AN INVESTIGATION ON THE NEED FOR STRONG HOME

(COUNTRY OF ORIGIN) PRESENCE FOR ALL

MULTINATIONAL CORPORATIONS: A CASE STUDY OF

COMCRAFT GROUP

BY:

WILLIAM O. OGUTU

UNITED STATES INTERNATIONAL UNIVERSITY –

AFRICA

FALL 2017

AN INVESTIGATION ON THE NEED FOR STRONG HOME

(COUNTRY OF ORIGIN) PRESENCE FOR ALL

MULTINATIONAL CORPORATIONS: A CASE STUDY OF

COMCRAFT GROUP

BY

WILLIAM O. OGUTU

A Project Report Submitted to the Chandaria School of Business in

Partial Fulfillment of the Requirement of the Degree of Masters in

Business Administration (MBA)

UNITED STATES INTERNATIONAL UNIVERSITY – AFRICA

FALL 2017

ii

STUDENT’S DECLARATION

I, the undersigned, declare that this is my original work and has not been submitted to

any other college, institution or university other than the United States International

University in Nairobi for academic credit.

Signed: ________________________ Date: _____________________

William Ogutu (ID 649157)

This project has been presented for examination with my approval as the appointed

supervisor.

Signed: ________________________ Date: _____________________

Fred Newa

Signed: _______________________ Date: ____________________

Dean, Chandaria School of Business

iii

COPYRIGHT

William Owuor Ogutu Copyright © 2017

All rights reserved. No part of this report may be photocopied, recorded, or otherwise

reproduced, stored in a retrieval system or transmitted in any form or by any electronic

or mechanical means without prior permission of the copyright owner.

iv

ABSTRACT

The general objective of the study was to determine the need for strong home (country

of origin) presence and if multinational corporations have an obligation to their country

of origin to retain a strong home presence. The study was guided by the following

research questions. To what extent does the country of origin benefit from an MNC

retaining a strong home presence? To what extent does the host country benefit from

an MNC active presence? To what extent does an MNC benefit from retaining a strong

home presence?

A descriptive study with mixed methodology design was used for the study. The target

population comprised of 50 management level employees of the Comcraft Group in

Nairobi – Head Office and 40 director level officers from the Ministry of Industry,

Trade and Cooperatives Kenya. The sample size of the study was 45 respondents

comprising 25 management staff of the Comcraft Group in Nairobi and 20 director level

officers from the Ministry of Industry, Trade and Cooperatives Kenya. Data was

collected using a structured questionnaire and an interview guide. Descriptive statistical

techniques were used to analyse quantitative data while content analysis was applied to

qualitative data. Inferential analysis was performed using Spearman’s rank correlation

technique at 0.05 significant levels.

The results showed that concerning to what extent country of origin benefit from an

MNC retaining a strong home presence, a statistically significant positive correlation

was found between local MNC strong home presence and government satisfaction with

benefits, importance of benefits to the country, impact of government policy and

stakeholder involvement in policy development.

With regards to the extent the host country benefit from an MNC active presence,

results showed MNC active presence in host country was significantly correlated to

foreign investment benefits.

In terms of the extent an MNC benefit from retaining a strong home presence,

Comcraft’s strong home presence in Kenya was significantly correlated to its

satisfaction with benefits, importance of benefits derived from Kenya government and

impact of benefits on Comcraft operations.

v

It was concluded that country of origin enjoys a number of benefits from an MNC

retaining a strong home presence, suggesting the need for all MNCs to retain a strong

home presence in their country of origin. A strong home presence leads to the creation

and retention of jobs directly through employment opportunities to citizens and

indirectly through business transactions with the MNC. Further, through the MNC’s

CSR activities, the government of the country of origin enjoys relief from the MNC’s

involvement in the eradication of social and environmental problems in the sectors of

interest to MNC. Host country benefits from an MNC’s active presence mainly through

foreign direct investment and to a lesser extent, better foreign relations. MNCs also

benefit significantly by maintaining a strong home presence.

The study recommended that the government of country of origin should create policies

that promote ease of doing business in order to make the country attractive for MNCs

to retain a strong home presence. The government should also initiate measures that

reduces the cost of doing business in the country with respect to the quality and cost of

energy, taxation policies to avoid double taxation as well as security of both physical

and intellectual property. In order to derive meaningful benefits from an MNC’s active

presence in the host country, the government of host countries should liberalize their

economies and come up with policies that cut down on government bureaucracy and

reduces legal risks to foreign investors. MNCs should consolidate their market power

in the country of origin by maintaining a strong home presence and by leveraging on

the goodwill they accrue from corporate responsibility activities. Other case studies in

other countries could be conducted to establish whether the need for strong home

presence is context specific.

vi

ACKNOWLEGEMENT

I would first like to thank God for giving me the will to carry on and especially the

resources and wisdom to complete my MBA in Strategic Management at USIU-Africa.

My sincere gratitude goes to my wife Anne M. Ogutu, for her support and

encouragement to realize my dream of accomplishing my MBA, not forgetting my

daughter Abigail. I would also like to thank Mr. Fred Newa of USIU-Africa, Chandaria

School of Business for his invaluable advice and guidance throughout my research.

Finally, I thank the entire USIU-Africa fraternity for giving me a chance to attain first

class quality education.

vii

DEDICATION

To my loving wife Anne M. Ogutu and our daughter Abigail for their unwavering

support.

viii

TABLE OF CONTENTS

STUDENT’S DECLARATION .................................................................................. ii

COPYRIGHT .............................................................................................................. iii

ABSTRACT ................................................................................................................. iv

ACKNOWLEGEMENT............................................................................................. vi

DEDICATION............................................................................................................ vii

LIST OF TABLES ....................................................................................................... x

LIST OF ABBREVIATIONS ................................................................................... xii

CHAPTER ONE .......................................................................................................... 1

1.0 INTRODUCTION.................................................................................................. 1

1.1 Background of the Problem .............................................................................. 1

1.2 Statement of the Problem ................................................................................. 4

1.3 Purpose of the study ......................................................................................... 5

1.4 Research Questions........................................................................................... 5

1.5 Significance of the study .................................................................................. 6

1.6 Scope of the Study ............................................................................................ 6

1.7 Definition of Terms .......................................................................................... 7

1.8 Chapter summary .............................................................................................. 8

CHAPTER TWO ......................................................................................................... 9

2.0 LITERATURE REVIEW ..................................................................................... 9

2.1 Introduction ...................................................................................................... 9

2.2 Impact to Home Country when MNC Maintains a Strong Home Presence ..... 9

2.3 Impact to Host Country when an MNC has strong presence. ........................ 16

2.4 Impact to MNC in Retaining a Strong Home Presence. ................................. 20

2.5 Chapter Summary ........................................................................................... 25

CHAPTER THREE ................................................................................................... 26

3.0 RESEARCH METHODOLOGY ....................................................................... 26

3.1 Introduction .................................................................................................... 26

3.2 Research Design ............................................................................................. 26

3.3 Population and Sampling Design ................................................................... 26

3.4 Data Collection Methods ................................................................................ 29

3.5 Research Procedures ....................................................................................... 30

ix

3.6 Data Analysis Methods ................................................................................... 30

3.7 Chapter Summary ........................................................................................... 31

CHAPTER FOUR ...................................................................................................... 32

4.0 RESULTS AND FINDINGS ............................................................................... 32

4.1 Introduction .................................................................................................... 32

4.2 Demographic Information .............................................................................. 32

4.3 Extent Country of Origin Benefits from MNC Strong Home Presence ......... 35

4.4 Impact of Local MNC active presence in host countries................................ 41

4.5 Benefits of strong home presence to MNCs ................................................... 46

4.6 Chapter Summary ........................................................................................... 57

CHAPTER FIVE ....................................................................................................... 58

5.0 DISCUSSION, CONCLUSION AND RECOMMENDATIONS .................... 58

5.1 Introduction .................................................................................................... 58

5.2 Summary ......................................................................................................... 58

5.3 Discussions ..................................................................................................... 60

5.4 Conclusions .................................................................................................... 64

5.5 Recommendations .......................................................................................... 65

REFERENCES ........................................................................................................... 67

APPENDICES ............................................................................................................ 72

APPENDIX A: INTERVIEW GUIDE .................................................................... 72

APPENDIX B: QUESTIONNAIRES ...................................................................... 74

x

LIST OF TABLES

Table 3.1 Population Distribution ................................................................................ 27

Table 3.2 Sample Size Distribution ............................................................................. 29

Table 4.1 Response rate ............................................................................................... 32

Table 4.2 Demographic profile of respondents from Comcraft Group ....................... 33

Table 4.3 Profile of Comcraft Company...................................................................... 34

Table 4.4 Demographic Profile of Respondents from the Ministry of Trade .............. 34

Table 4.5 Kenya Government receives benefits from MNC strong home presence ... 35

Table 4.6 Satisfaction with benefits of MNC strong home presence .......................... 36

Table 4.7 Importance of MNC strong home presence ................................................. 36

Table 4.8 Impact of benefits of MNC strong home presence on government policy .. 38

Table 4.9 Whether Kenya Government reviews policy for local MNC growth .......... 38

Table 4.10 Stakeholder involvement in policy drafting for local MNC growth .......... 39

Table 4.11 Significance of MNC strong home presence to country of origin ............. 40

Table 4.12 Model summary ......................................................................................... 40

Table 4.13 Kenya government promotes local MNC investment in other countries ... 42

Table 4.14 MNC presence in host countries improves Kenyan relations .................... 42

Table 4.15 Kenyan MNC focus on foreign country activities compared to Kenya ..... 43

Table 4.16 Government supports Kenyan MNC move to foreign countries ............... 43

Table 4.17 Kenya Government benefit from MNC companies in foreign countries ... 44

Table 4.18 Foreign country demand for Kenyan MNCs ............................................. 44

Table 4.19 Expansion cause comparatively stronger operation in host country .......... 45

Table 4.20 Correlation between MNC active presence and benefits to host country .. 46

Table 4.21 Model summary ......................................................................................... 46

Table 4.22 Benefits of strong home presence to Comcraft Group .............................. 48

Table 4.23 Benefits of strong home presence satisfying to Comcraft Group .............. 48

Table 4.24 Rating of importance of retaining strong home presence to Comcraft ...... 49

Table 4.25 Rating of importance of benefits accrued from Kenya government .......... 49

Table 4.26 Impact of benefits on Comcraft Operations ............................................... 50

Table 4.27 No challenge to Comcraft group in maintaining a strong home presence . 51

Table 4.28 Government’s active role in Comcraft’s strong home presence ................ 52

Table 4.29 Comcraft’s strongly focus on CSR ............................................................ 52

xi

Table 4.30 Comcraft strategy in place to maintain strong presence in Kenya ............ 53

Table 4.31 Greater benefits when Comcraft Group invests in other countries ............ 53

Table 4.32 Comcraft face great challenges in host countries ...................................... 54

Table 4.33 Benefits accrued in host countries outweigh those in Kenya .................... 54

Table 4.34 Comcraft has more CSR activities in host countries compared to Kenya . 55

Table 4.35 Correlation of strong home presence and benefits to MNC ...................... 55

Table 4.36 Model summary ......................................................................................... 56

xii

LIST OF ABBREVIATIONS

BoP Balance of Payment

MNCs Multinational Corporations

PESTEL Political, Economic, Social, Technological, Environmental and Legal

FDI Foreign Direct Investment

R&D Research and Development

GE General Electric

GB Great Britain (Island in the United Kingdom)

1

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Problem

A corporation can be defined as a group of people or a company that has been

authorized to act as a sole entity and such is recognized at law (Entrepreneur Media,

2017). A multinational corporation is a corporation that owns and controls a line of

production in the form of goods and or services in one or more countries as opposed to

just having a presence in its home country (Doob, 2013). In essence, it derives almost

a quarter of the revenue from the operations that it has outside its home country.

According to Eldridge (2011), multinational corporations can be either; a decentralized

corporation that has a strong home presence that is multinational; a globally centralized

corporation that would normally get a cost advantage due to its centralized production

in the areas where the resources are available at lower prices; an international company

that is built mainly on the parent or main corporation’s technology or a transnational

enterprise that is based on the above three approaches.

Eldridge (2011) gives that a multinational corporation would be characterized by its

size, its oligopolistic power, the sophisticated technology it uses, its centralized control

and management, the fact that their local subsidiaries are mostly managed by the

nationals, there is a direct investment pool in most countries and a large part of its profit

is derived from foreign operations among others.

According to Ideas For Leaders (2017), certain company and country factors determine

whether decisions should be centralized at parent company headquarters or

decentralized to the foreign subsidiary. Ignoring those factors will hurt parent and

subsidiary financial performance. While fixing the inappropriate decision-making

structure could prove costly.

Multinational corporations play a very fundamental role for host countries as well as

home countries. For host countries, they boost in the development and research

activities as they have a greater capacity in this area as compared to national companies.

