effects of selected porter’s five forces
TRANSCRIPT
EFFECTS OF SELECTED PORTER’S FIVE FORCES
MODEL ON STRATEGIC PLANNING IN STANBIC BANK
KENYA
BY
SARAH NJUGUNA
UNITED STATES INTERNATIONAL UNIVERSITY-
AFRICA
SPRING 2020
EFFECTS OF SELECTED PORTER’S FIVE FORCES
MODEL ON STRATEGIC PLANNING IN STANBIC BANK
KENYA
BY
SARAH NJUGUNA
A Research Project Report Submitted to Chandaria School of Business
in Partial Fulfillment of the Requirement for the Degree of Master of
Business Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY –
AFRICA
SPRING 2020
ii
STUDENT’S DECLARATION
I, Sarah Njuguna, I pronounce that this is my unique project report and has not been
submitted to any other institution or university other than the United States International
University-Africa for credit.
Signed: __________________________ Date: ___________________________
Sarah Njuguna (ID: 639743)
This project report has been presented for examination with my approval as the appointed
supervisor.
Signed: __________________________ Date: ___________________________
Prof. Timothy Okech
Signed: __________________________ Date: ___________________________
Dean, Chandaria School of Business
iii
COPYRIGHT
This research project reserves the right of usage either in print form, or electronic without
express written permission from the author
Copyright © Sarah Njuguna 2020
iv
ACKNOWLEDGEMENT
To my supervisor Prof Timothy Okech for walking with me through this journey and
offering your expertise and precious time, I am eternally grateful.
To Stanbic Bank for opening your doors to me to collect data and for your continued
support, may this information enable you to soar to greater heights.
v
DEDICATION
This is dedicated to my beloved parents and sister for their love, endless support,
encouragement and sacrifices. None of my success would have been possible without
you.
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ABSTRACT
The purpose of this study was to determine the effects of selected Porter’s Five Forces
Model on strategic planning in Stanbic Bank Kenya. The following research questions
guided the study: To what extent does threats of new entrants affect strategic planning, to
what extent does industry rivalry influence strategic planning and to what extent does
bargaining power of buyers influence strategic planning.
This study used descriptive research design in integrating study elements to address the
research problem appropriately. Population and sampling design have been presented
whereby the study had a population of 149 employees yielding a sample size of 108
respondents. Stratified sampling technique was deployed for this study. The study used a
structured questionnaire for data collection, and data collected was analysed by using
Statistical Package for Social Sciences software version 24. The study made use of both
descriptive statistics and inferential statistics. Descriptive statistics analysed frequency,
percentages, means and standard deviation. Inferential statistics analysed correlation and
regression analysis to establish the relationship among the study variables. The findings
were presented using tables and figures.
This study sought to determine the effect of threats of new entrants on strategic planning.
The findings deduced in the study show that there exists a significant relationship
between threats of new entrants and strategic planning, r (0.604); p-value < 0.01. The
findings also established that threats of new entrants accounts for 35.6% variability in
strategic planning.
The second objective of this study sought to determine the effect of industry rivalry on
strategic planning. The findings of the study revealed that there is a significant
relationship between industry rivalry and strategic planning, r (0.728); p-value < 0.01.
The findings also revealed that industry rivalry accounts for 52.3% variability in strategic
planning.
The study also sought to determine the effect of bargaining power of buyers on strategic
planning. The findings of the study revealed that there is a statistically significant
relationship between bargaining power of buyers and strategic planning, r (0.565); p-
value < 0.01. The findings also revealed that bargaining power of buyers accounts for
31% variability in strategic planning.
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On the basis of the findings, various inferences were made. One, there exists a strong and
significant association between threats of new entrants and strategic planning. Threats of
new entrants are crucial for the bank to formulate strategies that are essential for putting
up with competition as well as pursuing business opportunities available in the external
environment of the business. Two, economies of scale associated with commercial banks
activities motivate the rate of new entrants into the industry. Similarly, revenues and
profitability that commercial banks enjoy in the banking industry plays a crucial factor in
motivating new players to come into the industry and compete for the same market share.
High initial capital requirement prevents the rate of new entrants into the banking
industry. When the amount of setting up the operations carried out by commercial banks
are raised, this will make it hard for new players to come into the industry to compete for
the same market share as well as customers. Finally, there is a significant association
between industry rivalry and strategic planning. Industry rivalry enables commercial
banks to formulate various strategies that allow them to compete effectively by creating
products and services informed by strategy formulation process. Strategy formulation
process takes into consideration environmental scanning that enables commercial banks
to understand their competition and what they can offer to compete effectively in the
marketplace.
This study recommends that Stanbic Bank Kenya Limited should create embrace the use
of high initial capital requirements in its operations as well as technology, this will
prevent the threats of new entrants in competing for the same market share, hence, the
commercial banks will enjoy profitability while at the same time gaining a large market
share in the banking industry. This study recommends that Stanbic Bank Kenya Limited
should embrace industry rivalry by formulating competitive strategies that effectively
address its competition for them to remain in business and sustain themselves for the long
run. The findings of this study revealed a significant association between bargaining
power of buyers and strategic planning. Therefore, this study recommends that Stanbic
Bank Kenya Limited should innovate products and services that gives the bank leverage
to charge a premium while at the same time preventing backward integration.
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TABLE OF CONTENTS
STUDENT’S DECLARATION ....................................................................................... ii
COPYRIGHT ................................................................................................................... iii
ACKNOWLEDGEMENT ............................................................................................... iv
DEDICATION....................................................................................................................v
ABSTRACT ...................................................................................................................... vi
LIST OF TABLES ........................................................................................................... xi
LIST OF FIGURES ........................................................................................................ xii
LIST OF ABBREVIATIONS ....................................................................................... xiii
CHAPTER ONE ................................................................................................................1
1.0 INTRODUCTION........................................................................................................1
1.1 Background of the Study ...............................................................................................1
1.2 Statement of the Problem ...............................................................................................5
1.3 Purpose of the Study ......................................................................................................7
1.4 Research Questions ........................................................................................................7
1.5 Significance of the Study ...............................................................................................7
1.6 Scope of the Study .........................................................................................................8
1.7 Definition of Terms........................................................................................................8
1.8 Chapter Summary ..........................................................................................................9
CHAPTER TWO .............................................................................................................10
2.0 LITERATURE REVIEW .........................................................................................10
2.1 Introduction ..................................................................................................................10
2.2 Effect of Threats of New Entrants on Strategic Planning ............................................10
2.3 Effect of Industry Rivalry on Strategic Planning .........................................................14
2.4 Effect of Bargaining Power of Buyers on Strategic Planning .....................................18
2.5 Chapter Summary ........................................................................................................23
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CHAPTER THREE .........................................................................................................24
3.0 RESEARCH METHODOLOGY .............................................................................24
3.1 Introduction ..................................................................................................................24
3.2 Research Design...........................................................................................................24
3.3 Population and Sampling Design .................................................................................24
3.4 Data Collection Methods .............................................................................................26
3.5 Research Procedures ....................................................................................................27
3.6 Data Analysis Methods ................................................................................................27
3.7 Chapter Summary ........................................................................................................28
CHAPTER FOUR ............................................................................................................29
4.0 RESULTS AND FINDINGS .....................................................................................29
4.1 Introduction ..................................................................................................................29
4.2 Response Rate and Demographic Information ............................................................29
4.3 Effect of Threats of New Entrants on Strategic Planning ............................................33
4.4 The Effect of Industry Rivalry on Strategic Planning .................................................36
4.5 Effect of Bargaining Power of Buyers on Strategic Planning .....................................39
4.6 Chapter Summary ........................................................................................................43
CHAPTER FIVE .............................................................................................................44
5.0 SUMMARY, DISCUSSION, CONCLUSION AND RECOMMENDATIONS ...44
5.1 Introduction ..................................................................................................................44
5.2 Summary ......................................................................................................................44
5.3 Discussion ....................................................................................................................45
5.4 Conclusions ..................................................................................................................52
5.5 Recommendations ........................................................................................................53
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REFERENCES .................................................................................................................55
APPENDICES ..................................................................................................................60
APPENDIX I: INTRODUCTION LETTER .................................................................60
APPENDIX II: STUDY QUESTIONNAIRE ................................................................61
APPENDIX III: NACOSTI RESEARCH LICENSE ...................................................64
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LIST OF TABLES
Table 4. 1: Response Rate ..................................................................................................29
Table 4. 2: Descriptive Statistics for Threats of New Entrants and Strategic Planning ....33
Table 4. 3: Correlation between Threats of New Entrants and Strategic Planning ...........34
Table 4. 4: Regression Test for Threats of New Entrants and Strategic Planning.............34
Table 4. 5: Analysis of Variance between Threats of New Entrants and Strategic Planning
............................................................................................................................................35
Table 4. 6: Coefficient Table for Threats of New Entrants and Strategic Planning ..........35
Table 4. 7: Descriptive Statistics for Industry Rivalry and Strategic Planning .................37
Table 4. 8: Correlation between Industry Rivalry and Strategic Planning ........................37
Table 4. 9: Regression Test for Industry Rivalry and Strategic Planning .........................38
Table 4. 10: Analysis of Variance between Industry Rivalry and Strategic Planning .......38
Table 4. 11: Coefficient Table for Industry Rivalry and Strategic Planning .....................39
Table 4. 12: Descriptive Statistics for Bargaining Power of Buyers and Strategic Planning
............................................................................................................................................40
Table 4. 13: Correlation between Bargaining Power of Buyers and Strategic Planning ...41
Table 4. 14: Regression Test for Bargaining Power of Buyers and Strategic Planning ....41
Table 4. 15: Analysis of Variance between Bargaining Power of Buyers and Strategic
Planning .............................................................................................................................42
Table 4. 16: Coefficients for Bargaining Power of Buyers and Strategic Planning ..........42
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LIST OF FIGURES
Figure 4. 1: Respondents Gender .......................................................................................30
Figure 4. 2: Respondents Age ............................................................................................31
Figure 4. 3: Respondents Education ..................................................................................31
Figure 4. 4: Position in the Organization ...........................................................................32
Figure 4. 5: Work Experience ............................................................................................32
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LIST OF ABBREVIATIONS
ANOVA: Analysis of Variance
ERP: Enterprise Resource Planning
CBA: Commercial Bank of Africa
CBK: Central Bank of Kenya
NACOSTI: National Commission for Science, Technology and Innovation
HSBC: Hong Kong and Shanghai Banking Corporation
IMF: International Monetary Fund
SPSS: Statistical Package for Social Sciences
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
Strategic planning is regarded as an organization’s process of defining strategy or
direction and making decisions on allocating its resources to pursue the intended strategy
(Cressman, 2012). This may also be extended to control mechanisms for guiding the
implementation of the strategy. Strategic planning is also defined as an organizational
management activity that is used in setting priorities, focus energy and resources,
strengthen operations, ensure that employees and other stakeholders are working towards
common goals, and establish agreement around intended outcomes or results and
assessment of the organization’s direction in response to dynamic environment (Kim &
Hoskisson, 2015). According to Balducci (2011), strategic planning is considered to be a
disciplined effort that produces fundamental decisions and actions that shape and guide
what an organization is, who it serves and why it does it with a focus on the future.
Effective strategic planning articulates not only where an organization is heading and the
actions required to make progress but also how it will know if it is successful.
The aim of strategic planning is to effectively draw on business intelligence acquired
from an organization’s internal and external environment (Zekos, 2013). In the world
today, companies are operating in very dynamic environment that is changing faster than
it was before. This requires an organization to adopt business strategies that involve
strategic planning on how to analyze the implications of changes modifying how their
firms respond to the change (Parnell, 2010). The issue of strategic planning is very vital
for the growth of any organization since it guides the organization in formulating
appropriate strategies which give rise to the development of organization structure
through which the set objectives will be achieved. At the implementation phase of these
strategies there could be further environmental changes which imply that there could be
further strategic planning analysis of the new changes making the process iterative
(Bennett & Kottasz, 2012).
The essence of strategic planning is to cope up with completion in the dynamic business
environment which may call upon the incorporation of the porter’s five forces model in
organizational planning activities (Chen & Messner , 2010). The five competitive forces
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are the threat of new entrants, the threat of substitute products, bargaining power of
buyers, bargaining power of suppliers and rivalry among existing competitors (Porter &
Kramer , 2011). The threat of new entrants’ force determines how easy or not it is for the
firm to enter in an industry. If an industry is profitable and there few barriers of entry,
rivalry soon intensifies. When more firms compete for the same market share, profits start
to fall. Therefore, it is essential for existing firms to create high barriers to enter through
strategic planning to deter new entrants. Bargaining power of suppliers implies that strong
bargaining power allows suppliers to sell higher priced or low-quality raw materials to
their buyers. It directly affects the buying firm’s profits since it has to pay more for
materials, therefore forming a strategic partnership through strategic planning is essential
for success of the organization (Parnell, 2010).
