IMPACT OF TURBULENT ENVIRONMENT ON BUSINESS PERFORMANCE

IN THE CONFECTIONARY INDUSTRY IN KENYA

BY

AUDREY ACHIENG

UNITED STATES INTERNATIONAL UNIVERSITY-AFRICA

SUMMER 2018

IMPACT OF TURBULENT ENVIRONMENT ON BUSINESS PERFORMANCE

IN THE CONFECTIONARY INDUSTRY IN KENYA

BY

AUDREY ACHIENG

A Research Project Report Submitted to Chandaria School of Business

in Partial Fulfilment of the Requirement for Masters’ Degree in

Business Administration (MBA)

UNITED STATES INTERNATIONAL UNIVERSITY-AFRICA

SUMMER 2018

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STUDENT DECLARATION

I, the undersigned declare that this research project is my original work and that it has not

been submitted to any other college, or other institution of higher learning other than United

States International University for purposes of academic credit

Signed: ______________________ Date: ____________________________

Audrey Achieng (ID 615684)

This research project has been presented for examination with my approval as the appointed

supervisor

Signed: ____________________ Date: ____________________________

Dr. Paul Katuse

Signed: ____________________ Date: ____________________________

Dean, Chandaria School of Business

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ABSTRACT

The purpose of this study was to determine the effect of turbulent environment on business

performance in the confectionery industry in Kenya. This study was guided by the

following research questions: What is the impact of technological turbulence on business

performance? What the impact of environmental turbulence on business performance? And

what is the impact of market turbulence on business performance?

This study adopted a descriptive survey design on a target population of 150 managers from

24 confectionery organizations in the Kenyan market. A structured questionnaire was used

to collect primary data.

The findings of this study show that there exists a statistically significant relationship

between technological turbulence and business performance in the confectionery industry.

The findings have revealed the existence of a statically significant relationship between

environmental turbulence and business performance in the confectionery industry.

The findings show that there exists a statistically significant relationship between market

turbulence and business performance in the confectionery industry in Kenya.

This study concludes that the technological turbulence is important in that it can enhance

organizational business performance through additional technological know-how,

enhanced competencies, new knowledge exploration, and organizational learning that

enables confectionery firms to enhance business performance. This study also concludes

that environmental turbulence, particularly business operational environment, relationships

with political regimes on taxation, and social-cultural beliefs should be nurtured and

monitored closely to ensure they adopted to enhance business performance of

confectioneries. This study concludes that competition intensity, bargaining power of

buyers; bargaining power of sellers, and rivalry within the market affects business

performance of the confectionery industry

This study recommends that confectionery firms should invest more in emerging

technologies as a mechanism of leveraging technologies to enhance performance, while at

the same time, ensuring timely adoption minimizes negative effects of technological

turbulence. This study also recommends that confectionery firms should not only monitor

their operational environment, but also political relations, and social-cultural aspects within

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their operational spheres. Finally. This study recommends that confectionery firms should

enhance their competitive advantages through efficient and effective operations, quality

products, highly trained and competent human resources, in addition to adopting the latest

manufacturing equipment in the sector.

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ACKNOWLEDGEMENT

I would like to acknowledge Paul Katuse for the tireless guidance in the development of

this research project. I would also like to thank my family for the tireless support throughout

my education journey.

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TABLE OF CONTENTS

STUDENT DECLARATION ............................................................................................ ii

ABSTRACT ...................................................................................................................... iii

ACKNOWLEGEMENT.................................................................................................... v

TABLE OF CONTENTS ................................................................................................. vi

LIST OF TABLES ......................................................................................................... viii

LIST OF FIGURES ........................................................................................................... x

1.0 INTRODUCTION................................................................................................... 1

1.1 Background of the Study .......................................................................................... 1

1.2 Statement of the Problem .......................................................................................... 4

1.3 Purpose of the Study ................................................................................................. 6

1.4 Research Questions ................................................................................................... 6

1.5 Significance of the Study .......................................................................................... 6

1.6 Scope of the Study .................................................................................................... 6

1.7 Definition of Terms................................................................................................... 7

1.8 Chapter Summary ..................................................................................................... 7

CHAPTER TWO ............................................................................................................... 8

2.0 LITERATURE REVIEW ...................................................................................... 8

2.1 Introduction ............................................................................................................... 8

2.2 The Impact of Technological Turbulence on Business Performance ....................... 8

2.3 The Impact of Environment Turbulence on Business Performance ....................... 12

2.4 The Impact of Market Turbulence on Business Performance ................................ 16

2.5 Chapter Summary ................................................................................................... 20

CHAPTER THREE ......................................................................................................... 21

3.0 RESEARCH METHODOLOGY ........................................................................ 21

3.1 Introduction ............................................................................................................. 21

3.2 Research Design...................................................................................................... 21

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3.3 Population and Sampling Design ............................................................................ 21

3.4 Data Collection Methods ........................................................................................ 24

3.5 Research Procedures ............................................................................................... 24

3.6 Data Analysis .......................................................................................................... 25

3.7 Chapter Summary ................................................................................................... 25

CHAPTER FOUR ............................................................................................................ 26

4.0 RESULTS AND FINDINGS ................................................................................ 26

4.1 Introduction ............................................................................................................. 26

4.2 Demographic Information ....................................................................................... 26

4.3 Impact of Technological Turbulence on Business Performance ............................ 29

4.4 Impact of Environmental Turbulence on Business Performance ........................... 32

4.5 Impact of Market Turbulence on Business Performance ........................................ 37

4.6 Correlation Analysis ............................................................................................... 41

4.7 Regression Analysis ................................................................................................ 42

4.8 Chapter Summary ................................................................................................... 44

CHAPTER FIVE ............................................................................................................. 45

5.0 DISCUSSION, CONCLUSION, AND RECOMMENDATIONS .................... 45

5.1 Introduction ............................................................................................................. 45

5.2 Study Summary ....................................................................................................... 45

5.3 Discussion ............................................................................................................... 46

5.4 Conclusion .............................................................................................................. 50

5.5 Recommendations ................................................................................................... 51

REFERENCES ................................................................................................................. 53

APPENDIX I: COVER LETTER .................................................................................. 58

APPENDIX II: QUESTIONNAIRE .............................................................................. 30

APPENDIX III: RESEARCH BUDGET ........................... Error! Bookmark not defined.

APPENDIX IV: IMPLEMENTATION SCHEDULE ...... Error! Bookmark not defined.

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LIST OF TABLES

Table 3. 1: Population Distribution .................................................................................... 21

Table 3. 2: Sample Size Distribution ................................................................................. 22

Table 4.1: Reliability Analysis .......................................................................................... 26

Table 4.2: Confectionery Organization Technological Innovation ................................... 29

Table 4.3: Technological Innovation and Enhanced Product Lines .................................. 29

Table 4.4: Technological Innovation and Business Performance ...................................... 30

Table 4.5: Technological Uncertainty ................................................................................ 30

Table 4.6: Innovation and Organizational Restructuring ................................................... 31

Table 4.7: Technological Turbulence and New Knowledge ............................................. 31

Table 4.8: Knowledge Exploration and Business Performance......................................... 31

Table 4.9: Technological Innovation and Organizational Learning .................................. 32

Table 4.10: Environmental Turbulence and Competition.................................................. 33

Table 4.11: Environmental Turbulence and Competition.................................................. 33

Table 4.12: Environmental Turbulence and Tax Burden on Manufacturing ..................... 35

Table 4.13: Customer Buying Behavior and Business Performance ................................. 35

Table 4.14: Product Perception and Business Performance .............................................. 36

Table 4.15: Effect of Reducing Environmental Turbulence .............................................. 37

Table 4.16: prevalence of Market Turbulence ................................................................... 37

Table 4.17: Effect of Market Turbulence on Business Performance ................................. 37

Table 4.18: Market Competition ........................................................................................ 38

Table 4.19: Steady Dependable Buyers ............................................................................. 39

Table 4.20: Bargaining Power of Buyers ........................................................................... 39

Table 4.21: Bargaining Power of Suppliers Effect on Business Performance .................. 40

Table 4.22: Increase in Substitute Products ....................................................................... 40

Table 4.23: Threat of Substitute Products .......................................................................... 41

Table 4.24: market Intelligence and Market Turbulence ................................................... 41

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Table 4.25: Correlation Analysis ....................................................................................... 42

Table 4.26: Multiple Regression Model Summary ............................................................ 42

Table 4.27: ANOVA .......................................................................................................... 43

Table 4.28: Coefficients ..................................................................................................... 43

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LIST OF FIGURES

Figure 4.1: Respondents Gender ........................................................................................ 27

Figure 4.2: Respondents Age ............................................................................................. 27

Figure 4.3: Number of Years with the Organization ......................................................... 28

Figure 4.4: Respondents Job Designation .......................................................................... 28

Figure 4.5: Prevalence of Environmental Turbulence ....................................................... 32

Figure 4.6: Change Processes and Business Performance ................................................. 34

Figure 4.7: Environmental Turbulence and Political Uncertainty ..................................... 34

Figure 4.8: Effect of Environmental Turbulence on Business Performance ..................... 36

Figure 4.9:Effects of Market Competition on Business Performance ............................... 38

Figure 4.10: Dependable Suppliers .................................................................................... 39

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CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

In today’s world, the dynamic nature of globalization has subjected businesses and business

operational environments to a continuous wave of turbulence (Farsijani, Feizi & Shafiei,

2014). The speed at which business practices are adopted form one corner of the world is

fast, dynamic and competitive. This means that businesses have to continuously adjust to

the market forces to be able to remain viable, relevant and sustainable (Cooke, 2013).

Organizations are therefore forced to adopt new approaches of doing business be able to

attract customers, compete effectively, and enhance their business performance. This is

more so the case in the confectionary industry, where buoyancy in information gathering,

manufacturing, and assembling and distribution of their products (Farsijani et al., 2014).

The quicker the movement by organizations’ in adopting to the dynamic and changing

environment, the better the chances in enhancing competitive advantage necessary for

continuous business performance (Buganza, Dell’Era & Verganti, 2014)

The global confectionery market size was estimated at $184, 056 million in 2015, and was

expected to grow to $ 232, 085 million by the end of 2022 (Allied Market Research, 2017).

The leading players in the confectionery industry include Delfi Ltd of Singapore, Ezaki

Gilco Ltd of Japan; Lindt & Sprungli of Switzerland; Ferrero SpA of Italy; Lotte

Confectionery Ltd of South Korea; Mars Inc of USA; Nestle’ S.A of Switzerland; Wrigley

Jr Ltd of USA; and The Hershey Company of USA (Allied Market Research, 2017). For

instance, Wrigley Ltd is a global confectionery company that operates in more than 40

countries and distributing products in 180 countries. Wrigley started operations in 1891 in

Chicago USA, before expanding to other parts of the world (Farsijani et al., 2014).

Wrigley’s products include chewing gum, chewy candies, and mints. Some of the renown

Wrigley’s brands include Juicy Fruit; Wrigley’s Spearmint, Altoids, Orbit, Skittles,

Doublemint, Freedent, Winterfresh, Airwaves, Extra, and Eclipse.

