Drivers of competitive advantage and performance of Commercial Banks in Nairobi County, Kenya
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Date
2014-10-08
Authors
Mwangi, Julius Kahuthia
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
All firms aim at achieving and sustaining competitive advantage, leading to high
performance. However, they face challenge on how to achieve and sustain this
performance, especially in a rapidly changing environment. Empirical studies
indicate that this can be achieved if the firms understand drivers of their competitive
advantage. Kenya‟s commercial banking sector faces such challenges, and though
the sector has generally been performing well, there is difference in performance
among the banks, with some banks reporting poor performance so far as profit
before tax is concerned. This study evaluated the relationship between drivers of
competitive advantage and the performance of commercial banks in Kenya. The
drivers of competitive advantage studied were bank activities, bank activity drivers,
initial conditions and managerial choice. The study also evaluated the moderating
effect of dynamic capabilities on the relationship between drivers of competitive
advantage and performance. The study was anchored on the Dynamic Capabilities
Theory. Explanatory and cross sectional survey designs were employed in the study.
The study explored all the 43 commercial banks. Data collection was carried out
using a self–administered, semi-structured questionnaire for primary data, whereas
secondary data was collected from Central Bank of Kenya website plus the
commercial bank websites, with help of a designed tool. The study used descriptive
statistics such as mean, standard deviation and percentages, to explain characteristics
of data, while inferential statistics, mainly hierarchical multiple regression, were
used to test the relationships between drivers of competitive advantage and bank
performance. Tables and figures were used to present the results for ease of
understanding and interpretation. Statistical package for social sciences (SPSS) was
used for analysis. The study established the relationship between performance and
bank activities, performance and bank activity drivers, as well as performance and
managerial choices, to be positive and statistically significant. Dynamic capabilities
were found to have a moderating role between drivers of competitive advantage and
performance. However, the study found that initial conditions do not have a
significant relationship with performance of commercial banks in Kenya. The study
recommends that the banking management lobby for the training of all bank staff on
the role and application of the various categories of dynamic capabilities as well as
on market volatility and the correct measures to be taken within their banks. The
study also recommends that all staff be trained on customer service delivery and
customer relationship. Management should also ensure robust training programs
involving all their employees so as to uplift their intellectual capital.