Strategic responses to global competition by Kenya tour ...
Transcript of Strategic responses to global competition by Kenya tour ...
STRATEGIC RESPONSES TO GLOBAL COMPETITION BY
KENYA TOUR OPERATORS
BY
GRACEANNE MUTHONI KAMAU
A MANAGEMENT RESEARCH PROJECT SUBMITTED IN PARTIAL
FULFILMENT OF THE REQUIREMENTS FOR AWARD OF THE
DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF
BUSINESS, UNIVERSITY OF NAIROBI.
OCTOBER 2010
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DECLARATION
This management research project is my original work and has never been submitted for
examination in any university.
Signed ____________________________ Date ____________________
KAMAU GRACEANNE MUTHONI
D61/72287/2008
This management research project has been submitted for examination with my approval as the
university supervisor.
Signed ____________________________ Date ____________________
DR. JOHN YABS
LECTURER
SCHOOL OF BUSINESS
UNIVERSITY OF NAIROBI
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ACKNOWLEDGEMENT
I am very grateful to all individuals who directly or indirectly contributed to the completion of
this research project. My sincere thanks go to Prof. J. Yabs for guiding and challenging me from
conceptualization of the project to the end. I am also indebted to Prof Aosa for his unending
support and assistance in finalizing this research work. I appreciate all respondents who took
time to complete the questionnaires.
I am particularly grateful to my dear friends Elizabeth and Purity for their outstanding support in
all areas as far as my study programme is concerned.
Lastly and most profoundly, I thank my Lord and Saviour Jesus Christ for giving me life,
strength and good health to complete this study programme.
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DEDICATION
This project is dedicated to my brother Peter, and my parents Antony and Rosemary who have
been my pillars of strength and whose support, encouragement, sacrifice and patience I truly
cherish.
May the Favour of the Lord be with you all.
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ABSTRACT
The tourism industry is one of the largest and expanding industries in the world because of an
increase in the interaction between different countries and the development of commerce and
investment across borders (KATO Newsletter, 2006). The tour operators who are a crucial link in
the distribution chain, representing the central connection between customers and providers of
tourism services, have been challenged to devise strategies that ensure flow of tourist in the
country and succeed to compete with foreign tour operators to increase their business. The study
was conducted with the objective of establishing the strategic responses adopted by firms in the
tour operators in response to global competition.
The population of interest consisted of all tour operators based in Nairobi who are members of
Kenya Association of Tour Operators (KATO). To meet this objective, a sample of 87
respondents was drawn from KATO‟s Membership list using stratified random sampling
procedure and primary data collected using a semi-structured questionnaire. Data collected was
analysed using frequency tables, percentages, bar charts and other statistical measures.
Findings of the study have revealed that various response strategies were quite important to tour
operators in Kenya in responding to global completion. The strategic responses that ranked
highly included restructuring the firms operation to ensure continued profitability, investment in
technology communication technology (ICT) to add value to products/services, investment in
training and development programs for staff and forming co-operation, alliances and networks in
areas such as technology, marketing, distribution, and human resource sharing to add value to
products or services, maintaining an excellent public image, attaining reputation and brand
development and maintaining competitive position. Expansion and opening of regional offices to
coordinate tour activities seems to have been ranked the least. A check within the categories
shows that most of the companies in category D to „Associate‟ (79%) rated it quite lowly
The study has managed to identify various differences and similarities among the six categories
of tour operators‟ studied. The differences are reflected in the focus, goals and operations
pursued by the companies in each category. Generally, those in category D to „Associate‟ are
more focused on growth and expansion of company operations, while those in categories C to A
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are more geared towards maintaining the right public image and forming co-operation, alliances
and or networks in areas such as technology, marketing, distribution, and human resource
sharing to add value to products or services attaining market leadership and maintaining
profitability. In terms of similarities, the study established that almost all the tour operators in
their various categories are conscious of the need to enhance competitiveness as a tourist
destination in view of competition posed by the emerging destinations, and the need to
investment in technology communication technology (ICT) to add value to products and
services.
The study recommends that tour operators need to identify and employ to strategic responses that
will promote their success and competiveness. Environmental analysis and strategic planning
needs to be encouraged in all tour operators in category D to „Associate‟ since these categories
seemed to lag behind in responding to challenges posed by global competition. The study also
recommends a review by the Kenyan Government in regard to sustainable tourism in the country
in view of other competing destinations and competition faced by tour operators in Kenya from
foreign direct investment.
In future, the study recommends an integrated study covering other players in the tourism
industry like the hoteliers, parks and museums that would reveal more insights on how global
competition has impacted the tourism industry.
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TABLE OF CONTENTS
[
Declaration..................................................................................................................................... ii
Acknowledgement ........................................................................................................................ iii
Dedication ..................................................................................................................................... iv
Abstract .......................................................................................................................................... v
List of tables.................................................................................................................................. ix
List of figures ................................................................................................................................. x CHAPTER ONE: INTRODUCTION ......................................................................................... 1
1.1 Background of the Study .................................................................................................. 1
1.1.1 Organisation and the Environment ........................................................................ 1
1.1.2 Global Competition ............................................................................................... 2
1.1.3 Overview of the Tourism Industry ........................................................................ 3
1.1.4 Tour Firms in Kenya ............................................................................................. 4
1.2 Statement of the Problem ................................................................................................. 4
1.3 Objective of the Study ...................................................................................................... 6
1.4 Importance of the Study ................................................................................................... 6
CHAPTER TWO: LITERATURE REVIEW ............................................................................ 7
2.1 Organisations and the Environment ................................................................................. 7
2.2 Challenges Posed by Globalisation .................................................................................. 9
2.3 Strategic Responses ........................................................................................................ 10
2.3.1 Mergers and Acquisitions ....................................................................................... 11
2.3.2 Strategic Alliance .................................................................................................... 12
2.3.3 E-collaboration ........................................................................................................ 13
2.3.4 E-Commerce & Technological Development ......................................................... 13
2.3.5 Developing Niche Markets ..................................................................................... 14
2.3.6 Differentiation Strategy .......................................................................................... 15
2.3.7 Marketing Responses .............................................................................................. 15
2.3.8 Restructuring ........................................................................................................... 16
CHAPTER THREE: RESEARCH METHODOLOGY ......................................................... 17
3.1 Introduction .................................................................................................................... 17
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3.2 Research Design ............................................................................................................. 17
3.3 Population of the Study .................................................................................................. 17
3.4 Sample Design................................................................................................................ 17
3.5 Data Collection ............................................................................................................... 18
3.6 Data Analysis ................................................................................................................. 19
CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION ........................... 20
4.1 Introduction .................................................................................................................... 20
4.2 Sample Response Rate ................................................................................................... 20
4.3 General Characteristics of Respondents ......................................................................... 20
4.4 Markets served by the Tour Companies and Competitiveness in the Market ................ 22
4.5 Performance of Tour Companies in the Market ............................................................. 24
4.6 Global Competition Influence on Customer Tastes and Preferences ............................. 25
4.7 Importance of Environmental Factors in Gaining Competitive Advantage ................... 26
4.8 Strategic Responses to Challenges Posed by Global Competition ................................ 27
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS .............. 30
5.1 Summary ........................................................................................................................ 30
5.2 Conclusion ...................................................................................................................... 30
5.3 Limitations of the Study ................................................................................................. 31
5.4 Recommendations .......................................................................................................... 31
5.5 Suggestions for Further Research .................................................................................. 32
REFERENCES ............................................................................................................................ 33 APPENDIX I: TOUR OPERATORS QUESTIONNAIRE.................................................... 37 APPENDIX III: KATO MEMBERS ........................................................................................ 42
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LIST OF TABLES
Table 3.3.1 Population and sample size of tour operators............................................... 18
Table 4.2.1 Response rate per category……................................................................. 20
Table 4.3.1a: Age of the tour companies........................................................................... 21
Table 4.3.1b: Ownership the tour companies..................................................................... 21
Table 4.3.2 Branch Network/Associate companies......................................................... 22
Table 4.4.1a Market Served............................................................................................. 23
Table 4.4.1b Level of competitiveness of the market served............................................ 23
Table 4.4.1c Global competition in relation to survival and growth ............................... 24
Table 4.5.1 Performance of tour companies over the past three years............................ 24
Table 4.6.1 Global competition influence on consumer tastes and preferences.............. 25
Table 4.7.1 Respondents‟ rating of environmental challenges faced by their organization in
trying to gain competitive advantage............................................................ 26
Table 4.8. Respondents‟ ranking of strategic responses to global competition.............. 27
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LIST OF FIGURES
Figure 4.4.1 Competitiveness of the market……………………………..............29
Fig. 4.5.1 Performance of Tour operators in the market……………................32
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Global competition is one of the sweeping them in the 21st Century. Businesses have had to
contend with idea that the world is a small global village and decisions made should be focused
on satisfying the needs of both the local and foreign customers. Tourism industry is evidently not
immune to a wider context of global competition. In the past one or two decades, a stable
increase has been witnessed in international tourist flows, inter-regional and inter-organizational
alliances, and foreign direct investment. These trends are especially prevalent in the developing
world, largely because of their pristine nature, diverse culture, inexpensive goods and services,
cheap labours, and other resources.
