A Case of Tuskys Retail Supermarkets in Nairobi, Kenya

RELATIONSHIP BETWEEN COMPETITIVE STRATEGIES AND ORGANIZATIONAL PERFORMANCE: A CASE OF TUSKYS RETAIL SUPERMARKETS IN NAIROBI, KENYA

BETH N. MUIRURI

UNITED STATES INTERNATIONAL UNIVERSITY- AFRICA

SPRING 2020

RELATIONSHIP BETWEEN COMPETITIVE STRATEGIES AND ORGANIZATIONAL PERFORMANCE: A CASE OF TUSKYS RETAIL SUPERMARKETS IN NAIROBI, KENYA

BETH N. MUIRURI

A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Master’s in Business Administration (MBA)

UNITED STATES INTERNATIONAL UNIVERSITY- AFRICA

SPRING 2020

STUDENT’S DECLARATION I, the undersigned, declare that this is my original work and has not been submitted to any other college, institution or university other than the United States International University in Nairobi for academic credit.

Signed: Date:

Beth N. Muiruri (ID 656976)

This project has been presented for examination with the approval of the appointed supervisor.

Signed: Date:

Dr. Veronica Kaluyu

Signed: Date:

Dean, Chandaria School of Business

COPYRIGHT All rights reserved. No part of this project may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic or mechanical without prior written permission of the author.

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ABSTRACT The purpose of this study was to investigate the relationship between competitive strategies and organizational performance, a case of retail supermarkets in Nairobi, Kenya. The study was guided by the following research questions; to find out the relationship between differentiation strategy and organizational performance, to examine the relationship between cost leadership strategy and organizational performance and to determine the relationship between focus strategy and organizational performance of Tuskys retail supermarkets in Nairobi, Kenya.

The study used a cross-sectional and correlational research design to collect relevant data. The target population of the study was 264 employees of Tuskys retail supermarkets in Nairobi, Kenya, with a sampling frame of all senior employees of the retail supermarkets situated in Nairobi. The study utilized stratified random sampling technique in the selection of the appropriate sample and applied Yamane’s formula which helped determine the sample size of 159 senior employees. A semi-structured questionnaire was used to collect data from the selected respondents. For descriptive analysis mean and standard deviation were used. For inferential analysis, Pearson’s correlation coefficient was used to measure strength/degree of the relationships between study variables. Additionally, multiple regression analysis was used to establish the nature of the relationship between dependent and independent variables as well drawing predictions.

The results from the first research objective showed that applying differentiation strategy strongly and significantly but negatively contributes to organizational performance of the retail supermarkets (r= -0.835, p-value <0.5).The regression analysis further implying that 75.1% of the variation in organizational performance in the retail supermarkets can be explained by the differentiation strategy. The results from the second research objective then revealed that applying cost leadership strategies strongly and significantly contributes positively to organizational performance of the supermarket (r= 0.850, p- value <0.01). A regression analysis further revealing that 72% of the changes in organizational performance in the retail supermarkets, can be explained by the cost leadership strategies in place. Finally, the results from the third research objective showed that applying focus strategy strongly and significantly contributes positively to organizational performance of the supermarket (r= 0.739, p-value <0.01).The results from regression analysis showed possibly that 54.3% of the changes in organizational performance can be explained by the focus strategy.

The study results showed that applying differentiation strategy strongly and significantly contributes to organizational performance of the supermarket but can highly be attributed to the negative growth in organizational performance. Any variation in organizational performance in retail supermarkets can be explained by the differentiation strategy in place, meaning each unit increase in differentiation strategy causes a decrease in organizational performance. The results also showed that applying a cost leadership strategy strongly and significantly contributes to organizational performance of the supermarket highly attributed to the positive growth in organizational performance. A variation in organizational performance in retail supermarkets can be explained by the cost leadership strategies in place meaning each unit increase in cost leadership strategy causes an increase in organizational performance. The results showed that applying focus strategy strongly and significantly contributes to organizational performance of the supermarket, the application of the strategies is also attributed to the growth in organizational performance. Any variation in organizational performance in retail supermarkets can be explained by the focus strategies in place meaning each unit increase in focus strategy causes an increase in organizational performance.

The study recommends that the retail supermarkets should work towards investing more in research and development departments where innovation can take place. It also recommends the use of brand extensions to easily gain customer base, increasing the market share. The retail supermarkets should also enhance outsourcing and introduce specialization of the employees. The retail supermarkets should also embrace the use of data analytics to make certain decisions such as big data and internet of things. Additionally, the study recommends further research on relationship between competitive strategies and organization performance of retail supermarkets with the operating environment as a moderating variable.

ACKNOWLEDGEMENT I would like to thank the Almighty God for the strength that enabled me proceed with this research. I would also like to express my gratitude to my supervisor, Dr. Veronica Kaluyu for her patience, guidance, stimulation and dedication without which I would not have been able to complete this project. I also thank the entire Chandaria School of Business for the support throughout this master’s program, this is including my fellow students who played a great role in making this a success.

DEDICATION I would like to dedicate this project to my parents James and Mary and siblings Catherine, Kepha and Joan for their unwavering support, sacrifice and encouragement throughout my life. God bless you all.

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TABLE OF CONTENTS STUDENT’S DECLARATION ...... ii

ABSTRACT ...... iv

ACKNOWLEDGEMENT ...... vi

DEDICATION ...... vii

LIST OF TABLES ...... xi

LIST OF FIGURES ...... xii

CHAPTER ONE ...... 1

1.0 INTRODUCTION ...... 1

1.1 Background of the Problem ...... 1

1.2 Statement of the Problem ...... 4

1.3 Purpose of the Study ...... 6

1.4 Research Objectives ...... 6

1.5 Research Hypothesis ...... 6

1.6 Significance of the Study ...... 7

1.7 Scope of the Study ...... 7

1.8 Definition of Terms...... 8

1.9 Chapter Summary ...... 9

CHAPTER TWO ...... 10

2.0 LITERATURE REVIEW ...... 10

2.1 Introduction ...... 10

2.2 Relationship between Differentiation Strategy and Organizational Performance ...... 11

2.3 Relationship between Cost Leadership Strategy and Organizational Performance ...... 16

2.4 Relationship between Focus Strategy and Organizational Performance ...... 21

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2.5 Chapter Summary ...... 25

CHAPTER THREE ...... 26

3.0 RESEARCH METHODOLOGY ...... 26

3.1 Introduction ...... 26

3.2 Research Design...... 26

3.3 Population and Sampling Design ...... 26

3.4 Data Collection Methods ...... 30

3.5 Research Procedures ...... 30

3.6 Data Analysis Methods ...... 32

3.7 Chapter Summary ...... 33

CHAPTER FOUR ...... 34

4.0 RESULTS AND FINDINGS ...... 34

4.1 Introduction ...... 34

4.2 Response Rate ...... 34

4.3 General Information and Demographic Information ...... 35

4.4 Differentiation Strategy and Organizational Performance ...... 38

4.5 Cost Leadership Strategy and Organizational Performance ...... 45

4.6 Focus Strategy and Organizational Performance ...... 51

4.7 Chapter Summary ...... 58

CHAPTER FIVE ...... 59

5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ...... 59

5.1 Introduction ...... 59

5.2 Summary ...... 59

5.3 Discussion ...... 60

5.4 Conclusions ...... 65

5.5 Recommendations ...... 66

REFERENCES ...... 69

APPENDICES ...... 82

APPENDIX I: LETTER OF INTRODUCTION ...... 82

APPENDIX 2: QUESTIONNAIRE ...... 83

APPENDIX 3: LETTER FROM THE UNIVERSITY ...... 87

APPENDIX 4: NACOSTI PERMIT ...... 88

LIST OF TABLES Table ‎3.1: Target Population...... 27 Table ‎3.2: Sample Size ...... 29 Table ‎3.3: Reliability Test Results ...... 31 Table ‎4.1: Descriptive Statistics for Differentiation Strategy ...... 39 Table ‎4.2: Correlation between Differentiation Strategy and Organizational Performance ...... 41 Table ‎4.3:Model Summary for the Differentiation Strategy ...... 42 Table ‎4.4: ANOVA for Differentiation Strategy ...... 43 Table ‎4.5:Regression Coefficient for Differentiation Strategy ...... 44 Table ‎4.6: Descriptive Statistics for Cost Leadership Strategy ...... 45 Table ‎4.7:Correlation between Cost Leadership Strategy and Organizational performance ...... 47 Table ‎4.8: Correlation Analysis on the Cost Leadership Strategy and Organizational performance ...... 48 Table ‎4.9:Model Summary for the Cost Leadership Strategy ...... 49 Table ‎4.10:ANOVA for Cost Leadership Strategy ...... 50 Table ‎4.11:Regression Coefficient for Cost Leadership Strategy ...... 50 Table ‎4.12:Descriptive Statistics for Focus Strategy ...... 52 Table ‎4.13: Correlation between Focus strategy and Organizational performance ...... 54 Table ‎4.14: Correlation Analysis on the Focus strategy and Organizational performance 55 Table ‎4.15:Model Summary for the Focus strategy...... 56 Table ‎4.16:ANOVA for Focus strategy ...... 56 Table ‎4.17:Regression Coefficient for Focus strategy ...... 57

LIST OF FIGURES Figure ‎2.1: Conceptual Framework ...... 11 Figure ‎4.1:Response Rate ...... 34 Figure ‎4.2:Gender of Respondents ...... 35 Figure ‎4.3:Age of Respondents...... 35 Figure ‎4.4: Academic Qualification ...... 36 Figure ‎4.5: Number of Years ...... 37 Figure ‎4.6 : Position ...... 37 Figure ‎4.7: Histogram Plot for Differentiation Strategy ...... 40 Figure ‎4.8: Residual Plot for Differentiation Strategy ...... 41

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CHAPTER ONE

1.0 INTRODUCTION 1.1 Background of the Problem Competitive strategies are actions adopted by companies to make their operations more efficient, attract more customers and ensure the company can adapt to new customer needs and satisfy them enabling them react faster than the competition gaining a competitive advantage in the changing environment (Kolegija, 2018). The firms have to make a decision between three key generic strategies they could adopt which include differentiation, cost leadership and focus, characterized by two dimensions on how they would like to compete i.e. through cost or differentiation and where to compete i.e. the market scope (Mungai & Ogot, 2017). With the demands and need of the environment constantly evolving characterized by increased competition that threatens the attractiveness of an industry constantly reducing profitability of players, it has become paramount that management adjust the firms according to these needs by matching the firm’s capabilities with existing opportunities.

Differentiation involves portraying a particular product or service in a way that it stands out against other competitor products and services forming distinctive marketing competencies which are basis for competitive advantage which leads to improved sales performance (Chege, 2018). However, the results of the implementation of differentiation strategy are realized in the long term because it creates high production costs in the short term resulting to an expensive final product and only the intervening time and improvement of production processes will result to decreased cost of production and finally result in increased sales (Amar, 2016). According to Putra (2018), apart from improved sales the differentiation strategy creates a perception of a certain value to the customers such as excellent product performance, product innovation, premium service and association to the brand image.

According to Birjandi, Mesbahi, Akhavan and Birjandi (2014), low cost leadership depends on unique capabilities of a firm to achieve and sustain a low-cost position within the industry of operation. Companies can charge low prices by ensuring they utilize economies of scale, have efficient production process, ensure there is use of technology and have ease of access to raw materials. Cost leadership strategy involves production of goods and services with features acceptable to customers at lower cost relative to its

1 competitors and is achievable through experience, high investment in production facilities, conservation and monitoring of operating costs through size and quality management programs (Valipour, Birjandi, & Honarbakhsh, 2012). This is enhanced through innovation, adaptability and enhanced generation along the lines with extensive rate of inefficiencies in the formation process (Kiprotich, Gachunga, & Bonuke, 2018). Cost leadership is therefore founded on cost minimization and operational efficiency.

The focus strategy is based on selecting a market niche where buyers have distinctive preferences , it could be based on low cost where a buyer segment needs are less costly to satisfy and could also be differentiation where the buyer segment demands unique product attributes (Akintokumbo, 2018). Akintokumbo (2018) further explains that focus aims to growing market share by operating in niche markets or markets that have been ignored by larger competitors. In this strategy the firm concentrates on a select few target markets. By use of focus, efforts are narrowed to one or two narrow market segments and this way a firm can better meet the needs of that target market, the firm through this strategy looks to gain a competitive advantage through effectiveness rather than efficiency. It could also be used to select targets that are less vulnerable to substitutes or where a competition is weakest which earns above-average return on investment (Tanwar, 2014).

Due to globalization, there has been increased competition, this has led to firms adopting both cost and differentiation strategies for effective organizational performance and excellence (Baroto, Abdullah, & Wan, 2012). Organizational performance defines a firm's survival and is often defined as a set of both financial and non‐ financial indicators capable of assessing the degree to which organizational goals and objectives have been accomplished (Singh, Darwish, & Potocnik, 2015). Firms will only survive if they adopt the two corporate strategies, cost strategy to process the value chain in the most effective way producing quality products at the lowest price and differentiation strategy to produce unique products or services than its competitors by for example use of innovation (Baroto, Abdullah, & Wan, 2012). Adopting both low cost and differentiation strategy bring in the element of flexibility and a capacity to adopt to the unpredictable, turbulent and complex business environment, this often leads to an integrated ambidextrous organization (Lapersonne, Sanghavi, & Mattos, 2015). Prior studies have used such theories as Porter’s generic strategies which include differentiation strategies which

2 requires organizations to develop products that offer unique features perceived to be of value by the customer, cost leadership strategies which targets a broad market and requires an organization to acquire cost advantages such as process efficiencies, low cost raw materials and cost saving measures, finally the focus strategies which focusses on a narrow segment attempting to either achieve cost advantage or differentiated advantage. They have also been characterized by the use of the resource-based view model which dives focus to the organizations internal environment as what gives a company an advantage to achieve superior performance. Other studies have also used the dynamic capability theory choosing organizational capabilities as sources of advantages for achieving superior performance (Onditi, 2018). This study will be anchored on the Porter’s generic strategies. In this dynamic environment an organization strives to sustain superior performance through aligning its resources and abilities and this way it achieves a distinctive position in the market attracting a huge number of customers growing its market share for example. To sustain superior performance a firm must ensure it concentrates on identification and perception of customers’ demands, concentration on customer, and improvement of the processes. Also calls for exploitation of organizational competences that are not easily imitable (Hosseini, Soltani, & Mehdizadeh, 2018). Competitiveness is analyzed by using past performance indicators or potential competitiveness indicators such as the market share, product cost, financial performance which includes profit, sales growth and returns of investment, non-financial performance including customer satisfaction, employee’s growth, benchmarking and balanced scorecard which is identical with performance. The market position may enable a firm to earn profits that are higher than the average profit earned by its competitors (Sachitra, 2016).

