INFLUENCE OF STRATEGY FORMULATION ON PERFORMANCE OF WATER SERVICE PROVIDERS IN THE LOWER-EASTERN COUNTIES OF KENYA

Kenya's water service providers face significant performance challenges, with Non-Revenue Water exceeding 45% and water coverage at only 60%. These inefficiencies result in annual revenue losses of approximately Kshs 15.8 billion, significantly constraining agricultural productivity in an agriculture-dependent economy. The performance deficiencies suggest inadequate strategic planning approaches, necessitating examination of how strategy formulation influences organizational performance outcomes. This study examined the influence of strategy formulation on performance of water service providers in the Lower-Eastern counties of Kenya. The study aimed to determine the influence of strategy formulation on performance of water service providers in the Lower-Eastern counties of Kenya. The research was anchored on four complementary theories: Resource Based View theory, which emphasizes strategic application of distinctive organizational resources; Dynamic Capabilities Theory, focusing on adaptive capacity development; Agency Theory, addressing principal-agent relationships in state-owned water resources; and Stakeholder Theory, recognizing diverse interests in water resource management. The study adopted a positivist philosophy using descriptive survey design with mixed-methods approach. The target population comprised 758 staff across ten licensed water service providers. Stratified purposive sampling yielded 263 respondents determined by Yamane's formula. Data collection utilized self-administered questionnaires with pre-testing confirming reliability (Cronbach's Alpha: 0.73-0.86). Analysis employed SPSS Version 21 for descriptive and inferential statistics. Bivariate regression analysis revealed a significant positive relationship between strategy formulation and performance (r = 0.426, p < 0.001). Strategy formulation explained 18.2% of performance variation (R² = 0.182). The regression equation Y = 2.077 + 0.365X₁ + ε demonstrated that each unit increase in strategy formulation resulted in 0.365 unit improvement in performance (β = 0.365, t = 5.771, p < 0.001). The F-statistic (33.302) confirmed model significance. Strategy formulation significantly influences water service provider performance. Organizations with comprehensive strategic planning processes achieve superior outcomes in service delivery and operational efficiency. Water service providers should establish comprehensive stakeholder engagement frameworks, invest in strategic planning capabilities, implement balanced performance measurement systems, and prioritize research and development investments for sustainable competitive advantage.