Influence of Porter's Five Forces on the Competitiveness of Agrodealer Businesses in Nakuru East Sub-County, Kenya

Agrodealers play a crucial role in the agribusiness value chain by linking input manufacturers to farmers. With a high number of agrodealer businesses in Kenya, the industry is highly competitive necessitating the businesses to design strategies to gain a competitive edge. Interaction of various forces in the industry has led to high competition with changes in the environment requiring constant strategic adjustments by the businesses in their bid to remain competitive. As such, businesses are at task to design strategies to enable them counter this pressure, ensure survival and increase their market share. Despite their importance in the agribusiness value chain, minimal efforts have been done to identify the challenges that agrodealer businesses face in their quest to overcome competition. This study focused on determining the influence of Porter’s five forces on the competitiveness of agrodealer businesses in Nakuru East Sub-County, Kenya. Census study targeting all the 138 agrodealer businesses was carried out and achieved a 79% response rate. Semi-structured questionnaires were used for the collection of both qualitative and quantitative data which was analyzed through the facilitation of STATA. Factor analysis was used to assess the agrodealers perception of the main competitive forces in the industry while a multivariate probit model was used to analyze the effect of Porter’s five forces on the choice of competitive strategies. Market share was used as a metric for measuring competitiveness with the Tobit model being used to estimate the influence of Porter’s five forces and strategies on business market share. Results showed that competitive rivalry, buyer switching costs, operational costs, product substitution, and branding were the main forces leading to competition in the industry. Study findings revealed that significant factors that affect agrodealers’ preferences for generic strategies are age, experience, group membership, education, ownership structure, engagement in other businesses, business age, business branches, competitive rivalry, product substitution, operational costs, and branding. Results further indicated that market share was greatly influenced by business age, promotions strategies, competitive rivalry, branding, business expenditure, and entrepreneurial skills. The study recommends both the national and county governments create an enabling environment by devising strategies that will help curb counterfeit inputs from accessing the market and selling input subsidies through agrodealer businesses to minimize competition. Furthermore, policies geared towards educating and training agrodealers on maximum utilization of Porter’s generic strategies should be enhanced. There is also a need for agrodealer businesses to increase use of cost leadership strategies as they were found to have a positive impact on market share.