Differentiation Strategy And Performance Of Deposit Taking Saccos In Nairobi City County, Kenya

ABSTRACT

The Savings and Credit Cooperative Societies sub-sector occupies a strategic position in the socio-economic development of the country. Cost of doing business and reduced saving power of the SACCOs customers have reduced the revenue and access to cheap deposits that they use to give as loans to their members making them re-think their competitive strategy in order to remain competitive and increase performance. The study sought to look into differentiation strategy and performance of deposit taking SACCOS in Nairobi City County, Kenya. The specific objectives were to determine the effect of product, market; service and personnel differentiation on performance of deposit taking SACCOs in Nairobi City County, Kenya. The study was anchored on the Resource Based View Theory of the firm, Porter’s model of generic strategies, and Balance Score Card model. The study would benefit the management of deposit taking SACCOs, members of staff and the regulator. The study used a descriptive research design. The population of study was 410 employees from top level management, middle level management and low level management from 41 Deposit Taking SACCOs in Nairobi City County, Kenya. A 30% sample from the 410 management staff was taken resulting to a sample size of 123 drawn using stratified random sampling techniques. A structured questionnaire was developed to collect primary data by the use of self-administered method. Systematic random sampling was used to identify respondents. The research instrument validity was ascertained by conducting a pilot study. Cronbach’s alpha was used to determine reliability of the study. All the study variables had an aggregate of 0.866 of alpha which was above the recommended alpha of 0.7 while expert opinion was used to improve content validity. Construct validity was achieved through an in depth review of relevant theoretical and empirical literature. Data analysis was done by the use of descriptive statistics to study demographic data and presented using frequencies, mean scores and standard deviation. Correlation was conducted using Karl Pearson to determine the relationship between the variables of study. Multiple regression analysis was done with the aid of Statistical Package for Social Science. Reports and presentation was achieved using tables and graphs. The study established that product and market differentiation had positive but insignificant effect on performance while service and personnel differentiation had positive and significant effect on performance of deposit taking SACCOs. The study concluded that product and market differentiation had positive but insignificant effect on performance of deposit taking SACCOs while service and personnel differentiation had positive and significant effect on performance of deposit taking SACCOs. The study recommended the management of deposit taking SACCOs to enhance investment in research and development, improve on timely insight and decision making needed for product development. It also recommended opening of new branches in strategic locations in order to tap to the growing market. Management of SACCOs should come up with standard procedures and guidelines that will be used to reinforce the effective implementation of feedback received from customers to spearhead service improvement and staff training budgets should be increased. The study recommended future research in other locations, with use of a bigger sample and more research on the effect of product and market differentiation on organizational performance.