STRATEGIC CAPABILITIES AND COMPETITIVE ADVANTAGE OF TIER III COMMERCIAL BANKS IN NAIROBI CITY COUNTY KENYA
STRATEGIC CAPABILITIES AND COMPETITIVE ADVANTAGE OF TIER III COMMERCIAL BANKS IN NAIROBI CITY COUNTY KENYA
Charles Muriithi Karimi - Degree of Master of Business Administration (Strategic Management Option) of Kenyatta University, Kenya
Dr. Samuel Maina - Business Administration Department, School of Business, Economics and Tourism, Kenya
ABSTRACT
Commercial banks are central to the economic development and drive the process of investment, job creation and financial stability. But the banking sector is a very competitive one and requires strategic competencies to maintain competitive edge. In this study, the authors sought to investigate the impact of strategic capabilities related to technological, managerial and human resource capabilities on the competitive advantage of Tier Three commercial banks in Nairobi city County, Kenya. Tier Three banks are the most prevalent banks in Kenya accounting for more than 75% of banks in the country but only accounting for 8% of the market, suggesting that they struggle against larger competitors. This study was guided by the Dynamic capability theory, Upper echelon theory, Human capital theory and Porter's Competitive Advantage Theory and adopted descriptive and explanatory research design. The target population is 154 branch managers, heads of departments (including IT, HR and operations) and senior executives at head office level from 22 Tier Three commercial banks in Nairobi. Simple random sampling technique was used and a sample size of 112 respondents was obtained from the formula of Yamane (1967). The primary data collection was done using a structured questionnaire with a 5 point Likert scale. Content validation is achieved by inviting experts to review the content and construct validation is performed by factor analysis (factor loadings ≥ 0.5, acceptable). Reliability was checked by Cronbach's Alpha coefficient and was obtained a value of 0.7 which is considered acceptable for internal consistency. Descriptive statistics (mean, standard deviation) and inferential statistics (multiple regression analysis) were used for data analysis to test the hypotheses. The results were presented in tables, charts and graphs to facilitate understanding. Ethical issues such as confidentiality and informed consent are strictly observed and approval is obtained from NACOSTI. The results are expected to shed light on the effects of technological innovations, managerial efficiency and human resource development on the competitive advantage and provide actionable implications for bank management, policy makers (CBK, KBA) and future research. The research revealed a landscape of robust foundational investment, with a substantial implementation gap. There was high consensus that their banks possess modern IT infrastructure, that they have sufficient technological support and training, and that technology is advantageous in terms of being efficient and a competitive advantage. This was tempered by the lowest score in this domain, which was on the task of using technology to automate functions. Moreover, the study found a eerie internal/external dichotomy. The level of internal confidence was very high as the respondents expressed a strong belief in the success of their strategic efforts which had contributed to bettering their competitive position and in having a set of unique resources and differentiated services. The study concludes that Tier Three banks have been able to move from being technologically lagging to owners of modern digital infrastructure, understanding the strategic importance of technology. Leveraging the adaptability gap, the researcher suggested that it is necessary to have a program of leadership development in banks that includes training and development in the area of Strategic agility, Change Management, and Innovation leadership, so as to cultivate adaptive Leadership.
