RELATIONSHIP BETWEEN PROCUREMENT STRATEGIES AND PERFORMANCE

OF HOTEL: ELDORET CBD KENYA

CHAPTER ONE: INTRODUCTION

1.1 Background of the study

Procurement refers to the acquisition of goods, services and works by a procuring entity,

while public procurement, means the acquisition of goods, services and works by a

procuring entity using public funds (Kipkorir, 2013 ) The evolution of procurement dates

back to between 2400 and 2800 B.C. (Thai, 2001), with a procurement order of fifty (50)

containers of oil (Coe, 1989). Other historical evidence of procurement activities was the

development of the silk trade that involved China and Greek in 800 B.C. (Thai, 2001).

Global Perspective

Indeed, globally, estimates of the financial activities of government procurement

managers are believed to be in the order of 10% – 30 % of GNP (Calender& Mathews,

2012). In the United States, the public sector procures between $1.4 and $1.6 trillion

annually. The Federal government alone procured $231.08 billion and made 33.19

million procurement actions in fiscal year 2012. According to the Procurement

Executives Council (2011), the federal government made a purchase card payment every

.31 seconds, and issued a standard form 281 every .77 second and a standard form 279

every 13.91 seconds per each working day.

These procurement objectives and policies are implemented either by non-legal means

such as internal administrative circulars directing the activities of procurement officers

1
(in the United Kingdom, and those countries under the U.K.’s relationship between such

as Malaysia), or by formal statutes, rules or regulations (in France, many European

countries and the U.S.). Over the last decade, a significant number of countries,

particularly the transition countries, have adopted public procurement rules and

regulations for the first time or have reformed their existing procurement legal provisions

(Arrowsmith, 1998,).

In developing countries, public procurement is increasingly recognized as essential in

service delivery (Basheka, 2010 cited in Kipkorir 2013). It accounts for a high proportion

of total expenditure. For example, public procurement accounts for 60% in Kenya (Bhatt,

2000), 58% in Angola, 40% in Malawi and 70% of Uganda’s public spending (Wittig,

1999). This is very high when compared with a global average of 12-20 % (Froystadet

al., 2010).

Due to the colossal amount of money involved in government procurement and the fact

that such money comes from the public, there is need for accountability and transparency.

Consequently, various countries both in developed and least developed countries (LDCs)

have instituted procurement strategies to make the activity both efficient and effective.

1.1.1 Strategic Procurement

Procurement strategic is the process of creating alignment and consistency of action that

establishes the long range objectives and overall strategy or course of action by which

procurement function fulfills its mission. It entails the transformation of an organization’s

manage the procurement function (Doran, 1981& Kocabasoglu, 2002)

Procurement strategic can be approached from three main dimensions namely:

Development and management of key suppliers, internal operation of procurement

function and coordination of purchasing with other functions within the firm, and efforts

to meet or exceed customer expectations. It is seen as one of the critical function of an

organization with the potential to; save cost, improve operational efficiency, access to

trusted suppliers, and improve in quality of product or service, sharing of best practices

among others (Magnus, 2006). There are various procurement strategic practices that

affect organizational performance. However, the main approaches discussed in this study

comprise; strategy development, spend analysis, supplier relationship management,

measurement plan, and technology utilization, (CIPS Australia, 2010).

1.1.2 Organizational Performance

Organizational performance is the ability of an organization to fulfill its mission through

sound management, strong governance and a persistent rededication to achieving results,

(Parasuraman2002).The author, further contends that enterprises that have adopted

procurement strategic are able to deliver their products and (for this study), services.

When defining Organizational performance, it is important to consider a wide variety of

potential organizational performance indicators. This research considers organizational

performance in terms of quality, productivity and service delivery, reduction of waste,

cost reduction and public (customer) satisfaction.

1.2 Statement of the Problem

3
In both developed and developing countries, procurement is increasingly recognized as

the most essential in service delivery and it accounts for huge proportion of total

expenditures. Due to the colossal amount of money involved in government procurement

and the fact that such money comes from the public, substantial resources have been

committed by governments; Kenya included, towards implementing different strategies in

order to improve organizational performance in Government agencies to make them

efficient, effective, accountable and transparent.