1.1.1 Organisation and the Environment
An organization operates within an environment and depends on that environment for its inputs
in form of resources and as outlets for their output after transformation (Porter, 1985). Since
organizations are open system and are either environment dependent or environment serving,
organisations success or failure is dependent on its interaction with the environment. However
the environment within which companies operates is constantly changing presenting
opportunities, challenges and threats (Mintberg, 1987). The opportunities and the threats provide
the agenda for strategic positions taken by an organization.
According to Grand (2000), an organisation survives and succeeds when it creates and maintains
a match between its strategy and the environment, and also between its internal capability and
the strategy. The environment is not static but turbulent. Discontinuous and uncertain strategic
response calls for organisations to change their strategy to match the environment; an
organisation is pressed to shift strategy. As such, this will enable it support the newly adopted
strategic responses effectively (Ansoff and McDonnell, 1990). The challenge to organisations is
to continuously match strategy, environment, and their internal capabilities in order to survive,
succeed and to remain relevant (Porter, 1985).
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1.1.2 Global Competition
Various scholars have attempted to define global completion. Global competition is a complex
series of moves and countermoves on a global landscape integrated through a global network of
communication, transportation, and trade (Sassen, 2006). Global competition has been facilitated
by the process of globalisation which in essence is the elimination of state- enforced restriction
on exchange across borders and the increasingly integrated and complex global system of
production and exchange that has emerged as a result (Tom 2006). Global competition involves
approaching worldwide markets with standardised products (Johnson and Schools, 2002). This
has been made easier by advancement of science and technology especially telecommunications
and coming into use of wide- bodied aircraft
Deresky (1998) defines global competition as characterised by networks that bind countries,
institutions, and people in an interdependent global economy. The invisible hand of global
competition is being propelled by the phenomenon of an increasingly borderless world.
According to Sassen (2006), a core element of global competition is the expansion of world
markets and trade through the elimination or reduction of trade barriers, such as import tariffs.
Thomas L. Friedman (2008), examines the impact of global competition as “flattening” of the
world, and argues that the pace of global competition is quickening and will continue to have a
growing impact on business organization and practice.
Global competition has resulted into growing power of international economic and market forces
and consequent decline in the ability of individual states to control their economies and of the
private corporation in limited geographic spheres of operation to dominate domestic markets
(Kotler, et al 2003). Global competition, which is characterized by the escalating mobility of
capital, people, ideas and information on a universal scale, has become a sweeping theme in the
contemporary world. The impact on tourism is a stable increase in international tourist flows,
inter-regional and inter-organizational alliances, and foreign direct investment. There has been
increased power in the hands of a small number of global travel and tourism networks achieving
their globalisation not only through vertical and horizontal integration but through diagonal
integration, economies of both scale and scope, and their huge investment electronic marketing.
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1.1.3 Overview of the Tourism Industry
The World Travel and Tourism Council claimed that tourism has shown steady increase in
volume of international travel, and long with this growth in travel, the number of tourism
destination choices has also increased. The world Travel and Tourism Council also points out
that tourism is worth US$5.7 trillion to global GDP and employs 235 million people worldwide.
These are expected to grow to more than US$11 trillion and 303 million respectively by 2020
(World Travel and Tourism Council, 2007). Tourism has become one of the most vital sectors of
Kenya‟s economy and a major foreign exchange earner. Up to 45% of foreign exchange earnings
came from tourism, making tourism one of the leading earners of foreign exchange in Kenya,
and challenging tea and horticulture for the number one spot (Tourism Trust Fund, 2007).
Tourism has of late become and extremely competitive economic activity throughout the world
(Kenya National Tourism Joint Security Committee Report of 1998). Tourism in many countries
has gained importance due to competing tourist destinations and as a result Kenya‟s tourism
industry is trying to do everything possible to attract more tourist for itself (Kenya Tourism
Board) KTB) Marketing Strategies 2003-2007). Firms in the tourism industry are under pressure
to respond to increased competition in the tourism industry particularly from the emerging and
huge economies of China and India. In Africa, Kenya is facing competition from other
destinations for the reduced international tourists. According to the WTO report of 2003 the
tourist arrivals and receipts for top African destinations, in 2002, Kenya had only $838,297
million as compared to the highest South Africa with $ 65, 502,719 million. Others were
Mauritius with $ 682,612; Morocco with $ 41,932,152, Tunisia with $ 50,641,422 and Egypt
with $ 49,063,764 million.
International tourists to Kenya have different interests. Some are attracted by the country‟s warm
beaches; some come to visit Kenya‟s National Museum while others come for game drives.
These are among the competing tourism destinations in Kenya. According to the statistics of
2005 by the Kenya Tourism Board, most international tourists who came to Kenya for holiday
are interested in game drives and most of them visit more than one park. According to the
statistics, 77% of international tourists were attracted by Kenya‟s Wildlife and out of the 832,229
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international visitors to Kenya in 2005; about 640,539 of them visited the Kenya Wildlife
Service Parks.
1.1.4 Tour Firms in Kenya
The travel industry is one of the largest and expanding industries in the world because of an
increase in the interaction between different countries and the development of commerce and
investment across borders (KATO Newsletter, 2006). Tour operators are businesses that
combine two or more travel services (e.g. transport, accommodation, catering, entertainment, and
sightseeing) and sell them through travel agencies or directly to final consumers as a single
product. A tour operator is thus a crucial link in the distribution chain, representing the central
connection between customers and providers of tourism services, and thus has the power to
influence both the demand and the supply side (Nyingi, 2003).
The Kenya Association of Tour Operators (KATO) is the country‟s premier tourism association,
which has some 250 experienced professional tour operators as its members (KATO, 2008).
KATO exists to uphold the good reputation of Kenya as a tourism destination by ensuring that
Tour operators maintain the highest standards of service and value to the tourists and provides a
forum for members to air their disputes to the government and resolve disputes among
themselves. Certainly, many tour operators are already thriving, as evidenced by the number of
operators registered with KATO. Yet the potential for even greater success is virtually unlimited.
Tour operators have much to gain by improving their operations, service marketing, expanding
their connection with overseas clients and conveying to the world markets all that Kenya has to
offer. A major benefit provided by tour operators to developing countries like Kenya is the
significant increase the volume of tourist arrivals, ideally leading to employment generation,
export earnings and economic development. They employ tour guides, clerks and drivers.
1.2 Statement of the Problem
Organisation environment consist of all the conditions and forces that affects its strategy option
and defines its competitive situation (Pearce and Robinson). Organisations, success is dependent
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on its successful interaction with environmental condition and forces. Consequently,
organisations have devised strategies that match and fit its environmental influences.
Global competition has been on the rise as a result of the irreversible process of Globalisation.
Deresky (1998) defines globalisation as global competition characterised by networks that bind
countries, institutions, and people in an interdependent global economy. Global competition is
characterized by the escalating mobility of capital, people, ideas and information on a universal
scale, has become a sweeping theme in the contemporary world.
Its impact on tourism industry is a stable increase in international tourist flows, inter-regional
and inter-organizational alliances, and foreign direct investment and increased global
competition. Tour operators in Kenya are an important player in the tourism industry. They act
as a crucial link in the distribution chain, representing the central connection between customers
and providers of tourism services, and thus have the power to influence both the demand and the
supply side (Nyingi, 2003). Given their important role and increasing challenges brought by
global competition, tour operators have been challenged to devise strategies that ensure flow of
tourist in the country and succeed to compete with foreign tour operators to increase their
business. This has seen tour operators collaborating with other countries to establish foreign
clientele
Various researchers have provided insight into the area of strategic response to global
competition. Munyao (2007) studied the response strategies of tobacco companies in Kenya to
global competition and found out that Kenya tobacco companies had taken such diverse response
strategies towards tackling global competition. Other studies include those done by Changa
(2007), Abdullah (2000), Kombo, (1997), Mwarania (2003) and Mutua (2004). In these studies,
it was generally found out that firms made adjustments to their strategic variables depending on
their uniqueness to ensure survival. Studies done on tour operators have however focused on
other aspects other than strategic responses to challenges posed by global competition. It can
therefore be observed that there is a gap in literature as far as strategic response is concerned on
tour operators in Kenya.
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This study seeks to answer the following research question; what strategic response tour
operators in Kenya employ in order to survive and prosper in a competitive global market. Tour
operators in Kenya have to contend with global competition, higher standard of service product
and at a fair price.
1.3 Objective of the Study
The objective of this study was to establish the strategic responses adopted by firms in the tour
operators in response to global competition.
1.4 Importance of the Study
This study will be of value to various stakeholders. It will be useful to tour operators in Kenya
and elsewhere in the world as it will add knowledge on alternatives strategic responses they may
employ in response to global completion therefore improving their business.
