The effects of growth strategies on the Performance of Commercial Banks in Kenya The case of Kenya Commercial Bank

Abstract

Globalization and increased competition have made Kenya’s banking sector a cut-throat business arena. This has forced every bank to crafi growth strategies to sun/ive in the changing market conditions in order to maintain their market share and competitive advantages over their competitors. However, the relationship between these growth strategies on improved performance has not been clearly established .The study focused on the effect of growth strategies (branch network expansion, market penetration, product development and diversification) on performance (customer base, bank revenue and customer deposit) of Kenya Commercial Bank. The study employed a descriptive survey which was carried within the five regions of Kenya Commercial Bank. Primary data was collected by use of questionnaires. The study involved a census of 187 respondents’ out of which 148 responded to the questionnaires forming 79% response rate. The data was coded and analyzed using descriptive and inferential statistics. Descriptive statistics such as frequencies, means and pie charts were computed. Correlation analysis was used to establish the relationship between the independent variables and dependent variables. Regression analysis determined the combined effect of independent variables. The significance level used for the study was 0.01. Results of data analysis supported the following key findings: Branch expansion, Market penetration, Product development and diversification significantly influenced the performance of the Kenya Commercial Bank. The study concluded that diversification had the greatest effect on performance ofthe bank followed by market penetration and branch expansion while product development contributed the least on the performance of the bank. The overall level of performance in terms of customer base, customer deposits and bank revenue within the bank was found to be generally high, the greatest effect being on customer base. This study recommended effective application of growth strategies in order to achieve measurable improvement in the bank performance and combined application of the growth strategies to achieve higher performance in the bank. In addition the bank should focus more on customers’ needs to develop more innovative and appropriate product differentiation strategies that will not only appeal and attract customers but also actively retain and sustain them in the long term. Product training by staff should also be employed to improve staff knowledge for effective and efficient product development strategy implementation.