Effects of Kaizen System on the Financial Performance of Manufacturing Firms in Kenya

Abstract

The study objective was to analyze the effects of kaizen system on the financial performance of manufacturing firms in Kenya. This research anticipates helping in addressing the existing knowledge gap in literature of effects of kaizen system on the financial performance of manufacturing firms. The study was guided by Theory of Lean Management, The Theory of Constraints and Production Theory. The study used descriptive survey design. The study targeted selected medium size and large companies using Kaizen System in Nairobi County while purposively sampling method was adopted. The financial statements of manufacturing companies that had adopted kaizen system in the year 2011 were used. There were Unga Limited, Everyday E.A limited and London Distillers Limited. All data was analyzed by use of Statistical Package for Social Science (SPSS 21). The findings on the correlation analysis between company Profits and various indicators before introduction of Kaizen system found that Profits and return on sales as shown by correlation coefficient of 0.998, profits and return on investment was 0.964, profit margin on profits was 0.998. The analysis further found that after introduction of Kaizen system, Return on Assets and profits of 0.806, Profits and return on sales, 0.910, profits and return on investment 0.963, and profit margin on profits was 0.903. This indicated that, kaizen system had steady effect on organizational financial performance. The analysis found that in the short run, there was no statistically significant difference between performance of the company before introduction of Kaizen system and after introduction of kaizen system. The study concluded that as much as the financial performance of manufacturing companies could not be easily noticed within a short run, the long run results are the most important when using the kaizen system. The study recommends that policy makers on financial performances of manufacturing companies and other companies should investigate the importance of kaizen system in private and public institutions to help the increased productivity and performance which is greatly lacking to most of the companies. The study recommends that the regulatory body mandated to oversee manufacturing companies should make regulations that promote kaizen system in manufacturing companies in Kenya.