Strategic Alliance and Performance of Cooperative Insurance Company Ltd and Co-operative Bank of Kenya Ltd.
Abstract
Strategic alliances have become the most important tool of choice for most
organizations seeking to revolutionize their performance. Strategic alliances have
enable previously small firms engage with industry giants to gain an edge of their
competitors and create sustainable competitive advantage. The formation of strategic
alliances has also been necessitated by globalization and increasing uncertainties and
complexities of the business environment. No single organization can claim to possess
monopoly of expertise that will ensure the best customer service. This is also because
customer needs are dynamic and vary from one environment to another subject to
preferences, culture, and technology and government restrictions. The banking and
insurance sector have also been subjected to such changes and this has revolutionized
provision of insurance services. Insurance is beginning to loose its ambiguity with
consumers through provision of information by not only the insurer but also the
banking institution that provides financing. This change in tact has seen performance
in the insurance industry improve significantly over the last four years. Co-operative
insurance company has been in existence since 1968.It is considered among the
largest insurance service providers in Kenya and the largest micro-insurance service
provider. Given the nature of product that it offers there is constant need for the
company to present ‘insurance’ to the common man in a way that will defray the
suspicion that exists when customers are approached to take up the products offered.
Reaching the this market has posed a challenge until the recent developments brought
about by bancassuarance offered by CO-OP bank in alliance with CIC. The success of
the alliance arises curiosity as to what characteristic or features are important in a
potential alliance partner that would indicate the likelihood of success. I especially
direct my interest to financial organizations such as banks and micro finance
businesses that would consider such partnerships as viable for the bancassurance line
of business as this has been on the rise in the recent past. The research was conducted
by case study and primary data collected by use of an interview guide. This was
administered both at CIC Insurance Company Head office and Co-operative bank at
Co-operative Bank house here in Nairobi. The data collected was then analyzed using
content analysis. The study was able to unveil the reasons behind formation of the
alliance as need to increase market share for CIC, Diversifying into new business,
Acquiring a means of distribution for CIC, Gaining technology, Reducing operational
costs, Gaining competitive advantage, cheaper access to labour for CIC and the need
to gain brand identity. In this study I outline the suggested necessary characteristics an
alliance partner should possess for an effective strategic alliance. The respondents
suggested that Financial stability, Mutual trust, Experience in core business,
resilience, knowledge and resource capabilities, common customer base /products and
similarity in strategic direction were key traits to be examined in a potential alliance
partner. I also highlight the challenges of the alliance as staff indifference to
implementation, harmonizing organizational culture, accommodating dynamic
emerging needs and sustaining a mutually beneficial alliance. The study recommends
that Co-operative bank of Kenya should review the terms of its engagement with CIC
Insurance Company with a view to increasing its beneficial percentage stake .Further
research should be conducted to assess the outcome of an alliance in the face of
current duplication in the bancassurance sector. This will facilitate organisations by
equipping them with a checklist of characteristics for assessing prospective alliance
partners as well as provide a valid negotiating tool to ensure they make the most out
of the relationship having considered all relevant factors.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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