Effect of Product Innovation and cost leadership Strategy on the Financial Performance of Small and Medium Enterprises
The success and sustainability of any organization in a competitive environment is determined by its choice of strategy. Most strategies are replicated by competitors and thus a company must position itself in the minds of the consumer in order to remain competitive. The significance of small and medium sized enterprises to world economies and Kenya in particular cannot be over emphasized. SMEs make up the largest business sector in every economy. The lack of proactivity, innovativeness, risk taking and overall poor entrepreneurial orientation have negatively impacted on the SMEs. The study sought to determine whether product innovation and cost leadership strategy were positively associated with business performance of Small and Medium Enterprises in Nairobi County Kenya. Explanatory research design was used in the study. The target population of the study was made up of 7384 SMEs and a sample of 95 SMEs was picked using systematic random. Primary data was collected using a questionnaire with both structured and unstructured questions. Descriptive statistics such as mean and frequencies and inferential statistics such as regression and correlation analysis was used to perform data analysis. The study found out that product innovation and cost leadership strategy were positively and significant related to and financial performance. The study concluded that that product innovation and cost leadership strategy have a positive and significant effect on the financial performance of SMEs. The study recommended that to accomplish the goals of SMEs in the light of growth and profitability, management need to have a positive rethink towards the use of strategic management. Keywords: Product innovation, Cost leadership strategy, Financial performance and Small and Medium Enterprises