The retail and distribution sectors have been faced with stiff competition that has seen the evolution of retail sales and there have been notable changes and reorganization of distribution channels. Retailers are changing their strategies to respond to the recession in a mature environment with slow growth opportunities and are in fact expanding their target markets and are developing new strategies to capture the competitors’ customers (Aranda, Martin, & Santos, 2017). Globally, in Italy there have been seen significant changes in the retail environment resulting from more complex competition that in the past has forced the retailers to implement new strategies aimed at stimulating the switching between different store formats. To beat the competition, they are using the 3 combining strategies resulting to emergence of new hybrid store formats (Grazia & Silvia, 2014). Retailers also facing threat from discounters with lower prices and frequent promotions have reduced the level of the service they provide and some use differentiation to distinguish themselves by offering different prices or service combinations (Obonyo, 2013).

Africa has experienced a growth in the number of supermarkets over the past decades which has mainly been attributed to urbanization, increased per capita income, rise of the middle class, economies of scale and improved transport systems to allow for distribution. This has resulted in the evolution of the format and location of the supermarkets, moving away from only serving the traditional high-end affluent consumers in urban areas to successfully penetrating new markets in low-income rural communities. Large supermarkets are now able to offer lower prices due to economies of scale, and efficient procurement and distribution systems. This has led to the rise of competition (Nair, 2016). It is even more difficult for the existing firms to maintain market share and achieve growth. According to Mumassabba, Muchibi, Mutua and Musiega (2015) Kenya’s domestic retailers such as Tuskys however have built strong brands within Kenya and across East Africa. The expansions are also characterized with dynamic and unique business environments prompting the need for different strategies which have different requirements for success.

According to Mwirigi (2017), differentiation has been ranked as a major generic strategy influencing competitive advantage, high level differentiation on brand, operations, packaging, advertisement, security systems, supply and out bound logistics. It was also found out that broad differentiation and focused differentiation is Tusky’s favorable generic strategies. Mwirigi (2017) also found that Naivas supermarket had to a large extend applied the cost leadership strategy on its operations by defining its low- and middle-income market niche, with more to be done to enhance the efficiency of the cost leadership business model.

1.2 Statement of the Problem According to Grewal, Motyka and Levy (2018), retailers over the last decade have shifted greatly from focusing on internal perspectives such as expansion to the realization that

4 there is a rapidly changing landscape and are now developing their analytical capabilities to understand and serve customers better, pricing products and services dynamically as well as ensuring efficiency in logistics. Retailers are embracing the emergence of underserved geographic markets and are being innovative by exploring alternative retail business models and formats (Basu, 2013). Retailers are also adopting exploration of many options to differentiate themselves within the industry and to appeal to the target customers most often combining such options as product differentiation, being a cost leader and focusing on a niche. Due to the notable changes in the reorganization of distribution channels, in Spain, there has been an emergence new hybrid format defined as competitive convergence that has further given rise to the need of implementation of competitive strategies to ensure superior performance by organizations (Aranda, Martin, & Santos, 2017). The retail industry is also being characterized by brand extensions which are being used as a strategic instrument for creating meaningful differentiation.

In Kenya, a study by Mutinda and Mwasiaji (2018) showed how the use of cost leadership strategy reduced operational cost and consumer prices by adopting a promotional marketing strategy by the supermarkets in Machakos County, the introduction of tailored products increased their market share while the focus strategy influenced performance significantly. This study was limited and could have covered the indicators of the different strategies, the differentiation strategy for example should have included quality, technology and innovation, strong brand and marketing. Another study by Mwirigi (2017) established that Kenyan supermarkets use generic strategies such as broad differentiation, a low-cost provider, best cost leadership, focused low-cost strategy and focused differentiation to gain competitive advantage. The study was limited to competitive advantage including only sustained profits and market share leaving out the other indicators of organizational performance which include customer satisfaction and retention, profitability index, the brand image and supplier relationship.

According to Cytonn (2018), though there has been rapid growth of Kenyan retail supermarkets, there have been multiple problems facing the retail supermarkets even as new stores add revenues, this includes struggle to contain costs and as well as grow traffic. This is visible in both existing and new stores which have had similar average cost outlays. The growth in existing stores both from growth of number of regular visitors and average basket value could only happen if management is able to steward existing stores 5 to meet growth targets, contain the escalating costs of the individual stores as well as grow traffic to new stores by application of the competitive strategies. Lately the retail supermarkets have also been restructuring a move that have been influenced by the new entrants in the industry such as carrefour who have led to increase in competition and reduced traffic in the older retail supermarkets. The restructuring includes closure of low performing stores which has greatly impacted profit margins and have had ripple effects on the supply chain. The lack of liquidity has led to delayed payments to suppliers resulting to poor relationships making operations impossible (Oxford, 2017). According Oxford (2017) Tuskys retail supermarket closed down some of its low performing locations which included two stores in Nairobi, again due to competition they have reacted by opening more stores a move that is meant to curb the competition, this is seen as more of a historical problem done without proper planning, managing costs and supply chain. With the many problems facing the retail supermarkets there is need to close the gaps in the previous studies, extend and to clearly find the relationship between the competitive strategies and organizational performance.

1.3 Purpose of the Study The purpose of the study was to determine the relationship between competitive strategies and organizational performance of retail supermarkets in Nairobi, Kenya.

1.4 Research Objectives 1.4.1 To find out the relationship between differentiation strategy and organizational performance of retail supermarkets in Nairobi.

1.4.2 To examine the relationship between cost leadership strategy and organizational performance of retail supermarkets in Nairobi.

1.4.3 To determine the relationship between focus strategy and organizational performance of retail supermarkets in Nairobi.

1.5 Research Hypothesis

H01: There is no statistically significant relationship between competitive strategies and organizational performance.

H01a: There is no statistically significant relationship between differentiation competitive strategies and organizational performance.

H01b: There is no statistically significant relationship between cost leadership competitive strategies and organizational performance.

H01c: There is no statistically significant relationship between focused competitive strategies and organizational performance.

1.6 Significance of the Study

The findings of the study are valuable to various persons.

1.6.1 Retail Professionals

This study is of benefit to the target population that used in this study. The findings and recommendations guide the management of the retail supermarkets on making critical strategic decisions and serves as a reference point for improvements on the application of competitive strategies for the benefit all stakeholders and the enhancement of overall organizational performance.

1.6.2 Regulatory Bodies

The information obtained from the study gives new insight to the Kenyan government and retail regulators. The findings will facilitate the development of sustainable business models and establishment of research and development departments that will help shape the retail environment.

1.6.3 Academics

The study supplements the information and knowledge base for other academics and researchers who are interested in learning more about the relationship between competitive strategies and organizational performance.

1.7 Scope of the Study This study was carried out on Tuskys retail supermarkets in Nairobi, Kenya. The study was conducted in October and November 2019. The respondents were drawn from the Tuskys retail supermarkets in Nairobi, Kenya. Data collection was completed within one month. The variables that were focused on included cost leadership, differentiation, and focus strategies. The study established the relationship between the variables and organizational performance of the retail supermarkets.

1.8 Definition of Terms 1.8.1 Cost Leadership Strategy

Cost leadership strategy involves production of goods and services with features acceptable to customers at lower cost relative to its competitors and is achievable through experience, high investment in production facilities, conservation and monitoring of operating costs through size and quality management programs (Valipour, Birjandi, & Honarbakhsh, 2012). Encompassing economies of scale and the experience curve, capacity utilization, outsourcing, vertical integration and logistics efficiency as the drivers of the cost leadership strategy.

1.8.2 Differentiation Strategy

Differentiation Strategy involves portraying a particular product or service in a way that it stands out against other competitor products and services forming distinctive marketing competencies which are basis for competitive advantage which leads to improved sales performance (Chege, 2018). This encompasses high quality and uniqueness of products and services, technology and innovation and strong brand, marketing and customer service as the drivers of the differentiation strategy.

1.8.3 Focus Strategy

The Focus Strategy involves selecting a market niche where buyers have distinctive preferences, it could be based on low cost where a buyer segment needs are less costly to satisfy and could also be differentiation where the buyer segment demands unique product attributes (Akintokumbo, 2018). This encompasses focused cost strategy driven by operational efficiency, cost reduction and customer service. It encompasses focused differentiation driven by innovation and technology, market penetration and product development.

1.8.4 Organizational Performance

Organizational Performance is set of both financial and non‐ financial indicators set to assess the degree to which organizational goals and objectives have been accomplished (Singh, Darwish, & Potocnik, 2015). The performance indicators include customer satisfaction, customer retention/loyalty, profitability index, market share, brand image, supplier relationship among others.

1.9 Chapter Summary This study has been organized into five chapters. This chapter presents the background of the study, statement of the problem, significance of the study and the scope in which the study was done. In chapter two a review of existing literature on relationship between differentiation, cost leadership and focused competitive strategies and organizational performance will be presented. Chapter three will present the research methodology that will be employed for this study, outlining the target population and sampling design, data collection procedures, research procedures and data analysis methods to be used. Chapter four will then present the results and findings including data analysis and interpretation of the study based on the research questions. Chapter five will finally discuss the research results summarizing the findings from the data analysis in line with literature review presented by other scholars.

CHAPTER TWO

2.0 LITERATURE REVIEW 2.1 Introduction This chapter presents a review of literature on existing studies recently been carried out to show the relationship between cost leadership strategy, differentiation strategy, focus strategy and organizational performance.

2.1.1 Theoretical Review

The Strategy concept originated from the Greek word “Stratego” coming from the roots of “army” and it means planning of how to destroy enemies effectively using the available resources. This concept was adopted by businesses to move them from a relatively stable to a dynamic environment (Athapaththu, 2016). Michael Porter build on strategy relating it to competition and brought in the aspect of competitive strategy which is a process where an organization portfolio of products and services is designed to bring together unique resources and capabilities to help the organization secure a strong market position and achieve superior performance (Mita, Ochieng, & Mwebi, 2017).

To investigate the strategy and performance relationship many studies utilize the generic strategies which can be pursued by any type and size of business and has overtime remained the most notable in steering many businesses to superior performance. A business maximizes its performance either by striving to be a low-cost producer in an industry, differentiating its products or services as well as accompanying the approaches with focus of organizational efforts to a given market segment based on different views of the organization at hand (Bordean, Borza, Nistor, & Mitra, 2010). Porter (1998) explains that the three strategies are an essential part of any effective business plan, an organization can use to obtain a competitive market position, asserting that an organization performs best by choosing one strategy on which to concentrate. There are however companies have been successful with the combination or use of hybrid-strategy as long as there is a fit with the organization’s goals and objectives (Boroto & Abdullah, 2011).

2.1.2 Conceptual Framework

The research study was conceptualized with the sense that the competitive strategies have a direct effect on organizational performance. The framework shows the independent

10 variables as the competitive strategies which include cost leadership, differentiation and focus strategies. The dependent variable is organizational performance measured by profitability index, market share, brand image and supplier relationship. Manipulation of any the three independent variables is expected to have an influence on the dependent variable. In this case the hypothesis is that the adoption of competitive strategies significantly affects organizational performance.

Independent variables Dependent variable Competitive Strategies Organizational Differentiation Strategy · Uniqueness and quality Performance · Innovation and technology · Marketing and strong brand image

Profitability Index Cost leadership Strategy · Economies of scale and experience curve · Capacity utilization and technology Market Share · Outsourcing, vertical integration and supply chain efficiency Brand Image

Focus Strategy · Customer orientation, opertaional Supplier Relationship efficiency and cost reduction · Product development and market penetration · Innovation, technology and expertise

Figure 2.1: Conceptual Framework

2.2 Relationship between Differentiation Strategy and Organizational Performance A differentiation strategy is an integrated set of action taken to produce goods or services that customers consider as unique and important to them (Teeratansirikool, Siengthai, & Badir, 2013). Differentiation strategies allow an organization to offer unique products and services usually at a premium price, which is pegged on the value added and seeks to above average returns by creating brand loyalty (Buul & Omundi, 2017). Differentiation is characterized by high quality, uniqueness, innovation, research and development with response to changing customer needs. According to Adimo (2018), the factors that contribute to superior performance of organizations include quality of products and services offered, the size of the firm, the brand, product, the logistics system and

11 marketing approach. The emphasis is that differentiation is mainly achieved by having unique feature, responsive customer service, rapid innovations and technological leadership.

According to Semuel, Siagian and Octavia (2017) an organization advantages through the differentiation strategy are realized through a good quality product and emphasize that innovation must be on the forefront the company. Innovation has resulted from increased globalization mainly supported by advance in technology allowing entry of foreign competitors into markets and at the same time allowing imitation of products. Organizations are opting to innovate to cope with changing customer preferences and increased competition which result to decreased performance. The development of new and improved products is the only factor that is important in controlling the success or failure of an organization. Innovation is core in implementation of creative ideas within the organization and is a mechanism to adapt to the dynamic environment (Syafarudin, 2016).

According to Ju, Tong, Hu and Sun (2017), organizations provide superior quality products and services to improve customers satisfaction and maintain their loyalty and hence improve profitability and performance. Organizations such as Huawei have succeeded in providing high quality products by adopting a differentiation strategy and more to that making a huge investment in research and development both locally and internationally. Differentiation is also achieved through other features such as design, brand image, customer service and dealer network where organizations implement differentiation by focusing either on a product or service attributes which include its features, complexity, timing and location. It may also focus on its relationship with the customers through product customization, marketing and reputation. Finally, the organization can focus on its linkage within or between other organizations through its product mix, distribution channels and its customer service (Kavale, Mugambi, & Namusonge, 2016).

