INTERNATIONAL TRADE BARRIERS FACED BY NAIROBI AUTOMOBILE TRADERS BY ELIZABETH M. WANJIRU UNITED STATES INTERNATIONAL UNIVERSITY AFRICA FALL 2016
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INTERNATIONAL TRADE BARRIERS FACED BY NAIROBI AUTOMOBILE
TRADERS
BY
ELIZABETH M. WANJIRU
UNITED STATES INTERNATIONAL UNIVERSITY AFRICA
FALL 2016
INTERNATIONAL TRADE BARRIERS FACED BY NAIROBI AUTOMOBILE
TRADERS
BY
ELIZABETH M. WANJIRU
A Research Project Submitted to the Chandaria School of Business in Partial
Fulfillment of the Requirement for the Degree of Master in Business Administration
(MBA)
UNITED STATES INTERNATIONAL UNIVERSITY AFRICA
FALL 2016
i
STUDENT’S DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to any other
college, institution or university other than the United States International University in Nairobi
for academic credit.
Signed: ___________________________ Date: __________________________________
Wanjiru Elizabeth Muthoni (629329)
This project has been presented for examination with my approval as the appointed supervisor.
Signed: ___________________________ Date: __________________________________
Fred Newa
Signed: ___________________________ Date: __________________________________
Dean, Chandaria School of Business
ii
ABSTRACT
The purpose of the study was to identify the international barriers of trade affecting the Kenya
second hand automobile traders who own motor dealerships in Nairobi. The study also sought to
identify the challenges and risks the traders face locally. The study was guided by three research
objectives: (i) what are the importing practices practiced by the automobile traders in Nairobi?
(ii) What international barriers of trade do the traders experience when dealing with the vehicle
sellers abroad? And (iii) what challenges and risks do the traders face locally?
This study was quantitative in nature and employed a descriptive research design. This is
because the study is intended to provide a description that is factual and accurate. The target
population in this study comprised 240 motor dealerships in Nairobi. Due to the nature of motor
dealership; it was more practical and financially logical to carry out the research from a sample
rather than from the entire organization. Other motor dealership outside the Nairobi may be
inaccessible, the more the reason the choice of Nairobi area was justified. The study adopted
census approach and 144 of the target population was the sample size of the study. The study
used quantitative techniques in analyzing the data. Statistical Package for Social Sciences (SPSS)
version 20 program was used for analysis. Descriptive analysis was employed; which include;
mean standard deviations and frequencies/percentages. Inferential statistics such as correlation
and regression analysis was used. The results were presented using tables and pie charts.
The first finding of the study was that majority of the car dealers import products without
the authorization of the trademark or copyright owner in a country; importation of second hand
spare parts of motor vehicles are allowed in Kenya. Further, traders exercise great care in
selecting foreign automobiles manufacturers, and importation of second hand automobile
products is checked and they also enhance strict measures on the selection of second hand
automobile imports. Traders also engage in the inspection of foreign manufacturing facilities,
and traders deal directly with the automobile manufacturer and avoid dealing with
representatives.
The second finding was that tariffs are imposed on automobiles in order to increase
government revenue; taxes imposed on imports affect the automobile trading, tariffs created by
the government protect local businesses from low-priced competitive products and that Kenya
imposes relatively high tariffs on automobiles imports.
iii
The third findings were that investment regulations locally frustrate trade expansion of
second hand automobile dealerships; investment regulatory policies reduce the second hand
vehicles in the market. Currency fluctuation is the greatest challenge traders face in automobile
trading business which affects performance in the automobile sector, and foreign relations and
trade sanctions among countries substantively affect second hand cars importation in Kenya
The study concluded that international trade practices practiced by the automobile traders in
Nairobi enhance efficient importing among Nairobi automobile traders. The international trade
barriers affecting Nairobi automobile traders are the non-tariffs, and finally, the Nairobi second
hand automobile traders were affected by a number of challenges which the government has
control over.
In line with study results, the second hand automobile traders should strictly adhere to the
international importing practices. The study recommends that the government should reduce the
taxes imposed on second hand automobile products; the government should also lift or reduce
the quota on the importation of second hand automobile goods. Automobile traders should also
adhere to the standards of automobiles set by the government in order to enhance safety. The
study further recommends that government of Kenya should create an enabling environment for
local traders. Investment regulation and policies made by the government should be favorable for
trading. The Kenyan government should strengthen their international trade relation.
iv
COPYRIGHT
All rights reserved. No part of this report may be photocopied, recorded or otherwise reproduced,
stored in a retrieval system or transmitted in any form by electronic or mechanical means without
prior permission of copyright.
©Copyright Elizabeth M. Wanjiru 2016
v
ACKNOWLEDGEMENT
First and foremost, I thank the Almighty God for granting me peace, knowledge and sanity of
mind that has enabled me to complete this research work. It is through His abundance grace that
has brought my research work this far.
I am greatly indebted to my supervisor, Fred Newa for his patience, support and professional
guidance, encouragement and availability. My sincere gratitude also goes to the staff of United
States International University, for their support and assistance.
Finally, I appreciate the most important people who have provided spiritual and emotional
support that has been the ultimate inspiration for my academic pursuits. They include my family
and friends who relentlessly stood by me even when I barely had time for them while pursuing
this course. Their understanding and moral support went a long way in making this a success.
vi
DEDICATION
I dedicate this research work to my family who are my pillars and sources of great inspiration
and strength. My Mother for her unceasing prayers for God’s blessings upon me to be the best I
can, and my son Nathaniel, who inspires me to focus on higher goals. May the Almighty God
bless you.
vii
TABLE OF CONTENTS
STUDENT’S DECLARATION .................................................................................................... i
ABSTRACT ................................................................................................................................... ii
COPYRIGHT ............................................................................................................................... iv
ACKNOWLEDGEMENT ............................................................................................................ v
DEDICATION.............................................................................................................................. vi
TABLE OF CONTENTS ........................................................................................................... vii
LIST OF FIGURES ...................................................................................................................... x
LIST OF TABLES ....................................................................................................................... xi
LIST OF ACCRONYMS AND ABBREVIATIONS ............................................................... xii
CHAPTER ONE ........................................................................................................................... 1
1.0 INTRODUCTION................................................................................................................... 1
1.1 Background of the Study ...................................................................................................... 1
1.2 Statement of the Problem ...................................................................................................... 4
1.3 Purpose of the study .............................................................................................................. 5
1.4 Research Questions ............................................................................................................... 5
1.5 Significance of the Study ...................................................................................................... 5
1.6 Scope of the Study ................................................................................................................ 6
1.7 Definition of Terms............................................................................................................... 7
1.8 Chapter Summary ................................................................................................................. 9
CHAPTER TWO ........................................................................................................................ 10
2.0 LITERATURE REVIEW .................................................................................................... 10
2.1 Introduction ......................................................................................................................... 10
2.2International Trade Practices Practiced by the Automobile Traders ................................... 10
viii
2.3 International Trade Barriers ................................................................................................ 14
2.4 Challenges and Risks Traders Face Locally ....................................................................... 20
2.5 Chapter Summary ............................................................................................................... 25
CHAPTER THREE .................................................................................................................... 26
3.0 RESEARCH METHODOLOGY ........................................................................................ 26
3.1 Introduction ......................................................................................................................... 26
3.2 Research Design.................................................................................................................. 26
3.3 Population and Sampling Design ........................................................................................ 26
3.4 Data Collection Methods .................................................................................................... 28
3.5 Research Procedures ........................................................................................................... 29
3.6 Data Analysis Methods ....................................................................................................... 30
3.7 Chapter Summary ............................................................................................................... 30
CHAPTER FOUR ....................................................................................................................... 31
4.0 RESULTS AND FINDINGS ................................................................................................ 31
4.1 Introduction ......................................................................................................................... 31
4.2 Demographics ..................................................................................................................... 31
4.3 International Trade Practices .............................................................................................. 39
4.4 International Trade Barriers ................................................................................................ 44
4.5 Challenges and Risks Traders Face Locally ....................................................................... 51
4.6 Barriers of International Trade Affecting the Kenya Second Hand Automobile Traders .. 57
4.7 Inferential Statistics ............................................................................................................ 58
4.8 Chapter Summary ............................................................................................................... 59
ix
CHAPTER FIVE ........................................................................................................................ 61
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ................................... 61
5.1 Introduction ......................................................................................................................... 61
5.2 Summary ............................................................................................................................. 61
5.3 Discussion ........................................................................................................................... 65
5.4 Conclusions ......................................................................................................................... 69
5.5 Recommendations ............................................................................................................... 71
REFERENCES ............................................................................................................................ 73
APPENDICES ............................................................................................................................. 79
Appendix I: Letter of Introduction ............................................................................................ 79
Appendix II: Questionnaire....................................................................................................... 79
Appendix III: List of Second Hand Motor Vehicles Dealers in Nairobi .................................. 85
x
LIST OF FIGURES
Table 4.1: Response Rate .............................................................................................................. 31
Figure 4.1: Gender of the Respondents......................................................................................... 32
Figure 4.2: Level of Education ..................................................................................................... 32
Figure 4.3: Duration of Employments .......................................................................................... 33
Figure 4.4: Nature of Dealership .................................................................................................. 34
Figure 4.5: Operational Years ........................................................ Error! Bookmark not defined.
Figure 4.6: Importation Rate ......................................................................................................... 35
Figure 4.7: Average Total Imports................................................................................................ 36
Figure 4.8: Start of Importation .................................................................................................... 37
Figure 4.9: Tariffs ......................................................................................................................... 37
Figure 4.10: Non Tariffs Barriers ................................................................................................. 38
xi
LIST OF TABLES
Table 3.1: Sample Size ................................................................................................................. 28
Table 4.2: Barriers ........................................................................................................................ 38
Table 4.3: Parallel Imports ............................................................................................................ 40
Table 4.5: Inspecting Foreign Manufacturing Facilities ............................................................... 42
Table 4.6: Re importing ................................................................................................................ 43
Table 4.7: Identify the Product’s Country of Origin..................................................................... 44
Table 4.8: Tariffs .......................................................................................................................... 46
Table 4.9: Non Tariff Barriers ...................................................................................................... 47
Table 4.10: Quota.......................................................................................................................... 48
Table 4.11: Standards.................................................................................................................... 49
Table 4.12: Embargo ..................................................................................................................... 50
Table 4.13: Voluntary Export Restraints ...................................................................................... 51
Table 4.14: Investment Regulation ............................................................................................... 52
Table 4.15: Currency Fluctuation ................................................................................................. 53
Table 4.16: Foreign Relations and Trade Sanctions ..................................................................... 54
Table 4.17: Government Policy .................................................................................................... 55
Table 4.18: Market Competition ................................................................................................... 56
Table 4.19: Barriers of International Trade .................................................................................. 58
Table 4.20: Bivariate Correlation ................................................................................................. 59
xii
LIST OF ACCRONYMS AND ABBREVIATIONS
ADR Australian Design Rules
CBP Custom and Border Protection
DWPE Detention without Physical Evidence
EAC East Africa Community
EU European Union
FDI Foreign direct investments
GCC Gulf Cooperation Council
IMF International Monetary Fund
INTI National Institute of Industrial Technology
KMI Kenya Motor Industry
KNBS Kenya National Bureau of Statistics
KRA Kenya Revenue Authority
MNC Multinational Corporation
NTBs Non-Tariff Barriers
NTHSA National Highway Traffic Safety Administration
NTM Non-Tariff Measures
OECD Organization for Economic Co-operation and Development
SA South Africa
SPSS Statistical Package for Social Sciences
UNCTAD United Nations Conference on Trade and Development
USA United States of America
WTO World trade organization
1
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
World trade has expanded more than twice as rapidly as world gross domestic product over the
past decade World bank, 2008). This increase has resulted to an increased demand for trade
integration and a range of complementary policies by customs administrations that provide
traders with transparent, predictable, and speedy clearance of goods (Lane, 2008). In addition,
the customs administrations have had to face changes in their operating environment including:
more sophisticated and demanding clients who have invested heavily in modern logistics,
inventory control and information systems; greater policy and procedural requirements
associated with international commitments; proliferation of regional and bilateral trade
agreements, which increases the complexity of administering border formalities and controls and
heightened security concerns and demands to respond to the threats posed by international
terrorism and transnational organized crime. In response to the above challenges many countries
have devoted substantial resources to reforming and modernizing their operations and
modernization of customs has been on the development agenda of many governments (World
Bank, 2005).
International trade is the exchange of capital, goods and services across international borders or
territories. The business of creation and selling of goods and services across national borders is
referred to as international trade Dlabay and Scott (2010). There are many automobile
manufacturers globally whose vehicles are used across borders including Kenya. Multinational
corporations (MNCs), and Foreign direct investments (FDI), play a great role in the automobile
industry (Maylene, 2011). There are two types of trade barriers according to Chen and Li (2014),
which include objective barriers like distance which can be reduced in the long run and
subjective barriers like culture and historical relationships which can be reduced or removed in
the long run. These barriers tend to affect industries that are involved in international trade
immensely.
China has had its international trade grow rapidly over a short period of time compared to other
economies(Cling, 2012) , making it become the first importer of commodities in the world. This
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has greatly had a positive impact to its economy as well as penetrating many markets in Africa,
including Kenya. South Africa has over the years increased its turnover on import and sale of
second hand automobiles Damoense-Azevedo and Jordaan (2011), this has largely been
contributed by the fact that it has enhanced its bilateral relationships with the automobile
exporting countries and the government has as well supported the industry by reducing various
trade restrictions.
In 2009, 2010, and 2011, Indonesia increased its applied tariff rates for a range of goods that
compete with locally manufactured products, including electronic products, electrical and non-
electrical milling machines, chemicals, cosmetics, medicines, iron wire and wire nails, and a
range of agricultural products including milk products, animal and vegetable oils, fruit juices,
coffee, and tea (Baldwin, 2011). Indonesia’s simple average bound tariff of 37 percent is much
higher than its average applied tariff. Most Indonesian tariffs are bound at 40 percent, although
bound tariff levels exceed 40 percent or remain unbound on automobiles, iron, steel, and some
chemical products (Baldwin, 2011).
The EAC established a Customs Union in 2005 which was fully-fledged with zero internal tariffs
as from 2010. The EAC, in fast tracking its economic integration process, ratified a more far-
reaching common market protocol in July 2010. In November 2013, EAC Members signed a
protocol on a monetary union. The integration agenda of the EAC is strongly political in nature
as its ultimate goal is to become a federation (Stahl, 2005).
Uganda on 27th January 2012, signed a Memorandum of Understanding (MOU) with the
Republic of Rwanda on elimination of NTBs (Deloitte, 2014). In this arrangement, the two
governments through their Ministries of Trade have agreed on a reporting and removal
mechanism of all NTBs faced by traders in each other’s territory. A committee headed the
Permanent Secretaries in the same Ministries are responsible for coordinating various public and
private sector institutions involved in trade facilitation to eliminate NTBs. A follow up meeting
was held on 25th June 2012 to review the progress and a time bound work plan was adopted and
will be reviewed by the two countries semi-annually.
The quota agreement between Kenya and the United States was done before the Africa Growth
and Opportunity Act was drafted (World bank, 2008). The act, which seeks among other things
to eliminate trade barriers and encourage exports from sub-Saharan Africa to the United States,
3
creates provisions for the elimination of quotas from Kenya and Mauritius. Section i(c) of the
act says that "Pursuant to the Agreement on Textiles and Clothing, the United States shall
eliminate the existing quotas on textile and apparel exports to the United States from Kenya
within 30 days after that country adopts an efficient visa system to guard against unlawful
transshipment of textile and apparel goods and the use of counterfeit documents".
Kenya is the largest and wealthiest economy in East Africa and plays an important regional role.
Kenya’s sizeable middle class, progressive business environment, regional market access and
history of automotive assembly position the country well as a potential East African automotive
hub (KMI, 2012).
According to the KNBS (2015), a total of 112 536 vehicles were registered in 2015; this included
newly registered and re-registered vehicles. KNBS does not differentiate between the registration
of new vehicles and the re-registration of used vehicles, whereas the Kenya Motor Industry
(KMI) only records new vehicles sold. KMI states that 19 523 new vehicles were sold in Kenya
in 2015, reflecting the dominance of used vehicles in the retail market. In 2015 light and heavy
commercial vehicles combined accounted for 86% of total vehicle sales, highlighting the
importance of larger vehicles, such as light commercial vehicles, minibuses, heavy trucks, and
buses. Sedans and SUVs made up 14%. Heavy commercial vehicles had the highest growth;
with a CAGR of 17.5% between 2005 and 2015 and thus were key drivers underpinning new
vehicle sales growth over that period.
