Procurement Risk Management and Competitive Advantage: A Case Study of Brookside Dairy Limited in Ruiru, Kenya.

ABSTRACT The problem in Brookside Dairy Limited is alarming competition from the other dairy farms on the pricing of their products since BDL has been continually increasing the prices due to the informal markets, perennial milk shortage are brought about by drought related challenges and also there is a rising case of livestock diseases in a number of counties in the country. The purpose of the study was to determine the effect of procurement risk management on competitive advantage in Brookside Dairy Limited in Ruiru, Kenya. The specific objectives were to determine the effect between procurement risk management (strategic risk management, implementation risk management and demand risk management) on competitive advantage in Brookside Dairy Limited in Ruiru, Kenya. The study adopted a survey descriptive research design in which quantitative data was collected and analysed using SPSS. The sample size of 202 was selected from a target population of 413 using the Slovene’s formulae. The simple random sampling technique was used to select the respondents. 35 of the respondents failed to return the questionnaires thus giving a sum of 167 respondents. Results from linear regression analysis shows that there is a statistical significant effect between procurement risk management and competitive advantage in Brookside Dairy Limited in Ruiru, Kenya. The study findings was that strategic risk management on competitive advantage had an effect of 43.9% which is a positive, implementation risk management on competitive advantage had an effect of 19.6% which is a positive and demand risk management had an effect of 28.6% which positive on competitive advantage. On the first objective the researcher established that there are other factors that intervene on strategic risk management on competitive advantage. The second objective, the researcher established that implementation risk was affected by factors inclusive of resource; capital, human and natural resources this resulted to the effect. On the third objective demand risk management, the researcher concluded that the effect resulted to the influence of the external environmental factors in the organisation that are uncontrollable thus causing the effect on the demand. The researcher recommends one, extensive procedures should be carried out in order to realise and ensure achievement is attainted on strategies made. Two, the researcher recommended that effective training on the employee and provision of adequate resources and thirdly overstocking and redundancy should be encouraged to minimise the risk on shortages of goods and services to the consumers because it is unpredictable. The study contributes in aiding the policy makers of the procurement risk management to make an effort to mitigate, avoid, treat or transfer the impended risks to achieve competitive advantage

TABLE OF CONTENTS

DECLARATION...................................................................................................................................................I

APPROVAL .........................................................................................................................................................II

DEDICATION.....................................................................................................................................................III

ACKNOWLEDGEMENT...................................................................................................................................IV

LIST OF ACRONYMS AND ABBREVIATIONS ..............................................................................................V

TABLE OF CONTENTS ....................................................................................................................................VI

LIST OF TABLES................................................................................................................................................X

ABSTRACT........................................................................................................................................................XII

CHAPTER ONE...................................................................................................................................................1

INTRODUCTION................................................................................................................................................1

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

1.1 BACKGROUND TO THE STUDY........................................................................................................................1

1.1.1 HISTORICAL PERSPECTIVE............................................................................................................................1

1.1.2 THEORETICAL PERSPECTIVE........................................................................................................................2

1.1.3 CONCEPTUAL PERSPECTIVE.........................................................................................................................3

1.1.4 CONTEXTUAL PERSPECTIVE.........................................................................................................................4

1.2 PROBLEM STATEMENT......................................................................................................................................5

1.3 PURPOSE OF THE STUDY...................................................................................................................................6

1.4 SPECIFIC OBJECTIVE..........................................................................................................................................6

1.5 RESEARCH QUESTIONS .....................................................................................................................................6

1.6 HYPOTHESES........................................................................................................................................................7

1.7SCOPE OF THE STUDY.........................................................................................................................................7

1.7.1GEOGRAPHICAL SCOPE...................................................................................................................................7

1.7.2 TIME SCOPE.......................................................................................................................................................7

1.7.3 CONTENT SCOPE ..............................................................................................................................................7

1.8 SIGNIFICANCE OF THE STUDY ........................................................................................................................7

1.9 DEFINITION OF KEY TERMS ......................................................................................................................................9

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CHAPTER TWO................................................................................................................................................ 10

LITERATURE REVIEW .................................................................................................................................. 10

2.0 INTRODUCTION.................................................................................................................................................10

2.1 THEORETICAL REVIEW ...................................................................................................................................10

2.2 CONCEPTUAL FRAMEWORK..........................................................................................................................12

2.2.1 PROCUREMENT RISK MANAGEMENT.......................................................................................................13

2.2.2 COMPETITIVE ADVANTAGE........................................................................................................................13

2.3 REVIEW OF RELATED LITERATURE.............................................................................................................13

