An Investigation Into the Factors Influencing the Implementation of Agent Banking in Kenya: a Survey of Selected Commercial Banks in Kenya

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Chapter One
Introduction

1. Introduction
This chapter will cover the background of the research problem, purpose of study, hypotheses, importance of the study, and the scope of the study. The chapter introduces the major concepts of the study of strategic alliances and agent banking models.

1.1. Background
1.1.1 Strategic Management Process
Although most can agree that a firm’s ability to survive and prosper depends on choosing and implementing a good strategy, there is less agreement about what constitutes a good strategy (Barney, 2008). However, there seems to be an agreement as to what a strategy really means: a firm’s theory about how to gain competitive advantage. The strategic management process is a sequential set of analyses and choices that can increase the likelihood that a firm will choose a strategy that generates competitive advantage (Hesterly, 2008). The first step is mission (long term purpose) definition, followed by setting of objectives, that is, specific measurable targets that a firm uses to evaluate the extent to which it is realizing its mission. The next phase are the internal and external analyses, where a critical evaluation of the strengths, weaknesses, opportunities and threats is done in regard to both the internal and external environments. Once a firm establishes a sound balance between internal capabilities and weaknesses with external opportunities and threats, the management is in an informed position to select strategies that presents the best way possible to achieve the firm’s objectives. Barney (2008) categorizes strategy choices into business level strategies and corporate level strategies. Business-level strategies are actions a firm takes to gain competitive advantage in a single market and includes cost leadership, differentiation and focus. Corporate level strategies are actions a firm takes to gain competitive advantage in multiple markets and includes vertical integration strategies, strategic alliances, mergers and acquisitions. This study draws its subject on strategic alliances as a corporate-level strategy a firm may choose to achieve its broad objectives. 1.1.2 Strategic Alliances

A strategic alliance exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services. These alliances can be groped into three broad categories: nonequity alliances, equity alliances, and joint ventures (Barney, 2008). In a nonequity alliance, the cooperative relations are managed through the use of various contracts: licensing agreements, supply agreements, and distribution agreements. For instance, in the banking industry, agent banking falls under distribution agreements since agents are contracted by banks to offer banking services on behalf of the banks (C.G.A.P, 2009).

1.1.3 Agent Banking
In a growing number of countries, banks and other commercial financial service providers are finding new ways to make money and deliver financial services to unbanked people (Lyman, 2009). Rather than using bank branches and their own field officers, they offer banking and payment services through third parties. For poor people, “branchless banking” through retail agents may be far more convenient and efficient than going to a bank branch (C.G.A.P, 2009). For many poor customers, it will be the first time they have access to any formal financial services—and formal services are usually significantly safer and cheaper than informal alternatives. Two models of branchless banking through retail agents are emerging: one led by banks, the other by non-bank commercial actors (Lyman, 2009). Both use information and communication technologies, such as cell phones, debit and prepaid cards, and card readers to transmit transaction details from the retail agent or customer to the bank (C.G.A.P, 2009). Branchless banking through retail agents appeals to policymakers and regulators because it has the potential to extend financial services to...
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