Effect of value chain management practices on peformance of medium and large scale retail outlets in Nakuru County, Kenya

Abstract

The Kenyan retail outlets sector operates in a dynamic environment faced with intense competition. This calls for organizations to employ an efficient and effective value chain and this is achieved through coordinating operations in a manner that ensures the involved companies are able to create more consumer satisfaction than their competitors. However, past empirical studies have not focused on the effect of value chain management practices and organizational performance, particularly in retail outlet sector. The overall objective of this study was to determine the effect of value chain management practices on performance of medium and large scale retail outlets in Nakuru County. The specific objectives of the study were to: determine the effect of firm’s supplier relationship on performance, determine the effect of internal value chain activities on performance, determine the effect of customer relationship on performance and establish the joint effect of firm supplier relationship, internal value chain activities and customer relationship on organizational performance. The study was based on the resource-based view theory. The study employed explanatory research design. The population of the study was 43 medium and large scale retail outlets. Census study was carried out among 43 medium and large scale retail outlets in Nakuru County. Primary data was collected using close- ended questionnaires. The questionnaires were administered through drop and pick method. Data collected was summarized using descriptive statistics such as percentages, means and standard deviations. To examine the relationship between value chain management practices and organizational performance, Pearson’s correlation analysis was used. To examine the effect of value chain management practices on organizational performance, multiple regression analysis was used. The results revealed a positive significant relationship between supplier relationship and organizational performance. The findings also revealed a higher positive significant relationship between internal value chain activities and organizational performance. The results also revealed a positive significant relationship between customer relationship and organizational performance. Further, the results demonstrated that the joint effect of supplier relationship, internal value chain activities, and customer relationship explained a greater variance in organizational performance, than the variance explained by internal value chain activities alone. The study recommended that while internal value chain activities need to be the key vision of value chain management practices in firms, all value chain management practices dimensions should be combined for a greater increase in organizational performance. There is also need to cover other factors (scale, capacity utilization, vertical integration, learning, policy decisions and government regulations) related to value chain management practices that can impact on organizational performance to a larger extent since the factors used in this study explained 77.7% of the increase in performance. To minimize the effect of single respondent bias, future research can use multiple respondents including executive officers and middle managers.