Abstract
Theoretical propositions in strategic management show that the external operating environment of a firm influences the relationship between other organizational factors and performance. However, most of the arguments have been directed at firms that exist in the context of developed economies, with little attention to firms in developing economies such as the ones in Africa. This paper examines the moderating effect of external operating environment on the relationship between corporate strategies and performance of manufacturing firms in Nairobi City County, Kenya; which is a developing economy within Sub-Saharan Africa. The authors adopted indicators of competitive position, consumer behaviour and credit accessibility to measure external operating environment.Multistage probability sampling technique was used to select study sample out of a target population of 373 firms located in Nairobi City County where 80% of the country’s manufacturing firms are situated. The study collected primary data using a semi-structured questionnaire from 148 firms. The data was analysed using descriptive and inferential statistics for quantitative data and content analysis to analyze qualitative data. The study findings indicate that external operating environment has a moderating effect on the relationship between corporate strategies and firm performance. Based on this, the study recommends development of policies and legislative framework to regulate manufacturing sector’s competition practices, review of fiscal and monetary policies, and customer awareness programs to address consumer perceptions and attitude towards firms’ products. Keywords: Market development, Product development, Diversification, External operating environment, Firm performance DOI : 10.7176/EJBM/11-14-05 Publication date :May 31 st 2019
Highlights
Firms operate within external environment that constitutes varied factors which determine performance
The findings are consistent with a study byAdeoye and Elegunde (2012) which found that external operating environment affected the relationship between corporate strategies and performance of food and beverage manufacturing firms in Nigeria
The mean score of external operating environment round off to 4 on the five point Likert type scale, implying that the respondents agreed that www.iiste.org external operating environment affects the relationship between corporate strategies and firm performance
Summary
Firms operate within external environment that constitutes varied factors which determine performance. The concept of firm performance has been addressed in most strategic management studies as outcome of three factors, which are firm strategy (Mazdeh, Moradi & Mazdeh, 2011); competitive advantage (Hosseini & Sheikh, 2012); and business environment (Tan & Liu, 2014). Some of the external factors include; competitive position, consumer behaviour, market changes and credit availability (Kim & Lim, 1988; Powell, 1996; Spanos, Zaralis & Lioukas, 2004; Pearce & Robinson, 2013).firm strategies should be adequate to fit into the external operating environment so as to efficiently enhance performance of manufacturing firms in the developing economies (Eljelly, 2004; Padachi, 2006). According to Filbeck and Krueger (2005); Raheman and Nasr (2007) existing external operating environment in developing countries may be restrictive towards firm performance
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