BY WENDY OLUOCH
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STRATEGIC INTERVENTIONS AND PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NAIROBI CITY COUNTY, KENYA: A CASE OF CENTONOMY LIMITED BY WENDY OLUOCH UNITED STATES INTERNATIONAL UNIVERSITY-AFRICA SUMMER 2020
Transcript of BY WENDY OLUOCH
STRATEGIC INTERVENTIONS AND PERFORMANCE OF SMALL
AND MEDIUM ENTERPRISES IN NAIROBI CITY COUNTY,
KENYA: A CASE OF CENTONOMY LIMITED
BY
WENDY OLUOCH
UNITED STATES INTERNATIONAL UNIVERSITY-AFRICA
SUMMER 2020
STRATEGIC INTERVENTIONS AND PERFORMANCE OF SMALL
AND MEDIUM ENTERPRISES IN NAIROBI CITY COUNTY,
KENYA: A CASE OF CENTONOMY LIMITED
BY
WENDY OLUOCH
A Research Project Report Submitted to the Chandaria School of
Business in Partial Fulfillment of the Degree of Master in Business
Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY-AFRICA
SUMMER 2020
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STUDENT’S DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to any
other college, institution, or university other than the United States International University
in Nairobi for academic credit.
Signed __________________________ Date___________________________
Wendy Oluoch (ID 631678)
This project has been submitted for examination with my approval as the university
appointed supervisor.
Signed___________________________ Date____________________________
Dr. Charity Muraguri
Signed____________________________ Date___________________________
Dean, Chandaria School of Business
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ACKNOWLEDGEMENT
I would first like to thank God for His blessings granted during the entire period while
undertaking this study. A special thank you particularly goes to my Supervisor, Dr. Charity
Muraguri, for her patience, efficiency, and timely review and guidance throughout the
conceptualization of the research to the final preparation of this thesis. Her positive
criticism ensured that I remained within the subject context.
I also wish to thank my parents Mr. and Mrs. Oluoch and my siblings for their valuable
company and moral support throughout the course work to the development of this study.
To you all thank you and may God’s blessings be upon your lives.
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ABSTRACT
The general objective of this study was to establish the effects of strategic interventions
and performance of small and medium enterprises in Nairobi City County, Kenya: a case
of Centonomy Limited. The study was guided by the following specific objectives; to
establish the effects of organization training intervention and SMEs performance, to
investigate the effect of marketing skills intervention and SMEs performance and to
determine the effect of access to finance skills intervention and financial performance of
SMEs.
The study adopted a descriptive research approach. The descriptive survey research design
was used to determine the characteristics of a defined population group. Target population
comprised of 1539 registered SMEs owners found within Nairobi County and trained at
Centonomy Limited. The study sample size was 318 respondents. Eminently,
questionnaires were used for data collection. The Data collected from the questionnaires
was coded using the Computer Statistical Package for Social Sciences (SPSS) software
version 24 programme to enable analysis. Measures of central tendencies including means
and standard deviation were used during analysis. Inferential analysis was likewise used in
the study. Correlation analysis was used to investigate the relationship between the various
causative factors of financial performance of SMEs. Linear regressions analysis including
model summary, ANOVA and regression coefficients were used to observe how each of
the independent variables (Training intervention skills, Marketing intervention skills and
Access to finance skills) influenced financial performance of SMEs. Final analyzed data
was presented using figures and tables.
The study revealed that most members of the organization work and move towards a
desired agreed future, training strategy has helps the firm in foreseeing environmental and
market changes. The study also showed that the firm has a common mental model of its
future state that provides the basis for its actions. The firm is always willing to question its
current thinking and practices. The respondents agreed that their organization actively
encourages employees and customers to give feedback and suggestions for improvements.
Training strategy has increased the firms’ ability to innovate. Organizational knowledge
transfer has improved the performance of the firm. The firm has the tendency to create and
apply knowledge within the organization. Lastly; the firm evaluates its daily operations and
accepts new ideas easily.
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The study showed that organizations have intelligence (information about their strengths,
weaknesses and capabilities) about its competitors. Market orientation is a significant part
of the firms’ culture. Market orientation in the firm has been formalized to exist in the
firm’s rules and regulations. Market orientation has improved the firms’ market share and
profitability. Market orientation has improved customer satisfaction and loyalty to the firm.
The firm creates superior value to its customers through sufficient understanding of their
needs. Customer orientation has helped the firm in developing appropriate service
strategies that meet customer needs and demands. The organization seeks intelligence about
its competitors in order to improve its service delivery. Inter-functional coordination helps
the firm to analyze and use information gained in its decision process.
The study concludes that access to long-term credit with affordable interest rates from
financial institutions has influenced the growth of sales turnover in my business. High cost
of credit from financial institutions has influenced the growth of profit margin in my
business. Lack of credit history for long-term credit from financial institutions has
influenced the growth of asset value in my business. Risk exposures such as interest rates
affect the foreign investors more than local investors. Lack or inadequate collateral for
long-term credit from financial institutions has influenced the growth of asset value in my
business. Lack of awareness of funding opportunities for long-term credit by financial
institutions has influenced the growth of asset value in my business.
Change is inevitable and it is only through training that the SMEs can embrace change. The
study therefore recommends that training should be given priority and conducted in a
modern way. The study also recommends that firms must have the tendency to create and
apply knowledge within the organization and evaluates its daily operations and accepts new
ideas easily.
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TABLE OF CONTENTS
STUDENT’S DECLARATION ........................................................................................ ii
ACKNOWLEDGEMENT ............................................................................................... iii
LIST OF TABLES ......................................................................................................... viii
LIST OF FIGURES .......................................................................................................... ix
LIST OF ABBREVIATIONS ........................................................................................... x
CHAPTER ONE ................................................................................................................ 1
1.0. INTRODUCTION....................................................................................................... 1
1.1. Background of the Study .......................................................................................... 1
1.2 Statement of the Problem ........................................................................................... 5
1.3. General Objective ..................................................................................................... 7
1.4. Specific Objectives ................................................................................................... 7
1.5 Significance of the Study ........................................................................................... 7
1.6 Scope of the Study ..................................................................................................... 8
1.7 Definition of Terms.................................................................................................... 8
1.8 Chapter Summary ...................................................................................................... 9
CHAPTER TWO ............................................................................................................. 10
2.0 LITERATURE REVIEW ......................................................................................... 10
2.1 Introduction .............................................................................................................. 10
2.2 Training Intervention and Performance of SMEs .................................................... 10
2.3. Market intervention and Performance of SMEs ..................................................... 14
2.4 Access to Finance Skills and Performance of SMEs ............................................... 18
2.5 Chapter Summary .................................................................................................... 23
CHAPTER THREE ......................................................................................................... 24
3.0 RESEARCH METHODOLOGY ............................................................................. 24
3.1 Introduction .............................................................................................................. 24
3.2 Research Design....................................................................................................... 24
3.3 Population and Sampling Design ............................................................................. 24
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3.4 Data Collection Methods ......................................................................................... 27
3.5 Research Procedures ................................................................................................ 27
3.6 Data Analysis Methods ............................................................................................ 29
3.7 Chapter Summary .................................................................................................... 29
CHAPTER FOUR ............................................................................................................ 30
4.0 RESULTS AND FINDINGS ..................................................................................... 30
4.1 Introduction .............................................................................................................. 30
4.2 Response Rate and Demographic Information ........................................................ 30
4.3 Training Intervention and Performance of SMEs .................................................... 34
4.4 Marketing Skills Intervention and Performance of SMEs ....................................... 37
4.5 Access to Finance Skills and Performance of SMEs ............................................... 41
4.6 Chapter Summary .................................................................................................... 44
CHAPTER FIVE ............................................................................................................. 45
5.0 DISCUSSION, CONCLUSION AND RECOMMENDATION ............................. 45
5.1 Introduction .............................................................................................................. 45
5.2 Summary .................................................................................................................. 45
5.3. Discussions ............................................................................................................. 47
5.4. Conclusion .............................................................................................................. 52
5.5 Recommendations .................................................................................................... 54
REFERENCES ................................................................................................................. 56
APPENDICES .................................................................................................................. 75
Appendix I: Questionnaire ............................................................................................. 75
Appendix II: NACOSTI ................................................................................................. 80
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LIST OF TABLES
Table 4.1: Response ........................................................................................................... 30
Table 4.2: Descriptive on Variables of Training Intervention ........................................... 35
Table 4.3: Correlations analysis for Variable of Training Intervention ............................. 35
Table 4.4: Model Summary for Variable of Training Intervention and SMEs
performance ....................................................................................................................... 36
Table 4.5: ANOVA for Variable of Training Intervention and SMEs .............................. 36
Table 4.6: Coefficients for training intervention and performance of SMEs ................... 37
Table 4.7. Coefficients for training intervention and performance of SMEs ............. Error!
Bookmark not defined.
Table 4.8: Descriptive on Variables of Marketing Skills intervention and SMEs
Performance ....................................................................................................................... 38
Table 4.9: Correlation analysis for Marketing Skills intervention. ................................... 39
Table 4.10: Model Summary for Variable of Marketing Skills intervention and SMEs
performance ....................................................................................................................... 39
Table 4.11: ANOVA for Marketing Skills intervention and SMEs performance ............. 40
Table 4.12: Coefficients for Marketing Skills intervention and SMEs performance ........ 40
Table 4.13: Descriptive on Variables of Access to Finance Skills and SMEs Financial
Performance ....................................................................................................................... 41
Table 4.14: Correlation analysis for access to finance Skills intervention ........................ 42
Table 4.15: ANOVA for Access to Finance Skills and SMEs Financial Performance ..... 43
Table 4.16: Coefficients for Access to Finance Skills and SMEs Financial Performance 44
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LIST OF FIGURES
Figure 4.1: Gender ............................................................................................................. 30
Figure 4.2. Education ......................................................................................................... 31
Figure 4.3: Age .................................................................................................................. 31
Figure 4.4: Years in Business ............................................................................................ 32
Figure 4.5: Nature of Business........................................................................................... 32
Figure 4.6: Number of Employees ..................................................................................... 33
Figure 4.7: Management Level .......................................................................................... 34
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LIST OF ABBREVIATIONS
ANOVA: Analysis of Variance
GDP: Gross Domestic Product
GOK: Government of Kenya
EU: European Union
ILO: International Labor Organization
KEBS: Kenya National Bureau of Statistics
MSE: Micro and Small Enterprises
SME: Small and Medium Enterprises
SMEDAN: Small and Medium Enterprises Development Agency of Nigeria
SPSS: Statistical Package for Social Sciences
TVET: Technical and Vocational Education and Training
UHP: Urban Housing Permits
UK: United Kingdom
US: United States
USIU: United States International University
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CHAPTER ONE
1.0. INTRODUCTION
1.1. Background of the Study
Globalization has brought wild competition to various organizations, remotely. Business
performance has turned into an important problem for researchers and practitioners given
the intense rivalry and often showing signs of change in economic and business situations.
Hence, researchers as well as market experts were concerned with identifying the
precursors of business success. However, research has clearly shown that most SMEs
globally do not participate in strategic decision-taking when making investments (O'Regan,
& Ghobadian, 2012). This is at odds with much of the strategy literature that dictates that
enterprises must actively plan for the future to compete effectively and survive (Noble,
2010).
Accordingly, owner-managers of SMEs have been accused of being strategically short-
sighted and lacking the long-term vision as to where their enterprise will be investing in
(Robson, 2014). The concern is that by neglecting strategic investment decisions, SMEs
might not achieve their full potential for success and growth, and their survival may be
placed at risk (Rhodes & Keogan, 2015). SMEs can be described as small and medium-
sized enterprises or units engaged in small-scale business projects whose turnover rate is
low. People, family, that own small and medium-sized enterprises or a group of people who
have come together, pooled their resources to start the business venture (Sathe, 2015).
Strategic interventions are business policies which are responsible for a company's progress
towards its target. Strategic measures, according to Zhou, Gao, Yang and Zhou (2015), are
the strategic approach the organization follows in developing the right actions to achieve
superior results. Grinstein (2016) states that strategies are composed of three dimensions:
business, learning and capacity to execute them. Those dimensions have a positive effect
on the performance of the company. Guduru and Chandra (2016) describe strategic
interventions as organizational change in different aspects such as employees, technologies,
product and so on by focusing on organization interaction with the external environment.
Organizational success contributes to an organization's overall competitiveness in terms of
stock turnover, consumers, profitability and market share. Organizational performance can
be classified into financial measures and non-financial measures that allow managers to
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make decisions that reflect market conditions, not only on financials but also on other
measures (Atkinson & Brown, 2001).
The current literature shows that several prior studies have used strategic approaches to
describe the success of small and medium-sized enterprises (SMEs) (Worlu, Olokundun,
Akinbode, Augusta & Inelo, 2016). Hakala and Kohtamaki (2011) pointed out that,
combined with other factors; the impact of interventions on results was examined
individually or as a single intervention. Strategic measures have been regarded as important
and specific organizational tools for an organization while offering competitive advantage
when successfully implemented (Hoq & Chauhan, 2011). Worlu et al. (2016) contend that
lack of capital and skills in small and medium-sized companies is an obstruction for them
to develop their own markets and use the expertise, economies of scale and scope for
competitive advantage. Recent research results have concluded that interrelationships
between different strategic approaches offer a sustainable competitive advantage for
organizations and companies that tend to perform better in managing multiple strategic
orientations (Hult, Hurley & Knight, 2004).
