Strategies adopted by SMEP deposit taking microfinance limited to gain a sustainable competitive advantage
Competitive advantage is the ultimate intention of strategic management; positioning a company ahead of its rivals through the formulation and implementation of effective strategies. There is therefore need for adopting strategies for a sustainable competitive advantage in an ever changing market environment. In the absence of such strategies, a company can lose its market share or face the poss ibility of extinction. This research is a study of SMEP Deposit Taking Microfinance Ltd (SMEP), which is one of twelve microfinance companies regulated by the Central Bank of Kenya. As one of the large institutions in the young microfinance industry, a stu dy of the company would be an important contribution to the body of knowledge in the industry. The objective of this study is to determine the strategies adopted to give SMEP Deposit Taking Microfinance Ltd a sustainable competitive advantage. This researc h used the case study method employing both primary and secondary data. Primary data was gathered through in - depth interviews with the Chairman, Chief Executive Officer, and Senior Managers of SMEP Deposit Taking Microfinance Ltd. Secondary data was collec ted from SMEP ‟ s strategic plan, audited financial statements, operational reports, and various internet sites. Reports from the Central Bank of Kenya website were used to establish the client base and loans advanced to customers of SMEP ‟ s competitors. The data was collected for the five year strategic period from 2007 to 2011. Additional data for the years 2012, 2013, and 2014 was also collected to assess the effect of the strategies adopted after the strategic period. The findings show that SMEP ‟ s financia l performance improved in the strategic period as a result of strategies that were effective to realize growth objectives. The market share however, remained unchanged within the strategic period but assumed a declining trend thereafter. This implies that SMEP ‟ s strategies have seen the company grow in size but not on competitiveness. In addition, the company only managed to defend its position within the industry in the strategic period, but the market share is threatened subsequently. In conclusion, SMEP needs to specifically target increasing the market share by employing those strategies that will defend the current market share and those that will effectively encroach on the markets of her competitors. The result of this study provides insights into the factors at play within the competitive microfinance industry and how those factors can inform strategic formulation and implementation to secure a sustainable competitive advantage. The study further bridges the competitive advantage theory and practice. The study recommends more research on competitive advantage in the financial sector. More studies on sustainable competitive advantage of microfinance banks would add to the body of knowledge of the fairly young regulated microfinance industry.