Analysis of Influencing Factors Social Environment and Generic Strategies toward Performance of The Banking Sector in Indonesia

Abstract

The social environment is a challenge for the banking industry in Indonesia. The dynamic changes of the social environment influence the strategy and performance in the global competition of the banking sector in Indonesia. The objectives of this study are 1) to analyze the influence of the social environment on generic strategies, 2) to analyze the influence of generic strategies on bank performance, and 3) to analyze the influence of the social environment on the performance of the banking sector. Surveys are conducted on 101 banks through a set of questionnaires, which are given to the bank and collected directly by the researcher as well as by post to the president director and director of the banks in Indonesia. Data that have been collected are analyzed by using descriptive analysis, analysis of variance (ANOVA), and linear structural relationship (LISREL) using structural equation models (SEM). The results of this study show three paths that influence the social environment, generic strategies, and the performance of the banking sector in Indonesia. First, the social environment that consists of public knowledge about banking, lifestyle society and distribution of public income has a significant influence on the generic strategies, which are low cost and focus. Second, low cost generic strategies and focus have a significant influence on the financial and organizational performance, while the social environment that consists of public knowledge about banking, lifestyle society and distribution of public income has a significant influence on the financial and organizational performance. Therefore, it is important for decision makers of the national banking sector to develop a strategy to enhance profitability and competitiveness of banks given the current competition.