Dynamic capabilities, strategic orientation and competitive advantageof small and medium-retail enterprises in Kenya Grace Wangari Kiiru A thesis submitted in partial fulfillment for the degree of Doctor of Philosophy in Business Administration in the Jomo Kenyatta University of Agriculture and Technology 2015

Abstract

This thesis examined how strategic orientation mediated dynamic capabilities and competitive advantage relationships in small and medium-retail enterprises facing dynamic situations especially from large retail enterprises. Specifically, this study focused on three hypothesized dynamic capabilities, which were; sensing and seizing of market opportunities and reconfiguring the resource base; the mediating effect of competition orientation and customer- orientation for competitive advantage among retail SMEs within a developing country given the business environmental pressures. The study objectives were to determine the direct influence of sensing, seizing and reconfiguring capabilities on competitive advantage of retail SMEs and also the indirect influence by determining the mediating effect of strategic orientation on the relationship between dynamic capabilities and competitive advantage. The research was descriptive with the target population being the 8,601 FMCG retail SME’s registered with Thika Sub County. Stratified random sampling technique was used to select a sample of 358 enterprises and data collected by use of questionnaires and then analyzed using multiple regression analysis and tested hypotheses. The findings of this study from the multiple regression analysis indicated that SMREs competitive advantage is directly influenced by the deployment of strategic dynamic capabilities. The results of this research shows that, both competition orientation and customer orientation of an enterprise partially mediates the relationship between seizing and reconfiguration capabilities and fully mediates the relationship between sensing capabilities and competitive advantage. The results indicated that, customer oriented strategies coupled with reconfiguration capabilities were the most critical dynamic capabilities in enhancing an SMRE’s competitive advantage. The study therefore recommends that SMREs should focus integrating the newly acquired capabilities by enhancing their systems, products and service delivery responsive to the customers and focus in supporting the enterprise goals and objectives. The research also recommends SMEs need to go beyond the level of acquiring resources and move to the level of transforming the resources to capabilities, in order to remain competitive in a changing environment. Finally, study concludes aligning the dynamic capabilities to the enterprise’s competitive strategies with customers focus and proper analysis of competition trends would facilitate competitive attacks emerging from large retailers.