EFFECT OF FIRMS STRATEGIC RESPONSES TO THE CHANGING COMPETITIVE BUSINESS ENVIRONMENT ON THE COMPANY PERFORMANCE: A CASE OF PAINT MANUFACTURING COMPANIES IN KENYA

Abstract

Strategic responses are known to realign firms to respond to the ever-changing turbulent business environment. This research sought to assess the strategic responses of paint manufacturing companies, in view of the intensity of rivalry of competition. The purpose of the study was to determine the effect of firm’s strategic responses to the changing competitive business environment on performance. The specific objectives were: To analyze the effect of cost leadership strategy on company performance in the paint manufacturing firms in Kenya, to assess the effect of product differentiation strategy on company performance, and to investigate the effects of focus strategy on company performance of paint manufacturing companies in Kenya. The study used a survey design. The target population all the 44 paint companies in Kenya. However, a purposive sampling was deemed necessary to select only those companies with relatively formalized strategic planning systems. These were considered to be large companies with permanent employees of size greater than 200, thereby creating a listing of 10 companies that met the criteria. Therefore from a sampling frame of 2901, a sample size of 119 was obtained from the selected companies. Data collected was analyzed using the Statistical Package for Social Sciences (SPSS) computer program version 17.0. Descriptive statistics used were the percentages while inferential statistics involved the use of multiple regression analysis, correlation analysis and ANOVA. The regression and correlation analyses showed that all the three responses positively related with performance. However, the differences found among the strategic response effects could not be confirmed statistically. This implied that the firms did not apply pure strategies but used cost strategy as the basis on which other strategic responses are built with varying levels of emphasis. Therefore the study concluded that the companies in the paint manufacture sector studied applied mixed strategies with slight variations in the emphasis accounting for the differences in their performance. Consequently the study made recommendations that the companies need to find ways of increasing effects of niche market leadership and product differentiation as a way of improving performance, to increase research and development activities and human resource practices as these efforts are likely to improve company innovation and therefore performance. Finally the study suggests that further research be carried out regarding paint manufacturers can identify and market segments in the industry so that they can improve their differentiation and focus strategies.