Analysis of competitive strategies and performance of commercial parastatals in Kenya a case of Kenya Power Company

Abstract

ABSTRACT According to Economic Survey Report of 2018, by end of June 2018 Kenya Power Company (KPC) was selling electricity to over 6,761,090 million units. In the last two years, the average electric tariffs per unit sold rose to 15.65 up from 14.68 in the previous year. Despite this, electricity supply contribution to GDP has stagnated at 1.8% in the last two years. This points to stagnating performance of KPC, raising a point of concern. This may be explained by competitive strategies Kenya Power has adopted. However, studies on competitive strategies show inadequate attention on focus strategy despite the fact that knowledge on it may be useful in addressing performance issues firms such as what KPC are facing. It is established from the literature that the studies cover the competitive strategies together and details on differentiation focus (DF) strategy and cost focus (CF) strategy are lacking. It is unclear, what effect DF and CF as competitive strategies, have on performance of firms such as KPC. Therefore, this study sought to establish effect of competitive strategies on performance of commercial parastatals in Kenya. Specifically, the study sought to investigate effect of CF strategy on performance and establish the effect of DF strategy on performance of KPC. The study was guided by Resource Based View Theory. Correlation survey research design was adopted. The population was 61 managers of Kenya Power Company. Saturated sampling was used. Data was collected from secondary and primary sources. The former, from relevant documents of the parstatatals and government and; the latter from respondents using structured questionnaire. Validity and reliability of questionnaire was tested on pilot data targeting 5 respondents. Validity was established through expert review. Reliability coefficients all above threshold were .723, .832 and .711 for CF, DF and performance measures respectively. Regression results were (β = 0.340, p< 0.05), (β = 0.261, p< 0.05) and R2 of 0.468 for cost focus coefficient, differentiation focus coefficient and competitive strategies contribution respectively. These results show that cost focus and differentiation focus have each a positive significant effect on performance while competitive strategies accounts for 46.8% variation in performance of KPC. It is concluded that cost focus and differentiation focus are predictors of performance and that differentiation focus as a unit has effect on performance. The study recommends enhancement of cost focus and differentiation focus practices. The results may be used by policy makers in the parastatals and government in formulating policies. Researchers may also pursue further research from the study.