Evidence on Challenges Faced by Manufacturing Informal Sector Micro-Enterprises in Nairobi and Their Relationship with Strategic Choice

Abstract

The study sought to determine the challenges faced by Informal Sector Micro-Enterprises in the manufacturing sector as well as establish what influences, if any, they have on their strategic choice. Porter's competitive business strategy model formed the theoretical framework for strategic choice. A total of 135 enterprises were sampled from six regions in Nairobi, Kenya. From the study, 30 main challenges were identified and ranked. The top three challenges for the sector were Competition, High Cost of Production and Lack of Adequate Capital. A cross-reference with strategic choice found that, enterprises experiencing challenges of High Cost of Production, High Cost of Transport and High Cost of Capital were more likely to adopt focus low cost strategies within Porter's framework. Those experiencing Hard Bargaining Customers were more likely to adopt differentiation focus strategies, while enterprises adopting mixed strategies are more likely to face Consumer Purchasing Power, Dishonest Customers and Theft as their main challenges. The study therefore shows that there does exist a relationship between challenges faced by an informal sector micro-enterprises and their strategic choice.