The Effect of Market Forces on Performance of Dairy Industries in Kenya. A Case of Kenya Cooperative Creameries

Abstract

Milk and milk products consumption is common throughout the world.  Dairy industry is one of the food industries that make a big contribution to the income of Kenyan farmers as well as food for Kenyans. Kenya Cooperative Creameries (KCC) has been the sole formal sector dealing with milk for over 60 years. However, the milk sector was liberalized in 1992. A lot of research has been done on how strategic practices affect performance. However, there exists minimal information on how market forces affect performance of dairy industries in Kenya. It is in this view that this study aimed at assessing the market forces and performance of dairy industry a case of KCC. A cross sectional analytical research design focusing on a case study was adopted for this study. This study targeted a sample of 32 senior management staff of KCC. A research-administered questionnaire and an observation check list was used to collect information on strategic management practices and performance indicators. Tools were tested for validity and reliability. Data was coded, cleaned and analyzed using SPSS software. Descriptive statistics such as frequency, means and percentages were used to summarize the data. Chi-square test was used to establish the relationship between study variables. Qualitative data from open ended questions was analyzed by coding, combining similar responses together and determining the emerging themes. Results show that the main challenges faced by KCC are the threat of new entrants, which reduced sales, threat of substitute products which led to price reduction, the bargaining power of customers to lowering of prices so as to maintain these customers, bargaining power led to procurement of milk at a lower price. In addition, the intensity of competitive rivalry led lowering of prices leading to low income. This study concludes that the type of market forces adopted affected performance. These are the entry of new firms, presence of substitute products in the market, the bargaining power of customers and suppliers and the competitive rivalry is a major determinant of the competitiveness of the firm.

Keywords: Market forces, performance, dairy industry