PHD Paper - On Corporate Governance
PHD Paper - On Corporate Governance
PHD Paper - On Corporate Governance
Kosgei
A THEORETICAL REVIEW
BY
ABSTRACT
African economies have recently dropped drastically due to heavily depending on imports from
Asia and other continents. The agricultural sector which was the majorly operated by public
sector and which was back bone of these economies has gone to its knees leaving the countries to
struggle with ways of reviving them. Most of Sub-Saharan Africa countries are not an exception.
For the last 10 years Kenya has put in several efforts in reviving its public sugar sector but all
attempts have borne little fruits. A lot of money has been pumped into this sector in attempt of
stabilizing it but still there is nothing much to show. This has left many stakeholders wondering
what might be the solution with many scholars carrying many researches to find the solution but
the answer lies in operational management strategies. Operations management is the
administration of business practices aimed at ensuring maximum efficiency within a business,
which in turn helps to improve the firm’s performance and profitability. According to Amit
Kothari, (2016), it involves resources from staff, materials, equipment, and technology,
converting these inputs into efficient and effective outputs on both day-to-day and strategic
levels within an organization. This is what necessitated this study. Many hypothesis have been
raised, about the factors that have contributed to the state of the sugar sector in the region but
none has come out with tangible solutions to this challenge. Despite the region having a perfect
climatic condition for enabling growth of sugarcane, many of the sugar companies have
struggled till closure. This independent study paper explores the theoretical review of reviving
the public sugar sector through the implementation of operational management strategies. This
independent study paper offers a background and theorizes on operational management strategies
and the implementation of these strategies, highlighting the challenges faced by many
commercial firms in the implementation. This study concludes that lack of proper
implementation of these strategies is the solution the defunct public sugar sector in Kenya. The
study indicates the need for empirical research to ascertain the nature and extent of the impact of
full implementation of operational management strategies in reviving the public sugar sector
with the main focus on the Kenya.
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Proposed supervisors: Dr. Omagwa & Dr. Kosgei
INTRODUCTION
involves certain responsibilities that are influnced by factors which cannot be overlooked if the
company is to achieve its objectives, Fayol, (1991). One of those responsibilities is ensuring the
business operates efficiently, both in terms of using the least amount of resources necessary and
management entails managing the process by which raw materials, labor and energy are
converted into goods and serving fices. People skills, creativity, rational analysis and
technological knowledge are some of the important for the successful implementation of
productivity, Gatimu, (2011). Systematically analysis of these factors and and their constant
science of management, scientific selection of an effective and efficient worker, education and
development of workers, and an intimate cooperation between management and staff, Sturkhart
(2007)
Today, operations management revolves around four theories: business process redesign (BPR),
reconfigurable manufacturing systems, six sigma and lean manufacturing. BPR was formulated
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Proposed supervisors: Dr. Omagwa & Dr. Kosgei
designing workflow and business processes within a company. The goal of BPR is to help
companies dramatically restructure organization by designing the business process from the
ground up. The implementation of operational management in the Kenyan sugar industry has
faced many challenges which has led to the collapse of the sugar industry in kenya. The
sugarcane sector for years has been a big contributor to the Kenyan economy with more than half
of its production from state owned companies including Mumias Sugar company in western
Kenya sugar belt, Kenyasugarboard, 2017. For many years Kenya has been known for the
production of quality sugar for both export and local consumption. The sector was one of the
major pillars in agricultural secor of the economy but of the recent past the statistics have
changed leading to shortage of the commodity and closure of the many companies that were
once termed as giant industries. Several researches have been conducted to ascertain the reasons
for the decline of the sector and the recomandations made on ways of reviving it. With the
coming of Jubilee government focus on agriculture as one of its pillars, the proposal of
privatizing the 5 major sugar companies with an aim of bringing effiency in operational process.
