Effects of External Environments on Bank's Operations: A case study of selected Commercial Banks in Ethiopia

Abstract

In today's stiff competitive business environments, organizations of all types and sizes are facing continually changing situation externally and internally, and how to cope with these ambiguities and how to achieve competitiveness and expected level of performance is a real challenge for every organization. In order to adapt to these changing situations, research scholars recommend the practice of strategic management as it enables organizations to take advantage of new opportunities that help meet the needs of customers and clients and minimize the threats of the environment. Commercial banks in Ethiopia face challenges from their external environment (include politics, policies of the National Bank, government rules and regulations, customers banking habits, infrastructures and so on). This study sought to explore the external environmental challenges faced by commercial banks in Ethiopia and if there were significant difference in terms of ownership and size. The study was a survey of 12 commercial banks in Ethiopia established before June, 2008 through structured questionnaire. The collected data through the questionnaire analyzed by the help of SPSS and statistical analysis such as crosstab and ANOVA tests employed. The results of the study confirmed that the government policies, rule and regulations highly influenced the private commercial banks operations. Because of the frequent changes in the policies and rules of the national bank, not only made entry to the sector by private investors difficult but also the major concern for the existing banks for the next five years for growth more than the market competition.