A study on strategic groups in the oil industry in Kenya

Abstract

Strategic groups represent collections of firms that are similar on key strategic dimensions. Because opportunities are not evenly distributed across an industry, some industry segments offer better profit potential than others. Firms occupying one niche may be tempted to expand or to change strategies in order to exploit opportunities as they arise in other areas of the industry. The oil industry in Kenya has a diverse number of firms with varying degree of complexity and scope of operations. The industry is therefore a highly dynamic environment characterized by new entrants and exit of major firms as well as others engaging in joint operations and acquisitions in attempt to align their businesses to the changing environment. This research evaluates the strategic groups 111 the oil industry in Kenya with the objective of establishing the existence of strategic groups in oil industry in Kenya, identifying the mobility barriers that define these groups and finding out how these groups responds to the dynamic market. Cross sectional survey design is used where 32 oil companies are surveyed out of 47 to give a representative picture of the oil industry in Kenya. The oil industry in Kenya is found to consist of five strategic groups separated by mobility barriers whose boundaries tend to be narrowing with time allowing movement of some firms across group. The movement of firms across group is found to be a deliberate action aimed at maximizing returns of the oil firm and strategic positioning for future sustenance of the firm. During targeting of respondents in the survey, it was realized that some firms remained dormant although they were registered. It was difficult to get in touch with appropriate respondents from these firms hence; the research could not establish their strategic position in the industry limiting the research to active oil firms. Further research is therefore recommended to find out the why these firms were formed and what made them become dormant after setting out their vision.