EFFECTS OF STRATEGIC CHANGE ON ORGANIZATIONAL PERFORMANCE: A CASE OF KENYAN MOBILE

TELECOMMUNICATIONS INDUSTRY

BY

HABILE GERSHOM

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTERS OF

BUSINESS ADMINISTRATION (MBA)

GRADUATE BUSINESS SCHOOL (GBS)FACULTY OF COMMERCE

CATHOLIC UNIVERSITY OF EASTERN AFRICA

APRIL 2013

DECLARATION

This research project is my original work and has not been presented anywhere to the best of my

knowledge. No part of this proposal may be reproduced without the prior permission of the

author.

Habile Gershom

Signature _____________________________ Date _________________

SUPERVISORS

This project has been submitted with my approval as the university supervisor.

Dr. Aloys B. Ayako

Signature _________________________ Date _________________

Mr. Solomon Okumu

Signature _________________________ Date _________________

II

DEDICATION

I dedicate this work to my father Mr. S. Habile, my late mother Mrs. Dorothy K. Habile (+2001),

my step mother Mrs. Judith Habile, my late brothers Morgan (+1998) and Sebastian (+2005), my

late sisters Esther (+1992) and Emma (+2013). I also dedicate it to my brothers Daniel, Wezi and

Oswald, my sisters Bridget, Mazyani, Masuzyo and Mbose, my step sisters Paniso and Rachael,

my uncle Dr. Michael Habile, my extended family, all my friends and not forgetting all those

who have played a part in my life and my academic journey.

III

ACKNOWLEDGEMENT

After all the hard work, the struggles and all the challenges encountered, finally my project has

come to completion. This has been possible due to the various individuals who dedicated

themselves in assisting me in various ways. I will forever remain indebted. I therefore wish to

express my sincere gratitude first of all to almighty God for giving me the blessings I needed to

complete my project and my studies in general. Special thanks goes also to my family who,

though were miles away, supported and encouraged me especially my brothers Wezi and Oswald

and my sister Mazyani. I also wish to extend my sincere gratitude to my uncle Dr. Michael

Habile for all the financial support he gave me.

I would also like to thank my supervisors Dr. Aloys Ayako and Mr. Solomon Okumu Ndiao for

their dedication in helping and guiding me in writing my thesis. Thanks too to Dr. Mwanza, Mr.

Lumbama, Ignatius Chicha, Faith Mutie, Aaron Chanda, Floyd Chanda, Fr. Richard

Chimfwembe, my classmates and friends and all those who helped and supported me in one way

or the other.

Finally I would like to thank CUEA for providing me with the necessary and qualified members

of staff and the necessary material and infrastructure that made my studies possible.

IV

ABSTRACT

With changing environment, organizations too need to undergo change in order to remain competitive and enhance their performance. This calls for strategic change which is a very costly and time consuming exercise which can either be helpful or harmful to an organization. It is therefore important for an organization to know whether strategic change is helping them i.e. whether it is enhancing organizational performance or actually leading to organizational decline. This study was dedicated to establishing the effects of strategic change on organizational performance and specifically on financial performance in the mobile telecommunications industry in Kenya. Descriptive survey design was employed in carrying out the research. This enabled the researcher to investigate the effects of strategic change on the financial performance of the four leading mobile telephone service providers in Kenya. A sample of 60 respondents familiar with issues of strategic change was targeted and a questionnaire was used to collected data. Descriptive statistics such as frequencies and percentages was used. Furthermore, inferential statistical analysis was also employed in analyzing the data. These included cross tabulation, chi-square tests, correlation and regression. The findings of the study revealed that strategic change has actually enhanced the financial performance of these organizations. Strategic change has directly and greatly contributed to increased cash flow, sales, profits, capital and return on investment while it has had little influence on stock price, return on assets, return on capital and dividends. Therefore, it can be said that strategic change in the four companies has greatly enhanced only certain financial performance areas while it has had little or no influence at all on other financial performances areas.

Table of Contents

V

DECLARATION........................................................................................................................................II

DEDICATION...........................................................................................................................................III

ACKNOWLEDGEMENT........................................................................................................................IV

ABSTRACT.................................................................................................................................................V

LIST OF FIGURES...............................................................................................................................VIII

LIST OF TABLES.....................................................................................................................................IX

LIST OF ABBREVIATIONS AND ACRONYMS..................................................................................X

CHAPTER ONE..........................................................................................................................................1

INTRODUCTION........................................................................................................................................1

1.1 Introduction.................................................................................................................................1

1.2 Background of the Study.............................................................................................................1

1.2.1 Mobile Telecommunications Industry in Kenya..........................................................................4

1.3 Statement of the Problem.............................................................................................................7

1.4 Research Questions......................................................................................................................9

1.5 Significance of the Study...........................................................................................................10

1.6 Scope and Delimitations of the Study........................................................................................11

1.7 Conceptual Framework..............................................................................................................12

1.8 Organization of the study.................................................................................................................14

CHAPTER TWO.......................................................................................................................................15

LITERATURE REVIEW.........................................................................................................................15

2.1 Introduction...............................................................................................................................15

2.2 Theoretical Literature................................................................................................................15

2.2.1 Effects of Strategic Change.......................................................................................................15

2.2.2 The Change Problem.................................................................................................................18

2.2.3 Managing/Leading Change........................................................................................................21

2.3 Empirical Literature...................................................................................................................25

2.4 Research Gap.............................................................................................................................30

CHAPTER THREE...................................................................................................................................32

RESEARCH METHODOLOGY.............................................................................................................32

3.1 Introduction......................................................................................................................................32

3.2 Research Design........................................................................................................................32

3.3 Target Population.......................................................................................................................33

VI

3.4 Sampling Plan............................................................................................................................34

3.5 Data Collection Instruments and Procedures.............................................................................35

3.6 Data Presentation and Analysis..................................................................................................35

CHAPTER FOUR......................................................................................................................................37

PRESENTATION, DISCUSSION AND INTERPRETATION OF EMPIRICAL FINDINGS.........37

4.1 Introduction...............................................................................................................................37

4.2 Response Rate............................................................................................................................37

4.3 Strategic change.........................................................................................................................37

4.4 Challenges of Strategic Change.................................................................................................41

4.5 Organizational Financial Performance.......................................................................................51

4.6 Effective Strategies to be explored............................................................................................56

CHAPTER FIVE.......................................................................................................................................63

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS OF THE STUDY.............................63

5.1 Introduction...............................................................................................................................63

5.2 Summary of the findings............................................................................................................63

5.3 Conclusions...............................................................................................................................66

5.4 Recommendations......................................................................................................................66

5.5 Limitations of the study and Suggested areas for further research.............................................67

REFERENCES.............................................................................................................................68

Appendix i: Questionnaire........................................................................................................................78

VII

LIST OF FIGURES

Figure 1.0: Conceptual Framework.............................................................................................................13

Fig. 1.1: Lewins three-step- model (Source: Lewin 1951)..........................................................................24

LIST OF TABLES

VIII

Table 3.0: Total Target Population..............................................................................................................33

Table 3.1: Sample Population......................................................................................................................34

Table 4.1: Extent to which strategic change is employed............................................................................38

Table 4.2: Extent to which challenges affect the process of managing/leading change..............................41

Table 4.2.1: Cross tabulation of Lack of employee involvement by Process/systems change....................43

Table 4.2.2: Cross tabulation of employee resistance by Process/systems change.....................................45

Table 4.2.3: Cross tabulation of Lack of support by top management by Process/systems change............47

Table 4.3: Extent to which strategic change has been successful in achieving enhanced financial performance.................................................................................................................................................51

Table 4.3.1: Model summary of predictors..................................................................................................53

Table 4.3.2: Relationship between P, MC, SP, CVC, SC, PSC and cash flow...........................................53

Table 4.3.3: Coefficients of predictor variables...........................................................................................54

Table 4.4: Extent to which effective strategies ensured strategic change enhances organizational performance.................................................................................................................................................56

Table 4.4.1: Cross tabulation of training by cash flow................................................................................58

Table 4.4.2: Cross tabulation of creation of a change atmosphere by cash flow.........................................60

LIST OF ABBREVIATIONS AND ACRONYMS

IT = Information Technology

IX

SMS = Short Messages

GPRS = General Packet Radio Service

3G = Third Generation

FLE = Front Line Employee

S&Ls = Savings and Loans

U.S = United States

HMOs = Health Maintenance Organizations

ANOVA = Analysis Of Variance

SP = Strategic Planning

CVC = Culture/Values Change

R = Restructuring

PSC = Process/Systems Change

MC = Management Change

P = Partnerships

X

CHAPTER ONE

INTRODUCTION

1.1 Introduction

This chapter will give a brief overview of the concept of strategic change giving some of the

perspectives on strategic change and some models of strategic change. It will thereafter look at

the statement of the problem which explains why this study is necessary. Furthermore it will look

at the research questions which give what the research is trying to establish. Then it will explore

the benefits of the research and who will be beneficiaries of the study and also the scope and

delimitations of the study. The conceptual framework will follow and finally the organization of

the study.

1.2 Background of the Study

The topic of strategic change, defined by the dictionary of business (2013) as a restructuring of

an organization’s business or marketing plans that is typically performed in order to achieve an

important objective, is a very wide topic. It has attracted so much attention and has been at the

center of growing literature in both strategy and organizational fields (Fombrun, 1993; Ginsberg,

1988; Hofer and Schendel, 1978; Johnson, 1987; Zajac and Shortell, 1989). Rajagopalan and

Spreizter (1997) define strategic change as a radical shift in key activities or structures that goes

beyond incremental changes to preexisting processes while Van de Ven and Poole, (1995) define

it as the form, quality, or state over time in an organization’s alignment with its external

environment.

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Literature on strategic change identify two types of change which have been described by

Watzlawick, Weakland and Fisch (1974) as first-order vs. second order change, and by Yetton,

Johnston and Craig (1994) as evolutionary/incremental vs. revolutionary/transformational/radical

change. Revolutionary or discontinuous change is a radically innovative change in its aspects,

frequently altering the organization’s business framework and involving instantaneous

modifications in its strategy, formation, procedures and culture (Tushman & O'Reilly III, 2006).

Evolutionary change on the other hand involves regularly adjusting or acclimatizing the business

so that it develops in balanced relation with the transformations in its surroundings (Qamar &

Qamar, 2012).

According to Cameron and Green (2004), strategic change begins with an internal or external

trigger which makes an organization scrutinize itself resulting in reviewing of where an

organization wants to be, how it wants to get there and what it needs to do to get there. This calls

for strategic planning i.e. developing of new vision and mission. Although all sorts of change

need to happened as a result of this exercise, Cameron and Green (2004) identify four generic

strategic change options namely: structural change (restructuring) e.g. decentralizing, reducing

number of line managers; cultural/values change i.e. how things get done around the

organization and the required and acceptable behaviors, process change e.g. IT; and mergers and

acquisitions (partnerships) i.e. two or more companies pulling their resources together to achieve

a common objective. Burke (2002) also presented strategic change in a similar way though he

divided it into two categories: the human-processual which involved people and organizational

processes and the techno-structural approach which involved technology and organizational

structures .This is what this study will use when referring to strategic change.

2

Balogun (2001) pointed out that for strategic change to become a reality, it is necessary to

change the way in which individuals within an organization behave which requires more than

restructuring and new systems. According to her, change is all about changing people and not

organizations as organizations change only when managers and employees change their way of

doing business.