Experiences from developing countries indicate that the role of small and medium-sized
enterprises in the economy has increased in recent years and that the majority of enterprises
have been ranked more than 95 per cent in the SME group (Ayyagari et al., 2011).
Especially after the recent economic crisis that started in 2008, experience has shown that
small and medium-sized businesses have been able to adapt to the crisis challenges faster
and more flexibly than large companies have and indeed have succeeded in surviving and
prospering. Keeping this in mind, many developed countries have developed various kinds
of non-financial and monetary incentive frameworks designed to enhance the weight of
SMEs in different sectors. An economist, Bayramov, Hasanov, Aghayarli, Kadyrov,
Aghahasanli and Isayev (2017) studied small businesses in the US and Europe and noticed
a growing increase in their value since the 1980s. US General Motors, for example, uses
around 37,000 SMEs for subassembly and other facilities. Such activities are practiced not
only by American, but also by European firms, with one Italian firm, Benetton, conducting
around 95 per cent of production by subcontracting to SMEs (Bayramov et al., 2017).
Lukacs (2015) argued that SMEs are the foundation of the British economy as a whole,
responsible for more than half of United Kingdom (UK) trade turnover. The share of SMEs
in total companies in Romania is 99.47 percent and 98 percent of these SMEs are private
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owners (Statistical Yearbook, 2015). SMEs benefit not only individual European countries
but the economy of the European Union (EU) as a whole; SMEs in Europe are the first to
produce income, creativity, jobs and entrepreneurial skills. According to the Annual Report
on the situation of SMEs in the EU in 2012, out of the 20 million businesses that were
currently registered in the EU, more than 99.8% were SMEs and a vast majority of which,
92% to be exact, consisted of enterprises having less than 10 employees (Bayramov et al.,
2017).
In advanced industrialized countries, SMEs embody an integral source of economic growth,
dynamism and flexibility, just as they do in developing ones, while playing an important
role in the development. In a study that took into account 132 countries, 125 million SMEs
and 71.2 per cent (89 million) of them were located in developing countries (Kushnir,
Mirmulstein & Ramalho, 2015). Among many factors, SMEs are of vital significance to
emerging economies. First, they can deliver economic benefits beyond the boundaries of
the individual enterprise; namely, they promote experimentation, learning and adaptability.
These skills are especially important for countries, which were formerly part of centrally
planned systems. Additionally, SMEs decrease the erosion of human capital by opening
new alternative employment opportunities for relatively skilled, unemployed workers
((Bayramov et al., 2017).
Ninety percent of businesses are independent ventures in developing countries such as
Indonesia, the Philippines, Thailand, Hong Kong, Japan, Korea, India and Sri Lanka; in
addition, small businesses provide jobs for 98 percent of those working in Indonesia, 78
percent in Thailand, 81 percent in Japan and 87 percent in Bangladesh. Not only in Asia,
but also in developing African countries, the activities of SMEs are critical, especially for
promoting economic development, job creation and poverty eradication (Aryeetey &
Fenny, 2007). The performance of SMEs in Africa currently falls below the desired. SMEs
in Africa’s contribution to the respective national Gross Domestic Product (GDP) is
contended to be weak for different reasons. It includes lack of foundation / money-related
funding for organizations operating within the various segments; restricted use of
advancement to operations within the section, and unfavorable competition from local
businesses and organizations (Ndumanya, 2013).
Fabricating efficient technique is therefore vital to every small and medium-sized company,
because it empowers it to gain and retain an upper hand (Bangudu, 2013). Consequently,
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to survive, firms require a mix of different systems that are suitable for fast natural changes;
thus, scientists have utilized different variables to speak to a company’s key exercises that
are alluded to as key orientation (Weinzimmer, Robin & Michel, 2012).
If SMEs are crucial to job creation and economic development on the African continent has
long been debated (Muathe, Wawire & Ofafa, 2013). For countries such as South Africa,
there is a high unemployment rate of about 40 percent; however, for South Africa, 90
percent of all formal enterprises are SMEs (Ayandibu & Houghton, 2017). The SME
market is one of South Africa's major contributors to the economy (Watson, 2013). In
Ghana, small and medium-sized enterprises insinuated that they have 6 to 97 specialists
and have no more than Ghana Cedi (2.5 billion) of settled assets (despite zone and
structures). In Cameroon, SMEs are described as firms that have turnover estimation of no
less than 1 billion Cameroon Franc. In Nigeria SMEs are depicted as the business that
utilization under 200 workers and have under 500 million Naira worth of complete
resources, aside from land and building (SMEDAN, 2012).
As regards East African countries such as Uganda, Tanzania and Rwanda, the lack of
strategic access to venture capital participation, technical know-how and commercial
linkages are among the broader challenges facing developed SMEs. Martin (2014) observes
that the secret of success to winning in the new economy is to manage cultural diversity
with information, intelligence, and a critical and demanding attitude, patience and, above
all, a great deal of respect for and understanding of others' culture. However, despite this
growth in Microfinance, recent studies like that of Bowen and Makarius (2009) shows that
over 50% SMEs continue to have a deteriorating performance with 3 in every 5 SMEs
falling within the months of establishment.
The importance of Kenya's SME sector was first recognized in the 1972 report of the
International Labor Organization (ILO) (Muathe, 2010). According to International Trade
Centre (2019) the SME subsector plays a significant role in the economic structure of
Kenya, where nearly 80 percent of Kenya's total labor force has been employed by the
sector. Although the SMEs subsector accounts for nearly 80 per cent of jobs, it only
contributes to around 20 per cent of the country’s GDP. This implies dismal subsector
performance despite its potential contribution to employment, income and equity as was
asserted in the International Labor Organization (ILO) report in 1972. The paltry
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performance of the SMEs in Kenya is linked to several constraints among which the
regulatory and institutional framework is alleged to be one of the factors (Karami, 2015).
Attempts to tackle SME growth in Kenya can be expressed in the current 2010 Kenya
constitution, where devolution was incorporated as a key tool in promoting initiatives for
Local Economic Development (Benneworth & Roberts, 2012; Tawane & Muathe, 2019).
It is anticipated that the devolution instruments will impact the main drivers of the SME-
related economy which needs a local based SME policy embedded in the devolution
structure. Yet the policy structure for fostering SMEs' local economic growth has long been
tied to broader national policies, with little focus on state-led development strategies (GOK,
2014).
The Centonomy Entrepreneur is an online 14 week program that helps small and medium-
sized businesses creates a great business. The system ensures that big business is not
characterized purely by their scale, market, or popularity, but by the effect they have on the
creator, staff, consumers, and society as well as the culture they create; where people work
because they like, not because they need to. In fact, Centonomy Limited helps small and
medium-sized businesses significantly generate wealth by providing the proper structures
and turning innovations into great resources, goods and services.
1.2 Statement of the Problem
Problems related to SME development are diverse. As a result, owner managers are
increasingly venturing into SMEs as sole proprietors or partners to diversify risk, build
business synergies and shape alliances that can support and lobby government for a better
market climate (ILO, 2015). In Kenya, small and medium-sized enterprises are constantly
burdened by the lack of easily available credit, restricted exposure to international markets,
lack of added value to their goods and lack of entrepreneurial skills to profitably expand
their companies. As a result, small and medium-sized companies in Kenya were reduced to
becoming active in the informal sector. According to Ramsden (2013), SMEs thrive in an
environment that supports business growth, where the regulatory regime is transparent and
decisions are made consistently to favor growth.
According to the Kenya National Bureau of Statistics (KNBS) (2013), during the first two
years of service three out of every five SMEs in Kenya shut down. Along with other private
and public organizations, the government has recognized that the country's economic
development is crucial when investing in the SME market. As a result, these bodies have
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consistently encouraged people to be creative and set up small businesses in a step towards
job creation opportunities. It will curb the high unemployment rates and feed inventive and
imaginative SME owner managers. Research studies have been conducted to combat the
situation, with a focus on SME growth. Lerner, Brush and Hisrich (1997) conducted a study
to determine the individual factors that affect the success of micro and small enterprises
(MSEs) owned by females. The research classified factors affecting SMEs performance
into five perspectives. These include goals and priorities, entrepreneurial socialization,
connection to the network, human resources and environmental factors. The results of this
study showed very little correlation between individual factors and MSE efficiency. The
research recommended the need for a broad study to be undertaken in future on the
influence of financial access, entrepreneurial competencies, and strategic positioning as the
ideal growth factors of SMEs instead of SMEs.
Kinyua (2014) conducted another study to establish factors affecting the performance of
micro, small and medium-sized enterprises (SMEs) in Nakuru town's Jua Kali sector. The
study findings were on performance and included factors such as management skills,
macro-environment, and access to knowledge on the sector. The research focused not on
SMEs but rather on SMEs. The analysis did not concentrate on policy but dwelt on results
instead. The researcher proposed that more work on SME intervention approaches, rather
than MSEs, should be carried out. The researcher challenged future scholars to dwell their
research on growth factors influencing SMEs such as financial resources access,
entrepreneurial competence and positioning as a strategy in order to obtain credible and
conclusive findings.
Mugo (2014) explores the factors affecting women entrepreneurs in the development of
SMEs in the city of Nairobi. The study revealed variables such as lack of entrepreneurial
training and education, outdated technology, lack of finance, lack of proper management
of resources and lack of adequate management skills. The study outlined lack of finance as
the main problem affecting the growth of SMEs among women entrepreneurs. The study
focused on women-owned businesses rather than generally looking at all entrepreneurs
regardless of gender. The study greatly recommended the need for future researchers and
academicians to conduct further studies on critical factors influencing the growth of SMEs
in Kenya such as positioning, credit access, and entrepreneurial competencies in order to
obtain conclusive findings.
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The strategic interventions inside SMEs are little known. Past work on strategic
interventions has concentrated on major multinational corporations (Beaver, 2013). Such
mechanisms are often complex, involve numerous players and sometimes arise from
politics (Kelmar & Noy, 2010). Although strategic interventions have been well established
in large companies around the world, academic researchers have not thoroughly examined
the impact of strategic interventions on SME results. Hence, it is on this background that
the study aimed to fill the gap in literature by providing new empirical evidence on the
effects of strategic interventions in the performance of SMEs in Kenya with specific
consideration of Centonomy Limited.
1.3. General Objective
The general objective of the study was to investigate strategic interventions and
performance of small and medium enterprises in Nairobi City County, Kenya: a case of
Centonomy Limited.
1.4. Specific Objectives
1.4.1. To establish the effect of organization training intervention and performance of
SMEs
1.4.2. To investigate the effect of marketing skills intervention and performance of SMEs
1.4.3. To determine the effect of access to finance skills intervention and performance of
SMEs
1.5 Significance of the Study
1.5.1 SMEs Owners/Managers
The study results would include an in-depth analysis of the effect of strategic intervention
on the performance of SMEs at Centonomy Entrepreneur in Kenya, thereby giving SME
owners a better understanding of how these factors affect their companies. It will allow
these owners / managers to improve the performance of their businesses by leveraging on
entrepreneurial orientation, market orientation and learning orientation.
1.5.2. Government of Kenya
The Kenyan Ministry of Trade operates many loan programs designed to support the
country's SMEs. Therefore, the target group for their schemes is not usually trained in
business, this study may be important to them as it provides them with information on how
to manage the different SMEs. It also provides them with a training tool to promote how
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they can operate their company in a more efficient way for their beneficiaries. In exchange,
this may help them achieve a lower default rate for the companies they lend loans to. In
addition, the study can assist the ministry in developing policies that can help it run SMEs
in the country. There has been very little research in this area of strategic planning, yet it
may positively influence many businesses.
1.5.3 Scholars
This study serves as a reference tool for researchers interested in the implementation of
strategic management process in SMEs, not only in Nairobi but also in other African
countries. There has been little research and literature on strategic interventions as a
concept of management in Kenya and especially in regards to SMEs.
1.6 Scope of the Study
The scope of this study covered only SMEs operating in Nairobi City County, Kenya and
its environs with specific case of business owners who have gone through the Centonomy
Entrepreneur training program. The study targeted both small and medium enterprises in
the financial, manufacturing, service and technology industries. The study used the cross-
sectional study. This means that the researcher recorded information about their subjects
without manipulating the study environment. The research was carried out as from July
2020 to September 2020.
The researcher encountered some limitations in the course of the research in terms of data
access limitations where the information held by some business owners was considered
sensitive and was not easily available. This was mitigated by assuring the respondents of
anonymity and confidentiality, together with an official letter from the institution United
States International University – Africa (USIU-A), which affirmed the purpose of the study.
1.7 Definition of Terms
1.7.1 Small and Medium Enterprises (SMEs)
These SMEs or units engage in small-scale business ventures of which their turnover rate
is small. An individual, family or group of people who have come together pooled their
resources to start the business venture may own small and medium sized enterprises. Small
and medium-sized enterprises' capital base is limited due to their inability to access funding
from financial institutions that put in place a strict regulation that shut down most SMEs
(Noble, 2010; Muathe, 2010).
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1.7.2 Strategy
These are approaches, tactics, process adjustments and realignment of organizational
objectives that are intended to give an organization a competitive edge in the market
(Lynch, 2017).
1.7.3 Training Strategy
Training strategy scale measures the tendency or habit of seeking to increase one’s
knowledge and skills; toward valuing the learning process as a means to accomplish
mastery over a task; toward being interested in challenging activities; and toward using
information seeking as a personal strategy when problem solving (Keskin, 2012).
1.7.4 Market Strategy
Market strategy is a company philosophy focused on discovering and meeting the needs
and desires of its customers through its product mix (Jaworski & Kohli, 1993).
