Competitive strategies and performance of deposit taking saccos in Muranga County, Kenya.
Maina, Esther Njoki
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The World Council of Credit Unions (WOCCU) reports that Kenya has the highest fraction, in percentage points, of Gross Domestic Product (GDP) attributable to cooperative societies globally. SACCOs have continued to face drawbacks despite their significant contribution in the economy. Key among the challenges facing SACCOs is heightened level of competition in the financial sector. The SACCOs have therefore to rethink their strategic direction in order to remain focused and driven towards their objects.This study sought to determine the effect of competitive strategies on performance of Savings and Credit Cooperative Societies in Muranga County of Kenya. Specifically, the study sought to establish the effect of cost leadership, differentiation, focus cost and focus differentiation on the performance of SACCO’s. Performance indication embraced profitability as well as market based measures or perspectives for better comparisons. The study used market based measures (Market share) and turnover growth as the choice metrics of performance measurement. The study used a census study approach to select all the 8 active SACCOs in Muranga County as provided by the department of cooperatives of Muranga County Government. The study also purposively selected CEOs, Accountants, Credit Managers, Marketing Managers and all the 4 Executive Board Members as the choice class of respondents. This sampling procedure led to a total of 64 respondents selected. The study assessed non-financial performance of the SACCOs for 4 financial years 2012/2013-2015/2016. Both primary and secondary data sources were used. Questionnaires were used in collecting primary data. The instrument was tested for reliability using Cronbach’s Alpha Reliability test while content validity was assessed using expert opinion. Secondary data was collected from the annual financial statements and other reports of the SACCOS. The study employed both descriptive and inferential statistics in analysis and used correlation and regression analysis as key analytical models. Results established wide disparities in performance of the SACCOs in Murang’a County. Regression results demonstrated that competitive strategies (cost leadership, differentiation, focus cost leadership and focus differentiation) all yield statistically significant effect on performance of SACCOs indicated by market share and growth in turnover. The Coefficient of Determination or R square stood at 0.763 which implied that 76.30% of the variation in the Performance of SACCOs was explained by variability in in the variables under competitive strategies i.e. cost leadership, differentiation, focus cost leadership and focus differentiation. Pearson Correlation Analysis results further demonstrated a positive relationship between all competitive strategies assessed i.e. cost leadership, differentiation, focus cost leadership and focus differentiation and performance of SACCOs. The study recommends more pursuit of competitive strategies as demonstrated in the Annsoff framework to enhance performance and build competitive advantage of the SACCOs. Investors, management, government, researchers and academicians will greatly benefit from this study as it provides viable insights that could guide decisions to serve their interests on the critical subject of enhanced performance.