STRATEGIC RESPONSES TO GLOBAL COMPETITION BY KENYA TOUR OPERATORS BY GRACEANNE MUTHONI KAMAU A MANAGEMENT RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS, UNIVERSITY OF NAIROBI. OCTOBER 2010
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STRATEGIC RESPONSES TO GLOBAL COMPETITION BY
KENYA TOUR OPERATORS
BY
GRACEANNE MUTHONI KAMAU
A MANAGEMENT RESEARCH PROJECT SUBMITTED IN PARTIAL
FULFILMENT OF THE REQUIREMENTS FOR AWARD OF THE
DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF
BUSINESS, UNIVERSITY OF NAIROBI.
OCTOBER 2010
ii
DECLARATION
This management research project is my original work and has never been submitted for
examination in any university.
Signed ____________________________ Date ____________________
KAMAU GRACEANNE MUTHONI
D61/72287/2008
This management research project has been submitted for examination with my approval as the
university supervisor.
Signed ____________________________ Date ____________________
DR. JOHN YABS
LECTURER
SCHOOL OF BUSINESS
UNIVERSITY OF NAIROBI
iii
ACKNOWLEDGEMENT
I am very grateful to all individuals who directly or indirectly contributed to the completion of
this research project. My sincere thanks go to Prof. J. Yabs for guiding and challenging me from
conceptualization of the project to the end. I am also indebted to Prof Aosa for his unending
support and assistance in finalizing this research work. I appreciate all respondents who took
time to complete the questionnaires.
I am particularly grateful to my dear friends Elizabeth and Purity for their outstanding support in
all areas as far as my study programme is concerned.
Lastly and most profoundly, I thank my Lord and Saviour Jesus Christ for giving me life,
strength and good health to complete this study programme.
iv
DEDICATION
This project is dedicated to my brother Peter, and my parents Antony and Rosemary who have
been my pillars of strength and whose support, encouragement, sacrifice and patience I truly
cherish.
May the Favour of the Lord be with you all.
v
ABSTRACT
The tourism industry is one of the largest and expanding industries in the world because of an
increase in the interaction between different countries and the development of commerce and
investment across borders (KATO Newsletter, 2006). The tour operators who are a crucial link in
the distribution chain, representing the central connection between customers and providers of
tourism services, have been challenged to devise strategies that ensure flow of tourist in the
country and succeed to compete with foreign tour operators to increase their business. The study
was conducted with the objective of establishing the strategic responses adopted by firms in the
tour operators in response to global competition.
The population of interest consisted of all tour operators based in Nairobi who are members of
Kenya Association of Tour Operators (KATO). To meet this objective, a sample of 87
respondents was drawn from KATO‟s Membership list using stratified random sampling
procedure and primary data collected using a semi-structured questionnaire. Data collected was
analysed using frequency tables, percentages, bar charts and other statistical measures.
Findings of the study have revealed that various response strategies were quite important to tour
operators in Kenya in responding to global completion. The strategic responses that ranked
highly included restructuring the firms operation to ensure continued profitability, investment in
technology communication technology (ICT) to add value to products/services, investment in
training and development programs for staff and forming co-operation, alliances and networks in
areas such as technology, marketing, distribution, and human resource sharing to add value to
products or services, maintaining an excellent public image, attaining reputation and brand
development and maintaining competitive position. Expansion and opening of regional offices to
coordinate tour activities seems to have been ranked the least. A check within the categories
shows that most of the companies in category D to „Associate‟ (79%) rated it quite lowly
The study has managed to identify various differences and similarities among the six categories
of tour operators‟ studied. The differences are reflected in the focus, goals and operations
pursued by the companies in each category. Generally, those in category D to „Associate‟ are
more focused on growth and expansion of company operations, while those in categories C to A
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are more geared towards maintaining the right public image and forming co-operation, alliances
and or networks in areas such as technology, marketing, distribution, and human resource
sharing to add value to products or services attaining market leadership and maintaining
profitability. In terms of similarities, the study established that almost all the tour operators in
their various categories are conscious of the need to enhance competitiveness as a tourist
destination in view of competition posed by the emerging destinations, and the need to
investment in technology communication technology (ICT) to add value to products and
services.
The study recommends that tour operators need to identify and employ to strategic responses that
will promote their success and competiveness. Environmental analysis and strategic planning
needs to be encouraged in all tour operators in category D to „Associate‟ since these categories
seemed to lag behind in responding to challenges posed by global competition. The study also
recommends a review by the Kenyan Government in regard to sustainable tourism in the country
in view of other competing destinations and competition faced by tour operators in Kenya from
foreign direct investment.