It will also be useful to the government of Kenya and other policy planners in making
appropriate plans in the tourism sector in general and tour operator sub-sector in particular since
they relies heavily on tourism for foreign exchange.
Further, the study will be useful to scholars and academics as it will form a basis for further
research into the area of strategic responses to global completion by organisations or tour
operators.
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CHAPTER TWO: LITERATURE REVIEW
2.1 Organisations and the Environment
Firms are environmentally dependent because they source their inputs such as capital, raw
materials and human resources from it, and produce their output in the form of products and
services to it. Literature on the environment of an organization and its direct and indirect impact
upon organizational processes and outcomes is numerous (May et al. 2000). As Ansoff and
McDonnell (1990) argued, business firms are in a constant two-way interaction with the
environment. They receive an assortment of resources from the environment, and after a
transformation, deliver them back to the environment in the form of goods and services. The
connection of the external environment and the organisation is an input- throughput-output
process where inputs are received from the environment and released back into the same
environment after being processed by the environment. What is released back can only be
consumed by the organisations if it fits the environment requirements and needs (Porter, 1985)
Opportunities and threats posed by the business environment provide the agenda for future
strategic actions. An opportunity for one organization can be a threat for another depending on
their resources. Organizations exploit opportunities to achieve stated objectives. They protect
themselves from threats also to achieve stated objectives. Aosa (1992) acknowledged that
environmental turbulence normally tends to pose challenges to management. Managers in
organizations need to recognise the impact which environmental forces have on their decision
making by anticipating, acting and adapting to environmental opportunities and constraints.
For survival, an organisation must maintain a strategic fit with both the external and internal
environments. The external environment of a firm consists of the moves and counter moves
executed by its competitors. The organizational strategy is effectively realized only after gauging
the mood prevalent in the firm‟s external environment by conducting the industry analysis. Such
analysis also helps to ascertain the position of the organization vis-à-vis the competing firms and
come up with business plan strategy. Selzinck (1957) introduced the idea of matching the
organisation‟s internal factors with external environmental circumstances. The core idea was
developed into what we now call SWOT analysis by Learned, Andrews and others at the Harvard
Business School General Management Group. Strengths and weaknesses of the firm are assessed
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in light of the opportunities and threats from the business environment. This matching may call
for a restructuring of the organisation's operations (May et al. 2000). The external analysis of a
firm enables the firm to obtain a clear picture of the threats and opportunities prevalent in the
firm‟s external environment. Having done this, the firm can devise suitable strategies to exploit
the opportunities and negate the threats.
According to Grand (2000), an organisation survives and succeeds when it creates and maintains
a match between its strategy and the environment, and also between its internal capability and
the strategy. The environment is not static but turbulent. Discontinuous and uncertain strategic
response calls for organisations to change their strategy to match the environment and also to
transform or redesign their internal capability to match this strategy. When there is a shift in the
environment, an organisation is pressed to shift its strategy. As such, this will enable it support
the newly adopted strategic responses effectively (Ansoff and McDonnell, 1990). An
organisation‟s competitive strategy may thus reside as much in the environment as it is in the
individual organisation. The challenge to organisations is to continuously match strategy
environment, their internal capabilities in order to survive, succeed and to remain relevant
(Porter, 1985).
Competition is one of the main challenges presented by dynamic environment. Organisations
compete for input recourses such as raw materials, labour and capital and output resources such
market share, market dominance and market leadership in order promote their performance.
Firms in dynamic industries respond to competitive forces by employing different competitive
strategies either operational or strategic strategies. While operational strategies are short term
and are concern with operation effectiveness, strategic strategies are long- term in nature and
embrace the entire organisation. The challenge to organisations is to continuously match strategy
environment, their internal capabilities in order to survive, succeed and to remain relevant
(Porter, 1985).
The world we live in today is an international or global dimension to each of the macro-
environment (Atamer, et al., 1993). May, et al. (2000) has identified six key areas that have a direct
impact on a business‟ understanding of the international business environment, namely, success
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and failure in understanding the business environment; the changing nature of the international
business environment; the competitive factors influencing the business environment; the need for
general environmental scanning; systemising the search for international business opportunities;
and the key factors driving the competitive environment. Since the beginning of the 1990s, world
markets entered into a period in which structural changes in economic, technological,
institutional, social, political, physical and international environments are occurring in an
unprecedented manner. The market environment is changing dramatically because of the
increase in the general standard of living, the increase in competition among organisations and
the increase in consumerism. The changes of political, technological and economic environment
have de-clustered previously protected national areas, increasing dramatically communication
facilities and capacities, creating new needs all over the world, with some convergences among
customers‟ expectations (Atamer et al 1993). As a consequence, a majority of firms have to act,
not only to seize new opportunities, cut costs, reduce their exposure to fiscal pressure or to
foreign exchange, enlarge their access to new competences and skills, but also to prevent the loss
of their market shares and avoid possible take-overs from competitors.
2.2 Challenges Posed by Globalisation
According to Ouattara (1997), the challenge to national economies remains how to capitalise on
the opportunities for growth and development afforded by globalisation while at the same time
minimizing the risks. In an obvious sense this means following appropriate policies: stable
macroeconomic policies, prudent financial policies, and sound regulatory policies. But the
appropriate policies are easier to describe that to implement and vary over time. The more
fundamental problem is thus how to develop institutions with the capacity to determine
appropriate policies, implement them, and stick to them until circumstances change.
Globalisation is associated with the sharp increase of private capital inflows to developing
countries in form foreign direct investment. Foreign direct investments in emerging markets and
developing economies have been on the rise. Due to increased interconnections and the erratic
nature of the international tourism demand, the tourism industry has been characterised by the
active involvement and dominant role played by multinational corporations and transnational
corporations. Some of the international companies in the have taken advantage of globalisation
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to seek for new opportunities to growth their enterprises, reap the benefit of the economies of
scale, increase their market share, suppress competition and achieve global dominance (Keller
2005). Tour operators have had to contend with competition from multinational companies in
their countries who enjoy all the benefits the local tour operators enjoy. Some government have
used incentive and tax concessions to attract the multinational corporations.
Globalisation has influence the way business is conducted and connected the world market
which is now viewed as a Global village. Information exchange in the world market is an
integral part of the way business is conducted. This has seen the development of global
information system, global telecommunications infrastructure and greater Tran‟s border data
flow using such technologies as internet, communication satellites, submarine fibre optic cable,
and wireless telephones. Organisations have had to invest in information technology to adapt to
the way business in conducted via the internet. Marketing, conducting meetings through
teleconferencing and selling of products are some of the business activities that have benefited
from development in information technology.
Organisation in tourism industry should address these key issues and gather relevant information to
facilitate market and competitor analysis as a basis for strategic planning and strategic formulation
as part of effective international management. They should always be aware of international
economic trends like inflation, recession and shortages of resources as well as international
political developments (Atamer, et al., 1993).
2.3 Strategic Responses
Pearce and Robinson (2002) defined strategic responses as the set of decisions and actions that
result in the formalization and implementation of plans designed to achieve a firm‟s objectives.
Therefore it is a reaction to what is happening in the economic environment of organizations.
Ansoff and Mc Donnell (1990) argue the response strategy involves change in the firm‟s
behaviour and actions in an effort to pursue set goals and objectives.
Pearce and Robinson (2002) say that there is need to adopt new strategies that match the
challenges from the environment. Reengineering, downsizing, self-management and outsourcing
are some of the dominant strategies that have been used for restructuring in the 1990‟s. Ansoff
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and McDonnell (1990) asserts that the management system used by a firm is a determining
component of the firm‟s responsiveness to environment changes because it determines the way
that management perceives the environment, diagnosis their impact on the firm, decides what to
do and implements the decisions.
Burnes (2000), the concern in real time responses is to minimize the sum to total losses and
restore profitability to ensure organization‟s success in a turbulent and surprising environment.
He also observed that unstable and unpredictable conditions in which organizations have to
operate today means that the ability to think strategically and manage strategic change
successfully is key competitive strength for a sustainable competitive advantage. Real time
strategic issue responses are necessary to facilitate the firm‟s preparedness in handling the
impending issue, which may have profound impact on the firm.
Strategies employed by firm‟s aims at achieving competitive advantage over the key competitors
of in its industry (Majluf and Hax, 1991). These include mergers and acquisitions; retrenchment;
hostile takeovers, strategic alliances; vertical and horizontal integration; restructuring; divestiture
and; liquidation. For the purpose of this study the following strategies will be consider mergers
and acquisitions, strategic alliance, developing niche markets, e-marketing and investing in
technology and restructuring.
