Positioning Strategies and Competitive Advantage of Tier One Banks in Mombasa County, Kenya

Abstract

The financial and commercial banking sector of the economy across the globe is under intense pressure from competition and market changes as customers demand better service delivery. Kenyan banking sector has had a drastic change where many non-banking financial institutions such as microfinance institutions, building societies and Saccos are converting into fully fledged banks. This has led to a tremendous increase in the number of banks to the current 43 thereby setting in increased competition. For banks to gain new markets and retain existing ones, they need to strategize to gain superiority over their rivals by positioning their services, products and their brands aimed at consumer behavior and perceptions. Positioning is therefore regarded as the development of the image of a product or service in the minds of clients directly against that offered by competitors. Kenyan banking industry is dominated by few large banks of which together account over 60 percent market share. This study aimed to examine the positioning strategies adopted by Tier one banks to gain competitive advantage in Mombasa County, Kenya. The study specifically determined the effect of product differentiation, strategic pricing, agency banking and mergers and acquisition on competitive advantage of Tier one banks in Mombasa County, Kenya. Resource based view theory, Porter’s theory of competitive advantage, agency theory and modern portfolio theory guided the study. The study methodology entailed conducting descriptive research of 56 branch managers, operational managers and 9 regional managers. The study conducted census. Content validity of the research instruments was ensured by consulting the university supervisor while reliability was tested using Cronbach’s alpha coefficient. Structured questionnaires were used to collect data. Both descriptive and inferential statistics were used for analyzing data after which it was presented in tables. Descriptive statistics included frequencies, percentages, means and standard deviations. Inferential statistical tools were correlation and multiple regression analysis. The findings indicate that product differentiation (β₁ = 0.080; t = 0.876; p > 0.05), pricing (β₂ = -.044; t = -.429; p > 0.05) and mergers and acquisition (β₄ = 0.165; t = 1.840; p > 0.05) positively and insignificantly affects competitive advantage of banks of tier one banks in Mombasa County. It was established that strategic pricing (β₂ = -.044; t = -.429; p > 0.05) negatively and insignificantly (β₄ = 0.165; t = 1.840; p > 0.05) affects competitive advantage of banks. Firstly, the study concludes that product differentiation and mergers and acquisition positively and insignificantly affect competitive advantage. It was concluded that pricing negatively and insignificantly affects competitive advantage. It was also concluded that agency banking positively and significantly affects competitive advantage of Tier one banks in Mombasa County, Kenya. To banks, this study recommends that agency banking should be improved to enhance competitive advantage. Banks should also consider re-strategizing in terms of product differentiation, strategic pricing and mergers and acquisitions to improve their competitiveness in the market.