Effects of Strategy Choice and Performance on Sugar Companies in Kenya

Abstract

Performance implications of Strategy-Environment derive from Environment-Strategy-Performance (E-S-P) paradigm whose origin is the Structure-Conduct-Performance (SCP) paradigm of Industrial Organization literature. It is argued that the positive performance impact between environment and strategy of a business is an important theoretical proposition in strategic management. This argument forms the basis on which the current study was conceived with the main objective of determining the effect of strategic choice on the performance of sugar companies in Kenya moderated by macro environment. Five specific objectives emanated from this main objective: one, to determine the extent to which Product Development Strategy affects performance, two, to assess how Market Development Strategy affects performance, three, to establish how Diversification Strategy affects performance, four to determine the extent to which Corporate Social Responsibility affects performance, five to assess the moderating effect of Macro environment on the relationship between strategic choice and performance of sugar companies in Kenya. Out of these seven objectives, seven hypotheses were stated for testing. The study employed a mixed approach survey design targeting companies in sugar industry in Kenya. Through structured questionnaires and interviews, data was obtained from 8 companies both Government parastatal and privately owned. Secondary data was obtained from published and annual record sources. Both descriptive and inferential statistics were used to analyze the data and test hypotheses of the relationships stated earlier. The results revealed that sugar companies pursued product development, market development, diversification and corporate social strategies in different levels. Statistically significant effects were reported after inclusion of the moderating variable. Finally, the study revealed that the moderating effect of macro environment on the relationship between strategy and performance increased the explanatory power (R2) of the combined strategy variables over company performance. Therefore the study yielded conclusions with substantial implications in theory while in some cases it concurred and others contradicted related empirical studies.