Implementation Of A Strategic Alliance: Experience Of Kenya Post Office Savings Bank And Citibank

Abstract

Firms adapt various strategies in order to remain competitive in an increasingly global market. One of the strategies being adapted is strategic alliance. Strategic alliances involve cooperation between two or more firms who pool resources together to create value proposition for their customers and for themselves. Strategic alliances afford partners a higher likelihood of success than if a firm had to go it alone. Strategic alliances create synergy for the partners through shari ng of resources and capacities. KenyaPost Office Savings Bank and Citibank formed a strategic alliance in 1997. The two banks operate in a very competitive financial sector. Interest incomes which hitherto formed the major source of incomes for banks are shrinking and are likely to reduce even further with possible enactment of the Central Bank Amendment Act aimed at controlling interest rates. Banks have to hedge this risk as well as leverage their resources and capacities in order to be sustainable. This research study sets out to identify the nature of the strategic alliance between KPOSB and Citibank and to document the experience of both banks in the formation and implementation process. Other studies indicate that most alliances fail in their first and second year of operation due to various reasons. These reasons include, shifts in objectives of the alliance, lack of sustainable investments in the alliance and lack of continuous management oversight in the alliance. The study found that there was management commitment in this alliance right from the start and that the alliance has evolved over time to include a wide range of clients and beneficiaries. There was transfer of technology between the partners and the partners have received mutual benefits from this alliance. The study further found out that partners usually face many challenges while implementing a strategic alliance and should always work towards resolution of these challenges in order to retain the relationship. The study established there is need for openness and honesty from the beginning as this may affect the future of the relationship because, like a marriage strategic alliances thrive on mutual trust and equal sharing of benefits. Corporate culture was identified as one of the concerns affecting strategic alliances. However this study was not able to establish to what extent corporate culture has affected the alliance. There is therefore need for further study in this area.