Differentiation has been proven to result in superior performance of organizations. A study by Ngari and Bichanga (2017) showed that the commercial banks in Kenya have adopted the differentiation strategy which majorly enhances customer satisfaction and hence the need for other commercial banks to build market teams to handle different market niches, promote innovation which ensures they offer highly differentiated

12 products and services for specific customer needs. Another study on the performance of hotels in Mombasa County in Kenya specifically showed that the differentiation strategy is important in making a product and service standout against others, the organizations that use this strategy are able to create a niche as well as create customer loyalty and consequently spur performance (Burikwa & Kisingu, 2017).

2.2.1 Uniqueness and Superior Quality

By opting a differentiation strategy, most organizations aim at offering unique products and services characterized by such features as superior quality. The organizations aim at providing additional value to their customers rewarding them with a premium price (Kyengo, Ombui, & Iravo, 2016). Development of products and services with unique attributes that are valued by the customers and which are perceived different from competitor products help grow the market share and in turn results to high profitability. Differentiation also acts as a tool of competitive advantage and is often adopted by organizations to provide tailor made products and services that essentially provide satisfaction for individual needs. Customers are willing to pay more for the tailor-made solutions for example that fit their individual size, taste, style or need. This competitive advantage contributes to higher prices, growth in the market share and enhances customer loyalty (Dirisu, Iyiola, & Ibidunni, 2013).

Quality the other hand requires more expensive inputs and processes; customers are made to pay more. Quality creates superior value, a product or service with a higher quality which is technically superior and comes with superior service tends to have a special appeal as perceived by the customer. This builds a competitive advantage by building a loyal and less price sensitive customer base. Customers here are unlikely to look for alternatives and eventually results to the organization maintaining or even growing a market share (Obinna & Ugwuegbu, 2018). For the service industry it is very difficult with the increased competition and the inseparability and intangibility features of services. While considering levels of performance in setting customer service objectives, the organizations providing services should take into account variables which include reliability, responsiveness, assurance and empathy (Arora, 2013).

2.2.2 Technology and Innovation

Technology is knowledge, products, processes, instruments, procedures and systems used by organizations to create and deliver value in form of products or services (Kihara,

Bwisa, & Kihoro, 2016). Technology is something created through ordering organization characteristics with a purpose that can benefit or provide benefits (Caroll, 2017). Technology may be general and includes technical information which is common to organizations in the same industry, system specific technology which is knowledge and know how developed for solving specific problems in the industry and finally organization specific technology which covers the corporate skills and capabilities from more general activities to experience from each individual organization.

Technology is used by organizations to get competitive advantages when it is well understood and adopted. Through technology organizations can access and control their operating environment from anywhere and at any time, this way organizations are linking the physical world and electronic space creating ubiquitous space that allows for speed and quality. The quality translates to a competitive advantage which creates and enhances customer loyalty hence growing market share and profits (Cascio & Montealegre, 2016). Introducing new technology opens new positioning avenues by providing new service interactions, it must be leveraged through customer value sets that will outperform the organizations competitors. A study by Nuskiya (2018) to examine the relationship between technology and performance of the employees in Sri Lanka shows how technology resulted to reduced workload, increased satisfaction, improved employee motivation, reduced absenteeism and increased employees’ skills. Banks that have adopted technology reach the competitive advantages in their industry through employee performance.

Competitive strategies and technological capabilities successfully result in a gain in competitive advantage, this was evident in a study done in Malaysian manufacturing sector which boosted performance. To improve the organizational performance, organizations must design interventional programs that enhance competitive strategies that can be supported by enhancing technological capabilities (Sasitharan, 2018). Another study on the influence of technology on performance of insurance companies in Kenya showed that technology in underwriting operations resulted into error reduction, enhanced the workflow, improved the manuals translating to increased efficiency in the organization. This was also a similar scenario in other areas in the organization including claims management and customer service operations. There was a growth in the customer base, customer relationship improved, and costs were better controlled (Gakinya, Rotich, & Ndambiri, 2018).

Technology is a source of innovation, research and development, this has been brought by the emergence of change in customer needs which at the same time has led to focus on design driven innovation leading to convergence of technology and design. This is to enable an explorative culture to create a sustainable competitive advantage through balancing customer needs, technological opportunities and the specific product. Innovation brings more value to the customer as well as shapes the competition in an industry (Farhana & Bimenyimana, 2015). Innovation is defined as the generation of new ideas, implementing them into new products or service leading to the dynamic growth of a business enterprise. It is a long and cumulative process which is complex and multifaceted (Kogabayev & Maziliauskas, 2017).

2.2.3 Strong Brand, Marketing and Customer Service

A brand is an identifiable product or service augmented in a way that a buyer perceives relevant, has unique added value which match individual needs. It is also a means of building sales by identifying products and services, it builds customer awareness by naming the offer and distinguishing the offer from other similar products. It is successful when an organization can sustain the added value against competitors (Alizadeh, Moshabaki, Hoseini, & Naiej, 2014). A brand is a source of differentiation and value creation for an organization and customer, an organization builds a strong brand strategy by making sure they keep the promise, provide unique products and services which customer needs which include awareness, dependability, risk reduction and personality. A consumer on the other hand should be able to attain intangible benefits which range from sensorial, affective and cognitive experiences (Xara-Brasil, Hamza, & Marquina, 2018).

In today's dynamic environment, with increase in customer sophistication, the need for organizations to adopt strategically different approaches to radically differentiate them from the competition in term of product, services, practice, structure, system, procedure etc., a brand is an integral part of marketing and customer satisfaction, it is a marketing tool and is a source of sustainable competitive advantage. Strong corporate branding has been seen to be an instrument of creating instant credibility and value. Customers associate a strong corporate brand with quality and also assume that the attributes of a product or service has been developed to fit their needs (Ajike, Kabuoh, & Ogbuanu, 2015). Branding plays different roles in the performance of an organization, it lowers

15 transaction costs by reducing uncertainties to customers when searching for products and services, it plays the distinguishing roles, it increases customer loyalty by strengthening the organizations reputation. Basically, a strong brand is related to consumer awareness, improved organization performance and this translates to high financial returns (Castaldi & Giarratana, 2018).

2.3 Relationship between Cost Leadership Strategy and Organizational Performance A cost leadership strategy is a strategy that allows an organization to be a low-cost producer usually making more profits in comparison to its competitors due to the low cost of production which comes as a result of economies of scale. It works well especially if an organization is a first-mover or uses the blue ocean strategy as well as for organizations that have ease of access to factors of production (Marangu, Mwiti, & Thoronjo, 2017). Cost leadership strategy is usually reliant on unique organizational capabilities that allow them to sustain the low-cost position within the industry, the strategy may also call for the need to cut costs in areas that are not important to allow them charge lower prices and still offer distinct products and services (Chepchirchir, Omillo, & Munyua, 2018).

Sources of cost advantage are dependent on the industry structure and mainly include accurate demand forecasting, high capacity utilization, economies of scale, technology advancement, outsourcing and learning/experience curve (Hilman & Kaliappen, 2014). Pearce and Robinson (2016) insist that firms wishing to use the cost-leadership strategy must have a variety of services and products that appeal to their customers, manufacture goods that satisfy customer needs at a lower cost and high-quality meeting customer expectations, taste and preferences.

Organizations using the cost-leadership strategy must have a high market share that generates high revenues, this way managers can benefit from learning and experience, the leaders of the organizations must invest heavily in efficiency of production plants to permit a reduction in the unit cost of production. The managers should also invest heavily in technology to reduce production costs and a policy of product standardization must also be implemented within the organization to achieve high production costs. High entry barriers are also usually coupled with the cost leadership strategy for it to succeed. This is to keep off many players within the industry (Nzisa, Njeje, & Namiinda, 2017). A study

16 to examine the relationship between firm’s strategy and its sustainability of financial performance showed firms using the cost-leadership strategy have invested heavily in property, plant and equipment along with their already existing book value. The cost leaders also involve themselves in cost saving actions by building efficient scale facilities, tightly controlling overhead and production costs and monitoring costs to build standardized products that offer features acceptable to many customers at the lowest competitive price (Bhattarai, 2018).

Nevertheless, the cost leadership strategy has risks especially if its consistently followed without any measures to guarantee the continuance of previous status. An organization should have technological advantage which is well protected by patent, industry rivalry may easily match the organizations techniques over a short period of time. Fernando, Chang and Tripathy (2015), note that cost reduction which may be in the form of use of new tools and techniques or even relocating to new production areas, could create an advantage that can only be sustained over a short time period therefore requiring the organization to come up with measures to ensure they can adapt to new requirements. There is also limited validity of the experience curve especially with the rapid changes in the environment of operation or when there is disruption from new entrants who come up with new products that can ideally be used in place of the old products (Ahmed & Pagell, 2014).

A study by Ndungu, Otieno and Rotich (2016) to determine the effect of competitive strategies on financial performance of banks in Kenya showed that the cost leadership strategy helped the banks gain competitive advantage by reducing economic costs, it also offered a broad market for the previous services and also contributed highly to customer retention. The banks were seen to use of low prices to target average customers and to develop new products to meet new customer demands. Another study to provide insights on procurement competitive strategies used by manufacturing organizations to increase their performance showed that an organization pursuing cost leadership procurement strategy does so to become a low-cost producer gaining defense against its competitor and still earns high returns. The cost leaders for these organizations mainly focused on improving efficiency and were able to control costs throughout the organization’s supply chain significantly affecting performance of the organizations (Kiprotich, Gachunga, & Bonuke, 2018).

2.3.1 Economies of Scale and the Experience Curve

Economies of scale is the advantage achieved when organizations decrease their expenses by mass producing giving it a competitive advantage over smaller firms, and in turn translates to good performance of the company (Anwar & Ali, 2015). The size and structure of organizations change time to time and there is need constantly adjust to the size, nature and characteristics of the markets they interact with. Economies of scale results in such advantages as producing more volumes of products or services which eventually result in cost reduction on one unit allowing the organization to charge lower prices for the products and services (Massimilliano, 2013). The sources include mass production, huge discounts through massive supplies, multiple production or delivery of different goods or services, specialization of tasks through employing a larger workforce, expansion of an industry, government intervention, effective transportation networks that make the movement of outputs time and cost effective, availability of highly competent workforce.

According to Samadi (2018), specific costs decrease as experience is gained overtime from production goods or provision of services and use of a certain technology increases. The learning could be at an individual company level but could also be translated to the industry level. The experience curve helps the company reduce price giving rise to an increased market share and finally results in increase in profits. However, the benefits of the experince curve are shot lived.

2.3.2 Capacity Utilization

High capacity utilization measures production efficiency, it results to the reduction of average production costs overall reducing unit costs increasing the market demand often resulting into increase in a market share. An organization should be able to match production output to the capacity for it to have sustained competitive advantage. Excessive capacity reduces the competitiveness by increasing the costs and excessive capacity utilization implies a strain on equipment and employees leading to increased operation costs (Seguin & Sweetland, 2014). In production, organizations pursue to improve production capacity, there are different aspects that are considered machines should be utilized effectively, run at optimum speed, resource allocation should be improved to generally improve production and avoid any extra cost incurring (Jadayil, Khraisat, & Shakoor, 2017).

A study by Nyaoga, Wang and Magutu (2015) on tea processing firms in Kenya were found to have recognized the role of capacity utilization in promoting creation and maintaining a competitive advantage. The study recommended that organizations should improve the capacity utilization to increase the profits, customers, improvement in their business processes as well as the organizational capacity. Okunade (2018) emphasized on need to improve capacity utilization through creation of policies around appreciation of foreign exchange rate, ensuring coordinated imports of goods and services and facilitating access of modern technology for production or provision of goods and services.

2.3.2 Outsourcing, Backward Vertical Integration and Logistics Efficiency

Kamanga and Ismail (2016) define outsourcing as a strategy through which an organization assigns some of the non-core functions to specialized vendors to enable the organization concentrate on the core business activities. Due to globalization, the organizations are looking for ways of reducing costs and building new opportunities by optimizing the use of internal and external resources. Outsourcing generally aims at reducing overall costs, improving quality through use of specialized services, allows for easy adoption of technology to improve organization and customer efficiency and finally allows the organization to share or even transfer the risks. This way the organization performance improves through an increased market share, increase in sales which translates into profitability. Orange Telkom Kenya has adopted outsourcing to achieving exceptional and efficient customer service by partnering with Horizon Contact Centers and Ken call which has led to improved performance (Mburu & Rotich, 2017).

Backward integration on the other hand refers to the process in which a company purchases or internally produces segments of its supply chain. It could also be defined as the acquisition of controlled subsidiaries aimed at the creation or production of certain inputs that could be utilized in the production. This backward movement is initiated to ensure supply along with securing bargaining leverage on vendors (Gunathilake & Mel, 2016). In the recent past, there have been radical changes stemming up from globalization, backed by profound advances in the fields of communication, transportation, coordination process management and technologies. This phenomenon could have led to consumer fickle demands and more customized market requirements. Big companies that have ended up outsourcing more functions are now trying to gain a higher level of vertical integration. Examples of such companies include Oracle which

19 recently acquired Sun and has since transformed it into a maker of software, computers, and computer components. Apple has also developed to be a highly vertically integrated organization in the information technology sector. The company owns the designs of its own computer hardware, accessories, operating system and much of its own software itself. This trend and phenomenon of going back to vertical integration from outsourcing motivates this study on the strategic changes of vertical integration (Zhang, 2013).This integration has resulted into a significance improvement of the companies performances.

