I believe Pinnacle’s relationship with Avenue Bank in Nashville was an example of Tacit collusion. When Pinnacle purchased Avenue Bank, one of the founders of Avenue Bank was given a seat on Pinnacle’s board of directors.  After the sale, Pinnacle continued to grow the Avenue Bank brand before changing the name to Pinnacle. See links below.

http://www.businesswire.com/news/home/20160128006576/en/Pinnacle-Financial-Partners-Announces-Agreement-Merge-Avenue

http://www.bizjournals.com/nashville/blog/2016/01/why-ron-samuels-sold-his-10-yearold-avenue-bank-to.html

 

Pinnacle has both real assets and financial assets. The company is undergoing a growth strategy. Flexibility and real options are a source of sustained competitive advantage for Pinnacle. The company is trying to develop signature tools and customer service options that can’t be duplicated. The company has entered into a strategic alliance with Starbucks to offer a Starbucks within some of the bank’s branches.

 

http://www.bizjournals.com/memphis/news/2017/02/17/see-inside-starbucks-to-debut-inside-bank-branch.html

 

Pinnacle has used the concept of product differential, specifically distribution of service channels to stand out among its competitors. The company allows its customers to use any ATM machine in the nation free of charge for deposits and withdrawals. This is a great service to customers because they don't have to drive out of their way to use an ATM. This makes Pinnacle stand out tremendously among competitors because its an added customer convenience other banks do no offer.  

Pinnacle Financial Partners has an advantage over other banks with its technology. In chapter 6 the book discusses how technological hardware and technological software can lead to a cost advantage for companies. Pinnacle uses technology to allow its customers to use any ATM in the country without a fee. This can be a cost advantage because the company is saving money by not having to purchase and maintain its own ATM machines and pay for locations to place them. Many of Pinnacle's competitors have ATM locations strategically placed throughout cities in the U.S. Pinnacle can gain a cost advantage because the company doesn't have that expense.

Background: Pinnacle targets small businesses and their owners (individuals with personal assets greater than $250,000.)

In terms of competitive advantage, Pinnacle has several elements that are worth mentioning.

1.       Pinnacle competes with larger banks that have many more branches than them. To get a leg up, Pinnacle has a courier deposit pick up system. This is a convenience to customers because they don’t have to go to the bank to make deposits.

2.       Pinnacle customers get unlimited usage of any ATM in the world with no surcharge fee. This is different from other banks who charge their customers a fee to use any ATM that’s not owned by their bank.

3.       Pinnacle invest a lot in its customer and attracting and retaining highly skilled employees. The company’s associate retention rate is 96 percent compared to an industry standard of 75 percent. It’s listed as one of Nashville’s best places to work.

These are just a few examples of items that are strengths for Pinnacle. In term of evaluating general managers look at the fact that Pinnacle targets experienced managers who have worked for their competitors. This shows that Pinnacle’s general managers are more qualified than the average general manager and this is a competitive advantage. Most of them also bring inside knowledge of their competitor’s operations.

When you look at VRIO, by offering conveniences like free ATM transactions and courier deposit pick up, Pinnacle has created value for its customers. A competitor can try to duplicate this, but these are just two examples that are part of a culture of innovative customer trends. This culture would be hard for competitors to duplicate because there are probably many small things that contribute to the overall customer experience.

Neutralizing the threat of rivals

Chapter four discusses evaluating opportunities. As I stated last week, Pinnacle purchased US Bancorp and the purchase allowed Pinnacle to enter three new markets. This was a smart move when you consider that an alternative strategy could have been for Pinnacle to enter the markets by opening its own branches. By purchasing US Bancorp, Pinnacle removed one if its rivals. The move also allowed Pinnacle to better compete with other rival banks in the market by entering with an established customer base.

Pinnacle also used the strategy of preemption of valuable assets. Pinnacle had an aggressive strategy of stealing top employees from competitors. Employees are a company’s most value asset.

Hello, one of the topics in Chapter 3 discusses threat of rivalry as an environmental threat and barrier to entering a new market. Pinnacle in January of 2017 expanded its operations into the new markets of North Carolina, South Carolina, and Virginia by purchasing North Carolina-based US Bancorp. This merger gives Pinnacle a new significant presence in Charlotte, Raleigh, Greensboro, Winston-Salem, N.C., and Greenville-Spartanburg and Charleston, S.C. Had Pinnacle tried to enter these markets on its own without the acquisition, the company would have faced significant competition from competitors such as Bank of America Corp., Wells Fargo, BB&T, Fifth Third, etc. Pinnacle would have had to purchase real estate for its branches and compete with existing branch locations from competitors that were already open and frequented by customers. By gobbling up U.S. Bancorp Pinnacle was able to overcome some of the significant barriers to entry and go into three new markets and compete on a level playing field with its rivals.