Strategic Response To The Dynamic Economic Environment Of The Oil Marketing Companies In Kenya

Abstract

As recently as 10 years ago, people thought they knew most of what they needed to know about strategy. Portfolio planning, the experience curve, Michael E. Porter’s five forces– tools like these brought rigor and legitimacy to strategy at both the business unit and the corporate level (David). These traditional strategy approaches can soundly answer this central question in stable environments, however these approaches are not directly applicable to dynamic environments and there is currently no final and complete answer that determines the causes for a company's failure or success with their strategies in dynamic environments (Wirtz&Schilke, 2007, pp. 295-296).Having an up-to-date strategy is especially important for companies operating in the oil industry, since this industry, with its global and investment-demanding nature tends to be very turbulent and cyclical. The purpose of this study was therefore to establish the strategic response to a dynamic economic environment of oil companies in Kenya. The study set to address the strategic responses applied by oil marketing companies in Kenya and the impact of these strategic responses and the best suited strategic responses for the Kenya oil marketing industry.To achieve this, the study adopted a descriptive study of oil companies in Kenya. The target population of this study was all 55 oil marketing companies in Kenya. Census method was used is based on the fact that the entire population is sufficiently small with only 55 companies. Data collection was conducted through the use of questionnaires and analyzed through descriptive statistics in order to draw conclusions. The collected data was first coded statistically and thereafter analyzed with the use of a statistical package; SPSS in percentages and frequencies. Thereafter the results were presented via graphs, charts, tables as well as pie charts. The result on strategic response were analyzed in four categories; strategic response being used by oil marketing companies and how the respondents view the extent of their application by the companies, how respondents view the impact of various strategic response to dynamic economic environment of oil marketing companies in Kenya and a combination of strategic response to determine the best for the dynamic economic environment of oil marketing companies in Kenya. The last part looked at respondent’s view of the best strategic response to dynamic economic environment. The findings revealed that most oil marketing companies use to a great extent strategic alliances (64 percent), focus market (50 percent), joint ventures (50 percent), as well as corporate diversification (34 percent) as strategies in responding to dynamic economic environment. Further, the results revealed that some strategic responses have low application but would have high impact if they were utilized. Such strategies as Acquisitions and Mergers and Differentiation Strategy both with 67 percent impact have low application of 2 percent and percent respectively. Respondents view Acquisitions and Mergers, Strategic Alliances and Joint Ventures as the most suitable strategic responses to dynamic economic environment of the oil marketing companies in Kenya. The study therefore recommends blending of strategic response that are best suited for the market dynamics; when going for strategic alliances, companies should consider combining this with either joint venture in operations as this provides a platform for cost reduction due to economies of scale, while when a company is considering corporate diversification, it is recommended to combine this with mergers and acquisitions as this provides a faster and established approach to the market diversification as compared to starting from scratch.