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Competitive advantage strategies employed by Tour firms in Kenya: Theoretical insights
Nahida Athman1
School of Business, University of Nairobi
P.O Box 85136-80100, Mombasa, Kenya
Correspondence email: [email protected]
1
Abstract
To remain relevant amidst ever flooded tour sector, competition among tour operators has also
pitched high above the ceiling. There is therefore, need for tour firms to initiate strategies and
measures that will sustain them in a competitive position. Strategies employed are informed from
theoretical positions, which form the basis of this paper discussion. The discussion covers resource
based theory, knowledge based theory and capability theory, as relates to tour firm operations for
competitive advantage gains. The paper concludes by emphasizing the need for investment in human
capital to enable innovation and implementation of tools for competitive advantage.
Keywords: Competitive advantage, Strategy, Tour firms, Theory, Kenya
order to generate above normal returns and a
sustainable competitive advantage (Barney,
1991) and knowledge based theory considers
knowledge as the most strategically significant
resource of a firm, because knowledge based
resources are usually difficult to imitate and
socially complex, heterogeneous knowledge
bases and capabilities among firms are the major
determinants of sustained competitive advantage
and superior corporate performance.
Tour operators function as intermediaries in
the tourism distribution system linking products
and consumers to each other. Tour operators
handle all the details of foreign travel for
example, air ticket purchase, accommodation,
and transfers from and to airport and itineraries.
Tour operators in Kenya are registered by Kenya
Association of Tour Operators while travel agents
are registered by Kenya Association of Travel
agents. The Kenya Association of Tour Operators
is Kenya's foremost tourism trade association,
representing the interests of over 250 of the
leading and most experienced professional tour
operators in Kenya. Members are amongst the
finest safari operators in the world, and offer a
wide range of services. The Kenya Association of
Travel Agents (KATA) is a membership based
organization that represents the interests of
Travel Industry in Kenya and other interested
parties. Kenya Association of Travel Agents
works to enhance and improve the Travel
1.0 Introduction
Competitive advantage is an edge over rivals in
attracting customers and defending against
competitive forces (Porter 1990). It is achieved
through superior profits in the industry and
maintaining them. To succeed in building
competitive advantage a company must aim at
providing buyers with what they perceive as
superior value through prices lower than
competition. Since business environment is
dynamic, firms need to review their competitive
strategies on periodic basis. The review is
necessary to ensure that firms only invest in the
strategies that can make their business improve
performance and have competitive advantage.
The paper is anchored on dynamic of tour firm
capabilities, knowledge based view and a
resource based approach to management to lend
a firm a competitive advantage. Dynamic
capabilities are the ability of a firm to create new
capabilities and renew its resource base from
within and outside the firm in order to adapt to a
changing business environment (Teece et al,
1997). Peppard et al (2006) found that dynamic
capabilities are developed and renewed through
continuous internal activities such as in house
innovations, human resource activities, learning
activities and external activities with partner s
through collaborations and acquisitions. On the
other hand, a resource based view advocates for a
firm to utilize its resources and capabilities in
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Current Issues in African Tourism Research Vol 2 (1) pp 1-9 Copyright: © 2015 - ISSN: 2518-0363
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Industry business climate in Kenya by promoting
the services of Travel Agents to the general
public and protecting the rights of Travel Agents
(KTF 2015).
1.2 Tour operators in Kenya
The tour and travel industry is one of the largest
and expanding industries in the world because of
an increase in the interaction between different
countries and the development of commerce and
investments across borders (KATA, 2014) .The
travel industry includes Hotels , Camps and
lodges for accommodation .Restaurants, bars ,
canteens for services while buses, taxis , airplanes
, ferries, cruises used for transport and tour
operators , car rental agents and travel agents are
for the arrangements. KATOs vision is to be a
leading Tourism Trade Association in the
Region, offering world class services through its
members to the traveling public. Its mission is to
uphold the good reputation of Kenya as a tourist
destination by ensuring that Kenyan Tour
Operators maintain the highest possible standards
of service and value. Tour operator activities can
be broadly divided into air safaris, incentive
travel group safaris, custom safaris for individual
travellers, camping safaris, Indian Ocean and
Coast holidays cultural and community safaris,
golf Safaris, agro Safaris and Special interest
safaris.