Nestle from Switzerland is another confectionary conglomerate established in 1866 and

sprawling over 189 countries (Buganza et al., 2014). Some of the confectionaries by Nestle

include Butterfinger, KitKat, Crunch, Smarties, Orion, Aero, Wonka, Nestle Toll House,

and Cailler. On the other hand, Cadbury, a British multinational confectionery is the second

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largest after the Mars of the USA. Cadbury has subsidiaries in more than 50 countries. Some

of the Cadbury’s products include Dairy Milk chocolate, Roses selection box, Crème Egg,

Fudge Minis, Dairy Oreo, among others. Just like other products in other industries, the

confectionery industry has experienced turbulence environment affecting business.

According to Rob (2013), turbulent business environments are both external and internal

constant and unpredictable changes that affect business operations.

On the other hand, Buganza et al., (2014) posit turbulent environment as the amount of

change, and complexity associated with the change in a given business operational sector.

Companies in the confectionery sector (sweets/ candy and chocolate) are continuously being

challenged by an increase in competitiveness of their operational environment, dynamic

rapid changes in customer demands, to the extent that even the most traditional require their

operational processes and procedures modified from time to time to meet market

specifications, or customer needs (Cooke, 2013). As such, companies have adopted new

strategies to enhance their flexibility, quality, and responsibility. This is due to the fact that

new technologies and sector-specific philosophies do emerge to obsolete existing ones,

while on the other hand, customers remain relentless in their short-term product demands,

and equally demand new service (Rob, 2013).

According to Buganza et al., (2014) business turbulence takes different forms: technological

turbulence, market turbulence, economic turbulence, and even political turbulence. Since

the 21st century, technology has been at the forefront of innovation, competitiveness, and

business performance. Most organizations seeking to enhance competitive advantage, or

operational efficiency have turned to technology to gain such an advantage (Farsijani et al.,

2014). However, with the advent and adoption of technology in businesses, there emerged

significant disruption and turbulence to the normal way of doing business. For instance, Rob

(2013) notes that the earlier industrial revolution in Europe and America in the mid-1800’s

by the introduction of mechanized production did not have a severe impact as compared to

technological revolution of the 21st century. This is because mass production lines that were

managed by labor workers started being replaced by computerized technologies, and in the

process, enhancing efficiency, quality, and production. In as much as this was desirable, this

meant rapid disruption in the way of doing business for those who wanted to remain

competitive and relevant. As such, training of human capital had to change from unskilled

to skilled labors who could operate technology (Buganza, 2014). Companies had to retrain

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employees, enhance technical competencies and capacities when installing new

technologies (Hafeznia, 2012)

Market environments do influence how an organization does its business. When there is too

much turbulence in the market environment, the business operation becomes unstable

resulting either in poor competition, stiff competition, more or fewer entrants, and at the

time, market turbulence can make an organization’s products uncompetitive (Lichtenthaler,

2009). Global market forces can influence how organizations structure their operations, and

performance. Chen and Lin (2014) note that global market turbulence can either be

economical, social, political, technological or environmental changes and development.

Such turbulences, in most instances, due to globalization, do cascade to the regional level,

and national standards, and as such, influences how business competitiveness.

According to Hafeznia (2012), market turbulence has several characteristics. This includes:

competition intensity from new entrants, increase in availability of substitute products, and

severe fluctuations of product prices causing a negative impact on an organizations

performance or business operations (Sulaimani & Munira, 2012). Due to the impact of

globalization, developing countries have a disadvantage when it comes to market

turbulence. In most instances, as argued by Omri (2015), most technological innovations

emanate from the west. Meaning, these technologies are less disruptive to markets compared

to developing countries where the markets might be adopting the technology for the very

first time. This does not mean that Europe and America do not experience market or

technological turbulence, but rather the rate of assimilation of new technology within their

high development markets is more business-friendly than in developing countries

(Hafeznia, 2012).

According to Buzanga et al., (2014) turbulent environments influence business operations

globally. For instance, the financial and economic crisis of 2007/2008 in the United States

of America affected almost the entire Europe, and some countries in Asia. Most business

experience negative growth, loss business, stagnation, and even collapse. The example of

this being the Lehman Brothers that collapsed sending shockwaves through the American

and European markets (Cooke, 2013). In as much as the impact of 2009 did not significantly

impact Africa or Asia, it demonstrated how market turbulence could have affect business

operations and performance.

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Business performance is determined by various factors. According to Mamat and Ismail

(2011), some of these factors include competitive advantage, cost reduction capabilities,

and enhanced profits. For a business entity to progressively enhance performance, both

internal and external factors as highlighted by Mamat and Ismail (2011) should work in

concert to deliver on the organizational objectives. This is not always the case, particularly

in when environmental turbulence pervades performance factors. According to Oginni,

(2010) business entities do not operate in isolation of in a vacuum; both internal and external

factors influence the ultimate business performance.

Rob (2013) posits that operational business environment in Africa is extremely dynamic

due to the fact that most African states have variant business operation policies, trade

liberalization policies, and different regional business integration mechanisms. Thus,

business environments in Africa are case specific, and different dependent integration and

economic macro and microeconomic policies. In examining the link between turbulent

environment, it is difficult to use Africa summatively in this regard (Farsijani et al., 2014).

Whereas macro and microenvironmental factors in Southern and Northern Africa might be

conducive for business operation and performance, the same might not be the case for

Western African firms. Comparatively, the European Union (EU) states share common

markets, policies, tariffs, and regulations, and thus, business entities within the region tend

to enjoy similar advantages (Cooke, 2013). It is important to note that businesses in Africa

might be predisposed to economic turbulence as compared to European counterpart due to

advances in financial infrastructure, business regulations, and technology. According to

Hafeznia (2012), effects of environmental turbulence have a significant impact of viability,

performance, and sustainability of business entities, and therefore, cannot be wished away,

but rather, embraced with relevant and significant mitigation strategies.

1.2 Statement of the Problem

In the last two years confectionery industry in Kenya has been affected by business

operational turbulence forcing mega confectioneries like Wrigley’s to be acquired by

Confectionery giant Mars Inc. of USA, and as a resulting in significant changes for

Wrigley’s branches globally. Equally, other confectioneries such as Cadbury, Nestle, Mars,

have over the years gone through various restructuring due to environmental turbulence that

has in one way or the other affected their business. Africa confectionery markets have not

been spared with Nestle restructuring its Africa operational model, while at the same time,

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Wrigley’s East Africa has been acquired Mars group resulting in organizational

restructuring, including relocation from Nairobi to Machakos County (Njihia, 2017).

For the last 2 years, Wrigley’s East Africa has seen a dip in its profitability despite reporting

an increase in sales. As a result, staff salary increments and annual bonuses have been

suspended indefinitely. Partly, this has been attributed to costs associated with construction

of new factors under Mars Inc. However the impact of turbulence environment (economical,

technological, and market) experienced in Kenya has not been examined. Therefore, there

exists a knowledge gap on the impact of turbulent environment on business performance in

the confectionery industries (Buzanga et al., 2014).

Several studies have been conducted in the area of business environments and turbulent

environments. For instance, Buganza, Dell’Era and Verganti (2014) study on the effect of

turbulent environment on business performance on Mobile telephony sector in Spain, and

established that technological turbulence had the most significant impact on business

performance. On the other hand, Chuthamas (2011) study focused on examining how

turbulent environments affect small businesses in Thailand. The study concluded that there

existed a relationship between both technological, and market turbulence and performance

of the small business in Thailand. A study Njihia (2017) focused on innovation and use of

technology as a strategic tool for SME’s operating in a turbulent environment in Kenya. The

study concluded that SMEs are affected by social and technological factors than turbulent

environments. As noted, turbulent environments can negatively and positive affect business

performance. However, most of these studies did not focus on the confectionery industry.

Similarly, the studies have attempted to look at innovation in general and how this affects

business operations, but have not examined how turbulent environments impact business

performance particularly in the confectionery industries, and that is the gap this study seeks

to explore.

This study, therefore, seeks to expand on the available literature and also fill the gap existing

in the literature on the effects of turbulent environments on business performance in the

confectionery industry. Key focus areas for this study was an examination of market

turbulence, environmental turbulence, and technological turbulence.

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1.3 Purpose of the Study

The purpose of this study is to determine the effect of turbulent environment on business

performance in the confectionery industry

1.4 Research Questions

The following questions guided this study.

1.4.1 What is the impact of technological turbulence on business performance?

1.4.2 What is the effect of environment turbulence on business performance?

1.4.3 What is the impact of market turbulence on business performance?

1.5 Significance of the Study

This study is significant to the following stakeholders

1.5.1 Confectionery Industry

The confectionary industry can adopt the findings of this study to formulate strategies and

policies that will enhance competitiveness and also, can adopt recommendations of this

study to on how to deal with different types of turbulence in the market

1.5.2 Academicians and Researchers

Researchers and academicians seeking to gain knowledge or expand on research in the area

of turbulence on business performance can rely on the findings of this study or can use the

findings of this study to test hypothesis or con

1.6 Scope of the Study

This study seeks to determine the impact of turbulent environment on business performance

in the confectionery industry in Kenya. This study targeted both departmental managers

from all the 24 confectionery organizations. This study was limited to corporate managers

since they are in charge of developing and implementing strategies to contain turbulent

environment on business. The study was conducted from January 2018 to June 2018.

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1.7 Definition of Terms

1.7.1 Market Turbulence

Markey turbulence is defined as the constant changes or disruption in the competition, cost

of doing business, new entrants, ease of substitute products, and regulations that cause

harmful disruptions in the market structures (Sulaimani & Munira, 2012)

1.7.2 Technological Turbulence

Technological turbulence is defined as the constant change or disruption in the structure of

the market due to the rapid introduction of new and changing technologies (Mabrouk &

Mamoghli, 2010).

1.7.3 Environmental Turbulence

Environmental turbulence is defined as both the internal and external forces that bring

constant changes on business operations in terms of complexities associated with the

changes (Buganza et al., 2014)

1.7.4 Business Performance

Business performance is defined as the alignment and achievement competitive advantage,

profitability, lower cost of business, and an increase in client base over a set period of time

(Buganza et al., 2014).

1.8 Chapter Summary

The background of the study on turbulent business environment and business performance

has been presented in this chapter. The statement of the problem to which the study seeks

to respond to has also been presented in this chapter. The study research questions, the

significance of the study, the scope of the review, and the definition of terms used in the

study has also been presented.

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CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

The literature review on empirical studies on the impact of turbulent environment on

business performance is presented in this chapter. The section presents the literature review

based on the following research questions; what is the impact of technological turbulence

on business performance, what is the impact of environmental turbulence on business

performance and what is the impact of market turbulence on the business environment. The

chapter is concluded by a chapter summary providing an overview of the literature review

covered based on the research questions.

2.2 The Impact of Technological Turbulence on Business Performance

Technological revolution and the information explosion in the past two decades,

organizations have changed the ways of doing businesses in an attempt to cope with the

environmental changes. Organizations must continuously maintain the adaptability as well

as flexibility in today’s changing world (Mahajan, 2015). This stress the significance of

organizational learning for organizations that want to remain relevant and competitive in

the marketplace. Researchers have used the term “absorptive capacity” and suggest that it

can increase an organization’s capability to sustain competitive advantage through

reconfiguring its base of resources and by adapting to the dynamic market conditions

(Lillington, 2014). On the other hand, Christensen (2015) stresses that businesses’ capacity

to learning is crucial for survival in the marketplace since absorptive capacity can be used

as a mechanism to reinforce or refocus the organization’s knowledge base. Some of the

technological turbulence include innovation and organizational exploration.

