National Bank or investment company Of Kenya To Environmental Problems Business Essay

The financial industry has been growing at an instant rate not only locally but also internationally. Nevertheless the industry, especially retail bank has been facing many obstacles which include inner and exterior environmental challenges which has led to shrinking profit margins. These challenges calls for financial institutions to recognize and choose strategies which will give them better competitive edge and the ability to manage the constantly emerging environmental challenges in the industry if they're to remain in business.

As due to these problems, this research was completed to recognize environmental challenges faced by financial sector in Kenya and strategies that can be adopted to triumph over these challenges. To do this, a research study of National Bank of Kenya was performed by interviewing senior and middle level personnel to identify obstacles and strategies implemented by the lender against interior and exterior environmental obstacles.

Structured interview guide was found in collecting data from NBK personnel in Nairobi hq and its own branches within Nairobi city whereby a complete of 12 respondents were interviewed which included 3 general managers, 4 divisional professionals and 5 branch professionals. Interview guide pretest was completed a month prior to the genuine data collection took place which also included a reconnaissance stop by at preferred NBK branches to be able to familiarize and reserve an appointment. Data was examined using content analysis with numeric statistics examined using MS excel shown using graphs and desks.

Environmental challenges which include entrance of new rivals, high cost of functions, unstable economical conditions, tight insurance policies and regulations among other were identified. The strategies to overcome these troubles recognized include new product development and branding strategies, adopting new marketing strategies, expansion, outsourcing, ICT infrastructure upgrade to list a few.

The study recommends the necessity for the financial industry to come together and address these issues together rather than specific bank controlling these challenges. The analysis concluded by recommending further research on recognition of effective ways of be used by finance institutions.





ATM Auto Teller Machine

BFUB Lender Fusion Universal Banking System

CBK Central Loan company of Kenya

DFI's Development Financial Institution

GDP Gross Domestic Product

HRM Human Source Management

ICT Information Communication Technology

IMF International Monetary Fund

NBFI's Non-Banking Financial Institution

NBK National Lender of Kenya

PBT Earnings before Tax


1. 1 Track record of the Study

Organizations operate in a environment that influences its procedure either favorably or negatively depending on the dynamics of its business. As Porter (1996) talks about, "many organizations operate in a environment whereby they are expected to meet various stakeholders' objectives hence the necessity to formulate strategies that would help them meet this need" (p. 61). On the other hand organization operates in a environment with high competition which influences the firm's strategic process and therefore establishes the firm's achievements and goal (Sharma, 2008).

Therefore the survival and success of an organization may be accomplished if the firm has the source capacity to create and align its strategies to the environmental difficulties. This isn't only affected by the internal environment but also the external environment. Kumar (2006) talks about that rapid technical change, easier entrance by foreign competitors and the accelerating break down of traditional industry boundaries subject organizations to new unstable competitive makes. He further adds that contemporary companies functioning in a vibrant market contexts, often offer with these contingencies by applying strategies that enable quick reconfiguration and redeployment of property to deal with these environmental changes

Environmental influence hasn't spared the financial sector either, both locally and internationally. This was discovered by Kumar (2006) when he explains that "environmental influence has necessitated the necessity for financial institutions to redefine their modes of service delivery and goals so as to maintain and stay relevant in the ever changing and powerful environment" (p. 104-105). These changes therefore present a great deal of obstacles to lender since this change comes with a cost.

As due to changes in the business environment, strategies adopted by the organizations whether locally or internationally need to have a quick response to the consistent changes that are usually experienced in the market. These replies has been known by Chandler (1962) as adaptive strategies which indicate it considers all the factors prevailing on the market at that particular time and its own application brings forth a good impact in the day to day running of business making the company a profitable entity.

1. 2 Strategic management

The term strategy is thought as the path and opportunity of an organization over the long-term which achieves advantage in a changing environment through its construction of resources and competences with the aim of fulfilling stakeholder's expectations. (Johson, & Scholes, 2006)

Managers do not make tactical decision in a competitive vacuum. Their company is rivalling against others for customers. Your competition is a tough and tumble process in which only the most effective companies get out (Charles & Hill, 2008).

One of the main element challenges director face is to concurrently generate high profitability and increase the profits of the company. The two authors further explain that to increase shareholder value, professionals must formulate and use strategies that allow their company to outperform rivals-that give it a competitive advantage

1. 2. 1 Strategic Responses

According to Porter, (1996), strategic response identifies the process of fabricating a distinctive and valuable position with method of a couple of activities in a manner that creates synergistic quest for the targets of a company.

Firm's strategic reactions make reference to the processes employed by the professionals of the organization to be able to package effectively with exactly what affects the growth and profitability of the organization so that it can position itself optimally in its competitive environment by maximizing the anticipation of the environmental problems (Olwany, 2011)

Johnson and Scholes (2002) distinguish strategic response into three categories: interior development strategies, acquisition strategy and joint development strategies. Internal development strategy matching to them identifies the stage where an organization develops through its own management new markets and new product. Alternatively acquisition strategy consists of mergers between several companies and will involve full ownership between several companies and includes full ownership of another company. Thirdly is the joint development strategy which means that a firm can only achieve its objectives by co-operating with others (Johnson & Scholes, 2002). Therefore strategic response enables organizations to deal with increased turbulence and dynamism of the environment.

1. 2. 2 The Financial Sector in Kenya

Kenya's financial sector can be described as being relatively varied in conditions of the amount of finance institutions. The economic climate possessed 51 commercial lenders, 23 Non-Banking FINANCE INSTITUTIONS (NBFIs), 5 building societies, 39 insurance firms, 3 reinsurance companies, 10 Development Financial Institutions (DFIs), a Capital Market, 13 Forex bureau, and 2, 670 personal savings and credit cooperative societies (Ngugi & Kabubo, 1998).

