Doing Business in Kenya Report 2012

There are a number of parameters that are used to determine the ease of doing business in Kenya. This in-turn determines the attractiveness of the country to potential investors.  For economic growth to take place in the country, we must be able to produce what we need to use or consume, and by extent, export to other market since we also need to import what we do not produce. The report details key findings and we should be able to draw information that will assist us identify areas we need to improve on in order to promote investment.

Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in regulations affecting 10 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

In a series of annual reports Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. The data set covers 46 economies in Sub-Saharan Africa, 32 in Latin America and the Caribbean, 24 in East Asia and the Pacific, 24 in Eastern Europe and Central Asia, 18 in the Middle East and North Africa and 8 in South Asia, as well as 31 OECD high-income economies. The indicators are used to analyze economic outcomes and identify what reforms have worked, where and why.

This economy profile presents the Doing Business indicators for Kenya. To allow useful comparison, it also provides data for other selected economies (comparator economies) for each indicator. The data in this report are current as of June 1, 2011 (except for the paying taxes indicators, which cover the period January–December 2010).

The Doing Business methodology has limitations. Other areas important to business—such as an economy’s proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders and getting electricity), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions—are not directly studied by Doing Business. The indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policy makers in designing regulatory reform.

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Reference

http://www.doingbusiness.org.

"Are Kenyans Entrepreneurial or Enterprising?"

Take a walk down the streets of Nairobi or within the estates and one thing will definitely strike you. Its evident that you have numerous options of service providers or places to purchase items, be it airtime, footwear, clothing, fast food or tiny electronic gadgets. Most businesses have been quickly swallowed by the stall revolution withing the Nairobi Central Business District (NCBD). Every stall you enter will definately have numerous shops selling apparel, footwear, ladies bags, cellphones, pirated audio and audio visual copies production (be they CDs or DVDs) and Mobile retail and service outlets. Kenyans? Whats happening? Can be be more creative than local prototyping of businesses? What Happened to our creativity and Innovation?

True Entrepreneurs are known for excogitation and this clearly puts the demarcation of what most of us think we are doing, and what we are exactly doing. Most of us dive into business after learning of the success of an individual in a particular business, and we conclude that if others are making it, them we should. Starting a trading business or a simple service business can be quite easy but growth is definitely challenging. Most of the business owners hardly project about the growth of their business and are basically in it because they would like to have some extra income.If you were to ask some of the Mobile Money transfer Agency business owners of where they see their business in five or seven years, hardly will you get an answer. Last month I went to purchase a cartridge for my printer from Vincent who has been supplying me for the last two years, only to find a different business at the same spot. I was initially perplexed and I actually had to get out of the building to confirm whether I had used the right entrance, since most of them tend to resemble each other on the interior. This left me in a state of meditation as soon as the reality sank that the business was no longer in that building. Lets put a distinction between business persons and entrepreneurs since they come from a different school of thought. While an entrepreneur sees an opportunity to satisfy a particular need, a business man  sees an opportunity to make money. Kenyan business persons need to learn lessons on good customer service and customer relationship management, anyway, that will be on my next blog. Since I had the Vincent's cell phone number, I decided to give him a call, and the response I got is that he closed that business and was already running a cyber cafe at Donholm Shopping Centre. I wished I would have had sessions with him so as to understand his inspiration to move from a promising business venture to a rather quickly withering business.

From the Global Entrepreneurship Monitor (GEM) Report on Uganda, there are more businesses in the Uganda as opposed to a comparison of some European Countries which are already developed. A further look at the details, there was evidence that most Africans are pushed into entrepreneurship due to the need for survival and not necessarily the need to satisfy an existing unmet needs or existing business opportunity. This clearly explains the Kenyan Case where entrepreneurs in go into business for survival reasons. As a result, many copycat businesses mushroom in every corner of the city or town. This confirms that most Kenyans are Enterprising and not Entrepreneurial due to the reasons that drive them into business. However, lets give credit to the few entrepreneurs in the country who have innovative business ideas which are truly entrepreneurial. Its a high time that we changed the trend and decide to dream big, as well as project the future of the business beyond 5, 10 or 15 years. Lets accept that we can consolidate funds and start a big venture rather than run many small businesses that basically compete with each other. This is what most Asians have been practicing, hence they own most of the major businesses in the country. Pose for a moment and think of any blue chip companies in each of the sectors in the economy, ..........am sure that out of those you named, over 40 percent have Indian Ownership.

