Effect of Competitiveness on Financial Performance of the Sugar Industry in Kenya

Abstract

A firm’s competitiveness and management efficiency in production gives it an edge over others in performance and profitability and thus being competitive and having an efficient management is important in enhancing a firm’s performance. In this paper we therefore seek to empirically test the hypothesis that firm’s firm competitiveness and management efficiency does not affect its financial performance. Using a sample of five sugar firms over the period 30th June 2005 to 2016 we estimate a fixed effects regression model to examine the impact of competitiveness and management efficiency on firm performance of sugar industry. The results revealed that firms with small production costs per tonne seem to perform highly compared to those whose industry production costs per tonne is high and thus we conclude that the higher the production costs per tonne the less profitable an entity is and as such and policy should encourage cost minimization measures. Similarly, the results affirm the existence of a negative relationship between management efficiency and firm performance. The negative relationship is an indication that the extent of managerial efficiency among the firms in the sugar industry is not so compelling as to drive a firm’s financial performance. Based on these findings, we recommend that organizational management need to keep their production costs optimal as high costs negates their financial performanc

A firm’s competitiveness and management efficiency in production gives it an edge over others in performance and profitability and thus being competitive and having an efficient management is important in enhancing a firm’s performance. In this paper we therefore seek to empirically test the hypothesis that firm’s firm competitiveness and management efficiency does not affect its financial performance. Using a sample of five sugar firms over the period 30th June 2005 to 2016 we estimate a fixed effects regression model to examine the impact of competitiveness and management efficiency on firm performance of sugar industry. The results revealed that firms with small production costs per tonne seem to perform highly compared to those whose industry production costs per tonne is high and thus we conclude that the higher the production costs per tonne the less profitable an entity is and as such and policy should encourage cost minimization measures. Similarly, the results affirm the existence of a negative relationship between management efficiency and firm performance. The negative relationship is an indication that the extent of managerial efficiency among the firms in the sugar industry is not so compelling as to drive a firm’s financial performance. Based on these findings, we recommend that organizational management need to keep their production costs optimal as high costs negates their financial performanc