Effects of Generic Strategies on Competitive Advantage: Evidence From SMEEs in Nyahururu, Kenya

Abstract

There is a tremendous increase in the number of Small and Medium sized Enterprises (SMEs) that are collapsing in Kenya while others struggle to meet growth targets. Despite the importance of generic strategies being a determinant of a firm’s competitive advantage and its growth, inadequate empirical research has been undertaken with regard to SMEs. Researches done have tended to concentrate on large firms, and reported a positive link between generic strategies and competitive advantage. However, there is little information on whether generic strategies have an effect on competitive advantage of SMEs. The general objective of this study was to examine the effects of generic strategies on competitive advantage among the SMEs. Using a survey research design and a stratified sampling technique, 276 SMEs were sampled from a population of 985 SMEs operating in Nyahururu Town. From the sampled SME the business owner and manager were purposively selected. Using a structured self-administered questionnaire, primary data were collected through a drop and pick method, and analyzed using descriptive and correlation analysis. The results indicated that the generic strategies of cost leadership and differentiation were being adequately used by the SMEs to gain competitive advantage. The focus strategy was also used but only to a limited extent. The study recommends that owners/managers of SMEs should develop ways of differentiating themselves from competition so as to stand out as unique to their clients.