International Management

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International Business Management: Hemavicaciorea Wine in Kenya

Introduction

Statistics significantly role plays in decision making. According to Casadesus-Masanell and Armerding (721), Kenya imported about $32.3 billion in 2016, making it the world’s 85^th largest importer. For the past years, Kenya’s imports have continued to increase at about 127 billion annualized rate with refined petroleum and packaged medicaments being the top most imported  (Casadesus-Masanell and Armerding 725). For consumer goods, alcoholic beverages are the most imported. According to a report by the World Bank, alcohol constitutes about 1.6% of Kenya’s household consumption expenditure (Mwaura 5). Venturing in wines and spirit exportation to Kenya, thus, presents a great opportunity for slicing the billion-dollar sector.  It is against this backdrop that this paper conducts a political environment analysis of Kenya to determine whether it is actually viable for Hemavicaciorea, an alcoholic product.

Political Environment Analysis of Kenya

The republic of Kenya is a growing country within East Africa lying along the equator. It is surrounded by the Indian Ocean on the south east and countries like Somalia, Ethiopia, Uganda, Sudan, and Tanzania on the other ends. Within east and central Africa, Kenya’s economy is the largest by GDP (Nandonde 55). Its capital city, Nairobi, is a major commercial hub. Cumulatively, these factors make the country a developing and emerging African nation. To better understand its market dynamics, a PEST analysis will be conducted.

Political System and Structure

Kenya experiences politics from one election to another, with political leaders championing their views all the time. While Kenya’s elections and political environment has been known to be peaceful, the 2007 and 2017 brought a lot of fear to the residents of the country. Due to political heats that normally arise during such times, businesses often get interrupted because commercial establishments have to be closed to escape the wrath of demonstrators and rioters (Mkuu et al. 13). As a result of the country’s political structure, the country’s initially robust protectionist tendencies have also been liberalized since 2002 with the Kenyan government seeking to bolster investment inflows to increase its business environment (Kendagor et al. 13). Politics has also affected labour unions in the country, like Central Organization of Trade Unions (COTU), to the extent that labour unrests are rampant and there is a cumborsome cumbersome bureaucracy which impose costly delays on commercial dealings (Mutisya and Willis 56). The political system also makes the application of trade restrictions inconsistent. Businesses run by any other citizen is faced with several trade restrictions compared to those run by the top leaders of the country. When unethical or illegal conducts by those businesses run by top political leaders are detected no serious legal action is taken. On the contrary, common citizens face severe legal penalties.

Stability of Government

The political situation in Kenya has become more stable compared to times past. Kenya’s political condition is sufficiently predictable since it is determined by the elections. As such, a foreign investor can effectively plan their business and develop suitable cushions against uncertainties that may affect the country (Casadesus-Masanell and Armerding 729). The country is also characterized by very few economic crises, as such being attractive for investing in the wine industry.  Similarly, Kenya is the most preferred destination by foreign investors because of high level of security since Kenya is among the safest nations in Africa except for a few cases of Al-Shabaab terror attacks (Mwaura 7).

Not only is the government politically stable, but it is also it is also economically stable. A study  by Mkuu et al. indicate that Kenya derives its major strengths from its high domestic demand, geostrategic location, strong financial status, and well educated labour force (14). These factors have made Kenya one of the world’s most competitive economies. Similarly, the scope of Kenya’s development lies in the buttressing of creativity, proper use of its human capital, and innovation. Kenya’s current economic climate is marketplace centred with just a few express owned companies and a liberalized commercial system. Similarly, modern trade routines and liberalization regulations have resulted in new foreign companies venturing into the Kenyan economy, creating new sectors and it has had opportunities to support its energy requirements to a good degree (Gwako 15).  Similarly, due to the new trade routines and regulations, Kenya’s corporation taxes are currently lower than it was in the past. Thus, the economy is favourable for Hemavicaciorea wine trade.

The Kenyan government is also socially stable. Kenya is among the most populated nations in East Africa region, with its population being more than 50 million as at 2018 according to the UN estimates (Ssewanyana et al. 1943). This number creates a good marketplace for goods from other nations. Additionally, the country has a potential of being one of the Africa’s success stories in terms of youth population growth, a dynamic private sector, improved infrastructure, highly skilled labour, a pivotal role in East Africa, and a new constitution (Gwako 24). Despite having several tribal groups, the western and European cultures are highly embraced by its population, making the land a good market for goods that are produced in the western and European nations (Casadesus-Masanell and Armerding 728). The huge untapped labour force offers cheap workforce to new business ventures.

Bribery and Corruption Risk/Index

Kenya, according to the Transparency International’s latest report about East African Bribery Index showed Kenya to be the most corruption-prone nation within the region, with the general public sector being the worst affected (Nandonde 55). According to Kendagor et al. (13), Kenya is one of the most developed economies in Africa with its individual shortcomings and strengths. However, Ssewanyana et al. notes that some of the challenges that it must address, going forward, are like high unemployment rate, low R&D, and current account deficit (1946). The market largely relies on agriculture and the professional industry remains underdeveloped. The major monetary challenges facing the Kenyan marketplace are: high human population growth, rampant corruption, and inflation (Ssewanyana et al. 1942). 

The rampant corruption has negatively affected the economy to the extent that donors are withdrawing their services from Kenya. For instance, Kenya is the East Africa’s regional hub for trade. However, as a result of corruption, a lot amount of money is lost through misappropriation and embezzlement, resulting in inflation since the government is trying to raise taxes in various ways (Jenkins et al. 230). From 2004, the inflation rate of Kenya has steadily been rising, occasioned with political unrest and economic instability (Kendagor et al. 14). Ssewanyana et al. point out that donations, grants, and monies borrowed for various projects are embezzled every now and then, the latest being the money that was donated to the country to help fight Covid-19 pandemic that has eventually been traced into the pockets and bank accounts of the political class and top management  in various government agencies (1948). These are noteworthy concerns that should carefully be evaluated before investing in the Kenyan economy.

Future Political Risks

Kenya is vulnerable to political more risks. Elections occur after every five years. Such elections come with serious political heats that often interrupt businesses. Additionally, Kenya is attracting the western and eastern countries’ investors. Historically, the western and eastern countries have been in war, fighting for business grounds. Kenya being one of the viable grounds in Africa being fought for, there are several political risks, like sanctions, severing of business relationships with either of the regions, and devaluation of the Kenyan currency, among others (Okaru 2430). As such, Kenya must carefully play its part in the mix. Mkuu et al. add that terror attacks are on the rise and Kenya remains a target of such because of its association with some western or eastern countries (14). These political risks are likely to continue negatively affecting the economy. Mwaura notes that Kenya has more than 50 million people, providing a huge marketplace for various products (7).  With an averagely young population who are pro-fashion and pro-western cultures, the introduction of Hemavicaciorea will attract the attention of many Kenyan young generations that wants to identify with new brands (Jenkins et al. 230). However, with most Kenyans living below the poverty line, robbery, riots, kidnapping, and demonstrations, among other forms of unruly behaviours may increase and these may negatively affect business in the country.

Conclusion

There are several factors that influence the viability of an economy for foreign investment. This paper focused on the political environment, an aspect of PEST, established that Kenya is a viable country for running a Hemavicaciorea wine company. This is due to the political structure and system and government stability in its varied forms. However, the challenge of corruption is commonplace. As such, a company considering venturing in Kenya must take those factors into consideration.