It is estimated that approximately 80% of Kenya’s total vehicle fleet are second-hand vehicles,
with a total vehicle fleet of around 1.3 million units in 2014 (KNBS, 2015). In 2012, the average
age of vehicles on Kenya’s roads was 15 years, which has resulted in high levels of pollution,
frequent break-downs of vehicles, and a large non-genuine spare parts industry developing. The
total number of vehicles in use grew at a CAGR of 7.6% between 2005 and 2014. Figures for
Kenya’s motorization rate differ depending on the source, and range between 26 and 28 vehicles
per 1000 persons. This is forecast to increase to 31.5 in 2019, reflecting vehicle ownership
growing faster than Kenya’s population (World Bank, 2005).
The secondhand automobile industry has been slowly growing over the years (KNBS, 2013).
There have been so many trade restrictions, from increased import tax, increased cost of auto
fuel, and restriction in the age of the vehicle that should be imported. To a larger extent terrorism
4
and unfavorable trading conditions across the borders have had a negative contribution to the
grown of the automobile industry. If the restrictions and the challenges are addressed, then the
motor industry which has so much potential in terms of economic grown and revenue generation,
will blossom.
1.2 Statement of the Problem
In contrast to other EAC markets, vehicles older than eight years are not permitted for import
into Kenya. Although, there is anecdotal evidence of cases of importers forging import
documentation of older vehicles, this law is largely abided by and the industry believes that
government implements it effectively (EAC, 2005). All imported vehicles undergo a
roadworthiness inspection and the Ministry of Industrialization is in the process of lowering the
legal age limit of second-hand vehicles imported into the country to five years. This should
reduce the number of imported used vehicles, as newer second-hand cars will be more expensive.
One of the greatest inhibitors to the advancement of Kenya’s automotive sector is the
proliferation of second-hand vehicles available in the market. Decreasing the age of cars allowed
for import while simultaneously decreasing the affordability of these cars by increasing the taxes
levied on them should drive sales of more affordable, newer, roadworthy, and locally-assembled
cars.
According to the Kenya Bureau of statistics, the number of new registered auto mobiles, both
saloons and station wagons grew from 400,000 in 2012, to 600,000 in 2012 (KNBS, 2013). The
importation of second hand vehicles in Kenya is growing at a very fast rate translating to the
increase of driving licenses issuance (KNBS, 2013).However, the second hand motor industry
continue to face many challenges, and this has led to the closure of several second hand motor
dealerships. Further, some of the second hand motor dealerships are yet to be in formal
groupings and at the moment because most of them are individually owned, they tend to operate
in isolation. There is a need for the government to work together with the automobile players so
that the trade barriers negative effect can be minimized Zhou, Wencang and Huajing Hu (2015).
However, the study only focused on logistics yet there are many ways in which the government
can support the traders. Given the rise in the second hand automobile trade, it is evident that this
is an industry that has so much potential to grow the economy of Kenya.
5
Ernst and Young, (2001) argues that international trade presents unique risks. A company
engaged in importing foreign manufactured goods or considering becoming an importer should
have a complete and detailed business plan. Dennis and Shepherd (2011) concurred that it was
advisable for a prospective importer to check many references and not to limit its inquiries to
references that the prospective manufacturer identifies. Atkinson (2006) suggested that the
ability to exploit price differentials appears likely to result in the creation of parallel imports.
According to Kiriti (2012), tariff is a tax imposed by the local government on goods and services
coming into a country. They increase the price of the goods being imported. This background
invokes the study on international trade barriers faced by Nairobi automobile traders as there is a
research gap.
1.3 Purpose of the study
The main objective of the study was to identify the international barriers of trade affecting the
Kenya second hand automobile traders who own motor dealerships in Nairobi.
1.4 Research Questions
1.4.1 What are the international trade practices practiced by the automobile traders in Nairobi?
1.4.2 What international trade barriers do the traders experience when dealing with the vehicle
sellers abroad?
1.4.3 What challenges and risks do the traders face locally?
1.5 Significance of the Study
This study is of importance to the following stakeholders;
1.5.1 Automobile Dealers
The study will enable automobile dealers consider the importance of being aware of the risks and
challenges posed to them when doing international business, how they can handle them and put
more emphasis on the effectiveness of the strategies and practices adopted in other countries in
relation to international relations. The motor dealers’ daily deals with the issues of purchases,
marketing, and payments which have a great impact on their net profit, therefore, this research
paper may help them carry out these activities in the most effective ways.
6
1.5.2 Automobile Dealers Risk Managers
The study would also help risk managers to effectively understand the risk management
techniques and their implementation. They will be able to identify the various international risks
the organization is exposed to, and will help them come up with a process of managing them,
formulate strategies of minimizing their impact and finally coming up with the risk management
policy of the company. This can also help them in carrying out a sensitivity analysis to the
various practices they adopt hence minimize poor performance of the motor dealers.
1.5.3 Customers
The customers will benefit by getting quality cars at affordable prices. The study will also take
from them the burden of waiting for lengthy period of time for the garages to import parts in
cases where their vehicles need servicing and replacement of parts.
1.5.4 Garages and Vehicle Spare Parts Importers
They will effectively and efficiently be able to meet their customer demands in a timely manner,
and they will also be able to provide quality services, spare parts, and affordable prices, at the
same time increasing their profits.
1.5.5 Government
There will be an increase in revenue in form of import taxes and value added taxes (VAT) as the
dealership industry grows. The number of unemployed will also go down as the dealership
creates many forms of employment.
1.5.6 Scholars and Academicians
The research will be a tool for the reference of their research work, and will also help them have
an understanding of the challenges faced by Nairobi automobile dealers. They will also use it to
identify their research topics as per the areas of further studies.
1.6 Scope of the Study
The study sought to study the second hand automobile dealership based in Nairobi who is
registered by the Kenya Revenue Authority, with a sample size of 240 motor dealerships. The
study focused on the dealers who import their vehicles across international borders, for a period
of more than three years. Since the information sought is of a sensitive nature, the researcher
7
obtained an introductory letter from United States International University Africa (USIUA),
stipulating the purpose of the study so that the respondent will be confident in voluntarily giving
out the information. The study had a wide area limitation because it only covered the dealerships
in Nairobi and not the whole country.
1.7 Definition of Terms
1.7.1 Automobile
Is a motor vehicle with four wheels; usually propelled by an internal combustion engine
(Jordaan, 2011).
1.7.2 Currency Fluctuation
Currency fluctuations are a natural outcome of the floating exchange rate system that is the norm
for most major economies (Ausloos, 2000)
1.7.3 Embargo
Embargo is the most severe type of trade barrier which is a total ban on one or more products
from a particular nation. Embargoes are often motivated by political, rather than economic
concerns (Grandfield and Santana, 1997).
1.7.4 Export
An export is a function of international trade whereby surplus goods produced in one country are
shipped to another country for future sale or trade. The sale of such goods adds to the producing
nation's gross output. If used for trade, exports are exchanged for other products or services in
other countries (Vannoorenberghe and Janeba, 2016).
1.7.5 Import
Is the movement of a good or service in a legitimate fashion typically for use of trade or
consumption into a country with; deficit or does not produce the products. An import is a good or
service brought into one country from another (Findlay and Warren, 2013).
1.7.6 Importing Practices
8
Import practice is the voluntary code of practice to be used as a guideline for importers. It is
designed to encourage them to create their own accepted controls to help improve quality and
meet regulatory requirements (Weigand 1991).
1.7.7 International trade
International trade is the exchange of capital, goods and services across international borders or
territories (Dlabay and Scott, 2010).
1.7.8 Quota
Quota is a limit on the number of certain products that can be imported from another nation.
Quotas protect jobs in some industries that face foreign competition, but they lead to fewer
choices and higher prices for consumers (Aw and Roberts, 1996).
1.7.9 Standards
Standards are rules about the quality of imported goods. If imported goods do not pass a nation’s
standards, they are not be accepted (Morris and Green 2007).
1.7.10 Tariffs
Tariff is a tax imposed by the local government on goods and services coming into a country by
increasing the price of the goods being imported (Kiriti, 2012)
1.7.11 Trade Barriers
Trade barriers are the government-imposed restraint on the flow of international goods or
services (Ausloos, 2000)
1.7.12 Voluntary Export Restraints
Voluntary export restraint [voluntary export restraint: a limit on the quantity of a good that can
be exported from a country during a specified time period; a type of trade barrier], or VER
(Campbell and Stanley, 2008).
9
1.8 Chapter Summary
The chapter has given the background of the problem and research sought to be done is to
investigate the barriers of international trade faced by the Nairobi automobile traders. The
research worked with a sample of 50dealers based in Nairobi. The next chapter is the Literature
review on the research related to the problem of the study. Chapter three contains the
methodology that was used in this study including the research design, population, sample, data
collection methods, research procedures and data analysis methods. Chapter four shows the
analysis and findings of the study as outlined in the research methodology. Chapter five
discusses the summary of the findings, conclusions and recommendations.
10
CHAPTERTWO
2.0 LITERATURE REVIEW
2.1Introduction
The purpose of literature review is to outline what has been done previously as far as the
research problem being studied is concerned. The literature reviewed in this study was explored
under three dominant themes that are studied under the following sub-headings: importing
practices, international barriers of trade, and the challenges and risks being faced by traders
locally. This research depends on materials from several sources which are closely related to the
theme and the objectives of this specific study. The chapter finally presents the chapter summary.
2.2International Trade Practices Practiced by the Automobile Traders
Importing practices are the general guidelines and procedures laid down so that international
traders follow when importing goods and services into their countries. The practices are standard
procedures that must be duly followed so that the imports are accepted in the destined country.
2.2.1 Parallel Imports
Goods imported in parallel, also known as grey goods, are genuine products that are imported
without the authorization of the trademark or copyright owner in a country. In other words,
parallel importation takes place when a third party acquires branded goods from a source other
than the producer of those goods, imports such goods into a country and sells them directly to the
public, or sells them to retailers who then sell them directly to consumers(Ahmadi and Yang
1995).
Parallel imports affect a wide range of industries, spreading from traditional luxury and brand-
name consumer products (wines, cameras, and watches) to industrial products. Belgium, for
example, despite the fact that it has no automobile industry is a major car exporter in Europe
more than 25,000 cars some years. This export success story is because cars are cheaper in
Belgium than in nearby countries, due to tax differences and the effects of parallel imports
(Weigand 1991).
In the USA, the first-sale doctrine is employed (i.e. rights are exhausted when purchased outside
the vertical distribution chain). Parallel imports of second hand spare parts of motor vehicles are
11
rarely admissible in the USA; in order to block automobile industry, a trademark owner needs to
show that imports are not identical in quality to the original products. However, US patent
owners are protected from parallel imports in automobile sector by an explicit right of
importation. This situation is currently being challenged as purchasing second hand products or
daytrip shopping in Canada and Mexico is becoming increasingly popular pastimes for US senior
citizens (IMF, 2005).
2.2.2 Exercising Great Care in Selecting Foreign Automobiles Manufacturers
Ernst and Young, (2001) argues that international trade presents unique risks. A company
engaged in importing foreign manufactured goods or considering becoming an importer should
have a complete and detailed business plan. Selecting a capable and responsible overseas
business partner is one of the best ways to minimize risks. Before selecting a business partner in
another country, it is wise to investigate the fabricating manufacturer’s reputation, using readily
available public source information (such as the Internet) or, if possible, by interviewing other
customers of the fabricating manufacturer.
Dennis and Shepherd (2011) concurred that it was advisable for a prospective importer to check
many references and not to limit its inquiries to references that the prospective automobile
manufacturer identifies. If the country in which automobiles manufacturer is located has an
established government agency to oversee product safety, that agency’s public records may
contain useful information on the company’s history of recalls and regulatory compliance.
Importers may also wish to consider requesting the potential fabricating manufacturer’s catalogs
and sample products for evaluation.
Argentina prohibits imports of used automobile spare parts. However, there is an exception to
this prohibition. Certain used parts may be imported if they have been rebuilt by the original
manufacturer (or the supplier which produced the OE part). They may also be overhauled in
Argentina, with a previous authorization by the National Institute of Industrial Technology
(INTI) which checks on importation of second hand automobile products and enhances strict
measures on selection of imports (Skoko, 2005).
12
2.2.3 Inspecting Foreign Manufacturing Facilities
NHTSA (2001) explains that before entering into a written contract, they believe it was prudent
for the importer to personally visit the automobile manufacturer’s facility and to determine
whether the manufacturer is properly licensed by the appropriate government agencies. It may
also be reasonable to hire a consultant if the importer has limited knowledge of, or experience
with, the culture and trade practices of a foreign country.
Several trips may be necessary to conduct an objective evaluation of the automobile company, its
factory, and its management. To reduce the potential for fraud, it is preferable to deal directly
with the automobile manufacturer and to avoid dealing with representatives (such as trade
groups) that claim to represent a manufacturer. When dealing with a business partner of the
automobile manufacturer, it is generally advisable to determine whether the partner is a
subsidiary of a larger company and whether the importer has recourse against the parent
company if the subsidiary defaults on its obligations (NHTSA, 2001).
In US, any motor vehicle trader(s) or businesses engaged in the sale of imported second hand
motor vehicles or locally pre-owned motor vehicles or sale via auction and tender should have
their license inspected. But if a product or an exporter (country or firm) repeatedly violates US
regulations or poses risks in terms of SPS issues, the NHTSA will raise the level of surveillance,
creating an “alert” and implementing an “Automatic Detention’ (AD) or a ‘Detention Without
Physical Evidence” (DWPE) system. The surveillance of products is increased by compulsory
detention and the burden of proof that the shipment is compliant is transferred to the exporter
(Buzby, 2008).
2.2.4 Re-importing
Re importing is the manufacturer’s strategy to sell into the foreign market at a substantially
lower price than in the home market, due either to the market being poorer or there being
dramatic exchange rate differences, the foreign market is geographically close to the home
market, thus minimizing return transport costs. This way of importing in parallel may also be
developed on premises that an active parallel import cannot exist without price differentials
between international markets (Maskus, 1990).
13
Atkinson (2006) suggested that the ability to exploit price differentials appears likely to result in
the creation of parallel imports among automobile traders in Australia. However, price
differentials inevitably invite arbitrage behavior, if transportation costs, duties and tariffs
between the countries are modest or negligible, as is the case in the software industry. Because of
a favorable price differential, a motor vehicle importer can enter the market and compete with
authorized products. In contrast, if parallel imports on cars are not allowed, buyers have no other
choice than to purchase products priced well above the marginal cost in non-segmented markets.
In Malawi automobile dealers practice re-importing; car owners could dispose off their car to an
individual or franchise reseller (for cash or in a trade-in arrangement). This also allowed the
buyers who could not afford or who did not want to buy brand new cars to buy used cars.
However, there are other factors that have a great bearing in creation of markets of used cars like
strict regulation in testing which can drive car owners to sell their used cars (Berkovec, 1985).
2.2.5 Identify the Product’s Country of Origin
Finger (1991) asserted that it was generally required that an imported product be properly
marked with its country of origin. The pertinent statute, which is administered by CBP, requires
that, unless accepted, every article of foreign origin (or its container) imported into the United
States must be marked with the article’s country of origin. See Section 304, Tariff Act of 1930,
as amended (19 U.S.C. 1304). The purpose of the marking requirement is to inform the ultimate
purchaser in the United States of the country in which the imported article was produced.
Schmidt-Eisenlohr (2013) argued that motor vehicle articles that were not marked at the time of
importation with the English name of their country of origin may be subject to additional duties
unless they are properly marked after importation, or are exported or destroyed under CBP
supervision. CBP allows importers, where administratively practicable, to mark automobile
products that are not marked at the time of importation, prior to their release from CBP’s control
or custody.
This rule does not apply to second hand vehicle importer that has repeatedly violated the country
of origin marking requirements after receiving written notification from CBP that the vehicle are
required to be marked prior to importation. It is also important to keep in mind that any person
who removes, destroys, alters, covers, or obliterates, with the intent of concealing, the country of
14
origin marking on an imported article of used vehicle could be subject to criminal
prosecution(Schmidt-Eisenlohr, 2013).
2.3 International Trade Barriers
International trade barriers are the restrictions imposed by governments to enhance
protectionism. Trade barriers are tariff and non-tariffs. Some of the barriers have been
manifested in certain countries in the world. India has not systematically reduced the basic
customs duty in the past five years (Francis, 2011). India also maintained very high tariff peaks
on a number of goods, including flowers (60 percent), natural rubber (70 percent), automobiles
and motorcycles (60 percent to 75 percent), raisins and coffee (100 percent), alcoholic beverages
(150 percent), and textiles (some ad valorem equivalent rates exceed 300 percent). Rather than
liberalizing its customs duties, India instead operates a number of complicated duty drawback,
duty exemption, and duty remission schemes for imports. Eligibility to participate in these
schemes is usually subject to a number of conditions (Amiti, and Weinstein, 2011).
Even though the WTO advocates trade opening, many WTO members do not liberalize every
sector of the economy and, instead, maintain certain barriers to trade. Many of these barriers take
the form of non-tariff barriers (NTBs), i.e. discriminatory non-tariff measures (NTMs) imposed
by governments to favor domestic over foreign suppliers (Nicita and Gourdon, 2013). Barriers
can also take the form of procedural obstacles, i.e. obstacles related to the process of application
of an NTM rather than the measure itself.
