RESPONSE STRATEGIES OF ROOTS HAIR LIMITED TO COMPETITION

IN NAIROBI, KENYA

By

SUSAN NDINDA KASYOKA

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF

THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTER

OF BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS, UNIVERSITY

OF NAIROBI

AUGUST 2009

i

DECLARATION

I hereby declare that this research project is my original work and has not previously in entirety or in

part been presented in any other university for the award of a degree, and that all citations and

references in text have been duly acknowledged.

Signature: ..................................................... Date: ...............................................

Susan Ndinda Kasyoka

D61/P/8548/2005

The project has been submitted with my approval as the university supervisor.

Signature: ........................................... Date: .................................................

Mr. Jeremiah Kagwe

Lecturer

Department of Business Administration

School of Business

University of Nairobi

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DEDICATION

This project work is lovingly dedicated to my late mother who believed in me and

encouraged me. Her words of encouragement will always be a constant source of

inspiration. I also dedicate it to my husband, who challenged me to finish the work

and sometimes proof-read my drafts.

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ACKNOWLDEGMENTS

First and foremost, I thank God, the Almighty for your patience, kindness and

provision. I would have totally despaired without your unfailing love and support. I

am ineffably indebted to Mr. Jeremiah Kagwe and Dr. Mohammed Garad, my

supervisors at different times, for conscientious guidance and encouragement to

accomplish this assignment. Your tireless review and corrections of my drafts taught

me that perfection was never beyond reach.

I also take this opportunity to express a deep sense of gratitude to Mr. Steve Kumari

proprietor of Roots Hair Limited for his cordial support, valuable information and

guidance, which helped me in completing this task through various stages. Your

openness and willingness to share your experience in business is invaluable.

I also acknowledge with a deep sense of reverence, my late mother Margaret Kasyoka

Mutua for encouraging me to pursue a master‟s degree and telling me over and over

that I could make it. You were a pillar of strength and the reason, other than my own

career growth, that I pursued this degree. I resolved not to disappoint you.

Last but not least, I thank my family and friends for their unfailing support; my

sisters for the laptops and for challenging me to keep on, my husband for not allowing

me to give up and my children for staying asleep when mummy needed to write.

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List of Tables

4.1. Summary of key success factors of Roots Hair Limited......................... 31

4.2. Presence of cost methods ........................................................................ 33

4.3. Presence of Differentiation methods ...................................................... 34

4.4. Presence of Focus methods .................................................................... 36

4.5. Extend of the presence of generic responses to competition .................. 44

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ABSTRACT

This study was conducted to determine the response strategies of Roots Hair Limited

to competition in Kenya. This business firm is a representative case study, of first of

all, the hair industry in Kenya and secondly the small and medium enterprises in

Kenya. The research sought to understand how this enterprise has managed to stay in

business long after its first birthday and how it has managed to grow its customer base

and profits from zero and its employee pool from none to ten. A thorough literature

review was done on aspects of competition in business as well as competitive

advantage and after it was established that these terms are used interchangeably. This

literature formed the backbone of the interview guide which was created to gather

information on various aspects related to competition and competitive advantage such

as strategic capability, the PESTEL analysis of the firm, industry analysis, the firm's

competitive position, its strengths and weaknesses, the presence/absence of the

generic methods of competitive advantage by Michael Porter as well as other

strategies by other authors. A face to face interview with the proprietor of the

business himself was conducted at the business enterprise and the data was collected

and typed in by the researcher. Additional relevant information was also typed in and

evaluated and subsequently added to enrich the report as conclusions and

recommendations. Content analysis was the method of data analysis used. The results

of the study showed that competition was indeed not a challenge in the hair industry

as long as innovation, efficiency, quality goods and services and excellent customer

care was continuously practiced in the business. The interview also established that

diversification of products and services were advantageous to shielding the business

from direct competition and the threats of imitation and substitution. Of Michael

Porter‟s generic methods of competitive advantage, differentiation and focus were

found to be evident response strategies. Like many other studies, this study had one

limitation. That is the inability to compare the firm with other firms since an industry

review of the hair industry was not available. The results of this research have great

implications for the case firm in that, they affirms its policy and practice to be

business-sound and educates the industry as a whole in matters strategy and

competition. The research encourages the hair industry to embrace academic business

propositions of problem identification and solution.

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TABLE OF CONTENTS

DECLARATION........................................................................................................... i

DEDICATION.............................................................................................................. ii

ACKNOWLEDGEMENTS ....................................................................................... iii

ABSTRACT .................................................................................................................. v

LIST OF TABLES ...................................................................................................... iv

ABBREVIATIONS AND ACRONYMS ................................................................. viii

CHAPTER ONE: INTRODUCTION ........................................................................ 1

1.1 Background of the study ......................................................................................... 1

1.1.1 Response strategies to competition ............................................................... 2

1.1.2 The concept of competition ........................................................................... 2

1.1.3 The hair salon industry in Kenya .................................................................. 3

1.1.4 Roots Hair Limited ........................................................................................ 5

1.2 Research problem..................................................................................................... 6

1.3 Research objectives .................................................................................................. 8

1.4 Value of the study .................................................................................................... 8

CHAPTER TWO: LITERATURE REVIEW ........................................................ 10

2.1 Introduction ............................................................................................................ 10

2.2 Theoretical foundation .......................................................................................... 10

2.3 Competition and its impact on firms ..................................................................... 10

2.4 The competitive forces and industry analysis ........................................................ 11

2.5 A company‟s competitive position ........................................................................ 13

2.6 Strategic responses to competition......................................................................... 14

2.7 Generic strategies for achieving competitive advantage ....................................... 16

2.8 The major threats to sustainable competitive advantage ....................................... 16

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CHAPTER THREE: RESEARCH METHODOLOGY ........................................ 18

3.1 Introduction ............................................................................................................ 18

3.2 Research design ..................................................................................................... 18

3.3 Data collection ....................................................................................................... 19

3.4 Data analysis .......................................................................................................... 20

CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION ........... 21

4.1 Introduction ........................................................................................................... 21

4.2 General information on respondent ...................................................................... 21

4.3 Findings on competition and response strategies .................................................. 22

4.3.1 Competitive forces ...................................................................................... 23

4.3.2 Response Strategies ..................................................................................... 29

4.4 Discussion .............................................................................................................. 39

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION 38

5.1 Introduction ........................................................................................................... 38

5.2 Summary ............................................................................................................... 38

5.3 Conclusion ............................................................................................................ 41

5.4 Recommendations ................................................................................................. 47

REFERENCES ........................................................................................................... 50

APPENDICES ............................................................................................................ 55

Appendix: Interview Guide........................................................................................ 48

viii

Abbreviations and Acronyms

BCG: Boston Consulting Group

KRA: Kenya Revenue Authority

PESTEL: Political, economic, social, technological, environmental and legal

SBU: Small Business Unit

SME: Small and Medium Enterprise

R & D: Research and Development

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CHAPTER ONE

INTRODUCTION

1.1. Background of the study

When any business venture is seen to be profitable, there always arises what we can call

'copycats' or competitors. This is more the case where the business is seen to be a small

enterprise whose cost at start-up is not prohibitive. Larger business corporations may enjoy

market leadership longer before competitors arise due to the start-up costs, specialized human

resources and technology. However, in due time, competitors are inevitable. It is how the

entrepreneur prepares for this eventuality that saves the business from losing its market-share.

Porter (1985) in his book on competitive advantage stated that “Competition is at the core of

the success or failure of firms. It defines the "appropriateness of firms" activities that can

contribute to its performance such as innovation, a cohesive culture or a good competitive

position in an industry” (p. 1). Rothschild (1984) writes that “competitive understanding and

monitoring are key elements to strategic thinking, since they help you to see the relationship

between customers and resources” (p. 1).

The hair industry is worth billions of shillings here in Kenya and the world over. In Nairobi's

central business district alone, 3,138,295 inhabitants live within 696 km2 (269 sq. mi) and are

served by hundreds of hair salons clustered all around the city. Hair salon shops in the central

business district have to compete against each other and with those based near the homes of

their potential customers. The rivalry in the industry is stiff and many are the start-up

businesses that do not see their first birthday. This research aims at finding out how the

businesses that survive more than their first birthday do so.

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1.1.1 Response Strategies to Competition

Response strategies therefore in this research will be defined as those strategic actions that

aid a firm in preventing, combatting, controlling or avoiding the actions of competitors in the

industry. The Oxford dictionary defines strategy as „Generalship, the art of war…‟ which is

the old sense of the word. When it comes to business strategy however, Hardy (1987) builds

his definition on this and argues that “business strategy is when a businessman has available

certain resources, and he needs to plan their use in such a way as to ensure that he „wins the

war‟” (p. 5).

When choosing a competitive strategy, Porter (1985) mentions that managers and owners of

the business must consider if the industry they are in is attractive in terms of sustainable

profits and what the determinants of that competitive position are. Even though a firm is in a

very profitable industry, it may still not be in a position to make these high profits that are

expected. This may be as a result of not meeting the factors that determine competitiveness.

On the other hand, a firm may meet all these requirements, such as appropriate infrastructure,

capital, human resources and technology but be in a low profit industry and thus be unable to

advance its competitive position.