According to the Kenya Sugar Industry strategic plan 2010-2016, all sugar industries need to be
privatized in order to compete effectively. Despite developing strategic plans, public sugar
companies in Kenya rely on Government cash bail out to make them survive. For example
Mumias Sugar Company received over Kshs 1 billion in June, 2015 from the National Treasury
against an unexpected over Kshs 6 billion (RoK, 2015). The industry produces 68% of Kenya’s
domestic sugar requirement, making the region a net importer of sugar (RoK, 2013). The decline
in sugarcane production and sugar output can be attributed to the existing major operational
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Proposed supervisors: Dr. Omagwa & Dr. Kosgei
management problems in the industry; the rising level of inefficiency in sugar production,
milling and transportation. Due to factors attributed to performance, the Kenya sugar industry
has not met COMESA sugar safeguards for the last 12 years, since 2001 (ROK, 2014). This has
resulted in the Government of Kenya request for extension of the COMESA safeguards year in
year out. Kenya’s sugar production has recorded under production from the various sugar
millers, against what is expected from the forecasted annual production (MOA, 2015). The
expiry of preferential trade tariff prices from the COMESA region in 2016 has complicate
matters to the local millers as their sugar will compete with cheap imported sugar (Mwanje;
Guyo & Muturi, 2016). The Cost of producing sugar in Kenya is higher than those in other
producing countries in East Africa and COMESA member states. The Kenya Sugar Industry
Strategic plan (2010-2014) puts the cost of producing sugar in Kenya at 415-500USD/ton while
that of Uganda and Tanzania are put at 180-190 USD/ton and 140-180USD/ton respectively.
Report by The Kenya Sugar Industry Strategic plan (20102014) indicated the challenges such as
irregular factory maintenance, low crushing capacity, low sugar extraction rates, slow adoption
of new and appropriate technology, inadequate industrial research, high cost of sugar production,
narrow product base, dilapidated processing equipment, inefficient factory operations and
wastage in cane yard (RoK, 2015). While Mumias Sugar Company (MSC) has been the most
successful of the ten sugar factories in Kenya, its survival remains uncertain due to increased
competition for both market and raw materials. In its endeavor to improve efficiency, the
company installed a high capacity processer (diffuser), but this was met by another problem of
shortage of the raw cane as a good number of farmers contracted to the company uprooted their
crops as they went for other substitutes which they believed offered better returns.
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Proposed supervisors: Dr. Omagwa & Dr. Kosgei
MSC has in the recent past suffered continuous losses arising from mainly operational
challenges attributed to poor planning of logistics management practices and poor operational
management (Mukolwe & Wanyoike, 2015). From 2012, Mumias Sugar Company has been
experiencing low sugar output and decreased profits which have been blamed on internal
According to a forensic audit carried out by KPMG, the company registered a loss of up to Ksh.
1 billion in 2012. A further loss of Ksh. 2.7 billion was recorded in 2014. The Gross loss for
2015 was 1,660,212,000 which rose to 1,754, 422,000 for the year ending June 2016 (Mumias
Sugar Annual report, 2016). The challenges experienced by MSC majorly circulate around poor
consumption coupled with raw operational shortage (Annual Report, 2016). The Effect of
proliferation of mills created competition for the available cane in the western region, while the
general impact of the financial pressures on farming led to inadequate inputs to obtain optimum
cane yields. High unit cost of production arose mainly from underutilization of factory capacity
due to low cane supply and high cost of servicing the factory. Further, the company has been
bogged with poor operational planning and poor inventory control. This study therefore seeks to
Limited.
