Post on 27-Feb-2023
TURNAROUND STRATEGIES IN A COMPETITIVE ENVIRONMENT
A CASE OF UCHUMI SUPERMARKET
BY:
JOYCE NANCY OCHIENG
UNITED STATES INTERNATIONAL UNIVERSITY
SPRING 2018
ii
TURNAROUND STRATEGIES IN A COMPETITIVE ENVIRONMENT
A CASE OF UCHUMI SUPERMARKET
By
JOYCE NANCY OCHIENG
A Research Project Report Submitted to the Chandaria School of Business
in Partial Fulfillment of the Requirement for the Degree of Masters in
Business Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA
SPRING 2018
iii
STUDENT’S DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to any other
college, institution or university other than the United States International University in
Nairobi for academic credit.
Signed: ________________________ Date: ________________________
JOYCE NANCY OCHIENG (650194)
This Research Project Report has been presented for examination with my approval as the
appointed supervisor.
Signed: ______________________________ Date: ___________________________
Prof. Paul Katuse
Signed:______________________________ Date: ___________________________
Dean, Chandaria School of Business
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DEDICATION
I dedicate this paper to my family Persons, for their continued support during my study and
in preparation of this research paper.
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ACKNOWLEDGEMENT
I acknowledge the presence of God the Almighty in my life. For giving me the strength and
wisdom to have been able to prepare for the execution of this research project and finalizing
the research paper. My sincere gratitude goes to my supervisor Prof. Katuse for his guidance,
advice and effective timely response at each stage in the preparation and execution of this
research paper for examination. Thank you for your support and inspiration.
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ABSTRACT
This study seeks to analyze the turnaround strategies in a competitive environment a case of
Uchumi Supermarket. The study was guided by the following specific objectives; to evaluate
the turnaround process in a competitive environment, to determine the turnaround strategies in
a competitive that should be adopted by Uchumi supermarket and to establish the challenges
that Uchumi supermarket may face in adoption of the turnaround strategies in a competitive
environment.
In conducting this a descriptive research design was adopted. The population for the study was
the 84 respondents. The sampling frame was 84 employees comprised top level management,
middle level management and lower level management staffs at the Uchumi supermarket head
office. A sample of 50% of the total population was thus considered sufficient and was used
therefore 42 respondents constituted the sample population for the study and simple random
sampling was used. The study carried out a pilot study to pretest and validates the
questionnaire. The researcher selected a pilot group of 9 individuals from the target population
to test the reliability of the research instrument. The study used primary data in form of
questionnaire that was administered through drop and pick method to respondents who were
the owners or the managers of the SMEs. Analysis was done by use of Excel and SPSS
software. This generated frequency distributions, tables, percentages and mean.
The study established that Uchumi Supermarket used a number of turnaround strategies in
order to survive in the present competitive environment in Kenya. The strategies that were
mostly used were repositioning and restructuring strategies, retrenchment and change in the
top management of the company so as to make Uchumi Supermarket more competitive and
also reduce the operational cost of the company. It was also established that turnaround
strategy’s may help put back organisations to normality in terms of liquidity, solvency,
profitability and cash flow. Finally, it was established Uchumi Super market faced a number
of challenges when implementing turnaround strategies, key among them are resistance to
change by the employees, inadequacy of resources and technology to facilitate the change,
weak management and unaligned organizational system.
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It was concluded that the adoption of misplaced strategies is a cause of a company failure, a
company decline leads to crisis where the survival of the firm is threatened and the major cause
of a company failure lies within finance, operations and marketing the internal elements of its
business. The study concluded that the turnaround strategy’s may help put back a company to
normality in terms of liquidity and to achieve a successful turnaround a company management
team must first stem a firm’s decline. The study concluded that companies face a number of
challenges when implementing turnaround strategies, failure to ensure that companies’ daily
activities, work efforts and resources are directed to the implementation of strategy has led to
companies’ failure and companies have run into difficulties because of failure to acknowledge
and address strategic drift.
The study recommends that to enable companies implement the turnaround strategies
companies must take advantage of the new technological opportunities, managers of
companies need to create strategic management systems that integrate all disciplines and all
areas of operation of the organization in outcome-based structures and the managers of
organizations’ must critically look at their performance and compare it to other companies.
Further it was recommended that turnaround strategies should be adopted in a competitive
environment this is because they help put back companies to normality in terms of liquidity
and the turnaround strategies that should be adopted are repositioning and restructuring
strategies; retrenchment strategies and top management changes. Finally, it was recommended
that management should put in place measures to reduce the challenges that face organisation
in implementing turnaround strategies which include putting in place adequate resources to
help implement the strategy, having proper plans and policies to implement the strategies and
educating all levels of employees on the important of the strategy in order to help reduce
resistance from them.
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THE TABLE OF CONTENTS
STUDENT’S DECLARATION ............................................................................................ iii
COPYRIGHT ......................................................................................................................... iv
DEDICATION......................................................................................................................... v
ACKNOWLEDGEMENT ..................................................................................................... vi
ABSTRACT ........................................................................................................................... vii
THE TABLE OF CONTENTS ............................................................................................. ix
LIST OF TABLES ................................................................................................................ xii
CHAPTER ONE ..................................................................................................................... 1
1.0 INTRODUCTION............................................................................................................. 1
1.1 Background of the Study ................................................................................................ 1
1.2 Statement of the Problem ................................................................................................ 5
1.3 General Objective ........................................................................................................... 7
1.4 Specific Objective ........................................................................................................... 7
1.5 Significance of the Study ................................................................................................ 7
1.6 Scope of the Study .......................................................................................................... 8
1.7 Definition of Terms......................................................................................................... 9
1.8 Chapter Summary ......................................................................................................... 10
CHAPTER TWO .................................................................................................................. 12
2.0 INTRODUCTION........................................................................................................... 12
2.1 Introduction ................................................................................................................... 12
2.2 The Role of Turn Around Strategies in Solving Financial Decline in Organisations .. 12
2.3 Turnaround Strategies that Should be Adopted in a Competitive Environment .......... 17
2.4 Challenges in Implementing Turnaround Strategies in a Competitive Environment ... 21
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2.5 Chapter Summary ......................................................................................................... 25
CHAPTER THREE .............................................................................................................. 27
3.0 RESEARCH METHODOLOGY .................................................................................. 27
3.1 Introduction ................................................................................................................... 27
3.2 Research Design............................................................................................................ 27
3.3 Population and sample design ....................................................................................... 27
3.4 Data Collection Method ................................................................................................ 29
3.5 Research Procedure ....................................................................................................... 30
3.6 Data Analysis ................................................................................................................ 30
3.7 Chapter Summary ......................................................................................................... 31
CHAPTER FOUR ................................................................................................................. 32
4.0 RESULTS AND FINDINGS .......................................................................................... 32
4.1 Introduction ................................................................................................................... 32
4.2 General Information ...................................................................................................... 32
4.3 The Role of Turn Around Strategies in Solving Financial Decline .............................. 35
4.4 Turnaround Strategies that Should be Adopted in a Competitive Environment .......... 39
4.5 Challenges in Implementing Turnaround Strategies in a Competitive Environment ... 44
4.6 Chapter Summary ......................................................................................................... 48
CHAPTER FIVE .................................................................................................................. 50
DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ................................... 50
5.1 Introduction ................................................................................................................... 50
5.2 Summary of the Study .................................................................................................. 50
5.3 Discussion ..................................................................................................................... 52
5.4 Conclusions ................................................................................................................... 58
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5.5 Recommendations ......................................................................................................... 60
REFERENCES ...................................................................................................................... 62
APPENDICES ....................................................................................................................... 67
Appendix I: Introduction Letter .......................................................................................... 67
Appendix II: Questionnaire................................................................................................. 68
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LIST OF TABLES
Table 3.1: Sample Size ........................................................................................................... 29
Table 4.2: Response Rate ........................................................................................................ 32
Table 4.3: Gender of the Respondents .................................................................................... 33
Table 4.4: Age of the Respondents ......................................................................................... 33
Table 4.5: Level of Education of the Respondents ................................................................. 34
Table 4.6: Number of years worked at Uchumi Supermarket ................................................ 34
Table 4.7: The Turn Around Process in a Competitive Environment .................................... 36
Table 4.8: The Signs of Financial Decline .............................................................................. 37
Table 4.9: The Causes of Financial Decline ........................................................................... 38
Table 4.10: The Steps in Turnaround Process ........................................................................ 39
Table 4.11: Turnaround Strategies that Should be Adopted ................................................... 40
Table 4.12: Repositioning and Restructuring Strategies......................................................... 41
Table 4.13: Retrenchment ....................................................................................................... 42
Table 4.14: Top Management Changes .................................................................................. 43
Table 4.15: Challenges in Implementing Turnaround Strategies ........................................... 45
Table 4.16: Resistance to Change ........................................................................................... 46
Table 4.17: Inadequate Resources .......................................................................................... 47
Table 4.18: Strategic Drift ...................................................................................................... 48
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
According to Thompson (2013) strategies are the means by which long-term objectives will be
achieved. They further point that strategies are unified, comprehensive and integrated plans
that relate the strategic advantages of the firm to the challenges of the environment. They are
designed to ensure that the basic objectives of the enterprise are achieved through proper
execution by the organization. According to Wheelan and Hunger (2015) there are also other
types of strategies that can apply especially when the prospects of the firm appear too bleak to
continue as an ongoing operation. They include the exit strategy which can further be divided
into an immediate abandonment strategy that exits the market by immediately liquidating or
selling to another firm or a harvest strategy where the firm plays the end-game maximizing
near-term cash flows.
Turnaround refers to recovery to profitability from a loss situation. Following a loss, a firm’s
top management team must respond in an effort to ensure that the firm’s survival. A faltering
firm will most likely continue to decline and may eventually fail if its top management team
lacks the ability to respond successfully to external and internal factors causing decline. To
achieve a successful turnaround, a management team must first stem a firm’s decline and select
an appropriate strategy for recovery (Situma, 2016). Turnaround is a process dedicated to
corporate renewal. It uses analysis and planning to save troubled companies and returns them
to solvency. Once analysis is completed, a long term strategic plan and restructuring plan are
created. These plans may or may not involve a bankruptcy filing (Thompson and Strickland,
2007).
An industry environment consists of a particular set of competitive situations that establish
both opportunities and threats. The pattern of situational changes is a result of the actions of
'competitors'. Porter (2008) uses forces of change to make reference to buyers, suppliers,
substitute products, potential industry entrants, as well as rivalry among firms within the
industry. Strategic moves by any of these competitors can alter prevailing relationships and
thereby change the situation in a firm's environment. Organizations are open systems, and the
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external environment in which they operate is very important. Organizations need support from
their environment if they are to survive and perform well. The environment is the key factor in
determining the level of available resources and the ease with which an organization can carry
out its activities. To understand how industry environment drives competition, one needs to
determine the level of industry profitability (Sirmon et al., 2007).
The role of strategy is to identify the general approaches that the organization utilize to achieve
its organizational objectives. Various strategies are available to the firm depending on the
circumstance in the environment the firm operates which includes Corporate Turnaround,
Retrenchment, and Portfolio Restructuring Strategies. Thompson & Strickland (2008)
established that Retrenchment differs from turnaround in that retrenchment is a pullback and
leaning-up in the face of adverse conditions. The strategic posture of retrenchment is one of
defensively “battening down the hatches and weathering out the storm,” withdrawing from
activities where return on investment in supbar. They further explained Portfolio restructuring
strategies involves radical surgery on the mix and percentage makeup of the types of businesses
in the portfolio (Situma, (2016).
In the corporate world, failure is commonplace such that one-third of companies fail within
the first five years, and listed companies fail at a rate of 2% per year (Morris, 2007).
Organizational failure is hard to predict and results in a loss of economic viability, illiquidity,
and breach of legal obligations. Despite efforts being made to predict a firm’s failure, the
models developed have not proven successful. Failure in the competitive market can result
from a range of factors. In situations where the firm operations and performance have been
experiencing challenges, there is need for the firm to undertake turnaround strategies that will
drive it out of the declining performance trends. The likelihood of a successful turnaround will
depend on the strategies that are undertaken by the leadership of the firm. Research on
turnaround strategies has considered a number of factors that influence the likelihood of
recovery (Ramanujan & Varadarajan, 2007). According to Lohrke, Bedeian and Palmer
(2010), the severity of the financial deterioration and management failure has been highlighted
as one of the contributing factors to turnaround strategy formulation and likelihood of a
successful recovery.
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In these economically challenging times there are more and more businesses that find
themselves in a difficult situation where sales are falling, costs are rising and the creditors
getting ever more agitated (Finkin, 2007). Before a business owner or investor throws in the
towel and winds up the business it is worthwhile considering a turnaround approach which
before formulation, the root causes of the crisis must be established. The frequently
encountered causes include revenue downturn caused by a weak economy, overly optimistic
sales projections, poor strategic choices, poor execution of a good strategy, high operating
costs, high fixed costs that decrease flexibility, insufficient resources, unsuccessful Research
and Development projects, highly successful competitor, excessive debt burden, inadequate
financial controls and many others (Wheelan and Hunger, 2015).
Nearly every firm experiences a stage in their life-cycle with declining performance
threatening firm survival. While some firms continue to decline and eventually fail others
undergo successful turnarounds and return to prosperity. To enable this turnaround the
management should come up with smart strategies, implementation process and have
control/monitoring measures in place (Bowman, Schoenberg & Collier, 2013). Turnaround
strategies often fail since they focus on achieving a longer-term vision without getting out of
the hole in the first place thereby dying in the process, (David, 2016) some also fail because
they focus on getting out of hole without a strategy for sustainable recovery. Such turnarounds
which focuses on short-time survivability or a financial turnaround alone tend to be short-lived.
To get out of the hole successfully, certain longer-term sacrifices often need to be made if the
financial crisis is severe. Seamlessly dovetailing the actions of getting out of the hole, and
climbing the mountain, requires careful stakeholder management (Robins & Pearce, 2012).
According to Thompson and Strickland (2007), the overall goal of turnaround strategy is to
return an underperforming or distressed company to normal in terms of acceptable levels of
profitability, solvency, liquidity and cash flow. Turnaround strategy is described in terms of
how the turnaround strategy components of managing, stabilizing, funding and fixing an
underperforming or distressed company are applied over the natural stages of a turnaround.
Pearce and Robinson (2007) suggested that to achieve its objectives, turnaround strategy must
reverse causes of distress, resolve the financial crisis and yearn to achieve a rapid improvement
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in financial performance, regain stakeholder support, and overcome internal constraints and
unfavorable industry characteristics.
