Effect of Competitive Strategies on the Performance of Insurance Companies in Kenya

A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfilment of the Requirement for the Degree of Masters in Business Administration (MBA)The main purpose of the study was to investigate the effects of competitive strategies on the performance of insurance sector in Kenya. To achieve this, the study was guided by the following research questions; what is the effect of differentiation strategy on performance of insurance companies in Kenya? What is the effect of cost leadership strategy on performance of insurance companies in Kenya? What is the effect of focus strategy on performance of insurance companies in Kenya? The study employed a descriptive research design and this was appropriate for this research to ascertain the prevailing conditions of facts in a sample. The target population consisted of all strategic planning department in the 47 insurance companies in Kenya listed under the membership of Association of Kenya insurance (AKI). A purposive sampling technique was used to select a sample of three employees from strategic planning department in each insurance company resulting in 141 respondents. Only 135 questionnaires were filled and returned representing 95.7%, this was sufficient for the study. To analyse the data, descriptive statistics such as mean, standard deviation, frequency and percentage were used. For inferential analysis correlation was used to measure the strength of the relationship between differentiation, focus, cost leadership and firm performance. Moreover, regression analysis was used to show the nature of the relationship between dependent and independent variables. Based on the first research question majority of the firms offer a broad range of products and economize on cost of materials. It was also established that many differentiate their product and a majority do not offer narrower range of product than competitors. A correlation analysis between differentiation strategy and performance was a strong positive one and the regression coefficients showed a positive and significant relationship between differentiation strategy and insurance performance. Based on the second research question, the findings revealed that most of the firms charge lower prices than the competitors and heavily invest in sales promotion. It was also revealed that many constantly reduce labour input through automation. A correlation analysis between cost leadership strategy and performance was strongly positive and the regression coefficients showed a positive and significant relationship between cost leadership strategy and insurance performance The last research question established that majority of insurance firms serve specific geographical market and emphasize on marketing specialty product. The findings also established that many deal with broad product serving wider market while majority constantly target a specific market. A correlation analysis between focus strategy and performance was strong and positive and the regression coefficients showed a positive and significant relationship between focus strategy and insurance performance. The study concluded that companies should also aim to be the first in releasing new products that cannot be imitated easily so as to maintain their market share. Firms also need to consider and define affordable price so as to charge the most economical ways that ensure the company gains after the sale of the insurance policy. More so insurance companies should embrace the use of alignment and partnership with other players in the market as such to minimize operational costs and enhance market coverage and improve on their revenues. The research recommends that further studies can propose to find out whether generic strategies (combination of two strategies or use of single strategies) does have unique contribution on the firm performance. Generic strategies should also be compared with hybrid strategies to find which one have more impact on the firm performance. Future studies should also be done on the impact of the competitive strategies on other industry such as education, manufacturing firm, banking