Influence of Cost Leadership Strategy on Organizational Performance of Private Hospitals in Mombasa County Kenya

Abstract

This study aimed at ascertaining the influence of cost leadership on organizational performance of private hospitals in Mombasa County Kenya. The study was guided by Institutional theory. The study utilized census and adopted a descriptive survey design. Using a target population of 52 respondents composed of Chief executives and Branch managers, the study employed quantitative research methodology and structured questionnaires was used to collect data. Pilot test was done to measure validity and reliability of research instruments. Descriptive as well as inferential statistics were computed to measure the relationship between variables. The results showed that there was a positive correlation between cost leadership strategy and the dependent variable organizational performance. In conclusion Cost leaders seek to improve efficiency and control costs throughout the organizations supply chain. The study recommended that Private hospitals should open more branches in different parts of Mombasa County. Keywords; Cost Leadership, Performance, Private Hospitals. I. BACKGROUND OF THE STUDY ealth care is one of the key pillars of economic development in the sense that, any economy needs a healthy workforce for sustained productivity, economic growth and development. The private healthcare facilities in Kenya focuses on making more profits, the sector is growing fast and with the main aim of delivering the best healthcare services to people in the country. Best quality doctors are employed and they play a major role in private healthcare facilities. The business environment in the last few decades has been faced with numerous changes due to factors such as globalization, adoption of technology, fragmented markets and liberalization of industry rules (Hill, Jones & Schilling, 2014). According to Camisón and Villar-López (2014) the organizations that seek to survive must be fast enough to respond to the pressures to compete on levels unrivalled in the past. Therefore, organizations that survive the turbulent business are those that incorporate a strategy in their long term plan. These strategies are aimed at enabling the firm to gain competitive advantage over their rivals in the market and to enhance long-term performance and profitability. Cost leadership strategies are supported a firm’s ability to supply a product or service at a lower cost than its rivals (Birjandi, Jahromi, Darasi & Birjandi, 2014). The basic operating assumption behind a low-cost leadership strategy is to acquire a considerable cost advantage over other competitors which will be passed on to consumers to realize an outsized market share. According to Cavusgil, Ghauri and Akcal (2013) a low cost strategy then produces competitive advantage when the firm can earn a higher profit margin than results from selling products at current market prices. In many cases, firms attempting to execute low-cost strategies aim to sell a product or service that appeal to a mean customer during a broad target market. Private healthcare facilities are always improving on efficiency by employing the best doctors, nurses and other qualified staffs. And as the public healthcare facilities keep facing challenges every day, like the doctors and nurses strike, more patients keep flocking the private healthcare facilities even if it means spending more money. The technology has also eased the service delivery of the most private healthcare facilities, patients would not take a lot of time to get the medical service. Workers are motivated and thus, deliver in performance, Carolle (2016). In Uganda, there is a poor health system, lack of skilled medical staffs, socio-economic gap where the poor have very few options of accessing health facilities, the spread of HIV/AIDS disease has proved a major challenge in that region. Studies are required to look into strategies of improving the situation in that region, Kiwanuka (2008). In Nigeria, the healthcare system is not developed properly. The poor cannot afford the health care facilities that are too expensive for them while the public healthcare system has little to offer because of poor management of the health system, unskilled staffs, and lack of resources. Much is to be done or implemented with regards to improving healthcare systems in Nigeria, Pharm (2011). Organizational performance is the real productivity of an organization tested against its projected goals and objectives (Upadhaya, Munir, & Blount, 2014). The performance of an organizational is based on the notion that the organization is H International Journal of Research and Innovation in Social Science (IJRISS) |Volume V, Issue VII, July 2021|ISSN 2454-6186 www.rsisinternational.org Page 429 consists of valuable resources that include qualified personnel, physical infrusture and capital assets that are used to achieve a shared achievable goals. In general, Matthew, Grawhich, and Barber (2009) observe that organizational performance is determined by the organization’s capability to respond to threats and opportunities in an effective and efficient manner, with full knowledge of the strengths and weakness at hand. Statement of the Problem The aspect of cost leadership strategies is very important on organizational performance of private hospitals in Mombasa County. Private hospitals in Mombasa County would do better if they adopt cost leadership strategies to meet customers’ needs and at the same time maximize profits. Lukas (2013) analyzed the growth strategies adopted by private hospitals in Nairobi. The study aimed at determining the effect of market development, market penetration, diversification, product development on organizational performance of private hospitals. Using a sample size of 30 respondents, the study involved mean, standard deviation to review data. The researcher failed to include generic strategies to help in organizational performance of the private hospital. Previous studies have endeavoured to explore on effects of competitive strategies adopted by other industries on performance. Mobile telecommunications Companies in Kenya, Kamau, (2013) conducted a study on Competitive Strategies Adopted by Private Universities in Kenya. Another study done by Chepchirchir, Omillo and Munyua (2018) study investigated the effect of Cost Leadership Strategy on Organizational Performance of Logistics Firms at Jomo Kenyatta International Airport, Kenya. The study data came from 10logistics firms with active websites operating at JKIA Nairobi. Gituku and Kagiri (2015) conducted a study to investigate the effects of competitive strategies on organizational performance of middle level colleges in Thika town. Therefore none of the studies focused on private hospitals within Mombasa County. This study seeks to analyze the influence of cost leadership strategy on organizational performance of private hospitals in Mombasa County. Purpose of the Study The research was to evaluate influence of cost leadership on organizational performance of private hospitals in Mombasa County. Significance of the study The study will assist patients in having the opportunity to get all services under one roof through differentiation. We happen to have a lot of hospitals, but when it comes to all services under one roof, it becomes a major challenge. Therefore, this is emphasized through this study, under differentiation; the management can be able to offer all the services by having all facilities in regard to medical services. II. THEORETICAL LITERATURE REVIEW Institutional Theory Institutional theory was founded by William Scott the year 1995. It considers the role of the firm’s environment and how it directly influences organization structure with its roles, procedures and job positions. The organizational structures provide a room for actions, procedures and norms. This theory highlights how institutions change over a period of time and how they have impact on strategic management, Richard (2013). This theory is relevant to study because, organizations today must acquire a structure to help in coordinating functions, regulations and norms that will guide the firm towards its goals. The study focuses on cost leadership strategies adopted by private hospitals and with this theory its automatically applied for the effective performance of the organization. III. EMPIRICAL LITERATURE REVIEW Cost Leadership Strategy Musila (2013) analyzed the growth strategies and the competitive advantage of commercial banks in Kenya. His research intended to establish growth strategies used by the commercial banks in Kenya. Operating with a sample size of 45 respondents the study applied mean, standard deviation and regression analysis to analyze data. The researcher established that commercial banks in Kenya adopt growth strategies to achieve the competitive advantage in the market. The study also established expansion strategy as one of the many strategies that banks have adopted. The study concluded the firms need to use product development strategies comprising of redesigning the existing product to suit customers and as a result will lead to market expansion. The study recommended that the firms should have clear formulation and plan implementation of strategies, and ensure these strategies are implemented, ensure the staffs have the right knowledge and skills for these strategies to become a success. Also the firm should participate in social responsibilities as this will enable customers have their firms in mind. Michael (2014) analyzed the implementation of cost leadership strategy at Hashi Energy Ltd Kenya. The research aimed at determining the effect of expansion strategy at Hashi Energy Ltd, to investigate the challenges of implementing the expansion strategy at Hashi Energy Ltd. Taking sample size of 6 respondents, research applied mean and standard deviation. The study found that there were economic challenges that hashi energy ltd faced among other challenges like inadequate skills and