In order to achieve its objectives a turnaround strategy must reverse causes of distress, resolve
the financial crisis, achieve a rapid improvement in financial performance, regain stakeholder
support, and overcome internal constraints and unfavorable industry characteristics (Walshe,
2014). Turnaround management does not only apply to distressed companies' it in fact can help
in any situation where direction, strategy or a general change of the ways of working needs to
be implemented. Therefore, turnaround management is closely related to change management,
transformation management and post-merger-integration management (Boyne & Meier,
2009).). The turnaround strategy is meant to improve financial performance. It is aimed at
improving productivity of the existing operations, the confidence levels of the total workforce
and resources that could potentially be mined and ensuring that the full potential of land-based
operations is achieved (Pearce & Robinson, 2007).
Like many other developing markets, the retail industry in Kenya is highly fragmented with an
estimated 120,000 shops. It is estimated that the three quarters of all retail shopping is
transacted through small single shops and kiosks spread across the country while the remaining
quarter is covered by numerous supermarkets. Supermarkets in Kenya have grown from a tiny
niche market in 1990 to 20% of urban food retail today (Walshe2014). According to Nielsen
(2015) supermarkets are self-serving stores handling predominantly food, drug and fast-
moving consumer goods with at least 150m of floor space. By use of the above parameters
there were two four hundred supermarkets in Kenya as of 2007 (Kamau, 2017). The major
supermarket chains in Kenya include Nakumatt, Uchumi, Tuskys and Ukwala whose outlets
are concentrated on major towns such as Nairobi, Mombasa, Nakuru, Kisumu and Eldoret.
Uchumi Supermarkets Ltd (Uchumi Supermarkets Limited) is a Kenya-based company
engaged in the retail supermarkets operation. It distributes bakery, wines, meat, fish,
vegetables, as well as kitchen appliances and decoration, among others. On 17th December
1976, Uchumi shareholders-Industrial Commercial & Development Corporation (ICDC),
Kenya Wine Agencies Limited (KWAL) and Kenya National Trading Corporation (KNTC) -
all Government owned parastatals entered into a management contract with Standa SPA of
Italy. In the 1990's Uchumi spearheaded the hypermarket concept in Kenya. In early 2000s
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Uchumi started to experience financial and operational difficulties occasioned by a sub-optimal
expansion strategy coupled with weak internal control systems. As a result, on 31st May 2006,
the Board of Directors resolved that the Company ceases operations and on 2nd June 2006, the
Debenture Holders placed the Company under receivership. Simultaneously, the Capital
Markets Authority (CMA) suspended the Company’s listing on the Nairobi Securities
Exchange (NSE) (Uchumi Supermarket, 2017).
Following a framework agreement between the Government of Kenya, suppliers and debenture
holders, the company was revived and commenced operations from 15th July, 2006 under
Specialized Receiver Manager (SRM) and interim management. The management and staff
have since worked tirelessly to redeem the company. From a negative bottom line in 2006, the
company has reported profits in the last three financial years. The lending banks in turn lifted
the company’s receivership in 2010 and the company was successfully re-listed in the Nairobi
Securities Exchange on 31st May 2011 exactly five years to the date that it was suspended
(Uchumi Supermarket, 2017).
1.2 Statement of the Problem
The dynamism of the environment implies that organization have to constantly redesigned their
strategies in order to remain competitive or to survive (Thompson, 2013). Failure to effectively
adapt the organization leads to a strategic problem. Such a problem will be evidenced by a
mistake between what the organization offers and what is in the market. Achieving turnaround
calls for a totally different set of skills to probe into the causes of decline and to formulate
appropriate strategies to transform the company for a fresh lease of life. Turnaround strategies
are vital for firms in the realization of sustainable economic growth since their activities impact
directly on overall public and private sector expenditures and resources (Walshe, 2014). Top
management must rescue a declining firm by responding swiftly through strategies and policies
to external and internal factors causing decline with an aim of substantial recovery. A firm may
be said to be in decline when it experiences a resource loss sufficient to compromise its
viability. Turnaround may be considered to have occurred when a firm recovers adequately to
resume normal operations (Finkin, 2007).
Not all turnaround cases are a success story, Schendel, Patton and Riggs (2016) studied two
hundred and sixty cases of turnaround and only fifty-six had managed to recover over a four-
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year period. This suggests that turnaround especially in difficult operating environment like
mature, competitive businesses is not easy. Turnaround attempts more often than not fail where
firms concede defeat and have to wind up. Turnaround failure presents harsh realities of
liquidating a firm’s assets to try returning some capital to shareholders, creditors or owners. It
is always a drastic and sad situation to face up to the hard reality of liquidation, however, it
may be sometimes be the best thing to do rather than to go on into even the sadder and worse
situation (Khandwalla, 2011).
Uchumi has had a bad reputation over the years regarding the financial ability to sustain
profitability. Last year, it survived a court petition to wind up after several creditors held that
it owed them close to Sh300 million. In January, it announced that it made a Sh2.8 billion post
tax loss. The latest scandal will send stakeholders crying to the bank because there is no waking
up from a Sh67 million debt ((Kamau, 2017). The current situation of Uchumi can be likened
to that of a patient fighting for life in an Intensive Care Unit. Even as it continues denying the
allegations made by Euromart regarding the Sh67 million debt, Uchumi has in the past failed
to pay back suppliers. It has also made no successive attempts of revival that can put it on the
ranks of fellow competitors. At this moment, all it needs is an exit strategy to give space to
those in the same business ((Kamau, 2017).
There has been research carried out on turnaround strategies but little has been done in the
retail businesses sector hence the need to fill the gap. Mbwale (2014) conducted a study in
Namibia on Namdeb’s turnaround strategy to improve its financial performance and
established the need to review the current introduced turnaround strategy might be useful to
improve the financial performance. Roberts (2015) conducted a strategy in United Kingdom
on the role of management in the turnaround process and established that management has a
role in the turnaround process. Ngati (2013) did a study on turnaround strategies adopted by
the New Kenya Cooperative Creameries Limited and found that turnaround strategies were
employed in order to achieve a turnaround process in New KCC Ltd. Ondimu (2015)
conducted a study on turnaround strategies and performance of selected Commercial Banks in
Kenya and showed that turnaround strategies had a positive effect on the performance. All the
above studies have been done in different contexts, therefore this study seeks to establish the
turnaround strategies that should be adopted by Uchumi supermarket in order to fill the gap.
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1.3 General Objective
The purpose of the study was to assess the turnaround strategies in a competitive environment
a case of Uchumi Supermarket.
1.4 Specific Objective
The study was guided by the following specific objective
1.4.1 To evaluate the role of turn around strategies in solving financial decline in
organisations.
1.4.2 To determine the turnaround strategies in a competitive that should be adopted by
Uchumi supermarket.
1.4.2 To establish the challenges that Uchumi supermarket may face in adoption of the
turnaround strategies in a competitive environment.
1.5 Significance of the Study
1.5.1 Uchumi Supermarket Management
This study will be of value to the management of Uchumi Supermarket as the study will be a
source of information on the different turnaround strategies that can employed by the
supermarket in changing its fortune in a declining environment. From the study, the
management of the supermarket will be able to identify their appropriate strategy to be adopted
and ways in which to customize the turnaround strategies to their individual organization’s
situation to make it profitable.
1.5.2 Management of Other Organisations
The findings of the study will be of benefit to other organisations which are in decline and also
the stable organisations as they will know the signs and process of decline and also identify
the turnaround strategies to be employed to revive them to better their performance through
employment of such strategies. The outcomes of this study will give rise to the formulation of
an appropriate strategic framework to assist organizations in implementing organizational
turnarounds.
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1.5.3 The Government and Policy Makers
The Government of Kenya and the policy makers will benefit from the findings of this research
since they shall be quite interested on the turnaround strategies being adopted by Uchumi
Supermarket and hence put in place policies that will guide and encourage other firms within
and outside the industry in coming up with strategies that threatens the survival of the firms
and also put in place a conducive environment to prevent their decline.
1.5.4 The Academia and Researchers
The findings of the research will be used to develop new models for implementing turnaround
strategies that will be adopted under various situations. The research will also provide more
insight into the implication of turnaround strategies on organizational performance and build
their body of knowledge for more expounded research which they will use as a reference for
future studies.
1.6 Scope of the Study
The study aimed at establishing the turnaround strategies that should be adopted by Uchumi
supermarket. The target population was limited to the 84 employees at the Uchumi
supermarket head office (Uchumi Supermarket, 2017). The study was partial in terms of
coverage as it only covered the head office for easier collection of data and the limitation of
time. The study was conducted for a period of 3 months from July to September 2017.
The study experienced a number of limitations; first the respondents to be approached did not
give full information fearing that the information sought would be used against them or against
Uchumi supermarket. The study assured them of confidentiality and that the information would
not be shared to anyone as it would be used purely for academic purposes. The study also
encountered problems in eliciting information from the respondents as the information required
was subject to areas of feelings, emotions, attitudes and perceptions, which could not
accurately be quantified and/or verified objectively. The study minimized this by making the
questions objective. Some respondents even turned down the request to fill questionnaires. The
study handled the problem by carrying an introduction letter from the University and assuring
them that the information they gave would be treated with confidentiality.
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1.7 Definition of Terms
1.7.1 Strategy
According to Thompson and Strickland (2007) strategies are the means by which long-term
objectives will be achieved. They further point that strategies are unified, comprehensive and
integrated plans that relate the strategic advantages of the firm to the challenges of the
environment.
1.7.2 Turnaround
Turnaround refers to recovery to profitability from a loss situation. Following a loss, a firm’s
top management team must respond in an effort to ensure that the firm’s survival (Situma,
2016).
1.7.3 Retrenchment
Retrenchment means involuntary separation of an employee due to the replacement of labour
by machines or the close of the department. Retrenchment strategies involve cutting operating
costs and divestment of non-core assets (Beeri, 2009).
1.7.4 Corporate repositioning
Corporate repositioning is about repositioning your company and its products and services to
be seen as having few credible substitutes in the marketplace. It's about largely winning the
sale before a salesperson ever talks to the prospect or knows the prospect is in the market to
buy (Collard, 2011).
1.7.5 Restructuring
Restructuring is defined as a significant modification made to the debt, operations or structure
of a company (Heany, 2015). This type of corporate action is usually made when there are
significant problems in a company, which are causing some form of financial harm and putting
the overall business in jeopardy.
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1.7.6Turnaround Process
Turnaround process is a process dedicated to corporate renewal. It uses analysis and planning
to save troubled companies and returns them to solvency (Thompson and Strickland, 2007).
1.7.7 Turnaround Strategy
Boyne, (2009) points out that turnaround strategy is defined by the components of the
turnaround strategy which include stabilizing, managing, fixing and funding of a distressed or
underperforming corporation that are implemented during the stages of the turnaround.
1.7.8 Challenges
Challenges are the prevailing, new or emerging circumstances that threaten the existence and
sustainability of firm/ business entity (Morris, 2007).
1.7.9 Strategy Implementation
Is the process through which a chosen strategy is put into action. It involves the design and
management of systems to achieve the best integration of people, structure, processes and
resources in achieving organizational objectives (Thompson & Strickland, 2007).
1.7.10 Competitive Environment
A competitive environment is the dynamic external system in which a business competes and
functions (Porter, 1996).
1.8 Chapter Summary
This chapter presents the introduction to the study. The chapter provided the background
information of the stud and the problem statement of the study. The objective of the study was
also presented that was to determine the turnaround strategies that should be adopted by
Uchumi supermarket. The specific objectives were also clearly outlined that included; to
evaluate the turnaround process that determine the strategies to be used at Uchumi
Supermarket, to determine the turnaround strategies that should be adopted by Uchumi
supermarket and to establish the challenges that Uchumi supermarket may face in adoption of
the turnaround strategies. Finally, the scope, definition of specific terms that was used in the
project was presented. The next chapters represented literature review that reviewed the
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turnaround strategies that should be adopted by Uchumi supermarket. The third chapter was
research methodology that focused on research design, population and sample design, data
collection method, research procedures, data analysis method and chapter summary. The fourth
chapter was the interpretation and presentation of the result findings obtained from the field
and finally discussion, conclusion and recommendations that provided the major summary of
the study was made.
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CHAPTER TWO
2.0 INTRODUCTION
2.1 Introduction
The following chapter will review turnaround strategies in a competitive environment a case
of Uchumi supermarket. The chapter will then determine the turnaround strategies that should
be adopted in a competitive environment. Finally, it will determine the strategic management
practices that address challenges faced by female entrepreneurs while trying to grow their
businesses. Finally, it will establish the challenges that Uchumi supermarket may face in
adoption of the turnaround strategies in a competitive environment and the chapter summary.
2.2 The Role of Turn Around Strategies in Solving Financial Decline in Organisations
To survive in a globally competitive market, firms need to take advantage of the new
technological opportunities for efficiently serving their target market and quickly responding
to the needs of customers during the turnaround process. This forces firms to become craftier
in their resource management and manipulation. In the end, the ability to deal with a
sophisticated demand results not only in a direction towards more differentiated products but
also in a competitive edge in the global market. Ondimu (2015) points out the role of
demanding customers for driving forward new solutions and products. Decisions should be
made contingent to the prevailing situations.
Turnaround occurs when a firm undergoes a survival threatening performance decline over a
period of years but is able to reverse the performance decline, end the threat to firm survival
and achieve sustained profitability (Chowdhury, 2012). Corporate turnaround is also defined
as the implementation of a set of actions required to save an organization from business failure
and return it to operational normality and financial solvency. Turn around has been discussed
as a number of possible processes. Either a downturn phase followed by upturn phase or decline
stemming followed by reversal of the decline (Robbins & Pearce, 2012). The first task here is
always diagnosis of the underlying reasons for poor corporate performance. Crafting
turnaround strategies then follows (Thomson & Strickland, 2013). Managers need to create
strategic management systems that integrate all disciplines and all areas of operation of the
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organization in outcome based structures of the future the manager must critically look at their
performance and compare it to others (Thomson & Strickland, 2013).
Turnaround is considered to have occurred when a firm recovers adequately to resume normal
operations, often defined as having survived a threat to survival and regained sustainable
profitability (Barker & Duhaime, 2014). The recovery is due to a decline in performance which
in most cases is situational. When a firm’s Top Management Team responds inappropriately,
it may continue in its effort to reverse a firm’s decline although such efforts will most likely
become more difficult as slack resources become exhausted, organization stakeholders
withdraw support and key managers’ exit (Arogyaswamy et al, 2012). Thus, during decline the
management team must make expeditious well- informed decisions to hasten a firm’s recovery.
Research indicates that when management formulate and implement informed strategies, their
firms can turnaround even when facing declining environment munificence, increasing
environmental dynamism, escalating internal problems or limited slack resources (Barker &
Duhaime, 2014). Pearce & Robinson (2014) present the view that strategic management
research provides evidence the firms that have used a turnaround strategy have successfully
confronted decline.
