Management Practices and Industry Influences on Banks in Kenya

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dc.contributor.author Sesi, Paul
dc.date.accessioned 2018-11-08T08:37:52Z
dc.date.available 2018-11-08T08:37:52Z
dc.date.issued 2018
dc.identifier.uri http://erepo.usiu.ac.ke/11732/4094
dc.description A Project Report Submitted to Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters in Business Administration (MBA) en_US
dc.description.abstract The purpose of the study was to examine management practices and industry effects on banks in Kenya. This study was guided by the following research questions: The effects of management practices on banks in Kenya, the effects of the industry micro environment on Kenyan banks and the effects of the industry macro environment on banks in Kenya. A descriptive research design was adopted for this study. The population was drawn from senior management of all commercial banks and from published annual results for the year 2017. Judgement sampling was used to generate the sample for senior managers and document analysis was used to scrutinize financial statements of all commercial banks. A sample size of 2,150 managers and loan data from the financial statements of all commercial banks for the year 2017. The research procedure entailed the drafting of questionnaires to managers of commercial banks, and drafting a checklist for the collection of secondary data. Data analysis was carried out and interpreted using SPSS, t-test and frequency tables. The first research question set to establish how management practices influenced how banks positioned themselves for business, and the resultant strategic positions that management adopted to achieve desired outcomes. The findings indicated that management adopted practices that fit into their strategy, with most local banks adopting a differentiation strategy, whilst most international banks adopted cost leadership arising from a global strategy. The study also revealed that these management practices had a contribution to eventual firm and industry performance and had a bearing to the shift in dominance from international banks, to local banks. Managers overall also had a lot of emphasis on practices that enhanced employee engagement and motivation, but the approaches differed in how the organizations were designed to achieve outcomes in the market place, and the extent to which employee creativity and innovativeness were encouraged. The second objective set to establish how, the industry micro environment had effects on the banking industry and made use of the Porter 5 forces framework as the tool to analyze the industry. The study revealed the micro environment was one to attract moderate to high industry profits arising from entry barriers created majorly from regulation with the only area of concern being the high substitutability of banking industry productsThe findings also established that customers in banking faced steep switching costs, in terms of procedural and cost considerations when intending to switch from one institution to the other. The study also indicated that though the capital requirements for new entrants were not steep, and coupled with weak incumbency advantages, due to lack of dominance in distribution channels, restrictive CBK policy heightened by the moratorium in place for licensing new banks, significantly heightened the barriers to entry. The third objective set to establish how the industry macro environment had effect on the banking industry, and made use of the PESTEL framework as a tool for the analysis. The findings revealed that the macro environment was relatively stable with moderate external environment changes, but a highly complex environment. The complexity was brought about mainly by the number of potential external influences that are significant to the banking industry. The findings also established that the industry enjoyed high levels of trust and moderate to high levels of confidence, this was also coupled with the findings that the economic environment was favorable for business and the laws, policies and government institutions did little to create confusion and uncertainly. The study also found that the industry generally embraced technology and mainly impacted efficiency levels and customer interactions within the industry. The study concluded that the shift in dominance from international to local banks was mainly attributed to management practices that dictated strategies that adapted and responded to the markets differently. International banks with their bias on higher control, were less responsive to the markets while majorly employing practices that were geared toward lesser employee involvement in terms of innovation and creativity, while local banks mainly embraced strategies that had lesser control and therefore more responsive to the market providing differentiated services. The study also concluded that the micro environment being conducive was a key catalyst but need for the regulators to be wary of the high substitutability of the industry products and services by unregulated players. The Macro environment exhibited highly complexity compounded mainly by the rapid developments in the technological space, and social media where fake news and information can spread so fast as to erode confidence in the industry overnight. Finally, the research recommends that banks should be able to find a healthy tradeoff between cost leadership and differentiation with an aim at having a good level of responsiveness to the market. Local banks with the intent of venturing into the region should be wary of the same issues that international banks faced locally with the strong urge for control. Banks should also anticipate future changes in the micro environment and seek ways to adapt proactively through effective change management. The banks will also need to manage the macro environment players in the political and legal space through active lobbying and awareness with keenness not to flout corporate governance policies. Corporate social responsibility activities will be key in public engagement and education. en_US
dc.language.iso en en_US
dc.publisher United States International University - Africa en_US
dc.subject Management Practices en_US
dc.subject Industry Influences en_US
dc.subject Banks in Kenya en_US
dc.title Management Practices and Industry Influences on Banks in Kenya en_US
dc.type Thesis en_US

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