2.3.1 Tariffs
A tariff is a tax imposed on imports, which are goods coming into a country. The tax may range
from a few percent of the cost of the good to well over 100% of the cost of the good! This tax is
ultimately passed on to consumers, resulting in higher prices. According to Kiriti (2012), tariff is
a tax imposed by the local government on goods and services coming into a country. They increase
the price of the goods being imported. Tariffs were created by the government to protect local
businesses from low-priced competitive products. Higher prices reduce demand for the imported
goods and help a nation’s own industries compete. Tariffs also increase government revenue,
which can help reduce a nation’s budget deficit. Today, U.S. government collects tariffs on
imported steel and cars, among other things.
15
Brazil imposes relatively high tariffs on imports across a wide spread of sectors, including
automobiles, automotive parts, information technology and electronics, chemicals, plastics,
industrial machinery, steel, and textiles and apparel. Under Mercado Común Del Sur
(MERCOSUR), Brazil is permitted to maintain 100 exceptions to the CET until December 31,
2015(Antria and Foley, 2013). Using these exceptions, Brazil maintains higher tariffs than its
MERCOSUR partners on certain goods, including cellular phones, telecommunications
equipment, computers and computer printers, wind turbines, certain chemicals and
pharmaceuticals, sardines, mushrooms, joint cement, hydrogenated castor oil, white mineral oils,
hydrogen carbonate, machining centers, speed changers, and certain instruments and models
designed for demonstration purposes.
Argentina has bilateral arrangements with Brazil and Uruguay on automobiles and automotive
parts intended to provide preferential access among the three countries. Mexico and Argentina
also have a bilateral trade agreement regarding automobiles and automotive parts. U.S.
industries have raised concerns about prohibitively high tariffs and other taxes in Argentina on
certain products, including distilled spirits, restaurant equipment, motorcycles, and cars (Yeast,
1998).
After the implementation of the Uruguay Round, the internationally competitive textiles and
textile products sector will have, on average, high tariffs (between 16.3 percent and 35 percent).
In addition, there will be high tariffs on some items such as automobiles (maximum 80 percent),
glass fibers (maximum 25 percent), copper products (maximum 13 percent), and aluminum
products (maximum 13 percent). The bound rate for electrical equipment is 62.4 percent, and the
binding rate for industrial goods as a whole is 86 percent (Nordas, 2004).
Lee and Lee (2005) said that Korea’s efforts to push forward liberalization, including dropping
its 80 percent high end bound rate for second hand automobiles to a flat rate of eight percent in
February 1999, was appreciated. However, taking into account its status in the current world
trade system and its status as an OECD Member with a more developed economy than most
other countries, further steps toward trade liberalization is expected.
2.3.2 Non-Tariff Barriers
Nontariff barriers are forms of restrictive trade where barriers to trade are set up and take
procedural obstacles. Nontariff barriers include; quotas, embargoes, sanctions, levies and other
16
restrictions and are frequently used by large and developed economies. The United Nations
Conference on Trade and Development (UNCTAD) (2010) describes NTMs as policy measures
other than ordinary customs tariffs that can potentially have an economic effect on international
trade in goods, changing quantities traded prices, or both. The classification of NTMs includes
import measures such as sanitary and phytosanitary (SPS) measures and technical barriers to
trade (TBTs), and export-related measures. The process of applying NTMs can also hamper trade
among trading partners in different ways.
2.3.2.1 Quota
Quota is a limit on the number of certain products that can be imported from another nation. In
the 1980s, the U.S. forced a limit on the number of cars that could be imported from Japan, in
order to help American car companies compete (Aw and Roberts, 1996). Tariffs and quotas
protect jobs in some industries that face foreign competition, but they lead to fewer choices and
higher prices for consumers. They also hurt workers in other industries. For example, because
of the quota on Japanese cars in the 1980s, Japan earned less money from its exports to the U.S.
As a result, it had less money to spend on U.S. exports such as grain and air planes (Aw and
Roberts, 1996). United States
The United States imposed a general quota to automobile licenses for certain U.S. trading
companies, who are allowed to import a maximum quantity of vehicles on their previous imports
from Japan. In a different situation U.S. sugar imports are limited by a quota that specifies the
shares of individual countries; the right to sell sugar to the United States is given directly to the
governments of these countries (Thilmany and Barrett, 1997).
In December 2006, the Government agreed to develop and implement a “Quota Allocation System”
for the period 2007-2010, with the intention of alleviating the adverse impacts of the Foreign Used
Car Industry in Trinidad and Tobago. In 2010, given the impending expiration of the quota allocation
system, Government agreed to the approval of a Draft Policy to regulate the Foreign Used Car
Industry in Trinidad and Tobago for the period 2011-2013 and to the continued importation of a
maximum annual quota allocation of 13,500 second hand cars (Campbell and Stanley, 2008).
17
2.3.2.2 Standards
Standards are rules about the quality of imported goods. If imported goods do not pass a nation’s
standards, they will not be accepted. The U.S. might ban the import of fruit that has been sprayed
with certain pesticides. These standards protect the health of American consumers, but they also
protect American fruit growers from foreign competition (Morris and Green2007).
Standards Australia (standards.org.au) is the nation’s peak non-government standards
organization. The Commonwealth Government put this organization in place to meet Australia’s
need for contemporary, internationally-aligned standards and related services. The Department of
Infrastructure, Transport, Regional Development, and Local Government (infrastructure.gov.au)
governs the Australian Design Rules (ADRs). The ADRs are national standards for vehicle
safety, anti-theft and emissions. The current standards, the Third Edition ADRs, are administered
by the Australian Government under the Motor Vehicle Standards Act 1989. The Act requires all
road vehicles, whether they are newly manufactured in Australia or are imported as new or
second hand vehicles, to comply with the relevant ADRs at the time of manufacture and supply
to the Australian market (Hanson (2004).
In Ethiopia a number of assemblers indicated that they are instructed that local content should be
approximately 30% in order to qualify for the 30% tax incentive associated with all local
manufacturing, but that no written agreement exists between assemblers and the state (Maertens,
and Swinnen 2007).Due to Ethiopia’s tax system, which subjects vehicles to tax depending on
their engine size rather than age or origin, it is often cheaper to import a second-hand vehicle
with a smaller engine size than it is to assemble a vehicle locally, despite import taxes on these
vehicles. This is because of the lower standard of the second hand vehicles compared to the
original cars that are imported.
2.3.2.3 Embargo
The U.S. has maintained an embargo on imports from Cuba since 1961, after the Cuban leader
Fidel Castro seized U.S. property and embraced communism. Embargoes put pressure on
governments to change behavior viewed as undesirable by limiting their ability to trade
(Grandfield and Santana, 1997). U.S. law severely restricts American companies from
conducting business with Cuba, and Machado knows the lifting of sanctions and the sale of U.S.
automobiles and other goods are a long way off.
18
Trade embargoes have a mixed record. When successful, they pressure countries to change their
policies. South Africa, for example, abandoned its racial segregation policies when faced with
trade embargoes from many countries. In contrast, as of 2008, the decade’s long U.S. trade
embargo against Cuba had failed to bring about a change in the country’s government or policies
(Grandfield and Santana, 1997). The automobile sector was adversely affected by the total ban of
trade between US and Cuba as there was no transport communication between the two countries.
Whole automobile sector was affected including the second hand vehicle that could be easily
smuggled into the two countries.
In September 1994, the Gulf Cooperation Council (GCC) member countries (Bahrain, Kuwait,
Oman, Qatar, Saudi Arabia, and the United Arab Emirates) announced an end to their
enforcement of the secondary and tertiary aspects of the boycott, eliminating a significant trade
barrier to U.S. firms (Bley and Chen, 1996).The trade involved various products including food
products, used cars and pharmaceuticals. In December 1996, the GCC countries recognized the
total dismantling of the boycott as a necessary step to advance peace and promote regional
cooperation in the Middle East and North Africa. Although all GCC states are complying with
these stated plans, some commercial documentation containing boycott-related language
continues to surface on occasion and impact individual business transactions (IMF, 2005).
In a number of resolutions (06.02.2014, 13.03.2014, 17.04.2014), the European Parliament
expressed its concerns and supported the adoption and extension of sanctions. It endorsed the
process of association and called on the Commission to provide financial and technical
assistance to Ukraine (Johnson, 2009). Following Russia’s EU food ban, the European
Parliament in its Resolution adopted on 18.09.2014called on the Commission to "closely monitor
the impact of the Russian 'counter-sanctions' and to take swift measures to support producers
that are hit by the Russian trade restrictions". Furthermore, the Resolution calls on the
Commission to increase the EUR 125 million budget for market measures, to promote medium-
term measures in order to strengthen the EU's presence on third-country markets and to consider
the possibility of drawing on EU funds other than agricultural funds, since the crisis is first and
foremost of a political nature and not the result of a market failure or adverse weather conditions
(Johnson, 2009).
19
Grant and Lambert (2008) asserted that on 7 August 2014, Russia imposed a ban on the
importation from the EU, the USA, Canada, Australia and Norway of second hand vehicles, meat
and meat products, milk and dairy products, root crops, vegetables, fruits and nuts, vegetable fat-
based food products, fish and shellfish. The ban was valid for one year. Pork has already been
the subject of an import ban in Russia since January due to African swine fever, which has
spread into the area of the EU. The ban did not apply to imports by private individuals or to
products intended for children. Russia announced on 20 August 2014, that the import ban will
not affect, among other things, lactose-free dairy products or seed potatoes and second hand cars.
2.3.2.4 Voluntary Export Restraints
Voluntary export restraint [voluntary export restraint: a limit on the quantity of a good that can
be exported from a country during a specified time period; a type of trade barrier], or VER. This
type of barrier limits the quantity of a good that can be exported from a country during a specific
time period. In effect, it is an export quota, self-imposed by the exporting country (Campbell and
Stanley, 2008).
In most cases, however, a VER is not truly voluntary. It is usually established at the insistence of
an importing country. It is designed to avoid harsher restrictions, such as tariffs or import quotas.
For example, Japan imposed a VER on its automobile shipments to the United States in the
1980s when faced with U.S. threats to restrict Japanese auto imports (Campbell and Stanley,
2008).
On 1 May 1981 the Japanese government announced a three-year system of “voluntary export
restraints” (VER) on the export of automobiles to the U.S. market. For the period from April
1981 to March 1982 these exports would not exceed 1.68 million units, while for the second year
(April 1982 to March 1983) the export ceiling would be raised by 16.5 percent of the growth in
the U.S. market. At the end of the second year, a decision about whether to extend the export
restraint for a third year would be made (Schott, 2004).
Later the Japanese government announced that the exports of certain “utility” (used) vehicles
(e.g., the Subaru Brat, Toyota Land Cruiser and Van) would be limited to 82,500 units over the
initial year, and exports to Puerto Rico would not exceed 70,000. Thus, total Japanese exports for
all these vehicles in the initial year would not exceed 1,832,500 units. On 29 March 1982 it was
20
announced that the system of VER in place during the first year of the agreement would be
extended without change to the second year (presumably because of the lack of growth in the
U.S. market). The export limits are administered by the Japanese Ministry of International Trade
and Industry (MITI), which allocates fixed proportions of the total export quantity to the
Japanese producers; this method of restricting exports does not violate U.S. anti- trust law
(Schott, 2004).
In October 2000, the European Court of Justice delivered its judgment on the case where Bayer
had imposed supply restrictions in order to prevent second hand automobile imports. The ECJ
established that these restrictions did not contravene European competition rules as long as these
were not adopted; pursuant to a concurrence of wills between the manufacturer and domestic
suppliers and did not amount to an abuse of dominant position. As prices for motor vehicles were
lower in the latter countries, demand trebled suddenly which resulted in considerable parallel
trade from France and Spain to the UK. Bayer reacted by introducing a policy of supplies
corresponding to previous levels, allowing for a 10% increase compared to this level. The
European Commission responded by claiming this policy reflected a tacit agreement between
Bayer and its wholesalers with the aim of restricting exports from Spain or France (Balwin,
2011).
2.4 Challenges and Risks Traders Face Locally
Challenges and risks faced by traders are the factors that affect trading other than international
trade barriers. These may include; Investment regulation, currency fluctuation, foreign relations
and trade sanctions, government policy and market competition. These are the challenges and
risks local traders face in automobile industry.
2.4.1 Investment regulation
Heilan and Yalcin (2012) argued that investors who were non Canadians must comply with the
provision of the investment Canada Act, which requires them to file a notification when they
commence a new business activity in Canada or each time they acquire control of an existing
Canadian business. The investment will be reviewed if both the investor and the vendor are from
a country that is not a World Trade organization member and if the value of the business being
21
acquired in Canada is over 5 million. If the investor’s country is a WTO any direct investment in
excess of 223 million is reviewable.
During the 1960s, regulatory policies in the USA became more severe than regulations in the
United Kingdom. A 1976 study shows that the impact of the US regulations significantly delayed
the arrival of new vehicles on the market: from 1950 to 1961, the number of new vehicles on the
American market was on average 56 per year; between 1962 and 1976 it had fallen to 17 per
year. It was also found that this reduction was much greater in the USA than in the UK, France
or West Germany during the same period (OECD, 2002).
Grabowski (2010) examined the effect of the new regulations on used cars importation in the
USA and the UK. The authors assumed that factors unrelated to regulation would reduce the
automobile intensity in both countries, but that for reasons linked to regulation this reduction
would be greater in the USA. The results showed that between 1960 to 1961 and 1966-70; used
cars dropped six-fold as compared to three-fold in UK. The study also confirmed that the
concomitant decline in profitability induced US automobile companies to relocate their research
abroad. The percentage of total second hand cars investments overseas increased from 9.9% in
1972 to 15.4% in 1974.
2.4.2 Currency Fluctuation
Pakes (2003) argued that every county has its own currency and its patrons know how to use it
but everything you know about your own currency changes when you are dealing with another
country. The rate given by one country for another countries currency is called the currency
exchange rate. The daily exchange rate for the rest of the world is made according to the rates
used when two banks trade between different countries.
Rates of currency are always fluctuating and that can be a major barrier to trade because the
buyer could end up paying way more than intended. When a country’s currency is devalued in
relation to another countries currency it means the country with the lower value can sell more
because the other country saves money. However, it discourages the devalued country from
buying the goods and services from the country with the higher currency value because they
would pay more for less (Ausloos, 2000).
22
Kandil (2004) examined the effects of exchange rate fluctuations on real output growth and price
inflation in a sample of twenty-two developing countries on the automobile industry. The
analysis introduces a theoretical rational expectation model that decomposes movements in the
exchange rate into anticipated and unanticipated components. The model demonstrates the
effects of demand and supply channels on the output and price responses to changes in the
exchange rate on the automobile industry. In general, exchange rate depreciation, both
anticipated and unanticipated, decreases real output growth and increases price inflation. The
evidence confirms concerns about the negative effects of currency depreciation on economic
performance of automobile sector and developing countries.
The European Union has seen considerable currency fluctuations since the summer of 1992. In
three years, five currencies have depreciated by 20% or more against the most stable currencies
in the EMS. The scale and speed of these changes have justified this question being raised at the
highest political level. At its meeting in Cannes in June, the European Council requested the
Commission to "carry out a detailed examination of those problems and to report on its
conclusions in the autumn". In response to this request from the European Council, the
Commission has attempted to identify the impact of intra-Community currency fluctuations on
economic growth and on the second hand automobiles. It is also ready to present this report to
the appropriate institutions of the Union (Bahmani and Mirzaie 2000).
2.4.3 Foreign Relations and Trade Sanctions
Canada uses trade sanctions to influence polices or actions of other nations. Also attempts to stop
human right violations by imposing sanctions instead of using force. Canada tends to join with
other nations who share the same views to implement sanctions jointly. The United Nations Act
incorporates into Canadian law the decisions are passed by the United Nations Security Council.
The United Nations Security Council imposes a legal obligation on Canada to uphold the
decisions enacted by the United Nations Act (Cleveland, 2001).
Charnovitz (2001) asserts that Canada has authority which it can impose sanctions in relation to
a foreign state, either as implementing a decision, resolution or recommendation of a
international or organization of states or association of states. Export and Import Permits Act
allows goods to be traded with regulations ( area control list, export control list and the import
control list ) Area control list is a list of restricted countries, special permit is needed for Canada
23
to trade to a country on this list. Export control is a list that consists of restricted goods. Import
control is a list of goods that are not permitted into Canada. Import control list is not used to
impose sanctions onto a foreign state. But there are some exceptional circumstances.
