Paper Sample on Navigating Opportunities: Logistics Inc.'s Exploration of Exporting to Kenya

Introduction

Globalization is one of the current trends in the business environment, and many businesses do not want to be left behind. To maximize profits, an organization has to consider several factors before identifying a country to export its products. Organizations always aim to expand their markets. They implement their idea of expanding the market through expanding product lines and expanding geographical developments.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

It is important to expand market coverage in order to make a business, company or organization grow. However, caution must be taken to ensure that the risks associated with expanding the market in a certain area do not outweigh the benefits associated with it. As Logistics Inc. plans to export to Kenya, which is the new export country, it should also consider making more efficient and more appropriate products. There are many ways through which businesses can gain access to the international market, and these main ways include directly or indirectly exporting goods to a foreign country that has conditions and atmosphere favoring international trade.

Exporting goods is a practice that has been in existence for many years. In fact it is considered an old but well-established way of operating in foreign markets. Exporting means marketing goods and selling them from one country to another. When a foreign country sells its goods to Kenya, it means the foreign country exports the goods. A good investment in marketing is required for successful exportation. There is a need for a detailed marketing strategy, including obtaining good information about the market that one intends to export to.

Chege (2012) says exporting requires collaboration between the person exporting (exporter), the person receiving the exports (importer) transport, and the government. The risk of failure is increased if the four do not work or coordinate properly. There has to be an agreement or signed contract between the seller and the buyer.

New Export Country

This paper identifies Kenya as the new export country for Logistics Inc. The country is the commercial, economic, and logistics hub of East Africa, with a market-based economy. Kenya has attracted private equity capital because it has a strong industrial base in the East Africa region. Besides, Kenya has a comprehensive air route. The country has a good relationship with the United States, making it easier for international trade to take place between the two countries.

It is suitable to export high-tech types of equipment to Kenya because the country also has a good population, but is still behind in terms of technology. Many people still need technological types of equipment. According to Kenya's population and housing census (2019), the country has a population of about 47.5 million. There is also an increased number of professionals who want to embrace technology. Nairobi, the capital city of Kenya is known for its huge number of well-educated English-speaking, and multi-lingual professionals, and for its strong entrepreneurial tradition. A good percentage of Kenya's population consists of youth, who are below the age of 35.

Kenya’s Challenges

Kenya faces several challenges that include unemployment, corruption, ethnic clashes, poverty, and insecurity. With an estimated 40 percent unemployment, 43.4 percent of Kenya's population still lives below a dollar per day, and the country's GDP per capita is approximately USD 1,800 (Geda et al, 2015). The key economic challenge that Kenya has ahead is increasing its GDP growth rate (Vos et al, 2018). To address Kenya's higher unemployment rate, sustained significant economic growth is essential. Kenya achieved 7% growth of GDP in 2019 but the adverse effects of Covid-19 have lowered this drastically.

Achieving high growth of Kenya's GDP however, will depend on greater economic reforms and improved economic governance during and after this pandemic. The general elections, conducted in 2013 under Kenya's new constitution ushered in a devolution where development can take place at the grass-root level, but continued unemployment and high rate of corruption are letting the country down, even by way of increasing political risk.

According to the Kenya National Bureau of Statistics 2020 report, Kenya's volume of trade has fallen by 6%. Domestic exports have dropped due to the restrictions that were put in place by the government to control the spread of the coronavirus. Imports have also fallen by a significant percentage, owing to the same effects of COVID-19. One of the most growing sectors in Kenya is information communications technology (ICT), and Internet access rates are at a high level in the country. Kenya is a regional leader in terms of improved mobile services, with Kenya's leading telecommunication Company Safaricom giving Kenyans a chance to use value-added mobile services like M-pesa.

In the recent past, Kenya has experienced security threats that have been attributed to the existence of Al-Shabaab and other military troops. The insecurity and high crime rates have impacted negatively on trade. Kenya's financial and manufacturing industries, while relatively modest, are the most sophisticated in East Africa. Although Kenya's mineral resources are limited, the country has a potentially important source of high-value mineral commodities, such as titanium.

Kenya has an extensive, yet uneven, infrastructure. Nairobi is the transportation hub of Eastern and Central Africa and the largest city between Johannesburg and Cairo. The most important deep-water port in the Eat Africa region is the port of Mombasa, and it meets the shipping needs of several countries, making exportation and importation possible to carry out. Meanwhile, the port of Mombasa has been marked for re-habilitation and major expansion.

