Exploring the Implications of Low-Cost Leadership and Differentiation Strategies in the East African Community Market: A Perspective of Local Firms

Abstract

Over the past few decades, East African countries have made tremendous economic, social, and political progress and are seeking to consolidate this growth with the formation of the East African Community (EAC). The Global Entrepreneurship Summit held in Kenya's capital Nairobi in July 2015 highlighted the competitiveness of local firms in the region as having the potential to contribute to high value-added activities through innovation and entrepreneurship. Nonetheless, there are general concerns as to whether local firms can maintain their competitive advantages in the new environment of economic integration especially with the increasing entry of more resource-endowed players from abroad. This conceptual chapter explores the capacity of local firms to maintain their competitive edge in the current environment by either occupying low-cost positions or by becoming differentiators. Specifically, the chapter presents arguments in support of the differentiation strategies among fledgling manufacturing local firms. While recognizing the limitations of local firms along this path, the chapter identifies areas from previous research which address the question of upgrading firms from large emerging-market economies such as China, India, and Brazil to suggest possible lessons that can guide policy and research aimed at helping local firms to be successful differentiators.