Turnaround strategies at Development Bank of Kenya limited
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Date
2010-09Author
Kamunde, Dayana K
Type
ThesisLanguage
enMetadata
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Many firms experience trends of deteriorating financial performance at some point in the
organizational life cycle as a result of internal and external factors. Whatever the cause of
the decline, whether internal or external or both, management can respond by selecting
strategies that redirect the resources in an attempt to improve the firms competitive
position. The aim of the turnaround strategy is not only to halt the decline, but also to
generate the means for a substantial recovery. Therefore turnaround is considered to have
occurred when a firm recovers adequately and regains profitability.
Development Bank of Kenya Limited initially established in 1963 as a development
finance institution operating under the name Development Finance Company of Kenya
(DFCK). Its key objective was to fund long term project. Following the liberalization in
the financial industry in Kenya during the 1990’s, DFCK was transformed into a fully
fledged commercial bank in 1997 to Development Bank of Kenya Limited. This allowed
the bank to accept deposits from the open market and to broaden its scope of operations.
However, the bank’s lack of clear corporate strategy and other external factors resulted to
decline in profitability. This study sought to establish the turnaround strategies adopted to
successfully halt the decline and return the bank to profitability.
The study adopted a case study research design to gain an in depth understanding of the
strategies. Primary and secondary data were used. Primary data was collected by way of
pre-guided interview comprising of open ended questions. The respondents were drawn
from top management. This comprised of five managers heading various divisions in the
bank. These are Projects, Credit, Human Resource, Chief Operations and Business
Development. Secondary data was collected from Bank’s annual financial reports for various years and the Bank’s intranet. The research findings indicated that Development
Bank employed various strategies to confront declining performance. The process
involved top management change, which saw the exit of the previous CEO and other
changes at the board level. The process involved all the stakeholders to provide support
for the much needed changes. For any turnaround to be successful, the organization must
move fast to salvage the core of the business. Increasing efficiency is an important factor
as these actions improve profitability in the short run and allow the company to release
resources that may be used elsewhere. This can also play an important role in winning
back stakeholders support and help raise external resources to fund other strategies.
Citation
MBA ThesisSponsorhip
University of NairobiPublisher
School of Business, University of Nairobi