Environmental changes and their influence on industry structure: a study of the motor assemblers and franchise holders in Kenya

Abstract

There have been numerous environmental changes in the last 5 years in Kenya in terms of new technological breakthroughs, economic ups and downs, change in consumer behaviour as well as new laws and regulations. This study intended to find out how these environmental changes have affected industry structure in terms of entry and exit of firms, change in business focus, staffing issues, ownership structure among other variables. The Motor Industry in terms of new vehicles was selected for study as it was felt that there was limited information on structure in the industry. The industry comprises of both assemblers and franchise holders who also offer service and parts for the vehicles they sell. The study found that the environmental changes that have greatly affected this industry are those pertaining to the economy. This is especially with regards to the reduction of consumer purchasing power due to poor economic growth as well as the currency fluctuations. This has led to firms tending to keep a narrow product range. Changes in technology especially product innovation has made technology a competitive factor as the pressure in on for the firm to introduce features that will capture the customer. There is also the need to keep the organisation updated on the latest automotive innovations available in the market. Strategies adopted as a result of these changes in the environment include market segmentation and focus, low-cost strategy, strategic alliances and product differentiation. The findings of the study should help guide firms in the Motor Industry on what structural changes are occurring and give guidance on how to best position themselves in light of changes in the environment. Firms in other industries will also find the results of this study quite significant in understanding the changes in industry structure that occur as a result of environmental change and how these changes affect their competitiveness