EFFECT OF STRATEGIC MANAGEMENT PRACTICES ON PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract

The commercial banks operating in Kenya are experiencing a faster pace of change characterized by customers’ sophistication, strict regulation and supervision, technology advancement, liberalization of banking license leading to rapid internationalization and challenges in performance which require agile strategic practices to sustain competitive advantage. It was hence important to interrogate whether the commercial banks have implemented strategic management practices and if they do, what its effect on performance is. Specifically, the study seeks to determine the effect of strategy evaluation on performance of commercial banks in Kenya. This study adopted a thorough survey of the commercial banks in Kenya in order to unearth the problem surrounding strategic management and hence a descriptive survey design was adopted. The study conducted a census on the entire banking sector involving 40 commercial banks. The unit of observation (respondents) were the heads of Finance, Human Resource, Marketing, Operations and Administration from the head offices. Both secondary and primary data was used whereby primary data was collected through likert scale questionnaires while secondary data on performance of the commercial banks was accessed from the annual reports at CBK, Kenya. Descriptive statistics, correlations and regressions were conducted to ensure that relationships between the variables was established. It was established that strategy evaluation practices have a positive and significant influence on bank performance (? = 5.443: Sig = 0.000 < 0.05). The study also recommends that for commercial banks to realize a significant increase in their financial performance, the strategic and operations managers should implement strategy evaluation practices such performance review, analysis of variance in targets and taking corrective action to a high extent. This is because continued adoption of these practices is associated with a significant increase in performance of commercial banks in Kenya

Key Words: Strategic Management, Strategy Evaluation, Performance of Commercial Banks, Kenya