Bargaining power of buyers on the other hand implies that buyers have the power to
demand lower price or higher product quality from the industry producers when their
bargaining power is strong (Reid, 2015). Lower price translates to lower revenues for the
producer while higher quality products usually raise production cost. Both scenarios seem
to lower profits for the producers and buyers exert strong bargaining power when they
buy in large quantities, only few buyers exist in the industry, when there is low switching
cost to the supplier and when buyers are price sensitive. These components need to be
taken into consideration when the firm is developing its strategic plan as part of strategic
planning aimed at achieving the intended objectives (Kungu, Desta, & Ngui, 2014).
Threat of substitutes this force becomes threatening when buyers can easily find
substitute products with attractive prices or better quality and when buyers can switch
from one product or service to another at a little cost. For instance, switching from coffee
to soda does not cost anything, unlike switching from a car to a bicycle (Kim &
Hoskisson, 2015). Rivalry among existing firms, this force is a major determinant on how
competitive and industry is. In a competitive industry, firms have to compete aggressively
for their market share which tends to cause low profits and compete aggressively requires
strategic planning to direct the firm’s action in the industry it operates (Cressman, 2012).
An effective competitive strategy takes offensive or defensive action in order to create a
defendable position against the five competitive forces. The model comprises of five
forces that drive competition in the microenvironment threatening companies from
making profits. Blondiau, Glazer, and Proost (2015), supported this argument by stating
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that the market structure is influenced by the strategic behavior of organizations in that
the success of the market is independent of the organization's success. According to
Porter and Kramer (2011), the Porter’s five forces model can help a company find its
position in the industry that is less vulnerable to be attacked by other companies in the
industry and it is important to note that the forces have diverse degrees of impact in
certain industries adding that the individual forces and their collective impact change as
macroeconomic, the environment and government policies change. Increasing
competition within the industry in which a company operates is the business unit that is of
most concern (Mahat & Goedegebuure, 2016). Being able to correctly identify the
structure as well as the competitive dynamics of the sector the business is proposing to
pursue will create a good general point of reference for deciding whether it is worth the
investment or not (Balducci, 2011). When the general industry profile does not appear
attractive to the assessor and the assessor is planning to offer value propositions that have
close industry substitutes then this may be an important signal that the proposed venture
may need to be reconsidered (Ajibo, 2015). When the industry profile looks attractive,
then this could be a sign that positive prospects exist, hence, the relevance of the Porter’s
five forces model in strategic planning (Thursby & Berbari , 2016).
In developed nations like the United States of America as well developing nations
worldwide, organizations are operating in an ever-changing world faster than it was
before (Balducci, 2011). This requires organizations to adopt business strategies to learn
how to analyze the implications of changes modifying how their organizations respond to
the change (Porter & Kramer , 2011). The issue of strategic planning is very vital for
organizational growth and firms formulate appropriate strategies which give rise to the
development of organizational structure through which the set objectives will be achieved
(Fafchamps & Söderbom, 2014). At the implementation level of formulated strategies,
there could be further environmental changes which indicate that there could also be
further strategic planning analysis of the new changes making the process iterative and
requiring an effective tool to analyze the market (Mahat & Goedegebuure, 2016).
The global banking industry is highly fragmented and includes segments such as retail
banking, corporate and investment banking, and asset and wealth management (Chen,
2013).The industry went through mixed results in the post-crisis period from 2008 to
2010. Sector growth slowed considerably as indicated by the growth rate of assets of the
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top 1000 banks globally in the post-crisis period. The global financial crisis and recent
scandals involving the miss-selling of financial products and market manipulation
damaged the reputation of key sectors of the global banking financial system (Pinar,
Girald , & Ezer , 2012).While analyzing the failure of key processes and controls to
prevent such incidents, the focus of lawmakers and regulators has therefore increasingly
been on behavioral drivers and motivation behind the activity that is the culture of
financial institutions (Bennett & Kottasz, 2012).
In the United Kingdom for commercial banks to gain a competitive in the industry, there
is need to understand the industry forces in order to adopt an appropriate competitive
strategy (Mathooko & Ogutu, 2015). Porter's five forces model offers an important basis
for understanding the nature of competition in an industry including the banking industry.
The banking industry in the UK is highly competitive with four major players including
Barclays, HSBC, Lloyds and the Royal bank of Scotland (Bennett & Kottasz, 2012).
Competition intensity is the industry is determined by factors such as seller concentration,
diversity of competitors, and product differentiation together with excess capacity and
exit barriers. Taking into consideration these factors, it can be noted that Lloyd Bank
faces intense competition from Barclays, HSBC and Royal Bank of Scotland that provide
similar products or services at similar prices making product switching costs low, hence,
strategic planning is required to address these factors effectively (Boafo, Kraa , & Webu,
2018).
In Africa, it is evident that West Africa’s growth slowed late in the year 2014 and may
only strain banking profits in 2015, while the region’s largest banking market, South
Africa, faced a second difficult year of weak economic growth (Ajibo, 2015) Weakening
growth impacted South Africa and West Africa more than it did in East Africa, although
impairment charges rapidly deteriorated in two of the four east African markets (Chen,
2013). However, Africa’s major banking markets remain promising, with growth
prospects among the highest globally making hard decisions about where to compete
would be one of the key issues facing banks. Since the mid-1980s, most African countries
have attempted to implement financial sector reforms (Ajibo, 2015) and to a large extent
the reforms focused on restructuring as well as privatizing state controlled banks being
part of the International Monetary Fund (IMF) and the World Bank structural policies of
adjustment but this was accompanied by auxiliary policies to ease the entry and exit
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restrictions into the banking sector and the overall supervision and regulatory of the
banking industry (Nyantakyi, 2015).
The outlook for Kenya’s industry is that larger banks will control retail banking for the
foreseeable future, while local big players will dominate growth. Foreign banks operating
in Kenya have focused on serving international clients and the top end of the market,
limited by international banking governance and “know your customer” regulations
(Mathooko & Ogutu, 2015). Kenya’s growing middle class is boosting retail banking and
products such as mortgages and personal loans and is likely to continue to drive
acceptance of credit cards, which have high penetration among wealthy clients. Strength
and convenience of mobile banking may constrain the uptake of more traditional
products. As the busy Kenyan market continues to grow and mature, and with clear sights
towards the huge potential of the region and the rest of Africa, it is envisaged that
domestic banks will have a very busy time in future (Nyamongo & Temesgen , 2013).
Stanbic is one of the members of the Standard Bank Group. The idea of the establishment
of Standard Bank Group was brought by a group of businessmen in 1857 due to economic
prosperity in Port Elizabeth in South Africa, which was the major port and was used to
the export of wool (Juma, 2014). Stanbic Holdings Plc which was once known as CFC
Stanbic Holdings Limited is a financial service organization with its headquarters located
in Nairobi Kenya with subsidiaries in South Sudan, regulated by the National Banking
regulator of Kenya and governed by the Central Bank of Kenya (Keninina, 2008). Stanbic
operates in an environment that is highly dynamic in terms of government regulations
such as interest rate capping and competition from other key players in the industry where
mergers and acquisition strategy is used by commercial banks to gain market share. For
instance the recent merger of CBA Bank and NIC forming NCBA Bank making it the
second largest commercial bank in the country (Alushula, 2019). Such decisions require
Stanbic to embrace the porter’s five forces in their strategic planning process for them to
sustain competition in the business environment.
1.2 Statement of the Problem
Banking has traditionally operated in an environment that is relatively stable for the past
decades (Ajibo, 2015). Currently the industry has however been facing environmental
challenges in terms of competition due to the new deregulated environment with an
attempt of reducing exits and barriers in the banking sector (Katwalo & Muhanji, 2015).
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The banking industry has become dynamic and banks have reacted in various ways,
including strategic planning in ensuring that they gain a competitive advantage since the
banking segment encountered expanded rivalry that has seen big players as well as new
entrants into the market to provide financial services to the unbanked (Kungu, Desta, &
Ngui, 2014). Link to the topic
In Kenya, commercial banks have realized the stiff competition within the banking sector
that calls upon the necessity of designing competitive strategies that will guarantee
profitability and obtaining a desirable market share in the market (Katwalo & Muhanji,
2015).Successful implemented strategies of the Porter’s five forces tend to lead to
superior performance and sustainability of the firm’s competitive advantage in the long
run (Porter & Kramer , 2011). The use of Porter’s five forces model involves the use of
scenario planning to anticipate and respond to volatile and disruptive environmental
changes. Strategic management recognizes the general environment and the competitive
environment (Chen & Messner , 2010). Although many scholars and practitioners at both
the international and local levels still highly value and use the Porter’s Five Forces
Model, there has been a high level of debate on the application of this model to the
complex contemporary industry environment with rapid changes and technological
advancement. Based on these facts, there is a need to conduct a study in the banking
sector in Kenya, specifically to understand the effects of Porter’s five forces on strategic
planning in commercial banks.
Previous studies that have been conducted locally, have concentrated mainly on
implementation of competitive strategies leaving out the gaps on the effects of
competitive strategies adopted by commercial banks in line with strategic planning. For
instance, Kabila (2016) conducted a study on competitive strategies and performance of
commercial banks and found out that a firm’s ability to survive in the competitive
environment is highly dependent on ability to formulate and implement appropriate
strategies, Macharia (2016) on the study of the effect of competitive strategies on
performance of the banking industry and found out that investing in organizational
efficiency strategies led to a positive performance of the banks, and Sifuna (2014)
conducted a study on the effect of competitive strategies on performance of public
universities and revealed that universities gained a competitive advantage through cost
leadership strategies. However, none of these studies have documented the effects of
porter’s five forces on strategic planning in commercial banks, therefore there was a need
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to carry out this study to determine the effects of selected porter’s five forces model on
strategic planning in Stanbic Bank Kenya.
1.3 Purpose of the Study
The purpose of this study was to determine the effects of selected Porter’s five forces
model on strategic planning at Stanbic Bank Kenya Limited.
1.4 Research Questions
1.4.1 What is the effect of threats of new entrants on strategic planning in Stanbic Bank
Kenya Limited?
1.4.2 What is the effect of industry rivalry on strategic planning in Stanbic Bank Kenya
Limited?
1.4.3 What is the effect of bargaining power of buyers on strategic planning in Stanbic
Bank Kenya Limited?
1.5 Significance of the Study
The study is significant to the following stakeholders.
1.5.1 Stanbic Bank Kenya Limited
Stanbic Bank Kenya Limited will be the primary beneficiary of the findings obtained
from the study in a sense that insights will be obtained on how the porter’s forces impact
their strategic planning process. Managerial decisions regarding the porter’s forces will be
informed through analysis of its effects in regard to the company’s operating strategy,
hence, reducing the risk of the strategic decisions done by the bank to cope up with its
competitive environment.
1.5.2 Banking Industry
The banking industry will benefit from the study since various gaps on application of the
porter’s five forces model on strategic planning have been identified, this will help
various firms in the banking industry to formulate their competitive strategies on the basis
of informed decisions gained from the study.
8
1.5.3 Policy Makers and Regulators
Policy makers of the banking industry will also benefit from the findings of this study in
determining the effects of porter’s five forces on strategic planning, hence, formulating
the right rules and laws that will benefit the banking industry as a whole while addressing
the effects of porter’s five forces on the operations of the banks.
1.5.4 Academicians
The study will be significant to the scholars since they can rely on the findings as
additional knowledge on the effects of porter’s five forces on strategic planning as much
as the field of strategic management is involved. Scholars can also use the study in their
literature review when addressing a related topic.
1.6 Scope of the Study
The study focused on the effects of porter’s five forces model on strategic planning at
Stanbic Bank Kenya Limited. The target population of this study was 149 employees
working at Stanbic Bank Limited. The workstations to be surveyed were limited to
Nairobi County. The study took a period of four months to conduct and disseminate the
findings. The variables of the study included threats of new entrants, industry rivalry and
bargaining power of buyers and strategic planning being the dependent variable. One of
the limitation that the research faced was obtaining data from the target respondents. This
was mitigated by making close follow up which included making calls and sending mails
to the respondents reminding them to fill the questionnaires.
1.7 Definition of Terms
1.7.1 Porter’s Five Forces
Porter’s five forces model refers to a framework of analysing competition environment in
which the business operates in with an attempt of understanding the forces that shape
competition of a certain industry (Mathooko & Ogutu, 2015).
9
1.7.2 Strategy
Strategy is a plan of action designed with an aim of achieving a long term or the overall
objective of the firm through planning and mobilizing of resources to its most effective
use to effectively address the plan of the organization (Parnell, 2010).
