Strategic Positioning and Financial Performance of Commercial Banks in Kenya

Abstract

The study intended to determine the effect of strategic positioning on financial performance of commercial banks in Kenya. The need for proper strategic positioning to find the best ‘fit’ is of importance for any bank in positioning itself in a growth potential market. The detachment to strategy positioning can be attributed to a number of reasons, among them: a likelihood of failures in implementing strategies; complexity in the process of strategy implementation; strategy implementation being considered to be less attractive than formulation. In order to gain new markets and retain existing ones, firms strategize to gain superiority over its rivals by positioning its products or services in the minds of its customers. For an organization to become profitable it needs to place strategies that position it towards market dominance and improves the performance of the firm. The objective of the study was to determine the effects of strategic positioning on the performance of commercial banks in Kenya. A biased focus on market segmentation strategy, product range strategy, location and technological innovation strategy will be employed. The population of the study was the 43 commercial banks licensed by Central Bank of Kenya and operational by the close of business 31 December 2015 with data collected from managerial staff. Both primary and secondary data was used. Correlation analysis was carried out to investigate the strength of the relationship between the dependent variable and independent variables. Multiple regression analysis to investigate the nature of the relationship between the dependent and independent variables was undertaken. The study realized that the commercial banks in Kenya apply the four positioning strategies which include market segmentation, product focus strategy, technological innovation and location strategies to improve their competitiveness. From the regression analysis it was evident that technological innovation contributed to a greater extent in improving financial performance of the banks than the other three variables. The study recommends that further studies be done in other financial institutions and also on challenges affecting the implementation of strategic position among firms.