The Influence of Business-Level Strategy on Organizational Performance of Micro and Small Enterprises: A Case of Salons and Beauty Spas in Nairobi County, Kenya.

Abstract

Regardless of the fact that micro and small businesses significantly contribute to Kenya's economy through job creation and economic development, their performance has been stagnant for a long period, and in many cases worsening. This might adversely affect the ability of the MSEs to contribute to job creation and the growth of

the gross domestic product in the country and might negatively affect the socio- economic development of the nation. Despite widespread academic evidence on

effects of business level strategy on performance of businesses, there seems to be no consensus on the specific effect of business level strategies; differentiation, focused differentiation, cost leadership, and focused cost leadership on organizational performance of MSEs. This study aims to bring into the body of knowledge more evidence. This study has adopted Porter's generic strategy model and Ansoff Model as the underpinning theories. It has employed a descriptive research design. The target population was the 279 salons and beauty spas. Using stratified proportional sampling, a representative sample of 165 respondents was established, and then participants were chosen for each stratum using simple random selection. Data was collected using a structured questionnaire which was piloted for validity and reliability before being administered. Descriptive statistics were derived using qualitative analysis and inferential statistics using multiple regression. Using a hypothesis, the study tested model using Analysis of variance. The study was carried out with the assistance of Version 24 of the Statistical Package for Social Sciences software. Using ANOVA, the study found that cost leadership, differentiation strategy, focused cost leadership and focused differentiation strategy are predictors of performance of MSEs in Nairobi County (p<0.01). The study concludes that there; is significantly and positively moderate influence of cost leadership (p<0.05; β=0.251; r= 0.413), significantly and positively low influence of differentiation strategy (p=0.0.01; β=0.246; r= 0.265). significantly and positively moderate influence of focused cost leadership strategy (p=0.0.01; β=0.292; r= 0.489) and significantly and positively moderate influence of focused differentiation strategy (p<0.0.05; β=0.224; r= 0.404) on performance of MSEs operating within Nairobi County. The study recommends that MSEs in Nairobi County should; review their cost leadership approaches for the purpose of attracting and retaining more customers in broader markets as well as increase adoption of differentiation strategies e.g. highly skilled staff and unique affordable products in order to attract high-end clients. They should also try focused cost leadership and focused differentiation in order to increase sales in narrow markets