Strategic Responses of Major Supermarkets to Competition In Kenya

Abstract

There have been many competitive pressures and hostilities within the supermarket's retail sector in Kenya. These have necessitated implementation of various strategic responses to cope with the competition. The fundamental basis of above industry competition is a sustainable competitive advantage which is brought about by either low cost, differentiation or focus strategy. Previously, no research has been done to assess strategic responses, specifically Porter's three generic strategies, of major supermarkets to competition in Kenya, especially in the largest cities in Kenya. The relationship of loyalty programs on the relationship between strategic responses and competition has also not been sought in past studies. This study aimed at filling these gaps. The specific objectives on which this study was based were to: examine the relationship between cost leadership as a strategic response and competition, assess the relationship between differentiation as a strategic response and competition, establish the relationship between focus as a strategic response and competition, explore the interaction relationship between loyalty programs as a moderator variable and competition, investigate the interaction effect of loyalty programs on the relationship between strategic responses and competition all within the supermarkets sector in Kenya. Porter's theory of competitive advantage, competitive on the edge theory and the five forces model guided the study. This study was anchored on the positivism research philosophy. A cross-sectional descriptive survey research design was used. All the 31 major supermarkets branches in the three major cities in Kenya within a radius of 8 kilometers from the Central Business District (CBD) were picked for the study. A response rate of 77.4 % was realized. A well-structured questionnaire targeting supermarkets managers and analyzed by use of descriptive and inferential statistics was used to collect data. Five statistical hypotheses were tested using stepwise regression analysis and accepted at the 95% confidence interval. The study indicated that the coefficient of the variables is significant at 5 % levels of significance that are cost leadership strategy 0.027, differentiation strategy 0.029, focus strategy 0.048, loyalty programs 0.015 and the interaction effect of loyalty programs on the strategic responses 0.045. This study also showed that supermarkets could employ the three strategies without necessarily employing one at a time or with few employing anyone at the exclusion of the others. Overall, the study indicated that at a 5 % level of significance, a unit increase in any of the strategic responses would lead to a 43% increase in supermarkets ability to counter competition. Further, the moderator variable had an interaction effect on the relationship between the strategic responses and competition at 5% level of significance. Regarding managerial implications, supermarkets management should as much as possible follow a low-cost leadership, differentiation, and focus strategies by offering the lowest price to its customers, products and services that have unique and a variety of features from competitors and focus on service niche and narrow markets respectively to cope with competition. Law enforcers should monitor and follow up on the proper implementation of the competition law to safeguard interests of all retail players in the supermarket's sector. The study recommends that supermarkets adopt Porter's business level strategies (three generic strategics) as responses to competition. Professional strategists should spearhead supermarkets strategy development and implementation for consistency in monitoring and evaluation and in follow up.