In 2014, the United States won a second WTO case, where the claims focused on China’s export
restraints on rare earths, tungsten, and molybdenum, which are key inputs for a multitude of
U.S.-made products, including hybrid automobile batteries, wind turbines, energy-efficient
lighting, steel, advanced electronics, automobiles, petroleum, and chemicals. China has agreed to
comply with the WTO’s rulings in this second case by May 2015 (Mander, 2014).
In spite of this, China continues to deploy a combination of export restraints, including export
licensing, minimum export prices, export duties, and other restrictions, on a number of raw
material inputs where it holds the leverage of being among the world’s leading producers
(Asmundson, 2011). Through these export restraints, it appears that China is able to provide
substantial economic advantages to a wide range of downstream producers in China at the
expense of foreign downstream producers, while creating pressure on foreign downstream
producers to move their operations, technologies, and jobs to China. In 2013, China removed its
export restriction and duties on several raw material inputs of key interest to the U.S. steel,
aluminum, and second hand automobiles after the United States won a dispute settlement case
against China at the WTO.
2.4.4 Government Policy
The Angolan government has been gradually implementing legislation for the petroleum sector
originally enacted in November 2003 (Order 127/03 of the Ministry of Petroleum) (Black and
McLennan, 2015). The legislation requires many foreign oil services companies currently
supplying the petroleum sector to form joint-venture partnerships with local companies on any
new ventures. The Foreign Exchange Law for the Petroleum Sector requires that all petroleum,
oil, and gas companies use Angolan-domiciled banks to make all payments, including payments
to suppliers and contractors located outside of Angola. Furthermore, payments for goods and
services provided by foreign exchange resident service providers must be made in local currency.
The import taxes for roofing materials and bricks have also increased by 20 percent to 50 percent
(Black and McLennan, 2015).
24
Kassim (2008) investigated strategic responses by automobile dealers in Mombasa to
government policy on used motor vehicle importation. The study covered 30 automobile dealers
in Mombasa. The data was collected using questionnaires and analyzed by using descriptive
statistics which involved mean score and percentages. The findings show that the used
automobile dealers responded by forming collaborative partnership, embracing technology and
diversified to related and unrelated industry in order to survive the change. The findings of the
study further show that the dealers tried to change their image, personnel, systems and controls.
The large dealers managed because of huge capital reserve and strategic alliance with other
dealers in the country of origin. The findings also show that the industry in Mombasa is
experiencing intense competition and some of the dealers apply strategies to help them survive
and compete. The new dealers and used automobile dealers have similarities to some degree in
the strategies they use but the new dealers are said to have better financial year and have a higher
budget to do promotions and advertisements and also train and develop their staff.
Maertens and Swinnen (2007) found that increasing number of states, including most recently
the formerly socialist countries of Eastern Europe, have adopted antitrust legislation. Rather than
prohibit national cartels, however, most countries permit or encourage export cartels relating to
foreign markets. Exporting countries permit domestic second hand motor vehicle export cartels
because they expect to increase exports by enabling domestic enterprises to compete more
successfully in foreign markets. They expect to achieve this by reducing export costs and
enhancing bargaining power against foreign buyers and competitors.
2.4.5 Market Competition
Kenya is not a low-cost economy. In fact, the cost of skilled, educated labor is high by
developing world standards. A very large portion of the young population under the age of 35 is
relatively unskilled, and subsists in an employment environment that offers few opportunities.
Even so, Kenya’s skilled, educated labor pool is relatively abundant in comparison with
neighboring countries (Melitz and Ottaviano, 2007).
Widespread violations of intellectual property rights (IPR) for videos, music, software, and
consumer goods continue to cause major problems for some U.S. firms. The American Chamber
of Commerce (AmCham) in Kenya has an IPR committee of rights holders, who are very
engaged along with the U.S. State Department in combating counterfeiting in Kenya. The
25
government has been unable to provide a secure environment for businesses and families,
particularly in urban settings. Property crime and violence are major concerns and have become
another unavoidable cost of doing business for companies in Kenya (Hallak, 2006).
Africa’s automotive market is relatively small. In 2014, there were just over 42.5 million
registered vehicles in use in Africa; a continent of approximately one billion people. As a result,
the motorization rate on the continent is only 44 vehicles per 1 000 inhabitants. This is far below
the global average of 180 vehicles per 1 000 inhabitants, and lower than other developing regions
such as Latin America (176) and Developing Asia, Oceania and the Middle East (Julian, 2003).
Gaulier and Zignago (2010) asserted that export cartels restrict competition in foreign markets
for second hand automobiles products. Whether they were subject to domestic competition law
depends on the scope of application of the law within the automotive sector. Jurisdiction of
competition law is based on either the "effect" of anticompetitive activities on the domestic
market irrespective of where those activities were carried out ("effects principle"), or the fact that
the anticompetitive activities were carried out within the domestic territory ("principle of
territoriality"). Under the principle of territoriality, national competition law applies to
automobile products. Under the effects principle, only "mixed" export cartels which also involve
domestic restraints of competition are covered.
2.5 Chapter Summary
This chapter clearly reviewed the relevant literature in relation to the research questions
presented in this study. It has addressed the importing practices practiced in various sectors
including automobiles which includes; parallel importing, exercising great care in manufacturers,
inspecting foreign manufacturers, re importing and identifying the products country of origin;
international trade barriers which included: tariffs, quota, standards, embargo and voluntary
export restraint: and challenges, and risks face by locals while trading which included:
investment regulation, currency fluctuation, foreign relation and trade sanctions, government
policy and market competition. Chapter three describes the methods and procedures used to carry
out the study. Specifically, the research design, population and sampling design, data collection
methods, research procedures as well as data analysis methods were addressed.
26
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
Research methodology discusses the procedures and methods of the research period. This section
is an overall scheme, plan or structure designed to assist the researcher in answering the raised
research question. It is a programme to guide the researcher in collecting, analyzing and
interpreting observed facts. This section presents a review of the research methodology.
Specifically, the section discusses the research design, the population of the study, the sample
size and sampling procedure, research instruments, instrument validity instrument reliability,
data collection procedures, data analysis techniques and ethical consideration.
3.2 Research Design
Yang (2008) states that the phrase ‘‘research design’’ denotes both a process and a product
aimed at facilitating the construction of sound arguments. Research design is the plan, structure
of investigation conceived so as to obtain answers to research questions and to control variance.
This study was a quantitative in nature and employed a descriptive research design. This is
because the study was intended to provide a description that is factual and accurate. Descriptive
research design was used in preliminary and exploratory studies, to allow researchers to gather
information, summarize, presents data and interpret it for the purpose of clarification (Creswell
2003).The descriptive design provides sufficient information on the barriers of international trade
affecting the Kenya second hand automobile traders who own motor dealerships in Nairobi.
3.3 Population and Sampling Design
3.3.1 Population
Burns and Grove (2003) and Mugenda and Mugenda (2003) describe population as all the
elements that meet the criteria for inclusion in a study. Population is therefore the entire group of
individuals, events or objects having a common observable characteristic.
Target population is the specific population from which information is required. Target
population refers to an entire group of individuals who have common observable characteristics
27
(Mugenda and Mugenda, 2003). The more specifically a population of interest is defined, the
better the ability to describe and explain the behavior intended to be studied. Thus the population
should fit a certain specification, which the researcher is studying and the population should be
homogenous.
The target population in this study comprised 240 motor dealerships in Nairobi. Due to the
nature of motor dealership; it was more practical and financially logical to carry out the research
from a sample rather than from the entire organization. Other second hand motor dealership
outside Nairobi maybe inaccessible, the more the reason the choice of Nairobi area was justified.
The list of the second hand motor vehicle dealers in Kenya is attached on appendix V (Source:
Kenya Auto Bazaar and Yellow Pages Kenya).
3.3.2 Sampling Design
3.3.2.1 Sampling Frame
A sample frame is defined as a list that includes every member of the population from which a
sample is to be taken (Coopers and Schindler, 2000). Without some form of sample frame,
random sample of a population, other than an extremely small population, is impossible. The
sampling frame for this study was 240 second hand automobile dealers in Kenya; obtained from
the Kenya auto bazaar and yellow pages.
3.3.2.2 Sampling Technique
A sample technique is the architecture or the strategy used to select study participants or
respondents. The rationale is to draw conclusions about the entire population (Kothari, 2004).
The ultimate test of a sample design is how well it represents the characteristics of the population
it purports to. This study used simple random sampling technique, which will obtain a sample of
the motor dealers in Nairobi who are registered under the Kenya Auto Bazaar. The aim of the
simple random sample is to reduce the potential for human bias in the selection of cases to be
included in the sample. As a result, the simple random sample provides us with a sample that is
highly representative of the population being studied, assuming that there is limited missing data.
Since the units selected for inclusion in the sample are chosen using probabilistic methods,
simple random sampling allows us to make generalizations (statistical inferences) from the
28
sample to the population. This is a major advantage because such generalizations are more likely
to be considered to have external validity (Mugenda and Mugenda, 2003: Yang, 2008).
3.3.2.3 Sample Size
Kothari (2004) defines a sample size as the selected respondent representing the population.
Kombo and Tromp (2009) assert that a sample size is a subset of a population that has been
selected to reflect or represent characteristics of a population. A census of all the 240 managers
was taken since the population is small.
The term census in statistics is defined as a survey of an entire population, as opposed to a
sample survey. The study adopted census approach and 100% of the target population was the
sample population of the study. With an acceptable error margin of 5% and a confidence level of
95%, the table below shows how the sample will be drawn from the population for the study.
Table 3.1: Sample Size
P S P S P S
10 10 70 59 160 113
15 14 75 63 180 118
20 19 80 66 190 123
25 24 85 70 200 127
30 28 90 73 210 132
35 32 95 76 220 136
40 36 100 80 230 140
45 40 110 86 240 144
NB: P=Population size, S=Sample, Confidence level = 95%, Margin of error + or – 5%
Source: Krejcie, Robert V., Morgan, Daryle W. (1970), Determining Sample Size for Research
Activities, Educational and Psychological Measurement.
From the table the sample size of the study is 144 Motor dealers.
3.4 Data Collection Methods
The main instruments for the study were the use of questionnaires that were administered to the
respondents. Structured questionnaires were administered to the senior managers of the
29
automobile dealers. The questionnaire was organized into three sections: background of the
interviewee, background of the dealership and research questions. Orodho (2004) defines a
questionnaire as an instrument used to gather data, which allows a measurement for or against a
particular viewpoint. He emphasizes that a questionnaire has ability to collect a large amount of
data in a reasonably quick space of time. Best and Kahn (2008) observe that questionnaires
enables the researcher to explain the purpose of the study and give meaning of the terms that
may not be clear. The structured questionnaire allowed the researcher to obtain reliable
information from the dealers without potential biasness.
Primary data was obtained from the original sources using questionnaires. Primary data was
gathered by use of structured questionnaires and captured through a Likert scale. Likert scale is
an interval scale that uses five or any other anchors of strongly disagrees, disagree, neutral, agree
and strongly agree. The Likert measures the level of agreement or disagreement. Likert scale is
good in measuring perception, attitude, values and behavior (Upagade and Shende, 2012). The
Likert questionnaires were developed to address specific research questions of the study.
3.5 Research Procedures
This study commenced once the researcher obtains a letter of introduction from the University.
Before the actual field data collection, a pilot test was conducted on the questionnaire. The
purpose of the pilot test is to refine the questionnaire so that respondents will have no problems
in answering the questions and there will be no problems in recording the data. In addition, it
enables one to obtain some assessment of the question’s validity and the likely reliability of the
data that was collected (Saunders, Lewis and Thornhill 2012).
The questionnaires were administered to 144 senior managers of the second hand automobiles in
Nairobi. One research assistant, who is trained on communication and interviewing respondents
using the questionnaire tool, was also involved in administering the refined questionnaire and
also helped in data entry. The respondents were guided through illustrated answers to ensure that
they had a clear understanding of the questions and thus respond appropriately. Drop and pick
later method of data collection was applied to enhance the response rate.
30
3.6 Data Analysis Methods
Burns and Grove (2003) define data analysis as a mechanism for reducing and organizing data to
produce findings that require interpretation by the researcher. The study used quantitative
techniques in analyzing the data. Descriptive analysis was employed; which include; mean
standard deviations and frequencies/percentages. Inferential statistics such as correlation and
regression analysis were used. The organised data was interpreted on account of concurrence to
objectives using assistance of computer packages especially Statistical Package for Social
Sciences (SPSS) version 20 to communicate the research findings.The analyzed data was
presented in frequency and percentage tables; this enhanced easier interpretation and
understanding of the research findings.
3.7 Chapter Summary
This chapter discussed the methodology for the study, stated the research design, and method. In
addition, this chapter elaborated on the population, sampling technique, tools for data collection
and data analysis. This chapter is a requirement to chapter four (presentation of results) as it
gives the research framework and offer results creditworthiness. The next chapter presents
analysis and findings of the study as set out in the research methodology. The study findings
were presented on the barriers of international trade affecting the Kenya second hand automobile
traders who own motor dealerships in Nairobi.
31
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter presented the results and findings. This chapter contains analysis of data collected
for the study. It also contains results presentation for this study; the results were presented in
forms of figures and tables. Figures were used to present results on demographics while tables
were used to show results on descriptive and inferential analysis. The analyzed data was
arranged under themes that reflect the research objectives.
A total of 134 responses were received, out of the 144 questionnaires that were issued. This
translates to a response rate of 93.06%. According to Mugenda and Mugenda (2003) and also
Kothari (2004) a response rate of 50% or more is ideal for data analysis. Babbie (2004) also
asserted that return rate of 50% is acceptable to analyze and publish, 60% is good and 70% is
very good. Based on these assertions from renowned scholars, a 93.06% response rate is
adequate for the study.
Table 4.1: Response Rate
Responses Rate Frequency Percentages
Returned 134 93.06
Unreturned 10 6.94
Total 144 100
4.2Demographics
This section presents the general information of the respondents such as gender, level of
education, job level and length of employment.
4.2.1 Gender of the Respondents
The study sought to find out the gender of the respondents. Majority of the respondents were
male who represented 54% of the responses while 46% indicated that they were female. The
findings are presented in Figure 4.1. The findings imply that second hand automobile dealership
is a male dominated field.
32
Figure 4.1: Gender of the Respondents
4.2.2 Level of Education
The study sought to find out the education level of the respondents. Study findings in Figure 4.2
indicate that 39% of the respondents had attained university level education, 27% has attained
postgraduate studies, 19% had attained up to secondary level while 15% had attained education
up to college level. The findings imply that the respondents had high level of education in this
sector and perhaps the observed level of education may have had a bearing on the quality of our
responses.
Figure 4.2: Level of Education
4.2.3 Duration of Employment
The study sought to find out the number of years that the respondents had worked at second hand
automobile industry. Figure 4.3 indicated that 40% had worked for a period between 6 to 10
33
years, 36% had worked for over 10 years, and those who had worked for a period between 2 to 5
years and those had worked for less than one year were 12% respectively. The finding implies
that the respondents were appropriate and may impact positively on the coherence of the data
obtained as they had worked for second hand automobile industry long enough for them to be
well aware of the international trade barrier affecting the second hand automobile industry.
Figure 4.3: Duration of Employments
4.2.4 Nature of the Business
The respondents were asked to indicate their nature of their dealership. Majority of the
respondents indicated they were retailers with 40% of the responses,31% of the respondents
indicated that they were distributor while 29% of the respondents indicated that engaged in
wholesale dealership. The result implies that most of the second hand automobile dealers in
Kenya are retailers. The results are as shown in Figure 4.4 below.
34
Figure 4.4: Nature of Dealership
4.2.5 Operational Period
The study sought to find out the number of years that the second hand automobile firms have
been in operation. Figure 4.5 indicated that 28%of the second hand automobile firms had been in
operation for a period between 5 to 7 years, 23% had been operational for a period between 2 to
4 years, while 22% had been operational for a period between 8 to 10 years. The results further
indicated that 19% of the second hand automobile firms had been in operation for more than 11
years while only 8% had been in operation for a period of less than 2 years. This implies that
majority of the second hand automobile firms have been in operation for a gross period of 10
years which could make them be aware and more reliable on the study of international trade
barriers.
35
4.2.6Importation Rate
The respondents were also asked to indicate their rate of importation of the second hand
automobiles. Majority of the respondents indicated that they imported annually with 28% of the
responses, 23% of the respondents indicated that they imported quarterly and on a monthly basis
while 19% of the respondents indicated that imported on a semi-annual basis. Only 7% of the
respondents indicated that they imported weekly. The result implies that most of the second hand
automobile dealers in Kenya participated on regular importation. The results are as shown in
Figure 4.6 below.
Figure 4.6: Importation Rate
4.2.7 Annual Imports
The study sought to find out the average annual total imports of the second hand automobile
firms. Figure 4.7 indicated that 79% of the second hand automobile dealers imports more than 21
automobiles annually. Majority, 28% of the respondents indicated that their dealership imports
between 21 and 30 automobiles, another 28% of the respondents indicated that their dealership
imports more than 41 automobiles annually while 23% of the respondents indicated that their
dealership imports 31 to 40 automobiles annually. The results further revealed that 17% of the
respondents indicated that their dealership imports 11 to 20 automobiles and only 4% of the
respondents indicated that their dealership imports less than 10 automobiles annually. The
findings implies that majority of the dealerships 79%, imports more than 20 automobiles
36
annually which depicts automobiles dealers as practicing international importing practices which
facilitates their imports.
