Strategies and the forces influencing them within Kenya’s dairy industry

Abstract

An industry is made up of many players. The number of players in an industry is determined to a large extent by the attractiveness of the industry in sustainable growth and profitability. The players in an industry are faced with factors in their environment which affect the amount of profits they make and share. To maximize their stake in the industry, the players formulate strategies that assist them to minimize negative effect from the various external forces. These forces have been identified by scholars studying the behavior of industries and they differ in their level of importance from industry to industry.

This study focuses on the dairy industry in Kenya and singles out the players involved in milk processing. The study has advanced the following three objectives: a) To identify the strategies of the milk processors in the Kenya's

Dairy Industry.

b) To identify the forces that influence the strategies formulated by the milk processors in the Kenya's Dairy Industry c) To identify the differences and similarities of their strategies.

To achieve the objectives of the study, data was collected through use of a questionnaire administered through the drop and pick method from the 22 operatingcompanies in the selected districts.

The analysis of the data was by use of descriptive statistics and the chi-square test has been used to test the third objective. To facilitate this test, one set of hypothesis was formulated as the null hypothesis that was that there is no significance difference in the strategies formulated by milk processors in the dairy industry in Kenya. The alternative hypothesis was that there is a significant difference in the strategies formulated by the players in this segment of the dairy industry.

The finding of this study is that there are forces influencing the strategies formulated by the players processing milk in the dairy industry. These forces are existing competition, threat of new entrants, bargaining power of suppliers and buyers, availability of substitute products, government policy, infrastructure, and political connections. This study also found that the forces affect players in different degrees and that some are more important than others. The strategies adopted are market development, product development, horizontal integration vertical integration, product quality and pricing strategies. The strategies of product quality, vertical integration and growth are common to all the players and the strategies of market development, product development, pricing and horizontal integration are unique to the players with more than 150,000 litres per day installed capacity. The hypothesis tested through the chi-test concludes that there are significant differences on the strategies formulated and adopted by the different organizations involved in milk processing in the dairy industry in Kenya