ABSTRACT
Small regional banks with a traditional branch-based business model have been serving private households and corporate customers for decades in many European regions and are important warrants for their access to credit. However, their business model is increasingly threatened by market changes and regulatory enforcements. In rural regions, demographic challenges put an additional burden on such banks. This chapter explores how small regional banks in such a rural context build competitive strategies. Based on the case study of Upper Franconia, a rural region in southern Germany, we find that the small regional banks derive competitive strategies through two competitiveness factors: (1) tight, and long-term, customer relationships; and (2) a high degree of regional embeddedness and engagement for the rural region. Both factors support the banks in their endeavours to maintain a strong regional market position despite the multitude of external challenges. This chapter, thus, illustrates how rural enterprises can penetrate a spatially restricted market area by actively developing existing competitiveness factors into a coherent strategy.
