Value chain and competitive advantage at the Kenya Pipeline company limited

Abstract

For a company to survive in highly competitive environment of today, it must at least temporarily achieve a competitive advantage. Penrose (1959) pioneered resource-based view (RBV) and emphasized those resources internal to the firm as the principal driver of firm profitability and strategic advantage. Penrose argued that it is the heterogeneity, not the homogeneity, of the productive services available from its resources that give each firm its unique character. Competitive advantage is attained when a company moves into a position where it has an edge in coping with competitive forces and in attracting customers (Porter, 1980). KPC offers such services as transportation, storage, loading, receiving from stakeholders, transporting and dispensing petroleum products. A major challenge faced by Kenya pipeline corporation value chain is bullwhip effect and reverse bullwhip effect. This challenge is not only unique in KPC. When competition is fierce, companies must precisely manage their activities and costs to sustain their competitive advantage. However a critical review of existing literature reveals very scanty empirical studies on value chain analysis and competitive advantage. The few available ones are of foreign origin and therefore their findings are not compatible to the Kenyan situation. It is against this backdrop that the study sought to carry out a research to answer the question; to what extent does Kenya Pipeline Company limited use value chain to achieve competitive advantage? This research was conducted through a case study. Primary data was collected using an interview guide which was administered to Managers from the following departments; engineering, operations, administration, procurement, human resource, projects, business development and corporate planning at Kenya Pipeline Company as the respondents. The qualitative data collected was analyzed using content analysis technique. From the findings, KPC competitive basis are based on the fact that the company has heavy investment in infrastructure and that the company enjoys government support as the investment arm of government. From the findings, the government is involved in licensing players in the industry, ensuring quality product through the supply chain, controlling market prices through ERC, Industry benchmarking through its various arms with the overall mandate being the Ministry of Energy Kenya. The study established that indeed KPC uses information system in both the value chain’s inbound and outbound logistics through Modules in SAP that are currently being rolled out. KPC uses the Balanced score card as its performance management system in all the four dimensions in KPC terminologies. The study found out that the company operates at 90 % of the target time in a 24 hours operation. The study also concludes that, the logistics manager in KPC helps in Planning for the product orders based on available hulage (space) and projected demand in the market. Another notable role of logistics manager in KPC is to ensure products are available to the oil marketers at the designated depots. The study recommends that value chain analysis presents organizations with an overarching tool for improving their strategic planning and resource allocation. The study also recommends that analyzing costs and differentiation through the value chain is an essential component in the search for competitive advantage.