Vertical integration enhances organizational survival this could only mean there is significant improvement in performance of organizations that implement the vertical integration strategy. This is in view of the current dynamic nature of the business environment which is coupled with the pace at which technology which is evolving and leading to a more complex business world. Vertical integration would help the organizations which are now facing the reality of the paradigm shift which present a serious threat to the less innovative organizations. Another study to explain why some real estate companies choose to have a vertically integrated structure in Sweden instead of specializing in only stage of the production shows that for the companies that use vertical integration gain information and more options that are important in small number bargaining situations. The organizations bargaining power increases when they are well informed about, e.g. costs and profits in nearby activities, and when they can use in-house components, if there are issues to finding realistic conditions on the outside market (Lind, 2016). This ridiculously improves performance if especially companies can cut on costs of operation. A study to investigate the influence of vertical integration on inventory turnover and firm operating performance this is including costs and profitability revealed that vertical integration has a positive effect on most of the inventory which in turn contributes to a reduction in supporting processes costs which then causes an improvement on sales of an organization (Panayides & Andreou, 2015).

An efficient logistics system is important, one that supports integration of business processes from purchasing, manufacturing, selling and logistics throughout the value chain providing optimum value to the customer. The logistics efficiency reflects the organization performance relating directly to the ability to deliver goods and services as per customer order quantities and at the exact time. The efficiency could be measured in terms of customer satisfaction, delivery speed, dependability and flexibility (Hajiesmaeili,

Rahimi, Jaberi, & Hosseini, 2016). Most of the companies are nowadays choosing to outsource the logistics cutting on costs which results to a greater flexibility, an enhanced service level and the organizations can concentrate on their core activities. Examples of such companies include Coca Cola and East African breweries (Katana & Gichure, 2017). 2.4 Relationship between Focus Strategy and Organizational Performance The focus strategy converges on a limited number of segmented customers based on the price of products or geographical location where the organization bids to achieve either a cost advantage or differentiation. It operates on the premise that the needs of a specific group better known as a niche are serviced better when there is focused effort other than the wider market. Organizations that use the focus strategy benefit by having a high degree of customer loyalty since they are able to tailor a broad range of products and services development effort to a relatively narrow market segment (Arasa & Githinji, 2014). Organizations pursuing this strategy are often willing to be isolated to specific geographic areas, satisfy needs of customers with special financing, inventory or servicing problems and custom make products and services to the unique demand of customers. By achieving this strategy the organizations are likely to earn above average returns, select targets that are least vulnerable to substitute products or even select areas where the competitors are doing poorly (Akintokunbo, 2018).

It is however different from what Arasa and Githinji (2014) established in their study, they found the focus strategies very likely to present risks to most organizations. These risks include imitation and modifications in the target segments. They also established the ease of a broad-market cost leader adjusting its products and services in order to compete directly. Finally, other focusers may create sub-segments that they can operate in even. In the oil industry context, customers consider paying a higher price for petroleum products, which they consider genuine, and of high quality. However, when it is perceived that the fuel is adulterated; customers may avoid buying it altogether (Kago, Gichunge, & Baimwera, 2018).

Southwest Airline has been able to survive in the airline industry even with the turbulence facing the airline industry resulting from the changing demands of customers and other factors like the rise of oil prices. Its business model leverages on efficient operations focusing on customer experience, low pricing of their services and an efficient delivery system. It has remained profitable and is positioned as the strongest airline registering a market capitalization of 9.1 billion dollars recently (Odrigo, 2016). Over and above being

21 a cost focuser, Southwest airlines has heralded as an innovative pioneer emerging as the force behind the ever-changing operating environment of the airline industry. Other factors include its flexible business model, low operating costs, its insistence on quality through on-time performance, baggage handling and of customer complains appropriately (Roberts & Griffith, 2019).

2.4.1 Focused Cost Strategy

A focused cost strategy allows a firm to charge low prices to its products and services comparative to other firms that compete within the target. The focused cost leadership strategy competes solely on the prices charged and focuses on a narrow market. The target market may be defined depending on the type of products, the demographics such as gender, and also the channels of distribution. (HongKong, 2016). Netflix for example has used the cost focus strategy by use of different channels of delivery of the service which is able to reach many customers giving its services at a flat rate. This is seen to be a more proactive and adaptive strategy other than proactive. By using its unique strategy Netflix has been on the rise since 1997 growing its customer base from 30% to about 73% (Mandal, Diroma, & Jain, 2017).

An organization that applies the focused cost strategy will achieve and sustain competitive advantage if it analyzes its market identifying a niche as well as works on understanding how to meet customer needs and respond to their ever-changing needs. Other key factors of contributing to the success of this strategy includes emphasizing on setting up of efficient-scale facilities, cost reduction measures, excellent customer service to avoid marginal costs, use of technology and focus research and development to improve quality (Asena, 2017). The focus strategy is advantageous because the industries have many different niches and segments and firm only chooses a segment which matches its capabilities and distinct competencies, this ensures the firm along survival (HongKong, 2016).

2.4.1.1 Operational Efficiency, Cost Reduction, Excellent Customer Service

Operational efficiency underpins most organizations’ and is the most basic strategic goal. It is a driver of improving customer satisfaction as well as increasing shareholder value. Operational efficiency should be coupled up with activities such as proper communication and involvement of all employees. It also calls for organizations to advance in technology, development of new facilities to ensure adapting to the increasing

22 demand variety. Operational efficiency brings rise to low costs on products and services, quality products, improvement in service time which is directly attributed to the excellent customer service provided by organizations’ and overall increased revenues and profits (Okwang'a, Mungania, & Karanja, 2015). Once the firm achieves operational efficiency it automatically reduces on costs, there is need for the firm to emphasize on performance and organizational practices that will ensure the organization achieves superior performance by continually improving all dimensions of plant to reduce on waste, create value through interaction performance of employees, implementing changes by involving customers, constantly innovating and moving at optimal speed (Wahab, Ismail, & Muhayiddin, 2016).

2.4.2 Focused Differentiation Strategy

The focused differentiation strategy calls for a firm to offer unique attributes that satisfy demands of a narrow market. Organizations implement this strategy by concentrating on specific sales platforms/outlets while others aim at targeting specific demographic groups. Other than offering unique features that appeal to certain customers there is often pursuit to specialize (HongKong, 2016). There are multiple organizations that have adopted the focused differentiation strategy such as Mercedes Benz using cutting edge technology, styling and safety innovation, they can charge high prices based on how far the customization has gone. The focused differentiation strategy also provides a better entry barrier ensuring that the organization maintains the market share or even grows it (Tanwar, 2013).

The focused differentiation strategy considers such features as uniqueness achieved through use of innovation and technology, having a big enough market niche that offers good growth, this could be achieved by market penetration and product development (Githumbi & Ragui, 2017).In as much as focused differentiation has positive effects on performance increasing costs differentiated between broad range competitors and focus organizations is likely to offset he differentiation achieved through focus and turn the customers towards firms that offer a broad range of products. The perception created to the customer regarding specific products and services is likely to fade away with time. Other organizations are likely to find sub target groups within the main target market of the focus firm (Tanwar, 2013).

2.4.2.1 Innovation & Technology

Innovation is applied in organizations by use of open technologies and high-quality open resources often relying on a different kind of knowledge and information system. Knowledge management is an important part of innovation, it creates an organization culture or innovation and creativity as well as knowledge sharing innovation, this is especially for knowledge-intensive industry like insurance (Rajapathirana & Hui, 2018). Innovation is also regarded as a special tool to entrepreneurs, providing a new capacity to create affluence, enabling more efficient use of resources. Innovation consists of successive processes which starts from creation of new ideas, inspiration and imagination being the core pillar to the emergence of new ideas in innovation. It provides new opportunities for businesses to operate with its existing or new capabilities to meet customer needs (Karakasa, Ozb, & Yildizc, 2016).

2.4.2.2 Market Penetration and Product Development

Market Penetration creates opportunities for organizations to reduce inventory levels, decrease costs and increasing operating performance. This is achieved by reducing the cost of labor, market penetration creates greater financial performance because it decreases inventory costs. Its aim is to increase market shares without changing an organizations prime market and product strategy (Alkasim, Hilman, & Bohari, 2017). Mercedes-Benz has used the market penetration strategy operating in several cities in Germany and all around the world Africa, USA, Brazil, China, Japan, and recently in Romania. Mercedes-Benz has developed strategies to promote its products and services and to penetrate international markets. It has applied differentiation focus strategy through cutting edge technology, level of performance and has a popular unique character, distinct due to its brand strategy. It goes through a couple of steps to achieve this which include the intention to create a unique identity and clear-cut defining of the company’s identity, the values promoted by customers in this market in order to achieve the association with the brand name. This has resulted in an entirety of high performance, security, prestige, building a powerful brand , customers pride themselves when associating with the Mercedes-Benz producer’s image, personality or identity, perception of the company’s personality .This way it derives the value, grows customer loyalty eventually increasing its market share and overall profitability. Recently there is a strong market growth of 30% in Japan and more than 80% in Thailand (Nechita, Virlanuta, & Oprit-Maftet, 2013).

Product development on the other hand is an important function in an organization as it helps to identify and quantify problems and opportunities in the market segment, it mainly focuses on customer’s needs and wants rather than on the organization’s assets, such as technology, and employee skills. This way product development enables an organization to satisfy the customers’ needs and wants (Fong, Lo, & Ramayah, 2014). It leads to product uniqueness–through offering to consumers a value that could not be found on existing products, good market knowledge–through market analyses and extensive market research. It also benefits the organization through bringing about synergy between technology, production, and business proficiency. The success of product development can be seen through such companies as Apple iPhone was successfully launched and millions of iPhones have been sold, turned it in one of the most popular mobile phones ever launched. This has been made a success through vigorous developments that are made resulting to new versions out every year. Apple is now the leader on smartphone market, overtaking Samsung which was the first in the market in the fourth quarter of 2014 (Capatina & Draghescu, 2015).

2.5 Chapter Summary This chapter discussed the theoretical and empirical research covered in relation to the research questions. Literature reviewed in this section includes relationship between differentiation strategy, cost leadership strategy, focus strategy and organizational performance. Chapter three discusses the research methodology to be applied in the study.

CHAPTER THREE

3.0 RESEARCH METHODOLOGY 3.1 Introduction This chapter discusses the research methodology that was applied in the research study. It outlines research methodology elements which include the research design, population and sampling design, data collection methods, research procedure and data analysis methods.

3.2 Research Design Akthar (2016) defines research design as a structure of research which is the glue that hold all the elements in a research project together, it is basically a plan of the proposed research work. Tripathy and Tripathy (2017) also define research design as the logic or master plan of a research that gives light on how the study will be conducted, it shows how all the major parts of the research study work together to address the research questions. The research design is seen as an actualization of logic in a set of procedures that optimizes the validity of data for a given research problem.

This study adopted a cross-sectional and correlational research designs as most appropriate in collection of relevant data from a population of interest based on particular variables of interest at that given point in time. This then leads to formation of inferences about possible relationships, also indication whether exposure to specific factors correlates to particular outcomes (Kesmodel, 2018).The study was descriptive in nature, a descriptive study helps describe an existing phenomena as accurate as possible giving way to further research (Atmowardoyo , 2018) .This way the design is preferable because it will enable understand the relationship between the independent variables of the study which are differentiation strategies, cost leadership strategies and focus strategies with the organization performance a case of retail supermarkets in Nairobi, Kenya.

3.3 Population and Sampling Design 3.3.1 Population

Gravetter and Wallnau (2016) defines a population as a set of all individuals of interest in a study, it is more specific and can obviously vary in size from extremely large to very small depending on how the research defines it. Meeker, Hahn and Escobar (2017) defines a target population as specific members of a population where desirable

26 inferences are drawn. The target population ensures that there are clear characteristics that will be evaluated. The target population included Tuskys hyperstores which have a total number of 20 senior employees per store. Hyperstores are expansive retail supermarkets selling a wide range of products under one roof. It also included Tuskys supermarkets which have a total of 8 senior employees per store. A supermarket is a self-service shop offering a wide variety of products, larger and has a wider selection, but is smaller and more limited in the range of merchandise than a hypermarket. The study also included the Tuskys Chap Chaps which have a total number of 6 senior employees. A Chap Chap is a convenience store, which is mainly a small retail business that sells a range of everyday products such as coffee, groceries, snacks etc. The study used a target population of 264 senior employees which included the Branch Manager, Assistant Branch Manager, Accountant, Cashier and Branch Administrators of the retail stores of Tuskys Supermarkets in Nairobi Kenya.

Table 3.1: Target Population

Retail Store Target Population Percentage Tmall 20 7.58 Pioneer 20 7.58 Tom Mboya 20 7.58 Komarock 20 7.58 OTC 20 7.58 Embakasi 20 7.58 Magic Nairobi 20 7.58 Green Span 20 7.58 K Avenue 20 7.58 Diamond Plaza 20 7.58 Hakati 20 7.58 CBD 8 3.03 Adams 8 3.03 Thigiri 8 3.03 Libra 8 3.03 Mountain View 6 2.27 Shell Thika Road 6 2.27

Total 264 100 Source: Tusker Mattresses Limited (2019)

3.3.2 Sampling Design

A sampling design can be defined as a process of selecting the sample for estimating the population characteristics, it is the process of obtaining information about an entire population by only examining part of it (Muhammad, 2016). The sampling design is the method the researcher uses to ensure that the sample is a representation of the study population.

3.3.2.1 Sampling Frame

A sample frame is the listing of the units from which a sample is to be selected. When deciding upon a file to serve as a source for a sample frame for a survey, perhaps the most important consideration is the extent to which the target population will be covered by the frame (DiGaetano, 2013) . A sampling frame is a record of the actual players from which sample is drawn. The sampling frame must be a representative of the population (Taherdoost, 2016). The sampling frame for this study comprised of the list of all senior employees of Tuskys supermarkets in Nairobi and were provided by Corporate Affairs Office at Tuskys Head Office.

