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INTERNATIONAL JOURNALS OF ACADEMICS & RESEARCH ISSN: 2617-4138 IJARKE Business & Management Journal DOI: 10.32898/ibmj.01/2.1article19
www.ijarke.com
201 IJARKE PEER REVIEWED JOURNAL Vol. 2, Issue 1 Aug. – Oct. 2019
Effects of Competitive Strategies on Competitiveness of Insurance
Companies in Mombasa County – Kenya
Dennis Makadina, Jomo Kenyatta University of Agriculture & Technology, Kenya
Dr. Eric Lewa, Jomo Kenyatta University of Agriculture & Technology, Kenya
1. Introduction
Creating a sustainable competitive advantage is one of the most important goals of any Organization. This is because the
demands and needs of the environment are very dynamic. According to Tumbo (2012), competitive strategy is critical to the
attainment of competitive advantage in all companies. The management should therefore be more concerned with adjusting the
company according to the needs and demands of the environment. This is an important attribute on which a firm must place its
most focus on.
Competitive strategies refer to the action plan an organization adopts in a bid to attract more customers, endure pressure from
competitors and enhance their market performance (Thompson, Strickland & Gamble, 2010). It entails developing a favourable
competitive positioning in the industry. It focuses on assessing unique strengths, identifying growth opportunities, collecting
competitive intelligence, and responding to competitive threats. This concept has been underscored by various management
scholars and practitioners. According to Ogutu and Nyatichi, (2012), competitive strategy specifies the distinctive approach which
a firm intends to use in order to succeed in each of its strategic business areas. Porter (1985) defined competitive strategies as the
search for a favorable competitive position in an industry, the fundamental arena in which competition occurs. He developed four
generic strategies that can be viable in the long term business environment. They are cost leadership strategy, differentiation
strategy, cost focus strategy and differentiation focus strategy.
In order to remain competitive and make profits, insurance companies need to constantly improve on processes that respond to
increase in the size and number of competing firms. This is because when there is competition, market share and consequently
profitability of the competing companies is reduced. Insurance companies are thus forced to be proactive by formulating
successful response strategies to changes in the competitive environment. Firms having appropriate competitive strategies stand a
good chance of exploiting available opportunities which guarantee them a ready market over their rivals (Atikiya, 2015). It is
INTERNATIONAL JOURNALS OF ACADEMICS & RESEARCH (IJARKE Business & Management Journal)
Abstract
The insurance industry in Kenya has been in existence for decades. However, to this day, there is cutthroat competition among
various players. Each player in the industry to have a greater share of the market. This has further been complicated by the low
insurance penetration in the country. This research work focuses on effects of competitive strategies adopted by insurance
companies to remain successful in an industry with a market that all players are struggling to achieve. The main purpose of the
research is to establish the effects of strategies on competitiveness of insurance companies, specifically in Mombasa County.
To achieve this, the research will be guided by the research question. These are how the focus strategy, cost leadership
strategy, differentiation strategy and innovative strategy affect the competitiveness of insurance companies in Mombasa
County. The descriptive research technique was used for this study. The population targeted for this research was be made up
of 224 managers from the insurance companies and a stratified sampling technique was undertaken to come up with the
sample. Data was collected through questionnaires and analyzed. Analysis was done quantitatively and qualitatively by use of
descriptive statistics. These include frequency distributions, tables, percentages, mean mode, median etc. In addition, advance
statistical techniques (inferential statistics) were considered. The results indicated that majority of the firms used focus or
niche and market penetration strategies to create and sustain competitive advantage. They also indicated that all players
depend on their quality of service and brand loyalty as their main sources of competitive advantage. Recommendations were
made that the firms should investigate their managerial policies and practices to ensure they stand out among other key players
in the industry. Further studies can be carried out to determine how firms can adopt and use the strategies that are not widely
used in the industry to their advantage. The study can also be extended to other industries to see if the same strategies are used
across other industries.
Key words: Competitive Strategy, Focus Strategy, Cost Leadership, Leadership Strategy, Differentiation Strategy, Innovative
Strategy, Insurance
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202 IJARKE PEER REVIEWED JOURNAL Vol. 2, Issue 1 Aug. – Oct. 2019
therefore prudent for any firm to understand the underlying sources of competitive pressure in its industry in order to formulate
appropriate strategies to respond.
Insurance has been practiced for a long period of time world all over. Despite this, it is still a fact that insurance uptake is still
low world over. A global insurance outlook in by Ernst and Young pointed out that due to slim profit margin in 2011. Overall
gross premium declined by 0.8% in real terms. Statistics show that Global life insurance premiums shrank by 2.7% in 2011.
Advanced markets contracted by 2.3%, with the sharpest decline observed in Western Europe (9.8%).The US market recorded
moderate growth of 2.9%. Global non-life insurance premiums rose by 1.9% in 2011. Many insurers therefore opted to look for
opportunities for growth. One way to enable this was to develop customer-focused products based on distinctive needs for the
buyers (AKI report 2011).
Over the last few years, the insurance industry has undergone a series of changes through financial reforms, advancement of
communication and information technologies, globalization of financial services and economic development. Those changes have
had a considerable effect on efficiency, productivity change, market structure and performance in the insurance industry. Low
insurance penetration is still one of the challenges hindering the development of the insurance industry in terms of market share,
product diversification among other measures.
