A QUALITATIVE ANALYSIS INTO THE STRATEGIC PRIORITIES OF THE INDONESIAN BANK INDUSTRY

This research paper investigates present day strategic priorities employed by large (foreign exchange) banks in Indonesian banking industry. The research used ‘idea networking’ of the mission statements of banks as the means to identifying a handful of priorities. The population comprised commercial banks in Indonesia. Foreign exchange banks in Indonesia were chosen as a sample of this study .The study was conducted in 2014. The research method utilized in this study is qualitative clustering through idea networking. In this method, the idea statements were extracted and linked to each other to produce diagrams resulting in clusters of statements that were generalized into priorities. The finding from this study is that Indonesian banks have six main priorities of “service excellence”, “prudent corporate governance”, “innovative”, “customer segmentation focus”, “professionalism” and “social responsibility”. This, undoubtedly, provides some insight into the potential threats to the Indonesian bank industry as well as an agenda for change. Info Article History Article: Received December 2015 Approved January 2016 Published March 2016


INTRODUCTION
Banks still hold the dominant role in the economy of Indonesia at about 78.24% of market share followed by other institutions (Supriyanto, 2013).They are business entities that raise funds from the public in the form of savings and distribute it to the public in the form of credit or other forms in order to improve the living standard of the people (Republik Indonesia, 1998).As a depository financial institution, the bank has a crucial role in the development of the economy of a country.A bank facilitates the interests of savers with borrowers through products and financial services it offers (Buchory, 2014).In addition, a bank also holds a principal role as an intermediary in the financial system by mobilizing funds and allocates it to the productive activities and investments (Mahran, 2012).Moreover, the bank facilitates traffic flow payments.Therefore, it supports economic growth of a country.
The banking sector worldwide is an industry that faces high competition.The competition in the Indonesian banking industry has been sharp since the government introduced its deregulation package in the banking sector in October 1988 (Alfansi & Sargeant, 2000).This financial regulation abolished the restriction on the formation of new private banks and allowed foreign banks to form joint ventures with local partners in Indonesia.Therefore, the growth of bank industry increased dramatically in terms of the numbers of banks and branch offices.Based on data from Bank Indonesia cited in Kameyama et al. (2006) the number of banks, both national and private banks rose remarkably from 124 in 1988 to 240 in 1996, while the number of branch offices increased significantly from 1,900 to more than 6,000.These conditions, undoubtedly, caused stiff competition among banks in the financial industry.
When the economic crisis hit Indonesia in July 1997 it affected almost all industries, including the bank industry.The unique feature of banks, especially on the nature of their business, makes them to be risky (Riani et al., 2014).In-donesia suffered the most economic damage during the economic crisis in Asia (Harada & Ito, 2005).Alfansi and Sargeant (2000) argued, the drastic outflow of capital and the sharp depreciation of the currency have led almost to the collapse of the banking system.
Nonetheless, the Indonesian government made some interventions to overcome the economic crisis by making the restructuring of the banking supervision a priority program.Finally, Indonesia managed to exit from the IMF program and the Indonesian Banking Restructuring Agency (IBRA) was dissolved after completing its task.In fact, the general macro-economic indicator of the banking sector in Indonesia has recovered its confidence quickly.As far as published data shows, macro data on recent bank performance, the financial data of individual banks, and individual bank's stock prices, suggest recovery of the management of banks (Harada & Ito, 2005).Although the banking industry has gained its stability, concerns still remain to improve its performance and competitiveness.A lesson learned from the economic crisis is that banks need to improve the effectiveness of their management.Poor management and corporate governance is one of the factors that contributed to the vulnerability of the banking industry.
In response to this situation, the author intended to do research into the present day strategies of the larger (foreign exchange) banks to investigate what priorities the Indonesian banking industry feels it still has.The research will use 'idea networking' of the mission statements of banks as the means of identifying a handful of priorities.The research targeted private owned banks that conduct banking business in foreign currencies (foreign exchange banks).