1.7.3 Threats of New Entrants
Threats of new entrants refers to the threat posed by new competitors coming into the
market to the existing competitors operating in an industry (Kachaner, Kermit , & stewart
, 2016).
1.7.4 Bargaining Power of Buyers
The bargaining power of buyers in porter’s five forces refers to the pressure customers
can exert to the existing business in order to provide them with quality products, better
customers service and lowering prices of the product and services the company is offering
(Wilkinson, 2013).
1.7.5 Strategic Planning
Strategic planning refers to process whereby the organization defines its strategy or
direction and make decisions on allocating its resources to pursue this strategy (Kim &
Hoskisson, 2015).
1.8 Chapter Summary
This chapter has presented the background of the problem by highlighting various related
information to the research problem, a statement of problem has been highlighted,
followed by the purpose of conducting this study and the research questions that will
provide a guide to make the study a success. The significance of the study has also been
presented by stating various stakeholders that will benefit from the findings, the scope of
the study is presented and definition of various terms that are essential in the study. The
chapter ends with a summary that describes all the major elements covered in chapter
one. The next chapter will cover the literature review of the study, followed by chapter
three on research methodology adopted by this study. Chapter four covers results and
findings based on the data gathered from the respondents and chapter five is expected to
cover the discussion, conclusion and recommendations.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This being the second chapter of the study, the chapter presents the literature review on
the effects of selected Porter’s five forces on strategic planning. The first section of the
chapter presents the literature on the effects of new entrants on strategic planning, the
second section will present the literature review on the effect of industry rivalry on
strategic planning and lastly the effect of bargaining power of buyers on strategic
planning. At the end of the chapter, it is the summary highlighting the content covered in
chapter two for this study.
2.2 Effect of Threats of New Entrants on Strategic Planning
Zekos (2013), reveals that the entry of new product in the market tends to make the
already working firms to face stiff competitions. According to his research, the ideology
of the cost of entry in the banking sector is low. A reasonable explanation from that line
of thinking is that the regulation rules speculated to govern the working mechanism of the
banks are excessively flexible. This result of the philosophy of profits seems very
promising, the risk seems manageable, and as a result, new players have been entering the
commercial banking scene (Sancho-Esper, 2019). Indemnity industries, retailing firms,
and stock-broking firms are also making significant inroads into what has remained
known as traditional banking markets due to the low barriers of entry associated with the
industry. These potential competitors have created significant threats to the existing
established large banks (Simpasa, 2013).
According to Boafo, Kraa and Webu (2018), from the view of the current incumbents,
profitable markets are likely yield high returns are likely to attract new companies into the
industry. This results in many new competitors and eventually decreases profitability for
all companies in the business sector. Unless the entry of new companies can be blocked
by incumbents, the abnormal profit rate will tend toward zero which is also regarded as
perfect competition. Dobbs (2014), argues that from the perspective of new entrants, high
barriers to entry that the capital costs of getting the industry make it difficult to compete
with current incumbents. New entrants into the industry bring new ability or capacity and
the desires to gain market share that puts pressure on prices, costs and the rate of
11
investment necessary to compete. However, the threat of entry will largely depend on
high barriers and how many firms are in the industry. Furthermore, new entrants can
disrupt established players in a certain market and directly affect the competitive
advantages. When the demand is not increasing or decreasing, an additional supply of
goods or services will decrease profit margins of the market participants (Mathooko &
Ogutu, 2015).
The force of new entrants examines how intense the competition is in the marketplace. It
considers the number of existing competitors and what each can do (Hoque & Chia ,
2012). Rivalry competition is high when there are just a few businesses selling a product
or service, when the industry is growing and when customers can easily switch to a
competitor’s offering for little cost. When rivalry competition is high, advertising and
price wars ensue, which can hurt a business’s bottom line. The main driver is the number
and ability of competitors in the market. Many competitors, providing undifferentiated
products and services, will reduce market attractiveness (Porter & Kramer , 2011).
Ajibo (2015), asserts that both dedicated and existing industries will tend to influence the
profitability of an organization. Shakespeare suggests that the entry barrier is the key
factor that determines the effects of new entrants. Worthington and Welch (2011), show
that despite the fact that new entrants tend to come up with new products, resources and
new ways of doing things, it also tends to cover the market share an ideology that results
to a lower profitability among the banking organizations. Considering the above line of
thinking, the consequences that come over that ideology is competition over clients.
Consequently, so it will lead to the conflict of production materials and decrease the
companies’ profit level. The levels of the threat of new entrants depend on two kinds of
factor. One is the new entry barrier. The other is the reflection of existing companies to
new entrants. The threat of new entrants is a function of the height of entry barriers. The
higher the entry barriers are, the weaker is this competitive force (Robertson & Gatignon,
2012).
According to Mahat and Goedegebuure (2016), the possible sources of the entry barriers
tend to encompass economies of scale, brand loyalty, cost advantages, customer
switching costs, initial capital requirement regulation, many more. Additionally, the main
entry barriers include scale economy, product differences, capital demand, sales channels
development, government behaviour and policy and so on. Researchers have revealed that
12
some barriers are hard to break, using coping and imitating way. Whether a new company
will enter into an industry or not depends on the potential profit, expense and the risk of
being a new entrant (Kungu, Desta, & Ngui, 2014).
The local environment tends to play a significant role in strategic planning. Moreover, the
implementation of any new policies and rules that remain dedicated to the achievement of
the organizational goals and objectives entirely depends on the working environment
(Hoque & Chia , 2012). Therefore, the competitiveness of organizational performance
depends on strategic implementation. Empirical study studies indicate that industry forces
are valuable for business strategy formulation and implementation. The business should
identify its position in the market area and fight against the competition that threatens its
strategic position before formulating strategies (Gao, 2014). Further, industry forces have
a major impact on firm strategies. The notion is that companies must adopt a more
dynamic strategy to defend themselves against industry structures and increase their
market share (Okafor, Russell, & Lawal, 2012).
2.2.1 Market Share Acquisition
Research shows that the concept of the new entrants in the market seems to offer the new
capability for the organization to expand and the desire to share markets (Ahuja &
Novelli , 2016). Principally when new entrants are branching out from other markets, they
can influence existing cash flows and capabilities to shake up the competition. An
exemplary example is what Pepsi did when it got into the bottled water industry;
Microsoft did when it began to offer internet browsers, and Apple did when it got into the
music supply side of business eating into the profits of the established companies in the
industry. The threat of entry, as a result, puts a restriction on the profit probable of an
industry. When the threat is high, incumbents must grip down their prices or enhance
investment to discourage new competitors (Dobbs, 2014).
In the area of expertise, coffee retailing, for example, comparatively low entry barriers
mean that Starbucks must invest insistently in modernizing menus and stores. Most of the
empirical studies that have been conducted seem to offer insightful information on how
new entrants tend to bring about the effects of the strategic planning in the banking
industries. Ideally, the threat of new entrants in the industries tends to depend on the
heights of entry barriers that are the attendance and the response of the entrants that
clients are capable of anticipating from the incumbents (Thursby & Berbari , 2016).
13
Suppose entry barriers are low and newcomers expect small revenge from the well-
established rivals, the threat of entry is far above the ground and industry profitability
remain moderate. It is the threat of entry, not whether entry really occurs, that grips down
profitability.
2.2.2 Economies of Scale
Nyantakyi (2015) asserts that supply-Side Economies of Scale seems to occur when an
industry makes a larger volume that tends to take pleasure in the lower costs per unit
since they can stretch fixed costs over more units in return. Importantly, supply-side scale
economies discourage entry by forcing the hopeful entrant either to come into the
industry on a large scale, which needs extricating well-established rivals or to concede a
cost disadvantage. For almost all value chain, the ideologies of scale economies are
highly available. But this concept seems to differ depending on the type of organizations
(Kim & Hoskisson, 2015). For instance, scholars seem to use Intel companies as a good
example because it exploits the above concept clearly. In this company, Intel remains
scheduled by the scale economies investigation, which deploys both the chip manufacture
and consumer marketing (Cressman, 2012).
The benefits recognized as network effects happen in industries where a purchaser’s
eagerness to pay for a firm’s product magnifies with the number of other purchasers who
also hold up the organization (Rentes, 2017). Shoppers may trust superior organizations
more for a vital product: Recall the old proverb that no one ever remains fired for
purchasing from IBM when it was the leading computer maker. Buyers may also value
being in a “network” with a larger number of fellow customers. For example, online
public sale participants are paying attention to eBay because it offers the prospective
trading partners (Wills & Kennedy , 2013). Demand-side benefits of scale hold over entry
by discouraging the eagerness of customers to buy from a newcomer and by dropping the
price, the newcomer can influence until it puts up a large base of customers (Thursby &
Berbari , 2016).
2.2.3 Consumer Switching Costs
El-Manstryly (2016) reveals that switching cost is the concept that determines the
purchasing face of the clients when they change dealers. He further indicates that,
switching cost tends to be fixed. The higher the switching cost the difficult it for the new
entrants to achieve customers in the market. Enterprise resource planning (ERP) software
14
is an example of a product with incredibly high switching costs. Shah and assert that once
an organization has installed SAP’s ERP system, for instance, the costs of switching to a
new vendor are exorbitant because of implanted data, the reality that internal processes
have been adapted to SAP, main retraining needs, and the mission-critical nature of the
applications (Cressman, 2012).
According to Bennet and Kottasz (2012) the numerous studies that have remained carried
out in the banking industries that the idea of investing more financial resources with an
aim to compete in the market can discourage new entrants. Again, Capital may be
indispensable for both unchanging facilities and build inventories, extend customer credit,
and finance start-up losses. The barrier is for the most part immense if the capital is
required for unrecoverable and therefore difficult-to-fund expenditures, for example,
research and development or up-front advertising. While major organizations have the
financial resources to enter by force almost any industry, the vast capital requirements in
various fields limit the pool of possible entrants (El-Manstrly, 2016). On the other hand,
in such fields as short-haul trucking or tax preparation services, capital requirements are
minimal and potential entrants’ abundant. If industry incomes are good looking and are
expected to remain so, and if capital markets are efficient, investors will offer entrants
with the money they need. For aspirant air carriers, for example, funding is available to
purchase costly aircraft because of their high resale value, one reason why there have
been various new airlines in more or less every region (Prideaux & Whyte, 2013).
2.3 Effect of Industry Rivalry on Strategic Planning
Dobb (2014) suggests that when the thrill of competition becomes the goal, managers risk
the future of their organizational units and potential careers, as the Boeing manager
indictments demonstrate. At the same time, different units contend for limited resources
in organizations. Compared to a cohesive unit, an internally divided unit will suffer in the
contest for organizational resources and status. For example, the rivalry between German
brothers Adolf and Rudolf Gassler, who founded Adidas and Puma respectively, after
initially making shoes together, involved both personal and business feuds (Cressman,
2012).
Rivalry occurs when competitors sense the pressure or act on an opportunity to improve
their market segment (Robertson & Gatignon, 2012). Thursby and Berbari (2016) insist
that some forms of competition, such as price competition, are typically highly
15
destabilizing and are critical for profitability level in an industry. For example, price-
cutting lowers profits for all banks while advertising battles inflate the demand and
enhance the level of product differentiation for the benefit of all banks in the industry.
The intensity of rivalry differs across industries and this may be due to various factors.
The intensity of rivalry among and between companies within an industry is apparent
when companies in an industry battle achieve market share from each other. This rivalry
goes up and as a result, the competition turns out to be stronger with an increase in the
number of companies in the same industry as they push around for a considerable market
share (Gao, 2014).
Cost comes with the perception of others. For organizations, this translates into reputation
and legitimacy that affects relationships with employees, customers, regulators, and other
interested parties (Robertson & Gatignon, 2012). Ignoring reputation risks boycotts or
limited firm options for business partnerships. For example, Pfizer’s poor reputation as an
acquirer prevented its purchase of Covidien. For individuals, career progress depends on
favourable perceptions by colleagues. Specifically, it means at some level that your
superiors and peers accept you are someone they would want to work under. This relates
to the importance of perception and the need to consider how competition and rivalry
remain perceived, as a change in perspective can determine whether a situation remains
viewed positively or negatively (El-Manstrly, 2016).
2.3.1 Rivalry Intensity
The potency of rivalry is of the highest degree only if competitors are roughly equal in
power and size or are many (Kim & Hoskisson, 2015). In such state of associations,
competing firms find it hard to stay away from poaching business. This results to the state
that practices helpful for the organization as a whole go un-enforced without an industry
leader. The greatness of rivalry is also greater if the industry growth is slow. Sluggish
growth unexpectedly scrambles for market share. When exit barriers are high, the
intensity of rivalry is high (Dobbs, 2014). Exit obstacles, the rear side of entry barriers,
take place because of such things as management’s devotion to a certain business or very
much-specialized assets.
