International Market Entry Strategies Used by Stantech Motors Limited in Kenya

Abstract

Domestic companies grapple with tough competition in their home markets leading them to adjust and look for international business opportunities. Normally, foreign direct investment (FDI) is preferred entry strategy for MNCs because it allows business owners assurance to run the business to its own expectations at all levels. This is a challenge to the local company because of its resource capacity and market coordination expected in FDI situation. Therefore the process of entering a foreign market is progressive and a long-term venture. This explains why domestic companies prefer collaborative relationships with multinational corporations. International business enables domestic companies to expand their human resource skill set and increase their profitability. This offers business continuity in ways not available to purely domestic business. Diversifying business into international trade further enables a domestic company to provide a wider range of products to its customers. A company’s goals and resources determine its ability to conduct international business. This case study was carried out to identify the international entry strategy adopted by Stantech Motors Ltd in Kenya. It was expanded to include the challenges that the company faces in implementing the international strategy. Primary data was collected by means of administering interview guide whilst secondary data was obtained from SML internal documents, automobile magazines, newspaper articles and academic journals. The study established that Stantech Motors Ltd entered international business as a franchise with licenses to import completely knockdown kits (CKDs) and assemble on behalf of four Chinese manufacturing companies. SML also currently sells brands under the franchise arrangement locally and exports to Uganda and Tanzania. The study further revealed the company encountered various challenges in implementing the international strategy. Their greatest challenges at inception were raising the capital required to establish the international collaboration, perception on quality of the Chinese vehicles by Kenyans and cultural differences. Intense competition, inadequate incentives from the Kenyan Government compared to their rivals in other East African countries and taxes charged on vehicles in Kenya continue to be a challenge to their trade both within Kenya and East Africa region.