The subject of sugar industry in Kenya has been full of altercations (Ikiara, 2007). Many reports
have been done pointing out deficiencies in the management of public sugar sector in most of
sub-Saharan countries despite the area being endowed with the best climatic conditions for the
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Proposed supervisors: Dr. Omagwa & Dr. Kosgei
growth and thrive of this product. With all this potential, the public sugar sector in Kenya has
been reduced to a mere department of agriculture in most governmental ministries with most of
them citing Corruption, incompetency, political interferences and lack of strong policy
guidelines between public officials and the business community as key hindrances to
effectiveness in the sector. This therefore makes institutions commit to ineffective operational
management practices without strategies for economic viability and the good will of the
leadership to drive the desired change that can result in effective operational management
The factors that influence the effective operational management practices landscape are designed
to automate the operational cycle, optimize spending, improve process and workflow, support
bidding and tendering and facilitate more effective search for products and services via the
internet, (Garcia-Dastugue and Lambert, 2003). With even the growth in consumption and high
pricing of the commodity in the region, the public sugar firms have been associated with loss
making for many decades leading to closure of many firms with several attempts of revival by
respective governments bearing no fruit. This has been attributed to the high operation costs, lack
of sugar cane as raw materials, protruded striking labor force and suppliers, poor management.
All these have contributed to poor operating environment that made sugar produced in Kenya
costlier than imported ones on account of the poor infrastructure in the sugar growing areas.
A number of research studies have been carried out on public sugar sector in various countries
and their challenges, but little has dealt into the revival of public Sugar Sector in Kenya through
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Proposed supervisors: Dr. Omagwa & Dr. Kosgei
initiative from the point of view of various Singaporean firms. Huber, Sweeney, and Smyth,
(2014) found the perceived barriers to effective operational management strategies thereby, a
laizaeres fare” attitude among firms’ managers in selecting strategies and operational
Also, poor supply chain management and competence issues in management and staffs have
been cited as key issues resulting to resistance to change and achieve radical revision to the
The basis of this study is therefore majorly founded on some of these gaps identified in the
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LITERATURE REVIEW
Theoretical Framework
Business in developed countries has shifted to the e- commerce platform. Many of the he
developed economies in the world are driven by effective operational management practices in
their economic activities (Kbensons, 2017). The impact of operational management system on
organization cannot be over emphasized (Toyin and Damilola 2012) as it is one of the most
technological advancement that can be used to drive the firm into profitability. The OECD
(2008) identified operational management as the driving tools of the management areas in
Merriam Webster defines efficiency as, “the ability to do something or produce something
without wasting materials, time, or energy.” A prerequisite, therefore, its understanding exactly
what you are going to do or produce. You simply can’t have operations management efficiency
without a set of corporate goals and objectives as well as the key performance indicators against
which success will be measured. From all of the studies, it’s realized that efficiency in
operational management has undergone through various evolution right from the theories of F.
Taylor till to date. The implementation of operational management practice in organizations can
be achieved by three major concepts in management. JIT, TQM and lean management.
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Slack, Chambers and Johnston (2002), states that the single biggest factor a firm needs to think
about, therefore, when optimising its operational efficiency is its operating model. Achieving
efficiencies is not just about generating cost savings at the margins; it is about reassessing the
operating model to bring about a fundamental change in the way a firm operates. The firm needs
to examine what is core to its competencies and capabilities and create an end-to-end operating
model. It can then lift out the non-core elements of that model and place them with an outsourced
service provider that has the scale and expertise to perform them more efficiently. Taking that
approach will enable a firm to bring about a major reduction in its underlying cost base.
JIT as an operational management practice means getting products mainly when they become
needed. Slack, Chambers and Johnston (2002) expressed JIT into philosophy and a series of
techniques that helps direct the activities a company leadership and the workforce. It’s based on
doing things well and simple, constantly improving them for better quality, and eliminating
waste; hence leading to efficiency in operational activities. This technique was developed by by
Taiichi Ohno (1982), the Executive Vice-President of the Toyota Motor Company and it spread
to other companies of Japan in late 1970s. Knudsen, D. (2003). By the early 1980s, it became a
very popular manufacturing innovation in Western and Asian countries (Schonberger, 1982). It is
waste in the manufacturing process and gaining edge over the others through improving the
manufacturing process
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some extent these institutions are captives to powerful forces in government that makes it
significant progress has been achieved (Clear, 2012). However, challenges include financial
uncoordinated information, majorly at the sector level. To address these challenges several
researches argues that the current organizational realignments must be reinforced with adequate
Operational management practice is a new phenomenon that has not been fully exploited in the
these processes in establishing quality service delivery is faced by many challenges (Kibisu,
2015). However, because of insufficient data, their discussions are limited to benefits accrued in
well-established institutions. There are several empirical evidences on the challenges of effective
resources among others (Auriol, 2009). Operations management involves planning, organizing,
and supervising processes, and make necessary improvements for higher profitability. The
adjustments in the everyday operations have to support the company’s strategic goals, so they are
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Still, it was not until Henry Ford took a twist on manufacturing with his famous assembly line
concept, otherwise known as “bring work to men,” that the management of production for
improving productivity became a hot topic. From the 1950’s and 1960’s, it formed a separate
discipline, besides bringing other concepts, such as Taylorism, production planning, or inventory
control, to life.