With increased digital revolution and the explosion of information in the past two decades,

firms have now changed their ways of doing as well as approaching business (Carbonell &

Escudero, 2012). The speed at which technology evolves and the changes that come along

with it have made a significant influence on the creativity and innovations of the companies.

In the modern world of technology, firms need to keep up with adaptability and flexibility

to match the changes in the environment (Ali & Matsuno, 2018). This has stressed the

importance of organizational learning to cope up with technological turbulence. Iyer (2014)

9

uses the term absorptive capacity to state that it can always increase the company’s ability

in sustaining competitive advantage through configuration of its resources base and by

adapting to the changes in the market conditions, hence, making the firm’s ability to learn

as vital and crucial for their survival otherwise the companies can be doomed irrelevant in

the business environment.

Technological turbulence has forced companies into organizational learning which is a

process through which the firm renews its competences by value recognition of the new

information, assimilate it and apply in their business processes as an attempt to address

technological turbulence before it is too late (Pratono, 2016). With perspectives of

organizational learning Iyer (2014) expresses that companies generate their capabilities by

dividing their attention and other scarce resources among two broad aspects that are

knowledge exploitation and knowledge exploration. Knowledge exploitation is where the

firm applies and examines possible application of the knowledge that has been explored and

retaining it in the organization by including things like production, choice, efficiency, and

implementation. According to Chen and Lin (2014) exploration is the generation of new

knowledge in the company through invention efforts internally and acquisition of the

external resources that are necessary for inventions within the company, this includes things

like discovery, flexibility, creativity, and innovation. Companies that maintain a balance

between knowledge exploitation and exploration can easily cope up with technological

turbulence.

2.2.1 Innovation

Christensen (2015), innovative technological turbulence can significantly impact business

operations and performance. Innovation can be very disruptive particularly if new

technology is being introduced to the business operations. As such, innovation can bring

technological disruption that can define whether the business processes enhances

performance or not (State, 2013). This is supported by the fact that business incumbent

tends to focus on product and service improvements for their current business segments and

overlook (Christensen, Raynor, & McDonald, 2015) the inferior portion which is ignored

giving rise to opportunities that can be exploited by new entrants to cause turbulence.

Turbulence many take several forms as described by Tellis and Sood (2010) in the study

known as demystifying disruption. Their findings indicated that there are three domains of

turbulence, these include; the firm field, the demand and technological turbulence. The firm

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turbulence can take place during the time when business market share whose products are

using new technology exceed the market share of the biggest firm whose products and

services use the highest share technology, in this form of turbulence, the existing business

or new entrant can disrupt dominant organization in certain technology (Sood & Tellis,

2010). On the other hand, the demand turbulence occurs when the total share of products in

the market on the basis of new technology surpasses the share of the products based on the

dominant technology.

The technological turbulence drives the other two forms of turbulence, and this has been

widely explored in numerous studies as indicated by Raynor, McDonald, and Christensen

(2015). It is described as the technology which outperforms the various dimensions of

dominant technology, primarily in terms of performance (Sood & Tellis, 2010). The same

definition is supported by (Verspreet, 2013) through citing technological turbulence as the

technology which alters competition basis on which organizations compete through various

transformation performance metrics. This means that every developed technology for the

market on which established organization has limitations, the turbulence technology will

improve significantly over the time at a certain point and surpass performance of the

dominant technology and eventually it will be valued as much as the old technology by

consumers changing the way firms compete through the introduction of the new

performance metrics that were not part of the competition (Bower & Christensen, 1995).

As far as the literature on technological turbulence is concerned, innovation is regarded to

be a theme on the improvement of technology, either on small scale or large scale

(Christensen, Raynor, & McDonald, 2015). Innovation is described as the process of

developing a new product, service or a method that can provide added value to the users

through a provision of a function which is better at the same time affordable than the

previous option (Marcus, 2016). It can further be defined as the implementation of new or

significantly new marketing methods as well as new ways of organizing the work of

business (Hutt, 2016). Innovation cannot be only be limited to products because, in the case

of tech industries, for instance, it is evident that (Thornhill, 2017) that technology companies

need a significant amount of Research and Development for them to stay relevant with the

constant innovation that comes forth in their industry. Production in tech companies are

often the inputs into other industries which are posing a demand of making their processes

as well as products cheaper offering a high value to the end user (Howard, 2013) as the

result these companies focus on driving the innovation through the hiring of engineers and

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recruitment of new scientists and hiring of highly qualified technicians to drive the

performance of the business.

Research and development play a crucial role in the process of innovation (Mahajan, 2015).

Essentially it is an investment in technology as well as future capabilities which can be

transformed into a new service, products, and processes (Christense, 1993). In any business

industry and the technology, R&D is an essential component of innovation and acts as a key

factor in developing a competitive advantage for the organization. A company that has

devoted itself to the R&D they have managed continuously to stay ahead of the competition

(Root, 2007), Intel, in particular, has led to stay abreast in its industry largely due to the

investment is done in their R&D department.

2.2.2 Organizational Exploration

Organizational learning is the process through which an organization renews its

competencies by recognizing the value the new information offers, apply it and assimilating

into the firm (Cohen & Levinthal, 1990). Through the perspective of organizational

learning, it conveys that companies generate competence in two kinds of activities by

dividing attention as well as the scarce resources (Pratono, 2016). These two activities are

knowledge exploration and knowledge exploitation. Exploitation is defined as the

application and the examination of the possible applications of the knowledge being

explored and retained in the organization. The exploitation involves things like efficiency,

production, choice, selection, refinement, implementation and the execution (Lusia, 2016).

Exploration, on the other hand, refers to the generating of new knowledge within the firm

by involving internal invention efforts and external acquisitions from external sources

dividing knowledge exploration into the internal and the external exploration. The process

of exploration involves various things like variations, discovery, innovation, play, variation

and risk-taking (Lusia, 2016). Having the balance between exploitation and exploration

becomes complex since they are all competing over the same resources.

The ability of the organization to exploit the external sources of knowledge as well as

internal is an essential element of innovation capabilities within the firm. Cohen and

Levinthal (1990), argue that the capability to evaluate and use the external knowledge is

largely a function of the level of prior related know how. At the elemental level, prior

knowledge consists of the very basic skills (Bughin, 2017) or even shared a language but it

may also involve knowledge of the most recent technological and scientific developments

12

in a given field. The prior knowledge confers the ability of the firm to recognize the value

of new information, assimilating it and the application to commercial ends (Buganza,

Dell’Era & Verganti, 2014)

According to Bughin (2017), the imbalance between exploration and exploitation within the

company might lead to two things either a competency trap when implementing a system

that engages in exploration or suffering the costs of experimenting without gaining its

desired benefits. When a company strives for exploitation, there is always a trend towards

prediction of greater certainties, speed, proximity as well as clarity in terms of

organizational activities (Liu, 2006). This indicates that less effort is directed toward

revolutionary innovations, and in the long term this may be a component influencing the

tendency of obsolescence within the organizational knowledge management. Having

explicit knowledge is more present in terms of exploitation, and there is an idea of

continuity, standards operating procedures and repetition resulting to the addition of

competencies for the employees (Popadiuk, 2016) and the organization as a whole.

There is a growing interest in organizational learning and its associated concepts in

knowledge exploration. Previous researchers such as Bughin (2017) and Popadiuk (2016)

have indicated that the ability of organizations to learn is their primary source of competitive

advantage. Maintenance of appropriate balance between exploration and the exploitation

within the organization is the primary objective in organizational prosperity and survival in

a turbulence business environment (Lusia, 2016). Organizational learning can serve to

utilize the knowledge existing in the company and incorporate new knowledge into the

existing knowledge base in which the competencies of the company can be improved and

new ones to be developed for the organization to remain sustainable and cope with various

technological turbulence factors hindering its success.

2.3 The Impact of Environment Turbulence on Business Performance

The environment turbulence is an operational space where organizations relentlessly face

constant change characterized by profound transition. Organizations grapple with the

changes taking place in their environment to remain viable, vibrant, profitable and

competitive (Perrott, 2011). The changes in the environmental conditions impact most

companies hence making them emphasize on their external environment, performance,

strategic direction making strategic formulation to be crucial during this time for business

sustainability as the business operates in the uncertain business environment. The

13

environmental factors that may influence the organization include changes in the market,

customer demand, and competition (Shamsher, 2016).

The environment in which organizations operate is evolving with its unclear boundaries, the

turbulence and technological innovations taking place require companies to be flexible and

adapt changes with response strategies as well as the structure that can accommodate the

environmental changes of the business environment at all times (Shamsher, 2016). The

competitive environment for business expects to face turbulence impact of its environment

since the markets in this environment are considered as being increasingly involved with

the traditional industries converging the supply of goods and services in diversity. The

existence of shorter life cycles, perceptive and knowledgeable consumers are adding the

increasing complexity in the operating business environment (Jeroen, 2016).

In reference to Mason (2007), the business environment is made of a set of relationships

between the stakeholders and the environment and these relationships vary with the

individual decisions taken. He further describes that these relationships continuously co-

create the environment causing the business environment changes faster than ever before

and with such change occurring in two dimensions, turbulence, and complexity (Mason &

Clubb, 2007).

Environmental turbulence can be explained as dynamism in the business environment which

involves a rapid and uncertain change in the environmental dimensions (Mcmillan &

Conner, 2010). A stable business environment tends to change less often and when it does

the change is predictable. At the same time, there are many uncertain and unexpected

changes in the turbulent environments. Turbulence is brought by the changes and the

interactions between the environmental factors most of which are technological advances.

The increase of environmental turbulence, as a result, a reduction in orderly competition,

the highly need for information and responsive innovation and difficulty in comprehending

customer requirements for their products and services (Farsijani et al., 2014). As turbulence

increases in the business environment, strategic issues to be addressed by the organizations

through strategy formulation and implementation emerge. In addition, turbulence questions

the duties, the balance of authority and decision making priorities between those who govern

and manage. The different levels of turbulence determine the kind of responses the company

should take to survive. At low levels organization tend to respond by making operational

changes with a few strategic adjustments, on the other hand, with higher turbulence levels,

14

strategic issues that could impact the business’s ability to meet its goals and objectives can

engage at more frequent intervals under conditions such as vital issue management system

(Perrott, 2011).

Business leaders require guidance on how they need to cope up with the turbulent

environment if they want to improve corporate performance (Bughin, 2017). Studies on

environmental turbulence have suggested that companies that adopt a less centralized,

organic structure in uncertain environments. To cope up with the turbulent environment is

at the forefront of every business leader seeking a guide on how they can mitigate risk and

uncertainty that poses negative implications in their business operations. Studies have also

highlighted various ways on how companies can maximize their overall corporate

performance in an environment which is dynamic and volatile (Jaiswal, 2010).

Market leaders must also face and cope with turbulence by adjusting their strategy, sharing

of responsibilities for approach broadly within the company and focus on the firm’s

capabilities as their main source of competitive advantage (Lusch & Vargo, 2015). Other

researchers like Bughin (2017) have suggested that companies concentrate on the creation

of cross-functional organizational committees and a matrix while encouraging a boundary

spanning of events within the company. The contingencies of the environment also view the

company in a sense that it must align their strategy with the turbulent environment through

structuring the organization in a manner that has less centralization and more organic during

uncertain conditions. Innovation represents the most effective way for companies to deal

with external environment turbulence (Liu, 2006).

