Strategies Adopted by Commercial Banks in Kenya to Gain Competitive Advantage

Abstract

The competrtrve environment of a business is a part of company's external environment that consists of other firms trying to win customers in the same market. Dealing with competition is never easy. Business organizations, especially the banking industry of the 21st century operates in a complex and competitive environment characterized by these changing conditions and highly unpredictable economic climate. The Kenyan Banking industry is the most competitive in the East African region according to a survey by IMF (Business Daily, 2013). The threat of more foreign banks coming into the industry is now more real than ever. Banks have to keep abreast with what is happening in order to stay afloat. This study adopted a cross sectional research design. The target population was all the commercial banks in Nairobi. As at 31st December 2012, there were 43 commercial banks in Kenya. This was a census survey in which all banks was involved in the study so as to ensure as much representation as possible. A structured questionnaire was used to collect the primary data. Responses were edited, classified, coded and tabulated to analyze the data. Data presentation was done by the use of frequency table's percentages and charts. This ensured that the gathered information is clearly understood by describing what the respondents are saying. The study found that commercial banks had adopted various competitive strategies which were, training of staff, product diversification, marketing, pricings, financial innovation strategies, financial inclusion strategies , research development, information communication technology and service and product distribution. The study found that commercial banks in Kenya were gaining competitive advantage through gaining market share, market penetration, through enhanced performance, through service delivery, increased customer loyalty, increased product diversification and through growth of the bank. There is need for commercial banks to adopt various financial inclusion strategies as this will enable them gain market share and reach the unbanked population. Through financial inclusion strategies the commercial banks will be able to reach more customers thus increase their market share and customer base. The findings of this study may be applicable to only 40 banks which responded and may not be generalized to all 43 banks in Kenya. Time was limiting a limiting factor more so because some of the bank managers are very busy. Bank managers were also hesitant to give information on competitive strategies for fear that it will give competitors an upper hand. They were however assured that this was purely for research and will be treated as confidential. There is need for a study to be conducted on factors influencing adoption of competitive strategies by commercial banks in Kenya. There is also need to study whether the same strategies are applicable to other sectors in the economy. The study recommends research on challenges faced in implementing the strategies by commercial banks in Kenya should also be done.