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INFLUENCE OF STRATEGIC MANAGEMENT PRACTICESON
PERFORMANCE OF COMMERCIAL BANKS IN KENYA
BY
FATMA NDUNG’U MUIRURI
SUPERVISOR: PROFESSOR FRANCIS KIBERA
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
2017
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DECLARATION
This Research Project is my original work and has not been submitted for a Degree in any other University.
Signed _______________________________ Date_________________________
Fatma Ndung’u Muiruri
D61/75514/2014
This Research Project has been submitted for examination with my approval as the Student’s
University Supervisor.
Signed______________________ Date______________________
Francis N. Kibera, PhD
Professor of Marketing
Department of Business Administration
School of Business
University of Nairobi
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ACKNOWLEDGEMENT
First, I thank the Almighty God, Allah (SWT) for the gift of life and for giving me the
ability, skills and energy to be able to complete this Project. As without Allah, I wouldn’t
have made it thus far.
Secondly, special thanks go to my supervisor, Professor Francis Kibera and my
moderator Professor Martin Ogutu, for providing unlimited, invaluable and active
guidance throughout the study. Their immense command and knowledge of the subject
matter enabled me to appropriately shape this project.
Thirdly, I also thank my mother; Zubeida Mohamed, my brother; Sameer Muiruri, My
Sister; Maryam Njeri together with Marle, Lj, Alune, not forgetting Keanu and my entire
family for their encouragement. Their unwavering support and prayers has finally bore
fruit.
Finally, I owe my immense gratitude to persons’ who in one way or another contributed
towards completion of this project especially Mrs. Mary Wamae; Equity Group Holdings
PLC, Company Secretary & Director Corporate Strategy, Mr. Godfrey Maingi and Mr.
Patrick Nthenge.
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DEDICATION
This work is dedicated to my late father, Paul Ndung’u Muiruri, who instilled in me the
significance and value of education.
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ABSTRACT
The practice of strategic management has gained significance over the years, especially in
the banking industry in Kenya. This is due to the change in both internal and external
environment, the result of which is witnessed through the mergers and acquisitions of
banks in Kenya. It is in light of the forgoing, that this research was undertaken to find out
whether, commercial banks in Kenya practice strategic management and whether, it has
an effect on financial institution. Primary data was collected through questionnaires. The
population was 42 banks out of which 33 banks gave a complete response which
amounted to a feedback per centum of 78%. The study revealed that strategy formulation
process was highly practiced in most banks in Kenya, however the performance of tier
one banks were impeccable due to the implementation process that formulates the full
circle of strategic management practice. The findings portrayed that the banking industry
had been affected in both internal and external environment. Most banks last year alone
have been vastly affected in the change of legal environment that has seen a number of
banks reporting low profitability in their annual financial report. This however, has not
deterred the tier one banks in reporting profits, as they invest in technology and system to
compete with the change in environment. This has shown that strategic management
practice has an influence in the organizational performance. The study has further shown
that there is a need to formulate strategy that would guide the banks to its objectives
based on its resources. In that regard there is need for further research on the influence of
strategic implementation and evaluation process on institutional performance.
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TABLE OF CONTENTS
DECLARATION................................................................................................................................ ii
ACKNOWLEDGEMENT.................................................................................................................. iii
DEDICATION .................................................................................................................................. iv
ABSTRACT ....................................................................................................................................... v
LIST OF TABLES .............................................................................................................................ix
ABBREVIATIONS AND ACRONYMS ............................................................................................... x
CHAPTER ONE: INTRODUCTION .................................................................................................. 1
1.1 Background of the Study ........................................................................................................ 1
1.1.1 Strategic Management Practices ................................................................................... 2
1.1.2 Organizational Performance ......................................................................................... 4
1.1.3 The Banking Industry in Kenya .................................................................................... 4
1.1.4 Commercial Banks in Kenya ........................................................................................ 5
1.2 Research Problem.................................................................................................................. 6
1.3 Research Objectives .............................................................................................................. 8
1.4 Value of Study ...................................................................................................................... 9
CHAPTER TWO: LITERATURE REVIEW ..................................................................................... 10
2.1 Introduction ........................................................................................................................ 10
2.2 Theoretical Foundation ........................................................................................................ 10
2.2.1 Resource-Based View (RBV) ................................................................................... 10
2.2.2 McKinsey 7S Model................................................................................................ 11
2.2.3 Porter's Theory of Competitive Advantage ................................................................. 11
2.3 Evolution of Strategic Management ....................................................................................... 12
2.4 Strategic Management Practices and Organizational Performance.............................................. 14
CHAPTER THREE: RESEARCH METHODOLOGY ...................................................................... 16
3.1 Introduction.............................................................................................................................. 16
3.2 Research Design ....................................................................................................................... 16
3.3 Population of the Study.............................................................................................................. 16
3.4 Data Collection ......................................................................................................................... 16
3.5 Data Analys is ........................................................................................................................... 17
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4.1 Introduction ........................................................................................................................ 18
4.2 Data Analys is ..................................................................................................................... 18
4.3 Findings on the Strategic Formulation Practices of Banks inKenya ............................................ 18
4.3.1 Vision Statement ...................................................................................................... 18
4.3.2 Mission Statement .................................................................................................... 19
4.3.3 Understanding Values ............................................................................................... 20
4.3.4 SWOT Analys is ....................................................................................................... 21
4.3.5 Understanding Issues that Influence the Bank ............................................................... 22
4.3.6 Establishing Long term Objectives ............................................................................. 23
4.3.7 General Strategies .................................................................................................... 24
4.3.8 Selecting Strategies to Pursue..................................................................................... 25
4.4 Strategic Implementation Practices of Banks inKenya .............................................................. 26
4.4.1 Policy Support ........................................................................................................ 26
4.4.2 Financial Capac ity................................................................................................... 27
4.4.3 Motivation and Ownership ....................................................................................... 29
4.4.4 Board Support ........................................................................................................ 30
4.4.5 Organization Structure ............................................................................................. 30
4.4.6 Open to Change ...................................................................................................... 31
4.4.7 Human Resources ................................................................................................... 32
4.5 Performance of Commercial Banks in Kenya .......................................................................... 33
4.6 Discussion of Results .......................................................................................................... 34
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS ................................ 36
5.1 Introduction ........................................................................................................................ 36
5.2 Summary ofFindings............................................................................................................ 36
5.3 Conclusion ......................................................................................................................... 37
5.4 Limitations of theStudy ........................................................................................................ 37
5.5 Recommendations ............................................................................................................... 38
5.6 Further Research ..................................................................................................................... 39
REFERENCES ................................................................................................................................ 40
APPENDICES.................................................................................................................................. 43
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Appendix A: Strategic Management Practices Questionnaire ................................................................... 43
Appendix B: List of Commercial Banks ................................................................................................ 51
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LIST OF TABLES
Table 4.1: Vision
Statement………………………………………………………………..….Error! Bookmark not
defined.9
Table 4.2: Mission Statement………………………………………………………………....29
Table 4.3: Understanding
Values……………………………………………………………...Error! Bookmark not
defined.
Table 4.4: SWOT
Analysis……………………………………………………………………Error! Bookmark not
defined.
Table 4.5: Understanding Issues that Influence the
Bank……………………………………..Error! Bookmark not defined.
Table 4.7: Generate
Strategies………………………………………………………………...Error! Bookmark not
defined.
