Africa International Journal of Management Education and Governance

(AIJMEG) ISSN: 2518-0827 (Online Publication) Vol. 3 (4) 1-17, October 2018
www.oircjournals.org

Effect of Product Creation Strategy on

Performance of Small and Medium
Enterprises in Eldoret, Town.

1
Caren J. Barbengi, 2Kimutai Geoffrey
Jomo Kenyatta University of Agriculture and Technology

Type of the Paper: Research Paper.

Type of Review: Peer Reviewed.
Indexed in: worldwide web.
Google Scholar Citation: AIJMEG

How to Cite this Paper:

Barbengi C. J., and Kimutai, G., (2018). Effect of Product Creation Strategy on
Performance of Small and Medium Enterprises in Eldoret, Town. Africa
International Journal of Management Education and Governance (AIJMEG), 3 (4), 1-17.

Africa International Journal of Management Education and Governance

(AIJMEG)
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Barbengi and Kimutai, (2018) www.oircjournals.org

 Africa International Journal of Management Education and Governance
(AIJMEG) ISSN: 2518-0827 (Online Publication) Vol. 3 (4) 1-17, October
2018 www.oircjournals.org

Effect of Product Creation Strategy on Performance of

Small and Medium Enterprises in Eldoret, Town.
1
Caren J. Barbengi, 2Kimutai Geoffrey
Jomo Kenyatta University of Agriculture and Technology

ARTICLE INFO Abstract

Majority of SMEs collapse because they
Received 28th September, 2018 operate in business environment which is
highly turbulent characterized by external
Received in Revised Form 13th October, 2018 factors as well as internal business
factors. The study therefore sought to
Accepted 18th October, 2018 establish the effect of effect of product
creation strategy on performance of small
Published online 20th October, 2018 and medium enterprises in Eldoret town.
Keywords: Product Creation, Strategy, Performance, Small The study was guided by Balanced
Medium Enterprise Scorecard Theory. This study adopted
descriptive research design. The target
population of the study was 2,391
registered SMEs according to Uasin Gishu County government records and accessible population was 1764
respondents. The sample size for the respondents was therefore be 315. The study used questionnaires as the main
tool for collecting data. The data collected was analyzed by using the excel program and Statistical Package for
Social Science (SPSS) version 23. Data was analyzed using descriptive statistics such as mean, frequencies,
percentages and standard derivation and inferential statistics which include correlation and multiple regressions.
Data was presented by use of frequency tables, charts and graphs. The study findings a positive and significant
effect of product creation strategy on small and medium enterprises in Eldoret Town (β=0.476, p<0.05). The
study will be of benefit to management of medium enterprises and other organizations in understanding the
challenges they would encounter when implementing various strategies and be able to come up with better ways
of dealing with these challenges so as to be successful in their strategies. The study would be of importance to
future researchers and scholars since it would be a source of material for their research and would also help
them in identifying the research gaps they need to fill.

