Effect of strategy implementation factors on performance of Small and medium size enterprises in Kisumu

Abstract

It is evident to note that SMEs are a major source of entrepreneurial skills, innovation and employment,when well managed. A recent National Economic Survey report by the Central Bankof Kenya (CBK) indicates that SMEs constitute 98 percent of all business in Kenya, create 30 percent of the jobs annually as well as contribute 3 percent of the GDP. In Kisumu County, SME's account for 70% of employment and over 60% of GNP (Economic survey, 2006). Despite their contribution, statistics from A Survey by the Kenya National Bureau of Statistics released early 2017 indicate that three out of five SME businesses fail within the first five years of operation of those that are left, four out of five fail within the next four years. Of the remainingbusinesses, only 15% will be making a profit, the remaining will barely be surviving. The strategy implementation factors are essential in the improvement of business performance and turning around a loss-making business into profitable ventures. However, past studies linking strategy implementation to organizational performance focused majorly on variables such as strategic leadership, organization structures and resource allocation as possible factors of strategy implementation. In Addition, review of past literature shows that little attention was given to factors like organizational culture, communication and organization systems which are also regarded as critical factors for strategy implementation. Consequently, the effect of organizationculture, communication and organization systems on organization performance has not been explored and remain unknown. Therefore, the purpose of this study was to analyze the influenceof strategy implementation on performance of SMEs in Kisumu. Specifically, the study sought to establish the effect of organization culture, organization system and organization communication on performance of SMEs. Me Kinsey's 7S framework and Higgins 8s strategy implementation framework guided the study in correlation study design. Out of over 10,000 owners/mangers of SMEs, a sample of 384 respondents were selected using Krejcie and Morgan's formula. Pilot results showed reliability test of a Cronbach's Alpha coefficient between 0.870 and 0.962. Validity was established through expert review. The findings revealed that strategy implementation factors collectively accounted for 50% (R2 =0.50, p=O.OOO) variation in performance of SMEs in Kisumu County. It was further revealed that dimension of organization culture (B = 0.168, p= 0.000), organization systems (B =0.059, p = 0.000) and organization communication (B = 0.437, p= 0.000) all had significant positive influence on performance of SMEs in Kisumu. The study concludes that organization culture, organization system and organization communication are all critical antecedents of performance. Therefore, the study recommends to the management or owners of SMEs to intensify the adoption of practices such as: organization culture, organization system and organization communication as they are positively associated with performance. The results of the study may be useful for the managers/owners in SMEs as it gives new insight on strategic direction they can chat for their organizationso as to enhance their business performance.