Effect of Competitive Strategies on the performance of Manufacturing Firms in Kenya

Abstract

The purpose of this study was to determine effect of competitive strategies on the performance of manufacturing firms in Kenya. The study aimed at providing insights on competitive strategies used by manufacturing firms in Kenya to achieve competitiveness and increase their performance. Specifically, the study sought to determine the effect of cost leadership strategy on performance of manufacturing firms, to assess the effect of differentiation strategy on performance of manufacturing firms, to find out the effect of focus strategy on performance of manufacturing firms and to establish the moderating effect of competitive intensity on the relationship between competitive strategies and performance of manufacturing firms in Kenya. The study was anchored on Porter’s competitive business strategy typology. Survey research design was used covering a stratified sample of 189 firms drawn from the 454 manufacturing firms distributed across the 12 key industrial subsectors. The researcher used multi-stage sampling technique. In the first instance,

stratified sampling technique was used to classify each of the 12 sub-sectors into

individual strata. The sample was then selected using simple random sampling technique from each of the stratum. Questionnaire was used to collect data. Descriptive statistics such as percentage, mean, standard deviation and inferential statistics, namely; correlation analysis and regression analysis were further used as a test of study hypotheses. The results indicate that manufacturing firms in Kenya have largely adopted competitive strategies in order to compete in the market place. The findings of the study revealed that cost leadership, differentiation and focus strategies have positive significant relationship with manufacturing firm performance in Kenya. However, differentiation strategy had a higher coefficient of determination meaning that, it had the greatest effect on firm performance. Moreover, as opposed to Porter’s argument that a firm can achieve a higher level of performance over its rival by either being a cost leader or by supplying differentiated product or service, the manufacturing firms in Kenya combined their strategies into cost minimization, product differentiation and focus simultaneously while others chose any of the three strategies. It was further established that competitive intensity had insignificant moderating effect in the relationship between competitive strategies and firm performance. Negative relationship was also reported between the moderating variable competitive intensity and firm performance. The study recommends that manufacturing firms utilize much of differentiation strategy since it seemed to have greatest effect on performance as well as try out the other two strategies of cost leadership and focus simultaneously. It is also recommended that these firms pay more attention to competitive intensity and adopt other ways of coping with challenges presented by external environment. The study further recommends the need to strengthen this study via a longitudinal study and compare the performance of different categories of businesses as well. The implications from the findings point to a configuration approach on the implementation of competitive strategies by manufacturing firms. Manufacturing firms that intend to implement a competitive strategy should evaluate the environment to make sure they gain appropriate fit between the strategy and the environment in order to achieve competitive advantage. xvi