3.3.2.2 Sampling Technique

Devi (2017) describes a sampling technique as a procedure where the researcher decides the type of sample that will be used in the study. There are two broad categories of sampling techniques or methods which include the probability and non-probability methods. Mwangi (2017) defines probability sampling as a sampling approach in which each member of the population has an equal chance of being selected and is used when the representation of the sample is of importance to enable generalization. Non probability sampling on the other hand refers to a sampling technique where it uses non- randomized methods to draw the sample hence it does not give all the participants or units in the population equal chances of being included it mostly uses judgement to create the samples (Showkat & Parveen, 2017). This research adopted probability sampling; specifically, stratified sampling technique to select a sample size. According to Elfil and Negida (2017) a stratified sampling technique is applicable when conducting research on a population that is not homogenous

28 by picking the whole population and dividing it into homogeneous strata or subgroups according a demographic factor (e.g. gender, age, religion, socio-economic level, education, or diagnosis etc.). Then, the researchers’ select draw a random sample from the different strata. This study adopted stratified sampling as a method of categorizing the different occupations of the employees in the sampling frame.

3.3.2.3 Sample Size

Alvi (2016) defines a sample size as the number of sample units that are selected to be included in the sample. The sample size for this study was 159 employees. Yamane’s formula (1967) guided the selection of an appropriate sample size for the employees at Tuskys retail stores in Nairobi.

The sample size was guided by Yamane’s formula: - n =N / (1+N(e)2)

Where: - n = represents the sample size N = represents the population 1 = is a constant e2 = is the estimated standard error which is usually 5% for 95% confidence interval n = 264/ (1+ 264(0.05)2) n =159

Table 3.2: Sample Size

Position Population Distribution Sample Size (Percentage) Branch Managers 40 13 20 Ass Managers 60 31 50 Chief Cashiers 40 13 20 Ass Cashiers 52 28 45 Administrators 42 15 24 Total 264 100 159

3.4 Data Collection Methods Data collection methods refer to techniques and tools used to produce the data sought for a research study. Each method is best suited for particular kind of research questions, purpose of research, pragmatic issues such as access to respondents or participants, time constraints and researcher skills (Leavy, 2017). Primary data was collected directly from the respondents using structured questionnaires as the data collection instrument. Questionnaires were the most appropriate to be used for this study because they are an affordable and efficient method of collecting data. The questionnaire was developed with a 5point Likert scale based on the research questions. The Likert scale was simpler to understand and easier to respond to simplifying the data analysis process. The questionnaire was presented with a three-section structure. The first section captured background and demographic information; the second section captured data on the first research question which was the relationship between differentiation strategy and organization performance, the third section was based on the relationship between cost leadership strategy and organization performance and the fourth section presented questions related to the relationship between focus strategy and organization performance based on the third research question.

All questions were linked to organizational performance being the dependent variable. The questionnaires were administered through a face to face approach to be able to assist the respondents. There was consideration to use research assistants who were chosen from different universities in the undergraduate program and were also trained on how to administer the data collection instruments. They were also trained on how to guide respondents before they complete the questionnaires. Secondary data such as profitability index was used to supplement the primary data collected.

3.5 Research Procedures

The research used primary data collecting both qualitative and quantitative data. Primary data was obtained from questionnaire administered to sampled respondents. Questions on the questionnaire were optimized to minimize writing, hence it used a closed approach. A letter of permission to carry out the study was obtained from United States International University-Africa, Chandaria School of Business for delivery to Tuskys Head Offices in Nairobi as well as letter from National Commission for Science, Technology and Innovation. This letter provided information on the identity of the researcher and the purpose of the study. The questionnaires were tested during a

30 pilot study on 10% of the sample to assess whether the questions are easily understood and unambiguous.

Reliability test and validity tests were done. Reliability is a measure of the degree to which a measuring instrument yields consistent results or data after repeated trials. Kot hari ( 2015) defines reliability of a test instrument as the measure of the consistency with which a test instrument produces the same result when administered to the same group over time intervals. There are four types of reliability as indicated. First is the test-retest reliability. This is a measure of reliability obtained by administering the same test twice over a period of time to a group of individuals. The other type is inter-rater reliability which is used to assess the degree to which different judges or raters agree in their assessment decisions. This is useful because human observers will not necessarily interpret answers the same way. The fourth type is internal consistency reliability which is used to evaluate the degree to which different test items that probe the same construct produce similar results. Cronbach's alpha is the most common measure of internal consistency ("reliability"). It is most commonly used when you have multiple Likert questions in a survey/questionnaire that forms a scale and you wish to determine if the scale is reliable. A reliability test was run to establish the internal consistency of the tool. This was done through Cronbach Alpha. A value of 0.7 was considered for this study. Thus, all values above 0.7 indicated that the tool was good and reliable.

Table 3.3: Reliability Test Results

Questionnaire Variable Cronbach's Alpha Number of Items

Differentiation strategy .795 9

Cost leadership strategy .753 9

Focus strategy .721 8

Organizational performance .770 9

Overall .851 35

After data analysis, the table above shows that all the Likert scale tables have a Cronbach Alpha of more than 0.7. This means that the data gave reliable results.

Validity is the degree by which logistical and empirical measures are accurate. It is a measure of the degree to which a measuring instrument depicts true differences among items being measured (Kothari, 2015). An instrument is validated by proving that its items are representatives of the skills and characteristics to be measured (Mugenda & Mugenda, 2013). Content validity was ascertained by making sure that its items sufficiently cover the research objectives. It was also ascertained by subjecting the research instruments to experts for judgment and peers for review (Kothari, 2015). This study measured the construct validity to ensure that the instrument was measuring the construct, performance which it was intended to measure and not the other variables. Prerequisite analysis was done to test assumptions and establish the suitability of the regression analysis. The tests to be done included linear, normality and multicollinearity.

The questionnaires were administered through a face to face approach to be able to assist the respondents. Research assistants who assisted in data collection were trained on how to administer the questionnaires. The respondents were given one week to complete the questionnaires before collection, giving them ample time to understand and answer the questions. To ensure a high response rate the Corporate Affairs office at Tuskys Head Office assisted by sending official communication to all the Branch Managers as well as ample time was provided to ensure the questionnaires were filled.

3.6 Data Analysis Methods According to Matula, Kyalo, Mulwa and Gichuhi (2018), data analysis refers to the process of systematically organizing and scrutinizing responses obtained from respondents in order to make conclusions. The goal of this stage of the research is to apply logical techniques and make sense of data obtained from the research. The first step was coding the data that was collected from the questionnaires and to generating a code sheet for reference. Data was then keyed in the Statistical Package for Social Sciences (SPSS) before the utilizing descriptive statistics including means and standard deviation to present the information in summary for interpretation. Inferential statistics including correlation and regression analysis were applied to show the relationship between the study variables as well as aid in providing a generalized conclusion. The presentation was then done using figures and tables.

3.7 Chapter Summary This chapter has presented a detailed description of the research methodology that will be used in this study. It discussed critical elements of the research methodology including the research design, population design, sampling design, sampling frame, sampling technique, sample size, data collection methods, research procedures and data analysis techniques that will be applied in the study. The sampling technique and the sampling frame, and sample size have also been discussed in the chapter. Chapter four will present the results and findings including data analysis and interpretation of the study based on the research questions.

CHAPTER FOUR

4.0 RESULTS AND FINDINGS 4.1 Introduction This chapter presents the results and findings including data analysis and interpretation of the study based on the research questions. The findings were based on the purpose of this study which was to find the relationship the relationship between competitive strategies and organizational performance. The study sought to specifically answer the research questions; what relationship exists between differentiation strategy and organizational performance? what relationship exists between cost leadership strategy and organizational performance and to what relationship exists between focus strategy and organizational performance of retail supermarkets in Nairobi, Kenya. Both descriptive and inferential statistics were used to represent the data and to show significant differences and the links between the study variables.

4.2 Response Rate The study distributed 159 questionnaires to the employees of retail supermarkets in Nairobi, 122 questionnaires were dully filled and returned. This gave a response rate of 77% which is deemed sufficient for the study. According to Matula, et al. (2018) a rate of at leat 50% is statistically significant for analysis. The findings are as shown in Figure 4.1.

Non-Response , 23%

Response , 77% Response Non-Response

Figure 4.1: Response Rate

4.3 General Information and Demographic Information Respondents were asked to indicate their general demographic information regarding their gender, age, number of years worked, highest level of education attained and positions. The findings are indicated in subsequent sections. 4.3.1 Gender of Respondents The distribution of respondents’ gender is indicated in the Figure 4.2 shows that the majority of the respondent 61.5% at retail supermarkets were male, 38.5% were female. This presents that both genders were equitably represented in this research.

[CATEGORY NAME], 38.5%

[CATEGORY NAME], 61.5%

Male Female

Figure 4.2: Gender of Respondents

4.3.2 Age of Respondents The respondents were asked to indicate their age. The findings are as shown in Figure 4.3. The findings show that 7 of the respondents were aged 18-22 years, 47 were aged between 23-27 years, 51 were aged between 28-31 years, 11 were aged between 32-36 years and above 36 were 6. The findings show that majority of the respondents were 25 years and above an indication that the respondents were able to fill the questionnaire.

47 51

11 7 6

18- 22 23- 27 28- 31 32- 36 A B O V E 3 6

Figure 4.3: Age of Respondents

4.3.3 Academic Qualification This study sought to establish the highest level of academic qualification of those who participated. The fact findings are as indicated in the Figure 4.4. Majority of the respondents 34% highest level of education was certificate and degree, 28% had diploma and 4% had master’s degree. This indicates that the respondents would interpret the questionnaires and reliable data was sought from the retail supermarkets.

4% 34% 34% Certificate Diploma Degree 28% Masters

Figure 4.4: Academic Qualification

4.3.4 Number of Years Employed The respondents were also asked to indicate the number of years employees have been in retail supermarkets. The findings are as shown in Figure 4.5. The findings show that majority of the respondents 67 had worked for 1-5 years in the organization, 37 had worked for less than 6-10 year, 11 had worked for 11-15 years, 5 had worked for above 16 years. The findings show that majority of the respondents had worked between 1-5 years an indication that they were more skilled and understood how they operated; therefore, they were more knowledgeable on the aspect of this study.

0 1-5 6-10 11-15 16 and Above

Figure 4.5: Number of Years

4.3.5 Position The respondents were asked to state their job titles. The findings are as presented in Figure 4.6. The findings show that the respondents 41 were managers while 81 were assistant branch managers. The findings show that 18 respondents were branch manager, 42 respondents were assistant branch managers, 18 respondents were chief cashiers, 30 respondents were assistant cashier and 13 were retail administrators.

11% 15%

Branch Manager 25% Assister Branch Manager 34% Accountant

15% Cashier Admistrators

Figure 4.6: Position

4.4 Differentiation Strategy and Organizational Performance The study sought to establish the relationship between differentiation strategy and organizational performance based on the first research objective. The respondents were asked to specify their level of agreement with various elements of differentiation strategy that likely relate to organizational performance. The different statements measured the respondents’ level of agreement with regards to quality and uniqueness of products and services, use of technology and application of innovation, brand, marketing and customer service.

4.4.1 Descriptive Statistics for Differentiation Strategy

A five-point Likert Scale was used where 1 indicated a strong disagreement with the statements to 5 which indicated a strong agreement with the statements, the study sought to know respondents’ level of agreement with the statements. Means and standard deviations were used as part of the descriptive statistics to measure the central tendency and dispersion of the research data. The findings are presented in Table 4.1.

Table 4.1: Descriptive Statistics for Differentiation Strategy

Std. N Mean deviation The supermarket charges premium price for its products and 122 3.80 1.001 services. The supermarket has invested in innovation to provide custom 122 3.97 .944 made services. The supermarket has a well-established marketing department 122 4.11 .811 improving the purchase process of a customer. The supermarket has adopted technology enhancing the speed 122 4.15 .840 and quality of the services offered. The supermarket provides unique products with a special 122 4.15 .878 appeal to the customers. The supermarket provides a great customer service 122 4.27 .803 strengthening its reputation in the marketplace. Customers perceive the products and services of the 122 4.30 .770 supermarket different attracting a high market share. The supermarket places customers at the forefront when 122 4.33 .922 making decisions. The supermarket offers clearly identifiable products and 122 4.40 .540 services that are relatable to customers. Valid N (listwise) 122

As indicated in the findings in Table 4.1, most respondents agreed that the supermarkets offer clearly identifiable products and services that are relatable to customers with a mean score of (M = 4.40, SD = .540). There was also high agreement that supermarkets place customers at the forefront when making decisions (M = 4.33, SD = .922). Additionally, the respondents agreed that customers perceive the products and services of the supermarket different attracting a high market share (M = 4.30, SD = .770). However, the respondents seemed to be neutral to the statements on charging of premium prices for

39 supermarkets products and services (M=3.80, SD=1.001) as well as investing in innovation to provide custom made services (M=3.97, SD=.944).

The mean range analyzed on the Likert -Scale provided a mean range of 3.80 to 4.40. This range indicates that majority of the respondents either agreed or agreed strongly that the differentiation strategies presented in the research instrument are applied by the supermarkets. The standard deviation range for the responses is between 0.540 and 1.001. The highest variation of 1.001 between those who disagreed, agreed or were neutral when asked whether the supermarket charges premium price for its products and services. The least standard deviation was 0.540 for the clarity and relatability of products and services provided by the supermarkets to its customers. This implies very little variation in opinion of the responses provided for this statement.

4.4.1.1 Assumption for Linear Regression Analysis To ascertain differentiation strategy and organizational performance, the study conducted simple linear regression analysis.

4.4.1.1.1 Test for Normality Prior to linear regression analysis, test for the assumptions for linear regression analysis were done. Tests for Normality, Linearity, Heteroscedasticity and Multicollinearity were done to ascertain the assumption of linear regression analysis.

Figure 4.7: Histogram Plot for Differentiation Strategy

4.4.1.1.2 Test for Heteroscedasticity To determine the assumption for heteroscedasticity residual plot were used as shown

40 below in figure 4.8.

Figure 4.8: Residual Plot for Differentiation Strategy

4.4.2 Correlation Analysis between Differentiation Strategy and Organizational Performance To determine the degree to which a relationship exists between differentiation strategy and organizational performance, correlational analysis was done. The results are presented in Table 4.2. Findings in Table 4.2 indicate that there was a statistically significant strong and positive association /relationship between differentiation strategy and organizational performance, r (122) = -0. 825, p < .05.

