Analysis of the attractiveness of the comercial radio industry in Kenya

Abstract

The commercial radio industry in Kenya has undergone tremendous growth since liberalization in the late 1990s. This was after a long period when the government owned KBC was the sole radio station in the country. Immediately after liberalization, two commercial stations were launched with the KBC owned Metro being the first followed by Metro East, now East FM and Capital FM, the first privately owned commercial station to launch in Kenya. Liberalization led to growth in number of players and revenue and the industry is now attracting a lot of new investments. The study aimed at analyzing the attractiveness of the industry to new firms using Porter's five forces framework as a basis. The data used for this study was collected from commercial radio stations currently in operation using a structured self filling questionnaire. The target population consisted of all commercial stations currently in operation. However, purposeful sampling was used to select a list of 30 firms to be surveyed with a response rate of 37%. Results of the study suggest that the commercial radio industry in Kenya is still attractive to new investors even though acquisition of a frequency remains the key barrier to entry for new firms. It was also discovered that industry rivalry coupled with the strong bargaining power of buyers were the two key factors with the highest unfavorable impact on the attractiveness of the commercial radio industry in Kenya. It was also found in the study that, radio as an advertising media still had very little threat from other media as substitutes including TV and print. One limitation of the study was that it used a relatively small sample hence there could be some element of bias. It is recommended that further studies be done using the modified 6 forces including government which seems to have a high influence on the industry despite liberalization.