Differentiating Between Market Structures

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As times change, strategies change too. According to business experts, the change in strategies is one of the best coping mechanisms adopted by serious organizations that intend to be market leaders in the changing world economy. The change in the times and approaches in the world business has been captivated by existence and entry of large and small corporate players with competitive edge. The competition edge is enhanced by their a ability to outdo their rivals using either efficient structures, introducing unique products or offering low cost services or investing on captivating adverts. In the end, the competitive strategies have been source of opportunities and challenges (Porter 2005).

With the changing internal and external organizational environment, Johnson et al. (2003) advices that organizations should embrace new ways to counter the changing business scenarios. Embracing the changes would need designing of new capacities, objectives, defining new roles and responsibilities to edge out its competitors from the emerging opportunities.

It is stated that developing a competitive strategy is developing abroad formula that is necessary for the completion of a business strategy and designing the policies for meeting these objectives. To Porter, a competitive strategy is a combination of goals and policies. He highlighted competitive strategies as the threat of new entrants and substitute products and services, the bargaining power of buyers and suppliers and the intensity of rivalry among competitors in the industry (Porter et al. 2005).

According to Allen (2012), the intensity of competition influences profits. This demands that an organization lays out a strategy in response to its competitors in the market.

The operations and managements of banks in Kenya is undertaken in somehow deregulated environment. The sector is controlled by the companies’ Act, the Banking Act, and the Central Bank of Kenya Act. This has resulted in a survival for the fittest kind of strategies being adopted by the 42 banks which are all for the same market share in Kenya (The East Africa Standard Reporters 2009).

With the new demand by consumers and clients in the banking sector, banks in Kenya have continued to experience stiff competition. The case has been motivated by the factors such as privatization of government owned banks, international fiscal and monetary changes, economic reforms brought about by devolution, new consumer tastes and expectations as well as the dwindling fortunes in income. These alterations call for adjustments in strategies by Kenyan banks in order to survive.

Significantly, the banks in Kenya have been able to gain from the emerging trends in the banking sector. Some of the strategies widely adopted by Kenyan banks include agent banking, credit information sharing, mobile phone technology innovations and internet banking (Ibid). There have been notable exploration and venture by these banks into regional markets such as Equity and KCB in South Sudan (Allen et. al. 2011).

One bank in Kenya caught in the competition fray is the Kenya Commercial Bank Limited (KCB). This is a group bank whose services include corporate and retail banking services and treasury and mortgages services. The target customers include individual customers, stockbrokers, investment managers, and insurance companies. Generally, its retail services include personal banking, KCB cards, Biashara Banking, KCB Micro Banking, among others. The company is committed to providing custody services, corporate finance and asset financing through the bank’s corporate services.

In order to gain competitive edge over other financial and banking institutions, KCB has been able to integrate new strategic approaches. Some of its new strategies include expansion coverage, information technology system of T24 and training of workforce (ibid). These strategies are aimed at offering satisfactory services to their customers and mainstream its operations in line with the emerging trends in banking industry.

KCB’s expansion coverage strategy is being implemented under strategy and operations. The expansion has seen the bank record a total of 230 branches across the eastern Africa region. Currently, the bank has opened branches in Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan. These branches are complemented by over 940 ATMs in the region. In addition to the branches, the bank also has adopted internet and mobile banking service with over 2,600 agents (Ibid).

Secondly, KCBs information technology system offers the bank a leeway to reach the traditionally non-bankable population. This strategy comes with a unique product called M-Benki. This product enables customers to own accounts through the Mobi Bank platform. With this strategy, customers do not need to access a bank to open bank accounts.

Lastly, KCB uses workforce training as a competition strategy. The training entails nurturing diversity, that adds value to their services, attract best talents and provide their customers with different tastes of personalized services. Since employees become more productive with support and motivation from within and outside the organization, the bank invests in skills and knowledge development programmes targeting all its employees. In addition, there are opportunities for continual learning and leadership training (KCB, 2013)

To improve on its efficiency and market dominance, KCB will have to re-evaluate its current strategies so as to keep a breast with the emerging trends in the banking sector. Some of the strategies that would be of benefit are as discussed below:

First, adopt service digitalization: With more Kenyans owning internet enabled phones, the players in the financial industry must seek ways to win in the market share with new products designed around mobile, web, and social media.

Redefine relationships: With increasing entry of SMEs and Saccos into the financial market, there is great urgency to retain the trust originally enjoyed by the banks. The increasing competition from the originally non-bank players requires KCB to redefine its relationship so as to win back some of the liberal customers being swayed by the wind of change in the sector.

Third, redefine branch optimization approach: with the unsustainable branch optimization models in the banking sector, there is need improved full time access and simplicity in service provision. Therefore, KCB will have to provide clear cut solution that targets less-branch banking to gain a perceived convenience.

In addition, adopt a focus on customer approach. There are increasingly more literate and digitally connected populations in Kenya than ever before. To tap into this growing market, KCB will have to adopt a personalized service (i.e. online, 24/7), improved communication and enhanced kick-backs in the delivery of its services.

Finally, adopt brand differentiation: With the complexity associated with the banking sector, KCB will have to simplify its engagement with customers. The bank will have to rebrand itself as a stand-alone bank. It should have its own niche in terms of products and services it offers. This will meet the quest for simple, easy to understand and use products and services. This entails rethinking ways to handle paperwork and complicated bureaucracies.

References

Allen, Franklin, Isaac Otchere, and Lemma Senbet, 2011, African financial systems: A review, Review of Development Finance 1, 79-113.

East African Standard Reporters, 2009, Why central bank position on mobile banking attracts wrath. KBL Foundation

Franklin Allen, Elena Carletti, Robert Cull, Jun “Qj” Qian, Lemma Senbet, And Patricio Valenzuela, 2012, Improving Access to Banking: Evidence from Kenya, CBK.

Michael E. Porter, 2005, Competitive Strategy: Techniques for Analyzing Industries and Competitors, McGraw.