1.1 Background of the Study organization depends on proper management of the

Firm performance is defined as both behavior and
results. This definition covers the achievement of
expected levels as well as objective setting and
review (Katzenbach & Smith, 2015). The underlying
thought behind the study is to seek the relationship
bearing in mind that if the behavior of management
is right, then the expected levels of output was
achieved success and vice versa for failure. Success
and failure are taken as the two ends of the
performance continuum (Linder & Sperber, 2017).
Firm performance comprises the actual output or
results of firm measured against its intended outputs
(Ngui, 2015). Whereas the definitions may differ
between the authors, they are in agreement that firm
performance is about achieving superior results
and/or achievement of objectives.
Performance is the key interest of every business
manager or owner. The overall performance of the
Barbengi and Kimutai, (2018)
three levels, which fall within the jurisdiction of top,
middle and lower management (Kim& Franke,
2016). Firm performance provides useful
information for monitoring and control,
improvement, maximization of effectiveness of
improvement effort, reward and discipline and as a
lever towards alignment of organizational goals and
objectives. Profits, growth, balance scorecards,
economic value added, activity based analysis and
customer satisfaction are some of the frameworks
that several scholars have proposed as effective in
undertaking firm performance (Chang & Ellinger,
2016).
According to Ramanathan and Black (2017)
performance measurement refers to the process of
measuring the action’s efficiency and effectiveness.
Performance measurement is the transference of the
complex reality of performance in organized
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symbols that can be related and relayed under the
same circumstances. In the current business
management, performance measurement is
considered to be in a more critical role compared to
quantification and accounting (Al-Swidi & Fadzil,
2014).This is consistent with Bititci Carrie and Mc
Devitt (1997) who described performance
management as a process wherein the organization
manages its performance to match its corporate and
functional strategies and objectives (Al-Matari,
2014).
Performance measurement is critical for effective
management of any firm. The process improvement
is not possible without measuring the outcomes.
Hence, organizational performance improvement
requires measurements to identify the level to which
the use of organizational resources impact business
performance (Delima, 2017). The firm’s success is
basically explained by its performance over a certain
period of time. Ismail, (2017) have extended efforts
to determine measures for the concept of
performance as a crucial notion. Finding a
measurement for the performance of the firm
enables the comparison of performances over
different time periods.
Globally, SMEs have been considered as the
backbone of the economy in the European countries.
In the European countries, SMEs represent up to
99% of all businesses, and they generated
approximately 85% of new jobs. The important role
of SMEs in these countries has been supported by
(Payangan, Taba & Pabo, 2016). Garrigos Simon,
(2017) also confirmed the crucial role of SMEs in
promoting economic growth. Thus, it is no doubt
that SMEs play a very important role to the economy
in particular and development in general.
Also research have documented that SMEs play a
significant role in the economy of any country in the
world. Consequently, the performance of the SME
sector is closely associated with the performance of
the nation. In Thailand, SMEs account for a large
proportion of the total establishments in the various
sectors. In the manufacturing sector, for instance,
SMEs comprise 93.8 percent of all establishments.
Moreover, of the total number of SMEs, small
enterprises comprise 76.0 percent, while medium
companies account for 17.8 percent of all
manufacturing establishments. Meanwhile the
estimated that 90 percent of all manufacturing
establishments were SMEs, employing some
868,000 workers or 38.9 percent of the total.
Previous studies dealing with the conditions of
successful business have focused on large
companies rather than SMEs (Garrigos Simon,
Gonzalez-Cruz & Contreras-Pacheco, 2017).
Barbengi and Kimutai, (2018)
However, changes in the environment cause more
uncertainty in SMEs than in large companies. Thai
SMEs are increasingly seen as creator of new jobs
(Payangan, 2017) and Vietnamese SMEs employ
64% of industrial workforce. SMEs in Thailand play
an important role in the country’s economic
development. According to statistics, SMEs
accounted for 76.1% per cent of all establishments
in the manufacturing sector in the year2007. The
largest concentration, by number, of SMEs in
Thailand is in the food and beverage sector, textiles,
wearing apparel, and wood and wood products
(Azmi, 2017).
Regionally, concern on SMEs is very high. This is
due to the fact that SMEs has been considered as the
backbone of the economy. However, SMEs are
vulnerable to a variety of internal as well as external
barriers. As consequence, governments’ attention to
SMEs is mostly in the form of creating conducive
environment, entrepreneurship development, access
improvement to both domestics and international
markets, providing financial facilities, the
competitiveness improvement and providing
information and supporting network. Some
researches into small-business development have
also shown that the rate of failure of small scale
businesses in developing countries is higher than in
the developed world (Doh& Kim, 2014). In Nigeria
in particular, despite the support and incentive
programmes to small scale business, Abdullahi &
Kabir, (2016) succinctly stated that it would seem
reasonable to expect that small businesses would
grow and flourish, but the rate of business failure
continues to increase because of the obstacles
affecting firm performance which include: lack of
financial resources, lack of management experience,
poor location, laws and regulations, general
economic conditions, as well as critical factors such
as poor infrastructure, corruption, low demand for
products and services, and poverty (Abdullahi &
Jakada, 2016).
For instance in Cote d’ivoire, even though a number
of studies have been done on strategies leading to
failure or success of SMEs, none has been geared
towards the significant of marketing management
strategies in enhancing performance of SMEs in
Cote d’ivoire. The findings of this study revealed
that there is a high level of awareness of the
significance roles played by marketing management
strategies in the performance of SMEs; that adoption
of technology in marketing management strategies
can be mainstreamed into SMEs development
agenda and that marketing management strategy is a
veritable tool for sustainable development of SMEs
(Ardjouman & Asma, 2015).
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In Kenya, the Micro and Small Enterprises
Authority (MSEA) is a State Corporation
established under Micro and Small Enterprises Act
No. 55 of 2012. The Authority (MSEA) is
categorized as a Service Corporation, PC 3B and is
domiciled in the Ministry of Industrialization and
Enterprise Development. MSEA was established for
the promotion, development, regulation of Micro
and Small Enterprises (MSE) Sector in Kenya. The
Authority is mandated to formulate and review
policies and programmes, promote and develop
MSE sector, monitor and evaluate implementation
policies, programmes and activities related to MSE
development. Further, the Authority is established to
coordinate, harmonize and facilitate integration of
various public and private policies, programmes and
activities related to Micro and Small Enterprises in
Kenya.
The SMEs in Kenya just as anywhere else play an
important role in employment and wealth creation,
income distribution, accumulation of technological
capabilities and spreading the available resources.
According to the Economic Survey (GoK, 2012), the
SME sector contributed 79.8% of new jobs created
in the year 2011 with 89.7% of new jobs created in
2013 being created by the SME sector (GoK, 2013).
Although small and medium-sized enterprises
(SMEs) typically employ a major share of an
economy’s total employees, SME management
suffers from an insufficient business-related
knowledge base that top managers in SMEs possess
(Mohamad Radzi, Nor, Nazri & Ali, 2017).
However, SMEs are falling behind large companies
in adoption of management strategic practices and
the benefits of strategic management tools have not
fully been exploited by these firms. There is also
limited empirical evidence on whether management
strategies among the SMEs can explain their
performance differences. Further, SMEs in Kenya
continue to have poor performance and face stiff
competition from large firms (Mohamad Radzi,
2017). Against this background, this study aimed at
establishing the management strategies affecting
Performance of small and medium enterprises in
Eldoret Town.
1.2 Statement of the Problem
Majority of SMEs collapse because they operates in
business environment which is highly turbulent
characterized by external factors political/legal,
economic/demographic, socio-cultural,
technological and globalization) as well as internal
business factors management expertise, resources,
individual characteristics (Ismail & Sharifi, 2016).
In this dynamism and turbulence, small businesses
are affected more than the large organizations
because the response to environmental changes in
Barbengi and Kimutai, (2018)
small businesses is different from that of large
companies (Reid, 2016). A large company can move
from one business to another and have resources and
strategic choices not available to small business
enterprises. It is necessary to study the management
factors that are in place in the informal sector, that
is, investigate individual business adjustment
policies in relation to the state policies.
The business environment in Kenya is always
changing and hence firms have to adapt quickly to
competition and new challenges. This might be an
easy task for the small businesses due to their small
size and inadequate resources. Entrepreneurs
running small business face stiff competition
from large business in the market. They therefore
need to put more effort in categorization,
prioritization and coming up with solutions for the
challenges so as to be more competitive and remain
relevant in the market. The Kenyan government has
continued to campaign for the development of SMEs
as a platform of reducing unemployment by
encouraging self-employment, poverty reduction
and fostering economic growth. Despite the
incentives put in place by the government, recent
studies show that SMEs collapse within the first few
months of operation (Peter, 2017).
Developing small and medium enterprises (SMEs)
help to achieve sustainable growth as a centralized
theme. SMEs play a vital role in the country’s
overall production networks and they are core to the
economic growth of developing countries. The
contributions of formal SMEs are 50% of total
employment and 33% of the national income of
emerging economies. While including informal
SMEs the percentages was increased. Finance
accession is the main constraint to SME growth,
without that many SMEs are declined (Sharifi,
2016). It is expected that by the year 2030, Kenya
was transformed into a newly industrialized nation.