Figure 4.7: Average Total Imports
4.2.8 Period of Importation Start
The respondents were also asked to indicate when their second hand automobiles dealership
started importation. Majority of the respondents; 33% indicated that they started importation in
less than one year of operation, 30% of the respondents indicated that they started importing in a
period of 1 to 2 year after commencement of their operation, 14% of the respondents indicated
that they imported after a period of 3 to 4 year since they commenced their operation while 13%
of the respondents indicated that they imported after 5 to 6 years of their operation. Only 7% of
the respondents indicated that they imported after 7 years of operation. The result implies that
most of the second hand automobile dealers in Kenya participated implementation of importation
rules and regulation which are barriers to international trade. The results are as shown in Figure
4.8below.
37
Figure 4.8: Start of Importation
4.2.9 International Trade Barriers
a) Tariffs
The respondents were also asked to rate international trade barriers. Majority of the respondents,
80%, agreed that tariffs was a barrier affecting international trade, 9% of the respondents
indicated that they were unaware if tariffs was a barrier while 11% of the respondents indicated
that tariffs was not affecting international trade. The results are as shown in Figure 4.9 below.
Figure 4.9: Tariffs
38
b) Non-Tariff Barriers
The respondents were also asked to rate international trade barriers. Majority of the respondents,
87%, agreed that non-tariff barriers was affecting international trade, 10% of the respondents
indicated that they were unaware if non tariffs barriers affected international trade while 3% of
the respondents indicated that non tariffs barriers was not affecting international trade. The
results are as shown in Figure 4.10below.
Figure 4.10: Non Tariffs Barriers
Table 4.2: Barriers
Statement Mean Std. Deviation CV
Tariffs 1.97 1.117 0.567
Non tariffs 1.69 0.806 0.477
The average mean of the responses indicated from the results was 1.97and 1.69 for tariffs and
non-tariff barriers respectively; which show that the respondents were agreeing on most of the
statements while the coefficient of variance (CV) was 0.567 and 0.477 for tariffs and non-tariff
barriers respectively, which indicates that the answers received were varied as they were
dispersed far from the mean.
39
4.3 International Trade Practices
The study sought to be to identify the international trade practices practiced by the Kenya second
hand automobile traders who own motor dealerships in Nairobi.
4.3.1 Parallel Imports
The respondents were asked whether they could import products without the authorization of the
trademark or copyright owner in a country. Results on table 4.3 revealed that 46.3% of the
respondents strongly agreed while 50.7% agreed adding up to a total of 97% who agreed. Further
the results showed that 3% of the respondents were neutral while 0% of the respondents
disagreed or strongly disagreed respectively. This implies that Nairobi automobile traders could
import automobile products from other countries without trademark authorization in the country
of origin.
The respondents were also asked if second hand spare parts of motor vehicles were allowed in
Kenya. Results on table 4.3 revealed that 44.8% of the respondents strongly agreed while 53%
agreed adding up to a total of 97.8% who agreed. Further the results showed that 2.2% of the
respondents were neutral while 0% of the respondents disagreed or strongly disagreed
respectively. This implies that Nairobi automobile traders could import second hand spare parts
of motor vehicles into Kenya
The average mean of the responses indicated from the results was 1.57 which shows that the
respondents were agreeing on most of the statements while the coefficient of variance was 0.35
which indicates that the answers received were varied as they were dispersed far from the mean.
40
Table 4.3: Parallel Imports
Statement
Frequ
ency
Perc
ent
Mea
n CV
We import products without the
authorization of the trademark or
copyright owner in a country by
automobile traders in Nairobi strongly agree 62 46.3 1.57 0.35
agree 68 50.7
neutral 4 3
disagree
0
0.0
strongly disagree
0 0.0
Imports of second hand spare parts
of motor vehicles are allowed in
Kenya strongly agree 60 44.8 1.57 0.35
agree 71 53
neutral 3 2.2
disagree 0 0.0
Strongly disagree 0 0.0
4.3.2 Exercising Great Care in Selecting Foreign Automobiles Manufacturers
The respondents were asked whether they exercised great care in selecting foreign automobiles
manufacturers. Results on table 4.4 indicated that 50% of the respondents strongly agreed while
49.3% agreed adding up to a total of 99.3% who agreed. Further the results showed that 0.7% of
the respondents were neutral while 0% of the respondents disagreed and strongly disagreed
respectively. This implies that Nairobi automobile traders exercised great care in selecting
foreign automobiles manufacturers.
The respondents were also asked if they checked on the importation of second hand automobile
products and enhanced strict measures on selection of second hand automobile imports. Results on
table 4.4 revealed that 45.5% of the respondents strongly agreed while 44% agreed adding up to
a total of 89.5% who agreed. Further the results showed that 10.4% of the respondents were
neutral while 0% of the respondents disagreed and strongly disagreed respectively. This implies
that Nairobi automobile traders normally checked on the importation of second hand automobile
products and enhanced strict measures on selection of second hand automobile imports.
41
The average means of the responses indicated from the results were1.51 and1.65 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.4 respectively, which indicates that the answers received were varied as they
were dispersed far from the mean.
Table 4.4: Exercising Great Care in Selecting Foreign Automobiles Manufacturers
Statement Frequency Percent Mean CV
We are exercising great care in
selecting foreign Automobiles
Manufacturers
strongly
agree 67 50 1.51 0.4
agree 66 49.3
neutral 1 0.7
disagree 0 0.0
Strongly
disagree 0 0.0
We check on importation of second
hand automobile products and
enhance strict measures on selection of
second hand automobile imports
strongly
agree 61 45.5 1.65 0.4
agree 59 44
neutral 14 10.4
disagree 0 0.0
Strongly
disagree 0 0.0
4.3.3 Inspecting Foreign Manufacturing Facilities
The respondents were asked whether they engaged in the inspection of foreign manufacturing
facilities before importing automobiles. Results on table 4.5 indicated that 47.8% of the
respondents strongly agreed while 42.5% agreed adding up to a total of 90.3% who agreed.
Further the results showed that 9.7% of the respondents were neutral while 0% of the
respondents disagreed and strongly disagreed respectively. This implies that Nairobi automobile
traders engaged in the inspection of foreign manufacturing facilities before importing
automobiles. The respondents were also asked if they dealt directly with the automobile
manufacturer and avoided deals with representatives. Results on table 4.5 revealed that 41.8% of
the respondents strongly agreed while 50% agreed adding up to a total of 91.8% who agreed.
Further the results showed that 8.2% of the respondents were neutral while 0% of the
42
respondents disagreed and strongly disagreed respectively. This implies that Nairobi automobile
traders dealt directly with the automobile manufacturer and avoided deals with representatives.
The average means of the responses indicated from the results were1.66 and 1.62 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.38 and 0.41 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.5: Inspecting Foreign Manufacturing Facilities
Statement Frequency Percent Mean CV
We engage in the Inspection of Foreign
Manufacturing Facilities
strongly
agree 64 47.8 1.66 0.38
agree 57 42.5
neutral 13 9.7
disagree 0 0.0
strongly
agree 0 0.0
We deal directly with the automobile
manufacturer and avoid dealing with
representatives
strongly
agree 56 41.8 1.62 0.41
agree 67 50
neutral 11 8.2
disagree 0 0.0
strongly
agree 0 0.0
4.3.4 Re importing
The respondents were asked whether second hand automobiles were sold into the foreign market
at a substantially lower price than in the home market. Results on table 4.6 indicated that 41.8%
of the respondents strongly agreed while 50% agreed adding up to a total of 90.3% who agreed.
Further the results showed that 8.2% of the respondents were neutral while 0% of the
respondents disagreed and strongly disagreed respectively. This implies that Nairobi automobile
traders are aware that second hand automobiles were sold into the foreign market at a
substantially lower price than in the home market. The respondents were also asked if car owners
could dispose off their cars to an individual or franchise reseller. Results on table 4.6 revealed
that 47% of the respondents strongly agreed while 48.5% agreed adding up to a total of 95.5%
who agreed. Further the results showed that 4.5% of the respondents were neutral while 0% of
43
the respondents disagreed and strongly disagreed respectively. This implies that Nairobi
automobile traders could dispose off their cars to an individual or franchise reseller.
The average means of the responses indicated from the results were1.66 and 1.57 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.38 and 0.37 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.6: Re importing
Statement Frequency Percent Mean CV
Second hand automobiles are
sold into the foreign market at
a substantially lower price than
in the home market strongly agree 56 41.8 1.66 0.38
agree 67 50
neutral 11 8.2
disagree 0 0.0
strongly agree 0 0.0
Car owners can dispose off
their car to an individual or
franchise reseller strongly agree 63 47 1.57 0.37
agree 65 48.5
neutral 6 4.5
disagree 0 0.0
strongly agree 0 0.0
4.3.5Identify the Product’s Country of Origin
The respondents were asked if they employed identification of the product’s country of origin as
a strategy of importation. Results on table 4.7 indicated that 48.5% of the respondents strongly
agreed while 47.8% agreed adding up to a total of 96.3% who agreed. Further the results showed
that 3.7% of the respondents were neutral while 0% of the respondents disagreed and strongly
disagreed respectively. This implies that Nairobi automobile traders participated in identification
of the product’s country of origin.
The respondents were also asked whether automobile products that were not marked at the time
of importation were remarked before they are sold. Results on table 4.7 revealed that 52.2% of
the respondents strongly agreed while 42.5% agreed adding up to a total of 94.5% who agreed.
44
Further the results showed that 3% of the respondents were neutral while 0% of the respondents
disagreed and strongly disagreed respectively. This implies that Nairobi automobile traders
remarked imported automobile products that were not marked before they could sell them.
The average means of the responses indicated from the results were1.55 and 1.73 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.37 and 0.96 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.7: Identify the Product’s Country of Origin
Statement Frequency Percent Mean CV
Identifying the Product’s Country of
Origin is a strategy employed by us. strongly agree 65 48.5 1.55 0.37
agree 64 47.8
neutral 5 3.7
disagree 0 0.0
strongly agree 0 0.0
Automobile products that are not
marked at the time of importation are
remarked before they are sold strongly agree 70 52.2 1.73 0.96
agree 57 42.5
neutral 4 3
disagree 0 0.0
strongly agree 0 0.0
4.4 International Trade Barriers
The study sought to be to identify the international trade barriers affecting the Kenya second
hand automobile traders who own motor dealerships in Nairobi.
4.4.1 Tariffs
The study sought to be to identify tariffs affecting the Kenya second hand automobile traders
who own motor dealerships in Nairobi.
The study sought to know if tariffs were imposed on automobiles in order to increase
government revenue. Results on table 4.8 indicated that 48.5% of the respondents strongly
agreed while 50.7% agreed adding up to a total of 99.2% who agreed. Further the results showed
that 0.7% of the respondents were neutral while 0% of the respondents disagreed and strongly
45
disagreed respectively. This implies that tariffs were imposed on automobiles products in order
to increase government revenue.
The respondents were also asked if taxes imposed on imports had affected automobile trading.
Results on table 4.7 revealed that 52.2% of the respondents strongly agreed while 46.3% agreed
adding up to a total of 98.5% who agreed. Further the results showed that 0.7% of the
respondents were neutral while 0% of the respondents disagreed and strongly disagreed
respectively. This implies that taxes imposed on imports affected Nairobi automobile traders.
The respondents were also asked if tariffs created by the government protect them as local
businesses from low-priced competitive products. Results on table 4.8 indicated that 54.5% of the
respondents strongly agreed while 45.5% agreed adding up to a total of 100% who agreed. None
of the respondents was neutral similarly 0% of the respondents disagreed and strongly disagreed
respectively. This implies that tariffs created by the government protect Nairobi automobile as local
businesses from low-priced competitive products.
The respondents were also asked if Kenya imposed relatively high tariffs on automobiles
imports. Results on table 4.7 indicated that 59% of the respondents strongly agreed while 41%
agreed adding up to a total of 100% who agreed. None of the respondents was neutral similarly
0% of the respondents disagreed and strongly disagreed respectively. This implies that Kenya
imposed relatively high tariffs on automobiles imports.
The average means of the responses indicated from the results were1.52, 1.56, 1.46 and 1.41
respectively which showed that the respondents were agreeing on most of the statements while
the coefficient of variance were 0.34,0.67, 0.34 and 0.35 respectively, which indicates that the
answers received were varied as they were dispersed far from the mean.
46
Table 4.8: Tariffs
Statement Frequency Percent Mean CV
Tariffs are imposed on automobiles in
order to increase government revenue
strongly
agree 65 48.5 1.52 0.34
agree 68 50.7
neutral 1 0.7
disagree 0 0.0
strongly
agree 0 0.0
Taxes imposed on imports has affected
our automobile trading
strongly
agree 70 52.2 1.56 0.67
agree 62 46.3
neutral 1 0.7
disagree 0 0.0
strongly
agree 0 0.0
Tariffs created by the government protect
us as local businesses from low-priced
competitive products
strongly
agree 73 54.5 1.46 0.34
agree 61 45.5
disagree 0 0.0
strongly
agree 0 0.0
Kenya imposes relatively high tariffs on
automobiles imports
strongly
agree 79 59 1.41 0.35
agree 55 41
neutral 0 0.0
disagree 0 0.0
strongly
agree 0 0.0
47
4.4.2 Non-Tariff Barriers
The study also sought to identify non-tariff barriers that affecting the Kenya second hand
automobile traders who own motor dealerships in Nairobi.
The respondents were also asked if non-tariff barriers affected their second hand automobile
business in Kenya. Results on table 4.9 indicated that 48.5% of the respondents strongly agreed
while 44.8% agreed adding up to a total of 93.3% who agreed. Further the results showed that
4.5% of the respondents were neutral while2.2% of the respondents disagreed. None of the
respondents strongly disagreed. This implies that non-tariff barriers affected the second hand
automobile business in Kenya.
The average means of the responses indicated from the results was1.6which showed that the
respondents were agreeing on most of the statements while the coefficient of variance was 0.43
which indicates that the answers received were varied as they were dispersed far from the mean.
Table 4.9:Non-Tariff Barriers
Statement Frequency Percent Mean CV
Non-tariff barriers have affected
our second hand automobile
business in Kenya strongly agree 65 48.5 1.6 0.43
agree 60 44.8
neutral 6 4.5
disagree 3 2.2
strongly 0 0
4.4.2.1Quota
The respondents were asked if quota imposed by the government limited the number of second
hand automobile vehicles that could have been imported into Kenya. Results on table 4.10
indicated that 48.5% of the respondents strongly agreed while 49.3% agreed adding up to a total
of 97.8% who agreed. Further the results showed that 2.2% of the respondents were neutral.
Similarly, 0% of the respondents disagreed and strongly disagreed respectively. This implies that
quota imposed by the government limited the number of second hand automobile vehicles that
could have been imported into Kenya by Nairobi automobile traders.
48
The respondents were also asked whether quota imposed to automobile licenses in Kenya has
affected second hand business expansion. Results on table 4.10 revealed that 56.7% of the
respondents strongly agreed while 41.8% agreed adding up to a total of 98.5% who agreed.
Further the results showed that 0.7% of the respondents were neutral while another 0.7%
disagreed. Similarly, 0% of the respondents strongly disagreed. This implies that quota imposed
to automobile licenses in Kenya has affected second hand business expansion among Nairobi
automobile traders.
The average means of the responses indicated from the results were1.54 and 1.46 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.35 and 0.38 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.10: Quota
Statement Frequency Percent Mean CV
Quota imposed by the government limits
the number of second hand automobile
vehicles that can be imported into Kenya
strongly
agree 65 48.5 1.54 0.35
agree 66 49.3
neutral 3 2.2
disagree 0 0.0
strongly
agree 0 0.0
Quota to automobile licenses in Kenya
has affected our second hand business
expansion
strongly
agree 76 56.7 1.46 0.38
agree 56 41.8
neutral 1 0.7
disagree 1 0.7
strongly
agree 0 0.0
4.4.2.2Standards
The respondents were asked if standards imposed on the quality of imported second hand
automobiles had reduced the units they import into Kenya. Results on table 4.11 indicated that
47% of the respondents strongly agreed while 48.5% agreed adding up to a total of 95.5% who
agreed. Further the results showed that 4.5% of the respondents were neutral. Similarly, 0% of
49
the respondents disagreed and strongly disagreed respectively. This implies that standards
imposed on the quality of imported second hand automobiles had reduced the units they import
into Kenya.