Kenya's monetary performance weakened during the last decade as a result of failure to sustain prudent macroeconomic regulations, the slow pace of structural reform, and the persistence of governance problems. The often lax fiscal plan led to a rapid accumulation of short-term federal arrears which, in blend with declines in the keeping rate, translated into lending rates more than twenty percent in real conditions. This, as well as other high costs to do business in Kenya - because of corruption, a deteriorating infrastructure, and an inefficient Parastatal sector (e. g. , resources, and transport services) frustrated investment and its own effectiveness, and as a result economic progress, (International Monetary Fund, 2000)

The IMF (2000) article further explains that "since early 1998 Kenya's economic performance was mixed. They have achieved fiscal adjustment resistant to the difficult backdrop of worsening conditions of trade, a dearth of external financing, and negative weather conditions. At the same time, the save of a major bank in later 1998 strained fiscal policy and temporarily weakened monetary plan. In this context, investor assurance has remained weakened, and development has extended to decline", the survey concludes.

Kenya's banking industry documented a 16. 9 percent progress in pre-tax income, from 34. 9 billion in June 2010 to 40. 8 billion as at end of June 2011, corresponding to information posted in Central Loan company of Kenya (CBK) website. This rate of expansion has also resulted in increase in setting of service deliver from hall bank to street banking

Price Waterhouse Coopers (2012) publication explains some of the primary problems facing the financial sector today such as; new regulations enforced on financial institution by the Central Bank, for example, the Finance Act 2008, which had taken influence on 1 January 2009 requires banking companies and mortgage firms to create a minimum core capital of KShs 1 billion by December 2012. This necessity was hoped to help change small bankers into more stable organizations.

Ngugi and Kabubo, (1998) further explain more obstacles facing expansion of Kenya's financial sector such as unpredictable inflation rates. They explain that inflation continued to be subdued in 1998 and in the first 50 % of 1999, but it increased in the 3rd 1 / 4 of 1999 mainly owing to increases in petrol and food prices as well as the lagged ramifications of the depreciation of the shilling. Real GDP development slowed from 2. 3 percent in 1997 to 1 1. 8 percent in 1998, and it was expected to decrease further in 1999, and unemployment continuing to increase.

Financial Companies play a very significant role in the Kenyan current economic climate. Bankers, for example usually meet up with the needs of top quality investors by causing available high amounts of capital for big projects in the commercial, infrastructure and service industries of the overall economy. At exactly the same time, the medium and small projects must have credit open to them for new investment and growth of the prevailing units.

1. 2. 3 National Bank Kenya

National Bank or investment company Of Kenya Small was integrated on 19th June 1968. The primary goal of its establishment was to help Kenyans to get access to credit and control their current economic climate after freedom (National Loan company of Kenya, 2012)

National bank in the past has been working below its capacity credited to increased debt in loan collection amounting to 36 billion that was politically stimulated that pushed the bank into massive losses in the later 1990s and early on 2000. However this example has altered since recently the lender posted a income before taxes (PBT) of Sh2. 6 billion in the year 2011 compared to Sh2. 1 billion in '09 2009, relating to its audited financial assertions. (NBK, 2012)

The financial changes format by different writers above, explains a few of the difficulties that the financial sector is facing and specifically National Standard bank of Kenya. In this particular era of fast technical development and changes in market environment, NBK, has to put its strategic responses right to enable it compete both locally and internationally

1. 3 Research Problem

As Kenya's general financial condition deteriorated in the first 1980s, the financial sector performance also went down. Despite possessing a diversified financial system, financial savings remained at a minimal level. The show of domestic cost savings placed as financial property with the financial sector averaged 30% in 1984-1987, similar to the levels in the 1970s. Monetization of orders dropped from 34% to 30% and 29% in 1978-1980, 1980- 1984 and although NBFIs were mushrooming in the 1980s, the economic climate continued to be dominated by the commercial banking companies with about 70% of the total loans and innovations in 1988. In 1986, the sector encountered a crisis with most of the corporations experiencing undercapitalization problems. The situation was attributed to the various constraints facing the sector and resulted in the mounting of your financial sector reform (Ngugi & Kabubo, 1998)

The above conclusions obviously show that financial sector has been experiencing various obstacles which include both exterior and internal shocks. These issues as put together by Ngugi and Kabubo, (1998) include central bank regulatory differences across financial institutions, especially between commercial banking companies and NBFIs, and among the list of financial instruments limited regulatory and legal frameworks for the economic climate, together with weakness in prudential guidance weak monetary plan control by the central standard bank segmentation of the financial sector by activities. When financial institutions fail to develop quick response device against these problems, this often results to these establishments registering loss, and shedding its customer bottom to their competitors. It really is this strategic decision that will determine whether the institution shall continue to be profitable in the current and ever before changing market environment.

Franklin et al (2010) addresses a few of the gaps in books on the issues facing financial sector. They explain that the indegent talk about of African financial development raise a number of important questions on what went wrong with the financial reforms in Africa and on what could be increased. Is African financial development slow alone, or could it be merely a reflection of broader economical and coverage failures? Will be the degrees of financial development achieved outside of Africa, in both developed and expanding countries, achievable for most African countries? What factors have inhibited African financial development to this point? If those factors were corrected and financial development does take maintain, would the finance-growth nexus carry in Africa as seen in other areas? Understanding these issues is of crucial importance since, as well documented in the ample empirical evidence; there is a convincing linkage between financial development and monetary development. They conclude by directing out that there surely is virtually no rigorous academics research that addresses these questions. This research therefore looks for to find answers and doc challenges faced by financial sector thus help in filling the data gap in literature as described above.

