Strategic business networking and competitive advantage in large insurance firms in Kenya
New technologies, new products and new distribution chains have altered the competitive space within which firms compete to survive. Competitive advantage is the ability of the firm to occupy a superior position in an industry and outperform its rivals on the primary performance goal - profitability (Winer, 2004). Porter (1985) suggests that a firm can achieve a higher rate of profit over a rival either by supplying identical product or service at a lower cost, or supply a product or service that is differentiated in such a way that the customer is able to pay a premium price. On the other hand, the resources based view of strategy proposes that competitive advantage resides in a company’s possession and application of resources which are value creating, rare and not easily accessed, not easily imitable and not substitutable so that it is possible for them to be a source of a sustainable competitive advantage (Grant, 2001). This drives firms to seek partnerships with other firms who can complement and strengthen their access to such resources. Strategic networks are intentionally created, developed, maintained and managed to enable members of the network to draw from each other’s resources and capabilities to achieve either lower costs or differentiation advantage. This study focuses on the insurance industry in Kenya which offers largely homogenous products and services in a highly controlled environment that is bedeviled with cut throat competition. This has led to an increased need for firms to form partnerships and leverage each other’s resources so as to stay in the competition and where possible excel above the competition. Through a cross sectional survey of large insurance firms operating in Kenya, the study sought to answer the question: “To what extent does strategic business networking relate to the extent of competitive advantage enjoyed by large insurance firms’ in Kenya?” The objectives of the study were to (i) determine the extent to which large insurance firms in Kenya engage in strategic business networking and (ii) determine whether the extent of a firm’s strategic business networking is related to the extent of competitive advantage enjoyed. The study adopted a cross sectional survey of insurance firms operating in Kenya focusing on the large companies which total 11. The researcher was able to secure a 100% response rate albeit some resistance from some of the respondents to provide the information sought. On analysis of data collected from the firms under study, it was found that over 90% of large insurance companies in Kenya engage with more than 5 strategic business partners. The study further confirmed that there is a 0.95 correlation between the extent of Strategic Business Networking of the firms and the extent of competitive advantage enjoyed by the firms. This study established unequivocally that large insurance companies in Kenya are highly engaged with strategic business networks and that these networks greatly contribute to their competitive advantage. This study will open up a debate for managers in the industry to explore further how firms can leverage from pooling of resources and partnering with complementary companies so as to reduce costs, reach wider markets and offer differentiated products and services to the insuring vi public of Kenya. Further, this study has echoed the findings of other researchers who have found that in other industries such as the aviation and hospitality industries, there is a great correlation between establishing networks with other business groups and gain in competitive advantage. Other researchers on the other hand may be interested in expanding this study to all the insurance companies on Kenya or expand the study beyond Kenya’s boarders to determine if the same factors apply across the east African countries. In conclusion, this study had also provided findings that are in tandem with the resource based view of strategy and has confirmed the sentiments of Moss (1994, p.96) when he declared that “Strategic business networking is a must in today’s business strategy and are a matter of survival”.