Application of Outsourcing Strategy Among Shipping Firms in Kenya

Abstract

The shipping industry plays a very crucial role in the Kenyan economy. As the world business environment changes it is vital that businesses including the shipping firms adapt to these changes in order to survive and achieve their corporate objectives. Outsourcing is a strategic tool used by companies to improve their ability to concentrate on the core competencies, outsourcing non-core functions. It is therefore a business response to the external environment and to competitive forces within industry. Shipping companies use outsourcing practices due to increased levels of vessel charter hire costs and the high cost of fuel or bunker. Outsourcing helps the firms to keep at par with competitors while ensuring a return on investment coupled with certain, albeit diminishing profit margin. The overall aim of this study was to assess the application of outsourcing strategy among shipping companies in Kenya. The specific objectives were to establish the extent to which shipping companies use outsourcing practices and determine which strategies they use. The study also aimed to establish which factors influence outsourcing decisions by the firms. Literature review was gathered from various sources with more emphasis on more current literature from renowned authors in outsourcing strategy. The research used a cross-sectional survey research design which aimed at assessing the application of outsourcing strategy among the shipping firms in Kenya. The data collection tool used was a questionnaire with closed and open-ended questions guided by the contents of the literature review and aimed at achieving the set objectives. The targeted respondents were the senior managers in charge of outsourcing. The questionnaire was administered by drop and pick method and also via email. The study revealed that the shipping companies in Kenya use similar outsourcing strategy with a greater emphasis on cost reduction in order to increase their competitiveness. The study also established that outsourcing is regarded as an important element of the corporate strategy of most shipping firms in Kenya. This implies that shipping firms in Kenya apply outsourcing strategy and prefer to outsource non-core activities.