According to Payne and Leiter (2013), business industries are characterized with instability,

for instance, the media industry, computer, and telecommunication industries are often

noted to be highly turbulent, and people expect that situations will always prevail. However,

almost all industries at some point experience turbulence in their environment which may

vary form one industry to another industry. An environment with turbulence has also been

described as attributed by high levels of interfered changes which create uncertainty making

it difficult to predict changes that may occur due to its nature of volatility and dynamism

that sharp discontinuities in demand and rates of growth (Keegan, Harwood , & Lavallee,

2010). Putting together all these descriptors make up instead through measures of turbulence

in the environment, but when standing alone, for instance, there is a possibility of having a

heterogeneous environment that is not characterized with turbulence (Bughin, 2017).

15

However, in a hostile varied and dynamic turbulent environment will generate turbulence

that is defining turbulence in the business environment like the one in which unpredictable

and frequent market or technological changes within a certain industry accentuate

uncertainty and risk in the strategic planning exercise to address turbulence. Having the

inability to foresee accurately, even within the context of contingencies will help the

organization define turbulence from the top level management team aspect (Carbonell &

Escudero, 2012).

2.3.1 Political and Legal Environment

According to Naucer and Kandil (2009), the political processes and legislation within the

business environment have the influence on environmental conditions that a business or the

industry must comply with in order to operate. They further suggest that political and

government legislation have a significant effect on the governance of the business (Naceur

& Kandil, 2009). Political constraints for instance may be put on organizations through fair

trade regulations, tax programs, minimum wage laws, (Jeroen, 2016) pollution and the

policies on pricing which are likely to be seen as protecting the interests of consumers, the

environment, and employees and could restrict the profitability of the company as well as

its performance. At the same time, patent laws and government subsidies and product

research grants tend to protect the interests of the organizations (Farsijani et al., 2014) even

to enhance their profits and performance.

Shamsher (2016) suggest that it is crucial for companies to establish a political connection

with the government supporting the business environment in which it operates. The

relationship with the government tends to influence the strategic decisions within the firm

as well as the overall corporate governance of the business. The operational environmental

of the business consists of the market and the non-market dimensions, which is the political

and legal environment which play a key role in the growth of the business. Therefore, it is

important that companies have both the market and political strategies (Shamsher, 2016).

2.3.2 Social-Cultural Environment

Businesses do not operate in a vacuum, even the most successful companies must be aware

of the changes taking place in the societies and cultures in which business is operating with

an attempt to fulfill its missions and objectives of the firm (Richards, 2010). As the changes

in the culture and the society take place, companies are forced to adapt and stay ahead of

16

their competitors and stay relevant in the minds of customers interacting with the brand in

the marketplace (Grimsley, 2009). Lumpkin, Eisner, and Dess (2008) argue that socio-

cultural factors influence the beliefs, the values and the lifestyle of a society the business

operates in. They further indicate that the socio-cultural forces strongly influence the

revenues of products and services through the enhancement of sales of services and products

of an industry as a whole while at the same time suppressing those of the other sectors in

the business environment (Jeroen, 2016).

Customer purchases are significantly influenced by cultural, personal, and psychological

behaviors, and generally, marketers find it hard (Martin, 2014) despite taking them into

considerations. There both internal and external factors that influence the consumer buying

process as well as the behavior. The external factors consist of technology, social-cultural,

demographics while internal factors influencing consumer behaviors include attitudes,

motives, and needs, perception, personality, and values, together influence the consumer

behavior (Keegan, Harwood , & Lavallee, 2010)

Armstrong and Kotler (2014) have reinforced this by arguing that consumer buying

behaviors and their choices for products and services can be influenced by four major

psychological forces; these forces include; perception towards the product, motivation,

attitudes, learning, and beliefs. Attitudes represent the customer’s consistent evaluations,

the feelings and the inclination they have towards an idea, hence, putting themselves into a

state of mind for loving or disliking things or even moving away or towards a certain object

(Martin, 2014). This makes the creation and development of marketing strategies an integral

part of the business to seek competitive advantage over its rivals through the application of

market segmentation being the pivot to establishing an effective target market strategy in

the dynamic business environment (Simkin, 2008).

2.4 The Impact of Market Turbulence on Business Performance

According to Pearce and Robinson (2011), the market environment is defined through its

market turbulence. Different authors have conceptualized the concept of market turbulence

such as Shamsher (2016) who proposed the three environmental features that are the market

turbulence, technological turbulence, and the competitive intensity. The technological

turbulence and market turbulence are the rate of change in the technology and the market

respectively (Saeed & Aimin, 2015). Competitive intensity, on the other hand, refers to the

rate of activities and actions taken by competitors of the business (Jeroen, 2016). In this

17

study, market turbulence is regarded as the rate of change in the composition or proportion

of consumers and their preferences (Jaworski & Kohli, 1993). With this definition, market

turbulence captures the dynamism taking place in the customer base, the wants and needs

of consumers and the uncertainty of the market in terms of the changing rate in respect to

the competitors. Market uncertainty involves prediction of the future for the market

preference, the state of its competition and the environmental forces evolution

In regards, the market turbulence concept attempts to simultaneously evaluate the change

that businesses face in their consumer composition and the competitors also known as the

market dynamism and try to prepare the company to deal with the new competitive

situations (market uncertainty) (Milliken, 1987).

2.4.1 Competition

The market environment is determined by the kind of competition the firm is facing from

its rivals. In addition to the remote environment of the business, managers are challenged to

take into consideration the competitive environment as well as the industry.

Competitiveness in this sense refers to the positioning of the firm according to the strengths

and weaknesses the company has; this includes both intangible and tangible assets and the

managerial competencies the firm has (Dess, Lumpkin , & Eisner , 2008).

Saeed and Aimin (2015) argue that organization’s environment hosts various competitive

forces as well as a strategic performance which is significantly related to the capacity of

handling the impacts of competition in an industry and profitability of the business being

directly related to the environmental competition (State, 2013). The market turbulence can

be put into perspective with the use of Michael Porter’s five forces Model.

2.4.1.1 The Bargaining Power of Buyers

Buyers of the company’s products and services tend to pose a threat to the organization and

the industry as a whole; customers can cause turbulence to the organization as they demand

better products and playing competitors against one another. The power that each buyer

holds depends on the attributes of the situation prevailing in the marketplace based on the

significance of that buying group. A group of buyers becomes powerful when they purchase

large volumes of certain products or services that are relevant to the seller’s sales, and when

the products or service in the industry are undifferentiated, buyers have low switching costs

and when they show a threat of backward integration for the company’s products and

18

services. In addition to the bargaining power of buyers, Saeed and Aimin (2015) indicate

that consumer loyalty seems to be the marketplace currency of the 21st century. On the other

hand Lusch and Vargo (2015) suggest that customer retention is a good and effective

strategy rather than trying to attract new customers due to high costs involved in dragging

new customers into the company’s product and services to replace defect customers, making

it evident that consumers have a great role in the performance of organization.

With increased market turbulence, Pearce and Robinson (2011) argue that consumer

orientation also has a positive impact on business performance. The concept of market

orientation involves incorporating customer orientation and competitive orientation with a

focus on competitive threats and customer orientation focusing on the needs and wants of

consumers (Ranchhod, 2004). Businesses are faced with the market turbulence coming to

the bargaining power of buyers coupled with the challenging task of constant satisfaction of

consumer needs and wants. Through the collection of information pertaining to the needs

of customers and the actions of the competitors, a business can become more responsive to

the needs and wants of consumers hence; the organization becomes able to respond rapidly.

2.4.1.2 Intensity of Rivalry among Competitors

The environment in which businesses operate is faced with intense market competition

(Martin, 2014). Casu (2009) on the other hand indicate that competition is considered to be

having a positive impact on the efficiency, international competition of the industry and

innovation. Pearce and Robinson (2011) the rate of rivalry among competitors depend on

the intensity and the basis of the competition. Intense rivalry is due to the several interacting

forces that include various costs of storage, the absence of differentiation and high exit

barriers in the industry (Porter, 2008).

The more the rivals in an industry, the higher the competition pressure form the competitors

in the industry. A slow rate of growth tends to increase the competition rivalry because firms

have a higher tendency of competing with rivals with an attempt to steal market share.

Industries need to develop their own strategies in an efficient manner after scrutinizing the

company environment in which it operates (Jaiswal, 2010). Researchers have also found

that the strategy of the company is established by its competitive environment and matching

of the appropriate strategy tend to enhance the performance of the business (Shamsher,

2016).

19

2.4.1.3 Bargaining Power of Suppliers

Pearce and Robinson (2011), suppliers can have the bargaining power in the industry

through increasing of prices or reduce the quality of the goods and services purchased by

the organization. Hence, they become powerful in squeezing revenues out of the industry.

Suppliers have high bargaining power when the group of suppliers is dominated with a few

competitors, and the suppliers do not have any threat of a substitute product, the industry is

not a significant client of the supplier group, the product of the suppliers is a crucial input

to the buyers, high switching costs for the buyers and when the supplier group pose a

credible threat of forwarding integration (Lusch & Vargo, 2015).

Switching costs can be regarded as the market turbulence coming from the bargaining power

of suppliers. Switching costs refer to the one-time expenses that consumers incur in the

process of switching from one supplier to another. According to Kim (2009), switching

costs are consumer’s costs from switching and can also be referred to as barriers and benefits

from the constraints.

2.4.1.4 The Threat of Substitute Products and Services

All the firms in the industry compete with other firms that produce the substitute products

and services. Substitutes tend to reduce potential returns or profitability through replacing

ceilings on the prices that a company can charge at a profit. Porter (2008) indicates that a

substitute commodity tends to perform the same or a similar function as an industry’s

products through different means. Pearce and Robinson (2011) suggest that substitute

products and services requiring keen attention are the ones subjected to trends improving

their price-performance trade-off with the industry’s products and services or the ones being

produced by industries earning high profits.

2.4.1.5 The Threats of New Entrants

According to Pearson and Robinson (2011), the degree level of new entrants depends on the

barriers of entry and the reaction from existing competition that entrants expect, when

barriers to entry are too high, and new entrant hope to have a sharp retaliation from the

existing competition, then they do not pose a severe threat of entering the market or industry.

The barriers to entry consist of access to distribution channels, costs disadvantages (Dess,

Lumpkin , & Eisner , 2008). Thompson (2008) add to the factors which increase the threats

20

of new entries a large pool of entry players with sufficient expectations of new entrants with

an attempt to make high profitability

2.4.2 Market Orientation

In times characterized by an increased rapid change in the consumer’s tastes and even faster

fast technological progress, the intensity of rivalry among competing firms brought by the

market turbulence. It is essential for companies to develop mechanisms within their

organization that will help generate the market information, analyzing the data and

addressing the changes taking place accordingly (Saeed & Aimin, 2015). The set of

activities or initiatives developed by companies permanently to monitor, analyze and to

respond to the changes in the market is what is known as market orientation (Lusch &

Vargo, 2015) and its usefulness in the marketing performance (Dess, Lumpkin , & Eisner ,

2008). Terms such as customer focused, market-driven and market-oriented have become

the synonyms with the proactive approach of the business strategy in companies all over the

world to deal with market turbulence.

The notion in the companies that the needs of the customers need to be the source of

organizational planning processes seems to be a contemporary one as is the idea of

organizing a firm’s activities by understanding the consumer needs and demands to

overcome market turbulence (Kirca, Bearden, & Jayachandran, 2005). As many theorists

cite Peter Drucker’s statement that marketing is not an exclusive functional activity but the

whole business as seen from the perspective of the final result that is from the consumer’s

point of view. More specifically, market orientation consists (Saeed & Aimin, 2015) of

generating and disseminating of the market intelligence which is composed of the

information on the external business environment confronting the company, and sharing the

information among various departments in the organization to develop a rapid managerial

action to overcome market turbulence.