The research question guiding the study is exactly what environmental problems do financial sector in Kenya face and what strategic reactions has been put in place against these challenges by lender in Kenya and in particular NBK.

1. 4 Research Objective

The goal of the analysis is to recognize environmental difficulties facing financial sector and specifically National Loan provider of Kenya and the strategic responses adapted by the lender to conquer these problems.

1. 5 Value of the study

The results of this review has value in the academics field for the reason that it can help in filling existing gaps in literature as relating environmental challenges experienced by organizations and specifically financial institutions. That is fundamental in educational field as it becomes a valuable repository of knowledge to educational scholars which include students, lecturers and researchers who will be able to refer to the document in the foreseeable future while undertaking related studies.

The review will be worth focusing on in policy making not and then the bank and other finance institutions but also administration financial regulatory organ in producing and enacting procedures which ensure ecological operation of finance institutions in the country. External and interior environment has a great influence on procedures by financial institutions, hence the results of the analysis will become a guide to all or any stakeholders in the financial sector in developing operational policies that may ensure that any proper responses adopted is effective in realizing goals of finance institutions.

Furthermore, the study will be of great value in general management practice for the reason that the analysis will identify environmental problems faced by financial institution in today's times and through its results, the study will be able to recommend strategic responses that can be used by these corporations. In addition, having understanding of these environmental troubles, management will be able to placed their priorities and goals good challenges they expect of face hence giving them better competitive advantages in the ever changing market environment.


2. 1 Introduction

In this section, earlier studies related to this issue were reviewed. This chapter commences with books on ideas of strategy, Business and the surroundings, internal and external environmental challenges and lastly proper reactions to these obstacles.

2. 2 The Idea of Strategy

Johnson and Scholes (2002) define strategy as the way and opportunity of an organization over the permanent which achieves the advantage for the business through its construction of resources in just a challenging environment to meet the needs of markets and full fill stakeholder's expectations. The concept of strategy explains where the institution is aiming to achieve in the long term and organize which activities and resources that will have to be committed to achieve the expected goals.

Mintzberg (1994) defines strategy as an idea, a structure, perspective and position. As an idea because strategy identifies the means by which an organization goes from one condition to another that is from bad to good state. Strategy is also defines as a pattern since it is concerned with repetitive actions over a period. Further, he identifies strategy as a perspective since it provides a clear perspective and a sense of path of where in fact the organization is going to. Finally he defines Strategy as a position meaning organizations are willing to offer particular products and services to new marketplaces other than the existing markets. This therefore implies that they are able to position themselves better in new market segments by offering services or services.

Chandler (1962) defines strategy as the determination of the basic long term goals and goals of an organization and adoption of courses of action and the allocation of resources necessary for reaching these goals. He therefore considered strategy as a means of establishing the goal of an organization by specifying its long-term goals and aims, action programs and resources allocation pattern or to achieve the set goals.

Porter (1987) views strategy as why is the corporate full soon add up to more than same of its sections. He further classifies strategy in two levels that is corporate and business level strategy and business level strategy. Corporate level strategy defines what kind of business the organization is in as well as the managers should take care of their various business units. On the other hand business level strategy points out how to create competitive benefits in each one of the business unit where the organization compete.

Thompson and Strickland (2007) argues that the concept of strategy defines the various solutions that top corporate and business managers use concerning be able to in a position to achieve an improved performance of the set of business in which the organization has diversified to. Therefore he stress on the role of key business units managers to affect the strategic decision of the business units that they check out achieve mix business synergies and convert them into an increase of competitive edge to the organization.

Ansoff and Mcdonnel (1990) define strategic management as a process through which a firm manages its romantic relationship with the environment in which it performs. It involves aspects of proper planning and management of change. He argues that tactical management gets the ultimate goal of developing commercial values and managerial capabilities and through it, the will focus the decision of the entire organization in one route. Porter (1980) outlined very plainly that the concept of strategic management provides the central goal and way that has allowed management of business to adopt the changing environment.

2. 2. 1 Proper responses to obstacles of competition.

Competition recently has become one of the major challenge and factor that has added to the diverse strategic tendencies among organizations in general. Organizations in Kenya are characterized by an competitive competitive environment with a great deal of competitors which phone calls from those to re adapt and modify their strategies often in order to become strategically fit.

This is more common so for example in the bank industry in Kenya which is characterized by intense competition and show aggressiveness for customer satisfaction and customer loyalty. This has posed a great deal of issues to lenders in Kenya hence there is certainly need for lenders to respond to these issues which makes them to review their strategies so as to become strategically fit. This is because of the fact that whenever there may be climb in competition it offers a negative affect on prices of the firm's product, its production and finally the wages due to employees will diminish leading to restructuring and downsizing of the business consequently of the extensive competition.

Porter (1987) has defined the various issues and makes that organizations face from getting competitive benefits, they include: buyer and retailers bargaining power, hazards of new alternative products and rivalry among products as out lined in his five makes model. He further identifies the various strategies and tactical responses that may be used by firms to curb with the many challenges within the surroundings in relation to competition. They include: cost efficiency strategy, product differentiation strategy, target strategy, avoidance strategy and low cost strategy.

Cost efficiency strategy, one of Porter's universal strategies is cost management. This strategy mainly focuses on how companies can gain competitive benefits by having the most reasonably priced in the whole whole industry (Porter 1987). He argues that to be able to achieve low priced advantage, a firm must have a low cost leadership strategy, low priced manufacturing and way more a work force that is happy and committed to the reduced cost strategy. This helps to attain cost efficiency strategy that will outperform opponents in the same markets. With regards to the banking industry this can only be performed when banks put the expense of their services only possible so as to gain customer devotion and customer satisfaction.

