Business in Kenya
Legal and political situation
The legal and political factors in Kenya are as a result of the laws that were borrowed from the British that colonized the country as well as laws from Arab other considerations made when structuring the Kenyan constitution. Although the government has the mandate to protect the rights of all citizens, the country is still a developing state and there are a lot of human rights violations (Kasi, 2015). Corruption is also a major issue especially due to the government’s inability to do away with corruption in the region. The United States on the other hand is known for its strong democratic set up as well as the free and fair elections held in the country. The stable government greatly boosts the economy there are also policies and laws in place to govern the way businesses operate and this greatly favors business in the country (Focus Economics, 2019). Of the two, US is the most ideal country to conduct business. However, being a developing country, Kenya has the demand and opportunities that could be exploited to make profits through a new business venture.
Sociocultural climate
Kenya has sociocultural climate that makes it difficult for business ventures. To begin with, most Kenyan citizens have lost faith in the government’s ability to address their needs and protect their interest. This is mainly due to the high rate of corruption in the country as citizens strive to find a way to overcome all the challenges that exist in the country (Nation Master, 2019). However, Kenyans are business driven and most have found a way to work around all the challenges that result from the ineffective policies implemented by the government. In the case of the United States, the government’s determination to grow the country’s economy has had a positive impact on business and citizens. The country’s stability and strong economy provides the company with the capital and resources to not only venture into the Kenyan market, but also establish a business that will overcome all the challenges in the region. While the sociocultural climate may be negative, most Kenyan citizens are dissatisfied with the government policies, most are determined to conduct business as there is a ready market with huge demand for products and services.
Relevant issues
At present, the most relevant issue in Kenya is the topic on corruption and the government’s failed attempts to manage it. Corruption has been a major challenge in the country and its existence greatly affects the economic growth especially due to misuse of funds by the government. Various cases involving embezzlement of funds by top government officials have greatly threatened the government’s ability to govern and this has made citizen loose trust in the government’s capability to rule (Deloitte, 2017). While the political situation in the United States is more stable, the country is also battling crime and a lot of investments have been made to try and do away with crime. The crime rates are however low and have little, if any, impact on businesses. Even with the high rate of corruption, most businesses tend to do well in the country. Since the headquarters for the Kenyan business venture will be the United States, the company can use the corporate culture in the United States and implement it in the Kenyan branch to try and overcome issues related to corruption.
Kenya U.S Relations
Kenya has maintained good relations with the United States since it gained independence. The relationship is cemented by the common interests shared by the two countries such as the desire to protect human rights and freedoms. Although the relationship has faced some challenges, especially due to the current president’s decision to seek aid from countries in the east instead of the west as it has happened throughout history, the bond remains strong and the two countries continue to share common interests (Deloitte, 2017). The good relationship between The Us and Kenya make it an ideal location for a new business venture. The cooperation between the two governments will create profitable business deals that will greatly help the company as importing and exporting goods and raw materials will be relatively easy and cheaper. Furthermore, since the two countries have common interests, the laws and policies are similar and thus easier to work around legal and political barriers.
Kenyan economic outlook
Kenya has had a relatively slow economic growth throughout the year 2019. The economy is however expanding and is expected to continue growing throughout the year due to the large scale infrastructure projects funded by the policies under the Big Four Agenda implemented by the government. The country’s GDP is expected to grow by 5.8 percent in 2019 and a further 5.7 percent by the year 2020 (Nation Master, 2019). The slowed economic growth is greatly due to the decline in the private credit growth experienced in the first two months of 2019 and, combined with the decline in remittances, household spending was greatly reduced thus the slow economic growth. However, with a population of about 46.7 million citizens and an annual consumption variation of 7.0 percent, the country has the right customer and market needed to support a business venture like the one sought after by the company (Nation Master, 2019).
Reasons for manufacturing in Kenya
Kenya is rich in natural resources and manpower needed to allow the US based company to manufacture products for the Kenyan branch within the country. The country relies greatly on agriculture and industrialization thus making it ideal for manufacturing products for the company’s Kenyan branch. Kenya is rich in agriculture and thus has the raw materials needed in the manufacture of products. The state of the art industries and ready manpower ensure that the company will have an easy time getting employees and raw materials thus saving on cost. Most research on the topic present Kenya as a highly industrious nation capable of manufacturing high quality products (Brady, 2014). Despite the political instability in the country, industries have state of the art technology and skilled labor that manufactures the highest quality of products. Researchers further present Kenya as having the potential for growth which means that the quality of production will continue to improve, thus making it profitable to manufacture products within the country instead of importing (Brady, 2014). There is also the element of cost whereby raw materials in Kenya are cheaper than in the US. The process from raw material, to manufacture and up to the point where a final product is presented to the customer will therefore be less expensive if the company decides to manufacture its products in Kenya as opposed to manufacturing in the US.
Reasons to compete in Kenya
The business should compete in Kenya because it already has a competitive advantage. The relationship that Kenya has with the US has created a positive image for US based organizations. Customers from Kenya will therefore be more susceptible to products from the company compared to others in the market (Makena, 2017). The relationship also favors imports and exports which will lower prices and allow the US Company the freedom to use pricing as a competitive tool. Another reason why the company should compete in Kenya is because the country is still developing. This means that there will be a lot of opportunities as the target customers’ tastes and preferences grow as the country continues to develop.
Recommendation
Even with the political instability in the country, Kenya is still an ideal international market that the company should exploit. The best approach that company should take is franchising as it will allow the company to rely on the corporate culture and approaches used in the US branch to increases the chances of success in the Kenyan market. Franchising is likely to be successful because, on the one hand, the franchiser shares the knowledge and experience of working in different markets. On the other hand, those franchised share information on the target customers, how to attract customers and other vital information that could prove crucial to the success of the new business. Other than franchising, it is recommended that the company engage in training activities to help the new employees enhance their skills and maintain the same standard of quality that the company is known for in the US. By doing so, the company will be able to overcome most of the challenges and succeed in the Kenyan market.
References
Brady L, (2014) “Essentials of international marketing” Illustrated, reprint
Deloitte, (2017) “Kenya economic outlook 2017: Joining the dots” retrieved from, https://www2.deloitte.com/content/dam/Deloitte/ke/Documents/tax/Economic%20outloo k%20ke%202017%20Final.pdf
Focus Economics, (2019) “Kenyan economic outlook” retrieved from, https://www.focus- economics.com/countries/kenya
Kasi A, (2015) “PESTEL/PESTLE analysis of Kenya” PESTLE, retrieved from, https://freepestelanalysis.com/pestelpestle-analysis-of-kenya/
Makena S, (2017) “Doing business in Kenya” Kenya Climate Innovation, retrieved from, https://kenyacic.org/blog/doing-business-kenya
Nation Master, 2019) “Economy stats: Compare key data on Kenya and United States” retrieved from, https://www.nationmaster.com/country-info/compare/Kenya/United- States/Economy