However, as Leni et al. (2012) notes, there is a growing concern among the citizenry and

governments alike that despite the implementation of such strategies, organizational

performance in public enterprises, is still falling. Kenya CBD for

instance, has not been able to adequately distribute electricity services to the public and

this can be attributed to lack of proper strategic procurement. It is against this backdrop

that this study would like to establish the relationship between of procurement strategic

on the performance of hotel , a case of Kenya CBD , Eldoret .

1.3 Objectives of the Study

The study specifically sought to:

1. Establish the extent to which Kenya CBD has adopted strategic procurement

2. Examine how adoption of procurement strategic has influenced the performance of

3. Evaluate the challenges Kenya CBD has encountered in implementing

strategic procurement

4
1.4 Research Questions

1. Do what extent has Kenya CBD adopted strategic procurement?

2. How has the adoption of procurement strategic influenced the performance of Kenya

CBD ?

3. What challenges is Kenya CBD facing in implementing strategic procurement?

1.5 Assumptions of the Study

The study was conducted on the following assumptions:

That the employees in the study area are professionals and therefore were to give

valuable information on procurement strategic practices That the participants

were to give accurate, truthful and honest responses.

5
That all the employees in Kenya CBD , head office, Eldoret understood what

procurement strategic was, and thus, there was no difference in perception of

procurement activities in the organization and other enterprises.

1.6 Justification and Significance of the Study

The study findings are important to Kenya Power Company which is the institution

tasked with distribution of power not only to the public but also to the private sector. The

findings shed light on how procurement strategic can assist procurement department

perform its functions cost effectively and how this might relationship between on the

overall organizational performance.

Apart from Kenya Power Company, the findings are important to other public entities

and other government units since its findings will shed light on the importance of

procurement strategic in the public sector. The public agencies would therefore use these

findings to enable them weather down the storm and formulate policies and strategies that

would enable the public sector to play a positive role in enhancing government

competitiveness in the provision of services to the citizenry.

The study also provides scholars and academicians with a repertoire of knowledge on

how procurement strategic might play a role in enhancing cost effective functions that

contribute to the overall performance of an organization. Recognizing that usually

research raises more questions than it sought to answer, it is hoped that the limitations

from study would assist in generating research interests in the phenomenon of strategic

procurement, especially in the public sector.

6
1.7 Limitations and delimitations of the Study

1. shortage of relevant literature specific to the Kenyan situation was experienced.

However, since the phenomenon of procurement strategic has a universal application, the

researcher relied on a review of relevant literature, some of which have been carried out

in other countries in Africa so as to apply to the Kenyan situation.

2. Secondly, since the study was conducted exclusively among the employees of Kenya

Power company headquarters, the findings of the study was limited to, and could only be

applicable to the study organization and research population. Due to this, the findings can

only be generalized to other public enterprises.

3.Rrespondents were reluctant to give full information because of company

confidentiality. This problem was solved by assuring the employees that the information

was to be treated with confidentiality and only used for academic purposes.

7
 CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction

This chapter presents the theoretical framework, empirical literature, conceptual frame

work, and gaps to be filled by the study. Specifically, the chapter discusses the

institutional theory, socio-economic theory and systems theory. It also presents in detail

the factors influencing organizational performance in public enterprises. Past studies

concerning the current study are also presented in details in this chapter.

2.2 Theoretical Framework

2.2.1. Institutional Theory

According to Scott (2004), institutions are composed of cultural-cognitive and regulative

elements that, together with associated activities and resources give meaning to life. He

further explains the three pillars of institutions as regulatory, normative and cultural

cognitive.

The regulatory pillar emphasizes the use of rules, laws and sanctions as enforcement

mechanism, with expedience as basis for compliance. The normative pillar refers to

norms (how things should be done) and values (preferred or desirable), social obligation

being the basis of compliance. The cultural-cognitive pillar rests on shared understanding

(common beliefs, symbols, and shared understanding).

