Assessing strategic alliances’ influence on performance of commercial banks, Kenya

Abstract

Performance of Commercial Banks in Kenya has been on the decline in the last one decade with majority of the banks making minimal profit while others experiencing a yearly decline of more than 10% in profitability.  This is against high cost of business operations; increased competition forms the digital space among others.  Consequently, most of the banks have been experiencing a shrinking market share due to closure of some of their branches. Given the changes in the business environment such as entrance of new competitors, dynamic innovations, legislative and economic dynamics, organizations need to move with speed and make choices that add value to customers and those which will enable the organization remain relevant in such a dynamic business environment. It is on this context that this study sought to analyze the influence of strategic alliance on performance of Commercial Banks in Kenya The study was guided by the Resource-Based Theory of Strategic Alliances. This theory was appropriate since its major focus is on the rationale, formation and organizational preferences that have value addition for excellence.  To achieve the objectives of the study, explanatory research design was used. Both primary and secondary data were collected. Primary data was collected using questionnaire while the secondary data was collected from relevant literature materials, organization’s annual reports and website. Cronbach’s Alpha co-efficient was used to test the reliability of the data with an acceptable level of 0.7 at a confidence level of 95%. The study targeted tier 2 Commercial Banks in Kenya with the top management bank employees as the key respondents. These tier 2 banks have been in existence for more than 20 years and controls over 17 % of the market share in the banking industry. These banks are capable of advancing to tier 1 category if the right strategies are put in place. The study employed census targeting the entire population of the 162 top management bank employees. 18 respondents drawn from the top management team at Family Bank Limited which is one of the Tier 2 banks were considered for pilot study through convenience method. The pilot respondents were excluded from the main study leaving out 144 respondents from the other 8 Tier 2 banks who were considered in the main study. Out of the 144 respondents, 120 top management employees responded the questionnaire hence result findings were based on the 120 respondents. Descriptive and inferential statistics was used in analyzing the data. Descriptive statistics entailed the measure of central tendency (mean) and the measure of dispersions (standard deviation). The statistical package for social sciences (SPSS) was used to generate the data. Inferential statistics entailed regression and correlation analysis. Data was presented using tables. The study established that there was a significant influence on Product and processes through strategic alliances on performance of commercial banks in Kenya. The study concluded that, firstly, mobile banking and internet banking has enabled customers to access essential services at the comfort of their homes or offices. Secondly, big data solutions facilitate safeguarding of customers’ information. Thirdly, banks targets different categories of customers and uses differentiated channels in order to reach out to them hence the researcher recommends that banks need to adopt strategic alliances to reduce costs, ride on strengths, innovations and resources of key strategic partners in order to enhance performance.