Kenya has a federal administration, with 47 county governments and 19 ministries, similar to the U.S. way of administration. Kenya now has two houses of parliament i.e. Senate and the National Assembly, and the country is receiving increased attention from business communities and international investment. Kenya's Public-Private Partnership came into effect in 2013 with the main aim of increasing the country's ability to attract investments from different private sectors and to also encourage imports and exports. There is enhanced private sector participation in trade and the development of infrastructure, making Kenya a suitable place for Logistics Inc. to export its products.

Kenya's physical infrastructure is superior compared to those of her neighbors, therefore it can encourage trade and economic development. Kenya's government has tried to make investments in roads, competition regulation, government efficiency, and judicial system. This allows the country to gain ground when compared to other neighboring countries. There is little price competition in Kenya as compared to other neighboring countries. Kenya is said to be fast-developing, and it needs high-tech types of equipment to speed up development and improve service delivery.

The Kenyan government is working tirelessly to improve market efficiency, thereby giving hope for exportation and importation. By choosing to export high-tech machines to Kenya, Logistics Inc. will be taking advantage of the improving market efficiency in Kenya. In Kenya's urban settings, the government has been able to provide a secure business environment. Property crime and violence have been major problems in the past.

A serious disadvantage in Kenya is corruption. Transparency International which monitors corruption ranked Kenya at number 136 among the most corrupt countries in the world. Claims of corrupt dealings, particularly in large government contracts and purchases have been reported in Kenya in the recent past, and it seems the corrupt government officials and other leaders are taking too long to embrace change. There is concern that Kenya's public contracting law has not been able to stop corrupt leaders from steering contracts to those who offer bribes.

Legal recourse in Kenya is expensive and very slow. A popular feeling in Kenya is that government decisions are always made to benefit certain individuals. This is affecting judges, as it is very difficult to administer justice in a country where the independence of the judicial arm of government is compromised. While there are many honest and honorable judges, civil servants, and judges, there is still noticeable cynicism about the objectivity of executive and judicial branch decisions. This has adverse effects on companies and traders who shy away from giving bribes.

The use of the courts and police by political leaders to pursue personal interests is becoming rampant in Kenya. Despite what the law states, politicians are acting in their own interest and the interest of friends and family members. This, in the long run, denies other business partners the opportunity to pursue legal justice and support from the police and legal system. Companies having the desire to export to Kenya should be aware of the fact they have less political clout than any other Kenyan businessmen.

There is widespread counterfeiting in Kenya, and several individuals violate intellectual property. This can cause a major problem for Logistics Inc. To minimize the chance of having the copyrights of Logistics Inc., violated, the company should take advantage of The American Chamber of Commerce (AmCham). It has an IPR committee of rights holders, who are very engaged along with the United States Department in combating counterfeiting in Kenya.

Shipment times from the U.S. to Kenya are 8 weeks on average, and customs irregularities are usual. For prompt supply and customer service, Logistics Inc. should consider warehousing in Kenya, and using air transport to deliver machines. In July 2013, the Customs Department of the Kenya Revenue Authority (KRA) imposed a 1.5% Railroad Development Levy (RDL) on all shipments arriving in Kenya. The levy is applied to goods arriving in Kenya by ship, rail, air, or truck. The Railroad development levy was imposed to fund the construction of the standard gauge railway.

Kenya’s Advantages

Kenya faces many challenges, but some advantages favor exportation to Kenya. There are not too many procedures for exporting goods to Kenya, and Logistics Inc. should take advantage of this. Kenya has the most competitive economy in the East Africa region, this is according to a report by the World Economic Forum. The country is ranked 3.9 out of seven. Uganda, Ethiopia, and Tanzania score 3.6 out of seven.

Kenya also ranks higher than the other three countries in the region in higher education and market efficiency. There is also financial market development and innovation taking place in the business sector. It implies that Kenya has a dynamic economy which makes it possible to adapt to market forces. Kenya has relatively well-educated individuals and a better-trained workforce which puts it in a better position to engage in the importation and exportation of goods and services.

According to the Kenya Export Promotion and Branding Agency, successful exporting to Kenya requires planning. Logistics Inc. should be aware of the fact that to do successful exportation, there has to be commitment and effort, this also strengthens relationships. Planning helps in recognizing success factors, export options, the cost of exportation, the value of the timeframe for achieving each milestone, and the people needed to make exportation a success.

Kenya is a country that is open to foreign trade, and this trade greatly contributes to 36.2% of its GDP (World Bank, 2018). By being a member of the World Trade Organization, Kenya continues to remain committed to trade liberalization.