Pettigrew and Whip (1991) identify three dimensions of strategic change namely: Content which

includes Objectives, purpose and goals and aims to answer the question of what is to be changed;

the process which is about implementation and aims at answering the question of how to change

and finally the context which covers the internal and external environment and aims at answering

the question of why the change is to take place. Worley, Hitchin, and Ross (1996) assert that the

process of strategic change encompasses four basic steps: Strategy analysis; Strategy making;

strategic plan design and finally implementation of the plan.

Kanter, Stein and Jick (1992) identify three cluster forces that trigger change in and around

organizations namely: Relationship between organization and their external environment;

Organic growth through the organizations’ life cycle and constant power struggle within the

organization for control among individuals and groups.

Dowling, Boulton and Ellliot (1994), identify four major forces that are changing the face of the

Telecommunication industry thereby posing a challenge to the industry namely: Technological

change, Changes in market demands/consumer tastes, Deregulation and,

Internationalization/globalization. Because of all these, the telecommunications landscape has

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become very turbulent so much so that firms in the telecommunication industry are struggling to

adapt both internally and externally (Dowling et. al., 1994). Therefore, by the fact that there are

shifts in the Telecommunication industry’s environment means that firms in the industry also

need to shift their formula if they are to be successful (Freeman, 2001).

1.2.1 Mobile Telecommunications Industry in Kenya

Some of the strategic responses taken by firms in the telecommunications industry globally

include change of structures to customer focused structures so as to respond to customer needs as

customers have become more sophisticated and prefer individualized or customized products and

services (Dowling et. al., 1994). This has led to customization which has been one of the main

strategies adopted by these firms. Apart from restructuring and customization, other strategies

employed by telecommunications service providers include acquisitions, mergers, joint

ventures/partnerships and strategic alliances with other carriers (Chan-Olmsted and Jamison,

2001).

Becoming global players has become another important strategy for firms in the

telecommunication industry to achieve sustainable growth (Grundey, 2007). They, as Lal and

Strachan (2007) put it, need to sharpen their focus on growth by concentrating on both their

respective home markets and on their cross-border activities. Other strategies include lowering

costs and downsizing i.e. reducing overhead costs and the number of staff so as to increase

efficiency (Dowling et. al., 1994).

4

Kenya’s mobile telecommunications industry players, comprised of four major players namely

Safaricom Limited, Telkom-Orange Kenya, Bharti Airtel and finally YU Essar Kenya (Taiyou

Research, 2012) also undertake strategic changes in order to respond to environmental changes.

According to Elman (2009), the mobile telecommunications industry in Kenya, like world over,

is being affected by changes in the market environment such as competition from competitors,

technological advancement, changes in customer needs, globalization to mention but a few.

Therefore, firms in this industry are going through profound changes which call for strategic

changes. Previously firms in the industry concentrated mainly in Nairobi but now have moved to

other major towns across the country.

Other than just selling air time, firms in the industry have also widened their core businesses and

have ventured into partnerships. Some players in the industry operate as two different companies

so as to serve more than one operator. 10 years ago the telecommunications market was all about

making and receiving calls but now it has widened to short messages (SMS), GPRS which has

made available internet access. Recently the installation of 3G is shifting the market to data,

audio as well as video streaming. With such changes come software and hardware changes by

players in the industry.

Thus players in the Kenyan mobile telecommunication industry have had a number of strategic

changes so as to adapt to the changing environment thereby maintaining a competitive

advantage. For example Safaricom Limited formed in 1997 and the leading mobile network

operator in Kenya with over 19.1 million subscribers maintains a three to five year strategic

planning cycle and review its’ social, environmental and economic contexts of its operations

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(Safaricom Digital Sustainability Report, 2012). Safaricom’s strategies are based on four

perspectives: First, People; Secondly, Customers; thirdly, Financial performance and Risk; and

finally, Control. Safaricom has undergone many strategic as well as operational changes in the

past and today it is implementing a major transformation strategy that is expected to run for five

years. The goal of this transformation strategy is to deliver business growth, increase

productivity, drive efficiency i.e. enhanced service delivery, rationalize costs, enhance

stakeholder’s value i.e. profitability and capital growth and launch Safaricom to the next level

(Mativa, 2012).

On the other hand, because of the rapidly declining revenues and customer numbers, Telkom-

Orange made a strategic decision in 2005 to carry out extensive business reengineering and

restructuring of the company, with a hope to turnaround the situation and improve the

competitiveness of the company. Thus Telkom-Orange has undertaken, among others, culture

change, partnerships, restructuring and business reengineering (Kipkurui, 2008). Airtel too has

taken measures such as organizational restructuring, improvement in information technology

governance and security processes, enhancing competence in all its departments through

investments in innovative strategies and of the business enterprise structures. YU Essar despite

being young in the industry is also carrying out strategic changes as can be seen by its use of

organizational restructuring and partnering with other companies (Riany, Musa & Odera, 2012).

All this shows that the four players in the mobile telecommunication industry in Kenya are

facing stiff competition which in forcing them to undertake strategic changes. These strategic

6

changes being undertaken by various players in the industry are actually being managed and

what remains now is to analyze their effects on organizational performance.

Various theories and studies on the effects of strategic change have come to conclude that

strategic change leads to both economic and non-economic outcomes (Rajagopalan & Spreitzer,

1997). This study will focus on the economic outcomes i.e. the financial performance. Kaplan

(2009) suggests the use of a balanced scorecard in measuring organizational performance.

According to him the balanced scorecard looks at the following performance areas: finance,

internal business process, learning and growth and finally the customer. This study will focus on

the finance aspect e.g. return on investment, cash flow, return on capital employed and financial

results (quarterly/annually).

1.3 Statement of the Problem

Strategic change can either be helpful or harmful to organizational performance (Trinh &

O’Connor, 2002). Successful implementation of strategic change will reinvigorate the business

while failure will lead to catastrophic consequences including organizational decline and

eventually death (Hofer & Schendel, 1978). Therefore, it is important for firms to carry out a

cost benefit analysis so as to actually measure whether the effects that strategic change has on the

organization are of more value than the cost of undertaking it. In this way, firms will be able to

know whether strategic change is actually leading to enhanced organizational performance or

vice versa. Changes in the telecommunications industry pose challenges that greatly affect the

service providers.

7

These challenges cannot be ignored because the industry plays a significant role in the economy

and the service providers should operate efficiently and effectively in order to survive. The

changing demands of the telecommunication industry mean that the service providers have to

make a deliberate effort to put in place strategic plans that would ensure they develop rational

strategies to effectively respond. In this regard, one may wish to establish the strategic planning

practices in use by the service providers in the telecommunication industry and their effects on

the performance of the organization.

It is evident that as a result of changing environment, firms in the telecommunications industries

are engaging in strategic change. Strategic change is very costly and time consuming and if not

well managed can lead to huge loses and even firm death but despite this the link between

strategic change and organizational performance has not been the subject of much attention

among telecommunications service provider researchers. Previous studies have tended to

highlight the triggers of change, the strategic responses, change management and the challenges

of change in the telecommunications industry (Kipkurui, 2008; Onyango, 2007; Kappler, 2007;

Pennings et. al., 2005; Ochako, 2007; Gichangi, 2011; Mativa, 2012). Other studies have tried

to analyze the effects of strategic change on organizational performance and have realized

varying results.

For example a study by Zajac, Kraatz and Bresser (2000) show that organizations that deviated

from their model's prediction of dynamic strategic fit (i.e. changed more or changed less than

their model prescribed) experienced negative performance consequences. Nevertheless, the study

concluded that adherence to the normative model for strategic change had positive performance

8

consequences and that congruence with individual contingencies generally had beneficial effects

on subsequent performance. Another study by Trinh and O’Connor (2002) discovered that

strategic change can either be helpful or harmful to an organization depending on the type of

strategy employed. Furthermore, a study by Ye, Marinova and Singh (2007) found that strategic

change can lead either to enhanced organizational performance or to organizational failure

depending on front line employee (FLE) detachment, perception and participation. Caroline

(2008) discovered that strategic change improved financial performance while Akoth (2011) too

found that strategic change led to organizational success.

Researchers, managers, and policy makers frequently call for telecommunications service

providers to adapt to meet the needs of dynamic environments, but they rarely examine the

performance implications of such exhortations. Studies carried out in the mobile

telecommunications industry in Kenya have not looked at the effects of strategic change on

organizational performance to know if it does enhance organizational performance or not.

Therefore, this study aims at filling this gap by examining the telecommunications industry’s

changing environment and how players in the industry are strategically changing in order to

adapt to the environment and how they are managing and implementing strategic change so that

it does not fail but succeed by achieving its desired goal which is enhancing organizational

performance and what effects strategic change have on organizational performance.

1.4 Research Questions

i. What strategic changes have mobile telecommunications industry players in Kenya

implemented to enhance their financial performance?

9

ii. What challenges do mobile telecommunications industry players experience in

managing/leading strategic change?

iii. What are the effects of strategic change on the financial performance of mobile

telecommunications industry players?

iv. What effective strategies should players in the mobile telecommunications industry in

Kenya explore to make sure strategic change enhances financial performance?

1.5 Significance of the Study

This study is conducted to gather information on how strategic change affects performance of

Kenyan mobile telecommunications industry players. It will be significant because it analyses

the recent developments in the telecommunication industry and the strategic problem that this

brings. It also shows how the strategic problem facing firms in this industry can be managed for

better performance. Most of the earlier research on this industry has focused more on responses

that firms in this industry take in order to effectively respond to the challenges arising from the

rapidly changing environment. This study focuses on how these responses can be effectively

managed to make sure they do not fail. Thus, this study will be very helpful to the management

of Kenyan mobile telecommunications industry players in managing their strategic change so

that it does not fail but achieve its goal and thereby enhance the performance of the organization.

Since there are other players in the Telecommunication industry in Kenya, this study will not

only be beneficial to Safaricom Limited, Bharti Airtel, Telkom-Orange and YU Essar but also to

other players in the industry as it will set a platform that other players in the industry can learn

from and thus also effectively manage their strategic change processes and improve firm

10

performance. Even new entrants in the industry will benefit as the study will provide them with

the tools they need to successfully manage changes that they may have to undergo due to the

rapidly changing environment.

Furthermore, the study will contribute to the body of knowledge in the telecommunication

industry and will also help in the bridging of the knowledge gap on strategic change and

organization performance as it will give another perspective on the topic that other studies have

not yet tackled. This will also help further studies to be carried out on the topic.

Finally, the study will be of great importance to the researcher as it will help the researcher to

have a deeper understanding of the issues affecting the telecommunication industry and the

responses that firms in the industry are undertaking in order to effectively respond to the

challenges brought about by these issues and how these responses can be managed so as not to

allow them to fail but rather to succeed and thus enhance organizational performance. All this

will be vital to the researcher for self-professional development and enrichment.

1.6 Scope and Delimitations of the Study

The telecommunications industry in Kenya is made up of several players but this study focuses

only on the mobile telephone providers which are made up of four players namely Safaricom

Limited, Yu Mobile, Airtel and Orange. The four are said to be the major players in the

telecommunication industry and so have real experience of strategic change and its effects on

organizational performance. The study focuses on the effects of strategic change on the

performance of Safaricom Limited, Bharti Airtel, Telkon-Orange and YU Essar and how they

11

manage strategic change in order to respond to the challenges they face so as to ensure that their

strategic change efforts do not fail but achieve their goal i.e. enhancing organization

performance. Organizational performance measurement has four aspects according to Kaplan’s

balanced score card but this study will only focus on the financial aspect.

It focuses on staff of Safaricom Limited, Bharti Airtel, Telkon-Orange and YU Essar, and

basically staffs at the head offices in Key departments as these are the more and easily

accessible to the researcher and are more acquainted with issues of strategic change in the

organization. The study will cover the last five years of the four companies’ operations because

during this time these companies have undergone tremendous change and also because since

strategic change is a process it can be best analyzed over a period of time. On the other hand,

despite perceived enhanced performance, the named companies experience some challenges in

managing their strategic change and thus this study will propose other effective solutions to the

problems faced with strategic change in these companies.