The respondents were also asked whether lowering standards of the second hand vehicles made it
difficult for them to meet the national standards of vehicle safety. Results on table 4.11 revealed
that 60.4% of the respondents strongly agreed while 36.6% agreed adding up to a total of 97%
who agreed. Further the results showed that 3% of the respondents were neutral. Similarly, 0% of
the respondents disagreed and strongly disagreed respectively. This implies that lowering
standards of the second hand vehicles made it difficult for Nairobi automobile traders to meet the
national standards of vehicle safety.
The average means of the responses indicated from the results were1.45 and 1.43 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.35 and 0.38 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.11: Standards
Statements Frequency Percent Mean CV
Standards imposed on the quality of
imported second hand automobiles has
reduced the units we import
strongly
agree 63 47 1.45 0.35
agree 65 48.5
neutral 6 4.5
disagree 0 0.0
strongly
agree 0 0.0
Lower standard of the second hand
vehicles makes it difficult to meet the
national standards of vehicle safety
strongly
agree 81 60.4 1.43 0.38
agree 49 36.6
neutral 4 3
disagree 0 0.0
strongly
agree 0 0.0
50
4.4.2.3Embargo
The respondents were asked if there were countries that they were not allowed to trade with by
the government on second hand automobile products. Results on table 4.12 indicated that 30.6%
of the respondents strongly agreed while 24.6% agreed adding up to a total of 55.2% who
agreed. Further the results showed that 44.8% of the respondents were neutral. Similarly, 0% of
the respondents disagreed and strongly disagreed respectively. This implies that the traders were
not required to import second hand automobiles from certain countries.
The average means of the responses indicated from the results was2.14 which showed that the
respondents were agreeing on most of the statements while the coefficient of variance was 0.4
which indicates that the answers received were varied as they were dispersed far from the mean.
Table 4.12: Embargo
Statement Frequency Percent Mean CV
There are countries that we are not
allowed to trade with by the
government on second hand
automobile products
strongly
agree 41 30.6 2.14 0.4
agree 33 24.6
neutral 60 44.8
disagree 0 0.0
strongly
agree 0 0.0
4.4.2.4 Voluntary Export Restraints
The respondents were asked if there were countries that had limited number of second hand
automobiles that traders could import from them. Results on table 4.13 indicated that 55.2% of
the respondents strongly agreed while 44% agreed adding up to a total of 99.2% who agreed.
Further the results showed that 0.7% of the respondents were neutral. Similarly, 0% of the
respondents disagreed and strongly disagreed respectively. This implies there were countries that
automobile traders had limitation on imports.
The respondents were also asked whether imposed supply restrictions on second hand
automobile imports had affected automobile industry. Results on table 4.13 revealed that 36.6%
of the respondents strongly agreed while 32.8% agreed adding up to a total of 69.4% who
agreed. Further the results showed that 18.7% of the respondents were neutral while 9%
51
disagreed and 3% strongly disagreed. This implies that imposed supply restrictions on second
hand automobile imports had affected automobile industry in Nairobi.
The average means of the responses indicated from the results were1.46 and 2.09 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.35 and 0.52 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.13: Voluntary Export Restraints
Statement Frequency Percent Mean CV
There countries that have limited the
number of second hand automobiles that
you can import from them
strongly
agree 74 55.2 1.46 0.35
agree 59 44
neutral 1 0.7
disagree 0 0.0
strongly
agree 0 0.0
Imposed supply restrictions on second
hand automobile imports has affected
automobile industry
strongly
agree 49 36.6 2.09 0.52
agree 44 32.8
neutral 25 18.7
disagree 12 9
strongly
disagree 4 3
4.5 Challenges and Risks Traders Face Locally
The study sought to be to identify the challenges and risks faced by the Kenya second hand
automobile traders who own motor dealerships in Nairobi.
4.5.1Investment Regulation
The respondents were asked if local investment regulations had frustrated traders in expanding
their second hand automobile dealerships. Results on table 4.14 indicated that 62.7% of the
respondents strongly agreed while 35.1% agreed adding up to a total of 97.8% who agreed.
Further the results showed that 2.2% of the respondents were neutral. Similarly, 0% of the
52
respondents disagreed and strongly disagreed respectively. This implies local that investment
regulations had frustrated traders in expanding their second hand automobile dealerships.
The respondents were also asked whether investment regulatory policies had reduced the second
hand vehicles in the market. Results on table 4.14 revealed that 60.4% of the respondents
strongly agreed while 32.1% agreed adding up to a total of 92.5% who agreed. Further the results
showed that 4.5% of the respondents were neutral while 2.2% disagreed. None of the
respondents strongly disagreed. This implies that investment regulatory policies had reduced the
second hand vehicles in the market.
The average means of the responses indicated from the results were1.4 and 1.51 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.38 and 0.5 respectively, which indicates that the answers received were varied
as they were dispersed far from the mean.
Table 4.14: Investment Regulation
Statement Frequency Percent Mean CV
Investment regulations locally has
frustrated us in expanding our second
hand automobile dealerships strongly agree 84 62.7 1.4 0.38
agree 47 35.1
neutral 3 2.2
disagree 0 0.0
strongly agree 0 0.0
Investment regulatory policies has
reduced the second hand vehicles in
the market strongly agree 81 60.4 1.51 0.5
agree 43 32.1
neutral 6 4.5
disagree 3 2.2
strongly
disagree 1 0.7
4.5.2 Currency Fluctuation
The respondents were asked if currency fluctuation had been the greatest challenge they face in
automobile trading business. Results on table 4.15 indicated that 63.4% of the respondents
strongly agreed while 35.8% agreed adding up to a total of 99.2% who agreed. Similarly, 0% of
53
the respondents were neutral, disagreed and strongly disagreed respectively. This implies that
currency fluctuation had been the greatest challenge automobile traders’ face in automobile
trading business.
The respondents were also asked whether currency fluctuation affected their performance in the
automobile sector. Results on table 4.15 revealed that 72.4% of the respondents strongly agreed
while 26.9% agreed adding up to a total of 99.3% who agreed. Further the results showed that
0.7% of the respondents were neutral. Similarly 0% of the respondents disagreed and strongly
disagreed respectively. This implies that currency fluctuation affected their performance in the
automobile sector.
The average means of the responses indicated from the results were1.37 and 1.28 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.37 and 0.37 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.15: Currency Fluctuation
Statements Frequency Percent Mean CV
Currency fluctuation has been the
greatest challenge we face in our
automobile trading business strongly agree 85 63.4 1.37 0.37
agree 48 35.8
neutral 0 0.0
disagree 0 0.0
strongly disagree 0 0.0
Currency fluctuation affects our
performance in the automobile sector strongly agree 97 72.4 1.28 0.37
agree 36 26.9
neutral 1 0.7
disagree 0 0.0
strongly disagree 0 0.0
4.5.3Foreign Relations and Trade Sanctions
The respondents were asked if foreign relations and trade sanctions among countries had
substantively affected the second hand cars importation into Kenya. Results on table 4.16
indicated that 66.4% of the respondents strongly agreed while 33.6% agreed adding up to a total
of 100% who agreed. Similarly 0% of the response was neutral, disagreed and strongly disagreed
54
respectively. This implies that foreign relations and trade sanctions among countries had
substantively affected the second hand cars importation into Kenya.
The respondents were also asked whether Kenya uses trade sanctions to influence polices
importation of second hand cars. Results on table 4.16 revealed that 53.7% of the respondents
strongly agreed while 41.8% agreed adding up to a total of 95.5% who agreed. Further the results
showed that 4.5% of the respondents were neutral. Similarly, 0% of the respondents disagreed
and strongly disagreed respectively. This implies that Kenya uses trade sanctions to influence
polices importation of second hand cars.
The average means of the responses indicated from the results were1.34 and 1.51 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.35 and 0.39 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.16: Foreign Relations and Trade Sanctions
Statements Frequency Percent Mean CV
Foreign relations and trade sanctions
among countries has substantively affected
us in the second hand cars importation in
Kenya strongly agree 89 66.4 1.34 0.35
agree 45 33.6
neutral 0 0.0
disagree 0 0.0
Strongly
disagree 0 0.0
Kenya uses trade sanctions to influence
polices on importation of second hand cars strongly agree 72 53.7 1.51 0.39
agree 56 41.8
neutral 6 4.5
disagree 0 0.0
Strongly
disagree 0 0.0
4.5.4Government Policy
The respondents were asked if government policy on second hand car importation was highly
bureaucratic. Results on table 4.17 indicated that 70.1% of the respondents strongly agreed while
25.4% agreed adding up to a total of 95.5% who agreed. Further the results showed that 4.5% of
55
the respondents were neutral. Similarly, 0% of the respondents disagreed and strongly disagreed
respectively. This implies that government policy on second hand car importation was highly
bureaucratic.
The respondents were also asked whether Kenya legislation required many foreign oil services
companies currently supplying the automobiles to form joint-venture partnerships with local
companies. Results on table 4.17 revealed that 60.4% of the respondents strongly agreed while
32.8% agreed adding up to a total of 93.2% who agreed. Further the results showed that 6.7% of
the respondents were neutral. Similarly, 0% of the respondents disagreed and strongly disagreed
respectively. This implies that Kenya legislation required many foreign oil services companies
currently supplying the automobiles to form joint-venture partnerships with local companies.
The average means of the responses indicated from the results were1.39 and 1.46 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.51 and 0.43 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.17: Government Policy
Statements Frequency Percent Mean CV
Government Policy on second hand car
importation is highly bureaucratic strongly agree 94 70.1 1.39 0.51
agree 34 25.4
neutral 0 0.0
disagree 6 4.5
Strongly
disagree 0 0.0
Kenya legislation requires many foreign
oil services companies currently supplying
the automobiles to form joint-venture
partnerships with local companies strongly agree 81 60.4 1.46 0.43
agree 44 32.8
neutral 9 6.7
disagree 0 0.0
Strongly
disagree 0 0.0
56
4.5.5 Market Competition
The respondents were asked if Kenya’s second hand automobile market was relatively small.
Results on table 4.18 indicated that 64.2% of the respondents strongly agreed while 34.3%
agreed adding up to a total of 98.5% who agreed. Further the results showed that 1.5% of the
respondents were neutral. Similarly, 0% of the respondents disagreed and strongly disagreed
respectively. This implies that Kenya’s second hand automobile market was relatively small.
The respondents were also asked whether stiff market competition among second hand
automobile traders in the region had discouraged them from importing. Results on table 4.18
revealed that 70.9% of the respondents strongly agreed while 27.6% agreed adding up to a total
of 98.5% who agreed. Further the results showed that 1.5% of the respondents were neutral.
Similarly, 0% of the respondents disagreed and strongly disagreed respectively. This implies that
stiff market competition among second hand automobile traders in the region had discouraged
them from importing.
The average means of the responses indicated from the results were1.55 and 1.73 respectively
which showed that the respondents were agreeing on most of the statements while the coefficient
of variance were 0.37 and 0.96 respectively, which indicates that the answers received were
varied as they were dispersed far from the mean.
Table 4.18: Market Competition
Statements Frequency Percent Mean CV
Kenya’s second hand automobile
market is relatively small strongly agree 86 64.2 1.55 0.37
agree 46 34.3
neutral 0 0.0
disagree 2 1.5
Strongly disagree 0 0.0
Stiff market competition among
second hand automobile traders in
the region has discouraged us
from importing strongly agree 95 70.9 1.73 0.96
agree 37 27.6
neutral 2 1.5
disagree 0 0.0
Strongly disagree 0 0.0
57
4.6 Barriers of International Trade Affecting the Kenya Second Hand Automobile Traders
The respondents were also asked to indicate their opinions; on the questions on international
trade barriers and challenges the second hand automobiles importers faced locally. Results on
table 4.19 shows that 53.0% of the respondents strongly agreed while 26.9% agreed adding up to
a total of 79.9% who agreed on that importing practices the use faced challenges and risks;
74.6% of the respondents agreed that they were adversely affected by international trade barriers;
72.4% of the respondents agreed that the challenges and risks they faced locally impaired their
importation capacity; 79.1% of the respondents agreed that there was need to educate automobile
dealers on international trade practice; 79.2% of the respondents agreed that they had taken their
staff training on international trade barriers; 96.2% of the respondents agreed that it was easy for
to locate importers, distributors, and sales representatives in overseas markets; 93.3% of the
respondents agreed that selling their in other countries could be successful than in Kenya; 100%
of the respondents indicated that they knew the process of filing a petition to the government of
Kenya and 94.8% of the respondents indicated that they would appreciate support from the
Kenyan government in their automobile businesses.
The average mean of the responses indicated from the results was 2which show that the
respondents were agreeing on most of the statements while the coefficient of variance was 0.5
which indicates that the answers received were varied as they were dispersed far from the mean.
58
Table 4.19: Barriers of International Trade
Statements strongly
agree
agree neutral disagree strongly
disagree
Mean Std
Dev
CV
Are there importing practices that
you use that are risky?
53.0% 26.9% 7.5% 10.4% 2.2% 2 1
0.5
Are you adversely affected by
international trade barriers?
37.3% 37.3% 0.0% 18.7% 6.7% 2 1
0.5
Challenges and risks we face
locally impairs our importation
capacity
44.0% 28.4% 10.4% 14.2% 3.0% 2 1
0.5
Is there need to educate
automobile dealers on
international trade?
41.8% 37.3% 0.0% 16.4% 4.5% 2 1
0.5
Have you taken your staff through
any training on international trade
barriers?
49.3% 29.9% 2.2% 15.7% 0.7% 2 2
0.5
Is it easy for you to locate
importers, distributors, and sales
representatives in overseas
markets?
63.4% 32.8% 0.0% 3.0% 0.7% 1 1
0.5
Would selling your products be
successful in other countries other
than Kenya?
64.2% 29.1% 0.0% 6.0% 0.0% 2 1
0.5
Do you know the process of filing
a petition to the government of
Kenya?
56.7% 43.3% 0.0% 0.0% 0.0% 1 1
0.5
Are there trade barriers beneficial
to your business?
62.7% 36.6% 0.0% 0.7% 0.0% 1 1
0.5
Would you like more support
from the Kenyan government in
your automobile business?
61.2% 33.6% 2.2% 3.0% 0.0% 1 1
0.5
4.7 Inferential Statistics
This section presents the correlation and regression analysis.
4.8.1 Bivariate Correlation
59
The correlation results between international trade barriers and independent variable are
presented. Table 4.20 displays the results of correlation test analysis between the dependent
variable (international trade barriers) and independent variables (international importing
practices, trade barriers and challenges and risks traders face locally) also correlation among the
independent variables themselves. Results on Table 4.20 show that international trade barrier is
negatively correlated with international importing practices variables as supported by significant
(p values=0.026 and r=-0.362).International importing practices is negatively correlated with
tariffs and non-tariff barriers as supported by significant (p values=0.637 and r=-0.192).
Table 4.20: Bivariate Correlation
Correlations
Importing
Practices
Tariffs and
Non-Tariff
Barriers
Challenges
&Risks
International
Trade
Barriers
Importing Practices
Pearson
Correlation 1
Sig. (2-
tailed)
Tariffs and Non-Tariff
Barriers
Pearson
Correlation -.192* 1
Sig. (2-
tailed) 0.026
Challenges and Risks
Pearson
Correlation 0.005 0.041 1
Sig. (2-
tailed) 0.956 0.637
International Trade
Barriers
Pearson
Correlation -.362** .369** .394** 1
Sig. (2-
tailed) 0 0 0
* Correlation is significant
at the 0.05 level (2-tailed).
4.7 Chapter Summary
This Chapter reveals that any negative change in tariffs non-tariff barriers, challenges and risks
traders face locally leads to increased efficiency of international trade barriers for Nairobi
automobile traders. In addition, any negative change in international importing practices leads to
increase in severity of international trade barriers and Nairobi automobile traders will trade
effectively since importing will be less complicated. Chapter five discusses and summarizes the
60
findings of the study and finally gives conclusions and recommendations for improvement or
practice.
61
CHAPTER FIVE
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
The purpose of this chapter is to discuss and summarize the findings of the study and finally give
conclusions and recommendations for improvement or practice. This will be done with
justification from the data that was collected and analyzed. The main objective of the study was
to identify the international barriers of trade affecting the Kenya second hand automobile traders
who own motor dealerships in Nairobi.
5.2 Summary
This section summarizes the findings that were obtained in chapter four. The main objective of
the study was to identify the international barriers of trade affecting the Kenya second hand
automobile traders who own motor dealerships in Nairobi. The specific objectives of this study
were to establish the international trade practices practiced by the automobile traders in Nairobi,
to determine the international trade barriers that traders experience when dealing with the vehicle
sellers abroad and to identify the challenges and risks automobile traders face locally.
