Designing Optimal Management Structures and Control Systems for Commercial Banks: A Market Segmentation Approach *

Abstract

This article postulates that as commercial banks grow, their “products” have to be differentiated in terms of the distinctive market segments they wish to serve. This is necessary if they are to develop the required degree of specialization for providing effective and efficient customer service. A framework for introducing market segmentation approach in organizational structure and designing supportive management planning and control systems for commercial banks are suggested. The paper also enumerates criteria for segmentation in the operational context. The requirements of systems support for administering the recommended structure and the need for simultaneously integrating the differentiated segments are outlined. Finally, a sequence for introduction of market segmentation is recommended.