These may have far-reaching effects on the social, political and economic conditions

which may include; new product developments, growth in the economy as they exploit

the resources for the advancement of that country, labour costs are reduced or even a

2

change in the political or social structure. For example, Standard Chartered Bank (GB),

believes they should contribute directly to the economies in which they operate, as the

only bank with a strong presence in Asia, Africa and the Middle East. They say that

they are uniquely placed to help businesses grow in all three markets. To understand

how Standard Chartered Bank can contribute to these economies and societies, they

have commissioned independent studies to assess the socio-economic impact on their

markets (Standard Chartered, 2014). It is important to note that Standard Chartered

Bank in the United Kingdom does not have strong home presence compared to their

global influence.

Meanwhile, companies like Walmart, which started its operations in America-Arkansas

in 1962 employ a different strategy. Since their incorporation, the company has

expanded across borders and overseas. The U.S. remains the heart of their business

where they continue to test new ideas, learn from their customers and improve on their

ability to help people save money and live better. Today, Walmart employs more than

1.5 million U.S. associates at more than 5,000 stores and clubs nationwide. Last year,

they promoted more than 200,000 people to jobs with more responsibility and higher

pay (Walmart Stores Inc, 2017).

Due to their financial and market superiority, multinational corporations enjoy the

market reputations as they face far less challenges in the sale and adaptation of products.

With their financial superiority, they are able to set aside funds to produce products that

are of international quality and standards as compared to national companies. This

quality also gives them an easier access to capital markets externally thus expanding

their market territories.

Multinational corporations’ access new markets through mergers/direct acquisition by

taking over of existing concerns; and joint ventures (Eldridge, 2011). For the home

countries, they create opportunities in the form of marketing products that are produced

in the home country globally. There are employment opportunities created in this way

that lead to a boost in the industrial activities in the home country. Multinational

corporations help maintain a balance of payments in the country for the long term and

benefit the country in the foreign culture introduced.

There are implications both to the host and home countries for the presence of a

multinational corporation. In host countries, the multinational corporations supply

3

technology to these countries for the maximisation of profits and not to purely meet the

needs of the developing country. This may lead to ignoring of the host countries

interests which may harm them eventually. Due to the repatriation of their subsidiary’s

profits, there is an outflow of countries and this creates monopoly. Multinational

corporations use their money power for political reasons, dominating the domestic

policies. There is also a creation of adverse effects on the culture of the host countries

that may cause long term effects on the country’s cultural background. Interference in

the political and economic system is also common which may in turn lead to brain drain

in these developing countries. In host countries, multinational corporations’ via transfer

pricing, enables them to avoid taxes by manipulating the prices in cases of intra

company transactions. The technocrats and experts hired by multinationals also have

effects on the brain drain in developing countries. Their interference in the political and

social systems indirectly puts pressure in the formulation of policies that are favourable

to them (Davis, 2017).

For home countries, multinational corporations transfer capital from these countries to

other countries which lead to an imbalance in payments. They may not create

employment for the people in the home country if the geocentric approach is not used.

Investing in foreign countries brings in more profit and multinationals may neglect the

industrial and economic developments in these home countries. The Horn of Africa has

had a lot of optimistic reviews on the potential of its growth. It has been given the

symbol of “Africa on the rise”. Companies seek to set up their production in countries

which came back up after disasters such as famines and coups or even purges in the

communist eras; good examples being Diageo and Hennes & Mauritz (Jorgic, 2014).

The Comcraft group of Companies whose host country is in Kenya is hosted in over 40

countries, with Dr. Manu Chandaria as the Chairman and CEO. It deals in the industry

of mechanical or industrial engineering. Comcraft Kenya Ltd produces steel, plastics,

and aluminium products in Kenya, Tanzania, Uganda, Ethiopia, and internationally. It

also manufactures and markets various consumer and building products made from

steel and aluminium. The company was founded in 1915 and is based in Nairobi, Kenya

with additional offices in Singapore, Sydney – Australia, London – The United

Kingdom, Toronto – Canada, Geneva – Switzerland and India (Bloomberg, 2017). In it

are companies like SAFAL Group, Metalex Group among others.

4

Jorgic (2014) posited that in the Africa Investment; Comcraft group, in its intentions to

expand internationally, had discussions of taking sections of the business public then

reflecting on the size of the growth and the need for capital in this agenda. Sections of

the business mentioned that could go public were the steel and aluminium which have

been found to be very useful in Africa for roofing and making of kitchen equipment

like pans and pots. Jorgic (2014) further argues that with the expansion of the Comcraft

group, there has been creation of employment to over 40,000 people all over the world

across almost 45 countries.

1.2 Statement of the Problem

The need to maximize profits and continue to increase their spheres of influence has

seen MNC in almost all the continents of the world where they can extract resources.

The pressure to increase market and acquire higher level of resources such as minerals

and petroleum drive U.S and European corporations to transnational expansion

primarily to Latin America, Asia, Africa and Middle East (Korten, 2001). As the

corporations business grow significantly, the environment and the local people where

they operate continue to bear the heaviest brunt since corporations rarely invest in these

areas, and where they have done so it has been on a minute scale. Comcraft Companies

are rapidly expanding in Asia and Africa with higher presence in Kenya, Nigeria, South

Africa and Ethiopia. Dr. Manu Chandaria confessed to Reuters Africa Summit – 2014

that due to the size of the Comcraft groups, they cannot remain private and this would

also be attributed to its expansion globally. However, some of the group members are

skeptical that an IPO (Initial Public Offering) could hinder the growth entirely due to

the short-term demands by the shareholders. The leading Kenyan Philanthropist said

that he would have taken the company public already but his top management officials

thought that the company was still not ready for that move. Forbes in 2012 estimated

the worth of the Comcraft group at $2 billion (Forbes, 2017).

Jorgic (2014), observed that Manu Chandaria in a bid to make the Comcraft group

Kenya’s largest, had an initial idea to merge some of the sections of the business ahead

of the Initial Public Offering in the event that the family decided to be on the list of the

Nairobi bourse. Many foreign companies are frustrated by the fact that the state has a

firm grip on sections in the industry such as banking, telecommunication and other

sectors run by the state. China’s model for instance even with its huge population has

5

loosened controls in most sectors and Chandaria believes that Africa’s rulers would

eventually follow China’s model.

Jorgic (2014) states that the Chandaria family businesses have suffered in Uganda and

Ethiopia previously due to factors in the country; for example in the 1970s when the

regime overthrew the Emperor, Chandaria businesses were seized. Despite these fates,

the Comcraft Group plans to expand and increase the number of factories in Ethiopia.

In Nigeria, the Comcraft Group targets expansion as it boosts the growing middle class

among what is approximated as 140 million residents. The Chandaria Group remains

undeterred from the notorious Islamist rebels called Boko Haram and even set up

businesses in the rebel’s stronghold areas. The Philanthropist says that as much as it

may be demoralizing it is not reason enough for him to see this as a stop and sets himself

up to compete in the market no matter what is thrown at him. This confirms that

Comcraft has put a lot of investment in other countries as compared to the home country

Kenya, therefore the identified gap needs to be filled and thus the need for this study to

examine the need for strong home (country of origin) presence for all multinational

corporations.

1.3 Purpose of the study

To determine if multinational corporations have an obligation to their country of origin

to retain a strong home presence. This study was carried out specifically on Comcraft

Group.

1.4 Research Questions

1.4.1: To what extent does the country of origin benefit from an MNC retaining a strong

home presence?

1.4.2: To what extent does the host country benefit from an MNC active presence?

1.4.3: To what extent does an MNC benefit from retaining a strong home presence?

6

1.5 Significance of the study

1.5.1: The Comcraft Group of Companies

This research provided Comcraft Group with information that might help them come

up with policies that would act as a regulatory aspect for their different sectors on how

they benefit the other societies as they expand.

1.5.2: Other Multinational Corporations

This research might assist other MNCs’ in their decision on whether to retain strong

home presence and also on how to interact with their local environment.

1.5.2: State

This research might help the state understand the influence (both domestic and global)

they have on MNCs’ general decision and policy making as they try to achieve their

goals, while realizing the impact these policies have on MNCs’.

1.5.3: Researchers

This research might help other researchers come up with a comprehensive account of

events that could be beneficial to valuators as well as companies that want to expand

globally.

1.6 Scope of the Study

This study was conducted on The Comcraft Group of Companies, making comparative

references to those on a global aspect with both a strong home presence and without.

The research was based on primary data through interviews and secondary data

retrieved from recent debates with economists, published journals, articles and any

published reports. Respondents were drawn from Comcraft Group as well as from

Ministry of Industry, Trade and Cooperatives. Data was collected between months of

June 2017 and August 2017.

7

1.7 Definition of Terms

1.7.1 Multinational Corporations

A multinational corporation is a corporation that owns and controls a line of production

in the form of goods and or services in one or more countries as opposed to just having

a presence in its home country. It is an enterprise operating in several countries but has

a base in one country also known as the home country (Eldridge, 2011).

1.7.2 Glut

An excessively abundant supply of something (Ideas For Leaders, 2017).

1.7.3 Geocentric multinational

A company with offices in multiple nations that operates to achieve global objectives

as well as local objectives. The subsidiaries contribute unique competencies as part of

a whole rather a set of separate business units (Eldridge, 2011).

1.7.4 Initial Public Offering

This refers to the first time the company’s stock is offered to the public. The

Underwriters in the exchange firm, helps them determine what kind of security would

be issued. It can also be done by large private owned companies looking to trade

publicly (Jorgic, 2014).

1.7.5 Home country

This refers to the native country of an individual or organization in reference to its birth

(Eldridge, 2011).

1.7.6 Host Country

This refers to a nation where individuals or organizations from other states visit due to

meetings, business or government invitations (Eldridge, 2011).

1.7.7 Country of origin

This gives a clear distinction as to the ultimate purchaser of a product or service as to

where it was made (Jorgic, 2014).

1.7.8 Home presence

A company having active operations in their country of origin. (Eldridge, 2011).

8

1.8 Chapter summary

This chapter gives a background of study, statement of the problem, purpose of the

study, the research questions, and significance of the study, scope of the study and

definition of terms. Chapter two presents literature review based mainly on the specific

research objectives. The theoretical and conceptual framework area also discussed.

Chapter three explains the research methodology applied in this study and data

collection methods as well as analysis. Chapter four presents and interprets the findings.

Lastly, chapter five discusses the findings, draws conclusions and makes

recommendations.

9

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter highlights the various data from the available sources with the aim of

examining the need for a strong home presence for multinational corporations. The

literature is guided by the following research objectives; examine the benefits to the

company in retaining a strong home presence; examine the impact of these benefits to

the home country or country of origin and the company either socially, economically

and politically and examine if the above two objectives are enough to justify the need

for a strong home presence.

2.2 Impact to Home Country when MNC Maintains a Strong Home Presence

It is general knowledge that when most of the corporations were birthed, they often

started out as small companies and got a lot of support from their home countries. A

better illustration as painted by debaters is that of when one family member is in need;

more often than not a member of that family will offer a helping hand. In the same way,

we could argue that in maintaining a strong home presence, multinational corporations

are paying it forward in more of an ethical responsibility rather than an obligation

(Debate, 2017).

There are many MNCs’ that collectively perform a wide range of operations and

services. However, if we are to examine what these companies are doing, we would

discover that much of their activity could be classified into two major categories: (1)

exports and imports and (2) foreign direct investment (Rugman, Collinson, & Hodgetts,

2006).

2.2.1 Trade Flows

International trade is the exchange of goods and services across international borders

and is also known as exports and imports. Exports and good and services produced by

a firm in one country and then sent to another country. For example, when Kenya

exports its tea or coffee to South Africa or Egypt. Imports are goods and services

produced in one country and brought in by another country. For example, Japan is a

major importer of petroleum because it must rely on outside suppliers for all of its

energy needs. In most cases people think of exports and imports as physical goods but

10

they also include services as those provided by international airlines and hotels

(Rugman, Collinson, & Hodgetts, 2006).

In the United States, statistics give that the annual international trade volume 10 and 20

percent of its annual GDP. Its trade volume with other countries is; about 20 percent of

all U.S. exports are to Canada, while 13 percent are to Mexico. Canada, China, Mexico,

and Japan are the key exporters to the United States. They are responsible for more than

half of the value of all U.S. imports. We could borrow this analogy in trying to analyze

the various factors that affect trade flows as the current account balance is given by the

difference between the imports and exports i.e. Exports – Imports (Madura, 2012).

There are various factors in the country either political, economic or social that affects

the trade flows for MNCs. For instance, in lowering the labor costs, the current account

balance improves while a relative increase in the country’s inflation will generally

decrease the current account balance. If the country’s national income is increased, the

current account in turn decreases. Government policies in the home country such as

restrictions on imports; increase in tariffs on imported goods that in turn increase the

country’s current account or the government’s reduction in the country’s imports by

enforcing quotas among others.

The exchange rate of a country’s currency depreciates against the currencies of major

trading partners, the country’s exports tend to rise and imports fall improving the

current account balance. If this happens, there is a balance of trade deficit and neither

the home country nor host country will enjoy the benefits that MNCs bring. Therefore,

any policy that will increase foreign demand for a country’s goods and services will

improve its balance of trade for instance; the inflation could be low and the exchange

rates should be weak for home currency. The exchange rate may correct the trade deficit

in that more imports would imply that demand for foreign currency increases which

bring about an increase in the same and locally available goods become more attractive

to foreigners and export increases (Madura, 2012).