However, the study does not cover other players in the telecommunication industry of Kenya.

Also the proponent had limited time as the study had to be completed in one semester and also

the researcher had limited funds to finance the study as he had to rely only on pocket money in

carrying out the study.

1.7 Conceptual Framework

Figure 1.0 below provides the conceptualization of the strategic change process. The key features

of this framework are (1) the independent variables which consists of leaders having a vision and

12

doing some strategic planning; establishing a project management team for implementing

change. This will have to do with issues of policy and strategy e.g. strategic implementation

plans and then; operationalization and involving all relevant teams and individuals. This calls for

change in structures, systems, processes, culture and management. (2) Intermediate variables

which are the facilitators of strategic change or rather which are what should happen for strategic

change to lead to enhanced organizational performance e.g. communication, training and

employee engagement in the strategic change process and (3) the dependent variable which is the

outcome of the strategic change process which in this case is organizational performance i.e.

financial performance.

Figure 1.0: Conceptual Framework

Independent Variables Dependent Variable

Intermediate Variables

13

Strategic Change options Strategic planning Culture/values change Restructuring Processes/systems change Management change Partnerships

Organizational performance

Financial performances e.g. return on investment, cash flow, return on capital employed and financial results (quarterly/annually).

What should happen for strategic change to enhance organizational performance Communication Training, coaching etc. Employee engagement

1.8 Organization of the study

This study consists of five chapters. The first chapter gives the background of the study by

highlighting the concept of strategic change, the statement of the problem, the research

questions, the significance of the study, the scope and delimitation of the study and then the

conceptual framework. Chapter two on the other hand gives the literature review and looks at

theoretical as well as empirical literature and also the research gap. Chapter three highlights the

research methodology and it tackles the research design, target population, sampling plan, data

collection instruments and procedures and data presentation and analysis. Chapter four is about

presentation, discussion and interpretation of empirical findings. Finally chapter five is about

summary, conclusion and recommendations.

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CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

There is growing literature on the topic of strategic change. The study of organizational practices

that enact, construct and advance effective strategy is theoretically and practically based on two

main concepts, strategic change processes and organizational practices of strategizing and

enacting effective strategy. This chapter reviews and discusses the relevant theoretical and

empirical literature on the issue of strategic change and also presents the research gap on this

topic.

2.2 Theoretical Literature

2.2.1 Effects of Strategic Change

Organizations that carry out strategic change are likely to perform differently. They will either

perform better or worse. There is ongoing debate as to whether strategic change helps enhance

organization performance or it harms the organization (Barnett & Carroll, 1995). Organizational

adaption theorists suggest that strategic change helps organizations adjust to environmental

conditions, prepare for the future, reduce external dependence and improve overall

organizational coordination for better performance. Thus without strategic change, organizations

will be unable to reposition themselves in the new environment and will consequently perish

(Trinh & O’Connor, 2013).

According to Haveman (1992) strategic change leads to improved organizational performance in

certain contexts (1996). On the other hand Singh, House and Tucker (1986) argue that similar

15

strategic change in different contexts leads to organizational failure. Some theorists of strategic

change and organizational performance show that strategic change enhances organizational

performance and the likelihood of firm survival (Hambrick & Schecter, 1993; Haveman, 1992;

Zajac & Kraatz, 1993) while others show that similar strategic changes reduce financial

performance (Graham & Richards, 1979; Jauch, Osborne & Glueck, 1980) and the likelihood of

firm survival (Singh et. al., 1986). Others still find either no relationship between strategic

change and organizational performance or firm survival (Kelly & Amburgey, 1991; Zajac &

Shortell, 1989) or mixed relationships (Smith & Grimm, 1987).

In trying to harmonize these contradictions, Rajagopalan and Spreitzer (1997) presents an

integrative framework which highlights three critical sets of managerial processes that influence

performance effects of strategic change. First, managerial actions which can mitigate an

organization’s resistance to change and ensure strategic change is effected effectively; second,

managerial actions aimed at building environmental support which can effectively enhance the

range of options available to the organization, provide resources and increase the likelihood that

the change will be accepted by environmental stakeholders and third, managers ability to learn

from initial problems as strategic change is being implemented and then use this learning to

modify subsequent actions and cognitions thereby leading to the likelihood of managers making

choices that result in positive economic and non-economic outcomes.

This integrative framework is comprised of the rational, learning and cognitive lens perspectives.

According to the rational lens perspective, which focuses exclusively on the financial

performance e.g. return on investments, growth, productivity, production time, operating ratio

16

and so on and on organizational survival, strategic change mainly leads to improved economic

performance

The learning lens perspective, assert that strategic change leads to both economic and non-

economic outcomes and it concludes that changes in strategy are closely related to improved firm

economic performance if they are accompanied by executive succession and personnel changes

(Tushman, Virany & Romanelli, 1985) and changes in organizational structures and processes

(Barr, Stimpert & Huff, 1992). Non-economic outcomes include perceived managerial

effectiveness (Simons, 1994), commitment and morale (Greiner & Bhambri, 1989), perceived

quality of change (Nutt, 1987) and enduring changes in ideology (Meyer, 1982). On the other

hand, the cognitive lens perspective theorizes that strategic change leads to profitability

(Thomas, 1993), employee productivity (Child & Smith, 1987) and firm survival (Barr et. al.,

1992). This has led Rajagopalan and Spreitzer (1997) to conclude that if properly handled,

strategic change should enhance organizational performance.

Change management and organizational development (n.d.) argues that the goal of strategic

change is improved organizational performance. It further says organizational performance is not

only about application of hard and fast rules for achievement but rather an acceptance of

ownership of the impact that change factors have in shaping organizational behaviors during

change. If strategic change objectives are not seen to be remotely achievable, they can

unintentionally prevent organizations from creating the conditions necessary for gaining an

improved and sustainable performance.

17

Bloodgood and Morrow (2003) theorizes that strategic organizational change is influenced by

environmental structure, internal conscious awareness and organizational knowledge. This

strategic change in turn influences organizational performance. They therefore argue that a fit

between the type of organizational change strategy that a firm choses and the type of knowledge

resources that a firm needs to successfully implement this strategy will have a positive effect on

the performance of the firm. In line with this, Hitt et al. (1996) and Markides and Williamson

(1996) assert that proper fit between a firm’s strategy and its structure, its governance

mechanisms and its control systems enhance organizational performance. Bodaracco (1991) says

firm performance resulting from change strategies that rely largely on explicit knowledge may be

increased if the firm is able to disperse the explicit knowledge rapidly and efficiently throughout

the organization.

Ingram (2013) asserts that strategic change can have a number of positive effects, for example, a

company’s adaptation to changes in the marketplace, effective performance or cost-efficiency,

increase profitability and organizational growth. Strategic change can at the same time have

negative effects on an organization. It can leave the organization in a worse position than it was

before the change.

2.2.2 The Change Problem

Despite all the literature, money and efforts thrown into strategic change, most organizational

change efforts fail. Studies by Marks (2006), Paper and Chang (2005) and Quin (2004) show that

about fifty percent (50%) of all organizational changes fail to deliver expected results and or

meet intended objectives and a similar survey of global companies reported that only one-third of

18

organizational change initiatives were considered to be successful by organization executives

(Meaney & Pung, 2008). A report “20/10 Consulting” (2009) show that about seventy five

percent (75%) of change efforts do not achieve intended results as they fail to achieve set

objectives, mobilize and engage people, change the behaviors of people involved and remain

sustainable.

There are so many explanations for the high percentage of failure of strategic change but a

notable reason for such a phenomenon is employee resistance as employees play a major role in

the success or failure of change in their organizations (Kotter & Cohen, 2002; Martin & Taylor,

2006). Employees play a major part in the success or failure of strategic change in their

organizations as their attitude and behavior are closely related to post change organization

performance e.g. if they are committed, change will be a success but if they are not, then it is

likely to fail (Shin, Taylor & Seo, 2012). Yet employees are reluctant to commit to

organizational change as they view it to be intrusive and disruptive of the routines and social

relationships formerly relied upon to complete important work tasks (Beer, Eisenstat & Spector

1990). They also perceive increased workloads because of the introduction of new strategic goals

and as such become change averse and reluctant to enact supportive behaviors directed at

achieving goals set by the organization’s leaders (Kiefer, 2005).

This becomes an obstacle to organizational change and therefore calls for strategies to overcome

the obstacle so as to make change a success, it calls for management of organizational change

defined by Kumar (2012) as the process of planning and implementing change in the

organization in such a way as to minimize employee resistance and cost to organization, while

19

also maximizing the effectiveness of change effort. Resistance may arise at all levels of the

organizational hierarchy. The people at higher levels resist a change effort because of the threat

on their interests, power and control over resources. At lower levels, it arises because change

brings uncertainty and uncertainty creates insecurity.

According to the University of Adelaide (2012), one of the goals of change management is the

alignment of people and culture with strategic shifts in the organization, to overcome resistance

to change in order to increase engagement and the achievement of the organization’s goal for

effective transformation. Achieving sustainable change begins with a clear understanding of the

current state of the organization, followed by the implementation of appropriate and targeted

strategies. The focus of change management is on the outcome the change will produce. A

comprehensive change management strategy should lead to the desired objectives and create a

sense of ownership, enable sustained and measurable improvement and build capability to

respond to future change.

Thus, change needs to be understood and managed in a way that people can cope effectively with

and since change can be unsettling, the manager logically needs to be a settling influence, he

must make sure that people affected by the change agree with, or at least understand, the need for

change, and have a chance to decide how the change will be managed, and are also involved in

the planning and implementation of the change (Change Management Principles, 2012).

Strategic change implementation thus becomes one of the most important undertakings of any

organization as successful implementation can reinvigorate a business i.e. lead to enhanced

20

organizational performance while a failure can lead to catastrophic consequences including death

of an organization (Hofer & Schendel, 1978).

2.2.3 Managing/Leading Change

There are several models of managing strategic change. Kotter (1995) in trying to give a solution

to the problem of failure of the change process say that first executives and other players in the

firm need to assess potential risks and stir a sense of urgency among all stakeholders to be

affected by the change process in an effort to generate motivation to spur change within the firm.

Once this has been established and change is seen as the solution to issues of market share, profit

loses or other catalysts, it is now up to the leaders to band together and make sure they propel

and guide the change process. It is this same group that should coalesce to create a shared vision

for corporate change which should include transformation steps that are coordinated to propel the

organization towards its goals and this vision should be communicated not only in words but also

by actions of managers, supervisor and executives. The transformation process should have short

term goals that can be tracked to show executives and workers that the change process is making

progress in achieving the vision.

He thus highlights eight steps to successful management of change and he says firstly, establish a

sense of urgency by discussing today’s competitive realities, looking at potential future scenarios

and increasing the felt need for change. Secondly, form a powerful guiding coalition by

assembling a powerful group of people who can work well together. Thirdly, create a Vision to

guide the change effort together with strategies for achieving this. Then communicate the vision

at least ten times the amount you expect to have to communicate because the vision and

21

accompanying strategies form the new behaviors. Furthermore, empower others to act on the

vision by getting rid of obstacles to change such as unhelpful structures or systems and allow

people to experiment. Then consolidate improvements and produce still more change by

promoting and rewarding those able to promote and work towards the vision and energizing the

process of change with new projects, resources and change agents. Finally institutionalize new

approaches by ensuring that everyone understands that the new behaviors lead to corporate

success.