Product differentiation strategies refer to those strategies that make an effort to create unique products that cannot be easily matched up or duplicated by other rivals. This may only be achieved if firm's have a resource-based view strategy (Porter 1985). This implies that the organizations should have the resource capability to carry out product differentiation. This may only be performed through technology and faster acceleration of services wanted to customers.

Pierce and Robinson (2007) dispute that the differentiation strategies are aimed at achieving client satisfaction and loyalty by stressing on attributes of something that will allow firms to ask for reduced price for their products.

Thirdly avoidance strategies centered on environmental change that aims to improve market access cost. Muendo (2011) describes that the difficulties of competition within the environment that a firm is operating on, may take the form of increased prices, buildup of capacity which may require companies to fore-go short term profitability in the desire that they will maintain a permanent presence on the market.

Focus strategies identifies the sort of tactical response whereby a firm targets a specific segment of the market (Thomas & Strickland, 2007). They summarize that a company or organization can pick to focus on a determined customer communities and specific products that fits the conditions and the necessity of the decided on customer groups. This would go quite a distance to ensure customer loyalty hence boost the success of the businesses. Focus strategy is based upon an industry segment that should be large enough to obtain good growth potential that is worth focusing on to the major rivals.

2. 3 Corporation and the Environment

The environment refers to the pattern of all the external and interior condition that influences or influences the life and development of an entity or a business organization. Corresponding to Johnson and Scholes (2007) they clarify that the organizational environment encapsulates numerous influences and therefore there is difficulty in making sense of the diversity. They further argues that the environment is defined by it complexity which develops because of many of the split issues available environment that are interconnected.

Porter (1985) observes that the global doubt in environmental changes increased significantly in the 1970's scheduled to fluctuating natural materials, prices, swings in financial and foreign currency markets, electronic revolution among others. Therefore by accepting this diversity and difficulty of the surroundings, the organizational environment is identified in different layers.

The first general environmental coating is the macro environment level which contain environmentally friendly factors that impact to a greater or lesser scope on virtually all organizations, Scholes (2007). The macro-environment is defined by the PESTEL platform that can be used to recognize how future developments in the political, economic, interpersonal and technological and legal environment might impinge on the business. This would help identify the key drivers of change which varies from one business to another.

Organization in the world today operate in a environment that is very active and uncertain which therefore demands the need by the management to strategically position themselves to be able to adopt to the various changes and dynamism of the environment

Kirapash (2010) points out that organization needs to consider opportunities to exploit their tactical abilities and seek advancements in their sections building a knowledge and understanding of current strategies and success. Porter (1985) identifies the organizational environment into two categories: the exterior environment which is constituted by the makes that are beyond your organizations control. These makes are non-specific but would usually affect the organizations' activities and strategies. On the other hand, the inner environment; which contain all the makes within the business, and are within the business control.

2. 4 Internal Environment.

A firm interior environment identifies those aspects of the environment that are within the ability of the organizations. Pierce and Robinson (2007) has identified a firms inner environment as those elements within the organization that include the current employees, the management and the organization culture which defines the organization tendencies. An organizations inside environment is defined by the companies mission assertion which clearly identifies the reason for existence and generally clarifies the overall goal which include the attributes that would distinguish the business from other organizations. Therefore we shall discuss the traits that constitute the businesses internal environment which includes the firms composition, Organizations culture, company policies and firms inside resources.

A firm's inner environment also contains the corporate structure of the business which comprises of the hierarchical agreements that will specify the various jobs and people that are in charge of the activities occurring within the organization. A firm composition really helps to determine the stream of information between your management and the entire staff and therefore have an impact on the strategic decision making process of the firms

Secondly the organizational culture refers to various worth that the organization means the culture of the organization defines the particular key business of the company are. Equally as each person has a definite personality, so does each business. The culture of the business distinguishes it from others and styles the activities and patterns of folks working in the business (Johnson & Scholes, 2007).

Thirdly a company policy identifies those guidelines that always determine how certain situations in a organization are addresses. Thomas and Strickland (2007) dispute that firms build policies that provide guidance for professionals who make decisions concerning the circumstances that happen frequently within the organization They further summarize that company regulations serve as a sign of a businesses personality and really should be aligned to its objective statement.

Finally firm's resources are the people, facilities, information machinery and equipment, and infrastructure. The most important and critical resources will be the individuals who work within the business and managers have to be professional in manage resources that exist to them. This implies that mangers needs to manage both human and non-human resources so that they can create value and be of great impact to the organizations environment.

2. 5 Alternative Environment

The success of organizations in acquiring the needed resources and success, improving the grade of goods and services is all predicated on the impact the external environment has in the company as a whole. It really is in this respect that the companies choice of business strategies is moderated by the environment and that organizations that plan to meet or face up to the challenges of a rapidly changing environment require management decision that are founded on well-conceived strategies (Ward & Lewandaska, 2008)

Pierce and Robinson (2003) dispute that organizations aren't closed systems given that they do not operate in a vacuum. They can be instead open systems since they are likely influenced by the environment in their procedure. A firm's business environment can be broadly categorized into two categories: micro-environment and macro environment. The micro environment includes those stakeholders in whom the organization with frequently such as suppliers, vendors, employees and customers (Muendo, 2011). He argues that these groupings are stakeholders who've direct interest influence on a manager's decision making.

