Competitive Strategies of Islamic Banks: A Case of Pakistan

Abstract

The main aim of this study is to examine the competitive strategies of Islamic banks in Pakistan that they should adapt to compete in the banking industry. To achieve the aim, the authors conduct a study which is based on a theoretical framework. We examine the current situation of Islamic banking by investigating the current external environment using PEST (Political, Economic, Social and Technological) analysis, the industrial environment using Porter's Five Forces Model and internal environment using resource and competency analysis based on SWOT frame (Strengths, Weaknesses, Opportunities and Threats). The authors find that Islamic banks should employ differentiation strategy aimed at achieving a competitive advantage by offering better services and products. For achieving competitive position Islamic banks should adopt marketing tactics for attaining large market share, and conduct training workshops to deliver knowledge about Islamic banking to employees and also create awareness about the importance of interest-free banking in general public. This research paper is the first to examine the competitive strategies of Islamic banks in Pakistan the results of this study are valuable to Islamic Banks in Pakistan and the industry as it exposes the gaps in their strategy, which is addressed in time will help deter competition. They are also capable of gauging the success of the banks in employing specific competitive strategies.