Influence of Enterprise Strategy on Performance of Deposit Taking Savings and Credit Cooperatives in Kenya

Abstract

Enterprise strategy is critical to superior performance. It is not simply an aspect that explains instances when an organization unexpectedly survives or thrives, but provides direction, purpose and plans to an organization. Therefore, enterprises that understand influence of strategy on their operations, implement optimal strategies that consequently lead to superior performance. Cooperatives enterprises are no exceptional to this principle. However, most cooperatives have had unsustainable performance and low survival rate occasioned by lack of optimal strategic execution. The deficiency in strategic management could be attributed to lack of adequate and objective information on influence of enterprise strategy on performance. The inadequate information has made cooperatives passive or unable to opportunities and threats that affect their survival and competitiveness. To address this problem, the study examined influence key elements of enterprise strategy on performance of SACCOs moderated by SACCO regulations. The study was an explanatory cross-sectional survey targeting all the deposit taking SACCOs in Kenya. Random sampling was used to select study respondents, while questionnaires and document reviews were used to collect data for analysis. Descriptive, correlation and regression analysis were used to examine relationship between namely the strategic purpose, strategic resources, Sacco governance, Sacco management and Sacco regulations. Tests of hypotheses were based on the statistical significance of R2 at a level of Р<0.05. Data analysis results and perceptions of the respondents indicate that enterprise strategy positively influence performance of Saccos, while Sacco regulations enhance the relationships. Further analyses show the enterprise strategy variables as strong predictors of performance, since the variables are positively correlated and significantly explain variation in performance. The regression coefficients and return on assets (RoA) show higher performance during regulation than the prior period. The study also found that financial resources mobilized from members as essential to superior ROA due to its low cost. The members’ funds also enhance sense of ownership and belonging necessary to the survival and sustainability of Saccos. Most board sub-committees were found to lack requisite capacity, while decision processes in most SACCOs were slow. Further, the study found that Cooperative Management is not formally recognized in the cooperative principles despite its importance. The study recommends that with their formidable presence, Saccos need to secure a long-term positioning strategy by manifesting values and operating within their strategic purpose. Have a stretching strategy to mobilize strategic resources to be more competitive and sustainable. To improve the strategic thrust, disconnect between strategy formulation and execution should be reduced by formally recognising the leadership mandate of the management in the cooperative principles. Low influence of management on Sacco performance compared to other variables should be investigated. Impact of strategic plans and policies on performance should also be examined, while search for the best indicators of performance in enterprises should continue. Further research is also necessary to advice on reforms required to change the risky Sacco model, which is replete with insolvency, capital inadequacy, reliance on external borrowing and low use of technology. The study adds new evidence on the influence of optimal strategy on enterprise performance. The findings will enable practitioners and policy makers to establish performance indicators to target in improving strategic management of enterprises. In particular, SASRA could use the information in developing appraisal parameters that are sensitive to the Sacco business.