Despite the well established fact that product businesses are so much more profitable than service businesses, Kenyans still flock to do service business. We are truly addicted to services, and this is not an opinion. The fact is service industry contributes next to 63% of our GDP, and that 37% of product industry is the preserve of Indian and Caucasian expatriates. I am of the opinion that a Kenya's economy cannot move forward unless we focus on PRODUCTION. Otherwise we will always be strongarmed by the producers who we rely on to provide our services to.

So, why, despite this well-known business reality, are Kenyans so focused on service industry?

I don't know where you got this but aprx 64% of world economy is served by service industry; so you're either making an assumption that product business( manufacturing industry) is more profitable or you down right don't know what you're writing. Go back to your economics and read harder, look through NSE and see which companies do better.

1) Ponder this:our maize farmers (producers), despite breaking their backs doing all the hard farming work, still rake in less than the middlemen (service industry)who merely buy from the farms and transport it to a wider market.
2) Production, where not automated, is no walk in the park and costs an arm and a leg in financial and non-financial terms vis-a-vis service industry.

@kenyalyrics, Safaricom and NMG are in not service industries?

I don't get it

Safcom sells me airtime-nothing tangible!

NMG gives me news and entertainment. They sell advertising space...nothing tangible!

A product based business has lots of barriers of entry. The main one being the capital costs. It costs lots of money to setup a factory to manufacture anything. Due to technology, the production levels in most industries are very high and the main form of leverage to avoid going down is either a regulator or technology or scope of market. In a competitive environment, the risks become very high and therefore the question you ask about 'why, despite this well-known business reality, are Kenyans so focused on service industry? ' answers itself.
Let us assume that today you try to start a pharmaceutical plant to make a product competing with Panadol. Even a small factory will easily produce 1/2 a million tablets a week. This factory's monthly production is more than the potential market in Kenya. It has to grow it's market geographically. Now assume there are no regulatory barriers and the business expands into the rest of Africa. The factory needs some upgrading for business continuity and a huge marketing, distribution and supply chain system in place. All this for a product that is going to compete in an already mature market ?
Just the capex costs make this a non starter. No bank analyst or venture capitalist will finance this venture.

Point is, the world has advanced technologically to a level where the big product brands can produce at a scale large enough to supply a whole region. Any new entrant would have to come in with a 'unique selling point' and be ready to cough huge capex.

Compare this to a bunch of accountants and auditors who meet in a pub and decide to start an auditing firm. All they need is office space and some professional marketing skills. They can grow the business by hiring more associates on the fly, they can grow regionally by hiring and leasing space and they can shrink just as easily. The initial risk is minimal. Do they need to approach a bank with their business plan? No! Do they need to worry about regulation & competition? Yes but the scope of operations can scale to adjust to their client base hence they can survive/risk and not get burned.

If you want a proctor and gamble or a johnson & johnson in Kenya, the regulator, the banks and the market needs to work with you on that. Hope this answers your question.

Actually I thought that was a very flimsy explanation. What I see here is a lust for quick money that prevents Kenyans from seeing the bigger picture. I stick by my mantra that no entrepreneur worth his salt would blame lack of capital for failure

+1

@kenyanlyrics & @birdman....The point is that barriers of entry make the service industry a much better option. It does not make one grow rich quickly as you suggest. The service industry also takes time to grow ie growing the client base and reaching the critical mass of clients. However, while growing slowly due to lower overheads you can sleep better at night. Stop pushing a point down our throats then refusing to engage in a proper argument.
And how exactly do you find customers, build a product then look for capital? Give me an example if I want to start a phamarceutical company with Kshs 10,000 in my pocket.Im waiting @kenyanlyrics.

@KenyanLyrics.. I agree with you on those approaches but the problem is, market forces cannot let you approach a venture this way, because the pointof interaction of high enough demand and low firm concentration, sits the monopolist with large economy of scale and scope.