1.1 Insurance Firms in Kenya
The main players in the Kenyan insurance industry include insurance companies, reinsurance companies, insurance brokers,
insurance agents and finally the risk managers. The statute regulating the industry is the Insurance Act; Laws of Kenya, chapter
487. The insurance industry in Kenya comprises of 55 licensed insurance companies at the end of 2017(IRA, 2017). The insurance
industry is governed by the Insurance Act and regulated by the Insurance Regulatory Authority (AKI report, 2015).
Kenya‟s insurance sector is among the most developed and growing in Sub-Saharan Africa. It, however, has one of the lowest
penetration rates with insurance companies facing intense competitions (Mudaki, Wanjere and Ochieng, 2012). The players in
insurance industry in Kenya today are struggling to stay afloat, challenged by the increase in threat of new entrants, low insurance
penetration, and increase in fraudulent claims as well as being overwhelmed by high claim costs. Competition has further been
aggravated by price wars that have seen many companies undercut to unsustainable levels. Many of the players have been placed
under statutory management over the last decade. This being largely attributed to poor management, increase in fraud as well as
ineffective strategies.
Over the past few years, the insurance industry in Kenya has had a series of transformations through financial reforms,
advancement of technologies and increase in distribution channels for the various insurance products. These changes have had
significant effects on market structure and performance in the insurance industry. Reduced market share as well as profitability is
affected by low insurance penetration, product diversification among other measures. Insurance growth in Kenya was 2.7% in
year 2017(IRA, 2017). Thus, insurance firms in Kenya have to formulate competitive strategies for each to have credible market
share. The level of market penetration in Kenya demonstrates that there are numerous market opportunities for insurance firms.
Hence, ways to permeate the market must be identified in order to increase growth and profitability for firms through increased
uptake of insurance as well as improve the lives of people by cushioning them from the impact of various risks in today‟s ever-
changing environment.
2. Statement of the Problem
There exists a close connection between competitive strategies and competitive advantages (Kiamburi, 2013). It is vital for
firms to perform better than their competitors in the industry. In a growing economy, many firms wish to gain the largest market
share to ensure they can generate enough profit to serve purpose for their existence (Sumer & Bayraktar, 2012). Unique and right
competitive strategies in any organization that are well implemented provide a business environment that enables it to face
challenges from its competitors.
There are a total of 55 licensed insurance companies in Kenya (IRA, 2017). These companies compete for a limited market
share of 2.7 percent. This is because the insurance penetration expressed as a percentage of the Gross Domestic Product is at 2.7
compared to a world average of 6.1 and 3 in Africa (IRA, 2017). This therefore provides a platform for stiffened competition for
the limited market share amongst insurers. Consequently, insurance firms have been forced to formulate competitive strategies so
as to have significant market share and in order to remain relevant (Arasa & Gathanji, 2014).
Several studies have been done to investigate the concepts of competitive advantage of insurance companies. Akotey, Osei and
Gemegah (2011) studied competitive strategies of insurance companies in Ghana and found that they use premium flexibility and
modal agency. Nyaguthii (2014) studied the competitive strategies adopted by AON Insurance Company in Kenya and established
that product innovations was the highest ranked competitive strategy. Ombati (2012) investigated the core competencies and
competitive advantage of insurance firms in Kenya and established that the core competencies were in products, services and
processes. Mutimu and were (2013) researched on the relationship between strategy and competitive advantage and established
INTERNATIONAL JOURNALS OF ACADEMICS & RESEARCH ISSN: 2617-4138 IJARKE Business & Management Journal DOI: 10.32898/ibmj.01/2.1article19
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203 IJARKE PEER REVIEWED JOURNAL Vol. 2, Issue 1 Aug. – Oct. 2019
that there was a close relationship between strategy and competitive advantage. However, the research by Waweru (2011) did not
find any significant relationship between strategy and competitive advantage.
The studies that have been done focused on surveys within the insurance industry in general in the country. Different
companies use different competitive strategies to gain competitive advantage in a given market. Insurance companies operate in a
very competitive environment competing with each other. This study focuses on assessing the effects of strategies on
competitiveness of insurance firms in Mombasa County to gain competitive advantage.
3. Objectives of the Study
3.1 General Objective
The main objective of the study was to determine the effect of strategies on competitiveness of insurance companies in
Mombasa County, Kenya.
3.2 Specific Objectives
The study was guided by the following specific objectives:
i. To determine the effect of cost leadership strategy 0m the competitiveness of insurance firms in Mombasa. ii. To evaluate the effect of differentiation strategy on the competitiveness of insurance firms in Mombasa.
iii. To assess the effect of focus strategy on the competitiveness of insurance firms in Mombasa. iv. To evaluate the effect of innovative strategy on the competitiveness of insurance firms in Mombasa.
4. Literature Review
4.1 Theoretical Framework
4.1.1 Porters Theory of Competitive Advantage
Generic strategies were first presented in two books by Professor Michael Porter. Porter states that strategy targets focus,
differentiation or cost leadership and that a firm must only choose one of the three strategies or risk waste of precious resources.