This theory is very important when it comes to the implementation of procurement

strategic policy and practices in organizations that serve the public. This is a matter of

organizational culture and the degree to which the prevailing climate in an organization is

8
supportive of strategy and changes in general. In other respects, this dimension includes

the extent to which there is support for procurement strategic at senior levels in an

organization and the degree to which organizational processes and structures support, or

retard, the development of procurement strategic (Brammer& Walker, 2007).

2.2.2 Socio-economic Theory

Sutinen and Kuperan (1999) propounded the socio-economic theory of compliance by

integrating economic theory with theories from psychology and sociology to account for

moral obligation and social relationship between as determinants of individuals’

decisions on compliance

According to Lisa (2010) psychological perspectives provide a basis for the success or

failure of organizational compliance. Wilmshurst and Frost (2000) also add that socio-

economic theory postulates that the organization is responsible to disclose its practices to

the stakeholders, especially to the public and justify its existence within the boundaries of

society.

This theory, which focuses on the relationship and interaction between an organization

and the society, provides a sufficient and superior lens for understanding government

procurement system (Huietal. 2011). From this theory we can understand the policy,

planning and procurement strategic practices in public institutions and their relationship

between on service delivery to the society.

2.2.3 Systems Theory

9
This theory was first applied in the fields of science and engineering before finding its

way into management in the late 1950s.The roots of systems theory can be traced back to

such figures as psychologist Gestalt and Kurt Lewin, whose “field theory” of group

dynamics emphasized that the whole is more than the sum of its parts, (Nwabuzor, 2005).

According to this theory, an organization is viewed as a group of parts that are highly

interrelated and interdependence. Systems-oriented managers constantly think in terms of

the overall mission and major objectives of the total system in making decisions.

An organization requires the parts to add value to the overall performance. Value-based

management requires that procurement individuals perform processes that go beyond

traditional “buying” processes and obtain relevant information from the external

environment or their customers and transmit it to the appropriate individuals (Nwabuzor,

2005).

The relevance of this argument in this study is that, an organization receives inputs from

the outside world which it then transforms, (the process known as throughputs) into

output and takes it back to the world for use as consumables. An organization will need

suppliers to provide the input it requires. The inputs could either be materials,

information or even human capital.

The systems approach is very useful in procurement strategic decision making. By

understanding that the organization must obtain inputs from suppliers, the procurement

managers will be better placed to ensure that supplier selection is done thoroughly. The

result will be a highly efficient procurement function that serves the organization leading

to high performance.

10
2.3 Empirical Review

2. 3.1 Strategic Procurement

For this study, five key success factors which characterize effective procurement strategic

were shortlisted for consideration: strategy development, spend analysis, supplier

relationship management, measurement plan, and technology utilization

2.3.1.1 Strategy development

The first step in the development of a procurement strategic plan is to develop a clearly

identified goal which is aligned with the organization's mission, vision and values. A goal

is a broad statement of intended outcome. Goals are supported by measurable objectives.

Measurable objectives should be clear and specific enough that at the end of the plan's

implementation independent observers could agree as to whether the objective was or

was not met (CIPS Australia, 2010).

The acronym SMART is often used to provide guidance in the development of

objectives. SMART stands for: specific, measurable, actionable, realistic and time bound.

These objectives are the basis upon which progress can be evaluated. Procurement

strategic activities should be tailored to those values that are in line with the overall

business goals (Kathama, 2012).This is important in giving the procurement function the

force it requires in gaining the competitive edge that makes it realize or achieve intended

goals .Hence, development of procurement strategies enables the procurement function to

have direction and rally its resources in pursuit of these corporate goals. (Swinder,

&Seshadri, 2001)

11
2.3.1.2 Spend Analysis

According to Moore (2004), spend analysis, centers directly on the money spent to allow

management to make adjustments wherever they see fit. More specifically, spend

analysis has been defined as “an analysis of expenditures along dimensions such as type

of commodity or service and suppliers, number of contracts and expenditures, and other

variables showing how current money is spent on goods and services performance. The

data for spend analysis can take many forms and originate from various sources. As the

definitions above illustrate, spend data can be any money spent on the procurement of

goods or services, or even day-to-day business activities (Porter, 1985). The author

further argues that data could be taken from the personal expense accounts of senior

management, the financial reports of potential suppliers, or possibly the number of

contracts related to a particular commodity.