2.5 Chapter Summary

Chapter two presented the literature review on the impact of turbulent environment on

business performance. First, the chapter covers the literature on the impact of environment

turbulence on business performance, followed by the impact of environment turbulence on

business performance and the impact of market turbulence on business performance.

Chapter three of the study presents the research methodology adopted by the researcher.

21

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

The research methodology that was used to carry out this study is presented in this chapter.

The research methodology includes the research design highlighting the approach; the

population upon which the study was based; the sampling design which consists of the

sample frame, sample size, and sampling technique have also be presented. The data

collection methods, research procedures and data analysis are also presented in this study.

3.2 Research Design

According to Cooper and Schindler (2014), research design is defined as the roadmap or

framework that is used to determine the structure and methodology that was adopted for a

study. On the other hand, Creswell (2014) noted that a research design maps the overall

strategy research adopts to carry out a study that ensures logical sense that responds to the

study objectives. In choosing a research design, research has to be sure that he /she can

justify the choice of the design, the resource required to implement the design, and the type

of data required for the study. This study adopted a descriptive research design. Descriptive

survey design is defined as a study design that enables a researcher to collect both qualitative

and quantitative data in a manner that can enable the researcher to describe the study

characteristics, without tempering or influencing the study subject (Cooper & Schindler,

2014). This study adopted the descriptive survey design because primary data was collected

for this study, and a description of the respondent’s characteristics is essential to the findings

of this study.

3.3 Population and Sampling Design

3.3.1 Population

The population of a study refers to the whole elements of a study that a researcher seeks to

investigate or study (Creswell, 2014). A study population can also be defined as the subjects

of objects, or units that a researcher seeks to study and make an inference. According to

Cooper and Schindler (2014), a study population defines the context from which a study is

conducted. The target population of this study was 150 managers from 24 confectionery

organizations in the Kenyan market

22

3.3.2 Sampling Design

Sampling design is defined as the process through with a researcher establishes the basis for

selecting a sample for a study (Lavrakas, 2008). Creswell defines sampling design as the

blueprint the guides a researcher in determining and selecting a survey sample that can be

used to represent the entire population (Creswell, 2014). In research, the whole population

is hardly used to carry out a survey, unless if the study is a census. Therefore, researchers

usually adopt a scientific mechanism that can be relied on to select a sample that can provide

data to be influenced to the entire population. In this regard, a sampling design provides

researchers with the mechanism to do this (Cooper & Schindler, 2014). Sampling design is

composed of a sample frame, sample technique, and sample size.

3.3.2.1 Sampling Frame

The sampling frame is defined as the complete list that highlights the entire population of a

study in which a researcher is interested (Saunders, Lewis, & Thornhill, 2016). In research,

a sampling frame defines the parameters of the population and restricts the researcher within

the boundaries of the population when selecting the sample size to represent the entire

population. For this study, the sampling frame was obtained from the human resources

offices of the confectionery firms in their Nairobi head offices.

3.3.2.2 Sampling Technique

A sampling technique is defined as the tactic that researchers use to ensure the equal chance

of unit selection within a population that forms a sample size (Saunders et al., 2016). This

means that whether a population is either homogeneous or heterogeneous, all members must

have an equal chance of being selected to be part of a sample size. There are various types

of sampling techniques: probability sampling and non-probability sampling techniques.

According to Cooper and Schindler (2014), probability sampling refers to the use of

techniques that are predictable and can be replicated scientifically. This includes stratified

sampling, random sampling, and simple random sampling; while non-probability are

techniques used to select sample sizes, but are not scientific, nor can be replicated in a

similar order. This includes purposive sampling, convenience sampling, and snowball

sampling. This study adopted stratified sampling to select employees from different

departments, and also managers from different departments.

23

3.3.2.3 Sample Size

Creswell (2014) defines a sample size as the unit representation of an entire population, that

has similar characteristics and traits at the population upon which inference of a study was

made. The sample size is usually selected using a sampling technique. Sample size can

either be designated or final sample size. The designated sample size is the number of

sample units that have been selected to be used for data collection; while on the other hand,

a final sample size is a number of units of completed questionnaires or from which actual

data has been collected (Saunders et al., 2016). The sample size of this study was drawn

from the 9 management departments as follows: Groups Managing Director/GM, Head of

Finance, Head of Factory, Corporate Affairs, Head of HR, Head of Supply Chain, Head of

Marketing, Head of Sales, Demand Planning Lead. Thus, the sample was calculated as

follows:

n = N/(1+N(e)2) = 150/(1+150(0.5)2) = 108

Table 3.1: Sample Size Distribution Table

Organization Target population Percentage Sample Size

1) Mars - Wrigley Confectionery 12 8 9

2) Cadbury Kenya 10 7 7

3) Ferrero Rocher 6 4 4

4) Pladis 4 3 3

5) Nestle 9 6 6

6) Kenafric 5 3 4

7) Mzuri Sweets 6 4 4

8) Kenya Sweets Limited 4 3 3

9) Candy World 8 5 6

10) Patco Kenya 6 4 4

11) Pearl 8 5 6

12) Jaydev Confectioners 6 4 4

13) Kwality Candies & Sweets 8 5 6

14) Milan Pan House 8 5 6

15) Soko Sweety 4 3 3

16) Sweet Fresh Limited 6 4 4

17) Virgin International 6 4 4

18) Bhagwanji Hansraj & Sons 4 3 3

19) Mombasa Sweet Mart 6 4 4

20) Nakuru Sweet Mart 8 5 6

21) Swan Industries 4 3 3

22) Sweet Center 4 3 3

23) Virani Industries 4 3 3

24) Warku Industries 4 3 3

Total 150 100 108

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3.4 Data Collection Methods

Data collection methods are processes through which a researcher gathers all data and

information required to answer the research questions. Cooper and Schindler (2014) define

data collection methods as the systematic order through which a researcher collects

information that is used to answer the questions and objectives. This study used a structured

questionnaire to collect primary data. A questionnaire was ideal for this study in that it

enabled the researcher to structure respondents’ views, which made it easy to conduct

descriptive analysis since the response was restricted to a Likert scale scope (Saunders et

al., 2016). The questionnaire had a five-level Likert scale of strongly disagree, disagree,

neutral, agree and strongly agree. The scale used numeric numbers of 1, 2, 3, 4, 5 in the

same order of the Likert scale. The first section of presents demographic data of the study

respondents; second section presents information on the first research question; the third

section presents information on second research question; the fourth section presents

information on the third research question

3.5 Research Procedures

Research procedures refer to the systematic and detailed step by step approach a researcher

deploys to carry out a study (Cooper & Schindler, 2014). These detailed procedures allow

a researcher to accomplish the research process in a manner that logically accomplished the

study objectives. For this study, a letter of approval was drafted to confectionery firms

Human Resources Managers seeking permission to carry out the study. One of the

permission has been granted; a pilot test was conducted at Wrigley’s using 10 casual

workers who did not take part in the final study. Piloting the questionnaire allowed the

research to examine the validity, reliability, and usability of the questionnaire. Importantly,

piloting the questionnaire played an important role in determining whether questions that

accompany each research question are simple and understandable and whether they generate

desired true reflection of the situation on the ground.

As such, feedback from the pilot was used to enhance the questionnaire tool. The next step

involved the researcher assistants physically visiting confectionery offices in Nairobi, to

administer the questionnaire. This was done through heads of departments. Each head of

the department was given a set of questionnaires to distribute. Using the heads of

departments is strategic in increasing and ensuring a higher response rate. Employees in the

selected confectionery firms report to their heads of departments. Therefore it made sense

25

to use this office to enhance the response rate. The head of the department was given 72

hours to have collected back all the questionnaires. The researcher liaised with the head of

departments to pick up all questionnaires that had been collected from employees and other

managers. The researcher went through all the questionnaires counter checking any errors

and completeness of the data provided. After this is done, the questionnaires were coded

and entered into the Statistical Packages for Social Sciences (SPSS) version 24 for analysis.

3.6 Data Analysis

Data analysis is the process through which raw data from a survey is converted into

meaningful information through the use of a data analysis tool (Creswell, 2014). Data

analysis can also be referred to as the process through which a researcher inspects, models

and transforms raw data into meaningful information that answers the research questions

(Saunders et al., 2016). This study used the Statistical Package for Social Sciences (SPSS)

version 24 to analyze both descriptive and inferential statistics. Descriptive statistics were

used to document information frequencies and percentages, while inferential statistics were

used to document correlation and regression analysis. The analyzed information has been

presented using Tables and Figures. The following regression model was used:

Y = β0 +β1X1 + β2X2 + β3X3 + e

Where; β0 is a coefficient constant; X1= Technological Turbulence; β1 = Standardized Beta

vale for Technological Turbulence; X2 = Environmental Turbulence; β2 = Standardized

Beta vale for Environmental Turbulence; X3 = Market Turbulence, β3 = Standardized Beta

value for Market Turbulence;

3.7 Chapter Summary

This chapter has presented the research methodology adopted for the study. First, a

descriptive survey research design has been presented, followed by the study population

that is composed of 150 employees and managers from 24 confectionery firms in Kenya.

Stratified sampling was used to select 108 employees and managers. This chapter has also

presented data collection methods using structured questionnaire, study procedures, and

data analysis methods.

26

CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

These study findings are presented in this chapter. Demographic findings of are presented

first, followed by findings on the impact of technological turbulence on business

performance; the impact of environmental turbulence on business performance, and finally,

the effect of market turbulence on business performance. This study had a response rate of

(72%); out of the 108 respondents sample size, 78 questionnaires were returned back. The

questionnaire tool was tested for validity and reliability using a Cronbach Alpha. The

questionnaire tool was found to be reliable as it had a reliability Cronbach Alpha value

above 0.7 as indicated in Table 4.1

Table 4.1: Reliability Analysis

Variables No of Items Alpha Value

Technological Turbulence 10 0.782

Environmental Turbulence 10 0.720

Market Turbulence 10 0.846

Business Performance 6 0.770

4.2 Demographic Information

This study demographic information included respondents’ gender, age, years of work at

their respective organization, and their designation at the organization. Demographic

characteristics are presented as follows:

4.2.1 Respondents Gender

When respondents of the study were asked to indicate their gender; (55%) reported they

were male, while (45%) were female as highlighted in Figure 4.1

27

Figure 4.1: Respondents Gender

4.2.2 Respondents Age

On the question on respondents age, (35%) indicated they were aged 41-47 years; (31%)

reported they were aged 34 – 40 years; (14%) were aged 26-33 years; (13%) were aged 18-

25 years, while the remaining (8%) were aged above 48 years as summarized in Figure 4.2

Figure 4.2: Respondents Age

4.2.3 Respondents Number of Years at their Organization

When respondents were asked for a number of years had worked at their confectionery

organization, (42%) indicated they had been with the organization for 5-7 years, (19%) had

spent 8-10 years with the organization; (15%) had spent 2-4 years with their respective

55%

45% Male

Female

12.8

14.1

30.8

34.6

7.7

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

18-25 YEARS

26-33 YEARS

34-40 YEARS

41-47 YEARS

48 AND ABOVE

28

organization; (13%) had spent more than 10 years, while the remaining (10%) had spent 1

year or less with their organization as highlighted in Figure 4.3

Figure 4.3: Number of Years with the Organization

4.2.4 Respondents Designation

On the question on respondents’ designation at work, (41%) were human resource officers,