However, foreign companies may lower their prices to remain competitive; a country’s

currency may not weaken against all currencies simultaneously. A country that has

balance of trade deficit with many countries is not likely to solve all deficits

simultaneously; international transactions cannot be adjusted immediately. The lag is

estimated to be 18 months or longer, leading to a J-curve effect and many firms

11

purchase products that are produced by their subsidiaries. These transactions are not

necessarily affected by currency fluctuations (Madura, 2012).

2.2.2 The Comparative Advantage Theory

Comparative advantage occurs when one country can produce a good or service at a

lower opportunity cost than another. This means a country can produce a good

relatively cheaper than other countries. The theory of comparative advantage states that

if countries specialize in producing goods where they have a lower opportunity cost –

then there will be an increase in economic welfare (Maneschi, 1998). The principle of

this is counter-intuitive whereby most results from the formal model are against the

simple logic. The theory of comparative advantage is often presented in its

mathematical form by using numerical examples or diagrammatic representations

which prove more useful in basic results and deeper implications of the theory.

When the theory is stated in a particular way, the countries specialize in trading with

other countries such that each country benefits. In this way, it is easy to imagine how it

would not hold as truth in the complex real world. It shows that in maximizing the total

output in the world then we would need to; fully employ the resources in the world,

allocate them within the country’s comparative advantage industries and then allow the

countries to trade freely. By doing this, the well-being of individuals is raised despite

the differences in relative productivities and the result is no prediction to what would

happen in a complex real world. The logic carried on would be how things would have

to seem so as to achieve a certain result in the real world i.e. maximum benefits and

output (Madura, 2012).

Chandaria’s interest in international business (Comcraft Group) has established

management services companies in London, Geneva, Nairobi, Singapore and Toronto

among others. These networks monitor the activities of manufacturing and all other

units of the group across the globe. According to Nsehe (2017), the Comcraft Group

has more than $2billion in annual revenues with over 30,000 employees in three

continents. In Africa, it is the largest manufacturer of steel and aluminum products.

Manu Chandaria has stationed family members internationally and has come up with

innovative methods of accessing capital and acquiring talent. The group’s strategies in

play are set to navigate political turbulence in the countries in Africa. This way, there

is a demand across the globe on the services offered by this group.

12

2.2.3 Capital Flows

Foreign Direct Investment (FDI) is equity funds invested in other nations. It’s different

from portfolio (financial) investment in that FDI is undertaken by MNCs who exercise

control of their foreign affiliates. Many companies use FDI to establish a foothold in

world marketplace by setting up operations in foreign markets or by acquiring the local

businesses. FDI is important for a number of reasons: to protect domestic markets, to

protect foreign markets, to increase sales and profits, to enter rapidly growing markets,

to reduce costs, to gain a foothold in economic unions and to acquire technological and

managerial know-how (Rugman, Collinson, & Hodgetts, 2006).

FDI is mainly affected by; changes in Government Restrictions such as tariffs, quotas

and other Barriers; in privatization, DFI has also been stimulated by the movement

towards free enterprise; countries that have more potential economic growth are more

likely to attract FDI; the countries that impose relatively low tax rates on corporate

earnings are more likely to attract FDI and in the exchange rates factor, firms will

typically prefer FDI in countries where the local currency is expected to strengthen

against their own.

Investment Portfolio is affected by; tax rates on interest or dividends where investors

assess their potential after-tax earnings from investments in foreign securities; interest

rates whereby money tends to flow to countries with high interest rates and exchange

rates whereby if a country’s home currency is expected to strengthen, foreign investors

may be attracted (Chaminade & Gomez, 2016).

FDI data in 2002, show that industrialized countries have invested large amounts of

money in other industrialized nations as well as smaller amounts in less developed

countries (LCDs) such as Eastern Europe or newly industrialized countries such as

Korea and Singapore. However, most of the world’s FDI is invested both and within

United States, Western Europe and Japan. By 2002 the United States had become such

a major investment target that foreign holdings were over U$1.3 trillion (Rugman,

Collinson, & Hodgetts, 2006).

Technology-Driven Foreign Direct Investment (TFDI) in Africa is almost exclusively

related to ICTs investments as it makes up 80% of all TFDI projects. These grew at a

rate of 22% between 2003 and 2014. In the Global Innovation Index, Mauritius and

13

South Africa are ranked 1st and 2nd respectively. Half of these investments that

originated from Africa remained within Africa. On the contrary, Design Development

and Testing (DDT) investments in Africa were very few and instead played a huge role

in the South Africa technology support center (Chaminade & Gomez, 2016).

2.2.4 Imperfect Markets Theory

This theory states that the markets for the various resources used in production are

“imperfect”. It arises from international markets where there’s no perfect competition,

that is, at least one of the assumptions that make up a perfect market is violated

rendering it imperfect. The assumptions that make up a perfect market include; buyers

and sellers are both takers of price and have perfect information, companies may sell

products that are virtually identical, there’s no exit or entry barrier and multiple

companies own a small share of the market. The market structures are violated by

common situations such as monopolies, oligopolies and monopolistic competition

(Rugman, Collinson, & Hodgetts, 2006).

According to Chaminadez and Gomez (2016) in international trade, firms are seen as

price takers as they are a small part of the foreign market and cannot influence the

prices. This is because they have to deal with interference in the government as

discussed above that relates to trade and deal under imperfect information. It is an

international trade theory that tells us that in international markets, in a bid to safeguard

our interests, certain measures are necessary for protection. Free trade gives a situation

of perfect competition and since it doesn’t exist, certain outcomes are found to make

this more desirable such as government interference.

The Comcraft Group in Kenya, active in the services sector, is extending its presence

beyond the continent into Asian markets. Kenya is a major origin node of investment

flows, together with India and China. All of Kenya’s investments were made outside

Africa, towards Asia and Latin America and the Caribbean. Kenya’s investment source

is just one company Comcraft group which has a network of subsidiaries in five

countries, primarily in software and information technology services (Chaminade &

Gomez, 2016).

14

2.2.5 Impact of MNCs Corporate Social Responsibility activities

Antonio Cassese (1986) argued that, multinational corporations possess no

international rights and duties because states whatever their ideological outlook are

reluctant to grant them international standing. According to OECD (1976), corporate

social responsibility is a matter that can best be left to self-regulation by the industry.

The consensus among these international organizations was that if any standard-setting

or supervisory activity was required by them it should be of a gentle, voluntary nature

only. In August 2003 UN Sub-Commission on the Promotion and Protection of Human

Rights adopted a text entitled Norms on the Responsibilities of Transnational

Corporations and Other Business Enterprises with Regard to Human Rights

(Friedmann, 1966). The Norms represent an ambitious attempt to codify the principles

that companies must respect in the field of human rights, labour law, environmental

protection, consumer protection, prevention of corruption

MNCs have the liberty to choose whichever needs they wish to address in their CSR.

But the question lies between liberty and freedom. What may not be required may still

be permitted. As long as employees and customers are not harmed and through

shareholders consent. Dr. Manu Chandaria being the chairman of the Chandaria

Foundation, he is at the frontline of the charitable work of the family. He is the sponsor

of numerous schools and clinics in Kenya and has been involved with more than 25

organizations. Chandaria sees John D. Rockefeller and Henry Ford as his inspiration

behind his charitable streak due to their founding of the Rockefeller Foundation and

Ford Foundation respectively. Chandaria is a committed humanitarian, and in

contentment to the principles of Charity, he and his family set up the Chandaria

Foundation to further this belief.

He has funded the Chandaria School of business in USIU and Chandaria business

innovation and incubation center in Kenyatta University. Chandaria also aims at

building Chandaria schools in all slums in Kenya. He states that he belongs here and

that all he has is from Kenya, which is why he feels obliged to help in all the aspects he

is capable of. He rebukes the many billionaires in Kenya who feel unsafe and fail to

help the society as if they will lose by doing so. He further states that when one dies

they don’t take anything and that the secret behind the Asian society success is holding

each other’s hand (How Kenya, 2016).

15

2.2.6 Criticism against MNCs strong home presence

In the book Global Reach: The Power of the Multinational Corporations; Richard J.

Barnet and Ronald E. Muller mention some of the disadvantages of MNCs to both the

home and host countries.

The faultfinders of MNCs and the Third World nations view the rise and development

of MNCs as a major danger of contemporary times. They advocate solid and stringent

measures against the MNCs for keeping them from going about as instruments of neo-

imperialism. This should be possible just by national and local regulations, as MNCs

have turned out to be resistant to the control of the United Nations and other worldwide

monetary foundations. They are often interested in profits at the expense of the

consumer (Richard J. Barnet, 1977).

Their dominance makes it difficult for small firms to thrive. For examples big

supermarkets in Kenya are squeezing the margins of local kiosks leading to less

diversity.

MNCs have global presence and huge resources hence critics do not suggest for their

closure as the impact would be great but suggest for policies to be put in place that can

be used to control them. What is required is to present better direction of MNCs with a

view to keep them from perpetrating hurt upon mankind. MNC pose a danger to the

economies and power of both the home and host countries.

As non-state financial giants these can harm and influence the role of their parent

country states in international relations by impacting and notwithstanding controlling

their approaches and laws for their own benefit. They can act as obstacles in the

exchange of capital, innovation and know-how from the developed to the developing

countries (Richard J. Barnet, 1977).

Therefore there is need to initiate measures for regulating the activities of the MNCs

with a view to make these instruments of modernization and development and at the

same time to prevent them from developing into bigger and stronger instruments of

neo-colonialism and economic inequalities in the world. In poor and developing

countries which have few resources and probably little understanding or capabilities to

regulate business, the factors of production might be cheap hence there may be no

reason for corporations to respect the rights of the people who own those resources and

16

those who live there. With a weak government and few regulations, corporation can do

practically anything it wants.

The current process of globalization has delivered a major peril as the endeavors of the

MNCs to fortify their hold over the worldwide economic order. A few researchers have

even communicated the dread that globalization is in reality the plan of the corporate

elites (MNCs) to overwhelm the economies of the Third World nations specifically.

This dread has a legitimate premise and all things considered there is a pressing

requirement for controlling the exercises of MNCs by keeping them from assuming

such a position and part as they can hurt the interests of the developing countries

(Pettinger, 2008).

Both, the supporters and critics of MNCs ought to understand that since these have

effectively developed in to powerful non-state performers every endeavor ought to be

made to make MNCs as instruments of worldwide peace, security and development.

MNCs ought to be kept from harming the world, both the developed and developing

countries.

For this it is important to end their present status as instruments working outside

national and global legal and political jurisdiction. All the Nation-states, must build up

national and transnational establishments fit for controlling these monetary giants—the

MNCs. Failure to move toward this path can unquestionably make MNCs threat greater

and risky in the 21st century (Berrone, Surroca, & Tribo, 2007).

2.3 Impact to Host Country when an MNC has strong presence.

Globalization has been the key influence to MNCs expanding their operations into more

than one country. The impact of MNCs operating at an international scale affects its

host countries in various ways. When an MNC invests in a host country, the scale of

investment is likely to be very significant especially in comparison with the size of the

firm. Governments will often offer incentives like grants, subsidies and tax breaks to

MNCs so as to attract investments in to their countries. This FDI will have advantages

and disadvantages for the host country (Rugman, Collinson, & Hodgetts, 2006).

Limited liability is a privilege the corporations are given by the state. By doing this, the

state expects them to use their growth and these privileges for the benefit of other

17

societies. The host governments have often interfered with the autonomous process of

MNC strategy formulation. Government intervention sets the fiscal and regulatory

ground rules for an MNC’s decision to compete in a host country, best understood as

a limitation to strategic freedom as well as seeks to influence the internal mechanics of

an MNC’s decision-making process, best understood as a threat to managerial

autonomy.

As foreign trade and investment have made national economies less responsive to such

chestnuts of economic policy as the stimulation of demand to increase production, host

governments have progressively moved toward the closer regulation of entire industrial

sectors. This regulation has primarily affected multinationals in the form of such locally

sensitive issues as product/market choice, use of technology, level of employment, and

national trade balance (Yoshino, 1976).

For example, Spain set explicit sales and export volume conditions before allowing

Ford to establish production facilities there. The Spanish government limited Ford’s

sales volume to 10% of the previous year’s total automobile market and required that

its export volume be equal to at least two-thirds of its entire production in Spain.

Further, Ford had to agree not to broaden its range of automobile model lines without

government authorization (Doz & Prahalad, 1980).

Beyond establishing conditions that MNC policymakers must take into account, host

governments have also sought to influence directly the process by which that strategy

is formulated. Characteristically, developing countries in South America, West Africa,

and the Far East regularly request joint ownership of local MNC subsidiaries. The

workers’ codetermination schemes, which are now gaining momentum in the

developed countries of Europe, may ultimately have the same effect of forcing MNC

subsidiaries to share their strategic decision making with representatives of local

constituencies be they government officials, local business people, local workers, or

local unions.

