Critical Success Factors in Petroleum Products Retailing in Nairobi

Abstract

The liberalization of the petroleum industry in Kenya in 1994 following deregulation enhanced entry of independent petroleum product retailers of what was once an end line operation preserve of the multinational oil companies. The new regulations scaled down barriers of entry into the business. These included removal of price controls, shifting of the cost burden of "dead stock" (unutilized stock in the pipe oil transportation system) to the major oil companies, and allowing retailers to buy refined oil products rather than import crude oil and pay for the cost of refinery. The deregulated petroleum sector has been preceded by proliferation of retail stations that have been planted on major highways, urban feeder roads by both multinationals and the independent entrepreneurs. More often than not there are common billboards reading "petrol station under new management", "petrol station coming soon" for example. Initial visits to the field by the researcher reveal nonetheless that some independent petroleum product dealers are doing well while some are not. These are the issues which raise the following research questions: What are the critical success factors (the guidelines for being successful) in the petroleum products retailing in airobi? 'And what are the factors that limit the petroleum prod uct dealers' ability to implement the critical succes;tactors? The findings show that location of station in respect to type of road, demographics and business activity is the most critical success factor as indicated by 97.2% of the study respondents followed by use of effective financial controls and assessments of periodical returns (confirmed by 94.4% of the respondents). Competitive product pricing and monitoring was considered as a ('Sf's by 83.3% of the study respondents. Efficient and effective customer service, consistent product quality offering and maintenance of an efficient credit management policy were all implicated as CSFs by 66.7% of the study respondents. Services diversification however was considered a critical success factor in petroleum product retailing by half (50%) of the study respondents . Designing and implementation of petroleum product retailing business should be based on the identification and prioritization of the eight main critical success factors, starting with location, use of effective financial controls and assessments of periodical returns, competitive product pricing and monitoring, efficient and effective customer service, consistent product quality offering, maintenance of an efficient credit management policy and diversification of services in that order. The different CSFs should be addressed at different times in different ways depending on the availability of resources and situations in the operating environment. A proactive entrepreneurial development program for the retailers requires long-term view of current positioning in the market. Sustainable and long lasting solutions need to be the focus. The researcher recommends that future entrepreneurs ~hing to venture into petroleum product retailing consider investments where eight key critical success factors can be employed to ensure acceptable returns. The idea of idea of the petroleum product retail station being strategically located is critical to success.