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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
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Page 1: Strategic responses to global competition by Kenya tour ...

STRATEGIC RESPONSES TO GLOBAL COMPETITION BY

KENYA TOUR OPERATORS

BY

GRACEANNE MUTHONI KAMAU

A MANAGEMENT RESEARCH PROJECT SUBMITTED IN PARTIAL

FULFILMENT OF THE REQUIREMENTS FOR AWARD OF THE

DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF

BUSINESS, UNIVERSITY OF NAIROBI.

OCTOBER 2010

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DECLARATION

This management research project is my original work and has never been submitted for

examination in any university.

Signed ____________________________ Date ____________________

KAMAU GRACEANNE MUTHONI

D61/72287/2008

This management research project has been submitted for examination with my approval as the

university supervisor.

Signed ____________________________ Date ____________________

DR. JOHN YABS

LECTURER

SCHOOL OF BUSINESS

UNIVERSITY OF NAIROBI

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ACKNOWLEDGEMENT

I am very grateful to all individuals who directly or indirectly contributed to the completion of

this research project. My sincere thanks go to Prof. J. Yabs for guiding and challenging me from

conceptualization of the project to the end. I am also indebted to Prof Aosa for his unending

support and assistance in finalizing this research work. I appreciate all respondents who took

time to complete the questionnaires.

I am particularly grateful to my dear friends Elizabeth and Purity for their outstanding support in

all areas as far as my study programme is concerned.

Lastly and most profoundly, I thank my Lord and Saviour Jesus Christ for giving me life,

strength and good health to complete this study programme.

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DEDICATION

This project is dedicated to my brother Peter, and my parents Antony and Rosemary who have

been my pillars of strength and whose support, encouragement, sacrifice and patience I truly

cherish.

May the Favour of the Lord be with you all.

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ABSTRACT

The tourism industry is one of the largest and expanding industries in the world because of an

increase in the interaction between different countries and the development of commerce and

investment across borders (KATO Newsletter, 2006). The tour operators who are a crucial link in

the distribution chain, representing the central connection between customers and providers of

tourism services, have been challenged to devise strategies that ensure flow of tourist in the

country and succeed to compete with foreign tour operators to increase their business. The study

was conducted with the objective of establishing the strategic responses adopted by firms in the

tour operators in response to global competition.

The population of interest consisted of all tour operators based in Nairobi who are members of

Kenya Association of Tour Operators (KATO). To meet this objective, a sample of 87

respondents was drawn from KATO‟s Membership list using stratified random sampling

procedure and primary data collected using a semi-structured questionnaire. Data collected was

analysed using frequency tables, percentages, bar charts and other statistical measures.

Findings of the study have revealed that various response strategies were quite important to tour

operators in Kenya in responding to global completion. The strategic responses that ranked

highly included restructuring the firms operation to ensure continued profitability, investment in

technology communication technology (ICT) to add value to products/services, investment in

training and development programs for staff and forming co-operation, alliances and networks in

areas such as technology, marketing, distribution, and human resource sharing to add value to

products or services, maintaining an excellent public image, attaining reputation and brand

development and maintaining competitive position. Expansion and opening of regional offices to

coordinate tour activities seems to have been ranked the least. A check within the categories

shows that most of the companies in category D to „Associate‟ (79%) rated it quite lowly

The study has managed to identify various differences and similarities among the six categories

of tour operators‟ studied. The differences are reflected in the focus, goals and operations

pursued by the companies in each category. Generally, those in category D to „Associate‟ are

more focused on growth and expansion of company operations, while those in categories C to A

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are more geared towards maintaining the right public image and forming co-operation, alliances

and or networks in areas such as technology, marketing, distribution, and human resource

sharing to add value to products or services attaining market leadership and maintaining

profitability. In terms of similarities, the study established that almost all the tour operators in

their various categories are conscious of the need to enhance competitiveness as a tourist

destination in view of competition posed by the emerging destinations, and the need to

investment in technology communication technology (ICT) to add value to products and

services.

The study recommends that tour operators need to identify and employ to strategic responses that

will promote their success and competiveness. Environmental analysis and strategic planning

needs to be encouraged in all tour operators in category D to „Associate‟ since these categories

seemed to lag behind in responding to challenges posed by global competition. The study also

recommends a review by the Kenyan Government in regard to sustainable tourism in the country

in view of other competing destinations and competition faced by tour operators in Kenya from

foreign direct investment.

In future, the study recommends an integrated study covering other players in the tourism

industry like the hoteliers, parks and museums that would reveal more insights on how global

competition has impacted the tourism industry.

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TABLE OF CONTENTS

[

Declaration..................................................................................................................................... ii

Acknowledgement ........................................................................................................................ iii

Dedication ..................................................................................................................................... iv

Abstract .......................................................................................................................................... v

List of tables.................................................................................................................................. ix

List of figures ................................................................................................................................. x CHAPTER ONE: INTRODUCTION ......................................................................................... 1

1.1 Background of the Study .................................................................................................. 1

1.1.1 Organisation and the Environment ........................................................................ 1

1.1.2 Global Competition ............................................................................................... 2

1.1.3 Overview of the Tourism Industry ........................................................................ 3

1.1.4 Tour Firms in Kenya ............................................................................................. 4

1.2 Statement of the Problem ................................................................................................. 4

1.3 Objective of the Study ...................................................................................................... 6

1.4 Importance of the Study ................................................................................................... 6

CHAPTER TWO: LITERATURE REVIEW ............................................................................ 7

2.1 Organisations and the Environment ................................................................................. 7

2.2 Challenges Posed by Globalisation .................................................................................. 9

2.3 Strategic Responses ........................................................................................................ 10

2.3.1 Mergers and Acquisitions ....................................................................................... 11

2.3.2 Strategic Alliance .................................................................................................... 12

2.3.3 E-collaboration ........................................................................................................ 13

2.3.4 E-Commerce & Technological Development ......................................................... 13

2.3.5 Developing Niche Markets ..................................................................................... 14

2.3.6 Differentiation Strategy .......................................................................................... 15

