Strategy formulation challenges facing listed Commercial Banks in Kenya
Firms operate in a dynamic business environment. A number of forces in the environment affect business in various ways and influence their competitiveness. These forces bring about uncertainty for organizations in their quest for success and survival. Firms, therefore, have to come up with strategies aimed at gaining competitive advantage. The banking sector has experienced an increase in competition over the last few years resulting from increased innovation amongst competitors and new entrants into the market. This in turn implies that necessary strategies need to be formulated and implemented to maintain and improve the banks profitability. The general objective of the study was to assess the strategy formulation challenges facing listed commercial banks in Kenya. This study adopted a descriptive survey design. The target population for this research comprised of all the 11 listed commercial banks in Kenya. The study focused on listed commercial banks for the following reasons; they contribute 75% of the industry pre-tax profits, they are the largest in terms of asset base and distribution channels among other indicators of size. They also attract keen interest from the investing public and the various regulatory bodies. The results of the study would therefore reflect the sector position. The study made use of both primary and secondary data. To collect the primary data, a semi-structured questionnaire was used. Secondary data was obtained from review of periodic reports filed by these listed commercial banks. Data from the field was edited and coded according to themes, which emanated from the research objectives and questions. Descriptive statistical techniques were used in data using the statistical package for social sciences (SPSS). Descriptive statistics such as mean and percentages were utilized to analyze demographic information and Likert type of responses. Responses obtained from the questionnaire were also organized, tabulated, and analyzed using simple frequencies and percentages. The study concludes that listed commercial banks employ various strategy formulation approaches with organization’s mission statement outlining the future course and serving as a guiding concept being the most common. Organizational activities being defined through a set of clear objectives and goals is amongst other approaches commonly used. However, listed commercial banks face challenges in the strategy formulation process especially in relation to effective response to competitor strategy. External and internal factors were also found to contribute to the challenges these banks face. The study finally concludes that listed commercial banks in Kenya adequately respond to challenges during strategy formulation by top management showing commitment through availing resources and other supportive systems. Based on the findings, the study recommends that listed commercial banks in Kenya need to be aware of specific needs in the strategy formulation such as communication, coordination, planning and staff motivations. The study also recommends that these banks should embark on management improvement through training and offering conducive work environments that help improve productivity which in turn will win support from the staff and thus make strategy formulation a reality in listed commercial banks. The study was carried out on listed commercial banks in Kenya thus the same study should be carried out in the other banks to find out if the same results will be obtained. The study focused on the financial sector thus further studies need to be carried out in other sectors of the Kenyan economy to enhance the understanding in this area of strategy formulation.