Data was collected using questionnaires and analyzed by SPSS version 20 then presented using
tables,’ pie charts, mean, coefficient of variance and frequencies/percentages. A population of
240 second hand automobiles in Nairobi was identified and sample size of 144 automobiles was
identified using Krejcie model. A total of 134 responses were received, out of the 144
questionnaires that were issued. This translates to a response rate of 93.06%. According to
Mugenda and Mugenda (2003) and also Kothari (2004) a response rate of 50% or more is ideal
for data analysis. Babbie (2004) also asserted that return rate of 50% is acceptable to analyze and
publish, 60% is good and 70% is very good. Based on these assertions from renowned scholars, a
93.06% response rate is adequate for the study.
Findings from the study indicated that majority of the respondents were male who represented
54% of the responses while 46% indicated that they were female; 39% of the respondents had
attained university level education, 27% has attained postgraduate studies, 19% had attained up
to secondary level while 15% had attained education up to college level;40% of the respondents
62
had worked for a period between 6 to 10 years, 36% had worked for over 10 years, and those
who had worked for a period between 2 to 5 years and those had worked for less than one year
were 12% respectively.
Majority of the respondents indicated they were retailers with 40% of the responses, 31% of the
respondents indicated that they were distributor while 29% of the respondents indicated that
engaged in wholesale dealership. The findings also indicated that 28% of the second hand
automobile firms had been in operation for a period between 5 to 7 years, 23% had been
operational for a period between 2 to 4 years, while 22% had been operational for a period
between 8 to 10 years. The results further indicated that 19% of the second hand automobile
firms had been in operation for more than 11 years while only 8% had been in operation for a
period of less than 2 years; majority of the respondents indicated that they imported annually
with 28% of the responses, 23% of the respondents indicated that they imported quarterly and on
a monthly basis while 19% of the respondents indicated that imported on a semi-annual basis.
Only 7% of the respondents indicated that they imported weekly;79% of the second hand
automobile dealers imports more than 21 automobiles annually. Majority, 28% of the
respondents indicated that their dealership imports between 21 and 30 automobiles, another 28%
of the respondents indicated that their dealership imports more than 41 automobiles annually
while 23% of the respondents indicated that their dealership imports 31 to 40 automobiles
annually. The results further revealed that 17% of the respondents indicated that their dealership
imports 11 to 20 automobiles and only 4% of the respondents indicated that their dealership
imports less than 10 automobiles annually.
Findings also revealed that 79% of the second hand automobile dealers imports more than 21
automobiles annually. Majority, 28% of the respondents indicated that their dealership imports
between 21 and 30 automobiles, another 28% of the respondents indicated that their dealership
imports more than 41 automobiles annually while 23% of the respondents indicated that their
dealership imports 31 to 40 automobiles annually. The results further revealed that 17% of the
respondents indicated that their dealership imports 11 to 20 automobiles and only 4% of the
respondents indicated that their dealership imports less than 10 automobiles annually; majority of
the respondents; 33% indicated that they started importation in less than one year of operation,
30% of the respondents indicated that they started importing in a period of 1 to 2 year after
commencement of their operation, 14% of the respondents indicated that they imported after a
63
period of 3 to 4 year since they commenced their operation while 13% of the respondents
indicated that they imported after 5 to 6 years of their operation. Only 7% of the respondents
indicated that they imported after 7 years of operation.
Majority of the respondents, 80%, agreed that tariffs was a barrier affecting international trade,
9% of the respondents indicated that they were unaware if tariffs was a barrier while 11% of the
respondents indicated that tariffs was not affecting international trade. The average mean of the
responses indicated from the results was 1.97 and 1.69 for tariffs and non-tariff barriers
respectively; which show that the respondents were agreeing on most of the statements while the
coefficient of variance (CV) was 0.567 and 0.477 for tariffs and non-tariff barriers respectively,
which indicates that the answers received were varied as they were dispersed far from the mean.
The first objective of the study was to establish the international trade practices practiced by the
automobile traders in Nairobi. Results indicated that majority of the respondents agreed with the
statements that they imported products without the authorization of the trademark or copyright
owner in a country by automobile traders in Nairobi; importation of second hand spare parts of
motor vehicles were allowed in Kenya; traders exercised great care in selecting foreign
automobiles manufacturers; importation of second hand automobile products was checked and
they enhanced strict measures on the selection of second hand automobile imports; traders engaged
in the inspection of foreign manufacturing facilities; traders dealt directly with the automobile
manufacturer and avoided dealing with representatives; second hand automobiles were sold into
the foreign market at a substantially lower price than in the home market; car owners could
dispose off their cars to an individual or franchise reseller; traders identified the product’s
country of origin as an import strategy and automobile products that were not marked at the time
of importation were remarked before they are sold.
The relationship between international importing practices and international trade barriers is
negative and significant as supported by (p values=0.026 and r=-0.362). This implies that an
increase international importing practices leads to decreased international trade barriers effects
thus effective importing. International importing practices is negatively correlated with tariffs
and non-tariff barriers as supported by significant (p values=0.637 and r=-0.192). This reveals
that any negative change in tariffs non-tariff barriers, challenges and risks traders face locally
leads to increased efficiency of international trade barriers for Nairobi automobile traders.
64
The second objective of the study was to determine the international trade barriers that traders
experience when dealing with the vehicle sellers abroad. Results indicated that majority of the
respondents agreed with the statements that tariffs were imposed on automobiles in order to
increase government revenue; taxes imposed on imports affected our automobile trading; tariffs
created by the government protected local businesses from low-priced competitive products and
Kenya imposes relatively high tariffs on automobiles imports.
Results further indicated that majority of the respondents agreed with the statements that non-
tariff barriers affected second hand automobile business in Kenya; quota imposed by the
government limited the number of second hand automobile vehicles that can have been imported
to Kenya; quota to automobile licenses in Kenya affected second hand business expansion;
standards imposed on the quality of imported second hand automobiles reduced the units of
imports; lower standard of the second hand vehicles makes it difficult for traders to meet the
national standards of vehicle safety; there were countries that traders were not allowed to trade
with by the government on second hand automobile products; there were countries that have
limited the number of second hand automobiles that traders could import from and imposed
supply restrictions on second hand automobile imports affected automobile industry.
The third objective of the study was to identify the challenges and risks automobile traders face
locally. Results indicated that majority of the respondents agreed with the statements that
investment regulations locally frustrates traders expansion of second hand automobile
dealerships; investment regulatory policies reduced the second hand vehicles in the market;
currency fluctuation was the greatest challenge traders face in automobile trading business;
currency fluctuation affected performance in the automobile sector; foreign relations and trade
sanctions among countries substantively affected second hand cars importation in Kenya; Kenya
used trade sanctions to influence polices on importation of second hand cars; government Policy
on second hand car importation was highly bureaucratic; Kenya legislation required many
foreign oil services companies currently supplying the automobiles to form joint-venture
partnerships with local companies; Kenya’s second hand automobile market was relatively small
and stiff market competition among second hand automobile traders in the region discouraged
traders from importing.
65
The average mean of the responses indicated from the results was 2 which show that the
respondents were agreeing on most of the statements while the coefficient of variance was 0.5
which indicates that the answers received were varied as they were dispersed far from the mean.
5.3 Discussion
This section presents the discussion of the findings of the study based on the research questions.
5.3.1 International Trade Practices Practiced by the Automobile Traders
The first objective of the study was to establish the international trade practices practiced by the
automobile traders in Nairobi. Results indicated that majority of the respondents agreed with the
statements that they imported products without the authorization of the trademark or copyright
owner in a country by automobile traders in Nairobi; importation of second hand spare parts of
motor vehicles were allowed in Kenya; traders exercised great care in selecting foreign
automobiles manufacturers; importation of second hand automobile products was checked and
they enhanced strict measures on the selection of second hand automobile imports; traders engaged
in the inspection of foreign manufacturing facilities; traders dealt directly with the automobile
manufacturer and avoided dealing with representatives; second hand automobiles were sold into
the foreign market at a substantially lower price than in the home market; car owners could
dispose off their cars to an individual or franchise reseller; traders identified the product’s
country of origin as import strategy and automobile products that were not marked at the time of
importation were remarked before they are sold.
The result of the study conforms to Ahmadi and Yang (1995) who suggested that goods imported
in parallel, also known as grey goods, are genuine products that are imported without the
authorization of the trademark or copyright owner in a country. In other words, parallel
importation takes place when a third party acquires branded goods from a source other than the
producer of those goods, imports such goods into a country and sells them directly to the public,
or sells them to retailers who then sell them directly to consumers.
The results of the study are in line with Ernst and Young, (2001) who argued that international
trade presents unique risks. A company engaged in importing foreign manufactured goods or
considering becoming an importer should have a complete and detailed business plan. Selecting
a capable and responsible overseas business partner is one of the best ways to minimize risks.
66
Before selecting a business partner in another country, it is wise to investigate the fabricating
manufacturer’s reputation, using readily available public source information (such as the
Internet) or, if possible, by interviewing other customers of the fabricating manufacturer
The result informs NHTSA (2001) which explains that before entering into a written contract,
they believe it was prudent for the importer to personally visit the automobile manufacturer’s
facility and to determine whether the manufacturer is properly licensed by the appropriate
government agencies. It may also be reasonable to hire a consultant if the importer has limited
knowledge of, or experience with, the culture and trade practices of a foreign country.
The results also conforms to Maskus (1990) who observed that re importing was the
manufacturer’s strategy to sell into the foreign market at a substantially lower price than in the
home market, due either to the market being poorer or there being dramatic exchange rate
differences. The foreign market was geographically close to the home market, thus minimizing
return transport costs.
The further findings agree with those of Finger (1991) who asserted that it was generally
required that an imported product be properly marked with its country of origin. Motor vehicle
articles that were not marked at the time of importation with the English name of their country of
origin may be subject to additional duties unless they are properly marked after importation, or
are exported or destroyed under CBP supervision.
5.3.2 International Trade Barriers
The second objective of the study was to determine the international trade barriers that traders
experience when dealing with the vehicle sellers abroad. Results indicated that majority of the
respondents agreed with the statements that tariffs were imposed on automobiles in order to
increase government revenue; taxes imposed on imports affected our automobile trading; tariffs
created by the government protected local businesses from low-priced competitive products and
Kenya imposes relatively high tariffs on automobiles imports.
Results further indicated that majority of the respondents agreed with the statements that non-
tariff barriers affected second hand automobile business in Kenya; quota imposed by the
government limited the number of second hand automobile vehicles that can have been imported
to Kenya; quota to automobile licenses in Kenya affected second hand business expansion;
67
standards imposed on the quality of imported second hand automobiles reduced the units of
imports; lower standard of the second hand vehicles makes it difficult for traders to meet the
national standards of vehicle safety; there were countries that traders were not allowed to trade
with by the government on second hand automobile products; there were countries that have
limited the number of second hand automobiles that traders could import from and imposed
supply restrictions on second hand automobile imports affected automobile industry.
The findings are in tandem with Kiriti (2012) who observed that tariff is a tax imposed by the
local government on goods and services coming into a country. They increase the price of the goods
being imported. Tariffs were created by the government to protect local businesses from low-priced
competitive products. Higher prices reduce demand for the imported goods and help a nation’s
own industries compete. Tariffs also increase government revenue, which can help reduce a
nation’s budget deficit.
The findings conform to Aw and Roberts (1996) who suggested that quota is a limit on the
number of certain products that can be imported from another nation. Tariffs and quotas protect
jobs in some industries that face foreign competition, but they lead to fewer choices and higher
prices for consumers. The United States imposed a general quota to automobile licenses for
certain U.S. trading companies, who are allowed to import a maximum quantity of vehicles on
their previous imports from Japan.
The results inform Morris and Green (2007) who explained that standards are rules about the
quality of imported goods. If imported goods do not pass a nation’s standards, they will not be
accepted. The U.S. might ban the import of fruit that has been sprayed with certain pesticides.
These standards protect the health of American consumers, but they also protect American fruit
growers from foreign competition
The finding partly agrees with (Grandfield and Santana, 1997) who explained that embargoes put
pressure on governments to change behavior viewed as undesirable by limiting their ability to
trade. U.S. law severely restricts American companies from conducting business with Cuba, and
Machado knows the lifting of sanctions and the sale of U.S. automobiles and other goods are a
long way off. Trade embargoes have a mixed record. When successful, they pressure countries to
change their policies.
68
The findings are also in line with Campbell and Stanley (2008) who suggested that voluntary
export restraint limits on the quantity of a good that can be exported from a country during a
specified time period; a type of trade barrier. This type of barrier limits the quantity of a good
that can be exported from a country during a specific time period. In effect, it is an export quota,
self-imposed by the exporting country.
5.3.3 Challenges and Risks Traders Face Locally
The third objective of the study was to identify the challenges and risks automobile traders face
locally. Results indicated that majority of the respondents agreed with the statements that
investment regulations locally frustrates traders expansion of second hand automobile
dealerships; investment regulatory policies reduced the second hand vehicles in the market;
currency fluctuation was the greatest challenge traders face in automobile trading business;
currency fluctuation affected performance in the automobile sector; foreign relations and trade
sanctions among countries substantively affected second hand cars importation in Kenya; Kenya
used trade sanctions to influence polices on importation of second hand cars; government Policy
on second hand car importation was highly bureaucratic; Kenya legislation required many
foreign oil services companies currently supplying the automobiles to form joint-venture
partnerships with local companies; Kenya’s second hand automobile market was relatively small
and stiff market competition among second hand automobile traders in the region discouraged
traders from importing.
The findings informs Heilan and Yalcin (2012) who argued that investors who were non
Canadians must comply with the provision of the investment Canada Act, which requires them to
file a notification when they commence a new business activity in Canada or each time they
acquire control of an existing Canadian business. During the 1960s, regulatory policies in the
USA became more severe than regulations in the United Kingdom.
The results agrees with Pakes (2003) who argued that every county has its own currency and its
patrons know how to use it but everything you know about your own currency changes when you
are dealing with another country. The rate given by one country for another countries currency
is called the currency exchange rate. The daily exchange rate for the rest of the world is made
according to the rates used when two banks trade between different countries.
69
The findings also inform Kassim (2008) study who investigated strategic responses by
automobile dealers in Mombasa to government policy on used motor vehicle importation. The
findings show that the used automobile dealers responded by forming collaborative partnership,
embracing technology and diversified to related and unrelated industry in order to survive the
change. The findings of the study further show that the dealers tried to change their image,
personnel, systems and controls. The Foreign Exchange Law for the Petroleum Sector requires
that all petroleum, oil, and gas companies use Angolan-domiciled banks to make all payments,
including payments to suppliers and contractors located outside of Angola. Furthermore,
payments for goods and services provided by foreign exchange resident service providers must
be made in local currency. The import taxes for roofing materials and bricks have also increased
by 20 percent to 50 percent (Black and McLennan, 2015).
The finding further agrees with Gaulier and Zignago (2010) who asserted that export cartels
restrict competition in foreign markets for second hand automobiles products. Whether they were
subject to domestic competition law depends on the scope of application of the law within the
automotive sector.
5.4 Conclusions
This section presents the conclusions of the findings of the study based on the research
objectives.
5.4.1 International Trade Practices Practiced by the Automobile Traders
The first objective of the study was to establish the international trade practices practiced by the
automobile traders in Nairobi. The study concludes that international trade practices practiced by
the automobile traders in Nairobi enhance efficient importing among Nairobi automobile traders.
Results revealed that importation of second hand spare parts of motor vehicles were allowed in
Kenya; traders exercised great care in selecting foreign automobiles manufacturers; importation
of second hand automobile products was checked and traders enhanced strict measures on the
selection of second hand automobile imports; traders engaged in the inspection of foreign
manufacturing facilities; traders dealt directly with the automobile manufacturer and avoided
dealing with representatives; second hand automobiles were sold into the foreign market at a
substantially lower price than in the home market; car owners could dispose off their cars to an
70
individual or franchise reseller; traders identified the product’s country of origin as a import
strategy and automobile products that were not marked at the time of importation were remarked
before they are sold had significant and negative relationship to international trade barriers.
5.4.2 International Trade Barriers
The second objective of the study was to determine the international trade barriers that traders
experience when dealing with the vehicle sellers abroad. The study concludes that international
trade barriers affected Nairobi automobile traders. Results revealed that taxes imposed on
imports affected our automobile trading; Kenya imposes relatively high tariffs on automobiles
imports; non-tariff barriers affected second hand automobile business in Kenya; quota imposed
by the government limited the number of second hand automobile vehicles that can have been
imported to Kenya; quota to automobile licenses in Kenya affected second hand business
expansion; standards imposed on the quality of imported second hand automobiles reduced the
units of imports; there were countries that traders were not allowed to trade with by the
government on second hand automobile products; there were countries that have limited the
number of second hand automobiles that traders could import from and imposed supply
restrictions on second hand automobile imports affected automobile industry which significantly
affected second hand automobile dealers in Nairobi Kenya.