2.3.7 Marketing Responses .............................................................................................. 15

2.3.8 Restructuring ........................................................................................................... 16

CHAPTER THREE: RESEARCH METHODOLOGY ......................................................... 17

3.1 Introduction .................................................................................................................... 17

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3.2 Research Design ............................................................................................................. 17

3.3 Population of the Study .................................................................................................. 17

3.4 Sample Design................................................................................................................ 17

3.5 Data Collection ............................................................................................................... 18

3.6 Data Analysis ................................................................................................................. 19

CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION ........................... 20

4.1 Introduction .................................................................................................................... 20

4.2 Sample Response Rate ................................................................................................... 20

4.3 General Characteristics of Respondents ......................................................................... 20

4.4 Markets served by the Tour Companies and Competitiveness in the Market ................ 22

4.5 Performance of Tour Companies in the Market ............................................................. 24

4.6 Global Competition Influence on Customer Tastes and Preferences ............................. 25

4.7 Importance of Environmental Factors in Gaining Competitive Advantage ................... 26

4.8 Strategic Responses to Challenges Posed by Global Competition ................................ 27

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS .............. 30

5.1 Summary ........................................................................................................................ 30

5.2 Conclusion ...................................................................................................................... 30

5.3 Limitations of the Study ................................................................................................. 31

5.4 Recommendations .......................................................................................................... 31

5.5 Suggestions for Further Research .................................................................................. 32

REFERENCES ............................................................................................................................ 33 APPENDIX I: TOUR OPERATORS QUESTIONNAIRE.................................................... 37 APPENDIX III: KATO MEMBERS ........................................................................................ 42

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LIST OF TABLES

Table 3.3.1 Population and sample size of tour operators............................................... 18

Table 4.2.1 Response rate per category……................................................................. 20

Table 4.3.1a: Age of the tour companies........................................................................... 21

Table 4.3.1b: Ownership the tour companies..................................................................... 21

Table 4.3.2 Branch Network/Associate companies......................................................... 22

Table 4.4.1a Market Served............................................................................................. 23

Table 4.4.1b Level of competitiveness of the market served............................................ 23

Table 4.4.1c Global competition in relation to survival and growth ............................... 24

Table 4.5.1 Performance of tour companies over the past three years............................ 24

Table 4.6.1 Global competition influence on consumer tastes and preferences.............. 25

Table 4.7.1 Respondents‟ rating of environmental challenges faced by their organization in

trying to gain competitive advantage............................................................ 26

Table 4.8. Respondents‟ ranking of strategic responses to global competition.............. 27

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LIST OF FIGURES

Figure 4.4.1 Competitiveness of the market……………………………..............29

Fig. 4.5.1 Performance of Tour operators in the market……………................32

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CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Global competition is one of the sweeping them in the 21st Century. Businesses have had to

contend with idea that the world is a small global village and decisions made should be focused

on satisfying the needs of both the local and foreign customers. Tourism industry is evidently not

immune to a wider context of global competition. In the past one or two decades, a stable

increase has been witnessed in international tourist flows, inter-regional and inter-organizational

alliances, and foreign direct investment. These trends are especially prevalent in the developing

world, largely because of their pristine nature, diverse culture, inexpensive goods and services,

cheap labours, and other resources.

1.1.1 Organisation and the Environment

An organization operates within an environment and depends on that environment for its inputs

in form of resources and as outlets for their output after transformation (Porter, 1985). Since

organizations are open system and are either environment dependent or environment serving,

organisations success or failure is dependent on its interaction with the environment. However

the environment within which companies operates is constantly changing presenting

opportunities, challenges and threats (Mintberg, 1987). The opportunities and the threats provide

the agenda for strategic positions taken by an organization.

According to Grand (2000), an organisation survives and succeeds when it creates and maintains

a match between its strategy and the environment, and also between its internal capability and

the strategy. The environment is not static but turbulent. Discontinuous and uncertain strategic

response calls for organisations to change their strategy to match the environment; an

organisation is pressed to shift strategy. As such, this will enable it support the newly adopted

strategic responses effectively (Ansoff and McDonnell, 1990). The challenge to organisations is

to continuously match strategy, environment, and their internal capabilities in order to survive,

succeed and to remain relevant (Porter, 1985).

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1.1.2 Global Competition

Various scholars have attempted to define global completion. Global competition is a complex

series of moves and countermoves on a global landscape integrated through a global network of

communication, transportation, and trade (Sassen, 2006). Global competition has been facilitated

by the process of globalisation which in essence is the elimination of state- enforced restriction

on exchange across borders and the increasingly integrated and complex global system of

production and exchange that has emerged as a result (Tom 2006). Global competition involves

approaching worldwide markets with standardised products (Johnson and Schools, 2002). This

has been made easier by advancement of science and technology especially telecommunications

and coming into use of wide- bodied aircraft

Deresky (1998) defines global competition as characterised by networks that bind countries,

institutions, and people in an interdependent global economy. The invisible hand of global

competition is being propelled by the phenomenon of an increasingly borderless world.

According to Sassen (2006), a core element of global competition is the expansion of world

markets and trade through the elimination or reduction of trade barriers, such as import tariffs.

Thomas L. Friedman (2008), examines the impact of global competition as “flattening” of the

world, and argues that the pace of global competition is quickening and will continue to have a

growing impact on business organization and practice.

Global competition has resulted into growing power of international economic and market forces

and consequent decline in the ability of individual states to control their economies and of the

private corporation in limited geographic spheres of operation to dominate domestic markets

(Kotler, et al 2003). Global competition, which is characterized by the escalating mobility of

capital, people, ideas and information on a universal scale, has become a sweeping theme in the

contemporary world. The impact on tourism is a stable increase in international tourist flows,

inter-regional and inter-organizational alliances, and foreign direct investment. There has been

increased power in the hands of a small number of global travel and tourism networks achieving

their globalisation not only through vertical and horizontal integration but through diagonal

integration, economies of both scale and scope, and their huge investment electronic marketing.