Table 4.8: Selecting Strategies to Pursue………………………………………………...........34
Table 4.9: Policy Support…......................................................................................................35
Table 4.10: Financial Capacity………………………………………………………………..36
Table 4.11: Motivation and Ownership…………………………………………………….…37
Table 4.12: Board Support……………………………………………………………………38
Table 4.13: Organizational Structure…………………………………………………………39
Table 4.14: Open to Change……………………………………………………………….…40
Table 4.15: Human Resources………………………………………………………………..41
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ABBREVIATIONSAND ACRONYMS
CBK - Central Bank of Kenya
EBKL - Equity Bank (Kenya) Limited
KCB - Kenya Commercial Bank of Kenya
KShs. - Kenya Shillings
GDP - Gross Domestic Product
MFI - Micro Finance Institution
RBV - Resource-Based View
SWOT - Strength Weakness Opportunities and Threat
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CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Strategic management procedure in an organization assists management in the classification of
immediate actions that must be taken in to consideration on implementation of the organization’s
strategy (Pearce & Robinson, 2008). Setting control process is an ambit of the strategy evaluation
which enables the Organization obtain response in respect to the strategy being implemented and
conclude whether the best results are achieved (Hill & Jones, 2001; Steiner, 1997). Strategy
evaluation and control separates the actual performance of a firm to a desired performance of a
firm.
Competitive market forces, is a double edge sword, it can work in favour of a firm or in its
detriment. Through competitive advantage approach, commercial banks would be able to defend
itself from the competitive forces (Porter, 1980).Numerous essential assumptions are contained in
the competitive forces framework on the basis of the origin of strategy process and competition
(Porter, 1980). The other theory is the resource based theory, this theory observes that
organizations are defined by its resources that enables it to gain strategic advantage over other
firms’ and its unique blend of its assets, skills, intangibles and capability as a firm (Wenefeldt,
1984).
Commercial Banks in Kenya must accentuate on to strategic assessment process with the same
enthusiasm as formulation and implementation as this is the backbone to effective strategic
management process. Banks are to espouse strategic management models that suit their overall
objectives and vision. Hence, the banks are required to use the tools of evaluation such as
Strength Weakness Opportunity and Threats and Political, Environmental, Social, Technological,
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Environmental and Legal analysis that is by incorporating the external and internal factors in its
evaluation.
Strategic management practice is an epitome of any organization successful performance. It is
evident and can be visibly comprehended in blue chip banks such as EBKL and KCB among
other Tier 1 banks that have still managed to report profits during its last financial year results of
2016. This notwithstanding the immense change in the external environment; during the last
financial year 2016 banks have been wavering in a storm of uncertainty in the external
environment. This has seen the collapse of three potent banks that is Chase bank, Dubai Bank
and Imperial Bank. Thus the strategy that EBKL and KCB are able to implement within its
organization has seen it rise above all odds to ensure that it maximizes its profits through
strategic management practices in setting up long-term goals for the organization.
Strategic management practice in every organization is guided by the strategy formulation,
implementation, evaluation and control (Wheelen& Hunger, 2008). Strategy formulation is
important for any organization as it effectively develops long-term plans for the efficient
management of the external or internal environmental opportunities and strength, in the wake of
the corporate strength and weakness (Wheelen& Hunger, 2008).
1.1.1 Strategic Management Practices
The concept of Strategic Management involves making decisions and taking action to envision
the organizations goals and vision (Bakar et al, 2011). Therefore this means that organizations
need to plan ahead taking into consideration the internal and external environmental changes that
may affect the organization’s long-term target. The combination of decisions and action brings
forth formulation and implementation of the organizations objectives (Pearce & Robinson, 2005).
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Competitive position of a firm is viewed through the key strategic management practices that is
planning, implementation, evaluation and control.
Strategy has different meanings in an array of organizations. Among the definitions of strategy as
presented by various authors and jurists of strategic management spanning the years 1962 to 1996
include. The determination of the organization’s long-term objective and goals as result of which
the organization structures an action plan and resource allocation is known as strategy (Chandler,
Jr 1962). Therefore from the definition, it can be deduced that every organization has its own
strategy, the strategy of any organization is intertwined with the enduring objective and goals of
the business. This further extends to the organization’s resource allocation to implement these
goals hence bringing out the means to an end.
The true meaning of strategy has been envisaged by the father of strategy, (Porter,1996), argued
that strategy is about competitive advantage through diversification, by being different and
unique in the organization’s products and services , having a clear and exactable view of how to
position yourself uniquely in your industry. An organization with a strategy is able to survive the
change in the environment whether external or internal. Different strategists have differing
opinion on how to effect a strategy. Kay (2000) argues that gone are the days where strategy is a
mode that depicts planning or visioning but now it is centered on examining its influence in an
organization.
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1.1.2 Organizational Performance
Organizational performance this is the transformation of inputs into output this brings about the
economy, efficiency and effectiveness (Chen &Barnes, 2006).Organization’s success is due to
its performance(Bass &Rigio, 2006; Drucker, 2007).There is lack of unison on the actions to be
used in evaluating the organizational performance (Scott& Davis, 2007).
Organizational performance is streamlined with the company’s objective and goals. It is said that
an organization performance on analysis would reflect its financial performance, market
performance and shareholder value performance. In this study we majorly concentrate on the
influence of strategic management practice on either financial or non-financial performance of
commercial banks in Kenya.
1.1.3 The Banking Industry in Kenya
According to the Central Bank of Kenya (July 2016 report), during the quarter ended 31st March
2016, Kenya’s banking industry currently consist of 42 commercial banks, which were broken
down as follows, 3 Islamic Banks, 1 Home finance company, 12MFI banks, eight foreign banks
representative offices, 86 foreign exchange bureaus, 14 money remittance providers and 3 credit
reference bureaus. In 2016, Real Value Foreign Exchange Bureau was converted to a Money
Remittance Provider leading to a reduction in the number of the Foreign Exchange Bureaus and
an increase in the number of Money Remittance Providers.
Digitization on access to financial services is the principal contributor to increase in financial
inclusion, with Mobile Financial Services (MFS) rising to be the preferred method to access
financial services in 2016. The percentage of the population living within 3 kilometers of a
financial services access point has risen to 77.0% in 2016 from 59.0% in 2013.
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As at 31st March 2016, The Kenyan Banking Sector’s has viewed growth in the asset and loss
of aggregate assets which is at Kenya Shillings 3.6 trillion, with total worth Kenya Shillings 2.4
trillion, while the deposit base was Kenya Shillings 2.6 trillion and profit before tax was Kenya
Shillings 38.4 billion. The period of 2016, customer deposit in bank accounts and loan accounts
stood at KShs. 37,455,795 and KShs. 7,163,560respectively (Central Bank of Kenya, Report for
the quarter ended 31st march 2016, and July 2016).
The figures have drastically varied due to the change of external environment. This has forced
banks to cost cut to stay afloat a volatile banking environment, where the fight of survival has
become imminent and threatens the very essence of subsistence of a bank in the market.
1.1.4 Commercial Banks in Kenya
A commercial bank is a bank that provides transactional, savings, and money market accounts
and that accepts time deposits (Sullivan & Sheffrin, 2003). According to the Central Bank of
Kenya, there are 42 licensed commercial banks in Kenya (see list in appendix B). The
Government and state corporations of Kenya has majority shareholding over 3 banks, private
financial institutions are the majority in the composition. There is an aggregate of 27 local and 13
foreign commercial banks in Kenya out of the private financial institution.