In future, the study recommends an integrated study covering other players in the tourism
industry like the hoteliers, parks and museums that would reveal more insights on how global
competition has impacted the tourism industry.
vii
TABLE OF CONTENTS
[
Declaration..................................................................................................................................... ii
Acknowledgement ........................................................................................................................ iii
Dedication ..................................................................................................................................... iv
Abstract .......................................................................................................................................... v
List of tables.................................................................................................................................. ix
List of figures ................................................................................................................................. x CHAPTER ONE: INTRODUCTION ......................................................................................... 1
1.1 Background of the Study .................................................................................................. 1
1.1.1 Organisation and the Environment ........................................................................ 1
1.1.2 Global Competition ............................................................................................... 2
1.1.3 Overview of the Tourism Industry ........................................................................ 3
1.1.4 Tour Firms in Kenya ............................................................................................. 4
1.2 Statement of the Problem ................................................................................................. 4
1.3 Objective of the Study ...................................................................................................... 6
1.4 Importance of the Study ................................................................................................... 6
CHAPTER TWO: LITERATURE REVIEW ............................................................................ 7
2.1 Organisations and the Environment ................................................................................. 7
2.2 Challenges Posed by Globalisation .................................................................................. 9
and McDonnell (1990) asserts that the management system used by a firm is a determining
component of the firm‟s responsiveness to environment changes because it determines the way
that management perceives the environment, diagnosis their impact on the firm, decides what to
do and implements the decisions.
Burnes (2000), the concern in real time responses is to minimize the sum to total losses and
restore profitability to ensure organization‟s success in a turbulent and surprising environment.
He also observed that unstable and unpredictable conditions in which organizations have to
operate today means that the ability to think strategically and manage strategic change
successfully is key competitive strength for a sustainable competitive advantage. Real time
strategic issue responses are necessary to facilitate the firm‟s preparedness in handling the
impending issue, which may have profound impact on the firm.
Strategies employed by firm‟s aims at achieving competitive advantage over the key competitors
of in its industry (Majluf and Hax, 1991). These include mergers and acquisitions; retrenchment;
hostile takeovers, strategic alliances; vertical and horizontal integration; restructuring; divestiture
and; liquidation. For the purpose of this study the following strategies will be consider mergers
and acquisitions, strategic alliance, developing niche markets, e-marketing and investing in
technology and restructuring.
2.3.1 Mergers and Acquisitions
Scholes and Johnson (2004) define acquisition as “where an organisation develops its resources
and competencies by taking over another organisation”. He argues that the need to keep up with
the changing environment often dominates the thinking about acquisition. Mergers and
acquisitions offer and opportunity for companies to collaborate in doing business thereby
overcoming individual disadvantages. Mergers and acquisitions can be within the same market
or across different markets due to globalisation. Byar (1991) argues that mergers and acquisitions
allow for growth or development of an organisation to take place without the organisation
involved having to invest the level of resources that would be necessary if they were to operate
individually.
12
Johnson and Scholes (2001) give the reason for mergers and acquisitions as lack of resources and
competencies to develop a strategy internally as well as due to other financial motives and cost
efficiencies. Motivation for use of mergers and acquisitions strategy increased speed of new
product and market areas entry, deregulation, financial motives, lack of resources or
competencies to compete successfully, cost efficiency and expectations by key stakeholders.
To ensure profitability, survival and growth some local firms opted to enter into alliance with
foreign firms in order to face the challenges of competition and changing market demand.
2.3.2 Strategic Alliance
This is where two or more organisations share resources and activities to pursue a strategy.
Through cooperation, the need to obtain materials skills, innovation, finance or access to markets
may be readily available (Wortsel H. V and Worzel. H.1997). There are various forms of
strategic alliances such as licensing, franchising, subcontracting, joint ventures vertical and
horizontal alliances.
According to Shaw and Williams (2002), franchising is a contractual agreement whereby a firm
allows another to sell products and provide services on its behalf for a fee. This is also evident in
the tourism industry. This is the case with such brand names as the following corporate chains,
Avis Rent a Car, Hilton of the United Kingdom, Holiday Inn, Inter-Continental of Japan and
Club Mediterranean of France. Licensing is where the right to manufacture a patented product is
granted for a fee. With subcontracting, a company chooses the subcontract particular services or
part of a process. For example increasingly in public service responsibility for waste removal,
cleaning and Information Technology services may be subcontracted to private companies
(Scholes and Johnson, 2004). Joint venture is strategic alliance that occurs when two or more
organisations enter into a temporary partnership or consortium for purpose of exploiting
opportunities presented by a changed environment. Joint ventures enhance partnering
organisations competitiveness.