Moore et al. (2004 cited in Irvine 2005), writes that the data used for spend analysis can

“reveal targets of opportunity where altering purchasing practices could result in

significant performance improvements or savings. Carteret al (2003), asserts that by

applying spend analysis to business processes, procurement officials position themselves

to institute procedures and/or checkpoints that deter and control random spending.

Random spending refers to any expenses that have not been incorporated into a firm’s

strategic purchasing plan. While it is unrealistic to imply that all business-related

expenses can be foreseen, and therefore, planned for, by utilizing this technique,

organizations are able to identify and improve their purchasing processes in areas where

the greatest benefit can be realized—where exactly the change occurs depends on the

particular company and their long-range goals, (Moore et al., 2004 cited in Irvine 2005).

12
2.3.1.3Establishment of a Measurement Plan

Hendricks and Ruch (1998) noted that measurement plans are important elements of a

procurement strategic plan. Measurements should be designed to provide an indication,

on an ongoing basis, of the progress being made toward the achievement of tactics and

strategies in support of objectives and goals. Further they argue that, to ensure that the

plan is actionable and used to achieve the desired results, it is important to establish

accountability for strategies and tactics, to assign measures to monitor success and to

report regularly on progress. Good progress may indicate an opportunity to strengthen or

increase focus on specific strategies, while not meeting goals may suggest the need for

modifications.

Strategic procurement, including the design and implementation of sourcing plans, should

be measured in terms of the benefits that they have delivered compared with what they

were expected to deliver as set out in the original procurement plan. This might take the

form of a post-contract audit perhaps one year after the contract had been let. The

findings should be reported to and discussed by the purchasing and supply management

professional(s) and their Sourcing Board in order to learn from experiences and build on

current commercial arrangements (CIPS, 2010).

13
2.3.1.4 Supplier Relationship Management (SRM)

Supplier relationship has been defined as “two or more chain members working together

to create a competitive advantage through sharing information making joint decisions and

sharing benefits which result from greater profitability of satisfying customer needs than

acting alone (Sridharan, 2002 cited in Oyukeand Shale, 2014).

According to (Mac Neil, 2002) supplier relationship is departure from the anchor point of

discreteness that underlies business transactions to a relational exchange as the roles of

supplier and buyer are no longer narrowly defined in terms of simple transfer of

ownership of products. By focusing on relational exchange entails the activities that are

undertaken jointly rather than unilaterally (Heide, 2003).

Zohar and Zenkatraman(2004),SimatupangandSridharan(2003), suggest that the

requirements for effective collaboration are mutual objectives, integrated policies, joint

decision making, information and sharing of benefits and losses. Buyer/supplier

commitment is the belief that trading partners are willing to devote energy to sustaining

the relationship (Dion et al., 2004), whereas according to Moorman, and Deshpande

(2002), buyer\supplier commitment is an enduring desires to maintain a valued

relationship. Through commitment partners dedicate resources to sustain and further the

goals of the collaboration.

14
2.3.1.5 Technology Utilization

At the public sector level, technology enhances infinite and non-restricted access to

government information and increases market transparency and economic incorporation

based on complementarities (Carayanni &Popescu, 2005).Among the main advantages

that public administration can get through a system like this are: costs and process

cutting, possible broadening of supplier’s base, easy access to preferred goods (pre-

defined quality standards), information intelligibility and ease of comparison among

goods and purchases logging and ensuing expenditure monitoring

(Petrie,2001).Similarly, procurement technologies grasp a virtual market; open to capable

suppliers and not restrictive selection criteria, in which public administrations can choose

goods and services offered by several suppliers (Petrie, 2001). The whole process is

digital, using digital signature in order to guarantee transactions lawfully.

