THE ROLE OF PRODUCT INNOVATIONS IN CREATING COMPETITIVE ADVANTAGE

Abstract

The financial market in Kenya has been growing over the past decade and it is increasingly becoming more competitive.Since new entrants appear in the market every now and then, banks must find ways to maintain a competitive advantage.The increasing competitive environment for most banks makes enterprises to innovate the products and services they provide. The extent to which innovations by microfinance institutions on products and services contribute to profit, number of depositors and revenue in Nakuru town is not known. The purpose of the study was to evaluate the role of strategic innovation in creating competitive advantage in microfinance institutions within Nakuru town. The objectives of the study was to determine theextent to which product innovation contribute to the increase in profit, number of depositors and increase in revenues. The study used descriptive design, the population under study was microfinance institutions in Nakuru and the entire population was studied with branch managers as the respondents. Data was collected using structured questionnaires and then analyzed using descriptive statistics and multiple regression analysis. The research findings were that product innovations do not contribute to profit, number of clientele and revenue however individual innovations such as new product development, management approaches, efficiency in serving customers and training was found to contribute to profit,number of clientele and revenue.Factors such as capital, amount of loan and revenue are therefore the major variables that determine the firms, competitiveness.The recommendation therefore is that the managers of the various microfinance institutions should be more creative and innovative in order to adopt unique practices to enhance competitiveness in the industry.