corporate functions, including product management, started to integrate them. The service side
also began its approach by applying product management principles to the planning and
organizing of processes, to the point where it made more sense to call it operations management.
Required skills
The skills required to perform such work are as diverse as the function itself. The most important
skills are:
from planning and prioritizing through execution to monitoring. These abilities together
in your area often includes a broad understanding of other functions, too. An attention to
• Coordination of processes. Once processes are analyzed and understood, they can be
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Proposed supervisors: Dr. Omagwa & Dr. Kosgei
• People skills. Flaws in the interactions with employees or member of senior management
can seriously harm productivity, so an operation manager has to have people skills to
properly navigate the fine lines with their colleagues. Furthermore, clear communication
of the tasks and goals serves as great motivation and to give a purpose for everyone.
• Creativity. Again, problem-solving skills are essential for a creative approach if things
don’t go in the right direction. When they do, creativity helps find new ways to improve
corporate performance.
are getting increasingly technology-dependent, affinity for technology is a skill that can’t
technologies used in their industries, and have an even deeper understanding of the
The constant changing business environment demands a response from the public institutions
through realignment of its management tools in operational management. Among the strategic
responses are changes to governance tools in the governance structures is the implementation of
management practices can be hindered by several factors, Corini, J. (2000). To alleviate these,
the organizations require resources. The factors that are outstanding come from organizational
set.
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by these factors posing as challenges and this study seeks to investigate these variables.
Operational Environment
Implementation of effective
operational management Strategies
Legal framework and
Infrastructure
Organizational Resources
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Proposed supervisors: Dr. Omagwa & Dr. Kosgei
REFFERENCES
Andraski, J.C. and Novack, R.A. (1996), operational management practices, Journal of Business
Arrowsmith, S., Lineralli, J and Wallace, D. (2000). Regulating Sugar industry: National and
Auriol, E., Picard, P.M. (2009), "Government outsourcing: public contracting with private
Barua, A., Konana, P., Whinston, A. and Yin, F. (2001), “Driving e-business excellence”,
Boston Group: Boston, MA.Best Practices in effective operational management practices: The
Cooper, D. and Schindler, A. (2003), Business Research Methods, Irwin, Boston, MA.
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Croom, S., & Johnston, R. (2003). “E-Service: Enhancing internal customer service through
Croom, S.R. (2001), “The dyadic capabilities concept: examining the processes of key
Davila, A., Gupta, M., Palmer, R. (2003), "Moving operational management systems to the
Day, G.S., Fein, A.J. and Ruppersberger, G. (2003), “Shakeouts in digital markets lessons from
De Boer, L., Harink, J., Heijboer, G. (2002), Zinbarg (2005), "A conceptual model for assessing
Government of Kenya (2004), Report on the Development and Performance of the Public
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Henriksen, H.Z., Mahnke, V. and Hansen, J.M., (2004). Public e operational management
Ikiara, G., (2000) “Corruption in operational management”, in Mullei, A., (ed). The link between
corruption and poverty: Lessons from Kenya case studies. Nairobi: African Center for
Economic Growth.
Kassim, E.S., Hussin, H. (2010), "Public effective operational management practices: a research
Taiichi Ohno (1982), ECOM Group (2002, February). Effective operational management
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