PRICE FLUCTUATIONS ON PERFORMANCE OF FOOD AND BEVERAGE MANUFACTURING FIRMS IN KENYA

Abstract

Food and beverage supply chain (SC) is one of the complex food supply chains. Owing to the perishability characteristics of these products, successful distribution channel, strategy selection, implementation, and management is important so as to provide downstream value through timely delivery to the end users otherwise it is likely to face numerous customer complaints. Compared to the other sectors the manufacturing sector, which is dominated by food and beverage manufacturing firms lagged behind in output growth. Kenya Association of Manufacturers reiterates that the declining performance is disturbing for business and indicates eroded competitiveness and compromises the government’s aspirations of 20% growth that will enable Kenya to become prosperous. If this problem is not addressed it will cause low economic development leading to lack of achievement of the vision 2030.Despite the benefit effective management of bullwhip effect has on performance of companies, little research has been done on the same. This study therefore sought to establish the effect of price fluctuations on performance of food and beverage manufacturing firms in Kenya. The study also sought to assess the moderating effect of customer response on the relationship between price fluctuations and performance of food and beverage manufacturing firms in Kenya. This study was based on Transaction Cost Economics Theory and resource-based view theory. This study used descriptive research design to collect both qualitative and quantitative data. This study adopted constructive epistemology and specifically post positivism approach. The target population was 217 food and beverage manufacturing firms in Kenya. The food and beverage companies formed the unit of analysis while logistics/ procurement managers and their assistants formed the unit of observation. Hence a total of 434 respondents were targeted. The sample size of 208 respondents was determined using Yamane’s Formula. The sample was selected using simple random sampling. The researcher used structured and unstructured questionnaires. In the pilot study 14 participants were invited to participate in filling the questionnaires- representing 10% of study sample. Qualitative data was analyzed using content analysis and presented in prose form. Quantitative data collected was analysed using descriptive statistics techniques.  Pearson R correlation was used to measure the strength and direction of linear relationship between variables. Regression models were fitted to the data in order to determine how the independent variables (price fluctuations) influence the dependent variable (performance of food and beverage manufacturing firms in Kenya). From the findings, this study concludes that price fluctuation is statistically significant in explaining performance of food and beverage manufacturing firms in Kenya. The study also concludes that customer response has significant moderating effect on the relationship between price fluctuations and performance of food and beverage manufacturing firms in Kenya.

Key Words: Price Fluctuations, Performance of Manufacturing Firms, Food and Beverage Industry, Customer Response