Relationship between internal growth strategies and performance in selected Banks in Nairobi, Kenya

Abstract

This research investigated the relationship between internal (organic) growth strategies and the performance of banks in Kenya. The existing research has not provided evidence as to how three types of strategies within the internal growth category influence the performance of firms, namely innovation, market development and product development. Thus the objectives of the study sought to establish the relationship between each of these three strategies and the performance of banks in Kenya. The literature review needed to answer the research questions was generated from the various models used in understanding growth from economics and that utilized in strategic management from the work of Igor Ansoff The literature was reviewed to highlight the existing research gaps and a conceptual framework for responding to these gaps established with three variables. The independent variable is the set of three growth strategies, the dependent is bank growth and the intervening is the strategy implementation conditions needed for the successful execution of each strategy. The research adopted a descriptive survey design. The population was drawn from the 44 banks in Kenya and the sample size was 14 banks. Data was obtained from respondents in the banks in the areas of operations, marketing and strategy development. The data was collected through a drop and pick method and analyzed using means, standard deviations and multiple linear regression analysis. The study found that the banks have well adopted each of the three types of internal growth strategies and that the growth strategies have a strong significant relationship with performance of banks. The strategy implementation conditions required for the execution of each strategy partly mediate the relationship between the growth strategies and bank performance. The research recommended that future efforts be made to replicate parts of the current instrument and use factual data on a census research of the entire banking sector in Kenya. The study advises banks to strengthen their systems for team work and information sharing among departments.