Factors influencing pricing strategies adopted by large alcohol manufacturers in Kenya

Abstract

This study is on factors influencing pricing strategies adopted by Large Alcohol Manufacturers in Kenya. The study seeks to establish the challenges faced by managers in these companies while formulating and implementing pricing strategies, factors influencing pricing strategies adopted, and to what extent pricing strategies are employed in these firms. Pricing decisions have a direct effect on a firm‟s performance in the marketplace and indeed its survival, and have always occupied a crucial place in strategic planning. Regardless of product or industry, a well-established price enables the firm to best capture the value embodied in a product and thereby establish a competitively advantageous position in the market. Pricing decisions, however, can be difficult, and often speculative, due to the uncertainties associated with today‟s dynamic environments. Rapid changes in information systems, proliferation of product lines, and advances in technology are but a few of the elements marketers are confronted with in developing pricing strategies. This level of difficulty is compounded further when managers attempt to develop pricing strategies in the international arena. By attempting to operate in multiple markets, the Kenyan alcohol manufacturing firms are confronted with an even more complex and dynamic set of environmental contingencies all of which serve to magnify the problem of decision uncertainty for managers. The findings of this particular study intended to shed more light into the factors influencing pricing strategies adopted by large alcohol manufacturers in Kenya. The study modeled factors influencing pricing strategy choices such as pricing objectives ; product demand; firm cost structure; industry competition; buyers‟ knowledge and sellers‟ knowledge together with the major pricing strategies adopted by firms with a view of establishing any relationship between these factors and pricing strategies adopted by large alcohol manufacturing industry in Kenya. A census survey was carried out on the large alcohol manufacturers using a questionnaire to collect data from managers and executives who are involved in pricing activities from Mumias Sugar Company‟s alcohol plant; Spectre International in Kisumu and Agro-chemical and Food Company based in Muhoroni Kenya. A multivariate analysis of variance (MANOVA) was carried out to analyze the relationship between the dependent variables (pricing strategies) and the independent variables (factors influencing these strategies) on SPSS for windows. From the SPSS findings and analysis, firm cost structure (p value = 0.002) is the only significant factor determining the pricing strategy in alcohol producing firms. Another close player in pricing strategy formulation is the pricing objectives (p value=0.117) although not a significant contributor at 0.005 level of significance.