The Kenyan economy is rapidly rising with international businesses coming in and local businesses turning international as they go to other countries. This attracts attention of those companies that are willing to invest in Kenyan economy. Investments inflows were increasing till 2015 but had a sudden decline in 2016. There was a bit of a setback due to the elections of 2017 that caused a most business year to go down and many foreign companies and investors were leaving or not willing to come in, but now the economy is showing improvement and they are recovering quite faster. Also, Kenya is a big economy and has a high number of consumers (140 Million) compared to the other East African countries such as Tanzania, Uganda, Rwanda and Burundi. Such information increases interest of foreign investors.
Shanghai Corporation is willing to invest in the manufacturing department of the Kenyan economy. They are wanting to take different sectors in the manufacturing department and are willing to be the parent company in the wholly owned subsidiary.
To invest into Kenya, they need to know the environment, the economy, the department they are investing in and what lengths they are willing to take to achieve their goals. The Corporation needs to have all the factors cross checked and their implements to overcome the factors.
Foreigner investing in Kenya are more oriented towards long lasting. “Europe is the largest investor in Kenya with 33.7 per cent including Netherlands, France & UK. The second largest being Asia with 15.5 per cent.” Said KNBS. There are other African countries that invest in Kenya as well.
External Environmental Factors
A business must observe its external factors before investing in it to be able to control the outcomes and make necessary changes to the business or the investments to not create feuds amongst the environment.
An external environment consists of factors such as social, legal, economical, technological and political. All these factors play a part in how the business or investments run.
Social factors
These are related to the patterns of the consumers and how they behave. What are the consumers looking for or are interested in, what majority is inclined to what product? In relation to the manufacturing that the Shanghai Corporation wants to do, they must see sector of manufacturing is more reliable, either edible products or non-edible products. The products should not be harmful to the consumers and should serve the purpose. The process they use to manufacture the product should not change the environment negatively and should support the local culture of the area.
Legal Factors
These are the laws and regulations made by the government. These laws run and maintain the running of a business so that businesses are not biased to any situations. The investors should keep up with the regulations because they keep on changing or updating so they need to make sure they do not break any rules. The investors cannot use their home country rules and regulations to run a company in a foreign market because the laws may be different and can also go against the Kenyan laws. The investors should be abiding by the laws of the government and can be flexible enough to the sudden changes made if the laws change of Kenya.
Economic factors
These are affected by the living standards. Increase or decrease in living standards directly affects the purchase of products. If there is an increase in the living standards that means, there will be an increase in purchase of products. The opposite happens when there is decrease in standards of living, less purchase is done when there is less income made. The economy changes according to the interest rates, wages rates and the inflation rates. Shanghai Corporation should have pricing structures that accommodate the current living standards and not have prices that majority won’t buy because it is too expensive. This shows the business should be able to accommodate the changes and survive.
Technological factors
These change daily. Technology is updated regularly to make work easier. There will always be something new or something better than before that will be brought into the society for use. It is true that technology makes work easier, but it is as well true that it is cheaper. The Shanghai Investors can stay in their home country and still be able to know and see what is going on in Kenya at the same moment because of technology, you can be connected to the CCTV cameras and the computers to know the daily reports. Adapting to the new technology gives an upper hand in competition because you have already changed your system while your competitors are still learning about the update. It is cheaper and faster because rather than sending mails through post which takes at least days to reach E-mails does it in minutes. Communication between employees and employers has become fast and reliable.
Political factors
These are the changes in government and government policies. These are the effects that occur mostly when the government changes that is when after elections. Most of the times during elections is when foreigner lose interest in a country because their elections are near and there may or may not be riots. The government stability decides on if there will be foreigners dealing with Kenya. The current government decides on what they want with foreign investments or even if they can invest into the country and what rules and regulations are designed for them specifically. The investors should be aware of the government and their policies.
Strategic Planning
Planning a business strategy means analysing and scanning all the factors and resources around the firm to make decisions necessary for the growth of the business. A strategy is stating how the corporation will achieve its mission. This planning is long term generated.
A strategic plan is started with its creating a mission and vision. A mission is the description of the corporation as well as clearly outlines the goals of the company i.e. what we are, what we do, how we do it, whom do we do it for and who we are. A mission statement should be sensitive to the customers and should be concerned about the quality of the product produces. The mission statement is based on:
- That the product or service of business to benefit at least equal to its price. The product should be able to cover up the cost of production.
- The product provided should satisfy the consumers. The product should be tested before brought into the market to make sure consumers do not get side effects from it.
- The technology used should provide a cost and quality competitive product. The new advanced technology used should be able help create a product that is better than the competitors and less costly in production.
- The market place should satisfy the consumers. Be aware of where you are selling the product. The local public should not be offended with product that the firm you are manufacturing.
- The corporation should have a potential growth as the business years go by. A frim cannot stay in the same position for a constant 10 years; it should increase someway i.e. location increase, more production than before or increase in range of business area.
The vision statement is more future oriented. It shows the strategic intent that focuses on energies and resources of the corporation. The statement should be easily remembered, should be clearly understandable, should show a specific time horizon in which the goals are expected to be achieved, should be stable, they should challenge the company to help the business grow and should inspire the employees so that they have something to look forward too.
SWOT analysis
SWOT analysis is a management strategy that helps run the business. Swot defines for:
S – strength.
These are the strong points that keep the business running. They can be the resources, employees or even the building structure. If the employees have a good environment to work in, then they can do more work which means more output in production.
W- weaknesses.
These are the low points that pull back the business a few steps. Such as transport and location of the firm, limited amount of time to produce, bad quality resources.
O- opportunities.
