Feb 11, 2021 in Exploratory

Investment in Kenya
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Introduction

Foreign direct investment means a foreign company investing in a company based in another country. Kenya has a growing population, which is encouraging for anyone who wants to invest this country, but despite the growing population, Kenya has a few challenges to the business. In Kenya, there are many tribes as well as different religions with different ethics, which makes it favorable for a business to thrive. Moreover, the government of Kenya has laws that allow fair business competition together with having favorable investment rules. The major challenge to the thriving of business is insecurity contributed mostly by unstable neighboring countries. Although there are some challenges, I consider Kenya to be a better place for the investment for anyone who wants to maximize their profits.

 

Brief Overview of the Country

Kenya is located along the equator on the east coast of the African continent. The equator divides the country into almost two equal southern and northern parts. It has a perimeter of 3,446 km, according to international land boundaries. It borders five countries - Uganda, Tanzania, Ethiopia, Somalia, and Southern Sudan. It is also divided into seven major geographical regions that include coastal area, western region, and central region among others.

The British colonized Kenya in 1895, but it was declared a British colony officially in 1920. In 1942, some communities united to form the Mau opposing army that began the campaign of gaining independence. Kenya gained independence in 1963, and later in 1964, it became a republic. Jomo Kenyatta became the first president of Kenya, and later, after his death, Moi took over the as the next president. President Mwai Kibaki took over on 2002 and served his term until the current President.

There are many interesting places to see in Kenya. One of the attractive sites is the Coast region where it borders the Indian Ocean. Other interesting places include Mt. Kenya and some prehistoric sites such as Fort Jesus. In addition, the country boasts of numerous lakes as well as game reserves where various types of wild animals live. The fact that there are 42 tribes in Kenya makes it more attractive since each tribe has its cultural practices, some of which are preserved up to date.

I used the size and growth of population in my selection of this country. The reason behind my selection is there is a rapidly growing population in Kenya, which means the demand is high. Therefore, the business will prevail within a short period, which will lead to profits, thus fulfilling the objective of investing.

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Environmental Analysis

Political System

Kenya is a country ruled by a president who is elected by the people. The government has three branches - the judiciary and the executive as well as the legislature one. They govern the people. Additionally, some of the powers are devolved to county governments headed by the governors among other organs that work with these countys governments. Other main organs in the government are the cabinet secretaries who are the principals of the various ministries in the government. Kenya is a member of the Eastern African Community as well as a member of COMESA trading bloc, which is significant in my business since it will expand the market further.

Economic System

Kenya has a mixed economic system based on a market economy where there are less state-owned structure companies. Furthermore, it maintains a generous system of external trade. The recent report on GDP of the Kenya shows that it has a $69.977 GDP, which makes it among the 72 biggest economies in the world. The unemployment rate is about 40%, but it increases with the rise in population. As for inflation, its rates are not constant, and they vary from time to time but mostly between 4.5 and 11.5%. The current exchange rate in currency is as follows: one dollar is equal to 100 Kenya shillings. It should be noticed that Kenya has the best transport systems and logistics as compared to the neighboring countries. More roads and modern railway lines are still under construction and expansion. There are better communication systems, and mostly, Kenya is referred as the hub of technology in the eastern African region. Kenya reduces the trade barriers increasingly, but the insecurity caused by the unstable neighboring countries is the greatest threat to business.

Legal System

The Kenyan legal system has its roots in the English mutual law. The Constitution of Kenya is the supreme law that guides the people. The judiciary system is responsible for solving disputes that occur at different levels. The system is encouraging when it comes to marketing because strict measures are taken whenever there are criminal cases of importations.

Sociocultural Analysis

As for religion, there are two major religious groups in the country, namely Christianity and Islam. Although there are no significant differences that may lead to a conflict, there exist few cases where disputes have resulted from religious differences. Even though no major crises in the event of such situations have been, the business may fail. Having two national languages in Kenya, namely English and Kiswahili, makes the success of the firm quite possible as it eases communication. The diversity of cultural groups is promising for the success of the investment because if there is one cultural group that does not accept the product, there are many other groups available; hence, the marketing of the product will not be affected. The population of Kenya is currently estimated to be about 43 million, with many youths contributing in the population. Thus, large population means a wider market, which automatically leads to the success of the business.

Natural and Technological Environment Analysis

The Kenyan climate is moderate, meaning that most of the parts experience a hot and wet climate. Nevertheless, there are seasons, during which many the areas experience very high rainfalls, which causes flooding followed by the massive destruction of roads. This may make the delivery of products difficult, thus hindering the business. In the field of technology, most of the youths have joined social media groups that are an excellent platform of product advertisement, which favors the business.

Competitive Analysis

The country gives room for completion without blocking any channels that are used for distribution as well as giving preferences to the first company that offers a new product and service.

 
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Product Mix

Standardizing the product is the better option due to various key reasons. The first reason is that the market potential will increase when I offer standardized products. The market potential will increase because Kenya is among the countries that express interest in the benefits of standardization. The second reason is that when I develop different standards, I will be able to send powerful signals to the people that I invest in the best products and processes. The third reason for choosing to standardize the product is the fact that I will be able to add my focus and regulate cost-efficiency when I comply with the set standards of the product in the Kenyan free market. In addition, the process of standardization is an action for the investment by the investment, which means that direct engagement in the process of standardization will have a direct influence on the final product. This standardized product will get its way to many end users across the country, which will aid in shaping different future products. In addition, the benefit of standardization is the ability of the product to encourage international trade since most international traders request products by quoting certain standards. This stimulation of international trade will benefit the business since it will open ways to investing in Kenyas neighboring countries.

Market Entry

The best entry strategy in Kenya is through joint venturing with a local company. This form of the plan provides various advantages. One of the benefits involves a financial strength of such a company. This will reduce the cost of investing in the foreign country. Furthermore, the local company that has a profound good reputation among the people will aid in the marketability and acceptance of the new product across all parts of the country. In addition, there is a possibility that people will trust the product as safe for use since they already trust the local company, which will help in the expansion of the business within a short time. Another advantage is that the risks involved in the processing and marketing of the product will be shared. Therefore, in the case the business fails, the loss will be of lesser magnitude as compared to when I may have chosen the strategy of total ownership. Moreover, the ability to bring together the local and the foreign knowledge will lead to the production of the best quality of the product. This strategy proves to be the best since it has few disadvantages. The disadvantages include having no full control over the management of the product as well as the difference in expectations of anticipated benefits. These difficulties are insignificant as compared to the higher possibilities of business succeeding.

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Conclusion

The availability of a promising market that will last for an extended period is one of the goals of establishing the product in Kenya. It will help me achieve the goal of profit made from my product. Another reason is to take the advantage of the reviewed investing policies in a country that has less limitation despite having a large market. The other rationale is based on lack of similar products in the country. Thus, I would like to spread the quality of my product to the people of Kenya. I also anticipate that through acceptance of my product in the Republic of Kenya, it will be easier to penetrate the markets of other African countries. The introduction of the product will create many jobs, hence reducing the rate of unemployment. It will have a direct impact on people's living standards, and therefore, I will have achieved an objective of helping people get out of poverty.

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