1.1.2. The Concept of Competition

According to the Business Dictionary in Economics, competition is rivalry in which every

seller tries to get what other sellers are seeking at the same time, sales, profit, and market

share by offering the best practicable combination of price, quality, and service. Where the

market information flows freely, competition plays a regulatory function in balancing

demand and supply. Kurtus (2011) defined competition between businesses or stores as the

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action of trying to get customers to buy their products instead of the one offered by the

competitor. Barnett and Wilsted (1989) define competition as "the present and potential

alternative sources of a firm‟s goods and services" (p. 96). They write that competition can

be direct, in that, the competitor copies the business model as well as the products or services

and even poaches some of the other business' staff to attract the market share of the existing

business. Competition can also be indirect; where the competitor sells the same goods or

services but with specific focus on aspects that are failures or weaknesses of the existing

business or with a specific niche market that is not catered for by the existing market. Other

competitors may choose to provide products or services that are a close substitute to that

which is provided by the market leader.

Most of the literary works that have been written on competition have mostly delved into

competitive advantage and the term is almost used interchangeably with competition itself.

Although the concepts are slightly different, the definitions are interrelated. In attempting to

bring out the difference Porter (1985) and Grant (1998) mention the terms „sustainability‟ and

„persistence‟ respectively as what specifically means competitive advantage. Since strategic

management basically refers to decisions affecting the long term aspects of a business, then a

business firm must be informed and involved in planning response strategies for both the

short term and long term. As such, for purposes of this study, both strategies for competition

and competitive advantage shall be researched upon.

1.1.3. The Hair Industry in Kenya

As an avid and restless customer of the hair industry for the last fifteen years, my interest and

knowledge in the hair industry is the backbone reference of this project. The industry is not

adequately written about in text books but there are a few articles in the internet.

4

According to Okulo and Kanini (2013) in an article of The Star, on L'Oreal, a leading hair

products international organisation, the hair industry in Kenya is worth Kshs. 20 billion. This

is divided as Kshs 4 billion for hair relaxers and Kshs. 16 billion for oils, hair weaves and

sprays. Industry consensus has it that the hair industry in Kenya is mainly divided into two:

the hair product vendors and the hair salon service providers. Vendors of hair products deal

in items such as hair oils, hair texture altering chemicals, shampoos and conditioners as well

as hair addition pieces such as braids, weaves and wigs. They also sell grooming products

such as facial products and make-up as well as nail care products. The hair salon service

providers then buy these products and use them on their clients.

According to an unidentified author on http://www.startupbizhub.com/Starting-a-Hair-Care-

and-Beauty-Salon-Business.htm for a hair salon to succeed, one needs to find customer

satisfaction strategies, augment services done in salons such as hair care, skin care and nail

care in one place, and find a competitive location. A pre-interview with Mr. Kumari of Roots

Hair Limited informed that the cost of starting a hair salon depends on the size and location

of the salon. A large salon, capable of holding at least 15 – 20 clients and employees at a time

could cost at least Kshs. 1.5 million if it is situated in an upmarket area where rents range

from Kshs. 100,000 per month. The rest of the costs go into buying standard salon equipment

such as driers, furniture, mirrors, ergonomic seats and hair products as well as statutory

business start-up costs such as registration of names and certification by the city or county

council. A small business such as the one in study took around Kshs. 500,000 as start-up

capital.

From the interview referred to above, the researcher learned that in the hair salon industry,

knowledge is easily available and is widely shared. There is always a salon enterprise

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catering for every price bracket in all levels of economic wealth. Services offered are

branded under the following names: hair perming, curly kits, plaiting, weaving, barbering,

pedicures, manicures, facial treatment and dreadlock styling. The cost of hair products largely

determines the price of the services. This competes with the business need to retain clients by

maintaining prices they are comfortable with while maintaining quality.

Industry consensus has it that Ashley's hair salon is the market leader in the industry with the

highest customer base and the most number of branches in the country. Their customer base

includes grooming for media houses such as NTV and KBC as well as Kenya Airways. Their

profits have awarded them the opportunities to franchise Miss Tourism Kenya, Miss Global

international Kenya and Miss Teen Kenya.

1.1.4. Roots Hair Limited

Information on the proprietor and his business was obtained from

http://biasharasme.co.ke/the-arts/100-hair-stylist-cum-musician-shrugs-off-academic-failure-

to-build-successful-business.pdf from an interview done by Wanjiku Waithaka. The

researcher shared the details of this write-up with the proprietor and confirmed it to be true.

Roots Hair Limited is a salon that specializes in the dreadlock styling as well as the

manufacture and sale of hair products. The salon was an idea born in 2008 by Mr Steve

Kumari after his quest to supplement his income in music performance landed him on his gift

for hair and creativity. Formerly a cleaner at an established hair salon in Nairobi city centre,

Steve observed the hair artists twisting hair and learned the art. He requested a friend to allow

him to work on his hair and the friend was impressed and became his first client.

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Growing a customer base for him was a challenge but his first client, who was a popular

music performing artist, helped him draw the numbers. With the additional income from his

client base, he attended a hair styling college in Italy for six months. When he came back to

Kenya, he left employment, opened Roots Hair Limited with his savings and moved to his

new premises with the customer base he had built.

He initially worked alone for two months and thereafter gradually hired casuals to help with

none-core duties. The salon now employs 10 staff members for different hair styling

techniques, has a barber corner and nail grooming artists. However, it dominantly specializes

in the dreadlock fashion. The products that the interviewee manufactures are also sold from

the salon to mainly hair artists but also directly to consumers.

1.2. Research problem

Organisations must face competition and must remain competitive. It also follows that

business organisations must create and satisfy their customers' needs as their sole purpose of

their existence. To meet the customers' needs in a competitive environment is however a

challenge. Management must have a competitive strategy that matches the industry's

competitive forces. Even though one of the most obvious response strategies to competition

in the industry is investing in the newest high quality assets such as equipment, infrastructure,

capital, human resources and technology, Roots Hair Limited runs on the standard and not

necessarily the exceptional of these assets, and still has a large client base and good profits.

As such, its success cannot purely be attributed to its asset base.

Additionally, though the hair industry is highly profitable, many enterprises have invested in

these high quality assets but failed to stay in business. Industry consensus has it that new

7

businesses only survive the first year of operation if the management is experienced in the

salon industry. However, with what seems like little effort, and in the face of the high

competition, Roots Hair Limited has beaten the odds. Knowing that the interviewee has only

learned or observed knowledge of the salon industry, it is curious how he has managed to run

the business so profitably that it has grown from being a self-employment shop to one that

has ten permanent employees. The purpose of this study is to find out what these strategic

responses are and which industry forces they address.

Also important to highlight is that Roots Hair Limited is located in the same geographical

area as the industry leader and other big names in the industry as well as hundreds of direct

competitors of the same size criteria. The business has to daily deal with the probability of

losing its market share to competitors using new tactics, under-pricing, imitation, and

substitution to put them out of business. The rivalry in the industry is hands on and one has

to be careful about who is hired for even the casual jobs of hair washing since it could be the

ploy of a competitor to spy on the business. As such, the secret behind Roots Hair Limited‟s

success must be unravelled through studies of strategy formulation, competition in business

as well as competitive advantage.

Academically, in the context of response strategies to competition, this study is relevant

because it is the first recorded study of its kind done in the University of Nairobi. Mudanya

(2007) studied strategic responses in the cement industry and cited operational responses such

as cost minimisation, technology enhancement, promotional activities and corporate social

responsibility while Omondi (2004) found that Savings and Loan Kenya Limited addressed

changing environmental factors and competition by use of restructuring, marketing,

information technology and culture change as methods of strategy. Mokaya (2003) found

8

that Passenger Service Vehicle owners responded to changes in the operational environment

through modernization and distinctiveness of their fleet, improvement of customer service,

efficiency and network diversification and right sizing through rationalization and

retrenchment of staff as the most successful strategies. Ngunjiri (2005) studies various

responses that British American Tobacco (BAT) has employed to ward off competition

through Porter‟s Five –Force Model.

The above listed studies involved the cement industry, the banking industry, the transport

industry and the tobacco industry and others have been on the flight transport industry and

the flower exports industry but none include a case study in the hair industry. This research

aimed at closing this gap in knowledge in a bid to prove whether business level strategy

might also be at work in the sector. The research question was therefore this: What response

strategies has Roots Hair Limited employed to ward off competition in the hair industry?

1.3. Research Objectives

The objectives of this research study were:

i. To identify the competitive forces facing Roots Hair Limited

ii. To identify the responses of Roots Hair Limited to the competition in the hair

industry.

1.4. Value of the Study

This research study is a valuable asset to the Ministry of Trade, department of internal trade,

whose mandate it is to facilitate and promote the orderly

development and growth of domestic trade through formulating and implementing trade

policies and strategies. The findings of this study will be an eye-opener into the possible ways

to enforce trade regulations into the hair industry.

9

The research study is also a significant addition to the body of knowledge in the field of

strategic management. It will provide documentation for the hair industry‟s competitive

forces in Nairobi, Kenya and how to sustain competitive advantage. The background

information on the hair industry may be helpful to future researchers who wish to write on

relevant topics on the industry.

In practice, this research study will be useful to Roots Hair Limited; to confirm if the

response strategies to competition that management has adopted are indeed academically

sound. It will also serve to provide a platform for reform (if necessary) of the strategic plan

in place and sensitize the entrepreneur on the need to maintain strategies that ensure

sustainable competitive advantage.

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CHAPTER TWO

LITERATURE REVIEW

2.1. Introduction

This chapter reviews the relevant written works in the topics of business competition and

competitive advantage. In the first section, various definitions have been discussed and

Porter's five-force model is covered as a tool for industry analysis in the second section. The

third section covers facts on company position, giving way to the fourth section which

defines strategic responses and gives various examples from different authors. The fifth and

sixth chapters cover Porter's generic strategies to competitive advantage and other methods of

attaining competitive advantages and the threats to competitive advantage respectively.