2.3.1 Mergers and Acquisitions
Scholes and Johnson (2004) define acquisition as “where an organisation develops its resources
and competencies by taking over another organisation”. He argues that the need to keep up with
the changing environment often dominates the thinking about acquisition. Mergers and
acquisitions offer and opportunity for companies to collaborate in doing business thereby
overcoming individual disadvantages. Mergers and acquisitions can be within the same market
or across different markets due to globalisation. Byar (1991) argues that mergers and acquisitions
allow for growth or development of an organisation to take place without the organisation
involved having to invest the level of resources that would be necessary if they were to operate
individually.
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Johnson and Scholes (2001) give the reason for mergers and acquisitions as lack of resources and
competencies to develop a strategy internally as well as due to other financial motives and cost
efficiencies. Motivation for use of mergers and acquisitions strategy increased speed of new
product and market areas entry, deregulation, financial motives, lack of resources or
competencies to compete successfully, cost efficiency and expectations by key stakeholders.
To ensure profitability, survival and growth some local firms opted to enter into alliance with
foreign firms in order to face the challenges of competition and changing market demand.
2.3.2 Strategic Alliance
This is where two or more organisations share resources and activities to pursue a strategy.
Through cooperation, the need to obtain materials skills, innovation, finance or access to markets
may be readily available (Wortsel H. V and Worzel. H.1997). There are various forms of
strategic alliances such as licensing, franchising, subcontracting, joint ventures vertical and
horizontal alliances.
According to Shaw and Williams (2002), franchising is a contractual agreement whereby a firm
allows another to sell products and provide services on its behalf for a fee. This is also evident in
the tourism industry. This is the case with such brand names as the following corporate chains,
Avis Rent a Car, Hilton of the United Kingdom, Holiday Inn, Inter-Continental of Japan and
Club Mediterranean of France. Licensing is where the right to manufacture a patented product is
granted for a fee. With subcontracting, a company chooses the subcontract particular services or
part of a process. For example increasingly in public service responsibility for waste removal,
cleaning and Information Technology services may be subcontracted to private companies
(Scholes and Johnson, 2004). Joint venture is strategic alliance that occurs when two or more
organisations enter into a temporary partnership or consortium for purpose of exploiting
opportunities presented by a changed environment. Joint ventures enhance partnering
organisations competitiveness.
According to Burns and Holden (1995), vertical integration is a business practice whereby
companies at different level in the distribution chain seek to control various stages of production,
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delivery and marketing of their products. For example some tour operators have grown from
medium-sized national companies to truly international corporations that move millions of
people around the globe each year (Burns and Holden, 1995). Similarly, a number of tour
operators today have their own aircrafts and hotels, while some airlines also offer chauffer and
car rental services. Some global firms have also capitalised on these trends and produced
standardized tourism products in order to contribute to the homogenization of the world tourism
market.
According to Youell (1998), other organisations have sought to survive through horizontal
integration whereby companies at the same level have sought mergers with companies at third
level in the distribution chain. The mergers have been characterised by ether two companies
offering competing services; a result of a takeover of one company by another or a voluntary
agreement between two companies.
2.3.3 E-collaboration
Richmond et al (1998) defined e-business as the transaction of commercial activities on global
open networks between and ever-increasing number of corporate and individual participants.
Collaboration means working jointly with other for purpose of achieving the some goal set.
E-Collaboration is internet-based cooperation/collaboration with exchange of information,
materials, or cash amount entities. E-collaboration provides a very efficient strategic option with
low cost, easy access, large markets, reputation and resources sharing. It brings geographical
dispersed teams together, supporting communication, coordination and cooperation. Powerful,
integrated collaborative technology is the backbone of an e-collaboration (Vlanchopoulou and
Manthous 2003).
2.3.4 E-Commerce & Technological Development
The growing environmental complexity and dynamism, the explosion and use of e-commerce
and e-business models generate major impacts for tourism businesses and its competitive
positioning strategies. The general trend of almost all tourism firms is the move toward the
14
creation of business-to-business, business-to-consumer marketplace offering a medium to
establish direct relationships among suppliers, consumers and intermediaries in every level. A lot
of new online travel businesses have emerged recently such as Expedia, Orbitz, Online
Destinations, Travelocity to provide direct, easy, convenient, online travel access and reservation
as well as to enable distressed inventory to be distributed efficiently.
New technology has opened routes to a more cost -effective generation of inquiries, to convert
awareness and interest into bookings, and secure repeat business. Computerised database
technology and the need to know more about customer profiles and needs, as well as the
necessity to establish a competitive advantage has shifted the emphasis in marketing toward
direct response strategies in order to achieve sales volume. Direct response marketing can obtain
customer loyalty through customer care and service, and by building a relationship centred on
the customer rather than the product. It involves direct communication between the firm and
consumer and often includes direct mail, telephone selling and travel exhibitions, but is more
than direct selling.
2.3.5 Developing Niche Markets
It involves the identification of a small client base (niche) and giving emphasises personalised
attention. Porter (1996) argues that focussing by in this way; it becomes possible for an
organisation to dominate one chosen area. Mugambi (2003) argues that a focuser selects a
segment or group of segments and tailors a firm‟s strategy to serve them at the exclusion of
other. Furthermore, the „tourist experience‟ is created in relatively small geographic areas known
as clusters defined as geographic spaces in which the entire tourism experience takes place‟
(WTO, 2001).The development of niche tourism is recognised as a good competitive strategy
(World Tourism Organisation publications, Tourism in the Age of Alliance, mergers and
Acquisitions 2002). It was noted that travellers have become more sophisticated and are not
necessarily always looking for the standardized experience to be expected in a large chain/grand
name hotel. But for individualised experience hence the potential of niche markets Niche
developments for tour operators could include sports, health & wellness, cultural heritage,
business conventions, cuisine, wedding and honeymoons, golf, diving, festivals,
environment/nature, luxury, spas and wellness and families. Thus, tour operator‟s business
15
competitiveness depends on how its constituting parts, interact and interrelate to deliver the best
value for money for its tourists.
2.3.6 Differentiation Strategy
Lalampaa (2006) argues that differentiation strategy strives to achieve industry wide recognition
of different and superior products and services as compared to other players. A differentiation
strategy calls for the development of a product or service that offers unique attributes that are
valued by customers and that customers perceive to be better than or different from the products
of the competition (Porter, 1986).
Firms that succeed in a differentiation strategy often have the following internal strengths
(Porter, 1996): access to leading scientific research, highly skilled and creative product
development team, strong sales team with the ability to successfully communicate the perceived
strengths of the product, corporate reputation for quality and innovation. However, the risk
associated with a differentiation strategy includes imitation by competitors and changes in
customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve
even greater differentiation in their market segment.
2.3.7 Marketing Responses
Marketing is a vital ingredient to the success of tourism, and with a global market place with
hundreds of destinations competing for arrivals; any marketing initiative must be strategic, well
planned and researched and targeted to the best possible audience (Sanderson, 1998). For a
developing world destination, carrying out cost effective marketing is a genuine challenge.
Marketing enables an organization to give its output in the form of products and services to the
final consumers and therefore is key to any strategic moves that an organization undertakes with
regards to changes in the environment and to enhance a firm‟s competitive advantage. Kottler
(1997) argues that firms resort to relationship marketing as a response strategy to challenges
posed by a turbulent environment. This entails a process by which an organization seeks to
attract and maintain customers and consequently convert them into loyal customers and brand
ambassadors by encouraging others to try the company‟s product or service. Kanuk and
Schiffman (1994) assets that firms do respond to changes in their operating environment by
16
marketing their products and services as the customers often judge the quality of a product or
service on the basis of a variety of information cues.
2.3.8 Restructuring
Thompson (1997) argues that restructuring involves radical business process re-engineering as
the business searches for new ways through which performance can be improved. It is based on
the notion that some activities within a business‟s value chain are more critical to the success of
the business strategy than others. Hammer (1996) asserts that indeed organisations can greatly
improve their efficiency and quality by focusing on customers and processes that create value for
them such as outsourcing and rightsizing/retrenchment. Restructuring is the change of structure
by concentrating on only the activities that add value to the organisation.
According to Pricewaterhouse (1997), reengineering is the fundamental thinking and radical
redesign of business processes to achieve dramatic improvement in critical contemporary
measures of performance such as cost, quality, service and speed. It is about changing the way
we do things. It forces us to look at what we do and ask why we do it. If is still required then is
there a better way of doing it? According to Pearce and Robinson (1998), restructuring is based
on the notion that some activities in a business value chain are more critical to the success of its
strategy than others.
17
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
This chapter presents the methodology used to carry out the study. It further describes the
research design, the study area, target population, sampling techniques and sample size type, and
source of data research instrument to be used, data collection and data analysis
3.2 Research Design
The research design for this study was a survey. A survey research design is where data is
collected from a sample of a population. Since populations can be quite large, Busha and Harter
(1980) argue that researchers can directly question only a sample (i.e. a small proportion) of the
population.
