The Effect of Price Regulation on Competition Among Oil Firms in Kenya

Abstract

Pricing is one of the strategies that firms use to compete in the market. When pricing as a strategy is controlled through regulation, it then ceased to be a competitive factor. In the absence of price strategy therefore, do firms still compete and on what grounds especially when the product is homogenous? This was the crux of this paper considering the price regulation in the oil industry in Kenya. The objective of this study was to determine the effect of price regulation on competition among oil firms in Kenya. This study was a descriptive survey. The target population of the study was all the ten oil marketing firms. Primary data was collected using a structured questionnaires administered to the Managing Directors using drop-and-pick later method. The analysis was done using descriptive statistics such as mean scores and percentages. Results were presented in table and charts. The study found that service quality was the most adopted strategy by most of the firms followed by focus strategy and lastly the pricing strategy. The study also found that the intensity of competition was also low after the introduction of price regulations. The study concludes that the price of fuel in the price regulation era was marginally lower than the period before the price regulations. The study also concludes that price ceilings have reduced the level of competition in the oil industry. The study recommends that there is need for the oil marketing firms to be allowed to import oil on their own from the suppliers they are comfortable with. This will give them the leeway to negotiate better prices hence reduce their costs and enable them to price the fuel better in the market.