On the other palm a firm's macro-environment refers to all the factors that are beyond your organization also called the external environment. It offers all the relevant factors and influences beyond your organizations boundaries. Therefore a firm's external environment is infinite and involves all the elements outside the limitations of the company. The firm's environment provides all the mandatory inputs for the firm that the firm produces the outputs which is finally sent to the environments (Wachira, 2011). The firm's remote environment comprises of all political, monetary, social, cultural, technical, ecological and legal factors.

Political factors refer to the regulatory parameters within which a firm must operate and therefore serves as a major consideration for managers as it pertains to decision making. The data of government regulation is gained through the scanning of remote control environment which can help a firms avoid needless confrontation with the laws that govern the environment. They include the tax laws bare minimum income legislation, tariffs and quotas which constitute the legal construction.

Ecological factors refers to the romantic relationships and the coexistence between your environment and other living creature such as the air, dirt and normal water that support them (Wachira, 2011). He further claim that threats to our life promoting ecology is brought on principally by human being activities, the commercial society and therefore poses a significant threat to the general public welfare hence dependence on environmental legislation and its own impact on corporate and business strategies in Kenya. In Kenya, NEMA is tasked with the duty of undertaking environment examination of any project that is performed by companies.

Technological factors make reference to innovations which functions as a means through which organizations can react to the various complex challenges that a organization facing within the surroundings. It identifies all the creative adaptations that can suggest the possibilities for services or in production and marketing techniques. (Hammer, 1996)

Economic factors refer to the type and course of the economy which the organization operates. It refers to all the factors within the market that have a direct influence to the economy and affect strategic decision making by professionals. They include the consumption patterns that are dependant on the income levels hence companies need to judge the general option of credit levels, interest rates, taxation rates and the propensity of folks to invest money on certain products and services.

Social factors are the effects that have an effect on the organization and involve values, values, attitude, viewpoints and life styles of people in the businesses exterior environment as it is developed from ethnic demographic, religion, educational and ethnic conditionality hence therefore businesses should align their strategies to counter changes within the interpersonal factor.


3. 1 Intro.

This Chapter shows the methodology that was implemented by the researcher in order to execute the study and realize its objective. It included the research design, data collection and data research.

3. 2 Research Design

This research was conducted as a research study of National Loan provider of Kenya with the goals of figuring out environmental obstacles facing financial sector the tactical responses adopted by National Bank or investment company of Kenya to respond to these issues.

The researcher used an interview guide, interviewed management staff of Corporate Affairs, Money, Credit, Human Reference and Information technology areas in the NBK head of office in Nairobi. Their observation and comments were noted which was analyzed to come up with clear and elaborate answers to the research questions which the study sought to recognize.

The interview guide was sent to the respondents at least fourteen days before the actual interview. That is designed to give respondents sufficient time find answers to some of the questions if indeed they didn't have instant answers. An interview guide pre-test was finished with randomly selecting staff in another of the NBK branches where they'll be interviewed and the responses noted, used to evaluate if the questions to be asked through the interview will be able to answer the questions that the researcher desired to find answers.

3. 3 Data Collection

The researcher used an interview guide will be utilized in collecting data through the research process. Structured interview guide, outlining relevant questions which were necessary in providing sufficient information necessary to accomplish target of the analysis were used. The researcher personally will carried out the interview.

Data was collected from the very best level managers of NBK also to achieve this purpose at least six respondents were targeted. They included Standard Manager-HR, manager-credit, Director Fund, various branch professionals within Nairobi region, administrator ICT and manager corporate affairs. These respondents were resourceful enough to provide the required data.

The researcher further collected supplementary data from printed options such as newspapers, websites, total annual financial statements and the financial performance data available at the Nairobi Stock Exchange in order to compare and enrich the data accumulated from the interview.

3. 4 Data Research.

Data was analyzed using content evaluation guided by the objective of the study to establish the responses used by National Loan company of Kenya to troubles within the environment. Content Evaluation has been thought as "a study technique for the objective, organized, and quantitative description of express content of marketing communications" (Berelson, 1974). Content analysis is a study tool focused on the actual content and inner features of mass media. It can be used to determine the presence of certain words, concepts, themes, phrases, characters, or phrases within text messages or packages of texts and to quantify this presence in an purpose manner

The research specifically used issues of trustworthiness and validity. Consistency of a content analysis analysis refers to its stableness, or the tendency for coders to consistently re-code the same data just as over a period of time; reproducibility, or the tendency for a group of coders to classify categories account in the same way; and precision, or the magnitude to that your classification of the text message corresponds to a standard or norm statistically. (Berelson, 1974)

Advantages of content research are it looks directly at communication via text messages or transcripts, and therefore gets at the central aspect of social interaction. This method of data research also allows for both quantitative and qualitative businesses can provides valuable historical/cultural insights as time passes through examination of texts. Limitation with this technique is the actual fact that it can be extremely time consuming and and yes it is is at the mercy of increased error, particularly when relational analysis is used to attain an increased level of interpretation.


4. 1 Advantages.

The study experienced one main goal, which was to determine the strategic response undertaken by National Standard bank of Kenya to environmental difficulties within the financial sector. Main data was gathered by interviewing older and junior NBK personnel in the Nairobi hq and five working branches. The data was analyzed in relation to the study's aim and the results presented in the various categories below.

4. 2 Review People and composition

Respondents interviewed during data collection included three General Managers from Country wide Bank Hq located at National Bank or investment company Building in Nairobi, five branch managers attracted from Times Tower branch, Medical center branch, Kenyatta avenue branch, Greeting card Center and Kitengela branches were interviewed. The analysis people also included four divisional professionals attracted from four branches which include Kitengela, Kenyatta Avenue, Medical center and Head office branches. The respondent's tenure is really as categories and examined in the table below;

Table : Respondents Tenure





General Managers

20-30 years



Divisional Managers

10-25 years



Branch Managers

10-30 years






4. 3 National loan company of Kenya financial performance

The current banking environment is swiftly changing and the guidelines of yesterday no longer apply. The finance institutions has to keep pace with speedy changes it faces every day and of critical importance is the fact that if a standard bank is not in position to cope with these challenges there is high chance of the lender registering looses and in the long run many have to close its business.

