THE EFFECT OF VALUE CHAIN MANAGEMENT STRATEGIES ON COMPETITIVE ADVANTAGE: THE CASE OF BAMBURI CEMENT

Abstract

This research focused on the effect of the three value chain management strategies of cost reduction, differentiation and strategic alliance on the competitive advantage of Bamburi Cement Limited. The background of the study gave an overview of the structure, characteristics, and dwindling performance of the cement industry in East Africa and Kenya, highlighting the key players alongside their individual market share. The study was based on three theories. The value chain theory elaborated on the creation of value through linkages between activities that can be the basis of competitive strategies while, the resource based view and strategic factor markets theory elaborated on the significance of the acquisition and use of key resources by a firm seeking an advantage over its competitors. A descriptive survey research design was applied to gather data. The research targeted a population size of 495 employees of Bamburi cement based at its head office in Nairobi. Stratified random sampling method was used to select an appropriate sample size. A structured questionnaire was employed to collect primary data from respondents. These questionnaires were distributed to 222 employees and completed by 166, for a 75% response rate. Correlation was used to analyze the data collected and descriptive statistics used in presenting it by use of statistical tables and bar graphs. The respondents’ profile portrayed a stable workforce with good gender balance, which is well educated and has worked in the company for over five years, possessing good knowledge of its operations. The findings of the research revealed that, the cost reduction strategy had a significant effect on competitive advantage. This was mainly attributed to use of low cost energy, automation and adoption of current technology in production. Differentiation strategy also proved to have a significant effect on competitive advantage with high product quality and adherence to international standards having the greatest contribution to the success of the strategy. The third strategy, strategic alliance, was discovered to have a weak effect on competitive advantage, with collaboration with a knowledge partner highly ranked, but partnerships with distributors and retailers showing minimal effect on competitive advantage.