COMPETITIVE BUSINESS STRATEGIES ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA: CASE STUDY OF EQUITY BANK LIMITED
Caroline Muthoni Ndung’u - Masters Student, Jomo Kenyatta University of Agriculture and Technology, Kenya
Wicliffe Otieno - Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Gladys Rotich - Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
Competitive strategies which enable a firm to survive in a fierce competitive business environment and emerge stronger are the most valuable assets possessed by businesses as sources to competitive success are usually hard to determine and imitate. The relationship between the growing competitive business strategies and commercial bank’s financial performance in Kenya needs to be studied and establish whether these have contributed to their growth. The main objective of the study was to assess the effect of competitive strategies on financial performance of commercial banks. To meet this objective, a case study of Equity Bank Limited was carried out. The specific objectives were to establish the effect of differentiation, cost leadership, focus and organizational capabilities and innovation on financial performance of commercial banks. The target population was branch managers, credit managers, operations managers and senior managers based at Equity bank headoffice. A sample size of 128 was drawn using stratified sampling. Primary data was collected by use of questionnaires. 95 respondents participated in the survey translating to a response rate of 74%. A reliability test was done by carrying out a pilot survey using Crobanch Alpha method. Analysis was done by both quantitative and qualitative techniques. Quantitative technique involved use of tables. Data was analyzed using descriptive statistics and inferential statistics with the aid of Statistical Package of Social Sciences (SPSS). Correlation and regression analysis were utilized to study the nature and strength of the relationship between the independent and dependent variables. The findings revealed positive significance relationships between the variables all set at p<0.05. All the variables were statistically significant with organizational capabilities being the most significant at 0.0011. The study noted that competitive strategies adopted by banks have an effect on its financial performance. By collaborating with other institutions to increase uptake of the bank products and has been able to invest in innovative technologies not only aimed at improving their performance but also to maintain a strong brand/ image identification. The bank has also been able to improve on its financial performance over the years by developing new products/ services to meet customer needs. Based on the findings, the study concluded that differentiation, focus, cost leadership, organizational capabilities and innovation have a significant positive effect on financial performance of commercial banks. The study recommended that commercial banks should collaborate with other institutions to increase uptake of their products and also commercial banks should put more emphasis on development of skills continually and prioritize on innovation.