Sutherland (2014), suggests that the extent to which competition weakens an industry’s
profit potential depends, first, on the foundation of which organizations compete and,
second, on the intensity with which they compete. Price is characteristically the most
16
critical basis of rivalry for industry profitability. Price reductions move profits directly
from an industry to its clientele, and they are more often than not easy for rivals to see
and match, making successive rounds of disciplinary cuts more probable. On the contrary,
competition on features or services can permit industry competitors to sustain good
margins (Thursby & Berbari , 2016).
In the modern-day society, the dogma of competition maintains the issue of driving down
the rate of the return on the capital invested toward the competitive floor rate return or the
return that would remain earned by the economist's perfectly competitive industry
(Rentes, 2017). This competitive floor, or free market return, remains approximated by
the yield on long-term government securities adjusted upward by the risk of capital loss.
Stakeholders will not put up with returns below this level in the long-term since their
option of investing in other organizations and industries usually earning less than this
return will ultimately go out of business (El-Manstrly, 2016). The presence of rates of
return higher than the adjusted free market return serves to stimulate the inflow of capital
into an industry either through new entry or through additional investment by existing
competitors. The strength of the competitive forces in an industry determines the degree
to which this inflow of investment occurs and drives the return to the free market level,
and thus the ability of firms to sustain above-average returns (Simpasa, 2013).
Competition among fewer companies within a specific market can be far fiercer than
competition among a larger number of entities (Worthington & Welch, 2011). A good
example is two competing petrol stations in a small town, whose owners may change the
price of petrol or other products sold as frequently as several times a day, as compared to
seven branches of different commercial banks operating within a specific area. Ajibor
(2015) insist banks are much less likely to interact directly and fight for customers that is
the market, even if they are more numerous than the petrol stations mentioned above. In
order to carry out a detailed analysis, we would need to take into account sector-specific
differences or the global strategies of competing entities, which together with the
ownership policy would allow for a more objective assessment (Chen & Messner , 2010).
However, this example clearly shows the weakness of evaluations based on the number of
entities as a parameter of competitive intensity.
17
Dobbs (2014) argues that the five competitive forces; rivalry among current, bargaining
power of buyers, competitors’ threat of substitution, and bargaining power of suppliers
reveal the fact that competition in an industry moves well further than the well-known
players. Their information that is offered in their journal offers insightful information that
tends to provide rich information on the ideology of the potential entrants, suppliers,
customers, and substitutes are all competitors to organizations in the industry and might
be less or more famous depending on the certain situations. Competition in this bigger
sense might be termed extended rivalry.
The ideology of the company’s capacity to invest must be in a large amount for that
company to work effectively. A reasonable explanation for that line of thinking is that for
an organization to be run effectively there is need to attain the business equilibrium for
them to overdo the fellow competitors in the business platforms (Wills & Kennedy ,
2013). Since risk management tends to encompass the ideology of forecasting and
evaluation of the financial risks, the concept of the competitive strategies tends to be a
significant aspect that all the managing manager need to figure out for the success of their
organization. For the banking industries to attain their profits fully, the structural
competition mechanism is a serious aspect that needs a serious attention. In conjunction
with all the five porters’ five model forces, they all define the different level of the
industry competition and profitability (Giles, 2012). Again, the strongest forces are
prevailing and thus becoming critical from the viewpoint of strategic planning. For
instance, even a firm with an exceptionally solid market position in an industry where
plausible contestants are no longer danger will get low returns in the event that it
experiences a predominant bring down cost substitute. Even with no substitutes and
blocked entry, intense rivalry among existing competitors will limit potential returns. The
extreme case of competitive intensity is the economist's perfectly competitive industry,
where entry is free, existing firms have no bargaining power against suppliers and
customers, and rivalry is unbridled because the numerous firms and products are the same
(Rentes, 2017).
2.3.2 Competition
While price rivalry runs a stronger risk than non-price rivalry of becoming zero-sum, this
may not happen if firms take care to subdivide their markets, aiming their low-price
contributing to different customers (Cressman, 2012). Competition can be positive sum,
18
or in realism improve the typical profitability of an industry, when every competitor
makes an effort to serve the needs of different customer divisions, with diversity mixes of
features, price, products, services, or brand identities. Such rivalry cannot only sustain
higher average profitability but also enlarge the industry, as the needs of more consumer
groups remains better met (Dobbs, 2014).
McMillan (2010) established that the chance for positive-sum rivalry will be greater in
industries serving varied consumer groups. According to Rahman, Azad and Mostari
(2015) they indicate that with apparent consideration of the structural foundations of
competition, strategists can from time to time take steps to move the nature of rivalry in a
more positive direction. Ideally, the ideology of the competition in the middle of existing
rivals takes many recognizable forms: new-product introductions, price discounting,
service escalation, advertising campaigns, and so forth (Bennett & Kottasz, 2012). The
philosophy of competition tends to be gaining more popularity in the recent period due to
the advantages that the new technology is attempting to offer in the banking business
platforms (Hoque & Chia , 2012).
For companies to be efficient, the ideology of the capacity must remain expanded in the
greater increments (Rajasekar & Raee, 2013). For instance, in the polyvinyl chloride
business, the need for big capacity extension disrupts the industry’s supply-demand
equilibrium and over and over again leads to extensive and persistent periods of more
than enough numbers and price cutting (Prideaux & Whyte, 2013). Perish-ability makes a
strong opinion to cut prices and put up for sale a product while it still has value. Most
services and products are perishable than is generally thought. Just as tomatoes are
perishable since they decompose, computer models are perishable because they quickly
become obsolete, and information may be perishable if it diffuses rapidly or becomes
outdated, thus missing its value. Hotel accommodations are among services that are
perishable in the sense that unexploited capacity can never remain recovered (Sutherland,
2014).
2.4 Effect of Bargaining Power of Buyers on Strategic Planning
Bargaining power of buyers refers to that purchasers represent the competitive forces
since they hold the notion of the high-quality demand for services provision thus leading
to the bid down prices (Macy, 2018). The mandate of each vital buyer groups depends on
the various numbers of the current market characteristics and related importance of its
19
purchases from the diverse industries compared to the same business industries in the
overall outlook. Business class passengers are an airlines choice of the buyer group,
which they sell to as a crucial strategic decision. There is a number of pressure customers
can place on airlines, thus affecting its prices, volume and profit potential (Prideaux &
Whyte, 2013).
Buyers have the power to demand lower price or higher product quality from the industry
producers when their bargaining power is strong. Lower prices means lower revenues for
the producer while higher quality products usually raise production costs. Both of these
scenarios result in lower profits for producers. Buyers exert strong bargaining power
when buying in large quantities, only few buyers exist, switching costs to other suppliers
are low, presence of many substitutes, price sensitive buyers, threat of backward
integration (Ahuja & Novelli , 2016). Buyers tend to have power over an industry if they
are significant to the company, this may be if the business industry is such that buyers
either buy in bulk, or can easily switch to another supplier. Having a limited number of
strong buyers may be able to exert significant control over a seller. In addition, if a
product or a service is similar to the competitors with little or no differentiation, then
there are chances that the firm may need to let the supplier dictate terms in order to avoid
losing the customer (Porter & Kramer , 2011).
According to Bruijl (2018), when there is a monopoly market situation, buyers have the
greatest power when they are large and are able to switch comfortably to alternative
suppliers that are few in numbers. Other relative buyer concentration include
competitiveness many buyers and suppliers, mutual dependence few buyers and suppliers
and monopoly power, few suppliers and many buyers. Furthermore, buyers compete with
the industry by forcing prices down. When buyers are powerful, sellers may develop
ways where buyers are prepared to pay a premium price for some products. For instance,
sellers need to accept that there is an imbalance of power and that profitability will
reduced or even to accept a rate of return that is close to the cost of capital. Furthermore,
sellers may find various ways for increasing the cost that buyers incur when switching
from one seller to another seller. However, this is difficult as most buyers will recognize
that they may not appreciate when they are locked in to a certain buyer. Sellers may
overcome this lock by creating a buyer loyalty program that offers more value than
competitors provide such as just-in-time delivery system or increasing quality and
services (Sutherland, 2014).
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The bargaining power is another vital factor that plays a significant role on the effects of
competitive position of any firm. Numerous legislation has been passed to carry out the
various concept of the bargaining power of the clients in the banking industries so that
they can play the significant role in the strategic planning (Simpasa, 2013; Ajibo, 2015).
Scholars have reported that legislation has considerably improved customers’ rights while
technology and competition, on the other hand, is accountable for increased choices of
products and services (El-Manstrly, 2016). For that line of thinking, increased volumes of
available information on the Internet and changes in social behaviour have reduced the
loyalty of customers. Again, the increased competitions reduce the loyalty of customers to
their main banks and are more likely to try new banks which offer better rates, superior
technology, or more attractive rewards.
2.4.1 Buyer’s Power
The power of buyer remains defined as the notion of the buyers’ tendencies to always
want to drive down the price of the product or service and the need of the good service
requirements with an aim to improve the quality of the products and service in the
banking sector and all industries in general (Macy, 2018). Logically, buyers have the
power to threaten the industries by bargaining down the prices or raising the cost by
calling for better quality suppliers. In another word, it is clear to argue that the power of
the buyer can remain viewed as the image of the power of suppliers (El-Manstrly, 2016).
The buyer power is one of the two horizontal forces that influence the appropriation of
the value created by an industry. The most important factors of buyer power are the size
and the concentration of customers (Wong & Hui, 2008).
According to Cressman (2012), powerful customers, can capture more value by pushing
down prices, demanding more service or better quality, and normally playing industry
contestants off in opposition to one another, all at the expenditure of industry
profitability. In reality, customer buyers are strong if they have to negotiate power
relative to industry players, particularly if they are price sensitive, using their thump first
and foremost to pressure price reductions.
As per the suppliers’ point of view, the contemporary societies tend to have diverse
groups of customers who seem to vary in the bargaining powers. A customer remains
considered to have the capability of bargaining power if there are few purchasers, or each
one buys in volumes that are high relative to the size of one vendor (Lacoste & Blois ,
21
2015). Large-volume purchasers are predominantly powerful in industries with great
fixed costs, such as telecommunications apparatus, bulk chemicals, and offshore drilling.
Low marginal costs and high fixed costs intensify the pressure on competitors to keep
aptitude filled through discounting (Rahman, Azad , & Mostari, 2015).
2.4.2 Information of Buyers
Takashima and Kim (2016) indicates that buyers’ information is the notion of the
description that remains deployed pertaining to products and services that remain offered
in terms of advertisements. When the client has good information on the price and actual
market is capable of making a greater buyer bargaining advantage as compared to when
the information and communication channel is poor. Most of the sources of consumer
power can remain accredited to consumers as well as to industrial and commercial
buyers; only an alteration of the frame of reference is necessary (El-Manstrly, 2016).
Customers tend to be more sensitive to the price if they are purchasing goods that are
undifferentiated, of a variety where quality is not primarily significant to them, or
expensive relative to their returns (Dobbs, 2014). American Diabetes Association
empirical study reveals that the consumer power of retailers and wholesalers remains
affirmed by the same rules, with one imperative addition. Retailers can gain significant
bargaining power over manufacturers when they can influence consumers' purchasing
decisions, as they do in audio modules, appliances, jewellery, sporting goods, and other
goods (Gao, 2014). Wholesalers can gain bargaining power, similarly, if they can
influence the purchase decisions of the retailers or other firms to which they sell.
2.4.3 Backward Integration
The demand bargaining dispensation is achieved by the ideology when there are
consumers either are to some extent integrated or front a credible threat of backward
integration (Liinamaa & Gustafsson, 2010). Consumers remain directly attached to the
philosophy of the price response. For the managers in the banking industries to achieve
the highest clients profits, there is the need for them to think of the how to capture their
needs. Typically, a buyer group is price responsive only if the product it buys from the
industry stands for an important fraction of its procurement budget or cost structure (Gao,
2014). Purchasers are likely to shop around and bargain, as customers do for home
mortgages. Where the manufactured goods sold by an industry is a small portion of
purchaser’s expenditures or costs, buyers are typically less price sensitive. The buyer
22
group receives low profits, is impoverished for cash, or is otherwise on the spot to cut its
purchasing costs. Highly cash-rich or profitable customers, in contrast, are usually less
price sensitive (El-Manstrly, 2016).
According to Denning (2016) the quality of the buyer’s services remains normally less
affected by the industries’ services. Where on the other hand the firm’s products directly
affected by the quality of the services since the buyers are largely less sensitive to price.
An exemplary example is when renting or purchasing production quality cameras,
manufacturers of major motion pictures choose for highly dependable equipment with the
latest features. They pay inadequate consideration to price, industries in which this
situation exists include oil-field equipment, where a malfunction can lead to large losses,
and enclosures for electronic medical and test instruments, where the quality of the
enclosure can greatly influence the user's impression about the quality of the equipment
inside (Liinamaa & Gustafsson, 2010).
