Porter’s Generic Strategies and Perceived Microfinance Institution Performance in Northern Kenya
Leah Jeruto Chemitei *
School of Business and Economics, Garissa University, Garissa, Kenya.
Bashir Maalim
School of Business and Economics, Garissa University, Garissa, Kenya.
Aden Ali Abdi
School of Education, Arts & Social Sciences, Garissa University, Garissa, Kenya.
*Author to whom correspondence should be addressed.
Abstract
Microfinance institutions (MFIs) operating in Northern Kenya serve geographically dispersed and diverse markets in which operational efficiency, service distinctiveness, and market specialisation are strategically important. This article examined the first four objectives of a broader study by assessing the individual and combined predictive relationships of Porter’s generic strategies (cost leadership, differentiation, and focus) with perceived MFI performance. The study was anchored primarily on Porter’s Generic Competitive Strategies Framework and complemented by the Resource-Based View. A cross-sectional quantitative survey was conducted among managers and operational staff in conventional, Islamic, and hybrid MFIs in Garissa, Wajir, Mandera, and Isiolo counties. From a target population of 500 employees, 223 respondents were sampled, and 198 usable questionnaires were returned (88.8% response rate). Final-sample reliability was high for cost leadership (α = .920), differentiation (α = .926), focus strategy (α = .917), and perceived MFI performance (α = .911). Separate simple regressions showed that cost leadership (R² = .840, B = .839, β = .916, p < .001), differentiation (R² = .825, B = .852, β = .908, p < .001), and focus strategy (R² = .827, B = .837, β = .909, p < .001) each significantly predicted perceived MFI performance. In the combined multiple-regression model, the three strategies jointly explained 87.5% of the variance in perceived performance, R = .935, R² = .875, adjusted R² = .873, F(3, 194) = 452.38, p < .001. All three coefficients remained positive and statistically significant: cost leadership (B = .345, β = .377), differentiation (B = .276, β = .295), and focus (B = .265, β = .288). The results indicate that the three strategic orientations are strongly associated with perceived MFI performance both individually and jointly. However, the exceptionally high intercorrelations among the strategies and the cross-sectional self-report design require cautious interpretation of unique effects and preclude causal conclusions.
Keywords: Porter’s generic strategies, cost leadership, differentiation, focus strategy, perceived MFI performance, microfinance institutions, Northern Kenya