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Advantages and Disadvantages

Divisional structure brings agility because a division can be granted the freedom to serve specific customer needs and market situations. For example, it allows localised efforts by divisions, working on specific financial products or geographical areas in a global bank such as Saudi National Bank (SNB), providing customer service through specific focus. However, this autonomy can also be costly, since each division may need their own budget, IT systems and support services (Young, 2023). Coordination challenge may also occur if divisions work independently, resulting in a disruption of organisational cohesion and a minimisation of synergies from different departments essential for strategic objectives.

Appropriateness
For systems like SNB, a divisional structure is ideal because the different customer or product line segments lead them to serve people in other areas within the organisation. Dividing operations into separate divisions allows each division to manage the specialised services, and it adapts quickly to regional regulations and market demands, which is important in the banking sector (TAYLOR, 2022). Additionally, there is a faster and more effective way of decision making in each divisional level as leadership can tackle the localised challenges without waiting approval from central authority.

Stuckenbruck (1979) defines a matrix organisational structure as a combination of functional and divisional forms in which employees receive orders from a functional and project or product manager.

Advantages and Disadvantages

The matrix structure increases flexibility and resource sharing, which is particularly useful for the SNB with all the services that need to be collaborative between finance, risk management, and IT. It enables SNB to use employees’ specialised expertise on different parts of projects to solve problems more efficiently, as well as to innovate. In addition, it enhances cross functional understanding that is critical in banking to integrate services to enhance customer experience and regulatory compliance (Young, 2024). However, clear communication is required when coordinating across functional and project-based teams, and if no coordination takes place, misunderstandings and inefficiencies can occur.

Appropriateness
SNB is best suited by a matrix structure because of the bank’s requirement to offer integrated financial solutions across the product lines. It enables specialised teams to be in a position to respond to changes that are continuously emerging such as to changes in regulations, or to new technology demands (Stuckenbruck, 1979). The structure also provides for cross divisional collaboration to improve innovation while SNB stays competitive in serving the diverse customer and market needs.

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Cost Leadership Strategy: SNB maintains low operational costs in order to operate at competitive rates and fees, thereby making its services more attractive to a cost sensitive customer base. SNB supports this with digital transformation to optimise operations, process efficiencies and reducing overhead expenses (Peters, 2024b).

Growth Strategy: SNB grows through expansion of market reach, through new branch establishment, digital innovation, and through strategic mergers and acquisition, as manifested by its recent merger with Samba Financial. This method empowers SNB to pursue long term sustainability to meet future customer demands and stay in front of the race to compete in a competitive Saudi banking industry (Willmott, 2023).

Link to Organisation’s Goals

SNB’s cost leadership strategy is relevant in achieving the objective of offering bank services based on low hindrance and available rates. SNB can minimise costs, which will enable competitive rates that will assist it in attracting customers as well as its loyalty, which is at the core of maintaining market share in Saudi Arabian banking. The growth strategy is also directly aligned to SNB’s strategic objective of building its footprint and service scope (SNB, 2024). Through the deployment of investment in digital innovation, new branches or mergers, SNB increases its market share and diversifies its products.

Meeting the Customers’ Needs

The strategies of SNB are very effective in providing service to the customers’ needs. Using cost leadership strategy, SNB is able to provide competitive rates which fuel cost sensitive customers looking for affordable banking solutions. In particular, low fee accounts and attractive loan rates have been set up to ensure close access to the banks, whether at the individual or corporate levels. It further aligns SNB’s customer needs with the growth strategy through the provision of digitally enriched banking products and the enhancing of branch locations (SNB, 2024).

External Contexts

SNB’s cost leadership and growth strategies are subject to several external factors. Firstly, client’s borrowing power and spending behaviour dependent on the economic landscape and inflation rates, can influence SNB’s profitability. Technology is also another factor that plays a key major role in establishing digital banking due to the fact that technological advancement involves a lot of rapid developments that need to be funded with continued investment to ensure provision of competitive digital banking services (Suff, 2019). If SNB cannot keep up they might lose out on customer satisfaction and retention. Furthermore, changes in the bank regulatory regime may affect compliance and operational costs. The success of implementing these strategies will depend on SNB’s ability to change these strategies to ever changing economic and regulatory environments.

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SNB is highly susceptible to interest rates, both in terms of profitability and the number of loans and deposits customers are seeking. When interest rates rise, generally, they increase SNB’s income from loans. On one hand, it can hinder customers from borrowing due to the increasing repayment costs, which in turn may slow loan growth and make customers demand less mortgages, personal loans, as well as corporate financing (Bank of England, 2024). In contrast, lower rates encourage borrowing, yet might compress the SNB’s net interest margin and, therefore, overall profitability.

SNB’s priority is to manage interest rate risk and realise its asset liability management strategy. This could include boosting its income streams beyond the usual loan making business, through dealing in fee-based services like mobile banking or more of the form of digitisation in banking (CIPD, 2013).

Inflation

SNB is affected by inflation as it causes rise in operational costs and the change in customer financial behaviour. Higher wage demands and costs to buy goods and services consequent upon rising inflation might necessitate a rise in SNB’s operating expenditure (Oner, 2019). In addition, inflation will commonly reduce customers’ disposable income and may also lower demand for savings accounts and reduce the capacity to repay loans, raising risk of default.

SNB’s priority is to work on cost efficiency and improve risk management in order to address the inflationary impacts. And that includes an investment in digital transformation to, essentially, optimise their operations and reduce overhead costs. Besides, SNB can fortify its credit risk assessment and their monitoring processes to resist loan defaults. SNB can keep the profitability and maintain customer affordability in times of inflation by maintaining a balanced position between the cost control and credit risk.

Social Factors

Social expectations and demographics in Saudi Arabia are changing hence impacting SNB. With the population becoming younger, and more digitally inclined, and with the global need for mobile banking and digital services, product managers are struggling to catch up (Battista, 2024). On the positive side, this trend enables SNB to broaden the digital dimension of its offer and tap into the tech savvy customer segment that contributes to market share development. Despite its importance to customer satisfaction, failing to meet these expectations can result in losing competitive edge, a long-term risk for brand loyalty.

As a response, SNB prioritises its focus on accelerated digital transformation and workforce development. SNB can fulfil customer expectations and increase service accessibility with investment in advanced digital platforms and customer-filled banking solutions. In addition, SNB ought to accomplish robust employee training and engagement plans to meet modern labour requirements (Boys, 2024).

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