2.2. Theoretical Foundation

Traditional responses to competition include employing Porter (1980, 1985) generic models

of acquiring competitive advantage such as employing price based strategies, differentiation

strategies, focus based strategies and hybrid modules of any two of the three major methods.

These methods are a remedy to what contributes to competition, which are the factors of the

PESTEL analysis in Porter (1998). Porter‟s five forces, explained in details in pages below

also act as drivers of competition. These are dealt with through guarding against the threats

to competitive advantage. Other authors apart from Michael Porter have also addressed the

topic of competitive advantage. This research explored methods from Burns (2000) as well

as Hill and Jones (2001). Burns (2000) details strategies such as the stability, portfolio,

growth, harvesting, retrenchment and a combination of all the five. Hill and Jones (2001)

talks about employing quality, efficiency, innovation and customer responsiveness as ways to

respond to competition.

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2.3. Competition and its impact on firms

Definitions from Business Dictionary of Economics, Barnett and Wilsted (1989), Thompson

and Strickland (1992), Grant (1998), Barney and Hesterley (2011) and Kurtus (2011)

generally advocate that competition is rivalry, a contest or scramble for customers, market

position, market share, profit and growth opportunities by offering the best practicable

combination of price, quality and service. Drucker (1998) states that “the true source of

competitive advantage is productivity” (p. 155). Porter (1985) explains that competitive

advantage grows fundamentally out of the value a firm is able to create for its buyers that

exceeds the firm‟s cost of creating that value.

To have a sustainable competitive advantage an organisation must invest in a strategy that

can virtually not be duplicated. It is a responsibility of the managers in the firm to keep up on

strategy re-evaluation in consideration of the micro and macro environment. The PESTEL

model helps evaluate these factors. Grant (1998) explains that competitive advantage can be

revealed either in the form of higher profitability or the company may trade profits for

interests such as customer satisfaction, philanthropy, employee benefits, or executive perks.

Porter (1985) states that "without sustainable competitive advantage, above-average

performance is just a sign of harvesting” (p. 11). He emphasizes that "after years of success

and vigorous expansion, many firms forget about maintaining competitive advantage as they

fight for growth and pursuit of diversification.” (p. 33).

In terms of impact, where the market information flows freely, competition plays a regulatory

function in balancing demand and supply (Kurtus, 2011). Gandotra (2010) cites Ratnayake

(1998) as stating that competition ensures "allocative, technical and dynamic efficiency in an

industry". Strong competition is good for a firm because it reduces or annihilates the levels

12

of complacency, lack of innovation and indifference to customer needs in a firm. Krishna

(2006) in his article entitled „Strong competition and organizational well-being‟ on his blog

advocates that “A sense of urgency sets in and every moment is spent trying to outmanoeuvre

the competition. It becomes a matter of survival”. An industry with high competition is

marked with high quality and innovative goods and/or services as well as exceptional

customer service.

Hill and Jones (2001) state that “…a company has competitive advantage when its profit rate

is higher than the average for its industry, and that it has a sustainable competitive advantage

when it is able to maintain this high profit rate over a number of years” (p. 123). This is

through the value customers place on the company‟s goods or services and the company‟s

costs of production. According to Hill and Jones (2001), there are four factors that build

competitive advantage. These are efficiency, quality, innovation and customer

responsiveness.

2.3. The competitive forces and industry analysis

Porter (1998) states that his five-force model helps determine how profitable a firm is in an

industry as well as define the operations and competitiveness of an industry. Areas of focus

in the model are threats by new entrants, bargaining power of buyers, threats of substitute

products or services, bargaining power of suppliers and the degree of rivalry among existing

firms. Porter (1985) states that the five forces “… influence the prices, costs and required

investments of firms in an industry - the elements of return on investment” (p. 5). He

continues to explain that each force has implications on the cost of inputs, the price of outputs

and the size of investment to be done. New entrants will be many in numbers if the price of

inputs is low and if the demand for the goods is high. As such they pose a threat on the

13

pricing of goods and services. When suppliers have a high bargaining power, then the price

of inputs is influenced. Rivalry among existing firms also affects pricing and costs because it

affects issues like advertising and the cost of the sales force. When buyers have to pay more

for the goods or services then they demand superior quality of the goods and services which

also affects the cost of production. When a product or service is easily substitutable, pricing

has to be relative to the price of substitutes. With this in mind, it is of high consequence to

remember that the five forces affect competition in variable ways in different industries.

2.4. A Company’s Competitive Position

Pearce and Robinson (1991) states that “assessing a firm‟s competitive position improves a

firm‟s chances of designing strategies that optimize its environmental opportunities.” (p.

102). He approves that developing competitor profiles enables firms to forecast with more

accuracy on both its long and short term objectives. He also provides a criterion for

identifying a company‟s competitive position. This includes factors such as “market share,

breadth of product line, effectiveness of sales distribution, proprietary and key-account

advantages, price competitiveness, advertising and promotion effectiveness, location and age

of facility, capacity and productivity experience, raw material costs, financial position,

relative product quality, R&D advantage/position, calibre of personnel and general image”

(pp. 102-103).

Thomas and Strickland (1989) also emphasize on the importance of establishing a firm‟s

competitive position in four points. The first is that it is important to discover whether the

firm‟s position can be expected to improve or deteriorate with the strategy in use or if there

will be a need to fine-tune it to suit the current environment. Secondly, they state that, it is

important to ask how the firm ranks relative to key rivals on each important measure of

14

competitive strengths and industry key success factors. The third aspect to look out for is the

number of competitive advantages the firm has over its competitors and fourthly, the firm‟s

ability to defend its position in light of industry key driving forces, competitive rivalry and

the anticipated moves of rivals.

Thomas and Strickland (1989) further give points on how one can determine the signs of

strength and weakness in a company‟s competitive position. The signs of strength range

from having important "distinctive competencies" to a "creative entrepreneurially alert

management and ability to capitalize on opportunities" (pp. 107-108). Signs of weakness

include a company not having a good competitive advantage, losing ground on rivals, below

average growth in revenues – just to name a few.

Other methods of identifying a company's competitive position are suggested by Ansoff

(1999). These include strategic management analysis and choice models at Small Business

Units (SBU) level which include using models such as Boston Consulting Group (BCG)

matrix and the product market model. Strategic options that can be derived from these models

include market penetration, new product development, new market development or

diversification (concentric, horizontal or conglomerate).

2.5. Strategic Responses to Competition

A response to competition is the action or plan or strategy a firm undertakes to counter the

activities of competitors. It is how organisations adapt to competitive forces. Thompson and

Strickland (2008) state that “a competitive strategy concerns the specifics of the management

game plan for competing successfully and securing a competitive advantage over rivals” (p.

133). Every firm must have its own competitive strategy because no firm is identical to the

15

other in any given industry. Hax and Majluf (1991) define a business‟ competitive strategy

as the action controllable by the firm, which allow the understanding on how the business

develops unique and sustainable competitive advantage. Porter (1998) states that the essence

of formulating competitive strategy is relating a company and its environment, specifically

the industry in which it competes. He also mentions that competitive strategy encompasses

three core disciplines: industry analysis, competitor analysis, and strategic positioning.

According to authors on www.smarta.com on the topic of competition, there are thirty seven

ways to beat competitors in the manufacturing business. Among these include offering better

quality, longer lasting products or services, offering rare and innovative form of the goods or

services, creating goods that are easier to use, creating goods that are safer to use, that offer

more efficiency, that are more compact in terms of size, that are waterproof or indestructible,

goods or services that have elements of older items of sentimental value, that are modern and

that are more beautiful.

D'aveni and Gunther (1994) in their study on Intel Company Limited's competitive advantage

wrote on the "New 7-S analysis" as the secret to success. The 7-Ss stand for superiority of

stakeholder satisfaction, strategic soothsaying, speed in responding to competitor moves,

surprise, shifting the rules of the competition game, signalling or announcing the firm's

intentions and priorities and lastly, simultaneous and sequential strategic thrusts.

16

2.6. Generic Strategies for Achieving Competitive Advantage

Porter (1998) explained that competitive advantage is aimed at gaining customer preference

for the company‟s products and services. Customers can be divided into different segments

based on the specifications of needs they hope to meet from the company‟s products. When

the target customers are the general population, then that is referred to the broad target and

when the customers are a particular segment, with highly specialized needs, then that is

referred to as the narrow target or a niche.

Porter's concept is further divided by Thompson, Strickland and Gamble (2008) into five (5)

specific approaches to competitive strategy. These are the low-cost provider strategy, the

broad differentiation strategy, the best-cost provider strategy, the focused or market niche

strategy based on low costs, and lastly, the focused (or market niche) strategy based on

differentiation. Burns (2000) identifies corporate strategies that can be used by a firm to

maintain competitive advantage. These include: Stability strategy, growth strategy, portfolio

strategy, retrenchment strategy, harvesting strategy and combination strategy.

