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.