Strategies Used by Commercial Banks to Gain Competitive Advantage in Providing Financial Services to Oil Companies in Kenya

Abstract

Competitive strategy provides a company with the actions to create offensive or defensive positions in an industry and thereby yield a superior return on investment. A business should adopt a competitive strategy to secure its competitive advantage. For commercial banks in Kenya to remain relevant and competitive in providing financial services to the companies in the oil industry, they have to change from basing their competition on the products they provide to oil companies in Kenya because the banks have almost similar products which would only make oil companies indifferent and get services from any available bank. This study aimed at establishing the challenges commercial banks faced when providing financial services to companies in the oil industry in Kenya and the strategic responses they use in responding to the challenges. The study was a survey focusing on the marketing managers of the 43 commercial banks in Kenya. 30 out of 43 marketing managers responded to the self-administered questionnaires that used the Likert scale of 1 to 5 to establish the challenges and the strategies they used responding to the challenges. The study established that the challenges were: the wide branches network of competitors; low cost services from competitors; loss of customers to other commercial banks; high costs of potential customers switching from a competitor; dominance of few commercial banks; strong brand name of competitors. They responded to the challenges by: widening network of branches; focusing on a segment of oil companies; price cuts; designing new services for the oil companies; diversifying into other countries with oil companies; increased marketing activities targeting oil companies; increased expenditure in R&D; increased financing; investing in information and communication technology; paying off employees and venturing into businesses outside oil industry. The research recommends that commercial banks should reposition their banks by coming up with defences against competitors. The commercial banks can also exploit industry changes and come up with strategies that will completely alter the way business is conducted in serving clients in the oil industry. Commercial banks should critically look deep into the oil industry and accurately define this industry.