Generic Strategies and Firm Performance: An Investigation of Informal Sector Micro-Enterprises in Kenya

Esther Mungai,Madara Ogot

doi:10.5539/ijbm.v12n3p148

Abstract

Micro-enterprises (MEs) have been shown to collectively be the largest employer in most developing countries thus playing a significant role in the countries economies. Using informal sector micro-enterprise furniture makers (wood and metal) in Nairobi, Kenya and based on Porter's competitive business strategies typology, this study sought to determine if the strategies employed by the informal sector MEs fit within the typology framework, and if membership within the strategic groups in the typology are a predictor of better business business performance. From the study, although membership within the two focus strategic groups of differentiation and low cost was confirmed, unlike studies done with medium and large enterprises, membership was not found to be a predictor of better business performance. Porter's typology may therefore not adequately capture the competitive business activities relevant to and directly by MEs, presenting an opportunity for research into the development of competitive business strategy typologies directly derived from their activities and therefore applicable to them.

Highlights

In Sub-Saharan Africa (SSA), it is estimated that the informal sector accounts for approximately 90% of all new jobs (CfA, 2005) and up to 85% of total employment (World Bank, 2005)
Using informal sector micro-enterprise furniture makers in Nairobi, Kenya and based on Porter's competitive business strategies typology, this study sought to determine if the strategies employed by the informal sector MEs fit within the typology framework, and if membership within the strategic groups in the typology are a predictor of better business business performance
Many informal sector micro enterprises (IS/MEs) owners, were reluctant to provide financial data resulting in only 45 questionnaires where all sections were answered completely

Summary

Introduction

In Sub-Saharan Africa (SSA), it is estimated that the informal sector accounts for approximately 90% of all new jobs (CfA, 2005) and up to 85% of total employment (World Bank, 2005). Despite the significant role the informal sector micro enterprises (IS/MEs) play in SSA national economies, few transition to formal small or medium size enterprises. This may be due to a wide array of challenges faced that include stiff competition, high cost of production, lack of adequate capital, cyclical demand, lack of ready markets, hard bargaining customers, shortage of raw materials, dishonest employees, government regulation, among others (Ogot, 2014).

Results

Discussion

Conclusion