5.4.3 Challenges and Risks Traders Face Locally
The third objective of the study was to identify the challenges and risks automobile traders face
locally. The study concludes that Nairobi second hand automobile traders were affected by a
number of challenges and risks. Results revealed that local investment regulations frustrates
traders in the expansion of second hand automobile dealerships; investment regulatory policies
reduced the second hand vehicles in the market; currency fluctuation was the greatest challenge
traders face in automobile trading business; currency fluctuation affected performance in the
automobile sector; foreign relations and trade sanctions among countries substantively affected
second hand cars importation in Kenya; Kenya used trade sanctions to influence polices on
importation of second hand cars; government Policy on second hand car importation was highly
bureaucratic; Kenya legislation required many foreign oil services companies currently
supplying the automobiles to form joint-venture partnerships with local companies; Kenya’s
71
second hand automobile market was relatively small and stiff market competition among second
hand automobile traders in the region discouraged traders from importing. These challenges and
risks were exposed to second hand automobile traders in Nairobi thus affecting their operations
and subsequently their performances.
5.5 Recommendations
5.5.1 Recommendations for Improvement
5.5.1.1 International Trade Practices Practiced by the Automobile Traders
In line with study results, the second hand automobile traders should strictly adhere to the
international importing practices.
5.5.1.2 International Trade Barriers
The study recommends that the government should reduce the taxes imposed on second hand
automobile products; the government should also lift or reduce the quota on the importation of
second hand automobile goods. Automobile traders should also adhere to the standards of
automobiles set by the government in order to enhance safety. Countries which limit their
volume of export should relax such laws and encourage exports to enhance balance of payments
in their country and good international trade relation with other countries.
5.5.1.3 Challenges and Risks Traders Face Locally
The study recommends that government of Kenya should create an enabling environment for
local traders. Investment regulation and policies made by the government should be favorable for
trading. The government should formulate policies that enhance stability of the local currency
during volatile economic conditions. The Kenyan government should strengthen their
international trade relation in order to minimize foreign relations and enhance trade sanctions.
The government should reduce the bureaucracy involved in the importation of automobile
products and should lift the unfavorable sanctions imposed on the second hand automobiles. The
government should also enact policies that will create market for second hand automobiles in the
country.
72
5.5.2 Recommendations for Further Studies
The study recommends that further research be done on the effects of international trade barriers
on the revenues of second hand automobile dealers. The study also recommends that a similar
study be undertaken in other business sectors. The same study can also be replicated in any other
country to assess the situation.
73
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APPENDICES
Appendix I: Letter of Introduction
Date………………
.
Dear Respondent,
RE: Academic Research Project
I am a student from the United States International University, pursuing a Master in Business
Administration (MBA). I am carrying out research on ‘‘International Trade Barriers Faced By
Nairobi Automobile Traders’’. This is, in partial fulfillment of the requirement for the degree of
Masters in Business Administration at the United States International University.
Kindly take a few minutes of your time to fill in this questionnaire to the best of your knowledge.
Results from this study will be of importance to future and current automobile traders as it will
provide valuable information of how to avoid certain challenges when it comes to international
trade.
Your co-operation will be highly appreciated.
Kind Regards,
Elizabeth Muthoni.
Appendix II: Questionnaire
This questionnaire has statements regarding the International Trade Barriers Faced by Nairobi
Automobile Traders. Kindly take few minutes to complete the questionnaire as guided. Your
responses will be handled with confidentiality and ethics.
80
Thank you for agreeing to participate in this academic study.
Part I: Background of Interviewee
General /Demographic Data
Kindly tick () on the option that best applies to you
1. Kindly indicate your gender.
Male Female
2. Please indicate the highest level of education you have ever attained.
Secondary level College level University level Post graduate level
3. How long have you been working at the second hand automobile dealership sector?
Less than 1 year 2 to 5 years 6 to 10 years Over 10 years
Part II: Background of Company
4. Indicate the nature of your business firm
Wholesalers Retailers Distributors
5. How many years has your firm been operational?
Less than 2years 2 to 4 years 5 to 7 years 8to 10 years Over 11 years
6. On what rate does your dealership import automobiles?
Weekly Monthly Quarterly Semi-annually Annually
7. What are the average total imports that your company deals annually?
Less than 10 automobiles 11-20 automobiles 21-30 automobiles
31-40 automobiles More than 41 automobiles
5. After how long did you start importing second hand automobiles?
Less than 1 year of operation 1 to 2years of operation 3 to 4 years of operation
5 to 6 years of operation After 7 years of operation
81
6. Rate the international trade barriers affecting your automobile dealership
1= Strongly Agree, 2= Agree, 3= Neutral, 4= Disagree, 5 = Strongly Disagree
Statement 1 2 3 4 5
Tariffs
Non-tariff barriers
Part III: Questions under the Research Questions.
Section A: Importing Practices Practiced By the Automobile Traders in Nairobi Kenya
This section attempts to establish the Practices Practiced by the second hand Automobile Traders
in Nairobi Kenya. Kindly use the Likert scale to rate the following statement on automobile
sector. The response scale for the questions is as below:
1= Strongly Agree, 2= Agree, 3= Neutral, 4= Disagree, 5 = Strongly Disagree
Statement 1 2 3 4 5
We import products without the authorization of the trademark or copyright owner
in a country by automobile traders in Nairobi
Imports of second hand spare parts of motor vehicles are allowed in Kenya
We are exercising great care in selecting foreign Automobiles Manufacturers
We check on importation of second hand automobile products and enhance strict
measures on selection of second hand automobile imports
We engage in the Inspection of Foreign Manufacturing Facilities
We deal directly with the automobile manufacturer and avoid dealing with
representatives
Second hand automobiles are sold into the foreign market at a substantially lower
price than in the home market
Car owners can dispose off their car to an individual or franchise reseller
Identifying the Product’s Country of Origin is a strategy employed by us.
Automobile products that are marked before they are resold
Section B: International Trade Barriers
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This section attempts to establish the International Barriers of Trade affecting automobile traders
in Nairobi, Kenya. Kindly use the Likert scale to rate the following statement on automobile
sector. The response scale for the questions is as below:
Statements 1 2 3 4 5
Tariff Barriers
Tariffs are imposed on automobiles in order to increase government revenue
Taxes imposed on imports has affected our automobile trading
Tariffs created by the government protect us as local businesses from low-priced
competitive products
Kenya imposes relatively high tariffs on automobiles imports
Non-Tariff Barriers
Non-tariff barriers has affected our second hand automobile business in
Kenya
Quota imposed by the government limits the number of second hand
automobile vehicles that can be imported into Kenya
Quota to automobile licenses in Kenya has affected our second hand business
expansion
Standards imposed on the quality of imported second hand automobiles has
reduced the units we import
Lower standard of the second hand vehicles makes it difficult to meet the
national standards of vehicle safety
Embargo- there are countries that we are not allowed to trade with by the
government on second hand automobile products
Voluntary Export Restraints-Are there countries that have limited the number
of second hand automobiles that you can import from them?
Voluntary Export Restraints-Are there countries that have limited the number
of second hand automobiles that you can import to them?
83
Section C: Challenges and Risks Traders Face Locally
This section attempts to establish the challenges and risks traders face in Nairobi Kenya. Kindly
use the Likert scale to rate the following statement on automobile sector. The response scale for
the questions is as below:
Statements 1 2 3 4 5
Investment regulations locally has frustrated us in expanding our second hand
automobile dealerships
Investment regulatory policies has reduced the second hand vehicles that we
can avail in the market
Currency fluctuation has been the greatest challenge we face in our
automobile trading business
Currency fluctuation affects our performance in the automobile sector
Foreign relations and trade sanctions among countries has substantively
affected us in the second hand cars importation in Kenya
Kenya uses trade sanctions to influence polices on importation of second
hand cars
Government Policy on second hand car importation is highly bureaucratic
Kenya legislation requires many foreign oil services companies currently
supplying the automobiles to form joint-venture partnerships with local
companies
Kenya’s second hand automobile market is relatively small
Stiff market competition among second hand automobile traders in the region
has discouraged us from importing
84
Section D: Barriers of International Trade Affecting the Kenya Second Hand Automobile
Traders
This section aims at identifying the barriers of international trade affecting the Kenya second
hand automobile traders who own motor dealerships in Nairobi. Kindly use the likert scale to
rate the following statement on automobile sector.
Statements 1 2 3 4 5
Are there importing practices that you use that are risky?
Are you adversely affected by international trade barriers?
Challenges and risks we face locally impairs our importation capacity
Is there need to educate automobile dealers on international trade?
Have you taken your staff through any training on international trade barriers?
Is it easy for you to locate importers, distributors, and sales representatives in
overseas markets?
Would selling your products be successful in other countries other than
Kenya?
Do you know the process of filing a petition to the government of kenya?
Are there trade barriers beneficial to your business?
Would you like more support from the Kenyan government in your
automobile business?
Thank you for your participation
85
Appendix III: List of Second Hand Motor Vehicles Dealers in Nairobi
1. Toyota Tsusho East Africa Ltd
2. Zeema International
3. Zeeco Auto Enterprises
4. Yuasa International Ltd
5. Yaya Carsales Ltd
6. Shahid Automobiles Ltd
7. Shapla Motors Ltd
8. Signature Cars Ltd
9. Sinani Motors Ltd
10. Singapore Motors Ltd
11. Sochi Investments Ltd
12. Softude Auto Ltd
13. Sparco Auto Spares Ltd
14. Subru Motors
15. Tahidi Motors
16. Tata Africa Holdings
17. Timestar Marketing Option
18. Toyota Tsusho East Africa Ltd
19. Toyotsu Auto Mart Kenya Ltd
20. Truck Mart Co Ltd
21. Twiga Motors Ltd
22. Tymstar Motors
23. Valley Road Motors
24. Volex General Motors (K) Ltd
25. Vyuma Vya Magari (K) Ltd
26. Wagemar Automobile Co
27. Xylon Motors Ltd
28. Xylon Motors Ltd
29. Newday Motors Ltd
30. Newnet Motors
31. Nyandarua Motors (Nbi) Ltd
32. Odin Motors
33. Oto Doktuz Ltd
34. Palm Motors Ltd
35. Paltek Motors
36. Panther Trading Kenya Ltd
37. Patience Motors Ltd
38. Permaton Marketing Services
39. Pewin Motors Ltd
40. Planet Motors Co. Ltd
41. Porsche Center Nairobi Limited
42. Prestige Vehicle Importers Ltd
43. Principles Investments
44. Proauto Dealers
45. Planet Motors Co. Ltd
46. Porsche Center Nairobi Limited
47. Prestige Vehicle Importers Ltd
48. Principles Investments
49. Proauto Dealers
50. Rani Motors Ltd
51. Real Motors Ltd
52. Reca Two Global Business Kenya
53. Reddy Services Ltd
54. Rex Motors Ltd
55. Rimco Motors Ltd
56. Rising Motors
57. Ruby Motors
58. Runda Motors
59. Russ Motors Kenya
60. Russmotors (East Africa) Ltd
61. Salama Motors Ltd
62. Sea Mars Auto Trading
63. Sean Garstin Motors
64. Kenya Exotic Cars Ltd
65. Kenya Grange Vehicles
66. Key Group Motors Ltd
67. Kheng Keng Auto Kenya Limited
68. Khengkeng Auto (K) Ltd
69. Kilimani Motors (K) Ltd
70. King Prime International
46
71. Kenya Exotic Cars Ltd
72. Kenya Grange Vehicles
73. Key Group Motors Ltd
74. Kheng Keng Auto Kenya Limited
75. Khengkeng Auto (K) Ltd
76. Kilimani Motors (K) Ltd
77. King Prime International
78. Kingsway Motors (K) Ltd
79. Langata Road Motors
80. Leverage Co. Ltd
81. Liberty Powers
82. Limbani Motors
83. Limo Auto
84. Lonrho Motors
85. Mara Rach Investment
86. Kenya Exotic Cars Ltd
87. Kenya Grange Vehicles
88. Key Group Motors Ltd
89. Kheng Keng Auto Kenya Limited
90. Khengkeng Auto (K) Ltd
91. Kilimani Motors (K) Ltd
92. King Prime International
93. Kingsway Motors (K) Ltd
94. Langata Road Motors
95. Leverage Co. Ltd
96. Liberty Powers
97. Limbani Motors
98. Limo Auto
99. Lonrho Motors
100. Mara Rach Investment
101. Maridady Motors
102. Marine Auto Sales (K) Ltd
103. Matuto Mwalimu Motors Ltd
104. Medaleon Enterprises
105. Kenya Exotic Cars Ltd
106. Kenya Grange Vehicles
107. Key Group Motors Ltd
108. Kheng Keng Auto Kenya Limited
109. Khengkeng Auto (K) Ltd
110. Kilimani Motors (K) Ltd
111. King Prime International
112. Kingsway Motors (K) Ltd
113. Langata Road Motors
114. Leverage Co. Ltd
115. Liberty Powers
116. Limbani Motors
117. Limo Auto
118. Lonrho Motors
119. Mara Rach Investment
120. Maridady Motors
121. Marine Auto Sales (K) Ltd
122. Matuto Mwalimu Motors Ltd
123. Medaleon Enterprises
124. Miles Plus Ltd
125. Motherland Motors Ltd
126. Motor Care Ltd
127. Motor Mec Motors Ltd
128. Motorbank Kenya
129. Motorlink Ltd
130. Mottiz Company Ltd
131. Mozel Motors
132. Muthaiga Megga Motors
133. Mwalimu Motor Enterprises Ltd
134. Nazish Motors Ltd
135. New World Auto Ltd
136. Fiona Motors Ltd
137. Fortis Auto Ltd
138. Fran Investment Ltd
139. Global Autonet Africa Limited
140. Good Luck Trading Co
141. Goonhilly Motors Ltd
142. Greenland Motors
143. Heiwa Auto Kenya Ltd
144. Heritage Motors Ltd
145. Fiona Motors Ltd
146. Fortis Auto Ltd
147. Fran Investment Ltd
148. Global Autonet Africa Limited
149. Good Luck Trading Co
150. Goonhilly Motors Ltd
151. Greenland Motors
152. Heiwa Auto Kenya Ltd
46
153. Heritage Motors Ltd
154. Heritage Motors Ltd
155. Hilltop Motors
156. Hino Motors Kenya
157. HK Motors Kenya Ltd
158. Hotspot Motors Ltd
159. Hypercars Ltd
160. Hyundai Corporation
161. Image Motors (K) Ltd
162. Interswift Enterprises
163. Ivory Motors
164. Jamcity Motors
165. Japan Africa Marketing Co Ltd
166. Jasauto Solutions Ltd
167. Jayton Enterprises
168. Joginder's Auto Service Ltd
169. Joniz Wheelz
170. Kamsons Ltd
171. Kamsons Ltd
172. Kaptumoise Investments
173. Karen Motor Mart Ltd
174. Karen Motor Mart Ltd
175. Kenmuch Motors
176. Carland
177. Carmax (E A) Ltd
178. Carview Kenya Ltd
179. Caza Ltd
180. Central Motor Service Ltd
181. Chaka Motors Ltd
182. Chi Motors
183. Cica Motors Ltd
184. City Centre Auto Bazaar
185. Clifton Motor Dealers Ltd
186. Clyde Motors Company Ltd
187. Clyde Motors Company Ltd
188. Connel Trading Services
189. Coverpoint Automobiles Ltd
190. Crater Automobiles (NBI) Ltd
191. Dac Motors
192. Daewoo International Corporation
193. Daiko Auto Spares Ltd
194. Dejavu Ltd
195. Delights Kenya Co. Ltd
196. Diamond Shield Star Investments
197. Dorpa Enterprises
198. Doughty Ltd
199. Eagles Motor World Ltd
200. Eddka Motors
201. Empress Motor world Ltd
202. Escorts Motors Limited
203. Esjoe Marketing & General Services
204. Euro Cars Ltd
205. Excellent Car Sale
206. Sean Garstin Motors
207. Tymstar Motors
208. A-Plus Motors Company
209. Aisha Motor Dealers Ltd
210. Al-Shujah Motors Ltd
211. Allfix Services Ltd
212. Amu's Motors Ltd
213. Arrow Motors Ltd
214. Atsushi Information Services Ltd
215. Atsushi Information Services Ltd
216. ATV Motors
217. Auto Connection Ltd
218. Auto Selection (K) Ltd
219. AutoBazaar Kenya
220. Automobile Warehouse Ltd
221. Atsushi Information Services Ltd
222. ATV Motors
223. Auto Connection Ltd
224. Auto Selection (K) Ltd
225. AutoBazaar Kenya
226. Automobile Warehouse Ltd
227. Autoplanet Motors Ltd
228. Autoswift Ventures Ltd
229. Avic-Jac Motors (E.A) Ltd
230. Avic Motors (E.A) Ltd
231. B T Automobile Ltd
232. Best Property Connection & Car
Dealers
233. BHP Performance (K) Ltd
46
234. Bomas Motor Mart
235. Bond Autos Ltd
236. Bottomline Motors
237. Brands Motors Ltd
238. Car Dealers (1969) Ltd
239. Car House Ltd
240. Car-Net Ltd
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