Porter's Value Chain Model and Competitive Advantage in the Oil Industry in Kenya

82 Pages·2011·1.15 MB·English

PORTER’S VALUE CHAIN MODEL AND COMPETITIVE
ADVANTAGE IN THE OIL INDUSTRY IN KENYA
BY
MUNYI EDDAH WAHITO
A RESEARCH PROJECT SUBMITTED TO THE SCHOOL OF
BUSINESS IN PARTIAL FULFILLMENT OF THE REQUIREMENT
OF MASTER OF BUSINESS ADMINISTRATION DEGREE OF THE
UNIVERSITY OF NAIROBI
November 2011
Declaration
This research project is my original work and has not been presented for award of any
degree in any university.
Signed………………. Date…………………………….
Munyi Eddah
D61/61798/2010
This research project has been submitted for examination with my approval as the
University Supervisor.
Signed……………………………………. Date………………………….
Dr. Zack Awino, PhD
Senior Lecturer,
Department of Business Administration
School of Business, University of Nairobi
ii
Dedication
This research work is dedicated to my husband Mbatia Ndome and to my sons Elvis
Mbatia and Alvin Mbatia without whom life would be meaningless. The study is also
dedicated to my parents Mr and Mrs Solomon Munyi who have invested and believed in
me over the years and helped me appreciate the value of hard work. To my sister and
brother, who constantly challenge me to be the best, I am grateful for your support.
iii
Acknowledgements
First, I would like to thank the Almighty God for his provision financially and for giving
me the strength to carry out this project Special thanks to my husband Mr. Mbatia Ndome
and children Elvis Mbatia and Alvin Mbatia their understanding and patience during the
period of this project, when I was not a good wife and mum. Again thanks to my husband
for the sacrifice and errands you had to do, for the sake of this project when I was
transferred.
Special thanks to my supervisor, Dr Zack Awino, PhD, for his commitment, constructive
advice, professional guidance and availability during this research. The knowledge
imparted was valuable not just for this project but also for the future. Thank you for being
the guide in this academic journey.
I would like to thank all those who took part in filling the questionnaire and giving much
needed feed back. Special thanks Mr. Nubi, Mr. Kibara, Mr. Njenga, and Mr. Owour
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Table of Contents
Declaration...........................................................................................................................ii
Dedication..........................................................................................................................iii
Acknowledgements.............................................................................................................iv
List of Tables...................................................................................................................viii
List of Figures.....................................................................................................................ix
Abbreviations and Acronyms..............................................................................................x
Abstract...............................................................................................................................xi
CHAPTER ONE: INTRODUCTION..............................................................................1
1.1 Background of the study................................................................................................1
1.1.1 Value Chain Concept.............................................................................................2
1.1.2 Competitive Advantage..........................................................................................3
1.1.3 Oil industry in Kenya.............................................................................................4
1.1.4 Major Oil Companies in Kenya.............................................................................6
1.2 Research problem...........................................................................................................8
1.3 Research Objective......................................................................................................10
1.4 Value of the study........................................................................................................10
1.5 Definition of Terms......................................................................................................11
CHAPTER TWO: LITERATURE REVIEW...............................................................12
2.1 Introduction..................................................................................................................12
2.2 The Value Chain..........................................................................................................12
2.1.1 The Value Chain activities...................................................................................14
2.2.1 Linkages within the value chain...........................................................................15
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2.2.2 The buyer value chain..........................................................................................16
2.3 Competitive Advantage...............................................................................................17
2.4 The Value Chain and cost analysis..............................................................................18
2.5 Differentiation and the Value Chain............................................................................23
CHAPTER THREE: RESEARCH METHODOLOGY..............................................28
3.1 Introduction..................................................................................................................28
3.2 Research design...........................................................................................................28
3.3 Population....................................................................................................................29
3.4 Sample Design.............................................................................................................29
3.5 Data Collection............................................................................................................30
3.6 Data Analysis...............................................................................................................30
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION OF RESULTS31
4.1 Introduction..................................................................................................................31
4.2 Data Analysis...............................................................................................................31
4.2.1 Quantitative Data..................................................................................................31
4.2.2 Qualitative Analysis.............................................................................................37
4.3 Research Objective......................................................................................................39
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS...41
5.1 Introduction..................................................................................................................41
5.2 Summary Finding.........................................................................................................41
5.3 Conclusion...................................................................................................................43
5.4 Recommendations........................................................................................................44
5.4 Limitations of the study...............................................................................................45
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5.6 Suggestions for Further Research................................................................................46
5.7 Implications of the study on policy, theory and practice.............................................46
References.........................................................................................................................48
Appendices........................................................................................................................52
Appendix 1: Questionnaire.............................................................................................52
Appendix 11: Introduction letter to respondents..........................................................58
Appendix III: Kenya Petroleum Sales (January-March 2011)....................................59
Appendix IV: Authority to collect Data-University......................................................60
Appendix V: Authority to collect Data-Oilibya............................................................61
Appendix VI: Authority to collect Data-KenolKobil....................................................62
Appendix VII: Authority to collect Data-NOCK..........................................................63
Appendix VIII: List of Licensed Petroleum Companies..............................................64
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List of Tables
Table 4.1: Company Ownership........................................................................................31
Table 4.2: Number of Retail Outlets..................................................................................32
Table: 4.3: Effect of Price Controls by the government....................................................32
Table 4.4: Level of Economies of Scale............................................................................33
Table 4.5: Learning Effects................................................................................................34
Table 4.6: Linkages within the value chain.......................................................................34
Table 4.7: Sharing with Sister Unit....................................................................................35
Table 4.8: Policies and Procedures....................................................................................36
Table 4.9: Institutional factors...........................................................................................36
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List of Figures
Figure 2.1 Porter’s Value chain model..............................................................................12
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Abbreviations and Acronyms
KPC Kenya Pipeline Company
KPRL Kenya Petroleum Refinery
NOCK National Oil Corporation of Kenya
OMCs Oil Marketing Companies
ERC Energy Regulatory Commission
LPG Liquidified Petroleum Gas
PIEA Petroleum Institute of East Africa
LOKL Libya Oil Kenya Limited
OTS Open Tender System
ULLAGE Storage space in pipeline
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