ABSTRACT
This study sought to establish the
strategies used by ccommercial banks in Kenya in Managing Service Breakdown
among SME Customers. The study focused on five commercial banks namely
Barclays, Kenya Commercial Bank, Standard Chartered, Equity and Fina bank
which currently offer services to SME customers. A self-administered open and
closed ended questionnaire was utilized in collecting primary data from the field.
Data collected was analyzed using descriptive statistics. The study found that
lack of clear communication with customers, long procedures; intrusive
documentation and lack of flexibility are some of the causes resulting in
service breakdown. It also established that the main strategies used by banks
to deal with services breakdown include; designing services to fit the needs of
customers; ensuring that services are always oh high quality without
compromise; putting relevant systems in place; having competent employees in
place; on time delivery of services and ensuring that services are driven by
customers to increase acceptance and satisfaction.
Key words: Services Break down, strategies
CHAPTER
ONE
INTRODUCTION
This study sought to examine the
strategies used by Commercial banks in Kenya to deal with Service brieakdown.
The study had two objectives, namely To identify the causes of service
breakdown in commercial banks in Kenya, and To establish the specific marketing
strategies used by commercial banks in Kenya in managing service break down
A company’s strategy consists of the
business approaches and initiatives it undertakes to attract customers and
fulfill their expectations, to withstand competitive pressures and to
strengthen its market position. These strategies provide opportunities for the
organization to respond to the various challenges within its operating
environment. Firms also develop strategies to enable them seize strategic
initiatives and maintain a competitive edge in the market (Porter, 1985). The
competitive aim is to do a significantly better job to its customers. The
success of every organization is determined by its responsiveness to the
customer needs.
The competitive aim is to do a significantly
better job of providing what customers are looking for, thereby enabling the
company to earn a competitive advantage and outsmart rivals in the market
place. The core of a company’s marketing strategy consists of its internal
initiatives to deliver satisfaction to customers but also includes offensive
and defensive moves to counter the maneuvering of rivals, actions to shift
resources around to improve the firm’s long term competitive capabilities and
market position, and tactical efforts to respond to prevailing market
conditions. Assuming that there are a number of providers, customers will
choose which offering to accept on their perception of value-for-money.
Finance has been identified as the most
important factor determining the survival and growth of small and medium sized
enterprises in Kenya. Access to finance allows Small and Medium Enterprises
(SME’s) to undertake productive investments to expand their businesses and to
acquire the latest technologies, thus ensuring their competitiveness and that
of the nation as a whole. Poorly functioning financial systems can seriously
undermine the microeconomic fundamentals of a country, resulting in lower
growth in income and employment (Griliches, 1998). Landes (1998) argues that
despite their dominant numbers and importance in job creation, SME’s
traditionally have faced difficulties in obtaining formal credit or equity.
These difficulties are what the commercial banks call service breakdown. For
example, maturities of commercial bank loans extended to SME’s are often
limited to a period far too short to pay off any sizeable investment; secondly
SME’s are regarded by creditors and investors as high-risk borrowers due to
insufficient assets and low capitalization, vulnerability to market fluctuations
and high mortality rates; thirdly information asymmetry arising from SME’s’
lack of accounting records, inadequate financial statements or business plans
makes it difficult for creditors and investors to assess the creditworthiness
of potential SME proposals; and lastly is the high administrative/transaction
costs of lending or investing small amounts do not make SME financing a
profitable business.
To compete effectively in the SME
financing sector, and faced with this service breakdown, commercial banks need
to provide financial services that meet the specialized needs of SME’s while
coping with the high risks and costs associated with servicing them (Landes,
1998). To achieve this, an increasing number of banks have adopted separate
strategies to service SME customers. The current trend is to shift from a
product-based focus to a more customer oriented focus of providing packages of
financial services tailored to their needs. This has the potential of
considerably improving the banks’ relations with the SME sector, as well as
increasing the profitability of providing financial services to it (Landes,
1998).
The
Small and Medium Enterprises in Kenya
In Kenya, the rise of SME’s has been
hindered by financial challenges and political instability (Carrier,
1999). Kenya has created conditions for private-sector growth but is
still held back by an inadequate financial system. Kenya’s private sector
consists of mostly informal micro enterprises, operating alongside large firms.
Most companies are small because the private sector is new and because of legal
and financial obstacles to capital accumulation. Between these large and small
firms, SME’s are very scarce and constitute a “missing middle.”