1.7.5 Organizational Performance
The organizational performance concerns the accepted metrics in determining the health
and responsiveness of a hotel with respect to customer service delivery, financial status,
and regulatory compliance (Robson, 2014).
1.8 Chapter Summary
Chapter one presents the background information on strategic interventions on SMEs. The
chapter also outlined the specific objectives of this research, the significance of the study,
importance and the scope of the study as well as the working definitions of specific terms
used in the project. Chapter two focusses on the literature review of the study. Chapter three
discusses the research methodology. The chapter delves into the research design, the target
population of the study, the sampling design as well as the data collection procedure and
data analysis techniques. Chapter four delves with the analysis of the findings and Chapter
discusses the results, relevant conclusions and recommendations.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter gives the various relevant literature reviews that have been done by scholars
and academicians in line with strategic interventions and performance of small and medium
enterprises in Nairobi City County, Kenya and across other countries in the world. Each of
the factors elaborated on represents a specific objective of the study. It borrows heavily
from past similar studies that have been conducted in various countries in the recent past.
2.2 Training Intervention and Performance of SMEs
Several studies indicate that the organizational training approach impacts company results
positively and substantially (Baker & Sinkula, 2015; Martinette & Obenchain-Leeson,
2015). Some studies show the indirect effects on business performance of an organization's
training strategy. Calantone, Cavusgil and Zhao (2015) argue that the organization-training
approach directly and indirectly improves organizational efficiency through its impact on
competitive advantage. Innovativeness mediates the relationship between the plan and
success for organizational training (Nybakk, 2014).
Mungai (2012) states that the success of entrepreneurs’ development and management in
any enterprise depends on its capacity to develop human resources through training, ability
to start a business, create jobs, products and services that can compete in the global market.
Manimala and Kumar (2012), state that strengthening the internal capabilities of SMEs has
become a top priority nowadays and is positioned as an alternative or supplementary
strategy for SME development. Training is recognized as an important tool for developing
the internal capabilities of SMEs. A study by Afolabi (2012) found a very strong
relationship between training in business and the help it could have in the success of SMEs.
Some qualitative and quantitative research, such as (Phromket, 2014; Vij & Sharma, 2014)
show that the training strategy for organizations promotes creativity that improves results.
Similarly, preceding studies concentrate on one step of the organizational training strategy
or one form of innovation, primarily product or process innovation (Boh & Wong, 2013).
Vij and Sharma (2014), for example, consider a positive relationship between information
gain and product innovation. Ranyane (2014) in a study of a relationship between business
performance and level of training in 70 micro-enterprises in Nigeria, revealed that 49% of
the 51% of participants who had received training in their areas of business were doing well
11
in business, while 60% of the participants who were not trained reported that their
businesses were poorly performing. While the above-mentioned studies concentrate on
different aspects of the relationship between organizational learning and creativity, the
majority of them consider a positive relationship.
2.2.1 Commitment to Training
Organizations' contribution to training is the sum that an organization finds training worthy
of, and thereby aims not only to facilitate the learning process but also to build and improve
an organizational learning environment (Pearce & Ensley, 2014). In reality, training is
taken as an essential expenditure for some organizations which is required for
organizational maintenance (Sales & Savage, 2015). Therefore, the more important that an
organization views training as, the more likely it would be for that organization to have
access to this phase (Pearce & Ensley, 2014).
Through expertise and ability to consider and anticipate consumer desires, the organization
dedicated to training does not in any way miss the opportunities generated on the market.
Therefore, the company dedicated to learning will improve its potential to innovate due to
its dedication to innovation and its willingness to deliver and use technology in innovation,
thereby being more capable of innovation compared with its rivals (Pearce & Ensley, 2014).
2.2.2 Shared Vision
Shared vision in training helps to keep all staff focused on one target. One can describe
shared vision simply as the answer to the question "What do we want to create?” Just as
the pictures and images that people hold in their minds are personal dreams, so is mutual
perception of the images that workers carry in their mind. Such pictures create a sense of
uniformity. Shared vision is a mechanism which the team members form and shape
(Phromket, 2014). The most important goal of the leaders of the twentieth century is seen
as common vision. Pearce and Ensley (2014) describe shared vision as a specific mental
model of the team's future state, or its tasks, which provides the basis for team action.
Another definition indicates that mutual vision is the concepts, vocabulary, culture, and
norms common to group members and organizational units, which regulates members' acts,
decisions, which behaviors (Colakoglu, 2012). Organizations that are guided by a shared
vision focuses the energies of organizational members on creating superior value for
customers (Slater & Narver, 1995)
12
Shared vision is based on the idea that an organization’s goal and destiny are unique. A
declaration of purpose articulates its goal and offers a beacon of guidance for strategic
action (Nybakk, 2012). However, frequently a typical vision is based on head of
unexplored, unstated suppositions about the present and what's to come. If company leaders
can't focus on present reality, they can't transition to a desirable future. Sales and Savage
(2015) state that a shared vision is frequently built on top of unexplored, unarticulated
assumptions about the present and the future. If members of an organization cannot agree
on current reality, they cannot move towards a desired future (Sales & Savage, 2015).
According to Phromket (2014), mutual vision can only be created if the world is accurately
understood and the person correctly perceives his own consciousness and the knowledge
of others. It is harder to create shared vision in public institutions than in private institutions.
The reasons for these are factors such as the difficulty of predicting the aims of the
governments, the differences among the governments in terms of obtaining using political
power and the conflict among political parties (Boh & Wong, 2013).
2.2.3 Open-Mindedness
Open-mindedness refers to the objective appraisal of the everyday activities of the
organization, and the adoption of new ideas. In other words, processes by which
organization begins to remove existing knowledge or repetitive hypotheses and habits
(Eshlaghy & Maatofi, 2015). It is because the current information can act as a fundamental
obstacle to holding organization away from the vision and processes needed for innovation
and transformation (Laverie, Madhavaram & McDonald, 2016). In other words, preceding
instruction stops new learning happening in the company. Therefore, as far as innovation
is concerned, firms are unable to get prominent unless they follow this attitude, although
they may seek for other methods for maintenance (Vij & Sharma, 2014).
Therefore, open-mindedness is the willingness to actively search for evidence against one's
favored beliefs, plans, or objectives, and to weigh such evidence fairly when available.
While common approaches to problems and their solutions may have been effective in the
past, in the future they may not be as important. Open-mindedness promotes a desire to
challenge existing thought and action, receptiveness to new possibilities, exchange of ideas
and considering different viewpoints (Martinette & Obenchain-Leeson, 2012). Therefore,
fostering a culture of open-mindedness is more likely to lead to challenging long-held
practices and beliefs, and promoting sharing of strategic knowledge among decision-
makers (Day, 1994). Martinette and Obenchain-Leeson (2012) who state that Open-
13
mindedness encourages a willingness to question current thinking and practice,
receptiveness to emerging possibilities, the sharing of ideas and the consideration of
differing perspectives Therefore, the creation of an open-mindedness culture is more likely
to result in the questioning of long-held practices and beliefs and encourage the sharing of
strategic information among decision-makers.
The philosophy of open-mindedness has at its heart an effort to re-orientate organizational
beliefs, expectations and/or attitudes by modifying cognitive constructs (Nybakk, 2012),
conceptual models (Day, 2015), dominant logics, and key behavior-guiding assumptions.
If so, the culture's contribution is linked to its ability to prepare ground for the emergence
of new knowledge (Laverie, Madhavaram & McDonald, 2016).
2.2.4 Organizational Knowledge Sharing
Organizational knowledge transfer refers to the mechanism by which organizational actors
- teams, groups, or organizations - share, obtain, and are informed by others' experience
and expertise (Sales & Savage, 2015). Because the transition of organizational information
involves the incorporation of distinct information, it expresses itself through changes in the
knowledge bases or recipient output (Ajmal, Keka & Takala 2014). The transition of
organizational knowledge from internal as well as external sources has significant
consequences for organizational efficiency and innovation. Prior research supports a
positive relationship between organizational knowledge transfer and performance (Lien,
Hung & McLean, 2014). Transferring knowledge contributes to the development of
organizational capabilities that are difficult to imitate, and subsequently leads to enhanced
performance (Sales & Savage, 2015). Management involves employees frequently to
discuss new developments and they realize the importance of accepting diverse viewpoints
(Ajmal, Keka & Takala, 2014).
Keskin (2012) found that the output improved as the joint venture partners gained and
assimilated new external expertise. Likewise, companies that can learn about consumers,
rivals, and regulators have a greater chance of sensing and tailoring their goods and services
to changing needs (Day, 2015). Therefore the transition of organizational information was
correlated with higher levels of efficiency.
Organizational knowledge transfer helps a company to produce fresh ideas for the creation
of new goods (Pearce & Ensley, 2014), as it promotes the combination of current and newly
acquired expertise and enhances the capacity of a unit to create new ties and connections.
14
Moreover, the accumulation of knowledge not only allows the efficient use of related
knowledge but also allows organizations to better understand and assess the nature and
commercial potential of technological advances (Chaveerug & Ussahawanitchakit, 2016).
Prior work indicates therefore that the diffusion of organizational expertise enhances
innovativeness.
2.3. Market intervention and Performance of SMEs
A dominant position among experts in market strategy is that the degree of market strategy
of the company has a positive impact on business performance (Rojas-Mendez, Kara &
Spillan, 2012), especially on revenue, market share and profitability. Recent studies have
offered empirical evidence for positive business strategy implementation impacts on
perceived customer service, consumer retention and loyalty, as well as employees (Dauda,
2016). Business strategy is also essential to the success of a company as it promotes and
facilitates the production of new products to meet current and potential customer needs.
Nonetheless, a number of authors on the concept have questioned the existence of a positive
relationship between market intervention and business performance. Olavarrieta and
Friedmann (2016) findings showed that there was no relation between market intervention
and a firm’s actual market share. This was also supported by Greenley (2015) that found
existence of no relationship between market intervention and business performance.
Therefore, a related empirical study should be conducted in Kenya to validate the
aforementioned correlations between market intervention and business performance.
2.3.1 Customer Orientation
Day (2015) defines customer orientation as superior comprehensive and customer
satisfaction skills. Transforms marketing into a powerful strategic arsenal, transforming
corporate principles, opinions, expectations, and premises to a two-way customer-company
relationship. Customer orientation has to do with the culture of placing customer’s interest
first and requires a thorough understanding of client needs so as to fashion products or
services of superior value (Lansiluoto, Joensuu‐Salo, Varamaki, Viljamaa & Sorama,
2019). Slater and Narver (1990) describe consumer orientation as an adequate awareness
of one's target customers in order to constantly establish superior value for them. However,
it also allows a seller to consider the entire value chain of a customer, not just as it is today,
but also as it may change over time, subject to fluctuations within the internal market.
Customer orientation is greatly important to make the firms effort to understand the market
15
place, develop appropriate product, and service strategies to meet customer needs and
demands that interpret into performance (Langerak, Hultink & Robben, 2014).
Therefore, to achieve the highest level of performance and to maintain firms’ long term
capacity and create a mutually beneficial relationship with the customer, market orientation
should be at the heart of organization. Customer orientation is commonly seen as an aspect
of firm’s strategic means of delivering desires value to clients (Zhou et al., 2015). The main
aim of customer orientation is to lay a solid foundation of gaining information concerning
current and future clients for strategic actions based on sufficient information provided by
customer (Slater & Narver, 1990). Customer orientation must therefore not be relegated to
the background since it will help in delivering value to customers Benson, Saraph and
Schroeder (2016) found out a relationship between market orientation and market
performance. Asikhia (2010) found a significant and positive relationship between
customer orientation and SMEs performance in Nigeria.
Deshpandé, Farley and Webster, (1993) emphasized on the significance of Customer
orientation as a driver of long-term profits for organizations. Customer orientation is a
salient strategy for small firms as a medium of competitive advantage to make them
separable from bigger firms (Brockman, Jones & Becherer, 2012). SMEs firms tend to be
closer to their customers to meet-up their demands and can easily process the customer
intelligence data because of their spatial proximity (Maurya, Mishra, Anand & Kumar,
2015). Pekovic and Rolland (2012) found positive impact of sales people customer
orientation on organizational performance.
Miller (2015) also indicated that designing and enforcing customer orientation would be
the driving force for corporate market place. This position is supported by Verhoef and
Leeflang (2017) who confirm a significant relationship between a firm's customer
orientation and its financial and market performances. Thus, it is believed that a customer-
oriented company places the customer at the center of the operation and sees the customer
as having their reason to be in business and as such goods and services to meet their
customer's needs (Hurley & Hult, 2016). Customers are also likely to tend to support the
product or service that is borne out of their needs interpreting into sales growth and
performance of the firm (Boso & Cadogan, 2015).
16
2.3.2 Competitor Orientation
Businesses need to recognize vulnerabilities and strengths as well as rivals' capacities and
practices in order to understand their market share. Slater and Narver (2015) who state that
for businesses to realize its market share, it is required of to know weaknesses and strength
as well as capabilities and activities of competitors. Data obtained about rivals lets the
company reposition its bid to plan for the entity's potential survival (Slater & Narver, 2015).