There are two basic types of surveys: cross-sectional surveys and longitudinal surveys. Cross-
sectional surveys are used to gather information on a population at a single point in time while
longitudinal surveys gather data over a period of time. Cross –sectional survey allows the
collection of large amount of data from a sizable population at a single point in time and in a
highly economical way. Therefore, cross-sectional survey was deemed the best strategy to fulfill
the objective of this study
3.3 Population of the Study
The population of this study consisted of all Tour Operators based in Nairobi who are members
of Kenya Association of Tour Operators (KATO). The Kenya Association of Tour Operators has
a total of 290 members out of which 196 members are based in Nairobi
(www.katokenya/katomembers.asp).
3.4 Sample Design
The sampling frame for this study was based on the list of membership of tour operators
available from KATO. A sample was drawn using stratified random sampling procedure. KATO
has grouped its members into six major categories (A to E, and Associate) depending on their
gross annual turnover in the Association (www.katokenya/katomembers.asp). The categories
currently in use are : Category “A” - All members with a gross annual turnover exceeding United
18
States Dollar (US$) 1.7Million; Category “B” - All members with a gross annual turnover
exceeding US$1.1Million but below US$1.7Million; Category “C” - All members with a gross
annual turnover exceeding US$570,000 but below US$1.1Million; Category “D” - All members
with a gross annual turnover exceeding US$140,000 but below US$570,000; Category “E” - All
members with a gross annual turnover of not exceeding US$ 140,000; Associate - All new
members who are yet to complete one full year in membership. For the purposes of this study,
these categories were used as basis for stratification.
A sample size of 87 was used for this study. Cooper and Schindler (1998) concur that a sample
size of 30 and above is considered representative of the population for the purposes of data
analysis and generalization. The sample was chosen using proportionate stratified sampling from
each of the appropriate strata as shown in the Table 3.3.1.
Table 3.3.1 Population and sample size of tour operators
Category Population (N) % of total Sample (n)
A 28 10% 8
B 11 4% 3
C 16 6% 5
D 46 16% 14
E 151 42% 45
Associate 38 13% 12
Totals 290 100 87
3.5 Data Collection
Survey method was used to collect the pertinent primary data for this study. Data was collected
using a semi-structured questionnaire that consists of three parts. The questionnaire contains both
open ended and closed ended questions. The questionnaire was divided into three parts. Part A
dealt with tour operator‟s background information questions. Part B had questions that related to
tour operator business environment while Part C dealt with strategic responses questions. „Drop-
19
and-pick up-later‟ method was used. Respondents were either managing directors or marketing
managers or their equivalents. The researcher administered one questionnaire in each tour
company. Pilot testing was carried out prior to the full data collection phase in order to eliminate
any inconsistencies and to improve quality of the questionnaire.
3.6 Data Analysis
Before the responses were processed, the completed questionnaire was edited for completeness
and consistency. The responses was coded to facilitate statistical analysis and descriptive
statistics namely frequency distributions, mean scores, percentages, graphs and bar charts that
was used to establish relationships.
Both quantitative and qualitative data was collected. Quantitative data required the establishment
of means and percentages to have a comparison of responses. Qualitative information was
analysed by establishing the frequency of a given response to the question. This frequency was
tabulated and hence conclusion made. The findings were finally used to determine answers to
specific questions raised in the study.
20
CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION
4.1 Introduction
This chapter presents an analysis of the data collected. It also presents and discusses the findings
of the study. The findings have been summarised in percentages and mean scores and have been
presented by use of tables and graphs. In analysing the data, where appropriate, the researcher
has endeavoured to compare findings between the different strata in order to explain the
differences or similarities observed.
4.2 Sample Response Rate
The questionnaires were distributed on a „drop and pick up later‟ method. Some 66 out of the
target sample of 87 responded. This represents a response rate of 76% (Table 4.2.1). The rate
was considered adequate representation of the population for the purpose of making conclusions.
This is also adequate response given that the survey was conducted during the peak season in
tourist arrivals in the country.
Table 4.2.1 Response rate per category
Category Population (N) Sample (n) Actual Return %
A 28 8 8 100%
B 11 3 2 67%
C 16 5 4 80%
D 46 14 10 71%
E 151 45 34 76%
Associate 57 12 8 67%
Totals 290 87 66 460%
Mean Response rate 76%
Source: Research data
4.3 General Characteristics of Respondents
The researcher wanted to establish the general characteristics of the tour companies in each
category. The characteristics included age; form of ownership; and whether the tour companies
have associated companies or branches in Kenya and abroad. The findings are presented in tables
4.3.1a, 4.3.1b, and 4.3.2
21
Table 4.3.1a: Age of the tour companies
Category Respondents
(ni)
Over 15
yrs
(%)
10 to below
15 yrs
(%)
5 to below
10 yrs
(%)
Below 5
yrs
(%)
Total
%
A 8 50 25 13 13 100
B 2 33.3 33.3 33 0 100
C 4 33.3 40 40 20 100
D 10 20 29 36 21 100
E 34 14 27 44 13 100
Associate 8 8 17 25 50 100
Source: Research data
Table 4.3.1b: Ownership the tour companies
Category Respondents Foreign Local Both foreign
and local
Total %
(ni) (%) (%) (%)
A 8 63 13 25 100
B 2 33 10 57 100
C 4 20 40 40 100
D 10 14 20 62 100
E 34 17 58 25 100
Associate 8 17 70 13 100
Source: Research data
As shown in Table 4.3.1, the age of the companies was found to correspond with the stratum in
which the companies are placed. Most of the oldest companies were found in category A while
majority of the newest companies were found in category „Associate‟.
Half (63%) of the companies in category A are foreign owned or have a bigger percentage of
their ownership outside Kenya. This percentage decreases significantly within the other
categories such that 70% of category „Associate‟ are actually locally owned.
22
Table 4.3.2 Branch Network/Associate companies
Category Respondents
(ni)
In Kenya
(%)
Outside
Kenya
(%)
No branch/
Associate
(%)
A 8 37 63 0
B 2 50 50 0
C 4 60 40 0
D 10 47 33 20
E 34 50 27 23
Associate 8 53 22 25
Source: Research data
Findings in table 4.3.2 show that all the companies in category A and B have branches or
associated companies both in Kenya and outside Kenya. This varies within the categories and it
is observed that the number of companies with branches decreases towards category „Associate‟.
4.4 Markets served by the Tour Companies and Competitiveness in the Market
All the companies surveyed serve both domestic and foreign markets. In accessing these
markets, the companies were asked to state their view on the level of competition in the markets
served. In terms of competitiveness, all the companies chose only two options, i.e. competitive
and very competitive.
Table 4.4.1a Market Served
Category Respondents
(ni)
Foreign
Markets Only
(%)
Domestic
Markets Only
(%)
Both
Markets
(%)
Total
(%)
A 8 50 13 38 100
B 2 33 0 67 100
C 4 20 20 60 100
D 10 36 14 53 100
E 34 33 13 50 100
Associate 8 64 17 19 100
Source: Research data
23
Table 4.4.1b Level of competitiveness of the market served
Category Respondents
(ni)
Very competitive (%) Competitive (%) Total
%
A 8 62 38 100
B 2 67 33 100
C 4 80 20 100
D 10 67 33 100
E 34 70 30 100
Associate 8 64 36 100
Source: Research data
Figure 1 Competitiveness of the market
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Category A Category B Category C Category D Category E Associates
Very Competitive
Competitive
Source: Research data
Categories
24
Table 4.4.1c Global competition in relation to survival and growth Category Respondents
(ni)
Irrelevant to
business (%)
Good for
business (%)
Threat to
business (%)
Total %
A 8 25 63 13 100
B 2 33 67 0 100
C 4 20 60 20 100
D 10 21 64 14 100
E 34 22 64 13 100
Associate 8 25 67 8 100
Source: Research data
As can be observed from the findings in Fig. 4.4.1c, most of the respondents rated highly global
competition to be good for business. Only a small percentage felt that global competition is
irrelevant to business and is a threat to business.
4.5 Performance of Tour Companies in the Market
When asked about their performance over the last three years, the following are the responses
received from the different categories.
Table 4.5.1 Performance of tour companies over the past three years
Category Respondents
(ni)
Very
good
(%)
Good
(%) Fair
(%) Poor
(%) Total
(%)
A 8 63 37 0 0 100
B 2 33 67 0 0 100
C 4 20 60 20 0 100
D 10 43 29 29 0 100
E 34 38 40 22 0 100
Associate 8 17 42 33 0 100
Source: Research data
25
Figure 2 Performances of Tour Operators in the Market
Source: Research data As can be observed from the findings in Fig. 4.5.1, most of the respondents rated the
performance of their companies as „very good‟ and „good‟. Only a small percentage especially
on categories C to „Associate‟ felt their performance was fair. No company felt their
performance was poor.
