Role Of Competition In Determining Choice Of Strategic Response Of Multinational Corporations In Kenya

Abstract

The purpose of this study was to find out the role of competition in determining choice of strategic response of Multinational Corporations (MNC) in Kenya. In its effort to attain a middle income economy status by year 2030, Kenya aims at attracting large MNCs through Business Process Outsourcing (BPO) and at enhancing Foreign Direct Investment (FDI) in the manufacturing sector. However, these initiatives face a major challenge because MNCs operating in Kenya faces fierce competition that forces them to employ different response strategies. In the last 10 years, Kenya has witnessed have market exits, relocation to other countries, franchise sell out, cutting on operations and differentiation strategies by MNCs and there lacks adequate literature and researched models to explain this situation, which this study aims at providing. The study focused on industry competition which had competition intensity, firm’s product quality, firm’s product cost and firm’s marketing experience as independent variables that influences choice of strategic response of MNCs, which could be one or a combination of strategies that include cost leadership, relocation, product differentiation, market differentiation, avoidance and deterrence strategies. This study was based on industry competitive forces theory, strategic choice model and generic competitive strategies model which outlines how competition influences choice of organizational strategies. The research design for the study was descriptive survey that combined both qualitative and quantitative research designs, techniques and measures. The choice of this design was in order to have a mix that triangulates the empirical, constructs and reality research approaches. The study used a multi-stage sampling technique, the first stage being stratified sampling. At this stage, the target population was stratified into three strata of those MNCs that are in manufacturing, those that are in service and those that are engaged in both. The second stage was simple random sampling that chose the respondents in each stratum. The study covered a sample size of 165 Multinational Corporations drawn from a target of 213 such enterprises in Kenya. The key informants of the study were senior managers consisting of Chief executive officers and the heads of departments from each of the 165 MNCs. The study used four basic methods of xviii collecting data which included a questionnaire, an interview guide, review of secondary data and review of computer-based data from MNCs and other sources. In order to measure reliability of data collection instruments, the study used Cronbach’s alpha. Data was analyzed using descriptive statistics, Spearman’s coefficient correlation and binary logistic regression. The results indicated that the four variables that were used to measure competition (the independent variable) were statistically significant. This informed the rejection of the five null hypotheses that were developed for this study and retaining the decision that competition has significant influence on choice of strategic response of MNCs in Kenya. The study concluded that industry competition is quite intense in Kenyan market and plays a pivotal role in determining the choice organizational strategy. The cost leadership, product differentiation and market differentiation strategies are preferred responses to competition pressure with a significant number of MNCs employing relocation and deterrent strategies. It was recommended that MNCs in Kenya and other prospective ones should understand the competitive nature of the markets in host countries so that they can employ competitive strategies that would enhance their performance.