A Business Plan and its Uses

Most Kenyan entrepreneurs go into business blindly without having given their business idea a critical thought. Last month i had a chance to tour around the Nairobi Central district which left me pondering about the businesses that exist within the town. It is quite exciting that most of them are small businesses, that reaffirms the role they are likely to play in the achievement of the Vision 2030. But some things did not really excite me, for instance, i was interested in visiting one of the shops where I used to purchase computer accessories, only to find a botique at the same location. I got a little confused and I had to get out and confirm that i was in the correct building. Those of you who might have visited the stalls along Tom Mboya street, you know what i mean. Going back to the same shop I was advised that the business was closed and the owner sold the stock at through away prices. I knew the shop for around a year and since three years ago the building used to be a resturant, that confrimed to me that the business had not existred for long. As a result of my experience, I could tell that there is a high likelihood that the entrepreneur may not have developed a business plan before venturing into the business. The case is the same with many other stalls within town where other businesses hardly last three or four months. What can we do to ensure that our businesses are built on strong foundation and they are sustainable?

Business planning is of great help in enabling the entrepreneur understand how feasible the business idea is, as well as guide the business towards meeting its objective.It keeps the business itself and all its decision makers towards pre-determined direction/results.  It also serves as a sales tool for funds mobilization either from private investors or from lending institutions. A successful business plan is a document that conveys the exciting prospects and growth potential of your business. It might be best viewed as a selling document. It sells the business to potential financial institutions and lenders. By effectively selling the business as a whole, a
business plan makes a strong case for specific projects. For instance, a plan may be used to seek funding to cover the expenses associated with developing and marketing a new product. Or it may be intended to secure a bank loan for additional manufacturing equipment. Of late, it has become a vital tool for Small and Medium Enterprises (SMEs) seeking business opportunities from large organizations.

Similar to advertising and promotional material sell a company, so should a business plan — though in a more straightforward, organized, and detailed way. Thus, a business plan should not only emphasize the strengths of a company, but also be realistic about its problems, risks, and obstacles, while offering solutions to these issues. To accomplish its goals, a business plan must do the following:

• Discuss the company’s goals for the near-term and long-term future
• Show how the goals can be achieved
• Demonstrate that realization of the plan will satisfy the reader’s requirements.

External Uses of the Business Plan

The business plan is a company’s first-line tool for obtaining funding and other types of outside support. Investment Funds Private equity investors and venture capital firms will ordinarily not consider backing a company that does not have a written plan. Investors are seeking evidence of high growth. In addition, they want to know how they will realize their investment returns, whether through a public offering, sale of the company, or management buyback.
To assess the likelihood of high returns, investors look hard at the following:

• The track records of the company, the market, and the key executives
• The feasibility of achieving the forecasts
• The uniqueness of the product and its technology
• The quality of the management.

Bank Financing Bankers have traditionally focused on when and how the principal and interest will be repaid and the availability of collaterial to cover any loan losses. As such, loan application packages tended to consist of little more than past and current financial statements. However, bankers are putting more emphasis on how a company would survive possible setbacks. As such many bankers are requiring business plans be included in a loan applicable package. Also, a high quality business plan can help a company stand out favorably in today’s intense competition for loan funds.

Strategic Alliances These arrangements covering joint research, product development, and marketing have become increasingly vital for young, growing companies. The arrangement often includes a combination of financial backing and access to well-established distribution channels. The joint efforts may last three years or more. Major corporations invariably want to examine a company’s business plan before committing themselves to such long-term arrangements.

Mergers and Acquisitions As companies increasingly look to acquisitions as a means of expansion, and to divestitures as a means of gaining liquidity, business plans become more necessary. Companies seeking acquisition candidates typically use the candidates' business plans as one of their first screening tools. Similarly, if the managers of an acquisition candidate want to stay on after an acquisition, they will probably be extremely interested in the long-term plans of the acquirer.

Customer and Distributor Relationships For many growth companies, obtaining a large customer or gaining a commitment from a major distributor can be an important milestone. Large, well-known organizations are often reluctant to enter into arrangements with companies that are an unknown entity. A convincing business plan can help to dispel doubts.

External Uses of the Business Plan
A business plan is an important management tool. It enables management to plan company growth and to anticipate changes in a structured way. Executives sometimes argue that it is useless to write a business plan because the marketplace is changing so rapidly that any plan is quickly outdated. While it is certainly true that change is a matter of course, the process of preparing a business plan is at least as important as the plan itself. It forces management to think through the business in detail and to set objectives. And it allows benchmarks to be set, against which the company’s future performance can be measured.
 