4.6 Global Competition Influence on Customer Tastes and Preferences
The respondents were asked to rate the extent of global competition influence on consumer tastes
and preferences. Most of the respondent rated the influence on consumer tastes and preference
„to some extent and „to a large extent‟. Only a small percentage especially category D to
„Associate” rated the influence „to no extend‟ as shown below in Table 4.6.1. Table 4.6.1 Global competition influence on consumer tastes and preferences
Category Respondents
(ni)
To no
extend (%)
To a lesser
extent (%) To some
extent (%) To a large
extent (%) Total
(%)
A 8 0 0 63 38 100
B 2 0 0 33 67 100
C 4 0 20 60 20 100
D 10 7 14 44 29 100
E 34 16 13 42 27 100
Associate 8 8 17 47 33 100
Source: Research data
Categories
26
4.7 Importance of Environmental Factors in Gaining Competitive Advantage
The respondents were asked to rate various environmental challenges faced by their organization
in trying to gain competitive advantage in view of global competition they face. Mean scores
were ranked on a 5-point scale with 1 – not important and 5 – very important.
Table 4.7.1 Respondents’ rating of environmental challenges faced by their organization in
trying to gain competitive advantage Attribute Mini-
mum
rank
Maxi-
mum
rank
Mean
score
Standard
deviation
(std dev)
Advances in information communication
technology which could result in a company‟s
current systems being obsolete
4 5 4.5 0.5
Need for e-business capability to market products
locally and internationally
4 5 4.5 1.5
Customers‟ increased demand for value of money
spent
3 5 4 1
Poor infrastructure (i.e. roads, air transport, rail
transport etc.) making it expensive to operate travel
business
4 5 4.5 0.5
International terrorism and its effects on tourism
and travel
3 4 3.5 0.5
Competition from other global and regional tourist
destinations
4 5 5 0.5
Competition from foreign investors in the Kenyan
market.
5 5 5 0
Grand Mean score 4.21
Source: Research data
The findings in Table 4.7.1 show that generally all the environmental factors which the
respondents were asked to rate are quite significant to their operations (a grand mean score of 4
out of possible 5). Some of the factors according to the findings are absolutely fundamental, for
instance, competition from other global and regional tourist destinations, competition from
foreign investors in the Kenyan market and advances in information communication technology
which could result in a company‟s current systems being obsolete (both have mean scores 5).
Other factors like poor infrastructure and need for e-business capability to market products
locally and internationally also rank quite highly (Mean score 4.5).
27
One variable that scored averagely was customers „international terrorism and its effects on
tourism (Mean score 3.5). The finding show this factor received a big variability with the lowest
ranking being recorded at 1 and the highest ranking at 4. A check amongst the categories shows
that the factor received the lowest ranking in categories C to „Associate‟ (80% of the companies
ranked it at 3 and below). This shows that the most established companies in categories A and B
are more conscious of international terrorism and its effect on tourism than the categories C to
„Associate‟. This could be due to the reason that most of the companies in categories C to
„Associate‟ are more concerned with growing their revenue base and establishing their
competitive position.
4.8 Strategic Responses to Challenges Posed by Global Competition
In view of the challenges posed by the global competition, the respondents were asked to rank
the responses to these challenges by order of importance. The respondents were asked to rank the
responses in respect of influence to their company‟s business strategy. Mean scores were ranked
on a 5-point incremental scale with 1 – Least important and 5 – Most important
Table 4.8. Respondents’ ranking of strategic responses to global competition
Attribute Mini-
mum
rank
Maxi-
mum
rank
Mean
score
Standard
deviation
(std dev)
Growth and expansion of company operations 3 5 4 1
Restructuring the firms operation to ensure
continued profitability
4 5 4.5 0.5
Introduction of new and unique products/services 3 5 4 1
Reputation and brand development 4 5 4.5 0.5
Maintaining excellent public image 5 4 4.5 0.5
Developing niche markets 4 5 4 1.5
Maintaining a competitive position 3 5 4.5 0.5
Investment in technology communication
technology (ICT) to add value to products/services
4 5 4.5 1.5
Pricing of product by international currency due to
inflation
3 5 4 1
Expansion and opening of regional offices to 1 4 2.5 1.5
28
coordinate tour activities
Increase in expenditure on meeting customer needs
and satisfaction
3 5 4 1
Investment on training and development programs
for staff
4 5 4.5 0.5
Increase in expenditure on strategic and marketing
planning
4 4 4 0.5
Co-operation, Alliances and/or Networks in areas
such as technology, marketing, distribution, and
human resource sharing to add value to
products/services
4 5 4.5 0.5
Grand Mean score 4.21
Source: Research data
The results in Table 4.8 indicate that attaining an excellent public image, attaining reputation and
brand development and maintaining competitive position, (all have a mean score of 4.5) are most
important factors in addressing the challenges posed by global competition. This could be due to
the fact that tourism is highly influenced by image of specific destinations. Destinations cannot
exist in absence of the service providers within them. Therefore, if the image of the service
providers is affected, their ability to attract tourism clientele is also affected.
The respondent seem to agree to similar operational strategies which include restructuring the
firms operation to ensure continued profitability, investment in technology communication
technology (ICT) to add value to products/services, investment on training and development
programs for staff and forming co-operation, alliances and networks in areas such as technology,
marketing, distribution, and human resource sharing to add value to products or services (with
each have a mean score of 4.5). This could be due to the fact that their main focus is to increase
efficiency while offering high value products and services at a reasonable cost to the tour
operators. Such strategies are important to ensure the tour operators services viewed to be of high
value hence attracting more customers and ensure survival and profitability of the tour operators.
The results in Table 4.8 indicate growth and expansion of company operations, increase in
expenditure on strategic and marketing planning, introduction of new and unique
29
products/services, developing niche markets, pricing of product by international currency due to
inflation and increase in expenditure on meeting customer needs and satisfaction were
considered to be of importance (with a grand mean scores of 4.). This could be due to the fact
that their main focus is customer satisfaction and growth of their business. This is promoted by
the fact that tourists have become more sophisticated and their choice of service provider is
influence by the level of satisfaction and value for money offered.
Expansion and opening of regional offices to coordinate tour activities seems to have been
ranked the least. A check within the categories shows that most of the companies in category D
to „Associate‟ (79%) ranked it below 3. This could be due to the fact that their main focus may
not necessarily be expansion and opening of regional offices to coordinate tour activities, but
forming co-operation, alliances and or networks in areas such as technology, marketing,
distribution, and human resource sharing to add value to products or services growth (80% of
them rated forming co-operation, alliances and or networks in areas such as technology,
marketing, distribution, and human resource sharing to add value to products or services growth
at 4 and above). This is due to the fact that tour operators leverage their effort and work on the
work and effort of their alliance partners.
30
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary
The focus of this research was on the strategic responses to global competition by Kenya tour
operator. The study therefore analysed how global competition has affected tour operators, with
special regard to strategic responses by tour operators.
The study had one objective; to find out the strategic responses adopted by the firms in the
tourism industry in response to global competition. The study has revealed that various
environmental factors are quite important and affect the operations of tour operators in different
ways. Some of the factors according to the findings are absolutely fundamental, for instance,
competition from other global and regional tourist destinations, competition from foreign
investors in the Kenyan market, need for e-business capability to market products internationally
and advances in information communication technology which could result in a company‟s
current systems being obsolete Other factors like customers‟ increased demand for value of
money spent and poor infrastructure also rank quite highly. International terrorism and its effects
on tourism and travel received the lowest consideration, though its importance cannot be
underestimated given that it scored above average.
5.2 Conclusion
From the study results, it can generally be concluded that tour operators in Kenya have
responded to global competition by employing various significant strategies. The finding indicate
that restructuring the firms operation to ensure continued profitability, investment in technology
communication technology (ICT) to add value to products/services, investment in training and
development programs for staff and forming co-operation, alliances and networks in areas such
as technology, marketing, distribution, and human resource sharing to add value to products or
services, maintaining an excellent public image, attaining reputation and brand development and
maintaining competitive position are most important strategies employed to address the
challenges posed by global competition. Expansion and opening of regional offices to coordinate
31
tour activities seems to have been ranked the least. A check within the categories shows that
most of the companies in category D to „Associate‟ (79%) rated it quite lowly.
The study has managed to identify various differences and similarities among the six categories
of tour operators‟ studied. The categories differences in terms of revenue size show that the
various companies in each category are focused on different goals in their operations. Generally,
those in category D to „Associate‟ are more focused on growth and expansion of company
operations, while those in categories C to A are more geared towards maintaining the right public
image and forming co-operation, alliances and or networks in areas such as technology,
marketing, distribution, and human resource sharing to add value to products or services
attaining market leadership and maintaining profitability. In terms of similarities, the study
established that almost all the tour operators in their various categories are conscious of the need
to enhance competitiveness as a tourist destination in view of competition posed by the emerging
destinations, and the need to investment in technology communication technology (ICT) to add
value to products and services.
5.3 Limitations of the Study
This study was done during the peak season of the tourism calendar in Kenya. Hence, it was not
easy to get the target respondents in most of the companies. This is reflected in the response rate.
Time and financial resources were also a major impediment to the researcher‟s ability to do a
more comprehensive study, especially outside Nairobi.
