Challenges of Foreign Direct Investment Strategy for a New Market: Case of Tullow Oil Company in Kenya

Abstract

The environment that organisations operate is uncertain and this has forced firms to go outside their boundaries for fresh markets and to exploit untapped resources with the goal of expanding their businesses. The research objective for this study was determining the challenges of direct investment strategy for a new market using the case of Tullow Oil Company, Kenya. The study implemented a case study research design where primary data was collected with the help of an interview guide from four departmental heads at ToC who were exploration manager, operations manager, marketing manager and the human resource manager. Data was analyzed with the help of content analysis and the study found that the main impediments of direct investment strategy faced by ToC when trying to enter the Kenyan market were hidden costs from shipping of equipments, poor roads and infrastructure, poor network, rivalry from the host communities and political uncertainties. Some of the ways that ToC put in place to deal with these challenges were building good relations with the local community and the government, offering job opportunities and contracts to the local communities, CSR programmes and engaging the communities in oil contract agreements. The study recommends that ToC to continuously adopt direct investment as a strategy to enter new markets because this approach will enable the company to retain its control over its operations and reduce leakage of important information. This way the company will be able to maintain better relationships with its stakeholders and achieve its corporate goals. The major limitation for this study was that due to the busy schedules of the managers, their deputies were interviewed on the behalf. The assistant managers might not have the same experience as the managers on issues regarding the challenges of direct investment as a strategic approach for market entry because the managers are involved directly in these decisions. It would be more exciting if a similar study can be conducted in another Multinational corporation in a different industry to establish the kind of entry strategy that they implement and if they experience similar challenges depending on their nature of business.