Porter (1980, 1985) suggested that some of the most basic choices faced by companies are essentially the scope of the markets that
the company would serve and how the company would compete in the selected markets. Competitive strategies focus on ways in
which a company can achieve the most advantageous position that it possibly can in its industry. Anupkuma (2005) states that
Porter‟s (1980) strategic theory postulates that to succeed in business a firm needs to adopt generic competitive strategies
comprising of cost leadership, differentiation and focus.
According to Porter (1980) as cited in Kamau (2013) differentiation strategy is a business strategy intended to increase the
perceived value of the firm's products or services compared to competitors so as to create a customer preference due to its distinct
features. This implies that differentiation can be done specifically for a product to make them attractive, or for a service through
utilization of after sales services like consideration of quality, incentive programs, increased operating hours and so on (Kamau,
2013). A company can differentiate itself by offering innovative features, providing superior service, launching effective
promotions, and developing a strong brand name (Li & Zhou, 2010).
According to Sumer (2012) cost leadership targets to minimize and eliminate costs in fields including expenditure in research
and development and additionally advertising. This strategy tends to follow certain concepts, namely economies of scale, cost
saving efforts through the experience curve, strict control over costs and overhead costs (Sumer, 2012). Cost leadership strategy
enables companies to create a low-cost operation in their market niche with the core objective of attaining advantage over
competitors; this is done by reducing operating costs below that of other players in the market.
According to Porter (2001) as cited in Kamau (2013) focus strategy is described as strategies that pursue specific market
segments through overall cost leadership and differentiation as opposed to engaging in the whole market. It involves segmentation
of the market followed by specialization on a certain segment that would help the firm achieve competitive advantage. A
successful focus strategy depends upon an industry segment large enough to have good growth potential but not of key importance
to other major competitors (Atikiya, 2015). Focus strategy is seen as favourite and most efficient when customers have distinct
preferences and when the position has not been pursued by rival firms (Kiamburi, 2013).
The theory is relevant to the study since the development of competitive strategies helps manager‟s pinpoint critical tasks that
need to be performed in order to define an organization's strategic thrust and outperform their competitors successfully. Porter‟s
theory of competitive advantage informs this study of the key role of strategy in helping to secure an enduring competitive
advantage over competitors. Based on Porter‟s theory, strategy is the foundation of competitiveness.
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2.2.2 The Resource Based View
The resource-based view contends that in strategic management the fundamental sources and drivers to firms‟ competitive
advantage and superior performance are mainly associated with the attributes of their resources and capabilities which are
valuable and costly-to-copy (Mills, Platts & Bourne, 2003; Peteraf & Bergen, 2003). The theory posits that a firm can gain
competitive advantage by being in possession of distinctive resources or capabilities which are valuable, difficult to imitate and
rare in the marketplace (Baark, 2011). Based on the assumptions that these strategic resources are heterogeneously distributed
across organizations and that the differences are stable overtime, Hoopes, Madsen and Walker (2003) investigate the link between
firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate
sustained competitive advantage can be value, rareness, inimitability, and non-substitutability.
A firm resource includes all assets, attributes, information, firm capabilities, organizational processes, knowledge, etc.
controlled by a firm that enable the firm to conceive and implement strategies that improve its efficiency and effectiveness. Firm
resources and processes are important to firms since they influence its behavior and activities. It is the distinctive resources that
lead to sustained competitiveness and superior returns in firms (Barney, 2011). Moreover, a firm is said to have a sustained
competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or
potential competitors and when these other firms are unable to duplicate the benefits of this strategy (Hoopes, Madsen & Walker
(2003).
Firms with valuable resources that are rare and not easily copied, achieve a sustainable competitive advantage in form of
innovative new products. The theory is relevant in the objective of the study on how differentiation strategy affects
competitiveness of insurance firms. This theory is useful in explaining the role of differentiation and how it leads to firm
competitiveness through the production of innovative products and services in the market with improvement in processes. The
theory affirms the role of process innovation in firm competitiveness.
5. Conceptual Framework
A conceptual framework provides the relationship that the researcher feels exists between the study variables so as to establish
the effect of innovation practices on organizational performance in health insurance service providers in Kenya. This relationship
is represented graphically or in a diagram (Mugenda & Mugenda, 2008).
Independent Variables Dependent Variable
Figure 1: Conceptual Framework
6. Discussion of Key Variables
Cost Leadership
Competitive premium pricing
Economies of scale
Low operational costs
Focus Strategy
Speciality insurance products
Market Segmentation
Product Segmentation
Competitive Advantage Reduction in operational costs
Increase market share
Increased profitability
Timely delivery of services
Differentiation Strategy
Product Innovation
Alternative Distribution Channel
Brand Image
Innovative Strategy
Customer service
Premium payment
Claims handling
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205 IJARKE PEER REVIEWED JOURNAL Vol. 2, Issue 1 Aug. – Oct. 2019
6.1 Cost Leadership Strategy
Cost leadership strategy refers to gaining competitive advantage through charging sustainably lower prices than other
competitors (Porter, 2001). Sources of cost advantage are varied and depend on the structure of the industry. They may include the
pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. This is achieved by
lowering operating costs beneath those of others in the same business in order to lower the overall price of commodities. In
markets where there is price control, this is still possible through automation, flexibility and improved production thereby
eliminating large percentage of inefficiencies in the production process. When a company keeps lowering prices without a
reduction in operating costs, it runs the risk of depletion of resources and consequently becoming insolvent especially in a fiercely
competitive market (Woodruff, 2007).
