Porter’s value chain model and competitive advantage in the oil industry in Kenya

Abstract

The task of any business is to deliver customer value at a profit. In a hyper competitive economy with increasingly rational buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value. Porter’s Value chain is a model used to study the activities that are performed in the creation of a product or service by an organization. These activities add value and cost in the process of creating products and services. The activities may be classified as primary or secondary depending on whether they are the core business or they are auxiliary functions of the firm. The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin. Sustainable competitive advantage is a situation where a firm is capable of creating true value that is difficult for competitors to copy. A firm in this situation is able to earn economic rents. The objective of this study was to determine how a firm in oil industry in Kenya can utilize the value chain to create competitive advantage. The oil industry in general is divided into two sections: upstream and downstream operations. Upstream operations involve exploration and production works that will to discovery and mining of petroleum. The main players in the petroleum sector include the Kenya Pipeline Company (KPC), KPRL and the various petroleum companies involved in the distribution of petroleum products commonly known as Oil Marketing Companies (OMCs). The five major OMCs are Total Kenya, Kenol/Kobil, Oilibya, Kenya Shell and the government owned National Oil Corporation of Kenya. The study has been presented through five chapters and sections through which the researcher has discussed the above issues.