This type of intervention most commonly occurs when MNC subsidiaries are involved

in industries perceived by the host government as critical to national economic, social,

or political objectives. In such cases, the usual demand is for multinationals

to decentralize decision making to autonomous subsidiaries and for those subsidiaries

to share that process with one or another local constituency (Doz & Prahalad, 1980).

18

2.3.1 Benefits to Host Country in Research and Development activities

Research and development activities are very expensive hence most nations lack the

ability to carry-out such activities. Expenditure on research and development is

important for the promotion of technology. MNCs have greater capabilities in research

and development compared to the national companies. Therefore, MNCs survive in the

international market through research and development activities that give them that

competitive edge. MNCs will bring with them the technology and production methods

that are new to the host country. The host nation can learn a lot from these techniques

(Rugman, Collinson, & Hodgetts, 2006).

Competition from MNCs acts as an incentive to domestic firms in the host country to

improve their competitiveness. This could be a push to the local firms to improve on

quality and efficiency. Product innovation may lead to development of new products,

differentiation in the product line, and various other product improvements. MNCs

offer a much greater production opportunities compared to national firms. In host

countries that are underdeveloped, MNCs can participate in the industrial development

programs due to their technological superiority. They can produce globally recognized

goods that have international standards and quality specifications by adopting the latest

technology (Knoji, 2017).

2.3.2 Benefits on the economic, social and political conditions of the host country

Rugman, Collinson and Hodgetts (2006) assert that, one of the key benefits to the host

country is provision of employment. FDI will usually result in employment benefits as

the firm will recruit most of their employees locally. A government may decide to

attract investors in a region with relatively high unemployment or an area that has a

good labor supply. Increase in the scale of operations may open up more avenues

resulting in more job opportunities. Local companies may benefit from supplying

services or raw-materials to the new factory as this may also generate more jobs.

There is also the benefit of improved balance of payment. FDIs offer a direct flow of

capital into the host country and the investment is likely to result to import substitution

and export promotion. Export promotion is when the MNC exports the goods it

produces in the host country and import substitution occurs when products that were

previously imported may now be accessed locally. Total output of the economy will

19

increase and equally raise the GDP of the host country. FDIs bring in foreign exchange

currencies and if more of the product is exported then a lot more foreign exchange can

be earned (Heath & Norman, 2004).

Profits from MNCs will mostly be subject to local taxes hence boost the local source of

revenue for the host country government. Some countries may offer reduced taxes on

imports and exports so as to increase their foreign exposure and international trade.

Depending on the host country’s policies, taxes may help an MNC make or lose money.

If a country imposes lower excise and import duty, this may result to a higher profit

margin for the MNC.

If a host country faces local monopolies, MNC may help to break these monopolies.

With MNCs huge financial resources, they can help break these local monopolies hence

offer the local population a wider choice of goods and services and at a price possibly

lower. The presence of an MNC in one country may improve the host country’s

reputation hence attract even more MNCs.

2.3.3 Criticism against MNCs investing in a country

MNCs will want to produce in ways that are as efficient and as cheap as possible and

this practice may not necessarily be environmentally friendly. MNC may try to take

advantage of a government’s regulation, which favors them, knowing their economic

importance to the host nation. They may take short-cuts in areas like health and safety

in countries that has laws which are not as strict. MNCs may stifle local firms not

allowing them to compete effectively leading so some domestic firms collapsing. At

this point is when an MNC may decide to have a hostile takeover on local firms so as

to expand their domestic reach.

MNCs reduce cultural diversity by trying to impose their own culture on the host

country. This could be at the expense of the richness of the local culture. MNCs create

uncertainty to the host country since they can move or change, at their option, from the

host country. MNCs may decide to explore more on areas that they take full advantage

of, for example, a firm may decide to employ low-skilled personnel locally but employ

expatriate workers for the more senior and skilled positions.

Profits earned in a host country may be remitted back to a firm’s home country instead

of the money being reinvested in the host country. During which, an MNC may try to

20

reduce their tax liability to a minimum. Tax avoidance practices like transfer pricing

may be employed which aims at reducing its tax liability in countries with high tax rates

and increasing them in the countries with low tax rates.

Given MNCs economic importance to a host country and its financial muscle.

Governments may often agree to changes that are not necessarily beneficial for the

long-term welfare of its people in the domestic market (Richard J. Barnet, 1977).

2.4 Impact to MNC in Retaining a Strong Home Presence.

2.4.1 Benefits of MNC in maintaining a strong home presence.

As the world continues to be a ‘global village’ it’s easier for firms to go global but to

others it would be better to consolidate locally. The main identified and accepted goal

of a MNC is to maximize shareholder wealth by making sound financial and investment

decisions. However, there are two mainly identified problems with this goal; a) Agency

problems and b) Agency costs.

Agency problems relate to conflict of goals between the shareholders and managers as

seen in Manu Chandaria’s case above in taking on the business publicly. Agency costs

relate to the costs of ensuring that managers maximize the shareholder wealth. This is

because of the MCNs; sheer size, scattering of distant subsidiaries, culture of foreign

managers and subsidiary value versus overall MNC value. These can be reduced

through ways such as; Parent control and corporate control (Jordan, 2017).

Parent Control is done by exercising proper governance in; ensuring that the goal of

each subsidiary should be to maximize the value of the MNC rather than just the value

of the subsidiary; to oversee subsidiary decisions to ensure that they are compatible

with MNC goals and having compensation plans for subsidiary managers (stock

options).

Corporate control is done by reducing the threat of hostile takeover and by monitoring

done by the large shareholders. It is important to note that a centralized management

style reduces agency costs while a decentralized style gives more control to those

managers who are closer to the subsidiary’s operations and environment.

21

Even with the involvement of all these factors, there are benefits that the MNC gets in

retaining a strong home presence.

2.4.2 Balance of Payments

In International Economics, Multinational Corporations help maintain a favorable

Balance of Payments of the home country in the long run. This refers to the

measurement of all the transactions between the domestic and foreign residents over a

given specific period of time (Madura, 2012).

This study is important as it gives detailed information on the demand and supply of

the home country’s currency; the data signals the potential business partners in relation

to the rest of world and evaluates the country’s performance in international economic

competition. In double entry book keeping, the currency inflows are recorded as credit

whereas the currency outflows are recorded as outflows.

The balance of payments consists of the capital account, current account and financial

account. An illustration of the Balance of Payments could be as follows:

Figure 2.1: Balance of Payment

Source: International Financial Management, 11th Edition

In Export and import of goods (merchandise) and services we would include the

following; merchandise are tangible products such as automobiles and computers etc.;

current account

financial account

Direct foreign

investments

portfolio investments

Other capital investment

errors and omission reserves

capital account

Factor income

transfer services

Export and import of goods and

services

22

services include payments and receipts for insurance, tourism, consulting etc. and

balance of trade which gives the difference between total exports and total imports of

merchandise and services. In factor income we have payments and receipts of dividend

incomes and interest and transfer payments include aid, grant and gifts.

In Financial accounts; direct foreign investments (DFI) are investments in fixed assets.

Portfolio investments are investments in long term financial assets such as stocks and

bonds; the other capital investments are investments in short term financial assets or

short term securities. Capital and financial accounts record the flow of funds resulting

from the sale of assets between one specified country and all other countries (Luo &

Bhattacharya, 2006).

The current and capital account, records the following; if a country has negative current

account balance, it should have a positive capital & financial account balance. Ideally,

negative current account balance should be offset by a positive balance in capital

account.

But because of measurement errors, perfect offsetting is not there. So Balance of

payment has error & omissions account. Overall BoP should balance (Perez Carrillo,

2007).

2.4.3 Outsourcing

Outsourcing is the process of subcontracting to a third party in another country to

provide supplies or services that were previously produced internally. In doing this,

there is increased international trade activity because MNCs now purchase products or

services from another country and there is a lower cost of operations and job creation

in countries with low wages.

In the United States of America managerial decisions as regards outsourcing were as

follows: Managers of a U.S.–based MNC may argue that they create jobs for U.S.

workers by not outsourcing; Shareholders may suggest that the managers are not

maximizing the MNC’s value as a result of their commitment to creating U.S. jobs;

Managers should consider the potential savings that could occur as a result of

outsourcing and Managers must also consider the possible bad publicity or bad morale

that could occur among the U.S. workers (Madura, 2012).

23

The Sameer Group of Companies, for instance, planned to abandon the tyre

manufacture process in the Nairobi plant and shift the production offshore to either

India or China. In the Standard newspaper, 2016, Sameer Africa’s CEO, Allan

Walmsey, was quoted saying that his firm could make higher profit margins if they

contracted Indian firms which previously unsuccessfully bid to acquire Sameer. He also

stated that there was a discussion in moving the business offshore. The rationale behind

this was the millions of losses made in the previous years in over Ksh.15 million in

2015 and Ksh.66 million in 2014. The expectation is that the firm would retain its major

brands even after ceding the manufacturing process to third parties. The benefits the

major shareholder, Billionaire Naushad Merali, hopes to achieve is to accrue lower

production costs that are linked to friendlier taxation and cheaper energy process in

either of the two Asian economies. The profit margins in Kenya are about 21% while

in the off-site manufacturers is anticipated to be higher than 33%. This is one of the

many disadvantages, to a host country, that comes with outsourcing (Michira, 2016).

MNCs create opportunities in the form of marketing products that are produced in the

home country globally. There are employment opportunities created in this way that

lead to a boost in the industrial activities in the home country. Ceasing the tyre

manufacture business could have a lot of implications. This is especially for the almost

527 workers in the factory whose production has had a steady drop in the last five years.

The employees could lose their jobs with the shutting down of the plant. In 2015, for

instance, the firm produced tyres amounting to Sh2.4 billion from Sh3 billion in 2014.

Walmsley stated the firm had been forced to take a relook at its manufacturing business

strategies. This was due to the dwindling sales at home (Kenya) and all the regional

markets of Burundi, Tanzania and Uganda. Sameer Park’s sales recorded from imported

brands increased by a quarter in 2015 to Sh708 million in testament of a major shift to

the down market.

Vehicle registration grows at an average of approximately 7 per cent per year which is

not a case of shift in market needs. Thus, Sameer’s sales were actually on the decline.

In the modern day, a good number of newly registered vehicles are pre-owned. These

are vehicles previously bought and used in other countries then sold in Kenya as second

hand cars. This means that an even bigger proportion of the ‘budget conscious’

24

population are now driving cars, a non-justification for the decline in sales (Michira,

2016).

2.4.4 Return on Assets

According to Chan (2014), many multinational companies have developed a well-

established corporate social responsibility to the society as a program. This is set to

ensure that the company adheres to the code of conduct to help in economic growth, do

business in an ethical manner, to create a larger job market, protect the environment as

well as keep the public aware of the issues in the surrounding among others. Study by

Abels & Martelli (2012) proves that the ROA (Return on Assets) highly correlates to

social responsibility.

Synergos (2007) gives the work of the philanthropist Manu Chandaria, who, personally

and through his family business (The Comcraft Group of Companies), supports a

constellation of health centers, educational institutions, and foundations among others

throughout East Africa. Over the years, Dr. Chandaria's philanthropic work and

outspoken advocacy for corporate social responsibility have made him one of the

region's most esteemed businessmen and respected civil-society leaders.

According to Eldridge (2011), the international’s market place current trends have

favored the continued growth of multinational corporations by privatizing the

government run industries and any developing regional trading partnerships.

Privatization results in making available infrastructure for multinationals that want to

venture in new markets and the removal of trade barriers benefits multinational

operations.

In the continued capacity to produce by the multinationals, the relatively constant factor

is the buying capacity of its market. These factors could lead to a glut, would cause

price and wage deflation, a rapid decrease in the economic development as well as a

reduction in the set corporate activities. Even though these kinds of predictions may be

merely hypothetical, the foreseeable predictions state that multinationals would always

be on the rise globally.

2.4.5 Impact to home country stakeholders

Obligation to stakeholders is in terms of local employees, suppliers, communities as

well as shareholders. MNCs can help to reduce poverty by creating employment. Three

25

quarters of international investment in developing countries is from MNCs and private

sources. They can create jobs and raise labor standards. They can also pass on expertise

in their field. What better place to do so first than to their country of origin where they

had a favorable environment to grow and expand their business (Debate, 2017)?

The resources availed to an MNC to flourish were first given to them from the local

environment. Companies often start their international expansion by first serving the

foreign markets at close range from their home base. This is through locating all their

Research and Development and manufacturing in their home country. A good example

would be Fortune Global 500 which still focuses most of its bulk in the home country.

Other companies move on but eventually go back to the home base strategy e.g. GE in

home appliances and Bayer in pharmaceuticals. For other companies such as Zara

(Spanish Fashion Company), this strategy is more of a long term strategy (Ghemawat,

2005).

Zara has proven that home base strategies work well in the event that the economies of

concentration outweigh the dispersion economies. Companies like Korean giant,

Samsung, have balanced sales distributions as the R&D and production is at one point

(South Korea). The advantage that these bring about is the competitive advantage and

the low transport costs in relation to product value. The geographical concentration

dominates geographic dispersion locally and globally. This strategy may in turn limit

the company to its local region. The biggest threats to companies employing this

strategy would be to run out of room for growth or fail to hedge risk adequately.

