Strategic Responses And Competitive Advantage Of Commercial Banks In Kenya: A Case Of Equity Bank Branches In Nairobi City County

ABSTRACT

When there is an increase in competition of an industry, the profits by the members reduces. The banking sector in Kenya is no exemption, and thus, the commercial banks are formulating strategies to survive. The main objective of the study was to establish the effect of strategic responses on competitive advantage of commercial banks in Kenya focusing on Equity bank while the specific objective of the study wereto examine extent to which strategic positioning, strategic outsourcing, market segmentation and mergers and acquisitions affects competitive advantage of Equity bank. The study was guided by three theories namely resource based theory, resource advantage and resource dependence to explain the responses adopted by banks to gain competitive advantage. This study adopted descriptive cross section survey design.The unit of analysis was branches of the bank. Equity Bank maintains a network of 135 branches across Kenya, which includes 38 branches in Nairobi; therefore, the population was 135 branches of Equity Bank. The target population was the 38 branches in Nairobi County. There spondents of this study were top and middle management employees Equity Bank branches in Nairobi County. Stratifiedsampling methodwas used to group branches of Equity Bank into strata and afterward simple random sampling was subsequently be used. The study used primary data to achieve its objectives. Descriptive and inferential analysis were conducted on the quantitative data. The study findings indicated that strategic positioning, strategic outsourcing, market segmentation and mergers and acquisitionswere practiced to a large extent by Equity bank Kenya. The results further indicated that all the four strategic responses that is strategic positioning, strategic outsourcing, market segmentation as well as mergers and acquisition had a positive and significant effect on competitive advantage of Equity Bank. The study hence recommended that Equity bank and other commercial banks should invest more resources in strategic positioning practices like horizontal strategic alliances with peer companies in banking, downstream vertical strategic alliances with marketing firms and strategic alliances which stimulate generative knowledge flow so as to gain more competitive advantage in the banking sector. Furthermore, Equity bank and other commercial banks should engage more in strategic outsourcing in order to reduce/control costs, to gain access to world-class capabilities, to free up resources for other purposes, to free up resources for other purposes, as a way of sharing risks and due to lack expertise or difficulty in management so as to gain more competitive advantage in the banking sector. Another recommendation made by the study is that Equity bank and other commercial banks in Kenya should include market segmentation among their strategic responses since it leads to a positive significant effect on competitive advantage. They should engage in designing services perceived as unique by the clientele, geographical segmentation to develop products fitting a certain geographical area, differentiation based on the understanding of unique customer needs and seeking to meet them, demographic segmentation by developing products fitting certain demographic characteristics and designing services perceived as unique by the clientele. The study finally recommends that there is a need for commercial banks to also give mergers and acquisition a consideration in their strategic response as it leads to a positive and significant improvement in their competitive advantage.