If the country has to make this leap, then the small
enterprises are expected to play a key role in this
transformation. Although a number of researches
have been done on factors that contribute to success
or failure of SMEs, none has focused on the
management strategies affecting performance of
Small and Medium Enterprises in Kenya. This study
therefore sought to determine the effect of
management strategies on performance of small and
medium enterprises in Eldoret town, Kenya by
looking at pricing strategy, savings and investment
strategy and product creation strategy which affects
performance.
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General Objective
The purpose of the study was to establish the effect
of product creation strategy on performance of small
and medium enterprises in Eldoret town.
Research Hypothesis
H01: There are no significant effects of product
creation strategy on performance of small and
medium enterprises in Eldoret town.
Literature Review
2.2 Theoretical Review
This study adopted resource based view theory,
survival-based theory and the balanced scorecard
approach which are relevant to the study.
The Balanced Scorecard Theory
The Balanced Scorecard Approach emanated from
the works of Kaplan and Norton in 1996. The
balanced scorecard approach emphasizes on the
need to provide management with a set of
information that covers all relevant areas of
performance in an objective way. The idea of the
balanced scorecard is that performance could be
measured form four different perspectives.
Assumptions of Balanced Scorecard theory states
that the four areas of performance are defined and
labeled into financial perspective, customer
perspective internal business and innovation and
learning perspectives respectively. The four
performance perspectives are not necessarily
comprehensive, but should represent the critical
success factors necessary for continued
organizational success hence they are intended to be
a close link between the business unit strategy
adopted and the performance measures selected.
Critics of Balanced Scorecard posit that the major
strength of the balanced scorecard approach is the
emphasis that places on linking performance
measures with business unit strategy. According to
Kaplan & Norton (1996), the balanced scorecard not
only allows the monitoring of present performance,
but also tries to capture information about how well
the organization is positioned to perform in the
future. The balanced scorecard is designed to be at
the center of an organization’s control mechanisms
to effectively deploy strategy and to link operational
practices with strategic intent (Otley, 1999).
Balanced Scorecard theory is important to the study
since it explains that the idea of the balance
scorecard is that you should not evaluate a firm
based on one single measure thus in marketing the
balanced score card can be used to link the
marketing strategies with the overall organizational
Barbengi and Kimutai, (2018)
goals. Additionally, SMEs can use the balanced
score card approach to link their marketing
strategies with their strategic plans and the
performance.
Empirical Review
Product Creation Strategy
According to Makanyeza and Dzvuke (2015) on the
influence of innovation on the performance of small
and medium enterprises in Zimbabwe; study based
on a survey of 200 SMEs, this research investigated
innovation’s influence on the performance of small
and medium enterprises (SMEs) in Harare,
Zimbabwe. The study found that SMEs were
somewhat innovative. The performance of SMEs
was found to somewhat increase over the period
SMEs were innovating. Innovation was found to
positively predict the performance of SMEs.
Organizational innovation and product innovation
positively predicted the performance of SMEs while
marketing innovation and process innovation did
not. The influence of innovation on enterprise
performance varied from industry to industry. The
research has implications for managers and future
researchers.
Gudahi (2016) study empirically examined the
moderating effect of technology product creation on
the relationship between business strategy and
performance of SMEs in the Uganda’s
manufacturing sector. Findings of the study indicate
the performance of SME vary with the choice of the
business strategies they adopted that result to
building core competences with regard to the
competitive advantages. Additionally, to a certain
degree, the findings of the study suggest product
creation technology as measured by technological
complexity of process moderates the relationship
between business strategy and the performance of
SME’s. Finally the study suggests the model
diagrammatic model that portrays the role of
technology as facilitator to performance of SME’s
and in meeting overall customer needs and at a
balanced cost and fit of positioning in stiff
competitive environment.
Zhao, Lee & Chen, (2011) indicated that for a long
time, technology has been identified as the key for
commencing novel activities through risk-taking
and firm proactively which results in a firm’s higher
performance than competitors. Firms that focus on
technological advancement through innovation
research and development generate above average
performance. Firms that employ technology are
known for superior performance because they
believe in acquisition of new technologies for
product innovation, research and development
which enables the firm to produce unique products
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which are hard to copy. Technology deserves
consideration since it pursues opportunities and
renewal of new market from the areas of operation
that are existing to match with the changing needs of
the customers in the market.
The disparity between technological progression
and consumer demand means that technology does
not have an impact on superior performance of a
firm. An investigation of performance in
technology-based firms in Kenya indicated that
investment in research and development directly
contributed to higher performance of a firm. The
study analyzed a direct relationship between
technology and performance without taking into
account any mediation, which is a gap that the
current study attempted to fill by mediating the
relationship with competitive advantage while
maintaining technology as an independent variable
(Gakenia, 2015).
According to Keller, (2010), to invest in research
and development calls for evaluation of advantage
and cost before making the decision whether to
adopt or invest in technology. Technology is linked
to greater firm innovativeness. This has to do with
focusing the company’s effort on developing and
utilizing resource to produce unique products for
sustainability of competitiveness and performance.
The conclusion of the study was that there is a strong
positive relationship between technology and
performance in SMEs in Korea. However, the study
used correlation analysis, which was considered
weak for the current research.
Anal et al., (2011), concluded that innovativeness
and performance have a positive relationship, due to
the existence of uniqueness and inimitability of the
products. The study of Anal et al., (2011) analyzed
a direct relationship between innovation and
performance without either a mediator or a
moderator; therefore, the current study mediates and
moderates the relationship.
An interactive research by Hakala (2011)
maintained that for a firm to have a better
performance than its opponents, then it must make
use of complicated technologies which cannot be
duplicated by competitors for product development,
use swiftness of combination of original
technologies, and proactively expand new
technologies in creating novel, valuable and
distinctive product ideas. In addition, the firm’s
technical skills, research and development resources
and technological stand appear to be critical in
passing originality and better deliberated products
into the market, hence the firm’s superior
performance. Although the findings of the studies
showed a strong and positive relationship between
performance and technology, the studies used
Barbengi and Kimutai, (2018)
survey design only, which is not adequate for the
current study, hence the current study used of
descriptive and explanatory design as well. The
study concluded that technology-oriented firms
emerge to have the capability and will to obtain
advanced technological setting, and such firms hold
the idea that innovation is a strategy for superior
performance. Nevertheless, the study employed
structural equation method for data analysis, which
was not appropriate for the current study.
A study by Spanjolet al., (2011) states that for
product creation on technology oriented firms to
achieve superior performance, they should apply
technical ability to produce new products in the
market to cope with competition, flexible products
so as to change with changing needs of customers
and be able to maintain them, and originality in
developing original products, services and processes
which are unique and difficult to imitate. Anal,
Dionysis and Carmen (2011) found out that
customers choose technologically superior products
and services and that customers stick to a firm that
has the capability to react to their choices in a
successful way.
Product creation through technological competence
is viewed as the principal means of a firm to create
product differentiation which will end up being
unique to a specific firm and promote product
designs that are not beyond those of competitors.
Firms which use technological -oriented strategy are
in support of a strong research and development
department, acquisition of new technologies and
application of the most recent technologies which
enhance superior turnovers and be difficult to be
copied by competitors. Cristima (2012) noted that
for a firm that invest in technology to maintain its
superior performance, it should focus on engaging in
the search for new market opportunities and
rebuilding of existing areas of operations to keep on
producing unique products. The two studies used
Organization Learning theory and Knowledge
Management theory which were considered useful
in the current study, hence the decision to adopt
organization learning and RBV theories.
Wimmer (2016) on the title unraveling the
entrepreneurial process argue that the lack of
empirical testing of product creation based
entrepreneurship is a major impediment to the
further development of entrepreneurship theory
given its importance to firm- and societal-level value
creation. Since entrepreneurs move the market
forward and drive economic growth, the
understanding of what distinguishes their value-
creation activities from the conventional
management practices is a globally appealing
challenge, especially because of the recently
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experienced economic downturns in many countries.
Consequently, with the dissertation my aim was to
resolve the contemporary challenge of theory
development and contribute to the field by
investigating the behavioral aspects of
entrepreneurial activity.
Conceptual Framework
Conceptual framework will show the relationship
between independent variables which is product
creation strategy which was measured by following
indicators; level of innovation, level of consumer
demand, competition level and range of product
flexibility. The dependent variable was performance
of micro and small enterprises measured by the
following indicators; Quality of service, growth rate
and level of market value.