Banks, play a pivotal role in the country. They impact on financial deepening and economic
growth of the country through financial empowerment to investors and businesses. It can
therefore be said that commercial banks are key in its role in the economic sector. In the past two
decades, numerous strategic decisions have made in the financial sector industry. For instance,
there have been 33 mergers in the industry since 1989 with the recent one being the merger
between Equatorial Commercial Bank and Southern Credit Banking Corporation in June 2010
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(Central Bank of Kenya, 2012). There have also been numerous acquisitions since 2000 with the
acquisition of EABS Bank Ltd by Ecobank Kenya Ltd in June 2008 (Central Bank of Kenya,
2012), SBM Holdings acquired Fidelity Commercial Bank in November, 2016, Mwalimu
SACCO acquired Equatorial Commercial Bank in March 2015, Centum acquired K-Rep Bank in
July, 2014and GT Bank acquired Fina Bank Group in November, 2013 (Cytonn, 2017).
Reasons for strategic decisions are as follows: to meet the increased levels of share capital as
prescribed due to the change in the legal environment; expand distribution network and market
share to create market security; and to benefit from best global practices among others. This
study is done in the context of the banking industry in Kenya. Banks play a significant role in
Kenya’s economy. With intense competition in the industry, there’s always need for banks to be
strategically positioned to effectively compete in the market. This has seen several unifications
and acquisitions take place in the banking industry in Kenya as mode of positioning themselves
to compete in the industry.
1.2 Research Problem
Strategic management is the process of comprehending the organizations objectives and goals by
bring into line its internal capabilities with its external demands of its environment. An
organization’s strategy is said to be the stratagem to achievement of its objectives. Without a
strategy, an organization is like a ship without a rudder, going around in circles.
There are a number of influencers of strategic management practice in organizations, majorly the
change in the internal and external environment. The banking industry in Kenya has been the
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epicenter of the change in the external environment over the years; hence the strategic
management practice in banks has gained latitude in the recent years. Most organizations in the
last century dedicated on futuristic planning, wagering that the business environment remains
stable for a longer duration thereby paving way for organization to plan for the long whole.
Nowadays, such planning is deemed disastrous, as the internal and external environment changes
spontaneously; therefore the plans should be guided by a strategy that includes exigency planning
(Edirisinghe, 2008).
Strategic management is a vital concept to commercial banks. Branded by extreme struggle for
customers in the industry, it necessitated banks to be wary of the change in trends and prospects
in their external environment as shifts always occur. The banking industry has shown a
significant growth during the first half of 2012 (Central Bank of Kenya, 2012). The financial
sector in Kenya has experienced a transformation in the market, this is due to competition
through introduction of new products and services being a ripple effect from globalization and
adoption of new technologies. This has in turn brought about tremendous growth in the industry.
Therefore, exploring the current strategic management practices of commercial banks in Kenya
in relation to the internal and external factors that influence such practices was tremendously
important to determine the performance.
The banking industry has become volatile as a result of the changing external environment. It can
be noticed that banks are disheveled with compromises to keep up in the market. The financial
performance of tier three banks is quite unfortunate not to mention the first tier and second tear
has announced a colossal reduction of profit compared to previous years.
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A number of studies have been done on strategic management practices in other industries other
than the banking industry in Kenya (Kangoro, 1998; Ligare, 2010; Ngatia, 2011; Kariuki, 2011;
Riungu, 2008). A few examples of studies on commercial banks in Kenya include Njoroge
(2007), Mungai (2007), Wamalwa (2008), Wambugu (2008), Otieno (2010),Ondieki (2011),
Kakunu (2012), Abdi (2014). Despite the numerous studies on strategic management practices,
the banking industry has been largely neglected as only Riungu (2008), Kakunu (2012) and Abdi
(2014) attempted to study the same. Further, very few studies exist in the financial sector as there
is only one other study by Maina (2009) in insurance sector. This also suffers the same
shortcoming as that of Riungu (2008) as it was carried out as a case study. It is also worthy to
acknowledge the fact that most of the studies on the same in other industries have followed the
same methodology of case studies. There is therefore a need to carry out a survey of the banking
sector.
This study sought to find out whether strategic management is practiced in commercial Banks in
Kenya. Furthermore, it pursued to show whether the strategic management practices influence the
results of the commercial banks in Kenya.
1.3 Research Objectives
The objectives of the study are:
i. Identify the current strategic management practices among commercial banks in
Kenya; and
ii. Determine the influence of strategic management practices on performance of
commercial banks in Kenya.
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1.4 Value of Study
This study enlightens organizations the importance of strategic management in an organization. It
will provide the different strategic means that the Bank may engage in to be able to combat the
change in environment. Commercial banks can make improvement in their strategy as well as
increase their performance in an uncertain market; through combating the change internal and
external environment.
Researchers and academicians will find this study extensive and detailed guide for understanding
the significance of strategic management practice. This can offer informative process to
appreciate the significance of strategic management practice, due to the changing environment
this study is recommended in future.
This would benefit researchers and academician in understanding the value of strategic
management in organizations performance that is in both financial and non-financial.
Organization would benefit from this study in understanding what form of strategic management
practices that is adopted by banking institution in Kenya.
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CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
This chapter assesses the literature on strategic management practice. First, theories related to
the concept of strategic management practices are reviewed. Thereafter, a review of the evolution
of strategic management and finally understanding the impact of strategic management practice
on performance of commercial banks in Kenya.
2.2 Theoretical Foundation
A number of theories have been used to define the development of strategic management. The
following theories expound the different stages of strategic management process that is from
strategy formulation to its implementation and thereafter to its evaluation. Brief literature will be
used to explain the theories, which has shaped this study.
2.2.1 Resource-Based View (RBV)
This theory, underpins that an organization or firm rise above the rest of the other firms due to its
unique attribute that makes it attractive in the market, that is an organization is known for its
resources.
Therefore a firm is defined by its resources that give it a competitive advantage above the rest in
the firms in the market (Pearce & Robinson, 2007).
Inordinately it follows that the firms resources, is a critical factor in strategy formulation and
implementation. In order for the firm to obtain direction it ought to have an appreciation on what
are its best resources that would enable them to compete with other industry player. The market
is always in search of firms that offer the highest quality product with an efficient service. Due to
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a firm’s investment in superior technology and finest structure enables the firm reach impeccable
heights of profitability.
Therefore for an organization to establish its strategy, it ought to put in mind the resources of the
organization that makes it unique and able to compete in the market.
2.2.2 McKinsey 7S Model
McKinsey’s 7S Model is a famous model used by organizations to give seven variables that all
start with letter “S” that is structure, strategy, staff, style, skills, system and shared values
(McKinsey &Company, 1980s). These combined enable the firm formulate strategy and
thereafter implement.
Strategy is defined as a plan of action that gives direction to the firm. The structure on the other
hand is organogram of a firm; this is to enable the firm to acknowledge the hierarchy in a firm.it
is pertinent to involve strategy formulation top down. To ensure that the staff are involved the
strategy formulation process.
This would enable the strategy to be implemented, noting that the sense of involvement in the
formulation process. The way the Managers use strategy to achieve their goals this demonstrates
the style, this encompasses the cultural style of an organization.
