International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Effects of Decomposability Costs Organizational Growth of Edible Oil Manufacturers in Kenya
Ms Susan Khasenye Wasike, Dr. Luke Oyugi, Dr. Walter Okibo Bichanga

This paper’s discussion concentrated on the fact that the concept “growth” is used both for “change in amount” and for the process that leads to that change in edible oil manufacturers in Kenya. Today, estimation of production of edible oil is at 380,000 tones. This quantity constitutes about one-third of its annual demand, the rest is imported meaning that there is potential market for local firms in this industry -Export Processing Zone (EPZ, 2005). This implies that edible oil industry market in Kenya has not been exhausted. It is therefore evident that firms in this industry have the potential to grow as they exhaust the market. Firms in Edible oil industry have varied growth levels and yet there is market for their products. Firms can expand along different dimensions and show growth patterns overtime such as joint ventures, alliances, licensing, internationalization, diversification, integration but the general objectives of this study was to determine the level of organization decomposability in relation to coordination costs and how they affect firm growth. The argument here is to contribute to the knowledge about the relative and combined effects of coordination costs on firm growth in edible oil manufacturers in Kenya, and to limit the study to a more homogenous empirical context and generalize only to that context. This gives the study a closed-up nature that has a rich image especially when assessing organizational coordination costs along several dimensions of growth. The paper therefore sought to find out whether coordination costs could be a contributory factor in the varied growths levels of these firms. The research used a survey design with both quantitative and qualitative research approaches. The study was based on purposive sampling for manufacturing firms and stratified sampling for the respondents. Primary data was collected by use of questionnaires and yielded dichotomous answers by use of a Linkert Scale where 5=almost always, 4-often, 3-occasionally, 2-rarely, 1-never. 1-2 represented (0=No) while 3-5 represented (1=Yes). Secondary data was collected from the firm’s annual financial statements, i.e. debt ratio, return on investment, profit retention ratio, liquidity ratio formed the measurement for growth. This measurements were selected because they backtrack the proceedings of sales as the increase in sales necessitates increase in profits, return on investment, reduce debt ratio, on the basis of sales being a universal determinant of growth. The research analysis was based on correlation analysis model (path analysis) that calculates path coefficients, simple correlations, indirect effects, and total correlations for a set of data that clearly illustrated the relationship between coordination costs and firm growth. To make the data linear, the researcher used logarithmic transformation method to change the raw data into logarithmic mode to allow further arithmetic calculations to be done. The study found that the departments were highly interdependent of each other, tasks were shared and there were a lot of interrelations among the departments. The study found that the decomposability costs in the oil manufacturing were relatively low. The decomposability costs were insignificant in influencing the growth of the oil manufacturing companies due to high departmental interdependencies. Organizations can realize the potential synergies by actively managing the interdependencies caused by sharing of resources which may add to coordination demand from organizations existing tasks and may cause marginal costs to outweigh marginal synergy benefits. The impact of the activity system on the partitioning and recombination of organization units inside the firm (decomposability) can affect the firm growth either negatively or positively in terms of costs associated with carrying out the tasks in a recombined form of organization units. Depending on the costs of transaction, an organization can choose a more modular or integrated form of carrying out tasks. But it has to be put in mind that decomposability of the activity system constraints a given level of complexity which is the degree of organization modularity. Given that, it is worthwhile to mention that the organization structure employed plays the important role of coordination.

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