This strategy faces many challenges in different sectors. If perceptions of quality become too low, business will suffer. Also,
large volumes of sales are a must because margins are slim. The need to keep expenses low might lead cost leaders to be late in
detecting key environment trends. Low-cost firms‟ emphasis on efficiency makes it difficult for them to change quickly if needed.
It is only applicable in certain environments such as in the manufacturing where the level of output is higher as compared to the
market size thereby being able to achieve economies of scale. Marrison and Roth (1992) advanced the view that, for
manufacturing firms to be competitive, they need to adopt cost leadership, characterized by tight control of overhead and variable
costs, optimal use of production capacities and pricing below competitive price levels. This is aimed at achieving superior results.
Zahra (2000) posits that, outsourcing is a popular method of reducing salary costs while maintaining workforce size and
productivity. Products that are constantly improved are particularly important for long term business growth and performance
(Bayus, Erickson & Jacobson, 2013).
6.2 Focus Strategy
In focus strategies, the attention of the firm will be on one segment of the market. In this case the attention would be a certain
customer group, a certain product, a certain region, or a certain service (Porter, 1987). In adopting a narrow focus, the company
ideally focuses on a few target markets (also called a segmentation strategy or niche strategy). These should be distinct groups
with specialized needs. The choice of offering low prices or differentiated products/services should depend on the needs of the
selected segment and the resources and capabilities of the firm.
An empirical analysis performed by Kwasi and Acquaah (2008) on firm performance, competitive strategy, and manufacturing
strategy in Ghana, points out that the sector should shift to competitive and customer focused strategy by enacting measures which
enhances quality, develop customer-suppliers relationship, and enhance delivery and distribution of products. Kiragu (2014) focus
on Kenya insurance states that both cost and differentiation focus strategies have been minimally initiated in a shallow market
segment.
Cost aligned strategy initiates companies which intend to adopt a lower cost opportunity in a few or just one market segment.
On the contrary, differentiation aligned strategy initiates firms that intend to differentiate within few targets or just one market
segments. According to Kimani and Juma (2011) recommendation on “sustainable competitive advantage in the insurance
industry in Kenya,” players in the sector ought to constantly review their strategies in alignment to their objective that focuses on
leading the competitors in the market. This according to Ilovi (2011) as cited by Kimani and Juma (2015) could only be realized
through firms adopting a focus strategy, cost reduction strategies, as well as getting involved in resource investment.
6.3 Differentiation Strategy
According to Porter (1980) as cited in Kamau (2013) differentiation strategy is a business strategy intended to increase the
perceived value of the firm's products or services compared to competitors to create a customer preference due to its distinct
features. Differentiation involves differentiating the services or products offered by a specific organization by developing a
product that is viewed institutional wise as being innovative. The element of differentiation is reflected through brand name,
design, technology, dealer network, customer service, and features. Differentiation involves making your products or services
different from and more attractive than those of your competitors. How you do this depends on the exact nature of your industry
and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand
image that your customers value.
The existence of product differentiation is always a matter of customer perception, but firms can take a variety of actions to
influence these perceptions. This implies that differentiation can be done specifically for a product to make them attractive, or for
a service through utilization of after sales services like consideration of quality, incentive programs, increased operating hours and
so on (Kamau, 2013). To add to this, Olegube (2014) states that differentiation also includes physical aspects which would cover
location, space, design and display/layout and stores atmosphere. Acquaah and Yasai-Ardekani (2008) under took a study to
determine the benefits of executing differentiation strategy. Atikiya et al., (2015) examined the relationship between
differentiation strategy and manufacturing firm performance in Kenya. The study adopted both descriptive and exploratory
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research design. Simple random sampling technique was used to select 170 respondents. The differentiation strategy was
attributed as being mindful of product differentiation, by having customized products as compared to competitors, continuous
development of new products, innovative product, continuous and faster introduction of new products, quick response to
competitor's product innovation, heavy reliance on research and development of reputable products on the market in a bid to
create value to the customers.
A thriving differentiation will need the strategy taken to be costly to imitate and rare to find. Differentiation elements such as
costly and rare form a foundation for sustainable competitive opportunity. This aspect is supported by Barney and Hesterley
(2006) who acknowledges that “the rarity of a differentiation strategy depends on the ability of individual firms to be creative in
finding new ways to differentiate their products.” Therefore, firms which are more creative are usually able to differentiate
themselves from their rivals. This is because competitors always attempt to mimic those institutions last move, but the more
innovative firms will have already taken an advanced product thus always being ahead of its competitors.
Insurance firms should therefore, initiate unique elements such as reputation, timing, location, support, service, and
distribution channels in their functions to edge out rivals from catching up with their operations. One positive of a successful
differentiation strategy is that the company may charge a premium for its product or service. The company does so with
confidence because of a highly developed and strong corporate identity. The company can readily pass along higher supplier costs
to its customers because of the lack of substitute or alternative products on the market. Having a loyal customer following helps
stabilize the company's revenue and lessens the impact of market downturns because of customer loyalty in good times and bad
(Barney and Hesterley 2006).