According to Burns and Holden (1995), vertical integration is a business practice whereby
companies at different level in the distribution chain seek to control various stages of production,
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delivery and marketing of their products. For example some tour operators have grown from
medium-sized national companies to truly international corporations that move millions of
people around the globe each year (Burns and Holden, 1995). Similarly, a number of tour
operators today have their own aircrafts and hotels, while some airlines also offer chauffer and
car rental services. Some global firms have also capitalised on these trends and produced
standardized tourism products in order to contribute to the homogenization of the world tourism
market.
According to Youell (1998), other organisations have sought to survive through horizontal
integration whereby companies at the same level have sought mergers with companies at third
level in the distribution chain. The mergers have been characterised by ether two companies
offering competing services; a result of a takeover of one company by another or a voluntary
agreement between two companies.
2.3.3 E-collaboration
Richmond et al (1998) defined e-business as the transaction of commercial activities on global
open networks between and ever-increasing number of corporate and individual participants.
Collaboration means working jointly with other for purpose of achieving the some goal set.
E-Collaboration is internet-based cooperation/collaboration with exchange of information,
materials, or cash amount entities. E-collaboration provides a very efficient strategic option with
low cost, easy access, large markets, reputation and resources sharing. It brings geographical
dispersed teams together, supporting communication, coordination and cooperation. Powerful,
integrated collaborative technology is the backbone of an e-collaboration (Vlanchopoulou and
Manthous 2003).
2.3.4 E-Commerce & Technological Development
The growing environmental complexity and dynamism, the explosion and use of e-commerce
and e-business models generate major impacts for tourism businesses and its competitive
positioning strategies. The general trend of almost all tourism firms is the move toward the
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creation of business-to-business, business-to-consumer marketplace offering a medium to
establish direct relationships among suppliers, consumers and intermediaries in every level. A lot
of new online travel businesses have emerged recently such as Expedia, Orbitz, Online
Destinations, Travelocity to provide direct, easy, convenient, online travel access and reservation
as well as to enable distressed inventory to be distributed efficiently.
New technology has opened routes to a more cost -effective generation of inquiries, to convert
awareness and interest into bookings, and secure repeat business. Computerised database
technology and the need to know more about customer profiles and needs, as well as the
necessity to establish a competitive advantage has shifted the emphasis in marketing toward
direct response strategies in order to achieve sales volume. Direct response marketing can obtain
customer loyalty through customer care and service, and by building a relationship centred on
the customer rather than the product. It involves direct communication between the firm and
consumer and often includes direct mail, telephone selling and travel exhibitions, but is more
than direct selling.
2.3.5 Developing Niche Markets
It involves the identification of a small client base (niche) and giving emphasises personalised
attention. Porter (1996) argues that focussing by in this way; it becomes possible for an
organisation to dominate one chosen area. Mugambi (2003) argues that a focuser selects a
segment or group of segments and tailors a firm‟s strategy to serve them at the exclusion of
other. Furthermore, the „tourist experience‟ is created in relatively small geographic areas known
as clusters defined as geographic spaces in which the entire tourism experience takes place‟
(WTO, 2001).The development of niche tourism is recognised as a good competitive strategy
(World Tourism Organisation publications, Tourism in the Age of Alliance, mergers and
Acquisitions 2002). It was noted that travellers have become more sophisticated and are not
necessarily always looking for the standardized experience to be expected in a large chain/grand
name hotel. But for individualised experience hence the potential of niche markets Niche
developments for tour operators could include sports, health & wellness, cultural heritage,
business conventions, cuisine, wedding and honeymoons, golf, diving, festivals,
environment/nature, luxury, spas and wellness and families. Thus, tour operator‟s business
15
competitiveness depends on how its constituting parts, interact and interrelate to deliver the best
value for money for its tourists.
2.3.6 Differentiation Strategy
Lalampaa (2006) argues that differentiation strategy strives to achieve industry wide recognition
of different and superior products and services as compared to other players. A differentiation
strategy calls for the development of a product or service that offers unique attributes that are
valued by customers and that customers perceive to be better than or different from the products
of the competition (Porter, 1986).
