Strategic Responses Adopted by Kenya Post Office Savings Bank to the Changing Competitive Environment in the Banking Industry

Abstract

The growth of the banking industry has been mainly underpinned by an industry wide branch network expansion strategy both in Kenya and in the East African Community Region, automation of a large number of services and a move towards emphasis on the complex customer needs rather than traditional ‘off-the-shelf’ banking products. This has led to hyper competition in the industry as banks outdo each other to attract and retain customers. Kenya Post Office Savings Bank (KPOSB) has faced intense competition as the bank is purely a deposit taking institution and has had to come up with strategic responses to the competitive environment. Scholars such as Michael Porter (1985) described the external environment as the condition that affects a firm’s competitive situation. Equally, Pearce and Robinson (1997) defined strategic responses as the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a firm’s objectives. Therefore, it is a reaction to what is happening in the economic environment of an organization. The research design was a case study. Data was collected through an interview guide administered to KPOSB’s departmental heads who are better placed in the formulation of the bank’s strategy and policy. The research utilized content analysis method to determine strategic responses adopted by Kenya Post Office Savings bank to its changing competitive environment. The bank has adopted some strategic responses to its competitive environment that include, restructuring, retrenchment, increased marketing activities, changes in Information Technology and culture change. However, there are other strategic responses undertaken by KPOSB in addressing it’s changing competitive environment that were not the focus of the study. These variables include business process re-engineering and strategic alliances. The study recommends that the bank should implement lending and increase its media presence so as to achieve awareness of products and services and therefore grow business volumes. These factors will enable the bank to be more profitable and be sustainable as discussed in the study.