Competitor orientation as part of the market strategy is seen as an organizational strategy
that ends up creating business behavior that improves on the products that they deliver to
clients. It's important to know that rivals are going to sit up worried but are competing for
the same category of customers. Businesses must therefore seek intelligence about their
competitors in order to improve on their service delivery (Tomaskova, 2014). Those
contenders of the business are viewed as ventures that are giving substitute item by serving
similar need of clients (Kotler, 2009)
Competitor-oriented company is a company which regulates practices and activities used
to influence competitors' behavior and reactions (Miller, 2015). In such a case, an
organization that has taken competitor orientation focuses its energy on more critical
aspects of competitor and consumer trends, and tries to identify measures that can be
implemented against them. Often businesses are designed based on their strategic strengths
and weaknesses and a study of rival approaches (Hurley & Hult, 2016). If a company has
competitor focus, the management is continually re-evaluating their competitors ' strengths
and weaknesses. They revise regularly their capabilities to others in terms of skills and
knowledge based on people, technical and physical systems, managerial systems,
organizational structures, values and cultural norms (Bircall & Tovstiga, 2005).
The aim of competitor orientation is to provide a strong basis of intelligence for strategic
action with regard to current and future competitors. Such business competitors are seen as
companies which provide substitute products by serving the same consumer needs (Tse,
Leo, Yau, Lee & Chow, 2013). The present and potential rivals are located in companies
with an unusual or non-peculiar model for production technology. These called for an
insight into what rivals are doing to help influence the dynamics of the firm's operations
(Tay & Tay, 2014). Successful firms after some time are the ones that take part in more
elevated levels of innovative movement (Hussain et al., 2015), firms that attempt to bring
out more innovations are more likely to succeed (Boso & Cadogan, 2013), innovativeness
is a source of competitive advantage (Agrawal et al. 2003), and innovation and corporate
17
entrepreneurship leads to superior performance (Agrawal et al. 2003). Competitor-
orientation breeds innovation and new products (Augusto & Colho, 2009).
2.3.3 Inter-Functional Coordination
Inter-functional cooperation refers to the degree to which the different functions
/departments within the organization cooperate (Tay & Tay, 2014). It is the integration of
all the organizational and operational functions of consumer and business knowledge to
create value for the customer. When there exists a coordinated maximization of the firm’s
resources that aims at performing better in the eyes of the customer, it is seen as the
organization practicing inter-functional coordination (Boso & Cadogan, 2013). There is
subsequently a need to between practical facilitate the exercises that are worried about the
everyday administration of the business so as to help acknowledged to possibilities of the
business in augmenting its performance.
Tse et al. (2013) claim that inter-functional collaboration is the sharing of customer and
competitor knowledge across all parts of staff and organizations in order to provide a clear
interpretation of the customer's needs and desires, and to prepare to address competition.
They divided inter-functional coordination into four parts: functional integration into
strategy, shared information among functions, distribution of knowledge and coordination
between all units to establish value for the customer (Tse et al., 2013). Therefore, inter-
functional cooperation can be seen as the harmonization of all internal roles and processes
within a company. It consists of two parts: Business culture and management of
information (Tay & Tay, 2014).
Slater and Narver (1995) recognized inter-functional collaboration as an obstacle to
business strategy execution. The obstacles relevant to organizational culture are those of
systemic, institutional, administrative, and contact. Within an organization it is critical to
have no flaws in a program, structure, procedure or communication. Certain obstacles such
as unnecessary centralization, formalization or departmentalization can also arise (Hurley
& Hult, 2016). The second inter-functional communication barrier is related to the
communication of the information. Gaining knowledge, evaluating it, and then using the
findings in a company's decision process is critical (Tomaskova & Kopfova, 2014).
Inter-functional coordination is targeted at the internal context; however, inter-functional
coordination effects are also related to the local, external and branch system (Tay & Tay,
2014). Management has strong effect on inter-functional cooperation and staff according
18
to Tomaskova and Kopfova (2014). Improving management style leads to better co-
ordination between roles. Improvements in internal procedures become noticeable within a
limited period of time. Employees will detect changes very quickly. Branch and external
environmental changes require more time (Tomaskova & Kopfova, 2014).
Inter-functional collaboration acknowledges that the attitude of employees towards internal
and external customers is important to all departments as well as to employees. Coordinated
resource management is closely linked to client and rival, as they facilitate department-
wide customer engagement (Slater & Narver, 1990). Therefore, the activities related to the
day-to-day management of the business need to be inter-coordinated in order to help realize
the business' potential in maximizing its performance (Langerak, Hultink & Robben, 2014).
2.4 Access to Finance Skills and Performance of SMEs
This section addresses the access to finance and its influence on the financial performance
of SMEs. Family, friends and close business associates have been one of the primary
sources of capital. They have played a critical role in ensuring entrepreneurs can start and
even expand their companies. This is the principal financial source in Kenya and other
developing countries (Mwarari & Ngugi, 2013). The range of capital is raising options from
family and friends ranges from business founders tapping their own credit worthiness or
resources (savings, home equity or credit cards) to relatives or a trusted business partner
stepping up with the seed money needed to start the business. Generally, this type of capital
tends to be for lower financial value in terms of and usually taken in form of equity or part
ownership rather than a debt due to the uncertainty of growth of the business (Wolf, 2015).
2.4.1 Access to Business Capital
Business capital is the prerequisite for development, while growing its quality and
competitiveness is a critical factor in ensuring growth for SMEs and the rates of poverty
(Msoka, 2013). Even where microfinance institutions have come in to tackle the issue of
credit access, they have focused heavily on poverty reduction, instead of SME creation and
growth. Therefore their loan sizes appeared to be too small for growth support (Stevenson
& St-Onge, 2015). On the subject of supporting and investing in innovation, in addition to
the challenges mentioned, SMEs are starved for finance to support innovation even when
they have sound business and expansion plans worthy of investment, as they are considered
risky because their innovative business ideas have not been tried and tested (Kiraka, Kobia
& Katwalo, 2015).
19
Therefore, small and medium-sized companies find themselves in a vicious cycle of
delivering what is already on the market and unable to develop and expand to realize their
full potential because they lack both capital and business support resources to move into
unexplored business concepts (Aikaeli, 2014). Different financial sources as well as other
types of support are required for potential owner managers to create and expand start-up
SMEs and not just the current SMEs to turn them into tomorrow's biggest company
(Nieman, 2014). These budding entrepreneurs will thrive in the business environment by
coming up with innovative ideas to improve products and services to reach an increasingly
demanding market instead of relocating past business models (Kiraka, Kobia & Katwalo,
2015).
The new Global Financial Development Report from the World Bank (World Bank, 2015)
once again stressed the scarcity of both financial resources and business-related expertise
as primary impediments to firm development in developing countries. Failure to access
credit, however, is a major challenge for those SMEs who wish to extend their operating
activities (Gichuki, Njeru, & Tirimba, 2014). The reasons for this are well known, including
high cost of repayment, strict collateral requirements, unwillingness of people to act as
guarantors, high credit facilities’ processing fees and short repayment period. Therefore, it
is recommended that financial institutions set more flexible, affordable and attractive
requirements in financing micro and small enterprises (Gichuki, Njeru, & Tirimba, 2014).
2.4.2 Access to the Cost of Credit
There is still inadequate access to structured sources of finance for a large part of the
world’s population, and the prevalence of capital market imperfections and corresponding
lack of access to financial resources has often been highlighted as a major impediment to
firm growth in developing countries. The World Bank informal enterprise surveys, for
example, reveal that lack of access to finance is perceived as the most pressing obstacle
facing small firms in developing countries (World Bank, 2015). A couple of academic
studies report high returns on grants of cash or in-kind capital among small enterprise
owners in developing countries that are typically well above prevailing market interest rates
(Prediger & Gut, 2014).
Furthermore, the relatively higher cost of financial institutions processing credit implies
that lending to SMEs is not generally for banks (Matfobhi & Ruffing, 2013). Many SMEs
are faced with the challenge of having adequate protection in terms of credit-access
20
properties. Banks prefer urban housing permits (UHP) to support concrete or deposit
systems which are substantial as loan collateral. Mong’are (2017) states that most small
and medium-sized enterprises rely on informal financial support sources for credit. Around
82 per cent of small and medium-sized companies depend on family, personal savings and
even friends for financial help to expand their businesses. Grimm and Paffhausen (2014)
note that programmatic initiatives targeting small and medium-sized enterprises may
include measures to improve access to finance through the provision of micro-credit,
advisory services and business skills training, while policy interventions concentrate on
improving the environment conditions for small and medium-sized enterprises and may
include labor market regulations and property rights compliance or credit information.
Drever (2015) argued that financial difficulties (lack of funds) limited the creation and
growth of small businesses, as many of them were unable to access the same forms of
growth financing frequently available to big business. Empirical evidence shows the
importance of internal finance for SME growth, pointing to a positive relationship between
growth and internal finance in various economies, namely Germany, the USA Portugal and
Spain (Serrasqueiro, Nunes, Leitão & Armada, 2010). In situations of insufficient internal
finance, it is necessary to make external finance available so as to promote investment by
enterprises and ultimately growth. However, insufficiency of internal finance can be a
problem, given the greater difficulties faced by SMEs in accessing external finance
(Becchetti & Trovato, 2002).
However, interventions may also target the (potential) labor force through programs such
as technical vocational education and training (TVET) or the job service. It is worth noting
that small and medium-sized enterprises in Kenya are having trouble rising because of lack
of financial access. They rarely succeed past the start-up stage in terms of growth with past
statistics indicating that three out five fail within the first few months (Bowen, Morara &
Mureithi, 2009). The research carried out by Hallberg (2014) and Mead and Liedholm
(2013) shows that financial accessibility is instrumental to the growth and development of
SMEs. In terms of credit, these SMEs have little or no alternative to financial accessibility
other than the ability to rely on their retained earnings to finance their business investments.
Given the financial difficulties currently facing SMEs operating in Kenya, these SMEs are
finding alternative sources of funds to support themselves in the SME sector (Memba &
Gakure, 2013).
21
In Kenya a number of studies were carried out focused on the growth of SMEs. Namusonge
(2013) discussed the growth-oriented elements of SMEs in Nairobi. The main determinants
in the research included management experience, training and schooling as well as the
psychology of small and medium-sized business owners. The study concluded that the
availability and form of finance are critical elements contributing to SME growth. Owner
manager attributes also have an impact on SME production. The researcher failed to
highlight the basic indicators of SME growth according to this report.
Another study by Wanjau, Gakure, Magutu and Kahiri (2013) on the role of quality in SME
growth has clarified that quality adoption influences SME growth. Mungah (2014) further
indicated that determinants of growth of manufacturing SMEs in Kenya pointed out that
interest rates, fuel prices, business skills and political uncertainty were main factors that
were found to affect growth of SMEs in large companies. The problem retains recognized
significance, most notably because it is a global trend that small businesses experience
financial institutions' constraints on credit access (Baas & Schrooten, 2015).
Small businesses are more opaque in terms of information and therefore have less access
to external financing compared to large enterprises which are more open in terms of
information; financial institutions are unable to solve asymmetric knowledge problems and
sufficiently finance small enterprise expansion (Hartarska & Gonzalez-Vega, 2016).
For business growth the availability of sufficient economic resources is critical. This helps
small and medium-sized companies to obtain the requisite skills and capital to bring their
entrepreneurial ideas into practice, become profitable and develop survival strategies under
difficult circumstances as well as expand (Mong’are, 2017). The findings obtained by
Cooley, Quadrini and Quadrini (2004) indicate that the development of new small
businesses is hindered by financial constraints and a lack of diverse capital.
2.4.3 Advancing Credit through Financial Institutions
Approximately 45 percent of lending institutions, such as banks, continue to be very
restrictive and risk-averse, thereby avoiding SMEs, which are considered extremely risky
without collateral or with a credible and meaningful achievement, record (Mong’are, 2017).
Majority of SMEs, which typically have the opportunity to raise funds, considering capital
costs too high (Rwigema & Venter, 2014). Finance availability defines a company's
capacity in a number of ways, especially in technology choice, market access, and access
to vital resources, which in turn greatly influences a company's viability, and performance.
22
Raising capital for company start-ups or business operations appears to be one of the
primary challenges that any owner manager in the SME sector is facing. According to
Mong’are (2017) the inability to access credit for long-term growth is considered one of
the key difficulties preventing SMEs from expanding and rising.
Banerjee and Duflo (2014) conducted a review of loan details collected in detail from a
bank in India from 253 SME borrowers both before and after they became newly qualified
for the scheme. In particular, the program's size concept was updated in 1998 which
allowed a new category of medium-sized businesses the opportunity to receive loans at
subsidized interest rates. Of course, these companies began borrowing under this preferred
scheme, but instead of merely substituting subsidized credit for costlier funding, they
increased their revenues in proportion to the additional sources of loans, implying that these
companies had previously had to be credit constraints.
This means that SMEs cannot receive credit loans from other alternative financial sources.
This shows that inability to access credit is a critical issue for developing countries to build
and expand SMEs. A significant number of SMEs in Kenya continue to rely on self-
financing in terms of their retained earnings in comparison to the considerable difficulties
associated with accessing alternative loan facilities. Hallberg's (2014) study explains that
accessibility to credit is a cardinal element in SME creation and growth. The implication,
therefore, is conclusive that a large number of SMEs are not able to meet the operational
needs of their enterprise due to inadequate credit accessibility from financial institutions.
This indicates that there exists a financial gap for SMEs starting up or wishing to expand
(Drever, 2015).
