Working Capital Management, Competitive Advantage and Financial Performance of Enterprises in Kawempe.
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Date
2021-01-09
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Makerere University Business School
Abstract
This study was set out to investigate the relationship between working capital management, competitive advantage, and financial performance of Enterprises in Kawempe. Enterprises make up approximately 90% of Uganda’s private sector and make a significant contribution to employment and income generation for individuals and the government, yet most Enterprises continue to suffer from a high failure rate (25%) (World Bank Enterprise report, 2016). Using a cross-sectional survey, deploying systematic random sampling, a total of two hundred and eighty (280) Enterprises represented by the respondents, giving a response rate 98% (280÷285). From the primary data analysed using a Statistical Package for Social Sciences (SPSS) version 20, a multiple correlation coefficient and regression analysis were run. Regression analysis results revealed that both competitive advantage and working capital management have a significant effect on financial performance, while both working capital management and competitive advantage account for 22.5% of the variance in financial performance. It was also established that the level of competitive advantage has a promisingly higher potential in refining the financial performance of Enterprises. The results showed that an enterprise with a superior competitive advantage has stronger bargaining power in financing and is able to increase profitability by controlling the financing scale and cost rationally. This may be attributed to differentiation by the superiority of its products, the value of its brand, the customers’ loyalty, and other relevant factors that enabled it to sell products to many customers at a price higher than the market average, as well as to its cost leadership (cost control) ability. This verification of competitive advantage on the financial performance further suggests that an enterprise can take a cost leadership strategy to sharpen its competitive edge in order to gain more returns. Enterprises can improve the return on assets owned by optimizing their distribution channels and controlling their marketing expenses, reducing overheads, and improving management efficiency. The study also recommends improvements in cash management, inventory management, debtors and creditors management for effective management.
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This is a master's thesis.
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Asiimwe, H. (2021) Working Capital Management, Competitive Advantage and Financial Performance of Enterprises in Kawempe. Makerere University Business School.