Strategies employed by commercial Banks in Kenya to build competitive advantage

Abstract

This study was set out to investigate the strategies employed by commercial banks in Kenya to build competitive advantage. Strategy sets out the mission of the company, which, ideally, is in line with the values and expectations of major stakeholders and concerned with the scope and boundaries of the organization. A firm gains competitive advantage by performing strategically important activities more cheaply or better than its competitors. The research adopted the survey design which was most appropriate in attaining the objective of the study. The population of the study comprised of all commercial banks licensed by the Central Bank of Kenya as at 31st July 2010. Respondents were subjected to the study through a semi-structured questionnaire which collected primary data. Secondary data was from published reports, the banking industry’s publications, periodical and newspapers. The study found that the commercial banks have adopted both the lower cost structure and differentiated products in a bid to build competitive advantage. Lower cost structure has been achieved by charging fees lower than other banks. Differentiated products were achieved by identifying needs of prospective customers and focusing on products and services not offered by other banks. Resources which are the firm-specific assets were used to create a cost or differentiation advantage. Competitive advantage over rivals is through providing comparable value to the customer, but performing activities more efficiently than (lower cost), or performing activities in a unique way that creates greater buyer value and commands a premium price (differentiation). Further research should be undertaken to establish the strategies employed to build competitive advantage in other sectors in micro-finance institutions. The study was limited in that it included respondents from one sector and conclusions drawn may not be representative of other industries. It also captured members of the one focus group excluding other important stakeholders from the study.