If an organization instils the 7S model in its strategy formulation process, this will have a great
influence on the performance of any organization or firm.
2.2.3 Porter's Theory of Competitive Advantage
The well renowned theory of competitive advantage that is used significantly in most
organizations’ strategy formulation was incepted by Porter (1980). The theory of competitive
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advantage, allow an organization to compete with the other industries. This is noting that the
organization has acquired a set of unique attributes that allows it to gain advantage over and
above other organization that offer the same services or product in the market.
An organization can gain competitive advantage through its technological advancement, which
enhances its attractiveness in the market. Noting that there is a number of competitive market
sources that would block an organization to compete.
The industry structure determines the market and where the organization can compete. The
competitive forces model, that is five forces, entry barriers, bargaining power of suppliers, threat
of substitution, bargaining power of buyers and enmity among industry players this define the
profitability of an industry.
2.3 Evolution of Strategic Management
Business operations and planning lacked foresight in the early 1800s (Bourgeois, 1996). In
Kenya prior to Kenya’s independence in 1963, there was a central currency board for the East
African countries that is the East African Currency Board proposed the establishment of an East
African Central Bank which its main function was to act to as the banker to the governments.
Since then the Banking industry in Kenya has flourished, with extensive competition and
innovation to enable Banks ensure its survival in the market.
Strategic Management principles were incepted between the 1950s and 1960s. Initial to the
1950s, strategy was only synonymous in matters of war and politics not organizations
business. Many Banks initiated strategic planning in the 1960s. Different authors had their own
definition of strategic management.
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Pearce II and Robinson (2002) viewed strategic management as decision and actions of an
organization that results in preparation and application of strategies that are structured to
accomplish the goals and objective of the organization.
Strategy is the determination of the organizations long term and short term goals (Chandler,
1962).The rule for decision making, that is brought about by a market scope, competitive
advantage and growth trajectory is Strategy (Ansoff, 1965).
In 1980s Porter’s model of competitive analysis and set of generic strategies and the concept of
value chain dominated the area of strategic management. This brought about introduction of the
model of five competitive forces in a company’s environment that influence competition such as
threat of new entrants, bargaining power of firm’s suppliers and customers, threats of substitute’s
products and intensity of rivalry among competing firms. Furthermore, Porter (1985) brought
about the value chain model in the operation of organization, which introduce competitive
advantage in an organization.
Therefore, commercial banks should understand that there is more to strategy than positioning the
firm against its competitors.
Prahalad and Hamel (1990) define the core competences as “the collective learning in the
organization, especially how to coordinate diverse production skills and integrate multiple
streams of technologies”. Both the industry analysis and the resource based view analysis only
provide static analysis of the organization’s current position and do not concentrate much on the
future external environmental trends (Hubbard, 2000). In the late 1980’s Globalization and
technological developments has led to changing business environments for the organization in the
globe and hence organizations had to think on their feet to combat the change.
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Mintzberg (1987) always a big fan of organizational learning asserts that strategy is cautious and
embryonic, and cautious strategy focuses on control while embryonic strategy focuses on
learning. Mintzberg praises the value of embryonic strategy because it paves way for strategic
learning of the company and it also puts the organization’s ability to test (Mintzberg et al, 1998,
p189). Nonaka and Takeuchi (1995) define organizational learning as knowledge creation and
propose four modes of knowledge conversions in a company. The major purpose of
organizational learning is to successfully face future environmental changes and therefore, most
of the strategists view of the strategic management practice as a thought made process rather than
a planning process (Mintzberg, 1987).
In 1990’s prominent writers in the strategic management literature field comprised of two focal
classifications of what was perceived as strategy, specifically the “strategic planning” and the
“strategic thinking” approaches. However, (Heracleous, 1998) identifies the number of different
ways that the various authors use the terms of strategic development or planning and strategic
thinking. Liedtka (1998) highlights the importance of strategic planning systems for a company
to provide a corset for personnel to undertake strategic thinking. Companies are known to have
strategic planning systems further fortified the strategic thinking competence inside it.
2.4 Strategic Management Practices and Organizational Performance
Strategic management practice is a mode of examining the current and future environments and
formulating and implementing and controlling decisions absorbed on achieving the
organization’s goals and objective in the changing environment (Adeleke et al. 2008).Strategic
management practice is the procedure where the management establish performance objectives
15
and future direction of the organization in the wake of internal and external change in the
environment and execute the selected action plans(Thompson &Strickland, 2003).
Environmental scanning is depicted as a procedure of accumulating, analyzing and furnishing the
results with the aim of formulation of strategy (Thompson &Strickland, 2003).
Strategy formulation is method of selecting the paramount direction in realizing the
organization’s goals and objective (Thompson & Strickland, 2003).
Environmental scanning is tracked by formulation of corporate and operational strategy.
Thompson and Strickland, (2003), viewed strategy implementation, denotes putting the
formulated strategy into action. Lastly the vital step of strategy evaluation activities comprises of
reviewing internal and external factors that are the source of present strategies, determining
performance, and putting in consideration the counter active action(Thompson & Strickland,
2003). Evaluation ensures that the organization strategy is well implemented and attains the
organizational objective.
Abu-Bakar, Tufail, Yusof, and Virgiyanti (2011) pursued a study on practice of strategic
management in companies. The study’s findings brought out the connection between the strategic
practice and the financial performance indicators.
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CHAPTER THREE: RESEARCH METHODOLOGY
3.1Introduction
This chapter will highlight and define the approaches that are applied in the collection of data
vital in ascertaining the research questions. It is outlined as below.
3.2Research Design
The study used a descriptive survey. This design is preferred to other research designs since it is
the most commonly used form of survey design when data is to be collected at one point in time
across many firms. During the surveys a group of respondents was asked a set of questions at one
point in time.
3.3Population of the Study
The population of this study will comprised the analysis of all the 42 licensed commercial banks
in Kenya.
These commercial banks are licensed and regulated by the Central Bank of Kenya. Moreover the
stated commercial banks conduct banking business as prescribed under the banking Act cap. 488
of the laws of Kenya and guided by the central bank prudential guidelines 2013.
3.4Data Collection
Primary data was collected through questionnaires. The respondents’ are Directors of corporate
strategy in each of the 42 commercial banks in Kenya. The questionnaires were administered
using email method to the bank General Managers. This method was considered appropriate
because it was less time consuming and less costly too on the part of the researcher and it had
been used by other scholars to administer questionnaires to respondent. Given that all the banks
have email addresses, it was easier to email them the questionnaires. Late responder’s were called
17
by phone to ensure that they respond within appropriate times. The questionnaires are checked
for reliability using split half method.
A structured questionnaire was use for data collection. According to Mugenda and Mugenda
(2006), questionnaires give detailed answer to complex problems. Additionally, questionnaires
are also a popular method for data collection in deduction because of the relative ease and cost-
effectiveness with which they are constructed and administered. While Secondary data was
obtained mainly from audited and unaudited financial statements, library books, journals, and
magazines, the internet and appropriate literature of previous studies.
3.5Data Analysis
Once feedback had been received, the completed questionnaires were sorted to select the properly
filled forms. This ensures completeness and consistency, in order to fulfil objectives, a
descriptive analysis was employed.
Descriptive statistics such as mean, standard deviation and coefficient variance was used in
analysis of data to identify the existence and relationship between strategic management practices
among financial institutions in Kenya and its influence.