Jüttner, Christopher and Godsell (2012) assert that the industry’s product tends to have
the small effect on the buyer’s other costs. From that point of view, purchasers seem to
focus on the price of the product. Conversely, where an organization’s service or product
can pay for itself repeatedly over by enhancing performance or reducing material, labour,
costs, buyers are regularly more concerned in quality than in price. The living examples
include services and products like well logging or tax that can save or even make the
buyer money. In the same way, customers tend not to be price susceptible in services such
as investment banking, where bad performance can be thwarting and costly (Walker,
2017).
Some of the living sources of the buyers’ power are typical customers and the business-
to-business customers. This is because the ideology of the buyer’s power remains mostly
influenced by the sensitive concept of price (El-Manstrly, 2016). A reasonable
explanation for that line of thinking is that Consumers tend to be more sensitive to price,
like industrial consumers, if they are purchasing goods that are costly relative to their
incomes, undifferentiated, and of a type where goods performance has insufficient
consequences. The major distinction with customers is that their requirements can be
intangible and difficult to quantify. Intermediate consumers gain noteworthy negotiating
power when they can manipulate the purchasing decisions of customers downstream.
Consumer jewellery retailers, electronics retailers, and agricultural- equipment
23
distributors are cases in point of distribution channels that put forth a strong manipulate
on end customers (Chen, 2013).
2.5 Chapter Summary
This chapter reviewed the literature on the crucial effects of porter’s five forces on
strategic planning in the banking industry. The chapter discussed in the details on how the
effects of new entrants in the market effect on strategic planning. In this point of view, the
literature review narrowed down to discuss in depth the threat of New Entrants, protecting
Market Share, supply-Side Economies of Scale, principal Necessities and Customer
Switching Cost. Secondly, the research paper discussed how buyers’ power affects the
strategic planning. In this section, the literature review breaks down to cover the
Bargaining Power of Buyers, the Power of Buyers, backward Integration, and the Buyer
Information. Finally, the study attempted to discuss how firm rivalry is affecting strategic
planning. For this last section, the literature concentrated on the occurrence of
Competition, Intensity of Competition, the Intensity of Rivalry, and the industry Rivalry.
The next chapter will present the research methodology adopted by the study.
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CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter will present the research methodology used in conducting the study. The
chapter covers the research design adapted by the researcher, population and sampling
design of the study, data collection methods, research procedures and data analysis
methods. At the end of the chapter, a chapter summary is provided to highlight the
content of the chapter.
3.2 Research Design
Cooper and Schindler (2014) define research design as the plan that the researcher uses to
integrate different elements of the study in a logical manner to ensure that the research
problem has been addressed effectively. There are various research designs that can be
used in carrying out different studies including; explanatory research design, exploratory,
descriptive and correlational. This study used descriptive research design to integrate
different elements of the study while at the same time addressing the research problem
effectively. According to Janes (2011), descriptive research design refers to the research
design that is used to describe the characteristics of a population or phenomenon being
studied. The researcher used descriptive research design because it helps to address the
research questions through an empirical assessment, numerical metrics as well as
statistical analysis making it suitable for this study. In addition, descriptive survey design
was essential for this study since it enabled the researcher to describe attributes of the
phenomenon under investigation in systematic manner.
3.3 Population and Sampling Design
3.3.1 Population
Population refers to the collection of individuals, units or things on which inferences can
be drawn from (Cooper & Schindler , 2014). Population can also be defined as a well-
defined collection of individuals, objects or things that share similar characteristics or
behaviours (Simpson, 2014). The population of this study was 149 employees working at
headquarters of Stanbic Kenya Limited located in Westlands since this is where most of
25
strategic decisions regarding the organization are done. The population table is presented
in Table 3.1.
Table 3.1: Population Distribution
Level of Management Population % Distribution
Top Management 23 15%
Middle Management 56 36%
Lower Management 70 49%
Total 149 100%
Source: Stanbic (2019)
3.3.2 Sampling Design
3.3.2.1 Sampling Frame
Sampling frame refers to the list or a device from which a sample of the study is drawn by
referring to the correct list of the target population (Simpson, 2014). In this research the
sampling frame consisted of employees working at Stanbic Bank Kenya. The sampling
frame was obtained from the human resources office at the head office of Stanbic Bank
Kenya.
3.3.2.2 Sampling Technique
Sampling technique is the process through which the researcher is able to select units of
the population that will take part in the study, and can represent the larger population
(Cooper & Schindler , 2014). This study used stratified sampling technique. According to
Dalenius (2013), stratified sampling refers to the probability sampling technique where
the researcher divides the entire population into various subgroups or strata and then
randomly selects the final subjects proportionally from different strata. This study used
stratified sampling technique since the population had three strata that is the top-level
management, middle level and lower level management. Simple random sampling
technique was deployed in selecting the final sample within strata.
3.3.2.3 Sample Size
According to Cooper and Schindler (2014), sample size refers to the smallest unit of the
analysis of the study representing the larger population of the study. This study used
26
Yamane’s formula in determining the suitable sample size for the study, with assumption
of 95% of confidence level.
Where, n = sample size
N = Study Population, 149 in this case
e = Alpha level of 0.05
Table 3.2: Sample Size Distribution
Level of Management Population Sample Size % Distribution
Top Management 23 16 15%
Middle Management 56 39 36%
Lower Management 70 53 49%
Total 149 108 100%
3.4 Data Collection Methods
Data collection can be defined as the process through which the research gathers data
from the target respondents with the aim of answering the research question or objectives
(Cooper & Schindler,2014). Creswell (2018) defines data collection as a procedure used
in getting together and measuring data on the variables of interest in manner that is
systematic and helps one to answer the declared research objectives or questions, testing
the hypothesis and weighing the outcomes. This study used questionnaire as its data
collection tool for gathering primary data from the respondents. The questionnaire used
the Likert scale of 5 levels that is (Non-Disagree, Disagree, Neutral, Agree and Strongly
Agree). The first part of the questionnaire had demographic information of the
respondents, the second section had questions on the effects of threats of new entrants on
strategic planning, third section had questions on the effect of industry rivalry on strategic
27
planning and the last part of the questionnaire included questions on the effect of
bargaining power of buyers on strategic planning. The respondents were able to respond
to the research questions based on these five levels, hence, sufficient and easy for the
researcher to analyse data obtained from the respondents. Closed ended questionnaires
was desirable for this study due to the challenges that come along with open ended
questionnaires whereby various respondents have different opinions on the same question
which makes it a bit difficult in carrying out statistical analysis.
3.5 Research Procedures
Research procedures is a multiple step process on how the research should be carried out
with the aim of addressing the research objective (Liu, 2015). Upon completion of this
proposal, an approval was sought from the supervisor for data collection. An introduction
letter was obtained from the institution and use it for the application of research permit
from NACOSTI (National Commission for Science, Technology and Innovation).
Permission to carry out this study was sought from the human resource manager of
Stanbic Bank Kenya. After the approval, a pilot study was conducted using 6 respondents
to test the reliability and the validity of the questionnaire being used in data collection. In
case any weaknesses arose from the questionnaire the researcher amended the
questionnaire before the actual collection of data.
The researcher then physically visited Stanbic Bank Kenya head office through the
human resource department, the researcher explained the purpose of the study being
conducted as well as how the bank is likely to benefit from the study itself. Then the
researcher distributed the questionnaires to the respondents and gave them a maximum of
one week and a half to fill them, then the researcher collected them, checked if all the
sections of the questionnaire were answered, if the sections were not dully filled the
researcher sought the missing details from the target respondents. The questionnaires
were then collected by the researcher for data analysis.
3.6 Data Analysis Methods
Data analysis refers to the process by which the researcher evaluates collected data by
using analytical and logical reasoning in examining each element of the data provided by
the source targeted (Davenport & Harris, 2007). It is the process by which both statistical
and non-statistical methods are used in making sense of the research data and presenting
28
the data in a meaningful way that will make sense to the users of the data (Saunders,
Lewis, & Thornhill, 2016). This study analysed both descriptive and inferential statistics
data by using Statistical Package for Social Sciences (SPSS) software version 24.
Descriptive statistics were used to analyse frequency, percentages, mean and standard
deviation. Inferential statistics analysed correlation and regression analysis to establish
the relationship between the independent and dependent variables used in the study. The
findings were presented using tables and figures.
3.7 Chapter Summary
This chapter presented the research methodology adopted by the study. The chapter
presented the research design of the study which is explanatory research design, followed
by population and the sampling design whereby the study makes use of purposive
sampling in selecting individuals to make up the sample size, a sample size was
determined to be 108 respondents. Data collection methods have been presented
highlighting structured questionnaire to be the method chosen for data collection, research
procedures and data analysis methods on how data will be analysed has been presented in
this chapter. The next chapter presents results and findings gathered from the respondents.
29
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
Chapter four provides results and findings obtained from the target respondents of the
study. Demographic information of the respondents are presented first, followed by the
findings on the effect of threats of new entrants on strategic planning, the findings on the
effect of industry rivalry on strategic planning and finally the findings on the effect or
bargaining power of buyers on strategic planning are presented.
4.2 Response Rate and Demographic Information
This section presents the response rate gathered from the respondents involved in the
study followed by general information of the target respondents of the study. Response
rate of the study is presented first, then demographic information of the respondents
follows.
4.2.1 Response Rate
This study sought to establish the response rate obtained from the target respondents of
this study, the response rate was found to be 68% which accounted for 73 questionnaires
dully filled by the target respondents out of 108 that were issued. The response rate
obtained was sufficient for data analysis.
Table 4. 1: Response Rate
Response Frequency Percentage (%)
Response Obtained 73 68
Response Not Obtained 35 38
Total 108 100
4.2.2 Demographic Information
This study sought to determine demographic information of the respondents in the study.
Demographic attributes included; gender, respondents’ age, education, management level
and work experience.
30
4.2.2.1 Respondents Gender
In establishing the gender of the respondents involved in the study, the respondents were
asked to indicate their gender; 55% of the respondents were male and 45% were female
as shown in Figure 4.1. This implied that the organization had a diverse gender
representation.
Figure 4. 1: Respondents Gender
4.2.2.2 Respondents Age
This study sought to determine the age of the respondents involved in the study; 10% of
the respondents aged between 18-25 years, 23% aged between 26-33 years, 52% aged
between 34-40 years, 7% of the respondents aged between 41-47 years and 8% were
above 48 years as indicate din Figure. 4.2. This implies that the organization has a diverse
age representation among its employees.
31
Figure 4. 2: Respondents Age
4.2.2.3 Respondents Education
This study sought to determine the education level of the respondents; 7% of the
respondents had a diploma, 40% had a master’s degree and 53% had a bachelor’s degree
as shown in Figure 4.3. This implies that that respondents of the study had the ability to
read and interpret the findings sought in the study.
Figure 4. 3: Respondents Education
4.2.2.4 Position in the Organization
When the respondents were asked to indicate their position within the organization, 23%
of the respondents were in top level management, 32% were in middle level management
32
and 45% were in lower level management. This implies that the respondents had
sufficient information sought in the study.
Figure 4. 4: Position in the Organization
4.2.2.5 Work Experience
When the respondents were asked to indicate the number of years in the organization,
10% of the respondents had been in the organization for a less than a year, 33% between
2-4 years, 34% between 5-7 years, 15% between 8-10 years and 8% above 10 years as
shown in Figure 4.5. This implies that the respondents had sufficient knowledge of the
organization.
Figure 4. 5: Work Experience
33
4.3 Effect of Threats of New Entrants on Strategic Planning
This study sought to determine the effect of threats of new entrants on strategic planning.
The findings obtained are highlighted in both descriptive and inferential statistics.
4.3.1 Descriptive Statistics for Threats of New Entrants and Strategic Planning
The findings presented in Table 4.2 highlights the respondents’ feedback on the effect of
threats of new entrants on strategic planning at Stanbic Bank Kenya Limited. The
responses were tabulated in means and standard deviation, derived from a Likert Scale of
1-5, where; 1= strongly disagree, 2- disagree, 3-neutral, 4-agree and 5-strongly agree.
The findings of the study show that the respondents agreed that there are new entrants
into the banking industry, mean = 4.27 and Standard Deviation = 0.932. The respondents
of the study were also in agreement that there are high initial capital requirements into the
banking industry, mean = 4.33 and Standard Deviation = 0.668. The respondents of the
study also agreed that there is high customer switching costs in the organization, mean =
4.44 and Standard Deviation = 0.866. The study also show that the respondents agreed
that there are high entry barriers in the banking industry, mean = 4.40 and Standard
Deviation = 0.682. The respondents of the study agreed that the industry is characterized
by high exit barriers, mean = 4.33 and Standard Deviation = 0.783. The respondents of
the study were also in agreement that economies of scale motivate new entrants into the
industry, mean = 4.40 and Standard Deviation = 0.493.
