Evaluating The Effect of Digitalization on Competitive Advantage Among Select Commercial Banks in Kenya

Abstract

The onset of the COVID-19 pandemic accelerated the digitalization of commercial banks and this fast shift to digitalization posed challenges to banks as this did not match their strategic or long-term objectives thereby affecting their competitive advantage. Only 1 out of the 38 commercial banks had its digitalization model matched to its strategic plan. This motivated this research in evaluating effect of digitalization on competitive advantage among commercial banks in Kenya. Its specific objectives were to: analyse influence of digital capabilities, value proposition, and value creation on competitive advantage. The study was anchored on the resource-based view theory of the firm and the five forces model theory. A causal research design was adopted whereby the target population was 39 commercial banks as the units of analysis. The units of observation were a relationship and business managers from each of the banks which made for a target population of 78 respondents. A complete enumeration of the target population was used in the sample where a structured questionnaire was administered using Google Forms and the drop-and-pick later methods. Using SPSS, the data was first analysed descriptively followed by correlation and regression analysis to test association and effects among variables respectively. The findings revealed respondents ranked value proposition highest followed by value creation, and digital capabilities. There were positive and significant associations between all variables while only value proposition having a positive and significant effect on competitive advantage of commercial banks. Therefore, the study concludes that value proposition has a positive effect on commercial banks competitive advantage. This research recommends further research on how banks achieve their value proposition. Additionally, the research suggests future investigation involving exploring value proposition and value creation of digital banking products and services from a consumer perspective.