Kenya Association of Tour Operators also
gives agents and individual clients alike the
confidence of knowing that Kenya has
mechanisms designed to consider the possible
redress of any wrongs which a client may have
suffered. It also recommends certain standards
which the government might consider in
determining whether or not to grant or renew the
license of an operator. To provide means for the
Association’s members to seek protection or
redress in any dispute either with another member
or a non-member of the association (KATO
newsletter,2015). KATO also endeavours to instil
a spirit of unity and loyalty to each other amongst
members of the association.
KATA was registered in 1979 under Section
10 of the Societies Act after its forerunner, the
East African Society of Travel Agents, which was
in existence for 22 years was disbanded due to the
collapse of the East African Community. The
association is a member of UFTAA, the
Universal Federation of Travel Agents'
Association and cooperates closely with the
Ministry of Tourism, Ministry of Transport,
Kenya Tourist Board (KTB), Kenya Utalii
College (KUC) and the Civil Aviation Board
1.1 Competitive advantage matrix
Anoff (1957) presented the matrix that focused
on the company’s present and potential future
products or areas of engagement. The matrix
shows practitioners to consider ways with four
possible product/market combinations to grow
the business via existing and/or new products, in
existing and/or new markets. The matrix consists
of four strategies which are set out in a four-box
matrix that depicts the logical combination of two
available positioning variables existing and
potential products against existing and potential
markets as market penetration, market
development,
product
development
and
diversification (Harvard Business review, 1957).
Porter (1980) the corporate strategist goal is to
find a position in the industry where the company
can best defend itself against the five competing
forces. Knowledge of the underlying five
competitive forces provides the groundwork for a
strategic agenda of action because they constitute
industry structure and it is from industry analysis
that the firm is able to determine its best
competitive strategy. They highlight the critical
strengths and weaknesses of the company and
industry trends promising to hold the greatest
significance as either opportunities or threats.
A scheme developed by Porter (1985) noted
that any long term strategy should derive from a
firms attempt to seek a competitive advantage
based on three successful generic strategies.
These are overall cost leadership, differentiation
and focus. Low cost leaders depend entirely on
some fairly unique capabilities to achieve and
sustain their low-cost position. Strategies
dependent on differentiation are designed to
appeal to customers with specific attribute. A
focus strategy, whether anchored in a low-cost
base or differentiation base, attempts to attend to
the needs of a particular market segment. In
adopting a particular strategy an organization
must first decide on the core idea on how best it
can compete in the market place in its strategic
orientation.
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(CAB). It also plays an important role in the
private sector bodies such as the Kenya Tourism
Federation
(KTF),
Board
of
Airline
Representatives (BAR), Kenya Association of
Tour Operators (KATO), Kenya Hotelkeepers
and Caterer's Association (KAHC) and The
Kenya Private Sector Alliance (KEPSA).With a
Secretariat in Nairobi, KATA has members in
Eldoret, Kisumu, Lokichogio, Malindi, Mombasa
and Nairobi (KATA newsletter, 2014).
KATA is run by a full time secretariat with a
Chief Executive Officer and an Executive
Committee comprising senior working members
of the Travel industry. The executive committee
is mandated by the constitution to oversee the
overall management of the association and ensure
implementation of the associations' vision. The
Executive Committee meets monthly and also on
a need basis to deal with the myriad issues that
present themselves to the Travel Agents.
(Hoskisson et al. 1999), the focus was on the
internal actors of the firm. Researchers such as
Ansoff (1965) and Chandler (1962) made
important contributions towards developing the
Resource -Based View of strategy (Hoskisson et
al. 1999). From the 1980s onwards, according to
Furrer et al. (2008), the focus of inquiry changed
from the structure of the industry, example,
Structure Conduct Performance (SCP) paradigm
and the five forces model) to the firm’s internal
structure, with resources and capabilities (the key
elements of the Resource Based View (RBV).
Since then, the resource -based view of strategy
(RBV) has emerged as a popular theory of
competitive advantage (Furrer et al. 2008;
Hoskisson et al. 1999). The origins of the RBV
go back to Penrose (1959), who suggested that the
resources possessed, deployed and used by the
organisation are really more important than
industry structure.
