Cost Leadership Strategy and Performance of Logistics Companies in Kenya: A Case of Mitchell Cotts Group

Abstract

The persistent challenge of high logistics costs poses a significant barrier to profitability and sustainability of logistics firms. The study investigated the effect of cost leadership on logistics firms’ performance in Nairobi Kenya. The objectives of the study were to determine the influence of economies of scale, to establish the impact of economies of scope, to assess the effects of operational efficiency, and to determine the mediating effect of organizational culture on the relationship between cost leadership strategy and the performance of logistics firms in Nairobi County. This study was anchored on three theories namely: Michael Porter Competitive Advantage Theory, Value Chain Analysis, and Resource Based View. A descriptive research design was adopted. The study population was 102 full time employees of Mitchel Cotts Group located along Mombasa Road. Census was used on the population. Data was collected by use of structured questionnaires. A pretest of 10 employees was conducted at CEVA logistics Nairobi office. Validity was tested by item analysis to ascertain whether the tested items represented the entire domain of the construct while Cronbach's alpha was used to assess reliability. Data was analyzed using descriptive and correlation statistics analysis after which data was presented using tables. The findings revealed the significance of cost leadership in various aspects of logistics. Economies of scale, economies of scope, and operational efficiency received a high rating as to their impact in improving organizational performance in logistics organizations. In terms of preference, operational efficiency, economies of scope, and economies of scale were rated by respondents at 93.4%, 73.3%, and 72.0% respectively. Conclusion of the study is that Cost leadership strategy has a positively influence on the performance of logistics Companies in Kenya. The study recommends that Logistics companies should enhance their operations through economies of scale, economies of scope and operational efficiency for overall operational cost control which is possible if cost leadership strategy is implemented to enable them enhance efficiency.