Firms that succeed in a differentiation strategy often have the following internal strengths
(Porter, 1996): access to leading scientific research, highly skilled and creative product
development team, strong sales team with the ability to successfully communicate the perceived
strengths of the product, corporate reputation for quality and innovation. However, the risk
associated with a differentiation strategy includes imitation by competitors and changes in
customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve
even greater differentiation in their market segment.
2.3.7 Marketing Responses
Marketing is a vital ingredient to the success of tourism, and with a global market place with
hundreds of destinations competing for arrivals; any marketing initiative must be strategic, well
planned and researched and targeted to the best possible audience (Sanderson, 1998). For a
developing world destination, carrying out cost effective marketing is a genuine challenge.
Marketing enables an organization to give its output in the form of products and services to the
final consumers and therefore is key to any strategic moves that an organization undertakes with
regards to changes in the environment and to enhance a firm‟s competitive advantage. Kottler
(1997) argues that firms resort to relationship marketing as a response strategy to challenges
posed by a turbulent environment. This entails a process by which an organization seeks to
attract and maintain customers and consequently convert them into loyal customers and brand
ambassadors by encouraging others to try the company‟s product or service. Kanuk and
Schiffman (1994) assets that firms do respond to changes in their operating environment by
16
marketing their products and services as the customers often judge the quality of a product or
service on the basis of a variety of information cues.
2.3.8 Restructuring
Thompson (1997) argues that restructuring involves radical business process re-engineering as
the business searches for new ways through which performance can be improved. It is based on
the notion that some activities within a business‟s value chain are more critical to the success of
the business strategy than others. Hammer (1996) asserts that indeed organisations can greatly
improve their efficiency and quality by focusing on customers and processes that create value for
them such as outsourcing and rightsizing/retrenchment. Restructuring is the change of structure
by concentrating on only the activities that add value to the organisation.
According to Pricewaterhouse (1997), reengineering is the fundamental thinking and radical
redesign of business processes to achieve dramatic improvement in critical contemporary
measures of performance such as cost, quality, service and speed. It is about changing the way
we do things. It forces us to look at what we do and ask why we do it. If is still required then is
there a better way of doing it? According to Pearce and Robinson (1998), restructuring is based
on the notion that some activities in a business value chain are more critical to the success of its
strategy than others.
17
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
This chapter presents the methodology used to carry out the study. It further describes the
research design, the study area, target population, sampling techniques and sample size type, and
source of data research instrument to be used, data collection and data analysis
3.2 Research Design
The research design for this study was a survey. A survey research design is where data is
collected from a sample of a population. Since populations can be quite large, Busha and Harter
(1980) argue that researchers can directly question only a sample (i.e. a small proportion) of the
population.
There are two basic types of surveys: cross-sectional surveys and longitudinal surveys. Cross-
sectional surveys are used to gather information on a population at a single point in time while
longitudinal surveys gather data over a period of time. Cross –sectional survey allows the
collection of large amount of data from a sizable population at a single point in time and in a
highly economical way. Therefore, cross-sectional survey was deemed the best strategy to fulfill
the objective of this study
3.3 Population of the Study
The population of this study consisted of all Tour Operators based in Nairobi who are members
of Kenya Association of Tour Operators (KATO). The Kenya Association of Tour Operators has
a total of 290 members out of which 196 members are based in Nairobi
(www.katokenya/katomembers.asp).
3.4 Sample Design
The sampling frame for this study was based on the list of membership of tour operators
available from KATO. A sample was drawn using stratified random sampling procedure. KATO
has grouped its members into six major categories (A to E, and Associate) depending on their
gross annual turnover in the Association (www.katokenya/katomembers.asp). The categories
currently in use are : Category “A” - All members with a gross annual turnover exceeding United
18
States Dollar (US$) 1.7Million; Category “B” - All members with a gross annual turnover
exceeding US$1.1Million but below US$1.7Million; Category “C” - All members with a gross
annual turnover exceeding US$570,000 but below US$1.1Million; Category “D” - All members
with a gross annual turnover exceeding US$140,000 but below US$570,000; Category “E” - All
members with a gross annual turnover of not exceeding US$ 140,000; Associate - All new
members who are yet to complete one full year in membership. For the purposes of this study,
these categories were used as basis for stratification.
A sample size of 87 was used for this study. Cooper and Schindler (1998) concur that a sample
size of 30 and above is considered representative of the population for the purposes of data
analysis and generalization. The sample was chosen using proportionate stratified sampling from
each of the appropriate strata as shown in the Table 3.3.1.