“20/10 consulting” (2009) present strategic change levers which it believes once an organization

attends to them, increases its chances of success in its strategic change process and these levers

include: leading change which is all about having a champion who sponsors the change and

engaging leaders who provide resources, remove obstacles and take accountability for success;

creating a shared need for change, that is, establishing a compelling case for change which

should exceed its resistance; Shaping the right vision, that is, establishing a vision so that the

desired outcome of change is clear, legitimate and widely understood and shared by all;

Mobilizing commitment, that is, involving and informing all relevant stakeholders to obtain

ownership and support; Communicating relentlessly, that is, ensuring an ongoing flow of

information is shared in a timely manner and in a way the audience responds to; Aligning the

infrastructure, that is, ensuring that management practices are used to complement and reinforce

change and finally sustaining momentum/monitoring and adapting, that is, ensuring that once the

change is started, it endures, flourishes and learning is transferred throughout the organization.

22

Lewin (1951), building on his principle of the ‘force-field’ which assumes that strategic change

to be successful driving forces must outweigh resisting forces, suggests a three step model for

implementing strategic change: unfreeze-move-refreeze. This model is implicitly or explicitly

indorsed by many theoretical and practitioner models of change as can be seen from mangy

contemporary management texts which uncritically adopt it (e.g. Corley & Gioia 2004; Fiol,

2002; Isabella, 1990; Labianca, Gray & Brass, 2000).

The first step unfreezing the current state of affairs implies defining the current state, surfacing

the driving and resisting forces and picturing a desired end-state and it may take various forms

e.g. creating a sense of urgency about the need for change by presenting data to organizational

members that shows the gap between where they are and where they should be to meet growing

demand or changing environment, merging with another organization to mention but a few with

the intention of shaking up the system, confronting it with a compelling need to do business

differently and making it accessible and amenable to change interventions (Lewin, 1958).

The second is about moving to a new state or new directions with different technologies and

ways of operating or changing the organization through participation and involvement i.e.

educating managers to behave differently toward their subordinates to improve customer care

and implementing action plans for changing work processes or improving information systems

(Schneider, 1980). The third and last is about refreezing, that is, making change permanent by

setting new standards and reinforcing the new changed condition/state and putting in place a

process and infrastructure that will maintain the new system e.g. having a new reward system

that reinforces the behaviors that are congruent with the new, changed organization or having

23

different organizational structure and information systems (Lewin, 1958). Figure 1.1 illustrates

well Lewins’ three step model.

Fig. 1.1: Lewins three-step- model (Source: Lewin 1951)

Stanleigh (2013) says to begin with, we must recognize that change is a process and to move

from crisis to control, we must follow the process and engage everyone in the change. He

suggests seven stages in the strategic management process and says at stage one form a strategic

change management steering committee comprised of both management and staff who will

oversee the entire process of change, make recommendations, develop implementation strategies

and implement approved strategies. These have to engage and bring staff together and provide

them with an opportunity to vent, that is, to express themselves on how they feel about the

change and what they feel should be done to make change happen successfully. This helps to

prevent a crisis as it brings control to the change process from the very beginning so much so

that all those involved and to be affected feel they own it. The second stage is to identify

organizational culture i.e. commonly held attitudes, believes, values and behaviors of employees

and change readiness i.e. how receptive or resistant to change is the culture of the organization.

This too will help overcome resistance.

24

Unfreeze

Move

Refreeze

Examine status quo Increase driving forces for change

Decrease resisting forces against change

Take action Make changes Involve people

Make change permanent, Establish new way of

things, Reward desired outcomes

Stage three is creating a strategic change vision i.e. depicting what the future will look like once

the entire change process is successfully implemented and new culture is apparent. Here the

concern is with future structure, culture and how work will be done and what actions should be

taken and what strategies put in place to get from the present to the future. The next stage is now

developing change strategies, that is, developing plans that will help to know what is it that has

to be done to achieve their vision and satisfy employee as well as customer expectations. Then

analyze the risks, that is, identify what might prevent the organization from successfully

implementing their change strategies and how costly will this be compared to the benefits to be

received and what contingencies are in place to ensure that all roadblocks are removed.

Next create the change plan by identifying the objectives required to meet each of the change

strategies and the detailed action plan required to meet each identified objective. Finally establish

values and principles which form the culture of the organization and defines required employee

behavior and action to successfully fit into this culture. These become the strengths of the

organization as they are the essence of the organization understood and respected by all

employees and the guides on how employees live their values and influence the results they

achieve.

2.3 Empirical Literature

Most of the studies carried out on the issue of strategic change focus on the ease or difficulty of

organizational change and the likely performance consequences of that change (Bloodgood &

Morrow Jr., 2003). Zajac, Kraatz and Bresser (2000) in their study “Modeling the dynamics of

Strategic fit: A normative approach to strategic change” found that (1) the timing, direction, and

25

magnitude of strategic changes can be logically predicted based on differences in specific

environmental forces and organizational resources, and (2) organizations that deviated from their

model's prediction of dynamic strategic fit (i.e. changed more or changed less than their model

prescribed) experienced negative performance consequences. The study concluded that

adherence to the normative model for strategic change had positive performance consequences

and that congruence with individual contingencies generally had beneficial effects on subsequent

performance.

The research design used in this study was the case study and data used was secondary data

collected from financial reports submitted by all Savings and loans institutions (S&Ls) in the

United States (U.S.) to the federal home loan bank board over a 9 year period. Collected data

was analyzed using time series regression methods and specifically the generalized least-squares

regression. Also employed was a discrete time event history model which entails per-forming

simple logit analysis on pooled time series data with a binary dependent variable. The population

of this study was 4000 U.S. savings and loan institutions spanning the decade of the 1980s.

In trying to contribute to the debate as to whether strategic change helps or harms organizations

Trinh and O’Connor (2002) in their study, helpful or harmful? The impact of strategic change on

the performance of U.S urban hospitals examine how strategic change influences performance

change in urban hospitals. They examined three aspects of performance (1) market share (2)

operational efficiency and (3) financial performance and discovered that strategic change can be

either helpful or harmful to organizations. Their study revealed that affiliation with health

maintenance organizations (HMOs) is significantly associated with an increase in revenue and

26

market share, whereas signing more HMO contracts is associated with a reduction in both

revenue and patient day market shares. On the other hand increases in contractual discount rate

urban hospitals negotiate with HMOs have negative effects on all measures of operational

efficiency and financial performance (return on assets, operating margin).

The study employed the longitudinal approach using a panel design and a path analytic model.

Data used was secondary data which was collected from American Hospital Association (AHA)

annual survey (1994-1996), Health care financing administration’s Medicare cost reports (1994-

1996) and Medicare HMO files (1994), US Bureau of the census county business patterns files

(1994) and area resources files (1994). The unit of analysis was the private (non-profit of for-

profit) general acute care urban hospitals which comprised of 2,423 urban hospitals. Collected

data was recorded and transformed to normal scores using the preprocessor for linear structural

relations (PRELIS) statistical software package. Once transformed, PRELIS computed a matrix

of polyseric correlations of the variables which was later used as input into the path analysis.

Ochako (2007) in his study on Strategic issue management practices by mobile telephony

companies operating in Kenya: A case study of Safaricom Limited discovered that for the past

five years the benefits realized as a result of practicing strategic issue management innovation

included competiveness of the company, growth of the company, brand enhancement and

increased customer base. Nevertheless, some challenges in implementing strategic issue

management practices were also discovered and these include resistance to change by

employees, inadequate preparation for change, inadequate training in strategy formulation and

27

implementation, inaccurate correlation between market needs and strategic plans, new

competition, change in policy and lack of total support and fear of change.

A study by Ye, Marinova and Singh (2007) Strategic Change Implementation and Performance

Loss in the Front Lines reveals that (1) Frontline Employee (FLE) detachment is effective in

separating out the negative and positive effects of change (2) FLE change perceptions are

sensitive to the focus of strategic change (cost containment versus revenue enhancement

strategies) and (3) FLE participation significantly enhances the positive effects of change and

mitigates performance loss. As a result, the study suggests that when FLE are not involved in the

goal setting and decision making process of strategic change, detachment and subsequent

performance loss occur. FLE participation not only fosters functional FLE attitudes and quality

performance but also mitigates performance loss. This study used survey as its research design.

The non-profit health care sector was the setting of the study and 3626 hospital FLEs with direct

patient interactions were selected. Data was collected using questionnaires and was analyzed

using measurement model analysis and structural model analysis.

In her case study of strategic management practices and performance at the co-operative bank of

Kenya limited, Caroline (2008) discovered that strategic change was helping the financial

performance i.e. increase in sales and profit before tax of co-operative bank for the last five years

that it was implemented. However, the study also revealed that despite the enhanced financial

performance, strategic change had little effect on share capital growth and growth in return on

assets. The research design employed in this research was the case study and data collection was

done using structured questionnaires and interviews. Collected data was analyzed using

28

descriptive statistics such as frequencies, percentages, mean scores and standard deviation with

the help of statistical packages on social sciences.

Akoth (2011) in his study strategic response by jubilee insurance to changing competitive

environment found out that strategic change actually led to the success of the company as the

company experienced expansion to new regions, maintained its market lead and remained the

number one biggest insurer in East Africa. He used the case study research design and primary

and secondary data. Primary data was collected using interviews while secondary data was

obtained from existing documents at jubilee insurance including management accounts, strategic

corporate plans, annual reports and accounts, magazines and newsletters and so on. Content

analysis was used in analyzing collected data.

Bett (2012) analyzing the challenges facing the implementation of change strategies at Kenya

commercial bank group limited found that strategic change helped the organization to adapt to its

environment. This helps prevent underperformance, manage crises and consequently lead to

increased profitability and growth. The case study design was adopted and both primary and

secondary data was used. Interviews were mainly used but also bank bulletins in collecting data.

Content analysis was used in analyzing the data collected. Since the study relied solely on

interviewing senior management, the information provided was impartial leading to some the

information given to be unreliable.

29

2.4 Research Gap

Strategic change which involves restructuring, change of mission/vision, objectives and the form,

quality or state over time of an organization has attracted a lot of attention from researchers.

Most of the studies that have been carried out on strategic change in the telecommunications

industry have mainly focused on the triggers of strategic change, the strategic responses of firm

and challenges these firms face in the change process. They have mainly targeted people in either

top management or middle level management. Research on the effects of strategic change has

not explicitly been carried out especially on firms in the telecommunication industry and more

specifically on Safaricom limited, Airtel, Orange – Telkom and Yu Essar.

As such there is a research gap as there has been no research on what effects strategic change has

had on the four Kenyan mobile telecommunications industry players. Looking at the empirical

literature of this study, we discover that a lot of studies have been carried out which highlight the

triggers of change, the strategic responses, change management and the challenges of change in

the telecommunication industry (Kipkurui, 2008; Onyango, 2007; Kappler, 2007; Pennings et.

al., 2005; Ochako, 2007; Gichangi, 2011; Mativa, 2012). However, these studies have not

looked at the effects of strategic change and in particular in the Kenyan mobile

telecommunications industry. Though there are other studies that have analyzed the effects of

strategic change on organizational performance (Zajac, Kraatz & Bresser, 2000; Trinh and

O’Connor, 2002; Ochako, 2007; Ye, Marinova & Singh, 2007; Caroline, 2008; Akoth, 2011;

Bett, 2012), none of these studies are concerned with the telecommunications industry. This

therefore, leaves a gap in research on strategic change as the effects of strategic change in the

telecommunications industry have not been fully covered.

