Influence of Foreign Market Entry Strategies on Performance of Commercial Banks, Kenya

Abstract

A vast majority of global firms use international marketing entry strategies as a means of improving organizational performance and competitiveness in the marketplace. Due to the dynamic, complex, and ever-changing nature of today’s business environment, new financial institutions in a country must utilize the most effective and efficient market entry methods. Due to increased foreign investment, new bank institutions have entered Kenya’s market while others have relocated to other regions, domestic competition and regional integration attempts have been major contributors to this trend. This study therefore sought to determine the influence of foreign market entry strategies on performance of commercial banks in Kenya. The study aimed to establish the influence of merges and acquisitions, foreign direct investment, joint venture and licensing and franchising influenced the performance of commercial banks in Kenya. The study adopted a descriptive research design. The target population of this study was 42 commercial banks that have been operating in Kenya. Hence, the target population for the study was 42 managers. A questionnaire was used to collect primary data. This research study analyzed both qualitative and quantitative data. To ensure ease of analysis, the questionnaire was coded according to the objective of the research study to ensure the margin of error is minimized to achieve accurate analysis. Data collected was analyzed using descriptive statistics which helped to determine the respondents’ degree of agreement with the various statements under each factor. The quantitative data was analyzed using Statistical Package for Social Sciences (SPSS) software. Correlations and regression analysis were calculated to draw inferences to the entire population. Multiple linear regression model was applied in analysis of quantitative data. The findings were presented on tables. The research found that: FDI was the avenue that banks adopted in entering the Kenyan market, through foreign direct investment the banks have being able to get additional expertise, technology, and products and foreign investors have increased a workforce’s productivity since the establishment of the banks. The research also established that an intermediary is the most appropriate model for some banks foreign market entry. The study found that a joint venture is the most appropriate entry strategy mode first before fully initial foreign entry process. The research established that licensing and franchising is the most appropriate entry strategy to the foreign market and the banks use licensing approach to foreign market entry. The study concluded that joint venture had the most notable and highest impact on performance of commercial banks in Kenya, followed by merges and acquisitions, and then licensing and franchising while foreign direct investment had the least impact on the performance of commercial banks in Kenya in Kenya. The study recommends the need for commercial banks to penetrate the Kenyan market to adopt licensing strategy. The study recommends the need to harmonize all joint venturing activities. The study also recommended that management of commercial banks that seeks to enter into new market must carefully analyze the strategies that will maximize output.