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Analysis of the Attractiveness of the Commercial Radio Industry in Kenya

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Analysis of the Attractiveness of the Commercial Radio Industry in Kenya ANALYSIS OF THE ATTRACTIVENESS OF THE COMMERCIAL RADIO INDUSTRY IN KENYA PATRICK N O OGANGAH U-, A Management Research Project submitted in partial fulfillment of the requirements for the award of Master in Business Administration Degree, University of Nairobi November 2009 DECLARATION This research project is my original work and has not been presented for a degree in any other University. 061/7376/06 This research project h^s been submitted for examination with my approval as the University supervisor Signature \ \ \ *\ DR. ZACKB AWINO LECTURER DEPARTMENT OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS UNIVERSITY OF NAIROBI ii DEDICATION This research project is dedicated to my wonderful parents, Peter and Grace Ogangah without whose support and belief in me, I wouldn't have achieved my MBA. AKNOWLEDGEMENT My sincere gratitude to my supervisor Dr. Awino, who guided me through this project from topic formulation to the end and making It a success. Not forgetting my fellow MBA students at the University of Nairobi, other lecturers and faculty staff. Forever thankful to Morin Chacha and my colleagues at work who provided valuable and timely advice whenever consulted hence made this project successful. Last but not least, thanks to the Almighty God, who has made it all possible. Table of Contents CHAPTER ONE: INTRODUCTION........................................................................................................................................................1 1.1 Background of the Study............................................................................................................................................. 1 1.1.1 Attractiveness of the Commercial Radio Industry in Kenya..................................................2 1.1.2 Commercial Radio Industry in Kenya..............................................................................................3 1.2 Statement of the Problem.......................................................................................................................................... 5 1.3. Research Objectives.................................................................................................................................................. 6 1.4 Importance of the Study...........................................................................................................................................6 CHAPTER TWO: LITERATURE REVIEW....................................................................~.....................................................................7 2.1 Introduction............................................................................................................................ 7 2.2 Industry Analysis..............................................................................................................................................- ....... -7 2.3 Porter's Five Forces Framework...............................................................................................................................8 2.4 Competitive Strategy 2.5 Competition and its Challenges.............................................................................................................................10 2.5.1. Threat of entry of new Firms........................................................................................................... 11 2.5.2. Intensity of Rivalry among Existing Firms................................................................................. 12 2.5.3. Threat of Substitute Services............................................................................................................ 13 2 5.4. Bargaining Power of Buyers..............................................................................................................13 2.5.5. Bargaining Power of Supplrers..........................................................................................................14 2.6 Challenges..........................................................- .....................................................................................14 CHAPTER THREE: RESEARCH METHODOLOGY ......................................................................................................................15 3.1 Research Design....................................................................................................... 15 3.2 Population 15 3.3 Sampling..................................................................................................................... 16 3.4 Data Collection........................................................................................................ 16 3.5 Data Analysis........................................................................................................... 16 CHAPTER FOUR: DATA ANALYSIS AND PRESENTATION............................................. 18 4.1 Introduction.............................................................................................................. 18 4.2 Sample Characteristics ...................................................................................... 18 4.3. Threat of New Entrants to Industry Attractiveness.......................... 23 4.3.1 Strength of Factors Underlying Ihrea: of New entrant* 25 v 4.4 Effect of Industry Rivalry on Industry Attractiveness.................................................................................. 28 4.5 Impact of the Power of Buyers on Industry Attractiveness................................................ 37 4 6 Impact of the Power of Suppliers on Industry Attractiveness................................................................35 4.7 Effect of Substitute Services on Industry Attractiveness........................................................................... 37 4.8 Impact of Government Policies on Industry Attractiveness.................................................................... 40 4.9 Ranking of Forces Impacting Attractiveness of the Commercial Radio industry In Kenya.......42 4.10 Additional Comments on the Commercial Radio Industry in Kenya................................................ 43 4 11 Factor Analysis of the Variables Constituting Porters 5 Forces..........................................................43 CHAPTER FIVE: SUMMARY. CONCLUSIONS & RECOMMENDATIONS... .................................................................. 46 5.1 Introduction.................................................................................................................................................................... 46 5.2 Summary of Findings.................................................................................................................................................. 46 5.3 Conclusions......................................................................................................................................................................48 5.4 Recommendations.................................................................................................................................................. 49 5.4 Recommendations for Further Research........................................................................ 50 5.5 Implications to Policy and Practice................................................................................................. 50 REFERENCES............................................................................................................................................................................................52 APPENDIX 1: POR1ERS 5 FORCLS DIAGRAM...........................................................................................................................54 APPENDIX 2: LIST OF RADIO STATIONS IN KENYA |ASAT JULY 2009)........................................................................ 55 APPENDIX 3: QUESTIONNAIRE............................................................ .........................................................................................58 VI ABBREVIATIONS AND ACRONYMS MOA Media Owners Association CCK - Communications Commission of Kenya APA - Advertisers Practionerf’ Association MCK - Media Council of Kenya KBC - Kenya Broadcasting Corporation TV - Television PM - Frequency Module AM - Amplitude Module KNA - Kenya News Agency KTN - Kenya Television Network NTV - Nation Television KlMC - Kenya Institute of Mass Communication VOK - Voice of Kenya ICT - Information, Communication and Technology KUJ - Kenya Union of Journalists BBC - British Broadcasting Services NGO - Non Governmental Organizations KShs - Kenya Shillings PESTEl - Political, Economic, Social. Technological, Environmental and Legal SWOT-Strength, Weaknesses, Opportunities, Strength V I LIST OF TABLES Page Table 4.1: Respondent*' Job Title 18 Table 4.2: Age of tho participating firms 20 Table 4.3: Revenue profile of participating firms by age 20 Table 4.4: Competitors at launch and new entrants 22 Table 4.5: last 10 years growth in commercial radio stations 22 Toble 4 6: Rating of various aspects as barriers to entry into the commercial radio industry 25 Table 4.7: level of differentiation in terms of programming and target in commercial radio stations 30 Table 4.8: Stations which are biggest competitor 31 Table 4.9: Rating of various aspects Impacting on the bargaining power of buyers 32 Table 4 10: Rating of various aspects impacting on the bargaining power of firms over their suppliers 35 Table 4.11: Rating of other media as substitute services to radio 37
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