A Study of the Forces That Shape Competition in the Handcraft Industry in Kenya: an Application of Porter’s Five Forces Industry Analysis Model

Abstract

The basis for crafting competitive strategies is the understanding of the forces that shape competition in a particular industry. The most widely used framework to understand the competitive forces is based on Porter’s Five-Force model. The model provides an assessment of the contending forces that shape competition in the industry and determine firm strategy. Using the model, this study was designed to determine the applicability of Porter’s Five Forces Model applicable in Kenya’s handicrafts industry. Using a semi-structured questionnaire, data were gathered from Chief Executive Officers, Corporate Strategy Managers and/or Marketing Managers of the sampled handicrafts companies and statistically analyzed using percentages, frequencies, mean scores, and standard deviations. The major findings of the study were that out of the six forces (Porter’s five competitive forces and government policies) that were used in the study, five forces were highly rated as shaping competition in the industry. These forces include rivalry among existing companies in the industry, bargaining power of both buyers and suppliers, threat of substitutes, and government policies. It was established all the factors which were used to determine the competitive strength of each force were moderately rated on aggregated terms with mean scores ranging between 3.00 and 3.99. The threat of new entrants was the only force which was found to be insignificant in shaping competition in the industry. The study established there were a number of entry barriers which make it impossible for new entrants to invest in the industry, hence don’t affect the competition in the industry. The overall conclusion that could be drawn from the findings of this study was that Porter’s (1980) Five Force Model was found to be highly applicable in the handicrafts industry while government was considered as a separate contending force.