Strategic Planning and Performance of Pharmaceutical Manufacturing Firms in Kenya

Abstract

Kenya has rolled out four key agendas to aid in the accomplishment of its blue print, vision 2030. Manufacturing and Health sectors top the priorities towards making significant contributions to the country’s GDP. Manufacturing is expected to contribute an annual 10% growth to the overall country’s productivity with effect from 2017. One of major significant and performing sectors are Food and Beverages, followed closely by Pharmaceuticals which supply over 50% of the COMESA region. Despite having successful and leading markets for the pharmaceuticals in Kenya within the EAC, the local manufacturers have always faced devastating consequences of environmental upheavals. The contemporary market situation in Kenya is still dynamic. These significant challenges are driven by stiff competition from MNCs, their subsidiaries and joint ventures. As a result, the local manufacturers have secured lower market shares despite contributing significantly to the healthcare improvement in Kenya. Political, Economic and legal sporadic environments have made it elusive for these firms to improve their bottom line in a sustainable manner. At the moment, the local market leader in 2018 is Cosmos Ltd with a market share of 13.9% in EAC but has its annual sales significantly dropped to three year low of 9.1 Million in 2017 despite registering escalating sales growth at 19% CAGR. This drastic drop was attributed to political and economic uncertainties at the time. Recently the manufacturers have been devastated with higher energy costs, high tax rates, 15% increase on Excise Duty for internet data, additional 16% VAT on mobile services and 18% VAT on petroleum products. The stock markets have historically fell to 9 year low despite efforts to restore the manufacturing sector to attract more foreign investors and support local production. These challenges have pushed the need for empirical information on strategic planning in order to suggest effective strategic approaches for local producers, the government and investors in coping with such turbulent marketplace and critically register sustainable growth. The objective of this study was to establish the effect of strategic planning on performance of pharmaceutical manufacturing firms in Kenya. A plethora of literature in U.S.A, Asia, Europe and Africa jurisdictions have suggested the adoption of formal strategic plans for overall corporate agility.The environmental settings in which firms operate have always significantly influenced the effects of strategic plans on organizational performance and hence the investigation of the significance of strategic planning within a developing nation whose external context is distinct based on certain critical environmental factors such as Politics, Economics, Technology and Culture. The factors have a huge play on success of any strategic plan. A descriptive cross-sectional survey design was adopted. The study was inclined towards a positivist approach which was predicated on atomism, quantification and operationalization by using statistics to verify hypothesis. A census survey was done with 90% response rate. An open ended questionnaire of five point Likert type measurement scale was distributed to strategic leaders of each firm. SPSS version and Ms. Excel was used to analyze data. The null hypothesis was rejected based on the result of the least square analysis, Chi- Square and Cochran Q tests. The study found out that manufactures that used formal strategic planning, incorporated the aspect of financial projections to aid in crafting and implementing objectives and strategies more accurately. Majority of the manufactures valued strategic planning and agreed that it significantly influenced their long term success in the EAC market. Key Words: Strategic Planning, Organizational Performance, Pharmaceutical Industry, Kenya.