The term ‘resource -based view’ was coined
much later by Wernerfelt (1984), who viewed the
firm as a bundle of assets or resources which are
tied semi-permanently to the firm (Wernerfelt
1984). Prahalad and Hamel (1990) established
the notion of core competencies, which focus
attention on a critical category of resource a
firm’s capabilities. Barney (1991) also argued
that the resources of a firm are its primary source
of competitive advantage. According to Ramos
Rodríguez and Ruíz Navarro’s (2004)
bibliometric study of the Strategic Management
Journal over the years 1980 2000, the most
prominent contribution to the discipline of
strategic management was the Resource Based
View of strategy. In addition, the papers written
by Wernerfelt (1984) and Barney (1991) are the
two most influential articles in strategic
management research (Ramos Rodríguez & Ruíz
Navarro 2004). Early researchers simply
classified firms’ resources into three categories:
physical, monetary, and human (Ansoff, 1965).
These evolved into more detailed descriptions of
organisational resources (skills and knowledge)
and technology (technical know-how) (Hofer &
Schendel 1978). Amit and Shoemaker (1993)
proposed an alternative taxonomy involving
physical, human and technological resources and
capabilities. Lee et al. (2001) argued for a
distinction between individual level and firm
level resources.
2.0 Theoretical foundations
According to Porter (1985), competitive strategy
aims to establish a profitable and sustainable
position against forces that determine industry
competition. Johnson and Scholes (2006) argue
that competitive strategy is the basis on which a
business unit might achieve competitive
advantage in its market. Johnson, Strickland and
Gamble (2007), pp 133, argue that a company’s
competitive strategy deals exclusively with
specifics of management’s game plan for
competing successfully, its specific efforts to
please customers, its offensive and defensive
moves to counter the manoeuvres of its rivals, its
responses to whatever market conditions prevail
at the moment, its initiative to strengthen its
market position and its approach to securing
competitive advantage vis-s-vis rivals. Herein,
three selected theories for competitive advantage
are discussed within the context of tour
operations in Kenya.
2.1 Resource based theory
The resource based view of the firm (RBV) draws
attention to the firm’s internal environment as a
driver for competitive advantage and emphasises
the resources that firms have developed to
compete in the environment. During the early
strategy development phase of Hoskisson’s
account of the development of strategic thinking
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a firm’s internal assets and capabilities. The
assets in question could be physical assets,
knowledge assets (intellectual capital) as well as
human resources, which in turn determine the
capabilities of a firm. Maier and Remus (2002, p.
110) use the term ‘resource strategy’ and define
three steps in a firm’s resource strategy
competence creation, competence realisation and
competence transaction. Competence creation
defines and analyses the markets, product and
service. Competence realisation involves the
execution of services, procurement, and product
ion. Competence transaction involves market
logistics, order fulfilment and maintenance
(Maier & Remus 2002). Some researchers (Del
Canto & Gonzalez 1999; Lockett & Thompson
2001; Ray et al. 2004) distinguished between
tangible and intangible resources and conclude
that intangible resources are often the most
important ones from a strategic point of view.
They argue that intangible resources are more
likely to be a source of sustained competitive
advantage rather than tangible ones.
Other researchers (Barney & Wright 1998;
Prahalad & Hamel 1990) treated human resources
as the most valuable type of resource. Prahalad
and Hamel (1990) argued that these should not be
‘locked’ inside a business unit but should be
available for reuse by other parts of firm
wherever a potential use yielding higher returns
can be identified. Ray, Barney and Muhanna
(2004) understood the difficulties for a firm to
change its resources. They suggest that
redesigning a firm’s processes, activities and
routines can enable efficient and effective usage
of resources and capabilities that can achieve
sustainable competitive advantage. It has been
argued that the RBV ignores the nature of market
demand and only focuses on internal resources
(Hooley et al. 1996). Some authors (Andrew
1971; Chandler 1962, among others) argued that
external and internal elements cannot be
separated. Maier and Remus (2002) defined the
concept of ‘fit’ as a balancing act between the
external oriented MBV and the internal -oriented
RBV. Amit and Schoemnaker (1993) point out
the important link between the firm’s internal
resources and its external market conditions.