(31%) were managers, (19%) were manufacturing and packaging employees, while the

remaining (9%) were plant managers as indicated in Figure 4.4

Figure 4.4: Respondents Job Designation

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

0-1 Years 2-4 Years 5-7 Years 8-10 Years Above 10Years

10.3

15.4

42.3

19.2

12.8

9%

19%

31%

41%

Plant Manager

Manufacturing /Packaging Employee

Manager

Human Resource Officer

29

4.3 Impact of Technological Turbulence on Business Performance

This study sought to determine whether technological turbulence had an impact on business

performance. The findings are presented as follows:

4.3.1 Confectionery Organization Technological Innovation

Respondents were asked whether their respective organizations had been undergoing

technological innovation; (38%) strongly agreed, (36%) agreed, (11%) were neutral, (10%)

disagreed, while the remaining (4%) strongly disagreed as highlighted in Table 4.2

Table 4.2: Confectionery Organization Technological Innovation

Scale Frequency Percent

Strongly Disagree 3 3.8

Disagree 8 10.3

Neutral 9 11.5

Agree 28 35.9

Strongly Agree 30 38.5

Total 78 100.0

4.3.2 Technological Innovation and Enhanced Product Lines

On the question on whether technological innovation had enhanced product and service

lines, (41%) strongly agreed, (40%) agreed, (10%) disagreed, (8%) were neutral and (1%)

strongly opposed as highlighted in Table 4.3

Table 4.3: Technological Innovation and Enhanced Product Lines

Scale Frequency Percent

Strongly Disagree 1 1.3

Disagree 8 10.3

Neutral 6 7.7

Agree 31 39.7

Strongly Agree 32 41.0

Total 78 100.0

30

4.3.3 Technological Innovation and Business Performance

On the question on whether technological innovation had enhanced business performance,

the majority (51%) strongly agreed, (40%) agreed, (5%) were neutral, while the remaining

(4%) disagreed as summarized in Table 4.4

Table 4.4: Technological Innovation and Business Performance

Scale Frequency Percent

Disagree 3 3.8

Neutral 4 5.1

Agree 31 39.7

Strongly Agree 40 51.3

Total 78 100.0

4.3.4 Technological Innovation Uncertainty

Respondents were asked to indicate whether technological innovations adopted by their

organizations had increased performance uncertainty, (49%) strongly agreed, (44%) agreed,

(4%) were neutral, (3%) disagreed, while the remaining (1%) strongly disagreed as

highlighted in Table 4.5

Table 4.5: Technological Uncertainty

Scale Frequency Percent

Strongly Disagree 1 1.3

Disagree 2 2.6

Neutral 3 3.8

Agree 34 43.6

Strongly Agree 38 48.7

Total 78 100.0

4.3.5 Innovation and Organization Restructuring

When respondents were asked whether technological innovation had influenced

organizational restructuring, the majority (55%) strongly agreed, (37%) agreed, (5%) were

neutral, while (3%) disagreed as highlighted in Table 4.6

31

Table 4.6: Innovation and Organizational Restructuring

Scale Frequency Percent

Disagree 2 2.6

Neutral 4 5.1

Agree 29 37.2

Strongly Agree 43 55.1

Total 78 100.0

4.3.6 Technological Turbulence and New Knowledge

When respondents were asked whether technological turbulence had enhanced new

knowledge exploration, (67%) strongly agreed this to be the case, (29%) agreed, (3%) were

neutral, while (1%) disagreed as indicated in Table 4.7

Table 4.7: Technological Turbulence and New Knowledge

Scale Frequency Percent

Disagree 1 1.3

Neutral 2 2.6

Agree 23 29.5

Strongly Agree 52 66.7

Total 78 100.0

4.3.7 Knowledge Exploration and Business Performance

On the question on whether knowledge exploration had enhanced business performance, the

majority (58%) strongly agreed, (28%) agreed, (8%) disagreed, while (6%) were neutral as

highlighted in Table 4.8

Table 4.8: Knowledge Exploration and Business Performance

Scale Frequency Percent

Disagree 6 7.7

Neutral 5 6.4

Agree 22 28.2

Strongly Agree 45 57.7

Total 78 100.0

32

4.3.8 Technological Innovation and Organizational Learning

Respondents of the study were asked to indicate whether technological innovation had

enhanced organizational learning. The majority (64%) strongly agreed, (28%) agreed, (5%)

were neutral, while (3%) disagreed as highlighted in Table 4.9

Table 4.9: Technological Innovation and Organizational Learning

Scale Frequency Percent

Disagree 2 2.6

Neutral 4 5.1

Agree 22 28.2

Strongly Agree 50 64.1

Total 78 100.0

4.4 Impact of Environmental Turbulence on Business Performance

This study sought to determine whether environmental turbulence had an impact on business

performance. The findings are presented as follows:

4.4.1 Prevalence of Environmental Turbulence

Respondents were asked to indicate whether their organizations had been experiencing

environmental turbulence. The results show that the majority (57%) strongly agreed, (42%)

agreed, while the remaining (1%) were neutral as indicated in Figure 4.5

Figure 4.5: Prevalence of Environmental Turbulence

1%

42%

57%

Neutral

Agree

Strongly Agree

33

4.4.2 Environmental Turbulence and Competition

On the question on whether environmental turbulence had increase competition for the

organization, the majority (58%) strongly agreed, (32%) agreed, (5%) disagreed, and were

neutral respectively as indicated in Table 4.10

Table 4.10: Environmental Turbulence and Competition

Scale Frequency Percent

Disagree 4 5.1

Neutral 4 5.1

Agree 25 32.1

Strongly Agree 45 57.7

Total 78 100.0

4.4.3 Environmental Turbulence and Change Process Management

When asked whether environmental turbulence had influenced change management

processes at their organization, (56%) agreed, (38%) strongly agreed, while (3%)

disagreed and were neutral respectively as highlighted in Table 4.11

Table 4.11: Environmental Turbulence and Competition

Scale Frequency Percent

Disagree 2 2.6

Neutral 2 2.6

Agree 44 56.4

Strongly Agree 30 38.5

Total 78 100.0

4.4.4 Change Processes and Business Performance

When respondents were asked whether change processes at their respective organizations

had influenced business performance, (49%) strongly agreed, (45%) agreed, while (6%)

were neutral as highlighted in Figure 4.6

34

Figure 4.6: Change Processes and Business Performance

4.4.5 Environmental Turbulence and Political Uncertainty

On the question on whether environmental turbulence was affected by political uncertainty,

the majority (53%) of respondents strongly agreed, while (47%) agreed as indicated in

Figure 4.7

Figure 4.7: Environmental Turbulence and Political Uncertainty

6%

45%

49%

Neutral

Agree

Strongly Agree

47%53%

Agree

Strongly Agree

35

4.4.6 Environmental Turbulence and Tax Burden on Manufacturing

When respondents were asked whether environmental turbulence involved high tax burden

on manufacturing, the majority (60%) strongly agreed, (39%) agreed, while the remaining

(1%) were neutral as indicated in Table (4.12)

Table 4.12: Environmental Turbulence and Tax Burden on Manufacturing

Scale Frequency Percent

Neutral 1 1.3

Agree 30 38.5

Strongly Agree 47 60.3

Total 78 100.0

4.4.7 Customer Buying Behavior and Business Performance

This study sought to determine whether customer buying behavior had affected business

performance at confectionery organizations. The findings show that (63%) strongly agreed,

(30%) agreed, while (4%) disagreed and were neutral respectively as indicated in Table 4.13

Table 4.13: Customer Buying Behaviour and Business Performance

Scale Frequency Percent

Disagree 3 3.8

Neutral 3 3.8

Agree 23 29.5

Strongly Agree 49 62.8

Total 78 100.0

4.4.8 Product Perception and Business Performance

When asked whether perception towards organizational products had affected business

performance, (53%) strongly agreed on this to be the case, (41%0 agreed, while (6%)

remained neutral as highlighted in Table 4.14

36

Table 4.14: Product Perception and Business Performance

Scale Frequency Percent

Neutral 5 6.4

Agree 32 41.0

Strongly Agree 41 52.6

Total 78 100.0

4.4.9 Effect of Environmental Turbulence on Business Performance

On the question on whether environmental turbulence had an effect on business

performance, the majority (65%) of respondents noted this to be the case, (32%) strongly

agreed, while (3%) disagreed as highlighted in Figure 4.8

Figure 4.8: Effect of Environmental Turbulence on Business Performance

4.4.10 Effect of Reducing Environmental Turbulence

When asked whether reducing environmental turbulence would enhance business

performance, (58%) agreed that this would be the case, (36%) strongly agreed, while (6%)

as indicated in Table 4.15

2.6

65.4

32.1

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

DISAGREE

AGREE

STRONGLY AGREE

37

Table 4.15: Effect of Reducing Environmental Turbulence

Scale Frequency Percent

Neutral 5 6.4

Agree 45 57.7

Strongly Agree 28 35.9

Total 78 100.0

4.5 Impact of Market Turbulence on Business Performance

This study sought to determine the impact of market turbulence on business performance.

The findings are presented as follows:

4.5.1 Prevalence of Market turbulence

When respondents were asked whether their organization had experienced market

turbulence, (51%) strongly agreed, (42%) agreed, while (7%) were neutral as highlighted in

Table 4.16

Table 4.16: prevalence of Market Turbulence

Scale Frequency Percent

Neutral 5 7

Agree 33 42

Strongly Agree 40 51

Total 78 100.0

4.5.2 Effect of Market Turbulence on Business Performance

On the question on whether market turbulence affects business performance, (62%)

strongly agreed that this was actually the case at their organization, (37%) agreed, while

(1%) remained neutral as highlighted in Table 4.17

Table 4.17: Effect of Market Turbulence on Business Performance

Scale Frequency Percent

Neutral 1 1.3

Agree 29 37.2

Strongly Agree 48 61.5

Total 78 100.0

38

4.5.3 Market Competition

When asked whether respondents organizations have been experiencing competition

intensity as a result of market turbulence, (50%) strongly agreed, (49%) agreed on this to

be the case, while the remaining (1%) were neutral as summarized in Table 4.18

Table 4.18: Market Competition

Scale Frequency Percent

Disagree 1 1.3

Agree 38 48.7

Strongly Agree 39 50.0

Total 78 100.0

4.5.4 Effect of Market Competition

On the question on whether market competition affects business performance, (50%)

strongly agreed, while (50%) agreed that intensified market competition had affected

business performance as highlighted in Figure 4.9

Figure 4.9:Effects of Market Competition on Business Performance

4.5.5 Steady Dependable Buyers

On the question on whether respondents’ organizations had stable, dependable buyers, the

majority (56%) strongly agreed, (40%) agreed, (3%) disagreed, while (1%) were neutral as

indicated in Table 4.19

50%50%Agree

Strongly Agree

39

Table 4.19: Steady Dependable Buyers

Scale Frequency Percent

Disagree 2 2.6

Neutral 1 1.3

Agree 31 39.7

Strongly Agree 44 56.4

Total 78 100.0

4.5.6 Bargaining Power of Buyers

When asked whether the bargaining power of buyers had affected business performance,

(53%) strongly agreed, (45%) agreed, while (2%) remained neutral as indicated in Table

