Strategic Planning and Performance of the Petroleum Firms in Kenya

Abstract

Driven by cost conscious customers, increasing competition, stringent regulatory requirements and technological changes and innovations, petroleum firms in Kenya are constantly searching for new ways to obtain better performance, gain and sustain competitive advantage. The need to have strategies in an organization is increasingly being considered as very fundamental to attaining superior performance within the context of strategic management. However, the existing literature on strategic planning and performance focuses on other industries other than the petroleum industry in Kenya. The importance of good strategic planning is recognized by most organizations. There is therefore need for better strategic planning that capture the industry dynamics and that are premised on radical changes reminiscent of the industry for swift responses may such occasions arise. The study therefore sought to determine the effect of strategic planning on the performance of the petroleum firms in Kenya. A cross sectional survey design was employed. The population for this study was 182 of the oil marketing firms in the petroleum industry in Kenya from which a sample size of 18 firms was selected using simple random sampling technique. This study used primary data which was collected using structured questionnaires administered to the sample using drop-and-pick method as well as mail method. The questionnaires were addressed to the managers in charge of strategy who were the respondents in the study. Data was analysed using descriptive analysis, correlation analysis and OLS regression analysis. The study found that strategic planning positively and significantly influenced financial performance. It accounted for 92.9% of the variance in financial performance of these firms (R-squared = 0.9189). The findings, consistent with a number of previous studies, lead to the conclusion that there is a positive and significant relationship between strategic planning and firm performance for petroleum firms in Kenya. The study recommends that policies should be instituted to enhance better strategic planning for these organisations. More studies should be conducted to examine the moderating effect of industry on the relationship between strategic planning and firm performance.