Competitive strategies adopted by branded fast food chains in Nairobi

Abstract

The fast food market in Nairobi has in the last couple of years witnessed dramatic changes that have affected the state of competition. Ever since the market was liberalised in early 1990s, the industry has seen the establishment of new firms with strong brand heritage gained over the years. Some of these are household brands in their mother countries and also have a strong presence in Southern Africa (Akumu, 2001). These firms have increased the competitive pressure on indigenous branded firms, leading to a now thriving fast food industry. As a result of this, firms have had to employ various competitive strategies to survive in the industry. This study sought to establish and document the various competitive strategies being employed by the branded firms to compete effectively. The study also sought to highlight the various challenges these firms have to contend with. The study focused on all 11 branded fast food firms in Nairobi, but only 8 responded positively to the study. Data was collected through the questionnaire method.6 questionnaires were administered through personal interview with top managers of these firms, while the drop and pick method was used on the other two due to non availability of the target respondents. The findings of the study indicate that the firms use relatively similar competitive strategies, especially on service. There is however deliberate attempt to segment the market into specific offering, and this differentiation strategy is apparent with the new entrants, who are curving a niche for themselves. Key challenges faced by the firms were identified as huge capital investment required to compete with other branded firms, keeping abreast of changing consumer tastes and preferences as well as enormous competition from non branded outlets. Suppliers were also said to be unreliable, while inconsistency in quality and increasing overhead costs were also mentioned as key challenge areas. Competitive challenges were ranked based on calculated mean, and huge capital requirement was rated as the most critical. Respondents reported that at least sh 1 million to sh 2 million is required to start up an outlet. Summary data on key characteristics of the respondents show a multiplicity of similar characteristics. The findings established that most branded outlets are owned by Kenyan investors, with some being run based on franchise agreements with parent companies- mostly South African. That they have been operational for less than ten years could be attributed to the opening up of the market in the early 1990s.