Product Creation Strategy Performance of micro and small enterprises

 Level of product quality
 Level of Innovation
 Growth rate of SMEs
 Level of Consumer demand
 Level of market value
 Competition level
 Uniqueness of the products
 Range
Independent of product flexibility
Variable Dependent Variable
Figure 2.1 Conceptual framework

Research Methods ways and which forms the subject of the study in a
Research Design particular survey Orodho (2003). The target
Orodho (2003) defines descriptive as a method of population of the study was 2,391 registered SMEs
collecting information by interviewing or according to Uasin Gishu County government
administering a questionnaire to a sample of records (Company Registrar, 2017). The listed
individuals. This study adopted descriptive research SMEs include General Shops, SACCOs, Hotels,
design. This is due to the fact that the study sought Banking Agencies, Agrovet, Saloon and Barber
to have an accurate description of the study Shops, Boutiques, Service Firms, Mobile and Phone
variables and also study the relationship between Accessory Shops, chemist, membership Clubs,
the aforesaid variables. Guest Houses, Groceries, Hardware and Electronic
Shops.
Target Population
The target population refers to the group of people
or study subjects who are similar in one or more
Table 3.1 Target Population
Target Group Number of SMEs Accessible Population
General Shops 175 112
Banking Agencies 75 75
Agrovet 196 125
Chemist 110 90
Guest Houses 86 86
Service Firms 215 138
Membership Clubs 26 26
Mobile and Phone Accessory Shops 265 186
Saloon and Barber Shops 210 159
SACCOS 155 140
Boutiques 250 156
Electronic Shops 125 89
Hotels 213 206
Groceries 140 96
Hardware 150 80
Total 2391 1764

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Sampling Frame The sample size of the study was calculated using
The sampling frame comprised of 112 General the formula below as recommended by Fisher et al
Shops, 155 SACCOs, 206 Hotels, 75 Banking (2011):
Agencies, 125 Agro vet, 159 Saloon and Barber n
Shops, 156 Boutiques, 138 Service Firms, 186 nf 
n
Mobile and Phone Accessory Shops, 90 Chemists, 1
26 Membership Clubs, 86 Guest Houses, 96 N
Groceries, 80 Hardware and 89 Electronic Shops in Where;
Eldoret Town Uasin Gishu County. This choice was nf = Sample size (when the population is less
arrived by choosing those SMEs with managers. than 10,000).
Therefore the study target was 1764 respondents. n = Sample size (when the population is more
than 10,000); 384.
Sampling Techniques and Sample Size N = Estimate of the population size; 1764
Sample size refers to the number of observations or n = 384/ (1+ 384/1764)
replicates to include in a statistical sample (Orodho, 384
n=
2003). The sample was obtained using a 1.21769
Sample size for the respondents = 315
combination of non-probability sampling and
Using the proportionate sampling the study
probability sampling methods. In an attempt to
distributed the samples size among the target
obtain a fair representation of the population, the
group indicated in table 3.2.
selection of small and medium enterprises was done
using both judgmental sampling and random
sampling.

Table 3.2 Sample Size Distribution of Population

Target Group Accessible Population Sample size
General Shops 112 20
Banking Agencies 75 13
Agrovet 125 22
Chemist 90 16
Guest Houses 86 15
Service Firms 138 25
Membership Clubs 26 5
Mobile and Phone Accessory 186 33
Shops
Saloon and Barber Shops 159 28
SACCOS 140 25
Boutiques 156 28
Electronic Shops 89 16
Hotels 206 37
Groceries 96 17
Hardware 80 15
Total 1764 315

Data Collection Instruments by the researcher who interviewed the respondents

The study used questionnaires as the main tool for
collecting data. Gay (2010) explains that descriptive
data are usually collected using questionnaires.
Cohen and Manion (2013) have also identified
questionnaires as crucial instruments of data
collection in descriptive research. This study
adopted both the open ended and closed type of
questionnaires, the questionnaires was administered
Barbengi and Kimutai, (2018)
and recorded their responses.
Pilot Study
Pilot study was done among small and medium
enterprises in Kapsabet town by distributing 32
questionnaires representing 10% of the total sample
size. Pilot study was carried out to ascertain validity
and reliability of research instruments.
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Validity
Validity is the extent to which differences found
with a measuring tool reflect true difference among
respondents being tested (Kimberlin, & Winterstein,
2008). Content validity was determined using
constructive criticism from project supervisor who
have an extensive experience and expertise in
questionnaire construction.
Reliability
Reliability is the ability of research instruments to
generate same /consistent results when used
(Kimberlin, & Winterstein, 2008). Reliability was
ensured through a pilot study among small and
medium enterprises in Kapsabet town. Piloted data
was used to test for reliability using Split half type
of reliability test. Randomly, the test questions were
divided into two parts using odd numbers and even
numbers.
Data Collection Procedure
Data collection involves selecting subjects and
gathering information from them. The process
delineates the steps involved in data collection with
regard to a specific study and depending on the
research design and method of measurement (Burns
and Grove, 2012). Ghauri (2010) observed that
depending on the sources and techniques ones uses
for gathering data, it can be divided into secondary
and primary data. This study collected primary data
using semi structured questionnaires which
comprised open and closed ended questionnaires,
closed ended questions required respondents to fill
the questionnaires on their own after making some
necessary clarifications so as to get their full
consent while open ended questions was used where
explanation and personal opinion is seek.
The study used a survey questionnaire administered
to each member of the sample population. The
questionnaire had close-ended questions. The close-
ended questions provided more structured responses
to facilitate tangible recommendations. The closed
Table 4.1 Response Rate
Response Rate Frequency
Completed 298
Not completed 17
Total 315
Background Information
The first part of the questionnaire contained
background information regarding the respondents.
The areas sited in this part were: Gender of the
respondents, age brackets, and years of operation
and education levels of the respondents. The study
Barbengi and Kimutai, (2018)
ended questions were used to test the rating of
various attributes and this helped in reducing the
number of related responses in order to obtain more
varied responses. The questionnaire was carefully
designed and tested with a few members of the
population for further improvements. This was done
in order to enhance its validity and accuracy of data
collected for the study.
Data Processing and Analysis
Orodho (2005) observes that data analysis is the life
line of a research and that the method of analysis is
the back bone and conduct wire. The data collected
was analyzed by using the excel program. The study
generated quantitative data. Both descriptive and
inferential statistics was used to analyze data.
Descriptive statistics included frequencies, means,
mode, standard deviation, variance and percentages.
Inferentially data was analyzed using correlation and
multiple linear regressions. Data was presented
using frequency tables, charts and graphs. The
model equation was as follows:
Y= βo+ β1X1+ ε
Where,
Y represents Firm performance
βo represents Constant term
X3 represents product creation strategy
β1, is the coefficient of proportionality for product
creation strategy.
ε represents Error term.
Research Findings and Discussion
Response Rate
A total of 315 questionnaires were distributed to the
respondents and of the sample size of 315
questionnaires, 298 were completed and returned to
the researcher. This represents a response rate of
94.6%. The results were presented in Table 4.1. This
percentage was considered sufficient for this study.
The 3.4% who failed to fill questionnaires cited busy
schedules as the main reason for not filling them.
percentage
94.6
3.4
100
results were presented in table 4.2, 4.3, 4.4 and table
4.5.
The study sought to determine the gender of
respondents and it was evident from the findings of
the study in figure 4.2 that most of the subjects who
participated in the study are female as represented
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by 194(65.1%) and the least being male 104(34.9%) that most of the respondents were females compared
as shown in the table above. This is a clear indication to that of males.

Table 4.2 Genders of the Respondents

Gender Frequency Percent
Male 104 34.9
Female 194 65.1
Total 298 100

The study established in table 4.3 that most of the at 47(15.8%) while those over 49 years were the
respondents 126(42.3%) were aged between 29-39 least at 29 (9.7%). This indicates that the researcher
years followed by 96(32.2%) those aged between got the views from different age groups avoiding
39-49 years. Those aged between 18-29 years were biasness in the study.

Table 4.3 Age Brackets of the Respondents

Age Bracket Frequency Percent
Above 18-29 Years 47 15.8
Above 29-39 Years 126 42.3
Above 39-49 Years 96 32.2
Over 49 Years 29 9.7
Total 298 100

The study further sought to know the number of
years the respondent had been working in their
respective organizations. The study established in
table 4.4 that 127(42.6%) of the respondents had
below 2 years, 140(47.0%) were those who had
worked for 2-5 years, 31(10.4%) were those with 6
and above years working. This indicates that the
respondents were well experienced to understand
what has been going on in the organization.