Tracy and Tracy (2007) state that sources of debt capital include banks, leasing companies,
government-backed programs (microfinance within the context of our country), asset-based
lenders, factoring companies. Some type of lender is readily available on the market for
almost any debt-based necessity. Similar to private outlets, these entities continue to search
for a similar collection of characteristics when expanding debt-shaped capital. Some type
of insurance, such as an asset or personal guarantee, must be present, and debt suppliers
prefer to look for more secure market situations where a company has been in operation for
an extended period of time and has an established record of achievement. Nonetheless, the
majority of Kenya's SMEs are experiencing difficulty getting credit from the formal
monetary foundations since they need appropriate budgetary records. Most organizations
23
regularly keep different arrangements of books and don't have dependable bookkeeping
principles based examined fiscal summaries.
At the other hand, these organizations wind up getting credits at higher loan fees, as banks
regarded them as moneylenders at high danger. Asymmetric knowledge challenges for
small businesses could be more pronounced (Wanjohi, 2013). Monitoring small and
medium-sized companies is more challenging and costly because information about them
is less readily accessible, has less credit history, and is subject to less stringent reporting
standards and the consistency of their financial statements that vary (Pettit & Singer 2014).
All of these factors contribute to SMEs frequently failing to signal their creditworthiness.
2.5 Chapter Summary
This chapter reviewed literature on the strategic interventions and performance of SMEs.
The first section discussed the training intervention, the second section looked at the market
intervention and the third research question discussed financial skills and financial
performance of SMEs. The next chapter deals with the research methodology.
24
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter highlights the research methodology that was used as a framework of the
study. The research methodology that was employed played a vital role, as it determined
the overall outcome of the research. The research methodology was broken down into the
following sections, the research design, the target population, sampling design, data
collection methods and data analysis.
3.2 Research Design
This process outlined the plan of the study, connecting the research objectives or problems
to the empirical evidence. According to Kothari (2004), the research design is the
conceptual structure within which the research is conducted; it gives the researcher, the
structure needed for collection, measurement, and analysis of the data collected. The design
therefore provided an outline of the steps the researcher took from the hypothesis writing
stage, the operational workings to the final analysis of data. A descriptive research approach
was employed for this study. This design approach was preferred for this study as it seeks
to answer the questions, who, how, what, with which, when and how much (Muathe, 2010;
Cooper & Schindler, 2014). By using the descriptive design approach, the study provided
a picture of the situations it naturally happens it was able to draw a relationship between
strategic interventions and its effects on SMEs performance (Burns & Grove, 2012).
3.3 Population and Sampling Design
3.3.1 Population
Population is described as the total collection of elements, which have common observable
characteristics, or patterns that the researcher wishes to make some inferences (Cooper &
Schindler, 2014). Population is the universe of all members of a real or hypothetical set of
people, events or objects to which an investigator wishes to generalize the results (Borg &
Gall, 2013). The target population of interest in this study consisted of business owners of
SMEs in Nairobi City County, Kenya who have gone through Entrepreneurship training at
Centonomy Limited.
According to records from Centonomy Limited, there were 2259 registered SMEs
(Centonomy Limited, 2018) with 1539 SMEs found within Nairobi City, Kenya. The
researcher obtained this data from an official who works at Centonomy Limited. The study
25
targeted the business owners of SMEs that had been in operation for more than one year at
the time of the study. The target population consisted of SMEs from different sectors
including general trade, transport and communication, agriculture, hospitality, professional
and technical, education, entertainment, and manufacturing. The population distribution
that shows classification of SMEs is presented in Table 3.1 below.
Table 3.1: Population Distribution
Classification of SMEs Population (SMEs owners) Percent
General Trade 221 16
Transport and Communications 207 15
Agriculture 217 14
Hospitality 2 47 13
Professional and Technical 205 14
Education and Entertainment 231 13
Manufacturing 211 14
Total 1539 100
Source: Centonomy Limited (2019)
3.3.2 Sampling Design
A sample design is defined as a blueprint for conducting a study with maximum control
over factors that may interfere with the validity of findings (Burns & Grove, 2012).
3.3.2.1 Sampling Frame
According to Cooper and Schindler, (2014), a sampling frame refers to a list of elements in
population from which the sample is drawn. Similar characteristics representative of the
entire population is represented in a sample frame making its selection extremely
fundamental. A number of 318 SME’s owners who have undertaken the Entrepreneurship
program at Centonomy Limited formed the sample frame for this research.
3.3.2.2 Sampling Technique
A sampling technique refers the selection of sample units that are guided by statistical and
scientific methods of data collection. As there are several sampling techniques it is
important to choose the most relevant to obtain the most accurate representation (Cooper
& Schindler, 2014). The technique that was chosen for this study was the Stratified
technique a Stratified sampling technique is a non-probability sampling technique that
comprises of the division of the population into different groups that are known as strata
26
that are homogeneous in nature. Then the researcher applies the selection of individual
population units from each sub-divided group/ segment according to the research purpose
(Cooper & Schindler, 2014). The study made use of stratified sampling to certify that the
sample size of the study was evenly distributed across the study strata. The population of
the study was divided into five categories/ strata: general trade, transport and
communication, agriculture, hospitality, professional and technical, education and
entertainment and manufacturing. After which, simple random sampling was employed to
select the population units from each stratum
3.3.2.3 Sampling Size
According to Cooper and Schindler (2014), a smaller set of the larger population is referred
to as a sample size. The researcher adopted Yamane (1973) statistical formula to select an
appropriate sample size from a finite population. This formula was used to determine the
representative sample size from the owner managers of SMEs operating within Nairobi
City County, Kenya as follows:
Where;
n = required sample size
N = size of the population
e = alpha level, that is, allowable error e = 0.05 at 95% confidence interval n = 1539 / [1 +
1539 (0.05*0.05)] = 1539 / 4.8475 ≈ 318
The study utilized a sample size of 318 business owners of SMEs drawn from Nairobi City
County and operating in different parts of the county. This was proportionately allocated
based on the population size of each strata as shown in Table 3.2.
27
Table 3.2: Sample Size Distribution
SME Classification Population % Sample Size Sample
General Trade 221 16 51
Transport and Communications 207 15 48
Agriculture 217 14 43
Hospitality 247 13 42
Professional and Technical 205 14 45
Education and Entertainment 231 13 43
Manufacturing 211 14 46
Total 1539 100 318
3.4 Data Collection Methods
Structured questionnaires was used to collect the primary data. Harris and Brown (2010)
assert that the use of questionnaires is suitable since the responses are gathered in a
standardized manner, and the method is objective. An online survey questionnaire will be
the tool used to collect the primary data as provided the current data for analysis in the
subject area and it will be a faster and non-intrusive method of getting the data, given the
budget constraints as well.
The questionnaire format for the study had four sections. The purpose of the first section
was to provide general information deemed relevant for this study. The second section
sought to examine the effect of marketing strategy on performance of SMEs. The third
section sought to identify the effect of marketing strategy on performance of SMEs. The
fourth section examined the effect of access to finance skills on performance of SMEs. The
questionnaire made use of closed-ended questions. The closed-ended questions were in the
form of a Likert scale that guided the respondents to select co-opted options based on their
level agreement on a five-point summated rating scale denoted as 1=Strongly Disagree,
2=Disagree, 3=Neutral, 4=Agree, and 5=Strongly Agree. The respondents’ attitude was
reflected in the assigned score, individual scores were then totaled for an overall measure
of the responses whether they agreed or disagreed with the object of observation
3.5 Research Procedures
The research procedure describes the process a researcher used to gather their data; it
included the steps taken to enable another researcher to perform the same process in their
research for further research advancement. Pre-testing of the questionnaire was done
28
among a few students from the sample population, this was to ensure the questionnaire was
proofread and the line of questioning was checked to ensure the final target sample
understood the context of the questionnaires. This was conducted with the aim of refining
the instrument and testing its validity and reliability. Reliability was tested using the
Cronbach Alpha test using the Statistical Package for Social Sciences (SPSS).
Cronbach’s alpha measure assesses the reliability or internal uniformity, of a set trial items.
According to Cooper and Schindler (2014), the required threshold for questionnaire items
that have 6 and above items is >0.7 while for those that have 5 and below is >0.5. Table
3.3 provides the results of the questionnaire. The table indicates that all questionnaire items
had coefficients of 0.826, 0.879, and 0.736 for organization training strategy, market
intervention and access to finance skills of SMEs respectively. These questionnaire items
were all >0.7, meaning the instrument was reliable for data collection for the study.
Table 3.3: Cronbach Alpha Reliability Test Results
Items Coefficient
Organization Training Strategy 10 .826
Market Intervention 9 .879
Access to Finance Skills and Performance 9 .736
SMEs Performance 5 .788
In the study ethical considerations were employed. First was to seek permission for the
study. The researcher got in touch with the business owners of the SMEs and sought their
permission to conduct research before providing them with the questionnaires. Secondly,
the study required respondents to remain anonymous. They were not required to give their
personal details to guarantee confidentiality and anonymity. Lastly, professionalism was
required. A research permit from NACOSTI was also obtained to help facilitate with the
research. A research assistant helped to collect the data, they were trained accordingly and
finally signed a confidentiality agreement. This was an important step before the final
questionnaire was sent out to respondents. An introduction letter detailing the purpose of
the study and assuring confidentiality of respondent information was used as a strategy to
ensure a high response rate. The final questionnaire was sent via the online tool Survey
Monkey to the respondents since it was fast and cost effective.
29
3.6 Data Analysis Methods
Data analysis method involved data preparation, descriptive analysis and inferential
analysis. Questionnaires collected from respondents were reviewed carefully and checked
for completeness and consistencies. Each item in the questionnaire was assigned a
numerical representation and the responses from each respondent was coded using a
defined coding scheme. After completion of coding, data was entered into the Statistical
Package for Social Sciences (SPSS) tool for analysis. Descriptive statistics was used to
analyze the data collected and descriptive analysis determined frequency and percentage
distributions, mean and standard deviation. To analyze categorical data such as gender of
the respondent’s cross tabulations was used. This study used inferential statistics
particularly Pearson Correlation and Multiple regression for data analysis.
The following regression model was used in this regard.
Y= α +β1x1 + β2x2 + β3x3 + ε
Y = SME Performance
α =Constant term
β= Beta Coefficients
X 1 = Training interventions
X 2= Marketing interventions
X 3= Financial skills
ε = Standard Error
The results of the study was presented using tables and figures by use of Statistical Package
for Social Science (SPSS).
3.7 Chapter Summary
This chapter highlights the different techniques used to address the research objective.
Descriptive research approach was the preferred research design. The population of the
study was 1539 SMEs owners with a sample size of 318 formed the basis of the study. The
data for analysis was collected using the primary collecting tools, which involved a
questionnaire. SPSS and Microsoft Excel were the tools used to analyze the raw data form
and the findings presented in the form of tables and figures. The next chapter delved with
the analysis of the findings.
30
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter presents the results established from the data analysis done. This included
results relating to the demography and specific research objectives aimed at establishing
the strategic interventions and performance of small and medium enterprises in Nairobi
City County, Kenya: a case of Centonomy Limited.
4.2 Response Rate and Demographic Information
4.2.1 Response Rate
The research issued a total of 318 questionnaires and a total of 254 were filled giving a
response rate of 90%. This was sufficient for the study as indicated in Table 4.1
Table 4.1: Response
RateVariable Frequency Percentage
Filled 254 90%
Non-response 64 10%
Total 318 100
4.2.2 Gender of Respondents
The researcher sought to determine the gender distribution of the population and the results
presented in figure 4.1 indicate that 76% were male, and 24% were female. These results
show that more males run SMEs compared to females, this could be as a result of the nature
of the industry.
Figure 4.1: Gender of Respondents
Male76%
Female24%
0%
0%
Gender
31
4.2.3 Highest Level of Education
To analyze the literacy levels the result established that majority of respondents accounting
for 62% were degree holders while 38% had a Masters degree as shown in figure 4.2 below.
This implies that the data received that the response received was precise as the respondents
were very literate to comprehend the questions asked.
Figure 4.2. Education of Respondents
4.2.4 Age of Respondents
The researcher sought to determine the age bracket of the population and the results
presented in Figure 4.3 indicate that 52% were aged between 26-35 years, 43% were aged
between 36-45 years, 2% were 25 years and below and 2% were aged between 46 years
and above. These results show that most SME owners and managers were young and mid-
aged adults. This could be explained by the country’s demographics.
Figure 4.3: Age of Respondents
Degree62%
Masters38%
0% 0%
Education
Less than 25 26-35 36-45 46 and above
Series 3
Column1
Age 2% 52% 43% 3%
0%20%40%60%80%
100%
Axi
s Ti
tle
Age
32
4.2.5 Number of Years in Business
The researcher sought to determine the number of years the businesses had been in
operation and the results presented in Figure 4.4 indicated that 53% of the respondents
specified that the business had been in operation for 3-6 years, 31% indicated that the
business had been in operation for 7-10 years, 7% indicated that the business had been in
operation for less than 3 years and 15 years and over respectively and 2% indicated that the
business had been in operation for 11-14 years. These results show that most of the SMEs
had been in business for more than 4 years, making the population significant for the study.
Figure 4.4: Years in Business
4.2.6 Nature of Business
The researcher sought to determine the nature of business of the SMEs and the results
presented in Figure 4.5. The findings illustrated that 52% were in service business, and
48% were commercial trade and retail. These results show that all areas of the SME industry
were represented, meaning that the study results could easily be applied to all SME sectors.
