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Firm Performance
No consensus has been reached on the most appropriate measure of firm performance because
there are varied opinions of what is desirable outcome of business usefulness. In addition,
performance is characterized often by theory and purposes of the study being undertaken
(Ramani & Kumar, 2008; Sheng et al., 2011). Firm performance is defined as fulfillment of the
intended mission of organizations which is obtained through good management, persistent efforts
and superior governance to attain the objectives (Richard et al., 2009). Organization’s
presentation is centered on kinds of activities it carries out in fulfillment of its mission. End
results are the observable aspects that determine an organization’s performance (Valmohammadi
& Servati, 2011). Michael and Combs (2008) consider performance as a theme that continuously
happens in paradigm of management.
In today's dynamic globalized economy, growth of firm performance is related with progress of
individual performance, expertise, knowledge and understanding (Covey, 2004). Nevertheless,
the skill to attain and sustain high performance and productivity in businesses is a main
hindrance facing organizations nowadays. Firm performance is founded upon the notion that
business is a charitable link of productive resources including human, physical and assets, with
the aim of attaining a common goal (Barney, 2001b). Those giving the assets constrain them to
the business as far as the businesses are content with value gained in exchange, comparative to
another usage of the properties. Consequently, the principle of presentation is formation of
worth. As far as value formed by usage of added resources is equivalent to or superior than worth
anticipated by asset contributors, the assets will remain accessible to the organization and the
businesses will carry on to exist.
Many businesses have adopted the use of Balanced Score Card (BSC) in the recent years to
measure organizational performance; an approach that Wilson et al., (2012) considers to be
holistic and more comprehensive in measuring performance. Balance score card defines
comprehensive set of procedures that take into account financial measures and non-financial
measures in an organization (Silk, 1998). In using BSC-methodology, performance is followed
and calculated in various dimensions for instance client service, financial presentation, worker
stewardship and societal duties. The balanced score card therefore brings together, in a lone
administration report, presentation elements that were previously in separate reports, enabling
high-ranking managers ponder imperative performance measures collected and offer a holistic
view of a business’s performance.
Commercial Banks in Kenya
The banking sector is pillar in any economy because it acts as an accelerator for economic
activities and banks hold a central place in every country (Soyibo & Lawanson, 2011).
Commercial banks play an important role in the global economy providing value- added
products and services in addition to contributing to job creation and taxation. The sustainable
good or bad performance of a bank has bearing on the stakeholders and in the long term on gross
domestic product of the country. A financial institution main role is acting as intermediary
between people with excess resource and limited resource through providing financial solutions
and by doing so transforming money, maturities and risks (Soyiba et al., 2012).
The banking industry is facing high global competition and rapidly changing business
environment. Digital technology, commoditization, deregulation and globalization have changed
the face of banking (Joyner, 2012). In Kenya, for example, there has been the successful
introduction and adoption of mobile banking, agency banking, micro finance banking and
savings credit and cooperative societies (SACCO'S) financial services. The central bank
supervision report 2017-2018 show less than 7% all banking transactions are being transacted in
banking halls. Banks have understood the need to leverage on E-CRM strategies to gain
advantage over the competition by relying heavily on technology, while reducing on staff in
order to increase profits and efficiency in service delivery. There is a direct link between
customer satisfaction and profitability (Woodcock, Foss & Stone, 2003).
E-CRM is a strategy that enables a bank to analyze customer profiles, understand their needs
better, cross sales and provide an alternative channel that provides safety, convenience and
speedy delivery of services, that enhance customer satisfaction leading to sustainable
performances in the long run (Woodcock, Foss & Stone, 2003). Customers view competition as
a platform for increased choices. E-CRM is one way that a commercial bank can create a niche
market (Woodcock, Foss & Stone, 2003).
According to the Central Bank of Kenya (CBK) website (2019) there are 40 licensed commercial
banks and 1 Mortgage Finance Company. Of these 41 institutions, 23 are locally owned, 15 have
foreign interests either by incorporation or ownership and the remaining 3 have government
participation in their activities. Recent development included takeover of National bank of
Kenya and Imperial bank by KCB group and merger of NIC bank and CBA to form NCBA bank
all approved by CBK. And as (Swift, 2001) defines e-CRM as an enterprise approach to
understanding and influencing customer behavior through meaningful exchange of information
in order to improve customer growth, customer base retention, customer loyalty and satisfaction
then banks are left with no choice but to adopt e-CRM so as to remain competitive.
Social Problem
In a Kenyan study, E-CRM was indicated as being critical for a firm’s growth and performance.
The study reported that benefits of E-CRM which included understanding customers’ needs and
better classification of clients to design customized approaches to their needs. It also reported a
need to modernize various communication channels to be in line with current practices on social
media. Most of the staff had the relevant skills required for operation and use of E-CRM strategy
within the firm such as online management and practices. Some of the challenges noted
were multiplicity of touch points which complicated service delivery and customer interactions
and time required to implement new systems (Ng’ang’a, 2017).
Out of three CRM capabilities (information technology, human resource and business
architecture) used by banks, the dominant customer relationship administration capability used
by financial institutions was the human resource capability where building relationships with
customers was emphasized. Information technology and human resource capabilities showed a
positive effect on organizational performance that was significant (Githinji, 2017).