2.2.1 The Signs of Financial Decline
Early and eminent contributors to the field of turnaround argued that downturns came about as
a result of unfavorable environmental shifts combined with organizational inefficiency or
inappropriate competitive strategies (Schendel, Patton & Riggs, 2016). This view that the roots
of firm decline and possible failure can be traced to industry contraction or firm specific
problems received significant support in the broader management literature (Chowdhury &
Lang, 2013).
According to Scherrer (2013) long before a business commences its decline, warning signals
start flashing, but managers often do not notice the red lights, or they ignore them. Almost
every business will experience financial distress or pressure at some point in time the key to
survival lies in the owner’s ability to diagnose problem areas and take corrective action
quickly. This requires careful monitoring and measurement of key financial metrics which
highlight possible areas of financial pain. Despite the importance of tracking profitability as
14
well as cash flow, many business owners fail to measure even a handful of key performance
indicators (KPI) each month and often ignore the classic warning signs, which if left
unaddressed, could foreshadow the death of their business (Chowdhury & Lang, 2013).
Every business that is in distress shows clear symptoms of impaired profitability and cash flow.
Below are ways but not limited to through which firm’s management can recognize its firm is
about to have financial problems. Business and Management Warning Signs which can be
identified through Information found on financial statements (Chowdhury, 2012). Changes in
the market environment often trigger if not cause deterioration in a company's financial health
i.e. downturn in the economy, the appearance of a strong competitor, an unexpected shift in
buyer's habits, among other things, can put serious pressure on a company's revenues and
profitability. Lack of up-to-date financial information and failure to calculate or forecast cash
flow and continued erosion of gross profit margins, over-reliance on borrowed funds a firm
which is exposed to higher business risk, faces a greater chance of financial distress (Pandey,
2014).
2.2.2 The Causes of Financial Decline
Organizational decline represents substantial resource losses over time (Cameron, Whetten &
Kim, 2012) and can be either a gradual process or a sudden, unexpected disruption. Substantial
organizational decline leads to crisis where the survival of the firm is threatened. Managers
tend to attribute performance decline and any resulting organizational crises to the external
factors beyond their control, such as competition. Empirical studies, however, show that very
few business failures are the 20 results of outside factors only (Boyle & Desai, 2011). Instead
organizational failure is frequently linked to internal problems like failure to update products,
invest in core competencies and control cost. Apart from internal factors, external factors like
political, economic, social, technological, ecological and legal also play a decisive role in the
decline of an organization. It includes the role of unions, governmental regulations, safety and
health improvement measures, consumer organization pressures, shortage of energy and raw
materials etc. Research shows that external causes play a minimal role compared to the internal
causes in shifting the fortunes of the organization (Bruton & Wan, 2011).
15
The major cause of business failure lies within finance, operations and marketing the internal
elements of a business. The management has direct control over these functions and are the
force that drives them, yet 80 percent of business failures are caused by management’s inability
to control the internal elements (Scherrer 2013). Internal causes of financial distress include
Unanticipated changes in the factors providing competitive advantage e.g. the Introduction of
new products or services by competitors (Barker & Duhaime, 2014). The loss of firm specific
skills (human capital) which were the foundation of the firm’s competitive advantage, as noted
by Castanias and Helfat (2011). The adoption of misplaced strategies, or failure to update its
traditional capabilities, experience, knowledge or resources, as noted by Grant (2016)
Insufficient Accounting Practices and poor debt management can also lead to financial distress.
The external environment may also affect the operations of a company adversely. Pandey
(2014) has noted that macro-level environmental forces are all those forces that are external to
the firm. A change in an external uncontrollable element will be felt by all businesses in an
industry, but the impact these changes have on specific business depends on the strength and
stability on the management team (Scherer, 2013). Some of the major issues, which are
generated by the external environment, are Government policies regarding taxation, power
tariff, power supply, customs duties and import duties, restrictions on imports and exports
among others. Quota system imposed by the government on raw materials/ finished goods.
Large numbers of firm’s entry thereby sudden increase in the capacity. Development of new
technology as well as sudden withdrawal by some of the major customers resulting into decline
in orders. Change in consumers’ tastes and preferences. Strained relationship with the external
government. A change in the lending policies of the financial institutions.
2.2.3 The Steps in Turnaround Process
In turnaround strategies, the focus to most stakeholders is on the speed of change, rapid cost
reduction and/or revenue generation. The length of time necessary to complete successful
business turnaround varies (Scherrer, 2013). Much research has been done to find out the
sequence that precedes the turnaround in a company. According to Simister (2014) The
principal aim of any corporate turnaround is to remove the company quickly from any
immediate danger of going into liquidation, and to focus on activities and tasks that restore
16
corporate value. In order to achieve this, Smith and Graves (2015) identified six broad stages
that a company in a turnaround situation will need to go through:
The first stage is management change which involves the board of directors or senior
management recognizing that change is necessary and then initiating a corporate turnaround
programme. The second stage is business review where the company must quickly identify the
underlying problems causing the current situation and understand the business’ chances of
survival. Business restructuring plan is the next stage is to identify appropriate strategies and
develop an achievable recovery plan with detailed functional actions. Typically, this will
include action to: restructure outstanding debt obligations, reduce operating costs, improve
management of working capital, enhance product pricing and customer mix, streamline
product lines and accelerate growth of high potential products (Smith & Graves, 2015).
The plan must then be communicated to all key stakeholders in the business, including the
board of directors, the management team and employees, to ensure buy-in. communicating the
plan with external parties, such as the bank, key suppliers and creditors will be critical to
gaining credibility and restoring confidence in the business (Smith & Graves, 2015).
Implementation is the next stage where at the emergency stage, companies must do whatever
is necessary to survive. This may include: making redundancies, eliminating departments and
drastically reducing all non-essential costs. Positive cash flow is critical and must be
established as quickly as possible. Cash will often be required to implement the turnaround
strategy and this must also be sourced without delay. Often, unprofitable business units or
operations are sold as a means to raise cash. Operations that cannot be sold within a reasonable
timeframe may be liquidated (Smith & Graves, 2015).
Stabilization is the next stage where once the business has stopped hemorrhaging, overheads
have been cut and loss-making operations have either been divested or liquidated; the main
focus is on improving the efficiency and effectiveness of the remaining business operations.
To ensure long-term survival, the company must increase profitability and its return on
investment while ensuring the smooth operation of existing facilities. This is often the hardest
stage for an organization to achieve successfully (Smith & Graves, 2015). Improving return on
investment is typically more challenging than removing loss-making operations or cutting
costs. Embedding the change is the final stage concentrates on embedding the turnaround, with
17
the company gradually returning to financial health. Management behavior and reward and
compensation systems need to focus employees on profitability, return on investment and value
creation (Smith & Graves, 2015).
2.3 Turnaround Strategies that Should be Adopted in a Competitive Environment
Different scholars studying different business environment circumstances have identified
different strategies of addressing prevailing challenges in a competitive environment. Akrani
(2012) describes a turnaround strategy as an analytical approach used in solving the main or
root cause of failure of a firm that is making losses that will help it know the most crucial
reasons behind its failure. To solve the issues facing such a company, restructuring and a long
term strategic plan must be designed and implemented. The turnaround strategy’s overall goal
is to put back a distressed or underperforming firm to normality in terms of satisfactory levels
of cash flow, profitability, liquidity and solvency.
To achieve the above objectives, a turnaround strategy must initially start with reversing the
factors that caused the financial distress, resolution of the financial crisis, achievement of a
speedy financial performance, regaining of shareholders trust and getting past internal
constraints and characteristics of the industry which may not be favorable to the firm (Smith
& Graves, 2015). There are generally two broad and overlapping stages of a turnaround that
are acknowledged in available literature that is; decline stemming strategies and recovery
(Robbins & Pearce, 2012).
The overall goal of turnaround strategy is to return an underperforming or distressed company
to normal in terms of acceptable levels of profitability, solvency, liquidity and cash flow.
Turnaround strategy is described in terms of how the turnaround strategy components of
managing, stabilising, funding and fixing an underperforming or distressed company are
applied over the natural stages of a turnaround (Filatotchev & Toms, 2016). Turnaround refers
to recovery to profitability from a loss situation. Following a loss a firm’s top management
team must respond in an effort to ensure the firm’s survival. A faltering firm will most likely
continue to decline and may eventually fail if its top management team likes the ability to
respond successfully to external and internal factors causing decline. To achieve a successful
18
turnaround, a management team must first stem a firm’s decline and select an appropriate
strategy for recovery (Situma, 2016).
2.3.1 Repositioning and Restructuring Strategies
Corporate repositioning is about change. It's about repositioning the company in the mind of
prospects. Corporate repositioning is about repositioning your company and its products and
services to be seen as having few credible substitutes in the marketplace. It's about largely
winning the sale before a salesperson ever talks to the prospect or knows the prospect is in the
market to buy. Corporate repositioning is about repositioning your brand (Heany, 2015). If
nearly every sale of yours seems to come down to price, if you're closing fewer sales than you
used to, if your margins keep shrinking, you may need to reposition your company in the
marketplace, in the minds of both your prospects and your people.
Restructuring is defined as a significant modification made to the debt, operations or structure
of a company (Heany, 2015). This type of corporate action is usually made when there are
significant problems in a company, which are causing some form of financial harm and putting
the overall business in jeopardy. The hope is that through restructuring, a company can
eliminate financial harm and improve the business. When a company is having trouble making
payments on its debt for instance, it will often consolidate and adjust the terms of the debt in a
debt restructuring. After a debt restructuring, the payments on debt are more manageable for
the company and the likelihood of payment to bondholders increases. A company restructures
its operations or structure by cutting costs, such as payroll, or reducing its size through the sale
of assets. This is often seen as necessary when the current situation at a company is one that
may lead to its collapse (Akrani, 2012).
Keith (2008) posits that corporate reorganization can be tricky and difficult to get through. The
approach to successful repositioning includes four distinct phases. The first two, Research and
Repositioning, are aimed at converting the brand. Phase three which is Realignment, focuses
on making believers of your staff and Phase four referred to as Reinforcement, is about
converting others. Successful repositioning is about faith; Staff members' faith that
management is committed to and will support the revised market strategy.
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2.3.2 Retrenchment
Retrenchment strategies involve cutting operating costs and divestment of non-core assets. In
times of turbulent environment, business horizons often shorten with owners/managers
focusing on immediate survival rather than on long-term aims (Hanks,2009). Believing it is
easier to reduce costs than generate additional revenue, many businesses choose to retrench.
Beeri (2009) suggests that successful turnarounds are characterized by strategies of
retrenchment, repositioning and reorganization. Failing companies that use one or more of
these strategies are likely to perform better. Retrenchment is an integral component of
turnaround strategy. The critical role of retrenchment in providing a stable base from which to
launch a recovery phase of the turnaround process is well established.
Asset retrenchment which is often implemented concurrently with or immediately after the
cost efficiency drive. An asset retrenchment strategy involves assessing areas of the
organization that are underperforming and determining whether their efficiencies can be
increased or if it would be best to discontinue or divest from such an asset (Heany, 2015).
Various studies have also shown that the asset retrenchment strategies are only implemented
if strategies on cost efficiency don’t have a substantial effect on the company’s financial
stability. However, it is normally the second step to follow after the cost efficiency strategy.
(Robbins & Pearce, 2012). Robbins and Pearce (2012) state that the effectiveness of asset
retrenchment strategy as a part of the turnaround strategy largely relies on the ability of the
firm to generate cash from disposal of any asset.
Reorganisation deals with all the people issues in the business. It entails restructuring,
restaffing, reskilling and turnaround leadership revitalization to yield improved leadership,
management, organisational structure, organisational alignment and culture. Reorganisation is
invariably required to ensure success of the other turnaround strategies. Depending on the
turnaround situation, reorganisation can be limited to leadership alignment, and better
management systems for planning and control of the company. Often, however, the extent of
reorganisation required goes as far as changes in top management and in the organisational
structure (Lohrke, Bedeian & Palmer, 2010).
20
2.3.3 Top Management Changes
Turnaround management demands competent leadership to pave way on the implementation
of the policies, motivate the subordinates and communicate the importance of the process.
Collard (2011) emphasizes that it is always safer to change the leadership whenever an
organization is conducting turnaround management. Experience at the top management is
crucial since the existent leadership has a clear understanding of the culture of the organization.
Despite that, retaining the existent leadership who are not ready to admit failure on their part
in provision of competent guidance in implementation of the organization’s corporate strategy
is risky (Bibeault, 2012).
Managers attempt to turn around their organizations, through structural changes in the
organization and/or market repositioning (Banaszak-Holl, 2010). In addition, there are a wide
variety of managerial responses used during periods of crisis and decline that reflect more
general processes, routines, and rituals of managerial decision making. Slatter and Lovett
(2014) notes that management change phase involves selecting a chief executive officer who
can successfully lead the turnaround. This individual must have a proven track record and the
ability to assemble a management team that can implement the strategies to turn the company
around. Collard (2011) argued that they are less motivated to engage in turnaround strategies
especially if they are strongly committed to the firm’s current strategy or attribute decline to
external causes only. They further argue that changes of the top management team can endow
with important signals to outside stakeholders like lenders and creditors that the firm is
separating itself from past failed strategies.
A change of the company’s chief executive officer is normally implemented early in the
turnaround strategy It acts as an indication of how deep the firm’s crisis are and urgent action
is needed to correct the rot (Lee & Johns, 2014). There are two main reasons why the chief
executive officer is replaced. The first being that the shareholders and the media place the
responsibility of the negative performance on the CEO. When the incumbent CEO is replaced
it sends out the message that change is in the air both to external parties and also to the
employees (Daily & Dalton, 2015). The change is also a sign that the status quo in untenable,
that the firm is serious in its readiness to transform itself and that the strategic turnaround has
begun (Arogyaswamyet al., 2015). The second common reason for the chief executive officer’s
21
replacement is when the current CEO either ignores or does not see the existing problems or
he applies past solutions to current problems.
The top management must employ diversification strategies, where a company’s prior-
acquisition diversification strategy profile influences a company’s diversification strategy.
Jeyavelu (2014) suggests that organizational behavior is guided by routines that stem from
prior experience and from performance feedback. When a company has more experience with
a strategic action, it increases the likelihood of repeating that action in the future. Over time,
the strategic action becomes a routine for the firm. The possibility of a firm will be continuing
the same diversification strategy in the future is dependent on the performance feedback
outcome of a company’s prior diversification strategy. Positive performance feedback
increases the likelihood the company will repeat its diversification strategy in the future.
The successful carrying out of a diversification strategy makes the firm more confident that
they have the skills, knowledge and capabilities to be successful in that diversification strategy
(Lee &Johns, 2014). Furthermore, repeating a successful diversification strategy is perceived
to be less risky than using alternative strategies with limited organizational experience.
