This paper examines Ecobank Kenya's position within the Kenyan banking industry through the lens of Porter's Five Forces and Whitley's business systems theory. It explores the competitive dynamics of a market with over forty banks, the impact of global economic conditions on banking operations, and the rationale for a centralized organizational structure under high state regulation. The paper also evaluates the gap between Ecobank Kenya's actual operational model and its ideal business model, ultimately concluding that sustained competition — rather than market dominance — is the realistic and socially preferred outcome for the sector.
Ecobank Kenya, like the larger Ecobank system itself, operates primarily in the personal and business banking industries, serving as a place for cash deposits and handling many routine banking activities including money transfers and various smaller-scale loans (Ecobank 2010). The attractiveness of this industry depends on many complex factors and is especially difficult to assess given the current economic climate and the recent — and potentially ongoing — global recession. Kenya has a fairly strong economy relative to much of Africa, however, and continued growth is quite likely as global recovery progresses, making the banking industry a highly desirable one in the country. Ecobank Kenya is one of the larger banks operating in the country and is poised for faster growth and a gain in market share and overall volume as economic recovery truly begins to occur and Kenyans begin to progress and develop economically once again (Ecobank 2010).
There is a fair degree of rivalry in the banking industry in Kenya, with over forty banks in total — sixteen of which are larger than Ecobank Kenya — but there is still a large enough market to diminish the traditional effect of rivalry as described in Porter's Five Forces Model (QuickMBA 2010). Current market conditions, however, create other inhibiting factors such as reduced switching costs and increased barriers to entry as regulations and the overall money supply become tighter (QuickMBA 2010). This lack of available capital has also made operations more difficult and more time-consuming, as the banking industry worldwide has been reassessing its risk management decisions (Ecobank 2010).
The type of business system appropriate in a given situation is largely the result of state and societal regulations and expectations that make certain organizational structures more effective and appropriate than others (Whitley 2007). For Ecobank Kenya, the high degree of state regulation makes a highly centralized business system most appropriate, and this also provides the larger Ecobank network with greater control in a volatile banking market (Whitley 2007). This centralization affects Ecobank Kenya's operations by ensuring that all actions receive necessary authorization, especially when decision-making involves any risk to company or client assets (Ecobank 2010). Strategic considerations that Ecobank Kenya must take into account in order to maintain this system include accurate and ongoing forecasting of market trends on a continent-wide basis to determine the most effective use of company and client funds, as well as communicating this information and attendant decisions to individual banks such as Ecobank Kenya (Ecobank 2010).
The main way in which Ecobank Kenya creates value for its customers is through the offering of a wide array of banking services and many different modes of accessing those services — including an extensive network of banking institutions, automated teller machines (ATMs), and Internet banking services (Ecobank 2010). Ecobank attempts to make money easier to manage and, in doing so, easier to grow (Ecobank 2010). The ideal business model for this bank would involve an overwhelming dominance of the banking industry, enabling greater revenue generation while simultaneously creating greater value for customers through its extended network.
"Distance from dominance and competitive reality"
In essence, competition in the banking industry is inherently imperfect due to the mutual interdependence of all institutions and agencies that comprise a given nation's financial sector. While banks in Kenya, as elsewhere, will continue to try to increase their market share and profitability, it is likely that most banks will continue jockeying for position without ever truly eliminating or dominating their competitors. Ecobank Kenya will continue to thrive by all indications, especially as the Kenyan economy improves alongside the rest of the global economy.
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