Table 4.2: Correlation between Differentiation Strategy and Organizational Performance

Organizational Differentiation Performance Strategy Organizational Pearson Correlation 1 -.825** Performance Sig. (2-tailed) .000 N 122 122 Differentiation Pearson Correlation .825** 1 Strategy Sig. (2-tailed) .000 N 122 122 **. Correlation is significant at the 0.01 level (2-tailed).

4.4.3 Regression Analysis and Hypothesis Testing for Differentiation Strategy A regression analysis was carried out to determine relationship between the variables. To establish whether one or more than one independent variables (Differentiation Strategy) explain the changes in the dependent variable (Organizational Performance), multiple linear regression analysis was conducted.

H01: There is no statistically significant relationship between competitive strategies and organizational performance.

4.4.4 Model Summary for Differentiation Strategy

The findings from Table 4.3 show that the differentiation strategy explained a significant proportion of variance in organizational performance, adjusted R2 = 0.751. This means that 75.1% of the changes in organizational performance can be explained by the differentiation strategy applied by the supermarket.

Table 4.3:Model Summary for the Differentiation Strategy

Model Summary

Adjusted R Std. Error of the Model R R Square Square Estimate

1 .872a .761 .751 .23439 a. Predictors: (Constant), Differentiation Strategy

4.4.5 ANOVA for Differentiation Strategy

The relationship between differentiation strategy and organizational performance, as shown in the findings in Table 4.4, was significant, F(5,125) = 79.479, p < .01. This indicated that the model was statistically significant, and the differentiation strategy can be associated with organizational performance. This implies that the regression model was significant in explaining the relationship. Based on the significance of the F-statistic, the null hypothesis, D There is no statistically significant relationship between competitive strategies and organizational performance, was rejected.

Table 4.4: ANOVA for Differentiation Strategy

ANOVAa

Sum of Mean Model Squares Df Square F Sig.

1 Regression 21.832 4 4.366 79.479 .000b

Residual 6.867 118 .055

Total 28.699 122 a. Dependent Variable: Organizational Performance

4.4.6 Regression Coefficient for Differentiation Strategy

Multiple linear regression was conducted to determine the magnitude and direction of the relationship between differentiation strategy and organizational performance. The findings in Table 4.5 show that differentiation Strategy significantly predicted organizational performance in retail supermarket, β = -0.463, t (122) = -2.235, p < .05. This shows that a unit increase in differentiation strategy causes a decrease in organizational performance of retail supermarkets by about -0.46 units. Thus, the study findings conclude that differentiation strategy significantly predicts organizational performance in retail supermarket.

Table 4.5:Regression Coefficient for Differentiation Strategy

Coefficientsa

Unstandardized Standardized Coefficients Coefficients

Model B Std. Error Beta T Sig.

1 (Constant) 1.923 .074 25.971 .000

The supermarket provides -.001 .042 -.004 -.031 .975 unique products with a special appeal to the customers.

The supermarket charges .308 .083 .807 3.704 .000 premium price for its products and services.

The supermarket has adopted .409 .078 1.002 5.251 .000 technology enhancing the speed and quality of the services offered.

The supermarket offers clearly .164 .038 .409 4.268 .000 identifiable products and services that are relatable to customers.

Differentiation Strategy -.463 .207 -.982 -2.235 .027 a. Dependent Variable: Organizational Performance

4.4.7 Summary for Regression Analysis and Hypothesis Testing on Differentiation Strategy.

The multiple linear regression analysis established that differentiation strategy significantly predict organizational performance of retail supermarket, R2 = 0.751, F(4,122) = 79.48, p < .01; β = -0.463, p < .05. This implies that 75.1% of the variation in organizational performance in retail supermarket can be explained by the differentiation strategy. The regression model was found to be statistically significant in predicting the relationship between the differentiation strategy and organizational performance as it is

44 shown by a significant F-statistic. The coefficient for differentiation strategy means that each unit increase in differentiation strategy causes a decrease in organizational performance by about -0.463 units. The study therefore rejected the null hypothesis that differentiation strategy has no significant effect on organizational performance of retail supermarkets. This led to a conclusion that the differentiation strategy has a significant effect on organizational performance of retail supermarkets.

Based on the study findings, the model equation for differentiation strategy was:

Y = β0+β1X1+ Ɛ;

Y = 1.923 + -0.463 Differentiation Strategy + 0.207

4.5 Cost Leadership Strategy and Organizational Performance The study sought to establish the relationship between cost leadership strategy and organizational performance based on the second research objective. The respondents were asked to specify their level of agreement with various elements of cost leadership strategy that likely relate to organizational performance. The different statements measured the respondents’ level of agreement with regards to economies of scale, experience curve, capacity utilization, technology, outsourcing, vertical integration and supply chain efficiency.

4.5.1 Descriptive Statistics for Cost Leadership Strategy

Table 4.6: Descriptive Statistics for Cost Leadership Strategy

Std. N Mean Deviation The supermarket departments work well together resulting 122 4.25 .887 to efficient and highly integrated business processes. The supermarket has created partnerships with other 122 4.24 .761 companies resulting to efficiency. The supermarket conducts frequent trainings to the staff to 122 4.19 .875 better provide services to its customers. The supermarket has systems in place to track the amount 122 4.15 1.065 of stock as well as dispose old stock. The supermarket has fast moving stock reducing overall 122 4.11 .736 operational costs. The supermarket has outsourced its non-core functions 122 4.07 .652 reducing overall costs. The supermarket has specialized staff creating better 122 3.85 .915 efficiency in operations. The supermarket stocks enough goods and services at 122 3.84 .945 lower prices attracting many customers. The supermarket has allocated the right number of staff to a 122 3.48 1.228 single store depending on its size. Valid N (listwise) 122

From the findings in Table 4.6, most respondents agreed that supermarket departments work well together resulting to efficient and highly integrated business processes (M = 4.25, SD = .887). The respondents also highly agreed that supermarkets have created partnerships with other companies resulting to efficiency (M = 4.24, SD = .761). Additionally, they agreed that supermarkets conduct frequent trainings to the staff to better provide services to its customers (M = 4.19, SD = .875). The respondents seemed to be neutral to the statements on the supermarkets allocating the right number of staff to a single store depending on its size (M=3.48, SD=1.228). They were also neutral with the statements on stocking of enough goods and services at lower prices to attract many customers (M=3.84, SD=.945).

The mean range analyzed on the Likert -Scale provided a mean range of 3.48 to 4.25. This range indicates that majority of the respondents either agreed or agreed strongly that the cost leadership strategies presented in the research instrument are applied by the supermarkets. The standard deviation range for the responses is between 0.652 and 1.228. The highest variation of 1.228 between those who disagreed, agreed or were neutral when asked whether the supermarket has allocated the right number of staff to a single store depending on its size. The least standard deviation was 0.652 for outsourcing of supermarkets non-core functions reducing overall costs. This implies very little variation in opinion of the responses provided for this statement.

4.5.2 Correlation Analysis for Cost Leadership Strategy and Organizational Performance

The correlation analysis was conducted to establish the strength of a linear relationship between the cost leadership strategy and organizational performance. The results presented in Table 4.7 illustrate that the company use of results to enhance cost leadership strategy and organizational performance, result is as indicated in the table.

Table 4.7:Correlation between Cost Leadership Strategy and Organizational performance

Organizational performance Pearson Sig. (2- N

Correlation tailed)

The supermarket stocks enough goods and services at .475** .000 122 lower prices attracting many customers. The supermarket has specialized staff creating better .635** .000 122 efficiency in operations. The supermarket conducts frequent trainings to the .679** .000 122 staff to better provide services to its customers. The company uses the results to enhance Cost .710** .000 122 Leadership Strategy and set annual board goals. The supermarket has fast moving stock reducing .482** .000 122 overall operational costs. The supermarket has allocated the right number of .691** .000 122 staff to a single store depending on its size. **. Correlation is significant at the 0.01 level (2-tailed).

From a general point of view, the findings in Table 4.8 show that the association between overall cost leadership strategy and organizational performance is strong and significant, r(122) = 0.850, p < .01.

Table 4.8: Correlation Analysis on the Cost Leadership Strategy and Organizational performance

Correlations Organizational Cost Leadership performance Strategy Organizational Pearson Correlation 1 .850** performance Sig. (2-tailed) .000 N 122 122 Cost Leadership Pearson Correlation .850** 1 Strategy Sig. (2-tailed) .000 N 122 122 **. Correlation is significant at the 0.01 level (2-tailed).

4.5.3 Regression Analysis and Hypothesis Testing for Cost Leadership Strategy

To establish whether one or more than one independent variables (Cost Leadership Strategy) explain the changes in the dependent variable (organizational performance),

48 multiple linear regression analysis was carried out with an aimed at determining the relationship between leadership strategy and organizational performance. The null hypothesis tested was as below.

H01: There is no statistically significant relationship between cost leadership competitive strategies and organizational performance.

4.5.4 Model Summary for Cost Leadership Strategy

The findings from Table 4.9 show that the Cost Leadership Strategy explained a significant proportion of variance in organizational performance of retail supermarket, R2 = 0.720. The finding means that 72% of the changes in organizational performance in the retail supermarkets, can be explained by the Cost Leadership Strategy.

Table 4.9:Model Summary for the Cost Leadership Strategy

Model Summary

Adjusted R Std. Error of Model R R Square Square the Estimate

1 .850a .722 .720 .24874 a. Predictors: (Constant), Cost Leadership Strategy

4.5.5 ANOVA for Cost Leadership Strategy

The relationship between cost leadership strategy and organizational performance, as revealed in the findings in Table 4.10, was significant, F(1,122) = 334.840, p < .01. The study findings showed that the model was statistically significant in relating the cost leadership strategy used and organizational performance of retail supermarkets. Additionally, it was confirmed that cost leadership strategy was a good predictor of organizational performance retail supermarkets. The regression model was therefore significant and can explain the relationship between cost leadership strategy and firm performance. Based on the significance of the F-statistic, the null hypothesis, there is no

49 statistically significant relationship between cost leadership competitive strategies and organizational performance, was rejected.

Table 4.10:ANOVA for Cost Leadership Strategy

Model Sum of Squares Df Mean Square F Sig. 1 Regression 20.717 1 20.717 334.840 .000b Residual 7.981 121 .062 Total 28.699 122 a. Dependent Variable: Organizational performance b. Predictors: (Constant), Cost Leadership Strategy

4.5.6 Regression Coefficient for Cost Leadership Strategy

The findings in Table 4.11 illustrate that cost leadership strategy significantly predicted organizational performance in retail supermarkets, β = 0.440, t(122) = 18.299, p < .01. This indicates that a unit increase in cost leadership strategy causes an increase in organizational performance by about 0.440 units. Thus, the study findings conclude that cost leadership strategy significantly predicts organizational performance in retail supermarkets.

Table 4.11:Regression Coefficient for Cost Leadership Strategy

Unstandardized Standardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 1.766 .085 20.856 .000

Cost Leadership .440 .024 .850 18.299 .000 Strategy a. Dependent Variable: Organizational performance

4.5.7 Summary for Regression Analysis and Hypothesis Testing on Cost Leadership Strategy

The multiple linear regression analysis showed that cost leadership strategy significantly predict organizational performance of retail supermarkets, R2 = 0.720, F(1,122) = 334.840, p < .01; β = 0.440, p < .01. This implies that 72% of the variation in organizational performance in retail supermarkets can be explained by the cost leadership strategy. The regression model was found to be statistically significant in predicting the relationship between the cost leadership strategy and organizational performance as it is shown by a significant F-statistic. The coefficient for cost leadership strategy means that each unit increase in cost leadership causes an increase in organizational performance by about 0.440 units. The null hypothesis in this case that cost leadership strategy has no significant effect on organizational performance was rejected. This led to a conclusion that the cost leadership strategy has a significant effect on organizational performance of retail supermarkets.

From the study findings, the model equation for cost leadership was:

Y = β0+β1X1+ Ɛ;

Y = 1.766 + 0.440 Cost Leadership Strategy + 0.024.

4.6 Focus Strategy and Organizational Performance The study sought to establish the relationship between focus strategy and organizational performance based on the third research objective. The respondents were asked to specify their level of agreement with various elements of focus strategy that likely relate to organizational performance. The different statements measured the respondents’ level of agreement with regards to customer orientation, operational efficiency, cost reduction, product development, market penetration, innovation, technology and expertise.

4.6.1 Descriptive Statistics

Table 4.12:Descriptive Statistics for Focus Strategy

Std. Mea Deviati N n on The supermarket has opened several branches in different 122 4.70 .559 locations reaching many potential customers. The supermarket provides mobile and card payment options 122 4.64 .576 improving customers convenience. The supermarket has adopted a point of sale system better 122 4.52 .592 managing the inventory. The supermarket provides unique products to customers creating a 122 4.35 .559 unique identity. The supermarket provides delivery services to the customers 120 4.18 .953 resulting into excellent customer experience. The supermarket has invested in high performance equipment 122 4.07 .946 ensuring quality of the products and services provided. The supermarket has self service facilities reducing the amount of 122 3.88 .932 time taken by customers in the stores. Most supermarket products and services are tailor made to suit 122 3.80 1.067 specific needs of customers. Valid N (listwise) 120

From the findings in Table 4.10, most respondents agreed that the supermarkets have opened several branches in different locations reaching many potential customers. (M = 4.70, SD = .559). There was also massive agreement on the supermarkets providing mobile and card payment options improving customer’s convenience. (M = 4.64, SD = .576). It was also followed by undisputable agreement that the supermarkets have adopted a point of sale system better managing the inventory (M = 4.52, SD = .592).There was also neutrality on the supermarkets proving products and services that are tailor made to suit specific needs of customers(M = 3.80, SD = 1.067). The respondents also seemed to

52 be neutral on supermarkets providing self service facilities to reduce the amount of time taken by customers in the stores (M = 3.88, SD = .932). The mean range analyzed on the Likert -Scale provided a mean range of 3.80 to 4.70. This range indicates that majority of the respondents either agreed or agreed strongly that the focus strategies presented in the research instrument are applied by the supermarkets. The standard deviation range for the responses is between 0.559 and 1.067. The highest variation of 1.067 between those who disagreed, agreed or were neutral when asked whether the supermarkets’ products and services are tailor made to suit specific needs of customers. The least standard deviation was 0.559 the supermarkets has opened several branches in different locations reaching many potential customers, this was similar response to the supermarkets providing unique products to customers creating a unique identity. This implies very little variation in opinion of the responses provided for this statement. 4.6.2 Correlation between Focus strategy and Organizational performance

Correlation analysis was conducted to determine the degree to which a relationship exists between the focus strategy and organizational performance retail supermarket. The findings presented in Table 4.13 show that the action of focus strategy as a focal point for and organizational performance, the result is as indicated in the table below.