The feedback from the questionnaires were sorted into sets and entered in the Statistical Package
for the Social Sciences software to facilitate analysis using descriptive statistics.
18
CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION
4.1 Introduction
This chapter represents the analysis, interpretation and results of the study. The data was
collected through primary and secondary sources on a population of 42 banks. The data was
analysed through quantitative and descriptive analysis based on the performance of the 42 banks.
4.2 Data Analysis
Questionnaires were used to collect the primary data which were disseminated to all the 42
commercial banks in Kenya. The respondents were bank General Managers administered using
email method. Out of the 42 commercial banks, the successful responses obtained were from 33
which represents 78 % response rate. It is stated above 70% response rate was more than
sufficient to proceed with data analysis (Mugenda & Mugenda, 2003).
The secondary data was collected through the 42 bank’s financial statements exhibiting the
performance of the banks in relation to their strategy. The collected data from the 33 banks was
then coded and entered into the SPSS version20. The descriptive stat istics especially mean and
standard deviations were then used to perform the analysis. The results are presented and
interpreted here below.
4.3 Findings on the Strategic Formulation Practices of Banks in Kenya
4.3.1 Vision Statement
The respondents had been asked to indicate the extent of the Strategic Formulation Practices
of Banks in Kenya in terms of Vision statement by using a Likert scale ranging from 1-10.
19
The relevant responses are summarized in Table 4.1
Table 4.1: Vision Statement
Vision Statement
Mean SD
Coefficient
of variation
Your bank have a vision statement 10.0 0.000 0.0000
Last updating of the vision statement 5.32 1.012 0.1902
Relevance of the vision statement to the bank’s activities
and mandate 8.63 0.145 0.0168
Source: Primary Data (2017)
The findings in Table 4.1 revealed that all the banks surveyed had articulated vision
statements. Most of the banks had also updated their vision statements in the last 5 years.
Most of the respondents also agreed that the vision statements were relevant to the core
activities and mandates of the banks as shown by the mean of 8.63.
4.3.2 Mission Statement
Further, the respondents were asked to indicate the extent of the Strategic Formulation Practices
of banks in Kenya with Mission statement. Their responses are summarized in Table 4.2
Table 4.2: Mission Statement
Mission Statement
Mean SD
Coefficient of
variation
Development of bank mission statement 10.0 0.000 0.0000
When mission statement was last updated 5.48 0.415 0.0757
Rate your Banks’ mission statement correlates with 8.95 0.152 0.0170
20
the institution’s business
Participation rating in developing the mission
statement by the employees 6.15 1.253 0.2037
Participation rating in developing the mission
statement by the managers 8.94 1.115 0.1247
Participation rating in developing the mission
statement by the board of directors 7.14 1.632 0.2286
Source: Primary Data (2017)
The results in Table 4.2 indicate that all the banks had developed mission statements as shown
by the mean of 10. The mission statements were last updated in the last 5 years. The
respondents agreed that the mission statements were compatible with the activities carried out
by the banks as shown by the mean of 8.95. On the level of participation in the development
of mission statements, it was noted that managers were the most involved (mean of 8.94)
followed by the board of directors (mean of 7.14) and lastly the employees (mean of 6.15).
4.3.3 Understanding Values
With regard to understanding values, 93.2% (mean score=9.66) of the respondents agreed that the
bank’s value statements are well understood by the employees. Table 4.3 presents the results.
Table 4.3: Understanding Values
Understanding Values
Mean SD
Coefficient
of variation
Definition of the bank’s set of value statements 9.56 0.032 0.0033
21
When were they last updated of discussed formally? 4.25 1.260 0.2965
Rating of understanding of the bank’s value statements
by the employees 9.66 0.011 0.0011
Rating of understanding of the bank’s value statements
by the managers 9.47 0.214 0.0226
Rating of understanding of the bank’s value statements
by the board of directors 8.52 0.415 0.0487
Source: Primary Data (2017)
The results in Table 4.3 show that the respondents agreed that the banks had defined set of
value statements as shown by the mean of 9.56. These value statements were last updated in
the last 4.25 years. The respondents were of the opinion that the employees understood the
bank value statements better (mean of 9.66) followed by the managers (mean of 9.47) and
finally the board of directors (mean of 8.52).
4.3.4 SWOT Analysis
Further, the study pursued to examine the extent to which their bank used each of the following
ways to respond to SWOT Analysis. The relevant responses are summarized in Table 4.4.
Table 4.4: SWOT Analysis
SWOT
Mean SD
Coefficient
of variation
Conducting of the SWOT analysis bank 10.0 0.000 0.0000
Competencies rating of your bank to conduct a SWOT 8.45 1.224 0.1449
22
analysis
Priority rating of your bank places on the SWOT analysis
process 8.15 1.785 0.2190
Importance rating of the SWOT analysis process to the
effective operation of your bank 8.81 1.286 0.1460
Is a SWOT analysis employed when dealing with
significant issues outside of strategic planning 6.41 2.145 0.3346
Source: Primary Data (2017)
The results in Table 4.4 revealed that all the banks surveyed had conducted a SWOT analysis
(mean score=10). The results further show that most of the respondents regarded their banks as
being very competent in conducting SWOT analysis (mean score= 8.45). When the respondents
were asked to indicate their agreement that banks placed a higher priority on the SWOT analysis
process, majority answered in the affirmative (mean score=8.15). Further, the results revealed
that the SWOT analysis process was important in effective operation of the banks (mean
score=8.81).
4.3.5 Understanding Issues that Influence the Bank
On understanding issues that influence the Bank, the respondents had been requested to indicate
the extent at which their banks embraces factors that influence them. The results are contained in
Table 4.5.
23
Table 4.5: Understanding Issues that Influence the Bank
Understanding Issues that Influence the Bank
Mean SD
Coefficient of
variation
Employees’ articulation of issues that influence the
bank? 7.15 1.152 0.1611
Board of directors’ articulation of issues that influence
the bank?
8.56 0.0045 0.0005
Executive directors’ articulation of issues that influence
the bank?
9.12 0.045 0.0049
Managers’ articulation of issues that influence the
bank?
9.04 0.051 0.0056
Bank’s action/ decision to issues that influence it? 7.12 1.612 0.2264
Source: Primary Data (2017)
As shown in Table 4.5 the study found that the executive directors were rated as having the
highest understanding (mean of 9.12) followed by the managers (mean of 9.04) then the board
of directors (mean of 8.56) and finally the employees (mean of 7.15). Further the study
established that the banks had a higher attention to issues that influence them (mean score=
7.12).
4.3.6 Establishing Long term Objectives
The respondents were also requested to indicate the extent of the establishment of long term
objectives in the bank. The relevant results are presented in Table 4.6.
24
Table 4.6: Establishing Long-Term Objectives
Establishing Long-Term Objectives
Mean SD
Coefficient of
variation
Establishment of the Bank’s long term objectives? 10.0 0.000 0.0000
What is the degree of importance for your bank in instituting
long-term objectives? 9.47 0.031 0.0033
Source: Primary Data (2017)
The findings in Table 4.6 revealed that all the banks had established long-term (mean
score=10). The study also found out that it was very important for banks to establish long-
term objectives (mean score= 9.47).
4.3.7 General Strategies
In terms of the General Strategies of the bank’s success, the respondents gave out the responses
as indicated in Table 4.7.