5.4 Recommendations
The results of this study show that global competition poses a real challenge to tour operators in
Kenya and its paramount that tour operators to identify and adopt strategic responses that will
promote their success. Environmental analysis and strategic planning needs to be encouraged in
all tour companies, especially in tour operators in Categories D to Associate since these
categories seemed to lag behind in responding to challenges posed by global competition.
Ultimately the Kenyan Government should review its plans towards sustainable tourism in the
country in view of the other competing destinations and competition faced by tour operators in
Kenya from foreign direct investments. The government needs to review its attitude towards
32
tourism especially on infrastructure development, business incentives and subsidies, facilitating
training for tour operators. Most tour operators expressed their displeasure in the way the
government seems to be neglecting the „goose that lays the golden eggs‟. With proper focus and
attention to small details, the government can continue to reap huge benefits from tourism sector.
However, continued neglect could lead to loss of tourism clientele to other upcoming
destinations like India, Malaysia, China and our very own African countries like Botswana and
Tanzania.
5.5 Suggestions for Further Research
This study only focused on one sub-sector in the tourism industry – the tour operators. A further
integrated study covering the other players in the industry like the hoteliers, parks and museums
would reveal more insights on how the global competition has impacted the tourism industry.
33
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37
APPENDIX I: TOUR OPERATORS QUESTIONNAIRE
PART A: BACKGROUND INFORMATION OF TOUR OPERATOR
1. How long has your company been in operation in Kenya?
{ } 5-4 years { } 5-10 years
{ } 10-15 years { } over 15 years
2. Is your company
{ } Locally owned { } Foreign owned
{ } Other (Please Specify)
...........................................................................................................
3. Does your company have branches or associated companies in
{ } Kenya
{ } Outside Kenya
PART B: TOUR OPERATOR BUSINESS ENVIRONMENT QUESTIONS
4. What markets are served by your company?
{ } Domestic markets only
{ } Foreign markets only
{ } Both domestic and foreign markets
38
5. How would you describe the level of competition faced by your company in this market
region? (Please tick one)
{ } Very competitive { } Fairly Competitive
{ } Competitive { } Not competitive at all
6. How would you describe global competition in relation to a company‟s survival and
growth?
a) Good for business { } Yes { } No
b) Threat to business { } Yes { } No
c) Irrelevant to business { } Yes { } No
7. In terms of achieving your business or marketing goals, how would you rate the
performance of your company over the last three years?
{ } Very good { } Good { } Fair { } Poor
8. To what extent has global competition influenced consumer tastes and preferences? (tick
as applicable)
{ } To a lesser extent { } To a larger extent
{ } To some extent { } To no extent
39
9. As organizations strive to gain competitive advantage in a dynamic industry, it will
encounter various environmental challenges. In view of this, how would you rate the
following environmental challenges faced by your organization as a result of global
competition?
(Please use a scale of 1-5 to rate, where 1. Not important 2. Least Important 3. Neutral
4. Important 5. Very Important)
1 2 3 4 5
Advances in information communication technology which
could result in your current systems being obsolete
Need for e-business capability to market products
internationally
Customers‟ increased demand for value of money spent
Poor infrastructure (i.e. roads, air transport, rail transport etc.)
making it expensive to operate travel business
International terrorism and its effects on tourism and travel
Competition from other global and regional tourist
destinations
Competition from foreign investors in the Kenyan market.
Other (Please specify)
40
PART C: RESPONSES TO CHALLEGES OF GLOBAL COMPETITION
10. In view of the challenges posed by the global competition, please rank the following
responses in order of importance for your company (Use the incremental scale given)
Least important Most important
1 2 3 4 5
Growth and expansion of company operations
Restructuring the firms operation to ensure continued
profitability
Introduction of new and unique products/services
Reputation and brand development
Maintaining excellent public image
Developing niche markets
Maintaining a competitive position
Investment in technology communication technology
(ICT) to add value to products/services
Pricing of product by international currency due to
inflation
Expansion and opening of regional offices to
coordinate tour activities
Increase in expenditure on meeting customer needs
and satisfaction
Investment on training and development programs
for staff
41
Increase in expenditure on strategic and marketing
planning
Co-operation, Alliances and/or Networks in areas
such as technology, marketing, distribution, and
human resource sharing to add value to
products/services
11. Do you have any other comments that you may deem to be relevant to this research?
......................................................................................................................................................
......................................................................................................................................................
......................................................................................................................................................
.....................................................................................................................................................
12. If you would like to receive the results of this study, please give your company contact
details
(Optional)
Company Name .....................................................................................
Address .....................................................................................
Email .....................................................................................
Fax .....................................................................................
Thank you for your co-operation.
42
APPENDIX III: KATO MEMBERS
1 Abercrombie & Kent Ltd Category A
2 African Horizons Travel & Safaris Ltd Category A
3 African Quest Safaris Ltd Category A
4 African Secrets Ltd Category A
5 Balloon Safaris Ltd Category A
6 Bush and Beyond Ltd Category A
7 Cheli & Peacock Ltd Category A
8 Dodoworld (K) Ltd Category A
9 Express Travel Group Category A
10 Gamewatchers Safaris Ltd Category A
11 Guerba (K) Ltd Category A
12 Jade Sea Journeys Ltd Category A
13 Kobo Safaris Ltd Category A
14 Liberty Africa Safaris Category A
15 Maniago Safaris Ltd Category A
16 Mini Cabs Tours & Safaris Category A
17 Origins Safaris Category A
18 Pollman's Tours & Safaris Ltd Category A
19 Private Safaris (EA) Ltd Category A
20 Rhino Safaris Ltd Category A
21 Somak Travel Ltd Category A
22 Southern Cross Safaris (Mombasa)Ltd Category A
23 Southern Cross Safaris (NBI) Ltd Category A
24 Transworld Safaris (K) Ltd. Category A
25 Twiga Car Hire & Tours Ltd Category A
26 Vintage Africa Ltd Category A
27 Wild Trek Safaris Ltd Category A
28 Wildlife Safari (K) Ltd Category A
29 Across Africa Safaris Ltd Category B
30 Big Five Tours & Safaris Ltd Category B
31 Charleston Travel Ltd Category B
32 Discover Kenya Safaris Ltd Category B
33 Intra Safaris Ltd Category B
34 Kenya Wildlife Trails Ltd Category B
35 Luca Safari Ltd. Category B
36 Muthaiga Travel Ltd Category B
37 Robin Hurt Safaris Ltd Category B
38 Southern Sky Safaris Category B
39 Sunworld Safaris Ltd Category B
40 Africa Expeditions Ltd Category C
41 African Latitude (Kenya) Ltd Category C
42 African Road Safaris Category C
43 Best Camping Tours Category C
43
44 Dallago Tours & Safaris Category C
45 Eastern and Southern Safaris Category C
46 Gametrackers (K) Ltd Category C
47 Ker & Downey Safaris Ltd Category C
48 Ketty Tours Travel & Safaris Ltd Category C
49 Kimbla Mantana (K) Ltd Category C
50 Nature Expeditions Africa Category C
51 Real Africa LTD Category C
52 Shoor Travels & Tours Category C
53 Suntrek Tours & Travel Ltd Category C
54 Travel Affairs Ltd Category C
55 Tusker Safaris Ltd Category C
56 Air Travel & Related Services Ltd Category D
57 Allamanda Safaris Category D
58 Apollo Tours & Travel Category D
59 Archers Tours & Travel Ltd. Category D
60 Bateleur Safaris Ltd Category D
61 BCD Travel Category D
