Strategic Response to Competition in the Banking Industry A Case of Selected Local Banks in Nairobi

Abstract

Banks are faced with an increasingly competitive environment, replete with threats from non-bank institutions operating under different kinds of regulation. Changing regulations regarding banking provides opportunities as well as challenges. Explosive growth in information technologies has changed the way many individuals interact with their banks. This study sought to find out how banks are responding to competition in the industry. The study targeted local commercial banks in Nairobi. A total of 17 banks participated in the study. The Banks were selected by way of convenience sampling. The research design used was descriptive and integrated both qualitative and quantitative methods so as to harmonize both numerical data and non-numerical data. In the 1990s most of the banking activities such as money transfers from one bank to another could take 5-7 days. This has shifted and the focus has moved to customer perceived quality, especially when dealing with service operations. The banking industry is racing to develop the analytical and technological tools that will help them identify, attract, and build relationships with precisely those customers they want. Banks that want to capture and keep the lead will use what is learned about individuals to determine the product configurations, promotion tactics, pricing, service levels and channel mix that make sense for each customer. The strategies adopted include differentiation, low cost leadership, market segmentation, wide distribution network and high quality products and services. The study concluded that banks are involved in the strategic planning process and that is how they are able to address issues of competition. The study recommends that the companies organize their strategic planning processes in such a way that they will accommodate the Abstracts 73 knowledge of competitive strategies among managers. It is also recommended that banks should involve the whole organization in strategy formulation and implementation, then evaluate strategies and adjust where necessary.