The Effects of business process outsourcing practices on the operational performance of local manufacturing companies in Nairobi County
Date
2021
Authors
Mulli, Julia
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Given the operational performance challenges faced by manufacturing firms in Kenya, there was a need for a study to evaluate whether business process outsourcing practices can aid in enhancing operational performance of manufacturing firms. The study therefore sought to determine the effect of business process outsourcing practices on the operational performance of local manufacturing companies in Nairobi. The study was based on the transaction cost theory, the resource-based view theory and the core competency theory. The philosophical framework underpinning the study was the positivism approach. Descriptive survey design was adopted in the research. The population of the study was local manufacturing companies in Nairobi County. There are 341 local manufacturing companies in Nairobi (KAM,2016). The sample size was 184 and the study adopted simple random sampling to pick the 184 companies that took part in the study. The study used primary data that was obtained through a self-administered questionnaire. The questionnaire comprised of closed-ended questions. After the field survey, the raw data was coded and then entered into an MS Excel spreadsheet. Then the complete data were keyed into statistical package for the social sciences software for descriptive, correlation analysis and regression analysis were performed. The study established that primary activities were outsourced as evidenced by an average mean score tending towards agreement. Accounting and finance activities outsourcing was less practiced by local manufacturing companies with a few firms preparing not to outsource their accounting and finance activities as evidenced by average score tending towards disagreement. The study also established that back-office activities were highly outsourced as evidenced by average score tending towards agreement with statements. In addition, ANOVA showed that, first, primary activities outsourcing has a statistically insignificant effect on operational performance of local manufacturing companies in Nairobi County as given by p-value greater than 0.05 level of significance. Secondly, that accounting and finance activities outsourcing has a statistically significant effect on the operational performance of local manufacturing companies in Nairobi County as given by p-value less than 0.05 level of significance. Lastly, back-office activities outsourcing had a statistically significant effect on the operational performance of local manufacturing companies in Nairobi as given by p-value less than 0.05 level of significance. Finally, regarding the joint effect of primary, accounting & finance and back-office activities outsourcing on operational performance, R2 revealed that primary, accounting & finance and back-office activities outsourcing explained thirty-four point five percent of variation on operational performance of local manufacturing companies in Nairobi County. In addition, the ANOVA showed that primary, accounting & finance and back-office activities outsourcing on the operational performance of local manufacturing companies in Nairobi was statistically significant given by p-value less than 0.05 level of significance. The study concluded that business process outsourcing practices have a major influence on the operational performance of local manufacturing companies in Nairobi and recommend that top management of manufacturing firms in Nairobi to continue outsourcing company activities to improve operational performance and especially should outsourcing of back-office activities given its strong impact on operational performance. The research was based on local manufacturing companies in Nairobi County and the findings may not be applicable to other manufacturing firms outside Nairobi. Finally, the study focused on only three business process outsourcing practices, namely primary activities outsourcing, accounting and finance activities outsourcing, and back-office activities outsourcing. There are more than three business process outsourcing practices.
Description
A Thesis submitted in partial fulfillment of the requirement for the Degree of Master of Commerce at Strathmore University
Keywords
Operational performance, Local manufacturing companies_Nairobi County, Business process outsourcing practices