Cost Leadership Strategy, Competitive Advantage, and Performance: A Cross-Sectional Study in the Context of Milk Processing Firms in Kenya

Abstract

Purpose of the study: Cost leadership strategy is driven by economies of scale, economies of scope, and operational efficiency is a remedy to a performance where firms are facing high costs. This study sought to investigate the influence of cost leadership strategy on the performance of milk processing firms in Kenya through the lens of competitive advantage as a mediator.
 Methodology: The study adopted descriptive and explanatory non-experimental research designs. It was a census of all 29 milk processing firms registered with Kenya Dairy Board as of June 2019. Sampling was done using proportionate stratified random sampling technique and data was collected using self-administered semi-structured questionnaires. The analysis was done using means, standard deviations, and regression.
 Main Findings: The findings showed that a cost leadership strategy had a positive and significant effect on the performance of milk processing firms in Kenya with a competitive advantage partially mediating the relationship. The constituent measures of cost leadership strategy namely economies of scale, economies of scope, and operational efficiency accounted for 40.1% of the variation in firm performance.
 Applications of this study: This study provides suggestions for firms to manage costs and therefore improve performance. This is by increasing the size of operations, expanding into related business areas, and improving operational processes.
 Novelty/originality of this study: The study examines the influence of cost leadership strategy in a new context of milk processing firms in Kenya. It also incorporates a competitive advantage as a significant variable affecting the relationship between costs and performance.

The role of brand and market orientation on competitive advantage in the food sector: business strategy’s moderator role

“…According to the study’s conclusions, business strategy and cost leadership approach raised competitive advantage. Comparably, Kimiti et al . (2020) and Haque et al .…”

“…According to the study's conclusions, business strategy and cost leadership approach raised competitive advantage. Comparably, Kimiti et al (2020) and Haque et al (2021) hold a similar view that dairy companies will naturally set up a competitive advantage if they focus on a cost leadership strategy. The business strategy had a moderating role in the positive relationship between market orientation and competitive advantage, concurring with the investigation in little and medium businesses by Rehman et al (2021) and also similar RBV theory.…”

“…(2021), Iyer et al. (2019), Kimiti et al. (2020), Puspaningrum (2020), Rua and Santos (2022), Tinoco et al.…”

The Practice Of Strategic Management Accounting In Public Sector Indonesia

“…Cost leadership strategy, a key component of financial performance, is characterised by relatively low prices for goods and services, bulk purchases of inputs, routine training of staff in the efficient use of resources, adoption of a lean approach in banking operations and processes, and routine evaluation of banking operations to ensure efficiency (Wambaka, 2022). Research conducted by (Kimiti et al, 2020) explains that cost leadership in a company can be implemented with three drivers: economies of scale, economies of scope, and operational efficiency.…”

“…Cost leadership in a company can be implemented with three drivers: economies of scale, economies of scope, and operational efficiency (Kimiti et al, 2020).…”