Aberdeen Group (2006) noted that in comparison to faxed purchase orders and the use of

Excel spreadsheets, an effective technology platform, including a robust database

management component, is vital to providing reliable and accurate expenditure

information for spend analysis and management. An integrated ERP system with an

effective Procurement / e-procurement suite is a key enabler to successful procurement

strategic planning.

Suffice to say, that the application of technology to support procurement is replete;

results clearly show that the use of new technologies for instance, Electronic Data

Interchange (EDI) increase the efficiency of the procurement as well as improve overall

firm performance. However, adoption of technologies in organization operations is

15
occurring at a slower pace than expected and such delays will make an organization to

miss opportunities and expose them to unfavorable competition (Barney, 2008).

2.4 Relationship between of Procurement strategic on Organizational Performance

Kai (2006) has opined that, procurement strategic allows procurement officers to develop

strategies for dealing with suppliers to achieve ongoing value for money, and reduce the

risk of poor performance or non-delivery or non-availability. The author continues to

argue that procurement strategic allows the procuring organization to focus effort on the

right suppliers and ensures they are not being managed by their supplier. He further

argues that strategic contracts, including enterprise approved terms and language in key

clauses such as liability, attrition, cancelation, confidentiality and more, will ensure that

public enterprises are assured that all legal, corporate and regulatory requirements are

met; reducing risk at all levels particularly the financial penalties that can result from

loosely constructed contracts.

Magnus (2006), argues that an organization practicing procurement strategic stands to

benefits from; an overall reduction of quality costs by ensuring that the selected suppliers

deliver a product or service that does not need extensive quality control, contribution to

product and service innovation as most innovations in public institutions come from the

suppliers and buyers, reduce stock levels by imposing a solid discipline on suppliers and

enforce it.

In public enterprises, this will reduce the operational cost emanating from stock holding

limits and other supplies thus helping to increase flexibility of service to customer by

demanding it from partnered supplier through the technological platform for example

Electronic Data Interchange( EDI) and synchronized data systems (Kiragu, 2012).

16
From development point of view, procurement strategic policies are significant. Reducing

poverty and attaining health, education, and other objectives among the citizenry requires

that the limited public funds available for public procurement of goods, services, and

works are efficiently managed. Generally, the efficient, effective and professional

application of procurement strategic strategies can contribute towards sound management

of public expenditures (Hunja, 2003).Efficient procurement strategic leads to the

identification of major investment expenditures that in turn facilitates budgetary

allocation and decision-making of procurement practitioners. It is difficult however, to

envision how governments can deliver significant improvements in the welfare of its

citizens without prudent management of public expenditure that emphasize on effective

and efficient procurement policies. This recognition therefore accounts partly for the

increasing concentration on procurement strategic processes and practices and the likely

consequences of their implementation (Adu, 2011). Furthermore, there is a growing

appreciation of the linkages between specific public enterprise objectives and

procurement strategic practices. For instance, procurement strategic issues are often a

central focus of programs to deal with corruption and to ensure that appropriate entrusted

power for private gain by public officials are curbed (Everett, et al. 2005).

17
2.5 Challenges Facing Strategic Procurement

Most Enterprises are facing a problem of rapid changes in procurement requirements.

The changes are putting pressure on how the procurement function performs its internal

and external processes and procedures in order to achieve its objectives.

Kakwezi and Sony (2010), notes that, the ability of any organization to realize

procurement goals is influenced by internal force and external force. These Interactions

between various departments, professionalism, staffing levels and budget resources,

procurement organizational structure whether centralized or decentralized; procurement

regulations, rules, and guidance, and internal control policies, all need attention and

relationship between the performance of the procurement function and the organization.

Strategies are more easily formulated than implemented. Implementation of workable

strategies may require considerable patience on the part of procurement managers. Lyons

and Farrington (2006), agrees that suppliers will take time to ride the learning curve in

terms of doing business with the firm which may include understanding the firm’s values,

quality requirements among others. This therefore becomes a challenge in situations

where mistrust prevails among the partners.

