Strategies Adopted by Kenya Commercial Bank Group Ltd to Gain Competitive Advantage
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STRATEGIES ADOPTED BY KENYA COMMERCIAL BANK GROUP LTD TO GAIN COMPETITIVE ADVANTAGE BY MARGARET NYAMBURA THUO A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS, UNIVERSITY OF NAIROBI NOVEMBER 2015 Declaration This research project is my original work and has not been submitted for examination in any other University. Signature: ........................................ Date: ............................................ MARGARET NYAMBURA THUO D61/64383/2013 This research project has been submitted for examination with my approval as a University Supervisor. Signature: .......................................... Date: ............................................ PROF. EVANS AOSA DEPARTMENT OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS UNIVERSITY OF NAIROBI ii DEDICATION This project is dedicated to: To my Almighty God, who is the strength of my life. To my parents Gabriel Thuo and Jacinta Thuo who taught me the virtue of hard work and shaped me to whom I am today. They have seen me through my education and constantly encouraged me to strive for excellence. To my dear husband Francis, for his unfailing belief in my potential. To my dear son Smith and daughter Naomi for constantly encouraging and offering emotional support to complete my research project and who have over the years put a smile in my heart. iii ACKNOWLEDGEMENT I would like to take this opportunity to acknowledge those who supported me when I was working on this research project. My sincere appreciation goes to Prof Aosa, my project supervisor, for taking time out of his busy schedule to supervise my research project, and for his direction, assistance, and guidance. His recommendations and suggestions have been invaluable. Thank you! I would like to express my heartfelt gratitude to my respondents, who spared their valuable time from their tight schedules to accommodate and support my research initiative. Many thanks and may God Almighty bless you all. Finally to my dear family, colleagues, classmates and friends who encouraged and supported me when I was working on this research project. I thank you all. iv ABSTRACT Strategy is key in developing competitive advantage. Competitive advantage is key for success of organisations. Different organisations use different strategies to achieve competitive advantage derived from their capabilities. The Kenyan banking industry has been affected immensely by the business environmental changes such as technological innovations, globalization, privatization, implementation of economic reforms, increased customer demands and liberalization of both domestic and foreign markets that has led to increased competition, forcing banks to adjust their strategies in order to survive. It has had a drastic change where many non-banking financial institutions such as microfinance institutions (MFIs), building societies and Saccos are converting into fully fledged banks. This has led to a tremendous increase in the number of banks to the current 43 thereby setting in increased competition. KCB has risen to becoming the best performing bank in the banking industry in Kenya surpassing other banks in the industry that had consistent performance over the years. This study was therefore aimed at understanding what strategies KCB has adopted to gain competitive advantage over its peers in the Kenyan banking industry. The study adopted a case study design to carry out this research where an interview guide targeting 5 senior managers of the bank was used to collect data. Both primary and secondary data were sourced and analyzed through the Content Analysis method. The study revealed that KCB has adopted strategies such as invention and innovation of new products and services, quick and convenient sales and channels for more coverage, aggressive brand and targeted marketing, excellent customer experience, reliable and agile technology and systems, employee training and development, good corporate governance, risk management and customer centric operations to gain competitive advantage in the Kenyan banking industry. The study recommended that the bank should focus more on utilizing its large asset base more efficiently to generate higher profits than it is currently making. Through it operations, it should further improve efficiency in the delivery of its product and services to its customers, and reduce costs hence achieving higher profits as well. The major limitation of the study was that some respondents withheld some information they considered confidential and sensitive on the fear that it can leak to their competitors. v TABLE OF CONTENTS DECLARATION......................................................................................ii DEDICATION.........................................................................................iii ACKNOWLEDGEMENT......................................................................iv ABSTRACT..............................................................................................v CHAPTER ONE: INTRODUCTION.....................................................1 Background of the Study............................................................................1 1.1.1 Concept of Strategy......................................................................2 1.1.2 Concept of Competitive Advantage.............................................3 1.1.3 The Banking Industry in Kenya....................................................3 1.1.4 The KCB Group Ltd.....................................................................4 1.2 Research Problem.................................................................................6 1.3 Research Objectives.............................................................................7 1.4 Value of the Study................................................................................7 CHAPTER TWO: LITERATURE REVIEW.......................................9 2.1 Introduction..........................................................................................9 2.2 Theoretical Foundation of the Study....................................................9 2.3 Strategy in Organizations...................................................................12 2.4 Organizational Competitive Advantage..............................................15 CHAPTER THREE: RESEARCH METHODOLOGY.....................17 3.1 Introduction........................................................................................17 3.2 Research Design.................................................................................17 3.3 Data Collection...................................................................................17 3.4 Data Analysis......................................................................................18 CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSIONS.......................................................................................19 4.1 Introduction........................................................................................19 4.2 Background Information.....................................................................19 4.3 Strategies for Achieving Competitive Advantage at KCB................25 4.4 Discussion...........................................................................................34 CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS.......................................................................38 5.1 Introduction........................................................................................38 5.2 Summary of findings..........................................................................38 5.3 Conclusion..........................................................................................39 5.4 Recommendations..............................................................................40 5.5 Limitations of the study......................................................................41 5.6 Suggestions for Further Research.......................................................42 REFERENCES.......................................................................................43 APPENDICES.........................................................................................47 Appendix 1: Letter to Respondents.....................................................47 Appendix 2: Interview Guide..............................................................48 iv CHAPTER ONE INTRODUCTION 1.1 Background of the Study Strategy is a unifying (integrating) pattern of decisions and defines organization purpose, goals, objectives and priorities. The concept of strategy is a multi- dimensional concept viewed as a means of establishing the organizational purpose in terms of its long-term objectives, action programs, and resource allocation. Every organization has some form of strategy whether explicit or implied and it is these differences in strategy that determine whether an organization can gain competitive advantage or not. Competitive advantage is the strategic advantage one business entity has over its rival entities within its competitive industry. It relates to how effectively and efficiently a firm meets the wants and needs of its customers in the marketplace, relative to other organizations that offer similar products or services. Strickland (2003) view strategy as a deliberate search of ways of doing things in order to develop competitive advantage for the firm. The competitive advantage