Financing is necessary to help SME’s set
up and expand their operations, develop new products, and invest in new staff
or production facilities (Gomez-Mejia, 1988). Many small businesses start out
as an idea from one or two people, who invest their own money and probably turn
to family and friends for financial help in return for a share in the business.
But if they are successful, there comes a time for all developing SME’s when
they need new investment to expand or innovate further. That is where they
often run into problems, because they find it much harder than larger
businesses to obtain financing from banks, capital markets or other suppliers
of credit. This “financing gap” is all the more important in a fast-changing
knowledge-based economy because of the speed of innovation (Groke and Kreidle
1967).
Innovative SME’s with high growth
potential, many of them in high-technology sectors, have played a pivotal role
in raising productivity and maintaining competitiveness in recent years. But
innovative products and services, however great their potential, need investment
to flourish (Carrier, 1999). If SME’s cannot find the financing they need,
brilliant ideas may fall by the wayside and this represents a loss in potential
growth for the economy. The “bagless” vacuum cleaner and the “wind-up” radio or
flashlight which need no batteries are now common household items, but nearly
failed to see the light of day because their inventors could not find financial
backing to transform their ideas into production. Already, differences are
emerging between countries in terms of how easy it is for innovative SME’s to
grow and develop. This sector has been very dynamic in the United States and a
few other countries, but has lagged in many continental European countries and
Japan, to the detriment of job creation and competitiveness (Gomez-Mejia,
1988).
Improving access to finance of small
and medium enterprises is crucial in fostering entrepreneurship, competition,
innovation and growth in Kenya. Access to sufficient and adequate capital to
grow and further develop their activities is a difficulty faced by many Kenyan
SME’s. This situation is compounded by the difficulties in accessing finance as
SME financing is considered by many financial providers as a high risk activity
that generates high transaction costs and/or low returns on investment.
Moreover, SME’s need to meet the challenge of adapting to the changing
financial environment and the increasing complexity and extent of financial
acquisition. In an effort to access banking services, SME’s face the challenge
of service products availed by their banks failing to meet their expectation
leaving them helpless and frustrated to achieve their business objectives
(Carrier, 1999). These are events of service breakdown.
Several scholars have carried out
extensive studies in the area of banking in Kenya and especially on competitive
strategy. For instance, Warugu (2001) in his research, found out that focus and
product differentiation are some of the major strategies that the banks have
employed in their quest to outdo each other. Similarly Kiptugen (2003) looked
at the strategic responses to a changing competitive environment in the case
study of KCB, he established that proactive rather than reactive strategies
such as research on changing customer needs and preferences forms the basis of
its strategic planning. Mbwayo (2005) focused on the strategies applied by
commercial banks in Kenya in anti money laundering compliance programs. He
concluded that strict adherence procedures and standards have been implemented
to ensure that money laundering is contained in Kenya.
These studies have looked at competitive
strategies among commercial banks and response strategies at various levels in
an attempt to gain a competitive edge over rivals in the banking industry but
none has investigated marketing strategies used by these industry players to
address the rampant service breakdown being experienced by SME’s in commercial
banks in Kenya. Since there is a massive service breakdown in commercial banks
in Kenya, there was a compelling need to investigate the strategies used in
managing this problem.
This study is of significance in that
Executives in the banking industry will be able to use the findings of this
study in drafting strategies on how to operate in the Kenyan market. It will
help them understand better the problems facing SME’s as they relate with
financial institutions in their pursuit for survival. As a result, it is
expected that the executives will be able to formulate policies that are more
benign to the sector.
Also, investors in the SME sector will use
the information from this study to make decisions regarding investing in the
area. The findings of the research will expose some of the challenges they are
likely to encounter in their attempt to get banking services in Kenya. As a
result, the investors will be more endowed with knowledge and prepared to fit
in the prevailing banking environment.
Scholars in the field of strategic
management and marketing will use the information to understand the state of
the sector better. They will also use the information as a reference point to research
on the strategy formulation and innovations in other industries.
Finally, the Government will find the
information useful in diagnosing the problems affecting the SME sector and come
up with regulative solutions that would protect and help the SME’s thrive.
Department | Marketing |
Project ID Code | MKT0003 |
Chapters | 4 Chapters |
No of Pages | 43 pages |
Reference | YES |
Format | Microsoft Word |
Price | ₦4000, $15 |
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Contact Us On | +2347043069458 |