Table 4.4 Operation Times of the Respondents

Operation Times Frequency Percent
Below 2 Years 127 42.6
Above 2 – 5 Years 140 47.0
6 Years and Above 31 10.4
Total 298 100

The respondents were also requested to indicate 64(21.5%) and the least were those with masters at
their highest level of education and the research 60(20.1%). An implication that most of the
showed in table 4.5 that majority 94(31.5%) were respondents were learned and they provided correct
undergraduates followed by those with certificate information
80(26.8%). Those with diploma holders at
.
Table 4.5 Level of Education
Frequency Percent
Valid Certificate 80 26.8
Diploma 64 21.5
Undergraduate 94 31.5
Masters 60 20.1
Total 298 100.0

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Reliability Statistics
The study used Cronbach’s coefficient alpha to
measure the internal consistency reliability of the
instruments used in the study. The strategy is used
when the research carried out has multiple-item
Table 4.6 Reliability Statistics
Variable
Pricing strategy
Savings and investment strategy
Product innovation strategy
Small and medium enterprises
performance
Findings of Descriptive Statistics
In this section descriptive analysis of study
objectives was done and presented. A scale was used
to show the extent to which the respondent thought
the statement of effect of pricing strategy on
performance of small and medium enterprises in
Eldoret town, effect of savings and investment
strategy on performance of small and medium
enterprises in Eldoret town and effect of product
creation strategy on performance of small and
medium enterprises in Eldoret town. With
5=strongly Agree 4= Agree 3= Undecided
2=Disagree 1=Strongly Disagree. Therefore the
results of the study are as shown below.
Product creation strategy and Performance of
Small and Medium Enterprises
The also sought to know the level of the subjects
agreement on various elements concerning the
influence of product creation strategy on
performance of small and medium enterprises in
Eldoret Town, Kenya. A likert scale of 1-5 was used
and the results of the study are as shown in table 4.9.
The study found out that the respondents agreed that
the performance of the firm has increased since the
introduction of the innovativeness within the
product or service delivery as indicated by
(M=4.4463, SD=.83614). The respondents agreed
that all the services offered or products sold by the
business are under the consumer demand and
Barbengi and Kimutai, (2018)
measures of a concept. Therefore the research used
this technique since it had many variables. The
acceptable range of is between 0.70 and 0.90 or
higher depending on the type of research
(Howstatsc, 2015).
Cronbach's Alpha N of Items
.780 4
.728 4
.912 4
.869 4
description as evidenced by (M=4.7651,
SD=.81144). The respondents also agreed that the
products of the business are competent in market;
therefore enable the business to survive in the midst
of the same premises shown by (M=4.5839,
SD=.96819) and finally the subjects also agreed
strongly that Performance of the firm solely depends
on the flexibility of the products to suit the market
demand as shown by (M=4.5604, SD=.91271). The
studied deviations indicated the level of to which
responses varied.
Also the results showed that most of the subject
believed in positive effect of product creation on
performance leading to a conclusion that creation of
new products and updating them regularly to appeal
to consumers and using the right combination of
features that makes them cost effective to sell and
able to generate a high demand will eventually lead
to generation of high profits and improving the
performance enterprises.
The study findings agrees with Anal et al., (2011)
who concluded that innovativeness and performance
have a positive relationship, due to the existence of
uniqueness and inimitability of the products. It also
conceded with the study of Anal et al., (2011) who
analyzed a direct relationship between innovation
and performance without either a mediator or a
moderator.
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Table 4.9 Product Creation Strategy and Performance of SMEs

SD D UD A SA Total Mean Std. Min Max
Dev
The performance of the firm has F 5 7 16 92 178 298 4.446 .8361 1 5
increased since the introduction of the
% 1.7 2.3 5.4 30.9 59.7 100
innovativeness within the product or
service delivery.
All the services offered or products sold F 3 16 5 274 298 4.765 .8114 1 5
by the business are under the consumer
demand and description. % 1.0 5.4 1.7 91.9 100
The products of the business are F 6 21 4 29 238 298 4.584 .9682 1 5
competent in market; therefore enable
the business to survive in the midst of % 2.0 7.0 1.3 9.7 79.9 100
the same premises.
Performance of the firm solely depends F 7 13 6 52 220 298 4.560 .9127 1 5
on the flexibility of the products to suit
the market demand. % 2.3 4.4 2.0 17.4 73.8 100

Performance of Small and Medium Enterprises
The study lastly sought to know the level of
subject’s agreement concerning the small enterprise
performance. The results of the study are as shown
in table 4.10.
The study found out that the most agreed statement
was firm innovativeness and performance have a
positive relationship, due to the existence of
uniqueness and inimitability of the products
indicated by (M=4.7047, SD=.82473) followed by
that the Firms that embrace technological
advancement and integrate in the production of the
business have a competitive advantage as evidenced
by (M=4.6544, SD=.80695). The respondents also
agreed with the statement that Growth of the
business is contributed greatly by resource
availability that enables business to run successfully
as shown by (M=4.5671, SD=.66958) and lastly on
the last statement concerning Firm performance
depends on the market value of its products pricing
was agreed upon and this is evident by (M=4.7047,
SD=.82473). The standard deviations indicated that
the subjects were not clustered around the mean but
dispersed.
The study clearly shows that strategic practices has
a positive effects on performance of small and
medium enterprises in Eldoret Town the study
therefore concurs with Kurgat (2015) who
conducted a study on strategic management
practices and challenges at Nandi county
Government. This research was carried out with the
objectives of establishing the strategic management
practices adopted by Nandi county government and
the challenges faced by adopting strategic practices
at Nandi county Government. The research problem
was studied by use content analysis, the content
found out that although faced with challenges during
the adoption of strategic management practices like
inadequate financial resources, politics, human
resource malpractices, liberation of services and
diseases like HIV/AIDS, it was established that
Nandi county Government practice good strategic
management practices improving its performance.