Perhaps most important, the business plan commits the entire management team to the same goals. The process of working out the plan’s objectives invariably forces executives to reconcile different visions of where the company stands and where it is headed.A written business plan can be an important internal document for companies with multiple locations and operations. Top management can monitor the business plans not only to be certain that formal planning is occurring, but also to determine whether the finished plans are consistent with long-term financial and market goals.

In case you are thinking of pursuing a particular business idea, ensure you develop a business plan to crystallize it. It doesn't have to be a fifty page document, but one can start with a fifteen to twenty page document which can be improved on as the business grows. To strengthen your skills in business planning, you may consider participating in a business plan competition like the JITIHADA Business Plan Competition. The Deadline for receiving entries is on 15th March 2012. The guidelines for participation are also provided, which details the format and content. Go ahead and start a business today?

Business Growth Models

Structural Growth Model

The relationship between entrepreneurial structure or attitudes and firm growth is important for at least three reasons. First, it is widely believed that the entrepreneurs of a firm place a lasting stamp on their companies that influences the cultures and behaviors of their firms (Mullins, 1996). Second, investors and others often assess the potential of a new venture by evaluating the attributes of its entrepreneurs. One of the most important criterions used by venture capitalists, for example, in deciding whether to fund a firm is their perception of the entrepreneur's or the entrepreneurial team's ability to successfully launch the venture. Third, launching a new firm is a challenging process. As a result, individual difference variables, such as educational attainment and prior industry experience, have in many instances been found to be critical in successfully launching a new firm (Barringer et al., 2005).

Strategic Growth Model

Entrepreneurial strategy is an important factor for difference between rapid-growth firms and lower-growth firms (Wiklund, 1998). First, SME strategy is different from the strategy taken by large firms. Entrepreneurial strategy may affect all business activities in the progress of firm growth. Second, after a firm gets established and starts growing, the smaller firms usually are under bigger influence from entrepreneurs. And larger firms are in need of more professional management. Entrepreneurial strategy functions all the time. Hence, it is important for entrepreneurship researchers to recognize the importance of entrepreneurial dimensions of strategy in addition to individual level entrepreneurship (Miller, 1983). Wiklund (1998) suggests that entrepreneurial dimensions of a firm's strategy are seen as a combination of risk-taking, proclivity, and innovativeness.

Financial and Human Growth Model

Financial and human resources are basic inputs in the production process, whereas capabilities refer to the capacity for coordinating resources to perform certain tasks or activities. However, it is difficult from a measurement perspective to separate financial resource availability from the capacity to utilize these resources (Chandler and Hanks, 1993). The resource typology used in business growth is the one outlined above: fianacial capability, present size, number of employees that hold university degree, involvement of employees in decision making, present size (sales), formal professional cooperation, day-to-day advisors cooperation, decision making, and creating unique value for customers, product superiority, innovation (Barringer et al., 2005).

Organizational Growth Model

Wiklund suggests that task organizational characteristics in terms of dynamism, hostility and heterogeneity have been argued to be critical for suitable strategic choices, i.e. particular strategies are likely to lead to better performance depending on the level of organizational dynamism, hostility and heterogeneity. These dimensions are frequently used in small business growth and performance literature (Brown and Eisenhardt, 1996). Furthermore, Zahra (1991) suggests that each of these three dimensions should influence entrepreneurship orientation (EO), i.e. depending on the degree of organizational dynamism, hostility and heterogeneity; firms with a higher or lower degree of EO may perform better or worse.

Reference

Barringer, B.R., Jones, F.F., Neubaum, D.O. (2005), "A quantitative content analysis of the characteristics of rapid-growth firms and their founders", Journal of Business Venturing, Vol. 20 No.5, pp.663-87.

Brown, S.L., Eisenhardt, K.M. (1996), Competing on the Edge: Strategy as Structured Chaos, Harvard Business School Press, Boston, MA, .

Hambrick, D.C., Crozier, L.M. (1985), "Stumblers and stars in management of rapid growth", Journal of Business Venturing, Vol. 2 No.1, pp.29-39.

McClelland, D. 2005. Need Achievement and Entrepreneurship, A longitudinal study. Journal of Personality and Social Psychology, 1, 389 - 392

Mead, C. 2006. The Contribution of Small Enterprises to Household and National Income in Kenya, Economic Development and Cultural Change Development” Academy of Management Proceedings, pp 373 - 377

Miller, D. (1983), "The correlates of entrepreneurship in three types of firms", Management Science, Vol. 29 No.7, pp.770-91.