7. Research Methodology
The study adopted a descriptive survey research design. According to Kothari (2014), descriptive survey is structured to
examine a number of logical sub-units or units of analysis within organizations.
The population target for this study comprised of the managers from registered insurance companies in Kenya with a presence in Mombasa
County. According to the insurance regulatory authority there are 55 registered insurance companies as at June 2018. These have a total of 224 managers in the county. They mainly comprise of branch managers, regional managers, unit managers and sales managers. It is from these registered companies that the respondents were drawn from.
Table 1 Target Population
Population Category Population Frequency Percentage (%)
General insurers 116 51.7
Long term insurers 56 25.0
Composite insurers 36 16.1
Reinsurers 16 7.2
Total 224 100.0
For the data collection, an appropriate sample size was computed to achieve the true proportion at 95% confidence level. To
calculate the sample size of the respondents, the Yamane‟s formula (1967) was employed.
n = N ÷ (1 + Ne2)
n = 224 ÷ (1 + 0.052)
n = 143.589
n = 143
Where n is the sample size, N is the population size, and e is the level of precision or sampling error (0.05).
8. Research Findings
8.1 Descriptive Statistics
8.1.1 Level of Competition
The respondents were asked to respond to various questions addressing the level of competition and how they would rate it
within the industry and various issues relating to the different competitive strategies employed with a view of establishing which
strategies were being significantly employed in the industry and among them which ones were more popular amongst the players
in the industry.
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Respondents were asked to rate the level of competition in the industry and the outcome was as represented in Table 2. The
results in Table 2 indicate that approximately 66% of the respondents thought that there is very high competition in the insurance
industry. 33% thought of the competition in the industry as being relatively high. The results show that the industry experiences
stiff competition among the existing players.
Table 2 Rating of the Level of Competition
Level of Competition Frequency Percent
Very High 75 66
High 37 33
Low 1 1
Very Low 0 0
Total 113 100.0
8.1.2 Impact of Threats to the Firms
The respondents were asked to indicate the impact of external threats to their operations.
Table 3 Descriptive Statistics
Impact of Threats N Mean Std. Deviation
Impact of Existing rivalry to organization 113 3.57 .935
Impact of Threat of substitute products to organization 113 3.31 1.039
Impact of Bargaining power of buyers to organization 113 3.23 1.040
Impact of Threat of new market entrants to 113 3.00 1.017
Impact of Bargaining power of suppliers 113 2.69 1.105
The results from the Table 3 above indicate that the existing rivalry between organizations and the threat of substitute products
in the industry were ranked as having the greatest impact to organizations at a mean score of 3.57 and 3.31 respectively. However,
the bargaining power of the suppliers and the threat of new entrants into the market had the least impact to the organizations
within the industry with a mean score of 2.69 and 3.00 respectively.
8.1.3 Consideration of Competitors to the Firms
The respondents were also to indicate the level to which they considered other firms within the industry as competition to their
business. The responses were as represented in Table 4.
Table 4 Descriptive Statistics
Competition faced N Mean Std. Deviation
Firms that have existed locally for more than five years 113 3.37 1.098
Regional based firms 113 3.37 .850
Firms owned in Partnership 113 2.76 1.023
Firms that have entered the market recently 113 2.40 1.070
Individually owned firms 113 2.28 .841
The results in Table 4 above indicate that firms that have existed locally for more than five years and regional based firms
posed the greatest competition to organizations in the industry with a mean score 3.37 each. However, firms that have recently
entered the market with a mean of 2.40 and individually owned firms with a mean of 2.28 were not considered as big threats in
terms of competition.
8.2 Competitive Strategies Employed
In considering the competitive strategies employed the respondents were asked to respond to the various issues under
consideration when implementing the given strategies with a view of evaluating which issues were being heavily employed.
Means and standard deviations were used to evaluate the extent of appreciation in a given issue and consistency of responses for
each of the issues addressed.
8.2.1 Differentiation as a Competitive Strategy
The evaluation of responses with respect to differentiation strategy yielded the results presented in Table 5
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Table 5 Descriptive Statistics
Differentiation Strategies N Mean Std. Deviation
Our Products are designed to suit the customers‟ needs 113 4.59 .682
our products are available to the customer at the right 113 4.39 .567
time
Our products are of very high quality 113 4.28 .797
Our organization ensures that our products are reasonably priced 113 4.25 .752
Our organization has invested in training and technology in a bid to
improve service quality 113 4.23 .858
We always seek to improve on specific attributes of our product 113 4.10 .673
Our organization uses Marketing and promotional campaigns to
enlighten the customer about our products 113 3.97 .765
In our organization we offer products that are unique as compared to
other players in the industry 113 3.73 .868
Our organization invests in research and development in order to
come up with innovative products 113 3.67 .802
The results in Table 5 indicate that insurance companies in adopting the differentiation strategy, they design products to suit
customer needs, they ensure that products are available to the customers at the right time and provide products of very high
quality. This is shown by their high mean scores of 4.59, 4.39 and 4.28 respectively. However, the issue of distribution channels
with a premium price, client involvement in product improvement and investment in research and development were least
adopted within the industry in respect to differentiation at a rate of 3.22 and 3.67 respectively.