2.5 Chapter Summary

This chapter discussed literature review guided by the research objectives. The research

questions: benefits of an MNC retaining a strong home presence, the mutual benefits

for both an MNC and country of origin and the justification for strong home presence

were analyzed using various journals and books. Chapter three describes the research

methodology used to undertake the study.

26

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

This chapter outlines how the research was conducted and the motive for the chosen

methodology. The first part covers the plan and structure of the research, followed by

the population and sampling design. It further discusses the data collection method,

followed by the research procedure adopted before the data analysis approach is

discussed. Finally it concludes with the summary of the chapter.

3.2 Research Design

Burns and Grove (2003) define research design as a blue print for conducting a study

with maximum control over factors that may interfere with the validity of the findings.

Parahoo (1997) describes research design as a plan that describes how, when and where

data are to be collected and analyzed. While Dooley (2007) describes research design

as the scheme, outline or plan used to generate answers to research problems. A

descriptive study with mixed methodology design was used for the study. A descriptive

study allowed the detailing of in-depth analysis of need for strong home (country of

origin) presence for all multinational corporations. Additionally, mixed methodology

helped in collecting, analyzing and integrating quantitative data through questionnaires

and qualitative data through an in-depth interview collected from the key decision

makers.

3.3 Population and Sampling Design

3.3.1 Population

According to Cooper and Schindler (2011), a population is the elements about which

the researcher wishes to make some inference. While population element refers to the

individual participant or object on which the measurement is taken. Target population

comprised of 50 management level employees of the Comcraft Group in Nairobi – Head

Office and 40 director level officers from the Ministry of Industry, Trade and

Cooperatives Kenya. These included all directors and officers in Job Groups U

(Principal Secretary), T (Secretary, Internal Trade and Commission/Ambassador), S

(Directors), R (Deputy Directors) and Q (Senior Assistant Directors) and Job Group P

(Assistant Directors).

27

Table 3.1: Population Distribution

S

No.

Designation Title Job

Group

Total

Population

Percentage

of entire

population

1 Principle Secretary U 1

2.5%

2 Secretary, Internal Trade T 1

2.5%

4 Director Weights and Measures S I

2.5%

5 Director Kenya Institute of Business Training

Institute

S

1

2.5%

6 Director External Trade S 1

2.5%

7 Director Human Resource Mgt/Dev. Officer S 1

2.5%

8 Deputy Director Kenya Institute Of Business

Training Institute

R

1

2.5%

9 Policy Analysis And Research R 1

2.5%

10 Deputy Director Internal Trade R 1

2.5%

11 Chairperson-Business Rent Tribunal R 1

2.5%

12 Director, Policy And Research Analysis R I

2.5%

13 Senior Deputy Secretary (SDS) R 1

2.5%

14 Deputy Director, Weights And Measures Q I

2.5%

15 Senior Assistant, Internal Trade Q 1

2.5%

16 Deputy Chief Finance Officer Q 1

2.5%

17 SNR. Asst. Dir. Human Resource Mgt Deve.

Officer.

Q

1

2.5%

18 Senior Principal Lecturer P 4

10.0%

19 Assistant Director, Trade P 8

20.0%

20 Assistant Director Internal Trade P 10

25.0%

21 Principal Legal Officer P 1

2.5%

22 Assistant Director I.C.T Officer P 1

2.5%

TOTAL

40 100%

*Population Distribution at the Ministry of Trade as at 31st August 2017. Job Group U, T, S, R, Q and P.

Source: Human Resource Department – Ministry of Trade

28

3.3.2 Sampling Design

According to Stattrek (2017), the "best" sample design depends on survey objectives

and on survey resources. For example, a researcher might select the most economical

design that provides a desired level of precision. Or, if the budget is limited, a researcher

might choose the design that provides the greatest precision without going over budget.

The sampling design that was used in this study is discussed further in the section

below.

3.3.2.1 Sampling Frame

According to Zikmund & Babin (2012), a sampling frame refers to the source material

or equipment from which the given sample is drawn. It is a representation of all the

items in a population that can be sampled. Just how much inaccuracy one can tolerate

in choosing a sampling frame is a matter of judgment (Cooper & Schindler, 11th

Edition, 2011)

The sampling frame for this study included top-management team at Comcraft, who

were the decision makers and the information was obtained from the Human Resource

Department. Also industry advisors at the Ministry of Industry, Trade and

Cooperatives. Key focus on getting information on local MNCs operations in Kenya

and in foreign countries especially on the incentives they provide.

3.3.2.2 Sampling Technique

Stratified sampling technique was used in the study to select the respondents from the

list of employees provided by the human resource department in order to capture the

entire population. Depending on the job group of interest, each was then handed a

questionnaire. Purposive sampling technique was used when selecting respondents for

the in-depth interview to be carried out face to face. This was two to three senior

positioned respondents from both Comcraft Group and the Ministry.

3.3.2.3 Sample Size

A sample refers to a group of cases, participants, events or records consisting of a

portion of the target population, carefully selected to represent that population. Some

of the principles which influence sample size comprises of the following: the greater

the dispersion or variance within the population, the larger the sample must be, the

29

narrower or smaller the error range, the larger the sample must be, the higher the

confidence level in the estimate, the larger the sample must be and the greater the

number of subgroups of interest within a sample, the greater the sample size must be,

as each sub group must meet minimum sample size requirements” (Cooper & Schindler,

11th Edition, 2011).

Given the nature of the sampling technique selected for the study, the sample size of

the study was 25 management staff of the Comcraft Group in Nairobi and 20 director

level officers from the Ministry of Industry, Trade and Cooperatives Kenya. This

represented 50% of the target population which was considered representative.

Table 3.2: Sample Size Distribution

Section

Target

population Sample Size

Administration 10 5

Public Relations 14 7

Sales and Marketing 10 5

Production 16 8

Ministry of Industry, Trade and Cooperatives 40 20

Total 90 45

3.4 Data Collection Methods

Data collection method is a technique used for gathering data systematically from

various sources for a particular purpose, while data collection instrument refers to the

device used to collect data (Fielding, 2010). Primary data is the information the

researcher obtained from the field. Primary data was collected using an interview guide

and questionnaires.

The interview guide consisted of open-ended questions covering issues on need for

strong home (country of origin) presence for all multinational corporations. Weber

(1990) notes that interview guide enable a researcher to gather as much information as

possible about a phenomenon. According to Cooper and Schindler (2006), open-ended

questions in an interview guide allow respondents to give detailed insights on the topic

without holding back. Further it provides guidance about what to ask or say next, after

30

your interviewee has answered the last question (Kennedy, 2006). The interview guide

was orally administered in a face-to-face meeting with the respondents. Recording of

respondents may occur if allowed. Each interview took about 30 minutes to administer.

Primary data was also collected using a questionnaire. The questionnaire had three

sections. First to Comcraft Group the questionnaire covered the background

information or the demographics, Comcraft Group’s relationship with home country

and their relationship with host countries. To the ministry the questionnaire had three

sections; the demographics section, impact of MNC retaining strong home presence and

impact of MNC having stronger host country operations and not in Kenya. During the

survey the questionnaire used a Likert scale of one to five. Respondents were expected

to return the questionnaires on time if not the researcher would utilize the group heads

by making phone calls or physical visits to their offices to help in the follow-up.

3.5 Research Procedures

The questionnaire and interview guide questions were developed by the researcher. The

interview guide was pilot tested with 1 respondent from the top job group at Comcraft

group and the Ministry. The questionnaire was pilot tested with 3 respondents from

both Comcraft Group and the Ministry. The purpose of the pilot test was to establish

the validity and reliability of the research instruments and hence enhance face validity.

After the pilot test, the interview guide was administered through a face to face meeting

with two higher ranked officials at Comcraft Group and the Ministry. The questionnaire

was administered through a drop-off and pick-up method (DOPU). DOPU was effective

to reduce potential nonresponse bias through increased response rate.

3.6 Data Analysis Methods

Cooper & Schindler (2011) states that, managers need information and not raw data.

Researchers generally generate information by analysing the data after it has been

collected. Data analysis refers to the process of editing and reducing accumulated data

to a manageable size, developing summaries, looking for patterns and applying

statistical techniques.

The study used content analysis technique in data analysis. The main purpose of content

analysis is to study the existing information in order to determine factors that explain a

31

specific phenomenon (Mugenda & Mugenda, 2003). This helped analyze the qualitative

data.

Weber (1990) describes content analysis as a systematic, replicable technique for

compressing many words of text into fewer content categories based on clear rules of

coding. Content analysis technique enabled the researcher to analyze large volumes of

data with ease in a systematic fashion.

The study also used descriptive and inferential statistics to analyze the quantitative data

received from the survey. Descriptive statistics helps describe, show or summarize data

in a meaningful way to outline patterns from the data. It can be broken down into

measures of central tendency and measures of variability or spread. Mugenda &

Mugenda (2003) inferential statistics makes inference about populations using data

drawn from the population.

3.7 Chapter Summary

This chapter has described the methodology used in the research to meet the objectives

of the study. The research methodology presented the following sub sections; research

design, population, sampling frame, sampling technique, Sample size, data collection,

research procedure and data analysis. The next chapter presents the results and findings

of this study.

32

CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

This chapter presents and interprets the study findings. The findings are presented in

four sections. The first description presents descriptive analysis of respondents’

demographic profile. The rest of the data is presented as the research questions. These

were: To what extent does the country of origin benefit from an MNC retaining a strong

home presence? To what extent does the host country benefit from an MNC active

presence? To what extent does an MNC benefit from retaining a strong home presence?

A total of 45 respondents were targeted in the study. Of this, 36 successful responses

were obtained of which, 20 were respondents from the Ministry of Trade and 16 were

from Comcraft. This represents 80% response rate. Table 4.1 shows the response rate.

Table 4.1 Response rate

Category Frequency Percentage

Successful responses

Comcraft

Ministry of Trade

Total successful responses

16

20

36

80.0

Non-responses

Comcraft

9

20.0

Total 45 100.0

4.2 Demographic Information

This section analyzes respondents’ demographic information such as gender, age,

department, tenure and Comcraft Profile

4.2.1 Demographic Information of Respondents from Comcraft

The demographic profile of respondents from Comcraft is presented in Table 4.2. The

table shows that females accounted for 62.5% of the respondents while male

respondents were 37.5%. In terms of age bracket, 37.5% of the respondents were aged

between 38-47 years and another 37.5% were aged 58-67 years whereas 25.0% of the

respondents were in the age group of 28-37 years. The table indicates that

33

Administration/Accounts and Marketing departments accounted for 43.7% and 31.3%

of the respondents, respectively whereas Human Resource and Governance & Risk

departments accounted for 12.5%, each. In terms of tenure of respondents, 37.5% of

the respondents had worked for the company for more than 11 years, 25% had worked

for 9-11 years, 12.5% of the respondents had been at the company for 6-8 years and

25.0% had served for 3-5 years. However, interviews held with the Company directors

revealed that most of the directors had been at the company for over four decades.

Table 4.2 Demographic profile of respondents from Comcraft Group

Demographic information: Comcraft Officers Frequency Percentage

Gender Male 6 37.5

Female 10 62.5

Total 16 100.0

Age bracket 18 – 27 years 0 0.0

28 – 37 years 4 25.0

38 - 47 years 6 37.5

48 – 57 years 0 0.0

58 – 67 years 6 37.5

Total 16 100.0

Department Administration & Accounts 7 43.7

Governance & Risk 2 12.5

Human Resource 2 12.5

Marketing 5 31.3

Total 16 100.0

Tenure Less than 3 years 0 0.0

3 – 5 years 4 25.0

6 – 8 years 2 12.5

9 – 11 years 4 25.0

More than 11 years 6 37.5

Total 16 100

4.2.2 Profile of Comcraft

Table 4.3 presents descriptive information of Comcraft Group’s profile. The table

indicates that 43.8% of the respondents said that the strength of Comcraft was in

Aluminium works, 31.2% said the company’s strength was in Steel, another 25.0% said

34

its strength was in Plastics. The table also shows that 53.8% identified East and Central

Africa as the company’s market with the greatest return. This was followed by South

& West Africa at 30.8% and Asia and North Africa at 7.7%, each.

Table 4.3 Profile of Comcraft Company

Dimensions Frequency Percentage

Comcraft’s strength

Steel 5 31.2

Plastics 4 25.0

Aluminum works 7 43.8

IT 0 0.0

Consultancy 0 0.0

Total 16 100.0

Comcraft’s market with

greatest return

East & Central Africa 9 53.8

South & West Africa 5 30.8

Asia 1 7.7

Northern Africa 1 7.7

European & America 0 0.0

Total 16 100.0

4.2.3 Demographic Information of Respondents from Ministry of Trade

Table 4.4 shows the distribution of respondents from the Ministry of Trade according

to their demographic profile. The table shows that 50% of the respondents were male

and another 50% were female. Majority (55.0%) of the respondents were aged between

38-47 years followed by 25.0% of the respondents aged 48-57 years. Some 20% of the

respondents were aged 28-37 years.

