INFLUENCE OF DIVESTMENT STRATEGY ON PERFORMANCE OF LARGE MANUFACTURING FIRMS IN KENYA

Abstract

Purpose: The study sought to establish the influence of divestment strategy on the performance of manufacturing firms in Kenya. This comes at a time when manufacturing firms in Kenya have been experiencing declining performance in terms of revenue, sales and the profit margins. While the firms have tried to come up with different strategies to salvage their performance, it is not clear whether they have embraced divestment as one of the turnaround strategies, hence the subject of the study. Methodology: This study was informed by real options theory. Descriptive research design was used in the study. The target population was the 708 large manufacturing firms in Kenya. The sample size for the study was 249 firms selected randomly from all the 14 sub-sectors of the manufacturing industry in Kenya. The data collection instrument was a questionnaire. The collected data was analysed using descriptive and inferential statistics. Findings: The findings revealed that divestment strategy had a significant and positive influence on the performance of large manufacturing firms in Kenya. The study concluded that through divestment, manufacturing firms are able to save on costs and redirect their revenues to more productive and profitable processes, thus enhancing performance. Unique Contribution to Theory, Practice and Policy: The management of manufacturing companies should embrace divestment strategy through disposing some of their assets that are not generating profits and exiting any market that is least performing. This way, the companies raise more funds and save on costs used in running less beneficial products or services. Keywords: Turnaround Strategies, Divestment strategy, organizational culture, firm performance, manufacturing firms