Effects of Strategic Alliances on Performance of Commercial Banks in Kenya: A Case of Commercial Bank of Africa

Abstract

Strategic alliances among organizations have grown dramatically during the past two decades. In the banking industry, strategic alliances extend worldwide. Scholars argue that strategic alliances may be a faster way to help firms successfully enter into specific market domains and acquire complementary resources. The increased competition in the Kenyan financial sector has resulted in a situation where financial institutions such as commercial banks and micro-finance institutions (MFIs) are finding it difficult to go it alone. Majority of the commercial banks in Kenya are in strategic alliances with other firms to increase their competitive edge and remain profitable. Therefore the effect of strategic alliances on performance of commercial banks is hence a topic of consideration. The current study hence sought to determine the effect of strategic alliances on performance of commercial banks in Kenya specifically CBA bank. The study specifically sought to establish the effect of technical capability of alliance partners, the structure of strategic alliances, the relationship of alliance partners and the type of strategic alliance on performance of commercial banks in Kenya. A descriptive research design was employed by the study. The target study population included all the employees of commercial bank of Africa which is headquartered in Nairobi Kenya. Random sampling was used to select the sample of 96 respondents. The study used quantitative primary data gathered by use of structured questions. Data analysis was done using SPSS version 20. The study findings indicated that technical capability of alliance partners, structure of strategic alliances and relationship of alliance partners were positively and significantly associated with performance of commercial banks while the type of strategic alliance was positively but insignificantly correlated to performance of commercial banks in Kenya. The regression results indicated that entering into staretegic alliances with partners who had high technical capability would lead to an increase in the performance of commercial banks in Kenya; considering a favourable structure of staregic alliances led to an increase in the performance of commercial banks in Kenya; increased good relationship of alliance partners would lead to increased performance of commercial banks in Kenya and that  even though the type of strategic alliance would lead to increase in the performance of commercial banks in Kenya, this increase was not significant.

Keywords: Technical capability, Structure of strategic alliances, Relationship of alliance partners, Type of strategic alliance, Performance of commercial banks in Kenya