2.7. The major threats to sustainable competitive advantage

Grant (1998) states that competitive advantage may be an achievable goal but “is subject to

erosion by competition” (p. 180). He quotes Rumelt who states that for competitive

advantage to be sustained barriers to imitation, which Rumelt calls the isolating mechanisms,

must be present. According to Grant (1998) there is a process to competitive imitation which

includes four stages namely, identification of a desirable competitive advantage, creation of

incentive that one‟s firm could also acquire competitive advantage by imitating the strategy,

diagnosis of the features of the rivals strategy and lastly, acquisition of the resources

17

necessary to imitate the strategy. Even though a firm holds a superior product/service

position in the industry, it is not a guarantee that this position will hold. Mintzberg et al

(2002) argue that sustainability will hold when the element that makes the firm competitive is

scarce and when the firm creates conditions of appropriability in the industry. This means

that in addition to making the element of competitive advantage scarce, its benefits or values

should be impossible to hijack. Mintzberg Lampel, Quinn and Ghoshal (2002) state that the

threats of sustainable competitive advantage are mainly imitation, substitution, hold-up and

slack and can be cured with two conditions; scarcity, which bars competitors from imitation

and substitution, and appropriability, that deals with the threats of hold up and slack. In

conclusion, competition and competitive advantage are topics of interest for many in the field

of strategic management. The research will test the relevance and reliability of this

information and help create an appreciation for the literature.

18

CHAPTER THREE

RESEARCH METHODOLOGY

3.1. Introduction

This chapter discusses the research design of this research and highlights the data

collection method utilized to gather the information relevant to this research study. The

last chapter deals with the data analysis and the relevance of the data collected.

3.2. Research Design

The research design used was the case study method. This method was found to be most

useful in bringing alive and making practical the application of various topics in business

related research. The questions the research sought to answer were whether there was

competition in the hair industry and how business enterprises in the industry managed to

stay in business in the midst of this competition. Industry consensus has it that many

start-ups in the hair industry, as is in small and medium enterprises in general, do not

make it in their first birthday because they are fizzled out by the competition.

The researcher chose the hair industry because the industry has not been researched much

upon in the university. There were only two recorded research works related to the hair

industry; one on the packaging and labelling of hair products in Kasarani division by

Kamotho (2011) and another by Musundi (2011) on attitudes by service providers on men

seeking hair and beauty services in Mombasa. The research focused on Roots Hair

19

Limited as a case study because the researcher had easy access to the information and the

interviewee. The study was found to be holistic in nature and the findings could help

support or challenge existing theories of competition and competitive advantage. Roots

Hair Limited was also found to fit as a sample of the small and medium enterprise cluster

of businesses that the research would like to focus on.

3.3. Data Collection

The data was collected using the interview method. The interview was held with the

proprietor of Roots Hair Limited. The interview method was chosen because it is the

fastest and most efficiently accurate method of gathering information given the busy

schedule of the interviewee. It also allowed the researcher to clarify the technical meaning

of questions. The interview guide (attached at the end of this paper) was derived and

formulated from the literature review on the topic of study. It had a range of 'Yes' and 'No'

questions as well as comparative and narrative type questions. The data collected was

qualitative in nature and was used to write the narrative informing this research.

The case study evidence was information of a human nature as defined by Yin (1994) and

as such human affairs are reported and interpreted through the eyes of specific

interviewees and those well informed on the subject of study. The results expected could

not therefore be numerical in nature and unless corroborated with information on

competition and competitive advantage the broadness of answers could easily fail to bring

out the important aspects. The researcher included any other relevancies not included in

the questions as side notes.

20

3.4. Data Analysis

The interview guide used is the tool for content analysis. Content analysis in this research

work was used through taking elements of different areas of the literature review and

directly interviewing for their existence in the case study. Content analysis is the most

useful tool because the nature of the responses received was quantitative, and for them to

be reliable, a level of subjectivity to topics and literature on the topic of discussion was

required. On the other hand, to avoid collecting guided answers, all varieties of the

elements of that study were laid out in the interview guide.

The answers provided by the interviewee formed the story on the current business

environment, the company's strategic capability, and its methods of pursuing competitive

advantage as well as the threats it faced in sustaining this competitive advantage. Any

information received outside the range of questions that the interviewee considered

relevant to competitive advantage was added to the narrative for purposes of further study

and inclusion as recommendations. Data collected was dated for the years the company

has been in existence.

21

CHAPTER 4

DATA ANALYSIS, RESULTS AND DISCUSSION

4.1. Introduction

This chapter outlines details on the data collected for the study, the analysis of that data and

the implications of the information collected. The narrative follows the outline of the

interview guide which was formulated from the literature review through content analysis.

4.2. General Information on the Respondent

This research was a case study that intended to interview the manager of a business in the

hair industry that, if possible, would tell the story of both the hair salon and the hair product

sales business. Most businesses in this industry are involved in either one or the other of the

two. It was therefore very lucky to discover the business in question as it operates a two-tier

model of these different types of business in one premises. Both businesses are run by the

same individual and he was the key respondent of the research. All the findings of this

research were therefore collected from the proprietor of Roots Hair Limited.

This research found that Roots Hair Limited was a sole proprietorship that employed 10

permanent staff paid on commission. Of the ten staff members, the interviewee has

employed an administrator cum accountant who also performs simple hair care procedures

such as shampooing and styling. The other nine staff comprises of trained hair, nail and

make-up artists who each work to market their skills and have loyal clients who come

specifically for their services. The interviewee is the sole proprietor and the general manager

of the business. He also performs all core business activities of hair styling as well as sales

and delivery of hair products.

22

4.3. Findings on competition and response strategies

The first questions of the interview sought to find out if the business first of all recognized

strategic management, in whose context the research was being carried out. The research

also needed the interviewee to acknowledge the component of competition as a factor to

consider when running his business. It was also necessary to find out if there are deliberate

measures that the interviewee took to counter competition in the industry.

From the interview, it emerged that the business followed a written down business plan and

had a 5-year strategic plan which was reviewed and updated frequently for purposes of

maintaining relevance in a constantly changing business environment. Roots Hair Limited

was not just a hair salon, it was also a manufacturer and distributor of its own line of hair

products dabbed 'Roots'. These products were targeted at the natural hair market and were

used widely in salons all around the country.

The degree of competitiveness in the hair salon and products business was rated high by the

interviewee. He stated that the whole industry was worth around 15 billion Kenya Shillings.

He explained that success in the business relied heavily on creativity, understanding customer

needs and creating a product that met these needs. Since the majority of clients are women

and hair styling is a personalized service, the tendency to demand personalized high quality

end results drove the interviewee to motivate staff and encourage an environment for

creativity and learning in the hair styling art. Though creativity was mentioned as the top

ingredient for success, talent was rated second flanked by professional know-how. The

interviewee argued that not all well trained hair artists were talented but also pointed out that

since hair grooming was both an art and a science, it was imperative that this talent was

supported by proper knowledge of the anatomy of hair and the chemical elements that favour

23

or deter its health and growth. The interviewee also revealed that his business had created its

own niche market by specializing on the grooming and styling of natural hair (i.e. hair that is

not straightened or curled with chemicals) using products found in nature and had as such

invested in creating a range of hair products that met this purpose. This idea was born by the

realization that most of the commercial hair products designed for natural hair left residues

that caused long term negative effects on hair.

On the count of natural hair care, the interviewee informed that business could be rated as a

market leader in the industry with only three other competitors who have created the same

niche. The interviewee maintained though that he did not consider these other businesses as

competitors since they only imitated his business in the element of working on the niche

element; which is natural hair, but did not manufacture hair products. He also reiterated that

the market was large and there was therefore enough clientele for everyone.

4.3.1. Competitive Forces

The identification of the competitive forces at work in the hair industry was interviewed for

using the PESTEL analysis model and Porter‟s five-force model. For the micro-environment,

this research initially intended to interview on the strategic capability of the business, its

competitive position, and its strengths and weaknesses. As the interview proceeded, the

interviewee argued that these factors of micro-environment also served as response strategies

to competition because they were the weapons that helped create competitive advantage.

They are therefore discussed under response strategies but the findings on the macro-

environment are outlined in the following paragraphs as competitive forces.

24

4.3.1.1. A PESTEL Analysis of Roots Hair Limited

The interview gathered information on the political, economic, social, technological,

environmental and legal factors that challenge the running of the business; thus hindering or

promoting better competition in the industry. For the political issues, the interviewee gave the

2007 Kenya elections as an example of a difficult time for the business. He explained that

due to the unrest in the city centre, the business was closed indefinitely to avoid an episode

with looters or an encounter with violence in the street. As such, many clients who could not

access the business moved to access other salons that were situated in calmer areas to solve

their immediate need to treat their hair. In addition, every election year brings with it a

notable change in spending patterns. As such, the number of customers visiting the business

decreased.

On the economic front, the business environment had grown tremendously in recent years.

The interviewee explained that he observed two genres of customers: Those that depend on

salaries for a living and those that have none monthly sources of income. He explained that

the business received an enormous number of clients at the end of the month when most

clients had been paid but experienced slower business during the month. He observed

however that the number of customers in the middle of the month had increased and offered

his opinion that it was possible that more clients in entrepreneurships were accessing the

salon. He also mentioned that most of his clients were of the medium to low economic

cluster.

Further, the interviewee noted that more Kenyans were opening up to supporting local

products and local business as opposed to buying imports from the diaspora. Thanks to the

25

recently ended recession in Europe and its effects in Asia, the price of imported hair products

went up and caused many customers to desire a much cheaper change. As such, the products

that the business sells had overwhelming demand in the natural hair treatment market.

When it comes to the social factors, the interviewee shared that the Kenyan market shied

away from local products, preferring products made in the diaspora and placing more

confidence in them with the perception that they were of a superior quality than those made

locally. This as a result prevented the growth in sales of the products. However, more and

more of the market was realizing that these imported products are made mostly with their

local market as a target user and as such, for example, hair treatment products for Caucasian

hair would not meet the needs of African hair due to the difference in texture and

composition. As such, several clients were turning to the local alternative, trying to fill this

gap in product satisfaction.