Therefore, positive performance feedback reinforces the persistency of using a diversification
strategy in the future. However, when a company is experiencing negative prior-diversification
performance feedback it will explore for alternative strategies.
2.4 Challenges in Implementing Turnaround Strategies in a Competitive Environment
According to Beer, Eisenstat and Specter (2010) organizations seems to have difficulties in
implementing their strategies in a competitive environment, however, researchers have
revealed a number of problems in strategy implementation e.g. weak management roles in
implementation, lack of communication, lack of commitment to the strategy, unawareness or
misunderstanding of the strategy, unaligned organizational systems and resources, poor
coordination and sharing of responsibilities (Beer & Eisenstat, 2010). Lewin and Volberda
(2009) stated clearly that most of the individual barriers to strategy implementation that have
been encountered fit into one of the following interrelated categories: too many and conflicting
priorities, a top down management style, inter functional conflicts, poor vertical
communication and inadequate management development. Jeyavelu (2014) identified
22
challenges to be; insufficient partner buy-in; insufficient leadership attention; ineffective
leadership; weak or inappropriate strategy and resistance to change.
Drazin and Howard (2014) asserts that the most complicated and time-consuming part of
strategic management is execution of the strategy, whereas formulation of the strategy is
basically intellectual and creativity with emphasis on synthesizing and analyzing. Turnaround
strategies implementation has been affected by severe challenges ranging from limited
resources, severe time pressures and the reduced support by stakeholder. Firms face unique
challenges when implementing turnaround strategies which arise from internal and external
sources alike.
2.4.1 Resistance to Change
Implementation of turnaround strategy does not automatically follow strategy formulation
(Barker, & Duhaime, 2014). There is always some resistance, which occurs whenever there is
a departure from historical behavior, culture and power structure. It is therefore a multifaceted
phenomenon which introduces delays, additional costs and instabilities into the process of
change. Kottler (2016) cites a culture of complacency from an inept leadership as the main
reason that necessitates many turnaround situations. He states that a typical 20th century
organization has not operated well in a rapidly changing environment because of lack of
leadership.
Firms in turnaround tend to be over managed and under led” have a shortage of leaders who
are able to create the badly needed change. Managers who resist change develop a strong
arrogant culture and fail to acknowledge the value of customers and stakeholders. (Stopford &
Baden-Fuller, 2010) stated that there were mostly individual barriers to turn around strategy
implementation such as too many and conflicting priorities, insufficient top team functions, a
top down management style, inter-functional conflicts, poor vertical communication, and
inadequate management development (Barker, & Duhaime, 2014).
The employees should be undertaken through a proper training and development program to
understand the business processes and ways of handling issues. The managers and supervisors
should put more emphasis in cultural norms in the course of everyday tasks (Bibeault, 2012).
Slatter and Lovett (2014) contends that the organization that aspires to recover from decline
23
should have leaders who are competent and knowledgeable to overcome strategy
implementation challenges. Competent leaders contribute greatly towards the success of a
business especially on the way they make decisions and the strategies that they choose.
Resistance to change also impacts negatively to turn around strategy implementation. Change
aimed at making improvement in the organization is at the heart of strategic management.
Every strategy developed by senior managers is aimed at strengthening and enhancing
organization’s performance as well as sustaining and nourishing its very existence. To
overcome the resistance, education and effective communication, which, involves the
explanation of the reasons for and means of strategic change can play a key role (Johnson &
Scholes 2012).
2.4.2 Inadequate Resources
Resources available to an organization underpin the strategic capability of an organization
since it is resources that are deployed into the various stages of turnaround strategy
implementation. Inadequate resources may hinder sound strategy implementation in any
organization or may limit the choices of strategy available to it (Donaldson, 2014). Change
aimed at making improvement in the organization is at the heart of strategic management.
Every strategy developed by senior managers is aimed at strengthening and enhancing
organization’s performance as well as sustaining and nourishing its very existence. To
overcome the resistance, education and effective communication, which, involves the
explanation of the reasons for and means of strategic change can play a key role.
Most companies attempting to develop new organization capacities stumble over these
common organizational hurdles, competence, coordination, and commitment. Jeyavelu (2014)
indicated that these hurdles can be translated into the following implementation problems,
coordination of implementation activities was not effective enough, capabilities of employees
were insufficient, training and instruction given to lower level employees were inadequate and
leadership and direction provided by departmental manager were inadequate (Beeri, 2014).
Collard (2011) indicates that some firms lack adequate funds to invest in modern technologies
for example information communication technology (ICT) is a major challenge that impact
negatively on the performance of an organization. Failure to adopt modern to technologies may
24
lead to reduced efficiency, poor quality services, and increased costs of operation this might
expose the organization to poor performance (Slatter and Lovett, 2014).
Lack of adequate resources namely funds, machinery /equipment, human capacity, skills and
experience. The adoption of proper or appropriate policies can be quite useful. Equally
important is the adoption of an effective control system during strategy implementation. Turn
around strategies often fail to succeed due to lack of commensurate logistical and financial
back up (Scherrer, 2013). The resources and competences of the organization make up its
strategic capability, which enables success in implementation of chosen strategies. Just as there
are outside influences on the organization and its choice and implementation of strategies, so
there are internal influences. These internal influences constitute strengths and weaknesses.
Competences such as skills and knowhow enhance successful strategy implementation (Grant,
2016).
2.4.3 Strategic Drift
According to Lee and John (2014) strategies progressively fail to address the strategic position
of the organization and performance deteriorates. History suggests that most organizations run
into difficulties because of failure to acknowledge and address strategic drift. Strategic drift is
a situation where strategies progressively fail to address the strategic position of the
organization. Firms go through long periods of relative continuity during which established
strategy remains largely unchanged or changes incrementally. This can go on for considerable
periods of time in some organizations (Scherrer, 2013). This is then followed by a flux if it is
not well managed and the flux sets in which strategies fail but not in a very clear direction.
There may then be transformational change fundamental change in which there is change in
strategic direction. There are usually strong forces at work that are likely to push firms into a
strategic drift. Incremental strategic change is a natural outcome of the influence of
organizational culture, individual and collective experience, political processes and prior
decisions (Pandey, 2014).
Failure to work out the strategy by ensuring that the organization’s daily activities, work efforts
and resources are directed as much as possible towards the implementation of strategy which
involves developing operational plans and tactics through which the otherwise abstract strategy
25
will be implemented (Chowdhury, 2012). These plans and tactics are developed at operational
or functional level of strategic management. It is actually the inability to match strategy to the
institutions of the organization which include, structure, leadership, culture, support systems,
processes and policies. Many of the organization strategies and tactics overlap each other.
There are many possible sets of answers for the same set of requirements. There could be many
situations like that when a set of strategic tactics is chosen for implementation. Suitability of
chosen strategic tactics depends on the current production process, culture and many other
factors that are in place. Thus, a line of strategic tactics initially identified at the start of a
production process may not be valid later in the production process. Because of the competing
nature, an updated set of tactics might be more appropriate and cost effective later (Kamau,
2014).
However, if changes in an organization’s environment are at a greater rate than that rate of
incremental strategic change, the organizations will get out of line with its environment (David,
2016). There is another danger that organizations become merely reactive to their environment
and fail to question or challenge what is happening around them or to innovate to create new
opportunities. This means that strategy development processes in organizations need to
encourage people to have the capacity and willingness to challenge and change their core
assumptions and ways of doing things. Internationalization affects size of the market and range
of competitors, relations with potential partners’ overseas and organizational activities across
national boundaries (Situma, 2016).
2.5 Chapter Summary
This chapter basically reviews empirical literature regarding turnaround process that determine
the strategies to be used at Uchumi Supermarket, the turnaround strategies that should be
adopted by Uchumi supermarket and the challenges that Uchumi supermarket may face in
adoption of the turnaround strategies. It recognizes that turnaround occurs when a firm
undergoes a survival threatening performance decline over a period of years but is able to
reverse the performance decline, end the threat to firm survival and achieve sustained
profitability. The turnaround strategy’s overall goal is to put back a distressed or
underperforming firm to normality in terms of satisfactory levels of cash flow, profitability,
liquidity and solvency. Turnaround strategies implementation has been affected by severe
26
challenges ranging from limited resources, severe time pressures and the reduced support by
stakeholder. The next chapter three will cover the research methodology that will be used, in
an attempt to achieve the objectives of the study.
27
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter focused on the research methodology that will be used, in an attempt to achieve
the objectives of the study which is to assess the turnaround strategies in a competitive
environment a case of Uchumi Supermarket. Attention is focused on research design,
population and sample design, data collection method, research procedures, data analysis
method and chapter summary.
3.2 Research Design
The study will adopt a descriptive research design which is concerned with determining the
frequency with which something occurs or the relationship between variables. A descriptive
research design was preferred in this study since it allows for analysis of different variables at
the same time and enables the researcher to describe variables, situations and conditions
(Erikand & Marko, 2011). In addition, descriptive research design was chosen because it
enables the researcher to generalise the findings to a larger population. Thus, this approach is
appropriate for this study, since the researcher intends to collect detailed information through
descriptions and was useful for identifying variables and hypothetical constructs. This method
provided descriptions of the variables in order to answer the research questions in the study. It
was therefore an efficient way to use to obtain information needed to describe the attitudes,
opinions and views of the respondents on the assessment the turnaround strategies in a
competitive environment a case of Uchumi Supermarket.
3.3 Population and sample design
3.3.1 Population
According to Kothari and Garg (2014) a population is a well-defined set of people, services,
elements, events and group of things or households that are being investigated. Target
population is the specific population about which information is desired (Kothari, 2006). This
definition ensures that population of interest is homogeneous. Population studies are more
28
representative because everyone has an equal chance to be included in the final sample that is
drawn according to (Mugenda & Mugenda, 2003). The population for this study was limited
to the 84 employees at the Uchumi supermarket head office, where there was 7 senior
management employees comprising of 8%, 22 senior management employees comprising of
26% and 55 senior management employees comprising of 65% (Uchumi supermarket, 2017).
3.3.2 Sampling Design
3.3.2.1 Sample Frame
A sampling frame is a list of all the elements in the population from which the sample is drawn
(Cooper and Schindler, 2011). A sampling frame is also a list or other device used to define a
researcher's population of interest (Kombo & Tromp, 2006). The sampling frame defines a set
of elements from which a researcher can select a sample of the target population. Because a
researcher rarely has direct access to the entire population of interest in social science research,
a researcher must rely upon a sampling frame to represent all of the elements of the population
of interest
3.3.2.2 Sampling Technique
Sampling technique is the procedure a researcher uses to gather people, places or things to
study, (Kombo & Tromp, 2006). To achieve the desired homogenous grouping, the probability
sampling technique will be the most relevant as it allows for some form of random selection
(Gill & Johnson, 2006). The sample was 84 employees that comprised top level management,
middle level management and lower level management staffs at the Uchumi supermarket head
office. Stratified random sampling technique was used to select the sample from the 3 strata.
According to Cooper and Schindler (2011), stratified random sampling technique produces
estimates of overall population parameters with greater precision and ensures a more
representative sample is derived from a relatively non-homogeneous population.
29
3.3.2.3 Sample Size
Mugenda & Mugenda (2008) explain a sample to be a small group that is obtained from an
accessible population. It is further recommended that a sample of at least 10% of the total
population be used as a representation for true and accurate data. For descriptive studies, at
least 10% - 20% of the total population is enough to fulfill a study (Mugenda & Mugenda,
2008). A sample of 50% of the total population is thus considered sufficient and was used
therefore 42 respondents constituted the sample population for the study.
Table 3.1: Sample Size
Category Population Frequency Sample Ratio Sample Size
Senior management 7 0.5 4
Middle level management 22 0.5 11
Low level management 55 0.5 28
Total 84 0.5 42
3.4 Data Collection Method
Data collection procedure is the process of acquiring subjects and gathering information
needed for a study (Erikand & Marko, 2011). The study used primary data which was collected
using questionnaires to carry out the study. The study used both structured questionnaires and
unstructured questions to gather primary data. The structured questions were used in an effort
to conserve time and money as well as to facilitate in easier analysis as they were in an
immediate usable form; while the unstructured questions were used so as to encourage the
respondents to give an in-depth and give responses without holding back any information. The
questionnaires included closed and open-ended questions to ensure that the respondents give
relevant information. For the structured questions, a scale of 1 to 5 was used where 1
represented ‘very much agree’, 2 represented ‘disagree’, 3 represented ‘neutral’, 4 represented
‘agree’ and 5 ‘very much agree’. The questionnaire was divided into 2 sections. The 1st section
contained demographic information concerning age of the respondents, gender of the
respondents, education level and years of experience. The questioner also contained
30
organisation information that included statement as per research questions on Uchumi
supermarket head office.
3.5 Research Procedure
The study carried out a pilot study to pretest and validates the questionnaire. The researcher
selected a pilot group of 8 individuals from the target population to test the reliability of the
research instrument. Kothari (2014) recommends that a pilot of at least 10% of the population
should be represented thus the choice of 8 individuals is considered a representative pilot. The
pilot data was not included in the actual study. The pilot study allowed for pre-testing of the
research instrument to enhance the instrument’s validity and reliability. The pilot study enabled
the researcher to be familiar with research and its administration procedure as well as
identifying items that require modification. Pilot study also helps the researcher to correct
inconsistencies arising from the instruments, which would ensure that they measure what is
intended.
After the pretest, the researcher then proceeded to do the actual data collection. The researcher
carried an introduction letter from the university to assure the respondents that the information
that they give would be treated confidentially and it would be used purely for research
purposes. The researcher made use of network to persuade targeted respondents to fill up and
return the questionnaires to ensure a high response rate. The researcher also encouraged the
respondents to participate without holding back the information that they might had as the
research instruments would not bear their names. The questionnaire was then administered
through drop and pick method to respondents and the respondents that would not able to fill
the questioners within the stipulated time were contacted through email and telephone.
3.6 Data Analysis
Data analysis is the process of evaluating data using analytical and logical reasoning to
examine each component of the data provided which help in inspecting, cleaning,
transforming, and modeling the data (Bryman & Bell, 2007). Data collected was quantitative
in nature. The descriptive statistical tools was used to describe the data and determine the extent
used. Analysis was done quantitatively by use of descriptive statistics. This included frequency
31
distributions, tables, percentages and mean etc. Data analysis was also done with the use of
SPSS and Microsoft excel. Tables were used to summarize responses for further analysis and
facilitate comparison. This generated quantitative reports through tabulations, percentages, and
measures of central tendency. Cooper and Schindler (2011) notes that the use of percentages
is important for two reasons; first they simplify data by reducing all the numbers to range
between 0 and 100. Second, they translate the data into standard form with a base of 100 for
relative comparisons.