Table 4.7: Generate Strategies
Generate Strategies
Mean SD
Coefficient of
variation
Rate your bank’s success/practice of generating
strategies to deal with issues.
7.14 1.521 0.2130
How important is it to generate strategies to deal with 9.62 0.112 0.0116
25
issues for your bank?
Source: Primary Data (2017)
The results in Table 4.7 indicate that most of the banks were successful in generating
strategies to deal with the issues that affect the banks (mean score=7.14). It was also noted
that it was very important for the banks to generate strategies that deal with issues.
4.3.8 Selecting Strategies to Pursue
Further, the study established the following ways banks use to select strategies to pursue. The
relevant responses are summarized in Table 4.8.
Table 4.8: Selecting Strategies to Pursue
Selecting Strategies to Pursue
Mean SD
Coefficient
of
variation
Are strategies selected by your bank to address issues that
confront it? 8.94 1.081 0.1209
What is the rate of significance of selection of strategic
solutions to address your bank’s issues?
7.65 1.184 0.1548
What is the rate of the managers’ articulation of issues that
affect the bank?
9.04 0.051 0.0056
Relative to the decision making process, how would you
rate your bank’s attention to issues that influence the
bank?
7.12 1.612 0.2264
Source: Primary Data (2017)
The study results in Table 4.8 indicate that most of the banks selected strategies to address
issues that confront the banks (mean score=8.94. The study further found that the banks
considered selecting strategies to address issues that confront the bank as important (mean
26
score=7.65).
4.4 Strategic Implementation Practices of Banks in Kenya
The researcher sought to investigate the extent of the strategic implementation practices of banks
in Kenya by using a Likert scale between 1 and 10. The results are presented in the Sections 4.4.1
to 4.4.7 below.
4.4.1 Policy Support
The study sought to investigate the implementation of the policies in the Kenyan banks. The
results are presented in Table 4.9.
Table 4.9: Policy Support
Policy Support Mean SD
Coefficient
of variation
Maintenance of the policy manual by the bank 10.0 0.000 0.0000
Are bank policies updated on a regular basis? 5.82 2.453 0.4215
Relevance of your bank’s policies to current bank activities? 7.41 2.164 0.2920
Understanding and support to formal policy development and
implementation by the employees
3.14 1.152 0.3669
What is the rate of board of directors’ articulation and
acceptance to formal policy development and implementation? 5.10 2.145 0.4206
What is the rate of executive directors’ articulation and
acceptance to formal policy development and implementation? 6.45 2.154 0.3340
Source: Primary Data (2017)
27
The findings in Table 4.9 show that all the banks maintained policy manuals (mean score=10)
and that the banks updated last their policies 5 years ago (mean score=5.82). Further, the results
indicated the bank policies to their activities as relevant (mean score=7.41). In terms of the rating
on the understanding and support to formal policy development and implementation was ranked
the lowest (mean score=3.14).
4.4.2 Financial Capacity
On the strategic implementation of the financial capacities in the Kenyan banks, the respondents
gave the results as abridged in Table 4.10.
Table 4.10: Financial Capacity
Financial Capacity Mean SD
Coefficient
of variation
Bank’s financial capacity to implement strategies. 8.12 0.141 0.0174
Commitment of the bank to provide financial resources to
support the implementation of strategic initiatives by the board of
directors
7.69 0.331 0.0430
Source: Primary Data (2017)
The results in Table 4.10 found that most of the banks had the financial capacity to implement
strategies as indicated by the mean of 8.12. The results also showed that there was a high
commitment by the board of directors of various commercial banks to provide financial resources
to support the implementation of strategic initiatives.
29
4.4.3 Motivation and Ownership
With regard to motivation and ownership as a strategic implementation practice in the Kenyan
banks, the rated their opinions as indicated in Table 4.11.
Table 4.11: Motivation and Ownership
Motivation and Ownership Mean SD
Coefficient
of variation
What is the rate of board of directors’ motivation to maintain and
support the implementation of strategic initiatives?
6.31 1.451 0.2300
Rate the motivation to maintain and support the implementation
of strategic initiatives by the staff 7.12 2.115 0.2971
Rate the “ownership” taken to the implement strategic initiatives
by the staff
4.62 1.745 0.3777
What is the Rate of “ownership” the board of directors’ take to
implement strategic initiatives? 5.41 2.312 0.4274
What is the Rate of “ownership” the executive directors’ take to
implement strategic initiatives?
6.33 2.201 0.3477
Source: Primary Data (2017)
The results in Table 4.11 reveal that the board and the staff were highly motivated to maintain
and support the implementation of strategic initiatives (mean of 6.31 and 7.12 respectively). On
the ownership to implement strategic initiatives, executive directors were rated high (6.33)
followed by the board (5.41) and finally the staff (4.62).
30
4.4.4 Board Support
In terms of board support the respondents indicated that the board in most banks was highly
committed in implementing strategic initiatives (8.71). Further, the board performed well in
terms of delivery of support to implementation of strategic initiatives. Table 4.12 summarizes the
results.
Table 4.12: Board Support
Board Support Mean SD
Coefficient
of variation
What is the rate of board’s pledge and sustenance to the
application of strategic initiatives? 8.71 1.951 0.2240
What is the rate of your Board performance to the delivery of
support of strategic initiatives?
8.94 1.012 0.1132
Source: Primary Data (2017)
4.4.5 Organization Structure
Respondents were further requested to rate the implementation of the organization structure. The
results are tabulated in Table 4.13.
31
Table 4.13: Organizational Structure
Organizational Structure Mean SD
Coefficient
of variation
What is the rate of suitability of bank’s current structure in the
sustenance of operation of strategic initiatives? 6.95 2.115 0.3043
What is the rate the efficiency of your bank’s current governance
model in the operation of the strategic initiatives? 6.02 1.045 0.1736
Source: Primary Data (2017)
The findings in Table 4.13 indicate that the current structure of banks was moderately appropriate
(6.95) to support the implementation of strategic initiatives.
4.4.6 Open to Change
The respondents were also requested the rate the extent of “open to change” as a strategic
implementation practice in the Kenyan Banks. Their relevant results are presented in Table 4.14.
Table 4.14: Open to Change
Open to Change Mean SD
Coefficient
of variation
Bank’s readiness for organizational change. 7.44 1.302 0.1750
Willingness to accept and implement change by the staff 6.12 1.331 0.2175
Willingness to accept and implement change by the board 7.66 1.512 0.1974
Willingness to accept and implement change by the executive
Directors
8.46 1.452 0.1716
Source: Primary Data (2017)
32
As discernible in Table 4.14, the respondents rated to a great extent “willingness to accept and
implement change by the executive Directors” (mean score=8.46), followed by “willingness to
accept and implement change by the board” (mean score=7.66). The results further reveal that all
the mean scores were over 6.00 on a scale of 1 to 10. This meant that the banks embraced open to
change factors that improve effectiveness.
4.4.7 Human Resources
The respondents were finally asked rate the extent of how human resources as a strategic
implementation practice was been implemented in their banks. The pertinent results are
summarized in Table 4.15.
Table 4.15: Human Resources
Human Resources Mean SD
Coefficient
of variation
What is the rate of the bank’s human resource ability to manage
and put to operation variation? 7.41 1.365 0.1842
Rate the competencies of your bank staff to plan, manage and
implement strategic initiatives?
