Strategies for gaining competitive advantage of commercial banks listed at the nse in kenya
Gitonga, Kenneth M
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The Kenyan banking sector has experienced several challenges over time. The government has implemented several reforms to enhance growth and competition in this sector. To achieve financial stability and growth, it is important to identify the strategies used by commercial banks in gaining competitive advantage. Currently, there is competitive pressure in the lending market for commercial banks given lending as their core activity. As a result, driven by the need to maximize profit, banks are likely to pay great attention to lending rates that they charge. The objective of this study was to identify the strategies used by commercial banks listed at NSE to gain competitive advantage. Descriptive survey design was used for the study. The population for the study was the 11 commercial banks listed at the Nairobi Stock Exchange. A total of 50 employees were targeted as study respondents out of which 48 responded giving a response rate of 96%. Both primary and secondary data was used for the study. Primary data was collected using a questionnaire while secondary data was collected from the bank published records. Both qualitative and quantitative data analysis technique were used to analyze the data. Quantitative data collected were analyzed using descriptive statistics such as means, standard deviations, frequencies and percentages. Qualitative data were analyzed thematically. The analyzed data were presented in form of tables, piecharts and bar-graphs where applicable. The study found that Different strategies for gaining competitive advantage were used by banks listed in the NSE where product differentiation and diversification strategy was used to a very large extent and indicated by 56.3% and 37.5% respectively. The findings also revealed that cost differentiation, strategic alliances and joint ventures were neutrally used by bank listed in the NSE in gaining competitive advantage as indicated by 29.2%, 43.8% and 31.3% respectively. It was finally found that mergers as a strategy was used to no extent at all as indicated by 43.8% of the respondents. On the use of the strategies for gaining competitive advantage, the study found that banks use credit diversification where loans are given to people in different sectors of the economy (Mean score 4.13) to a very large extent. It was also found that the respondents were neutral with the statements that banks offers lower charges on client services making it attractive for many customers (Mean score 2.81) and that banks forms strategic alliances with other organizations to gain competitive advantage in the market (Mean score 2.69). The respondents further indicated that joint ventures leads to the formation of strategic alliances making banks gain competitive advantage to a large extent (Mean score 3.25) and that mergers helps banks in reducing the cost of operation to a large extent (Mean score 3.75). Finally, on product differentiation, it was indicated that banks diversify in different products making them gain competitive advantage in the market (Mean score 4.69). The study concluded that banks listed in the NSE use product differentiation and diversification strategy was used to a very large extent in gaining competitive advantage in the market. It is recommended that banks should provide excellent and unexpected customer experiences that will give them a competitive edge in the market thus improving their performance. The study finally recommends that another study be carried to assess strategies used by banks not listed in the NSE in gaining competitive advantage in the market.