Moderating Effect of External Operating Environment on the Relationship Between Corporate Strategies and Performance of Manufacturing Firms in Nairobi City County, Kenya

Abstract

Theoretical propositions in strategic management show that the external operating environment of a firm influences the relationship between other organizational factors and performance. However, most of the arguments have been directed at firms that exist in the context of developed economies, with little attention to firms in developing economies such as the ones in Africa. This paper examines the moderating effect of external operating environment on the relationship between corporate strategies and performance of manufacturing firms in Nairobi City County, Kenya; which is a developing economy within Sub-Saharan Africa. The authors adopted indicators of competitive position, consumer behaviour and credit accessibility to measure external operating environment.Multistage probability sampling technique was used to select study sample out of a target population of 373 firms located in Nairobi City County where 80% of the country’s manufacturing firms are situated. The study collected primary data using a semi-structured questionnaire from 148 firms. The data was analysed using descriptive and inferential statistics for quantitative data and content analysis to analyze qualitative data. The study findings indicate that external operating environment has a moderating effect on the relationship between corporate strategies and firm performance. Based on this, the study recommends development of policies and legislative framework to regulate manufacturing sector’s competition practices, review of fiscal and monetary policies, and customer awareness programs to address consumer perceptions and attitude towards firms’ products.

Keywords: Market development, Product development, Diversification, External operating environment, Firm performance

DOI: 10.7176/EJBM/11-14-05

Publication date:May 31^st 2019