Table 4.4 Demographic Profile of Respondents from the Ministry of Trade

Demographic information: Ministry of Trade Officers Frequency Percentage

Gender Male 10 50.0

Female 10 50.0

Total 20 100.0

Age bracket 18 – 27 years 0 0.0

28 – 37 years 4 20.0

38 - 47 years 11 55.0

48 – 57 years 5 25.0

58 – 67 years 0 0.0

Total 20 100.0

Tenure Less than 3 years 0 0.0

3 – 5 years 4 22.2

35

6 – 8 years 0 0.0

9 – 11 years 4 22.2

More than 11 years 12 55.6

Total 20 100.0

4.3 Extent Country of Origin Benefits from MNC Strong Home Presence

In order to answer the research question; to what extent does country of origin benefit

from an MNC retaining strong home presence, the questionnaires were administered to

director-level officers at the Ministry of Trade and the results analyzed as follows;

4.3.1 Descriptive analysis of benefits of MNC strong home presence to country

of origin

4.3.1.1 Benefits of MNC strong home presence to Kenya government

Respondents were asked whether Kenya government receive benefits from local

multinationals strong home presence. Table 4.5 shows that 40% of the respondents

agreed and 60% of the respondents strongly agreed that the government received

benefits from an MNC retaining strong home presence. Therefore, all of the

respondents from the Ministry of Trade agreed that the government benefited from

strong MNC presence in the country. This finding was qualified by findings from

interviews held with two deputy directors at the Ministry of Trade who identified job

creation as the key benefit from a strong MNC home presence. This was also

corroborated by response received from interviews by two Directors at Comcraft

Group. According to the directors, Comcraft employed 7,000 staff and one of its major

subsidiaries employed another 1,200 people.

Table 4.5 Kenya Government receives benefits from MNC strong home presence

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 0 0.0

Agree 8 40.0

Strongly agree 12 60.0

Total 20 100.0

36

4.3.1.2 Satisfaction with benefits of MNC strong home presence

The opinion of respondents was sought as to whether the benefits of MNC strong home

presence were satisfying. Table 4.6 shows that 35.0% of the respondents said it was

somewhat satisfying while 65.0% of the respondents said it was very satisfying. The

results suggest that most of the respondents from the Ministry of Trade were satisfied

with the benefits of a strong MNC home presence.

Table 4.6 Satisfaction with benefits of MNC strong home presence

Responses Frequency Percentage

Not at all 0 0.0

Not really 0 0.0

Not sure 0 0.0

Somewhat 7 35.0

Very much 13 65.0

Total 20 100.0

4.3.1.3 Importance of benefits accruing from MNC strong home presence

The opinion of respondents were sought concerning the importance of the benefits of

MNC strong home and the findings presented in Table 4.7.

Table 4.7 Importance of MNC strong home presence

Responses Frequency Percentage

Not important 0 0.0

Somewhat important 0 0.0

Neutral 0 0.0

Important 4 20.0

Very important 16 80.0

Total 20 100.0

As table 4.7 reveals, 20% of the respondents said MNC strong home presence was

important and a further 80% of the respondents said it was very important. Therefore,

all of the respondents were of the view that a strong MNC home presence was important

for the country. These views were corroborated by findings from in-depth interviews

37

with two deputy directors at the Ministry of Internal Trade who had the following to

say about a strong MNC home presence;

“[Importance is felt] mainly in the job creation plus the

availability of key products in the country. There is also the

support they provide to their environment that helps boost the

society through activities like CSR”.

The finding on importance of benefits in terms of CSR was also corroborated by the

two directors at Comcraft Group as per the following verbatim comments;

“We have allocated both time and money. We sit in various

charitable organizations board meetings and have allocated

around Kshs.200million for the same. We focus on the growth

of a society activities and also offer advisory services esp. on

accounts for free to institutions like the Kenya Deaf

Association.”

“We have a health-centre in Mariakani that treats over 40,000

patients. It directly treats around 28,000 patients with common

ailments like malaria and treats around 4,000 patients daily. It

also has an enabling VCT centre. We have a Technical

Training Institute with 240 students that offers 2 year DIT

course, boda boda repairs which has enrolled 30-40 students

and also has 60-80 ladies enrolled on short-courses on beauty.

During the post-election violence one institution was burnt and

we are helping to rebuild it.”

4.3.1.4 Impact of benefits of MNC strong home presence on government policy

The views of the respondents were sought on whether the benefits from local

multinationals impact how the Kenya government drafts its policies. Table 4.8 shows

that 30% of the respondents said the benefits somewhat influence drafting of

government policy while 70.0% of the respondents said it influences the drafting of

government policies very much. Therefore, most of the respondents observed that an

MNC strong home presence did influence government policy very much. As per

38

interviews held with the Deputy Director at Ministry of Trade, government policy was

influenced in the sense that the government “strive to provide best infrastructure to local

companies to ensure an enabling environment to do business”.

Table 4.8 Impact of benefits of MNC strong home presence on government

policy

Responses Frequency Percentage

Not at all 0 0.0

Not really 0 0.0

Not sure 0 0.0

Somewhat 6 30.0

Very much 14 70.0

Total 20 100.0

4.3.1.5 Kenya Government review of policy for local MNC growth

Respondents were asked whether the Kenya government reviews its policies annually

to accommodate growth of companies to bigger multinationals. Table 4.9 shows that

80% and 10% of the respondents agreed and strongly agreed, respectively whereas 10%

of the respondents disagreed. Thus, majority of the respondents agreed that the

government reviewed its policies annually in consideration of the growth of MNCs.

The Director of Internal Trade had this to say;

“We have set-up some policies and some are in the pipeline to

ensure a consistent enabling environment that assures the local

companies of their continued business in the country”.

Table 4.9 Whether Kenya Government reviews policy for local MNC growth

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 2 10.0

Neutral 0 0.0

Agree 16 80.0

Strongly agree 2 10.0

Total 20 100.0

39

4.3.1.6 Stakeholder involvement in policy drafting for local MNC growth

The views of the respondents were sought on whether in the drafting of policies for

multinationals, Kenya government involves all stakeholders. Table 4.10 indicates that

10% of the respondents agreed and a further 80% strongly agreed. However, 10% of

the respondents were neutral. Thus, most of the respondents strongly agreed that

stakeholders were involved when drafting policy for promoting local MNC growth in

Kenya.

Table 4.10 Stakeholder involvement in policy drafting for local MNC growth

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 2 10.0

Agree 2 10.0

Strongly agree 16 80.0

Total 20 100.0

4.3.2 Inferential Analysis of need for MNC strong home presence

Spearman’s rank correlation analysis was run to establish the relationship between an

MNC strong home presence and benefits to country of origin at alpha=0.01. Table 4.11

presents the statistical output. The table shows that a statistically significant positive

correlation subsisted between local MNC strong home presence and government

satisfaction with benefits (r=.685, p<.01), importance of benefits to the country (r=.612,

p<.01), impact of government policy (r=.802, p<.01) and stakeholder involvement in

policy development (r=.609, p<.01). The results imply that the stronger the MNC home

presence, the more the benefits to country of origin.

40

Table 4.11 Significance of MNC strong home presence to country of origin

1 2 3 4 5

1. Local MNC strong home

presence

Correlation Coefficient 1.000

Sig. (2-tailed) .

N 20

2. Government satisfaction

with benefits

Correlation Coefficient .612** 1.000

Sig. (2-tailed) .004 .

N 20 20

3. Importance of benefits to

Kenya

Correlation Coefficient .802** .764** 1.000

Sig. (2-tailed) .000 .000 .

N 20 20 20

4. Impact of government

policy

Correlation Coefficient .456* .000 .488* 1.000

Sig. (2-tailed) .043 1.000 .029 .

N 20 20 20 20

5. Stakeholder involvement in

policy development

Correlation Coefficient .609** .311 .759** .611** 1.000

Sig. (2-tailed) .004 .183 .000 .004 .

N 20 20 20 20 20 **. Correlation is significant at the 0.01 level (2-tailed).

4.3.2.2 Regression of MNC strong home presence on benefits to Kenya

Government

Linear regression was performed to regress MNC strong home presence on benefits to

Kenya government to establish the need for local MNC strong home presence. The

results are shown in Table 4.12. The model summary and the ANOVA result reveal that

MNC strong home presence explained 65.9% of the variability in benefits to Kenya

government (R2=0.659, p<.01).The coefficients indicate that importance of benefits to

Kenya government had the strongest relationship with MNC strong presence (B=0.764,

p<.05), followed by stakeholder involvement in policy development (B=0.682, p<.05)

and government satisfaction with benefits (B=0.582, p<.05).

Table 4.12 Model summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .812a .659 .568 .330 a. Predictors: (Constant), Government satisfaction with benefits, Importance of benefits to Kenya,

Stakeholder involvement in policy development

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

1

Regression 3.164 4 .791 7.250 .002b

Residual 1.636 15 .109

Total 4.800 19 a. Dependent Variable: MNC strong home presence

b. Predictors: Constant), Government satisfaction with benefits, Importance of benefits to Kenya, Impact of

government policy, Stakeholder involvement in policy development

41

Coefficientsa Unstandardized Coefficients Standardized

Coefficients

T Sig.

B Std. Error Beta

(Constant) MNC strong home

presence 3.118 1.247

12.000 .024

Government satisfaction with

benefits

.582 .345 .477 .427 .046

Important of benefits to

Kenya

.764 .583 .397 .524 .042

Impact of government policy .436 .649 .595 .780 .243

Stakeholder involvement in

policy development

.682 .254 .460 .616 .044

a. Dependent Variable: MNC strong home presence

4.4 Impact of Local MNC active presence in host countries

This section presents results on the extent host countries benefit from an MNC active

presence.

4.4.1 Descriptive analysis of benefits of MNC active presence in host countries

4.4.1.1 Promotion of Local MNC investment in other countries

Views of the respondents were sought on the statement, “Kenya government promotes

multinational investment in other countries”. Table 4.13 shows that 70% of the

respondents perceived the statement as true and 10% said the statement was very true.

However, 10% of the respondents were not sure whereas another 10% said the

statement was false. Thus, majority of the respondents held the opinion that the

government of Kenya promotes local MNC investments in other countries. This was

corroborated by the findings from interviews held with two Deputy Directors at the

Ministry of Trade as per the following verbatim comment;

“We do not actively encourage it but it is beneficial to the

country.”

42

Table 4.13 Kenya government promotes local MNC investment in other

countries

Responses Frequency Percentage

Very false 0 0.0

False 2 10.0

Not sure 2 10.0

True 14 70.0

Very true 2 10.0

Total 20 100.0

4.4.1.2 Role of local MNC in promoting relations with host countries

The study sought to establish whether through local multinational investments in other

countries, Kenya’s relations with these nations has greatly improved. Table 4.14 shows

that 40% of the respondents said it was true and another 40% said it was very true.

However, 10% of the respondents were not sure while another 10% said it was false.

Therefore, most of the respondents concurred that Kenya’s relations with host nations

has greatly improved through local MNC investments in the respective countries.

Table 4.14 MNC presence in host countries improves Kenyan relations

Responses Frequency Percentage

Very false 0 0.0

False 2 10.0

Not sure 2 10.0

True 8 40.0

Very true 8 40.0

Total 20 100.0

4.4.1.3 MNC focus on foreign country activities

Respondents were asked to comment on the statement; “Most Kenyan multinationals

focus more in foreign country activities compared to Kenya”. Table 4.15 shows that

55% of the respondents said the statement was false and 35% of the respondents were

not sure. However, 10% of the respondents said the statement was true. Therefore, most

43

of the respondents at the Ministry of Trade did not believe most Kenyan multinationals

focus more in foreign country activities compared to Kenya.

Table 4.15 Kenyan MNC focus on foreign country activities compared to Kenya

Responses Frequency Percentage

Very false 0 0.0

False 11 55.0

Not sure 7 35.0

True 0 0.0

Very true 2 10.0

Total 20 100.0

4.4.1.4 Government support to Kenyan MNC move to foreign countries

The opinion of the respondents were sought as to whether Kenya government has set-

up policies supporting local companies to move to foreign countries. Table 4.16 shows

that 75% of the respondents agreed while 25.0% of the respondents were neutral.

Therefore, majority of the respondents at the Ministry of Trade agreed that the

government supported Kenyan MNC move to foreign countries. This is confirmed by

verbatim excepts from in-depth interview with a director at the ministry;

“We organize exhibitions and trade shows and invite local

business to try identify where they can invest in. This is in

collaboration with other ministries”.

Table 4.16 Government supports Kenyan MNC move to foreign countries

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 5 25.0

Agree 15 75.0

Strongly agree 0 0.0

Total 20 100.0

44

4.4.1.5 Benefits of local MNC investment in foreign countries

The study sought to establish whether the Kenya government derived benefits from

Kenyan companies that invest in foreign countries. As per table 4.17, the results reveal

that 70% of the respondents disagreed while 30% were neutral. Therefore, most of the

respondents disagreed that the government benefited from Kenyan companies investing

in foreign countries.

