Efficiency Performance of Manufacturing Companies in Kenya: Evaluation and Policies

Subject Areas : General Management

Miencha Haron ¹ , J. A. Arul Chellakumar ²

1 - Department of Economics, Commerce and Financial Studies, Bharathidasan University, Tamil Nadu, India.
2 - Department of Economics, Commerce and Financial Studies, Bharathidasan University, Tamil Nadu, India.

Received: 2013-04-20 Accepted : 2013-04-20 Published : 2012-07-01

Keywords: Efficiency performance, manufacturing companies, Kenya,

Abstract :

The objective of this paper is to determine the efficiency of manufacturing companies in Kenyaover the period of 2009 to 2011 as well as suggesting appropriate policies to be employed by the manufacturingcompanies in Kenya based on the findings of the study. Three critical inputs variables (raw materials, staffexpenses and plant and machinery) and two output variables (net sale and earnings after tax) are used to evaluatethe relative efficiency of 30 manufacturing companies in Kenya. This study uses the two appropriate tools ofanalysis namely; Pearson correlation to indicate positive correlation between input and output variables and usesinput approach of DEA model. Data is gathered from Kenya Association of Manufacturers database and thesecompanies are categorized under large-sized (with assets above Kshs100 million), medium-sized (with assetsbetween Kshs 40 million to Kshs100 million) and small-sized (with asset below Kshs 40 million). The results indicate that small-sized company has the highest relative efficiency compared to medium-sized and large size company. In addition, the study finds that 1 large-sized company, 2 medium-sized companies and 3 small-sized companies operate under the most productive scale size throughout the three-year period. These results have important policy implications for the targeting policy prescriptions to increase manufacturing competitiveness to attain sustainable efficiency performance.