30

Strategic change is costly and therefore, it is very vital for firms undertaking any strategic change

processes to do a cost benefit analysis so as to evaluate how beneficial the strategic change

process is to the organization. Therefore, this study aims at filling this gap by examining the

telecommunications industry’s changing environment and how players in the industry are

strategically changing in order to adapt to the environment whilst enhancing organization

performance. It also looks at how these players manage and implement strategic change so that it

does not fail but succeed by achieving its desired goal which is enhancing organizational

performance. It further looks at what some of the effects of strategic change are on these

organizations’ performance.

31

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents the research design used in collecting data and the target population of the

study. Furthermore, the chapter presents the sampling plan, data collection instruments and

procedures used in collecting the same and finally it looks at how data will be analyzed and

presented.

3.2 Research Design

A research design involves an arrangement of conditions for collecting and analyzing data in a

manner that aims at combining relevance with the research purpose. Orodho (2003) defines

research design as the scheme, outline or plan that researchers use to generate answers to

research problems. Furthermore, Kothari (2003) says that it constitutes the blue print for the

collection, measurement and analysis of data. This study uses descriptive survey defined by

Orodho (2003) as a method of collecting information by interviewing or administering

questionnaires to a sample of individuals.

The descriptive survey design is used because it provides the best means to answering the

questions raised in the study. Survey allows the collection of a large amount of data in a

relatively short period of time and is less expensive compared to many other designs. Also

survey can be created quickly and administered easily and can be used to collect information on

a wide range of things, including personal facts, attitudes, past behaviors and opinions, for

example by use of questionnaires.

32

3.3 Target Population

According to Kombo and Tromp (2006), target population is a group of individuals, objects or

items from which samples are taken for measurement. This study’s target population consists of

those in top, middle and lower level management from the four organizations. These are the key

informants responsible with strategic planning, management and implementation as well as

organizational performance and are in a position to have knowledge on strategic changes taking

place in these companies and its effect on organizational performance. This group has been

selected because they are in a better position to give information that is relevant to the

completion of this study because of their enormous experience and knowledge on strategic

changes in the organization. Total targeted population for this study is 253 and they are in

proportion to the size of the each organization as shown in the table below. Proportionality

enables the results to be representative of the whole population of each organization.

Table 3.0: Total Target Population

Company Top level Middle level Lower level total

Safaricom 11 12 53 76

Airtel 12 11 43 66

Telkom-Orange 9 10 51 70

YU Essar 8 8 25 41

Total 40 41 172 253

Population – 253

33

3.4 Sampling Plan

Sampling plans are divided into two: Probability designs and non-probability designs. This study

employs a probability sampling technique and specifically stratified random sampling. This is so

because the population is be divided into subgroups e.g. top level management, middle level

management and lower level management and then a simple random sample selected from each

subgroup. The use of this sampling plan ensures that each subgroup in the population is

represented in the sample in proportion to their number in the population. The sample population

consists of sixty respondents and using a method of proportional allocation under which the sizes

of the samples from the different strata are kept proportional to the sizes of the strata, the sample

population is divided as shown in the table below.

Table 3.1: Sample Population

Company Top level Middle level Lower level total

Safaricom 3 4 15 22

Airtel 3 3 11 17

Telkom-Orange 2 2 10 14

YU Essar 1 1 5 7

Total 15 21 24 60

Sample size = 60

Proportionality is calculated by the formula suggested by Kothari (2004) as follows: S = n.P1

where S is number of elements selected from stratum i, n is the total sample size and P1 is the

proportion of population included in the stratum i, e.g. supposing we want a sample size n = 30

34

to be drawn from a population of size N = 8000 which is divided into three strata of size N1 =

4000, N2 = 2400 and N3 = 1600. Proportional sample size for each strata will be as follows:

Strata with N1 = 4000, we have P1 = (4000/8000) and hence S = 30 (4000/8000) = 15

Strata with N2 = 2400, we have P1 = (2400/8000) and hence S = 30 (2400/8000) = 9

Strata with N3 = 1600, we have P1 = (1600/8000) and hence S = 30 (1600/8000) = 6

\

3.5 Data Collection Instruments and Procedures

There are two sources of data, that is, primary data and secondary data. Primary data is

information obtained directly from the respondents while secondary data is information which is

neither collected directly by the user nor specifically for the user. This is obtained from books,

journals and the internet. In this study, primary data was obtained through self-administered

questionnaires. The questionnaire was semi-structured with the use of both closed and open

ended questions. The inclusion of open ended questions gives respondents the opportunity to

give their own opinion on certain questions. The use of closed-ended questions limits

respondents to limited options of the proposed answers. Secondary data on the other hand was

obtained by use of desk search techniques from published company reports and other documents

both physical and digital.

3.6 Data Presentation and Analysis

Since data analysis is all about examining the data that has been collected then making

deductions and inferences, in this research data analysis methods used include thematic analysis

as well as content analysis, that means data is categorized into related themes/topics/major

subjects and inferences made by systematically and objectively identifying specified

35

characteristics of messages and using the same to relate trends respectively. Content analysis

allows both qualitative and quantitative operationalism which this study employs.

Data collected was analyzed using descriptive statistics such as frequencies and percentages.

Descriptive statistics included statistical procedures that are used to describe the population

under study. Furthermore, since the study involves ordinal variables, inferential statistical

analysis was used in analyzing data. These included chi-square, cross tabulation, ANOVA,

correlation and regression analysis which enabled the study to investigate the effects of predictor

variables on an outcome variable. With inferential statistics, the study was able to measure the

confidence levels and test the hypothesis.

Data presentation simply refers to the way collected data is presented after analysis and it is

comprised of three ways: using statistical techniques, graphical techniques or a combination of

both. This study uses statistical techniques and all the responses were critically analyzed and

properly sorted and coded in order to have a proper statistical analysis. The captured data was

processed using Statistical Package for Social Sciences (SPSS). The processed or analyzed data

was then presented in tables where applicable.

36

CHAPTER FOUR

PRESENTATION, DISCUSSION AND INTERPRETATION OF EMPIRICAL

FINDINGS

4.1 Introduction

This chapter presents the findings and discussions of the data that was collected from the field

based on specific objectives of the study presented in chapter one. This is done through the use

of frequencies, chi-square, correlation and regression. Results have been presented in such a way

that they answer the research questions. These have been divided into four main sections namely

strategic change practices, challenges, organizational performance and effective strategies to be

explored.

4.2 Response Rate

Sixty questionnaires were distributed to the four companies understudy and out of the sixty only

forty seven were collected representing a 78% response rate. This represents a fairly strong

response rate which can be attributed to the fact that respondents were assured that the

information given would be used purely for academic purposes and that absolute confidentiality

would be upheld. The high response rate can also be attributed to the fact that the researcher

appealed to authority by distributing the questionnaires through high ranking officials in the

named organizations. This high response rate will ensure the reliability of the data collected as

the data collected will be representative of the target population.

4.3 Strategic change

The study sought to establish to what extent strategic change was employed to enhance

organizational performance and Cameron and Greens’ (2004) generic strategic options namely:

37

strategic planning, culture/values change, restructuring, process/systems change, management

change and partnerships where used. Respondents were therefore asked to state, from a very

small extent to a very large extent, the extent to which identified strategic change options were

employed. The respondents’ results are shown in table 4.1 below.

Table 4.1: Extent to which strategic change is employed

Items Very small

extent

Small

extent

Moderate

extent

Large

extent

Very large

extent

F P

(%)

F P

(%)

F P

(%)

F P

(%)

F P

(%)

a. Strategic

planning

0 0 1 2.1 13 27.7 17 36.2 16 34

b. Culture/values

change

0 0 2 4.3 19 40.4 7 14.9 19 40.4

c. Restructuring 1 2.1 4 8.5 19 40.4 18 38.3 5 10.6

d. Process/systems

change

0 0 6 12.8 13 27.7 7 14.9 21 44.7

e. Management

change

0 0 13 27.7 15 31.9 17 36.2 2 4.3

f. Partnerships 3 6.4 13 27.7 9 19.1 7 14.9 15 31.9

According to table 4.1, two key factors emerged as highly rated strategic options that are

employed to enhance organizational performance. These were process/systems change and

culture/values change. From the various strategic options looked at, process/systems change was

identified by majority of respondents (44.7%) as the most important since it was employed to a

very large extent. Culture/values change and restructuring emerged second with 40.4% of

38

respondents saying that the two are strategic options that are considered to a moderate extent

when it comes to improving organizational performance. Though all the strategic options are

employed to enhance organizational performance, management change was said to be employed

to a minimal extent as evidenced by 27.7% of respondents who said it is employed to a small

extent.

This is explained by the rapidly changing environment with which organizations need to keep

abreast with. This can be achieved through change in processes or systems that organizations

use. For example with development of technology an organization that does not adapt to and

adopt new technology is likely to lag behind its competitors and this would reflect badly on its

continued survival. Therefore, as process/systems i.e. structures by which an organization does

what is necessary to create value for customers e.g. purchasing, manufacturing,

advertising/marketing to mention but a few are improved through change, it will lead to

effectiveness and efficiency in meeting customers and consequently this will enhance

organizational performance because as many customers are satisfied the more likely they will

make repeated use of the products offered to them and the more likely they are to tell others

about what a company offers leading to improved financial organizational performance.

It can therefore be observed that companies understudy have undergone process/systems change

which has helped in enhancing Organizational performance. For example it was discovered that

in all 4 companies understudy, there has been great changes in terms of information technology

(IT) which has changed the way business was done before e.g. money transfer, purchase of

good/services using mobile phones, data bundles etc.

39

These findings concur with the study by Sheila (2008) on strategic responses by Barclays Bank

of Kenya Limited to changes in the environment who found out that culture/values change and

process/systems/technology change were among the strategies that were very much used in order

for the bank to gain competitive advantage over other banks. Other studies by Olunga (2007) on

Responses of Safaricom limited to changes in the telecommunication industry in Kenya and

Akoth (2011) on strategic responses by Jubilee insurance found that adapting to new technology

by being very innovative is a key strategic change strategy to gaining a competitive edge over

competitors. Also Palvia (1997) and Buxmann and Gebauer (1999) found out that information

technology was one of the key success factors in any organization. The more any of the four

companies understudy has been very innovative, the more it has enhanced its performance in

general. This is further evidenced from the results which reveal that majority of respondents i.e.

41 out of the 47 who took part in the research said that process/systems is employed to a

moderate, large and very large extent respectively with only 6 saying it is employed to a small

extent.

In conclusion, it can be observed that process/systems change is a very important strategic

change option to be employed if a company is to enhance its performance as lack of it can have a

very negative impact on the performance of an organization as this can make an organization

unable to compete in a highly competitive and rapidly changing environment and thereby render

it unworthy to continue operating in the industry. This means it can lead to firm death, a result

that no company aspires to.

40

4.4 Challenges of Strategic Change

The second aspect that was found to be worth probing in this study was the challenges faced in

implementing strategic change in an organization. The key target under this objective was to find

out from the respondents the extent to which they felt challenges of strategic change affected the

process of managing/leading change. The various challenges identified are presented and

discussed in the frequency table 4.2 below.