Table 4.13: Correlation between Focus strategy and Organizational performance

Organizational performance Pearson Sig. (2- N Correlation tailed) The supermarket has invested in high performance .803** .000 122 equipment ensuring quality of the products and services provided.

The supermarket has self service facilities reducing the .758** .000 122 amount of time taken by customers in the stores.

The supermarket provides delivery services to the .119 .190 121 customers resulting into excellent customer experience.

The supermarket provides mobile and card payment .182* .049 118 options improving customers convenience.

The supermarket has adopted a point of sale system better -.080 .379 121 managing the inventory.

The supermarket has opened several branches in different .008 .930 117 locations reaching many potential customers.

The supermarket provides unique products to customers .293** .001 120 creating a unique identity.

Most supermarket products and services are tailor made to .147 .103 121 suit specific needs of customers.

**. Correlation is significant at the 0.01 level (2-tailed).

Generally, the findings in Table 4.13 show strong and significant association between overall focus strategy and organizational performance in retail supermarkets, r (122) = 0.739, p < .01.

Table 4.14: Correlation Analysis on the Focus strategy and Organizational performance

Correlations Organizational Focus performance strategy Organizational performance Pearson Correlation 1 .739** Sig. (2-tailed) .000 N 122 122 Focus strategy Pearson Correlation .739** 1 Sig. (2-tailed) .000 N 122 122 **. Correlation is significant at the 0.01 level (2-tailed).

4.6.3 Regression Analysis and Hypothesis Testing for Focus strategy

To establish whether one or more than one independent variables (focus strategy) explain the changes in the dependent variable (organizational performance) multiple linear regression analysis was conducted to determine the relationship between focus strategy and organizational performance. The null hypothesis tested was;

H03: There is no statistically significant relationship between focused competitive strategies and organizational performance.

4.6.4 Regression Model Summary for Focus strategy

The findings from Table 4.14 show that the focus strategy explained a significant proportion of variance in organizational performance, R2 = 0.543. This showed that 54.3% of the changes in organizational performance can be explained by the focus strategy.

Table 4.15:Model Summary for the Focus strategy

Model Summary

Adjusted R Std. Error of Model R R Square Square the Estimate

1 .739a .547 .543 .31752 a. Predictors: (Constant), Focus strategy

4.6.5 ANOVA for Focus strategy

The relationship between focus strategy and organizational performance was found to be significant, the findings are presented in Table 4.15, F(1,129) = 155.654, p < .01. The study results implied that the model was statistically significant and there exists a relationship between the focus strategy and organizational performance. Additionally, it was confirmed that focus strategy was a good predictor of organizational performance in retail supermarkets. The regression model was also significant in explaining the relationship. Based on the significance of the F-statistic, the null hypothesis, There is no statistically significant relationship between focused competitive strategies and organizational performance, was rejected.

Table 4.16:ANOVA for Focus strategy

ANOVAa

Sum of Mean Model Squares df Square F Sig.

1 Regression 15.693 1 15.693 155.654 .000b

Residual 13.006 129 .101

Total 28.699 130 a. Dependent Variable: Organizational performance b. Predictors: (Constant), Focus strategy

4.6.6 Regression Coefficient for Focus strategy

Multiple linear regression was carried out to find out the magnitude and direction of the relationship between focus strategy and organizational performance. The findings in Table 4.16 show that focus strategy significantly predicted organizational performance, β = 0.623, t(122) = 12.476, p < .01. Therefore, a unit increase in focus strategy results to an increase in organizational performance by about 0.623 units. Thus, the study findings conclude that focus strategy significantly predict organizational performance.

Table 4.17:Regression Coefficient for Focus strategy

Coefficientsa

Unstandardized Standardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 1.208 .167 7.224 .000

Focus strategy .623 .050 .739 12.476 .000 a. Dependent Variable: Organizational performance

4.6.7 Summary for Regression Analysis and Hypothesis Testing on Focus strategy

The multiple linear regression analysis established that focus strategy significantly predict organizational performance of retail supermarket, R2 = 0.543, F(1,121) = 155.654, p < .01; β = 0.623, p < .01. This implies that 54.3% of the variation in organizational performance in retail supermarkets can be explained by the focus strategy. The regression model was found to be statistically significant in predicting the relationship between the focus strategy and organizational performance as it is shown by a significant F-statistic. The coefficient for the focus strategy implies that each unit increase in focus strategy results to an increase in organizational performance by about 0.6233 units. The study thus rejected the null hypothesis that there is no statistically significant relationship between focused competitive strategies and organizational performance. The focus strategy therefore has a significant effect on organizational performance.

Considering the study findings, the model equation for focus strategy was:

Y = β0+β1X1+ Ɛ;

Y = 1.208 + 0.623 Focus Strategy + 0.050.

4.7 Chapter Summary This chapter summarized the results and findings of the study. The first section of the chapter provided the response rate, the second section presented the general and demographic analysis. The third section presented finds on the relationship between differentiation strategy and organizational performance, the fourth section presented the analysis on the relationship between cost leadership strategy and organizational performance and the fifth section presented the analysis on relationship between focus strategies and organizational performance. Chapter five discusses the findings, conclusions and recommendations.

CHAPTER FIVE

5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS 5.1 Introduction This chapter discusses the research results and summarizes the findings from the data analysis. The findings are also discussed in line with literature review presented by other scholars. Conclusions are then drawn from the study, recommendations for improvement and further studies are also clearly laid out on the relationship between the competitive strategies and organizational performance.

5.2 Summary The aim of the study was to find the relationship between competitive strategies and organizational performance of retail supermarkets in Nairobi. The study was guided by three research questions to find out the relationship between differentiation strategy and organizational performance, to examine the relationship between cost leadership strategy and organizational performance and to determine the relationship between focus strategy and organizational performance of retail supermarkets in Nairobi, Kenya.

The study adopted a cross sectional and descriptive research design. Data collection was done through questionnaires to obtaining information from the respondents. The target population comprised of retail supermarket employees from Nairobi. A sample size of 159 respondents was selected and questionnaires presented to them. As displayed on Figure 4.1, 122 questionnaires were dully filled and returned giving a response rate of 77%. The data was then entered into SPSS (version 24) which was then used to analyse and summarize the responses resulting into both descriptive and inferential statistics. The output was then presented using tables and figures.

The first research objective was to determine the relationship between differentiation strategy and organizational performance of retail supermarkets. The study revealed that applying differentiation strategy strongly and significantly contributes to organizational performance of Tuskys retail supermarkets. It revealed differentiation as an effective strategy (r= -0.835, p-value <0.5). The regression analysis on the other hand implied that 75.1% of the variation in organizational performance in retail supermarkets can be explained by the differentiation strategy. The second research objective was to determine

59 the relationship between cost leadership strategy and organizational performance of retail supermarkets. The study revealed that applying cost leadership strongly and significantly contributes to organizational performance of Tuskys retail supermarkets. It further revealed that cost leadership’s strategy was the most significant strategy i.e. more effective than differentiation and focus strategy (r= 0.850, p-value <0.01). A regression analysis then revealed that 72% of the changes in organizational performance in the retail supermarkets, can be explained by the cost leadership strategy. The third research objective was to determine the relationship between focus strategy and organizational performance of retail supermarkets. The study revealed that applying focus strategy strongly and significantly contributes to organizational performance of Tuskys retail supermarkets. It further revealed that focus strategy was not as effective as the cost leadership strategy (r= 0.739, p-value <0.01). The results from regression analysis show possibly that 54.3% of the changes in organizational performance can be explained by the focus strategy.

5.3 Discussion 5.3.1 Differentiation Strategy and Organizational Performance In this study differentiation study research findings proved that on the contrary differentiation strategy does not necessarily increase the performance of retail supermarkets in Nairobi. However, it was keen to note that the findings of the study revealed that the retail supermarkets have adopted differentiation strategies. The strategies that have been applied include provision of high-quality products and services, use of technology, presence of a strong brand, establishing good marketing platforms and excellent customer service. This agrees with Adimo (2018) who highlighted that the factors of emphasis in differentiation strategies include having unique features, culminating a culture of responsive customer service, having rapid innovations within the organizations and as well as adoption of technology.

The study results showed that the retail supermarkets have in place differentiation strategies. They provide unique products and services with a special appeal to the customers. At the same time the respondents agreed that the customers perceive the products and services of the supermarket different attracting a high market share. The adoption of the strategies verifies what Obinna and Ugwuegbu (2018) had asserted to that

60 quality creates value coming with a superior service as perceived by the customers. The study findings however show a negative relationship (r= -0.835, p-value <0.5) with performance this could be owing to the fact the study was done in a more service-oriented industry. The study results show consensus with Arora (2013) who stated that in the service industry it is very difficult with increase in competition, inseparability and intangibility features of services for customers to choose between services of one organization and leave out of the other. The study results also reveal that the retail supermarkets have adopted technology enhancing the speed and quality of the services offered, they have also put the customers at the forefront when making decisions.

The results from the research highlight that the supermarkets offer clearly identifiable products and services that are well relatable to the customers. The retail supermarkets also have in place good customer service strengthening their reputation in the marketplace. Marketing is also seen to be well invested by the supermarkets by virtue of the supermarkets having well established marketing departments. The outcome from the marketing technique as a tool for increasing organization performance tends to agree with a study on effects of use of marketing as a technique to improve performance where Marketing strategies including product promotion , price and place were found not to be useful for survival, sustenance and expansion of the Nigerian Bottling Company (Daniel, 2018). The study however also showed uncertainties about uniqueness and innovation within the supermarket.

The results show that applying differentiation strategy strongly and significantly but negatively contributes to organizational performance of the supermarket (r= -0.835, p- value <0.5), this highly attributes the negative growth in organizational performance to the differentiation strategies in place. The regression analysis further implying that 75.1% of the variation in organizational performance in retail supermarkets can be explained by the differentiation strategy. These outcomes are different from those findings of a research carried out by Ngari and Bichanga (2017) which showed how commercial banks that have adopted differentiation strategies have been able to enhance customer satisfaction, they have promoted innovation highly differentiating the products and services for specific customer needs. For this study the findings indicate for sure that lack of research and development within organizations results to failure of the businesses regardless of whether the differentiation strategies have been applied. The findings agree 61 that an organization derives differentiation advantages through high quality and emphasize on innovation. Innovation subsequently from increased globalization coupled with advance in technology which is achieved by allowing entry of foreign competitors into markets. Organizations should opt to innovate to cope with changing customer preferences, change in the operating environment and increased rate of competition which result to decreased performance (Semuel, Siagian, & Octavia, 2017). Organizations should embrace the development of new and improved products as the only factor that is important in controlling the success or failure of an organization. Therefore, due to lack of innovation the differentiation techniques adopted are not working in favor of the retail supermarkets in Nairobi.

5.3.2 Cost Leadership Strategy and Organizational Performance Cost leadership was found to be significant as well as positively contributing to the performance of retail supermarkets in Nairobi (r= 0.850, p-value <0.01). This implies that charging competitive prices compared to other entities will continue to improve the performance of retail supermarkets. According to Chepchirchir, Omillo and Munyua ( 2018), cost leadership is reliant on organizational capabilities to allow them attain a low cost position this calls for need to cut costs in areas that are not core to their business to allow them charge lower prices and still offer up to per products. This explains why the supermarkets have adopted a cost leadership strategy such as high capacity utilization, use of technology, vertical integration and supply chain efficiency to cut down costs as well as increase the market share.

The study indicates that the supermarkets have in place cost savings approaches. The supermarkets stock fast moving stock reducing overall operational costs they have in place systems to track and dispose old stock that could generally contribute to increase in storage costs and have adopted technology to reduce the operational costs. The cost reduction measures in place contribute to improved organizational performance. These findings are also in line with other researches. According to Okunade (2018) there is need to improve capacity utilization through creating of well laid policies to curb foreign exchange rate, ensure coordinated imports of goods and services and facilitate access of technology for production and provision of goods and services. Seguin and Sweetland (2014) also indicated that an organization should be able to match its output to input explaining that excessive capacity implies a strain on employees and equipment which generally leads to increased operation costs.

The research results also show how operational efficiency and vertical integration is a key driver of cost. The supermarkets have partnered with other companies resulting to efficiency within the retail stores. There is also cohesion within the retail stores departments which has resulted to efficiency and highly integrated business processes improving service delivery hence resulting to growth in the market share. In earlier studies (Lind 2016) argued that companies that have chosen to use vertical integration gain knowledge and have more options that are important in many bargaining situations for example in costs and profits of other activities. In agreement with the research findings Hajiesmaeili, et al. (2016) also argued that companies can measure efficiency if they achieve customer satisfaction through delivery speed, dependability and flexibility.

The study results also showed uncertainty about the economies of scale and the experience curve within the supermarkets. There was also uncertainty of the outsourcing of activities adoption by the management of the supermarkets. The findings contradict the results of studies that have been listed with economies of scale, experience curve and outsourcing as low-cost drivers. According to Katana and Gichure (2017) most of the companies in the recent past have adopted outsourcing as a strategy to cut costs which results in greater flexibility and enhance service level allowing organizations to focus on their core activities. This was also in contradiction with Samadi (2018) who stated that specific costs decrease as experience is gained overtime form provision and production of goods and services helping the company reduce price as this gives rise to an increased market share.

