Competitive strategies, managerial capabilities and organization performance of Commercial Banks in Kericho County

Abstract

Organization performance has been acknowledged in strategic management literature as the key driving force in all organizations; nevertheless, aspects that support achievement of the same, have remain insufficiently examined. The study sought to determine the effect of competitive strategies on organizational performance of commercial banks in Kericho County and establish the moderating role of managerial capabilities on the relationship. The study was directed by four specific objectives: to determine the relationship between cost leadership strategy and organization performance; to establish the relationship between differentiation strategy and organization performance; to establish the relationship between focus strategy and organization performance; and to evaluate the moderating role of managerial capabilities on the relationship between competitive strategy and organization performance. The investigation was grounded on Resource Based view theory in addition to Value Chain Analysis model and Organization Performance models. Michael Porter’s competitive strategies model was adopted as the standard to analyze competitiveness at commercial banks in Kericho County. The study employed explanatory research design. Target population of the study consisted of 139 commercial banks employees, comprising of both managers and non-management staff, in Kericho County. A sample size of 103 was drawn using multistage sampling technique. Primary data was collected by use of structured questionnaires. The questionnaires collected from the banks were coded, and transcribed into the Statistical Package for the Social Sciences (SPSS), Version 23.0, for data analyses. Classification, analysis and interpretation of data were carried out using descriptive and inferential statistics. Descriptive statistics, for instance, frequencies and means were used to describe, summarize, and organize the data. Hierarchical multiple regression was used to test both the direct and indirect effects in the study whereas data was presented using tables, graphs, frequencies and percentages. Internal consistency of the study constructs was measured by Cronbach’s Alpha values, which ranged from 0.760 to 0.819, showing that they were reliable. Results showed that cost leadership strategies had a significant and positive effect on organization performance of commercial banks in Kericho County (B=0.228, t= 6.266, p<.0001). Similarly, focus strategies had a significant and positive effect on organization performance of commercial banks in Kericho County (B=1.185, t= 18.663, p <0.0001). However, differentiation strategy had no significant effect on organization performance of commercial banks in Kericho County (B = -0.037, t= -0.743, p = 0.459). Managerial capabilities did not directly affect organization performance but were found to strongly moderate the relationship between cost leadership strategy (B=0.463, t= 8.509, p<0.0001) and focus strategy (B=0.813, t= 6.599, p<0.0001) and organization performance. Results showed that cost leadership strategy or focus strategy only increase organization performance when managerial capabilities are at the highest level. However, managerial capabilities were found not to significantly moderate the relationship between differentiation strategy and organization performance (B=-0.031, t= -0.271, p = 0.787). The study therefore recommends that commercial banks identify cost and focus strategies that would assist in generating sustainable organization performance. It also recommends that managerial capabilities must be at the highest level for a successful implementation of a cost leadership strategy or focus strategy, especially for the former. The study suggests that future researchers can look into the occurrence of organization performance across other various sectors.