Turnaround Strategy, Adaptive Capability, and Service Quality in Kenya Airways Plc

Abstract

According to recent studies, poor service quality greatly affects organizations’ financial performance. Further, studies show that very few airlines have succeeded in improving service quality even after implementing a turnaround strategy. In Kenya, continuous bailout of Kenya Airways by the exchequer continues to drain the government of resources that could be used in other critical sectors. The objective of this study was to determine the perceived effects of turnaround strategy on service quality among customers and employees of Kenya Airways Plc and the moderating effect of adaptive capability on this relationship. The specific objectives were to assess the effects of the retrenchment strategy, repositioning strategy and replacement strategy on the service quality in Kenya Airways Plc. The other objective was to evaluate the moderating effect of adaptive capability on the relationship between turnaround strategy and service quality in the company. In this study, the measurements of the service quality and adaptive capability variables were guided by the indicators conceptualized in the Expectancy Disconfirmation Theory and the Dynamic Capability Theory respectively. The other models that guided the study include; SERQUAL model, Porter’s Generic Strategies Model and Balanced Score Card model. The study targeted Kenya Airways employees and customers using quantitative research methodology involving an explanatory survey. The targeted respondents comprised 2,000 daily passengers who fly Kenya Airways through Jomo Kenyatta International Airport, 280 customer-facing employees, and 40 senior management staff. The study used a stratified random sampling technique to ensure that each category of target respondents was fairly represented in a sample size of 402. Quantitative data analysis techniques namely, descriptive statistics, multivariate regression model, and hierarchical regression model were used. Using the direct effect regression model, the study results suggest that retrenchment strategy (β= 0.238; P value=0.015), repositioning strategy (β= 0.313; P value=0.017), and replacement strategy (β= 0.183; P value=0.033) have a direct positive effect on service quality and this effect was significant. When control variables (gender and years of work experience) were introduced in the direct effect model, the three independent variables retained their significant positive effect i.e. retrenchment (β= 0.239; P value=0.015); repositioning (β= 0.300; P value=0.023) and replacement (β= 0.191; P value=0.028). The ANOVA test results for the direct effect model without control variables (R=0.444; R2=0.197; P value=0.001) and with control variables (R=0.458; R2=0.209; P value=0.001) were also significant. When the independent variables were regressed with adaptive capability as a moderator in the hierarchical regression model, the strengths of the prediction of the relationship increased as the R statistic increased in every step after introducing each of the interaction terms (Step 1: R=0.445, R2= 0.198, P value=0.019; Step 2: R=0.515, R2= 0.265, P value=0.017; Step 3: R=0.516, R2= 0.267, P value=0.016; Step 4: R=0.518, R2= 0.269, P value=0.014;). Based on these results, the study concludes that the three turnaround strategy variables namely retrenchment, repositioning and replacement have a positive effect on service quality and the effect is significant, Additionally, the study concludes that adaptive capability variable has a strengthening effect on the relationship between turnaround strategy and service quality. Therefore, this study recommends that implementation of retrenchment strategy, repositioning strategy and replacement strategy in Kenya Airways plc should be undertaken jointly with adaptive capability initiatives to enhance service quality. These recommendations cannot be generalized on all airlines as this was a case study. The study suggests that other scholars should conduct a similar study in different contexts e.g. different airlines, countries, regions, cultures, etc. to verify whether the results are replicable in different contexts. This is necessary because the study was limited to one organization. Replication of the result in all contexts would confirm the universality of the relationship.