Table 4.17 Kenya Government benefit from MNC companies in foreign

countries

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 14 70.0

Neutral 6 30.0

Agree 0 0.0

Strongly agree 0 0.0

Total 20 100.0

4.4.1.6 Foreign country demand for Kenyan MNCs

Respondents were asked whether the Kenya government receives requests from foreign

countries asking specific companies to invest in their countries. The findings in Table

4.18 shows that 50% of the respondents agreed and a further 40% strongly agreed.

However, 10% of the respondents were neutral. Therefore, majority of the respondents

at the Ministry of Trade agreed that foreign countries request Kenya government for

specific companies to invest in their countries.

Table 4.18 Foreign country demand for Kenyan MNCs

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 2 10.0

Agree 10 50.0

Strongly agree 8 40.0

Total 20 100.0

45

4.4.1.7 Effect of MNC expansion to a foreign country on strong home presence

The study sought respondents’ opinion on whether sometimes expansion of a Kenyan

company to a foreign country has caused some companies to have stronger operations

in the foreign country than its home country. Table 4.19 indicates that 45% of the

respondents said the statement was false and another 10% said the statement was very

false. However, 35% of the respondents were not sure while 10% said the statement

was true. Therefore, most of the respondents at the Ministry of Trade did not believe

that expansion of a Kenyan company to a foreign country has caused some companies

to have stronger operations in the foreign country than its home country.

Table 4.19 Expansion cause comparatively stronger operation in host country

Responses Frequency Percentage

Very false 2 10.0

False 9 45.0

Not sure 7 35.0

True 2 10.0

Very true 0 00.0

Total 20 100.0

4.4.2 Inferential Analysis of need for MNC Active presence in host country

4.4.2.1 Correlation of MNC active presence and benefits to host country

Correlation analysis was performed to establish the significance of MNC active

presence in host country to the host. Table 4.20 shows that MNC active presence in

host country was significantly correlated to foreign investment benefits (r=.823, p<.01),

implying that foreign investment gains increased with increased MNC activities in host

country. However, the relationship between MNC active presence in host country and

strength of foreign relations was not statistically significant (r=.279, p>.01).

46

Table 4.20 Correlation between MNC active presence and benefits to host

country

Spearman’s Rho 1 2 3

1. MNC active presence in host

country

Correlation Coefficient 1.000

Sig. (2-tailed) .

N 20 1.000

2. Strength of foreign relations

Correlation Coefficient .279 .293

Sig. (2-tailed) .234 .210

N 20 20 1.000

3. Foreign investment

Correlation Coefficient .823** .253 .221

Sig. (2-tailed) .000 .281 .350

N 20 20 20

**. Correlation is significant at the 0.01 level (2-tailed).

4.5 Benefits of strong home presence to MNCs

This section analyzes the findings on the extent MNCs benefit from retaining a strong

home presence.

4.4.2.2 Regression of MNC active presence on benefits to host country

MNC active presence in host country was regressed on benefits to host country to

establish the extent to which host country benefits from MNC active presence. The

findings are shown in Table 4.21. The model summary and the ANOVA result indicate

that MNC active presence explained 34.9% of the benefits of MNC active presence

(R2=0.349, p<.05).The coefficients indicate that MNC active presence in host country

had a strong impact on foreign investment (B=0.664, p<.05) but not foreign relations

(B=0.382, p>.05).

Table 4.21 Model summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .591a .349 .228 .820

a. Predictors: Predictors: (Constant), Strong foreign relations, Foreign investment

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

1

Regression 5.784 3 1.928 2.865 .039b

Residual 10.766 16 .673

Total 16.550 19

a. Dependent Variable: MNC active presence in host country

b. Predictors: Constant), Strong foreign relations, Foreign investments

47

Coefficientsa Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

(Constant) MNC active

presence 3.118 1.247

7.121 .050

Strong foreign relations .382 .345 .477 .427 .142

Foreign investment .664 .583 .397 .524 .046

a. Dependent Variable: MNC active presence

4.5.1 Descriptive analysis of benefits of strong home presence to MNCs

4.5.1.1 Benefits of strong home presence to Comcraft Group

The views of the respondents were sought as to whether Comcraft Group received any

benefits in maintaining a strong home presence in Kenya. Table 4.22 shows that 87.5%

of the respondents agreed while 12.5% of the respondents were neutral. Therefore,

majority of the respondents agreed that the company did benefit from its strong home

presence in Kenya. This perspective was corroborated by findings from interviews with

two directors at the company who cited the country’s favorable infrastructure, business

orientation and its strategic location as depicted in the following verbatim examples;

“Best I can point-out is the condition or business environment.

With basic infrastructure and security, Kenya has been good

to us. That’s why we have been here for now 100 years. As

you read Monday’s newspaper, we commissioned a multi-

million shillings colour-coating line.”

“Kenya understands business, hence provides a much better

environment plus Kenya is a big-brother in the EAC making it

a strategic country to operate from.”

48

Table 4.22 Benefits of strong home presence to Comcraft Group

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 2 12.5

Agree 14 87.5

Strongly agree 0 0.0

Total 20 100.0

4.5.1.2 Satisfaction with benefits of strong home presence to Comcraft Group

The opinion of the respondents were sought as to whether the benefits of strong home

presence were satisfying to Comcraft Group. Table 4.23 shows that 75% of the

respondents agreed and a further 12.5% strongly agreed whereas 12.5% of the

respondents were neutral. Therefore, majority (87.5%) of the respondents at Comcraft

Group were satisfied by the benefits accruing from the company’s strong presence in

Kenya. This finding is supported by the comments by the company’s directors thus;

“As I earlier said, the provision of basic infrastructure is important

to us so we can say we are satisfied.”

“We do not take short-cuts and have operated in the country for

many years, hence we can say we are quite satisfied”.

Table 4.23 Benefits of strong home presence satisfying to Comcraft Group

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 2 12.5

Agree 12 75.0

Strongly agree 2 12.5

Total 20 100.0

49

4.5.1.3 Importance of benefits of retaining strong home presence

Respondents were asked to rate the importance of the benefits of retaining strong home

presence to Comcraft Group. Table 4.24 indicates that 87.5% of the respondents said it

was somewhat important while 12.5% of the respondents were undecided.

Table 4.24 Rating of importance of retaining strong home presence to Comcraft

Responses Frequency Percentage

Not at all 0 0.0

Not really 0 0.0

Undecided 2 12.5

Somewhat 14 87.5

Very much 0 0.0

Total 20 100.0

4.5.1.4 Importance of benefits accrued from Kenya government

The study sought to establish how respondents rated the importance they attached to

benefits accrued from the Kenya government. Table 4.25 reveals that 37.5% of the

respondents rated the benefits as important and 12.5% said the benefits were very

important. However, 25% of the respondents were neutral whereas another 25% of the

respondents said the benefits were not important.

Table 4.25 Rating of importance of benefits accrued from Kenya government

Responses Frequency Percentage

Not at all 0 0.0

Not all important 4 25.0

Neutral 4 25.0

Important 6 37.5

Very important 2 12.5

Total 20 100.0

50

4.5.1.5 Impact of benefits on Comcraft operations

Respondents were asked to indicate the impact of benefits derived from Kenya

government on Comcraft’s operations. As per Table 4.26, the results reveal that 37.5%

of the respondents said benefits from Kenya government impacted on Comcraft’s

operations very much while 12.5% said the impact was somewhat. However, 25.0% of

the respondents were not sure while another 25.0% said “not really”. Therefore, most

of the respondents noted that Comcraft’s operations were very much impacted by the

benefits accruing from Kenya government. From the interviews held with the

company’s directors, it was inferred that the benefits led to further investment in home

country. Local expansion was an underlying theme evidenced from the following

verbatim comments;

“We celebrated 100 years and in the next 100 years we will be

here. We plan to invest more and more in new and current

business.”

“We plan to continue for 50 years and more.”

Table 4.26 Impact of benefits on Comcraft Operations

Responses Frequency Percentage

Not at all 0 0.0

Not really 4 25.0

Not sure 4 25.0

Somewhat 2 12.5

Very much 6 37.5

Total 20 100.0

4.5.1.6 Comcraft’s challenge in maintaining a strong home presence

Respondents were asked whether Comcraft Group has not faced any challenge in

maintaining a strong home presence. Table 4.27 shows that 62.5% of the respondents

disagreed and 37.5% of the respondents were neutral. No respondent agreed. Therefore,

most of the respondents were in agreement that the company’s strong home presence

was not without challenges. From the interviews with the company’s directors, cost of

doing business arising from security concerns, double taxation and cost of electricity

emerged as a major concern as implied in the following comment;

51

“In Kenya there is no proactive and positive considerations to enable

the business environment. This is for example double taxation in

holding company. Taxation of subsidiaries within the country defeats

the purpose of networking. Even with the trading blocs there is an

imbalance such that Kenya cannot stand-up a country like Egypt

within COMESA. There is also the issue of levies which is around

4%-5% expensive when exporting to a country like Uganda. There is

additional 1.5% levy on railway to Uganda. Power costs are too high.

Kenya needs to live by its strategies because even customs are not

effective and efficient, goods come in through the port and are

declared wrongly to reduce on the duty. KEBS also need to look into

the standardization of such goods”.

Table 4.27 No challenge to Comcraft group in maintaining a strong home

presence

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 10 62.5

Neutral 6 37.5

Agree 0 0.0

Strongly agree 0 0.0

Total 20 100.0

4.5.1.7 Government’s active role in Comcraft’s strong home presence

The study sought to establish whether the Kenya government plays an active role in

ensuring Comcraft’s active presence in Kenya. Table 4.28 reveals that 25% of the

respondents disagreed, 62.5% were neutral whereas 12.5% of the respondents agreed.

52

Table 4.28 Government’s active role in Comcraft’s strong home presence

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 4 25.0

Neutral 10 62.5

Agree 2 12.5

Strongly agree 0 0.0

Total 20 100.0

4.5.1.8 Comcraft’s strong focus on CSR

The opinion of the respondents were sought as to whether CSR is one of Comcraft’s

strongest focus in Kenya. Table 4.29 shows that 87.5% of the respondents agreed and

12.5% of the respondents were neutral.

Table 4.29 Comcraft’s strongly focus on CSR

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 2 12.5

Agree 14 87.5

Strongly agree 0 0.0

Total 20 100.0

4.5.1.9 Comcraft’s strategy for strong home presence

Respondents were asked whether Comcraft has put in place a strategy to maintain a

strong home presence in Kenya. Table 4.30 shows that 87.5% of the respondents agreed

and 12.5% of the respondents were neutral. However, no respondent disagreed.

Therefore, majority of the respondents agreed that Comcraft had strategy in place to

maintain a strong home presence.

53

Table 4.30 Comcraft strategy in place to maintain strong presence in Kenya

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 2 12.5

Agree 14 87.5

Strongly agree 0 0.0

Total 20 100.0

4.5.1.10 Benefits of Comcraft’s presence in other countries

The study sought to establish whether there are greater benefits when Comcraft Group

invests in other countries. Table 4.31 reveals that 71.4% of the respondents were not

sure and 28.6% of the respondents said there was somewhat greater benefits of

Comcraft’s presence in other countries.

Table 4.31 Greater benefits when Comcraft Group invests in other countries

Responses Frequency Percentage

Not at all 0 0.0

Not really 0 0.0

Not sure 12 71.4

Somewhat 4 28.6

Very much 0 0.0

Total 20 100.0

4.5.1.11 Comcraft’s challenge in host countries

Respondents were asked whether Comcraft faced great challenges in host countries.

Table 4.32 shows that 75% of the respondents agreed whereas 25% of the respondents

were neutral. The table shows that no respondent disagreed. Thus, most of the

respondents held the view that the company faced great challenges in host countries.

54

Table 4.32 Comcraft face great challenges in host countries

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 4 25.0

Agree 12 75.0

Strongly agree 0 0.0

Total 20 100.0

4.5.1.12 Weight of benefits in host countries

The study sought to determine whether the benefits accrued in other host countries

outweighed those from Kenya. Table 4.33 shows that 12.5% of the respondents

disagreed while 87.5% of the respondents were neutral. However, no respondent agreed

that benefits accrued in host countries outweigh those in Kenya. Interviews held with

the company’s directors revealed that the benefits of a strong home presence

outweighed those derived from host countries abroad as evidenced from the following

verbatim comment;

“We have a pull of intelligence and experience here in Kenya.

So many years of experience and also a skilled labour force”.

“Kenya is better since a country like Tanzania is becoming

stubborn with their policies and a country like Ethiopia has

very strict processes. A country like Rwanda has internal

favouritism. In Kenya the workforce and labour force is well

trained, the location is good (equidistant from left to right,

right at the middle of the world)”.

Table 4.33 Benefits accrued in host countries outweigh those in Kenya

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 2 12.5

Neutral 14 87.5

Agree 0 0.0

Strongly agree 0 0.0

Total 20 100.0

55

4.5.1.13 Comcraft’s CSR activities in host country

The views of the respondents were sought with regards to whether Comcraft has many

CSR activities in other host countries compared to Kenya. Table 4.34 shows that 100%

of the respondents were neutral whereas no respondent agreed or disagreed.

