Strategic Responses to Competition: A Case of Contracted Small Scale Vegetable Farmers in Machakos District
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Though a business does not want competition from other businesses, inevitably most will face a degree of competition. The amount and type of competition depends on the market the business operates in. A business could react to an increase in competition by cutting prices (but can reduce profits), improving quality (but increases costs), spend more on promotion, and cutting costs (Porter, 1998). Some may opt to product improvement, divestiture, diversification, entry into new markets or even merging or buying out competitors. Studies have shown that the size of a firm has an effect on the way it responds to competition. Most of these studies show support for use of niche strategies in small firms (O’Gorman, 2001; Fiegenbaun and Karni, 1991; Lee et al, 1982). These studies have shown that small firms use niche strategies to respond to competitive pressures. The objectives of this study were to determine the competitive pressures facing small scale contracted vegetable farmers in Machakos District and to determine the strategic responses employed by them to deal with competitive challenges. This was a descriptive survey. The research population consisted of all the small scale vegetable farmers contracted by Homegrown Ltd in Machakos District. There are 120 such farmers in the district. All the 120 farmers were selected for the survey. This being a census survey, no sampling technique was employed to select the sample size. In this study, emphasis was given to primary data. The primary data was collected using a semi-structured questionnaire. Data collected was analyzed based on descriptive statistics. The descriptive statistics that were used here included the mean scores and percentages. The results were then presented using tables and figures. The Statistical Package for Social Sciences (SPSS) aided in the analysis. The study found that the farmers contracted by Homegrown have been facing a myriad challenges brought about by competition. The salient challenges are quality of production, loyalty issues, liberalization of trade, and lack of bargaining power. The farmers have responded to these challenges in a number of ways. The farmers have had to strive and offer quality produce in the market as a starting point. The farmers have also had to compete for the same buyers as other target specific markets in order to create a market for their produce. As other farmers demand better prices for their products, some have resorted to targeting other farms when the prices are better elsewhere. This is what has expounded the switching behaviour among the farmers. The study recommends that the cost of inputs be subsidized by the Government in order to reduce the costs for the farmers. This, given that the farmers have less say in pricing their produce, will help them fetch a good margin. The Government should also come to the rescue of farmers by setting up a minimum price that the farmers need to be paid for their produce so as to shield them from the large companies out to use them. The Government of Kenya needs to sensitize farmers on the need of having and honoring legal contracts in order to avoid hurting their relationships with reliable partners.
University of Nairobi, School of Business