Table 4. 2: Descriptive Statistics for Threats of New Entrants and Strategic Planning
Variable N Mean Std. Deviation
There are new entrants into the banking industry. 73 4.27 .932
There are high initial capital requirements into the
banking industry. 73 4.33 .668
There is high customer switching costs in your
organization. 73 4.44 .866
There are high entry barriers in your banking
industry. 73 4.40 .682
The industry is characterized by high exit barriers. 73 4.33 .783
Economies of scale motivate new entrants into the
industry. 73 4.40 .493
Valid N (listwise) 73
34
4.3.2 Correlation between Threats of New Entrants and Strategic Planning
Correlational analysis was conducted to establish the relationship between the
independent variable (threats of new entrants) and the dependent variable (strategic
planning). The findings in Table 4.3 shows a correlation between threats of new entrants
and strategic planning. The findings of the study showed a significant and positive
relationship between threats of new entrants (independent variable) and strategic planning
(dependent variable), r (0.604); p-value < 0.01.
Table 4. 3: Correlation between Threats of New Entrants and Strategic Planning
Correlations
Variable Strategic Planning
Threats of New
Entrants
Strategic
Planning
Pearson Correlation 1
Sig. (2-tailed)
N 73
Threats of
New
Entrants
Pearson Correlation .604** 1
Sig. (2-tailed) .000
N 73 73
**. Correlation is significant at the 0.01 level (2-tailed).
4.3.3 Regression Test for Threats of New Entrants and Strategic Planning
Regression analysis was conducted in order to determine the underlying relationship
between the independent variable threats of new entrants and the dependent variable
strategic planning.
The results in Table 4.4 shows the model summary derived from the regression test for
threats of new entrants and strategic planning. The findings in Table 4.4 shows a model
summary derived from the regression test for threats of new entrants and strategic
planning. The computations deduced an adjusted R square value of (0.356). This implies
that threats of new entrants represents (35.5%) variability in strategic planning and 64.4%
variability is attributed to factors outside the regression model.
Table 4. 4: Regression Test for Threats of New Entrants and Strategic Planning
Model Summary
Model R R Square
Adjusted R
Square
Std. Error
of the
Estimate
1 .604a .365 .356 .30494
a. Predictors: (Constant), Threats of New Entrants
35
The ANOVA test findings presented in Table 4.5, show that the Fisher statistic value is
40.750 with a p-value of 0.000. This indicates that; F (1, 71) = 40.750, p = 0.000 (p-
value< 0.01). This implies that there exists a substantial variance between threats of new
entrants and strategic planning.
Table 4. 5: Analysis of Variance between Threats of New Entrants and Strategic
Planning
ANOVAa
Model
Sum of
Squares df
Mean
Square F Sig.
1 Regression 3.789 1 3.789 40.750 .000b
Residual 6.602 71 .093
Total 10.391 72
a. Dependent Variable: Strategic
b. Predictors: (Constant), Threats of New Entrants
Table 4.6 presents variable coefficients of the study variable, it shows a beta coefficient
for the variables calculated as, constant (β0) = 1.938 and beta for threats of new entrants
(β1) = 0.532. The p-value for threats of new entrants has been revealed as 0.000 (p =
0.000, p-value < 0.01.
The regression equation was established as follows:
Y (strategic planning) = 1.938 + 0.532X1
The findings imply that there exists a significant association between threats of new
entrants and strategic planning. The findings imply that for every unit change in threats of
new entrants, there will be a 0.532 unit change in strategic planning.
Table 4. 6: Coefficient Table for Threats of New Entrants and Strategic Planning
Coefficientsa
Model
Unstandardized
Coefficients
Standardize
d
Coefficients
t Sig. B Std. Error Beta
1 (Constant) 1.938 .365 5.308 .000
Threats of
New
Entrants
.532 .083 .604 6.384 .000
a. Dependent Variable: Strategic
36
4.4 The Effect of Industry Rivalry on Strategic Planning
This study sought to determine the effect of industry rivalry on strategic planning. The
findings obtained from the respondents are presented in both descriptive and inferential
statistics.
4.4.1 Descriptive Statistics for Industry Rivalry and Strategic Planning
The findings presented in Table 4.7 highlights the respondents’ feedback on industry
rivalry on strategic planning at Stanbic Bank Kenya Limited. The responses were
tabulated in means and standard deviation, derived from a Likert Scale of 1-5, where; 1=
strongly disagree, 2- disagree, 3-neutral, 4-agree and 5-strongly agree.
The findings revealed that the respondents of the study agreed that industry rivalry make
the company come up with strategies that helps it compete effectively with rivals, mean =
4.34 and Standard Deviation = 0.870. The findings also revealed that the respondents
agreed that industry rivalry enhances investments in research and development, mean =
4.30 and Standard Deviation = 0.845. The findings revealed that that the respondents
agreed that the organization deliver quality service due to market rivalry, mean = 4.49 and
Standard Deviation = 0.710.
Furthermore, the findings show that the respondents agreed that due to rivalry the
company has embraced innovation and creativity, mean = 4.42 and Standard Deviation =
0.498. The respondents were also in agreement since they agreed that the company
develops strategies on how they can gain and maintain significant market share from the
industry, mean = 4.14 and Standard Deviation = 0.787.
The findings also show that the respondents agreed that the company’s strategic planning
takes into consideration competitive analysis in the industry, mean = 4.37 and Standard
Deviation = 0.858. The findings show that the respondents agreed that industry rivalry
has enhanced customer satisfaction practices, mean = 4.55 and Standard Deviation =
0.501.
37
Table 4. 7: Descriptive Statistics for Industry Rivalry and Strategic Planning
Descriptive Statistics
Variable N Mean Std. Deviation
Industry rivalry makes your company come up
with strategies that will help you compete
effectively with your rivals.
73 4.34 .870
Industry rivalry enhances your investments in
Research and Development. 73 4.30 .845
Your organization deliver quality service due to
market rivalry. 73 4.49 .710
Due to rivalry your company has embraced
innovation and creativity. 73 4.42 .498
Your company develops strategies on how they
can gain and maintain significant market share
from the industry
73 4.14 .787
Your strategic planning involves industry
competitive analysis. 73 4.37 .858
Industry rivalry has enhanced your customer
satisfaction practices. 73 4.55 .501
Valid N (listwise) 73
4.4.1 Correlation between Industry Rivalry and Strategic Planning
Correlational analysis was conducted to establish the relationship between the
independent variable (industry rivalry) and the dependent variable (strategic planning).
The findings in Table 4.8 shows a correlation between industry rivalry and strategic
planning. The findings of the study showed a significant and positive relationship
between industry rivalry (independent variable) and strategic planning (dependent
variable), r (0.728); p-value < 0.01.
Table 4. 8: Correlation between Industry Rivalry and Strategic Planning
Correlations
Variable Strategic Industry Rivalry
Strategic
Planning
Pearson Correlation 1
Sig. (2-tailed)
N 73
Industry
Rivalry
Pearson Correlation .728** 1
Sig. (2-tailed) .000
N 73 73
**. Correlation is significant at the 0.01 level (2-tailed).
38
4.4.2 Regression Test for Industry Rivalry and Strategic Planning
Regression analysis was conducted in order to determine the underlying relationship
between the independent variable industry rivalry and the dependent variable strategic
planning.
The results in Table 4.9 shows the model summary derived from the regression test for
threats of new entrants and strategic planning. The findings in Table 4.9 shows a model
summary derived from the regression test for industry rivalry and strategic planning. The
computations deduced an adjusted R square value of (0.523). This implies that industry
rivalry represents (52.3%) variability in strategic planning and 47.7% variability is
attributed to factors outside the regression model.
Table 4. 9: Regression Test for Industry Rivalry and Strategic Planning
Model Summary
Model R R Square
Adjusted R
Square
Std. Error
of the
Estimate
1 .728a .530 .523 .26230
a. Predictors: (Constant), Industry Rivalry
The ANOVA test findings presented in Table 4.10, show that the Fisher statistic value is
80.032 with a p-value of 0.000. This indicates that; F (1, 71) = 80.032, p = 0.000 (p-
value< 0.01). This implies that there exists a substantial variance between industry rivalry
and strategic planning.
Table 4. 10: Analysis of Variance between Industry Rivalry and Strategic Planning
ANOVAa
Model
Sum of
Squares df
Mean
Square F Sig.
1 Regression 5.506 1 5.506 80.032 .000b
Residual 4.885 71 .069
Total 10.391 72
a. Dependent Variable: Strategic
b. Predictors: (Constant), Industry Rivalry
Table 4.11 presents variable coefficients of the study variable, it shows a beta coefficient
for the variables calculated as, constant (β0) = 0.489 and beta for industry rivalry (β1) =
0.862. The p-value for industry rivalry has been revealed as 0.000 (p = 0.000, p-value <
0.01.
39
The regression equation was established as follows:
Y (strategic planning) = 0.489 + 0.862X1
The findings imply that there exists a significant association between industry rivalry and
strategic planning. The findings imply that for every unit change in industry rivalry, there
will be a 0.862 unit change in strategic planning.
Table 4. 11: Coefficient Table for Industry Rivalry and Strategic Planning
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig. B Std. Error Beta
1 (Constant) .489 .422 1.156 .251
Industry
Rivalry .862 .096 .728 8.946 .000
a. Dependent Variable: Strategic
4.5 Effect of Bargaining Power of Buyers on Strategic Planning
This study sought to determine the effect of bargaining power of buyers on strategic
planning. The findings obtained from the target respondents are highlighted in both
descriptive and inferential statistics.
4.5.1 Descriptive Statistics for Bargaining Power of Buyers and Strategic Planning
The findings presented in Table 4.12 highlights the respondents’ feedback on the effect of
bargaining power of buyers on strategic planning at Stanbic Bank Kenya Limited. The
responses were tabulated in means and standard deviation, derived from a Likert Scale of
1-5, where; 1= strongly disagree, 2- disagree, 3-neutral, 4-agree and 5-strongly agree.
The findings of the study revealed that the respondents agreed that the availability of
information gives buyers a greater leverage in terms of bargaining, mean = 4.29 and
Standard Deviation = 0.736. The findings also revealed that the respondents agreed that
bargaining power of buyers makes the organization form strategies that limit consumer
leverage to some extent, mean = 4.51 and Standard Deviation = 0.690. The findings also
revealed that the respondents agreed that buyers pose a threat of integrating backward to
offer the industry’s services, mean = 4.11 and Standard Deviation = 0.542.
40
Furthermore, the findings of the study revealed that buyers do have a high bargaining
power for the organization’s services, mean = 4.67 and Standard Deviation = 0.473. The
findings of the study also revealed that buyers become powerful if they have negotiating
leverage, mean = 4.38 and Standard Deviation = 0.700.
The findings of the study show that the respondents agreed that their organization’s
strategic planning involves the analysis of the bargaining power of buyers, mean = 4.58
and Standard Deviation = 0.498. The respondents were also in agreement that their
organization has created high consumer switching costs with an attempt to reduce the
bargaining power of buyers, mean = 4.53 and Standard Deviation = 0.689. The findings
show that the respondents agreed that there is a presence of favorable licensing
regulations in the industry, mean = 4.58 and Standard Deviation = 0.575.
Table 4. 12: Descriptive Statistics for Bargaining Power of Buyers and Strategic
Planning
Descriptive Statistics
Variable N Mean
Std.
Deviation
Availability of information gives buyers a greater
leverage in terms of bargaining. 73 4.29 .736
Bargaining power of buyers makes your
organization create strategies that limit consumer
leverage to some extent.
73 4.51 .690
Do you think your buyers pose a threat of
integrating backward to offer the industry’s
services?
73 4.11 .542
Do you think your buyers have high bargaining
power for your service? 73 4.67 .473
Your buyers become powerful if they have
negotiating leverage. 73 4.38 .700
Your strategic planning involves analysis of the
bargaining power of buyers. 73 4.58 .498
Your company has created high consumer
switching costs to reduce the bargaining power of
buyers.
73 4.53 .689
There is a presence of favorable licensing
regulations in your industry. 73 4.58 .575
Valid N (listwise) 73
41
4.5.2 Correlation between Bargaining Power of Buyers and Strategic Planning
Correlational analysis was conducted to establish the relationship between the
independent variable (bargaining power of buyers) and the dependent variable (strategic
planning). The findings in Table 4.13 shows a correlation between bargaining power of
buyers and strategic planning. The findings of the study showed a significant and positive
relationship between bargaining power of buyers (independent variable) and strategic
planning (dependent variable), r (0.565); p-value < 0.01.
