewal and combination. We found growth and stability strategies have been applied in Carlow district credit union. A growth strategy involves in introducing new products or new features. For examples credit unions are introducing quick lodgement facilities and online services. Recently credit union introduces personal money management application for I phone and Android mobiles. A stability strategy continues to do what it is currently doing. Credit unions are able to maintain market share and serve the same customers.
According to Michael Porter "No company can perform at an above average profitability level by trying to be all things to all people, Management in art chooses one of the competitive strategies to capitalize on company strength and industry" (class handout). In the case of credit union manager choose one of three generic competitive strategies which is cost leadership strategy.
Cost leadership strategy (low-cost and best- value): Credit union is achieving low direct and indirect operating costs. For example over heads costs are kept low by paying low wages and locating the organization in low rent areas. That's why credit unions are able to operate its businesses at a lower cost than its rivals. Most of the credit union offices are located far from busy or city area because of low rent.
Alternatives strategies are prepared at every stage under new central bank requirements. Alternatives solutions are re-visited once variances are more.
A credit union must also have a vision for growth. They aim to bring the credit union advantage to all. A strategy that is achievable has resources that will ensure its completion, involves all internal processes, and developed by the board who are committed to aims and objectives. A structure that incorporates targets in services and services delivery to members, it has the flexibility to change and includes realistic goals. All stake holders have input in its organizational goals. A credit union must ensure that it's most important assets its members, will use its services and can only do so if involved. Statutory governance ensures safety of assets under the following strategic plan.
Business development: It's a growth of organizational units, activities and services. Credit unions are doing great jobs since 1958. They have developed new businesses and new products.
Governance and management: Corporate governance shows the direction of the organization. It exercises the control of the organization. Governance provides a framework for managing organization. Management is the process of getting things done effectively and efficiently with and through people. The effective management is helpful to achieve organizational goals.
Structure and administration: Credit unions are members owned co-operative where control lies among the members. All earnings are shared among the members.
Figure : structure and administrative system of credit union
Staff training and development: It is essential to develop the performance of individual staffs. Credit unions are providing free trainings and educations to their staff in order to achieve the organizational goals effectively and efficiently.
Communications and marketing: It promotes credit union vision and aims. It helps to maintain and develop the reputation of credit union.
Credit unions re-allocate resources to fill gaps. Its regular review acts as its control. The review of aims, review of individual performances, assessment of risk identified and process to eliminate /control are mechanism for achieving corporate coherence .Strategic change has to be looked at in how or what range of strategy is affected i.e. if demand for lending increased it would need to be reviewed under resources, controls, policy, and marketing . However it would have to change or the strategy would be of no use. The vision of credit union is to take finance service attainable by all. Credit unions key elements are equality of membership. All members have equal access to services and also the option to occupy board positions regardless of size of shareholding. Members are shareholders and rank above all other groups. All decisions are made by director and board members to ensure security of shareholders funds.
We found credit unions are non-discriminatory in relation to race, sex and religion. As a part of research due to the lack of IT skills unable to produce full range of data necessary for productions of accurate process reports, even though they are promoting the education among their staffs. Greater skills should be needed at board level to enhance the current corporate strategy in credit union. However credit unions are able to give a security of member's funds and services. Lending strategy influences by labor market or unemployment. Today's economic condition is the external factor to affect the organizational future of credit union. It is a non -profit organization, so there are no hidden and extra charges for its members. The recession has affected the cash flow in credit union. We found that credit union has dropped its business volumes. Credit unions are still doing great jobs despite threats over regulation and lack of board skill set. As the central bank is focused in capital reserves, credit union focus is on a strategy that will provide revenue to increase these reserves. Resourcing financial, personal and market share are the performance area of credit unions. Central bank has introduced a "prism" review into credit unions and those measures against internal and external risks, governance and operational factors. Corporate or strategic plans must fit philosophy and ethos of credit union movement. Enhanced security of members and services are the main aims to achieve at the end. The credit union SWOT analysis are analysed by us in the following way (based on interview):
Not profit focused
No hidden charges at all
Low interest rate lending
Each office separates entity cost of providing services
Limited services by banking standards
Lack of IT expert
Lack of trust in banks by public
More extra charges in other banks
Not Skills board members
Credit union is successful non-profit organization. It has 3 million members. Corporate or strategic plan must fit philosophy and ethos of credit union movement. Strategy starts by filling skills shortage, implement intensive interaction between committees and focus group members for input to service qualify and new products. Credit union has a social aims, in order to achieve these aims, it should be run effectively with good staffing and marketing. It can't provide better service without planning, organizing, leading and controlling of the organizational performance.
We found in credit union of aging membership. They are unable to attract young members because of a new technology services and the costs. At present Carlow credit unions focus on helping members who are in difficulty and making personal finance available to them. We understand the banks are not willing to provide this type of lending at present. Despite the downturn of economic still they are providing the financial assistants to their members. It's easy to save money but hard to get borrowing. They should provide hassle free services either in saving or borrowing.
In order to insure its future, it needs a steady inflow of new young members. As members grow older they have a reduced requirement to borrow. Credit unions have sufficient human, financial and operational resources to meet its current strategy. The external environment is challenging due to high levels of unemployment. Corporate strategy is effectively implemented and controlled by credit unions by oversight committee, but we recommend them to have a risk manager and internal auditor to reports on its policy. Up-skilling should be considered by credit union to improve skills and capabilities of the staff, usually providing trainings and educations, so that staffs will better at their jobs.
What kind of strategy credit union is implementing to compete with others lending organizations?
At present the focus is on helping members in difficulty and making personal finance available to members. We understand the banks are not willing to provide this type of lending at present (page no.7).
What is the purpose of the credit union?
The credit union is the drive of the operating principles established and its aim is to apply them for the benefit of the members.
What is the credit union corporate strategy at this movement?
At the movement a range of new legislation is being introduced and corporate strategy is to ensure full compliance with these.
How would you execute your strategy?
Start by filling skills shortage, implement intensive interaction between committees and focus group members for input to service qualify and new products.
How do you measure a SWOT analysis of credit union?
Through a series of surveys of members and now members.
What is your mechanism for achieving corporate coherence/coordinating activities?
Review of aims, review of individual performances assessment of risk identified and process to eliminate/control.
What are the steps followed when structuring a corporate plan?
Review, Identify, Resource and Monitor.
What are the alternative strategies that can be developed into a final strategic corporate plan?
In our case it revolves around growth, profile and income return, Slippage in these areas trigger reviews.
How would evaluate your current corporate Strategy?
Not meeting the challenges faced due to skills gap at board level.
What are your modes of expansion in the Credit union?
Current strategy is consolidation until economic conditions shown signs of sustained improvement.
What strategic uncertainties keep you wake as a manager at night?
The skills deficit at board level to take the right technical decisions.
What strategic boundaries have you set?
Expansion of I.T functions to enable introduction of online services.
Identify and source members who have financial and I.T skills required at board level.