Influence Of Strategic Orientation on Performance of Commercial Banks in Kenya: Case of Study Family Bank Limited

Abstract

In Kenya, fierce competition from both the banking industry and mobile telephony carriers which offer creative alternative offerings to traditional banking products, emphasizes the need for strategic orientation. Particularly, though Family bank continues to deploy new products and services while leveraging technology and building relationships with customers, it is yet to upgrade towards the intended tier 1 status. The bank continues to experience slow growth rate despite numerous strategies being formulated by the firm. In 2018, non-performing loans went up to Ksh 4.7 billion and interest income reduced by 50% in the first half to June as lending went down. Family bank’s low market share raises the question on the effects of strategic orientation practices on the performance of the firm. The objective of the study was to establish the influence of strategic orientation on performance of commercial banks in Kenya, a case study of Family Bank Ltd. The specific objectives of the study were to; assess the effect of technological orientation on the performance of commercial banks in Kenya, assess the effect of entrepreneurial orientation on the performance of commercial banks in Kenya and examine the effect of customer orientation on the performance of commercial banks in Kenya. This study was anchored on three main theories; Resource Based View Theory, Contingency Theory and Mckinsey 7S Model. The study was based on descriptive research design. The target population of the study was all the 31 Family bank branches based in Nairobi County. Census sampling technique was adopted and hence all the 31 targeted branches participated in the study with 171 managerial employees as the respondents. Data was collected using questionnaires. The collected data was analyzed using descriptive and inferential analysis. SPSS version 26.0 aided in the analysis of the data. Tables and figures were used to present the collected data. The study found that technological orientation has a positive and significant effect on the performance of commercial banks in Kenya (β=0.480, P-value=0.000). The study also found that entrepreneurial orientation has a positive and significant effect on the performance of commercial banks in Kenya (β=0.223, P-value=0.000). Further, the study found that customer orientation has a positive and significant effect on the performance of commercial banks in Kenya (β=0.480, P-value=0.000). The overall regression model of the study revealed that strategic orientation was a good predictor of organizational performance. The study concluded that strategic orientation has a significant effect on the level of organizational performance (adjusted R-square= 0.666). The study recommended that commercial banks in Kenya should enhance the adoption of strategic orientation in order to improve their performance and more so in new product development to enable them carve out new market niche for their goods and services, making them more competitive in the sector.