8.2.2 Cost Leadership as a Competitive Strategy
The evaluation of responses with respect to cost leadership as a strategy yielded the results represented in Table 6.
Table 6 Descriptive Statistics
Cost Leadership strategies N Mean Std. Deviation
Our organization has invested in advanced Technology 113 3.70 .837
that has reduced costs of operation
Most of the policies adopted by our organization are 113 3.60 .932
geared towards minimizing operation costs
Our clientele is large thereby minimizing the costs of 113 3.53 .900
operation per client
Our organization has a large branch network 113 3.47 .860
We are located closer to the customer thereby reducing 113 3.03 1.117
transport costs
The results in Table 6 indicate that insurance firms invest in advanced technologies (3.70) and adopt policies that are geared
towards reducing daily operations costs (3.60). The results however indicated that the companies may not be close to the
customer to warrant a reduction in transport costs and most of the organizations did not have a large branch network as shown by
their mean scores of 3.03 and 3.47 respectively.
8.2.3 Focus and Niche as a Competitive Strategy
The evaluation of responses with respect to focus and niche yielded the results presented in Table 7. The results indicate that
the insurance firms to a great extent tailored their products to customers‟ needs and that the existing product lines were expanded
by introducing new products to serve different market segments as shown by the mean scores of 4.10 and 3.87 for each
respectively. They however focused the least on selling their products through complementary firms (2.68) and focusing on very
specific segments of the industry (3.63).
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Table 7 Descriptive Statistics
Focus and Niche strategies N Mean Std. Deviation
We have products that are tailored to specific customer 113 4.10 .618
We have expanded the existing product line by 113 3.87 .973
introducing new products to serve different market segments
Our organization has expanded the existing product line by
introducing additional new products 113 3.83 .950
Our organization focuses on very specific segments of the industry 113 3.63 .999
Our organization sells some of our products through complementary
firms acquired recently complementary firms acquired recently 113 2.68 .905
8.2.4 Product Development as a Competitive Strategy
The evaluation of responses with respect to diversification yielded the results presented in Table 8. In respect to product
development as a strategy, the results in Table 8 indicate that organizations mainly focused on coming up with new products to
meet the emerging needs of new customers in the market and that additional features were being added to the existing products to
meet extra customer demands. There was however indication that no rebranding or repackaging of products had taken place in the
recent past among the different organizations in the industry.
Table 8 Descriptive Statistics
Product Development Strategies N Mean Std. Deviation
Our organization comes up with new products meant to meet new
customer needs. 113 3.90 .885
Our products now have Additional features that meet the extra
customer demands. 113 3.70 .915
We offer Additional complimentary services to all our Clientele. 113 3.33 .844
We have Rebranded/repackaged our products recently 113 3.07 1.258
8.2.5 Market Development as a Competitive Strategy
The evaluation of responses with respect to market development yielded the results presented in Table 9.
Table 9 Descriptive Statistics
Market Development Strategies N Mean Std. Deviation
Our products are modified to suit the needs of the new markets 113 4.00 .707
Our organization always seeks to enter and invest in new markets 113 3.97 .718
We have increased the points at which customers can access our
products 113 3.80 .925
We have moved our operations to new geographical locations 113 3.07 1.258
Our organization charges different Prices for different segments 113 2.93 1.230
The results in Table 9 indicate that with respect to market development as a competitive strategy, firms focused on modifying
products to suit the needs of the new markets and seeking to create avenues for accessing or investing in new markets with a mean
if 4.00 and 3.97 respectively. The different markets were however enjoying similar rates in terms of pricing industry wide at a
mean of 2.93.
8.2.6 Market Penetration as a competitive strategy
Responses concerning market Penetration were evaluated and yielded the results presented in Table 10
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Table 10 Descriptive Statistics
Market Penetration strategies N Mean Std. Deviation
We engage in aggressive marketing campaigns 113 4.00 .830
Our distribution strategies are superior to those of our competitors 113 3.73 .868
Our prices are Competitive compared to our competitors 113 3.69 .806
Our organization engages in community activities in a 113 3.60 1.070
We offer discounts and other promotional offers to our 113 3.47 .860
clients
Our organization has experienced Increase in the number of
branch networks number of branch networks 113 3.37 1.273
The results in Table 10 indicate that the firms engaged in aggressive marketing campaigns and there was great focus on getting
the product to the customer faster and better than the competitors. However, there was an indication that the number of branch
networks did not increase among the different organizations within the industry.
8.2.7 Competitive Advantage
Competitive advantage was evaluated based on the responses given and the outcomes were as indicated in Table 11. The
results indicate that insurance firms mainly depend on loyalty of customers and a stronger brand to remain competitive within the
industry at a rate of 4.17 and 4.07 respectively. The size of the market share they command and the product portfolio that they
have was however not a key consideration as a competitive advantage gaining a mean of 2.90 and 3.28 respectively.
