Relationship between porter’s competitive strategies and performance of value added services by mobile phone operators in Kenya

Abstract

The mobile telephony sector in Kenya has seen an unprecedented growth since its liberalization in 1998. Although there has been a huge growth in the mobile subscriber base, the sector has experienced a fierce competition whereby the mobile phone players have engaged in a price war which intensified from the year 2008 to date, following the entry of two new players YU and Telkom Orange. The decline in conventional voice service tariffs has gradually reduced average revenue per user (ARPU), thus decreasing the service providers’ profits. In the wake of changing industry markets, telecom operators are looking at Mobile Value-Added Services (MVAS) such as mobile internet and money transfers to survive and succeed in the market. To create competitive and enhance the performance of MVAS, the firms are adopting competitive strategies. This study therefore sought to investigate the effect of the competitive strategies on the performance of the MVAS in the mobile industry in Kenya. The overall objective of this study was to determine the effect of competitive strategies on the performance of MVAS. Cross-sectional survey was adopted and a census study method was used since the number of firms was small. The research utilized both primary and secondary data. Questionnaires were used to collect the data. The target population of the study was the four mobile operators in Kenya. The respondents were the senior managers drawn from the marketing, planning and finance departments. Twelve managers from the firms were targeted for the interviews. Three managers from each firm were interviewed. The data obtained was summarized using descriptive statistics such as mean and standard deviation. Pearson’s correlation was used to determine the relationship between the variables, and multiple regression was used to determine the effect of the competitive strategies on the performance of MVAS. To determine whether the competitive strategies vary with the type of MVAS, t-test was used. The study found out majority of the firms had adopted low cost leadership strategies, differentiation strategies as well as focus strategies to a great extent. The study concluded that the strategies adopted by the telecommunication companies had a positive effect on the performance of the MVAS in terms of growth of sales and market share. The study recommends that the firms should adopt competitive strategies to achieve competitive advantage and enhance their performance.