An Assessment of the Effectiveness of Competitive Strategies by Commercial Banks: A Case of Equity Bank

Abstract

Commercial banks in Kenya are facing stiff competition necessitating the design of competitive strategies to guarantee their performance. These commercial banks have to consider how to enter a market and then build and protect its competitive position. Banks begin to realize that no bank can offer all products and be the best or leading bank for all customers. Banks should therefore not only come up with strategies to counter the competition but also measure the effects of the combined strategies that they employed. The purpose of this study was to assess the effectiveness of competitive strategies adopted by Commercial Banks in response to demand for banking services in Kenya and employed a descriptive research design. The study’s population comprised of the employees of equity bank based at the head office in Nairobi. Structured questionnaires were administered to 44 respondents selected using stratified sampling technique. Data was analysed in form of frequencies and percentages and presented in form of tables and graphs. The study found that equity bank uses different competitive strategies among them the combination strategy, cost leadership strategy, differentiation strategy, and focus strategy. The main source of competition for equity bank is external. The study also found that equity bank possesses various strengths that make it survive in the market or compete favourably against other firms. The research established that equity bank is exposed to opportunities that would enable it to compete favourably against other banks in future. The study found that equity bank makes organizational changes that make it to remain competitive in the banking industry in Kenya. The bank is faced by many challenges in the implementation of the competitive strategies. The study found that there was a positive correlation between competitive strategy effectiveness; and innovation, customer focus, bench marking and differentiation which were found to be statistically significant. The researcher recommends that the commercial banks improve their information system, come up with effective pricing strategies, and adopt advanced technology. The government should come up with relevant policies regarding competition in the industry, and create an enabling environment for investment and market competition. The researcher recommends further research in the area of the factors affecting the effectiveness of competitive strategies in dealing with falling demand of banking services. The research also recommends further study on the effect of competition on the performance of commercial banks in Kenya.

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