Table 11 Descriptive Statistics
Competitive Advantage N Mean Std. Deviation
Our organization prides itself in loyal customers over the years 113 4.17 .711
We pride ourselves in a stronger brand name 113 4.07 .753
Our organizations has seen our profits grow over the years 113 4.03 .865
We have very strong technological capability
that makes our organization better than the rest 113 3.93 .530
Our operations regularly result in huge returns on investment 113 3.69 .850
We are stronger financially than our competitors 113 3.41 .780
We have a wider and better network of customer
access points
113 3.34 1.045
Our product portfolio is superior to that of our competitors 113 3.28 .922
8.3 Inferential Statistics
8.3.1 Beta Coefficients
A multiple regression was conducted so as to determine the extent of influence of the independent variables on the dependent
variables and also to determine the significance of the relationship using the p values. The regression equation showed that if the
independent variables (cost leadership strategy, focus strategy, differentiation strategy and innovation strategy) were held to a
constant zero, competitiveness of insurance companies would be 13.753. A unit increase in cost leadership would lead to
increase in competitiveness of insurance companies providers by 0.330 units. The findings supported Ana-María, Francisco and
Bernardino (2014) findings that there was a positive on firm‟s performance competitiveness.
A unit increase in focus strategy would lead to a rise in performance of health insurance service providers by 0.879 units.
O‟Brien (2013) that focuses strategy achieves quality function deployment and business processing reengineering.
The results supported Barney & Clark, (2017) the competitiveness of most firms majorly depends on strategies employed. At
5% level of significance and 95% level of confidence, all the variables were significant (p
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Table 12 Beta Coefficients
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 13.753 3.639 3.779 .000
Cost Leadership (X1) .330 .100 .196 3.299 .001
Focus Strategy(X2) .879 .114 .486 7.721 .000
Differentiation Strategy (X3) .468 .111 .274 4.231 .000
Innovation (X4) .393 .108 .216 3.628 .000
The regression model is presented as below:
Y= 13.753 + 0.330 X1 +0.879 X2 + 0.468 X3 + 0.393 X4
8.3.2 Correlation Analysis
A correlation analysis was carried out to establish whether there is a significant relationship between the competitive strategies
and competitive advantage. The results were as presented in Table 13. The results indicated a strong positive correlation between
each of the competitive strategies and competitive advantage. The relationship with focus strategy was the strongest while cost
leadership had the weakest relationship.
Table 13 Correlation Analysis
Competitive
Strategy
Cost
Leadership Differentiation Focus Innovation
(Y) (X1) (X2) (X3) (X4)
Competitive Pearson
1
Strategy Correlation
(Y) Sig. (2-tailed)
N 113
Cost Pearson
.404**
1
Leadership Correlation
(X1) Sig. (2-tailed) .000
N 113 113
Focus Pearson
.685**
.275**
1
Strategy Correlation
(X2) Sig. (2-tailed) .000 .003
N 113 113 113
Differentiation Pearson
.583**
.237*
.401**
1
Strategy Correlation
(X3) Sig. (2-tailed) .000 .011 .000
N 113 113 113 113
Innovation Pearson
.390**
.044 .163 .314**
1
Strategy Correlation
(X4) Sig. (2-tailed) .000 .647 .085 .001
N 113 113 113 113 113
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
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8.3.3 Coefficient of Determination (R2)
The model summary sought to determine whether the correlation coefficient was significant at 5% significance level and also
the extent that each independent variable explained the dependent variable through the coefficient of determination. The table
displays R at 0.810 showing the correlation between the observed and predicted values of the dependent variable. The relationship
between the two values is deduced to be average the adjusted R squared value is 0.643 meaning that 64.3% of the variation
retention (dependent variable) can be explained from cost leadership, focus strategy, differentiation strategy and technological
strategy at 95 percent confidence interval. Table 14 presents the findings on model summary so as to determine whether the
correlation coefficient was significant.
Table 14 Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .810a
.656 .643 4.29270
8.3.4 Analysis of Variance
An Analysis of Variance (ANOVA) was tested so as to determine whether the model was significant at a confidence level of
95%. The overall model relationship was considered significant since F calculated (51.515) is higher than the F critical (value =
2.44) 4 df, 112 df and 0.001 < 0.00 at 5% level of significance.
Table 15 ANOVA
Model
Sum of
Squares df
Mean
Square F Sig.
1 Regression 3797.123 4 949.281 51.515 .000b
Residual 1990.141 108 18.427
Total 5787.264 112
9. Discussion of Key Findings
The researcher sought to find out which were the major challenges the firms within the insurance industry faced in the
implementation of their strategies and their daily operations. The data was collected by was requesting respondents to highlight
the major challenges.
The data findings indicated that the main challenge was price undercutting by the different firms where most prices are
deliberately set below that which has been given by the regulator with an aim of attracting customers. This has led to major price
wars that have left small firms struggling to survive within the market. Another challenge has been the inability to reach
customers especially within the rural areas. Many of the firms in industry do not have a wide branch network and they have not
built their distribution channels and therefore their reach is limited to only the major towns. This has made it difficult to get the
products closer to the customers and in some cases forcing the customers to travel long distances to access the products and
services.
