The Role of Strategic Groups on the Performance of Private Security Firms in Kenya

Abstract

Strategic groups are clusters of firms in an industry that have similar strategies on key strategic dimensions and which differ significantly with those of other groups of firms. The groups are affected by the competitive forces in the industry in different ways resulting in the firms in some groups having a potential for higher profitability compared to firms in other groups. The strategy of a firm depends on the bundle of resources the firm possesses which determines the factors that a firm considers to be major hindrance to meeting their business objectives as well as how they respond to market dynamics. Mobility barriers restrict the movement of firms from group to group as well as imitation of strategies of firms in one group by a firm in a another group resulting in stability of the group structure. The study sought to find the strategic groups in the private security industry in Kenya and the role they play in the performance of those firms. The study targeted the 30 firms that are members of the Kenya Security Industry Association using a cross sectional census survey. This was done using a structured questionnaire that was administered to operations managers of the firms. 17 firms responded which was a 56.67% response rate. The data was analyzed using clustering and descriptive statistics techniques. The analysis revealed that there are four strategic groups in the private security industry in Kenya characterized by differences in resources and scope of services. Those firms that had higher levels of resources invested were able to have fewer sources on hindrance to meeting their business objective and were also able to respond more robustly to the dynamics in the market. These firms were also able to generate more gross revenues compared to firms that had less invested resources and product scope. The study concluded that strategic group membership plays a role in the performance of firms in the private security industry in Kenya. The author recommends that managers of private security firms should familiarize themselves with the strategic groups in the industry and use the knowledge to formulate their competitive strategies. The author also recommends that government agencies to develop policies and regulatory framework with a better understanding the strategic group structure of the industry. This will enable them find ways and means of eliminating or reducing the hindrances to a more competitive industry.