Strategies Adopted by Multinational Enterprises in Response to Political Changes: a Case of Firms Quoted at Nairobi Securities Exchange in Kenya

Abstract

Organizations respond to the external environment and develop strategies that enable them to survive the ever changing environment that they operate in (Beck et al., 2010). One of the environmental factors that most enterprises have to deal with is the political environment. Companies have to respond to the environment strategically in order to be sustainable and avoid losses (Johnson et al., 2008; 2005). By using an effective strategy, a company can stay competitive and relevant to the market (Thompson and Strickland, 2003). The political environment is a key component of the external business environment. The election politics and environment in Kenya often affect the MNC business. The factors that have shaped and influenced the country’s political environment include consumers, households and communities; the electoral legislation and administration of justice as well as discipline of law enforcement agencies; the economic impact in terms of taxation, government spending, general demand, interest rates, exchange rates and global economic factors; political and government policy; rapid technological changes that also affect production processes and product innovation in business; among others. The objective of this study was to determine strategies that have been adopted by MNCs in response to political changes in the external environment of firms quoted at the NSE in Kenya. This study utilized descriptive survey. The population of interest comprised of 60 companies operating in Nairobi, Kenya. The study employed primary data collection. Primary data was collected through a self-made questionnaire. The data was analyzed using descriptive statistics and in particular, using the mean as a measure of central tendency. From the findings, the respondents indicated that the political environment in Kenya was stable although a moderately high number described the political environment for the last two general elections (2008 and 2013) as being very uncertain and risky. From the findings, majority of the respondents strongly agreed that the multinational home country relations with the host country is cordial and good, that the political environment in the country allows firm market their products and services freely and that the political structure and nature in Kenya is conducive for carrying out business. From the findings, to survive in a dynamic and highly political external environment an organization has to engage various strategies to survive. According to the respondents one such strategy is the turnaround strategy. Companies adopt strategies directed at improving, the effectiveness of basic operations within the company, such as production, marketing, materials management, research and development, and human resources. From the findings, organizational process affects the adoption of various response strategies. The major challenges in adoption of response strategies appear to be more cultural and behavioral in nature, including the impact of poor integration of response strategies and diminished feelings of ownership and commitment. The following conclusions are drawn; organizational process affects the adoption of various response strategies, companies adopt strategies directed at improving, the effectiveness of basic operations within the company, such as production, marketing, materials management, research and development, and human resources.