Figure 4.5: Nature of Business
Less than 37%
3-6 years53%
7-10 years31%
11-14 years2%
15 and above
7%
Years in Business
Service Business
52%
Commercial Trade and Retail 38%
0%0%
Nature of business
33
4.2.7 Number of Employees
The researcher sought to determine the number of employees that had been hired in each
of the SMEs and the results presented in Figure 4.6. The findings indicate that 41% had 5-
10 employees, 40% had 11-30 employees, 14% had 31-50 employees, 3% had 50
employees and above, and 2% had less than 5 employees. These results show that most of
the SMEs had hired many employees and contributed greatly to employment in the country,
and the results showed that the population was significant to the study.
Figure 4.6: Number of Employees
4.2.8 Management Level
To analyze the management levels the result established that majority of respondents
accounting for 45.1% were lower managers, and 43.7% were senior managers, 8.5% were
middle managers only 2.8% were regular staffs as shown in Figure 4.7. This implies that
the data received that the response received was relevant as it is the responsibility of
managers to evaluate strategic interventions and performance of small and medium
enterprises.
Less than 52%
5-10 employees42%
11-30 employees41%
31-50 employees15%
Number of employees
34
Figure 4.7: Management Level
4.3 Training Intervention and Performance of SMEs
The first objective of the study was set to examine the effect Training Intervention and
Performance of SMEs. This section offers the descriptive, correlation and regression
analyses for Training Intervention and Performance of SMEs.
4.3.1. Descriptive Statistics
The first objective set to establish how organization training intervention affects SMEs
performance. Respondents were asked a set of questions to indicate to what extent they
concur and not concur with statement related to organization training intervention and
SMEs performance. Using a five point Likert scale where 1 - Strongly Disagree 2 - Disagree
3 - Neutral 4 - Agree 5 - Strongly Agree.
The results established that most respondents agree that all members of the organization
work and move towards a desired agreed future (4.74), training strategy has helped the firm
in foreseeing environmental and market changes. (4.50). the firm has a common mental
model of its future state that provides the basis for its actions (4.50). The firm is always
willing to question its current thinking and practices (4.50).The respondents agreed that
their organization actively encourages employees and customers to give feedback and
suggestions for improvements (4.26). Training strategy has increased the firms’ ability to
innovate (4.25). Organizational knowledge transfer has improved the performance of the
firm (4.25). The firm has the tendency to create and apply knowledge within the
organization (4.00). Lastly; the firm evaluates its daily operations and accepts new ideas
easily (4.01) as shown in table 4.2
Senior management
44%
Middle management
8%
Lower management
45%
Regular Staff3%
Management Level
35
Table 4.2: Descriptive on Variables of Training Intervention
Variable N Mean Std.
Deviation
The firm has the tendency to create and apply knowledge within the
organization.
145 4.000 0.707
Training strategy has helped the firm in foreseeing environmental and
market changes.
145 4.500 0.502
The organization actively encourages employees and customers to give
feedback and suggestions for improvements.
145 4.260 0.831
Training strategy has increased the firms’ ability to innovate. 145 4.250 0.434
The firm has a common mental model of its future state that provides the
basis for its actions.
145 4.500 0.502
All members of the organization work and move towards a desired agreed
future
145 4.740 0.437
The firm evaluates its daily operations and accepts new ideas easily. 145 4.010 0.712
The firm is always willing to question its current thinking and practices. 145 4.500 0.502
Organizational knowledge transfer has improved the performance of the
firm.
145 4.250 0.434
4.3.2. Correlation Analysis for Variable of Training Intervention
Table 4.3 presents the correlations training intervention and performance of SMEs. The
table shows that training interventions had a significant correlation with performance of
SMEs (r=0.545, p<0.05).
Table 4.3: Correlations analysis for Variable of Training Intervention
Performance
Training
Intervention
Performance Pearson Correlation 1 .604
Sig. (2-tailed) .000
N 254 254
Training Intervention Pearson Correlation . 545 1
Sig. (2-tailed) .000
N 254 254
**. Correlation is significant at the 0.01 level (2-tailed).
36
4.4.3 Regression Analysis for Variable of Training Intervention
The following part presents the regression analysis between training intervention and
performance of SMEs. This was conducted to examine the nature of the relationship
between the two study variables training intervention and performance of SMEs,
specifically, to determine how the independent variable influences the dependent variable
and the course of their relationship when the variables change. This is presented using the
model summary, ANOVA, and linear regression coefficient.
4.4.3.1 Model Summary for Variable of Training Intervention and performance of
SMEs
Table 4.4 shows the existing relationship between training intervention and performance of
SMEs, and the R square value of .365 shows that training intervention influence
performance of SMEs by 36.5%.
Table 4.4: Model Summary for Variable of Training Intervention and SMEs
performance
Model R
R
Square
Adjusted R
Square
Std. Error
of the
Estimate
Change Statistics
R Square
Change
F
Change df1 df2
Sig. F
Change
1 .604a .365 .360 .69914 .365 82.098 1 143 .000
a. Predictors: (Constant), training intervention.
4.3.3.2 ANOVA for Variable of Training Intervention and SMEs
Table 4.5 presents the ANOVA for training intervention and performance of SMEs. The
linear regression of the F statistics shown signifies that there was a statistical and significant
linear relationship training intervention and performance of SMEs (F (1, 252) = 82.098,
p<.05). This means that the regression analysis was fit for the study.
Table 4.5: ANOVA for Variable of Training Intervention and SMEs
Model Sum of Squares df Mean Square F Sig.
1 Regression 40.130 1 40.130 82.098 .000b
Residual 69.898 252 .489
Total 110.028 253
a. Dependent Variable: performance
b. Predictors: (Constant), training intervention.
37
4.3.3.3 Coefficients for Training Intervention and Performance of SMEs
Table 4.5 provides the regression coefficient that indicates the existing relationship
between training intervention and performance of SMEs. The table produces a linear
regression of the relationship in the form:
Performance of SMEs = 1.439+ .643training intervention + 𝑒
From the table, it can be inferred that training intervention was significant to the operational
performance of SMEs because its p-value was < 0.05. From the equation, it can also be
inferred that a single unit increase in training intervention results in a 64.3% increase in
performance of SMEs.
Table 4.6: Coefficients for training intervention and performance of SMEs
Model
Unstandardized Coefficients
Standardized
Coefficients
t Sig. B Std. Error Beta
1 (Constant) 1.439 .271 5.314 .000
training intervention .643 .071 .604 9.061 .000
a. Dependent Variable: performance
4.4 Marketing Skills Intervention and Performance of SMEs
The second objective set to establish how Marketing Skills intervention affects SMEs
performance. Respondents were asked a set of questions to indicate to what extent they
agree or disagreed with statement related to Marketing Skills intervention and SMEs
Performance. Using a five point Likert scale where 1 - Strongly Disagree 2 - Disagree 3 -
Neutral 4 - Agree 5 - Strongly Agree.
4.4.1 Descriptive Statistics
The results established that most respondents agree that the organization has intelligence
(information about their strengths, weaknesses and capabilities) about its competitors
(4.26). Market orientation is a significant part of the firms’ culture (3.75). Market
orientation in the firm has been formalized to exist in the firm’s rules and regulations (3.25).
Market orientation has improved the firms’ market share and profitability (3.49). Market
orientation has improved customer satisfaction and loyalty to the firm (4.25). The firm
creates superior value to its customers through sufficient understanding of their needs
(3.61). Customer orientation has helped the firm in developing appropriate service
strategies that meet customer needs and demands (3.99). The organization seeks
38
intelligence about its competitors in order to improve its service delivery (3.91). Inter-
functional coordination helps the firm to analyze and use information gained in its decision
process (3.77) as shown in table 4.8.
Table 4.7: Descriptive on Variables of Marketing Skills intervention and Performance
of SMEs
Variable N Mean Std.
Deviation
Market orientation is a significant part of the firms’ culture. 145 3.750 0.434
Market orientation in the firm has been formalized to exist in the firm’s rules
and regulations.
145 3.250 0.434
Market orientation has improved the firms’ market share and profitability. 145 3.490 0.875
Market orientation has improved customer satisfaction and loyalty to the
firm.
145 4.250 0.829
The firm creates superior value to its customers through sufficient
understanding of their needs.
145 3.610 1.095
Customer orientation has helped the firm in developing appropriate service
strategies that meet customer needs and demands.
145 3.990 0.712
The organization has intelligence (information about their strengths,
weaknesses and capabilities) about its competitors.
145 4.260 0.831
The organization seeks intelligence about its competitors in order to improve
its service delivery.
145 3.910 0.865
Inter-functional coordination helps the firm to analyze and use information
gained in its decision process.
145 3.770 0.727
4.4.2. Correlation Analysis for Marketing Skills Intervention
Table 4.9 presents the correlations of Marketing Skills intervention and SMEs performance.
The table shows that Marketing Skills intervention were significant to the performance of
SMEs (r=0.579, p<0.05).
39
Table 4.8: Correlation analysis for Marketing Skills intervention.
4.4.3 Regression Analysis for Marketing Skills Intervention and Performance of
SMEs
The following part presents the regression analysis between Marketing Skills intervention
and SMEs performance. This was conducted to examine the nature of the relationship
between the variable Marketing Skills intervention and SMEs performance, specifically, to
determine how the independent variable influences the dependent variable and the course
of their relationship when the variables change. This is presented using the model summary,
ANOVA, and linear regression coefficient.
4.4.3.1 Model Summary for Variable of Marketing Skills intervention and
Performance SMEs
Table 4.10 shows the existing relationship between Marketing Skills intervention and
SMEs performance, and the R square value of 0.335 shows that marketing skills
intervention influence performance of SMEs by 33.5%.
Table 4.9: Model Summary for Variable of Marketing Skills intervention and
performance of SMEs
Model R
R
Square
Adjusted R
Square
Std. Error of
the Estimate
Change Statistics
R Square
Change
F
Change df1 df2
Sig. F
Change
1 .579a .335 .332 .73529 .335 126.774 1 252 .000
a. Predictors: (Constant), marketing intervention
performance marketing intervention
Performance Pearson Correlation 1 .579**
Sig. (2-tailed) .000
N 254 254
marketing intervention Pearson Correlation .579** 1
Sig. (2-tailed) .000
N 254 254
**. Correlation is significant at the 0.01 level (2-tailed).
40
4.4.3.2 ANOVA for Marketing Skills Intervention and Performance of SMEs
Table 4.11 presents the ANOVA for marketing skills intervention and performance of
SMEs. The linear regression of the F statistics shown signifies that there was a statistical
and significant linear relationship between Marketing Skills intervention and SMEs
performance. (F (1, 252) = 126.774, p<.05). This means that the regression analysis was fit
for the study.
Table 4.10: ANOVA for Marketing Skills intervention and performance of SMEs
Model Sum of Squares Df Mean Square F Sig.
1 Regression 68.540 1 68.540 126.774 .000b
Residual 136.244 252 .541
Total 204.784 253
a. Dependent Variable: performance
b. Predictors: (Constant), marketing intervention
4.4.3.3 Coefficients for Marketing Skills intervention and performance of SMEs
Table 4.12 provides the regression coefficient that indicates the existing relationship
between training intervention and performance of SMEs. The table produces a linear
regression of the relationship in the form:
Performance of SMEs = 0.371 + 0.896 Marketing Skills intervention + 𝑒
From the Table, it can be inferred that marketing skills intervention was significant to the
operational performance of SMEs because its p-value was < 0.05. From the equation, it can
also be inferred that a single unit increase in marketing skills intervention results in an
89.9% increase in performance of SMEs.
Table 4.11: Coefficients for Marketing Skills intervention and performance of SMEs
Model
Unstandardized
Coefficients
Standardized
Coefficients
T Sig. B Std. Error Beta
1 (Constant) .371 .326 1.137 .257
marketing
intervention
.896 .080 .579 11.259 .000
41
4.5 Access to Finance Skills and Performance of SMEs
The third objective set to establish how finance skills affects SMEs performance.
Respondents were asked a set of questions to indicate to what extent they agree or disagreed
with statement related to Marketing Skills intervention and SMEs Performance. Using a
five point Likert scale where 1 - Strongly Disagree 2 - Disagree 3 - Neutral 4 - Agree 5 -
Strongly Agree.
4.5.1 Descriptive Statistics
Results showed that most respondents agree that access to long-term credit with affordable
interest rates from financial institutions has influenced the growth of sales turnover in my
business (4.50). High cost of credit from financial institutions has influenced the growth of
profit margin in my business (4.00). Lack of credit history for long-term credit from
financial institutions has influenced the growth of asset value in my business (3.00). Risk
exposures such as interest rates affect the foreign investors more than local investors (3.75).
Lack or inadequate collateral for long-term credit from financial institutions has influenced
the growth of asset value in my business (3.78). Lack of awareness of funding opportunities
for long-term credit by financial institutions has influenced the growth of asset value in my
business (4.04). The results are as shown in Table 4.13.
Table 4.12: Descriptive on Variables of Access to Finance Skills and Performance of
SMEs
N Mean Std.
Deviation
High cost of credit from financial institutions has influenced the growth of
profit margin in my business 145 4.00 .707
Lack of credit history for long-term credit from financial institutions has
influenced the growth of asset value in my business. 145 3.00 .707
Lack or inadequate collateral for long-term credit from financial institutions
has influenced the growth of asset value in my business. 145 3.78 1.090
Lack of audited financial statements for long-term credit from financial
institutions has influenced the growth of profit margin in my business. 145 2.76 1.095
Lack of awareness of funding opportunities for long-term credit by financial
institutions has influenced the growth of asset value in my business. 145 4.04 .351
Access to long-term credit with affordable interest rates from financial
institutions has influenced the growth of sales turnover in my business. 145 4.50 .502
42
4.5.2 Correlation Analysis for Access to Finance Skills Intervention.
Table 4.14 presents the correlations access to finance Skills intervention and SMEs
performance. The table shows that access to finance Skills intervention was significant to
the performance of SMEs (r=0.748, p<0.05).
