Analysis of Value Innovation Strategies on Performance of Commercial Banks, Kenya.

Abstract

Performance of Commercial Banks in Kenya has been on 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. Consequently, most of the banks have also been experiencing a shrinking market share. Given the changes in the business environment such as entrance of new competitors, dynamic innovations, legislative and economic dynamics, organizations need to make choices that add value to customers and those, which will enable the organization, remain relevant in such a dynamic environment. It is on this context that this study sought to analyze the influence of value innovation strategies on performance of Commercial Banks in Kenya. The objectives were; To examine influence of processes innovation strategy on performance of Commercial Banks in Kenya; to investigate influence of technological change strategy on performance of Commercial Banks in Kenya, to examine influence of positioning strategy on performance of Commercial Banks in Kenya, to examine influence of strategic alliance on performance of Commercial Banks in Kenya and to examine the moderating effect of government regulations on relationship between value innovation strategies and performance of Commercial Banks in Kenya. To achieve the objectives of the study, explanatory research design was used.. Primary data was collected by means of questionnaire whereas the secondary data was gathered from relevant literature resources, organization’s annual reports and website. Cronbach’s Alpha co-efficient was applied to test the reliability of the data with an acceptable level of 0.7. The reliability score in this study was 0.808. The study targeted tier 2 Commercial Banks in Kenya with the top management bank employees as the key respondents. With the right strategies, these banks are capable of advancing to tier 1 category. The study employed census targeting the entire population of the 162 top management bank employees. 18 respondents from Family Bank Limited were considered for pilot study through convenience method. The pilot respondents were excluded from the main study leaving out 144 respondents who were considered in the main study. Out of the 144 respondents, 120 responded the questionnaire. Descriptive and inferential statistics was applied in examining the information. Descriptive statistics entailed the measure of central tendency (mean) and the measure of dispersions (standard deviation). The SPSS was applied to generate the statistics. Inferential statistics entailed regression and correlation analysis. Data was presented using tables. The overall R2 was 0.632. The study established processes innovation strategy, technological change strategy and positioning strategy had significant influence on performance of commercial banks in Kenya however the influence of strategic alliance on performance of commercial banks was moderate. The study resolved that, firstly, mobile 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 should adopt value innovation strategies in order to enhance performance