Table 4.10 Performance of Small and Medium Enterprises

SD D UD A SA Total Mea Std. Dev Min Max

Firms that embrace F 4 12 3 45 234 298

technological advancement
and integrate in the % 1.3 4.0 1.0 15.1 78.5 100 4.654 .8070 1 5
production of the business
have a competitive advantage.
Growth of the business is F 2 5 3 100 188 298 4.567 .6696 1 5
contributed greatly by
resource availability that % .7 1.7 1.0 33.6 63.1 100
enables business to run
successfully.
Firm performance depends on F 6 10 38 72 172 298 4.322 .9589 1 5
the market value of its
products pricing. % 2.0 3.4 12.8 24.2 57.7 100

Firm innovativeness and F 7 8 4 28 251 298 4.705 .8247 1 5

performance have a positive
relationship, due to the % 2.3 2.7 1.3 9.4 84.2 100
existence of uniqueness and
inimitability of the products

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Findings of Inferential Statistics
The study uses correlation analysis and regression
analysis as its inferential statistics. The study started
with testing of regression models assumptions.
Correlation Analysis
The research used Karl Pearson’s coefficient of
correlation examines if there is linear association
between the variables. The correlation showed in the
table 4.11 below shows bivariate correlations of all
the variables (pricing strategy, savings and
investment strategy, product creation strategy and
performance of small enterprises). Since a variable
in the questionnaire was measured by multiple
variables, the mean of the items was computed and
used in the analysis such as correlation analysis and
multiple regression analysis (Wang and Benbasat,
2007).
Research shows that correlation coefficient values
(r) ranging from 0.10-0.29, it is considered to be
weak correlation, 0.30-0.49, medium, 0.5-1.0 is
Table 4.11 Correlation Analysis
Product creation strategy Pearson Correlation
Sig. (2-tailed)
Performance Pearson Correlation
Sig. (2-tailed)
Regression Analysis
Multiple linear regression model was used analyze
the linear statistical relationship between the
independent (pricing strategy, savings and
investment strategy and product creation strategy)
and dependent variable (small enterprises
performance). The study computed regression
model for each of the variables each showing how
they associate with each other.
Linear Regression Model of Product Creation
Strategy and Performance.
The linear regression analysis models the
relationship between the dependent variable product
creation strategy and independent variable
performance. The results are shown in table 4.20.
The coefficient of determination (R2) and correlation
coefficient (R) shows the degree of association
between product creation strategy and performance
of small enterprises. The results of the linear
regression in table indicate that R2 =0.151 and R =
Barbengi and Kimutai, (2018)
considered strong, Wong and Hiew (2005).
Implying that pricing strategy is positively and
statistically significant (r=0.266, p=0.000), savings
and investments strategy is positively and
statistically significant (r=0.169, p=0.00) and
product creation strategy is positively and
statistically significant (r=0.388, p=0.000).This
implies that all the study variables: pricing strategy,
savings and investment strategy and product
creation strategy were positively correlated to
performance of small enterprises and statistically
significant.
From the study it is clear that the table was at 99%
level of confidence (significant at the 0.01 level (2-
tailed), meaning a unit increase in pricing strategy
leads to 26.6 % increase in performance, a unit
increase in savings and investment strategy leads to
16.9% increase in performance and lastly a unit
change in product creation strategy leads to 38.8%
increase in performance.
Product creation Performance
strategy
1 .388**
0.000
.388** 1
0.000
0.388. R value indicates that there is a strong linear
relationship between product creation strategy and
performance of small enterprises. The R2 indicates
that explanatory power of the independent variables
is 0.151. This means that 15.1% of the variation in
small enterprises performance is explained by the
regression model while 84.9 % is unexplained by the
model.
Adjusted R2 is a modified version of R2 that has been
adjusted for the number of predictors in the model
by less than chance. The adjusted R2 0.148 of which
is slightly lower than the R2 value is an exact
indicator of the relationship between the
independent and the dependent variable because it is
sensitive to the addition of irrelevant variables. The
adjusted R2 indicates that 14.8% of the changes in
strategy implementation are explained by the model
while 85.2% is not explained by the model. This
implies that level of product creation strategy has a
weak influence on small enterprise performance.
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Table 4.12 Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate
1 .388a 0.151 0.148 0.54902

From the results in table 4.21 the F test provides an
overall test of significance of the fitted regression
model. The F value indicates that all the variables in
the equation are important hence the overall
regression is significant. The F-statistics produced
(F = 52.585) was significant at p=0.000<0.05thus
confirming the fitness of the model and therefore,
there is statistically significant relationship between
product creation strategy and performance of small
enterprises in Eldoret Town. The study therefore
rejects the third null hypothesis; H03: There is no
significant effect of product creation strategy on
performance of small and medium enterprises in
Eldoret town.

Table 4.13 ANOVA Product Creation Strategy

Model Sum of Df Mean F Sig.
Squares Square
1 Regression 15.85 1 15.85 52.585 .000b
Residual 89.22 296 0.301
Total 105.071 297

The table 4.13 indicates there was positive linear by 0.294 units. Product creation strategy was
relationship between product creation and significant (p=0.000) in performance. This is an
performance which means that an increase in a unit indication that product creation strategy influence
of product creation strategy increases performance small enterprises performance.

