Competitive Strategies and Organisational Performance: A Case of Insurance Companies in Nyeri County, Kenya

Abstract

The Kenyan insurance sector has been struggling with inability to sustain the momentum of insurance penetration. Challenges have been experienced in not only in attracting more customers but also retaining their existing clients, a factor which has continued to hurt the sector turnovers. Additionally, there have also been concerns over rising levels of inefficiency in the operations of Kenya’s insurance sector, a factor that has adversely hurt not only their ability to generate revenue but has also hindered their momentum of growth. This study sought to determine the effect of competitive strategies on performance insurance companies in Nyeri County, Kenya. The specific objectives were: to determine the effect of cost leadership strategy, differentiation strategy, focus cost strategy and focus differentiation strategy on the performance of insurance firms. The study was anchored on Porter’s Five Forces Model, Dynamic Capabilities Theory and the Resource-Based View Theory. A census study approach was used to subject all the twenty (25) insurance companies operating in the county to study. Purposive sampling was used to identify the respondents who included branch managers, finance officers, marketing managers, claims managers and actuaries of all the insurance firms being studied. This procedure led to a total of 125 respondents. The study assessed non-financial performance of the insurance companies for 5 financial years 2014-2018. Primary data was collected through questionnaires while secondary data was gathered using a document review guide to review financial statements, management reports and other key publications in the company. Validity was tested using pretesting and expert opinion. Reliability of the instrument was assessed using Cronbach’s Alpha Reliability test which evaluates internal consistency status. Both descriptive and inferential statistics were used in the analysis. The Pearson correlation analysis results established that all the independent variables (cost leadership, differentiation, focus cost and focus differentiation strategies) were positively and significantly related with organisational performance. The Coefficient of Determination (R Square) demonstrated that 64.0 per cent of variation in organisational performance was influenced by variation in the independent variable that is competitive strategies and its constituent variables. The results of the multiple linear regression analysis showed that all the independent variables; cost leadership, differentiation, focus cost and focus differentiation have a positive effect on organisational performance. Thus a conclusion was made that pursuit of competitive strategies delivers positive results to the organisation. The study recommends that insurance companies work on improvement of the adoption of proprietary technology and innovative distribution channels for products which were found to be only moderately entrenched. This could be limiting their efficiency in effectively controlling the operating and distribution costs. A recommendation is further given that differentiation of the premise of technology be enhanced to improve the performance of insurance firms.