Documente Academic
Documente Profesional
Documente Cultură
-0827 )
Received in 23rd June 2016 Received in Revised Form on 4th August 2016 Accepted on 8th August 2016
Abstract
A company’s strategy is a management game plan for growing the business, starting out a market
position, attracting customers, competing successfully, conducting operations and achieving targeted
objectives. The main purpose of the study was to find out the strategies adopted by commercial banks in
Kenya for competitive advantage, a case study of Equity bank. Thus the study sought to achieve the
following objectives; to establish the strategies adopted by Equity bank for its quest for competitive
advantage and to establish the role played by competitive strategies in the growth of Equity bank. The
study employed survey research design and the target population comprised 28 employees of Equity bank.
Face to face interviews and structured questionnaires was applied to the management and general staff to
collect primary data. The generated data comprised of primary (field survey) and secondary (period
survey) sources. The data was analyzed through use of quantitive and qualitative methods and the
obtained findings were presented in tables and figures. The study identified the strategies adopted by
Equity bank as ; provision of variety of products, high level of technology in place ,competent employees,
attractive interest rates , competent customer care and giving back to the society through schemes such as
sports and scholarships for students. These strategies were adopted for survival, coping up with
competition, profit making and growth. The study recommends that there should be an inclusion of other
forms of competitive strategies for instance offering and that the bank to adopt competitive strategies that
benefit the clients also.
Introduction
The business environment in which commercial In most industries, companies have considerable
banks operate is rapidly changing (Barringer strategic freedom in choosing the strategy
and Bluedorn, 1995). Therefore, a firm to (Porter, 1996). Accordingly, rivals strive to
compete successfully it needs to be improve their performance and market standing
competitively a head of the rest. A company’s by driving down some costs, while others
strategy is a management’s game plan for pursue product priority or personalized
growing the business, starting out a market customers service or development of
position, attracting and pleasing customers, competencies and capabilities that rivals cannot
competing successfully, conducting operations march. According to Thompsonet al.,(2006), the
and achieving targeted objectives. A company’s central thrust of a company’s strategy involves
strategy thus indicates the choices its managers crafting a move to strengthen the company’s
have made about specific actions and plans in long term competitive position and financial
order to achieve the targeted outcomes. performance. There is no other way to achieve
dramatic and durable competitive advantage; by
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dynamic markets have become but failed to emphasizes improvement in the competitive
bring a way out of such a quagmire as far as position of a corporation’s products or services
strategies are made. in the specific industry served by that division.
Thompson (1998) considers the essence of good Business strategy is essentially concerned with
strategy making as that of building a market how the firm competes within a particular
position strong enough and organizations market or industry. If the firm is to prosper
capable enough to produce successful within an industry, it must establish a
performance despite unforeseeable events, competitive advantage over its rival’s which
potential competition, and internal difficulties also known as competitive strategy is. It focuses
Ohmae 2003) emphasizes on strategy as the way on improving the competitive position of a
in which a corporation endeavors to company’s services or products within the
differentiate itself positively from its relative specific segment that the company or its
strategies to better satisfy customer needs. business services (Hunger, 1996). Competitive
Strategy is therefore considered as a preparation strategy is a key area of strategy and must
for the uncertainty of the future, by positioning therefore grow out of a sophisticated
the enterprise in the form of making it understanding of the rules of competition and
adaptable, and thus prepared for the future. determine an industry’s attractiveness.
However Omar (2003) fails to describe how Competitive strategy ultimately aims at
competitive strategies prepare the firm to changing the rules of competition to favour a
confront the future. If the strategies position the firm (Hunger, 1996). The authors, however,
company in the market they should be tailored failed to acknowledge the work of other staff
to specific market situations to capitalize on its and the management in formulation of
niche. competitive strategies.
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price/low added value, low price, hybrid Porter’s Generic Competitive Strategies
differentiation, focused differentiation, and The aim of any firm should be to develop a
increased price/standard, increased price/low distinctive competence that is greater than its
value/ standard price. competitors. Porter (1997) identifies three
generic strategies for achieving the above
The logic behind the General Electric model is
average performance in an industry and these
based on the argument that it is not always
are cost leadership, Differentiation, and Focus.
possible to develop objectives or make
Each strategy is a different approach to creating
investment decisions solely on the basis of
and sustaining competitive advantage (Lowes et
growth-share matrix. This model identifies
al, 1998). The differences among the three
business units in terms of market attractiveness
generic strategies are illustrated in figure 2. To
and business strengths like the glories of
be an average performer, a firm must generally
planning or the wonders of core competences.
make a choice amongst them rather that attempt
Unfortunately, the process will only work for
to address all of them at once. Any enterprise
them when they deal with the entire
not following any of the strategies identified is
organization. However Ansoff’s (2000) Matrix
said to be stuck in the middle, which places it in
focused on competitive marketing strategies. It
a very poor position and although successful it
should have encompassed all types of strategies
would not survive if there was an increased
for general performance. The lesson in all this is
competitive pressure.
that there is a need for a wider system
perspective and a better practice, not neater, but
narrow technique or theory.