Dyer and Singh (1998) as well as Wang (2004)
suggested that the link between the individual
firm and the network of relationship in which the
Miller and Shamsie (1996) classified
resources into two categories: property based and
knowledge based. Barney (1991) suggested that
other than the general resources of a firm, there
are additional resources, such as physical capital
resources, human capital resource and
organisational capital resources. Later, Barney
and Wright (1998) add human resource
management related resources to this list of
additional resources of a firm. These resources
can be tangible or intangible (Ray et al. 2004).
Wernerfelt (1984) also discussed that resources
might be tied semi-permanently to the firm.
Barney (1991) drew attention to ‘all assets,
capabilities, organizational processes, firm
attributes,
information,
knowledge
etc.,
controlled by a firm that enable the firm to
conceive of and implement strategies that
improve its efficiency and effectiveness’.
Ultimately, firms that are able to leverage
resources to implement a ‘value creating strategy
not simultaneously being implemented by any
current or potential competitor’ (Barney 1991)
can achieve competitive advantage. Researchers
subscribing to the RBV argue that only
strategically important and useful resources and
competencies should be viewed as sources of
competitive advantage (Barney 1991). They have
used terms like core competencies (Barney 1991;
Prahalad & Ham el 1994), distinctive
competencies (Papp & Luftman 1995) and
strategic assets (Amit & Shoemaker 1993;
Markides & Williamson 1994) to indicate the
strategically
important
resources
and
competencies, which provide a firm with a
potential competitive edge. Strategic assets are,
‘the set of difficult to trade and imitate, scarce,
appropriable and specialized resources and
capabilities that bestow the firm’s competitive
advantage’ (Amit & Shoemaker 1993). Powell
(2001) suggested that business strategy can be
viewed as a tool to manipulate such resources to
create competitive advantage.
Core competencies are distinctive, rare,
valuable firm level resources that competitors are
unable to imitate, substitute or reproduce (Barney
1991; Prahalad & Hamel 1994).Distinctive
competencies refer to all the things that make the
business a success in the marketplace (Papp &
Luftman 1995) Wang (2004) outline an approach
to firm level analysis that requires stocktaking of
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firm is embedded is important for competitive
advantage. Wang (2004) suggested that an inter organisational level view is useful to analyse
business relationships, since neither the RBV nor
the MBV address this specific aspect. Dyer and
Singh (1998) pointed out, in relation to the RBV
and MBV, that, ‘the fact that there are clear
contradictions between these views suggests that
existing theories of advantage are not adequate to
explain
inter-organizational
competitive
advantage’.
and easily valued; balance sheets where people
are a residual resource, not a core one’’. In the
knowledge intensive companies knowledge
workers, however, prefer performance oriented
methods (Sadler,1988) and/or task driven
organization of work processes (Beer et al.,
1990). Continuous changes in the state of
knowledge
produce
new disequilibrium
situations and, therefore, new profit opportunities
(Jacobsen, 1992), and they do so at an increasing
pace. Unfortunately for many companies, so does
imitation, creating a dynamic competitive
process. Thus, as the competitive process
eliminates an opportunity, changes in the stream
of knowledge produce other opportunities. This is
in line with Schumpeters vision of competition as
‘‘a process of creative destruction’’, rather than
as a static equilibrium condition (Mahoney &
Pandian, 1992). Consequently, there is an
increasing emphasis on a knowledge based
economy (Quinn, 1992; Drucker, 1993; Nonaka
& Takeuchi, 1995; Leonard-Barton, 1995). This
unending stream of knowledge keeping markets
in perpetual motion, calls for companies to
execute
continuous
improvements
and
continuous innovation, while simultaneously
limiting imitation.
Knowledge has special characteristics that
make it the most important and valuable resource.
