Effects of Strategy on the Performance of Firms in the Medical Insurance Industry in Kenya

Abstract

Strategy is a very key concept in the performance and achievement of various goals that organizations set within the course of their functions. The role of strategy is to help a firm gain a sustainable competitive edge over its competitors. Strategy refers to a set of policies and plans by which a firm seeks to gain advantages over the competitors in the respective industry. Organizational performance, on the other hand, is the actual output of an organization measured against the set objectives and goals through the employed strategies. In Kenya, the insurance sector‘s highly competitive and dynamic market makes the firms in the sector to continually create, implement, assess and improve on strategies so as to remain relevant and competitive in this market. The types of strategies adopted by the different insurance companies are a major determinant on the achievement of their objectives and the ultimate performance in the industry. This research‘s objectives are, therefore, to identify the strategies adopted by firms in the medical insurance industry in Kenya, and to determine the relationship between strategies adopted and the performance of the firms in the medical insurance industry in Kenya. This research study used two main theories—the Resource-Based View (RBV) and Porter‘s Generic Strategies. The literature review section delves on three main strategies: corporate, operational and business level strategies, and goes ahead to analyze how they influence a firm‘s performance in the medical insurance industry. The study employed a descriptive survey research design. The population of the study included nineteen insurance firms that offer medical insurance covers in Kenya. Research respondents included senior executive staff/managers in the functional departments in the target firms. Data was examined through use of descriptive statistics. The research tool used was the questionnaire, and the research subsequently employed descriptive statistics—correlation analysis—to analyze the data garnered. The findings revealed that there exists a positive relationship between the firms‘ performance and the corporate, business and operational strategies. Overall, this research sought to confirm the relationship between strategy and firm performance in the medical insurance industry. As established in Chapter four, all the hypotheses formulated in the literature review section were accepted. Insurance firms in Kenya have relatively rigorous operational environments. This significantly hampered the data collection process. Also, with the political uncertainty that went on for months, most respondents were skeptical about the intentions of the researcher. The study recommends that the Government of Kenya, through the Insurance Regulatory Authority (IRA), should institute the suitable policies that offer support to medical insurance firms as a means of raising their contribution to the Kenyan economy. Further, IRA should seek to set standards and policies that will ensure that effective performance in the medical insurance industry is achieved.