Mitchell, D.W., Bruckner Coles, C. (2004), "Business model innovation breakthrough moves", Journal of Business Strategy, Vol. 25 No.1, pp.16-26.

Mullins, J.W. (1996), "Early growth decisions of entrepreneurs: the influence of competency and prior performance under changing market conditions", Journal of Business Venturing, Vol. 11 No.2, pp.89-105.

Reid, G. 2006.  Small Business Enterprise. An Economic Analysis.

Sabatine, F. J. 2002.  The Entrepreneurial Decision.  Muncie, IN: “The Midwest Entrepreneurial Education Centre, College of  Business, Ball State University,

Siegel, R., Siegel, E., MacMillan, I.C. (1993), "Characteristics distinguishing high-growth

Stimpson, D.V., Huefiner, J.C., Hunt, H.K. 2000.  An Attitude Approach to the Prediction of Entrepreneurship, Entrepreneurship Theory and Practice, 15(4), 13 - 31.

Wiklund, J. (1998), “Small firm growth and performance”, unpublished doctoral dissertation, Jonkoping International Business School, Jonkoping, .

Yuli Zhang (2001), Management Obstacle to the Growth of SMEs, Tiajin University Press, Tiajin, (in Chinese), .

Zahra (1991), "Predictors and financial outcomes of corporate entrepreneurship: an explorative study", Journal of Business Venturing, Vol. 2 No.6, pp.259-85.

Zook, C., Allen, J. (1999), The Facts about Growth, Bain and Company, New York, NY, pp.45. 

STRATEGIES ADOPTED BY MID LEVEL COLLEGES TO COPE WITH GLOBALIZATION

The challenges in the business environment calls for organizations to develop a roadmap in order to steer in the right direction amid the environmental turbulence and challenges of globalization. This makes it necessary for an organization to device an appropriate strategy to enable it create a “fit”. The business environment is becoming increasingly competitive and hence there is the need to ensure that they put in place mechanisms to enable them compete not only at the national level but also at the international level. Globalization involves the diffusion of ideas, practices and technologies. It is something more than internationalization and universalization. Giddens (1990), described globalization as the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa. This involves a change in the way we understand geography and experience localness, as well as offering opportunity it brings with considerable risks linked, for example, to technological change.

Globalization effects are spreading all over the world with increased speed and organizations must align themselves accordingly or be faced out of business. Small and Medium Enterprises are not an exception in this and they will have to adopt new ways of doing things in order to remain relevant and competitive (Ansoff and McDonnell, 1990). This brings about the relevance of development of a game plan of action to enable them move to the next level.

Globalization of competition really starts to get hold when one or more ambitious companies precipitate a value for worldwide market leadership by launching initiatives to expand into more and more country markets. Globalization can also be precipitated by the blossoming of consumer demand, where national organizations find themselves competing with international organizations at the national level. The forces of globalization are sometimes such a strong driver that companies find it highly advantageous, if not necessary, to spread their operating reach into more and more country markets (Osterhammel and Niels, 2005). Globalization is very much a driver of industry change in such as the educational sector through the various academic programs offered. Various educational institutions have developed various strategies to take the huge opportunities that are opening up as a result of globalization. Some of the strategies include development of partnerships, offering of international programs through collaborations, expansion to new markets and broadening of the academic programs.

The education sector has been growing rapidly with the increase of mid level colleges and institutions of higher learning. There has been increased competition both locally and internationally. Most of the colleges fall under the category of small and medium enterprises and the level of competition mainly stems from larger institutions. In order to remain competitive, the mid level colleges have developed strategies that enable them to remain relevant, offer competitive programs and at the same time offer high quality education. Some of the activities they have engaged in are development of academic programs that are unique and also having them validated and recognized by the government. Other activities include development of programs in collaboration with the universities and international institutions. However, it has been an uphill task for most of them since they have been operating in a local level or national level, and as a result of globalization, they have suddenly found themselves experiencing regional and international competition in their operating levels.

The mid level colleges that have been applying various strategies in order to cope with the challenges brought about by globalization. However, the strategies developed have not proven as best practices in the operations. Previous studies carried out in the small and medium enterprise sector by Omondi (2009), Maina, (2009), Ngui (2007) and Awino (2007) were on the areas of performance, development of strategies, relationship management and strategic responses but none has looked at the strategies they have adopted to contend with globalization in the higher education Sector.