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1.1.3 Overview of the Tourism Industry

The World Travel and Tourism Council claimed that tourism has shown steady increase in

volume of international travel, and long with this growth in travel, the number of tourism

destination choices has also increased. The world Travel and Tourism Council also points out

that tourism is worth US$5.7 trillion to global GDP and employs 235 million people worldwide.

These are expected to grow to more than US$11 trillion and 303 million respectively by 2020

(World Travel and Tourism Council, 2007). Tourism has become one of the most vital sectors of

Kenya‟s economy and a major foreign exchange earner. Up to 45% of foreign exchange earnings

came from tourism, making tourism one of the leading earners of foreign exchange in Kenya,

and challenging tea and horticulture for the number one spot (Tourism Trust Fund, 2007).

Tourism has of late become and extremely competitive economic activity throughout the world

(Kenya National Tourism Joint Security Committee Report of 1998). Tourism in many countries

has gained importance due to competing tourist destinations and as a result Kenya‟s tourism

industry is trying to do everything possible to attract more tourist for itself (Kenya Tourism

Board) KTB) Marketing Strategies 2003-2007). Firms in the tourism industry are under pressure

to respond to increased competition in the tourism industry particularly from the emerging and

huge economies of China and India. In Africa, Kenya is facing competition from other

destinations for the reduced international tourists. According to the WTO report of 2003 the

tourist arrivals and receipts for top African destinations, in 2002, Kenya had only $838,297

million as compared to the highest South Africa with $ 65, 502,719 million. Others were

Mauritius with $ 682,612; Morocco with $ 41,932,152, Tunisia with $ 50,641,422 and Egypt

with $ 49,063,764 million.

International tourists to Kenya have different interests. Some are attracted by the country‟s warm

beaches; some come to visit Kenya‟s National Museum while others come for game drives.

These are among the competing tourism destinations in Kenya. According to the statistics of

2005 by the Kenya Tourism Board, most international tourists who came to Kenya for holiday

are interested in game drives and most of them visit more than one park. According to the

statistics, 77% of international tourists were attracted by Kenya‟s Wildlife and out of the 832,229

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international visitors to Kenya in 2005; about 640,539 of them visited the Kenya Wildlife

Service Parks.

1.1.4 Tour Firms in Kenya

The travel industry is one of the largest and expanding industries in the world because of an

increase in the interaction between different countries and the development of commerce and

investment across borders (KATO Newsletter, 2006). Tour operators are businesses that

combine two or more travel services (e.g. transport, accommodation, catering, entertainment, and

sightseeing) and sell them through travel agencies or directly to final consumers as a single

product. A tour operator is thus a crucial link in the distribution chain, representing the central

connection between customers and providers of tourism services, and thus has the power to

influence both the demand and the supply side (Nyingi, 2003).

The Kenya Association of Tour Operators (KATO) is the country‟s premier tourism association,

which has some 250 experienced professional tour operators as its members (KATO, 2008).

KATO exists to uphold the good reputation of Kenya as a tourism destination by ensuring that

Tour operators maintain the highest standards of service and value to the tourists and provides a

forum for members to air their disputes to the government and resolve disputes among

themselves. Certainly, many tour operators are already thriving, as evidenced by the number of

operators registered with KATO. Yet the potential for even greater success is virtually unlimited.

Tour operators have much to gain by improving their operations, service marketing, expanding

their connection with overseas clients and conveying to the world markets all that Kenya has to

offer. A major benefit provided by tour operators to developing countries like Kenya is the

significant increase the volume of tourist arrivals, ideally leading to employment generation,

export earnings and economic development. They employ tour guides, clerks and drivers.

1.2 Statement of the Problem

Organisation environment consist of all the conditions and forces that affects its strategy option

and defines its competitive situation (Pearce and Robinson). Organisations, success is dependent

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on its successful interaction with environmental condition and forces. Consequently,

organisations have devised strategies that match and fit its environmental influences.

Global competition has been on the rise as a result of the irreversible process of Globalisation.

Deresky (1998) defines globalisation as global competition characterised by networks that bind

countries, institutions, and people in an interdependent global economy. Global competition is

characterized by the escalating mobility of capital, people, ideas and information on a universal

scale, has become a sweeping theme in the contemporary world.

Its impact on tourism industry is a stable increase in international tourist flows, inter-regional

and inter-organizational alliances, and foreign direct investment and increased global

competition. Tour operators in Kenya are an important player in the tourism industry. They act

as a crucial link in the distribution chain, representing the central connection between customers

and providers of tourism services, and thus have the power to influence both the demand and the

supply side (Nyingi, 2003). Given their important role and increasing challenges brought by

global competition, tour operators have been challenged to devise strategies that ensure flow of

tourist in the country and succeed to compete with foreign tour operators to increase their

business. This has seen tour operators collaborating with other countries to establish foreign

clientele

Various researchers have provided insight into the area of strategic response to global

competition. Munyao (2007) studied the response strategies of tobacco companies in Kenya to

global competition and found out that Kenya tobacco companies had taken such diverse response

strategies towards tackling global competition. Other studies include those done by Changa

(2007), Abdullah (2000), Kombo, (1997), Mwarania (2003) and Mutua (2004). In these studies,

it was generally found out that firms made adjustments to their strategic variables depending on

their uniqueness to ensure survival. Studies done on tour operators have however focused on

other aspects other than strategic responses to challenges posed by global competition. It can

therefore be observed that there is a gap in literature as far as strategic response is concerned on

tour operators in Kenya.

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This study seeks to answer the following research question; what strategic response tour

operators in Kenya employ in order to survive and prosper in a competitive global market. Tour

operators in Kenya have to contend with global competition, higher standard of service product

and at a fair price.

1.3 Objective of the Study

The objective of this study was to establish the strategic responses adopted by firms in the tour

operators in response to global competition.

