An Analysis of Funeral Industry Attractiveness: a Study of Funeral Service Providers in Nairobi

Abstract

Organizational survival is dependent on the ability of the organization to adapt to a changing environment. For an organization to achieve its objectives, it needs to provide goods and services that are demanded by the market. A firm unable to do this will encounter the 'strategic problem', which is characterized by the mismatch of the output of the firm and the demands of the market place. The type of industry that a firm finds itself in will influence the way it competes and the strategies it will adopt. Porter (1980) developed the five-force industry analysis model which advanced the theory that there are five forces that determine competition in an industry and hence its attractiveness. The 8-force model is a modification of Porter's model and made up the conceptual framework that was used to study the funeral industry in Nairobi, Kenya. At the time of this study there were sixteen registered funeral service providers. Data was obtained from owners or managers of these companies usmg a semi-structured questionnaire administered through personal interviews. Data was summarized using frequencies and percentages and analyzed using partial correlation analysis and factor analysis. The findings indicate that the funeral industry is very young and most companies in this sector are less than five years old. Most are either sole proprietorships or partnerships and operate in two countries, Kenya and Tanzania. Of the sixteen companies in Nairobi, only three have mortuaries. Africans locally own 94% of the companies. Anticipated high profits play a key role in motivating entry into the sector and to a small extent the desire to ease funeral transport problems. Hearse services form-the mainstay of the industry and all companies offer this service. Other common services offered are .provision of coffins, hire of lowering gear, repatriation, hire of public address systems, accessories and church trolley. The main entry requirement is capital to purchase hearses. Whereas all companies indicated that a certificate of registration is required to enter the industry, the responses for other licenses required varied among respondents. Other licenses mentioned included a trade license, work permit from Nairobi City Council, TLB and license for display board. Overall, prices charged are not fixed. 75% of the companies sampled indicated that they negotiate with customers and agree on a price. Among older companies however (over 5 years old) this figure drops to 67% and for those companies less than five years increases to 85%. It is difficult to compare pricing structures at present because of low levels of standardization. For example, for hearse services, some companies base their prices on mileage, others on the type of vehicle used and yet others charge per day. Advertising in the sector is mostly limited to word of mouth and the reputation of the owner of the company. The three companies perceived to be the largest are Montezuma, Umash and Lona in that order. The main entry barrier for new companies is the high capital outlay required to enter the industry and the length of time and money, which has to be spent so that the company can create high awareness of its services in the market. Cooperation among competing companies is almost non-existent except for occasionally recommending other companies to potential customers when a company was fully booked. Similarly most said there was no code of ethics governing the operations of companies in the sector. The three main problems facing the sector are poor roads/infrastructure which increases costs of operations considerably due to the high costs of maintaining hearses, lack of awareness among consumers of the funeral services offered by companies and unfair competition from unlicensed companies. Companies in the secto~m:ed to grow the market by educating consumers on the advantages of using professional funeral service providers and creating increased awareness; petition the government to address problems facing the sector and develop a code of conduct for the industry