In regards to the technological factors, the interviewee has invested in the knowledge of the

chemistry of hair products by attending various training courses in Jamaica and USA as well

as the Kenya Institute of Research and Development (KIRDI) on natural hair products. This

has increased his expertise in understanding his clients‟ hairs and needs and as such, he has

created his own line of hair products that cure the hair of the effects of substitute imported

goods. There are no environmental factors that affect the business but legal obligations such

as needing legal assistance with the leasing agreement for the property the business is situated

are considered, but do not affect the competitiveness of the business directly.

26

4.3.1.2. Industry Analysis using Porter’s Five-Force Model

Porter‟s five-force model discusses the correlation of five factors namely; threats of new

entrants, the bargaining power of customers, the bargaining power of suppliers, threats of

substitutes and industry rivalry to evaluate the level of competition in an industry. This

research applied this model to discover the level of competitiveness in the hair industry in the

eyes of Roots Hair Limited.

In regards to threats of new entrants, the interviewee informed that he thought that it was easy

to enter the industry. If one was interested, and could mobilize adequate capital, find a viable

location and possess hair making skills, he/she only needed to develop a customer base,

identify their styling needs and then finds ways to retain these customers. Since the

industry's customer base was overwhelmingly large, an entrepreneur could easily find first

time clients but met the real challenge in having repeat business.

For Roots Hair Limited, the manager informed that his working in another established salon

for six years helped him develop his customer base, develop a vision and mission for his own

business plan, grow in skill and learn management techniques. While in employment, he saw

a gap in the market (grooming natural hair) and sought to fill it. When it was time to move to

his own business, he gradually informed all his clients that he would be starting his own

business and gave them the address of the new premises. The grapevine mode of

communication through clients themselves was his major tool of advertisement and as a

result, the business grew. However, and as stated before, the start-up capital was limited and

as such the intervieweee could not break-even for about four years since he had to reinvest all

his earnings into the business. He began to make profits in the fifth year of operation.

27

When it comes to the level of rivalry in the industry, the interviewee said that he thought that

this relied heavily on factors such as the services available, the levels of customer service, the

location of the business and the number of salons near it. In his view if the services available

in a certain location were similar, then the tendency for the businesses to physically compete

for new clients (those yet to be retained by a particular business) was high. He gave the

example of Kenyatta Market in Ngummo estate, Nairobi, where salon artists waited for

clients at the bus terminus and aggressively advertised themselves and their businesses to

potential clients. For his business however, the interviewee had established a niche market,

which is the clients specifically interested in keeping their hair natural. For these clients, he

uses the products that he himself designed. He also offered all other styling techniques done

in competitor salons using the products in the common market. He repeatedly mentioned that

the client numbers are overwhelming and as such the degree of rivalry was not so high; there

was enough for everyone.

In regards to customers bargaining power, the interviewee stated that the clients did not have

a say in how much they were charged. Even though it was obvious that the clients were

classified into economic brackets of high income earners, middle class earners, and the low

class earners, the spending habits depended on an individual. The industry offered solutions

for each type of spender depending on factors such as the location of the business and the

type of equipment to be used. As such, the price was set at market value for the services.

The clients' decision on which salon to visit was informed by their own needs, their preferred

location to access the services, their bias of who the service provider should be and how

much money they were willing to spend.

28

The interviewee also clarified that for the salon business, the relationships with suppliers of

hair products were an integral part of the business. These were mainly the wholesale shops

and importers of hair products who were situated in the Industrial Area and River Road

streets of Nairobi. Since there were many suppliers of many products, the supplier faced an

equally large number of buyers who knew they had options on where to buy their products at

a competitive price. As such the suppliers did not have the bargaining power for the hair

products and thus competed with each other to offer the most competitive price, topping this

up with delivery services and variety in products stocked.

For Roots Hair Limited in particular, the interviewee confirmed that the hair products

business manufactured most of the products required for its niche market. This part of the

business enjoyed a broad source of suppliers for the raw materials. This is because the

majority of raw materials were natural products that were easily accessible in rural farming

areas. As such, the suppliers were only happy to sell their products at the price that the

business quoted. The interviewee was passionate about encouraging entrepreneurship and as

such, liked to ensure that his suppliers also made a profit from the business he gave them.

This rewarded him with good relationships and consistent high quality of raw materials. As

such no excess supplier costs were directly passed onto the customers.

The threat of substitutes was the major problem in the industry. This is because the clients‟

choices were the major strength on which the hair industry thrived. If a client chose to

maintain their hair natural the substitute would be to use hair processing chemicals to

straighten or curl their hair or to plait, weave or even keep short hair that did not require any

of these styling techniques. For Roots Hair Limited, this meant that the client annihilated

their need for the business' products which as a result meant that the business did not earn

29

that revenue. To retain the client therefore, the business ensured that it offered whichever

styling choice the clients preferred at the highest possible quality. Since the core business of

Roots Hair Limited was to provide styling solutions for natural hair, it served as an advantage

that the emerging market wished to keep their hair natural.

4.3.2. Response Strategies

After establishing that competitive forces exist in the hair industry and that the firm in study

indeed faces these forces, the second objective of this study was to identify the response

strategies that work to counter these forces. This research identified five major sources of

response strategies. These are strategic capability, a firm‟s competitive position, its strengths

and weaknesses, Michael Porter‟s generic methods and lastly guarding against threats to

sustainable competitive advantage. Each of these strategies is explained in details below.

4.3.2.1 Strategic Capability

In tandem with the literature review, the following factors were set as a guide to find out the

strategic capability of Roots Hair Limited; ownership of business premises, type of labour,

own start-up capital, type of management, involvement of technology, customer

responsiveness, innovation of goods or services, innovation of product style, innovation of

sales style, innovation of management systems, innovation of organisation strategies on

development and quality of goods. The interview session revealed that in terms of ownership

of infrastructure, the business held a 6-year lease for the room it was housed in. It employed

10 permanent employees on commission and enjoyed overwhelming customer

responsiveness.

30

The manager submitted that the business remained in place due to innovation of product

style, sales style as well as management styles. In reference to the product style, the

interviewee invested heavily on his education and training on natural hair products abroad.

He created advertising pages on social media such as Twitter, Facebook and Google Plus as a

sales tool for the products and thus cut down on overhead costs.

Due to the fact that the business began and ran on creativity, it was difficult to convince

anybody to loan the manager any start-up capital. As such, the business was started on

savings and thus had no loan and interest to deduct from the business‟ revenues. Other

elements of strategic capability were the involvement of chemicals from nature as a

technology in the creation of hair products and innovation of organisation strategies through

continuous studies on natural hair products at the Kenya Institute of Research and

Development (KIRDI). The quality of the products was high since the manager had not

received any complaints from customers and enjoyed a competitive number of loyal

customers.

4.3.2.2. The Business’ Competitive Position

According to the literature review, it was concluded that the business‟ competitive position

could be determined by finding out the levels of the following factors: market share, breadth

of product line, effectiveness of sales distribution, effectiveness of advertising and promotion,

price competitiveness, capacity and productivity experience location of facility financial

position, cost of raw materials, research and development advantage position, relative product

quality and image of the business and its proprietor and lastly the calibre of personnel. Table

4.1 below shows the results of this part of the interview.

31

Table 4.1: A summary of key success factors of Roots Hair Limited

Success Factors Level in terms of

high, moderate

and low

Market share High

Breadth of product line High

Effectiveness of sales distribution High

Effectiveness of Advertising and

promotion

High

Price competitiveness Low

Capacity and productivity experience High

Location of facility High

Financial position Moderate

Raw material cost Low

Research & Development

advantage/position

High

Relative product quality High

General image High

Calibre of personnel High

To quote Pearce and Robinson (1991), “assessing a firm‟s competitive position improves a

firm‟s chances of designing strategies that optimize its environmental opportunities” page

102. From this research it was evident that firms that assess their competitive position place

themselves at a better position to understand, formulate and implement strategies. Evaluation

of the firm's competitive position was therefore identified as a response strategy.

4.3.2.3. Strengths and weaknesses

The results of the interview showed that Roots Hair Limited was definable within the major

facets of determining a firm‟s strengths and weaknesses. Beginning with the strengths, there

was a high presence of important distinctive competencies such as the manufacturing of hair

products that were sold to other businesses and used in the salon. The second strength was a

growing customer base, and the third was the ability to concentrate on the fastest growing

32

market segment which is natural hair styling clientele. Fourthly, the business had strongly

differentiated products which catered for this growing market segment. Fifthly, as a result of

the growing customer base the business was making above average profit margins, the

average margins being at 20%. The sixth and seventh strengths were that the firm boasted of

technological and innovative capability thanks to its hair products line and a creative,

entrepreneurially alert management respectively. The eighth strength was that the firm

showed the ability to capitalize on opportunities such as the growing need in the market to

embrace nature in the area of cosmetics and foods by creating hair products from plants,

herbs and honey. This brought rise to the ninth strength which was high product quality;

determined by the fact that there was a high number of repeat customers and none had

complained about the services/products.

The research found two weaknesses of the firm. The first weakness was inconsistent

revenues caused by the fact that most clientele in the salon were the working class, who only

accessed the services of the business at the end of the month, when salaries were paid. As

such, the business staff experienced idleness during the month and overwhelming numbers of

clients at the end of the month. The second weakness is the below average marketing skills,

which hindered the promotion of the business‟ products and services.