1.4 Importance of the Study

This study will be of value to various stakeholders. It will be useful to tour operators in Kenya

and elsewhere in the world as it will add knowledge on alternatives strategic responses they may

employ in response to global completion therefore improving their business.

It will also be useful to the government of Kenya and other policy planners in making

appropriate plans in the tourism sector in general and tour operator sub-sector in particular since

they relies heavily on tourism for foreign exchange.

Further, the study will be useful to scholars and academics as it will form a basis for further

research into the area of strategic responses to global completion by organisations or tour

operators.

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CHAPTER TWO: LITERATURE REVIEW

2.1 Organisations and the Environment

Firms are environmentally dependent because they source their inputs such as capital, raw

materials and human resources from it, and produce their output in the form of products and

services to it. Literature on the environment of an organization and its direct and indirect impact

upon organizational processes and outcomes is numerous (May et al. 2000). As Ansoff and

McDonnell (1990) argued, business firms are in a constant two-way interaction with the

environment. They receive an assortment of resources from the environment, and after a

transformation, deliver them back to the environment in the form of goods and services. The

connection of the external environment and the organisation is an input- throughput-output

process where inputs are received from the environment and released back into the same

environment after being processed by the environment. What is released back can only be

consumed by the organisations if it fits the environment requirements and needs (Porter, 1985)

Opportunities and threats posed by the business environment provide the agenda for future

strategic actions. An opportunity for one organization can be a threat for another depending on

their resources. Organizations exploit opportunities to achieve stated objectives. They protect

themselves from threats also to achieve stated objectives. Aosa (1992) acknowledged that

environmental turbulence normally tends to pose challenges to management. Managers in

organizations need to recognise the impact which environmental forces have on their decision

making by anticipating, acting and adapting to environmental opportunities and constraints.

For survival, an organisation must maintain a strategic fit with both the external and internal

environments. The external environment of a firm consists of the moves and counter moves

executed by its competitors. The organizational strategy is effectively realized only after gauging

the mood prevalent in the firm‟s external environment by conducting the industry analysis. Such

analysis also helps to ascertain the position of the organization vis-à-vis the competing firms and

come up with business plan strategy. Selzinck (1957) introduced the idea of matching the

organisation‟s internal factors with external environmental circumstances. The core idea was

developed into what we now call SWOT analysis by Learned, Andrews and others at the Harvard

Business School General Management Group. Strengths and weaknesses of the firm are assessed

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in light of the opportunities and threats from the business environment. This matching may call

for a restructuring of the organisation's operations (May et al. 2000). The external analysis of a

firm enables the firm to obtain a clear picture of the threats and opportunities prevalent in the

firm‟s external environment. Having done this, the firm can devise suitable strategies to exploit

the opportunities and negate the threats.

According to Grand (2000), an organisation survives and succeeds when it creates and maintains

a match between its strategy and the environment, and also between its internal capability and

the strategy. The environment is not static but turbulent. Discontinuous and uncertain strategic

response calls for organisations to change their strategy to match the environment and also to

transform or redesign their internal capability to match this strategy. When there is a shift in the

environment, an organisation is pressed to shift its strategy. As such, this will enable it support

the newly adopted strategic responses effectively (Ansoff and McDonnell, 1990). An

organisation‟s competitive strategy may thus reside as much in the environment as it is in the

individual organisation. The challenge to organisations is to continuously match strategy

environment, their internal capabilities in order to survive, succeed and to remain relevant

(Porter, 1985).

Competition is one of the main challenges presented by dynamic environment. Organisations

compete for input recourses such as raw materials, labour and capital and output resources such

market share, market dominance and market leadership in order promote their performance.

Firms in dynamic industries respond to competitive forces by employing different competitive

strategies either operational or strategic strategies. While operational strategies are short term

and are concern with operation effectiveness, strategic strategies are long- term in nature and

embrace the entire organisation. The challenge to organisations is to continuously match strategy

environment, their internal capabilities in order to survive, succeed and to remain relevant

(Porter, 1985).

The world we live in today is an international or global dimension to each of the macro-

environment (Atamer, et al., 1993). May, et al. (2000) has identified six key areas that have a direct

impact on a business‟ understanding of the international business environment, namely, success

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and failure in understanding the business environment; the changing nature of the international

business environment; the competitive factors influencing the business environment; the need for

general environmental scanning; systemising the search for international business opportunities;

and the key factors driving the competitive environment. Since the beginning of the 1990s, world

markets entered into a period in which structural changes in economic, technological,

institutional, social, political, physical and international environments are occurring in an

unprecedented manner. The market environment is changing dramatically because of the

increase in the general standard of living, the increase in competition among organisations and

the increase in consumerism. The changes of political, technological and economic environment

have de-clustered previously protected national areas, increasing dramatically communication

facilities and capacities, creating new needs all over the world, with some convergences among

customers‟ expectations (Atamer et al 1993). As a consequence, a majority of firms have to act,

not only to seize new opportunities, cut costs, reduce their exposure to fiscal pressure or to

foreign exchange, enlarge their access to new competences and skills, but also to prevent the loss

of their market shares and avoid possible take-overs from competitors.

2.2 Challenges Posed by Globalisation

According to Ouattara (1997), the challenge to national economies remains how to capitalise on

the opportunities for growth and development afforded by globalisation while at the same time

minimizing the risks. In an obvious sense this means following appropriate policies: stable

macroeconomic policies, prudent financial policies, and sound regulatory policies. But the

appropriate policies are easier to describe that to implement and vary over time. The more

fundamental problem is thus how to develop institutions with the capacity to determine

appropriate policies, implement them, and stick to them until circumstances change.