Strategic Advantage
Uniqueness perceived
Particular FOCUS
Segment only
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buyers consider essential. The value of a cost The advantage or uniqueness maybe in form of
advantage depends on its sustainability, customer service, design, brand image or
whether rivals find it easy or inexpensive to technology (Porter, 1997) Differentiation extends
imitate the low cost methods will determine the beyond the characteristics of the product or
duration of the advantage. The cost leadership service to encompass every possible interaction
strategy benefits the firm in that it is able to between the firm and its customers.
withstand intense price competition and buyers Differentiation strategies are not about pursuing
may appreciate the offer for low prices uniqueness for the sake of being different but
(Thompson and Strickland, 1998). New entrants about understanding the product or service and
are also deterred by low cost capabilities and the customer (Grant, 1998). Differentiation
supply price increases are more easily absorbed. insulates against competitive rivalry because of
The greatest danger of cost leadership strategy is brand loyalty customers and resulting lower
in the competitor’s ability to find ways of sensitivity to price. The strategy leads to higher
producing at a lower cost and beat the cost margins, which helps in dealing with supplier
leader at his own game. The competitor’s power. The buyer is also mitigated since buyers
ability to imitate easily the cost leader’s methods lack comparable alternatives to choose from and
also poses a great risk. Cost leadership therefore are therefore less sensitive to price.
imposes severe burdens on the firm to keep up
its position through investing in modern Focus Strategy
equipment and being alert for technological This is a strategy about identification of a
improvements. Technological change and low particular customer segment or geographical
cost learning may however nullify past market and coming up with products suitable
investments. Another great risk of the strategy is for that segment. It is built around serving a
that the single-minded desire to reduce costs particular target very well and once the segment
may cause loss of sight of changes in customer’s is identified. Then the firm may pursue either
tastes. A company thus while making decisions cost or differentiation strategies (Porter 1997).
to reduce cost may drastically affect demand for The target segment may be defined by
the product due to the shifts in consumer tastes. geographical uniqueness, specialized
Porter (1997) doesn’t explain how cost requirements, in using the product or by special
leadership strategies will coordinate costs and product attributes that appeal only to segments
maximize profits hence performance members.
Cost focus is a low competitive strategy that
Differentiation Strategy focuses on a particular buyer group or a
Differentiation strategy is where the business geographic market and attempts to serve only
creates differential advantage through features this niche. It seeks a cost advantage in its
or services that set it apart from others in the segment (Hunger, 1995). Differentiation focus
market. The essence of differentiation is to be concentrates on a particular buyer group,
unique in ways that are valuable to customers product line segment while seeking
and that can be sustained (Pearce and Robinson, differentiation in its target segment. It seeks to
1997). For a company to be successful in the offer segment members something they perceive
strategy, it has to study buyers’ needs and is better. According to Porter (1997), the target
behaviour carefully to learn what they consider market segments must either have buyers with
important, with value and what they are willing unusual needs or else the production and
to pay for it. There is almost no limit to a firm’s delivery systems that best serve the market
opportunities for differentiating its offering, segment must differ from that of other industry
although the range of differentiation segment. Focusing is attractive where the
opportunities depends on the nature and segment has good growth potential and the
characteristic of the product. However, it has focusing firm has the capabilities and resources
been claimed that anything can be turned into a to serve the targeted niche effectively.
value added product or services for a well A focus niche can suddenly disappear because
defined or newly created market (Peters, 1987). of technology change of changes in consumer
taste. The focuser cannot move easily to new
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Findings
Table 4.4: Strategies Adopted by Equity for its quest for competitive advantage
Responses
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It was noted from the table that the bank had a the characteristics of the product or service to
clear view regarding competitive strategies encompass every possible interaction between
adopted for competitive advantage. 100 percent the firm and its customers.
of respondents in bank strongly agreed that An analysis of top management interview
variety of products offered, nature of technology schedule equity bank confirmed that they were
in place, competent employees, attractive clear about the role of competitive strategies.
interest rates, customer care and social They concurred that the ultimate aim of
responsibility through schemes such as sports competitive strategies is to develop a distinctive
and scholarship for students were being competence greater than its competitors.
employed. This concurs with Pearce and
Robinson, (1997) who observed that competitive Role played by Competitive Strategies in the
strategies is achieved through differentiation Growth of Equity bank
which may be in form of customer service, An examination of the questionnaire response
design, brand image or technology. This is pertaining the role played by competitive
further supported by Porter (1997) who strategies in the growth of Equity bank for each
mentioned that differentiation extends beyond of the 71 respondents revealed the information
shown in Figure 4.3
.
