MARKETING
Battle For Market Share : Why China Square Won While Nyakima Traders Lost
By Geoffrey Sirumba
A few months ago , the country was treated to a high-drama spectacle . Reason ? There was an unexpected foreign entrant into the retail business who apparently disrupted the market with their low prices . In response to that , local entities petitioned the government to shut down the new kid on the block . However , it turned out to be a much more complex diplomatic issue than the many naive informal traders belatedly realized .
Amidst the raging debate , one thing was clear : Kenya is a free enterprise economy , and any law-abiding resident is at liberty to explore locally available business opportunities . Instead of fighting competition through unwarranted market protection mechanisms , why not up our competitiveness ? As a matter of fact , any shrewd businessperson should constantly be looking for new opportunities . But before establishing your dream business , you first need to thoroughly understand industry dynamics and fundamentals .
In this special edition , I will show you why
China Square won while Nyakima traders lost the battle for market share . Consider the retail industry . Competition levels are usually brutal and cut-throat . Indeed , only the strong and smart will survive . Kenya ’ s retail industry is a significant contributor to the country ’ s economy , accounting for about 11 % of Kenya ’ s GDP .
Porter ’ s Five Forces Model can be used to explain what has happened to Kenya ’ s retail sector by analyzing the threat posed by the entrance of a new player ( China Square ), the competitive landscape , the bargaining power of buyers , the bargaining power of suppliers , and the threat caused by substitute products . This analysis will help Kenyan retailers estimate the risk posed by the emerging players and potential areas for growth and competitive advantage .
Threat posed by new entrant
This force considers how easy or difficult it is for competitors to enter the market . The
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Kenya is a free enterprise economy , and any law-abiding resident is at liberty to explore locally available business opportunities . Instead of fighting competition through unwarranted market protection mechanisms , why not up our competitiveness ? As a matter of fact , any shrewd businessperson should constantly be looking for new opportunities . easier it is for an upcoming competitor to gain entry , the more likely the risk of an established business ’ s market share being depleted . Barriers to entry include absolute cost advantages , access to inputs , economies of scale , and strong brand identity .
Retail is a very profitable space considering that a significant proportion of all commodities sold in Kenya are imported , with the major player being China . Starting a retail business in Kenya is very simple and encouraged by the government . If you have capital , you just need to register as per the regulations , and you will soon be open to trade . The main risk posed by international players is the threat of dumping . But the authorities have been on constant alert , although you can ’ t rule out systemic corruption .
Introduction of Cheaper Substitute Products
When you visit China Square , you will notice that in almost all product categories sold , they have introduced new product lines that were previously non-existent in our Kenyan market . By having a physical location , they can provide warranties for the new products , reducing switching barriers .
Bargaining Power of Customers
In today ’ s world , customers are no longer loyal . They move to where they are appreciated and valued . In addition , one major advantage of the new entrant is that they are based under one roof , a strategy that was last seen as a pioneer after Nakumatt . They have combined almost
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