Effect of Strategy Implementation and External Environment on Performance of Commercial Banks in Kenya

Abstract

The main objective of the study was to determine the effect of strategy implementation and external environment on performance of commercial banks in Kenya. Implementation of strategy is a cautiously measured practice that ensures effective and efficient execution of formulated strategies in an organization so as to realize organizations goals and objectives. It is a constant feedback mechanism process which ensures relevance, objectivity and effectiveness of strategies to the goals of the organization. The banking institutions operating in Kenya currently face a business environment that is dynamic, fast paced and competitive not only locally but also globally. It is thus very important that each institution develops strategies that will facilitate their survival as well as maximize value even with the dynamics in the external environment. It is however important to note that importance is not placed on mere formulation of strategies as this will not guarantee its success. Sound formulation and excellent implementation of strategies is the only way that banks will be able to realize success. The study was carried out to ascertain what role implementation of strategy and external environment played on performance of commercial banks that operate in Kenya. The research design that was employed for this research was descriptive cross sectional survey whereby all operating commercial banks were targeted. Structured questionnaires were distributed to 43 banks whereby 31 were collected back which accounted for a response rate of 74%. Findings from the study showed that majority of the banks develop guidelines/models which guide the strategy implementation process and puts into consideration different environmental factors that can influence the implementation process. The study also found that each institution is exposed to a myriad of factors unique to the specific firm which has an influence on strategy implementation process. Putting in mind the findings of the study, the researcher recommends that banks ought to consider outsourcing the strategy implementation process to experienced professionals in the field and also put into consideration the myriad of factors that have an influence on the process. The researcher also recommends that policy makers can enforce best practices identified like development of guidelines for the strategy implementation process while putting into consideration the environmental factors that may affect the process. Limitations arose owing to respondents giving positive information to present a good picture of their organization and senior officers not responding on claims of being too busy. Comparative research could be conducted in other industries to identify any similarities or differences or specific study could be done for banks in similar banks