Table 4.14 Coefficients Product Creation Strategy on Performance

Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
1 (Constant) 3.243 0.189 17.195 0
Product Creation 0.294 0.041 0.388 7.252 0
Strategy

Overall Regression Analysis
The linear regression analysis models the
relationship between the dependent performance
and all the independent variable. The findings are as
shown in table 4.14;
Table 4.15 presents results of model summary; the
“R” value is used to indicate the strength and
direction of the relationship between the variables.
The closer the value gets to 1, the stronger the
relationship. In this case the R= 0.567. This means
there was an average positive relationship between
the variables. This value of R square indicates that
the independent variables can explain 32.1% of the
variation in the dependent variable. This implies that
there is a positive relationship between the
dependent and the independent variables and the
data that had been employed in the regression model
were accurate.
Adjusted R2 is a modified version of R2 that has been
adjusted for the number of predictors in the model
by less than chance. The adjusted R2 of 0.314 which
is slightly lower than the R2 value is an exact
indicator of the relationship between the
independent and the dependent variables because it
is sensitive to the addition of irrelevant variables.
The adjusted R2 indicates that 31.4% of the changes
in small enterprise performance are explained by the
model while 68.6% is not explained by the model
This implies that product creation strategy has a
positive relationship on small enterprise
performance in Eldoret Town.

Table 4.15 Model Summary

Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .567a 0.321 0.314 0.49253

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Table 4.16 presents the results of regression
ANOVA to test the model fitness at 95%
confidence level. The study results indicated that
there was a significant value (p<0.05) and F-value
of 46.734. This shows that the regression model has
Table 4.16 Overall ANOVA
Model Sum of
Squares
1 Regression 33.749
Residual 71.321
Total 105.071
Table 4.25 presents the results of regression
coefficients. The study findings showed that pricing
strategy registered a p-value of 0.000 indicating that
the influence on performance was extremely
significant while savings and investment strategy
registered a p-value of 0.019 indicating that the
influence was statistically significant and finally
product creation registered a p-value of 0.000
showing that the influence on performance was
greatly significant.
The results shows that the regression coefficients of
the independent variable product creation strategy is
statistically significant in explaining small
enterprises performance in Eldoret Town. Thus the
regression equation becomes;
The equation for the regression model is expressed
as:
Y= β0 + β1 Χ1 + є
Table 4.17 Coefficients
Model Unstandardized Coefficients
B Std. Error
(Constant) 1.081
Product Creation 0.36
Strategy
Table 4.17 presents the results of hypotheses testing.
The study findings on pricing strategy found out a
positive and significant (β= 0.435; p<0.05) effect on
small enterprise performance in Eldoret Town. The
null hypothesis was rejected and the conclusion was
that adoption of pricing strategy by small and
medium enterprises leads to a positive performance.
The study findings indicated that the effects of
product creation strategy on small and medium
enterprises in Eldoret Town was positive and
significant (β= 0.476; p<0.05). This implies that the
null hypothesis was rejected and shows that there
was a significant effect of savings and investment
Barbengi and Kimutai, (2018)
a probability of less than 0.000 of giving wrong
prediction. Hence, the regression model used above
is a suitable prediction model for explaining the
relationship between product creation strategy and
performance of small enterprises in Eldoret Town.
Df Mean F Sig.
Square
3 11.25 46.374 .000b
294 0.243
297
Y= 1.081 + 0.360Χ1 + є
Where;
Y represents performance
X1 represents product creation
β0 represents Co-efficient of the model
β1–β2 represents Beta Co-efficient of Determination
є represents Stochastic Error Term
The results of the regression equation show that if all
the independent variables were rated zero,
performance would be 1.081. However, all the
predictors had a positive relationship with the
dependent variable. A unit increase in product
creation would increase performance by 0.360. The
Stochastic Error Term was assumed to be zero.
The results above also indicated there was positive
linear relationship between product creation strategy
and performance.
Standardized t Sig.
Coefficients
Beta
0.323 3.346 0.001
0.04 0.476 9.12 0.000
strategy on performance of small and medium
enterprises in Eldoret town was rejected.
Summary, Conclusions and Recommendations
Summary of the Findings
There were three specific objectives in this study. So
as to attain the results the researcher conducted the
research by using the questionnaires and the
following was found from the study;
Product Creation Strategy on Performance
Finally the researcher looked into the effects of
product creation strategy on small and medium
enterprises in Eldoret Town and found out that that
product creation strategy has a positive and
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significant (p=0.000) influence on small and
medium enterprise performance in Eldoret Town.
The findings means that the null hypothesis that
there is no significant effect of savings and
investment strategy on performance of small and
medium enterprises in Eldoret town were rejected
and concluded that there is a significant effect on
adopting savings and investment strategy on
performance of small and medium enterprises.
Also the results showed that most of the subject
believed in positive effect of product creation on
performance leading to a conclusion that creation of
new products and updating them regularly to appeal
to consumers and using the right combination of
features that makes them cost effective to sell and
able to generate a high demand will eventually lead
to generation of high profits and improving the
performance enterprises.
The study findings agrees with Anal et al., (2011)
who concluded that innovativeness and performance
have a positive relationship, due to the existence of
uniqueness and inimitability of the products. It also
conceded with the study of Anal et al., (2011) who
analyzed a direct relationship between innovation
and performance without either a mediator or a
moderator.
Conclusions
The study concluded that creation of new products
and updating them regularly to appeal to consumers
and using the right combination of features that
makes them cost effective to sell and able to generate
a high demand will eventually lead to generation of
high profits and improving the performance
enterprises.
Balanced Scorecard theory was important to the
study since it explains that the idea of the balance
scorecard is that you should not evaluate a firm
based on one single measure thus in marketing the
balanced score card can be used to link the
marketing strategies with the overall organizational
goals. Additionally, SMEs can use the balanced
score card approach to link their marketing
strategies with their strategic plans and the
performance.
Recommendations
The study therefore recommends that small
enterprises should create new products and employ
new strategies in improving their sales and their
competitiveness to improve their performance.
The study recommends management of medium
enterprises and other organizations to come up with
better ways of dealing with strategic challenges so
as to be successful in their operations.
Research for Further Researchers
The study recommends future researchers to
research to major on market for effective pricing
decision and strategy to later improve firm sales.
They should research on how and the importance of
savings to businesses.

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