THE EFFECT OF COST LEADERSHIP STRATEGY ON PERFORMANCE OF COMMERCIAL BANKS IN NAIROBI COUNTY, KENYA
THE EFFECT OF COST LEADERSHIP STRATEGY ON PERFORMANCE OF COMMERCIAL BANKS IN NAIROBI COUNTY, KENYA
Joan Nyambura Gitau - Jomo Kenyatta University of Agriculture and Technology, Kenya
Robert Mang’ana - Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
Performance of commercial banks is important because provision of finance is crucial for all sectors in the society comprising of companies, households and governments. However, the dynamic business environment has continued to exert a great impact on performance of all organizations globally. The purpose of this study was to determine the effect of competitive strategies on the performance of commercial banks in Nairobi County, Kenya. The specific objectives were to establish the effects of cost leadership strategy, focus strategy, differentiation strategy and innovation strategy on performance of commercial banks in Nairobi County, Kenya. The theories underpinning this study were Porter’s Generic Competitive strategies, Resource Based View (RBV) This study employed a descriptive research design and survey design. Since the listed banks are 40 in number, this study adopted a census survey where the entire population will be included in the study. The study adopted purposive sampling to select the senior managers as respondents in the study. A questionnaire consisting of both open and close-ended questions developed by the researcher in line with the objectives of the study was used to collect primary data. Quantitative data analysis was done with the help of SPSS version 25 software and included descriptive and inferential analysis. Inferential analysis involved multiple regression analysis to determine the relationship between competitive strategies on performance of commercial banks. From 120 questionnaires that were dispatched for data collection, 103 questionnaires were returned completely filled, representing a response rate of 85.8% which is very good for generalizability of the research findings to a wider population. Both descriptive and inferential statistics showed that cost leadership strategy, significantly influenced performance of commercial banks in Nairobi County, Kenya. The study concluded that one cost leadership strategy significantly influences performance of commercial banks in Nairobi County; in terms of effective use of cost leadership approaches such as low interest, low operating costs and competitive pricing can enhance performance of commercial banks. The study recommends that relevant management team of commercial banks should craft viable cost reduction strategies to reduce bank operation costs so as to enhance the banks’ financial and non-financial performance. For further research, a longitudinal study can be done, using time series data for a span of 5 years to assess commercial banks’ performance after adoption of selected competitive strategies.