Table 4.13: Correlation analysis for access to finance Skills intervention
Correlations
performance
finance skills
intervention
performance Pearson Correlation 1 .748**
Sig. (2-tailed) .000
N 254 254
finance skills intervention Pearson Correlation .748** 1
Sig. (2-tailed) .000
N 254 254
**. Correlation is significant at the 0.01 level (2-tailed).
4.5.3 Regression Analysis for Access to Finance Skills and Performance of SMEs
The following part presents the regression analysis between access to finance Skills
intervention and SMEs performance. This was conducted to examine the nature of the
relationship between the variable access to finance Skills intervention, specifically, to
determine how the independent variable influences the dependent variable and the course
of their relationship when the variables change. This is presented using the model summary,
ANOVA, and linear regression coefficient.
4.5.3.1 Model Summary for Variable Analysis for Access to Finance Skills and
Performance of SMEs
Table 4.13 shows the existing relationship between finance Skills intervention and SMEs
performance, and the R square value of 0.559 shows that finance Skills intervention
influences performance of SMEs by 55.9%.
43
Table 4.13. Model Summary for Variable Analysis for Access to Finance Skills and
Performance of SMEs
Model R R Square
Adjusted R
Square
Std. Error of
the Estimate
Change Statistics
R Square
Change F Change df1 df2
Sig. F
Change
1 .748a .559 .558 .59839 .559 319.906 1 252 .000
a. Predictors: (Constant), finance skills intervention
4.5.3.2 ANOVA for Access to Finance Skills and Performance of SMEs
Table 4.15 presents the ANOVA for access to finance skills intervention and performance
of SMEs. The linear regression of the F statistics shown signifies that there was a statistical
and significant linear relationship between access to finance Skills intervention and SMEs
performance (F (1, 252) = 319.906, p<.05). This means that the regression analysis was fit
for the study.
Table 4.14: ANOVA for Access to Finance Skills and Performance of SMEs
Model Sum of Squares Df Mean Square F Sig.
1 Regression 114.550 1 114.550 319.906 .000b
Residual 90.234 252 .358
Total 204.784 253
Dependent Variable: performance
b. Predictors: (Constant), finance skills intervention
4.5.3.3 Coefficients for Access to Finance Skills and Performance of SMEs
Table 4.16 provides the regression coefficient that indicates the existing relationship
between access to finance intervention and performance of SMEs. The table produces a
linear regression of the relationship in the form:
Performance of SMEs = -0.613 + 0.748 Access to Finance Skills intervention + 𝑒
From the table, it can be inferred that access to finance skills intervention was insignificant
to the financial performance of SMEs.
44
Table 4.15: Coefficients for Access to Finance Skills and Performance of SMEs
Model
Unstandardized Coefficients
Standardized
Coefficients
T Sig. B Std. Error Beta
1 (Constant) -.613 .261 -2.348 .020
Finance skills
intervention
1.200 .067 .748 17.886 .000
4.6 Chapter Summary
This chapter has highlighted results and findings. The first section provided an analysis of
demographic data of the respondents, the second section dealt with organization training,
the third section looked at the marketing skills and the last section covered issues on Access
to finance skills. In chapter five this results will be discussed and relevant conclusions and
recommendations made with regard to performance of SMEs in Kenya.
45
CHAPTER FIVE
5.0 DISCUSSION, CONCLUSION AND RECOMMENDATION
5.1 Introduction
This section covers a summary of the findings and discussion of the findings based on
literature review. It also gives conclusion and recommendation of the study based on
research objectives. The section also gives recommendations that can be used for future
studies by researcher, academicians and other stakeholders.
5.2 Summary
The general objective of this study was to establish the effects of strategic interventions
and performance of small and medium enterprises in Nairobi City County, Kenya: a case
of Centonomy Limited. The study was guided by the following specific objectives; to
establish the effects of organization training intervention and SMEs performance, to
investigate the effect of marketing skills intervention and SMEs performance and to
determine the effect of access to finance skills intervention and performance of SMEs.
The study adopted a descriptive research approach. The descriptive survey research design
was used to determine the characteristics of a defined population group. Target population
comprised of 1539 registered SMEs found within Nairobi County and the study sample size
was 318 respondents. Eminently, questionnaires were used for data collection. Data
collected from the questionnaires was coded using the Statistical Package for Social
Sciences (SPSS) software to enable analysis. Measures of central tendencies including
means and standard deviation were used during analysis. Inferential analysis was also used
in the study. Correlation analysis was used to investigate the relationship between the
various causative factors of financial performance of SMEs. Linear regressions analysis
including model summary, ANOVA and regression coefficients were used to observe how
each of the independent variables (Training intervention skills, Marketing intervention
skills and Access to finance skills) influenced financial performance of SMEs. Final
analyzed data was presented using figures and tables.
The first objective set to establish how organization training intervention affects SMEs
performance. The results established that most respondents agree that all members of the
organization work and move towards a desired agreed future (4.74), training strategy has
helped the firm in foreseeing environmental and market changes (4.50). The study also
showed that the firm has a common mental model of its future state that provides the basis
46
for its actions (4.50). The firm is always willing to question its current thinking and
practices (4.50).The respondents agreed that their organization actively encourages
employees and customers to give feedback and suggestions for improvements (4.26).
Training strategy has increased the firms’ ability to innovate (4.25). Organizational
knowledge transfer has improved the performance of the firm (4.25). The firm has the
tendency to create and apply knowledge within the organization (4.00). Lastly; the firm
evaluates its daily operations and accepts new ideas easily.
The second objective revealed that most respondents agree that the organization has
intelligence (information about their strengths, weaknesses and capabilities) about its
competitors (4.26). Market orientation is a significant part of the firms’ culture (3.75).
Market orientation in the firm has been formalized to exist in the firm’s rules and
regulations (3.25). Market orientation has improved the firms’ market share and
profitability (3.49). Market orientation has improved customer satisfaction and loyalty to
the firm (4.25). The firm creates superior value to its customers through sufficient
understanding of their needs (3.61). Customer orientation has helped the firm in developing
appropriate service strategies that meet customer needs and demands (3.99). The
organization seeks intelligence about its competitors in order to improve its service delivery
(3.91). Inter-functional coordination helps the firm to analyze and use information gained
in its decision process (3.77).
The third objective showed that most respondents agree that access to long-term credit with
affordable interest rates from financial institutions has influenced the growth of sales
turnover in my business (4.50). High cost of credit from financial institutions has influenced
the growth of profit margin in my business (4.00). Lack of credit history for long-term
credit from financial institutions has influenced the growth of asset value in my business
(3.00). Risk exposures such as interest rates affect the foreign investors more than local
investors (3.75). Lack or inadequate collateral for long-term credit from financial
institutions has influenced the growth of asset value in my business (3.78). Lack of
awareness of funding opportunities for long-term credit by financial institutions has
influenced the growth of asset value in my business (4.04).
47
5.3. Discussions
5.3.1 Training Intervention and Performance of SMEs
The results showed that all members of the SMEs work and move towards a desired agreed
future and training strategy has helped the firms in foreseeing environmental and market
changes. This is in line with Nybakk, (2014) who found out that organization training
strategy positively and significantly affect business performance. The finding is also in
agreement with Calantone, Cavusgil and Zhao (2015) who assert that organization-training
strategy increases organizational performance directly and indirectly through its influence
on competitive advantage. Innovativeness mediates the relationship between organization
training strategy and performance.
The above finding concur with Pearce and Ensley (2014) who explain that having
knowledge and ability to understand and predict the need of customers, the firm committed
to training will by no means lose the opportunities created in market. Moreover, because of
being committed to innovation, and due to having ability to offer and use technology in
innovations, the organization committed to learning can increase its ability to innovate,
thus, being more capable of innovation as compared to its rivals.
The study revealed that training strategy has increased firms’ ability to innovate and
organizational knowledge transfer has improved the performance of the firm. It was also
established that firms have the tendency to create and apply knowledge within the
organization and evaluates its daily operations and accepts new ideas easily. The study
result is in agreement with Sales and Savage (2015) who stated that organizational
knowledge transfer refers to the process through which organizational actors – teams, units,
or organizations – exchange, receives and is influenced by the experience and knowledge
of others. Since organizational knowledge transfer requires the integration of differentiated
knowledge, it manifests itself through changes in the knowledge bases or performance of
recipients. Organizational knowledge transfer from both internal and external sources has
important implications for organizational performance and innovativeness. Prior research
supports a positive relationship between organizational knowledge transfer and
performance. Transferring knowledge contributes to the development of organizational
capabilities that are difficult to imitate, and subsequently leads to enhanced performance
(Sales & Savage, 2015).
48
Keskin (2012) found that as joint venture partners acquired and assimilated new external
knowledge, performance increased. Likewise, firms that are able to learn about customers,
competitors, and regulators stand a better chance of sensing and adapting their products
and services to emerging needs. Hence, organizational knowledge transfer has been
associated with higher levels of performance. Pearce and Ensley (2014) also support this
finding by stating that organizational knowledge transfer enables an organization to
generate new ideas for new product development as it stimulates the combination of
existing and newly acquired knowledge and augments a unit’s capacity for making novel
linkages and associations. In addition, the accumulation of knowledge not only permits
efficient utilization of related knowledge but also enables organizations to better understand
and evaluate the nature and commercial potential of technological advances.
The study showed most of the SMEs have a vision in that they have a common mental
model of their future state that provides the basis for their actions. This is in line with
Nybakk (2014) who states that vision is based on the idea that an organization has a unique
aim and destiny. A vision expresses that reason and gives a reference point of clearness for
vital activity. However; a shared vision is frequently built on top of unexplored,
unarticulated assumptions about the present and the future. If members of an organization
cannot agree on current reality, they cannot move towards a desired future.
The study also found out that the SMEs encourages open mindedness by actively
encourages employees and customers to give feedback and suggestions for improvements.
This in line with Martinette and Obenchain-Leeson (2012) who state that Open-mindedness
encourages a willingness to question current thinking and practice, receptiveness to
emerging possibilities, the sharing of ideas and the consideration of differing perspectives
Therefore, the creation of an open-mindedness culture is more likely to result in the
questioning of long-held practices and beliefs and encourage the sharing of strategic
information among decision-makers.
5.3.2 Market Intervention and Performance of SMEs
The research found out that Most SMEs have intelligence (information about their
strengths, weaknesses and capabilities) about its competitors. This finding agrees with that
of Narver and Slater, (2015) who state that for businesses to realize its market share, it is
required of to know weaknesses and strength as well as capabilities and activities of
competitors.
49
Information that is gathered about competitors help the firm to reposition its offering to
prepare for the future survival of the entity Competitor orientation as part of market strategy
is seen as an organizational strategy to end up creating behavior of businesses improving
on the products they deliver to customers. It is important to know that competitors will sit
down concerned but strive over the same group of customers. Businesses must therefore
seek intelligence about their competitors in order to improve on their service delivery.
The study established that market orientation is a significant part of the firms’ culture.
Furthermore, market orientation in the firm has been formalized to exist in the firm’s rules
and regulations. This supported by Miller (2013) who suggested that the development and
implementation of customer orientation is the driving force for organizational position in
the marketplace. Verhoef and Leeflang (2017) also confirm a significant relationship
between the customer orientation of a firm and its financial and market performance
support this position.
The study revealed that customer orientation has helped the firm in developing appropriate
service strategies that meet customer needs and demands. Verhoef and Leeflang (2017) that
confirm it is believed that a customer-oriented firm puts the customer at the center of the
operation and sees the customer has their reason for being in business and as such goods
and services to meet the needs of their customer. Customers are also likely to tend to
support the product or service that is borne out of their needs interpreting into sales growth
and performance of the firm. Customer orientation is greatly important to make the firms
effort to understand the market place, develop appropriate product, and service strategies
to meet customer needs and demands that interpret into performance.
The discovered that Inter-functional coordination help the SMEs to analyze and use
information gained in its decision process. It is the coordination of all the functions of the
organization and operation of customer and market information in order to create value for
the customer. Tse et al. (2013) agree with the finding in that that inter-functional
coordination is dissemination of information about customers and competitors among all
sections of staff and organizations in order to make a correct understanding of the needs
and wishes of the customer and planning to overcome competition. They divided inter-
functional coordination to four parts: functional integration in strategy, information shared
among functions, dissemination of information and coordination among all units towards
creating value for the customer (Tse et al., 2013).
50
Inter-functional coordination therefore can be seen as the harmonization of all internal
functions and processes in a company. It consists of two parts, namely corporate culture
and information coordination. The finding concur with Tay and Tay (2014) who posit that
Inter-functional coordination is aimed at internal environment; however, the effects of
inter-functional coordination are connected with internal, external and branch environment
as well. According to Tomaskova and Kopfova (2014) agree that management has high
impact on inter-functional coordination and employees. Improving of management style
leads to improving inter-functional coordination. Improvements in internal processes are
visible during a short period. Employees can perceive changes very soon.
Improvements in branch and external environment need more time Inter-functional
Coordination recognizes that, all departments as well as employees are aware that,
employees’ attitude with respect to internal and external customer is crucial. Coordinated
integration of resources is tightly related to the customer and competitor since they are
promoting customers experience among department. There is therefore a need to inter-
coordinate the activities that are concerned with the day-to-day management of the business
in order to help realized to potentials of the business in maximizing its performance.