Globalisation is associated with the sharp increase of private capital inflows to developing

countries in form foreign direct investment. Foreign direct investments in emerging markets and

developing economies have been on the rise. Due to increased interconnections and the erratic

nature of the international tourism demand, the tourism industry has been characterised by the

active involvement and dominant role played by multinational corporations and transnational

corporations. Some of the international companies in the have taken advantage of globalisation

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to seek for new opportunities to growth their enterprises, reap the benefit of the economies of

scale, increase their market share, suppress competition and achieve global dominance (Keller

2005). Tour operators have had to contend with competition from multinational companies in

their countries who enjoy all the benefits the local tour operators enjoy. Some government have

used incentive and tax concessions to attract the multinational corporations.

Globalisation has influence the way business is conducted and connected the world market

which is now viewed as a Global village. Information exchange in the world market is an

integral part of the way business is conducted. This has seen the development of global

information system, global telecommunications infrastructure and greater Tran‟s border data

flow using such technologies as internet, communication satellites, submarine fibre optic cable,

and wireless telephones. Organisations have had to invest in information technology to adapt to

the way business in conducted via the internet. Marketing, conducting meetings through

teleconferencing and selling of products are some of the business activities that have benefited

from development in information technology.

Organisation in tourism industry should address these key issues and gather relevant information to

facilitate market and competitor analysis as a basis for strategic planning and strategic formulation

as part of effective international management. They should always be aware of international

economic trends like inflation, recession and shortages of resources as well as international

political developments (Atamer, et al., 1993).

2.3 Strategic Responses

Pearce and Robinson (2002) defined strategic responses as the set of decisions and actions that

result in the formalization and implementation of plans designed to achieve a firm‟s objectives.

Therefore it is a reaction to what is happening in the economic environment of organizations.

Ansoff and Mc Donnell (1990) argue the response strategy involves change in the firm‟s

behaviour and actions in an effort to pursue set goals and objectives.

Pearce and Robinson (2002) say that there is need to adopt new strategies that match the

challenges from the environment. Reengineering, downsizing, self-management and outsourcing

are some of the dominant strategies that have been used for restructuring in the 1990‟s. Ansoff

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and McDonnell (1990) asserts that the management system used by a firm is a determining

component of the firm‟s responsiveness to environment changes because it determines the way

that management perceives the environment, diagnosis their impact on the firm, decides what to

do and implements the decisions.

Burnes (2000), the concern in real time responses is to minimize the sum to total losses and

restore profitability to ensure organization‟s success in a turbulent and surprising environment.

He also observed that unstable and unpredictable conditions in which organizations have to

operate today means that the ability to think strategically and manage strategic change

successfully is key competitive strength for a sustainable competitive advantage. Real time

strategic issue responses are necessary to facilitate the firm‟s preparedness in handling the

impending issue, which may have profound impact on the firm.

Strategies employed by firm‟s aims at achieving competitive advantage over the key competitors

of in its industry (Majluf and Hax, 1991). These include mergers and acquisitions; retrenchment;

hostile takeovers, strategic alliances; vertical and horizontal integration; restructuring; divestiture

and; liquidation. For the purpose of this study the following strategies will be consider mergers

and acquisitions, strategic alliance, developing niche markets, e-marketing and investing in

technology and restructuring.

2.3.1 Mergers and Acquisitions

Scholes and Johnson (2004) define acquisition as “where an organisation develops its resources

and competencies by taking over another organisation”. He argues that the need to keep up with

the changing environment often dominates the thinking about acquisition. Mergers and

acquisitions offer and opportunity for companies to collaborate in doing business thereby

overcoming individual disadvantages. Mergers and acquisitions can be within the same market

or across different markets due to globalisation. Byar (1991) argues that mergers and acquisitions

allow for growth or development of an organisation to take place without the organisation

involved having to invest the level of resources that would be necessary if they were to operate

individually.

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Johnson and Scholes (2001) give the reason for mergers and acquisitions as lack of resources and

competencies to develop a strategy internally as well as due to other financial motives and cost

efficiencies. Motivation for use of mergers and acquisitions strategy increased speed of new

product and market areas entry, deregulation, financial motives, lack of resources or

competencies to compete successfully, cost efficiency and expectations by key stakeholders.

To ensure profitability, survival and growth some local firms opted to enter into alliance with

foreign firms in order to face the challenges of competition and changing market demand.

2.3.2 Strategic Alliance

This is where two or more organisations share resources and activities to pursue a strategy.

Through cooperation, the need to obtain materials skills, innovation, finance or access to markets

may be readily available (Wortsel H. V and Worzel. H.1997). There are various forms of

strategic alliances such as licensing, franchising, subcontracting, joint ventures vertical and

horizontal alliances.

According to Shaw and Williams (2002), franchising is a contractual agreement whereby a firm

allows another to sell products and provide services on its behalf for a fee. This is also evident in

the tourism industry. This is the case with such brand names as the following corporate chains,

Avis Rent a Car, Hilton of the United Kingdom, Holiday Inn, Inter-Continental of Japan and

Club Mediterranean of France. Licensing is where the right to manufacture a patented product is

granted for a fee. With subcontracting, a company chooses the subcontract particular services or

part of a process. For example increasingly in public service responsibility for waste removal,

cleaning and Information Technology services may be subcontracted to private companies

(Scholes and Johnson, 2004). Joint venture is strategic alliance that occurs when two or more

organisations enter into a temporary partnership or consortium for purpose of exploiting

opportunities presented by a changed environment. Joint ventures enhance partnering

organisations competitiveness.

According to Burns and Holden (1995), vertical integration is a business practice whereby

companies at different level in the distribution chain seek to control various stages of production,

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delivery and marketing of their products. For example some tour operators have grown from

medium-sized national companies to truly international corporations that move millions of

people around the globe each year (Burns and Holden, 1995). Similarly, a number of tour

operators today have their own aircrafts and hotels, while some airlines also offer chauffer and

car rental services. Some global firms have also capitalised on these trends and produced

standardized tourism products in order to contribute to the homogenization of the world tourism

market.

According to Youell (1998), other organisations have sought to survive through horizontal

integration whereby companies at the same level have sought mergers with companies at third

level in the distribution chain. The mergers have been characterised by ether two companies

offering competing services; a result of a takeover of one company by another or a voluntary

agreement between two companies.