3.7 Chapter Summary
This chapter exposed the research methodology that will be used for the study. The study
adopted a descriptive research design. The population for the study was the 84 Uchumi
supermarket head office. The sampling frame was 84 employees that comprised top level
management, middle level management and lower level management staffs at the Uchumi
supermarket head office. A sample of 50% of the total population is thus considered sufficient
and was used therefore 42 respondents constituted the sample population for the study and
simple random sampling. The study carried out a pilot study to pretest and validates the
questionnaire. The researcher selected a pilot group of 9 individuals from the target population
to test the reliability of the research instrument. The study used primary data in form of
questionnaire that was administered through drop and pick method to respondents who were
the owners or the managers of the SMEs. Analysis was done quantitatively by use of
descriptive statistics. This included frequency distributions, tables, percentages and mean. Data
analysis was done with the use of SPSS and Microsoft excel.
32
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter discusses the results and findings obtained from the field. The chapter presents
the background information of the respondents, findings of the analysis based on the objective
of the study; to analyze turnaround strategies in a competitive environment a case of Uchumi
Supermarket. The chapter closes with a summary of the findings.
4.2 General Information
4.2.1 Response Rate
Out of the targeted 42 respondents, 38 filled in and returned the questionnaires since the
researcher was not able to cover the entire sample and thus made a response rate of 90% which
was satisfactory. According to Mugenda and Mugenda (2003), a response rate of 50% is
adequate for analysis and reporting; a rate of 60% is good and a response rate of 70% and over
is excellent. This response rate therefore was satisfactory to make conclusions on turnaround
strategies in a competitive environment a case of Uchumi Supermarket.
Table 4.2: Response Rate
Response Frequency Percentage
Response 38 90
Non Response 4 10
Total 42 100.0
33
4.2.2 Gender of the Respondents
Results on gender distribution amongst respondents showed that 53.3% of the target sample
were male while 44.7% were female; the study showed fair engagement of male and female
respondents.
Table 4.3: Gender of the Respondents
Gender of the Respondents Frequency Percentage
Male 21 55.3
Female 17 44.7
Total 38 100
4.2.3 Age of the Respondents
The study was interested in establishing the age of the respondents to deduce the difference in
opinion. Most of the respondents showed that 55.3% fell between the age brackets of 21 to 30
years, 34.2% were aged between 31 to 40 years and 10.5% were aged between 41 to 50 years.
Table 4.4: Age of the Respondents
Age of the Respondents Frequency Percent
21-30 years 21 55.3
31-40 years 13 34.2
41-50 years 4 10.5
Total 38 100
4.2.4 Level of Education of the Respondents
On the level of education of the respondents in the organization, the study requested the
respondents to indicate their level of education, from the findings; the study recognized that
39.5 % of the respondents had attained a bachelor’s degree, 36.8% had a diploma, 13.2% had
post graduate while 10.6% indicated they had attained secondary education level. Therefore,
the respondents had the relevant education necessary to complete the questionnaire and in
running their businesses.
34
Table 4.5: Level of Education of the Respondents
Level of Education Frequency Percent
Secondary 4 10.3
Diploma 14 36.8
Bachelor’s degree 15 39.5
Post graduate 5 13.2
Total 38 100
4.2.5 Number of years worked at Uchumi Supermarket
With regards to the number of years worked at Uchumi Supermarket, 89.5% respondents
indicated that they had worked at Uchumi Supermarket for less than 5 years while 10.5% had
worked for 5 to 10 years. This implied that most of the respondents had been in the business
for quite a long time which implies they were in a position to give credible information relating
to this study.
Table 4.6: Number of years worked at Uchumi Supermarket
Number of Years Worked Frequency Percent
Below 5 years 34 89.5
5 to 10 years 4 10.5
Total 38 100
35
4.3 The Role of Turn Around Strategies in Solving Financial Decline
4.3.1 Turnaround Strategies that Have Been Used by Uchumi Supermarket
It was deduced that Uchumi Supermarket used a number of turnaround strategies in order to
survive in the present competitive environment in Kenya. The strategies that were mostly used
were repositioning and restructuring strategies, retrenchment and change in the top
management of the company so as to make Uchumi Supermarket more competitive and also
reduce the operational cost of the company. Investigation on turn around process in a
competitive environment showed that; the respondents strongly agreed that to survive in a
globally competitive market, Uchumi Supermarket need to take advantage of the new
technological opportunities (mean = 4.14, std deviation = 0.38).
Decisions regarding Uchumi Supermarket turn around process need to be made contingent to
the prevailing situations (mean = 3.86, std deviation = 0.39), to deal with the demand of
customers Uchumi Supermarket need to differentiate its products (mean = 3.83, std deviation
= 0.39). Further it was strongly agreed that Uchumi Supermarket need to take advantage of the
new technological opportunities to respond to the needs of customers (mean = 3.64, std
deviation = 0.37) and managers at Uchumi Supermarket need to create strategic management
systems that integrate all operation of the organization (mean = 3.54, std deviation = 0.40).
Finally, it was agreed that Uchumi Supermarket need to take advantage of the new
technological opportunities to ensure service of its target market (mean = 3.48, std deviation =
0.39). It was noted that the standard deviation represented the variation of responses from the
mean were less than 1 hence there was less variation of responses.
36
Table 4.7: The Turn Around Process in a Competitive Environment
Mean Std Deviation
To survive in a globally competitive market, Uchumi
Supermarket need to take advantage of the new
technological opportunities
4.14 0.38
Uchumi Supermarket need to take advantage of the new
technological opportunities to ensure service of its target
market
3.48 0.39
Uchumi Supermarket need to take advantage of the new
technological opportunities to respond to the needs of
customers
3.64 0.37
To deal with the demand of customers Uchumi
Supermarket need to differentiate its products
3.83 0.39
Decisions regarding Uchumi Supermarket turn around
process need to be made contingent to the prevailing
situations
3.86 0.39
Managers at Uchumi Supermarket need to create
strategic management systems that integrate all operation
of the organization
3.54 0.40
4.3.2 The Signs of Financial Decline
Investigation on the signs of financial decline showed that; the respondents strongly agreed
that Uchumi Supermarket downturns came about as a result of unfavorable environmental
shifts (mean = 3.84, std deviation = 0.55). Uchumi Supermarket managers ignore the red lights
of downfall (mean = 3.82, std deviation = 0.56) and Uchumi Supermarket managers often do
not notice the red lights of downfall (mean = 3.76, std deviation = 0.54). Further it was strongly
agreed changes in the market environment often trigger a company's financial health (mean =
3.63, std deviation = 0.71) and lack of up-to-date financial information and failure to calculate
or forecast cash flow lead to financial distress (mean = 3.63, std deviation = 0.75). Finally, it
was agreed that Uchumi Supermarket managers do not diagnose problem that lead to its
downfall (mean = 3.50, std deviation = 0.92) and Uchumi Supermarket tracks its profitability
37
as and cash flow (mean = 3.16, std deviation = 0.31). It was noted that the standard deviation
represented the variation of responses from the mean were less than 1 hence there was less
variation of responses.
Table 4.8: The Signs of Financial Decline
Mean Std
Deviation
Uchumi Supermarket downturns came about as a result of
unfavorable environmental shifts
3.84 0.55
Uchumi Supermarket managers often do not notice the red lights
of downfall
3.76 0.54
Uchumi Supermarket managers ignore the red lights of downfall 3.82 0.56
Uchumi Supermarket managers do not diagnose problem that
lead to its downfall
3.50 0.92
Uchumi Supermarket tracks its profitability and cash flow 3.16 0.31
Changes in the market environment often trigger a company's
financial health
3.63 0.71
Lack of up-to-date financial information and failure to calculate
or forecast cash flow lead to financial distress
3.63 0.75
4.3.3 The Causes of Financial Decline
Investigation on the causes of financial decline showed that the respondents strongly agreed
that the adoption of misplaced strategies is a cause of Uchumi Supermarket failure (mean =
3.71, std deviation = 0.87). Uchumi Supermarket decline leads to crisis where the survival of
the firm is threatened (mean = 3.66, std deviation = 0.97) and the major cause of Uchumi
Supermarket failure lies within finance, operations and marketing the internal elements of its
business (mean = 3.58, std deviation = 0.68). Further it was agreed that change in consumers’
tastes and preferences is a cause of Uchumi Supermarket declining dominance (mean = 3.39,
std deviation = 0.75) and Uchumi Supermarket decline represents substantial resource losses
over time (mean = 3.37, std deviation = 0.97). Finally, it was agreed that change in lending
38
policies of the financial institutions is a cause of Uchumi Supermarket declining dominance
(mean = 3.32, std deviation = 0.87) and it was strongly disagreed that Uchumi Supermarket
failure is frequently linked to its internal problems (mean = 1.18, std deviation = 0.39). It was
noted that the standard deviation represented the variation of responses from the mean were
less than 1 hence there was less variation of responses.
Table 4.9: The Causes of Financial Decline
Mean Std
Deviation
Uchumi Supermarket decline represents substantial resource
losses over time
3.37 0.97
Uchumi Supermarket decline leads to crisis where the survival of
the firm is threatened
3.66 0.97
Uchumi Supermarket failure is frequently linked to its internal
problems
1.18 0.39
The major cause of Uchumi Supermarket failure lies within
finance, operations and marketing the internal elements of its
business
3.58 0.68
The adoption of misplaced strategies is a cause of Uchumi
Supermarket failure
3.71 0.87
Change in consumers’ tastes and preferences is a cause of Uchumi
Supermarket declining dominance
3.39 0.75
Change in lending policies of the financial institutions is a cause
of Uchumi Supermarket declining dominance
3.32 0.87
4.3.4 The Steps in Turnaround Process
Investigation on the steps in turnaround process showed that the respondents strongly agreed
that Uchumi Supermarket board of directors and senior management identifies the underlying
problems causing the current situation (mean = 3.58, std deviation = 0.67) and Uchumi
Supermarket identifies appropriate strategies to an achievable recovery plan (mean = 3.58, std
deviation = 0.86). It was agreed that Uchumi Supermarket board of directors and senior
management recognize that change is necessary (mean = 3.39, std deviation = 0.95). Finally,
39
it was disagreed that management behavior and reward systems need to focus employees on
profitability (mean = 2.63, std deviation = 0.76). It was noted that the standard deviation
represented the variation of responses from the mean were less than 1 hence there was less
variation of responses.
Table 4.10: The Steps in Turnaround Process
Mean Std
Deviation
Uchumi Supermarket board of directors and senior management
recognize that change is necessary
3.39 0.95
Uchumi Supermarket board of directors and senior management
identifies the underlying problems causing the current situation
3.58 0.69
Uchumi Supermarket identifies appropriate strategies to an
achievable recovery plan
3.58 0.86
The recovery plan is usually communicated to all key stakeholders
in Uchumi Supermarket
3.37 0.68
Management behavior and reward systems need to focus employees
on profitability
2.63 0.76
4.4 Turnaround Strategies that Should be Adopted in a Competitive Environment
4.4.1 Whether Uchumi Supermarket Adopted Any Turnaround Strategies
It was noted that Uchumi Supermarket had adopted some turnaround strategies as represented
by 78.9% of the respondents compared to 21.1% who indicated there were no strategies.
Frequency Percent
Yes 30 78.9
No 8 21.1
Total 38 100
40
4.4.2 Turnaround Strategies that Should be Adopted
It was strongly agreed that the turnaround strategy’s may help put back Uchumi Supermarket
to normality in terms of liquidity (mean = 3.74, std deviation = 0.55) and to achieve a
successful turnaround Uchumi Supermarket a management team must first stem a firm’s
decline (mean = 3.58, std deviation = 0.79). It was agreed that the turnaround strategy’s may
help put back Uchumi Supermarket to normality in terms of solvency (mean = 3.21, std
deviation = 1.07) and to solve the issues facing Uchumi Supermarket, restructuring and long
term strategic plan must be designed and implemented (mean = 3.18, std deviation = 0.95).
Finally, it was agreed the turnaround strategy’s may help put back Uchumi Supermarket to
normality in terms of profitability (mean = 2.84, std deviation = 1.13) and that the turnaround
strategy’s may help put back Uchumi Supermarket to normality in terms of cash flow (mean =
2.71, std deviation = 0.93). It was noted that some of the standard deviation represented the
variation of responses from the mean were less than 1 while others were more. The standard
deviation represented the variation of responses from the mean with the highest variation being
0.13 an indication that the variations in response was great while the least was 0.55.
Table 4.11: Turnaround Strategies that Should be Adopted
Mean Std
Deviation
To solve the issues facing Uchumi Supermarket, restructuring and long
term strategic plan must be designed and implemented
3.18 0.95
The turnaround strategy’s may help put back Uchumi Supermarket to
normality in terms of cash flow
2.71 0.93
The turnaround strategy’s may help put back Uchumi Supermarket to
normality in terms of profitability
2.84 1.13
The turnaround strategy’s may help put back Uchumi Supermarket to
normality in terms of liquidity
3.74 0.55
To achieve a successful turnaround Uchumi Supermarket a
management team must first stem a firm’s decline
3.58 0.79
The turnaround strategy’s may help put back Uchumi Supermarket to
normality in terms of solvency
3.21 1.07
41
4.4.3 Repositioning and Restructuring Strategies
It was strongly agreed that Uchumi Supermarket has restructured its operations to cope with
its challenges (mean = 4.39, std deviation = 0.50) and Uchumi Supermarket has restructured
its operations by cutting costs (mean = 4.29, std deviation = 0.46). It was strongly agreed that
Uchumi Supermarket has restructured its operations by reducing its payroll (mean = 4.24, std
deviation = 0.63) and Uchumi Supermarket has restructured its operations by reducing its size
through the sale of assets (mean = 4.16, std deviation = 0.64). It was also strongly agreed that
Uchumi Supermarket has restructured its debt structure to cope with its challenges (mean =
3.74, std deviation = 0.72) and that Uchumi Supermarket repositions its products and services
so as to be seen as having few credible substitutes in the marketplace (mean = 3.50, std
deviation = 0.60). Finally, it was agreed that Uchumi Supermarket repositions itself in the mind
of prospects (mean = 3.50, std deviation = 0.60). The standard deviation represented the
variation of responses from the mean with the highest variation being 0.72 an indication that
the variations in responses were acceptable since the standard deviations were less than 1.
