The Implications of Price Regulation by the Energy Regulation Commission on the Oil Marketing Strategies in Kenya

Abstract

The implications of price regulation, whether it is economic regulation or social regulation, are likely to depend on a variety of factors. Price regulation is adopted in order to increase consumer welfare by putting a cap on the maximum price that can be charged on petroleum products and in turn lowering supplier profits. This study was guided by two objectives: to establish the implications of price regulation on the oil marketing strategies in Kenya; and to determine the effectiveness of oil marketing strategies adopted to cope with price regulation in Kenya. A descriptive survey of all oil marketing companies in Kenya was conducted. The target population of this study was all the 45 registered oil marketers in Kenya from which all were targeted but only 35 firms took part in the survey (response rate is 78%). Primary data was collected through structured questionnaires administered by the researcher to the marketing managers using a drop-and-pick later method. The analysis was done using paired ttests and descriptive analysis (percentages, mean and standard deviations). Results were presented in tables and charts. The study found that pricing regulations significantly affected the pricing strategy but not the entire marketing strategy of oil marketing firms as they were still effective, although the effectiveness had marginally reduced. The study also concludes that marketing strategies before and after the introduction of pricing regulations were not significantly different in terms of their effectiveness and therefore the regulations did not significantly influence the effectiveness of marketing strategies of oil marketing firms in Kenya. It also found that improved service quality and offering high quality products were the most adopted strategies by most firms while innovation and pricing strategy where oil marketers price lower than their competitors were the least employed strategies. The study also found that the intensity of competition was low after the introduction of price regulations and that the price of fuel in the regulation era was marginally lower than the period before price regulations. The study recommends that oil marketing firms should focus on innovation, quality of products, and superior customer service in order to compete in the market. A marketing strategy that focuses on building better customer relationships would provide a better avenue for oil firms to compete.