COST OPTIMIZATION AND PERFORMANCE OF PHARMACEUTICAL FIRMS IN NAIROBI CITY COUNTY, KENYA
Keywords:
Cost Optimization, Firm Performance, Pharmaceutical Industry, Logistics Efficiency, Nairobi City CountyAbstract
Cost optimization is a critical component of logistics management, particularly in the pharmaceutical sector, where efficiency, timely delivery, and cost control directly influence firm performance. This study investigates the effect of cost optimization on the performance of pharmaceutical firms in Nairobi City County, Kenya. Firm performance was assessed through four key dimensions: operational efficiency, customer satisfaction, profitability, and competitive advantage. A cross-sectional research design was employed, enabling data collection at a single point in time to examine the relationships among variables. The study targeted all 154 pharmaceutical firms registered under the Kenya Association of Pharmaceutical Industry (KAPI) in Nairobi City County. The unit of analysis comprised logistics managers, supply chain officers, and operations managers, with a total population of 462 individuals. A stratified random sampling technique was used to ensure proportional representation of manufacturing and importing firms, resulting in a sample size of 210 respondents, determined using Krejcie and Morgan’s formula. Primary data was gathered using a semi-structured questionnaire featuring both closed-ended items, rated on a 5-point Likert scale, and open-ended questions to capture in-depth insights. The instrument underwent a pilot test involving 21 respondents to ensure content validity and reliability. Expert reviews were used to assess content validity, while Cronbach’s Alpha was applied to establish internal consistency, with a minimum acceptable value of 0.7. Data analysis was conducted using SPSS version 28. Descriptive statistics (frequencies, percentages, means) summarized the data, while inferential statistics (Pearson correlation and multiple regression analysis) tested the hypothesized relationships. The results indicated that cost optimization has a statistically significant and positive impact on firm performance (B = 0.284, p < 0.05). The study concludes that effective cost optimization strategies contribute to enhanced operational efficiency, customer satisfaction, and overall firm profitability. It recommends that pharmaceutical firms strengthen collaborative partnerships, streamline logistics processes, and adopt technology-driven cost-saving strategies to improve service quality and maintain competitive advantage.
Key Words: Cost Optimization, Firm Performance, Pharmaceutical Industry, Logistics Efficiency, Nairobi City County
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