Financial performance of NBK has been improving over the modern times. According to money director interviewed during data collection, he mentioned that financial performance of the banking had registered substantial improvement because the year 2006. Not surprisingly, the director was categorical to point out that this process is not a smooth trip. There were stumbling blocks on its recovery path, but corresponding to him, audio strategies used by the lender has taken financial success

In order to raised understand the difficulties and strategic responses set up by NBK against environmental problems facing financial sector in Kenya, its financial performance from the year 2007 to 2011 financial years were analyzed. These results were obtained from the finance official of national loan provider and to ensure authenticity of the results, only end calendar year audited results by were used for the examination.

Table : Country wide Loan provider of Kenya financial information 2007-2012

Profit and Reduction Account






Total Interest Income






Total Interest Expense






Net Interest Income/Loss






Total Non-Interest Income






Total Operating Income






Total operating Expenses






Profit before taxes and exceptional items






Net Non-performing Lending options and advances






Total insider loans, developments and other facilities






Total Contingent Liabilities






Total Capital






Balance Sheet







Total Liabilities






Total Shareholders' funds






Source: NBK audited financial reports 2007-2011

Figure : National Lender of Kenya Balance Sheet Items 2007-2011

Figure 1 above shows performance pattern of NBK balance sheet items from the year 2007 to 2011 as displayed in the Stand 2 above. The synopsis offered in the pub charts in Fig 1 above implies that the lender has assets worth more than 4 million whereby in the lender invested a whole lot in increasing property to a tune of almost Ksh. 7 Million as per the year 2011. Total liabilities increased in the year 2011 probably anticipated to high investment in acquiring more property as mirrored by high increase in assets in the year 2011 as compare to the other years. Share holders' money increased slightly between your 12 months 2007 and 2008, but decreased in the year's 2010 and 2011 as a result of the companies proceed to acquire more belongings. However there was an increase in shareholders account in the entire year 2009 consequently of the company's move to sales part of its resources which is corroborated by moderate drop of belongings in the same calendar year.

Figure : National Loan company of Kenya Income and Damage performance 2007-2011

Figure : Country wide Bank or investment company of Kenya Earnings and Reduction % change 2007-2012

Figure 2 and 3 above shows companies' Income and Reduction items performance style from the year 2007 to 2011. Total of all items in each category symbolized in the chart was used for examination. An overview of the results show that income before taxes increased from the entire year 2007 to 2010 but there was a 9% drop in the year 2011 when compared with the entire year 2009. World wide web non-performing loans and advance decreased between 2007 and 2010 but increased minimally in the entire year 2011. Total operating expenditures and income has been increasing from the year 2007. Company's capital shows a growing trend with the year 2011 achieving Ksh10000 million.

4. 6 Internal obstacles faced by the bank.

Internal challenges refer to those problems which come up within the business daily businesses and which are within the control of the business. Some of the internal challenges recognized during the analysis are as explained below:-

4. 6. 1 Cost of applying the new ICT infrastructure

According to the general manager ICT, The ICT infrastructure implemented by the lender has taken great success in conditions of service provision by the lender. However corresponding to NBK product official, there's been challenges in employing the new technology. Information obtained highlights that the bank Kshs. 500 million in acquiring new systems. Apart from these cost, there is certainly the expense of hiring trainers, amount of time taken in training the personnel and the upkeep cost for the staff through the training. Such cost brings more to the total expenses details.

4. 6. 2 Dishonest employees

The general Manager Human resource pointed out that the Success of any business lays with the personnel who provide services to the customers and outlined the way the management is able to set policies which will ensure the personnel provides quality services in a clear manner. However it has become a challenge in the financial sector whereby the junior personnel who are generally new graduates have a whole lot of experience with technology as compared to their bosses who might not be having extensive experience by using technology. As the NBK it staff points out, this often brings about a scenario where the dishonest staff take good thing about this knowledge gap and perform purchase which defrauds the business a lot of money, without the lender management noticing this, and if indeed they do, then it has already been too late. A few of these dishonest staff collaborates with criminals who create as customers and take money from the lender. This aspect according to the general manager strongly believes which it hinders the finance institutions growth since they have to continue dismissing and hiring new and proficient employees which is hard to get from the marketplace and poses a major challenge to the bank.

4. 6. 3 High cost of training staff

Further the general manager Human learning resource pointed out that In the 21st century, school education is not enough to ensure one performs his / her tasks well in the work place. You can find rapid exterior and inside changes that are generally followed by the financial sector also to keep speed with this, staffs need to be trained regularly to ensure they offer quality services to the clients. These changes include scientific changes and adoption of new guidelines in the financial sector which means staffs should be trained upon this. However challenge comes in where the company has to use big money in contracting businesses with the skill to handle the training. Other cost arise from the fact that the in facilitating the personnel during the learning terms of meals and transport aside from the price of hiring the location. Additional a lot of time is utilized in undertaking this training which means the few personnel left to attend to customers are often under pressure to deliver.

