INFLUENCE OF ELECTRONIC CUSTOMER
RELATIONSHIP MANAGEMENT, COMPETITIVE
ADVANTAGE AND PERFORMANCE OF
COMMERCIAL BANKS IN NAIROBI CITY
COUNTY KENYA
Theoretical Foundation of Study
This study was anchored on the Resource Based Theory. The supporting theories were the
contingency and stakeholders theories.
Resource Based Theory
Resource based view can be used to focus resource on strategic business unit activities. These
activities are categorized as primary and support activities. Those in the primary include
marketing sales and output of business firm while support activities are essential roles
supporting the primary activities and coordination of other services such as human resource
management. All these provide an effective way of diagnosing the position of the business
against major competitors with the goal of maintaining profitability. Therefore, resource
based view targets on a set conversion of transforming inputs into outputs that customers’
value (Pearce & Robinson, 2013).
The resource based theory helps firms strategically examine and identify their unique bundle
of resource, which can be exploited to gain competitive advantage. When a firm develops
competencies from this resource well, these become the source of the competitive advantage.
The resource-based view guidelines are based on the idea that resources are of a higher value
when they are very important in meeting a customer’s need better than other alternatives, for
example, faster TAT on request, employee loyalty and customer service satisfaction can
contribute to competitive advantage (Pearce & Robinson, 2013).
Contingency Theory
This theory traces its proponent to the work of Fielder (1964) landmark article entitled, ‘A
Contingency Model of Leadership Effectiveness.’ The theory states that there is no better
mechanism to manage a firm, leading firms or of making firm resolutions since firms are
dependent on their internal and external environment (Fielder, 1964). Despite criticisms,
Lawrence and Lorsch (1967)’s work plays a vital role in developing the theory of
organizations which takes account of change, variable interactions and uncertainties.
This is the case because the organizational environment is not static and it must keep on
changing and adapting to new changes for its survival. The theory promulgates the idea of a
changing business environment, a challenge affecting many tier two and tier three commercial
banks in Kenya and hence its study relevance. The theory is crucial for tier two and tier three
banks to understand the importance of adopting new changes in order for them not to be
declared laggards as far as strategic change is concerned (Hoy & Miskel, 2008). In an
environment full of uncertainties, integration strategy can be achieved at lowered levels and
mainly through personal interconnected relationships with just a moderate use of
administrative methods. E-CRM is a way to cope with the changing business environment; it
will enhance competitive advantage and therefore boosting financial performance.
Stakeholder Theory
The Stakeholder Theory was suggested by Freeman (1984) and expounded in his book
“Strategic management: A stakeholder approach”. The theory defines stakeholder as any
individual or group of individuals who have interest in the firm’s objectives. Managers in an
organization should put forth associations with the suppliers, employees and business partners
(Sundaram & Inkpen, 2004). Scholars observe that the theory is important; they hold that
there should be accountability of the organization externally and internally as business entity
activities impacts the external environment. This theory is condemned on
the basis of assuming a single-valued objective i.e. gains that accrues to a firm’s
constituencies (Jensen, 2001). Jensen (2001) states that there are other measures to
measure how a firm has performed besides by benefits got by stakeholders. These
measures include information flow from senior management to subordinate staff, working
organization environment and interpersonal relations within the organization.
Stakeholder theory is important to this study because it is aimed at ensuring that the diverse
needs of all the stakeholders are well represented. This is achieved through establishing a
network of relationships with the stakeholders of the firm, which will mainly include the
customers through electronic customer relationship management. This is part of the
corporate goals of the firm. In this study, the banks’ management aspire to successfully
implement strategic plans. To achieve this goal; they should engage the customer who is
the end-user of these services.
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