Competitive Strategies Adopted by Primary Lubricant Marketers in Kenya

Abstract

The petroleum industry in Kenya was liberalized in October 1994. This opened the market up to competitive forces and led to an influx of new players. Most of these new players traded only in fuels. This greatly increased competition in the fuels business resulting into very low margins and reduced profitability. As a result of increased competition, several major multinational companies have quit the Kenyan market in the last few years. To improve their profitability, the remaining petroleum companies have had to adjust their focus by placing more emphasis in related petroleum products like Liquified Petroleum Gas (LPG) and Lubricants. This study set out to investigate what competitive strategies are applied by the lubricant marketers in Kenya to survive the increased competition. The study was done through a census survey of the primary lubricant marketers in Kenya. Primary data was used in this study an 1 was collected through questionnaires administered through drop and pick method or face to face interviews. A 100 % response rate was achieved. The study found that majority of the lubricant marketers were multinational companies owning blending plants to produce lubricants. Competition from the existing marketers was found to be the market force with the greatest impact on the lubricant business. The lubricant marketers were found to be very strong on product diversity and product quality. Loyalty to a certain lubricant brand was found to be a key factor influencing competition in lubricants business. The study revealed that lubricant marketers were offering a wide selection of lubricants to customers. The lubricant marketers were also offering lubricants recommended by original equipment manufacturers (OEM). Competitive pricing strategies applied by the lubricant marketers were found to be extended credit period, keeping prices lower than competition and offer of volume discounts. The lubricant marketers were offering lubrication equipment to customers and maintaining very close relationships with their customers. Having lubricant distributors in major towns of the country was found to be a key distribution strategy among the marketers. The lubricant marketers hired only competent staff for the business and trained them well cn product knowledge. The study recommends further reseal :h to include all importers and traders of lubricants whose activities were not included in the Ministry of Energy sales statistics for the country used in this study.