Table 4.2: Extent to which challenges affect the process of managing/leading

change

Items Very small

extent

Small

extent

Moderate

extent

Large

extent

Very large

extent

F P

(%)

F P

(%)

F P

(%)

F P

(%)

F P

(%)

a. Employee Resistance 11 23.4 25 53.2 8 17 2 4.3 1 2.1

b. Communication

Problem

22 46.8 18 38.3 5 10.6 1 2.1 1 2.1

c. Organizational

structure hindrance

19 40.4 21 44.7 5 10.6 2 4.3 0 0

d. Lack of support by top

management

26 55.3 16 34 3 6.4 1 2.1 1 2.1

e. Lack of monitoring 23 48.9 19 40.4 2 4.3 2 4.3 0 0

f. Lack of institutionaliza

tion of change

11 23.4 25 53.2 7 14.9 2 4.3 1 2.1

g. Lack of employee

involvement

7 14.9 17 36.2 16 34 5 10.6 2 4.3

41

Table 4.2 shows that majority of the respondents (10.6%) said lack of employee involvement

was a challenge that affected the process of managing/leading change to a large extent. This was

followed by employee resistance (4.3%), lack of monitoring (4.3%) and organizational structure

hindrance (4.3%). The last was lack of support from top management (2.1%) and communication

(2.1%). This can be attributed to the fact that the success or failure of any strategic change is

defined by employees as they are actually the enablers of any strategic change. Therefore, a lack

of involvement of employees in strategic change can prove to be very detrimental as employees

may not feel they own the change thereby will not be willing to put in a lot of effort to make sure

the change achieves desired results. It is this that leads to employee resistance which is identified

by 17% of respondents as the next challenge to lack of employee involvement that affected the

process of managing/leading change to a moderate extent.

Although all the identified challenges of strategic change affect the process of managing/leading

change, 55.3% of the respondents said lack of support by top management affected

managing/leading change to a very small extent. This can be attributed to the fact that there are

very rare circumstances where top management does not support the process of

managing/leading change. Mostly in business management, strategic change is initiated by top

management and therefore it is very unlikely that the same people who initiated it would not

support it. To demonstrate the extent to which challenges affect the process of managing/leading

change, a cross tabulation between lack of employee involvement and process/systems change

was done. The statistical values generated from the cross tabulation are presented in table 4.2.1

below.

42

Table 4.2.1: Cross tabulation of Lack of employee involvement by

Process/systems change

Process/systems change Total

Small extent

Moderate extent

Large extent

Very large extent

Lack of Employee Involvement

Very small extent

Count 1 0 1 5 7

% of Total

2.1% .0% 2.1% 10.6% 14.9%

Small extent

Count 0 4 2 11 17

% of Total

.0% 8.5% 4.3% 23.4% 36.2%

Moderate extent

Count 4 5 3 4 16

% of Total

8.5% 10.6% 6.4% 8.5% 34.0%

Large extent

Count 1 3 0 1 5

% of Total

2.1% 6.4% .0% 2.1% 10.6%

Very large extent

Count 0 1 1 0 2

% of Total

.0% 2.1% 2.1% .0% 4.3%

Total Count 6 13 7 21 47

% of Total

12.8% 27.7% 14.9% 44.7% 100.0%

Chi-Square = 17.168 df = 12 Sig = .143 Cramer’s V = .349 Pearson’s R = -.398

At 12 degrees of freedom the chi-square value (17.168) is significant at .143. This means that

lack of employee involvement and process/systems change have no statistical association given

that the chi-square value is greater than .05. Furthermore, the study results show that there is a

43

fairly weak negative correlation between lack of employee involvement and process/systems

change as shown by the Pearson’s R. This means that as lack of employee involvement

increases, process/systems change is reduced. The results further reveal that there is a .398

degrees of association between lack of employee involvement and process/systems change. This

means that 39.8% of challenges experienced in process/systems change is as a result of lack of

employee involvement.

Despite the lower degree of association between lack of employee involvement and

process/systems change, it can be observed from the results that lack of employee involvement

actually has a greater challenge on process/systems change as shown by 40 of the 47 respondents

involved in the study who said lack of employee involvement causes a challenge to the process

of leading/managing strategic change to a moderate, small and very small extent respectively.

This implies that lack of employee involvement negatively affects change in processes/systems

of the organization and thereby negatively affecting the organizations’ performance.

From the table, 23.4% of respondents who said that lack of employee involvement was a

challenge to a small extent also said that process/systems change is affected to a very large

extent. This implies that in instances where lack of employee involvement has been high,

process/systems change has been very low. This is evidenced by 5 of the 47 respondents who

not only said that lack of employee involvement is a challenge to a moderate extent but also said

process/systems change was also influenced to a moderate extent. This can be attributed to the

face that when employees feel not to be involved in the process of change, they lack the feeling

44

of ownership of the change and thus they tend to resist that change. This leads to low success of

process/systems change.

In summary, it can be noted that lack of employee involvement is a challenge that organizations

undergoing strategic change are experiencing most and that it negatively affects organizational

performance.

Table 4.2.2: Cross tabulation of employee resistance by Process/systems change

Process/systems change TotalSmall extent

Moderate extent

Large extent

Very large extent

Employee Resistance

Very small extent

Count 1 3 2 5 11% of Total

2.1% 6.4% 4.3% 10.6% 23.4%

Small extent

Count 1 8 2 14 25% of Total

2.1% 17.0% 4.3% 29.8% 53.2%

Moderate extent

Count 4 0 2 2 8% of Total

8.5% .0% 4.3% 4.3% 17.0%

Large extent

Count 0 2 0 0 2% of Total

.0% 4.3% .0% .0% 4.3%

Very large extent

Count 0 0 1 0 1% of Total

.0% .0% 2.1% .0% 2.1%

Total Count 6 13 7 21 47% of Total

12.8% 27.7% 14.9% 44.7%100.0

%Chi-Square = 26.476 df = 12 Sig =.009 Cramer’s V =.433 Pearson’s R = -.213

As shown in the table above, it can be noted that employee resistance and process/systems

change has a significant association as indicated by the chi-square value (26.476) which is

45

significant at .009. There is a significant association between the two because the chi-square

significance is less than .05. The Pearson’s R, as shown on the table, shows that the kind of

relationship between the two variables is a negative linear one meaning that as one of the

variables increases, it causes a decrease in the other. The table further reveals that only 43.3% of

the challenges experienced during process/systems change can be attributed to employee

resistance as indicated by the Cramer’s V.

From the table above, 29.8% of respondents who took part in the study indicated that a small

extent of employee resistance affects process/systems change to a very large extent. This is so

because mostly those who make use of the process/systems and make them work well to achieve

their purpose are employees so once employees offer even the slightest resistance it is very likely

that the process/systems being introduced will fail as employees tend to sabotage the

process/system so as to render it unhelpful with the hope of convincing management to change it

to suit the employees wishes or revert to the old one. This is in line with studies by Kotter and

Cohen (2002) and Van Knippenber, Martin and Kyler (2006) who concluded that employees

play a major role in the success or failure of change in their organizations. With such

implications, all four companies understudy are putting up efforts to mitigate the challenge of

employee resistance as evidenced by their efforts in empowering employees, increased

engagement of employees and promoting culture change through training.

Furthermore, results show that 44 out of the 47 respondents said that employee resistance is a

challenge to process/systems change to a moderate, small and very small extent while only 3 said

it is a challenge to a large extent and very large extent respectively. This can be explained by the

46

fact that though the impact of employee resistance is great, mobile telecommunications service

providers understudy are giving it utmost attention so as to minimize it while maximizing the

effectiveness of the change effort.

All in all, employee resistance though a challenge that can greatly affect an organizations’

performance as employees are the enablers of change is being minimized by the mobile

telecommunications’ service providers thereby rendering it less a challenge than it has been in

the past before companies embarked on efforts to minimize it.

With 55.3% of respondents saying lack of support from top management affects strategic change

to a very small extent, the study found it important to analyze this. So the study sought to

establish the extent to which lack of support from top management affect strategic change and

strategic change was represented by process/systems change. Results of this analysis are

presented in table 4.2.3 below.

Table 4.2.3: Cross tabulation of Lack of support by top management by

Process/systems change

Process/systems change TotalSmall extent

Moderate extent

Large extent

Very large extent

Lack of support by top management

Very small extent

Count 3 1 3 19 26% of Total

6.4% 2.1% 6.4% 40.4% 55.3%

Small extent

Count 2 10 2 2 16% of Total

4.3% 21.3% 4.3% 4.3% 34.0%

Modera Count 1 1 1 0 3

47

te extent

% of Total

2.1% 2.1% 2.1% .0% 6.4%

Large extent

Count 0 1 0 0 1% of Total

.0% 2.1% .0% .0% 2.1%

Very large extent

Count 0 0 1 0 1% of Total

.0% .0% 2.1% .0% 2.1%

Total Count 6 13 7 21 47% of Total

12.8% 27.7% 14.9% 44.7% 100.0%

Chi-Square = 32.426 df = 12 Sig = .001 Cramer’s V = .480 Pearson’s R = -.412

The statistical values of table 4.2.3 above depict a significant association between lack of support

from the top management and process/systems change. As demonstrated by the cross tabulation,

the chi-square is significant at .001 (less than .05). This is an indication that lack of support from

top management and process/systems change exhibit a very significant association. The degree

of association between these two variables is .480 meaning that on a scale of 0 -1, the degree at

which lack of top management support would influence process change is located at .480.

Presented in another way, it means that 48% of the changes experienced in the processes/systems

changes of the organizations studied could be attributed to the lack of support from top

management.

However, it should be observed that top management of the four organizations studied gave the

required support to their organizations since a total of 42 out of 47 respondents said that lack of

support is a challenge to a very small extent and small extent respectively. This explains the

reason why the two variables depict a negative correlation as exemplified by the value of the

48

Pearson’s R. This indicates that lack of support from the management which is to a very small

extent as revealed by this study minimizes the effective take off of key process changes in an

organization thus minimizing the organizations performance. The initial explanation to the

scenario being presented here is that changing a system that is being used by an organization

(e.g. technological systems) largely depends upon the approval of the leadership at the top level

of management. This is because policies that drive an organization emanate from the top

management and trickle down to the other employees for implementation. Therefore if the

managers do not approve of a particular change, it will not be possible for the organization to

embrace such a change.

Based on the researchers’ observation, nearly all the communication providers that were visited

during this study had undergone great changes in as far as technology is concerned. This has

been occasioned by the competition in the communication industry which has compelled the

various service providers to impress their customers with good services since this might provide

an opportunity for each of them to increase their customer base and consequently returns as well.

Key among these changes have been the introduction of mobile money transfers that is supported

by nearly all the service providers and provision of internet services which is also provided by all

the four service providers at different rates. The availability of such changes in the last few years

is a proof of support by the management since without them no organization can adopt such

fundamental changes. However, worthy to observe is that the negative association between the

two variables being correlated in table 4.2.3 has emanated from the fact that support from the

management is not lacking as such but the few instances where there has been no support from

the top management, the adoption of process changes has been negatively affected.

49

The direct proportionality between the column variable and the row variable in the two-way table

presented above is further demonstrated by the cell values. From the table, 40.4% of respondents

who said that lack of support from the top management was a challenge to a very small extent

also said that process change was influenced to a very large extent. This indicates that in

instances where the support has been high, the process changes have been greater. However,

when the support is lower, the process changes also take off at a slower pace. This is

demonstrated by 10 respondents who apart from saying that lack of support was a challenge to a

small extent also said that process change had been affected to a moderate extent. The opinion

expressed by the 10 respondents above is indeed a reality in some organizations visited. This is

because some organizations had not adopted customer friendly services such as affordable rates

of communication and other services that could improve customer satisfaction. Furthermore,

some service providers were also slow in embracing services that would attract customers at the

initial stages when they entered the market hence their poor performance today. The inability to

have embraced the desired changes at the right time in order to respond to the needs of their

customers has negatively influenced their performance today hence the reason why their profits

margins are relatively lower compared to their colleagues in the market.

In conclusion however, it can be said that though lack of support from the management is not a

great challenge now, it has been a challenge in the past and it has occasioned the poor

performance of some service providers today. In a nut shell however, the indication is that lack

of support from the top management of an organization bears a negative impact on

50

organizational performance since this has been demonstrated by the extent to which it bears the

possibility of frustrating the adoption of process/systems changes.

