Strategic Alliances and Competitive Advantage of Selected Commercial Banks in Kenya

Abstract

According to Porter (1985), firms can achieve competitive advantage by implementing a value-creating strategy that is not simultaneously being implemented by any current or potential competitors. Strategic alliances are helping organizations to fulfill customer demands, attain growth and become successful in the highly competitive and dynamic corporate world. The purpose of the study was to establish the effect of strategic alliances on competitive advantage of selected Commercial Banks in Kenya. The study respondents were 25 top management employees from the selected Commercial Banks in Kenya identified through purposive sampling technique. A self - administered questionnaire was used for data collection. Qualitative data was analysed using content analysis, through developing a thematic framework from the key issues, concepts and themes emanating from the open ended questions while the quantitative data was analyzed using descriptive statistics through SPSS v.20. Thereafter, the findings were presented in the form of tables and graphs. The study established that 50% of the respondents indicated that their banks’ decision to form strategic alliances with other firms was so as to generate more profits while another 28% of the respondents indicated that the decision to form strategic alliances was so as to increase their bank’s market share. Other factors highlighted as reasons behind the formation of strategic alliances included to reduce operational costs, to overcome market entry restrictions and slow market penetration, for risk sharing purposes, to achieve economies of scale, to learn new skills and knowledge, for sociopolitical factors/considerations, to increase efficiency and quality of services and for blocking a competitive threat. The study also found out that the existing strategic alliances had a significant influence on the banks’ competitive advantage. The study concluded that commercial banks in Kenya engaged in various kinds of strategic alliances including joint research and development, outsourcing, long-term supply arrangements, joint marketing ventures, franchises, mergers, acquisitions and joint ventures so as to bolster their competitive edge through the synergies and other benefits attributable to the strategic alliances. The study recommended that the banks should form strategic alliance driven by the need to differentiate their products and services within one or a number of target market segments. Use of strategic partnerships geared towards differentiated strategy would help the banks to gain more competitive advantage compared to their competitors in terms of market capture. The study further recommended that the banks’ management should initiate an appraisal of all the strategic alliances entered into with other firms with a view of identifying the most important limiting factors impeding their successful implementation in order to ensure that the constraints are systematically addressed so that the banks can leap optimal benefits of the strategic alliances.