Hamel and Prahalad (1994) argue that
knowledge, know how, intellectual assets and
competencies are the main drivers of superior
performance in the information age. Evans
(2003) and Tiwana (2002) also suggest that
knowledge is the most important resource of a
firm. Evans (2003) pointed out that material
resources decrease when used in the firm, while
knowledge assets increase with use. Tiwana
(2002) argued that technology, capital, market
share or product sources are easier to copy by
other firms while knowledge is the only resource
that is difficult to imitate. Grant (1996) argued
that there are two types of knowledge:
information and know how. Beckmann (1999)
proposed a five level knowledge hierarchy
comprising data, information, knowledge,
expertise and capabilities. Zack (1999) divides
organisational knowledge into three categories:
core knowledge, advanced knowledge, and
innovative knowledge. Core knowledge is the
basic knowledge that enables a firm to survive in
2.2 Knowledge based view theory
Hyper competition, a situation which is
characterized by short periods of advantage
punctuated by frequent disruptions (D’Aveni,
1994) are altering the ground rules for
competition. Companies are increasingly
realizing, on the one hand, that the basis for their
competitive advantage is their knowledge base
(Sveiby, 1997), and on the other hand, that
innovation is paramount for the sustainability of
these advantages. ‘‘Innovation, that is the
application of knowledge to produce new
knowledge’’ (Drucker, 1993, p. 173). Hence,
better use of existing knowledge and more
effective acquisition and assimilation or new
knowledge becomes the business imperative
(Thurow, 1996). ‘‘Increasingly, developing and
managing human intellect and skills, more than
managing and deploying physical and capital
assets, will be the dominant concern of managers
in successful companies’’ (Quinn, 1992).
Archibugi and Michie (1995) argue that
contemporary economic systems have become
more ‘‘knowledge intensive’’ than in the past.
Knowledge-intensive companies are described by
Sveiby (1997) in the following way: ‘‘most
employees of knowledge companies are highly
qualified educated professionals that are they are
knowledge workers. Their work consists largely
of converting information to knowledge, using
their own competencies for the most part,
sometimes with the assistance of suppliers of
information or specialized knowledge. These
companies have few tangible assets. Their
intangible assets are much more valuable than
their tangible assets’’. But Fruin (1997) still says:
‘‘Western management is mostly concerned with
efficient use of tangible resources, etc. These are
things that can be counted, routinely depreciated,
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the market in the short term. Advanced
knowledge provides the firm with similar
knowledge as its rivals and allows the firm to
actively complete in the short term. Innovative
knowledge gives the firm its competitive position
over its rivals. The firm with innovative
knowledge is able to introduce innovative
products or services, potentially helping it
become a market leader (Zack 1999).
et al. (2001) discussed the influence of internal
capabilities and external networks on firm
performance.
3.0 Theoretical aspects in strategic moves by
tour firms
Theories discussed in previous section emphasize
strategies based on resource, intellectual assets
and capability.
A resource strategy requires that a tour firm
invests in property and human capital as key
resources. However, this has been critiqued as not
providing sufficient back up to illustrate
competitive moves at firm level (see Andrew,
1971; Chandler, 1962; Hooley et al. 1996; Maier
and Remus, 2002), so this study didn’t delve
much into it. Nevertheless, human capital, a
component of the resource strategy is a key asset
in the other two theories discussed in this section.
For the knowledge based angle in strategy,
intellectual assets are key to innovations which
will give a tour company a competitive edge. At
the moment of study, tour firms were keen
competitive advantage as directed by social
media use, and this was enabled by recruiting
social media strategists to firms.
Figure 1 shows the position of Social Media
Strategist among tour Firms in Kenya. This was
aimed at determining the effectiveness of social
media adoption in creating competitive
advantage of the tour firms.
2.3 Capability based view theory
Grant (1991) argued that capabilities are the
source of competitive advantage while resources
are the source of capabilities. Amit and
Shoemaker (1993) adopted a similar position and
suggested that resources do not contribute to
sustained competitive advantages for a firm, but
its capabilities do. Haas and Hansen (2005), as
well as Long and Vickers Koch (1995), supported
the importance of capabilities and suggest that a
firm can gain competitive advantage from its
ability to apply its capabilities to perform
important activities within the firm. Amit and
Shoemaker (1993,) defined capabilities in
contrast to resources, as ‘a firm’s capacity to
deploy resources, usually in combination using
organizational processes, and effect a desired
end. They are information based, tangible or
intangible processes that are firm -specific and
developed over time through complex
interactions among the firm’s resources’. Teece
et al. (1997) define dynamic capabilities as, ‘the
firm’s ability to integrate, build, and reconfigure
internal and external competencies to address
rapidly changing environments’. Grant (1996)
defines organisational capability as, ‘a firm’s
ability to perform repeatedly a productive task
which relates either directly or indirectly to a
firm’s capacity for creating value through
effecting the transformation of inputs to outputs’.