Table 3.3.1 Population and sample size of tour operators
Category Population (N) % of total Sample (n)
A 28 10% 8
B 11 4% 3
C 16 6% 5
D 46 16% 14
E 151 42% 45
Associate 38 13% 12
Totals 290 100 87
3.5 Data Collection
Survey method was used to collect the pertinent primary data for this study. Data was collected
using a semi-structured questionnaire that consists of three parts. The questionnaire contains both
open ended and closed ended questions. The questionnaire was divided into three parts. Part A
dealt with tour operator‟s background information questions. Part B had questions that related to
tour operator business environment while Part C dealt with strategic responses questions. „Drop-
19
and-pick up-later‟ method was used. Respondents were either managing directors or marketing
managers or their equivalents. The researcher administered one questionnaire in each tour
company. Pilot testing was carried out prior to the full data collection phase in order to eliminate
any inconsistencies and to improve quality of the questionnaire.
3.6 Data Analysis
Before the responses were processed, the completed questionnaire was edited for completeness
and consistency. The responses was coded to facilitate statistical analysis and descriptive
statistics namely frequency distributions, mean scores, percentages, graphs and bar charts that
was used to establish relationships.
Both quantitative and qualitative data was collected. Quantitative data required the establishment
of means and percentages to have a comparison of responses. Qualitative information was
analysed by establishing the frequency of a given response to the question. This frequency was
tabulated and hence conclusion made. The findings were finally used to determine answers to
specific questions raised in the study.
20
CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION
4.1 Introduction
This chapter presents an analysis of the data collected. It also presents and discusses the findings
of the study. The findings have been summarised in percentages and mean scores and have been
presented by use of tables and graphs. In analysing the data, where appropriate, the researcher
has endeavoured to compare findings between the different strata in order to explain the
differences or similarities observed.
4.2 Sample Response Rate
The questionnaires were distributed on a „drop and pick up later‟ method. Some 66 out of the
target sample of 87 responded. This represents a response rate of 76% (Table 4.2.1). The rate
was considered adequate representation of the population for the purpose of making conclusions.
This is also adequate response given that the survey was conducted during the peak season in
tourist arrivals in the country.
Table 4.2.1 Response rate per category
Category Population (N) Sample (n) Actual Return %
A 28 8 8 100%
B 11 3 2 67%
C 16 5 4 80%
D 46 14 10 71%
E 151 45 34 76%
Associate 57 12 8 67%
Totals 290 87 66 460%
Mean Response rate 76%
Source: Research data
4.3 General Characteristics of Respondents
The researcher wanted to establish the general characteristics of the tour companies in each
category. The characteristics included age; form of ownership; and whether the tour companies
have associated companies or branches in Kenya and abroad. The findings are presented in tables
4.3.1a, 4.3.1b, and 4.3.2
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Table 4.3.1a: Age of the tour companies
Category Respondents
(ni)
Over 15
yrs
(%)
10 to below
15 yrs
(%)
5 to below
10 yrs
(%)
Below 5
yrs
(%)
Total
%
A 8 50 25 13 13 100
B 2 33.3 33.3 33 0 100
C 4 33.3 40 40 20 100
D 10 20 29 36 21 100
E 34 14 27 44 13 100
Associate 8 8 17 25 50 100
Source: Research data
Table 4.3.1b: Ownership the tour companies
Category Respondents Foreign Local Both foreign
and local
Total %
(ni) (%) (%) (%)
A 8 63 13 25 100
B 2 33 10 57 100
C 4 20 40 40 100
D 10 14 20 62 100
E 34 17 58 25 100
Associate 8 17 70 13 100
Source: Research data
As shown in Table 4.3.1, the age of the companies was found to correspond with the stratum in
which the companies are placed. Most of the oldest companies were found in category A while
majority of the newest companies were found in category „Associate‟.
Half (63%) of the companies in category A are foreign owned or have a bigger percentage of
their ownership outside Kenya. This percentage decreases significantly within the other
categories such that 70% of category „Associate‟ are actually locally owned.
22
Table 4.3.2 Branch Network/Associate companies
Category Respondents
(ni)
In Kenya
(%)
Outside
Kenya
(%)
No branch/
Associate
(%)
A 8 37 63 0
B 2 50 50 0
C 4 60 40 0
D 10 47 33 20
E 34 50 27 23
Associate 8 53 22 25
Source: Research data
Findings in table 4.3.2 show that all the companies in category A and B have branches or
associated companies both in Kenya and outside Kenya. This varies within the categories and it
is observed that the number of companies with branches decreases towards category „Associate‟.