2.3.3 E-collaboration

Richmond et al (1998) defined e-business as the transaction of commercial activities on global

open networks between and ever-increasing number of corporate and individual participants.

Collaboration means working jointly with other for purpose of achieving the some goal set.

E-Collaboration is internet-based cooperation/collaboration with exchange of information,

materials, or cash amount entities. E-collaboration provides a very efficient strategic option with

low cost, easy access, large markets, reputation and resources sharing. It brings geographical

dispersed teams together, supporting communication, coordination and cooperation. Powerful,

integrated collaborative technology is the backbone of an e-collaboration (Vlanchopoulou and

Manthous 2003).

2.3.4 E-Commerce & Technological Development

The growing environmental complexity and dynamism, the explosion and use of e-commerce

and e-business models generate major impacts for tourism businesses and its competitive

positioning strategies. The general trend of almost all tourism firms is the move toward the

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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

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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

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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.

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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

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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-

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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.

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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.

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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

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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

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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

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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

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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).

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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

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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

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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.

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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

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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

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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.

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APPENDIX I: TOUR OPERATORS QUESTIONNAIRE

PART A: BACKGROUND INFORMATION OF TOUR OPERATOR

1. How long has your company been in operation in Kenya?

{ } 5-4 years { } 5-10 years

{ } 10-15 years { } over 15 years

2. Is your company

{ } Locally owned { } Foreign owned

{ } Other (Please Specify)

...........................................................................................................

3. Does your company have branches or associated companies in

{ } Kenya

{ } Outside Kenya

PART B: TOUR OPERATOR BUSINESS ENVIRONMENT QUESTIONS

4. What markets are served by your company?

{ } Domestic markets only

{ } Foreign markets only

{ } Both domestic and foreign markets

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5. How would you describe the level of competition faced by your company in this market

region? (Please tick one)

{ } Very competitive { } Fairly Competitive

{ } Competitive { } Not competitive at all

6. How would you describe global competition in relation to a company‟s survival and

growth?

a) Good for business { } Yes { } No

b) Threat to business { } Yes { } No

c) Irrelevant to business { } Yes { } No

7. In terms of achieving your business or marketing goals, how would you rate the

performance of your company over the last three years?

{ } Very good { } Good { } Fair { } Poor

8. To what extent has global competition influenced consumer tastes and preferences? (tick

as applicable)

{ } To a lesser extent { } To a larger extent

{ } To some extent { } To no extent

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9. As organizations strive to gain competitive advantage in a dynamic industry, it will

encounter various environmental challenges. In view of this, how would you rate the

following environmental challenges faced by your organization as a result of global

competition?

(Please use a scale of 1-5 to rate, where 1. Not important 2. Least Important 3. Neutral

4. Important 5. Very Important)

1 2 3 4 5

Advances in information communication technology which

could result in your current systems being obsolete

Need for e-business capability to market products

internationally

Customers‟ increased demand for value of money spent

Poor infrastructure (i.e. roads, air transport, rail transport etc.)

making it expensive to operate travel business

International terrorism and its effects on tourism and travel

Competition from other global and regional tourist

destinations

Competition from foreign investors in the Kenyan market.

Other (Please specify)

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PART C: RESPONSES TO CHALLEGES OF GLOBAL COMPETITION

10. In view of the challenges posed by the global competition, please rank the following

responses in order of importance for your company (Use the incremental scale given)

Least important Most important

1 2 3 4 5

Growth and expansion of company operations

Restructuring the firms operation to ensure continued

profitability

Introduction of new and unique products/services

Reputation and brand development

Maintaining excellent public image

Developing niche markets

Maintaining a competitive position

Investment in technology communication technology

(ICT) to add value to products/services

Pricing of product by international currency due to

inflation

Expansion and opening of regional offices to

coordinate tour activities

Increase in expenditure on meeting customer needs

and satisfaction

Investment on training and development programs

for staff

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Increase in expenditure on strategic and marketing

planning

Co-operation, Alliances and/or Networks in areas

such as technology, marketing, distribution, and

human resource sharing to add value to

products/services

11. Do you have any other comments that you may deem to be relevant to this research?

......................................................................................................................................................

......................................................................................................................................................

......................................................................................................................................................

.....................................................................................................................................................

12. If you would like to receive the results of this study, please give your company contact

details

(Optional)

Company Name .....................................................................................

Address .....................................................................................

Email .....................................................................................

Fax .....................................................................................

Thank you for your co-operation.

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APPENDIX III: KATO MEMBERS

1 Abercrombie & Kent Ltd Category A

2 African Horizons Travel & Safaris Ltd Category A

3 African Quest Safaris Ltd Category A

4 African Secrets Ltd Category A

5 Balloon Safaris Ltd Category A

6 Bush and Beyond Ltd Category A

7 Cheli & Peacock Ltd Category A

8 Dodoworld (K) Ltd Category A

9 Express Travel Group Category A

10 Gamewatchers Safaris Ltd Category A

11 Guerba (K) Ltd Category A

12 Jade Sea Journeys Ltd Category A

13 Kobo Safaris Ltd Category A

14 Liberty Africa Safaris Category A

15 Maniago Safaris Ltd Category A

16 Mini Cabs Tours & Safaris Category A

17 Origins Safaris Category A

18 Pollman's Tours & Safaris Ltd Category A

19 Private Safaris (EA) Ltd Category A

20 Rhino Safaris Ltd Category A

21 Somak Travel Ltd Category A

22 Southern Cross Safaris (Mombasa)Ltd Category A

23 Southern Cross Safaris (NBI) Ltd Category A

24 Transworld Safaris (K) Ltd. Category A

25 Twiga Car Hire & Tours Ltd Category A

26 Vintage Africa Ltd Category A

27 Wild Trek Safaris Ltd Category A

28 Wildlife Safari (K) Ltd Category A

29 Across Africa Safaris Ltd Category B

30 Big Five Tours & Safaris Ltd Category B

31 Charleston Travel Ltd Category B

32 Discover Kenya Safaris Ltd Category B

33 Intra Safaris Ltd Category B

34 Kenya Wildlife Trails Ltd Category B

35 Luca Safari Ltd. Category B

36 Muthaiga Travel Ltd Category B

37 Robin Hurt Safaris Ltd Category B

38 Southern Sky Safaris Category B

39 Sunworld Safaris Ltd Category B

40 Africa Expeditions Ltd Category C

41 African Latitude (Kenya) Ltd Category C

42 African Road Safaris Category C

43 Best Camping Tours Category C

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44 Dallago Tours & Safaris Category C

