International Business Communication - Investing in Kenya - Essay Example

?. International Business Communication Paper Executive summary Kenya is a country in the East of Africa and it is the economic hub of the region, probably because of the huge potential and educated workforce. Apart from the political unrests seen in 2007/08, the country is doing quite well in all sectors compared to her neighbors, most of who are languishing in civil wars. The country has a multiethnic population made up mostly of young people, the median age of who are 18-19 years old. The political situation is one of the factors that determine success of investments. The business sector has potential the progress of which is limited by corruption, with many government agencies expecting kickbacks in exchange of contracts. Bureaucracy is the other major obstacle as there are endless procedures and forms to fill, resulting in waste of time and money, which are the most important resources for a business. It is therefore, crucial for an investor to note that though the country does not have specific cultural practices to be followed, they should not forget that it is a foreign country. For instance, there are people who have to be pleased in order for an investor to succeed, mostly from the ruling class. It is hard for foreign investors to procure funding since the country is in debts and there is a lot of external pressure for reform implementation. A person of either gender can own a business in the country but the people are leaning towards women leaders. However, a foreign company can only own between 40% and 70% of a business depending on the sector. The law prohibits import of labor for locally available skills, and limits inputs import by imposing heavy import duty. Table of Contents Table of Contents ii International Business Communication Paper Before investing in a foreign country, a citizen of the United States needs to familiarize with such a country to ensure a smooth transition from one business environment to another. Therefore, background research is necessary to ensure success of the investment once the investor knows the rules by which to play. Factors about the country that should be of interest to an investor in any sector include, but are not limited to business norms and cultural considerations. Business norms include all the requirements of the business world that the investor must follow in order to be in line with government policies, clients’ preferences, competitive landscape and possible business partners. Cultural considerations encompass the social expectations on the investor from the various stakeholders in this foreign land. Countries have different definitions of what they consider as the ethical or the unethical and any investor keen on succeeding in a foreign land should familiarize himself with these values. On keen observation though, it is clear that even if the country has a favorable environment for foreign investments, there is still a lot of room for improvement. For instance, the process of obtaining trade licenses is tedious though the country is currently undergoing reforms in all sectors due to the recent adoption of what politicians and the media claim to be one of the best constitutions in the world. If Kenyan leaders do not do what they are famous for i.e. corrupting systems, the country is ready and is a prime location for new investments. The country’s economy is driven mainly by agriculture and service industries. Its economy does not experience exponential growth because unprocessed goods always fetch low prices in the international market. The service industry, on the other hand, has been deteriorating as tourists shun the country due to civil unrests and terrorism threats especially in the period following the 2007/08 post election violence. Business Norms For one to invest in Kenya, there are numerous licenses to be obtained. However, since the country always sends delegations here in the US to talk to investors encouraging them to do business, it is safe to assume that the country’s government would not give investors a hard time. This is partly because foreign investment could be the only salvation for their ailing economy and the provision of employment to the highly educated population that suffers from high rates of unemployment. One major snag is the requirement that no foreign firm should import labor if the skills of interest can be acquired locally. This means that all American firms can take back its profits from the country which suffers a major blow due to high and increasing cost of doing business in the country. The other major channel for loss of profits is the bureaucratic labyrinth that an investor has to negotiate, often bribing officials who ask to be paid to do their job. Delays of as much as a year have been recorded, though with the adoption of accreditation and service charters the process can take less than a month, as shown in table 1 below. The second channel is the taxes levied at every phase of the production and trading process. One would require an experienced economic lawyer to prevent cases of multiple taxations which are quite common. Table 1: The cost of doing business in Kenya Source: The World Bank (2011), Economic profile: Kenya. Doing business in a more transparent world. This table shows the time taken in processing business documents for a new investment on left hand side, and the percentage cost per capita on the right hand side. The country is open to most investment classes, with a few limitations to protect the local industries and the economy at large from undue exploitation by unscrupulous investors out to further selfish interests at the expense of citizens. The law requires that foreign firms have a 33% local ownership except for foreign brokerage and fund management investments, which should have a local management of 31% and 30% local ownership. The