4.3.2.4 Generic methods of Competitive Advantage by Michael Porter

The three generic methods of responding to competition include employing cost/price based

strategies, differentiation strategies, focus-based strategies and hybrid modules of any two of

the three methods. To test for the presence of cost drivers in the business, the following

methods of cost behaviour were researched upon: economies of scale, learning or experience

33

curve effects, patterns of capacity utilization, improving supply chain efficiency (by keeping

away middlemen and suppliers), using modern online systems, adopting labour-saving

operations, vigorous salesmanship, allocation of funds to R & D, spreading advertising and

administrative costs over time, substituting expensive raw materials for cheaper ones, using a

company‟s bargaining power with suppliers to get concessions, outsourcing, vertical

integration in the value chain and discretionary policy. These cost drivers were lifted from

Porter (1985) and Thompson, Strickland and Gamble (2008). From the interview, only

outsourcing and using online systems were relevant in the business environment at the time.

The manager thought it was more efficient and cheaper to outsource a manufacturing plant to

mix the contents of his hair products rather than do it by hand with casual labourers. Instead

of using marketing and advertising methods such as print media, television and billboards,

the manager uses social media to let clients and customers know about his products and

services.

Table 4.2. Presence of Cost methods of creating competitive advantage

Characteristics Yes No

1. Strives to capture all economies of scale X

2. Taking full advantage of learning/experience curve effects X

3. Trying to operate facilities at full capacity X

4. Vigorous sales to increase profits X

5. Allocate funds for R&D X

6. Advertising and administrative costs over time X

7. Improving supply chain efficiency X

8. Substituting expensive raw materials for cheaper ones X

9. Using modern online systems X

10. Adopting labour-saving operations X

11. Using a company‟s bargaining power with suppliers to get concession X

12. The firm being alert to the cost advantages of outsourcing/ Vertical

integration in the value chain

X

13. Discretionary policies X

34

To test for differentiation of the business‟ products and services, the interview sought to find

out if the firm invested in the following attributes: superior product quality, unusual or

unique features for products/services, responsive customer service, rapid product innovation,

advanced technological features of products and the prestige or status of products. The

business tested positive on all these attributes. The interview also brought out the fact that the

business strived to gain and retain customers through high end customer care services such as

offering refreshments. Product research and development aimed at improving the hair

products and the final result of meeting customer needs of healthy beautiful hair was also

core. The manager attended training sessions periodically on hair and beauty to learn the

newest in the science and technology of hair. As such, the business had developed its own

distinctive competencies to differentiate its products and services and evade competition.

Table 4.3 Presence of Differentiation methods of creating competitive advantage

Characteristics Yes No

1. The firm strives for superior quality X

2. The firm invests in unusual or unique features for the products X

3. The firm invests in responsive customer service X

4. Rapid product innovation X

5. Products have advanced technological features X

6. Product has an image of prestige or status X

Focus relates to various attributes of customers or clients that the business takes advantage of

to create a niche for itself and attract certain groups of customers. Some of the attributes that

identified a focus based strategy included customer behaviour, customer benefits from the

products, demographics, geographical location, group interests, special concerns for cost of

goods/services and special concerns for the nature of the goods and services.

35

The interview established that Roots Hair limited was indeed maximizing on some of these

strategies to create a niche for itself. These include customer behavior, the benefits of the

products to customers, geographical location of the business and special concerns for the

nature of goods/services. The interviewee had observed that many customers had the

tendency of accessing the salon only at the end or beginning of the month. He observed that

most of these clients were employed formally and only came to the salon when they received

their salaries. To profit from this behaviour, business hours were extended during the peak

period and staff were allowed to work long hours. This was the one time when the

employees „shared‟ their clients. Should a stylist be occupied with a client, he/she

recommended his colleague and as such earned a percentage of the commission for that

client. This served the purpose of reducing the waiting time of clients, improving customer

retention through giving the client multiple choices of stylists, such that should they return,

they had more than one option of who could do a good job on their hair.

Also on customer behavior, the interviewee observed that celebrities and artists such as

musicians and actors tended to embrace the unconventional when it came to hair styling and

dressing. As such, he created a name for the business whereby these individuals knew to

expect creativity and accuracy in Roots Hair Limited. In addition, since this group of

customers tended to change their styles regularly, they required hair products that did not

strain or harm the hair due to repeated usage. The natural hair products used by the inventor

himself therefore became an attractive point of focus when it came to choosing a service

provider for their hair.

Since roots hair is one of four salons that offer services specialized to styling natural hair

using products from nature, the special benefit a client got was to keep their hair natural, well

36

styled, clean and healthy. The use of the hair products manufactured by the business ensured

that the customer's hair was kept safe from the effects of chemicals made from artificial or

laboratory chemicals. Closely related to this is the special concern of customers on the nature

of the hair products used on their hair. Clients with allergies or reactions to the artificial hair

products and those with bias towards natural products found Roots Hair Limited the ultimate

solution to their problems. The products yielded no reactions and helped weak hair to grow,

without the irritation to the scalp experienced with supermarket products. The geographical

location of the firm was central to all who accessed the town center. The research however

found that the business did not focus on demographics and the cost of goods or services.

Table 4.4.Presence of Focus methods of creating competitive advantage

Characteristics Yes No

1. Customer behavior; Time they access services, formal jobs not

allowing natural hair styles

X

2. Gain specific benefits from the products different from other

customers

X

3. Demographics, i.e.age, education, occupation, gender, race, etc. X

4. Geographical location (where they use the product) X

5. Certain activities, opinions, interests of a group of customers X

6. Special concerns for the cost of goods/services X

7. Special concerns for the nature of goods/services X

4.3.2.5. Guarding against threats to sustainable competitive advantage

During the interview, it became evident that the entrepreneur was constantly trying to

redefine his business strategy in correlation with the changing factors of the business

environment, his customers‟ needs and the needs of the business itself. The entrepreneur was

only aware of the threat of imitation; whereby other businesses tried to copy the major

37

features of the business model. The areas of imitation were styling techniques and names of

products (even in the international market to the word 'roots' was almost imitated as a brand

of hair products). The interviewee mentioned that though he had patented his products there

had been an instance where a backstreet manufacturer had produced a replica batch of the

containers holding his hair products but filled them with a different brand of hair products.

This was however discovered at an early stage and the culprit was apprehended.

The interview also brought out substitution of products and services as a major threat to

sustainable competitive advantage. As earlier explained, hair grooming is a very personal

choice of a customer and the customer themselves is the major channel through which

substitution comes in. To counter this, the interviewee diversified his hair styling services as

much as is provided for all hair types so as to ensure that the customer could have any style

done in his business at a competitive price. This way, he did not lose customers.

Consequently, the hair products line was also threatened by the greater market of imported

hair products, which are much more easily available and are sold at competitive prices.

4.3.2.6. Stability & Growth Strategies

The research also tested for other methods of acquiring competitive advantage apart from

Porter‟s generic model. These were mainly the corporate strategies identified by Burns

(2000) such as the stability strategy, the growth strategy, the portfolio strategy the

retrenchment strategy, the harvesting strategy and the combination strategy. The stability

strategy involves maintaining the stability of successful organizations which operate in

medium attractive industries that could be facing unpredictable environmental factors. The

growth strategy is concerned with a firm dominating the industry or growing its operation

through diversification across a number of industries, based on the correlation between turn

38

over and increased profit. Roots Hair Limited was found to employ the stability strategy and

the growth strategy to achieve its competitive advantage. The stability strategy was found to

be largely in place because the interviewee believed that his business kept growing because it

maintained the major features of the business such as location, customer service, business

approach, products and techniques. The business remained in the medium enterprise

category and kept off from trying to „grow bigger‟ or to upgrade so as to ward off the effects

of a changing environment and keep to what the clients fell in love with at the start.

The growth strategy was also observed in that the business started off as purely a one man

show with the entrepreneur doing only hair styling. Gradually, the business increased its staff

members, who offered other salon business services such as nail grooming, eye beauty and

introduced the hair product manufacture wing, all to keep in tandem with market trends. This

gives customers the advantage of accessing more of their beauty related services under one

roof. This strategy, as the entrepreneur says, was an ongoing strategy because the goal of the

business was to grow through franchising where the franchises would pay royalties and use

the products of the business. This would not mean that the current business changes in any

way. The entrepreneur hoped to keep the current business at the same level, but franchise the

look, products and mission of caring for natural hair. The research found no proof of the

portfolio strategy, the retrenchment strategy and the harvesting strategy, and consequently not

the combination strategy.

4.3.2.7 The Respondent's Secret

This research also found that the entrepreneur believed in four elements being the secret to

competitive advantage. These include efficiency, quality, innovation and customer

responsiveness. This strategy matches the Hill & Jones (2001) factors that build competitive

39

advantage. The interviewee mapped a correlation between these four factors that he believed

was possibly the cause of the business success. The interviewee believed that if a business

invested in high quality inputs such as labour, working space, capital, good management

skills and high caliber technical know-how in a measure that would bring in the desired

profits, then high quality products and services would be realized. These quality products and

services would only remain relevant to the customer if innovation was embraced; if the

customer‟s needs, that kept changing, were met without disappointment at repeat visits. This

element of the customer then returning to access the business became what is measured as

customer responsiveness.

4.4. Discussion

Since competitive advantage was at the heart of a firm's performance in competitive markets

according to Porter (1985), we determine from this study that competitive advantage is a

major ingredient of success in a firm. Though the interviewee has never studied business

management or strategic management, it is evident that he has followed an intelligible script

that is concurrent with the literature in the subject. Porter (1985) mentions that after years of

success and vigorous expansion, many firms forget about maintaining competitive advantage

and concentrate on growth and pursuit of diversification. One of the major points driven

home by the interviewee was that his idea of growth was to continue planning on how to keep

the business in a competitive position and not to open other outlets or enlarge the current

business. We can therefore conclude that managers must never tire of strategy re-evaluation

and value creation for clients.