Table 4.12: Repositioning and Restructuring Strategies
Mean Std
Deviation
Uchumi Supermarket repositions itself in the mind of prospects 3.50 0.60
Uchumi Supermarket repositions its products and services so as to
be seen as having few credible substitutes in the marketplace
3.61 0.55
Uchumi Supermarket has restructured its debt structure to cope
with its challenges
3.74 0.72
Uchumi Supermarket has restructured its operations to cope with its
challenges
4.39 0.50
Uchumi Supermarket has restructured its operations by cutting
costs
4.29 0.46
Uchumi Supermarket has restructured its operations by reducing its
payroll
4.24 0.63
Uchumi Supermarket has restructured its operations by reducing its
size through the sale of assets
4.16 0.64
42
4.4.4 Retrenchment
It was strongly agreed that the critical role of retrenchment is providing a stable base from
which to launch a recovery phase of the turnaround process (mean = 4.26, std deviation = 0.32)
and successful turnarounds at Uchumi Supermarket are characterized by strategies of
retrenchment (mean = 4.24, std deviation = 0.63). Uchumi Supermarket uses asset
retrenchment which is often implemented concurrently with or immediately after the cost
efficiency drive (mean = 4.21, std deviation = 0.62) and retrenchment is an integral component
of turnaround strategy at Uchumi Supermarket (mean = 4.11, std deviation = 0.61).
Effectiveness of asset retrenchment strategy at Uchumi Supermarket largely relies on the
ability of the firm to generate cash from disposal of any asset (mean = 3.37, std deviation =
0.67) and reorganization at Uchumi Supermarket is limited to leadership alignment (mean =
3.24, std deviation = 0.63). The standard deviation represented the variation of responses from
the mean with the highest variation being 0.67 an indication that the variations in responses
were acceptable since the standard deviations were less than 1.
Table 4.13: Retrenchment
Mean Std
Deviation
Successful turnarounds at Uchumi Supermarket are characterized by
strategies of retrenchment
4.24 0.63
Retrenchment is an integral component of turnaround strategy at
Uchumi Supermarket
4.11 0.61
The critical role of retrenchment is providing a stable base from
which to launch a recovery phase of the turnaround process
4.26 0.32
Uchumi Supermarket uses asset retrenchment which is often
implemented concurrently with or immediately after the cost
efficiency drive
4.21 0.62
Effectiveness of asset retrenchment strategy at Uchumi Supermarket
largely relies on the ability of the firm to generate cash from disposal
of any asset
3.37 0.67
Reorganisation at Uchumi Supermarket is limited to leadership
alignment
3.24 0.63
43
4.4.5 Top Management Changes
On top management changes, it was strongly agreed that the top management at Uchumi
Supermarket must employ diversification strategies (mean = 4.36, std deviation = 0.72) and
managers at Uchumi Supermarket use structural changes in the organization turnaround (mean
= 4.16, std deviation = 0.64). It was strongly agreed that turnaround management at Uchumi
Supermarket demands competent leadership to pave way on the implementation of the policies
(mean = 4.13, std deviation = 0.74) and the successful carrying out of a diversification strategy
makes Uchumi Supermarket more confident (mean = 4.05, std deviation = 0.61). It was
strongly agreed that experience at the top management is crucial at Uchumi Supermarket in its
turnaround (mean = 3.94, std deviation = 0.48). The standard deviation represented the
variation of responses from the mean with the highest variation being 0.74 an indication that
the variations in responses were acceptable since the standard deviations were less than 1.
Table 4.14: Top Management Changes
Mean Std
Deviation
Turnaround management at Uchumi Supermarket demands
competent leadership to pave way on the implementation of the
policies
4.13 0.74
Experience at the top management is crucial at Uchumi
Supermarket in its turnaround
3.94 0.48
Managers at Uchumi Supermarket use structural changes in the
organization turnaround
4.16 0.64
The top management at Uchumi Supermarket must employ
diversification strategies
4.39 0.72
The successful carrying out of a diversification strategy makes
Uchumi Supermarket more confident
4.05 0.61
44
4.5 Challenges in Implementing Turnaround Strategies in a Competitive Environment
The study sought to establish the challenges in implementing turnaround strategies in a
competitive environment. It was established that Uchumi Super market faced a number of
challenges when implementing turnaround strategies, key among them are resistance to change
by the employees in the company since the employees’ fear change as they thought that the
change would result to entrenchment. Other challenges were inadequate resources and
technology to facilitate the change. On challenges in implementing turnaround strategies in a
competitive environment the respondents strongly agreed that weak management roles in
strategy implementation is a challenge at Uchumi Supermarket (mean = 4.29, std deviation =
0.69) and Uchumi Supermarket seems to have difficulties in implementing their strategies in a
competitive environment (mean = 4.24, std deviation = 0.68). Unaligned organizational
systems is a challenge in strategy implementation at Uchumi Supermarket (mean = 4.18, std
deviation = 0.69) and lack of resources is a challenge in strategy implementation at Uchumi
Supermarket (mean = 4.11, std deviation = 0.61).
It was strongly agreed that unawareness or misunderstanding of the strategy is a challenge at
Uchumi Supermarket (mean = 4.08, std deviation = 0.67) and that lack of communication in
strategy implementation is a challenge at Uchumi Supermarket (mean = 4.05, std deviation =
0.77). Poor coordination is a challenge in strategy implementation at Uchumi Supermarket as
strongly agreed (mean = 4.08, std deviation = 0.67). The standard deviation represented the
variation of responses from the mean with the highest variation being 0.77 an indication that
the variations in responses were acceptable since the standard deviations were less than 1.
45
Table 4.15: Challenges in Implementing Turnaround Strategies
Mean Std
Deviation
Uchumi Supermarket seems to have difficulties in implementing their
strategies in a competitive environment
4.24 0.68
Weak management roles in strategy implementation is a challenge at
Uchumi Supermarket
4.29 0.69
Lack of communication in strategy implementation is a challenge at
Uchumi Supermarket
4.05 0.77
Unawareness or misunderstanding of the strategy is a challenge at
Uchumi Supermarket
4.08 0.67
Unaligned organizational systems is a challenge in strategy
implementation at Uchumi Supermarket
4.18 0.69
Lack of resources is a challenge in strategy implementation at Uchumi
Supermarket
4.11 0.61
Poor coordination is a challenge in strategy implementation at Uchumi
Supermarket
3.87 0.43
4.5.1 Resistance to Change
On resistance to change as a challenge in implementing turnaround strategies in a competitive
environment the respondents strongly agreed that there are insufficient top team functions at
Uchumi Supermarket, (mean = 4.18, std deviation = 0.73), there is always some resistance
when implementing Uchumi Supermarket turnaround strategies (mean = 4.16, std deviation =
0.68) and resistance to change impacts negatively to turn around strategy implementation
(mean = 4.16, std deviation = 0.72). It was strongly agreed that to overcome the resistance,
education and effective communication (mean = 4.13, std deviation = 0.58) and there is a
shortage of leaders who are able to create the badly needed change at Uchumi Supermarket
(mean = 4.13, std deviation = 0.74).
It was strongly agreed that unawareness or misunderstanding of the strategy is a challenge at
Uchumi Supermarket (mean = 4.08, std deviation = 0.67) and that lack of communication in
46
strategy implementation is a challenge at Uchumi Supermarket (mean = 4.05, std deviation =
0.77). Poor coordination is a challenge in strategy implementation at Uchumi Supermarket as
strongly agreed (mean = 4.08, std deviation = 0.67). The standard deviation represented the
variation of responses from the mean with the highest variation being 0.77 an indication that
the variations in responses were acceptable since the standard deviations were less than 1.
Table 4.16: Resistance to Change
Mean Std
Deviation
There is always some resistance when implementing Uchumi
Supermarket turnaround strategies 4.16 0.68
There is a shortage of leaders who are able to create the badly needed
change at Uchumi Supermarket 4.13 0.74
There are too many and conflicting priorities at Uchumi
Supermarket
4.05 0.66
There are insufficient top team functions at Uchumi Supermarket 4.18 0.73
There is inadequate management development at Uchumi
Supermarket
4.08 0.71
Resistance to change impacts negatively to turn around strategy
implementation
4.16 0.72
To overcome the resistance, education and effective communication 4.13 0.58
4.5.2 Inadequate Resources
On inadequacy of resources as a challenge in implementing turnaround strategies in a
competitive environment the respondents strongly agreed that inadequate resources may hinder
sound strategy implementation of Uchumi Supermarket (mean = 4.26, std deviation = 0.60),
coordination of implementation activities is not effective at Uchumi Supermarket (mean =
4.21, std deviation = 0.58) and failure to adopt modern to technologies lead to reduced
efficiency at Uchumi Supermarket (mean = 4.18, std deviation = 0.72). It was strongly agreed
that leadership is not effective at Uchumi Supermarket (mean = 4.16, std deviation = 0.82) and
to overcome the resistance, education and effective communication must be enhanced (mean
47
= 4.13, std deviation = 0.58). It was strongly agreed that competences such as skills and
knowhow enhance strategy implementation at Uchumi Supermarket (mean = 4.05, std
deviation = 0.57) and resources available to Uchumi Supermarket underpin its strategic
capability (mean = 3.67, std deviation = 0.41). The standard deviation represented the variation
of responses from the mean with the highest variation being 0.58 an indication that the
variations in responses were acceptable since the standard deviations were less than 1.
Table 4.17: Inadequate Resources
Mean Std
Deviation
To overcome the resistance, education and effective communication
must be enhanced
4.13 0.58
Resources available to Uchumi Supermarket underpin its strategic
capability
3.67 0.41
Inadequate resources may hinder sound strategy implementation of
Uchumi Supermarket
4.26 0.60
Coordination of implementation activities is not effective at Uchumi
Supermarket
4.21 0.58
Leadership is not effective at Uchumi Supermarket 4.16 0.82
Failure to adopt modern to technologies lead to reduced efficiency at
Uchumi Supermarket
4.18 0.65
Competences such as skills and knowhow enhance strategy
implementation at Uchumi Supermarket
4.05 0.57
4.5.3 Strategic Drift
On strategic drift as a challenge in implementing turnaround strategies in a competitive
environment the respondents strongly agreed that failure to ensure that Uchumi Supermarket
daily activities, work efforts and resources are directed to the implementation of strategy has
led to its failure (mean = 4.42, std deviation = 0.60) and Uchumi Supermarket has run into
difficulties because of failure to acknowledge and address strategic drift (mean = 4.29, std
deviation = 0.46). It was also strongly agreed that the strategic plans and tactics are developed
48
at operational and functional level of Uchumi Supermarket (mean = 4.24, std deviation = 0.49).
It was strongly agreed that strategies set fail to address the strategic position of Uchumi
Supermarket and hence performance deteriorates (mean = 4.12, std deviation = 0.52) and
Uchumi Supermarket strategy development processes need to encourage people to have the
capacity and willingness to change their ways of doing things (mean = 4.08, std deviation =
0.59). It was strongly agreed that Uchumi Supermarket strategies and tactics overlap each other
(mean = 3.95, std deviation = 0.54). The standard deviation represented the variation of
responses from the mean with the highest variation being 0.52 an indication that the variations
in responses were acceptable since the standard deviations were less than 1.
Table 4.18: Strategic Drift
Mean Std
Deviation
Strategies set fail to address the strategic position of Uchumi
Supermarket and hence performance deteriorates
4.12 0.52
Uchumi Supermarket has run into difficulties because of failure to
acknowledge and address strategic drift
4.29 0.46
Failure to ensure that Uchumi Supermarket daily activities, work
efforts and resources are directed to the implementation of strategy
has led to its failure
4.42 0.60
The strategic plans and tactics are developed at operational and
functional level of Uchumi Supermarket
4.24 0.49
Uchumi Supermarket strategies and tactics overlap each other 3.95 0.54
Uchumi Supermarket strategy development processes need to
encourage people to have the capacity and willingness to change
their ways of doing things
4.08 0.59
4.6 Chapter Summary
This chapter sought to find out turnaround strategies in a competitive environment a case of
Uchumi Supermarket. The study consisted of demographic factors parts, the role of turn around
strategies in solving financial decline in organisations, turnaround strategies that should be
adopted in a competitive environment and challenges in implementing turnaround strategies in
49
a competitive environment. Results obtained showed that to survive in a globally competitive
market, firms need to take advantage of the new technological opportunities. Also, firms need
to put in place different turnaround strategies in order to survive in a competitive environment.
Finally, firms face a number of challenges when implementing turnaround strategies in a
competitive environment. Chapter five provides a discussion, conclusion and
recommendations on the findings of this research.
50
CHAPTER FIVE
DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
In this chapter, the researcher provides the major summary of the study, a discussion on the
findings of the research compared with the findings in the literature review. The findings were
concluded on the basis of turnaround strategies in a competitive environment a case of Uchumi
Supermarket. Recommendations for further improvement were made through identification of
the measures to be taken on organizational.
5.2 Summary of the Study
The purpose of this study was to analyze the turnaround strategies in a competitive
environment a case of Uchumi Supermarket. The study was guided by the following research
questions: to evaluate the role of turn around strategies in solving financial decline in
organisations, to determine the turnaround strategies in a competitive that should be adopted
by Uchumi supermarket and to establish the challenges that Uchumi supermarket may face in
adoption of the turnaround strategies in a competitive environment.
The study adopted a descriptive research design. The population for the study was the 84
Uchumi supermarket head office. The sampling frame was 84 employees that comprised top
level management, middle level management and lower level management staffs at the Uchumi
supermarket head office. A sample of 50% of the total population was thus considered
sufficient and therefore 42 respondents constituted the sample population for the study and
simple random sampling. The study carried out a pilot study to pretest and validates the
questionnaire. The researcher selected a pilot group of 9 individuals from the target population
to test the reliability of the research instrument. The study used primary data in form of
questionnaire that was administered through drop and pick method. Analysis was done
quantitatively by use of descriptive statistics. This included frequency distributions, tables,
percentages and mean. Data analysis was done with the use of SPSS and Microsoft excel.
It was deduced that Uchumi Supermarket used a number of turnaround strategies in order to
survive in the present competitive environment in Kenya. The strategies that were mostly used
51
were repositioning and restructuring strategies, retrenchment and change in the top
management of the company so as to make it more competitive and also reduce the operational
cost of the company. Uchumi Supermarket downturns came about as a result of unfavorable
environmental shifts, managers ignored the red lights of downfall and managers often do not
notice the red lights of downfall. The adoption of misplaced strategies is a cause of Uchumi
Supermarket failure, Uchumi Supermarket decline leads to crisis where the survival of the firm
is threatened and the major cause of Uchumi Supermarket failure lies within finance,
operations and marketing the internal elements of its business. Investigation on the steps in
turnaround process showed that Uchumi Supermarket board of directors and senior
management identifies the underlying problems causing the current situation and Uchumi
Supermarket identifies appropriate strategies to an achievable recovery plan.