Survival
41.7%
25.0%
Profits
33.3%
As shown from the figure 4.3, survival with 41.0 25.0 percent and 33.3 percent respectively. The
percent response was identified as the main role results are in line with Porter (1996) who found
played by competitive strategies employed by out that the essence of strategy formulation is
the bank. Other reasons identified included: coping up with competition. He stated that
coping up with competition and profit making companies pursue competitive strategies to gain
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a competitive advantage that allows them to Strategies that could enhance growth and
outperform rivals and achieve above average development in Equity bank
profitability. The researcher sought to establish strategies that
An analysis of top management interview could enhance growth and development in
schedule of the bank confirmed that competitive Equity bank. An examination of the
strategies through features or services creates questionnaire response pertaining to strategies
differential advantages that set it apart from that could enhance growth and development in
others in the market. The essence of Equity bank is revealed in the Table 4.6 below.
differentiation is to be unique in ways that are
valuable to customers and that can be sustained.
As shown in the table all the respondents 100% Discussions and Conclusions
concurred that expanding the existing pool of Regarding the strategies adopted by Equity
human resource was very paramount is bank for its quest for competitive advantage, the
ensuring the competitive advantage of the bank, study established that variety of products
conducting customer satisfaction research, offered, nature of technology in place,
drawing up strategy implementation budget, competent employees, attractive interest rates,
Policy on human resource recruitment and customer care and corporate social
Policy on competitive information system. This responsibility through schemes such as sports
findings concur with Pearce & Robinson (1997) and scholarship for students were the main
who mentioned that customers have become strategies employed by the banks. Concerning
demanding and the loyalties are diffused if they the role played by competitive strategies in the
think a bank is not serving them well and growth of Equity bank, the study established
therefore having a good relationship with that competitive strategies played significant
customers in a service industry is the most roles in this bank. In particular, the study
important thing. Customers want to have a established that competitive strategies were
sense of belonging that will keep them from employed for survival, coping up with
seeking alternative (Ziethamlet al, 1996). competition, profit making and growth of the
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bank. Regarding the challenges facing Equity Competitive strategies in the banking industry
bank in the adoption of competitive strategies, could be enhanced by conducting customer
the study identified that that imitation of the satisfaction research, drawing up strategy
same strategy by competitors, the changing implementation budget, policy on human
client/customer preference and strategy bun-out resource recruitment and policy on competitive
were the biggest challenges facing the banks. information system.
Regarding the strategies that could enhance
growth and development in equity bank the Based on the findings, the study forwards the
study identified that conducting customer following possible recommendations:
satisfaction research, drawing up strategy
implementation budget, policy on human (i) On the basis of the findings
resource recruitment and policy on competitive documented, the researcher observed
information system would yield better variety of products offered, nature of
competitive advantage. technology in place, competent
In relation to the findings of the study, it can be employees, attractive interest rates,
concluded that there are different strategies customer care and giving back to the
adopted by Equity bank for its quest for society through schemes such as sports
competitive advantage. Specifically, variety of and scholarship for students therefore
products offered, nature of technology in place, are is need to include other forms of
competent employees, attractive interest rates, competitive strategies such as offering.
customer care and giving back to the society (ii) Although Competitive strategies play a
through schemes such as sports and scholarship very crucial role in the banking sector in
for students were the main strategies employed the growth of Equity bank, it was
by Equity bank. observed that competitive strategies
Competitive strategies play a very crucial role in were adopted for: survival, coping up
the banking sector in the growth of Equity bank with competition, profit making and
it was observed that competitive strategies were growth. There is need therefore to adopt
adopted for survival, coping up with competitive strategies that benefit
competition, profit making and growth. A range clients also.
of challenges faced by the bank while adopting There is need to for the bank to avoid imitation
competitive strategies identified were; imitation of the same strategy from other banks. The bank
of the same strategy by competitors, the need to develop a working research and
changing client/customer preference and development department and develop their own
strategy burn-out. strategies without imitation.
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