Table 4. 13: Correlation between Bargaining Power of Buyers and Strategic
Planning
Correlations
Variable Strategic
Bargaining Power
of Buyers
Strategic
Planning
Pearson Correlation 1
Sig. (2-tailed)
N 73
Bargaining
Power of
Buyers
Pearson Correlation .565** 1
Sig. (2-tailed) .000
N 73 73
**. Correlation is significant at the 0.01 level (2-tailed).
4.5.3 Regression Test for Bargaining Power of Buyers and Strategic Planning
Regression analysis was conducted in order to determine the underlying relationship
between the independent variable bargaining power of buyers and the dependent variable
strategic planning.
The results in Table 4.14 shows the model summary derived from the regression test for
bargaining power of buyers and strategic planning. The findings in Table 4.14 shows a
model summary derived from the regression test for bargaining power of buyers and
strategic planning. The computations deduced an adjusted R square value of (0.310). This
implies that bargaining power of buyers represents (31%) variability in strategic planning
and 69.0% variability is attributed to factors outside the regression model.
Table 4. 14: Regression Test for Bargaining Power of Buyers and Strategic Planning
Model Summary
Model R R Square
Adjusted R
Square
Std. Error of the
Estimate
1 .565a .319 .310 .31563
a. Predictors: (Constant), Bargaining Power of Buyers
42
The ANOVA test findings presented in Table 4.15, show that the Fisher statistic value is
33.304 with a p-value of 0.000. This indicates that; F (1, 71) = 33.304, p = 0.000 (p-
value< 0.01). This implies that there exists a substantial variance between bargaining
power of buyers and strategic planning.
Table 4. 15: Analysis of Variance between Bargaining Power of Buyers and
Strategic Planning
ANOVAa
Model
Sum of
Squares df
Mean
Square F Sig.
1 Regression 3.318 1 3.318 33.304 .000b
Residual 7.073 71 .100
Total 10.391 72
a. Dependent Variable: Strategic
b. Predictors: (Constant), Bargaining Power of Buyers
Table 4.16 presents variable coefficients of the study variable, it shows a beta coefficient
for the variables calculated as, constant (β0) = 1.895 and beta for bargaining power of
buyers (β1) = 0.530. The p-value for bargaining power of buyers has been revealed as
0.000 (p = 0.000, p-value < 0.01.
The regression equation was established as follows:
Y (strategic planning) = 1.895 + 0.530X1
The findings imply that there exists a significant association between bargaining power of
buyers and strategic planning. The findings imply that for every unit change in bargaining
power of buyers, there will be a 0.530 unit change in strategic planning.
Table 4. 16: Coefficients for Bargaining Power of Buyers and Strategic Planning
Coefficientsa
Model
Unstandardized
Coefficients
Standardize
d
Coefficients
t Sig. B Std. Error Beta
1 (Constant) 1.895 .411 4.608 .000
Bargaining
Power of
Buyers
.530 .092 .565 5.771 .000
a. Dependent Variable: Strategic Planning
43
4.6 Chapter Summary
Chapter four presents result and findings of the study gathered from the target
respondents. The first section highlights the response rate and demographic information
of the respondents. The second section presents the findings on the effect of threats of
new entrants on strategic planning, followed by the findings on the effect of industry
rivalry on strategic planning. The fourth section presents the findings on the effect of
bargaining power of buyers on strategic planning. The next chapter presents the
discussion, conclusion and recommendations.
44
CHAPTER FIVE
5.0 SUMMARY, DISCUSSION, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
Chapter five presents the summary of the study, followed by the discussion, conclusions
and recommendations in line with the findings of the study. First the study summary is
highlighted, followed by the discussion of the study findings for each research question,
conclusions and finally recommendations.
5.2 Summary
The purpose of this study was to determine the effects of selected Porter’s Five Forces
Model on strategic planning in Stanbic Bank Kenya. The following research questions
guided the study: To what extent does threats of new entrants affect strategic planning, to
what extent does industry rivalry influence strategic planning and to what extent does
bargaining power of buyers influence strategic planning. This study used descriptive
research design in integrating study elements to address the research problem
appropriately. Population and sampling design has been presented whereby the study had
a population of 149 employees yielding a sample size of 108 respondents. Stratified
sampling technique was deployed for this particular study. The study used a structured
questionnaire for data collection, and data collected was analysed by using Statistical
Package for Social Sciences software version 24. The study made use of both descriptive
statistics and inferential statistics. Descriptive statistics analysed frequency, percentages,
means and standard deviation. Inferential statistics analysed correlation and regression
analysis to establish the relationship among the study variables.
This study sought to determine the effect of threats of new entrants on strategic planning.
The findings deduced in the study show that there exists a significant relationship
between threats of new entrants and strategic planning, r (0.604); p-value < 0.01. The
findings also established that threats of new entrants accounts for 35.6% variability in
strategic planning. The findings show that threats of new entrants enhance market
acquisition for the organization. The findings have also shown that economies of scale
accelerates the rate of new entrants into the market.
45
The second objective of this study sought to determine the effect of industry rivalry on
strategic planning. The findings of the study revealed that there is a significant
relationship between industry rivalry and strategic planning, r (0.728); p-value < 0.01.
The findings also revealed that industry rivalry accounts for 52.3% variability in strategic
planning. The findings indicate that the intensity of industry rivalry plays crucial role in
motivating firms to formulae strategies that will enable them to stay in the market. The
findings also show that strategic planning enhance competition analysis of the market in
which the business is operating.
The study also sought to determine the effect of bargaining power of buyers on strategic
planning. The findings of the study revealed that there is a statistically significant
relationship between bargaining power of buyers and strategic planning, r (0.565); p-
value < 0.01. The findings also revealed that bargaining power of buyers accounts for
31% variability in strategic planning. The findings of the study show that availability of
information offers buyers leverage when it comes to bargaining. The findings of the study
revealed that buyers pose a threat of integrating backwards.
5.3 Discussion
5.3.1 The Effect of Threats of New Entrants on Strategic Planning
This study sought to determine the effect of threats of new entrants on strategic planning.
The findings of the study revealed that there is a strong and significant relationship
between threats of new entrants and strategic planning. These findings correspond to the
findings of Mahat and Goedegebuure (2016) arguing that the possible sources of the entry
barriers tend to encompass economies of scale, brand loyalty, cost advantages, customer
switching costs, initial capital requirement regulation, many more. Additionally, the main
entry barriers include scale economy, product differences, capital demand, sales channels
development, government behaviour and policy and so on. Researchers have revealed that
some barriers are hard to break, using coping and imitating way. Whether a new company
will enter into an industry or not depends on the potential profit, expense and the risk of
being a new entrant (Kungu, Desta, & Ngui, 2014).
In addition, Hoque and Chia (2012) argues that the local environment tends to play a
significant role in strategic planning. Moreover, the implementation of any new policies
and rules that remain dedicated to the achievement of the organizational goals and
objectives entirely depends on the working environment. Therefore, the competitiveness
46
of organizational performance depends on strategic implementation. Empirical study
studies indicate that industry forces are valuable for business strategy formulation and
implementation. The business should identify its position in the market area and fight
against the competition that threatens its strategic position before formulating strategies
(Gao, 2014). Further, industry forces have a major impact on firm strategies. The notion
is that companies must adopt a more dynamic strategy to defend themselves against
industry structures and increase their market share (Okafor, Russell, & Lawal, 2012).
The findings of the study also revealed that threats of new entrants enhance market
acquisition. These findings are in line with those of Ahuja and Novelli (2016) indicating
that the concept of the new entrants in the market seems to offer the new capability for
the organization to expand and the desire to share markets. Principally when new entrants
are branching out from other markets, they can influence existing cash flows and
capabilities to shake up the competition. Dobbs (2014) revealed that an exemplary
example is what Pepsi did when it got into the bottled water industry; Microsoft did when
it began to offer internet browsers, and Apple did when it got into the music supply side
of business eating into the profits of the established companies in the industry. The threat
of entry, as a result, puts a restriction on the profit probable of an industry. When the
threat is high, incumbents must grip down their prices or enhance investment to
discourage new competitors.
In the area of expertise, coffee retailing, for example, comparatively low entry barriers
mean that Starbucks must invest insistently in modernizing menus and stores. Most of the
empirical studies that have been conducted seem to offer insightful information on how
new entrants tend to bring about the effects of the strategic planning in the banking
industries. Ideally, the threat of new entrants in the industries tends to depend on the
heights of entry barriers that are the attendance and the response of the entrants that
clients are capable of anticipating from the incumbents (Thursby & Berbari , 2016).
Suppose entry barriers are low and newcomers expect small revenge from the well-
established rivals, the threat of entry is far above the ground and industry profitability
remain moderate. It is the threat of entry, not whether entry really occurs, that grips down
profitability.
47
The findings of the study also revealed that economies of scale motivate the rate of new
entrants into the market. The findings are in line with Nyantakyi (2015) who asserts that
supply-Side Economies of Scale seems to occur when an industry makes a larger volume
that tends to take pleasure in the lower costs per unit since they can stretch fixed costs
over more units in return. Importantly, supply-side scale economies discourage entry by
forcing the hopeful entrant either to come into the industry on a large scale, which needs
extricating well-established rivals or to concede a cost disadvantage. For almost all value
chain, the ideologies of scale economies are highly available. Bu this concept seems to
differ depending on the type of organizations (Kim & Hoskisson, 2015). For instance,
scholars seem to use Intel companies as a good example because it exploits the above
concept clearly. In this company, Intel remains scheduled by the scale economies
investigation, which deploys both the chip manufacture and consumer marketing
(Cressman, 2012).
Rentes (2017), argues that the benefits recognized as network effects happen in industries
where a purchaser’s eagerness to pay for a firm’s product magnifies with the number of
other purchasers who also hold up the organization. Shoppers may trust superior
organizations more for a vital product: Recall the old proverb that no one ever remains
fired for purchasing from IBM when it was the leading computer maker. Buyers may also
value being in a “network” with a larger number of fellow customers. For example, online
public sale participants are paying attention to eBay because it offers the prospective
trading partners (Wills & Kennedy , 2013). Demand-side benefits of scale hold over entry
by discouraging the eagerness of customers to buy from a newcomer and by dropping the
price, the newcomer can influence until it puts up a large base of customers (Thursby &
Berbari , 2016).
5.3.2 The Effect of Industry Rivalry on Strategic Planning
The second research question of this study sought to determine the effect of industry
rivalry on strategic planning. The findings revealed the existence of a strong and
significant relationship between industry rivalry and strategic planning. These findings
concur with the findings of Dobb (2014) suggesting that when the thrill of competition
becomes the goal, managers risk the future of their organizational units and potential
careers, as the Boeing manager indictments demonstrate. At the same time, different units
contend for limited resources in organizations. Compared to a cohesive unit, an internally
48
divided unit will suffer in the contest for organizational resources and status. For
example, the rivalry between German brothers Adolf and Rudolf Gassler, who founded
Adidas and Puma respectively, after initially making shoes together, involved both
personal and business feuds (Cressman, 2012).
According to Robertson and Gatignon (2012) rivalry occurs when competitors sense the
pressure or act on an opportunity to improve their market segment (Robertson &
Gatignon, 2012). Thursby and Berbari (2016) insist that some forms of competition, such
as price competition, are typically highly destabilizing and are critical for profitability
level in an industry. For example, price-cutting lowers profits for all banks while
advertising battles inflate the demand and enhance the level of product differentiation for
the benefit of all banks in the industry. The intensity of rivalry differs across industries
and this may be due to various factors. The intensity of rivalry among and between
companies within an industry is apparent when companies in an industry battle achieve
market share from each other. This rivalry goes up and as a result, the competition turns
out to be stronger with an increase in the number of companies in the same industry as
they push around for a considerable market share (Gao, 2014).
The findings of the study also show that the intensity of industry rivalry enables firms to
formulate strategies to stay in the industry. According to Kim and Hoskisson (2015) the
potency of rivalry is of the highest degree only if competitors are roughly equal in power
and size or are many. In such state of associations, competing firms find it hard to stay
away from poaching business. This results to the state that practices helpful for the
organization as a whole go un-enforced without an industry leader. The greatness of
rivalry is also greater if the industry growth is slow. Sluggish growth unexpectedly
scrambles for market share. When exit barriers are high, the intensity of rivalry is high
(Dobbs, 2014). Exit obstacles, the rear side of entry barriers, take place because of such
things as management’s devotion to a certain business or very much-specialized assets.
