Porter’s Generic Strategies and Performance of Selected Automotive Firms in Nairobi City County, Kenya

Abstract

Every firm operating in a dynamic and competitive environment must employ competitive strategies in order to enhance performance and remain relevant to the market. The automotive industry in Kenya has experienced shifts within the last couple of years that have disadvantaged automotive firms’ sales and this despite adequate capacity to supply local demand. Consequently, a persistent decline in volume sales has negatively impacted performance of these firms in overall, reducing competition to price wars that are not a viable option in the long run. This study therefore, sought to investigate the effect of Porter’s generic strategies on performance of selected automotive firms in Nairobi City County, Kenya. The specific objectives of the study were; to determine the effect of cost leadership strategy on the performance of selected automotive firms in Nairobi county, Kenya, to investigate the effect of differentiation strategy on the performance of selected automotive firms in Nairobi county, Kenya and to establish the effect of focus strategy on the performance of selected automotive firms in Nairobi county, Kenya. The scope entailed a study of selected new vehicle firms in the automotive industry in Nairobi County, Kenya. The study was anchored on three theories that included the market based view, the resource based view of the firm and Porter’s diamond theory of national advantage. Descriptive research design was adopted. The study used simple random sampling to attain the sample size and data was collected through drop and pick method using semi structured questionnaires. To ensure reliability in the questionnaire, Cronbach’s alpha correlation coefficient was used where a level of above 0.7 confirmed internal consistency. Pilot testing was done on ten respondents and Pearson’s product correlation coefficient was used to check for correlation between the study variables. A multivariate regression model was used to determine the relative importance of each variable to the study. Data collected was presented in graphs, tables and charts and a conclusion of the study drawn. The study revealed that cost leadership was significant in influencing the organizations’ performance. The study also revealed that differentiation affected their organizations’ performance to a great extent. The study also revealed that the focus strategy improved the sales growth in the firms thereby resulting to overall organization performance. The study concluded that cost leadership was significant in influencing the organizations’ performance. The study also concluded that differentiation affected their organizations’ performance to a great extent. The study also concluded that the focus strategy improved the sales growth in the firms thereby resulting to overall organization performance. The study recommended that the government and other policy makers come up with policies and regulations meant to foster innovation in the automotive industry. Policies should also be put in place meant for the creation of an enabling environment for fair and market driven competition to take place. The study recommended that the management of the automotive firms should often review their pricing structures and be geared towards minimizing their operational costs so as to offer cost friendly vehicles to the clients. The study also recommended that the firms’ management ensure they develop quality vehicles and embrace differentiation strategy so as to remain competitive in the market. The study also recommended that the management fully adopt the focus strategy to help in improving the sales growth in the firms thereby resulting to overall organization performance as well as improving on the product innovation which would lead to improved market share.