On the turnaround strategies that should be adopted in a competitive environment, the
turnaround strategy’s may help put back Uchumi Supermarket to normality in terms of
liquidity and to achieve a successful turnaround Uchumi Supermarket a management team
must first stem a firm’s decline. On the repositioning and restructuring strategies, Uchumi
Supermarket has restructured its operations to cope with its challenges, has restructured its
operations by cutting costs, reducing its payroll and by reducing its size through the sale of
assets. On retrenchment strategies, the critical role of retrenchment is providing a stable base
from which to launch a recovery phase of the turnaround process and successful turnarounds
at Uchumi Supermarket are characterized by strategies of retrenchment. On top management
changes, it was strongly agreed that the top management at Uchumi Supermarket must employ
diversification strategies and structural changes in the organization turnaround.
It was established that Uchumi Super market faced a number of challenges when implementing
turnaround strategies, key among them are resistance to change, inadequate resources,
technology to facilitate the change, weak management roles and difficulties in implementing
their strategies in a competitive environment. Further there are insufficient top team functions
at Uchumi Supermarket, there is always some resistance when implementing Uchumi
Supermarket turnaround strategies and resistance to change impacts negatively to turn around
strategy implementation. Inadequate resources may hinder sound strategy implementation of,
coordination of implementation activities is not effective at Uchumi Supermarket and failure
52
to adopt modern to technologies lead to reduced efficiency. Failure to ensure that Uchumi
Supermarket daily activities, work efforts and resources are directed to the implementation of
strategy has led to its failure and Uchumi Supermarket has run into difficulties because of
failure to acknowledge and address strategic drift.
5.3 Discussion
5.3.1 The Role of Turn Around Strategies in Solving Financial Decline
The objective sought to deduce the role of turn around strategies in solving financial decline.
It was deduced that Uchumi Supermarket used a number of turnaround strategies in order to
survive in the present competitive environment in Kenya. The strategies that were mostly used
were repositioning and restructuring strategies, retrenchment and change in the top
management of the company so as to make Uchumi Supermarket more competitive and also
reduce the operational cost of the company. Investigation on turn around process in a
competitive environment showed that; the respondents strongly agreed that to survive in a
globally competitive market, Uchumi Supermarket need to take advantage of the new
technological opportunities (mean = 4.14, std deviation = 0.38). Managers need to create
strategic management systems that integrate all disciplines and all areas of operation of the
organization in outcome based structures of the future the manager must critically look at their
performance and compare it to others (Thomson & Strickland, 2013).
Decisions regarding Uchumi Supermarket turn around process need to be made contingent to
the prevailing situations (mean = 3.86, std deviation = 0.39), to deal with the demand of
customers Uchumi Supermarket need to differentiate its products (mean = 3.83, std deviation
= 0.39). Further it was strongly agreed that Uchumi Supermarket need to take advantage of the
new technological opportunities to respond to the needs of customers (mean = 3.64, std
deviation = 0.37) and managers at Uchumi Supermarket need to create strategic management
systems that integrate all operation of the organization (mean = 3.54, std deviation = 0.40).
Finally, it was agreed that Uchumi Supermarket need to take advantage of the new
technological opportunities to ensure service of its target market (mean = 3.48, std deviation =
0.39). Research indicates that when management formulate and implement informed
strategies, their firms can turnaround even when facing declining environment munificence,
53
increasing environmental dynamism, escalating internal problems or limited slack resources
(Barker & Duhaime, 2014).
Uchumi Supermarket downturns came about as a result of unfavorable environmental shifts
(mean = 3.84, std deviation = 0.55). Uchumi Supermarket managers ignore the red lights of
downfall (mean = 3.82, std deviation = 0.56) and Uchumi Supermarket managers often do not
notice the red lights of downfall (mean = 3.76, std deviation = 0.54). Further it was strongly
agreed changes in the market environment often trigger a company's financial health (mean =
3.63, std deviation = 0.71) and lack of up-to-date financial information and failure to calculate
or forecast cash flow lead to financial distress (mean = 3.63, std deviation = 0.75). According
to Scherrer (2013) long before a business commences its decline, warning signals start flashing,
but managers often do not notice the red lights, or they ignore them. Almost every business
will experience financial distress or pressure at some point in time the key to survival lies in
the owner’s ability to diagnose problem areas and take corrective action quickly.
Investigation on the causes of financial decline showed that the respondents strongly agreed
that the adoption of misplaced strategies is a cause of Uchumi Supermarket failure (mean =
3.71, std deviation = 0.87). Uchumi Supermarket decline leads to crisis where the survival of
the firm is threatened (mean = 3.66, std deviation = 0.97) and the major cause of Uchumi
Supermarket failure lies within finance, operations and marketing the internal elements of its
business (mean = 3.58, std deviation = 0.68). Further it was agreed that change in consumers’
tastes and preferences is a cause of Uchumi Supermarket declining dominance (mean = 3.39,
std deviation = 0.75) and Uchumi Supermarket decline represents substantial resource losses
over time (mean = 3.37, std deviation = 0.97). The findings supported earlier results by
Cameron, Whetten and Kim (2012) who concurred that Organizational decline represents
substantial resource losses over time and can be either a gradual process or a sudden,
unexpected disruption. Substantial organizational decline leads to crisis where the survival of
the firm is threatened.
Investigation on the steps in turnaround process showed that the respondents strongly agreed
that Uchumi Supermarket board of directors and senior management identifies the underlying
problems causing the current situation (mean = 3.58, std deviation = 0.67) and Uchumi
Supermarket identifies appropriate strategies to an achievable recovery plan (mean = 3.58, std
54
deviation = 0.86). It was agreed that Uchumi Supermarket board of directors and senior
management recognize that change is necessary (mean = 3.39, std deviation = 0.95). Finally,
it was disagreed that management behavior and reward systems need to focus employees on
profitability (mean = 2.63, std deviation = 0.76). In turnaround strategies, the focus to most
stakeholders is on the speed of change, rapid cost reduction and/or revenue generation. The
length of time necessary to complete successful business turnaround varies (Scherrer, 2013).
5.3.2 Turnaround Strategies that Should be Adopted in a Competitive Environment
The objective sought to establish the turnaround strategies that should be adopted in a
competitive environment. The turnaround strategy’s may help put back Uchumi Supermarket
to normality in terms of liquidity (mean = 3.74, std deviation = 0.55) and to achieve a
successful turnaround Uchumi Supermarket a management team must first stem a firm’s
decline (mean = 3.58, std deviation = 0.79). It was agreed that the turnaround strategy’s may
help put back Uchumi Supermarket to normality in terms of solvency (mean = 3.21, std
deviation = 1.07) and to solve the issues facing Uchumi Supermarket, restructuring and long
term strategic plan must be designed and implemented (mean = 3.18, std deviation = 0.95). To
solve the issues facing such a company, turnaround strategy’s must be designed and
implemented. The turnaround strategy’s overall goal is to put back a distressed or
underperforming firm to normality in terms of satisfactory levels of cash flow, profitability,
liquidity and solvency (Akrani, 2012).
On the repositioning and restructuring strategies, it was strongly agreed that Uchumi
Supermarket has restructured its operations to cope with its challenges (mean = 4.39, std
deviation = 0.50) and Uchumi Supermarket has restructured its operations by cutting costs
(mean = 4.29, std deviation = 0.46). It was strongly agreed that Uchumi Supermarket has
restructured its operations by reducing its payroll (mean = 4.24, std deviation = 0.63) and
Uchumi Supermarket has restructured its operations by reducing its size through the sale of
assets (mean = 4.16, std deviation = 0.64). It was also strongly agreed that Uchumi
Supermarket has restructured its debt structure to cope with its challenges (mean = 3.74, std
deviation = 0.72) and that Uchumi Supermarket repositions its products and services so as to
be seen as having few credible substitutes in the marketplace (mean = 3.50, std deviation =
0.60). Finally, it was agreed that Uchumi Supermarket repositions itself in the mind of
55
prospects (mean = 3.50, std deviation = 0.60). A company restructures its operations or
structure by cutting costs, such as payroll, or reducing its size through the sale of assets. This
is often seen as necessary when the current situation at a company is one that may lead to its
collapse (Akrani, 2012).
On retrenchment strategies, it was strongly agreed that the critical role of retrenchment is
providing a stable base from which to launch a recovery phase of the turnaround process (mean
= 4.26, std deviation = 0.32) and successful turnarounds at Uchumi Supermarket are
characterized by strategies of retrenchment (mean = 4.24, std deviation = 0.63). It was strongly
agreed that Uchumi Supermarket uses asset retrenchment which is often implemented
concurrently with or immediately after the cost efficiency drive (mean = 4.21, std deviation =
0.62) and retrenchment is an integral component of turnaround strategy at Uchumi
Supermarket (mean = 4.11, std deviation = 0.61). It was agreed that effectiveness of asset
retrenchment strategy at Uchumi Supermarket largely relies on the ability of the firm to
generate cash from disposal of any asset (mean = 3.37, std deviation = 0.67) and
Reorganisation at Uchumi Supermarket is limited to leadership alignment (mean = 3.24, std
deviation = 0.63). Beeri (2009) suggests that successful turnarounds are characterized by
strategies of retrenchment. Retrenchment is an integral component of turnaround strategy. The
critical role of retrenchment in providing a stable base from which to launch a recovery phase
of the turnaround process is well established.
On top management changes, it was strongly agreed that the top management at Uchumi
Supermarket must employ diversification strategies (mean = 4.36, std deviation = 0.72) and
managers at Uchumi Supermarket use structural changes in the organization turnaround (mean
= 4.16, std deviation = 0.64). It was strongly agreed that turnaround management at Uchumi
Supermarket demands competent leadership to pave way on the implementation of the policies
(mean = 4.13, std deviation = 0.74) and the successful carrying out of a diversification strategy
makes Uchumi Supermarket more confident (mean = 4.05, std deviation = 0.61). It was
strongly agreed that experience at the top management is crucial at Uchumi Supermarket in its
turnaround (mean = 3.94, std deviation = 0.48). According to Collard (2011) turnaround
management demands competent leadership to pave way on the implementation of the policies,
motivate the subordinates and communicate the importance of the process. Collard (2011)
56
emphasizes that it is always safer to change the leadership whenever an organization is
conducting turnaround management.
5.3.3 Challenges in Implementing Turnaround Strategies in a Competitive Environment
The study sought to establish the challenges in implementing turnaround strategies in a
competitive environment. It was established that Uchumi Super market faced a number of
challenges when implementing turnaround strategies, key among them are resistance to change
by the employees in the company since the employees’ fear change as they thought that the
change would result to entrenchment. Other challenges were inadequate resources and
technology to facilitate the change. According to Beer, Eisenstat and Specter (2010)
organizations seems to have difficulties in implementing their strategies in a competitive
environment, however, researchers have revealed a number of problems in strategy
implementation e.g. weak management roles in implementation, lack of communication, lack
of commitment to the strategy, unawareness or misunderstanding of the strategy, unaligned
organizational systems and resources, poor coordination and sharing of responsibilities (Beer
& Eisenstat, 2010).
Weak management roles in strategy implementation is a challenge at Uchumi Supermarket
(mean = 4.29, std deviation = 0.69) and Uchumi Supermarket seems to have difficulties in
implementing their strategies in a competitive environment (mean = 4.24, std deviation = 0.68).
It was strongly agreed that unawareness or misunderstanding of the strategy is a challenge at
Uchumi Supermarket (mean = 4.08, std deviation = 0.67) and that lack of communication in
strategy implementation is a challenge at Uchumi Supermarket (mean = 4.05, std deviation =
0.77). Poor coordination is a challenge in strategy implementation at Uchumi Supermarket as
strongly agreed (mean = 4.08, std deviation = 0.67). Unaligned organizational systems is a
challenge in strategy implementation at Uchumi Supermarket (mean = 4.18, std deviation =
0.69) and lack of resources is a challenge in strategy implementation at Uchumi Supermarket
(mean = 4.11, std deviation = 0.61). Jeyavelu (2014) identified unawareness or
misunderstanding of the strategy as a challenge to an organisation. Other challenges were
insufficient partner buy-in; insufficient leadership attention; ineffective leadership; weak or
inappropriate strategy and resistance to change.
57
It was confirmed there are insufficient top team functions at Uchumi Supermarket, (mean =
4.18, std deviation = 0.73), there is always some resistance when implementing Uchumi
Supermarket turnaround strategies (mean = 4.16, std deviation = 0.68) and resistance to change
impacts negatively to turn around strategy implementation (mean = 4.16, std deviation = 0.72).
It was strongly agreed that to overcome the resistance, education and effective communication
(mean = 4.13, std deviation = 0.58) and there is a shortage of leaders who are able to create the
badly needed change at Uchumi Supermarket (mean = 4.13, std deviation = 0.74). It was
strongly agreed that unawareness or misunderstanding of the strategy is a challenge at Uchumi
Supermarket (mean = 4.08, std deviation = 0.67) and that lack of communication in strategy
implementation is a challenge at Uchumi Supermarket (mean = 4.05, std deviation = 0.77).
Poor coordination is a challenge in strategy implementation at Uchumi Supermarket as
strongly agreed (mean = 4.08, std deviation = 0.67). Implementation of turnaround strategy
does not automatically follow strategy formulation (Barker, & Duhaime, 2014). There is
always some resistance, which occurs whenever there is a departure from historical behavior,
culture and power structure.
On inadequacy of resources as a challenge in implementing turnaround strategies in a
competitive environment the respondents strongly agreed that inadequate resources may hinder
sound strategy implementation (mean = 4.26, std deviation = 0.60), coordination of
implementation activities is not effective at Uchumi Supermarket (mean = 4.21, std deviation
= 0.58) and failure to adopt modern to technologies lead to reduced efficiency (mean = 4.18,
std deviation = 0.72). It was strongly agreed that leadership is not effective at Uchumi
Supermarket (mean = 4.16, std deviation = 0.82) and to overcome the resistance, education
and effective communication must be enhanced (mean = 4.13, std deviation = 0.58). It was
strongly agreed that competences such as skills and knowhow enhance strategy
implementation (mean = 4.05, std deviation = 0.57) and resources available to Uchumi
Supermarket underpin its strategic capability (mean = 3.67, std deviation = 0.41). Inadequate
resources may hinder sound strategy implementation in any organization or may limit the
choices of strategy available to it (Donaldson, 2014).
On strategic drift as a challenge in implementing turnaround strategies the respondents strongly
agreed that failure to ensure that Uchumi Supermarket daily activities, work efforts and
58
resources are directed to the implementation of strategy has led to its failure (mean = 4.42, std
deviation = 0.60) and Uchumi Supermarket has run into difficulties because of failure to
acknowledge and address strategic drift (mean = 4.29, std deviation = 0.46). It was also
strongly agreed that the strategic plans and tactics are developed at operational and functional
(mean = 4.24, std deviation = 0.49). Strategies set fail to address the strategic position of
Uchumi Supermarket (mean = 4.12, std deviation = 0.52) and Uchumi Supermarket strategy
development processes need to encourage people to have the capacity and willingness to
change their ways of doing things (mean = 4.08, std deviation = 0.59). Uchumi Supermarket
strategies and tactics overlap each other (mean = 3.95, std deviation = 0.54). Failure to work
out the strategy by ensuring that the organization’s daily activities, work efforts and resources
are directed as much as possible towards the implementation of strategy which involves
developing operational plans and tactics through which the otherwise abstract strategy will be
implemented (Chowdhury, 2012).