7.12 2.144 0.3011
(Primary data, 2017)
The results in Table 4.15 revealed that most of the banks had prepared for organizational change
(mean score=7.44) and that the executive directors were most willing to accept and implement
change (mean score=8.46) followed by the board (mean core=7.66), and lastly the staff (mean
score=6.12).
33
4.5 Performance of Commercial Banks in Kenya
The results of the coefficient variation in Table 4.1 and 4.15, it indicate a relationship between
strategic management practice and performance of the organization.
The study found that most of the banks’ human resources were capable of managing and
implementing change process to achieve performance. It was also revealed that most of the bank
staff was competent in planning, managing, and implementing strategic initiatives.
The study found that the respondents highly rated their banks practices on evaluation of strategic
initiatives. The banks’ performance in communicating assessment results to the board was ranked
very high followed by communication to the shareholders and finally to the
auditors/public/others. The study found that the banks were moderately successful at identifying
corrective action when strategic initiatives are failing or could be improved.
The banks were also moderately effective at evaluating the impact of changes subsequent to
initial strategy formulation. The level of participation in strategy evaluation was highest for the
executive directors followed by the management and lowest for the board.
The study found that the level of attention paid to abandoning, adjusting or developing new
strategies subsequent to evaluation of the initial strategies was highest for the executive directors
followed by the management and lowest for the board.
The study found that most of the banks considered the strategic management model relevant and
suitable. The respondents considered their boards were moderately committed to strategic
management as the model of choice while the management of banks were highly committed to
the models. The performance of banks with effective strategic management practice was
34
exemplary especially if there is a lot of commitment from the board.
4.6 Discussion of Results
This study intended to determine whether strategic management practice has an influence in
the commercial bank’s performance.
The results show that there was more emphasis on strategy formulation in commercial banks
in Kenya. Literature confirms that strategy formulation in firms are pertinent in the bank’s
performance.
Greatest number of firms practicing strategic management, had an objective, a watertight
strategy that was established to achieve the objective and a comprehensive vision statement to
lead the firms’ accomplishment of its objective Abu-Bakar et al (2011).
Most organization have a vision and mission statement which formulated as the epitome of
any organization performance towards its objective Ogolla (2007).
As recent as 2016 and 2017 two regulations have been introduced to banks, this has utmost
effect in the financial results of commercial banks in Kenya. The change in the legal
environment has been introduced that through the introduction of interest capping which has
seen bank’s lending rate not above 4% of the Central Bank Rate which is determined by the
monetary policy committee. Furthermore the institution of IFRS9 as a reporting standard for
bank, has caused a stir in the market that would eventually see bank’s merging as the cost of
financing has shot upwards, this has an effect on the economy of the country.
The study also noted that a number of factors influenced the practice of strategic management
in commercial banks in Kenya.
Through the questionnaires and the review of the bank’s financial statements has shown that
35
most of the well performing banks have a strategy in place, mission, vision and values that stir
the organization to success. There is however need of implementation and evaluation of the
strategy to obtain greater results in organization.
36
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Introduction
This chapter presents a synopsis of the data collected and analysis. This will depict the
summary of the analysis of the data collected, the limitation found in the study, conclusion of
the data collected and recommendation of the study.
5.2 Summary of Findings
The population of the study was 42 banks out of the said number of banks, 33 banks gave a
complete response. Questionnaires were used to collect data, this was administered to General
Managers in strategy, through emails which gave a response rate of 78%, which is depicted as
a good response to proceed with the study. This gave the descriptive, correlation and
regression analysis.
The study pursued to achieve two objectives: to identify the current strategic management
practices; and to identify factors that influence the banks strategic management practices in
Kenya. This was a descriptive study. The population was 43 banks and the response was from
33 banks giving a response rate of 77%. Primary data was co llected in the study using
questionnaires administered to general managers using email. Descriptive analysis through
mean, standard deviation and coefficient variation method was used to analyses the data
collected.
The study established that strategy formulation had a mean of 8.26 which was the highest this
37
being an analysis for 33 banks in Kenya. This finding shows that most commercial banks, rely
heavily on strategy formulation. This translated well in the financial performance of
commercial banks with a proper strategy formulation. Most tier one banks, had revealed they
have very strong strategy formulation that guide them to a successful financial results for the
banks. That is evident in the return on asset and return on equity, thereby maximizing the
profit of the banks.
5.3 Conclusion
The study concludes that strategic management practice has an influence in the bank’s
performance. Most commercial banks in Kenya were in the forefront of strategy formulation,
this is due to the change in environment of commercial banks in Kenya. The strategy,
provides commercial banks with direction and guides them to its objective. However strategy
formulation is not the end, rather implementation and evaluation to ensure that the firm gives
its highest performance.
It was noted that the tier one banks, with advanced strategy formulation had a high profitable
performance.
In light of the changing environment, most banks are open to strategy formulation to enable it
survive in the competitive environment. Therefore strategic management practice is an
important tool for organizational subsistence, to ensure stability in the firms’ performance.
5.4 Limitations of the Study
The research was solely based on commercial banks in Kenya. Therefore the results are
limited to banks rather than other financial institutions such as SME’s, MFI’s among other,
38
hence one is unable to obtain the impact of the strategic management practice on financial
institutions as a whole. It is pertinent to note that this study should not be used to give the
overview of all other financial institution.
The results of the study were administered from a questionnaire with a set of structured
questions. This form of data collection has a likelihood of obtaining a biased response from
the respondents. Hence, the response to the questionnaire is not absolute.
The research was specifically on strategic management practice and its effect in the
performance of commercial banks in Kenya. Therefore the results of the study are limited to
the strategic management practice and its performance in commercial banks in Kenya and not
any other concept.
5.5 Recommendations
The study recommends that commercial banks in Kenya should ensure to have a strong and
water tight strategy formulation to drive the objective of the bank.
The financial statements of the banks in Kenya depict tier one banks with better financial
performance than other tier 2 and 3 banks. It was viewed from the analysis that the tier one
banks had advanced strategy formulation compared to the tier 2 and tier 3 banks. Commercial
banks in Kenya need to adopt strategy formulation that is in line with the objective of the
bank that will offer direction to the bank to achieve its goals. Thereafter the Banks will
achieve high financial performance. The need to put up policies that shall be par t of the
strategy formulation provides an essential component in the results of banks.
There is need for commercial banks to understand and adopt model of strategy formulation
39
that would drive it implement the strategy in the event of change in both internal and external
environment.
5.6 Further Research
Based on the study, it is recommended that further research should be explored on the
influence of strategic implementation and evaluation process on performance of commercial
banks in Kenya. Implementation and evaluation being a vital process in strategic management
practice, as most banks have neglected implementation and evaluation process.
40
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APPENDICES
Appendix A: Strategic Management Practices Questionnaire
1.1 Vision Statement
Does your bank have a vision statement?
(10 -if YES 1 -if NO)
1
2
3
4
5
6
7
8
9
10
Last update of the vision statement? (10 - if in the
last year, 9 - if in the last 2 years, etc.)
1
2
3
4
5
6
7
8
9
10
Relevance of the vision statement to the bank’s
activities and mandate? (10 -for very relevant 1
-not relevant at all)
1
2
3
4
5
6
7
8
9
10
44
1.2 Mission Statement
Rate development of bank mission statement? (10
-if YES 1 - if NO)
1
2
3
4
5
6
7
8
9
10
Last update of the mission statement was last
updated? (10 - if in the last year, 9 - if in the last 2
years, etc.)