Grant (1996) also divides capability into four
categories: cross functional capabilities, broad
functional
capabilities,
activity
related
capabilities and specialised capabilities. Sirmon
et al. (2003) stressed the importance of
organisational learning. They suggest that
capabilities and organisational learning implicitly
and explicitly are a part of any strategy within a
firm. It has been argued (Zack 1999) that the
ability to learn and create new knowledge is
essential for gaining competitive advantage. Lee
Position of Social Media
Strategist
Yes
No
Unmarked
Figure 3.1: Position of social media strategist
in tour firms, Source: Primary Data, 2015
From figure 3.1 the researcher aimed at finding
out whether tour firms in Kenya possessed a
social media strategist. The results found out that,
tour firms recorded having a high outlook 87% in
the provided media platforms in figure 1 above.
However, 6 firms representing 11.3% of the
respondent population recorded inappropriate
social media strategy office or representative.
The social media strategist platform is an option
perpetuated by the tech- savvy folks to ease their
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deliverables in the respective operating
departments. 46 respondents representing 87% of
the firms recorded having established a social
media strategy office.
Lastly, capability relates to powers to
implement processes that create competitive
edge. This strategy can also be viewed through
the lens of social media adoption. Are tour
companies ready to implement this strategic
move? The researcher presented a questionnaire
to the respondents that aimed at finding the
popularity of social media among respondent
from tour Firms in Kenya.
Interval of social sites
updates
14
12
10
8
6
4
2
0
Popularity of social media
9%
Figure 3: Interval of social media sites updates
among firms, Source: Primary Data, 2015
Yes
91%
No
With the technical equipment and know how in
their respective duties in the firms, there was a
considerable effort to keep the clients updated on
operational challenges and successes in the day to
day running of firms. Also considered was the
timeliness of the updates.11.7 % of the
respondents used whatever was at their disposal
to update customers and visitors to their social
marketing sites after every 6 hours.23.5%
updated their sites after every 24 hours, 5.8%
made updates every week, while 3.9% made
updates every month.3.9 % abstained from
specifying their social media updates interval.
Another aspect relating to this theory is the
implementation of real time communication on
social media. Study respondents were also served
with a questionnaire aimed at determining the
influence of real time communication via social
media towards achieving competitive advantage
of the tour firms.
Table 3.1 shows the output on real time
communication on social media on the
competitive advantage of an organization.
Figure 3.2: Popularity of social media among
respondent firms, Source: Source: Primary
Data, 2015
Figure 3.2 illustrates the popularity of social
media adoption among the tour firms in the study.
This was to determine the effect of adopting
social media strategy in creating competitive
advantage of the tour firms. Social media was
considered most popular by the respondents
given the World Wide Web offering momentary
touch with those millions of miles away. As
displayed in figure 4.8 above, 91 % the
respondents at least had a computer or a smart
phone. Moreover, all the respondents were
subscribed to at least one social media site. Only
9% subscribed that social media was not very
popular.
The study further sort to find out the interval
of social media sites updates among tour firms in
Kenya as shown in figure 3.3
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Table 1: Real time communication on social
media on the competitive advantage of an
organization
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Source: Primary Data, 2015
Of the four factors that have effect real time
communication on social media competitive
advantage, Company making full use of social
media as compared to rest of the predictors (Real
time communication increase sales, Website
updated regularly, Company communicates
regularly with clients) had the highest mean score
of 3.81 and sum score of 202.
With the median being 4.00 it means that the
respondents agreed that real time communication
on social media give the company the
competitive advantage in the market.
4.0 Conclusion
Theoretical insights informing strategic moves
for competitive advantage all point to human
capital as a critical asset. The resource based
strategy highlights that physical assets and human
resources are much needed for competitive
moves. The knowledge based resource theory is
adamant on intellectual assets to bring in
innovations as a strategic move. Lastly, the
capability angle is all about implementation of
projects and processes to win over competition,
and this is effected by competent staff. Specific
focus on tour firms in Kenya reveals that
companies were aware of role of human capital in
strategic endeavours. For instance, adoption of
social media was viewed as a way of gaining
competitive advantage over other firms.
Consequently, most firms implemented the
adoption process, and their consistency was
enabled by special staff recruited as social media
strategist. Thus companies should not only focus
their investment in property, but adequate
considerations should be in place for investment
in human capital.
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