5.4 Conclusions
5.4.1 The Role of Turn Around Strategies in Solving Financial Decline
Based on the results from the analysis and discussion, the study concludes that a number of
turnaround strategies are used in order to survive in the present competitive environment in
Kenya. The strategies that are mostly used were repositioning and restructuring strategies,
retrenchment and change in the top management of the company so as to make it more
competitive and also reduce the operational cost of the company. Further a company downturn
come about as a result of unfavorable environmental shifts and when managers ignore the red
lights of downfall. Also, the adoption of misplaced strategies is a cause of a company failure,
a company decline leads to crisis where the survival of the firm is threatened and the major
cause of a company failure lies within finance, operations and marketing the internal elements
of its business. Finally, the board of directors and senior management need to identify the
underlying problems causing failure, identify appropriate strategies to an achievable recovery
plan and senior management need to recognize that change is necessary.
59
5.4.2 Turnaround Strategies that Should be Adopted in a Competitive Environment
The study concluded that the turnaround strategy’s may help put back a company to normality
in terms of liquidity and to achieve a successful turnaround a company management team must
first stem a firm’s decline. The strategies available are repositioning, retrenchment,
restructuring strategies and top management changes. Most of the companies have restructured
their operations to cope with challenges, some have restructured their operations by cutting
costs, others by reducing its payroll, by reducing their size through the sale of assets while
others debt structure. On retrenchment it was concluded that the critical role of retrenchment
is providing a stable base from which to launch a recovery phase of the turnaround process and
successful turnarounds at companies are characterized by strategies of retrenchment. Some
companies use asset retrenchment which is often implemented concurrently with or
immediately after the cost efficiency drive and retrenchment is an integral component of
turnaround strategy. On top management changes, it can be concluded that top management
must employ diversification strategies and managers use structural changes in the organization
turnaround.
5.4.3 Challenges in Implementing Turnaround Strategies in a Competitive Environment
The study concludes that companies face a number of challenges when implementing
turnaround strategies, key among them are resistance to change by the employees in the
company since the employees’ fear change as they thought that the change would result to
entrenchment. Other challenges were inadequate resources and technology to facilitate the
change. Weak management roles in strategy implementation is a challenge at for companies
and they have difficulties in implementing their strategies in a competitive environment. There
is always some resistance when implementing turnaround strategies and resistance to change
impacts negatively to turn around strategy implementation. Unawareness, misunderstanding
and lack of communication are causes of resistance to change during strategy implementation.
Inadequate resources may hinder sound strategy implementation and failure to adopt modern
to technologies lead to reduced efficiency in companies. Failure to ensure that companies daily
activities, work efforts and resources are directed to the implementation of strategy has led to
companies’ failure and companies have run into difficulties because of failure to acknowledge
and address strategic drift.
60
5.5 Recommendations
5.5.1 Recommendation for Improvement
5.5.1.1 The Role of Turn Around Strategies in Solving Financial Decline
Turn around strategies are crucial in solving financial decline. The studies recommend that to
enable companies implement the turnaround strategies companies must take advantage of the
new technological opportunities, managers of companies need to create strategic management
systems that integrate all disciplines and all areas of operation of the organization in outcome-
based structures and the managers of organisations must critically look at their performance
and compare it to other companies.
5.5.1.2 Turnaround Strategies that Should be Adopted in a Competitive Environment
The study recommends that turnaround strategies should be adopted in a competitive
environment this is because they help put back companies to normality in terms of liquidity.
The turnaround strategies that should be adopted are repositioning and restructuring strategies;
retrenchment strategies and top management changes. The above strategies in addition help
put back companies to normality in terms of solvency and solve the issues facing companies
in terms of restructuring.
5.1.1.3 Challenges in Implementing Turnaround Strategies
It was recommended that management should put in place measures to reduce the challenges
that face organisation in implementing turnaround strategies which include putting in place
adequate resources to help implement the strategy, having proper plans and policies to
implement the strategies and educating all levels of employees on the important of the strategy
in order to help reduce resistance from them.
5.5.2 Recommendations for Further Studies
The study sought to examine turnaround strategies in a competitive environment a case of
Uchumi Supermarket. The study suggests that future research should try to analyze the factors
affecting implementation of turnaround strategies in supermarkets, types of turnaround
61
strategies that can be adopted in supermarkets and the challenges of implementing turnaround
strategies in a competitive environment in organisations.
62
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APPENDICES
Appendix I: Introduction Letter
Dear Sir/Madam,
I am student conducting a study on TURNAROUND STRATEGIES IN A COMPETITIVE
ENVIRONMENT A CASE OF UCHUMI SUPERMARKET in partial fulfillment of my
MBA program at USIU Africa. I am glad to inform you that you have been selected to form
part of this study. I kindly request your assistance in completing the attached questionnaire
which forms a major input of the research process. The information and data will be strictly
used for academic purposes only and strict confidence shall be observed on the same.
Your cooperation will go a long way in ensuring the success of this project. I would like to
thank you in advance for your time and consideration.
Yours Sincerely,
JOYCE NANCY OCHIENG
68
Appendix II: Questionnaire
Section A: General Information:
1. Gender of the respondent?
Male [ ]
Female [ ]
2. What is your age in years………………………...
3. What is your highest level of education achieved………………………
4. How long have you worked at Uchumi Supermarket in terms of
years…………………?
Section B: The Role of Turn Around Strategies in Solving Financial Decline in
Organisations
5. What turnaround strategies have been used by Uchumi Supermarket in order to help it
in financial decline?
…………………………………………………………………………………………
……………………………………………………………………………………….
The Turn Around Process in a Competitive
Environment. Please complete the following
questions by rating on a scale of 1 to 5 where: 1
=Strongly disagree, 2 =Disagree, 3 = Agree, 4
=Strongly Agree and 5 = N/A for Not Applicable. Str
ongly
dis
agre
e
(1)
Dis
agre
e (2
)
Agre
e (3
)
Str
ongly
Agre
e (4
)
N/A
(5)
The Turn Around Process in a Competitive
Environment
6. To survive in a globally competitive market,
Uchumi Supermarket need to take advantage of the
new technological opportunities
7. Uchumi Supermarket need to take advantage of the
new technological opportunities to ensure service
of its target market
69
8. Uchumi Supermarket need to take advantage of the
new technological opportunities to respond to the
needs of customers
9. To deal with the demand of customers Uchumi
Supermarket need to differentiate its products
10. Decisions regarding Uchumi Supermarket turn
around process need to be made contingent to the
prevailing situations
11. Managers at Uchumi Supermarket need to create
strategic management systems that integrate all
operation of the organization
The Signs of Financial Decline
12. Uchumi Supermarket downturns came about as a
result of unfavorable environmental shifts
13. Uchumi Supermarket managers often do not notice
the red lights of downfall
14. Uchumi Supermarket managers ignore the red
lights of downfall
15. Uchumi Supermarket managers do not diagnose
problem that lead to its downfall
16. Uchumi Supermarket tracks its profitability as and
cash flow
17. Changes in the market environment often trigger a
company's financial health
18. Lack of up-to-date financial information and
failure to calculate or forecast cash flow lead to
financial distress
The Causes of Financial Decline
19. Uchumi Supermarket decline represents
substantial resource losses over time
70
20. Uchumi Supermarket decline leads to crisis where
the survival of the firm is threatened
21. Uchumi Supermarket failure is frequently linked
to its internal problems
22. The major cause of Uchumi Supermarket failure
lies within finance, operations and marketing the
internal elements of its business
23. The adoption of misplaced strategies is a cause of
Uchumi Supermarket failure
24. Change in consumers’ tastes and preferences is a
cause of Uchumi Supermarket declining
dominance
25. Change in lending policies of the financial
institutions is a cause of Uchumi Supermarket
declining dominance
The Steps in Turnaround Process
26. Uchumi Supermarket board of directors and senior
management recognize that change is necessary
27. Uchumi Supermarket board of directors and senior
management identifies the underlying problems
causing the current situation
28. Uchumi Supermarket identifies appropriate
strategies to an achievable recovery plan
29. The recovery plan is usually communicated to all
key stakeholders in Uchumi Supermarket
30. Management behavior and reward systems need to
focus employees on profitability
71
Section C: Turnaround Strategies that Should be Adopted in a Competitive Environment
31. Has Uchumi Supermarket adopted any turnaround strategies?
Yes [ ]
No [ ]
If yes, what strategies have been adopted
…………………………………………………………………………………………
…………………………………………………………………………………………
……………..
To complete the following questions please read and then rate each statement between 1 to 5
where: 1 -Strongly disagree, 2 –Disagree, 3 – Neutral, 4 - Agree, 5- Strongly Agree
Turnaround Strategies that Should be Adopted in a
Competitive Environment. Please complete the
following questions by rating on a scale of 1 to 5 where:
1 =Strongly disagree, 2 =Disagree, 3 = Agree, 4
=Strongly Agree and 5 = N/A for Not Applicable. Str
ongly
dis
agre
e (1
)
Dis
agre
e (2
)
(3)
Neu
tral
5A
gre
e (4
)
N/A
(5)
Turnaround Strategies that Should be Adopted in a
Competitive Environment
32. To solve the issues facing Uchumi Supermarket,
restructuring and long term strategic plan must be
designed and implemented
33. The turnaround strategy’s may help put back Uchumi
Supermarket to normality in terms of cash flow
34. The turnaround strategy’s may help put back Uchumi
Supermarket to normality in terms of profitability
35. The turnaround strategy’s may help put back Uchumi
Supermarket to normality in terms of liquidity
36. To achieve a successful turnaround Uchumi
Supermarket a management team must first stem a
firm’s decline
72
37. The turnaround strategy’s may help put back Uchumi
Supermarket to normality in terms of solvency
Repositioning and Restructuring Strategies
38. Uchumi Supermarket repositions itself in the mind of
prospects
39. Uchumi Supermarket repositions its products and
services so as to be seen as having few credible
substitutes in the marketplace
40. Uchumi Supermarket has restructured its debt structure
to cope with its challenges
41. Uchumi Supermarket has restructured its operations to
cope with its challenges
42. Uchumi Supermarket has restructured its operations by
cutting costs
43. Uchumi Supermarket has restructured its operations by
reducing its payroll
44. Uchumi Supermarket has restructured its operations by
reducing its size through the sale of assets
Retrenchment
45. Successful turnarounds at Uchumi Supermarket are
characterized by strategies of retrenchment
46. Retrenchment is an integral component of turnaround
strategy at Uchumi Supermarket
47. The critical role of retrenchment is providing a stable
base from which to launch a recovery phase of the
turnaround process
48. Uchumi Supermarket uses asset retrenchment which is
often implemented concurrently with or immediately
after the cost efficiency drive
73
49. Effectiveness of asset retrenchment strategy at Uchumi
Supermarket largely relies on the ability of the firm to
generate cash from disposal of any asset
50. Reorganisation at Uchumi Supermarket is limited to
leadership alignment
Top Management Changes
51. Turnaround management at Uchumi Supermarket
demands competent leadership to pave way on the
implementation of the policies
52. Experience at the top management is crucial at Uchumi
Supermarket in its turnaround
53. Managers at Uchumi Supermarket use structural
changes in the organization turnaround
54. The top management at Uchumi Supermarket must
employ diversification strategies
55. The successful carrying out of a diversification strategy
makes Uchumi Supermarket more confident
74
Section D: Challenges in Implementing Turnaround Strategies in a Competitive
Environment
56. What challenges does Uchumi Supermarket face in implementing its turnaround
strategies?
………………………………………………………………………………………………
………………………………………………………………………………………………
……………..
To complete the following questions please read and then rate each statement between 1 to 5
where: 1 -Strongly disagree, 2 –Disagree, 3 – Neutral, 4 - Agree, 5- Strongly Agree
Challenges in Implementing Turnaround Strategies in
a Competitive Environment. Please complete the
following questions by rating on a scale of 1 to 5
where: 1 =Strongly disagree, 2 =Disagree, 3 = Agree,
4 =Strongly Agree and 5 = N/A for Not Applicable. Str
ongly
dis
agre
e (1
)
Dis
agre
e (2
)
(3)
Neu
tral
5A
gre
e (4
)
N/A
(5)
Challenges in Implementing Turnaround Strategies in a
Competitive Environment
57. Uchumi Supermarket seems to have difficulties in
implementing their strategies in a competitive
environment
58. Weak management roles in strategy implementation is
a challenge at Uchumi Supermarket
59. Lack of communication in strategy implementation is
a challenge at Uchumi Supermarket
60. Unawareness or misunderstanding of the strategy is a
challenge at Uchumi Supermarket
61. Unaligned organizational systems is a challenge in
strategy implementation at Uchumi Supermarket
62. Lack of resources is a challenge in strategy
implementation at Uchumi Supermarket
75
63. Poor coordination is a challenge in strategy
implementation at Uchumi Supermarket
Resistance to Change
64. There is always some resistance when implementing
Uchumi Supermarket turnaround strategies
65. There is a shortage of leaders who are able to create
the badly needed change at Uchumi Supermarket
66. There are too many and conflicting priorities at
Uchumi Supermarket
67. There are insufficient top team functions at Uchumi
Supermarket
68. There is inadequate management development at
Uchumi Supermarket
69. Resistance to change impacts negatively to turn
around strategy implementation
70. To overcome the resistance, education and effective
communication
Inadequate Resources
71. Resources available to Uchumi Supermarket underpin
its strategic capability
72. Inadequate resources may hinder sound strategy
implementation of Uchumi Supermarket
73. Coordination of implementation activities is not
effective at Uchumi Supermarket
74. Leadership is not effective at Uchumi Supermarket
75. Failure to adopt modern to technologies lead to
reduced efficiency at Uchumi Supermarket
76. Competences such as skills and knowhow enhance
strategy implementation at Uchumi Supermarket
76
Strategic Drift
77. Strategies set fail to address the strategic position of
Uchumi Supermarket and hence performance
deteriorates
78. Uchumi Supermarket has run into difficulties because
of failure to acknowledge and address strategic drift
79. Failure to ensure that Uchumi Supermarket daily
activities, work efforts and resources are directed to
the implementation of strategy has led to its failure
80. The strategic plans and tactics are developed at
operational and functional level of Uchumi
Supermarket
81. Uchumi Supermarket strategies and tactics overlap
each other
82. Uchumi Supermarket strategy development processes
need to encourage people to have the capacity and
willingness to change their ways of doing things
Thank you very much for your cooperation and honest feedback.