62 Bill Winter Safaris Category D
63 Bottger Productions & Tours Ltd Category D
64 Chameleon Tours Category D
65 Chronicle Tours & Travel Category D
66 Concorde Car Hire & Safaris Ltd Category D
67 Crown Tours & Car Hire Ltd. Category D
68 Destination (K) Ltd Category D
69 East Africa Safari Ventures Ltd Category D
70 Fredlink Company Ltd Category D
71 Geo Safaris Ltd Category D
72 Global Holidays & Incentives Ltd Category D
73 Grant & Cameron Safaris Ltd Category D
74 Holiday Bazaar Ltd Category D
75 IntoAfrica Eco-Travel Ltd Category D
76 Jambo Travel House Limited Category D
77 Kenia Tours & Safaris Category D
78 Kibo Slopes & Safaris Ltd Category D
79 Kuldips Touring Company Category D
80 Let's Go Travel Category D
81 Market Service Station Ltd Category D
82 Motto Tours & Travel Ltd Category D
83 Offbeat Safaris Ltd Category D
84 On Safari (K) Ltd Category D
85 Rajair Travel & Tours Category D
86 Rickshaw Travels (Kenya) Ltd Category D
87 Safaris In Style Category D
88 Safaris Unlimited (Africa) Ltd Category D
44
89 Special Lofty Safaris Category D
90 Star Travel & Tours Ltd Category D
91 Texcal House Service Station Category D
92 Tobs Kenya Golf Safaris Category D
93 Tour Africa Safaris Category D
94 Travel Creations Ltd Category D
95 Travel 'n Style Ltd Category D
96 Travel Scene Services Category D
97 Tropical Breaks Category D
98 Tropical Ice Ltd Category D
99 Uniglobe Northline Travel Ltd Category D
100 Venture Africa Safaris & Travel Category D
101 Westminster Safaris Ltd Category D
102 Absolute Adventure Africa Safaris Limited Category E
103 Acacia Holidays Ltd Category E
104 Accacia Safaris( Kenya ) Limited Category E
105 Adventure Centre Ltd Category E
106 Africa Viza Travel Services Ltd Category E
107 African Eco-Safaris Category E
108 African Route Safaris Category E
109 African Safari Diani Adventures Category E
110 African Sermon Safaris Category E
111 African Spice Safaris Category E
112 African Tropical Safaris Ltd Category E
113 Afriqueen Adventure Ltd. Category E
114 All Seasons Safaris and Tours Category E
115 Aloha Tours & Safaris Category E
116 Anste Tours & Travel Limited Category E
117 Archer Clark Enterprises Ltd Category E
118 As You Like It (Safaris) Ltd Category E
119 Asili Adventure Safaris Category E
120 Australken Tours & Travel Ltd Category E
121 AV Tours and Safaris Ltd Category E
122 Avenue Motors Ltd Category E
123 Avenue Service Station Category E
124 Basecamp Travel Ltd Category E
125 Bushbuck Adventures Ltd Category E
126 Call of Africa Safaris Category E
127 Catalyst Travels Ltd Category E
128 Central Rent a Car Category E
129 CKC Tours & Travel Category E
130 Cotts Travel & Tours Ltd Category E
131 Custom Safaris Category E
132 David & Evanson Tours (INT) Category E
133 Daymu Travel and Safaris Ltd Category E
45
134 Designer Tours & Travel Category E
135 Destination Connect Co. Ltd Category E
136 Destination Link Services Category E
137 Diwaka Tours & Travel Ltd Category E
138 Earth Tours & Travel Ltd. Category E
139 East African Shuttles & Safaris Category E
140 East African Wildlife Safaris Category E
141 Eco Adventures Limited Category E
142 El Molo Tours & Travel Category E
143 Enchanting Africa LTD Category E
144 Exotic Destinations Ltd Category E
145 Ferrari Tours Category E
146 Finch Travels Ltd. Category E
147 Flawless Links Category E
148 Four By Four Safaris Ltd Category E
149 Furstenberg Safaris Ltd Category E
150 Game Viewers Adventures Limited Category E
151 GAT Safaris Category E
152 Genet Tours & Safaris Category E
153 Glory Car Hire Tours & Safaris Ltd. Category E
154 Go Africa Safaris and Travel Category E
155 Go Africa Travel Ltd. Category E
156 Going Places Ltd Category E
157 Grand Edition Tours Category E
158 Hamerkop Safaris Category E
159 Haya Safaris (A) & Travel Ltd Category E
160 Holiday Seekers Ltd Category E
161 Hotel Adventure Travel Ltd Category E
162 Ibis Tours and Travel Ltd Category E
163 Imperial Air Services Category E
164 Incentive Travel Ltd Category E
165 Jet Travel Ltd Category E
166 JMAR Safaris Ltd Category E
167 Karisia Limited Category E
168 Kentan Safaris Ltd. Category E
169 Kenya Beach Travel Ltd Category E
170 Kisima Tours & Safaris Category E
171 Kuja Safaris Category E
172 Leading Expeditions Safaris Category E
173 Leboo Safari Tours Ltd Category E
174 Linderberg Holidays & Safaris Category E
175 Long Ren Tours & Travel Ltd Category E
176 Maridadi Safaris Ltd Category E
177 Mathews Safaris Category E
178 Menengai Holidays Ltd Category E
46
179 Mombasa Air Safari Ltd Category E
180 Monaco Tours and Safaris Category E
181 Nahdy Travel & Tours Category E
182 Naked Wilderness Africa Category E
183 Nappet Tours & Travel Ltd Category E
184 Nature's Edge Category E
185 New Kenya Travel & Tours Safaris Ltd Category E
186 Nutty Safaris Category E
187 Ostrich Holidays Adventures Category E
188 Palbina Travel & Tours Category E
189 Papa Musili Safaris LTD Category E
190 Prima Vera Tours & Safaris Category E
191 Primetime Safaris Category E
192 Raydoll Tours & Travel Category E
193 Raylenne Tours & Safaris Category E
194 Rekero Camp Ltd Category E
195 Safari Line Africa Category E
196 Safari Partners Kenya Ltd. Category E
197 Safari Trails Limited Category E
198 Safari Travel Kenya Ltd Category E
199 Safe Ride Tours and Safaris Category E
200 Saleva Africa Tours Ltd. Category E
201 Sardius Tours & Safaris Category E
202 Satguru Travel & Tours Services Ltd. Category E
203 Sayari Afrika Ltd Category E
204 Scenic Wildlife Safaris Ltd Category E
205 Selective Safaris Category E
206 Senator Travel Services Category E
207 Shades of Africa Tours & Safaris Category E
208 Sights of Africa (E.A.) Tours & Travel Category E
209 Silver Africa Tours & Travel Category E
210 Silverbird Adventure Tours & Travel Category E
211 Silverbird Travel Plus Ltd Category E
212 Sportsmen's Safaris & Tours Category E
213 Spurwing Travel & Tours Ltd Category E
214 Steenbok Safaris & Car Hire Category E
215 Taipan Vacations & Travel Ltd Category E
216 Tamasha Africa Ltd Category E
217 Tee Off Kenya Limited Category E
218 Travel Shoppe Ltd. Category E
219 Travel Wild E.A LTD Category E
220 Travelmart Ltd Category E
221 Tropical Winds Ltd. Category E
222 Tulip Travel Ltd Category E
223 Ulf Aschan Safaris Ltd Category E
47
224 Unik Car Hire & Safaris Category E
225 Victoria Safaris Category E
226 Visit Africa Ltd Category E
227 Waymark Safaris Ltd. Category E
228 Wild Destinations Ltd Category E
229 Wild Times Ltd Category E
230 Woni Safaris Ltd Category E
231
Xcellent Wildlife Paradise - Holidays and
Safaris
Category E
232 Yare Safaris Ltd Category E
233 Zirkuli Expeditions Ltd Category E
234 ASTA Society Of Travel Agents Associate
235 Blue Wave Ltd Associate
236 Campfire Conservation Ltd Associate
237 East African Magazines Associate
238 Exclusive African Treasures Associate
239 K.P.S.G.A Associate
240 KATO Secretariat Associate
241 Kenya Utalii College Associate
242 Kinazini Funzi Dhow Safaris Associate
243 New African Territories Associate
244 PAWS Africa Safaris Ltd Associate
245 Riuki Cultural Centre Associate
246 Sher Safari Services Ltd. Associate
247 Shimoni Aqua Ventures Associate
248 Tamarind Management Ltd Associate
249 The Air Travel & Related Studies Associate
250 Tourist Maps Kenya LTD Associate
251 Wild Waters LTD Associate
252 World of Tui Associate
253 Access Africa Safaris LTD Associate
254 Affable Tours & Safaris (E.A) Associate
255 Africa Bound Safaris (K) Ltd Associate
256 Africa Classic Escapes Ltd Associate
257 Africa Partners In Safari Ltd Associate
258 Baisy Oryx Tours Travel & Safaris Associate
259 Bellafric Expeditions Ltd. Associate
260 Bravo Norris Ltd. Associate
261 Buena Vista Tours & Safaris Associate
262 Bushtroop Tours & Safaris Associate
263 Centurion Travel & Tours Ltd Associate
264 Cheetah Tours Ltd Associate
265 Deans Travel Centre Ltd Associate
266 DK Grand Safaris & Tours Ltd Associate
267 Eastern Vacations Tours Ltd Associate
48
268 Elite Travel Services Ltd Associate
269 Exotic Golf Safaris Ltd. Associate
270 Eyes on Africa Adventure Safaris Ltd Associate
271 Gofan Safaris Associate
272 Hirola Tours & Safaris Associate
273 Ideal Tours & Travel Associate
274 JK Safari Adventures Ltd Associate
275 Jocky Tours & Safaris Associate
276 Kenor Safaris Ltd Associate
277 Marble Travel Associate
278 Napenda Africa Safaris Associate
279 Natural Track Safaris Associate
280 Natural World Msa Safaris Associate
281 Platinum Car Hire & Tours Associate
282 Safari Icon Associate
283 Sameco Tours Associate
284 Scenic Treasures Ltd Associate
285 Spot Kenya Safaris Associate
286 Sunpeak Safaris Associate
287 Tamimi Kenya Ltd Associate
288 The Eriksen Adventure Associate
289 Travel Waves Safaris Associate
290 World Explorer Safaris Ltd Associate