METHOD
Qualitative data was used in this research.The population was commercial banks in Indonesia.Based on data from the Central Bank (Bank Indonesia), there are 120 commercial banks in Indonesia, which consists of 4 state owned banks and 116 privately owned banks (Bank Indonesia 2014).This research used purposive or judgmental sampling, which is a non-random sample technique, to focus on a specific group.The research targeted private owned banks that conduct banking business in foreign currencies (foreign exchange banks).According to regulation from the central bank (Bank Indonesia 2013), some criteria for bank to be foreign exchange banks are: CAR (Capital Adequacy Ratio) minimum of 8% in the last month, the level of health during the past 24 months in a row categorized as healthy, Rp.150 billion minimum paid-up capitals, banks preparedness to carry out foreign exchange transactions, human resources, and operational guidelines.
The chosen sample was based on the fact that they are well-established banks and that the service and products of the banks are more varied.Based on data from Bank Indonesia (2014), there are 35 foreign exchange banks in Indonesia, which used as a sample in this study.The advantage of this method is to select specific informative cases.In addition, it is more convenient than a random sample technique.On the other hand, this method may not be as accurate as random sampling.However, it is appropriate for highly targeted and narrowly defined population.Therefore, the sample represented the target population.
Research method utilised in this study is qualitative clustering through idea networking.Idea networking is a part of concept mapping (Metcalfe 2007) which is classifying, linking and grouping idea statements.Source of idea statements can be anything, which is relevant to a problem situation.Statements can be a community meeting, the transcript of an interview, comments from a conversation or statements in corporate documents (Metcalfe, 2007).In this method, the idea statements are extracted and linked to each other for producing diagrams and resulting in clusters of statements that can be generalized into priorities.
To conceptualize the strategic priority of Indonesian banks, the researcher networked the mission statements, which were available on the banks' website.This networking provides a qualitative means of inductively clustering the statements (Hassanli & Metcalfe, 2013).The mission statement was chosen because it is reveals the intended strategy actions, endorsed by the senior management and publicly available.An example of a mission statement is "We provide outstanding technology-enabled banking product and services supported by an international network that delivers enhanced stakeholders value to be a financial institution of choice".A further list of mission statements can be seen in Table 1.
The statements were collated and numbered.There were 91 statements from the strategies of 35 banks.These statements were then linked by use of keywords.The links were recorded in an interaction matrix using the social network analysis program, Nodexl.There are many similar social network analysis programs, such as UCINET and Gephi, each with very similar clustering algorithms.Nodexl was utilised in this research give the researcher familiarity with the software and its endorsement by Microsoft.The networking resulted in a network diagram and clusters of statements.Clusters represent group of similar mission statements.These clusters named based on what statements they contained.This act of synthesis does required judgement by the researcher based on their understanding of the industry.The names provide a convenient classification of the statements and can be interpreted as a summary of priorities.

The cluster in figure 1 was named as: Cluster 1 -Service Excellence
Through analysis of concept mapping, six clusters of the statements were revealed (see Figure 1 and Table 2).The cluster is in dark blue colour.This group of statements focused on providing excellent service to the customers in order to achieve customer satisfaction.Banks need to offer a wide range of products and primary service to public.Service becomes an essential part of the bank industry because it is a competitive edge for companies that distinguish Focusing as retail banking by providing the best service to customers.
Maximizing the company's profits for the benefit of all employees and shareholders.

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Bank Artha Graha Internasional, Tbk www.arthagraha.com Providing prime service to public is one of our success keys.
To provide comprehensive and innovative financial solution following market requirement.
To develop human capital.
To create optimum benefit for the stakeholders.
To become good corporate citizen that cares about public and the environment.

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Bank BNI Syariah www.bnisyariah.co.id To make a meaningful contribution to society, while supporting environmental sustainability.
To provide solutions for the benefit of the community, through the medium of sharia banking.
To deliver optimum investment value to all investors.
To create a 'place of pride' for working and achieving best performances for the staff, as the embodiment of worship.
To serve as a standard of a trustworthy corporate governance.
5 Bank Bukopin,Tbk www.bukopin.co.id To provide excellent and comprehensive financial services solutions to fulfil customers needs in business, individual and family.
To take an active role in developing competitive Small, Medium and Micro Enterprises.
To build employee engagement in increasing employee productivity and welfare.it to others.The example of the statement is "to provide a complete range of bank facilities to our customers backed by the latest technology and high services standards, to help increase their competitive edge and reach in domestic and international markets" (statement 51).

Cluster 2 -Prudent Corporate Governance
This set of statements in this cluster highlighted organisations to implement good corporate governance in the organisations (see light blue colour in the map).For example: "carrying out bank operations with the principles of Good Corporate Governance and Risk Management" (statement 22).There are five principles of Good Corporate Governance in Indonesia: transparency, accountability, responsibility, independency and fairness (KNKG, 2006).

Cluster 3 -Innovative
The dark green colour in the diagram represents this cluster.This group of statements centred on organisations determination through innovation in products and services, yet innovation systems that efficient and encourages performance.For example: "to provide comprehensive and innovative financial solution following market requirement" (statement 8).

Cluster 4 -Customer Segmentation Focus
This group of statements encompassed the organisations to focus on the customer (see light green colour in the map).In this case, banks need to focus on their customer target, whether for retail (personal) client, small and medium business or corporate or provide service for wide range customer segments.The example statement is "UOB is committed to growing its business in the consumer and corporate banking, while maintaining excellence in SME segment" (statement 91).

