| dc.description.abstract | Petroleum industry has been dominated by competition by many oil companies. To
achieve competitive advantage in the market, it is necessary that firms pursue
strategies, which are difficult for competitors to copy. Product differentiation provides
firms in the oil industry with the opportunity to make them more competitive. To
understand the extent of use of this strategy in the oil industry, a study was undertaken
and the objectives were to establish strategies used by oil companies to differentiate
their products in the Kenyan market; and to determine the extent to which the
different categories of petroleum companies have adopted product differentiation as a
competitive strategy. The population of interest was major Oil companies based in
Nairobi, which handle a base load allocation in excess of five hundred metric tonnes.
Based on the base load of five hundred metric tonnes and above, sixteen companies
were sampled and data collected through structured questionnaires. Out of the sixteen
sampled respondents, eleven responded representing a response rate of sixty nine per
cent. Data was ana lysed using descriptive statistics such as mean scores standard
deviations and percentages.
The study established that Shell has embraced broad based product differentiation
focusing on customer values. The Independent petroleum dealers and National Oil
differentiate their products to target price sensitive segments of the market, for
example the' matatu' market. Total differentiates its products through service (64%),
Shell on quality (45%), Oilibya on Non-fuel offer (54.5%) and Independents on price
(46%). All the Major oil companies ride on their brand name as a base of their strong
foundation.
Product differentiation is a more sustainable competitive strategy due to the inherent
difficulty of imitation. Unlike price-based competition, which is ruinous for the
industry, differentiation can assist a firm to stretch its competitive edge in the
industry. However, oil companies in Kenya have not fully exploited the potential of
product differentiation. As a result, it is recommended that:
1. Oil companies need to exploit the gains of differentiation by investing on
attributes valued by customers. This decision should be preceded by consumer
survey to ascertain the specific differentiating attributes valued by customers.
2. Price is a key consumer concern and the Oil Marketers need to strike a balance
between quality of product and price. However, given the Governmental proposal
to regulate the retail pump prices, competition based on price is unsustainable.
There needs to be a paradigm shift to other differentiating factors such as service,
quality, non-fuel offers and so on.
Suggested considerations for future research include the following: The cost - benefit analysis on product differentiation in the oil industry in
Kenya. Consumer perceptions about oil product differentiation in Kenya. Consumers
are not aware of the differentiation strategies adopted by the Oil Marketers whether price or quality. Consumer survey to ascertain the specific differentiating attributes they value
in product and service offering in the Oil industry | en |