4. 6. 4 Increased service breakdown

The general supervisor operations remarked that one of the difficulties the bank is facing is the problem of increased service malfunction. This has manifested itself through postponed approval of loans. He emphasized that NBK'S customers are deal seekers and they always look for a lender that can serve them within the least time possible. However, the approval of loans takes weeks or even calendar months depending on the availability of the mandatory documentation. This wait is costly particularly when the customer or a firm has a limited time frame to show that it can raise the required capital to carry out a particular job. More over intrusive documents is of concern. At the point of program for banking services, some finance institutions are regarded as too requiring on paperwork. Customers believe that the documents required (such as duty compliance certificate) before the approval of the essential loans can be an intrusion into their financial level of privacy. Discouraged by this exercise some customers have opted for other informal financial institutions that not require too much aspect. The operations supervisor also pointed out the bank offers challenges on flexibility which has a lot of influences on customer tastes, because they are bound to respond to the worthiness added offerings. He known Customers have become demanding and the loyalties are diffused because the bank is not offering them well need hence Customers want to have a feeling of owed that will keep them from seeking alternatives.

He mentioned that the financial sector and the economy in general overall economy has become progressively more competitive, and there is dependence on the bank to develop efficient products that can quickly satisfy a more demanding customer basic and build long-term customer trust. Therefore the bank has a challenge to enhance both inside and external invention, while seeking operational excellence in any way levels. Which means marketing manager meeting these challenges would require new business and marketing strategies that increase revenues, improve operational efficiency, spend less, and improve the overall management of business. She emphasized that in today's banks are looking beyond traditional routines to new practices and tools that analysts and thought market leaders have discovered as the best for the industry.

4. 7 External challenges encountered by the bank.

External troubles include those challenges that result outside the company's operations and that your company had hardly any control. It results from the company's interaction with the outside world in its process of service provision. Listed below are the external obstacles which were revealed through the research process:-

4. 7. 1 Competitive banking environment

The Marketing manager emphasized that increased competition within the financial sector has been one of the primary challenges that the bank has experienced is competition He further mentioned that with the liberalization of the central loan company rules to the financial institution has triggered Competition in the financial sector to go up at a extraordinary rate. That is mainly as a result of increased change of customer's needs, flavour and differences. Other than customer foundation, the financial industry is also seen as a increased variety of financial institutions within the industry which may have competitively designed and packed products which may have taken customers from the major bankers to micro funding organizations and small banking institutions within the industry. This example has kept countrywide bank of Kenya on its toes to innovate products packed to meet the needs of the clients so as to maintain them. Different lender in the sector are developing attractive products and providing quality of service to their customer which means if a lender does not keep carefully the pace with the competitive environment, there exists probability of it being kicked out of business. Banks are investing in technology so as to reach and interact with their customers with a great deal of ease. According to NBK marketing officer interviewed, she reckons that anticipated to competition, NBK has lost significant amounts of its customers to other banking companies. However she was categorical that the lender has set up strategies to strike former and clients.

4. 7. 2 Increased frauds and money laundering

The operations administrator pointed out that technological innovations are taking place at a very high rate in every industries of the economy and banking sector is not left out. However with such improvements, technology has turned into a double edged sword since despite great benefits it brings to the contemporary society, there is also the negative aspect whereby instances of technology abuse has risen. Lenders will be the latest victims of this offense where frauds and creation of artificial money has increased. Banking companies are shedding huge amounts of money through online ventures while at exactly the same time production of fraudulent money has become a concern for the staff to differentiate real and fraudulent money. Money laundering has become a set back to the financial sector since this has been finished with a lot of easiness by tech-savy those who carry out this practice without being easily detected. In addition, frauds involving staff and criminals have resulted in the banks sacrificing vast amounts of shillings and this has derailed banking operations. Despite restricted security measures put in place, the hackers come up with new techniques which finance institutions have not had the opportunity to outdo.

4. 7. 3 Spiral aftereffect of Euro zone debt crisis

This refers to a period of time in which several Europe experienced the collapse of financial institutions, high government credit debt and rapidly rising bond yield spreads in authorities securities. The Western sovereign debt crisis were only available in 2008, with the collapse of Iceland's bank operating system, and spread primarily to Greece, Ireland and Portugal during 2009.

According to Chandler, (1962) African economies have benefited from more powerful product prices and better international direct investment. These benefits were constrained by currency appreciation occasionally, and moreover, by growing food prices. So the crisis did give food to itself through the commodity route and the commodities are a double-edged sword for African economies. If the global crisis occur, export progress from the Sub-Saharan economies declined from an twelve-monthly average of 7. 0 per cent between 2000 and 2007 to only one 1. 4 % between 2008 and 2010

However these didn't only impact on Sub-Saharan market, but its influences was sensed even by the local banks. To be a cure to the this personal debt problems credit was constrained globally and trade volumes collapsed throughout the world hence the worthiness of real exports of good and service declined causing the cost of trade to increase therefore of increase in cost of imports. The trade limitations enforced by the Europe to be able to salvage the dropping economy influenced financial sector in conditions of lowered borrowing and investment. The expense of borrowing lending options became so higher to be afforded by entrepreneur and associates of public and this was compounded since the loan company operation cost increased for example cost of acquiring investments increased dramatically forcing finance institutions and other financial institution to impose stringent regulations on loan borrowing. This regarding to marketing official interviewed led to low borrowing, high cost of businesses in the bank and the result was decrease in income reported.

4. 7. 4 Politics influence

Some branch professionals remarked that Finance institutions and financial sector on the whole operate in an open economy. Because of this, the banking institutions often experience politics influence in the process of their services provision. An interview with real human resource director of National lender emerged that since the government has a large share in the business, some strong and influential politicians usually take advantage by endorsing individuals of their own choice to certain managerial articles hence locking out licensed and experienced people from acquiring such articles. This often leads to poor decision making and coverage implementation by such staff. In addition, political instabilities like the one experienced in the entire year 2007 led to foreign shareholders shying from buying Kenyan banking companies since during such period, destruction of property caused huge losses on investors, whom the bank depends because of its success.