telecommunications industry, which was once a domain of the government allows for a minimum 60% local ownership for foreign investments. However, investments for provision of basic amenities like power are a monopoly for government owned enterprises and the only way a foreign firm can be involved is by selling all its products or services to the central government, which in turn resells them to the people of the Republic of Kenya (Central Intelligence Agency, 2009). Cultural Expectations The culture in Kenya is low in context. The people there do not leave anything to imagination, as the locals who comprise as many as 43 ethnic tribes do not attempt to hide their differences. It is advisable though, that a non-citizen avoids direct involvement in the tensions that exist between the major tribes. Locals offer foreigners better treatment than they offer their compatriots which should not be misinterpreted for choosing foreigners over their compatriots. To some it is only an opportunistic adaptation to ensure they reap maximum benefits from foreigners although in many cases it is just a gesture of hospitality. One single advice to an investor intending to go to Kenya is to befriend the locals and do business with them, bearing in mind the differences between them. The Kenyan government and the US embassy in the country ensure that all US citizens are offered high level of protection by the security forces as foreigners are vulnerable to attacks in some parts of the country. Being a multiethnic society, most local cultural practices, especially in the cities, have been discarded and paved way to derivatives of the western culture. In addition, being a multicultural society, most Kenyans are used to having cultural differences between them, and therefore, a foreign investor does not have any problem blending in as no one expects anyone to change and be like them. In any case, a good number of Kenyans are not of African origin and, as such, no one would expect an investor from the US to adapt and fit in any African tribe. Gender as a Factor Men dominate all sectors of the country as businessmen, politicians, clergy and administrative leaders. However, the country has seen huge positive changes such that the population is offering preference to female leaders. This is partly due to the disappointment in male leaders who have led the country for quite a long time, with poor results till the present days. In addition, the citizens are aware that women also have the potential to become great leaders or even global icons like the Kenyan world famous environmentalist and Nobel Peace Prize Winner, the late Wangari Maathai. Therefore, for a business to increase its chances of surviving in Kenya, it is advisable for women to be a part of the management team (United Nations, 2011). Ethical Considerations Starting a business in a new liberal market is tricky as infrastructure and laws to curb unethical practices have not been fully put in place. For instance, due to the recent digitization of businesses, IT is quite likely to be abused through hacking and web tracking - vices that have no existing laws covering them. In addition, the inadmissibility of electronic evidence in courts is a cause for concern since all documents and transactions would need a hard copy backup for legal purposes. Bureaucracy is the other source of unethical practice where one has to follow numerous tedious procedures to obtain any business document. However, it is a hustle that is avoided by bribing an official. Business people in Kenya believe in undercutting, sale of poor quality or fake products and advertisements with exaggerated or false content. In the US however, there are laws to ensure fair business where defaulters are severely punished. If a US investment is to survive in the competition with tricky Kenyan businesspersons, the first step would be to earn the trust of the people. Quality assurance and convincing the people that what is on sale is worth every cent they spend should be of great concern to the marketing management of the firm. Another strategy would be to do things differently and since this is a new market, some business strategies that have been successful in the US could be applied to Kenya, with quite a high likelihood of success. For example, the people in developing countries love free things, and offering free samples to would-be clients is a good idea (The World Bank, 2011). Conclusion Being the economic and industrial hub of East Africa, Kenya is a suitable candidate for foreign investment. Since the economy is primary agricultural and tertiary industry driven, the government welcomes investors warmly in the manufacturing industry. The business people should be wary with the taxation system to avoid losing their profits to double taxation. Acquisition of labor should not pose a problem to an investor since there are many trained but jobless youths in the country. The only disadvantage in employing these people, who make up most of the population, is that they are overly ambitious and have tendencies to ignore orders and accepted ethics. It is easy for a foreigner to fit in the Kenyan population owing to its cultural diversity. On ethics, the unwillingness or inability for the country’s leaders to enforce high ethical standards may be a letdown. With the current reforms taking place in Kenya, things will surely get better and it is in the interest of any investor to be strategically placed. References Central Intelligence Agency (2009). Kenya, the world factbook. Retrieved on 3 December 2011 from, https://www.cia.gov/library/publications/the-world-factbook/geos/ke.html The World Bank (2011). Economy profile: Kenya, Doing business in a more transparent world. Washington, DC. United Nations (2011). Human development report 2011. United Nations. Retrieved on 3 December 2011 from, http://hdr.undp.org/en/media/HDR_2011_EN_Tables.pdf Read More