The application of porter's five forces model in assessing the attractiveness of the mailing industry in Kenya

Abstract

The objective of the study was to establish the extent of attractiveness of the mailing industry in Kenya using Porter's five forces framework. Specifically, the study sought to determine how the attractiveness of the mailing/courier business in Kenya is influenced by bargaining power of suppliers, bargaining power of customers, entry of new players, existence of substitutes, and competitive rivalry within existing industry players. The study applied a descriptive survey research design. The design involved primary research methods. Field research involved the collection of primary data. The population of the study comprised of 105 postal cum courier operators according to information from the Communication Commission of Kenya. A sample of 40% was drawn from the population. The sample was drawn through stratified random sampling. The stratification was based on the operational categories as defined by the Communication Commission of Kenya. Primary data was collected using a structured questionnaire. The questionnaire was structured into two broad sections. The first section captured background information about the firm while the second section captured information on the Porter's five forces model. The data was analyzed using descriptive statistics namely frequency tallies and the corresponding percentages. This study established that the supply bargaining power is high within the industry hence the buying industry often faces a high pressure on margins from their suppliers. This relationship to powerful suppliers can potentially reduce strategic options for the mail/courier operators. The bargaining power of customers determines how much customers can impose pressure on margins and volumes. New entrants have the potential to change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction and adjustment for existing players in this industry. Substitutes have been found to potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry.