Relationship between Porter’s Competitive Forces and Performance of Micro and Small Enterprises in Agro-food Industry in Kenya

Abstract

The purpose of this conference paper is to present the findings of the influence of the three of Porter’s competitive forces (buyers’ bargaining power, suppliers bargaining power and rivalry among existing competitors) and performance of Micro and Small Agro-food Processors in designing of advantageous agro-food products for local and international markets. The study sampled 132 value-addition MSEs in Busia and Nairobi Counties. The researcher used Porter’s industry analysis model to inform the conceptual framework. A survey tool containing Likert Scale questions and interview guide was used to measure the MSEs’ gradation in opinion, attitude and behaviour on agro-food industry competition landscape. Research instruments’ reliability were tested by chronbach’s alpha and realized 0.97 which was greater than 0.70 showing excellent internal consistency of the items in instrument. Due to inadequate information management of agro-food processors at the county level, snowballing sampling techniques were used. The data was analyzed using Binomial Logistic Regression (Logit) model at a corresponding 5% level of significance using Statistical Package for the Social Sciences (SPSS) version 21.0. According to the agro-food processors opinion rivalry from incumbent competitors was the most influential n=130(98.5%) of the Porters competitive forces, followed by suppliers bargaining power n=122(92.4%) and buyers bargaining power n= 117(88.6%). Finally the study found out that a combination of buyers & suppliers bargaining power and existing competitors rivalry influenced the making of advantageous food products by wald (1) =41.475, p=.000, sig<.05, 2-tailed. In conclusion, food value addition for improved income, customer demand satisfaction and competitively imitable products can be achieved if competitive forces, especially incumbent rivals are well managed. The study suggests that maize, beans and potatoes products; economic agglomeration models, entrepreneurial training and innovative financing methodologies that have lowest transaction costs be encouraged; and food and beverage administration authority be established.