Responses by commercial banks operating in Kenya to changes in the environment: a case of National Bank of Kenya Limited

Abstract

The objectives of the study were to identify changes in the external environment affecting National Bank of Kenya and to establish the response of National Bank of Kenya to the changes in the competitive environment, and to document the relevant responses made by the bank. In order to meet these objectives, the pertinent primary and secondary data was collected. Primary data was obtained from personal interviews with the respondents who were responsible for developing the strategic responses by NBK to its changing competitive situation. The same research interviewees have also been overseeing the implementation of these responses. Secondary data was collected from various sources. The data was then analyzed qualitatively. The study established that the changing competitive situation in the Kenyan banking industry has posed some challenges to NBK. These challenges arose from the changes in the business environment in terms of economic ,> decline, liberalization; legislative changes, incressing level of education and technological advancements. The management of these changes has been made more difficult by the presence of all five forces that influence the competitive situation in an industry. These forces are barriers to entry, rivalry within the industry, threat of substitutes, power of buyers and power of suppliers (Porter, 1980). v According to the research findings, NBK has addressed its changing competitive situation through restructuring, marketing, information technology, re-capitalization and culture change among other responses. These have made NBK more competitive but have not adequately enabled the bank to fully match its environment. However, most of the respondents believe that NBK has the necessary capability to effectively respond to its changing competitive environment. This study was based on four major strategic response variables. A further - study can, therefore, be carried out on the other responses that NBK has made to address its changing competitive situation. Alternatively, a cross sectional survey covering the whole industry can be undertaken to determine the strategic responses by the banking industry. This would give an indication of the responses made by banks, in Kenya, to their changing competitive situation especially with the increasing growth, in the number and size, of the non-bank financia" l institutio-n.s. This, then, will allow for industry generalizations to be made.