Challenges of Diversification Strategy at Safaricom Limited

Abstract

Kenya's mobile market has grown significantly over the last few years. Competition has increased with the introduction of two additional Mobile Network Operators and this has contributed to a price drop of over 70% in the last four years. Mobile coverage has increased to 96% of the population, and there are now over 3,500 3G sites in the country. As a result of the high penetration level, mobile service providers have to come with strategies aimed at providing and improving their products and services so as to remain profitable in the increasingly competitive market. For the past decade Safaricom has been the most dominant telephone service provider with an average of 80% of the market belonging to them. They have managed to maintain this dominance despite the entrance of new service providers such as Airtel, Orange and Yu mobile. In the past years, Safaricom that seemed to understand the market better than its competitors managed to maintain its dominance to a point that it did not even bother to come up with strategies to counter those of Airtel; its main competitor. The entry of new market player such as Orange and Yu Mobile and the change of management at Airtel Kenya has seen more competition exhibited in the mobile telephony market. These companies have rolled out marketing strategies aimed at capturing the untapped market and the existing telephone users. The competitors have also come up with interesting products and services leading to an excitement the local market. In order to remain relevant and maintain its market leader position in the telephony market, Safaricom has had to respond to the competition and has also rolled out strategies aimed at maintaining their customer base and venturing in the untapped market segments. The company has therefore engaged in product and service diversification while diversifying from its core voice market to mainly data and financial services. However, there have been challenges through the diversification strategy implementation process. This study aimed to evaluate some of these challenges and propose recommendations on how to overcome them so as to remain competitive.