18
According to Thai (2001), public procurement practitioners have always walked on a

tight rope. Their ability to accomplish procurement objectives and policies is influenced

very much by internal forces including: Interactions between various elements of the

procurement systems, various actors and sub-agencies within a department or executive

agency and actors and Enterprises external to sub-agencies; types of goods, services and

capital assets required for an agency's missions; Professionalism or quality of

procurement workforce; Staffing levels ( ratio of procurement practitioners to contract

actions) and budget resources; Procurement organizational structure such as the issue of

centralization vs. Decentralization; Procurement regulations, rules and guidance; and

Internal controls and legislative oversight. Efficient public procurement is a good tool to

implement public policy in all areas, and should be an instrument for good governance

and therefore good government. In this sense, good procurement contributes to the

government’s legitimacy and credibility.

On the contrary, inefficient public procurement increases poverty and inequality by

diverting funds away from the attention of social needs; it engenders bad choices,

encouraging competition in bribery rather than in quality or price ( Kiplagat, 2012)

Some of the key influences of corruption on procurement listed out by Transparency

International (2006); include a financial relationship between and an economic influence.

Financial relationship between can consist of unnecessarily high cost of purchases,

burdening a government with financial obligations for purchases or investments that are

not needed and early repair costs to repair and maintain investments. Economic

relationship between can consist of burdening a government with operational,

maintenance and debt servicing liability for

19
20
investments/purchases and when capital investment levels decrease because of corruption

costs, it threatens business operators.

Value for money and reduction of waste and inefficiencies are important principles of

procurement. The procurement department should provide value to the entire

organization or government unit and should therefore entail consideration of the

contribution to be made to advancing government policies and priorities while achieving

the best return and performance for the money being spent (Bauld& McGuiness, 2006).

The authors however, argue that overseeing and ensuring that wastage is minimized or

eliminated and the unit is given value for money can often be a challenge.

Lipchak (2002) argues that good governance based on transparency, accountability and

trust (and similar values) has become a shared goal among governments around the

world. He goes on to say, however, that achieving this goal requires a common approach

to the establishment of recordkeeping programs – programs that enable and support

effective good governance. He stresses the fact that there is a need to explore the

relationship between information management and good governance and to identify key

issues, which governments in both developed and developing countries should consider

in assessing and improving their recordkeeping (or records management), programs.

However, the ability to preserve records does not match the ability to create such records.

Electronic records for example can be fragile, easily lost, destroyed, or altered, and run

the risk of obsolescence as software and hardware age and are replaced (Aberdeen Group,

2001)

21
Alternatively, recognizing that good supply management requires long-term perspective

(Tummalaet al., 2006), government procurement could take a more strategic perspective,

reflecting on its uniqueness, improving its strategic contribution and meaningful

involvement Johnson and Leenders(2003), through accelerating quality delivery and

reduction of waste. In response to this, increasing number of governments all over the

world are adopting modern information communication technologies (ICT) as a tool for

providing effective and efficient services to their citizens.

However, in executing successful ICT in developing countries, public enterprises are

faced with difficulties, such as resistance from the bureaucracies involved; lack of

decision making from the top; lack of motivation; weak human capital; corruption and

fraud; and, in the case of conflict-ridden countries, the instability and violence that

damage any efficient long-term work (Dobler, 2002). Moreover, ICT systems are knotty,

expensive, and difficult to manage and maintain. In summary, it is clear that procurement

practitioners have always faced challenges imposed upon by a variety of environment

factors including market, legal environment, political environment, organizational

environment, socio-economic and other environmental factors.

22
2.6 Summary of Literature Review and Research Gap

When it comes to the study of general procurement, there exist a number of studies in

Kenya. However, there is limited research in the area of procurement strategic and in

particular with respect to its relationship between on the performance of public

enterprises. Chalton (2014) conducted a research on the challenges of implementing

procurement policies in state corporations in Kenya, Nyaboke, etal. (2013), conducted

research on the effects of public procurement policies on organizational performance

which focused on the water sector, while Obiero (2008), did a study on the challenges in

the implementation of the Public Procurement & Disposal Act 2005 in the Ministry of

Higher Education, Science and Technology in Kenya.

