Globalization Strategies And Financial Performance Of Equity Bank

Abstract

This study was based on globalization strategies and financial performance at Equity Bank. Specifically, the study sought to establish globalization strategies that Equity Bank uses, and to determine the impact of the strategies on Equity Bank’s financial performance. Study was guided by the following questions; which globalization strategies does Equity Bank use? What implications do globalization strategies have on Equity Bank’s financial performance? To establish the relationship between globalization and financial performance, the study used resource-based view theory and new trade theory. Independent variables included joint venture, partnership, whollyowned entry mode, strategic alliance, franchising, mergers and acquisition, outsourcing and licensing as globalization strategies. The dependent variable included revenue and profit margins, share earnings and market position as financial performance. The study adopted a case research design. Equity Bank headquarter served as the data point. Secondary and primary data was collected from a target of 6 senior bank manager using an interview guide and a study guide. Data analysis was done by use of content analysis technique. Out of the six (6) target respondents the study managed to get engage five (5), giving a response rate of 83 %. From responses, it was established that out of the eight (8) globalization strategies that were under observation, the bank used six of them; excluding licensing and franchising. The six duly used globalization strategies were also categorised into two different dimensions. The first one indicates mergers and acquisition and wholly-owned strategies which are used by the bank in moving physical operations across border. The rest which include joint venture, partnership, strategic alliance and outsourcing were found to be used in enhancing the instituting and operationalization of the bank in the foreign markets. Financial performance of the bank was found to be in ascending graph at an average profit growth rate of 8%. Due to the economies of scale that the Bank gains from international expansion, total operating costs were found to reduce at an average of 4%. The ranking of the bank were also found to commensurate its revenue and profit performance. The bank ranked at position 799 globally and 35th in terms of soundness, 44th in terms of return on equity and 8th in return on assets. Locally, the bank is at position three on general ranking with best retail banking. The study concludes that there is a strong positive relationship between globalization strategies and financial performance at Equity Bank. The study therefore recommends that globalization and globalization strategies be adopted by other banks. Limitation of the study include the focus on Equity Bank alone, yet the banking industry in Kenya is made of 43 banks, of which quite a number are operating across local borders. The study further recommends furtherance of this study to include all commercial banks in Kenya that are operating in international markets.