2.3.1 THE EFFECT OF STRATEGIC RISKS MANAGEMENT ON COMPETITIVE ADVANTAGE ..................14

2.3.2 THE EFFECT OF IMPLEMENTATION RISK MANAGEMENT PLAN ON COMPETITIVE ADVANTAGE

.....................................................................................................................................................................................14

2.3.3 THE EFFECT OF DEMAND ON THE RISK MANAGEMENT PLAN ON COMPETITIVE ADVANTAGE

.....................................................................................................................................................................................15

2.4 EMPIRICAL REVIEW .........................................................................................................................................16

2.5 RESEARCH GAPS ...............................................................................................................................................19

CHAPTER THREE............................................................................................................................................ 20

RESEARCH METHODOLOGY....................................................................................................................... 20

3.0 INTRODUCTION ........................................................................................................................................ 20

3.1 RESEARCH DESIGN...........................................................................................................................................20

3.2 STUDY POPULATION........................................................................................................................................20

3.4 SAMPLING PROCEDURE ..................................................................................................................................21

3.5 DATA COLLECTION INSTRUMENTS .............................................................................................................22

3.6 VALIDITY AND RELIABILITY OF RESEARCH INSTRUMENTS ................................................................22

3.6.1 VALIDITY.........................................................................................................................................................22

3.6.2 RELIABILITY ..................................................................................................................................................23

3.7 DATA GATHERING PROCEDURE ...................................................................................................................23

3.7.1 BEFORE ADMINISTRATION OF THE QUESTIONNAIRE..........................................................................23

3.7.2 DURING ADMINISTRATION OF QUESTIONNAIRES................................................................................24

3.7.3 AFTER ADMINISTRATION OF QUESTIONNAIRES...................................................................................24

3.8 DATA ANALYSIS ...............................................................................................................................................24

3.9 ETHICAL CONSIDERATIONS...........................................................................................................................25

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

PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS .................................................... 26

4.0 INTRODUCTION.................................................................................................................................................26

4.1 RESPONSE RATE................................................................................................................................................26

4.2 DEMOGRAPHIC CHARACTERISTICS OF RESPONDENTS..........................................................................26

4.2.1 RESPONDENTS GENDER...............................................................................................................................27

4.2.2 RESPONDENTS AGE GROUP ........................................................................................................................27

4.2.3 LEVEL OF EDUCATION .................................................................................................................................28

4.2.4 RESPONDENTS MARITAL STATUS.............................................................................................................28

4.2.5 RESPONDENT WORK EXPERIENCE............................................................................................................29

4.3 DESCRIPTIVE STATISTICS FOR PROCUREMENT RISK MANAGEMENT................................................29

4.4 DESCRIPTIVE STATISTICS FOR COMPETITIVE ADVANTAGE.................................................................33

4.5 THE EFFECT OF STRATEGIC RISK MANAGEMENT ON COMPETITIVE ADVANTAGE .......................35

4.6 THE EFFECT OF IMPLEMENTATION ON THE RISK MANAGEMENT PLAN ON COMPETITIVE 

ADVANTAGE............................................................................................................................................................37

4.7 THE EFFECT OF DEMAND RISK MANAGEMENT ON COMPETITIVE ADVANTAGE............................39

4.8 THE EFFECT OF PROCUREMENT RISK MANAGEMENT ON COMPETITIVE ADVANTAGE................41

CHAPTER FIVE................................................................................................................................................ 43

DISCUSSION, CONCLUSION AND RECOMMENDATION......................................................................... 43

5.0 INTRODUCTION.................................................................................................................................................43

5.1 DISCUSSION........................................................................................................................................................43

5.1.1 STRATEGIC RISK MANAGEMENT ON COMPETITIVE ADVANTAGE ..................................................43

5.1.2 IMPLEMENTATION RISK MANAGEMENT PLAN ON COMPETITIVE ADVANTAGE .........................44

5.1.3 DEMAND RISK MANAGEMENT ON COMPETITIVE ADVANTAGE.......................................................45

5.2 CONCLUSION .....................................................................................................................................................45

5.3 RECOMMENDATIONS.......................................................................................................................................46

5.4 LIMITATION TO THE STUDY ..........................................................................................................................48

5.5 CONTRIBUTION TO KNOWLEDGE.................................................................................................................48

5.6 SUGGESTIONS FOR FURTHER RESEARCH ..................................................................................................49

REFERENCES................................................................................................................................................... 50

APPENDICES .................................................................................................................................................... 59

APPENDIX I: TRANSMITAL LETTER .......................................................................................................... 59

APPENDIX II: INTRODUCTORY LETTER................................................................................................... 60

APPENDIX III: QUESTIONNAIRES............................................................................................................... 61

APPENDIX IV: BUDGET ESTIMATE ............................................................................................................ 66

APPENDIX V: TIME FRAMEWORK ............................................................................................................. 67