STRATEGIC MANAGEMENT PRACTICES AND PERFORMANCE OF SMALL AND MICRO ENTERPRISES IN NAIROBI CITY COUNTY, KENYA
Ali Khalif Gure - Master of Business Administration (Strategic Management), Kenyatta University, Kenya
Dr. Janesther Karugu - Department of Business Administration, Kenyatta University, Kenya
ABSTRACT
Small and Medium Enterprises (SMEs) is an important sub sector for the Kenyan economy like many other developing countries since it employs about 85% of the Kenyan workforce (about 7.5million Kenyans of the current total employment). The current constitutional framework and the new Micro and Small Enterprise Act 2012 provide a new window of opportunity through which the evolution of SMEs can be realized through the devolution framework. However, the impact of devolution on SMEs development depends on the architecture of the regulatory and institutional framework inclined to support SMEs in an economy. Lack of access to credit is a major constraint inhibiting the growth of SMEs sector. The issues and problems limiting SMEs acquisition of financial services include lack of tangible security coupled with inappropriate legal and regulatory framework that does not recognize innovative strategies for lending to SMEs. The study sought to establish the influence of strategic management practices on the organizational performance of SMEs in Nairobi City County, Kenya. The specific objectives were to determine the effect of low cost leadership strategy, differentiation strategy, focus strategy and combination strategies on performance of SMEs in Nairobi City county.The study was anchored on the following three theories which include Porter’s generic strategies model, resource-based view theory, and resource dependence theory. Empirical literature reviewed scholarly studies on the porter’s generic competitive strategies which included cost leadership strategy, differentiation strategy,focus strategyand combination strategies and their influence on financial performance of SMEs. The study used a descriptive research design. The population of study wre youth owned SMEes in the 17 sub-counties in Nairobi City County that are operational. This consisted of 100 respondents who were the proprietors of the enterprises. A sample of 30 respondents was taken which formed 30% of the target population which was evenly spread across the sub-counties. The primary data was collected by use of self-administered semi-structured questionnaire. Data analysis was done by use of descriptive statistics such as frequencies, percentages, mean scores and standard deviation with the aid of SPSS and presented through tables, charts, graphs, frequencies and percentages. The study realized that the Michael Porter’s generic strategies of competitive advantage used in the study which include low cost leadership strategy, differentiation strategy, focus strategy and combination strategy significantly influenced the organizational performance of SMEs in Nairobi City County, Kenya. The variables explained 85.11% of the changes in organizational performance of the SMEs. A unit increase in low cost leadership strategy adoption by SMEs led to a 0.655 increase in organizational performance of the SMEs, a unit increase in differentiation strategy adoption led to a 0.876 increase in performance of the enterprises, a unit increase in focus strategy transformed to a 0.945 increase in performance of the firms while a unit increase in application of combination strategy by the SMEs led to a 0.860 increment in their overall performance.