Strategies Adopted by Commercial Banks in Kenya to Gain Sustainable Competitive Advantage

Abstract

In order to survive and thrive in any industry environment, an organization must compete. In order to create and gain sustainable competitive advantage for itself, an organization must compete. These conditions also hold in Kenya’s commercial banking industry. A commercial bank will compete against its peers in the commercial banking industry. To compete effectively, a bank must be aware of who it is competing against, so that it formulates strategy to out-compete its competitors. A firm in pursuit of competitive advantage must also identify those skills and resources that have the greatest potential to give it enduring competitive advantage. Firms will then hedge their strategies on these skills and resources so as to obtain and sustain competitive advantage. Theoretical research presents three main theories of competitive advantage; the resource based view, the dynamic capability theory and the game theory. The resource based view focuses on an organisation being a collection of resources whose performance depends on the ability of the organisation’s ability to use its resources. The dynamic capability theory emphasizes on the need for an organisation to have ability to create, adapt and reconfigure its dynamic capabilities, so as to refresh its resource stock to have competitive advantage. Game theory provides a method for the organisation’s executive team to identify objectives and potential strategies of competitors. The main generic strategies of competitive advantage are cost leadership, differentiation and focus. The commercial banking industry in Kenya is very competitive having 43 licensed commercial banks. These banks offer similar services and products. From the findings, the study implies that banks have to focus on differentiating their products and services as well as a number of activities in their value chain to create a perception of having unique value in the eyes of the customers. In so doing, banks will be able to charge a premium price for its products and services, attract new customers and investors, penetrate new markets with relative ease, attract new talented people seeking employment, attract reliable, reputable suppliers and also draw the attention of strategic partners seeking business alliances. In time, the strategies employed by banks and their various capabilities may allow banks to achieve a position of sustainable competitive advantage, which will in turn lead to increased revenues for the bank and will ultimately meet all stakeholders’ needs.