Response Strategies by Commercial Banks to Economic Changes in Kenya

Abstract

Dynamic environment changes impact on organizations goals and objectives and this makes it difficult for organizations to remain viable. To be able therefore to stay ahead of competition, it’s imperative for the organizations to continually scan the environment so that the organizations adjust their strategic responses to accommodate the demands of the environment. The appropriate response strategies guarantee a competitive edge that ensures the organizations remain relevant. This study examined the strategies used by commercial banks in Kenya to respond to changes in the economic environment. A sample of thirty five banks was used and primary data collected using questionnaires administered to the managers of the banks who are responsible for developing response strategies. Secondary data was obtained from the banks’ existing bank publications and annual reports. The study established that the commercial banks have been able to respond to the changes in their environment through retrenchment strategies which involved cutting operating costs and divestment of non-core assets. They have also responded to the environment using various investment strategies which contrast with retrenchment and as such firms perceive these changes as opportunities to invest, innovate and expand into new markets in order to achieve or extend a competitive advantage. It was also established that ambidextrous strategies have been used where organizations combine incremental change with discontinuous change, or the exploitation of existing resources to improve efficiency. This occurs through exploration of new sources of competitive advantage and innovation. It is recommended that in order to stay ahead of competition, commercial banks should continuously scan the environment aggressively and speed up implementation of various strategies.

Key words: Response strategies, commercial banks, economic changes