4.5 Organizational Financial Performance

Another aspect the study was interested in was to establish the extent to which strategic change

enhanced organizational performance. Data was collected and analyzed as presented below.

Table 4.3: Extent to which strategic change has been successful in achieving

enhanced financial performance

Items Very small

extent

Small

extent

Moderate

extent

Large

extent

Very large

extent

F P

(%)

F P

(%)

F P

(%)

F P

(%)

F P

(%)

a. Sales 0 0 1 2.1 11 23.4 21 44.7 14 29.8

b. Profit 0 0 1 2.1 16 34 16 34 14 29.8

c. Dividends 1 2.1 10 21.3 19 40.4 10 21.3 5 10.6

d. Stock price 1 2.1 11 23.4 17 36.2 7 14.9 8 17

e. Capital 0 0 3 6.4 21 44.7 4 8.5 18 38.3

f. Cash flow 0 0 3 6.4 14 29.8 11 23.4 19 40.4

g. Return on assets 0 0 10 21.3 16 34 16 34 5 10.6

h. Return on capital 0 0 11 23.4 16 34 15 31.9 5 10.6

i. Return on investment 0 0 5 10.6 17 36.2 11 23.4 14 29.8

From the various financial performance measures looked at in this study (sales, profit, dividends,

stock price, capital, cash flow, return on assets, return on capital and return on investment), cash

flow was identified as an aspect of organizational financial performance that was enhanced most

51

by strategic change as stated by 40.4% of respondents. Cash flow defines a company’s solvency,

that is, it shows a company’s financial performance as companies with ample cash at hand are

able to pump that money back into the business in order to generate more cash and profit.

Therefore, cash flow is very crucial to a company’s survival as it supports the operations of the

organization e.g. paying of creditors, employees, investing in technology etc. Other performance

measures identified by respondents as ones that were enhanced more by strategic change are

capital (38.3%) which are financial resources available for use, sales, profit and return on

investment (29.8% each), stock price (17%) and lastly dividends, return on assets and return on

capital (10.6% each).

However, to explain these opinions statistically, a simple linear regression analysis was

conducted to establish the extent to which cash flow (An indicator of organizational

performance) could be predicted by independent variables such as strategic planning (SP),

culture/values change (CVC), restructuring (R), process/systems change (PSC), management

change (MC) and partnerships (P). The simple linear regression analysis generated the statistical

values presented in tables 4.3.1, 4.3.2 and 4.3.3 below:

Table 4.3.1: Model summary of predictors

Model R R SquareAdjusted R

SquareStd. Error of the Estimate

1 .722a .521 .449 .734

a. Predictors: (Constant), P, MC, SP, CVC, SC, PSC

52

According to table 4.3.1, the R value indicates a relatively strong correlation between predictor

variables and the consequent variable (cash flow). This is because the R value is positive (.722).

This means that cash flow that the studied mobi-tech companies recorded was attributed to a

certain percentage of predictor variables. According to the value of the R-Square, 52.1% of the

cash flow recorded in the various companies could be explained by independent variables.

Therefore independent variables would have a 52.1% influence on the performance of the

studied organizations in as far as their cash flow is concerned while the remaining 47.9% could

be attributed to other factors other than predictor variables.

The correlation between these two variables is further demonstrated by the ANOVA table

presented below.

Table 4.3.2: Relationship between P, MC, SP, CVC, SC, PSC and cash flow

ANOVAb

ModelSum of Squares df Mean Square F Sig.

1 Regression 23.424 6 3.904 7.245 .000a

Residual 21.554 40 .539

Total 44.979 46

a. Predictors: (Constant), P, MC, SP, CVC, SC, PSC

b. Dependent Variable: Cash flow

The regression model presented in table 4.3.2 predicts the outcome variable significantly well.

This is because on the regression column, the p value is significant at .000 (< .05), an indication

that P, MC, SP, CVC, SC, PSC positively predicts cash flow. The association between P, MC,

SP, CVC, SC, PSC and cash flow can be explained by the fact that organizations understudy

operate in a highly competitive and rapidly changing environment and thereby the best way that

53

these companies can remain competitive is by changing to adopt new ways of doing things e.g.

changing technology. This can be achieved through strategic change i.e. through strategic

planning, culture/values change/ structural change, process/systems change, management change

and partnerships. With this taking place, organizations will experience enhanced cash flow.

Table 4.3.3: Coefficients of predictor variables

Model

Unstandardized Coefficients

Standardized Coefficients

t Sig.B Std. Error Beta

1 (Constant) .904 .449 2.013 .051

Strategic planning .310 .200 .266 1.549 .129

Culture/values change .529 .240 .533 2.203 .033

Structural Change -.372 .246 -.331 -1.514 .138

Process/systems change -.284 .209 -.321 -1.358 .182

Management Change .327 .170 .295 1.923 .062

Partnerships .264 .147 .363 1.800 .079a. Dependent Variable: Cash flow

Table 4.3.3 gives the results about the effects of each predictor variable on the dependent

variable and the coefficients indicate the increase or decrease in the value of the dependent

variable for each unit increase in the independent variable. The coefficient indicates that a unit

increase in the predictor variable causes an increase in the dependent variable. The standardized

coefficient (beta) shows that the greatest predictor of an organizations’ cash flow is

culture/values change (.533). This is explained by the fact that successful culture/values change

lead employees to learn new ways of doing things and thus become more competent on their jobs

54

and thus able to adapt to process/systems change which once is successfully implemented leads

to enhanced organizational performance. Balogun (2001) pointed out that for strategic change to

become a reality, it is necessary to change the way in which individuals within an organization

behave which requires more than restructuring and new systems. According to her, change is all

about changing people and not organizations as organizations change only when managers and

employees change their way of doing business. Therefore, culture, when it is strong, that is,

when there is a shared belief among employees in practices, norms and other practices that help

energize everyone to do their jobs to promote successful strategy implementation, promotes

successful strategy implementation. This means that when an organization has a strong culture, it

will be very easy for this company to implement any strategic changes undertaken.

Due to the importance of culture/values change, all the companies studied in this research were

found to be concerned with culture/values change as can be seen from the various activities they

are undertaking in order to make sure that their employees keep developing and adapting to new

ways of carrying out their jobs whilst keeping up with the changing culture/values of the

company e.g. rigorous recruitment process to make sure that only those who share common

values are employed; training and development which is part and parcel of all the four

companies operations. They hold regular training and development programs for employees.

As such, it can be concluded that culture/values change is one of the strategic change optios that

mobile service providers in Kenya are using to enable the implementation of change for

enhanced organizational performance. This is in line with a case study by Riungu (2008) on

55

strategic management practices and performance at the Co-operative Bank of Kenya limited

which showed that culture change had a positive influence on sales and cash flow.

However, it should be noted that there is a positive relationship between cash flow and

independent factors strategic planning, culture/values change, management change and

partnerships meaning that an increase in these results in increase of cash flow. On the other hand,

it should also be noted that there is a negative relationship between restructuring,

process/systems change and cash flow. This means that as structural change and process/systems

change increases, cash flow reduces and vice versa.

4.6 Effective Strategies to be explored

The study was also interested in knowing to what extent alternative effective strategies ensured

strategic change enhanced organizational performance. Data on the same was collected, analyzed

and presented as shown in Table 4.4 below.

Table 4.4: Extent to which effective strategies ensured strategic change

enhances organizational performance

Items Very small

extent

Small

extent

Moderate

extent

Large

extent

Very large

extent

F P

(%)

F P

(%)

F P

(%)

F P

(%)

F P

(%)

a. Creation of a change

atmosphere

1 2.1 3 6.4 19 40.4 19 40.4 5 10.6

b. Formation of a

change team

1 2.1 1 2.1 12 25.5 24 51.1 9 19.1

56

c. Creation of a change

vision

1 2.1 0 0 13 27.7 25 53.2 8 17

d. Communication 0 0 4 8.5 14 29.8 17 36.2 12 25.5

e. Training 1 2.1 1 2.1 5 10.6 17 36.2 23 48.9

f. Commitment

mobilization

1 2.1 2 4.3 8 17 21 44.7 15 31.9

g. Institutionalization of

new approaches

0 0 1 2.1 15 31.9 19 40.4 11 23.4

From the frequency table above, it can be seen that many respondents i.e. 48.9% who took part

in the study said training is an effective strategy that should be explored as it helps ensure that

strategic change enhances organizational performance to a very large extent. This is so because

as employees are trained on a constant basis, it is very easy for them to accept and implement

change because they learn new skills that would help them adapt easily to new approaches in the

likely event of change in the organization. 40.4% of respondent on the other hand said creation

of a change atmosphere helps ensure strategic change enhances organizational performance to a

moderate extent while 8.5% said communication ensured strategic change enhances

organizational performance only to a small extent.

Thus, taking training and creation of a change atmosphere in consideration, cross tabulations,

chi-square tests and correlations were carried out to try and establish their association with

organization performance represented by cash flow and the results are presented below. And the

first to be analyzed is training and cash flow.

57

Table 4.4.1: Cross tabulation of training by cash flow

Cash Flow Total

Small extent

Moderate extent

Large extent

Very large extent

Training Very small extent

count 0 0 1 0 1

% of Total .0% .0% 2.1% .0% 2.1%

Small extent

Count 1 0 0 0 1

% of Total 2.1% .0% .0% .0% 2.1%

Moderate extent

Count 0 2 2 1 5

% of Total .0% 4.3% 4.3% 2.1% 10.6%

Large extent

Count 1 10 2 4 17

% of Total 2.1% 21.3% 4.3% 8.5% 36.2%

Very large extent

Count 1 2 6 14 23

% of Total 2.1% 4.3% 12.8% 29.8% 48.9%

Total Count 3 14 11 19 47

% of Total 6.4% 29.8% 23.4% 40.4% 100.0%

Chi-Square = 32.574 df = 12 Sig = .001 Cramer’s V = .481 Pearson’s R = .372

Results shown in the table above indicate a statistical significant association between training

and cash flow. This can be seen from the chi-square significance value (.001) which is less

than .05, an indication that the two variables have a statistical association. The degree of

association between the two is a .481 as demonstrated by the Cramer’s V. This implies that of

the enhanced cash flow experienced as a result of exploring effective strategies, 48.1% can be

attributed to training. This association between the two is a weak positive relationship as shown

58

by the Pearson’s R (.372). It’s a weak positive relationship because using a scale of 0 - 1, the

moderate or middle point would be .05. Thus, .372 falls on the weak point and therefore the

weak positive relationship.

It should therefore be noted that training as an effective strategy in enhancing organizational

performance has ensured that strategic change enhances organization performance to a very large

extent. This is demonstrated by the majority of respondents i.e. 40 of the 47 who took part in the

study who said that training ensures strategic change enhances organizational performance to a

large and very large extent respectively. This is evidence that training is central to the success of

any strategic change undertaken by a company as it is through training that employee’s way of

doing things is changed and improved to promote efficiency and effectiveness on the job whilst

adapting to the changing organizational culture/values. Consequently, if training is employed

only to a very small extent, it will not ensure strategic change enhances cash flow. As such, it

was found that the companies understudy have actually been engaging their employees including

those in management positions in various training and development activities so as to keep them

up to date with the rapidly changing environment and thereby better their performances. These

activities include presentations e.g. lectures, workshops, conferences etc. and on the job training

e.g. apprenticeship or self-directed learning such as e-learning.