4.20

Table 4.20: Bargaining Power of Buyers

Scale Frequency Percent

Neutral 2 2.5

Agree 35 44.9

Strongly Agree 41 52.6

Total 78 100.0

4.5.7 Dependable Suppliers

Respondents were asked whether their organization had dependable suppliers, (56%)

strongly agreed, and the remaining (44%) agreed as indicated in Figure 4.10

Figure 4.10: Dependable Suppliers

44%

56%

Agree

Strongly Agree

40

4.5.8 Bargaining Power of Suppliers Effect on Business Performance

When respondents were asked whether the bargaining power of suppliers had affected

business performance, (55%) strongly agreed, (39%) agreed, (5%) were neutral, while the

remaining (1%) disagreed as indicated in Table 4.21

Table 4.21: Bargaining Power of Suppliers Effect on Business Performance

Scale Frequency Percent

Disagree 1 1.3

Neutral 4 5.1

Agree 30 38.5

Strongly Agree 43 55.1

Total 78 100.0

4.5.9 Increase in Substitute Products

To examine whether market turbulence had led to an increase in substitute products,

respondents were asked for their organization experience on the same. The findings show

that (51%) strongly agreed, (46%) agreed, while (3%) were neutral that market turbulence

had led to an increase in substitute products as summarized in Table 4.22

Table 4.22: Increase in Substitute Products

Scale Frequency Percent

Neutral 2 2.6

Agree 36 46.2

Strongly Agree 40 51.3

Total 78 100.0

4.5.10 Threat of Substitute Products

When respondents were asked whether increase in substitute products a threat to their

organization's products (51%) strongly agreed, (41%) agreed, (6.4%) were neutral, while

(1%) disagreed as highlighted in Table 4.23

41

Table 4.23: Threat of Substitute Products

Scale Frequency Percent

Disagree 1 1.3

Neutral 5 6.4

Agree 32 41.0

Strongly Agree 40 51.3

Total 78 100.0

4.5.11 Market Intelligence and Market Turbulence

On the question n whether market intelligence was being used by respondents’ organization

to fend off market turbulence, (50%) strongly agreed on this to be the case, (49%) agreed,

while (1%) were neutral as summarized in Table 4.24

Table 4.24: market Intelligence and Market Turbulence

Scale Frequency Percent

Disagree 1 1.3

Agree 38 48.7

Strongly Agree 39 50.0

Total 78 100.0

4.6 Correlation Analysis

A correlation analysis was conducted to determine the existence of any relationships

between the study variables. The findings show that market turbulence had the most

substantial relationship with business performance, r (0.597); p-value < 0.01. This was

followed by a relationship between environmental turbulence and business performance, r

(0.561); p-value < 0.01; and finally, the relationship between technological turbulence and

business performance, r (0.533); p-value < 0.05. The relationships were statistically

significant as summarized in Table 4.25

42

Table 4.25: Correlation Analysis

Variables 1 2 3 4

Business

Performance

Pearson

Correlation 1

Sig. (2-tailed)

N 78

Technological

Turbulence

Pearson

Correlation .533* 1

Sig. (2-tailed) .040

N 78 78

Environmental

Turbulence

Pearson

Correlation .561** .576** 1

Sig. (2-tailed) .001 .000

N 78 78 78

Market

Turbulence

Pearson

Correlation .597** .482** .447** 1

Sig. (2-tailed) .000 .001 .000

N 78 78 78 78

*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).

4.7 Regression Analysis

Since this study variables revealed the existence of strong relationships, multiple regression

analysis was conducted to determine the level of relationship when the variables are

combined. The findings show an adjusted R squared value (0.457), meaning that about

(46%) of variability in business performance in confectionery industry can be attributed to

market turbulence, technological turbulence, and environmental turbulence as summarized

in Table 4.26

Table 4.26: Multiple Regression Model Summary

Model R R Square Adjusted R Square

Std. The error of the

Estimate

1 .535a .490 .457 .19685

a. Predictors: (Constant), Market Turbulence, Technological Turbulence, Environmental

Turbulence

43

The Analysis of Variance (ANOVA) show F (3, 74) = 5.770; p-value = 0.01; meaning the

variance in the mean of the mean of the variables was statistically significant

Table 4.27: ANOVA

Model

Sum of

Squares df

Mean

Square F Sig.

1 Regression .671 3 .224 5.770 .001b

Residual 2.868 74 .039

Total 3.538 77

a. Dependent Variable: Business Performance

b. Predictors: (Constant), Market Turbulence, Technological Turbulence, Environmental Turbulence

The study findings also revealed that market turbulence had the highest Beta Coefficient β

(0.433); p value = 0.12; followed by Technological turbulence Beta coefficient, β (0.397);

p value = 0.000; and environmental turbulence Beta coefficient β (0.326); p value = 0.003.

All the coefficients p values < 0.05, meaning they were statistically significant as

summarized in Table 4.28

Table 4.28: Coefficients

Model

Unstandardized

Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) 1.387 .796 2.743 .005

Technological

Turbulence .362 .087 .397 2.875 .000

Environmental

Turbulence .369 .120 .326 3.075 .003

Market Turbulence .465 .132 .433 21.250 .012

a. Dependent Variable: Business Performance

The regression model for the variable relationship is:

Business Performance = 1.387 + 0.397TT + 0.326 ET + 0.433 MT

Where; TT = Technological Turbulence; ET = Environmental Turbulence; and MT =

Market Turbulence

44

4.8 Chapter Summary

This chapter has provided the results and findings of this study. The significant findings of

the survey show that market turbulence had the strongest relationship with business

performance, r (0.597); p-value < 0.01. This was followed by a relationship between

environmental turbulence and business performance, r (0.561); p-value < 0.01; and finally,

the relationship between technological turbulence and business performance, r (0.533); p-

value < 0.01. The next chapter presents the study summary, discussion, conclusion, and

recommendations.

45

CHAPTER FIVE

5.0 DISCUSSION, CONCLUSION, AND RECOMMENDATIONS

5.1 Introduction

This chapter presents the study summary, discussion, concussion, and recommendations.

The study summary is presented first, followed by a discussion of findings for each research

question. Conclusion and recommendation are also presented for each research question are

also presented.

5.2 Summary of the Study

The purpose of this study was to determine the effect of turbulent environment on business

performance in the confectionery industry in Kenya. This study was guided by the following

research questions: What is the impact of technological turbulence on business

performance? What the impact of environmental turbulence on business performance? and

what is the impact of market turbulence on business performance?

This study adopted a descriptive survey design on a target population of 150 managers from

24 confectionery organizations in the Kenyan market. A structured questionnaire was used

to collect primary data.

The first research question sought to determine the impact of technological turbulence on

business performance. The findings show that there exists a statistically significant

relationship between technological turbulence and business performance in the

confectionery industry, r (0.533); p-value < 0.01.

The second research question sought to determine the impact of environmental turbulence

on business performance. The findings have revealed the existence of a statically significant

relationship between environmental turbulence and business performance in the

confectionery industry, r (0.561); p-value < 0.01.

The third research question sought to determine whether the impact of market turbulence

on business performance. The findings show that there exists a statistically significant

relationship between market turbulence and business performance in the confectionery

industry in Kenya, r (0.597); p-value < 0.01.

46

5.3 Discussion

5.3.1 Impact of Technological Innovation on Business Performance

One of the objectives of this study was to determine the impact of technological innovation

on business performance in the confectionery industry in Kenya. The study findings show

that there exists a statistically significant relationship between technological innovations

and business performance in the confectionery industry in Kenya. This finding is in line

with the findings of Christensen (2015) who argued that technological innovation does have

a significant impact on business operations and performance. Christensen further argued

that in as much as technological innovation positively impact business operation, it could

be very disruptive particularly, if new technology is being introduced to the business

operations. As such, innovation can bring technological disruption that can in the short-term

stall business performance, however, the long-term benefits far out way short-term

performance hitches

The findings of this study also established that technological turbulence could lead to

enhanced organizational knowledge and lead. When an organization explores new

technologies, there is a significant impact on the way in which internal operations are

organized, and by extension, the resultant performance. Raynor, McDonald, and

Christensen (2015) equally established that technological innovation impact organizational

knowledge and learning. In most instances, technological innovation enhances knowledge

that is essential for organizational competitive advantage. When an organization has a

significant competitive advantage in the market, it improves business performance. In most

instances, organizational learning is the process through which an organization renews its

competencies by recognizing the value the new information offers, apply it and assimilating

into the firm (Cohen & Levinthal, 1990). As such, leveraging technological innovations

turbulence to advance organizational learning and competitiveness is important for business

performance in confectionery sectors.

This study also found that knowledge exploitation enhances efficiency, production, choice,

selection, refinement, implementation and the execution, factors that are necessary for

organizational business performance in the confectionery industry. The ability for

organizations to exploit the external sources of knowledge as well as internal is an essential

element of innovation capabilities within the firm, to which technological innovation

turbulence plays a significant role. Cohen and Levinthal (1990) had argued that the capacity

47

to evaluate and use the external knowledge is largely a function of organizational operations,

which feed into the business performance of an organization. The main importance of

technological innovation is to enhance internal organization competencies, processes, and

explicit knowledge. Having versatile internal technological capability does not only drive

competitiveness but also contribute significantly to the quality of products, durability, the

versatility of production and also cost reduction in manufacturing and distribution of goods

and services. This is in line with the findings of Popadiuk (2016) who have argued that in

the modern times, adoption and utilization of technology in manufacturing are extremely

important as it enables organizations to reduce on the cost of production, enhance efficiency

and quality output which in essence contributes significantly to business performance.

Similarly, Thornhill (2017) had argued that technology technological turbulence is good for

organizations since it enhances research and development component which enables

organizations to develop more quality products and as a result, stay relevant in a constantly

changing business environment. In most instances, in the manufacturing sector, research

and development is an essential component that enables organizations to reduce operational

costs, since technology enhances efficiency and effectiveness of resource utilization, and

output enhancement. Additionally, use of technology improves organizations internal

competencies necessary for long-term business performance.

5.3.2 Impact of Environmental Turbulence on Business Performance

This study sought to establish the impact of environmental turbulence on the business

performance of the confectionery industry in Kenya. The findings of this study show that

there exists a significant relationship between environmental turbulence and business

performance. This is in line with arguments placed by Perrot (2011) who noted that the

environment in which an organization operates has a significant impact on the business

performance of the organization. Therefore, any substantial changes in the operational

environment affect the business performance of the organization. Further, Perrot had noted

that the environment in which organizations operates, particularly in the face of relentless

change, determines the ultimate performance of the organization. Changes in the

environmental conditions of an organization impacts both internal and external mechanics

of business operation and by extension performance. Therefore, reducing negative

environmental turbulence enhances business performance; conversely, enhancing positive

environmental turbulence improves business performance and strategic direction. The

findings by Shamsher (2016) had established that changes in customer demand,

48

competition, regulation, political influences and affects business performance. The

competitive environment for business expect to face turbulence impact of its environment

since the markets in this environment are considered as being increasingly complex with

the traditional industries converging the supply of goods and services in diversity.

This study findings have established that political turbulence is part of environmental

turbulence affecting business performance of the confectionery sector in Kenya. Shamsher

(2016) had argued that it is crucial for companies to establish a political connection with the

government supporting the business environment in which it operates. The connection with

the government tends to influence the strategic decisions within the firm as well as the

overall corporate governance of the business. The operational environmental of the business

consists of the market and the non-market dimensions, which is the political and legal

environment which play a key role in the growth of the business. Therefore, it is important

that companies have both the market and political strategies. Based on the findings of this

study, and the arguments placed by Shamsher (2016), it is possible to argue that

organizations should endeavor to not only uphold regulatory, operational requirements but

also establish significant political relationships with government regimes for negotiating

favorable taxes and licenses that do not impinge on business performance.

