EFFECTS OF EXPANSION STRATEGIES ON PERFORMANCE OF TIER THREE COMMERCIAL BANKS IN KENYA

James Njuki

Jomo Kenyatta University of Agriculture and Technology

(JKUAT)

Dr. Karanja Ngugi (PhD)

Kenyatta University, Kenya

CITATION: Njuki, J., & Ngugi, K. (2018). Effects of Expansion Strategies on Performance of Tier Three Commercial Banks in Kenya. International Journal of Strategic Management. Vol 7 (5) pp 1 – 22.

ABSTRACT

The study aimed at establishing the effects of expansion strategies on performance of tier three commercial banks in Kenya. Organizations in the modern business environment are faced with the risks of huge dynamism which threatens the performance and even existence of many of the organizations. Banking sector is one of the sectors that recently have been facing a wide range of dynamics from all angles. According to the recent trends in Kenyan banking sector, performance of Tier three commercial banks has been sabotaged by a wide range of factors in the recent past. The heat started by the emergence of mobile banking which has seen many customers shift from bank transactions to mobile transactions which are more efficient and time saving. Recently, the parliament passed a bill to restraint the lending rate for banks thus leading to a more tough ground for the commercial banks. This therefore has called for commercial banks to come up with more profound ways to have their performance and existence in the market enhanced. Specifically, the study focused on four independent variables which include innovation, information technology, market strategy and management strategy. The study used a descriptive survey research design. The target population for this study was the Tier three banks in Kenya which constitutes of 22 least performing commercial banks in Kenya in terms of market and capital share. The study adopted an all-inclusive sampling design which generated a sample of all the 22 tier three commercial banks in Kenya. The ICT managers, operations managers, human resource managers and finance managers were the key targets to be involved in the study. This therefore constituted a sample of 88 respondents. Self-structured questionnaires were used to collect primary data which was afterwards analysed by use of SPSS software to generate mean, standard deviation and frequencies. The findings were presented in form of frequency tables, pie-charts and bar graphs for easier interpretation. The findings from the study revealed that innovation was significantly and positively related to performance of tier three commercial banks in Kenya. The findings further revealed that information technology was a key factor in enhancing the performance of tier three commercial banks similar to market strategy and management strategy which were found to significantly and positively relate to the performance of the tier three commercial banks in Kenya. The study concluded that mostly of the tier three commercial banks had not effectively adopted information technology and innovation as expansion strategies and this led to their underperformance. The study recommends that tier three commercial banks should effectively embrace innovation, information technology and market strategy to enhance their performance. The findings from the study will be essential to the banks managers, the government and policy makers as well as other scholars and future researchers.

Key Words: Expansion strategies, Information technology, Innovation strategy, Market Strategy, Management strategy and Tier three commercial banks.

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