Strategies employed by oil marketing companies in Kenya to achieve competitive advantage
Thompson and Strickland (1998) defined strategy as the game plan for positioning an organization in the market arena. The organization looks at the external environment and formulates strategies to enable it ‘fit’. Johnson and Scholes (2002) defined strategy as a configuration of an organizations resources and competences with the aim of achieving stakeholder’s expectation. Strategy in this case is a ‘stretch’ of a firm’s resources and competences to achieve competitive advantage. The oil industry has changed from a few players who single sourced their entire product from KPRL, to many players who source additional white oil from overseas markets. This was necessitated by the growth of the economies in the region which brought huge demand for the petroleum products. These changes have been accompanied by changes in government policies, from deregulation back to regulation of oil prices, standardization of LPG cylinder valves, improvement in infrastructure, introduction of upfront payment of taxes to curb damping of transit product in the industry, increase of industry players and hence increased competition and exit of major oil companies, among other changes. These have necessitated a shift in the way the oil companies run their business by formulating and implementing strategies that would ensure not only their survival but also their ability to bit competition. This study was therefore instituted to establish the strategies employed by oil marketing companies in Kenya to achieve competitive advantage. 53 oil marketers were targeted in a census survey out of which 35 responded representing 66% response rate. The study was carried out through questionnaire prepared and distributed to the oil marketers by dropping and picking, face to face interview as well as electronic transmission. It was established that oil marketers employed broad low cost strategy, internationalization, vertical integration, outsourcing and strategic alliances in that order. Out of the strategies employed to keep the organization cost low, the OMC’s agreed that direct-to-end- user sales and marketing strategies, economies of experience and economies of scale were the most employed. On the value chain activities carried out by the marketers, it was established that clearing and forwarding was the most outsourced, followed by transportation and storage. It was further established that the majority of OMC’s planned to extend their operations to include storage facilities. As a result of the above findings, the researcher made various recommendations which included the need for OMC’s to consider extending their operations to retail networks where the margins were higher in a regulated market as opposed to storage activities which had been invaded by a number of new investors and hence rendering it unattractive. Secondly, it was recommended that the government invest in the refinery in order to reduce its cost of production and hence encourage local investment. The researcher identified various opportunities for research which included study on competitive strategies employed by OMC’s in the LPG sector and Lubricants among Multinational Corporations.