RESPONSES OF JUBILEE INSURANCE COMPANY OF KENYA LIMITED TO CHANGING ENVIRONMENTAL CONDITIONS BY NYAMEMBA PATRICK N. TUMBO 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 2012 DECLARATION BY CANDIDATE This proposal is my original work and to the best of my knowledge has not been submitted for examination or a degree award in any other university. Z^rpZ— Nyamemba, Patrick N. Tumbo DATE D61/P/7932/2001 SUPERVISOR This proposal has been submitted for examination with my approval as the university supervisor. Prof. Martin Ogutu DATE jH j'3-01'2- Department of Business Administration, School of Business, University of Nairobi ii ACKNOWLEDGMENT I would like to acknowledge the contribution of my supervisor Professor Martin Ogutu and my Moderator Dr. John Yabs and friends for their valued contribution and input without which this study would not have been finalized within the stipulated time. in DEDICATION I would like to dedicate this study to my family and in particular to my wife Mary Kerubo Nyamemba, son Bernard Masogo Nyamemba and daughters’ Beverlyne Kemunto Nyamemba, Beryl Nyamoita Nyamemba and Britney Esther Nyamemba as well as my friends all of whom have always encouraged me to further my studies and continuously encouraged me throughout the study and course. IV LIST OF ABBREVIATIONS CBK: Central Bank of Kenya CEO: Chief Executive Officer CM A: Capital Markets Authority IRA: Insurance Regulatory Authority JICK: Jubilee Insurance Company of Kenya Limited JHL: Jubilee Holdings Limited KRA: Kenya Revenue Authhority NSE: Nairobi Securities Exchange RBA: Retirement Benefits Authority ta ble o f c o n t e n t s DECLARATION......................................................................................................................................... ii ACKNOWLEDGEMENT........................................................................................................................iii DEDICATION ......................................................................................................................................... iv ABBREVIATIONS........................................................................................................................................... V ABSTRACT ......................................................................................................................................viii CHAPTER ONE: INTRODUCTION........................................................................................................1 1.1 Background of the Study.................................................................................................................... 1 1.2 Research Problem .....................................................................................................................8 1.3 Objectives of the Study ........................................................................................................... 9 1.4 Value of the Study .................................................................................................................... 10 CHAPTER TWO: LITERATURE REVIEW ................................................................................... 11 2.1 Introduction ................................................................................................................................ 11 2.2 The Concept and Theory of Strategy .................................................................................... 11 2.3 Organization and Business Environment ...............................................................................14 2.4 Responses to Environmental Change .....................................................................................18 2.5 Empirical Review ....................................................................................................................20 CHAPTER THREE: RESEARCH METHODLOGY ............................................................ 23 3.1 Introduction .............................................................................................................................23 3.2 Research Design ......................................................................................................................23 3.3 Data Collection ........................................................................................................................23 3*4 Data Analysis ..........................................................................................................................24 vi CHAPTER FOUR: FINDINGS & DISCUSSIONS ................................................................... 25 4.1 Introduction .............................................................................................................................25 4.2 Bio-data of the Interviewees ................................................................................................... 25 4.3 Forces of Change in the External Environment ...................................................................... 26 4.4 Responses to the External Environmental Conditions .......................................................31 CHAPTER FIVE: SUMMARY, CONCLUSIONS & RECOMMENDATIONS ................40 I 5.1 Introduction ............................................................................................................................41 5.2 Summary & Conclusions ........................................................................................................ 41 5.3 Limitations of the study ......................................................................................................... 44 5.4 Recommendations for Further Research ...............................................................................45 5.5 Implications for Policy & Practice ......................................................................................... 46 REFERENCES ......................................................................................................................... 47 APPENDICES......................................................................................................................................... 50 APPENDIX I: Interview Guide ............................................................................................ 50 APPENDIX II: Letter of Introduction....................................................................................57 VII ABSTRACT The main objective of this study was to identify responses of Jubilee Insurance to the changing environmental conditions. The study also sought to determine the forces of change in the external environment of Jubilee. This study was occasioned by the realization that Jubilee Insurance has been experiencing environmental turbulence such as rapid political, economic, technological and socio-cultural changes. Also, little research has been undertaken in this area. The few researches done for example those of Mriti (2010) on responses by Fidelity Insurance to the changing environment and Keranga (2009) on responses by Government of Kenya Press to the external environment were never exhaustive. This study adopted a case study approach of the Jubilee Insurance firm. Data was collected by using an interview guide. The researcher himself interviewed all the top ten managers of Pensions, Finance, Human resource, Business Development, Operations, Marketing, Public Relations, ICT, Legal and Underwriting departments. Data was analyzed by content analysis. The study findings indicate that the Jubilee Insurance faced challenges in terms of increased competition, changes in customer tastes and preferences, technology and economic changes. The study findings identified various response strategies by Jubilee Insurance. These included generic strategies of cost leadership, differentiation and focus. Strategic leadership was identified as the most important Strategic response by jubilee insurance. Other responses included product diversification, market development and use of modem technology as well as the use of marketing strategies like improved distribution and fair pricing. The findings of the study imply that Jubilee Insurance should invest more in R&D, Innovations and the creation of a learning culture. The study faced constraints of lack of enough time, resources and unwillingness of the interviewees to give the correct responses. It is hoped that the findings of this study will be of great value to various groups like other industry players, the Jubilee management and scholars. Given the limitations, the researcher did not fully cover the objectives set out and therefore recommends that further research be done on the nature of competition posed by Jubilee Insurance’s other markets outside Kenya and the role of strategy in the growth of Jubilee Insurance business. CHAPTER ONE INTRODUCTION 1.1 Background of the Study In the recent past it has become a norm that the external business environment has become a significant player in the way of doing business by firms towards the realization of their goals. Firms draw inputs from the environment and from within themselves which they translate into outputs for consumption by the environment and the firm itself. The changes in the environment therefore have a profound effect on the nature of opportunities and risks they pose to the firms. It becomes necessary for organizations to align themselves with the environment for their