The results show that applying cost leadership strategies strongly and significantly contributes to organizational performance of the supermarket (r= 0.850, p-value <0.01), this highly attributes the growth in organizational performance to the cost leadership strategies in place. A regression analysis further revealing that 72% of the changes in organizational performance in the retail supermarkets, can be explained by the cost leadership strategies in place. These outcomes are similar to those findings of a research carried out by Kiprotich , Gachunga and Bonuke (2018) which showed how organizations used the cost leadership strategies to become a low cost producer, gaining defense against competitors and still maintaining high revenue returns by focusing on improving efficiency which was able to control costs.

5.3.3 Focus Strategy and Organizational Performance

The research findings showed that the retail supermarkets have also employed focus strategies in their operations. The results were found to be significant and positively contribute to the performance of retail supermarkets in Nairobi (r= 0.739, p-value <0.01). Focus strategies used were more alienated to differentiation and low-cost focus and were found to improve the performance of retail supermarkets. The focus techniques such as customer orientation, operational efficiency, market penetration and technology have been applied within the supermarkets. The findings are similar to the study by Arasa and Githinji (2014) that the organizations that apply this strategy ensure a high degree of customer loyalty. Similarly, on cost focus Asena (2017) asserted that factors contributing to success of the strategy include efficient-scale facilities, excellent customer service and use of technology. On the other hand, according to Githumbi and Ragui (2017) focus differentiation is achieved through use of technology and having a big enough market achieved through market penetration.

The results indicate that supermarkets provide delivery services to its customers creating a niche for the online age. They have also invested in high performance equipment ensuring quality of products and services provided. These contributes to operational efficiency across the retail stores which directly translates to improvement in provision of services to the customer largely contributing to customer loyalty and growth of the market share. The study findings concur with findings from a study by Okwanga, Mungania and Karanja (2015) who purported that operational efficiency brings about low costs on products and services, improvement in service time which is directly attributed to excellent customer service provided by organizations.

The research results also show that the supermarkets massively provide mobile and card payment services across the supermarkets resulting into improved customer convenience as well as adoption of systems to better manage inventory. The findings are similar to findings on a study on effect of mobile and card payments on the Performance of supermarkets in Nairobi County, Kenya which indicated that there was an increase in sales from introduction of card, credit, debit and mobile payments. The study also indicated that the introduction of the channels greatly reduced operational costs (Jumba & Wepukhulu, 2019). Market penetration was also portrayed as a strategy that has also

64 contributed to the improvement of performance of the retail supermarkets creating opportunities for the supermarkets due to the different operating environments. It gives the supermarket better ways of managing inventory since the different markets have different needs. Other studies also agree with the findings of this research. According to Alkasim, Hilman and Bohari (2017), market penetration creates opportunities for organizations to reduce inventory levels, decrease cost and increase operating performance.

The study results also showed uncertainties on product development more precisely tailor-made products and services and self-services within the supermarkets. This was also the same when it came to innovation and expertise within the retail supermarkets. This is mostly relating to provision of unique products and services to specific target customers to create a unique identity as well as provision of tailor-made products and services to suit specific needs of customers. This is contrary to what Karakasa, Ozb and Yildc (2016) asserted that innovation is a successive process provides new opportunities for businesses to operate with its new capabilities to meet specific customer needs. Again, operational efficiency helps ensure superior performance by improving all dimensions from production, employees’ interaction, implementing changes by involving customers constantly innovating and moving at optimal speed (Wahab, Ismail, & Muhayiddin, 2016).The results show that applying focus strategy strongly and significantly contributes to organizational performance of the supermarket (r= 0.739, p-value <0.01), this highly attributes the positive growth in organizational performance to the focus strategies in place. The results from regression analysis show possibly that 54.3% of the changes in organizational performance can be explained by the focus strategy. 5.4 Conclusions 5.4.1 Differentiation Strategy and Organizational Performance

The results show that applying differentiation strategy strongly and significantly contributes to organizational performance of the supermarket but can highly be attributed to the negative growth in organizational performance to the differentiation strategies in place, any variation in organizational performance in retail supermarkets can be explained by the differentiation strategy meaning each unit increase in differentiation strategy causes a decrease in organizational performance. The study thus rejected the null hypothesis that differentiation strategy has no significant effect on organizational

65 performance of retail supermarket leading to a conclusion that the differentiation strategy has a significant effect on organizational performance of a retail supermarket.

5.4.2 Cost Leadership Strategy and Organizational Performance

The results show that applying a cost leadership strategy strongly and significantly contributes to organizational performance of the supermarket highly attributed to the positive growth in organizational performance, a variation in organizational performance in retail supermarkets can be explained by the cost leadership strategies in place meaning each unit increase in cost leadership strategy causes an increase in organizational performance. The study thus rejected the null hypothesis that cost leadership strategy has no significant effect on organizational performance. This led to a conclusion that the cost leadership strategy has a significant effect on organizational performance of retail supermarkets.

5.4.3 Focus Strategy and Organizational Performance

The results show that applying focus strategy strongly and significantly contributes to organizational performance of the supermarket, the application of the strategies is also attributed to the growth in organizational performance. Any variation in organizational performance in retail supermarkets can be explained by the focus strategies in place meaning each unit increase in focus strategy causes an increase in organizational performance. The study thus rejected the null hypothesis that there is no statistically significant relationship between focused competitive strategies and organizational performance. This led to a conclusion that the focus strategy has a significant effect on organizational performance.

5.5 Recommendations 5.5.1 Recommendations for Improvement

5.5.1.1 Differentiation Strategy and Organizational Performance

The retail supermarkets in Nairobi should work towards investing more in research and development departments where innovation can take place. Innovation ensures that there is increased competition from the rivals as well as makes the operating environment global, meaning an organization can compete globally with other global players. At the same time the retail stores will be able to increase consumer expectations and mostly gain first mover advantage. Internally, the retail supermarkets will be able to change the

66 demographics at the workplace by generally changing processes, policies and structure of the organization. This means that the supermarkets will be able to survive and improve performance continually. The retail supermarkets should also introduce brand extensions which work well in favor of their brand. The supermarkets will be able to increase their product lines by introducing new product and service categories. The use of brand extensions is easily acceptable since the customers are already familiar with the current brand and are also able to give feedback directly for improvement of the products.

5.5.1.2 Cost Leadership Strategy and Organizational Performance

Cost leadership is very instrumental in improvement of performance for the supermarkets; therefore, the supermarkets should continue applying the techniques this should be done keeping in mind the quality of goods and services as well as what the customer needs are. The supermarkets should also enhance outsourcing to be able to reap the benefits that come up with it. This is including massive reduction of costs, increase in efficiency in operations due to faster delivery of better services by the dedicated staff. Again, the retail supermarkets employees can focus on core areas such as developing better strategies for the organization. The supermarkets will also be able to save on cost of laying down the infrastructure and technology. This should be coupled up with introduction of specialization by employees within the stores to increase speed of services delivery, improving efficiency as well as guaranteed job satisfaction for the employees.

5.5.1.3 Focus Strategy and Organizational Performance

Retail supermarkets should also continue the use of focus techniques to ensure improved performance. They should partner with other companies to provide delivery of goods and services for example the emergent taxi services. They should also allow global payment services to allow visitors purchase items whenever they are within Kenya. Market penetration being a key technique should also be taken with a lot of caution, there is need to include market researches before opening new stores. The retail supermarkets should also embrace the use of data to make certain decisions such as big data and internet of things, this way they can tell how long a certain trend will last. Mostly the supermarkets should focus on the changing landscape i.e. the operating environment rather that expansion of their stores.

5.5.2 Recommendations for Further Research

The study was limited to one retail supermarket. Further research will be necessary to include other retail supermarkets and other major cities such as Mombasa, Eldoret and Kisumu to be able to generalize findings on the Kenyan retail market. This way the problem which has been prevailing within the retail players can be addressed. The study was also concentrating on competitive strategies and does not give time to the environment where the retail stores are operating which is equally important to survival and performance of organizations. A study on relationship between competitive strategies and organization performance of retail supermarkets with the operating environment as a moderating variable is recommended.

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APPENDICES

APPENDIX I: LETTER OF INTRODUCTION Beth Muiruri P.O. BOX 18859-00500 Nairobi, Kenya Email: [email protected]

23rd September 2019

Dear Respondent,

RE: REQUEST FOR PARTICIPATION IN RESEARCH WORK

I am a graduate student at the United States International University – Africa pursuing a master’s degree in Business Administration (MBA) with a concentration in Strategic Management. I am conducting a research on the “Relationship between Competitive Strategies and Organizational Performance: A Case of Retail Supermarkets in Nairobi, Kenya” and need the views of management staff at the retail stores.

For this purpose, I require your assistance in getting responses of the attached questionnaire. Please note that all the information provided will be treated with confidentiality and for the purposes of this research only.

Please feel free to contact the undersigned should you require any clarification.

Thank you for your co-operation.

Yours Sincerely, Beth Muiruri Student ID: 656976

APPENDIX 2: QUESTIONNAIRE RELATIONSHIP BETWEEN COMPETITIVE STRATEGIES AND ORGANIZATIONAL PERFORMANCE: A CASE OF RETAIL SUPERMARKETS IN NAIROBI, KENYA

SECTION A: GENERAL INFORMATION

Please tick the most appropriate answer (√)

1. Indicate your gender? Female [ ] Male [ ] 2. What is your age group? 18-22 [ ] 23-27 [ ] 28-31 [ ] 32-36 [] Above 36[] 3. Which is your highest education level? Certificate [ ] Diploma [ ] Degree[ ] Masters[ ] PHD [ ] 4. Number of years of employment? 1-5 [ ] 6-10 [ ] 11-15[ ] 16 and Above [ ] 5. Please indicate your job title

SECTION B: DIFFERENTIATION STRATEGY

Kindly indicate your level of agreement or disagreement with the following statements by ticking (√) where appropriate 1= Strongly Disagree, 2= Disagree, 3= Neutral, 4 = Agree, 5= Strongly Agree

Differentiation Strategy 1 2 3 4 5 i. High Quality and Uniqueness 6. The supermarket provides unique products with a special appeal to the customers. 7. The supermarket charges premium price for its products and services. 8. Customers perceive the products and services of the supermarket different attracting a high market share. ii. Technology and Innovation 9. The supermarket has adopted technology enhancing the speed and quality of the services offered. 10. The supermarket has invested in innovation to provide custom made services.

11. The supermarket places customers at the forefront when making decisions. iii. Strong Brand, Marketing and Customer Service 12. The supermarket offers clearly identifiable products and services that are relatable to customers. 13. The supermarket provides a great customer service strengthening its reputation in the marketplace. 14. The supermarket has a well-established marketing department improving the purchase process of a customer. SECTION C: COST LEADERSHIP STRATEGY

Kindly indicate your level of agreement or disagreement with the following statements by ticking (√) where appropriate 1= Strongly Disagree, 2= Disagree, 3= Neutral, 4 = Agree, 5= Strongly Agree

Cost Leadership Strategy 1 2 3 4 5 i. Economies of Scale and Experience curve 15. The supermarket stocks enough goods and services at lower prices attracting many customers. 16. The supermarket has specialized staff creating better efficiency in operations. 17. The supermarket conducts frequent trainings to the staff to better provide services to its customers. ii. Capacity Utilization 18. The supermarket has fast moving stock reducing overall operational costs. 19. The supermarket has allocated the right number of staff to a single store depending on its size. 20. The supermarket has systems in place to track the amount of stock as well as dispose old stock. iii. Outsourcing, Backward Vertical Integration and Logistics Efficiency

21. The supermarket has outsourced its non-core functions reducing overall costs. 22. The supermarket has created partnerships with other companies resulting to efficiency. 23. The supermarket departments work well together resulting to efficient and highly integrated business processes. SECTION C: FOCUS STRATEGY

Kindly indicate your level of agreement or disagreement with the following statements by ticking (√) where appropriate 1= Strongly Disagree, 2= Disagree, 3= Neutral, 4 = Agree, 5= Strongly Agree

Focused Cost Strategy 1 2 3 4 5 i. Operational Efficiency, Cost Reduction, Excellent Customer Service 24. The supermarket has invested in high performance equipment ensuring quality of the products and services provided. 25. The supermarket has self service facilities reducing the amount of time taken by customers in the stores. 26. The supermarket provides delivery services to the customers resulting into excellent customer experience. Focused Differentiation Strategy i. Innovation and Technology 27. The supermarket provides mobile and card payment options improving customers convenience. 28. The supermarket has adopted a point of sale system better managing the inventory. ii. Market Penetration and Product Development 29. The supermarket has opened several branches in different locations reaching many potential customers.

30. The supermarket provides unique products to customers creating a unique identity. 31. Most supermarket products and services are tailor made to suit specific needs of customers. SECTION D: ORGANIZATIONAL PERFORMANCE

Kindly indicate your level of agreement or disagreement with the following statements by ticking (√) where appropriate 1= Strongly Disagree, 2= Disagree, 3= Neutral, 4 = Agree, 5= Strongly Agree

Supplier Relationship 1 2 3 4 5 32. The suppliers of the supermarket deliver the supplies on time. 33. The suppliers of the supermarket deliver quality products and services. 34. There exists mutual cooperation between the supermarket and its suppliers. Brand Image 35. The supermarket has many repeat customers indicative of a strong brand. 36. The supermarket outlets and services are easily identifiable by customers. 37. The supermarket records high annual sales volumes. Market Share 38. The supermarket has the largest share of the retail customers. 39. The supermarket is attractive to most customers. 40. The supermarket mostly gives rise to emergent trends resulting to the growth of its market share. Please indicate the profitability index of the supermarket over the past 3 years 41. Profitability Index for the last 3 years Year 1 Year 2 Year 3

Thank you for taking time to respond to this questionnaire.

APPENDIX 3: LETTER FROM THE UNIVERSITY

APPENDIX 4: NACOSTI PERMIT