From the key success factors part of the research, we confirm what Pearce & Robinson

(1991) state that “assessing a firm‟s competitive position improves its chances of designing

40

strategies that optimize its environmental opportunities” page 102. This practice of assessing

a firm's competitive position should be repeated every time the business needs to re-evaluate

its strategy. From the words of the interviewee of this research study, industry

competitiveness does not guarantee success in a business.

Though the hair industry is very profitable, individual businesses must fight for their market

share through innovation, efficiency, quality services and executive customer care. The

customer's needs and sense of satisfaction is the key to success through customer retention.

The above points lead to the conclusion that a firm can only beat its competition when facing

inwards. This means that entrepreneurs must be ready to criticize their own business models

frequently and accept constructive criticisms if at all they receive them. After all, the firm

may not single-handedly be in a position to fight external forces from the PESTEL model.

Porter (1985) noted that “the significance of any strengths and weaknesses a firm possesses is

ultimately a function of its impact on relative cost or differentiation; cost advantage and

differentiation in turn stem from industry structure. They result from a firm‟s ability to cope

with the five forces better than its rivals” page 11. From the results of testing for the generic

methods of creating competitive advantage, and identifying the firm's strengths and

weaknesses, one can conclude that Porter was correct. This is evident in that the firm's

weaknesses such as market visibility and marketing skills are actually a function of its

relative impact on cost in that, the business manager chooses to avoid additional costs

associated with marketing and advertising and uses social media and the grapevine to market

the business products and services.

Since Kenya now has 26 million mobile subscribers as per Frontline SMS Cloud

http://www.frontlinesms.com/2013/02/14/kenya-from-the-phone-booth-to-widespread-

41

mobile-adoption-in-silicon-savannah/. A large percentage of Kenyans have access to a

computer or a mobile phone and since clients must market the business either positively or

negatively with their hair styles and by talking about it, the business marketing costs become

obsolete. Since in differentiation strategies a firm strives for the superior, peculiar, unique or

advanced quality, product features, customer care, innovation, technology or image, this in

itself creates elements that 'speak for themselves' and eventually advertise the business firm.

According to his writings, Porter (1985) believed that firms that specialize in a specific

method of acquiring competitive advantage earn higher profits than those that are stuck-in-the

middle. In this research we see the interviewee has concentrated mostly on differentiation

methods along with focus methods and an inkling of cost based methods. This appears to be

the general outlook when you look at Roots Hair Limited as a whole. In Johnson, Scholes &

Whittington (2006) they identify strategic business units as “a part of an organisation for

which there is a distinct external market for goods and services that is different from another

SBU.” Roots Hair Limited, as revealed by the interview, has two SBUs: the hair salon unit

and the hair products unit. When we look at each arm of the business, i.e. the salon business

and the hair products business separately, we find that the salon side of the business has

followed the differentiation focus strategy and the hair products business has taken up the low

cost focus strategy.

According to Porter (1985) there is a difference between differentiation and differentiation

focus. Differentiation involves the strategy of maximizing on widely valued attributes while

differentiation focus is a strategy of meeting needs of a special market segment. Porter noted

that “a focuser takes advantage of sub-optimization in either direction by broadly-targeted

competitors. Competitors may be underperforming in meeting the needs of a particular

42

market segment, which opens the possibility for differentiation focus” page 15-16. This

exactly explains the strategy in this case study. The salon business has targeted clients who

care for natural hair by providing them with high quality hair products and styling that has

unique and brand image characteristics that are offered with great customer service.

Coupled with this strategy is the imperative need to keep costs of production low. From

earlier explanations, we note that the interviewee sources his raw materials straight from the

producers and farmers and subsequently has completely managed to cut out distributors,

dealers and middlemen. This is one of the six ways Thompson, Strickland and Gamble

(2008) suggest for innovative elimination of costs in various units of a firm. In addition,

since starting and running a manufacturing firm has high cost implications in the buying of

machinery, the interviewee pays the services of a mixing machinery business that, under his

instructions, mix the various raw materials and package the products. His work is only to

order and drop packaging material, drop off the raw materials, and collect the finished and

packaged products ready for sale. This process is efficient, time saving and it preserves the

quality of the hair products.

Apart from all the methods of acquiring and sustaining competitive advantage lifted from the

literature review, there is such a thing as the success criteria as written by Johnson, Scholes

and Whittington (2006). According to their writings, there are three main success criteria: the

suitability, the acceptability and the feasibility of strategy. Suitability of strategy has been

largely discussed through the discussion on the PESTEL analysis and the five forces where

the suitable strategies revealed from the interview were industry convergence and the need to

develop barriers to new entrants, also confirmed by Johnson, Scholes and Whittington (2006)

page 358.

43

Acceptability is concerned with “the expected performance outcomes of a strategy” (page

361) which is measured in terms of returns or profitability, financial risk ratios and

stakeholder reactions. Feasibility speaks of “whether an organisation has the resources and

competences to deliver a strategy” page 371. This involves financial and resource

availability. The interview brought out the issue of strict re-investment into the business in

the first three years after inception, as a way for the business having built a competitive

advantage. When the business does not have working capital, it will be incapable of

purchasing hair products, repairing equipment, purchasing snacks and refreshments, paying

its lease on time, paying staff commissions – all of which are the core inputs to the success of

the business.

Burns (2000) also defines the portfolio strategy as when an organization grows through

mergers and acquisitions or diversification rather than through internally generated organic

growth. The retrenchment strategy, as the name suggests involves dismissing staff so as to

match expenditure with projected income and somehow refocus the organization for a

prosperous future. The harvesting strategy involves reducing investment in a business so as

to reduce cost, improve cash flows and capitalize on whatever residual competencies that

could be available to the firm. Finally the combination strategy employs all of the above

strategies for a specific set of goals.

Porter's generic strategies for competitive advantage, as responses to the five forces were

each tested for. By picking out of the literature review, distinct characteristics of each method

and questioning for its existence were directly questioned. The research revealed that to

some extent, all the methods; cost, differentiation and focus were being employed in the

44

business but differentiation was at 100% utility. Cost leadership methods were at 15% in

terms of how many characteristics fitted the model for competitive advantage of the business,

differentiation was at 100% and focus was at 57%. Table 4.4.1 below explains this further.

Table 4.5. Extend of the presence of generic responses to competition.

Generic method Number of

characteristics

tested

Number with

"Yes" for

presence

Number

with "No"

for presence

Percentage

of

Presence

Cost Leadership 13 2 11 15%

Differentiation 6 6 0 100%

Focus 7 4 3 57.1%

From the table above, we see that Roots Hair Limited uses a hybrid of all the methods which

brings us to the term 'stuck in the middle' as described by Porter (1985). This strategy was

said to bring instability to a firm and has attracted major criticisms. In his book, Porter

argues that a firm that attempted to follow two of the broad target strategies would end up in

the "stuck in the middle" position where they would not make profits and no competitive

advantage would be sustained. The results of this research show otherwise. All the generic

strategies are in fact in use and the firm in question seems to have sustained its competitive

advantage.

Though competitive forces such as political events and the economy could be said to be

periodic and general in nature, their effect on the business firm may be fatal even though their

remedy may be beyond the abilities and response strategies the firm can set in place. These

forces can be grouped as macro-environmental factors. However, other factors such as

identifying the strengths and weaknesses, using cost, differentiation and focus methods,

guarding against threats and the stability and growth strategies are more pertinent to the

internal running of the business. These can therefore be grouped as micro-environmental

45

factors. Most response strategies apply as remedies for the micro economic factors. This

means that with all the response strategies in place, the business would be at risk of closure in

the event the macro-environmental factors came into play.

It is also important to note that competition does not necessarily make or break a business.

We see this in the case of this research study. Since the firm has found a niche market, and

has diversified its portfolio, it has almost excluded the effects of competition and reduced the

instance of imitation of its business model. Customer responsiveness and high caliber

customer satisfaction are an integral part of sustaining and retaining customer visits and as

such, important in maintaining sustainable competitive advantage. To conclude this

discussion, it is important to note that competition is real. Developing strategic responses

needs to be a deliberate and tireless effort for every business and the response strategies must

be innovatively mastered.

46

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1. Introduction

This chapter defines the purpose of this study by giving a summary of the research, its

conclusions and recommendation for policy and practice as well as for further studies to the

benefit of the body of knowledge.

5.2. Summary

This research study was driven by the need to understand how competition affects the hair

industry and its two main objectives were to identify the competitive forces facing Roots Hair

Limited as well as point out the response strategies in place. There were seven competitive

forces revealed by this research; political events, effects of the economy on earners, social

implications, technological input, threats to new entrants, threats of substitutes and industry

rivalry.

The response strategies identified were strategic capability, finding the competitive position

of a firm, periodically and deliberately identifying the strengths and weaknesses of the

business, using applicable cost methods, differentiation techniques and focus strategies,

guarding against threats of substitution and imitation, applying stability and growth strategies

where relevant and most of all ensuring that the firm runs efficiently, giving quality services

and goods with an innovative touch to result in customer responsiveness.

47

5.3. Conclusion

From the findings of this work of research, it is evident that the hair industry is a lucrative

area of national domestic trade revenue. Due to the numerous numbers of existing

businesses, the growing numbers of clients and their needs, and the potential for profits, it is a

growing sector of the economy that generates high revenue and offers employment to many.

To beat the competition and acquire a sustainable competitive advantage, it is imperative that

a business employs a hybrid model of various strategies to address the different angles that

competition is directed from. The entrepreneur must obviously not forget the value of hard

work, the benefit of re-investment and the aspect of innovation to bring quality services and

goods in an efficient manner so as to gain customer responsiveness.

