Role of Stakeholder Management Strategies on Operational Performance of Smallholder Tea Sector in Kenya

Abstract

Kenya’s overall economic and social development is highly dependent on the growth and development of the agricultural sector. The tea industry has contributed significantly to the economic development of the country, Kenya. Its importance cannot be underestimated in the country. Despite its importance, the tea sector is facing a number of constraints. These challenges require effective stakeholder management strategies in order to enhance operational performance of the sector. The purpose of the study was to establish the role of stakeholder management strategies on operational performance of smallholder tea sector in Kenya. The study sought to establish the role of offensive strategy, hold strategy, defensive strategy and swing strategy on performance of smallholder tea sector in Kenya. The study was based on the Stakeholder Theory, Resource Based Theory, Corporate Social Responsibility Theory, value Chain Theory and Dynamic Capability Theory. The study adopted a survey research design. The target population comprised of 708 directors, production managers, field officers and the factory unit managers in the smallholder tea sector in different tea regions in Kenya. The sample size of the study was 256 respondents and it was determined by the use of Slovin’s sample size determination formula. The study used stratified random sampling based on different tea regions to select a representative sample of the population. A pilot study was carried out to test the reliability and validity of the data collected. Data was collected through use of questionnaires and analysed using the statistical package for social sciences software, version 21. Quantitative data was analysed using descriptive statistics and inferential statistics used to make predictions from the sample and make generalizations about a population. Qualitative data was analysed using the content analysis method. Data was presented using summary statistics, tables and figures. The study adopted regression analysis to test the relationship between the independent and dependent variables. The study established that exclusive use of either offensive, hold, defensive or swing strategy has a positive and significant relationship with operational performance of smallholder tea sector in Kenya. Further, the study established that offensive, hold, defensive and swing strategies combined had significant relationship with performance of smallholder tea sector in Kenya. From the study findings, stakeholder engagement had a strong moderating effect on the relationship between exclusive use of either offensive, hold, defensive, swing strategy or collective use stakeholder management strategies and the operational performance of smallholder tea sector in Kenya. Stakeholder management strategies enhance operational performance of smallholder tea sector in Kenya in terms of reduction of costs, new product varieties, sales volume and the quality of tea. The exploration of the linkage between stakeholder management strategies and operational performance of smallholder tea sector in Kenya, provides not only significant contribution to the strategic management literature but also enables managers to employ the right stakeholder management strategies for their firms to compete in the fast changing business environment, particularly, in developing countries. Another major contribution underlies the assumption of Stakeholder Theory as used in this study, to the effect that stakeholder management strategies of offensive, hold, defensive, swing and stakeholder engagement strategies influence performance of smallholder tea sector in Kenya. The study recommends that for firms to achieve enhanced performance, they must carry out a process of stakeholder analysis to align stakeholder management strategies to the correct category of stakeholder relationship. The study also recommends that policy managers of these firms should consider aligning their stakeholder management strategies and stakeholder engagement as one of the environmental variables so as to enhance performance in this ever changing global business environment.