Business Turnaround Strategies and Performance of Large Manufacturing Firms in Kenya

Abstract

Most of the large manufacturing firms in Kenya have been experiencing declining performance in terms of revenue, sales and the profit margins for more than a decade. This has seen some of the large manufacturing firms in the country consider strategies such as relocating or restructuring their operations, opting to serve the local market through importing from low-cost manufacturing areas instead of adopting turnaround strategies. This therefore prompts a question on which turnaround strategies are effective for the manufacturing firms; hence a motivation of this study to establish the influence of turnaround strategies on performance of large manufacturing firms in Kenya. The study specifically focused on retrenchment strategy, divestment strategy, re-engineering strategy and outsourcing strategy. The moderating effect of organizational culture on the relationship between turnaround strategies and performance of large manufacturing firms in Kenya was considered since conducive working environment is key for success of any strategy in the firm. This study was informed by theory of strategic orientation, real options theory, transaction cost economics theory, theory of constraints and human relations theory. Positivism research philosophy and descriptive research design were adopted while 708 large manufacturing firms in Kenya registered under the Kenya Association of Manufacturers as at 2017 were targeted. The sample size for the study was 249 firms selected randomly from all the 14 sectors of the manufacturing industry in Kenya. The data collection instrument was a questionnaire, while mean, frequencies and percentages were used to describe the data. Correlation and regression inferential statistics were employed to show the direction, magnitude and significance of the association between turnaround strategies and performance of large manufacturing firms in Kenya. Data presentation was done through charts, figures and tables. The study established that retrenchment strategy, divestment strategy, re-engineering strategy and outsourcing strategy have significant and positive influence on the performance of large manufacturing firms in Kenya. The findings further revealed that organizational culture has significant moderating effect on the relationship between turnaround strategies and performance of large manufacturing companies. The study concluded that the turnaround strategies (retrenchment strategy, divestment strategy, re-engineering strategy and outsourcing strategy) with culture as the moderating variable positively influence the performance of large manufacturing companies. It is therefore recommended that the management of large manufacturing firms uphold the retrenchment, reengineering, divestment and outsourcing strategies as a way of enhancing the performance of the firms.