Cluster 5 -Professionalism
The group statements were concerned with development of human capital to improve its competencies and professionalism (see red colour).For example: "functioning of the organization in a professional manner with the process of sustainable human resource development, so it provides consistent excellent service in the business activities of national and international standard" (statement 23).In addition, the cluster also emphasizes on the need to be professional in conducting their business.In this case, all statements are about core bank as sharia banking.For example: "to become a ROLE MODEL among the world's sharia financial institutions" (statement 66).

Figure 1. Network Diagram of Planning Statements Cluster 6 -Social Responsibility
The group of statements is focused on the Corporate Social Responsibility activities (see orange colour).Corporate Social Responsibility (CSR) is a process with the aim to embrace responsibility for the company's actions and encourage benefits or values to all stakeholders through its activities.For example: "providing maximum value to customers, employees, shareholders, government and all other stakeholders" (statement 57).

Service Excellence
Due to high competition in the banking sector, customer service in this industry is crucial.Banks need to pay attention to this issue by providing excellent service to their costumers.From customer point of view, there are some factors they considered as service quality.Based on BSQ (Bank Service Quality) index research, there are three dimensions of service quality, namely: "systemization", "reliable communication" and "responsiveness" (Abdullah et al., 2011).
Systemization refers to aspects such as systematic and organized arrangement of banks' service delivery.Reliable communication means banks need to communicate and offer their services in a reliable and trustworthy, and excellent personal service when dealing with clients.In addition, banks' employees must be responsive and have the willingness to help their customers.
Another study done by Muyeed (2012), which examined customer perception on service quality in developing countries found that speed and accuracy in transactions is the most important factor, then followed by the safety of investments and keep confidentiality of account and transactions.
Excellent service may lead to customer satisfaction.Some previous studies examine the relationship of service quality to customer satisfaction and customer loyalty.Arasli et al. (2005) and Lundahl et al. (2009) found that technical and functional dimension of customer service correlate positively to customer satisfaction.Permana (2013) also found that service quality correlate positively to customer satisfaction.

Prudent Corporate Governance
Corporate governance is linked to the process and mechanism on how organisations are directed and controlled.Good Corporate Governance (GCG) is bank governance that applies the principles of transparency, accountability, responsibility, independency, and fairness (Bank Indonesia, 2006).The general guideline for the implementation of corporate governance in Indonesia is issued by the national committee governance policy of 2006 while the implementation of GCG for banks is regulated in detail by Bank Indonesia as the central bank.
Good corporate governance practices in banking institutions are crucial.Poor corporate governance mechanism was a major factor that contributed to vulnerability to the financial crisis effect in Indonesia in 1997 (Kameyama et al, 2006).On the other hand, Nam & Lum (2006) found that prudent corporate governance is a success key of banks in post crisis Asia, including Indonesia.
Corporate governance is related to the issue of ownership.Wardoyo and Veronica (2013) stated that the separation of ownership and management is the main focus of corporate governance.This may lead to information asymmetry between owners, managers and creditors.In order to implement good corporate governance of the bank, the challenge is how to maintain the independence, competency, and professionalism of the members of the Board of Commissioners as the core body of monitoring and advising corporate governance.

Innovative
Being innovative is being creative and novel in the provision of new goods and services.Innovation is considered to be the successful development and application of new ideas (Tambunan, 2008).It is important not only in companies that create products but also in service sectors because it can create a competitive edge for companies.Researchers classified innovation into some different types.For example, Oke (2007) classified into product innovation and service innovation.In service industries, product innovations are 'new developments in the core offering of service companies that tend to create new revenue streams' and service innovations are 'new developments in activities undertaken to deliver core service products' (Oke, 2007).
In terms of its process, innovation can be divided into two types: radical and incremental (Zhao 2005).Radical innovation refers to 'pathbreaking, discontinuous, revolutionary, original, pioneering, basic, or major innovations'.Incre-mental innovation is 'small improvements made to enhance and extend the established processes, products, and services'.

Customer Segmentation Focus
Market segmentation divides consumers into relatively homogeneous groups in order to determine marketing strategies for specific segment (Mo et al., 2010).It is clear that customer segmentation influence marketing strategies for banks.In addition, the market segmentation can help banks identify their opportunities and threats.Customer segments of banks can be determined by the demographic attributes, behavior of a particular group of customers, transactions, the use of Internet banking and etc.
Generally, identifying customer segments is used to obtain more details about unique customers in retail banking scope.However, market segmentation can also estimate customer future value as a part of Customer Lifetime Value (CLV) in retail banking scope (Khajvand & Tarokh, 2011).They conclude that customer lifetime value includes calculating past and present value of the customers and predicting of future value of the customers.

