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Competitive Strategies Adopted by Nakumatt Holdings Limited to Gain Competitive Advantage

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Competitive Strategies Adopted by Nakumatt Holdings Limited to Gain Competitive Advantage COMPETITIVE STRATEGIES ADOPTED BY NAKUMATT HOLDINGS LIMITED TO GAIN COMPETITIVE ADVANTAGE BY MIRIAM MUKAMI CHEGE A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS, UNIVERSITY OF NAIROBI OCTOBER 2014 DECLARATION This research project is my original work and has not been presented for a degree or any other award in any other university. Signed: _________________________________Date: _________________________ MIRIAM MUKAMI CHEGE D61/63155/2011 This research project has been submitted for examination with my approval as the University Supervisor. Signed: _________________________________Date: _________________________ PROF. EVANS AOSA Supervisor, School of Business University of Nairobi ii ACKNOWLEDGEMENT The attainment of my MBA is a great milestone that I cannot celebrate alone. My sincere gratitude to the almighty God for His steadfast favour, guidance and provision. I am also appreciative of my supervisor’s guidance as well as the faculty and fellow classmates who gave me motivation during the presentation of the research proposal. I am equally grateful to the Chief Executive Officer and managers at Nakumatt Holdings who were interviewed in this study for their time and acceptance to open up their business as a case for this study. Finally, I give tribute to my family, parents and siblings who were a great source of encouragement during the whole period of study and research. iii DEDICATION This research project is dedicated to my two dear children, Bridgitte and Bryan for their inspiration. iv ABSTRACT Competitive strategy in business is central for survival and growth. How well a business is able to build and sustain its advantage is a question of strategy and how competitive those strategies are based on internal as well as market dynamics. In Kenya, the retail business has in the last ten years experienced exponential growth. This sector has entered a phase of cut-throat competition with new entrants coming on board and multi-billion shilling expansion plans by key supermarkets including Nakumatt, Uchumi, Tuskys and Naivas. Nakumatt Holdings Limited leads the pack with a turnover of KES.38 billion and a profit of to KES.312 million in the year to June 2012 compared to its Nairobi Securities Exchange listed rival Uchumi Supermarkets which achieved a profit of KES.273 million on revenues of KES.14 billion for the year ended June 30, 2012. This research project is a case study undertaken to establish the competitive strategies that Nakumatt Holdings limited has adopted in Kenya and how such strategies has given it competitive advantage in this highly competitive market. This study involved collecting primary data from face to face interviews with five senior managers in the retailer using an interview guide and secondary data collected from newspapers, the internet and review of internal documents. Content analysis was used to analyze the data in line with emerging themes. The study established that strategy has a central place in Nakumatt’s growth with numerous strategies having been adopted. These are customer-orientation, differentiation of service, strategic mall location, technology leverage, aggressive branch expansion, innovation and learning orientation, strategic partnerships, branding and brand positioning, staff development, vertical integration, departmental store model and centralized quality control and management system. The study established that though some of these strategies are not unique to the retailer, they have succeeded in giving it competitive advantage over competitors. The study concluded that Nakumatt has not only used the Resource-based view of competitive advantage but has also used the Porters Model of creating competitive advantage by taking offensive and defensive actions to create a defendable position in the industry and to successfully generate a superior return on investment for its shareholders. The retailer has differentiated its service and shopping experience creating a regional and global brand. The study recommends that Nakumatt and the whole retail sub-sector at large should enhance and innovate on the above mentioned strategies for growth and competitive advantage with insights for policy markers on what would make the retail sub-sector boom and possible areas of incentives. v TABLE OF CONTENTS ACKNOWLEDGEMENT............................................................................................... iii DEDICATION.................................................................................................................. iv ABSTRACT....................................................................................................................... v CHAPTER ONE: INTRODUCTION............................................................................. 1 1.1 Background of the study.............................................................................................1 1.1.1 Competitive strategy .......................................................................................2 1.1.2 The retail industry in Kenya............................................................................3 1.1.3 Nakumatt Holdings Limited...........................................................................4 1.2 Research problem..................................................................................................5 1.3 Research objectives...............................................................................................7 1.4 Value of the study .................................................................................................7 CHAPTER TWO: LITERATURE REVIEW................................................................ 9 2.1 Introduction.............................................................................................................. 9 2.2 Theoretical foundation of the study ......................................................................... 9 2.2.1 Resource Based View (RBV) of competitive advantage ...............................9 2.2.2 Michael Porter’s perspective of competitive advantage...............................11 2.3 Concept of strategy ................................................................................................ 13 2.4 Competitive advantage........................................................................................... 16 2.5 Competitive strategy and environment .................................................................. 18 2.6 Cooperative and offensive strategies ..................................................................... 19 CHAPTER THREE: RESEARCH METHODOLOGY ............................................. 21 3.1 Introduction............................................................................................................ 21 3.2 Research design ..................................................................................................... 21 3.3 Data collection ........................................................................................................21 3.4 Data analysis ...........................................................................................................22 vi CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION ................ 23 4.1 Introduction .........................................................................................................23 4.2 Interviewees ........................................................................................................23 4.3 Competitive strategies that Nakumatt has adopted in Kenya..............................24 4.4 How the strategies have given Nakumatt competitive advantage.......................37 4.5 Discussion ...........................................................................................................39 CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS .. 41 5.1 Introduction .........................................................................................................41 5.2 Summary of findings...........................................................................................41 5.3 Conclusions .........................................................................................................42 5.4 Implications.........................................................................................................43 5.5 Limitations of the study.......................................................................................44 5.6 Suggestions for further research..........................................................................45 REFERENCES............................................................................................................................. 46 APPENDICES................................................................................................................. 50 vii CHAPTER ONE: INTRODUCTION 1.1 Background of the study Business is about competitive strategy. Organizations exist in a competitive environment and it is the intensity of such competition that determines the strategic moves that a firm makes to prosper. Liberalization and growth of an economy often leads to a conducive environment for businesses to grow and thrive. This results to intense competition. Such intensity in competition could be a combination of price fights, advertising battles, product introductions, better customer service or warranties. The nurture and degree of competition in an industry
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