Cost Leadership Strategy and Organisational Performance of Private Hospitals in Kisumu County, Kenya

Abstract

Private hospitals in Kenya operate in an increasingly competitive healthcare environment in which the ability to control operating costs while maintaining quality services is important for organisational sustainability and performance. Cost leadership strategy provides organisations with an approach for achieving efficiency through cost control, resource optimisation, reduction of wastage and economies of scale. However, empirical evidence on the relationship between cost leadership strategy and organisational performance among private hospitals in Kenya remains limited, particularly at the county level. This study therefore examined the relationship between cost leadership strategy and organisational performance of private hospitals in Kisumu County, Kenya.  A correlational research design was adopted. The target population comprised 461 eligible employees drawn from 18 Level IV and Level V private hospitals in Kisumu County. A sample of 214 respondents was selected using stratified and simple random sampling techniques, of whom 179 provided usable responses, representing a response rate of 83.6%. Data were collected using structured questionnaires and a structured secondary-data extraction sheet. Descriptive statistics, Pearson correlation and multiple linear regression analysis were used to analyse the data. The findings showed that cost leadership strategy was highly adopted by private hospitals, with a mean score of 4.07. Cost leadership strategy had a statistically significant positive relationship with organisational performance (r = 0.569, p < 0.01). Regression analysis further showed that cost leadership strategy had a statistically significant positive predictive relationship with organisational performance (β = 0.569, p = 0.010). The null hypothesis that cost leadership strategy has no statistically significant relationship with organisational performance was therefore rejected. The findings suggest that cost control, efficient resource utilisation, reduction of wastage and related cost-efficiency practices are relevant to organisational performance among private hospitals in Kisumu County. The study recommends that private hospital management strengthen cost-efficiency practices while maintaining service quality and adequate investment in employees and other strategic resources.