4. 7. 5 Industry regulations

The constant advancement of local and international rules is a major driving force in the bank industry. The central bank polices on the financing rates, enactment of charges guiding local and international deal, minimum central loan company need and the instability of the local currency against foreign currency has been the other troubles experienced by banking institutions. Hence introduction of these new oversight rules and bodies has already established a significant implication on the development and performance of the banking industry based on the NBK marketing official.

4. 8 Adaptive strategies followed by the NBK.

Having analyzed a few of the major exterior and internal issues that that confronted by NBK from attaining competitive advantage, the analysis further reveals a few of the strategic responses undertaken by countrywide bank to respond to the obstacles facing the financial sector. Some of the strategic replies were the following;

4. 8. 1 Investment on information technology

The NBK is implementing a new primary banking system and updating its infrastructure to effectively support Kenyan businesses for example, accommodating changing regulatory requirements - that may get new trade finance customers. At the same time, it will drive down operating costs through use of productive technology.

In the year 2006, NBK broadened its ICT infrastructure where they were able to increase service provision to their customers through increasing the amount of Automated Teller Machine (ATM). This was achieved through partnership with an authorized provider Pesa Point Limited. This arrangement managed to get possible for the bank to provide services with their customers beyond the areas included in the Lenders' ATM network.

More over the bank recently invested Kshs. 2. 2Billion to get a new banking system known as Bank Universal Fusion Banking systems. This was a great migration from the previous Branch Electric power System which had issues especially offline issues. The brand new system has helped in centralizing operations apart from enhancing efficiency and efficiency in the businesses of the branches. According to the operations manager the BFUB system would help the lender go a long way to improving customer service and realize increased customer satisfaction.

The bank in addition has adopted mobile and internet bank in order to reach its customers wherever they may be. The primary reason for this according to customer care officer was to handle most of the challenges which their customers, both locally and internationally experienced such as having to travel long distance looking for an ATM and long queues in the bank hall. The adoption of the technology has eased congestion in the banking halls, potential of customers to pay for their bills without having to visit the bank. On the positive note, this has seen the income of the lender rise because of this of transactions completed using mobile and internet. In addition, adoption of this technology has put the bank a notch higher when compared with the other banks, who've also followed the same systems.

The bank just lately acquired Lender Fusion Universal Banking System (BFUB) price 2. 2 Billion in the year 2011 to enhance networking between its branches and the head office. The machine has the capacity for allowing transactions carried out in the branch transferred automatically to the head office and also to other branches. It has created a central network of all the company's transaction in doing so enhancing efficiency in reaching customers' needs in conditions of making deposits, withdrawal plus more important minimizing cost of time spend in getting these services. The BFUB systems also have resulted in increase correctness by minimizing mistakes and decrease likelihood of frauds happening.

4. 8. 2 Product technology and Development.

According to the marketing director and some of the branch director interviewed in the study noted that part of the strategic replies that the bank has carried out to responf to a competitive environment is Product innovation and development. The bank has gone quite a distance to incorporate services to the existing range of products. This has come about as a result of increased competition and increased diverse customers' needs accompanied with increased market niche. To start of the of bank has made efforts to launch new products including the Taifa accounts, pinnacle accounts, Al-mumin personal savings makes up about Muslims, Superchama accounts to add to the existing selection of saving accounts available to their customers. Apart from saving accounts the bank has made efforts to improve their financing product which includes Superchama loans and stima loan which were not in their loan portfolio. Moreover more strategic responses witnessed included the review of the mortgage insurance plan that would include home loan for commercial and construction purpose other than the home loan for residential purpose.

Further During one of the interviews with the sales manager, it emerged to my attention that the lender has recently developed new and attractive products. Included in these are different personal and corporate banking accounts which meet diverse customer needs. Lending options offered by the bank also include favorable rates of interest and payment periods which get customers. The lender has also been running offers where customers should cut costs in their accounts and by doing this, the stand a potential for winning lots of prices. This has resulted in increased savings in that way widening loan financing base of the bank. All of this products have became very attractive and also have gained a great deal of understanding to both existing and new customers in line with the product manager interviewed.

Sim-ple bank is a fresh product produced by NBK Banking which allows its customers to receive short messages on their mobile phones including up to-date information about latest trades on their Accounts, as well as information about new trends on products and services made available from National Loan company to his customers. It is the new Mobile Banking Service from National Bank, offering access to more than 3 x as many Bank or investment company Functions as any other service currently in the market in Kenya and the goal is to offer accessible.

4. 8. 5 Marketing and advertising strategy

The company has varied its online marketing strategy through using different channels of advising their products and services. Some of the means implemented by the bank is through internet where the company has made its website user-friendly by which makes it easy for customers to get information quickly on the products that are being provided by the bank. In addition, the lender has adopted the utilization of radio and Tv, realtors and through facilitation sports major contests such as athletics. Through such means, the company has been able to attain out to large audience with information of these new products.

4. 8. 6 Extension strategy

The General supervisor Operations pointed strongly feels that the bank must make the banking institutions presence needs to felt in every corner of the united states and the region as a whole. Therefore in respect to this The bank has gone quite a distance to increase its branch network from 37 to 53 branches between your 12 months 2007 and 2011. The reason behind doing this, I found through the interview was the actual fact that the bank was focused on reaching out to middle and low course customers hence increasing its customers bottom to around 3 million.

4. 8. 7 Outsourcing

As a result of rising cost in conditions of service provision to

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