Michael E Porter, professor Harvard Business School, visited Kenya for the first time in 2007, and held a seminar at the Strathmore Business School. But today, I wonder aloud how relevant his most famous work applies to Kenya?

You see at only 26 years of age, the young professor earned his PhD in Business Economics from Harvard and 6 years later (in 1979) developed his famous business strategy framework - Porter's five forces:

attractiveness of industry determined by rivalry, substitutes, buyer power, supplier power, and new entrants


But in Kenya, the biggest and by far most uncertain factor is GOVERNMENT. I read the headlines of the East African and Business Daily today with empathy:
1. How does government decide in one fell swoop to award market dominance to a laggard in the sector of fibre optic and data business?
2. How does government decide to perpetuate the same monopoloy by giving preference to a crippled player in all future government data contracts?
3. How does government hand over majority ownership of TEAMS - a telecom competitors joint venture - to one player at the expense of all the others?
4. How does government hand over, in a silver platter, management of taxpayers nationwide fibre backbone and trust it will be managed competitively?

All the while:
5. Instituting lopesided legislation to "improve competitiveness" in the telecoms sector
6. Insisting acquisition of small telecom companies - shells issued with licenses/spectrum by same government - require their approval so as to eliminate speculators


Business made in Kenya I tell you; business made in Kenya.

How the French got their way in battle for Telkom Kenya
Tough rules for buyers of telecoms companies

The French are not above paying bribes... see Turkwell Gorge Dam... and Kenyan politicians are effing corrupt...

They would even demand bribed from their mothers...

Well, what you seem to be referring to is political risk. With every risk one has to decide how much his business can take. In Kenya political risk is very high but alot of MNCs still make it here. They play the field using the rules as they find them.
If a certain sector is undermined by poor government policy eventually no business will thrive there so the government will be forced to do something about it. At the exact time that they enact reforms a new entrant will come in and do very well.
So its all about risk and timing. The five forces model then applies after these have been considered.

Mugunda, your observations are spot on. Why do West and South Africa lead Kenya in the banking industry? My take is that, what we have had in Kenya as banks before Equity are foreign owned multinationals, I observed in Nigeria that Std Chartered and Barclays have a very small presence and even were not as popular as Eco, IBE, Oceanic etc which are all local. Down south the same story.

For a long time we've tended to depend too much on "foreign investors" that we have forgotten that e.g E.A Inidustries (Unilever) products "made in Kenya" cannot pass as genuinely Kenyan products. This has somehow resulted in slow growth of local industries/businesses to match other countries in the continent. As for telekoms/mobile telephony, West, South Africa and indeed the world is looking up to Kenya - Safaricom are the trail blazers.

@VituVingiSana, very many factually correct assertions. But would you say EABL is foreign just because of Diageo? What about Equity and all their help from European Union, China, Helios? Or Scangroup with WPP?

I said Kenyan bred because:
-company was started in Kenya
-is run by Kenyans in toto except the 2
-is patronised by Kenyans in toto
-if transplanted from Kenya to elsewhere, wouldn't work the same

By the way, as a matter of investment, I'm personally leaning on companies that are Kenyan bred, with some international oversight - the best of both worlds in this global village.

@Rahatupu, good stuff. And for the record: In last year’s edition of the ABA, Equity Bank won the prestigious African Business of the Year award.

@VVS, agreed. Your comment on value reminds me of when Sunny Bindra recently wrote about a CEO who used the fact that a competitor had come into the country to scare the living daylights out of his team.

Only he knew competitor was weak, but he used the 'crisis' to shake up status quo and pull them up by their bootstraps. International companies do the same when local companies expect blind patriotism.

@Muganda

I agree in part to Prof. Porter's assertions. The biashara's you are referring to involve players from the 10 millionaires club; Porter's model applies to the 10 million beggars.



90% of us MME's (Micro & Miniscule Enterprises) are left to fight over the scraps from the big boys' table! The only government interference we encounter is the budget (consequences of which are duly passed on to the hapless consumer) or local government.

Any OTHER government interference is duly decimated by price wars, something we River Road types are experts at (remember Posta Corporations pathetic attempt at the Cyber Cafe market? Boy, was that a cropper!).

@Muganda.

Hapo umenena mzee. I agree...in part.

Kenya's Jua Kali should be a discipline in itself. In the face of Nyayo-nomics/Kibaki-nomics, this sector thrived initially with zero regulation/ assistance during Nyargei's nightmarish regime...and with enough red tape/ taxation during Kibaki's sleepy reign.

South Africans, Nigerians and other foreigners have come, set up shop and left in shock as mama mbogas, exhibitions and 2-bit print shops continue to mushroom in downtown Nairobi to this day.

Bottom line? This one-man-show outfits respond more to market forces than government regulation, and, often times, do not mature beyond sole proprietorship. One should note too that tertiary education in this sector is worth crap - street smarts, dexterity and creativity rule; I should know...I learned this the hard way!

When all's said and done, I DO agree with you (in general) that the six-forces law applies because the informal sector experienced its sweetest years during Kibaki's first term, thanks to policies that boosted micro-finance AND goodies that trickled down from the big kahunas.