Competitive Advantage and Performance of Real Estate Development Firms in Nairobi City

Abstract

Competitive advantage translates to superior performance of a firm compared to its competitors. It originates from various sources internal to a firm which are either tangible or intangible. Tangible sources include among others human resource, equipment and technology, while intangible sources include business strategies, corporate reputation among others. Competitive advantage positively correlates organizational performance. This study therefore sought to establish the influence of competitive advantage on the performance of the real estate development firms in Nairobi city. The study also aimed at establishing the link between competitive advantage and the performance of firms in the real estate development industry in Nairobi. Specific objectives were to determine the derivation of competitive advantage of companies and to determine the impact of the sources of competitive advantage employed on performance. The study adopted cost leadership, differentiation, focus and organizational performance as the key variables of the study. This study adopted descriptive design since it provides an in-depth view of the subject of a study. The population of the study was sixty five registered real estate development firms based in Nairobi city. Questionnaires were administered to the respondent firms while statistical data analysis software (SPSS) was used to analyse data while the response rate was 74 %. The study findings indicated that 18.75% of the respondents had operated for a period below 5 years, 39.58 % operated for between 5 - 9 years while 41.67% had operated for more than 10 years. Regarding size of the firms their turnover ranged from Ksh. 100 million – 1 billion. with staff size of 10 – 50 workers. Regarding sources of competitive advantage it was revealed that differentiation strategy was the most prominent source of competitiveness adopted at high extent (M=3.66, SD=1.078) operationalized through favourable corporate reputation (M= 3.81, SD =0.942), research and development expenditure for innovation (M =3.60, SD =1.120) and provision of customised services (M =3.57, SD =1.172).Focus strategy was adopted by firms at moderate extent (M=3.25, SD=1.074) operationalized through search for cost advantage (M=3.71, SD= 0.078), targeting a niche market (M= 3.63, SD= 1.026) and focusing on the premium pricing (M= 2.42, SD =1.117).Cost leadership strategy was found to deliver more customer value adopted at moderate extent(Mean=3.19, SD=0.891) Regarding influence of competitive advantage on the firms performance, majority of the firms stated that their performance was exceptional 11 (22.9%), 31 (64.6%) of the firms indicated that their performance was fair while 6 (12.5%) registered poor performance. Regarding performance indicators it was established that profitability, market share and customer satisfaction were excellent with a mean score of (M=3.65; SD=1.133), (M=3.64; SD= 1.087) and (M= 3.63; SD= 0.927) respectively. However, innovations were least with a mean score of (M=2.05; SD = 0.896).The study established presence of a significant influence of competitive advantage on firms performance as established by the high mean scores that have registered by the key performance indicators that can be attributed to three sources of competitive advantage that the firms employed..