Effect of Market Orientation Strategies on Performance of Commercial Banks in Kenya, A Case of Kisumu County

Abstract

Banking is an essential service in an economy. The stability of a country's economy is closely related to the soundness of its banking system. Literature links bank performance with market orientation strategies. Strategy must match a firm's strength to its competitive environment. It is not clear why banks operating in the same environment with almost equivalent asset baserecord more profits while others make losses. This calls for an evaluation of themarketing strategies involved. The purpose of this research therefore was to study the effect of market orientation strategies on performance of commercial banks in Kisumu. Specific objectives of the study were to determine the relationship between customer-oriented, competitor-oriented and productoriented strategy against performance of commercial banks in Kisumu. The study was guided by a conceptual framework where the dependent variable was performance of commercial banks while the independent variables were market orientation strategies. The study adopted both descriptive and correlation design. The population was 78 employees which included three representatives from each of the 26 banks in Kisumu. Saturated sampling was utilized. The study utilized both primary and secondary data. Primary data was collected using questionnaires while secondary data was obtained through review of published financial statements. Experts' opinion was used to test for reliability and validity. Descriptive, analysis of the study revealed that customer-oriented and product-orientedstrategies were positively correlated to performance and significant while competitor-orientedstrategy was negatively correlated to performance and not significant. Regression results revealed that customer orientation (Pl=O.551, p<O.05) and product orientation (P3=O.381, p<O.05) were positive and significant predictors of performance while competitor orientation (~3=;-O.216, p<O.05) was negative and significant predictor of performance. The three market orientation variables accounted for 46.3% of the variations in performance. The study concludes that a positive relationship exists between customer-oriented, product-oriented strategies and performance while the inverse exists between competitororiented strategy and performance. The study recommends the adoption of customer-oriented and product-orientedstrategies as they are considered to positively influence performance; further, competitor-oriented strategyshould be discouraged as it influences performance negatively. Future researchers can adopt other methodologies in the same area of research.