Influence of Generic Strategies on Performance of Large Dairy Firms in Kenya

Abstract

Dairy industry, just like other firms focus to achieve high performance. Approaches like application of generic strategies, has been associated to performance. This study aims to assess the influence of cost leadership, differentiation, cost focus, differentiation focus strategies on performance of large dairy firms in Kenya. This study adopted a descriptive research design. This study targeted a sample of 244 senior and middle level management staff from large dairy. An interview schedule was used to collect information on generic strategies on performance indicators. Tools were tested for validity and reliability. Data were coded, cleaned and analyzed using SPSS software version 20.0 through the use of descriptive statistical and inferential methods. Descriptive statistics such as frequency, means and percentages were used to summarize the data. Pearson correlation was used to establish the influence of study variables. Multiple linear regression analysis using a multiple regression model was used to determine the extent to which the study variables predict the performance of dairy firms. Significance levels were determined at 95% confidence interval where a P-value of <0.05 was considered significant. Results show that cost leadership strategy significantly (P<0.05) influenced the performance of the firm where use of economies of scale and accessibility to cheap sources of supply reduced the cost of production consequently leading to reduced prices and increased sales. Differentiation strategy significantly (P<0.05) influenced the performance of the firm where use of brand image and improved product features led to unique products that appealed more to customers and hence more sales. In addition, cost focus strategy significantly (P<0.05) influenced the performance of the firm where lowering costs for a particular segment and concentration on a particular segment led to customers’ loyalty to a product thereby increasing sales. Moreover, differentiation focus strategy significantly (P<0.05) influenced the performance of the firm where use of unique product for a particular segment and packaging made the firm’s products more appealing to some specific customers. All these strategies led to improved performance through increased market share, low customer response rate and improved efficiency. Cost leadership strategy has a significant positive relationship with performance. The generic strategies led to reduced cost of production, having appealing products, increased sales and finally to improved performance. It is thus noted that cost leadership strategy, differentiation strategy, cost focus strategy and differentiation focus strategy are integral in enhancing performance. Thus, this study recommends that firms focus on generic strategies so as to improve on performance. Firms need to focus on economies of scale and to ensure that they access cheap sources of supply so as to produce products at a lower price and use brand image and improved product features so to have products that attract customers more. In addition, firms should concentrate on a particular segment in order to increase their sales as cost focus strategy was shown to be critical to performance as well as use unique product for a particular segment and unique packaging to improve performance.

Keywords: Generic strategies, performance, dairy firms, Kenya