5.3.3 Access to Finance Skills and Performance of SMEs
The study established that access to long-term credit with affordable interest rates from
financial institutions has influenced the growth of sales turnover in SMEs. Reid (2013)
agrees with the findings by arguing that the strategies of SMEs for accessing finance are
fundamental in explaining the growth patterns, and this can be prevented through subjecting
enterprises to necessary financial restrictions. Drever (2015) supports that financial
problems (lack of funds) constrained the development and growth of small enterprises, as
many of them are unable to access the same kinds of growth funding often available to
large enterprises.
The study showed that lack of awareness of funding opportunities for long-term credit by
financial institutions has influenced the growth of asset value in SMEs. This is supported
by Hartarska and Gonzalez-Vega (2016) who state that small enterprises are more opaque
in terms of information and therefore have less accessibility to external funding compared
to large enterprises which are more informational transparent; financial institutions are
unable to solve problems of asymmetric information and to adequately fund small business
expansion. The availability of appropriate economic resources is important for business
51
development. This makes SMEs not able to secure the necessary expertise and resources in
order to implement their entrepreneurial ideas into operation, to become competitive and
to gain survival tactics during unfavorable conditions as well as to grow.
The study revealed that lack of credit history for long-term credit from financial institutions
has influenced the growth of asset value in SMEs. The study agrees with that of Wanjohi,
(2013) who state that vast majority of the SMEs in Kenya experience issues in getting credit
from the formal budgetary establishments since they need appropriate budgetary records.
The greater part of the organizations regularly keep various arrangements of books and do
not have evaluated fiscal summaries in light of solid bookkeeping norms.
On the other hand, these firms end up getting loans at higher interest rates because banks
considered them as high-risk borrowers. Asymmetric information problems may be more
pronounced for small firms Monitoring SMEs is more difficult and expensive as
information on them is less easily available, they have less credit history, are subject to less
rigorous reporting requirements and the quality of their financial statements may vary. All
these elements result in SMEs often facing difficulties in signaling their creditworthiness.
It was found out that lack or inadequate collateral for long-term credit from financial
institutions has influenced the growth of asset value in SMEs. This is in line with Tracy
and Tracy (2007) who states that debt capital sources including banks, leasing companies,
government-backed programs (microfinance in our country’s context), asset-based lenders,
factoring companies. For almost any debt-based need, some type of lender is readily
available in the market.
These groups, similar to private sources, tend to look for a common set of characteristics
when extending capital in the form of debt. Security of some sort - an asset or personal
guarantee, for example - must be present and debt providers tend to look for more stable
business environments where a company has been in business for an extended period and
has a proven record of accomplishment.
The study revealed that high cost of credit from financial institutions has influenced the
growth of profit margin in SMEs. Pettit and Singer (2014) support this by stating most
SMEs wind up getting advances at higher loan fees since banks considered them as high-
hazard borrowers.. Asymmetric information problems may be more pronounced for small
firms. Monitoring SMEs is more difficult and expensive as information on them is less
52
easily available, they have less credit history, are subject to less rigorous reporting
requirements and the quality of their financial statements may vary. All these elements
result in SMEs often facing difficulties in signaling their credit worthiness.
5.4. Conclusion
5.4.1. Training Intervention and Performance of SMEs
The finding concludes organization-training strategy increases organizational performance
directly and indirectly through its influence on competitive advantage. Innovativeness
mediates the relationship between organization training strategy and performance.
Furthermore, having knowledge and ability to understand and predict the need of
customers, the firm committed to training will by no means lose the opportunities created
in market. Moreover, because of being committed to innovation, and due to having ability
to offer and use technology in innovations, the study concludes that the organization
committed to learning can increase its ability to innovate, thus, being more capable of
innovation as compared to its rivals.
Receptiveness urges a readiness to address current reasoning also, practice, openness to
rising prospects, the sharing of thoughts and the thought of contrasting points of view.
Consequently, the formation of a liberality culture is bound to bring about the scrutinizing
of since quite a while ago held practices and convictions and encourage the sharing of
strategic information among decision-makers.
Study also concluded that most of the SMEs work and move towards a desired agreed future
and training strategy has helped the firms in foreseeing environmental and market changes.
Organization-training strategy increases organizational performance directly and indirectly
through its influence on competitive advantage. Innovativeness mediates the relationship
between organization training strategy and performance.
5.4.2. Market intervention and Performance of SMEs
The study concludes that SMEs have intelligence (information about their strengths,
weaknesses and capabilities) about its competitors since for businesses to realize its market
share, it is required of to know weaknesses and strength as well as capabilities and activities
of competitors. Information that is gathered about competitors helps the firm to reposition
its offering to prepare for the future survival of the entity. Competitor orientation as part of
market strategy is seen as an organizational strategy to end up creating behavior of
53
businesses improving on the products they deliver to customers. It is important to know
that competitors will sit down concerned but strive over the same group of customers.
Businesses must therefore seek intelligence about their competitors in order to improve on
their service delivery.
The study concluded that market orientation is a significant part of the firms’ culture.
Furthermore, market orientation in the firm has been formalized to exist in the firm’s rules
and regulations. The development and implementation of customer orientation is the
driving force for organizational position in the marketplace.
The researcher concluded that Inter-functional coordination help the SMEs to analyze and
use information gained in its decision process. It is the coordination of all the functions of
the organization and operation of customer and market information in order to create value
for the customer. Inter-functional coordination is dissemination of information about
customers and competitors among all sections of staff and organizations in order to make
a correct understanding of the needs and wishes of the customer and planning to overcome
competition.
5.4.3. Access to Finance Skills and Performance of SMEs
The study concluded that high cost of credit from financial institutions has influenced the
growth of profit margin in SMEs. Most SMEs end up getting loans at higher interest rates
because banks considered them as high-risk borrowers. Asymmetric information problems
may be more pronounced for small firms. Monitoring SMEs is more difficult and expensive
as information on them is less easily available, they have less credit history, are subject to
less rigorous reporting requirements and the quality of their financial statements may vary.
The study also concluded that lack of credit history for long-term credit from financial
institutions has influenced the growth of asset value in SMEs. Most of the SMEs in Kenya
have difficulty in getting credit from the formal financial institutions because they lack
proper financial records. Most of the businesses often keep multiple sets of books and do
not have audited financial statements based on reliable accounting standards.
The researcher made a conclusion that lack of awareness of funding opportunities for long-
term credit by financial institutions has influenced the growth of asset value in SMEs.
SMEs are more opaque in terms of information and therefore have less accessibility to
external funding compared to large enterprises which are more informational transparent;
54
financial institutions are unable to solve problems of asymmetric information and to
adequately fund small business expansion. The availability of appropriate economic
resources is important for business development. This makes SMEs not able to secure the
necessary expertise and resources in order to implement their entrepreneurial ideas into
operation, to become competitive and to gain survival tactics during unfavorable conditions
as well as to grow.
5.5 Recommendations
5.5.1 Recommendation for Improvement
5.5.1.1 Training Intervention and Performance of SMEs.
Change is inevitable and it is only through training that the SMEs can embrace change. The
study therefore recommends that training should be given priority and conducted in a
modern way. The study also recommends that firms must have the tendency to create and
apply knowledge within the organization and evaluates its daily operations and accepts new
ideas easily.
5.5.1.2 Market intervention and Performance of SMEs.
The researcher recommends that SMEs should have intelligence (information about their
strengths, weaknesses and capabilities) about its competitors since for them to realize their
market share, it is required of to know weaknesses and strength as well as capabilities and
activities of competitors. Information that is gathered about competitors helps the firm to
reposition its offering to prepare for the future survival of the entity. Competitor orientation
as part of market strategy is seen as an organizational strategy to end up creating behavior
of businesses improving on the products they deliver to customers. It is important to know
that competitors will sit down concerned but strive over the same group of customers.
Businesses must therefore seek intelligence about their competitors in order to improve on
their service delivery.
5.5.1.3 Access to Finance Skills and Performance of SMEs.
The study recommends that SMEs should go for cheaper interest rates while looking for
capital. The capital should be raised through personal savings if possible since lack of credit
history for long-term credit from financial institutions has influenced the growth of asset
value in SMEs. Moving forward, SMEs should have proper financial records to help the
acquire loans from various institutions.
55
5.5.2 Recommendations for Further Studies
The purpose of this research was to determine the effects of strategic interventions on
performance of small and medium enterprises in Nairobi City County. The study only
looked at Training intervention skills, Marketing intervention skills and Access to finance
skills. Therefore, more studies should be done to determine other factors that affect
performance of SMEs.
56
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APPENDICES
Appendix I: Questionnaire
Kindly respond to the following questions by ticking on the appropriate box (√) or filling
the answers in the blank spaces. Your input is highly appreciated. Information provided
will be handled with discretion and confidentiality.
SECTION 1: DEMOGRAPHIC INFORMATION
Part A: General Information
A. Gender
Male [ ] Female [ ]
B. Highest level of education
Primary School [ ] Secondary School [ ] Certificate [ ] Diploma [ ] Degree [ ]
Post Graduate [ ] Masters [ ]
C. Age range
Less than 25 years [ ] 26-35 years [ ] 36-45 Years [ ] 56 years and over [ ]
D. Number of years the business has been in operation
Less than 3 years [ ] 3-6 years [ ] 7-10 years [ ] 11- 14 years [ ] 15 years and over [ ]
E. Please indicate the number of employees in your enterprise
Less than 5[ ] 5-10 [ ] 11- 30[ ] 31- 50[ ] Over 50 employees [ ]
F. Kindly indicate your position in the organization.
Senior management level [ ] Middle management level [ ]
Lower management [ ] Regular staff [ ]
G. How has the organization applied strategy intervention within its system and
Processes?
Very Ineffectively [ ] Ineffectively [ ] Neutral [ ] Effectively [ ]
76
Very Effectively [ ]
H. How effective is the organization in terms of utilizing strategy interventions?
Very Ineffectively [ ] Ineffectively [ ] Neutral [ ] Effectively [ ]
Very Effectively [ ]
SECTION II: STRATEGIC INTERVENTIONS
PART A: Organization Training Strategy
To what extent would you rate the following statements concerning strategic
investment planning decisions? Use the scale: SD-Strongly Disagree; D-Disagree;
N-Neutral; A-Agree; and SA-Strongly Agree.
Statement 1 2 3 4 5
A The firm has the tendency to create and apply knowledge within
the organization.
B Training strategy has helped the firm in foreseeing
environmental and market changes.
C The organization actively encourages employees and customers
to give feedback and suggestions for improvements.
D Training strategy has increased the firms’ ability to innovate
E The firm has a common mental model of its future state that
provides the basis for its actions.
F All members of the organization work and move towards a
desired agreed future.
G The firm evaluates its daily operations and accepts new ideas
easily.
H The firm is always willing to question its current thinking and
practices
I Organizational knowledge transfer has improved the
performance of the firm.
J Organizational knowledge transfer has enabled the organization
in generating new ideas for service development
77
PART B: Market Intervention
To what extent would you rate the following statements with regards to strategic
investment planning decisions? Use the scale: SD-Strongly Disagree; D-Disagree;
N-Neutral; A-Agree; and SA-Strongly Agree.
Statement 1 2 3 4 5
A Market orientation is a significant part of the firms’ culture
B Market orientation in the firm has been formalized to exist in the
firm’s rules and regulations
C Market orientation has improved the firms’ market share and
profitability.
D Market orientation has improved customer satisfaction and
loyalty to the firm.
E The firm creates superior value to its customers through sufficient
understanding of their needs.
F Customer orientation has helped the firm in developing
appropriate service strategies that meet customer needs and
demands.
G The organization has intelligence (information about their
strengths, weaknesses and capabilities) about its competitors.
H The organization seeks intelligence about its competitors in order
to improve its service delivery.
The firm has a high degree of co-operation between its different
functions/departments.
I Inter-functional coordination helps the firm to analyze and use
information gained in its decision process.
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PART C: Access to Finance Skills and Performance
To what extent would you rate the following statements with regards to strategic investment
planning decisions and SMEs performance? Use the scale: SD-Strongly Disagree; D-
Disagree; N-Neutral; A-Agree; and SA-Strongly Agree.
A High cost of credit from financial institutions has
influenced the growth of profit margin in my business
B Lack of credit history for long-term credit from financial
institutions has influenced the growth of asset value in my
business.
C Lack or inadequate collateral for long term credit from
financial institutions has influenced the growth of asset
value in my business
D Lack of audited financial statements for long term credit
from financial institutions has influenced the growth of
profit margin in my business
E Access to long term credit with affordable interest rates
from financial institutions has influenced the growth of
sales turnover in my business
F Lack of awareness of funding opportunities for long term
credit by financial institutions has influenced the growth
of asset value in my business
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PART D: PERFORMANCE
Please circle the choice that you feel suits your situation/opinion from the choices provided
by the Likert scale (1-5) where; 1 = Strongly Disagree, 2 = Disagree, 3 = Neutral, 4 =
Agree, 5 = Strongly Agree.
Statement 1 2 3 4 5
A Your organization offers unique new products different form its
competitors.
B I am aware of marketing strategies offered by my firm.
C The organization offers training to its employees.
D Your firm gets finance from lending institutions with low interest.
E Customer emplacement aides the firm in developing appropriate
service strategies that meet customer demands.
THANK YOU FOR TAKING TIME TO ANSWER THESE QUESTIONS
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Appendix II: NACOSTI
