Strategies Adopted by Commercial Banks in Kenya to Gain Competitive Advantage
View/ Open
Date
2015-11Author
Musau, Timothy M
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Competitive advantage is a position that a firm occupies against its competitors. To
compete effectively, a bank must be aware of who it is competing against, so that it
formulates strategy to out-compete its competitors. A firm in pursuit of competitive
advantage must also identify those skills and resources that have the greatest potential
to give it enduring competitive advantage. Firms will then hedge their strategies on
these skills and resources so as to obtain and sustain competitive advantage. This
study was set out to establish the strategies employed by commercial banks in Kenya
in order to build competitive advantage. Strategy consists of all those moves and
approaches that a firm has and is taking to attract buyers, withstand competitive
pressure and improve its market position. The research adopted cross sectional survey
design which was most appropriate in attaining the objective of the study. The
research study was grounded on five theories namely; Resource based theory, profitmaximizing
and competition-based theory, game theory, resource dependency theory
and porter’s generic competitive advantage. The population of the study comprised of
43 commercial banks as licensed by the Central Bank of Kenya as at 31st December,
2014. Respondents were subjected to the study through a semi-structured
questionnaire which collected primary data. In administering the questionnaires, the
respondents were contacted by mail, or drop and pick later method. Descriptive
statistics data analysis method was used to analyze quantitative data using frequency
distribution, percentages and mean specifically for the purpose of analyzing the
quantitative data and presenting it inform of table, bar graphs and histograms.
Qualitative data analysis method was employed to analyze qualitative data gathered
using open ended questions. The study found that different commercial banks adopt
different strategies in order to gain competitive advantage. Under Cost leadership
strategy, banks have adopted alternative channels like mobile banking, agent banking,
internet banking and cards. Under differentiation strategy, banks have introduced
electronic, digital, Diaspora, Islamic, or executive banking, and unique products. On
Focus strategy, banks have focused on a certain group of customers like business
people and transport sector. Strategic alliance strategy, banks have partnered with
telecommunication companies and collaborated with major organization.
Diversification strategy, banks have diversified into other businesses like insurance,
investment banking and telecommunication services. Merger and acquisition strategy,
banks are either acquiring or merging with other institutions and banks. The study
concludes and recommends that for banks to remain competitive and outdo their
competitors they have to adopt a mix of strategies in order to gain competitive
advantage. The study was only limited to focusing on strategies adopted by
commercial banks in Kenya. Further research should be undertaken to establish the
strategies employed by other organization in order to build competitive advantage in
other sectors like micro-finance institutions, telecommunication sector, insurance,
investment banks and Sacco’s that pose real threat to commercial banks survival.
Publisher
University of Nairobi