45 Eastern and Southern Safaris Category C

46 Gametrackers (K) Ltd Category C

47 Ker & Downey Safaris Ltd Category C

48 Ketty Tours Travel & Safaris Ltd Category C

49 Kimbla Mantana (K) Ltd Category C

50 Nature Expeditions Africa Category C

51 Real Africa LTD Category C

52 Shoor Travels & Tours Category C

53 Suntrek Tours & Travel Ltd Category C

54 Travel Affairs Ltd Category C

55 Tusker Safaris Ltd Category C

56 Air Travel & Related Services Ltd Category D

57 Allamanda Safaris Category D

58 Apollo Tours & Travel Category D

59 Archers Tours & Travel Ltd. Category D

60 Bateleur Safaris Ltd Category D

61 BCD Travel Category D

62 Bill Winter Safaris Category D

63 Bottger Productions & Tours Ltd Category D

64 Chameleon Tours Category D

65 Chronicle Tours & Travel Category D

66 Concorde Car Hire & Safaris Ltd Category D

67 Crown Tours & Car Hire Ltd. Category D

68 Destination (K) Ltd Category D

69 East Africa Safari Ventures Ltd Category D

70 Fredlink Company Ltd Category D

71 Geo Safaris Ltd Category D

72 Global Holidays & Incentives Ltd Category D

73 Grant & Cameron Safaris Ltd Category D

74 Holiday Bazaar Ltd Category D

75 IntoAfrica Eco-Travel Ltd Category D

76 Jambo Travel House Limited Category D

77 Kenia Tours & Safaris Category D

78 Kibo Slopes & Safaris Ltd Category D

79 Kuldips Touring Company Category D

80 Let's Go Travel Category D

81 Market Service Station Ltd Category D

82 Motto Tours & Travel Ltd Category D

83 Offbeat Safaris Ltd Category D

84 On Safari (K) Ltd Category D

85 Rajair Travel & Tours Category D

86 Rickshaw Travels (Kenya) Ltd Category D

87 Safaris In Style Category D

88 Safaris Unlimited (Africa) Ltd Category D

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89 Special Lofty Safaris Category D

90 Star Travel & Tours Ltd Category D

91 Texcal House Service Station Category D

92 Tobs Kenya Golf Safaris Category D

93 Tour Africa Safaris Category D

94 Travel Creations Ltd Category D

95 Travel 'n Style Ltd Category D

96 Travel Scene Services Category D

97 Tropical Breaks Category D

98 Tropical Ice Ltd Category D

99 Uniglobe Northline Travel Ltd Category D

100 Venture Africa Safaris & Travel Category D

101 Westminster Safaris Ltd Category D

102 Absolute Adventure Africa Safaris Limited Category E

103 Acacia Holidays Ltd Category E

104 Accacia Safaris( Kenya ) Limited Category E

105 Adventure Centre Ltd Category E

106 Africa Viza Travel Services Ltd Category E

107 African Eco-Safaris Category E

108 African Route Safaris Category E

109 African Safari Diani Adventures Category E

110 African Sermon Safaris Category E

111 African Spice Safaris Category E

112 African Tropical Safaris Ltd Category E

113 Afriqueen Adventure Ltd. Category E

114 All Seasons Safaris and Tours Category E

115 Aloha Tours & Safaris Category E

116 Anste Tours & Travel Limited Category E

117 Archer Clark Enterprises Ltd Category E

118 As You Like It (Safaris) Ltd Category E

119 Asili Adventure Safaris Category E

120 Australken Tours & Travel Ltd Category E

121 AV Tours and Safaris Ltd Category E

122 Avenue Motors Ltd Category E

123 Avenue Service Station Category E

124 Basecamp Travel Ltd Category E

125 Bushbuck Adventures Ltd Category E

126 Call of Africa Safaris Category E

127 Catalyst Travels Ltd Category E

128 Central Rent a Car Category E

129 CKC Tours & Travel Category E

130 Cotts Travel & Tours Ltd Category E

131 Custom Safaris Category E

132 David & Evanson Tours (INT) Category E

133 Daymu Travel and Safaris Ltd Category E

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134 Designer Tours & Travel Category E

135 Destination Connect Co. Ltd Category E

136 Destination Link Services Category E

137 Diwaka Tours & Travel Ltd Category E

138 Earth Tours & Travel Ltd. Category E

139 East African Shuttles & Safaris Category E

140 East African Wildlife Safaris Category E

141 Eco Adventures Limited Category E

142 El Molo Tours & Travel Category E

143 Enchanting Africa LTD Category E

144 Exotic Destinations Ltd Category E

145 Ferrari Tours Category E

146 Finch Travels Ltd. Category E

147 Flawless Links Category E

148 Four By Four Safaris Ltd Category E

149 Furstenberg Safaris Ltd Category E

150 Game Viewers Adventures Limited Category E

151 GAT Safaris Category E

152 Genet Tours & Safaris Category E

153 Glory Car Hire Tours & Safaris Ltd. Category E

154 Go Africa Safaris and Travel Category E

155 Go Africa Travel Ltd. Category E

156 Going Places Ltd Category E

157 Grand Edition Tours Category E

158 Hamerkop Safaris Category E

159 Haya Safaris (A) & Travel Ltd Category E

160 Holiday Seekers Ltd Category E

161 Hotel Adventure Travel Ltd Category E

162 Ibis Tours and Travel Ltd Category E

163 Imperial Air Services Category E

164 Incentive Travel Ltd Category E

165 Jet Travel Ltd Category E

166 JMAR Safaris Ltd Category E

167 Karisia Limited Category E

168 Kentan Safaris Ltd. Category E

169 Kenya Beach Travel Ltd Category E

170 Kisima Tours & Safaris Category E

171 Kuja Safaris Category E

172 Leading Expeditions Safaris Category E

173 Leboo Safari Tours Ltd Category E

174 Linderberg Holidays & Safaris Category E

175 Long Ren Tours & Travel Ltd Category E

176 Maridadi Safaris Ltd Category E

177 Mathews Safaris Category E

178 Menengai Holidays Ltd Category E

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179 Mombasa Air Safari Ltd Category E