These are the new ideas, innovations or chances provided to the firm to increase the growth of the business. They come in different forms such as new manufacturing ideas or new working structures for the employees to work in or increasing the infrastructure.
T- threats.
These are the negative effects that try to shut down the firm. Such as local competition, price of the product too high for purchase, less supply against demand, not adapting to the new technologies.
The strength and weaknesses go against each other just like the threats and opportunities.
It as well makes a common relation between strengths and opportunities and threats and weaknesses, they all go hand in hand with each other.
Benchmarking
This is where a firm compares their current performance to other firms and change their overall presentation to fit to the goals achievement in the long run.
Strategies and Policies
There are two types of strategies:
Generic strategies
There are two types of generic strategies low cost and differentiation.
- Low cost is based on reducing the cost of production as much as possible and still being able to produce the same output if not more. This increases capacity utilization and large-scale economy.
- Differentiation is making a product different from its competitors but still having the main attribute to stand out and achieve the consumer attention and increase customer loyalty.
Focus is a strategy that is reliable on both low cost and differentiation. It is mostly focusing to satisfy a specific group of consumers and they are willing to move the firm’s location according to consumers area.
Grand Strategies
These are strategies that are coordinated and sustained to achieve long term goals or objectives.
- Horizontal integration is where a firm buys another with the same production or marketing strength
- Vertical integration is where the firms does everything oneself i.e. from the of producing raw material to the marketing and selling all done by the one firm on its own.
- Joint ventures where two or more firms come together with the same categories to overcome a big competition market. They share their resources, technologies and ideas.
Shanghai Corporation should choose Joint Venture strategy because it would be easier to invest in an already existing company to not have to start all over again and rather just continue. Choose a company that is going through crisis and help it with your invests to overcome their problems as well start up a venture and make the company international to attract more attention of consumers.
Policies are broad, precedent- setting, decisions that guide or substitute for repetitive or time sensitive managerial decision making. These are the rules set by the corporation to guide the employees to do the work and helps in decision making. Policies are made by a group of people that base it on past experience. Policies establish indirect control and help make faster decisions.
Implementation
These are the strategies or policies that are put into action through the development of programs, budgets and procedures.
- Programs are the projects that are created for the work that is to be carried out in the corporation, they are action oriented, plans made for the firm’s departments to make sure the works are done.
- Budgets are long term plans of the firm’s revenues. After the program have been created the budgets are set to decide and control the how much it would cost from the cost of production to the marketing cost. Budgets are future cost predictions of certain activities.
- Procedures are how the activities will be carried out, what will be done for it to work. It is a detailed information of what work is to be done and how the products will be produced to how the will be sold. Everything is written in detailed specifics.
For implementation to positively work it must be carried out properly. The strategic intent of the program should be identified well, there should be a leader willing to accept change in the organization for the better future of the firm,
Poor implementation occurs when there is lack of communication, lack of ownership, lack of funds, less resources, an overwhelmed plan or a meaningless plan, no progress report or accountability and lack of empowerment. All these factors can cause a strategic plan to fail.
In a joint venture strategy, the firm should plan programs on how they will overcome the crisis with the other firm i.e. what they should improve to increase the consumer attraction and the image of the business. The budgets should be less costly but also increase the production by using new technology to make product quality better. Procedure should do the same meaning should reduce work and be easier to follow. They should refrain from making any of the poor implementation decisions to reduce chances of failure.
Evaluate and Control
Evaluation is the collection and analysis of data that help make decisions for the business. This process helps get feedback from the employees on how the strategies are applied and what have they concluded about them i.e. are the programs created efficiently working, are they doing what is needed to be done, does there need to be made a change in any of the strategies applied, are all the resources being utilized and is the organization performing.
Selecting an exact criterion for the firm depends on the size of the firm, strategies and philosophies used by the organization.
- Quantitative and qualitative are criteria’s that evaluation is analysed on. Quantitative is more oriented towards the amount of production done against the cost of production. It is compared in three different ways performance over time, performance over competitors and performance over the industry market.
- Qualitative factors are the non-tangible aspects such as the consumer satisfaction. These factors are as well used to answer questions such as is the strategy applying all its resources into the firm, is it constant with the external and internal environment and does it have an acceptable timeframe work.
- Control is what a firm does after they have made the evaluations to reduce the negatives and maintain the positives. Make changes where necessary when problems are detected.
- Premise control is where there is constant analyzation of the environment to know that where the premise is located is good for the strategy applied. All the external environment mentioned above are constantly changing, so to keep up with the change, they need to be understood to make the same changes to the firm.
Shanghai Corporation needs to be constantly checking in with the firm’s activities to make sure the work is being done and they need to be given feedbacks on all progresses reports applied in the firm.
Conclusion
As I said before, I would recommend the Shanghai Corporation to do a Joint venture with another company to reduce the time spent on building a new one from scratch which at least takes 5 years of strategic planning.
Merging with this company means most equipment are already there and only need upgrading. It has already survived through the election period which caused businesses to go down. It has experienced and skilled workers who already have the knowledge on what to do and what not to do. They have everything planned out from analysing the external factors to planning the strategies and policies and have already implemented them onto workers.
When the merging is done, the changes can be made the two or more firms coming together and discussing where the problems are from the evaluations and feedbacks brought in and create controlled outcomes to help success the Corporation.
The merging can then be measured by steering controls, activity-based cost or management or shareholder value.
For a successful merging the strategies should follow these steps:
- Engage the right people
- Create the right environment
- Broaden the scope
- Create a clear scope of action
- Communication to be clear and understandable to all
- Alignment of the strategies and structure to be straight forward.
2018-4-4-1522847796