4.4 Markets served by the Tour Companies and Competitiveness in the Market
All the companies surveyed serve both domestic and foreign markets. In accessing these
markets, the companies were asked to state their view on the level of competition in the markets
served. In terms of competitiveness, all the companies chose only two options, i.e. competitive
and very competitive.
Table 4.4.1a Market Served
Category Respondents
(ni)
Foreign
Markets Only
(%)
Domestic
Markets Only
(%)
Both
Markets
(%)
Total
(%)
A 8 50 13 38 100
B 2 33 0 67 100
C 4 20 20 60 100
D 10 36 14 53 100
E 34 33 13 50 100
Associate 8 64 17 19 100
Source: Research data
23
Table 4.4.1b Level of competitiveness of the market served
Category Respondents
(ni)
Very competitive (%) Competitive (%) Total
%
A 8 62 38 100
B 2 67 33 100
C 4 80 20 100
D 10 67 33 100
E 34 70 30 100
Associate 8 64 36 100
Source: Research data
Figure 1 Competitiveness of the market
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Category A Category B Category C Category D Category E Associates
Very Competitive
Competitive
Source: Research data
Categories
24
Table 4.4.1c Global competition in relation to survival and growth Category Respondents
(ni)
Irrelevant to
business (%)
Good for
business (%)
Threat to
business (%)
Total %
A 8 25 63 13 100
B 2 33 67 0 100
C 4 20 60 20 100
D 10 21 64 14 100
E 34 22 64 13 100
Associate 8 25 67 8 100
Source: Research data
As can be observed from the findings in Fig. 4.4.1c, most of the respondents rated highly global
competition to be good for business. Only a small percentage felt that global competition is
irrelevant to business and is a threat to business.
4.5 Performance of Tour Companies in the Market
When asked about their performance over the last three years, the following are the responses
received from the different categories.
Table 4.5.1 Performance of tour companies over the past three years
Category Respondents
(ni)
Very
good
(%)
Good
(%) Fair
(%) Poor
(%) Total
(%)
A 8 63 37 0 0 100
B 2 33 67 0 0 100
C 4 20 60 20 0 100
D 10 43 29 29 0 100
E 34 38 40 22 0 100
Associate 8 17 42 33 0 100
Source: Research data
25
Figure 2 Performances of Tour Operators in the Market
Source: Research data As can be observed from the findings in Fig. 4.5.1, most of the respondents rated the
performance of their companies as „very good‟ and „good‟. Only a small percentage especially
on categories C to „Associate‟ felt their performance was fair. No company felt their
performance was poor.
4.6 Global Competition Influence on Customer Tastes and Preferences
The respondents were asked to rate the extent of global competition influence on consumer tastes
and preferences. Most of the respondent rated the influence on consumer tastes and preference
„to some extent and „to a large extent‟. Only a small percentage especially category D to
„Associate” rated the influence „to no extend‟ as shown below in Table 4.6.1. Table 4.6.1 Global competition influence on consumer tastes and preferences
Category Respondents
(ni)
To no
extend (%)
To a lesser
extent (%) To some
extent (%) To a large
extent (%) Total
(%)
A 8 0 0 63 38 100
B 2 0 0 33 67 100
C 4 0 20 60 20 100
D 10 7 14 44 29 100
E 34 16 13 42 27 100
Associate 8 8 17 47 33 100
Source: Research data
Categories
26
4.7 Importance of Environmental Factors in Gaining Competitive Advantage
The respondents were asked to rate various environmental challenges faced by their organization
in trying to gain competitive advantage in view of global competition they face. Mean scores
were ranked on a 5-point scale with 1 – not important and 5 – very important.
Table 4.7.1 Respondents’ rating of environmental challenges faced by their organization in
trying to gain competitive advantage Attribute Mini-
mum
rank
Maxi-
mum
rank
Mean
score
Standard
deviation
(std dev)
Advances in information communication
technology which could result in a company‟s
current systems being obsolete
4 5 4.5 0.5
Need for e-business capability to market products
locally and internationally
4 5 4.5 1.5
Customers‟ increased demand for value of money
spent
3 5 4 1
Poor infrastructure (i.e. roads, air transport, rail
transport etc.) making it expensive to operate travel
business
4 5 4.5 0.5
International terrorism and its effects on tourism
and travel
3 4 3.5 0.5
Competition from other global and regional tourist
destinations
4 5 5 0.5
Competition from foreign investors in the Kenyan
market.
