Strategic responses of petroleum importing and marketing companies in Kenya to changes in government legislation

Abstract

The purpose of this study was to investigate the strategic responses of Petroleum Importing and Marketing Companies (PIMCs) to various government legislations. The objectives were twofold: to determine the strategic responses of PIMCs in Kenya to changes in Government legislations on the supply of petroleum products and to establish what factors influence the strategic responses for each company. The legislations in question were five, namely, that oil companies import petroleum products through an open central tendering system, that oil companies meet over 60% of their needs by processing crude at the Kenya Petroleum Refinery Limited, the requirement that petroleum products imported into the country can only be offloaded at the Kenya Pipeline Company terminal in Mombasa, the requirement that PIMCs maintain specific stock levels and that the PIMCs to pay customs taxes on imported products in advance at the point of entry .

The theoretical framework was based on the Ansoff-MacDonnell model that outlines the relationship between the environment, strategy and company capability. E1 and E2 are the present and future states of the environment and f.E is the difference in the levels of turbulence. This information is used to select the strategic response S2, which will assure future success. f!.S, the strategy transformation, is the difference between the current response pattern S1, and the adjusted response pattern S2, occasioned by environmental turbulence. To ensure effective implementation, the firm also needs to design the capability C2, which will enable it to initiate and support the new strategic responses. L1C, the capability transformation, is represented by the difference of the new capability, C2 over the current capability C1, as a consequence of the turbulence. The study was a census that employed an exploratory survey design. The population of interest were all the PIMCs registered by the Ministry of Energy as at so" June 2005. The research instrument was a questionnaire that consisted of open-ended and closed-ended questions. The instruments were addressed to the chief executives or their designated backups; the "drop and pick later" method was used. Data analysis was conducted using descriptive statistics, which included the use of measures of central tendency, measures of spread and bar charts. Chapter four presents the data output and discussions and chapter five presents the conclusions. The critical indication was that varied strategic responses were used in responding to the new legislative requirement. The responses used depended on key factors such as organizational size and financial capability.