EFFECT OF PORTERS’ GENERIC STRATEGIES ON COMPETITIVE ADVANTAGE OF MULTINATIONAL COMPANIES WITH REGIONAL HEADQUARTERS IN KENYA

Abstract

Multinational corporations contribute critical financial infrastructure and enormous resources for economic and social development. In recent years, multinational corporations have been faced with increasing competition arising from other multinationals and local firms. Regardless of the sector, multinational companies face high competition that even lead to some of them closing down their businesses, relocating or scaling down their operations. Despite this, contradicting results exist on which strategies are the best to be able to be competitive. Some scholars are for only the pure generic strategies of cost leadership or differentiation while others argue for a combination of strategies involving both low-cost and differentiation. This therefore raises a question on which strategies are the best to achieve competitive advantage. The study hence focused on the effect of porters generic strategies on competitive advantage of multinational companies with regional headquarters in Kenya. The study specifically focused differentiation strategy, cost leadership strategy, diversification strategy and focus strategy. A descriptive survey design was adopted for the study on a population of 77 firms. Descriptive and inferential analysis revealed that differentiation, cost leadership and diversification strategy have a positive significant effect on competitive advantage while focus strategy has a positive but not significant effect. The study recommends that in order for both multinational firms as well as other firms in the same line of businesses to enhance their competitive advantage through differentiation strategy, there is a need to focus on creating a unique value to customers as well as improving the product design. To enhance competitive advantage through cost leadership, there is a need to enhance cost leadership practices regarding construction of efficient scale facilities, vigorous pursuit of cost reduction from experience and application of tight cost practices. There is also a need to improve competitive advantage through improvement of diversification strategy practices such as development of new products in the same line of operation, development of new services in the same line of operation, going back to previous products, adding new products to fully utilize the potential of existing technology and marketing structure and moving to new services and products that have no connection with the current line since the study has established a positive effect.