THE IMPACT THAT COMPETITIVE STRATEGIES HAVE ON COMPETITIVE ADVANTAGES IN THE FAST FOOD INDUSTRY OF BULAWAYO, CENTRAL BUSINESS DISTRICT, ZIMBABWE.

Abstract

ABSTRACT Title: The impact of competitive strategies on competitive advantage in the Fast Food Industry in Bulawayo, Central Business District (CBD), Zimbabwe. Name of Researcher: Duduzile Dephney Dube Name of Advisor: Dr. Barnold A. Baidya, PhD Date of Completion: 24 November 2016 Statement of the Problem It is apparent that there exists stiff competition in the industry and consequently, this study seeks to determine the impact and effect of the competitive strategies as drivers to achieving competitive advantages for the fast food companies in Zimbabwe with particular focus on Bulawayo outlets. From the literature reviewed, while challenges facing the industry have been covered, no study has covered the competitive strategies taken by fast food chains to gain competitive advantages in Zimbabwe. Most of the studies have focused on firm’s competitive environment. Thus, a gap of knowledge is left in the area of the competitive strategies impact on the competitive advantage as experienced by fast food players in Zimbabwe. This research study therefore seeks to answer the question “how are the fast food players in Zimbabwe able to harness and maintain competitive advantage in this highly-contested market?” Research Methodology The research design used for this research was a hybrid, i.e. it used 90% quantitative research design (descriptive) for statistical inference and 10% qualitative research design (exploratory) to get further understanding. Primary data was gathered from the responses to the questionnaire sent to 97 Fast Food Outlet managers that represented a total population of 127 Fast Food outlets managers in Bulawayo CBD, Zimbabwe. The variables were measured on a five point Likert scale and data was analysed using descriptive statistics obtained using the Statistical Package for Social Sciences Software (SPSS). Findings of the Study The findings of the study were as follows: 1. The research findings show that Fast Food Outlets apply the low cost strategy in their marketing mix and that these low prices have an effect on the organizations profit margins. In the analysis of how cost advantages affect competitive advantage the study confirmed this with the variables “the organizations offer low cost products of acceptable quality” with a mean of 4.12 and a standard deviation 0.74 as well as the variable “Low prices affect organizations profit margins had a mean of 3.86 and a standard deviation of 0.89. A Pearson correlation done between competitive advantages (dependent variable) against other factors of cost advantage revealed a positive and significant relationship thereby confirming that indeed the variables are heavily loaded on the positive side implying that most of the fast food outlets are cost effective. The overall mean of 4.007 and a standard deviation of 0.8225 indicated that the impact of using the cost strategy has a high average ranking impact on gaining competitive advantage in the Fast Food Industry in the CBD of Bulawayo, Zimbabwe. 2. The research findings prove that product differentiation also has a high impact that can enhance competitive advantage to some extent. The most significant component of product differentiation was the element of uniqueness which had the highest average score of agreement (4.28) and a standard deviation of 0.718. An overall grand mean of 4.067, which is higher than 3 was observed, and an overall standard deviation of 0.781 showing that most of the study participants generally also agreed that the differentiation strategy also has a high impact on achieving a competitive advantage in the Fast Food Industry in CBD Bulawayo, Zimbabwe. 3. It is evident from the research findings that the majority of the Fast Food Outlets have the necessary skills to introduce new products in the market. From the observation and analysis of the elements of diversification, the grand mean is relatively higher than the scale median, but it is relatively lower (3.982) as compared to the grand means for the previous variables of cost and differentiation and a standard deviation of 0.8381. This then implied that although the diversification strategy has a high impact on gaining competitive advantage, its impact is relatively lower than the cost strategy and differentiation strategy. 4. All the incorporated factors of Cost, Differentiation and Diversification were positively related to Competitive Advantage as shown on the Model Coefficients table. This implies that the best way for organizations to be competitive in the fast foods industry in Bulawayo is to attend to Cost, differentiation and diversification in their respective order. This was shown on the table that a 100% rise in cost effectiveness expected to enhance Competitive Advantage by 46% and the same effect on differentiation and diversification would raise Competitive Advantage by 26% and 35% respectively. 5. Organisations are also considering other variables that are enhancing or leading to Competitive Advantages in the Bulawayo market to fully take advantage of the market and increase profits and the market share. The fact that there other variables leading to Competitive Advantage is seen with the high adjusted R-Square of 86.3% implying that Cost, Differentiation and Diversification have a 86.3% effect on achieving Competitive Advantage. This then translated to that there is 15% which is not contributed by the 3 factors that organisations are further identifying to achieve maximum Competitive Advantage. Conclusion The means and standard deviations for all the three competitive strategies show that they all have a high impact on gaining competitive advantage. This study revealed that most firms offer low cost products of acceptable quality and the various fast food restaurants have managed to reduce overhead costs over time. Furthermore, offering very low priced products has negative impact organizations profit margins. The procurement function plays a pivotal role in harnessing competitive advantage hence the research noted that cost advantages do really accrue from bulk purchases. The respondents however were uncertain if low cost strategy in the industry had minimized the number of new firms entering the industry or not. This was important because in a monopolistic competition structure as in the fast food sector, Aulakh et al (2000) established in his research, that if several firms in an industry apply cost-leadership techniques effectively then being a cost-leader does not generate a sustained competitive advantage for a company and organisations would need to dwell on other strategies to gain competitive advantage. This study also revealed that applying the differentiation strategy will gain Competitive Advantages however the issue of other organisations imitating and coming up with “me-too” products needs to be considered as supported by similar conclusions drawn by Nolega, et al. (2015) who identified that to achieve aggressive advantage in the marketplace, it is always important that firms pursue techniques that are tough for competition to copy. Strydom (2014) states that it is advantageous to differentiate on several sources which then would translate greater barriers of defence. An analysis of the findings from the research study also indicated that Fast food restaurants have all the necessary skills to introduce new products while at the same time having the leverage of premium pricing thereby improving revenues. Another key development from the study is that new products have the attraction, thereby increasing customer attention towards the products. Recommendations It is therefore recommended based on the findings that: 1. As far as cost saving is a form of competitive advantage the fast food restaurants need to not only focus on being a lowest cost management compared to competitors but also have in mind the fact that their customers not only value low prices but are concerned in the quality of products offered. 2. Due to changes that are taking place in customers taste and preference, fast food restaurants should continue to differentiate their products. Through this they will be able to compete in other areas other than price, able to focus on quality and create brand image hence creating customer loyalty and achieving a competitive advantage. 3. Fast food restaurants should create brand loyalty for new products. Through this, they will be able enhance customers perception about their products, increase their profit and create value for customers. Customers will also be able to recommend other customers to their restaurant. Recommendations for Further Study According to the literature reviewed, competitive strategies have an impact on Competitive Advantages in the Fast Food Industry in Bulawayo, CBD, Zimbabwe. However, this study only looked at the three factors which were cost, product differentiation and diversification. The researcher recommends further studies to be done to reveal other effects of strategic response on Competitive Advantage of fast food restaurants in Bulawayo as also indicated by the R-square of 86.3% which showed that these three strategies are not all the strategies that will lead to Competitive Advantage but there are other factors and variables that lead to Competitive Advantage.