This study has also established that social-cultural factors also affect the business

performance of confectionery firms in Kenya. In most instances, as established by this

study, businesses do not operate in a vacuum, even the most successful companies must be

aware of the changes taking place in the societies and cultures in which business is operating

with an attempt to fulfill its missions and objectives of the firm. To this, Richards (2010)

had argued that as changes in the culture and the society take place, companies should

position their operations in a manner that adapts and adjusts to the changes in the

environment. Based on the findings of this study, it could be argued that the socio-cultural

factors such as beliefs, the values and the lifestyle of a society the business operates in are

essential to business performance and should not be ignored by confectionery firms. Further,

it should be noted that socio-cultural forces within an operational business environment

strongly influence the revenues of products and services through the enhancement of sales

of services and products of an industry as a whole while at the same time suppressing those

of the other sectors in the business environment.

49

5.3.3 Impact of Market Turbulence on Business Performance

This study sought to determine the impact of market turbulence on business performance.

The findings of this study show that there exists a significant relationship between market

turbulence and business performance of the confectionery industry in Kenya. Most

significant, this study established that competition intensity, market uncertainty, bargaining

power of buyers, and the bargaining power of sellers are important attributes that contribute

to market environment and turbulence that affects business performance.

This study found that competition intensity affects business performance of firms in the

confectionery industry in Kenya. It is the case that the market environment is mostly

determined by the kind of competition a firm is facing in a given market environment. The

stiffer the completion, the more the impact on firms ‘business performance. This is due to

the fact that as more organizations operation within a given market environment, there is

bound to be enhanced competition in terms of pricing, quality, quantity, and production or

manufacturing resources. This finding adds to the results by Dess et al., (2008) that

established that intense competition could position an organization to enhanced business

performance or failure. The less an organization invests in a competitive advantage, the

more it feels the negative impact of intense competition on business performance, compared

to organizations that do invest in mechanisms that enhance competitive advantage and vice

versa. Competitiveness enhances organizations position in a given market, and therefore,

enhancing competitiveness, enhances opportunities for business performance.

This study found that the bargaining power of buyers also affects business performance in

the confectionery industry in Kenya. This means that buyers of confectionery products have

a significant amount of power that can sway the operations and business performance.

Similar arguments posed by the findings of this study had been posited by Saeed and Aimin

(2015) who noted that buyers of the company’s products and services tend to pose a threat

to the organization and the industry as a whole. This is to the extend that buyers can cause

turbulence to the organization by choosing to abandon a given product line, boycotting the

product altogether, or switching to a substitute product. As such, it could be argued that the

power buyers hold on the attributes of the situation prevailing in the marketplace based on

the significance of the product to the buying group. For instance, a group of buyers could

become powerful when they purchase large volumes of confectionery products, and as such,

any boycotts, failure to purchase the products for any given market reasons could

50

significantly impact the company’s ability to sell the products, and thus, affect the firm’s

business performance. One of the reasons as to why buyers might have such sway on a

product's performance is when such a product is undifferentiated, and buyers have low

switching costs (Saeed & Aimin, 2015)

The findings of this study also established that the bargaining power of suppliers could do

have an effect on the business performance of the confectionery industry in Kenya. This

finding confirms Pearce and Robinson (2011) who noted that suppliers could have the

bargaining power in the industry when they control the supply chain of a given product line.

This means that they can have the ability to influence pricing and distribution of the product.

In the confectionery industry, this means that if a supplier decides to hoard or increase

distribution pricing of the confectionery products, this would ultimately result in the unit

price of the confectionery products in the marketplace. If other substitute products on the

market are priced cheaply, then an organization can incur losses or poor sales due to the

actions of their suppliers, which can, in turn, affect the firm’s business performance.

Additionally, suppliers have high bargaining power when the group of suppliers is

dominated with a few competitors, and the suppliers do not have any threat of a substitute

product, the industry is not significant client of the supplier group, the product of the

suppliers is a crucial input to the buyers, high switching costs for the buyers and when the

supplier group pose a credible threat of forwarding integration. To mitigate such incidences,

it is important that confectioneries develop multiple distribution channels, and set both the

distribution and unit sells price at the retail level.

5.4 Conclusion

5.4.1 Impact of Technological Turbulence on Business Performance

This study sought to establish the impact of technological turbulence on business

performance. This study has established that there exists a significant relationship between

technological turbulence and business performance. Therefore, this study concludes that the

technological turbulence is important in that it can enhance organizational business

performance through additional technological know-how, enhanced competencies, new

knowledge exploration, and organizational learning that enables confectionery firms to

enhance business performance. However, this study also concludes that disruptive

technology can bring about negative turbulence that negatively affects business

performance.

51

5.4.2 Impact of Environmental Turbulence on Business Performance

This study sought to determine the impact of environmental turbulence on the business

performance of the confectionery industry in Kenya. The study has established the existence

of a significant relationship between environmental turbulence and business performance.

Therefore, this study concludes that environmental turbulence, particularly business

operational environment, relationships with political regimes on taxation, and social-

cultural beliefs should be nurtured and monitored closely to ensure they adopted to enhance

business performance of confectioneries. Negotiating for favorable tax incentives, in

addition, to secure politically stable operational environment is equally important to the

business performance of confectionery businesses in Kenya

5.4.3 Impact of Market Turbulence on Business Performance

This study sought to establish the impact of market turbulence on the business performance

of the confectionery industry in Kenya. The findings have established that there exists a

significant relationship between market turbulence and business performance. Therefore,

this study concludes that competition intensity, bargaining power of buyers; bargaining

power of sellers, and rivalry within the market affects business performance of the

confectionery industry in Kenya. The stiffer the competition, the severe the effect on

business performance. Buyers with the ability to buy significant volumes of confectioneries

and have substitute products do have significant sway in influencing the business

performance of the confectionery industry.

5.5 Recommendations

5.5.1 Recommendations for Improvement

5.5.1.1 Impact of Technological Turbulence on Business Performance

Since the findings of this study has established the existence of a significant relationship

between technological turbulence and business performance; this study recommends that

confectionery firms should invest more in emerging technologies as a mechanism of

leveraging on technologies to enhance performance, while at the same time, ensuring timely

adoption minimizes negative effects of technological turbulence.

52

5.5.1.2 Impact of Environmental Turbulence on Business Performance

This study has established the existence of a significant relationship between environmental

turbulence and business performance. This study recommends that confectionery firms

should monitor not only their operational environment, but also political relations, and

social-cultural aspects within their operational spheres. This will entail negotiating for

favorable tax incentives, and favorable regulatory and legislative laws concerning

confectionary manufacturing, distribution, and sale.

5.5.1.3 Impact of Market Turbulence on Business Performance

This study has established the existence of a significant relationship between market

turbulence and business performance. This study recommends that confectionery firms

should enhance their competitive advantages through efficient and effective operations,

quality products, highly trained and competent human resources, in addition to adopting the

latest manufacturing equipment in the sector. This will help reduce operational costs and

enhance performance. Quality and efficient products will enhance customer loyalty, a

necessary condition for enhancing business performance in the confectionery sector.

5.5.2 Recommendation for Future Research

This study focused on the impact of turbulent environment on business performance in the

confectionery industry in Kenya. The study variables were limited to technological

turbulence, environmental turbulence, and market turbulence. Future studies should look at

other factors such as economic turbulence and political turbulence and their effect on

business performance.

53

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APPENDIX I: COVER LETTER

30th March 2018

Audrey Achieng

P.O.BOX 424, 00200

Nairobi

Dear Sir/Madam,

RE: REQUEST FOR PARTICIPATION IN MY STUDY

I am a student at the United States International University (USIU-AFRICA) currently

pursuing a Master’s in Business Administration (MBA). In partial fulfillment of my

master’s program, I am currently working on my master’s thesis entitled, “Impact of

Turbulent Environment on Business Performance in The Confectionary Industry in

Kenya.”

The study will be beneficial to the entire confectionery industry in that it will provide

information on how turbulent environment has affected business performance, and as such,

use this information to improve the organizational performance. Every employee will take

part in this study, and thus how you have been selected to take part in the study. Your views

and opinions are confidential, and your name will not be used anywhere in the research or

findings. Kindly take few minutes to answer the questionnaire to the based on your

knowledge.

Yours Sincerely,

Audrey Achieng

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APPENDIX II: QUESTIONNAIRE

SECTION I: GENERAL INFORMATION

This section contains general questions. Kindly answer to the best of your knowledge

1. Kindly indicate your gender

Male Female

2. Kindly indicate your age range

18- 25 Years

26- 33 Years

34- 40 Years

41-47 Years

48 and Above

3. Kindly indicate the number of years you have worked at your organization

0-1 Years

2-4 Years

5-7 Years

8-10Years

Above 10 years

4. Kindly indicate your job designation

Plant Engineer

Manufacturing & Packaging Employee

Manager

Human Resource Officer

Finance Officer

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SECTION II: Impact of Technological Turbulence on Business Performance

Kindly answer the following questions to the best of your knowledge using the following

Likert scale. Strongly disagree = 1, disagree = 2, neutral = 3, Agree = 4, strongly agree = 5

No Questions 1 2 3 4 5

5. Do you think your organization has been undergoing

technological innovation?

6. Technological innovation has enhanced product and service

lines

7. Technological innovation has enhanced business

performance

8. Technological innovation has increased change uncertainty

in your organization

9. Innovation has influenced organizational restructuring

10. Technological turbulence has enhanced new knowledge

exploration

11. Knowledge exploration has enhanced business

performance

12. Technological innovation turbulence has enhanced

organizational learning

13. Technological turbulence has enhanced knowledge

exploitation

14. Knowledge exploitation has enhanced business

performance

SECTION III: Impact of Environmental Turbulence on Business Performance

Kindly answer the following questions using the Likert scale provided in section II

No Questions 1 2 3 4 5

15. Your organization has been experiencing environmental

turbulence

16. Environmental turbulence has increased competition

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17. Environmental turbulence has increased change processes

at your organization

18. Changes processes have affected your organizations

business performance

19. Environmental turbulence has been affected by political

uncertainty

20. Environmental turbulence has involved a high tax burden

on manufacturing

21. Customer buying behavior has affected business

performance

22. Perception towards your organization's products has

affected business performance

23. Environmental turbulence has affected business

performance

24. Reducing environmental turbulence will improve your

organization business performance

SECTION IV: Impact of Market Turbulence on Business Performance

Kindly answer the following questions to the best of your knowledge using the Likert scale

in Section II.

No Questions 1 2 3 4 5

25. Your organization has been experiencing Market

turbulence

26. Market turbulence has affected business performance

27. Your organization has also been experiencing competition

intensity from other players in the market

28. Competition intensity has affected business performance

29. Your organization has steady, dependable buyers

30. The bargaining power of buyers of your organization's

products has affected business performance

31. Your organization has steady, dependable suppliers

33

32. The bargaining power of suppliers of your organization

affects business performance

33. There has been an increase of substitute products to your

organization

34. The threats of substitute products affect your organization

35. Your organization relies on market intelligence to fend off

market turbulence

Thanks very much for your participation!

34