23
2.7 Conceptual Framework

According to Raps and Kauffman (2005) conceptual framework is a set of broad ideas

and principles taken from relevant areas of application and used to structure a subsequent

presentation. It is a research tool intended to assist a researcher to develop an

understanding of the situation understudy and present it.

Mugenda and Mugenda (2003), postulates that a conceptual framework refers to

conceptualization of the relationship between variables in the study and it is shown

diagrammatically. Apart from showing the direction of the study, through the conceptual

framework, the researcher is able to demonstrate the relationships of the different

constructs that a researcher wants to investigate. Previous studies have identified a

number of factors that relationship between organizational performance. However, the

five factors in procurement strategic including procurement strategy development, spend

analysis, measurement plans, supplier relations management and technology utilization,

as depicted below, were identified as having major relationship between on

organizational performance in public enterprises.

24
Figure 2.1: Conceptual Framework

Strategic Procurement
Organizational performance

Strategy development Cost reduction

Spend analysis Efficient service delivery

Measurement plans Quality of goods/services

Supplier relationship management delivered

Technology utilization Timely deliveries

Productivity increase

Independent Variables

Dependent Variables

Source: Researcher 2019

The figure 2.1 above describes the relationship between the variables of study.

Accordingly, procurement strategic factors serves as the independent variable while

organizational performance is the dependent variable. For the purpose of this study,

procurement strategic variables include; strategy development, spend analysis,

measurement plans, supplier relations management and technology utilization.

These independent variables were studied in relation to organizational performance as the

dependent variable with indicators such as; procurement productivity, procurement cost

reduction, quality of deliveries and timely delivery of goods and services procured and

finally the customer service index.

25
 CHAPTER THREE: RESEARCH METHODOLOGY AND DESIGN

3.1 Introduction

This chapter presents the research design and methodology of the study. It consist research

design, data collection method, data analysis and presentation.

3.2 Research Design

Kerlinger (1969) contends that a research design is a strategy used by a researcher in

collecting and analyzing data in order to answer the research questions or the research

hypothesis. This study adopted a descriptive survey design. According to Orodho (2003), a

descriptive survey is a method of collecting information by interviewing or administering a

questionnaire to a sample of individuals. He further contends that the purpose of survey is

to describe part of the population (sample) on the basis of which data will be collected.

Kothari (2001) postulates that descriptive survey design is preferred because it is

economical in terms of time, it is possible and easy for the researcher to obtain current

factual information from the employees in the organization and it is a cheaper method of

studying the organization and coming up with accurate and deeper findings.

3.3 Research Location

The research was carried out at Kenya CBD head office, Eldoret . Kenya CBD head

office is at KVDA plaza

26
3.4 Target Population

Orodho (2005) has defined population as is a well-defined or set of people, services,

elements, and events, group of things or households that are being investigated. It is thus

the entire group of individuals, events or objects having common observable

characteristics.

The population on focus in this study comprised the employees of Kenya CBD ,

head office, which has a population size of one hundred and ten employees (110).

The employees are distributed in five (5) distinct departments. This target population

was picked purposively, based on departments since they have the knowledge on the

study area. The table below shows the stratification of each department.

Table 3.1 Target Population Stratification.

Department Target population Percentage

Human Resource 10 9.09%

Procurement 16 14.55%

Finance 12 10.91%

Customer care and 30 27.27%

Technical department 42 38.18%

Total 110 100%

Source: KPLC (2019 )

27
3.5. Sample Size and Sampling Technique

Sampling refers to the process of selecting a number of individuals for a study in such a

way that the individuals selected represents the large group from which they are

selected (Mugenda & Mugenda, 2003). To constitute a structured sample, the researcher

used stratified method since population to be sampled was heterogeneous. The

researcher also used stratified sampling in order to provide greater precision geared to

bring forth proportionate stratification whereby each stratum had the same sampling

fraction Kothari (2004).

