The effect of business policy on organizational performance, the case of cooperatives in Kenya.

Abstract

This research examined the effect of business policy on organizational performance in Kenya lts purpose was to attempt to establish the extent to which consumer cooperatives in Kenya are affected by business policy or formal strategic management systems as related to the Kenyan demographic and socioeconomic environment. A theoretical model relating formulation of formal strategic management systems and organimtional performance to nine explanatory variables was developed. The study had the following objectives: Q to investigate the extent to which the consumer cooperatives have adopted formal strategic management systems in each of the functional business areas; ~ to investigate and assess the relative importance of various demographic and socioeconomic factors that influence the extent to which formal strategic management systems are formulated; Q to determine the relationships between level of members‘ participation in the activities of their cooperatives and formulation of formal strategic management systems; ' to investigate the effects of demographic and socioeconomic factors on the levels of members’ participation in the activities of their organization; v to determine the relationship between the formulation of formal strategic management systems and the organizational perfomrance; and I to investigate the effects of demographic and socioeconomic factors on organizational perfomrance. On the basis of the stated objectives and the available literature evidence, the following hypotheses were advanced: ~ significantly more than two thirds of the consumer cooperatives have not adopted any formal strategic management systems; 0 organizational demographic and socioeconomic factors significantly influence the level to which formal strategc management systems are formulated; I members‘ participation in the activities of their organization significantly influence levels to which fomtal strategic management systems are formulated; organizational demographic and socioeconomic factors significantly influence levels of members’ participation in the activities of their organization; 0 business perfonnance ratios of organizations with formal stratcgic management systems are significantly higher than those without formal strategic management systems; and I Demographic and socioeconomic factors significantly influence organizational performance. The population of study included all consumer cooperatives in Kenya. In total, there were eighty-five active consumer cooperatives. Out of these, 59 (69.4%) were interviewed. The data were analysed by the use of tabulations, chi-square and multinomial logit model. The results were both consistent and inconsistent with the theoretical and practical expectations. They were as follows: 0 majority of the consumer cooperatives have not adopted formal strategic management systems, which implies that majority of these cooperatives use informal business policy; 0 like in past studies done elsewhere, formal strategic management systems in Kenya also influence organimtional performance; 1 while demographic and socioeconomic factors appear to influence development of fonnal strategic management systems and members‘ participation, they have no direct eflects on organimtional performance; and v Members’ participation has no noticeable effects on development of formal strategic management systems.