5.4. Recommendations

5.4.1. Implications on Policy, Theory and Practice

The results of this research study are of great importance to the owner of Roots Hair Limited

in that, they affirm his efforts of frequent industry analysis, his evaluation of the competitive

position of the firm as well as its strengths and weaknesses, and in identifying the firm

specific response strategies. This implies that the firm's strategic plan will no longer be

relevant if these factors are not addressed in details. The interviewee can therefore measure

his level of success and failure in the business with these tools and is keen on trying to

implement the techniques utilised to monitor the business environment and in identifying the

competitive forces and the response strategies he has utilized to continue successfully running

the business.

48

The research findings also have implications on the hair industry's business plan as a whole.

It informs the entrepreneurs and managers of the need for conscientious and tactful

identification of their firm's response strategies and the potential for growth of the industry.

This research also raises the question of the levels of competition in the hair industry. As

Krishna (2006) mentioned, an industry with high competition is marked with high quality and

innovative goods and/or services as well as exceptional customer service.

This indicates that replication of business models may on one hand be very easy and thus, the

number of new entrants may grow by a large percentage. This growth will need to be

measured in the bid to keep the industry profitable and not flooded with replicas. This study

is also valuable to other firms in the SME sector, as a template for identifying the competitive

forces and response strategies in their respective enterprises.

5.4.2 Recommendations for Further Studies

It is recommended that a separate extensive study purely on industry analysis of the hair

industry be conducted to provide more information, especially on the buying and selling of

hair products; both locally and imported. This is due to a claim laid by the interviewee that

certain hair products are harmful to the health of the users. This investigative study should

encompass the procurement procedures and the bargaining power of suppliers and buyers in

the business. The study could also follow a similar content analysis as this current study to

bring out information on competition in hair product business.

It is also recommended that a possible study on a failed business in the hair industry be done

to evaluate and dissect the root cause of start-up closures. The hypothetical reason given is

high competition in the industry but this research has shown that this may not be the only

reason. It could either be poor management skills or lack of innovation and quality services.

49

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54

APPENDICES

APPENDIX 1: INTERVIEW GUIDE

SECTION A: The business knowledge on strategic management and competition

1. What is the structure of management of the firm? Are you the boss? Is there a partner

or an assistant? What about the rest of the employees? How do you hire and delegate duties?

2. Does the firm follow a strategic plan? Do you think the strategic plan in place works to guide

the firm to a profitable future or it needs to be fine-tuned or reviewed?

3. How do you rate the degree of competitiveness in the industry Low □? Moderate □? High□?

Has this degree of competitiveness changed over the years your business has been in operation?

4. In the industry, where would you rate the firm ranges in competitiveness? Market Leader □?

Average performer□? Low performer □?

Why? Salons for natural hair were not present. No processing of hair as such that creates a

niche to the business. Only 2-3 similar salons needs a lot of dedication, is a risky business.

Many people moving hair fashion style to natural hair style.

SECTION B: The strategic capability of the business

5. Indicate what is relevant for your business? (√ Yes and X No)

Do you solely own your business premises

Yes □ no □

Have you come up with your own

new/Innovation of goods/services Yes □

no □

Is your labour pc

permanent□ casual□ mixed□

Commission basis.

Do you think your production style is

different from others? Innovation of

production style □

Did you borrow startup capital? own□

loan □

Is there an existing special way you market

your goods/services that is different from

others? Innovation of sales style Yes □ no

□

Who manages the business primarily? self

□ Employee □

Do you think the management system in

place is a special advantage to the

business/Innovation of management system

Yes □ no □

Is there a specific technology not used in

other businesses/Any technology involved

Yes □ no □

Are there plans to develop

products/services/business as a whole? Yes

□ no □ Do you have innovative

organization strategies on development □

How has been the response of customers

been? Customer responsiveness: High □

Moderate □ Low □

Quality of goods: High □ Moderate □ Low

□

57

SECTION C: PESTEL analysis of the business environment

6. Which and how have the aspects on the PESTEL model affected the business in

the last five years?

Tick (X) Give examples that have affected the firm's business

Political

Economic

Social

Technological

Environmental

Legal

7. SECTION D: Industry analysis using Porter's five-force model

a) How easy or difficult (was) is it to start a business like Roots Hair Limited?

Started as an employee in a salon, worked for 6 years, gathered customers,

developed

b) What is the level of rivalry in the business? What are some examples of how

this rivalry works?

c) Do customers have a say in how much you charge them for your services? Can

they bargain?

Not really. They cannot bargain. Price is set at market value for hair services

and the d) Who are your suppliers? Do your suppliers have a say in how much you

charge the customers? China??

e) What other substitute hair services out there threaten to take away your market

share?

Hair processing is the primary one. This business is based on nurturing natural

hair. Women being the main

SECTION E: The firm's competitive position

8. The table below shows some key success factors of any given industry. Please

tick what you think describes your firm best:

i. Market share:

Niche market of

taking care of

natural hair.

High □

Moderate □

Low □

ii. Breadth of product

line: no. of products

or services offered

to clients

Single product

□

Multiple products

□

58

iii. Effectiveness of

sales distribution:

social media and

word of mouth

High □

Moderate □

Low □

iv. Advertising and

promotion

effectiveness: word

of mouth

High □

Moderate □

Low □

v. Price

competitiveness

High □

Moderate □

Low □

vi. Capacity and

productivity

experience

High □

Moderate □

Low □

vii. Location of facility High □

Moderate □

Low □

viii. Financial position High □

Moderate □

Low □

ix. Raw material cost High □

Moderate □

Low □

x. Research

&Development

advantage/position

High □

Moderate □

Low □

xi. Relative product

quality

High □

Moderate □

Low □

xii. general image High □

Moderate □

Low □

Calibre of staff or personnel: High □ Moderate □ Low □ talent and

few minutes of practical working on a client

9. Which of the following would you consider to be the firm's strengths and

Weaknesses? Mark X where relevant, leave blank where irrelevant.

Strengths Mark

X

Weaknesses Mark

X

Important distinctive competencies X No real distinctive competence,

A growing customer base/customer

loyalty

X A slipping reputation with

customers/ Losing ground to rivals

Above average market visibility: Below average growth in revenues X

Being in a favorably situated strategic

group

X Being in the „losers‟ strategic

group

Being able to concentrate on the fastest

growing market segments

X Showing poor performance in the

areas with the most market

potential

Strongly differentiated products/cost

advantages

X Being a high cost producer

Above average profit margins X Coming short of financial

resources

Above average marketing skills Average or low level marketing

skills

X

Above average technological and

innovation capability

X Poor product development

strategies

A creative, entrepreneurially alert

management

X Being too small to be a major

factor in the market place

Ability to capitalize on opportunities X Precariously placed when dealing

with emerging threats

High product quality X Poor product quality

59

SECTION F: Presence of the Generic methods of competitive advantage as

response strategies

10. COST

Mark (X) where applicable for the firm: Yes No

14. Strives to capture all economies of scale X

15. Taking full advantage of learning/experience curve effects X

16. Trying to operate facilities at full capacity X

17. Vigorous sales to increase profits X

18. Allocate funds for R&D X

19. Advertising and administrative costs over time X

20. Improving supply chain efficiency X

21. Substituting expensive raw materials for cheaper ones X

22. Using modern online systems X

23. Adopting labour-saving operations X

24. Using a company‟s bargaining power with suppliers to get

concession

X

25. The firm being alert to the cost advantages of outsourcing/

Vertical integration in the value chain

X

26. Discretionary policies X

11. DIFFERENTIATION

Mark (X) where applicable for the firm: Yes No

7. The firm strives for superior quality X

8. The firm invests in unusual or unique features for the products X

9. The firm invests in responsive customer service X

10. Rapid product innovation X

11. Products have advanced technological features X

12. Product has an image of prestige or status X

12. FOCUS

Mark (X) where applicable for the firm: Can you divide

your customers according to the following criteria?

Yes No

8. Customer behavior; Time they access services, formal jobs not

allowing natural hair styles

X

9. Gain specific benefits from the products different from other

customers

X

10. Demographics, i.e.age, education, occupation, gender, race, etc. X

11. Geographical location (where they use the product) X

12. Certain activities, opinions, interests of a group of customers X

13. Special concerns for the cost of goods/services X

14. Special concerns for the nature of goods/services X

13. OTHERS

Method Notes:

60

Stability strategy: involves

maintaining stability of

successful organizations which

operate in medium attractive

industries that could be facing

unpredictable environmental

factors

Growth strategy: concerned

with a firm dominating the

industry or growing its

operation through

diversification across a number

of industries. This is based on

the correlation between turn

over and increased profit.

Portfolio strategy: denotes an

organisation growing through

mergers and acquisitions or

diversification rather than

through internally generated

organic growth.

Retrenchment strategy:

suggests involves dismissing

staff so as to match

expenditure with projected

income and somehow refocus

the organization for a

prosperous future.

Harvesting strategy: strategy

involves reducing investment

in a business so as to reduce

cost, improve cash flows and

capitalize on whatever residual

competencies that could be

available to the firm.

Combination strategy:

describes strategy of

combining all of the above

strategies to acquire a given set

of goals

Others:

61

14. Threats of sustainable Competitive advantage

Threats High Moderate Low/unlikely Reaction of organization

Imitation: X NONE. IT WILL cost to react.

Keep with business.

Substitution: X Also does other hair styling

techniques apart from natural

hair

Hold up X

Slack X

Notes: