Competitive Strategies Adopted By Commercial Banks In Rwanda

Abstract

strategy is the unifying theme that gives coherence and direction to the decisions of an organization. It is the framework through which an organization asserts its vital continuity whilst managing to adapt to the changing environment to gain a competitive advantage. Firms under competition can either use generic strategies, marketing growth strategies or even management firm-specific strategies to respond to the environment. There are three basic generic competitive strategies, namely, cost leadership, differentiation and focus, to counter the fives forces intensifying industry competition. Managers have applied strategic approaches as a panacea to counter competitive challenges facing their firms. This study was a survey investigating competitive forces in the Rwandan market that affected the banking industry. It sought to find out the competitive strategies the commercial banks companies in Rwanda adopted in the face of various forces of competition in the industry. The research relied on primary data. The study found out that the industry was mainly characterized by the following: the challenges of competitors seeking greater market share, the threat of substitutes from competitors and the ever-changing customer needs and preference. On the contrary, information technology changes, strategic planning, managing customer relationships and security issues posed the least competitive challenge. When faced with the challenges, most companies reacted through strategies aimed at focusing on needs of customers, maintaining strong customer relationships, offering professional services to customers, innovating products and processes, improving banking systems, enhancing the banks’ corporate image, offering reputable quality products and services, controlling bank expenditures, and new product development. The least used strategies were reducing the banks’ overhead costs, maintaining low administrative costs, product re-engineering, strengthening marketing capabilities, relying on high quality research, and joining strategic alliances to reduce costs. This study has several recommendations to make. First the banking industry in Rwanda should be reorganized to allow for more competition. In a competitive market the most efficient and productive companies survive. The government should reduce its presence in the banking industry to allow for more competition from within and without the country. Mechanisms should be put in place to allow more globalization to embrace the amalgamation of the East African countries.