The population was stratified into a number of strata and sample item were selected

from each stratum. Stratification aims to reduce standard error by providing some

control over variance. The researcher used a sample of fifty -five (55) employees which

constituted 50%

of the whole population under the study which is one hundred and ten (110) employees.

The researcher selected (50%) of the target population to act as the sample size, since it

has been argued that a sample size of at least 10% of the target population is adequate

for a descriptive survey study (Patton, 2002).

28
Table 3.2 Sample Design

Department Population Frequency Sample Ratio Sample

Human Resource 10 0.5 5

Procurement 16 0.5 8

Finance 12 0.5 6

Customer service 42 0.5 21

and marketing

Technical 30 0.5 15

department

Total 110 0.5 55

Source: CBD (2019)

3.6. Research Instruments

Mbweza (2006) defines research instruments as the techniques or tools which are used

for data collection. A questionnaire was used in this research. Cohen et al (2004) opines

that a questionnaire is a collection of items to which a respondent is expected to react,

usually in a written form. A questionnaire was used because it is very economical in

terms of time, energy and finance. Similarly, it yields quantitative data which is very easy

to collect (Kothari 2008).

3.7 Instrument’s Validity and Reliability

Validity is the degree to which a test measures what it targets to measure. Cook and

Campbell (1979), postulate that validity is the best available approximation to the truth

29
and falsity of a given inference, proposition or conclusion. In this study, the researcher

adopted two kinds of validity: content validity and face validity. In the first instance, for

research instrument to be considered valid the content selected and included in the

questionnaire must be relevant to the variables being investigated. Moreover, face validity

which is commonly used in research of this kind was applied to determine if the tool

measured what it was supposed to measure. To establish the validity of the research

instrument, the researcher sought opinions of experts especially the supervisors to give their

opinions as to whether or not the instrument met this criterion. This concurs with Carmine

and Zeller (1979), who have argued that validity can be assessed using expert opinion and

informed judgment.

On the other hand, reliability, according to Mugenda and Mugenda (2003), is a measure of

the degree to which a research instrument yields consistent results on the data after repeated

trials. In order to establish the reliability of the instruments the researcher used

Cronbach’s Alpha formula which measures the internal consistency. The value of the alpha

coefficient ranges from 0-1 and may be used to describe the reliability of factors extracted

from dichotomous and or multi-point formatted questionnaires or scales. A higher value

shows a more reliable generated scale. Cooper and Schindler (2008) have indicated 0.7 to be

an acceptable

reliability coefficient. The Alpha test was run using SPSS software which gave 0.856,

implying that the instrument was consisted and reliable

30
3.8 Data collection Procedures

Data was collected using structured questionnaires. Structured questionnaires usually consist

of a prepared list of concrete questions and a choice of possible answers (Orodho,

2012). The questionnaires were self-administered whereby the participants filled

themselves. First permission was sought from the: National Commission for Science,

Technology and Innovation, the County Commissioner and County Director for Education

in Eldoret County, the Kenya CBD head office Eldoret , and Kenyatta University.

After permission was granted, the researcher contacted Kenya CBD Eldoret , and the

intention to drop questionnaires was explained to the human resources manager. The

questionnaires were then delivered to the respondents and they were given two weeks to

fill. The researcher collected the filled questionnaire after two weeks

3.9 Data Analysis

The analysis of data requires a number of closely related operations such as the

establishment of categories, the application of these categories or raw data through coding,

and tabulation (Orodho, 2012).The data was analyzed by applying descriptive statistics

which included frequencies, percentages and graphs through thematic discussions of issues

and themes for the study. Graphs were generated by use of statistical package for social

sciences (SPSS) which gave figures which were interpreted.

3.10 Data Presentation

31
The results were presented on average percentages, frequency table distributions and graphs.

3.11 Ethical Considerations

Before data collection, the researcher sought for introductory letters from Kenyatta

University and also National Commission for Science, Technology and Innovation. After

this, permission was sought from the management of Kenya Power Company for the

administration of questionnaires and data collection.

32