180 Monaco Tours and Safaris Category E

181 Nahdy Travel & Tours Category E

182 Naked Wilderness Africa Category E

183 Nappet Tours & Travel Ltd Category E

184 Nature's Edge Category E

185 New Kenya Travel & Tours Safaris Ltd Category E

186 Nutty Safaris Category E

187 Ostrich Holidays Adventures Category E

188 Palbina Travel & Tours Category E

189 Papa Musili Safaris LTD Category E

190 Prima Vera Tours & Safaris Category E

191 Primetime Safaris Category E

192 Raydoll Tours & Travel Category E

193 Raylenne Tours & Safaris Category E

194 Rekero Camp Ltd Category E

195 Safari Line Africa Category E

196 Safari Partners Kenya Ltd. Category E

197 Safari Trails Limited Category E

198 Safari Travel Kenya Ltd Category E

199 Safe Ride Tours and Safaris Category E

200 Saleva Africa Tours Ltd. Category E

201 Sardius Tours & Safaris Category E

202 Satguru Travel & Tours Services Ltd. Category E

203 Sayari Afrika Ltd Category E

204 Scenic Wildlife Safaris Ltd Category E

205 Selective Safaris Category E

206 Senator Travel Services Category E

207 Shades of Africa Tours & Safaris Category E

208 Sights of Africa (E.A.) Tours & Travel Category E

209 Silver Africa Tours & Travel Category E

210 Silverbird Adventure Tours & Travel Category E

211 Silverbird Travel Plus Ltd Category E

212 Sportsmen's Safaris & Tours Category E

213 Spurwing Travel & Tours Ltd Category E

214 Steenbok Safaris & Car Hire Category E

215 Taipan Vacations & Travel Ltd Category E

216 Tamasha Africa Ltd Category E

217 Tee Off Kenya Limited Category E

218 Travel Shoppe Ltd. Category E

219 Travel Wild E.A LTD Category E

220 Travelmart Ltd Category E

221 Tropical Winds Ltd. Category E

222 Tulip Travel Ltd Category E

223 Ulf Aschan Safaris Ltd Category E

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224 Unik Car Hire & Safaris Category E

225 Victoria Safaris Category E

226 Visit Africa Ltd Category E

227 Waymark Safaris Ltd. Category E

228 Wild Destinations Ltd Category E

229 Wild Times Ltd Category E

230 Woni Safaris Ltd Category E

231

Xcellent Wildlife Paradise - Holidays and

Safaris

Category E

232 Yare Safaris Ltd Category E

233 Zirkuli Expeditions Ltd Category E

234 ASTA Society Of Travel Agents Associate

235 Blue Wave Ltd Associate

236 Campfire Conservation Ltd Associate

237 East African Magazines Associate

238 Exclusive African Treasures Associate

239 K.P.S.G.A Associate

240 KATO Secretariat Associate

241 Kenya Utalii College Associate

242 Kinazini Funzi Dhow Safaris Associate

243 New African Territories Associate

244 PAWS Africa Safaris Ltd Associate

245 Riuki Cultural Centre Associate

246 Sher Safari Services Ltd. Associate

247 Shimoni Aqua Ventures Associate

248 Tamarind Management Ltd Associate

249 The Air Travel & Related Studies Associate

250 Tourist Maps Kenya LTD Associate

251 Wild Waters LTD Associate

252 World of Tui Associate

253 Access Africa Safaris LTD Associate

254 Affable Tours & Safaris (E.A) Associate

255 Africa Bound Safaris (K) Ltd Associate

256 Africa Classic Escapes Ltd Associate

257 Africa Partners In Safari Ltd Associate

258 Baisy Oryx Tours Travel & Safaris Associate

259 Bellafric Expeditions Ltd. Associate

260 Bravo Norris Ltd. Associate

261 Buena Vista Tours & Safaris Associate

262 Bushtroop Tours & Safaris Associate

263 Centurion Travel & Tours Ltd Associate

264 Cheetah Tours Ltd Associate

265 Deans Travel Centre Ltd Associate

266 DK Grand Safaris & Tours Ltd Associate

267 Eastern Vacations Tours Ltd Associate

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268 Elite Travel Services Ltd Associate

269 Exotic Golf Safaris Ltd. Associate

270 Eyes on Africa Adventure Safaris Ltd Associate

271 Gofan Safaris Associate

272 Hirola Tours & Safaris Associate

273 Ideal Tours & Travel Associate

274 JK Safari Adventures Ltd Associate

275 Jocky Tours & Safaris Associate

276 Kenor Safaris Ltd Associate

277 Marble Travel Associate

278 Napenda Africa Safaris Associate

279 Natural Track Safaris Associate

280 Natural World Msa Safaris Associate

281 Platinum Car Hire & Tours Associate

282 Safari Icon Associate

283 Sameco Tours Associate

284 Scenic Treasures Ltd Associate

285 Spot Kenya Safaris Associate

286 Sunpeak Safaris Associate

287 Tamimi Kenya Ltd Associate

288 The Eriksen Adventure Associate

289 Travel Waves Safaris Associate

290 World Explorer Safaris Ltd Associate