Influence of Cost Strategy on Firm Performance

Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 10 April 2020

Influence of Cost Strategy on Firm Performance

Ndung’u Consolata, Ogutu Martin, Yabs John, Njihia James Muranga, Wanjiru Kinoti

Dedan Kimathi University of Technology (Kenya), University of Nairobi (kenya)

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10.31014/aior.1992.03.02.215

Pages: 503-506

Keywords: Cost Strategy, Customer, Manufacturing Industry in Kenya

Abstract

In today's complex and dynamic environment firm competitiveness is inevitable. This means therefore, that for better positioning and to remain ahead of rivals, firms can pursue suitable strategies especially being a cost leader. Empirical studies show that cost strategies influence competitiveness and growth of a firm (Tehrani, 2003). This study sought to determine the influence of cost strategy on the performance of manufacturing firms in Kenya. According to Porter (1995) firms that pursue cost leadership can achieve better competitive advantage leading to improved performance. Additionally, he asserts that firms are able to defend their market since lower cost can enable them earn better returns. Firms that adopt cost strategy, therefore, endeavor to lower cost in terms of production in the industry. The study utilized Porter's (1980) framework with the foundation of Dynamic capability theory by David Teece & Gary Pisano in 1994 and stakeholders theory(Harrison, Bosse & Phillips, 2010) and goal setting theory by Locke & Latham (2006). The study adopted cross sectional descriptive survey, guided by positivist philosophy. This is because the study intended to observe a phenomenon and report it as it is. The study aimed to study all large manufacturers in Kenya. Data was collected using a structured questionnaire. Through use of percentages, mean scores and standard deviation the data was described. Regression analysis was used to test the hypothesis. The study found that cost strategy had a significant influence on the performance of manufacturing firms in Kenya.

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