1
2
3
4
5
6
7
8
9
10
Rate your Banks’ mission statement if it
correlates with the institution’s business? (10 - if
YES 1 - if NO)
1
2
3
4
5
6
7
8
9
10
Participation rating in developing the mission
statement by the:
(10 -very involved 1 -not involved at all)
1
2
3
4
5
6
7
8
9
10
Employees
1
2
3
4
5
6
7
8
9
10
Managers 1 2 3 4 5 6 7 8 9 10
Board of Directors 1 2 3 4 5 6 7 8 9 10
45
1.3Understanding Values
Definition of the bank’s set of value statements
When were they last updated of discussed
formally? (10 -if YES 1 - if NO)
1
2
3
4
5
6
7
8
9
10
Last update of the vision statement? (10 - if in the
last year, 9 - if in the last 2 years,etc.)
1
2
3
4
5
6
7
8
9
10
Rating of articulation of the bank’s value
statements by the:
Employees
1
2
3
4
5
6
7
8
9
10
Managers 1 2 3 4 5 6 7 8 9 10
Board of Directors 1 2 3 4 5 6 7 8 9 10
1.3 Strengths, Weaknesses, Opportunities and Threats Analysis(SWOT)
Conducting of the SWOT analysis bank? (10
-if YES 1 - if NO)
1
2
3
4
5
6
7
8
9
10
Efficiency rating of your bank to conduct a
SWOT analysis?
1
2
3
4
5
6
7
8
9
10
Priority rating of your bank places on the SWOT
analysis process?
1
2
3
4
5
6
7
8
9
10
Importance rating of the SWOT analysis process to the effective operation of your bank?
1
2
3
4
5
6
7
8
9
10
Is a SWOT analysis employed when dealing with
significant issues outside of strategic planning?
1
2
3
4
5
6
7
8
9
10
46
1.5 Understanding Issues that Influence the Bank
1.5.1 Establish long-term objectives
Establishment of the Bank’s long term objectives?
(10 -if YES 1 -if NO)
1
2
3
4
5
6
7
8
9
10
What is the degree of importance for your bank in
instituting long-term objectives? (10 -very important 1-not important at all)
1
2
3
4
5
6
7
8
9
10
1.5.2 Generate Strategies
Establishing Long-Term Objectives
Establishment of the Bank’s long term objectives?
1
2
3
4
5
6
7
8
9
10
What is the degree of importance for your bank in
instituting long-term objectives?
Rate articulation of issues that influence the
bank by the:
Employees
1
2
3
4
5
6
7
8
9
10
Board of Directors 1 2 3 4 5 6 7 8 9 10
Executive Director 1 2 3 4 5 6 7 8 9 10
Managers 1 2 3 4 5 6 7 8 9 10
Relative to the decision making process, how would you rate your bank’s attention to issues that influence
the bank?
1 2 3 4 5 6 7 8 9 10
47
1
2
3
4
5
6
7
8
9
10
1.5.3
Selecting Strategies to Pursue
Are strategies selected by your bank to
address issues that confront it?
1
2
3
4
5
6
7
8
9
10
What is the rate of significance of
selection of strategic solutions to address
your bank’s issues?
1
2
3
4
5
6
7
8
9
10
What is the rate of the managers’
articulation of issues that affect the
bank?
1
2
3
4
5
6
7
8
9
10
Relative to the decision making process,
how would you rate your bank’s
attention to issues that influence the
bank?
1
2
3
4
5
6
7
8
9
10
1.5.4
Policy Support
Maintenance of the policy manual by the
bank
1
2
3
4
5
6
7
8
9
10
Are bank policies updated on a regular
48
basis?
1
2
3
4
5
6
7
8
9
10
Relevance of your bank’s policies to current
bank activities?
1
2
3
4
5
6
7
8
9
10
What is the rate of executive directors’
articulation and acceptance to formal policy
development and implementation?
1
2
3
4
5
6
7
8
9
10
1.5.5
Financial Capacity
Bank’s financial capacity to implement
strategies.
1
2
3
4
5
6
7
8
9
10 Commitment of the bank to provide financial
resources to support the implementation of
strategic initiatives by the board of directors
1
2
3
4
5
6
7
8
9
10
1.5.6
49
Motivation and Ownership
What is the rate of board of directors’
motivation to maintain and support the
implementation of strategic initiatives?
1
2
3
4
5
6
7
8
9
10 Rate the motivation to maintain and
support the implementation of strategic
initiatives by the staff
1
2
3
4
5
6
7
8
9
10 Rate the “ownership” taken to the
implement strategic initiatives by the staff
1
2
3
4
5
6
7
8
9
10 What is the Rate of “ownership” the board
of directors’ take to implement strategic
initiatives?
1
2
3
4
5
6
7
8
9
10
1.5.7
Board Support
What is the rate of board’s pledge and
sustenance to the application of strategic
initiatives?
1
2
3
4
5
6
7
8
9
10
What is the rate of your Board
performance to the delivery of support of
strategic initiatives?
1
2
3
4
5
6
7
8
9
10
Open to Change
50
Bank’s readiness for organizational
change.
1
2
3
4
5
6
7
8
9
10
Willingness to accept and implement
change by the staff
1
2
3
4
5
6
7
8
9
10
Willingness to accept and implement
change by the board
1
2
3
4
5
6
7
8
9
10
Willingness to accept and implement
change by the executive Directors
1
2
3
4
5
6
7
8
9
10
Human Resources
What is the rate of the bank’s human
resource ability to manage and put to
operation the change process or new
strategic direction issued by the board of
directors?
1
2
3
4
5
6
7
8
9
10
Rate the competencies of your bank staff
to plan, manage and implement strategic
initiatives
1
2
3
4
5
6
7
8
9
10
Thank you for taking part in the survey.
51
Appendix B: List of Commercial Banks
Source: Central Bank of Kenya website
1. ABC Bank (Kenya)
2. Bank of Africa
3. Bank of Baroda
4. Bank of India
5. Barclays Bank of Kenya
6. Chase Bank Kenya (In Receivership)
7. Citibank
8. Commercial Bank of Africa
9. Consolidated Bank of Kenya
10. Cooperative Bank of Kenya
11. Credit Bank
12. Development Bank of Kenya
13. Diamond Trust Bank
14. Dubai Islamic Bank
15. Ecobank Kenya
16. Equity Bank (Kenya) Limited
17. Family Bank
18. First Community Bank
19. Guaranty Trust Bank Kenya
20. Guardian Bank
21. Gulf African Bank
22. Habib Bank AG Zurich
23. Housing Finance Company of Kenya
24. I&M Bank
25. Imperial Bank Kenya (In receivership)
26. Jamii Bora Bank
27. Kenya Commercial Bank
28. Mayfair Bank
29. Middle East Bank Kenya
30. National Bank of Kenya
31. NIC Bank
32. Oriental Commercial Bank
33. Paramount Universal Bank
34. Prime Bank (Kenya)
35. SBM Bank Kenya Limited
36. Sidian Bank
37. Spire Bank
38. Stanbic Bank Kenya
39. Standard Chartered Kenya
40. Trans National Bank Kenya
41. United Bank for Africa
42. Victoria Commercial