The Effect of Retail Distribution Strategies on the Competitive Advantage of Oil Marketing Firms in Kenya: A Case of Vivo Energy
Nderitu, Duncan Mathenge
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The liberalization of the Kenya’s petroleum sub-sector in October 1994 has over the years led to unexpected entry of new players into this sector. This has subsequently led to an increase competition as oil marketing companies fight a never-ending war for customers. In addition, the increase in competition has increased the bargaining power of the consumers as they now have a wide variety of choices. This coupled with changes in socio-cultural trends such as education and the increased importance of time has forced oil companies to be more sensitive and responsive as customers are now demanding value for their money. This study therefore sought to assess the implications of retail distribution strategies on the competitive advantage of oil marketing firms by focusing on Vivo energy. The study also sought to determine the influence of retail network expansion, franchising and partnerships, logistics outsourcing convenience retailing strategy on the competitive advantage of oil marketing firms in Kenya. The study was anchored on resource based view, resource dependency and agency theory. This study used a descriptive research design. The target population of this study was all the 110 staff working at the headquarters of Vivo Energy. Stratified random sampling technique was used to select 50% of the target population. The strata included departments in Vivo energy such as marketing, supply chain management, finance and customer service as well as petrol Station managers. The sample size was 55 staff. This study used both primary and secondary data. Secondary data was collected from the financial statements and the strategic plan of Vivo energy. Primary data was collected by use of semi-structured questionnaires and key informant interview guide. Before the main data collection a pilot test was conducted to test the validity and reliability of the research instrument. Quantitative data was analyzed by use of both descriptive and inferential statistics by use of statistical package for social sciences (SPSS version 22). Descriptive statistics included frequency distribution, percentages, measures of central tendencies (mean) and measures of dispersion (standard deviation). The data was then presented in tables and graphs. Inferential statistics such as correlation analysis and multivariate regression analysis were used to establish whether there is a relationship between the dependent and the independent variables. The results indicated that retail distribution strategies explain 75.5% of the competitive advantage of oil marketing firms in Kenya. The results indicated that retail network expansion has a positive influence on the competitive advantage of Vivo energy (β1=0.402, p-value=000). In addition, logistic outsourcing has a positive influence on the competitive advantage of Vivo energy (β2=1.019, p-value=0.000). Further, convenience retailing strategy has a positive influence on the competitive advantage of Vivo energy (β3=0.441, p-value=0.000). . Franchising had no significant influence on the competitive advantage of Vivo energy (β4=0.172, p-value=0.322). The study recommends that Vivo Energy should seek to increase its branch network even more. In addition, they should focus more on areas lacking fuel stations, upcoming residential areas and developing cities. To improve its distribution network, Vivo Energy needs to adopt the franchising strategy as it requires little or no resources. Also, since the company has been increasing its branch network, it should consider incorporating conveniences stores like shopping Matts and services like car wash and motor vehicle servicing.