Organisational Factors and Implementation of Diversification Strategies by Tier One Commercial Banks in Kenya

Abstract

Diversification seeks to ensure that the revenue streams are increased. The process of implementation of diversification strategies is a risk and calls for robust planning because good strategies can fail even after being formulated smartly. Diversification strategies aims at increasing the number of revenue streams for entities in order to enhance the overall profitability of firms. Diversification can be done within the same market or outside the current market that firm serve. In particular, commercial banks practice diversification strategies majorly through harnessing the capacity of the Information and Communication Strategies. Commercial banks in Kenya engage in a wide variety of diversification strategies which include: mobile banking, electronic funds transfer, bancassurance, internet banking, agency banking and use of app banking. Further commercial banks practice geographical diversification strategies through opening up of new branches in other neighboring countries. This process is not an easy one. The study purposed to assess the organizational factors that influenced implementation of diversification strategies, by Tier one commercial banks in Kenya. The Resource Based View, Mckinsey Strategy Implementation Model and Porter’s Strategy Implementation typology formed the theoretical underpinning for this study. All these theories are pertinent to this study since they enhance understanding of the process of strategy implementation. The study sought to fill the gap that other studies had left since most did not specifically consider diversification strategies and also the few done are done out of Africa. The study collected primary data through interviewing senior staff of the selected commercial banks. Data was analysed through content analysis technique. The study found that organizational factors influence implementation of diversification strategies among the tier one banks in Kenya. Specifically, the study found out that organizational structure was not favourable towards implementation of diversification strategies as the planning procedures were not considerate of all involved parties and equally rewards systems were not commensurate with responsibilities of the staff during diversification strategy implementation. The study found out that lack of internal resources such as finances and skills also hampered the implementation of diversification strategies. Equally, noted that the institutions were not ready for change and also the top management was not supportive in implementation of diversification strategies. The study recommends that top management should offer guidance and involve staff during implementation of diversification strategies, the implementing team need to be allocated adequate resources and appropriate reward systems should be set up in order to enhance implementation of diversification strategies.