The literature review explored the different types of competitive strategies that firms can adopt and the models for this
competitive strategy with a focus on the porter‟s generic strategies and the Ansoff‟s growth matrix. Porter argues that competitive
strategy means taking offensive or defensive actions to create a defendable position in an industry, to cope with the competitive
forces and thereby yield a superior return for the firm. He highlights three generic strategies that are cost leadership,
differentiation and the focus strategies. Various aspects of these strategies have been utilized within the insurance as shown by the
research findings. The cost leadership strategy is the least popular in the industry while differentiation and focus strategies are
more utilized.
Dynamic capabilities refer to the firm‟s ability to integrate, build and reconfigure internal and external competencies to
address rapidly changing environments (Teece, Pisano, & Shuen, 1997). Firms within this industry focus their resources and
capabilities on ensuring customer needs have been met and their products have been tailored to those needs. By utilizing these
capabilities, they have been able to ensure there is customer loyalty and have built their brand name which is the major sources of
competitive advantage especially since the level of competition is very high in the industry.
Ansoff on the hand argues that for a firm to grow it should adopt one or a mix of four growth strategies. He put forward four
growth strategies that include market penetration, product development, market penetration and diversification. The different
players within the insurance industry have adopted various aspects of each of these growth strategies to gain an edge on their
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major competitors. From the research findings market penetration is the most popular strategy while product development is the
least popular.
Kiragu, (2014) in his study found out that majority of the respondents indicated that distribution channel affected service
delivery levels and that the insurance industry should adopt internet marketing and distribution and recruit more agents
respectively to improve its competiveness through the distribution channels. This is consistent with the research findings of this
study where the researcher found that insurance firms place very little resources and capabilities on developing their distribution
channels for their products. Investment in technology has also not been significantly employed in the industry to aid in
distribution. The insurance industry is facing stiff competition especially among the firms that have been in existence for over five
years and the competition is driven by the existing rivalry. The products in insurance firms are not very varied in terms of their
features and benefits and there is therefore a need for the existing firms to adopt the strategies that will make them superior to
their competitors. This may involve the adoption of one or more competitive strategies that give the firm competitive advantage.
The insurance industry has mainly focused on differentiation, focus and niche strategy and market penetration to gain competitive
advantage.
10. Conclusions and Recommendations
10.1 Conclusions
The study concluded that the competition within the insurance industry is very stiff with most of the respondents rating the
level of competition to be very high. This led to the need for the organization to adopt competitive strategies that will enable them
to remain very competitive in the industry.
The study concluded that due to the nature of the product offering and the industry in general, the focus and niche strategy
seemed to be employed most with most of the products being tailor made to customer needs. Due to the fierce competition the
market development was also employed a lot in a bid to open up new markets for the firms and the industry at large. Being a
service industry, technology was not considered as a competitive advantage but was a major driver in reduction of costs.
The large number of players in the industry and the coming up of new and better products every day meant that price could not
be used as a competitive advantage but there was the challenge of price undercutting that was rampant in the industry. The price
undercutting led to customer hoping from one organization to the other and this made it impossible to determine the actual market
share of the firms. The firms relied more on the loyal customers and a strong brand name as their competitive advantage. The
study also concluded that whichever competitive strategy that an organization employed had a strong relationship to the
competitive advantage that organization would have.
The insurance industry in general should investigate ways of addressing the problem of price undercutting which was pointed
out as one of the major challenges as it meant that the profits were being eroded. The price undercutting also means that the firms
must strive to reduce costs and this may affect the quality of the product offering or the services that accompany it thereof. The
firms should also look into ways of accessing the rural markets or bringing services closer to the people in a bid to increase the
demand side of the business. This would also increase on the product offering taking into account that the needs of this markets
may be different from the current conventional markets being served by the firms.
10.2 Recommendations
The study seeks to make recommendations that will contribute to the body of knowledge, managerial practice and managerial
policy.
10.2.1 Contribution to Body of Knowledge
The study adds more knowledge to existing theories by providing more literature on the market competition and enhances
more information theoretically concerning the effects of strategies on competitiveness of insurance companies in Mombasa,
Kenya. This will enable future researchers to build on the existing research and carry out further research on the same industry or
across another industry.
This study will further increase the knowledge base because it will facilitate the capability to adopt and shift the knowledge
gained from theory into practice through implementation of the competitive strategies not only in the insurance industry but also
across other industries.
10.2.2 Contribution to Managerial Practice
The researcher recommends that management within these insurance firms should delve more in identifying how the strategies
that are least adopted into the industry such as cost leadership and product development can be used to gain an edge over their
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competitors. This is through identifying which aspects of the strategy can be exploited to gain competitive advantage over their
competitors.
This study would also recommend that the firms within this industry should invest more in technology due to the major
developments occurring globally. This will ensure an easier and wider reach of existing and new customers such that they are able
to have access to the products online. Firms can also utilize the social media to create awareness about their products because it
has been widely accepted around the globe as a huge marketing platform.
10.2.3 Contribution to Managerial Policy
The insurance industry has experienced consistent price undercutting among the different players within the industry. This
study recommends the adoption of stricter policies by the regulators such as IRA and AKI that will completely stop these practices
and provide a level playing field especially for the small organizations in the industry.
The study also recommends that organizations within this industry should develop strategic plans that aim at reaching more
customers and creating new markets through establishing more branch networks, partnerships and geographical expansion into
other regions. This will address the issue of the small market share that the industry players are currently fighting for.
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