5 5 5 0
Grand Mean score 4.21
Source: Research data
The findings in Table 4.7.1 show that generally all the environmental factors which the
respondents were asked to rate are quite significant to their operations (a grand mean score of 4
out of possible 5). Some of the factors according to the findings are absolutely fundamental, for
instance, competition from other global and regional tourist destinations, competition from
foreign investors in the Kenyan market and advances in information communication technology
which could result in a company‟s current systems being obsolete (both have mean scores 5).
Other factors like poor infrastructure and need for e-business capability to market products
locally and internationally also rank quite highly (Mean score 4.5).
27
One variable that scored averagely was customers „international terrorism and its effects on
tourism (Mean score 3.5). The finding show this factor received a big variability with the lowest
ranking being recorded at 1 and the highest ranking at 4. A check amongst the categories shows
that the factor received the lowest ranking in categories C to „Associate‟ (80% of the companies
ranked it at 3 and below). This shows that the most established companies in categories A and B
are more conscious of international terrorism and its effect on tourism than the categories C to
„Associate‟. This could be due to the reason that most of the companies in categories C to
„Associate‟ are more concerned with growing their revenue base and establishing their
competitive position.
4.8 Strategic Responses to Challenges Posed by Global Competition
In view of the challenges posed by the global competition, the respondents were asked to rank
the responses to these challenges by order of importance. The respondents were asked to rank the
responses in respect of influence to their company‟s business strategy. Mean scores were ranked
on a 5-point incremental scale with 1 – Least important and 5 – Most important
Table 4.8. Respondents’ ranking of strategic responses to global competition
Attribute Mini-
mum
rank
Maxi-
mum
rank
Mean
score
Standard
deviation
(std dev)
Growth and expansion of company operations 3 5 4 1
Restructuring the firms operation to ensure
continued profitability
4 5 4.5 0.5
Introduction of new and unique products/services 3 5 4 1
Reputation and brand development 4 5 4.5 0.5
Maintaining excellent public image 5 4 4.5 0.5
Developing niche markets 4 5 4 1.5
Maintaining a competitive position 3 5 4.5 0.5
Investment in technology communication
technology (ICT) to add value to products/services
4 5 4.5 1.5
Pricing of product by international currency due to
inflation
3 5 4 1
Expansion and opening of regional offices to 1 4 2.5 1.5
28
coordinate tour activities
Increase in expenditure on meeting customer needs
and satisfaction
3 5 4 1
Investment on training and development programs
for staff
4 5 4.5 0.5
Increase in expenditure on strategic and marketing
planning
4 4 4 0.5
Co-operation, Alliances and/or Networks in areas
such as technology, marketing, distribution, and
human resource sharing to add value to
products/services
4 5 4.5 0.5
Grand Mean score 4.21
Source: Research data
The results in Table 4.8 indicate that attaining an excellent public image, attaining reputation and
brand development and maintaining competitive position, (all have a mean score of 4.5) are most
important factors in addressing the challenges posed by global competition. This could be due to
the fact that tourism is highly influenced by image of specific destinations. Destinations cannot
exist in absence of the service providers within them. Therefore, if the image of the service
providers is affected, their ability to attract tourism clientele is also affected.
The respondent seem to agree to similar operational strategies which include restructuring the
firms operation to ensure continued profitability, investment in technology communication
technology (ICT) to add value to products/services, investment on training and development
programs for staff and forming co-operation, alliances and networks in areas such as technology,
marketing, distribution, and human resource sharing to add value to products or services (with
each have a mean score of 4.5). This could be due to the fact that their main focus is to increase
efficiency while offering high value products and services at a reasonable cost to the tour
operators. Such strategies are important to ensure the tour operators services viewed to be of high
value hence attracting more customers and ensure survival and profitability of the tour operators.
The results in Table 4.8 indicate growth and expansion of company operations, increase in
expenditure on strategic and marketing planning, introduction of new and unique
29
products/services, developing niche markets, pricing of product by international currency due to
inflation and increase in expenditure on meeting customer needs and satisfaction were
considered to be of importance (with a grand mean scores of 4.). This could be due to the fact
that their main focus is customer satisfaction and growth of their business. This is promoted by
the fact that tourists have become more sophisticated and their choice of service provider is
influence by the level of satisfaction and value for money offered.
