Thesis:

Influence of competitive strategies on the performance of tier one commercial banks in Nairobi county, Kenya

The study conducted in Nairobi County revealed that tier-one commercial banks can improve their performance and resilience by employing a blend of cost leadership, product diversification, technological innovation, and market innovation. These strategic approaches showed a strong association with increased profitability and operational efficiency, even amidst various challenges. The primary aim of the research was to assess how competitive strategies affect the performance of tier-one commercial banks within Nairobi County. Specifically, the study sought to: evaluate the impact of cost leadership, explore how product diversification influences performance, analyze the role of technological innovation, and assess the effect of market innovation on these banks. The study was underpinned by theoretical frameworks including the Technology Acceptance Model, Resource-Based View (RBV), Porter’s Five Forces, and the Dynamic Capabilities Theory, with the RBV serving as the principal foundation. A descriptive survey research design was adopted. The study targeted 492 management personnel across eight tier-one commercial banks located in the county. Data collection was conducted using structured questionnaires. A sample of 220 respondents was drawn, comprising 19 from senior management, 61 from middle management, and 140 from lower management levels. To ensure accuracy and consistency, the questionnaire’s validity and reliability were tested using a pilot group of 22 respondents, representing 10% of the total sample. The data gathered was analyzed through both descriptive statistics (frequencies, percentages, and means) and inferential analysis, with findings presented in the form of tables, graphs, and pie charts. The study found that cost leadership significantly enhances the performance of commercial banks, with a strong positive correlation (r = 0.924), indicating that cost-reduction strategies improve profitability and financial stability. Product diversification was also positively correlated with bank performance (r = 0.924), suggesting that expanding financial products contributes to revenue growth and risk mitigation, although its impact may depend on market demand. Technological innovation showed a strong correlation with bank performance (r = 0.924), but its regression results (β = -0.291, p = 0.766) suggest that it does not have a direct impact on financial success. Market innovation was found to be a key driver of competitiveness, with a strong correlation (r = 0.881) and a significant regression coefficient (β = 2.199), showing that banks with innovative market strategies are more likely to perform well. The study recommends commercial banks to prioritize cost leadership strategies by investing in automation and operational efficiency while ensuring that cost-cutting measures do not compromise service quality. Regulators should create policies that encourage product diversification while safeguarding financial stability, enabling banks to expand their offerings in response to market demands. Banks should collaborate with technology providers to implement secure and customer-friendly digital solutions, ensuring technological innovation aligns with operational goals and regulatory requirements. Lastly, banks should invest in market-driven strategies like customer segmentation, digital marketing, and tailored financial products to enhance competitiveness and long-term profitability.