Outsourcing Strategy and Performance of Kenya Tea Development Agency Managed Tea Factories in Kenya

Abstract

Organizations are constantly in search of strategies to increase their competitive edge in our present day competitive world. Outsourcing has become one of those strategies that are being embraced to reduce cost, improve efficiency and improve on profitability. No study is available on the impact of outsourcing on performance of KTDA managed factories. This study sought to fill the gap by establishing how outsourcing can improve factory performance. The study was cross sectional longitudinal research targeting the 54 managed by KTDA factories in Kenya. Primary data was collected using structural questionnaires which aimed at establishing the extent of outsourcing and the effect of outsourcing on performance. The secondary data was collected from books of accounts and annual returns at KTDA The findings of the study were that outsourcing improved on efficiency in internal business operations, improved customer satisfaction and improved performance. However it was found that morale of staff went down with outsourcing. It was also noted that quality of the final product improved over the three years. That was attributed to improved efficiency in operations and the ability to concentrate on the core business of the factories. Over the three years costs increased marginally and this was attributed to factors other than outsourcing majorly changes in oil prices, increased cost of labour and deteriorating shilling against dollar. Respondents also advocated for top factory management to be involved in formulation of outsourcing strategy. They also gave a precaution on the extent of outsourcing where core services should not be outsourced. The study recommended that there is need to outsource to improve on efficiency and reduce costs. However in cases where the service provider cannot deliver sufficiently, the respondents were of the opinion that such service be kept in-house. It was also found that there should be further studies on the field to establish the relationship between outsourcing and profitability with a detailed focus on all determinants of performance.