The use of customer relationship administration programs as a strategy to achieve competitive
advantage in the banking industry using KCB Kenya Ltd, was assessed in a Kenyan case study.
The study utilized a descriptive research design using survey technique and the finding was that
majority of the staff were aged 30-49 years and mostly men. CRM major benefits included
increased profitability, enhanced market productivity, market effectiveness and organization
learning. Major issues included diverse customer needs, leadership issues and failure of CRM.
The knowledge gap identified was that the research study did not look at advanced technology in
electronic customer relationship management banking (Githaiga, 2013).
Riugu (2017) study sought to assess customer relationship management as competitive tool in
the Kenya banking industry using KCB Kenya Ltd as a case study. The study found customer
orientation was an essential component of marketing concept in KCB and their marketer
understood the buyer’s entire value chain. Customer orientation in KCB provided a solid basis of
intelligence pertaining customer and service quality improvement. Customer service was found
to be a fundamental factor behind KCB success in customer relation growth. The
recommendation was that KCB considers improving its electronic products to operate as
promised and shift to a knowledge-based economy.
Most of research work done has identified the objectives and benefits of E-CRM implementation
from a business perspective, rather than from the customers’ perspective (Sivaraks et al, 2011).
Customer relationship administration in banking is different from other sectors in that because it
deals with financial services, there is need for a higher level of trust in relationships with people.
It is therefore important to create a customer care support system in the right time. The objective
of e-CRM process is thus to create profitability, assess, retain and attain customers (Abu-Shanab
& Anagreh, 2015).
Tracking and measuring the dimension of the relationship of the bank and its customers will aid
in identifying the bank’s internal strengths and external weaknesses in the relationship
management and thus continually improve on it based on ongoing feedback from customers
(Sheth & Parvatiyar, 2001). An organization can have better customer relationship by
establishing clear contract with clients, getting adequate information on clients to make informed
decision based on customer needs and asking more questions help understand customer needs
better (OCS, 2018).
Literature review shows a research gap in measurements of feedback of E-CRM from customers’
point of view and how it affects customers’ loyalty while applying both quantitative and
qualitative statistical approaches to data analysis to show relationship between quality
relationship and relationship outcomes (Sivaraks et al, 2011). The banking sector focus is on
return on investment without looking at the customers’ perspective in terms of local conditions
and customers’ opinions hence the need to involve customers before introduction of e-CRM
strategies so as to have maximum benefits (Edusah, 2011).
The attitude of human resource has a direct effect on customer relationship (Edusah, 2011).
Human resource capability aids in building relationships with customers. Hence there is a need
to continually assess how customer care consultants and managers in the banking sector relate to
e-CRM and how this affects relationship quality and outcomes. Human resource is used by
management of commercial banks to improve relationships with customers through effective
service delivery. This is because human resource capability significantly influences
organizational performance and growth (Githinji, 2017). E-CRM is quite a recent trend that uses
financial technologies that exploits the power of internet to create long-term relationships with
valued customers resulting in sustainable profitability and competitive advantage (Sivaraks et al.,
2011). To gain sustainable competitive advantage will require a shift by banks from product
centric model to customer centric model resulting in a number of benefits such as provision of
appropriate feedback for more personalized and customized product and services (Beckett-
Camarata et al., 1998).
The study intended to research on electronic customer relationship management measurement
from the end user perspective, which is lacking, in the service industry. The main context of the
study is the commercial banking sector in Kenya. The branches are categorized as medium, large
and small and the research is concerned with all branch types regardless of size. The research
problem is “how banks can use electronic customer relationship management to gain competitive
advantage in customer to business context.” The study provided solutions to the following
research questions: how do customers perceive the services that they get through their bank’s
electronic customer relationship management, what effect does electronic customer relationship
management have on the quality and outcome of customer bank relationships and how can
commercial banks utilize the electronic customer relationship management to improve the
overall financial performance of the bank and to gain competitive sustainable advantage?
Research Objective
To determine the influence of electronic customer relationship management on performance of
commercial banks in Nairobi City County, Kenya. To determine the influence of competitive
strategies on the relationship between electronic customer relationship management and
performance of commercial banks in Nairobi City County, Kenya.
Value of the Study
The contribution of this study will be evaluating the customers’ feedback that will result in
retention and satisfaction of informed customers, employees being trained to provide efficient
and effective service delivery and the bank utilizing the electronic customer relationship
management to improve its overall financial performance. The research data of the study will
contribute to theory and knowledge in the area of relationship development and outcome of such
relationship in regards to quality and quantity service delivery.
Building a customer centric organization is a continuous process that requires strategic planning
(Wang et al., 2004). The capping of interest rate means that all banks operate under the same
interest rate for all sectors of the economy. Therefore, banks will compete on service delivery so
as to gain competitive advantage. The research will provide ways of measuring customer
satisfaction and retention from customers’ point of view thereby offering a way to improve on
the relationship thus contributing to practice and industry.
The contribution to research will be of great impact, as the area is not heavily researched. This
research will provide in-depth literature to other researchers, academia and policy making
institutions such as central bank, treasury and other banking institutions. The focus of developing
customer relationship is to reduce turnaround time, improve capacity, profitability, and
accessibility, and provide complete and up to date information (Abu-Shanab & Anagreh, 2015).
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