Internal Growth Strategies and Performance of Agrochemical Companies in Nakuru County, Kenya

Abstract

The performance of the agrochemical industry in Kenya is of paramount importance to the agricultural sector because agriculture is the mainstay of Kenya’s economy. This study sought to investigate the effect of internal growth strategies on performance of agrochemical companies in Nakuru County, Kenya. The specific objectives were to determine the effect of market penetration strategy, market development strategy, product development strategy and diversification strategy on performance of agrochemical firms in Nakuru County, Kenya. The theories which underpinned the study are: Ansoff’s product/market model, Greiner’s growth model and Resource-based theory. The study employed a descriptive survey design with a target population of 20 agrochemical companies in Nakuru County. The study employed a census survey and purposive sampling was used to select 60 senior managers. Self-administered questionnaires were used as the data collection tool. Cronbach’s alpha was used to measure the reliability of research instrument. The overall reliability was 0.869 and was considered an acceptable measure of internal reliability since it was greater than the recommended 0.7. The content validity of the research instrument was ensured by seeking the opinion of the supervisor who is an expert in strategic management and comparing with other instruments that have been used in studies in strategic management. Data analysis included both descriptive and inferential analysis. The purpose of descriptive analysis was to summarize data. Inferential analysis was conducted to determine the relationship between the dependent variable (performance of agrochemical companies) and the independent variables (market penetration strategy, market development strategy, product development strategy and diversification strategy). The findings show that market penetration, market development, product development and diversification strategies have a positive and statistically significant relationship with the performance of agrochemical companies. This study makes several conclusions: one, market penetration is the most important predictor of performance of agrochemical companies. Two, product development strategy is the second most important predictor of performance of agrochemical companies. Third, diversification is the third most important predictor of performance of agrochemical companies while market development is the least important predictor of performance of agrochemical companies. The study recommends that in order to strengthen market penetration strategy, managers of agrochemical companies need to increase their sales representatives and advertising budget so as to reach more clients and educate them about the available products. Second, to improve on market development strategy, it is recommended that the companies should open new branches in new geographical areas and package their products in different quantities for different clients. Third, this study recommends that agrochemical companies need to step-up their pursuit of product development strategies so as to come up with products that meet the changing needs of their customers by having strong R & D departments that can develop products that suit the ever-changing customers’ preference. Fourth, in improving on diversification strategy, agrochemical companies should consider strengthening their business to client networks thus eliminating the need of middlemen which will increase their profits. Finally, it is also recommended that future studies could be carried out in other counties and different industries such as banking and manufacturing for a comparison of the finding.