Corporate Strategy for Medium Scale Manufacturing Enterprises in Kenya

Abstract

Sustainable Development Goals and Africa Agenda 2063 acknowledges Small and Medium Enterprises as critical in promoting sustainable global economic development. However, most studies on corporate strategy in Kenya have mainly examined micro, small and large enterprises creating a missing middle with inadequate empirical data on medium scale enterprises, including those in the manufacturing sector. Moreover, Kenya’s big four agenda proposes support to the manufacturing sector so as to raise its GDP share to 15 percent by 2022 in support of the realization of Vision 2030. Unfortunately, growth in the manufacturing sector has stagnated at about USD 5 billion for over a decade and continues to lose market share and competitiveness internationally. This study therefore investigated corporate strategy and competitiveness of medium scale manufacturing enterprises in Kenya. Data was collected from 56 senior management staff.  Mean responses received in a Likert scale of 1 – 5 for each of the tested item was calculated by summing up all the codes and getting the average of the 56 respondents. This study established MSMEs which are within the SME sector are on average performing below par on issues to do with business strategy. The results show that in 56.1% of the MSMEs, there is a clearly written business unit mission statement (mean response of 4.3). In 54.5% of the firms, the business unit strategy is not adequate in light of competitive pressure (mean response 2.5) and the business unit strategy is not appropriate for exploiting opportunities in the future. In 48.5% of the firms, the business unit strategy is not formulated carefully by all levels of management (mean response 2.7) and there is no clearly developed long term business unit strategy (mean response 2.9). In 39.4% of these firms, the business unit strategy does not adequately reflect the strengths of the business unit (mean response 2.8). The study concluded that lack of an effective business strategy to direct the efforts of human resources in the desired direction would result in inability to realize the set organizational objectives. This means these MSMEs are struggling to operate, manage and improve their businesses efficiency and effectiveness in order to deliver quality products and services consistently and on time. This has a negative effect on MSMEs performance as it implies internal inefficiencies, ineffectiveness and negative bottom line, reduced job opportunities and low contribution to the gross domestic product (GDP) in Kenya. The study recommended that the MSMEs should organise strategic focus workshops and use a combination of Porter’s five force model components to plan, organise and formulate their business strategy mechanism after a comprehensive SWOT analysis. The MSMEs should periodically review their strategy in line with the prevailing competitive pressures using the following criteria to identify crucial strategic issues: (a) The impact they could have on their enterprises, (b) the likelihood that the identified issues would materialize, and (c) the time frame over which they could develop. The number of these issues needs to be limited to a manageable number (three to nine) to enhance the chances of securing the commitment and resources necessary to effectively act on them. The expected study output would be enhanced competitiveness of MSME and realization of Kenya’s vision 2030.