Capacity utilization, quality of tea and returns to KTDA factories in Kenya

Abstract

The relationship between capacity utilization, quality of tea and returns to KTDA factories in Kenya is key to over half a million small scale tea farmers who have invested heavily in these tea factories and whose livelihood depends on the returns from the factories. Capacity utilization is one of the most important factors in determining the financial performance in both manufacturing and service industries. The objective of this study was to establish the capacity utilization in KTDA factories in Kenya and how capacity utilization affects both the quality of tea and returns to the factories. A descriptive research design was adopted. A population of 54 factories was used. Questionnaires were sent to all the 54 factories through their respective Regional Managers to provide secondary and primary data and information on factory capacity, payments to small scale tea farmers and average tea auction prices which were used for the tea quality index. Quantitative techniques were used in analysing the data in this study. The study found out that there is a strong relationship between capacity utilization and returns for KTDA factories and less significant relation between the capacity utilization and quality of tea in KTDA factories. The study recommends KTDA management to improve on capacity utilization in the tea factories because it was found to positively affect returns without compromising on quality.