Expansion and opening of regional offices to coordinate tour activities seems to have been
ranked the least. A check within the categories shows that most of the companies in category D
to „Associate‟ (79%) ranked it below 3. This could be due to the fact that their main focus may
not necessarily be expansion and opening of regional offices to coordinate tour activities, but
forming co-operation, alliances and or networks in areas such as technology, marketing,
distribution, and human resource sharing to add value to products or services growth (80% of
them rated forming co-operation, alliances and or networks in areas such as technology,
marketing, distribution, and human resource sharing to add value to products or services growth
at 4 and above). This is due to the fact that tour operators leverage their effort and work on the
work and effort of their alliance partners.
30
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary
The focus of this research was on the strategic responses to global competition by Kenya tour
operator. The study therefore analysed how global competition has affected tour operators, with
special regard to strategic responses by tour operators.
The study had one objective; to find out the strategic responses adopted by the firms in the
tourism industry in response to global competition. The study has revealed that various
environmental factors are quite important and affect the operations of tour operators in different
ways. Some of the factors according to the findings are absolutely fundamental, for instance,
competition from other global and regional tourist destinations, competition from foreign
investors in the Kenyan market, need for e-business capability to market products internationally
and advances in information communication technology which could result in a company‟s
current systems being obsolete Other factors like customers‟ increased demand for value of
money spent and poor infrastructure also rank quite highly. International terrorism and its effects
on tourism and travel received the lowest consideration, though its importance cannot be
underestimated given that it scored above average.
5.2 Conclusion
From the study results, it can generally be concluded that tour operators in Kenya have
responded to global competition by employing various significant strategies. The finding indicate
that restructuring the firms operation to ensure continued profitability, investment in technology
communication technology (ICT) to add value to products/services, investment in training and
development programs for staff and forming co-operation, alliances and networks in areas such
as technology, marketing, distribution, and human resource sharing to add value to products or
services, maintaining an excellent public image, attaining reputation and brand development and
maintaining competitive position are most important strategies employed to address the
challenges posed by global competition. Expansion and opening of regional offices to coordinate
31
tour activities seems to have been ranked the least. A check within the categories shows that
most of the companies in category D to „Associate‟ (79%) rated it quite lowly.
The study has managed to identify various differences and similarities among the six categories
of tour operators‟ studied. The categories differences in terms of revenue size show that the
various companies in each category are focused on different goals in their operations. Generally,
those in category D to „Associate‟ are more focused on growth and expansion of company
operations, while those in categories C to A are more geared towards maintaining the right public
image and forming co-operation, alliances and or networks in areas such as technology,
marketing, distribution, and human resource sharing to add value to products or services
attaining market leadership and maintaining profitability. In terms of similarities, the study
established that almost all the tour operators in their various categories are conscious of the need
to enhance competitiveness as a tourist destination in view of competition posed by the emerging
destinations, and the need to investment in technology communication technology (ICT) to add
value to products and services.
5.3 Limitations of the Study
This study was done during the peak season of the tourism calendar in Kenya. Hence, it was not
easy to get the target respondents in most of the companies. This is reflected in the response rate.
Time and financial resources were also a major impediment to the researcher‟s ability to do a
more comprehensive study, especially outside Nairobi.
5.4 Recommendations
The results of this study show that global competition poses a real challenge to tour operators in
Kenya and its paramount that tour operators to identify and adopt strategic responses that will
promote their success. Environmental analysis and strategic planning needs to be encouraged in
all tour companies, especially in tour operators in Categories D to Associate since these
categories seemed to lag behind in responding to challenges posed by global competition.
Ultimately the Kenyan Government should review its plans towards sustainable tourism in the
country in view of the other competing destinations and competition faced by tour operators in
Kenya from foreign direct investments. The government needs to review its attitude towards
32
tourism especially on infrastructure development, business incentives and subsidies, facilitating
training for tour operators. Most tour operators expressed their displeasure in the way the
government seems to be neglecting the „goose that lays the golden eggs‟. With proper focus and
attention to small details, the government can continue to reap huge benefits from tourism sector.
However, continued neglect could lead to loss of tourism clientele to other upcoming
destinations like India, Malaysia, China and our very own African countries like Botswana and
Tanzania.
5.5 Suggestions for Further Research
This study only focused on one sub-sector in the tourism industry – the tour operators. A further
integrated study covering the other players in the industry like the hoteliers, parks and museums
would reveal more insights on how the global competition has impacted the tourism industry.
33
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