EFFECTS OF STRATEGIC ALLIANCES ON ORGANIZATIONAL PERFOMANCE: A CASE OF SUPERMARKETS IN KENYA

ABSTRACT 
This study sought to examine the effect of strategic alliances on performance of supermarkets and their alliances in Kenya. The objectives of the study were to establish the effects of technological, production and marketing strategic alliances on the performance of supermarkets in Kenya. The study employed a cross sectional correlational research design. The sample of the study entailed a study of all the five leading supermarkets in Kenya (Nakumatt, Ukwala, Naivas, Tuskys and Uchumi) and 95 of their strategic partners. Data for this study was collected from the head offices of the firms by use of a questionnaire. The data was analyzed using correlation analysis and multiple regression models in order to test the hypothesis. ANOVA test and t-test were used to determine the level of significance. Data was presented using figures and tables. The correlation coefficient(R) value for supermarket alliances and performance was 0.017. This means that there is a weak insignificant relationship between strategic alliances and performance. The correlation coefficient(R) value showed that there is a strong significant relationship between strategic alliances and supermarkets’ performance. The overall significance of the strategic alliances and supermarket performance model was 0.002 with an F value of 0.95. This means that there is a statistical significant relationship between strategic alliances and supermarkets’ performance. This study, therefore, concluded that strategic alliances have a positive effect on supermarkets’ performance. The overall significance of the strategic alliances and supermarket alliances’ performance model was 0.657 with an F value of 0.539. This means that there is no statistical significant relationship between strategic alliances and supermarket alliances’ performance. This study, therefore, concluded that strategic alliances have an effect on supermarkets’ performance but do not have an effect on the performance of supermarkets’ alliances. The study recommended that for supermarkets to improve on their performance they need to engage in alliances downstream (production strategic alliances), upstream (Marketing strategic alliances) and facilitative (Technological strategic alliances). Considering the design the study adopted, it is recommended that a longitudinal study be carried out to find the effect of strategic alliances on performance of supermarkets over a longer period of time.

CHAPTER ONE 
INTRODUCTION 
Background of the Study 
The Kenya Economic Survey 2012 shows that the retail and wholesale sector grew by 19 per cent in five years from 2007-2012, becoming the second largest driver of economic growth after the transport and communications sector. The large volume of the sector, with more than Kshs. 300 billion turnover for both formal and informal retail (“Four global retail chains eye Kenya,” 2012) makes competition in the sector intense and strategic alliances a solution to improve supermarkets’ performance. 

Retail trade is defined as the resale (sale without transformation) of new and used goods to the general public, for personal or household consumption or utilization (Organization for Economic Co-operation and Development (OECD), 2007). The entities that practice retail trade are referred to as retailers. The channels of retailing include hypermarkets, supermarkets, discounters, convenience stores, mixed retailers, health and beauty retailers, clothing and footwear retailers, furniture and furnishing stores, hardware stores, durable goods retailers, leisure and personal goods retailers. The retailers act as a go between from producers to consumers. Since they are many and offer similar goods and services the competition is high among them. 

The Kenyan retail sector consists of 80 per cent non-formal outlets such as kiosks and small corner outlets and 20 percent formal outlets that consist of formalized stores like supermarkets, hypermarkets and convenience stores (“Four global retail chains eye Kenya,” 2012). Kenya’s supermarkets have increased from 206 supermarkets in 2002 to 494 supermarkets in 2008 (Riungu, et al., 2013). They further observed that drivers of supermarkets growth include change of lifestyles, urbanization, policies that attract foreign direct investment by most of developing countries, growing economy with an average growth rate of over 5% between 2004 and 2007, and market liberalization. 

Kenya’s formal retail sector is dominated by six major supermarkets and numerous other smaller retail chains spread across the country. They include Nakumatt, Tuskys, Uchumi, Naivas, Ukwala, and Chandarana (“Four global retail chains eye Kenya,” 2012). The paper reported that Wal-Mart (through its South African subsidiary, Massmart) and other South African retail chains like Game Stores and the Edcon group that has Jet and Edgars, and other smaller low end retailers had plans to open shop in Kenya by 2014. This is expected to further heighten competition in Kenya’s retail market. This shows that the Kenyan market is becoming more appealing to other external firms. 

A Strategic alliance is an arrangement between two or more firms to join forces and resources together to pursue a certain aim though sharing risks, returns and control while retaining their independence. Supermarkets find themselves between producers and suppliers on one end and customers on the other end of the supply chain. Supermarkets entry into alliances helps them reap the benefits of engaging in alliance relations Wheelen and Hunger (2000), Bamford (2005). 

Strategic alliances have been grouped into two categories by academicians. On one hand alliances are grouped based on their areas of collaboration with examples being joint promotions, joint selling, production, design, technology, research and development collaborations. On the other hand the category is based on the level of integration resulting into a continuum of complex equity joint ventures to loose arrangements by the firms informed (Serna, 2007). 

According to Rothaermel and Deeds (2006) strategic alliances are formed upstream, horizontal and downstream in the supply chain. Mellahi et al., (2005) seemed to agree with these views when they argued that in search of alliance partners firms should consider vertical or horizontal integration. Vertical relationships imply that alliances are formed between suppliers and buyers that agree to use and share skills and capabilities in the supply chain. Horizontal alliances are formed between rival firms selling the same or similar goods and services hence collaborative alliances. 

Firms including supermarkets usually seek alliances for a number of reasons namely; cost saving, market penetration and retention, financial injection, infrastructure constraints, circumventing institutional constraints and maintaining market stability (Button et al., 2008). Supermarkets in their choice of alliance partners always seek to achieve these benefits upstream with customers, downstream with producers and horizontally with competitors. This concurs with Barney’s observations that the long term goal of firms in competitive markets is improving or defending their competitive position and gaining advantages over competitors (Barney, 2002). 

By the turn of this century many of the world’s largest companies had over 20% of their assets, and over 30% of their annual research expenditures, tied up in alliance relationships (Ernst, 2004). A study by Partner Alliances Company reported that over 80% of Fortune 1000 CEOs believed that alliances would account for almost 26% of their companies’ revenues in 2007– 2008 (Kale et al., 2009). From the foregoing it is evident that STAs have been increasing in appeal to most firms in various industries. More managers also seem to have accepted STAs’ contribution to their firms’ profitability. 

Alliances management is vital to the success of the alliance relationship. Dussauge et al., (2000) identified the alliance management matrix as a key determinant to the success of alliances between and among firms. Their view of alliance management matrix consists of the three Rs, the two Cs and knowledge gateway. The 3 Rs represent how the results are shared among the alliance partners, how resources are contributed to the alliance and how responsibilities are shared between partners. The 2 Cs represents how the alliance implementation and functioning is coordinated and how new resources are created to enhance the alliance capabilities and capacity for growth. 

Supermarkets have enhanced their competitive capacity to offer greater advantages to their customers as they improve their margins. The competitive moves adopted by supermarkets span within production, distribution and handling of the customers. This implies that a supermarket, as the point of contact between a product and consumers, should be able to have a hand in the production, packaging, distribution, and after sales service. The interrelations between a supermarket and its suppliers and stakeholders are of a strategic nature acting as a liaison between producers and customers. To lower their item acquisition cost supermarkets have tended to partner with producers and importers in the supply chain (Lewis, 2007).

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Item Type: Kenyan Postgraduate Material  |  Attribute: 62 pages  |  Chapters: 1-5
Format: MS Word  |  Price: KSh900  |  Delivery: Within 30Mins.
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