Sutherland (2014) also suggests that the extent to which competition weakens an
industry’s profit potential depends, first, on the foundation of which organizations
compete and, second, on the intensity with which they compete. Price is characteristically
the most critical basis of rivalry for industry profitability. Price reductions move profits
directly from an industry to its clientele, and they are often easy for rivals to see and
match, making successive rounds of disciplinary cuts more probable. On the contrary,
49
competition on features or services can permit industry competitors to sustain good
margins (Thursby & Berbari , 2016).
The findings of the study revealed that strategic planning enhances competition analysis
of the market in which the business operates. According to Cressman (2012) while price
rivalry runs a stronger risk than non-price rivalry of becoming zero-sum, this may not
happen if firms take care to subdivide their markets, aiming their low-price contributing
to different customers. Competition can be positive sum, or in realism improve the typical
profitability of an industry, when every competitor makes an effort to serve the needs of
different customer divisions, with diversity mixes of features, price, products, services, or
brand identities. Such rivalry cannot only sustain higher average profitability but also
enlarge the industry, as the needs of more consumer groups remains better met (Dobbs,
2014).
McMillan (2010) established that the chance for positive-sum rivalry will be greater in
industries serving varied consumer groups. According to Rahman, Azad and Mostari
(2015) they indicate that with apparent consideration of the structural foundations of
competition, strategists can from time to time take steps to move the nature of rivalry in a
more positive direction. Ideally, the ideology of the competition in the middle of existing
rivals takes many recognizable forms: new-product introductions, price discounting,
service escalation, advertising campaigns, and so forth (Bennett & Kottasz, 2012). The
philosophy of competition tends to be gaining more popularity in the recent period due to
the advantages that the new technology is attempting to offer in the banking business
platforms (Hoque & Chia , 2012).
5.3.3 The Effect of Bargaining Power of Buyers on Strategic Planning
This study also sought to determine the effect of bargaining power of buyers on strategic
planning. The findings show that there is a significant and positive relationship between
bargaining power of buyers and strategic planning. These findings correspond to the
findings of Simpasa (2013) who indicates that the bargaining power is another vital factor
that plays a significant role on the effects of competitive position of any firm. Numerous
legislations has been passed to carry out the various concept of the bargaining power of
the clients in the banking industries so that they can play the significant role in the
strategic planning. El-Manstrly (2016) on the hand indicates that scholars have reported
that legislation has considerably improved customers’ rights while technology and
50
competition, on the other hand, is accountable for increased choices of products and
services. For that line of thinking, increased volumes of available information on the
Internet and changes in social behaviour have reduced the loyalty of customers. Again,
the increased competitions reduce the loyalty of customers to their main banks and are
more likely to try new banks which offer better rates, superior technology, or more
attractive rewards.
The findings of the study show that availability of information offers buyers leverage
when it comes to bargaining. According to Macy (2018) the power of buyer remains
defined as the notion of the buyers’ tendencies to always want to drive down the price of
the product or service and the need of the good service requirements with an aim to
improve the quality of the products and service in the banking sector and all industries in
general. Logically, buyers have the power to threaten the industries by bargaining down
the prices or raising the cost by calling for better quality suppliers. In another word, it is
clear to argue that the power of the buyer can remain viewed as the image of the power of
suppliers (El-Manstrly, 2016). The buyer power is one of the two horizontal forces that
influence the appropriation of the value created by an industry. The most important
factors of buyer power are the size and the concentration of customers (Wong & Hui,
2008).
In addition. Robertson and Gatignon (2012) rivalry occurs when competitors sense the
pressure or act on an opportunity to improve their market segment. Thursby and Berbari
(2016) insist that some forms of competition, such as price competition, are typically
highly destabilizing and are critical for profitability level in an industry. For example,
price-cutting lowers profits for all banks while advertising battles inflate the demand and
enhance the level of product differentiation for the benefit of all banks in the industry.
The intensity of rivalry differs across industries and this may be due to various factors.
The intensity of rivalry among and between companies within an industry is apparent
when companies in an industry battle achieve market share from each other. This rivalry
goes up and as a result, the competition turns out to be stronger with an increase in the
number of companies in the same industry as they push around for a considerable market
share (Gao, 2014).
51
According to Cressman (2012) powerful customers, can capture more value by pushing
down prices, demanding more service or better quality, and normally playing industry
contestants off in opposition to one another, all at the expenditure of industry
profitability. Customer buyers are strong if they have to negotiate power relative to
industry players, particularly if they are price sensitive, using their thump first and
foremost to pressure price reductions.
The findings of the study revealed that buyers pose a threat of integrating backwards.
According to Liinamaa and Gustafsson (2010) the demand bargaining dispensation is
achieved by the ideology when there are consumers either are to some extent integrated or
front a credible threat of backward integration. Consumers remain directly attached to the
philosophy of the price response. For the managers in the banking industries to achieve
the highest client’s profits, there is the need for them to think of the how to capture their
needs. Typically, a buyer group is price responsive only if the product it buys from the
industry stands for an important fraction of its procurement budget or cost structure(Gao,
2014). Purchasers are likely to shop around and bargain, as customers do for home
mortgages. Where the manufactured goods sold by an industry is a small portion of
purchaser’s expenditures or costs, buyers are typically less price sensitive. The buyer
group receives low profits, is impoverished for cash, or is otherwise on the spot to cut its
purchasing costs. Highly cash-rich or profitable customers, in contrast, are usually less
price sensitive (El-Manstrly, 2016).
On the other hand Denning (2016) the quality of the buyer’s services remains normally
less affected by the industries’ services. Where on the other hand the firm’s products
directly affected by the quality of the services since the buyers are largely less sensitive to
price. An exemplary example is when renting or purchasing production quality cameras,
manufacturers of major motion pictures choose for highly dependable equipment with the
latest features. They pay inadequate consideration to price, industries in which this
situation exists include oil-field equipment, where a malfunction can lead to large losses,
and enclosures for electronic medical and test instruments, where the quality of the
enclosure can greatly influence the user's impression about the quality of the equipment
inside (Liinamaa & Gustafsson, 2010).
52
5.4 Conclusions
5.4.1 The Effect of Threats of New Entrants on Strategic Planning
This study concluded that there exists a strong and significant association between threats
of new entrants and strategic planning. Threats of new entrants are crucial for the bank to
formulate strategies that are essential for putting up with competition as well as pursuing
business opportunities available in the external environment of the business. This study
also concludes that economies of scale associated with commercial banks activities
motivate the rate of new entrants into the industry. Revenues and profitability that
commercial banks enjoy in the banking industry plays a crucial factor in motivating new
players to come into the industry and compete for the same market share.
This study concluded that high initial capital requirements prevents the rate of new
entrants into the banking industry. When the amount of setting up the operations carried
out by commercial banks are raised, this will make it hard for new players to come into
the industry to compete for the same market share as well as customers.
5.4.2 The Effect of Industry Rivalry on Strategic Planning
This study concluded that there is a significant association between industry rivalry and
strategic planning. Industry rivalry enables commercial banks to formulate various
strategies that allow them to compete effectively by creating products and services
informed by strategy formulation process. Strategy formulation process takes into
consideration environmental scanning that enables commercial banks to understand their
competition and what they can offer to compete effectively in the marketplace. This study
concluded that industry rivalry enables commercial banks to embrace innovation and
creativity for their success. Industry rivalry forces players in the market to create new and
innovative services that attracts new customers, therefore for other players to compete
effectively and to remain in the market they are forced to embrace innovation.
5.4.3 The Effect of Bargaining Power of Buyers on Strategic Planning
This study concluded that there exists a significant relationship between bargaining power
of buyers and strategic planning. Bargaining power of buyers’ forces commercial banks
to plan strategically on how to address issues relating to bargaining power of buyers by
seeking to create an environment where the bank can exert high bargaining power in the
buying process. This study concludes that strategic planning takes into consideration the
53
analysis of bargaining power of buyers, this is crucial since buyers can drive prices of
services down which can have a negative implication on the operations of the bank.
5.5 Recommendations
This section presents recommendations for practice based on the findings gathered from
the respondents and recommendation for future studies.
5.5.1 Recommendations for Practice
5.5.1.1 The Effect of Threats of New Entrants on Strategic Planning
This study recommends that Stanbic Bank Kenya Limited should create embrace the use
of high initial capital requirements in its operations as well as technology, this will
prevent the threats of new entrants in competing for the same market share, hence, the
commercial banks will enjoy profitability while at the same time gaining a large market
share in the banking industry. This study recommends that Stanbic Bank Kenya Limited
should create high consumer switching costs by offering the best value through creative
products and services that their competitors cannot match, this will enhance customer
retention.
5.5.1.2 The Effect of Industry Rivalry on Strategic Planning
A significant relationship between industry rivalry and strategic planning has been
established. Therefore, this study recommends that Stanbic Bank Kenya Limited should
embrace industry rivalry by formulating competitive strategies that effectively address its
competition for them to remain in business and sustain themselves for the long run. This
study recommends that Stanbic Bank Kenya Limited should invest in research and
development department that will enable it to produce and innovate new services that are
in line with emerging needs of banking consumers in the market, this will also help the
bank to keep up with industry rivalry.
5.5.1.3 The Effect of Bargaining Power of Buyers on Strategic Planning
The findings of this study revealed a significant association between bargaining power of
buyers and strategic planning. Therefore, this study recommends that Stanbic Bank
Kenya Limited should innovate products and services that gives the bank leverage to
charge a premium while at the same time preventing backward integration. This study
also recommends that Stanbic Bank Kenya Limited should create a high consumer
54
switching costs to prevent them from switching. The bank can do this by offering high
value to its customers at an affordable cost that other commercial banks cannot put up
with, this will prevent customers from switching to competitors.
5.5.2 Recommendations for Further Studies
This study sought to determine the effects of selected porter’s five forces model on
strategic planning in Stanbic Bank Kenya Limited. Further studies should research on the
effect of porter’s five forces model on strategic planning in sectors such as education,
telecommunication industry, transport industry, manufacturing, pharmaceutical and
tourism industry.
55
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APPENDICES
APPENDIX I: INTRODUCTION LETTER
61
APPENDIX II: STUDY QUESTIONNAIRE
SECTION I: GENERAL INFORMATION
This section contains demographic information questions. Kindly respond to the best of
your knowledge.
Kindly tick (√) where applicable.
1. What is your gender?
Male Female
2. Kindly indicate your age bracket.
18- 25 Years
26- 33 Years
34- 40 Years
41-47 Years
48 and Above
3. Kindly indicate your level of education.
Diploma
Bachelor’s Degree
Master’s Degree
Doctorate Degree
4. Kindly indicate your position within the organization
Lower Level
Manager
Middle level
manager
Top Level Manager
5. What is your work experience?
0-1 Years
2-4 Years
5-7 Years
8-10Years
Above 10 years
62
SECTION II: THE EFFECT OF THREATS OF NEW ENTRANTS ON
STRATEGIC PLANNING
Kindly answer the questions below on the effect of new entrants on strategic planning to
the best of your knowledge based on a Likert Scale. Strongly disagree=1, Disagree=2,
Neutral=3, Agree=4 and Strongly Agree=5.
No Questions 1 2 3 4 5
6. There are new entrants into the banking industry.
7. There are high initial capital requirements into the banking
industry.
8. There is high customer switching costs in your
organization.
9. Presence of favorable licensing regulations.
10. There are high entry barriers in your banking industry.
11. The industry is characterized by high exit barriers.
12. Economies of scale motivate new entrants into the
industry.
SECTION III: THE EFFECT OF INDUSTRY RIVALRY ON STRATEGIC
PLANNING
Kindly respond to the following questions using the Likert Scale that is provided in
section II
No Questions 1 2 3 4 5
13. Industry rivalry makes your company come up with
strategies that will help you compete effectively with your
rivals.
14. Industry rivalry enhances your investments in Research and
Development.
15. Your organization deliver quality service due to market
rivalry.
16. Due to rivalry your company has embraced innovation and
creativity.
17. Your company develops strategies on how they can gain
and maintain significant market share from the industry
18. Your strategic planning involves industry competitive
analysis.
19. Industry rivalry has enhanced your customer satisfaction
practices.
63
SECTION IV: THE EFFECT OF BARGAINING POWER OF BUYERS ON
STRATEGIC PLANNING
Kindly respond to the following questions based on the Likert Scale in Section II.
No Questions 1 2 3 4 5
20. Availability of information gives buyers a greater leverage
in terms of bargaining.
21. Bargaining power of buyers makes your organization create
strategies that limit consumer leverage to some extent.
22. Do you think your buyers pose a threat of integrating
backward to offer the industry’s services?
23. Do you think your buyers have high bargaining power for
your service?
24. Your buyers become powerful if they have negotiating
leverage.
25. Your strategic planning involves analysis of the bargaining
power of buyers.
26. Your company has created high consumer switching costs to
reduce the bargaining power of buyers.
Thank you, your participation is highly valued
64
APPENDIX III: NACOSTI RESEARCH LICENSE