Competitive Strategies and Financial Performance of Telecommunication Firms in Kenya: A Case of Safaricom PLC.

Abstract

The telecommunications industry exhibits intense competitiveness. Despite its market leadership, Safaricom's financial performance has shown signs of decline, particularly in its call revenue, net profit, and stock price. For instance, the company's net profit dropped from KES 62.74 billion in FY2023 to KES 35.38 billion in FY2024, indicating a substantial decline attributed to various macroeconomic factors and operational challenges. The decline in Safaricom's financial performance can be partially attributed to the intensified competition from local and international players as well as lack of effective competitive strategies. Thus, the purpose of the study was to evaluate the effect of competitive strategies on the financial performance of Safaricom PLC. The study objectives were to determine the competitive strategies adopted by Safaricom PLC, examine the level of financial performance of Safaricom PLC, to evaluate the extent to which competitive strategies influences financial performance of Safaricom PLC and determine key challenges facing Safaricom PLC in implementation of their competitive strategies. This study was anchored on the resource-based theory, porter’s competitive advantage theory and institutional theory. This study used embedded mixed research design and 158 senior and middle level management employees at Safaricom PLC formed the target population of this study. The study used stratified sampling to get a sample size of 113 senior and middle level management employees of Safaricom PLC from various departments. To gather information, the study used semi-structured questionnaire. The researcher conducted pretest study among 10 management level employees at Airtel Kenya to test validity and reliability of the questionnaire. Data analysis employed descriptive, inferential and content analysis methods. Ethical guidelines were strictly followed throughout the study. The study results established that Safaricom PLC employs a mix of competitive strategies; which includes cost leadership strategy; differentiation strategy and focus strategy which has an effect on its financial performance. The study concludes that cost leadership strategy (β1 = 0.261, p=0.000<0.05) differentiation strategy (β2 = 0.152, p=0.004<0.05) focus strategy (β3 = 0.116, p=0.001<0.05) has a positive and significant influence on the financial performance of Safaricom PLC.The study also concludes that the primary challenges hindering the effective implementation of competitive strategies at Safaricom PLC are external factors, notably regulatory pressure and market conditions. The study further concludes that Safaricom PLC has a robust financial performance based on various financial metrics, but challenges remain in maintaining its high performance in the last 5 years. The study recommends that Safaricom consider continuously refining its strategies, investing in digital financial services, renewable energy, AI, and 5G, enhance regulatory compliance, form strategic partnerships, and develop tailored solutions for various industries to improve profitability and competitiveness. Government policies should support this by enhancing the regulatory framework, reforming taxation, improving infrastructure, and encouraging technological innovation to create a favourable business environment. The study suggested areas for further research includes comparative analysis of competitive strategies employed by different telecom firms and impact of technological advancements such as 5G on the effectiveness of competitive strategies and overall financial performance. The study is relevant to Sustainable Development Goals 9 on Industry, Innovation, and Infrastructure and Kenya Vision 2030 as it will enhance economic growth and technological innovation and development.