Professionalism
Professionalism is generally defined by the status, methods or standards within a career area (Basheka & Mugabira, 2008).In this case, developing professionalism related to development of human capital to improve its competencies.In the banking sector, professionalism correlates with customer satisfaction.Abdullah et al. (2011) found that professionalism in service to the customer is one factor that influences customer satisfaction.Therefore, banks' employees should be able to work professionally and banks need to develop employee's professionalism and competency by training and education.

Social Responsibility
Corporate Social Responsibility (CSR) is a process with the aim to embrace responsibility for the company's actions and encourage benefits or values to all stakeholders through its activities (McWilliams et al., 2006).
There are some arguments why organizations act more responsible in the absence of legal requirements.According to Lindgreen and Swaen (2010), it can be categorized into four arguments: (1) reducing cost and risk (2) strengthening legitimacy and reputation (3) building competitive advantage, and (4) creating winwin situations through synergistic value creation.Primahendra (2011) explained CSR practices may vary depend on the policy environment, industry, business strategy, and the level of awareness of stakeholders, especially consumers and investors.
Lindgreen and Swaen (2010) suggested that developing appropriate CSR strategies is required to achieve effective CSR, which improving both stakeholder relations and social welfare.Widjaja and Pratama (2008) stated that the practice of CSR requires careful planning so the company cannot do it at any time.CSR practices must run continuously, while requiring clear plans and targets, and has clear evaluations and reporting mechanism.
There are some studies about the relationship between CSR with corporate performance.According to Fauzi and Idris (2009), Corporate Social Responsibility (CSR) has a positive relationship to corporate financial performance.Their study is based on manufacturing industries in Indonesia. Fernita et al. (2014) did research about CSR disclosure in banking industry.This study tried to associate CSR disclosure of the bank's performance in terms of financial performance and stock performance.
It could not be concluded that banks which had a high level of CSR disclosure would have a good financial performance as well, be-cause there were banks that had low levels of CSR disclosure but have a satisfactory financial performance.Moreover, in this study they also found that the higher the level of CSR disclosure by banks on average has a higher stock price than the bank that has a level of CSR disclosure below average.So, it can be seen that CSR has a positive relationship with financial performance in the long term by increasing of companies' value, which is reflected in the stock price.

Dialectic Analysis
Dialectic analysis is setting up a contradiction of the priorities identified above.It is thought useful to explore the tension between the priorities as a means of imagining creative strategies (Metcalfe 2014).It is thought there is no one best or most important priority but rather the generation of opposing concepts can encourage balance and yet creativity.The author analyzed the dialectic and tensions that potentially occur between the priorities.
Banks are profit organizations, so gaining profit is a priority.However, this priority may conflict with others that banks need to have, such as service excellence and social responsibility.Banks need to spend some money in order to actualize excellent services and good Corporate Social Responsibility (CSR).So, it may reduce companies' profit.It may be true if the organizations view it in the short-term, but in the long-term the organization can gain more profit from that.This is because service excellence can increase customer satisfaction and lead to customer loyalty.Whereas CSR can increase the value of the firms, which can be seen from increased price stock on the market.
Another possibility is to consider a combination of two or more priorities.For instance, by thinking upon the combination of "customer segmentation focus" and "innovative".A bank may create innovative products and services based on customer segmentation.In this way, the bank can gain specific targeted market and consumers.Another example is by reflecting upon the combination of "social responsibility" and "innovative", a bank may implement innovative concept in corporate social responsibility activities, such as: programs for encouraging creative entrepreneurs, empowering local village programs and etc.

CONCLUSION AND RECOMMENDATION
This study has investigated the strategic priorities of larger banks in Indonesia.The conclusion is that Indonesian banks have six main priorities of "service excellence", "prudent corporate governance", "innovative", "customer segmentation focus", "professionalism" and "social responsibility".This provides some insight into the potential threats to the industry as well as an agenda for change.Individual banks may want to reflect on their own priorities knowing what the collective concerns of the larger banks.
This study used a qualitative data analysis from the mission statements of relevant banks.Future research may also combine this with primary data such as a focus group or interview with stakeholders to get deep insights.Moreover, future research may also involve these stakeholders in the data analysis, as their knowledge of the industry will likely to add some more novel insight.However, using a qualitative linguistic clustering approach has revealed particular insights not possible from a statistical survey, where complex concerns are reduced to Likert scale responses and averaged.This sort of qualitative analysis is thought to add something to traditional methods.This paper is a revised version of a paper presented at the 29 th International Business Research Conference, Sydney, 24-25 November 2014

Table 1 .
Sample Chosen and Mission Statements of Foreign Exchange Banks Optimizing bank's role as intermediary.

Table 1 .
Continues www.panin.co.idTo transform Panin Bank into the one of Indonesia's leading consumer and business banks.