Effect of Differentiation and Focus Strategies on the Financial Performance of Small and Medium Enterprises
Keywords:
Differentiation Strategy, Focus strategy, financial performance and Small and Medium EnterprisesAbstract
Strategy is the key determinant of an organization sustainability in the current competitive business environment. Most strategies are replicated by competitors and thus a company must position itself in the minds of the consumer in order to remain competitive. Small and medium sized enterprises (SMEs) plays a significant role to the world economies and Kenya in particular. They make up the largest business sector in every economy. Despite the great role which the SMESs play, major benefits have remained a mirage due to lack of proper strategic managements practices by the owners and total failure by the regulatory authorities in properly playing their part. The study endeavored to determine how differentiation and focus strategies affected the performance of SMEs in Nairobi County Kenya. Explanatory research design was used in the study. The target population of the study was made up of 7384 SMEs and a sample of 95 SMEs was picked using systematic random sampling. Structured questionnaires were used to collect data, which was then analyzed using descriptive and inferential statistic. Findings indicated that differentiation strategy and market focus strategy were positively and significantly related to financial performance. The study concluded that that differentiation strategy and market focus strategy had positive and significant effect on the financial performance of SMEs. The study recommended that to accomplish the mission and objectives of SMEs with consideration on growth and profitability, management need to have a positive rethink towards the use of strategic management.
Keywords: Differentiation Strategy, Focus strategy, financial performance and Small and Medium Enterprises
References
Aluko, M, Odugbesan, O, Gbadamosi, G and Osuagwu, L. (2004). Business Policy and Strategy. (3 rd ed), Nigeria: Longman, (Chapter Two).
Augier, M., & Teece, D. J. (2009). Dynamic capabilities and the role of managers in business strategy and economic performance. Organization science, 20(2), 410-421.
Babbie, E. (2004). Laud Humphreys and research ethics. International journal of sociology and social policy, 24(3/4/5), 12-19.
Beaver D. E. (2007). Strategic management: from theory to implementation. Taylor & Francis. Kamau, J. K. (2013). Effects of differentiation strategy on sales performance in supermarkets in Nakuru town central business district (Doctoral dissertation).
Kazmi, A. (2008). Strategic Management and Business Policy. (3 rd ed), New Delhi: McGraw- Hill Companies, (Chapter One).
Miller, N. J., McLeod, H., & Young Ob, K. (2001). Managing family businesses in small communities. Journal of Small Business Management, 39(1), 73-87.
National Investment Promotion Commission (2004), “Overview of small and medium enterprises.
Ochako, J. O. (2007). Strategic issue management practices by mobile telephony companies operating in Kenya: a case study of Safaricom ltd (Doctoral dissertation, Department of Business Administration, School Of Business, University Of Nairobi).
Olson, P. D., & Bokor, D. W. (1995). Strategy process-content interaction: Effects on growth performance in small, start-up firms. Journal of small business management, 33(1), 34.
Porter M (1980). "From competitive advantage to corporate strategy", Harvard Bus. Rev., May/June, pp.43-59.
Porter M (1985). Competitive Advantage Creating and Sustaining Superior Performance, Free Press, New York, N.
Powers, T. L., & Hahn, W. (2004). Critical competitive methods, generic strategies, and firm performance. International Journal of Bank Marketing, 22(1), 43-64.
Pushpakumari, M. D., & Watanabe, T. (2009). Do strategies improve SME performance? An empirical analysis of Japan and Sri Lanka. Meijo Asian Research Journal, 1(1), 61-75.
Reilly T (2002). "Be a champion of the solution", Industrial Distribution, 91(5): 62.
Rumba, C. K. (2008). Strategic responses by mobile phone companies in Kenya to environmental changes. Unpublished MBA Research Project, University of Nairobi.
Sadaghiani, J. S., Dehghan, N. A., & Zand, K. N. (2011). Impact of International Market Entry Strategy on Export Performance. The Journal of Mathematics and Computer Science, 3(1), 53-70.
Teece, D. J. (2007). Explicating dynamic capabilities: the nature and micro-foundations of (sustainable) enterprise performance. Strategic management journal, 28(13), 1319-1350.