Further evidence of the importance of training in ensuring strategic change enhances

organizational performance can be seen from the 29.8% of respondents in the table who not only

said training was employed to a very large extent but also said it also ensures cash flow is

enhanced to a very large extent. This concurs with a study by Kappler (2007) ‘a practice-based-

59

perspective on strategic change’ which found that training and learning activities played a crucial

role in the Global process and data and IT system environment 2 (GPD/IT 2) change process and

were also seen as important elements for an effective change process.

In summary, training has been valued by respondents as an effective strategy to be explored that

can ensure effective strategic change and thereby enhanced organizational performance. If

training is not employed in the process of strategic change, it is very unlikely that the change will

be successfully implemented and this will mean even the expected results of the change process

namely enhanced organizational performance will not be achieved. This then means training

remains cardinal to ensuring that strategic change enhances organizational performance.

The other effective strategy looked at was creation of a change atmosphere. Therefore, a chi-

square test was carried out to establish to what extent creation of a change atmosphere ensure

strategic change enhances organizational performance and organizational performance in this

case was represented by cash flow. Results of this test are presented in table 4.4.2 below.

Table 4.4.2: Cross tabulation of creation of a change atmosphere by cash flow

Cash flow TotalSmall extent

Moderate extent

Large extent

Very large extent

Creation of a change atmosphere

Very small extent

Count 0 0 1 0 1% of Total

.0% .0% 2.1% .0% 2.1%

Small extent

Count 0 3 0 0 3% of Total

.0% 6.4% .0% .0% 6.4%

Modera Count 2 8 4 5 19

60

te extent

% of Total

4.3% 17.0% 8.5% 10.6% 40.4%

Large extent

Count 1 2 4 12 19% of Total

2.1% 4.3% 8.5% 25.5% 40.4%

Very large extent

Count 0 1 2 2 5% of Total

.0% 2.1% 4.3% 4.3% 10.6%

Total Count 3 14 11 19 47% of Total

6.4% 29.8% 23.4% 40.4%100.0

%

Chi-Square = 18.750 df = 12 Sig = .095 Cramer’s V = .365 Pearson’s R = .347

At 12 degrees of freedom, the chi-square value (18.750) is significant at .095. This is an

indication that creation of a change atmosphere and cash flow are not statistically associated

given that the chi-square significance is greater than .05. However, further results show that there

is a weak positive correlation between creation of a change atmosphere and cash flow as the

Pearson’s R (.347) reveals. There is also a fairly smaller degree of association between the two

variables i.e. .365 meaning that of all enhanced cash flow, 36.5% can be attributed to creation of

a change atmosphere.

It should however be noted that creation of a change atmosphere has been promoted in the four

organizations understudy as a total of 42 respondents out of the 47 who took part in the study

said that creation of a change atmosphere is an effective strategy that is employed to a moderate,

large and very large extent in ensuring that strategic change enhances organizational

performance. This explains the weak positive correlation between the two variables and brings

out the fact that creating a change atmosphere ensures that strategic change enhances cash flow

61

to a very large extent. This is so because if employees do not see the urgency or need for change,

they are most likely to resist change and thereby thwart any efforts to boost an organization’s

performance but once an atmosphere for change has been created, employees will see and

understand the need for change and will even put in every effort to make change a success. This

will in the long run ensure the success of change and thereby ensure enhanced organizational

performance.

This is why 25.5% of respondents who said that creation of a change atmosphere is an effective

strategy to a large extent also said that creation of a change atmosphere enhances cash flow to a

very large extent. Therefore, it can be concluded that creation of a change atmosphere is equally

important in ensuring successful change and consequently enhanced organizational performance.

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS OF THE STUDY

62

5.1 Introduction

This chapter presents the summary of findings of the study and gives conclusions derived from

study. It then gives recommendations and limitations of the study and also gives suggestions for

further studies. In the summary is a presentation of the findings of the study and a brief

discussion in relation to the research questions. The conclusion presents the study’s contribution

to the body of knowledge on the subject of strategic change while the recommendation part

suggests what can best be done regarding the study area.

5.2 Summary of the findings

The aim of the study was to investigate the effects of strategic change on organizational

performance and organizational performance is measured using financial performance measures

e.g. sales, profit, dividends etc. The study was guided by four research questions and the first

research question sought to establish to what extent strategic change options where being

employed by the companies understudy to enhance organizational performance. The findings

indicated that the mobile telecommunications service providers actually employed strategic

change options to a moderate, large and very large extent with process/systems change being

employed more with 44.7% of respondents saying it is employed to a very large extent.

Process/systems change was said to be a strategic change option that was employed to a very

large extent because of the rapidly changing environment which requires organizations to change

their process/systems to adapt and keep abreast with the rapidly changing times.

The second research question sought to investigate the extent to which challenges such as

employee resistance, communication, lack of support from top management, to mention but a

63

few, affected the process of managing/leading change. Results show that strategic change

challenges affect the process of managing/leading change mostly to a moderate, small and very

small extent with lack of employee involvement being the major challenge as 10.6% of

respondents said it poses a challenge to a large extent. Lack of employee involvement was said

to be the major challenge because once employees are not involved, they don’t feel they own the

change process and as such they won’t get committed to ensuring change is successfully

implemented and achieves desired goals. On the contrary they will resist change making it

difficult for it to be implemented. This will result in change failing to achieve its desires goals.

Cross tabulation, Chi-square tests and correlations done on some challenges and strategic change

represented by process/systems change show that these challenges have a fairly weak negative

relationship with process/systems change. This is as a result of the fact that, for example, as lack

of employee involvement increases, process/systems change reduces because more and more

employees won’t be working towards the success of process/systems change as they feel they

don’t own the change.

The next research question aimed at finding out the extent to which strategic change enhanced

organizational financial performance. It was found out that strategic change enhanced

organizational financial performance to a moderate, large and very large extent with 40.4% of

respondents saying that cash flow, a representation of organizational performance, is enhanced to

a very large extent by strategic change. This is so because as strategic change occurs there is a lot

of investment done to make sure change is successful and this in return leads to a lot of revenue

generation and the more revenue generation, the more the chances of further reinvestment and

64

therefore the increased level of transaction within an organization leading to enhanced cash flow.

It is cash flow therefore that determines how solvent an organization is and not profit as most

people think.

It was further found that there is a moderate positive relationship between strategic change and

organizational performance e.g. between process/systems change and cash flow. This shows that

as strategic change increases, organizational performance also increases because through

strategic change many things that are thought to negatively affect organizational performance are

changed and new things thought to enhance organizational performance are employed. For

example, getting rid of old technology and introducing the new one.

The final research question aimed at establishing the extent to which alternative strategies help in

ensuring that strategic change enhances organizational performance. It was found out that

alternative effective strategies helped to ensure strategic change enhances organizational

performance to a moderate, large and very large extent with 48.9% of respondents saying that

training helps ensure strategic change enhances organizational performance to a very large

extent. This was so because through training employees are helped to acquire new skills to help

them carry out their jobs differently thereby adapting effectively to the various changes taking

place in organizations. Furthermore, it was found out that there is a weak positive relationship

between alternative effective strategies and organizational performance. Therefore, as there is an

increase in the effective strategies, there is also an increase in the extent to which strategic

change is ensured to lead to enhanced organizational performance.

65

5.3 Conclusions

Based on this study’s’ findings, it is evident that strategic changes have been carried out in the

four mobile telecommunications service providers understudy. This is as a result of the rapid

changes in the environment and the competitiveness of the industry. These strategic changes

have actually enhanced the financial performance of these organizations. Strategic change has

directly and greatly contributed to increased cash flow, sales, profits, capital and return on

investment while it has had little influence on stock price, return on assets, return on capital and

dividends. Therefore, it can be said that strategic change in the four companies has greatly

enhanced only certain financial performance areas while it has had little or no influence at all on

other financial performances areas.

5.4 Recommendations

The four mobile telecommunications service providers operate in an environment that is rapidly

changing and which is highly competitive. Therefore, they need to constantly adapt to this

changing environment if they are to remain competitive through what is called evolutionary

strategic change. In view of this, the researcher thus recommends that mobile service providers

should explore other strategic change options to also help in the enhancement of other financial

performance areas other than cash flow, sales, profits, capital and return on investments. It is

therefore recommended that the four companies focus on research that would help them come up

with strategies that would help them enhance dividends, stock price, return on assets and return

on capital as these are also important financial performance areas that contribute to the overall

performance of the organization.

66

5.5 Limitations of the study and Suggested areas for further research

Despite the successful completion of this study, the study suffered a couple of limitations. The

major limitation was related to data collection. Since the study used stratified random sampling

in choosing its sample size and used a descriptive survey research design, the study could not

collect enough data that could lead to very accurate information. As such, the researcher could

not get enough data to enable him conduct a good analysis. This makes some of the analysis to

lack validity. Not only that, collection of data also proved to be difficult as most respondents

seemingly lacked the time to fill in the questionnaires, they had to be reminded several times and

the researcher also had to physically follow up several times. Therefore, it was not easy to get

back the questionnaires on time.

Another limitation of the study was that the time frame to complete the study was so short for

the researcher and hence the option of the research to use descriptive survey. A more

appropriate research design for such a study should have been the observation method.

Despite the in-depth coverage of this study and its findings, there still exists a gap that future

research could explore. This study only focused on the financial performance of the

organization but organizational performance is quite wide. Therefore, the study suggests that

further research should focus on other performance measures such as internal business process,

learning and growth and customers.

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performance implications. Strategic Management Journal, 10, 413-430.

Appendix i: Questionnaire

I’m a finalist Master of Business Administration (MBA) student at Catholic University of

Eastern Africa (CUEA). In partial fulfillment of the award of the MBA, I’m carrying out a

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research on “Effects of Strategic change on Organizational Performance: A Case of Kenyan

Mobile Telecommunications Industry. Therefore, the information obtained will be treated

confidentially, and only be used for academic purposes. Your honest opinion will be appreciated.

You don’t need to write your name. Please answer all questions by ticking the appropriate

answer or giving you opinion where required.

Part One: Strategic Change

1. To what extent has your company employed strategic change to enhance organizational

performance? (For each strategy tick only one box where 1 = Very small extent, 2 = Small

extent, 3 = Moderate extent, 4 = Large extent, 5 = Very large extent)

Strategy 1 2 3 4 5

Strategic planning

Culture/values change

Restructuring

Process/systems change

Management change

Partnerships

Others, please specify in the spaces below

Part Two: Strategic change challenges

2. To what extent do the following challenges affect your company in managing/leading

change? (For each challenge tick only one box where 1 = Very small extent, 2 = Small

extent, 3 = Moderate extent, 4 = Large extent, 5 = Very large extent)

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Strategy 1 2 3 4 5

Employee resistance

Communication Problem

Organizational structure hindrance

Lack of support by top management

Lack of monitoring

Lack of change institutionalization

Lack of employee involvement

Others, please specify in the spaces below

Part Three: Organizational performance

3. To what extent has strategic change been successful in achieving enhanced financial

performance in your company? (For each performance measure tick only one box where 1 =

Very small extent, 2 = Small extent, 3 = Moderate extent, 4 = Large extent, 5 = Very large

extent)

Organizational Performance 1 2 3 4 5

Sales

Profit

Dividends

Stock price

Capital

Cash flow

Return on asset

Return on capital

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Return on investment

Others, please specify in the spaces below

Part Four: Effective strategies to be explored

4. To what extent have the following strategies ensured that strategic change enhances

organizational performance in your organization? (For each strategy tick only one box where

1 = Very small extent, 2 = Small extent, 3 = Moderate extent, 4 = Large extent, 5 = Very

large extent)

Strategies 1 2 3 4 5

Creation of a change atmosphere

Formation of a change team

Creation of a change vision

Communication

Training

Commitment mobilization

Institutionalization of new approaches

Others, please specify in the spaces below

- THANK YOU -

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