MODERATION EFFECT OF MACRO ENVIRONMENT ON THE RELATIONSHIP BETWEEN COMPETITIVE STRATEGY DRIVERS AND PERFORMANCE OF MANUFACTURING SMALL AND MEDIUM ENTERPRISES IN NAIROBI COUNTY, KENYA

Abstract

This study establishes the moderating effect of macro environment on the relationship between
competitive strategy drivers and the performance of small and medium enterprises (SMEs) in the
manufacturing sector in Nairobi City County in Kenya. SMEs are the backbone of many
economies through creation of employment opportunities as well as wealth creation for
entrepreneurs. Strong competitive strategy drivers have been found to enable SMEs achieve
favorable performance and remain competitive in their own markets. The macro environment
could have a significant moderating effect in the relationship between competitive strategy drivers
and firm performance. This study was based on Resource-Based theory which was augmented by
the open systems theory, combining to provide a framework for examining the moderating effect
of macro environment on the relationship between strategy drivers and performance of
manufacturing SMEs in Nairobi County, Nairobi. For the methodology, a cross-sectional survey
was done covering 334 manufacturing small and medium enterprises in Nairobi County, Kenya.
Structured questionnaires were used for data collection with a response rate of 89.6%. Various
descriptive statistics were used to project the demographic characteristics of the association and
the respondents. Inferential statistics was used to build up the connection between the factors and
test the model. The results of the study on the moderating effect of macro environment on the
relationship between competitive drivers and firm performance showed a very strong
relationship, implying that the competitive strategy drivers depend on macro environment in
determining the performance of manufacturing SMEs and consequently supporting the
formulated hypothesis. The results suggest that manufacturing SMEs need to edge their
operations by considering macro environment dynamics as they undertake their service and
product development. The findings in this research will have implications on business
management practices as well as be beneficial to business owners by way of improving their
management practice, for instance on the importance by manufacturing SMEs to scan their
political, economic, social, technological, ecological environment as they adopt various competitive
strategy drivers so as to enhance their performance. The researcher recommends similar research
to be undertaken in other SMEs and also have more managers respond to the questionnaires in
order to enrich the collected data.