Effect of Global Sourcing on Profitability of Medium Motor Vehicle Firms in Kenya: A Survey of Nairobi County

Abstract

Global sourcing has been widely used in the motor vehicle businesses in the resent past due to its ability to increase competitiveness of firms in the markets. It has opened up opportunities in the industry making a significant contribution to the economic growth of developing countries. Since the 1980s, global sourcing has experienced rapid expansion in Kenya which has seen many firms target the global market for their goods and services which are not available locally in the Kenyan market so as to increase their profit margins by sourcing from low cost countries. The study, therefore, discusses the effect of global sourcing on financial performance of small and medium motor vehicle firms in Kenya: A survey of Nairobi County. It aimed to establish the effect of currency exchange rates on the profitability of small and medium motor vehicle firms and to analyse the effect of government policy on the financial performance of these firms in Kenya. Exploratory research design was used in conducting the study to ensure a complete description and analysis of the situation in Nairobi County. The target population of the study consisted of 298 motor vehicle firms which operate and have offices in Nairobi County. A total of 89 respondents was selected from the target population where each firm produced one respondent who was a procurement manager in the firm. Questionnaires were used in obtaining accurate information from the respondents and these data were analysed using quantitative techniques. T-test and Chi square test were also used where applicable and the findings were presented using tables and percentages. From the analysis the results showed that currency fluctuations and government policies affect the businesses greatly affecting the financial performance of motor vehicle firms.Therefore, if implemented correctly it can be seen that most firms in the sector improve their financial performance. This implementation will go hand in hand with the required infrastructure, support from the top management and the goodwill of employees in doing their work. This will increase their competitive edge to match their counterparts across the region.

Keywords: Global Sourcing, Financial Performance, Logistics, Profitability, Sourcing, Service Delivery

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