Effects of Strategy Implementation on Firm Profitability: A Case of State Owned Sugar Factories in Western Kenya

Abstract

 State owned Sugar factories performance has been on a declining trend for over ten years in Kenya. Management has been blamed mostly for this trend. Sugar firms, however, have had robust attempts to expand its operations to respond to the grace period given to Kenya sugar Industry. The general objective of this study was to analyze the effect of strategy implementation on the performance of state owned sugar firms in Western Kenya. Strategy implementation was measured using document analysis and annual reports. Profitability was measured as annual net profit Panel data analysis based on Generalized Method of Moments (GMM) technique was used to estimate a multiple regression model using instrumental variables regression and test for significance of relationship between strategy implementation and performance. The findings were that Growth Strategy implementation has a significant correlation coefficient = -3.187052 with p-value of 0.051; Cost Minimization Strategy was also significantly correlated with firm performance with a correlation coefficient = -1175.274 and a p-value of 0.951, while Product Differentiation Strategy was significantly related with a regression coefficient = 13042 and p-value of 0.685, all these at R-squared value of 0.9709 at 95% confidence interval. The moderator variable for the research - Market demand had a significant effect on firm performance with a p-value (0.0057**). Thus the study revealed the existence of a significant relationship between strategy implementation and performance and recommended that privately owned sugar firms should diversify their operations, cut operational and overheads costs to minimize cost and increase their nuclear estates.