Relationship Between Market Orientation and Performance of Commercial Banks in Kenya

Abstract

In the prevailing, highly competitive business environment characterized globalization and deregulation of markets, aggressive competition and ever-rising expectations of customers, organizations need to adopt strategies that provide a competitive advantage within their sector. Market orientation focuses on discovering and meeting the needs and desires of customers through the product mix. Although a substantial amount of research on market orientation and firm performance can be found in the marketing literature, little attention has been paid in investigating the relationship between customer orientation, competitor orientation and inter-functional and firm performance in the banking industry in Kenya. The objective of this study was to determine the relationship between market orientation and the performance of commercial banks in Kenya. The study adopted the descriptive survey research design to determine and ascertain whether there existed any association between MO and performance of commercial banks. The study population comprised all the commercial banks in Kenya. Since the study population was manageable, the study adopted the census survey in the collection of data and included all the 43 commercial banks in Kenya. A structured, self-administered questionnaire was utilized in collecting the data. The data collected from the study respondents was analyzed with the aid of the Statistical Package for Social Scientists (SPSS) Version 20. Descriptive statistics were used to summarize the data and establish characteristics of the study population and the distribution of the response variations on market orientation strategies in the commercial banks. The relationships between market orientation strategies and bank performance were explored using correlation analyses by conducting the Pearson’s Product Moment Correlation and regression analyses. Further analysis involved simple regression analysis to determine the percentages in performance that may be explained by the variances in market orientation strategies. The study established that there was a significant positive relationship between and bank performance and customer orientation (r=0.489; n=39; p<0.05; competitor orientation (r=0.76; n=39; p<0.05); inter-functional coordination (r=0.57; n=39; p<0.05). Multivariate correlation and regression analysis revealed that at p<0.05, MO strategies positively affected bank performance. Thus, the study recommended that commercial banks should make deliberate attempts to recognize and take into consideration their customers' needs better than competitors. If a bank is able to recognize early enough which services customers need and design as well as implement strategies to satisfy those needs, the bank will gain a competitive advantage over its competitors thus gain a larger market share, hence better performance. Banks should effectively analyze competitor strategies and actions and make efforts to counter the actions by providing superior products and services to their customers. The bank managers need to recognize that their institutions would do well if they develop inter-functional coordination capabilities, which will support the competitive behavior of innovativeness.