Influence Of Political-Legal Environment On Foreign Market Entry Strategies Among Multinationals Corporations In Kenya

Abstract

The study examined the influence of the political-legal environment on international business entry strategies among multinationals in Kenya. The study was anchored on two theories, namely, international product life cycle theory and environmental dependency theory. A descriptive research design was utilized in the study. The survey covered 44 multinationals corporations with offices in Nairobi County. A census was conducted in the investigation since the focus population was small and manageable. For each of the company, only one managing director, one business development manager and one legal manager were picked randomly. Questionnaires with closed-ended questions were administered directly to the respondents. The data was analyzed using descriptive and inferential statistics. The descriptive statistics entailed the frequencies, mean and standard deviation, while inferential statistics comprised of the correlation and the regression analysis. Analysis of variance was utilized to determine whether the overall model was statistically significant. The findings of the study established that the political environment factors that affected the foreign market entry strategies in large extent were election cycles, politician’s involvement, the political risk and predictability, level of democracy, embezzlement of funds, the graft level, political traditions, political structure and taking of bribes. Besides the study found that the legal factors that affected the foreign market entry strategies among multinationals corporations to a large extent were liberation in management, levels of consumer protection, economic regulation on price ceiling, licensing requirements, competition regulation, export subsidies, trade tariffs, import quotas and level of taxes. Additionally, The study revealed that foreign entry strategies used in large extent were direct exporting, indirect exporting, investment franchising, management franchising, provision of managerial expertise, hiring of the management company, cooperation with another business, separate joint venture, licensing of copyright and trade secrets and licensing of trademarks. The correlation results showed that the political environment and legal environment were positively and significantly associated with foreign market entry strategies. The study concluded that the political environment and legal environment were positively and significantly related to foreign market entry strategies. The study recommended that multinational corporations in Kenya be granted democracy in their leadership style and not dictated on who be involved in the management. The study also recommended that politicians should distance themselves from interfering with the operations of the business and government to establish policies and regulations to protect companies from the interference from the influential people in the country. The study also recommended that other multinational corporations aiming to expand their business in different countries can also adapt those strategies of cooperation with another company, separate joint venture and direct exporting since they were the most used by the multinational corporations in Kenya.