Effects of Generic Competitive Strategies on Profitability: The Case Study of Commercial Bank of Ethiopia
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Date
2018-06-12
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Addis Ababa University
Abstract
Porter’s generic competitive strategies have been hypothesized by many researchers to have an influence on performance, profitability and customer satisfaction. Amongst stiff competition, it is important that appropriate strategies are used to ensure this aim is achieved. This study was set to determine the effect of Porter’s Generic Competitive Strategies (cost leadership, Differentiation and Focused strategies) on Profitability of Commercial Bank of Ethiopia. This study has applied explanatory research design and employed purposive sampling technique in the selection of the respondents because the scope of this study was limited to marketing department of CBE at head office. Thus, the sampling size and the population of the study were all one hundred twenty one (121) marketing department staffs working at head office. The study used a questionnaire to gather primary data from the respondents and review of published documents collect secondary data. Data collected was analyzed for descriptive statistics and inferential statistics (correlation and regression) by using Statistical Package for Social Sciences (SPSS) computer software version 20.
The findings indicated that there was a significant correlation between cost leadership strategy and profitability which was measured by foreign exchange rate, operating expense and non-performing loan. There was also a significant correlation between differentiation strategy and profitability which was measured by brand position and quality of products/services. Regarding to technological advancement, convenient ATM service and Secured banking system had a significant positive effect on profitability. However, Automated Financial Services and Card-linked banking services had no a significant effect on profitability of the bank. It can also be indicated that there was a significant effect of focus strategy and profitability which was measured by IFB and e-banking as focus strategy variables.
The study recommended that CBE should minimize the rate of non- performing loans and the bank should be advanced in banking technology such as enhancing digital banking services. It is also recommended that similar studies be carried out in private commercial banks in Ethiopia for comparison purposes and similar research studies should also be conducted in other economic sectors
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Cost Leadership, Differentiation, Strategies