Competitive business strategies and firm performance in commercial Banks in Kenya

Abstract

This study sought to examine the competitive business strategies and firm performance in commercial banks in Kenya. The study was guided by the following specific objectives: (i) to determine the competitive strategies adopted by commercial banks in Kenya; and (ii) to establish the relationship between the competitive strategies used by commercial banks in Kenya and their performance. A review of the relevant literature was undertaken in order to eliminate duplication of what has been done and provide a clear understanding of existing knowledge base in the problem area. The literature review is based on authoritative, recent, and original sources such as journals, books, thesis and dissertations. A descriptive study design was used to undertake the study. The population from which the study was carried out was all the commercial banks registered and licensed to undertake commercial banking business in Kenya, whose number stood at 45 as at December, 2008 (CBK, 2008) The respondent from each of the commercial banks was the Chief Executive Officer (CEO), who is charged with the responsibility of shaping the strategic direction of his/her respective organization. A semi-structured questionnaire was used to collect primary data from the respondents. Statistical Package for Social Sciences (SPSS) was used as an aid in the analysis. Data pertaining to the profile of respondents was analyzed by employing content analysis while determination of the link between the competitive strategies and organizational performance was undertaken using a regression analysis. Findings of the study show that there is a direct correlation between the number of full time employees and the number of branches owned by commercial banks. The findings also show that vi majority of the respondents had worked in their respective organizations for more than 5 years, a period long enough to understand operations of their respective banks. The responses were thus expected to be objective. The findings also show that the strategies adopted by commercial banks in Kenya so as to cope with the competitive environment include vrigorous pursuit of cost reductions; providing outstanding customer service; improving operational efficiency; controlling quality of products/services; intense supervision of frontline personnel; developing brand or company name identification; targeting a specific market niche or segment; and providing specialty products/services. The findings also show a significant relationship between the strategies adopted by commercial banks in Kenya and their respective performances with respect to the following objective performance indicators: total revenue growth, total asset growth, net income growth, market share growth and overall performance or growth.