Table 4.34 Comcraft has more CSR activities in host countries compared to

Kenya

Responses Frequency Percentage

Strongly disagree 0 0.0

Disagree 0 0.0

Neutral 16 100.0

Agree 0 0.0

Strongly agree 0 0.0

Total 20 100.0

4.5.2 Inferential Analysis of benefits of strong home presence to MNCs

4.5.2.1 Correlation of MNC strong home presence and benefits to MNCs

Spearman’s rank correlation analysis was performed to establish the significance of

benefits of strong home presence to Comcraft. Table 4.35 shows that strong home

presence in Kenya was significantly correlated to respondents’ satisfaction with

benefits (r=.756, p<.01), importance of benefits from Kenya government (r=.428,

p<.05) and impact of benefits on Comcraft operations (r=.408, p<.01).The means that

the stronger the home presence of Comcraft in Kenya, the more the benefits derived

from operations.

Table 4.35 Correlation of strong home presence and benefits to MNC

Spearman’s Rho 1. 2 3 4

1. Strong home

presence in Kenya

Correlation Coefficient 1.000

Sig. (2-tailed) .

N 16 1.000

2. Satisfaction with

benefits

Correlation Coefficient .756** .500*

Sig. (2-tailed) .001 .049

N 16 16 1.000

3. Importance of

benefits from Kenya

government

Correlation Coefficient .428* .351 .171

Sig. (2-tailed) .042 .183 .526

N 16 16 16 1.000

56

4. Impact of benefits

on Comcraft

operations

Correlation Coefficient .408* .314 .171 .342

Sig. (2-tailed) .048 .237 .526 .194

N 16 16 16 16

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

4.5.2.2 Regression of MNC strong home presence on benefits to MNCs

MNC strong home presence was regressed on benefits to MNC to establish the extent

to which MNCs benefit from a strong home market presence. The findings are shown

in Table 4.36. The model summary and the ANOVA result reveal that MNC strong

home presence explained 45.9% of the variability in benefits to the MNC (R2=0.459,

p<.05).The beta coefficients show that MNC strong home presence had a strong impact

on MNC satisfaction with benefits (B=0.667, p<.05) and importance of benefits

(B=0.589, p<.05) but not MNC operations (B=0.386, p>.05).

Table 4.36 Model summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .612a .459 .368 .330 a. Predictors: (Constant), MNC satisfaction with benefits, Importance of benefits to MNC, Impact of

benefits to MNC operations

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

1

Regression 2.964 4 .588 4.250 .032b

Residual 1.635 12 .412

Total 4.599 16 a. Dependent Variable: MNC strong home presence

b. Predictors: Constant), Government satisfaction with benefits, Importance of benefits to Kenya, Impact of

government policy, Stakeholder involvement in policy development

Coefficientsa Unstandardized Coefficients Standardized

Coefficients

T Sig.

B Std. Error Beta

(Constant) MNC strong home

presence 5.118 1.247

9.001 .043

MNC satisfaction with

benefits

.667 .345 .477 .427 .019

Important of benefits to MNC .589 .583 .497 .324 .041

Impact on MNC operations .386 .549 .395 .208 .133

a. Dependent Variable: MNC strong home presence

57

4.6 Chapter Summary

This chapter has presented the results and findings of the study. As per the major

findings, a statistically significant positive correlation was found between local MNC

strong home presence and government satisfaction with benefits, importance of benefits

to the country, impact of government policy and stakeholder involvement in policy

development. MNC strong home presence explained a higher percentage of the

variability in benefits to Kenya government.

MNC active presence in host country was significantly correlated to foreign investment

benefits. However, the relationship between MNC active presence in host country and

strength of foreign relations was not statistically significant. Regression results

indicated that MNC active presence in host country explained a higher percentage of

the benefits of MNC active presence.

Strong home presence in Kenya was significantly correlated to respondents’

satisfaction with benefits, importance of benefits from Kenya government and impact

of benefits on Comcraft operations. MNC strong home presence explained a higher

percentage of the variability in benefits to the MNC.

These results are discussed in the next chapter and subsequently, conclusions and

recommendations are drawn.

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CHAPTER FIVE

5.0 DISCUSSION, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

This chapter summarizes the study, discusses the findings and draws conclusions as

well as recommendations. The summary provides a synopsis comprising of the study

objectives and methodology that was used, along with the major research findings.

These are then discussed in line with the objectives and literature review. Subsequently,

conclusions are drawn based on the discussions from which practical recommendations

are made and areas for further studies suggested.

5.2 Summary

The general objective of the study was to determine the need for strong home (country

of origin) presence and if multinational corporations have an obligation to their country

of origin to retain a strong home presence. The study was guided by the following

research questions. To what extent does the country of origin benefit from an MNC

retaining a strong home presence? To what extent does the host country benefit from

an MNC active presence? To what extent does an MNC benefit from retaining a strong

home presence?

A descriptive study with mixed methodology design was used for the study. The target

population comprised of 50 management level employees of the Comcraft Group in

Nairobi – Head Office and 40 director level officers from the Ministry of Industry,

Trade and Cooperatives Kenya. The sample size of the study was 45 respondents

comprising 25 management staff of the Comcraft Group in Nairobi and 20 director level

officers from the Ministry of Industry, Trade and Cooperatives Kenya. Data was

collected using a structured questionnaire and an interview guide. Descriptive statistical

techniques were used to analyse quantitative data while content analysis was applied to

qualitative data. Inferential analysis was performed using Spearman’s rank correlation

technique at 0.05 significant levels.

In answer to the question; to what extent does the country of origin benefit from an

MNC retaining a strong home presence? Results showed that 40% of the respondents

59

agreed and 60% of the respondents strongly agreed that the government received

benefits from an MNC retaining strong home presence, 65.0% of the respondents said

the benefits were very satisfying and a further 80% of the respondents said the benefits

were very important. A statistically significant positive correlation was found between

local MNC strong home presence and government satisfaction with benefits (r=.685,

p<.01), importance of benefits to the country (r=.612, p<.01), impact of government

policy (r=.802, p<.01) and stakeholder involvement in policy development (r=.609,

p<.01). MNC strong home presence explained 65.9% of the variability in benefits to

Kenya government (R2=0.659, p<.01).

The second research question was; to what extent does the host country benefit from an

MNC active presence? Results showed that 40% of the respondents said it was true and

another 40% of the respondents said it was very true that through local multinational

investments in other countries, Kenya’s relations with these nations has greatly

improved. However, 70% of the respondents disagreed that the Kenya government

derived benefits from Kenyan companies that invest in foreign countries. Further

findings showed that 45% of the respondents said the statement that sometimes

expansion of a Kenyan company to a foreign country has caused some companies to

have stronger operations in the foreign country than its home country was false while

another 10% said the statement was very false. MNC active presence in host country

was significantly correlated to foreign investment benefits (r=.823, p<.01). However,

the relationship between MNC active presence in host country and strength of foreign

relations was not statistically significant (r=.279, p>.01). MNC active presence in host

country explained 34.9% of the benefits of MNC active presence (R2=0.349, p<.05).

The third research question was; to what extent does an MNC benefit from retaining a

strong home presence? The study established that 87.5% of the respondents agreed that

Comcraft Group received benefits in maintaining a strong home presence in Kenya.

Majority (87.5%) of the respondents at Comcraft Group were satisfied by the benefits

accruing from the company’s strong presence in Kenya. Strong home presence in

Kenya was significantly correlated to respondents’ satisfaction with benefits (r=.756,

p<.01), importance of benefits from Kenya government (r=.428, p<.05) and impact of

benefits on Comcraft operations (r=.408, p<.01). MNC strong home presence explained

45.9% of the variability in benefits to the MNC (R2=0.459, p<.05).

60

5.3 Discussions

5.3.1 Benefits of MNC strong home presence to country of origin

The study established that all of the respondents from the Ministry of Trade agreed that

the government benefited from strong MNC presence in the country. Specifically, job

creation was identified by most of the respondents as a key benefit of an MNC strong

home presence. This is in line with Debate (2017) that a strong MNC home presence

can help reduce poverty by creating employment and improving labour standards of the

country of origin. This was quantified at Comcraft whereby the company provided a

source of income through employment of over 8,000 people. The finding is also

consistent with Eldridge’s (2011) argument that employment opportunities created in

this way lead to a boost in the industrial activities in the home country. In the current

study, these benefits were found to be very satisfying according to most respondents at

the Ministry of Trade.

The results also showed that all the respondents from the Ministry of Trade were

unanimous that the benefits accrued to the government from an MNC strong home

presence was important to the country’s economy. On this respect, availability of key

products in the country and support to the environment and to society through corporate

responsibility activities were highlighted as important benefits. For instance, the results

revealed that Comcraft Group allocated about Ksh.200 million for charitable activities

and the directors sit in various charitable organizations board meetings. In terms of

impact, the study revealed that over 40,000 patients have benefited from the company’s

charitable activities in the health sector. Further, the study established that nearly 400

youth have benefited from vocational training through Comcraft’s CSR activities in the

education sector. The finding agrees with Debate (2017) that in maintaining a strong

home presence, multinational corporations are returning back to society in more of an

ethical responsibility rather than an obligation.

The findings revealed that most of the respondents observed that an MNC strong home

presence did influence government policy very much. Interviews with directors at the

ministry of trade indicated that government responded through initiation of policies that

facilitates the provision of best infrastructure to local companies to ensure an enabling

environment to do business. Further findings indicated that the government reviewed

61

its policies annually in consideration of the growth of MNCs. This finding is consistent

with the observation by Davis (2017) that MNCs use their strong presence to influence

policy development in their country of origin or host economies. As established in the

current study, most of the respondents strongly agreed that stakeholders were involved

when drafting policy for promoting local MNC growth in Kenya.

Findings from inferential analysis revealed that there was a statistically significant

positive correlation between local MNC strong home presence and benefits accrued to

the country of origin. Further, MNC strong home presence had the strongest

explanatory power on the benefits accrued. This implied that the stronger the MNC

home presence, the more the benefits to country of origin. The results suggest the need

for strong home presence by local multinational corporations. This is in agreement with

Madura (2012) who vouches for the maximization of benefits and output through the

maintenance of a strong home presence by local multinational companies such as the

Comcraft Group.

5.3.2 Impact of Local MNC active presence in host countries

The study found that majority of the respondents held the opinion that the government

of Kenya promotes local MNC investments in other countries in the recognition that a

local MNC’s active presence in other countries is beneficial to the country. This finding

supports the observation by Nshehe (2017) with respect to Comcraft Group which, he

argues, has established management services companies in London, Geneva, Nairobi,

Singapore and Toronto among others besides employing over 30,000 employees in

three continents. Related findings indicated that most of the respondents concurred that

Kenya’s relations with host nations has greatly improved through local MNC

investments in the respective countries. This agrees with the perspective of Rugman et

al. (2016) that an NMC’s active presence in host countries helps gain a foothold in

economic unions which, in this case, is through the promotion of foreign relations with

the respective countries.

The results however shows that most of the respondents at the Ministry of Trade did

not believe most Kenyan multinationals focus more in foreign country activities

62

compared to Kenya. This may be linked to the comparative advantage theory as

discussed by Maneschi (1995). In the current study, it was established from the

interviews held with the company’s directors that Comcraft, for example, maintains a

strong home presence as opposed to focusing in foreign country activities due to

Kenya’s strategic location, skilled human capital and its economic power in the East

African Community. This implies that Kenya commands a comparative advantage on

these dimensions, thereby supporting the comparative advantage theory. By extension,

the results disprove the study assumption that Comcraft put a lot of investment in other

countries as compared to the home country Kenya. Although the company has a

footprint in over 40 countries across the world, the results of this study suggest that

Kenya still retains its position as the single largest investment location for the company

and its subsidiaries. This finding is buttressed by views of most of the respondents at

the Ministry of Trade who did not believe that expansion of a Kenyan company to a

foreign country has caused some companies to have stronger operations in the foreign

country than its home country.

The study also established that majority of the respondents at the Ministry of Trade

agreed that foreign countries request Kenya government for specific companies to

invest in their countries. This implies that Kenya benefits in the process through export

promotion while the host country also benefits through the access to quality goods and

services. This process promotes trade flows which promotes balance of payment. This

is in line with the argument by Madura (2012) that any policy that will increase foreign

demand for a country’s goods and services will improve its balance of trade since

locally available goods become more attractive to foreigners and export increases.

From the inferential analysis, it was found that MNC active presence in host country

was significantly correlated to foreign investment benefits, implying that foreign

investment gains increased with increased MNC activities in host country. This is in

line with Rugman et al. (2006) who aver that MNCs bring with them the technology

and production methods that are new to the host country besides the creation of

employment to the locals. It also agrees with Knoji’s (2017) view that MNCs can

participate in the industrial development programs of host country due to their

technological superiority, thereby enabling them to produce globally recognized goods

that have international standards and quality specifications by adopting the latest

63

technology brought about by MNC active presence in the host country. Further, local

companies may benefit from supplying services or raw-materials to the new factory as

this may also generate more jobs. Similarly, profits from MNCs are subject to local

taxes hence boost the local source of revenue for the host country government.

However, since a weak explanatory power of MNC active presence in host country on

benefits was obtained, it may be argued that other factors potentially contribute to the

benefits a host country derive from MNC active presence.

5.3.3 Benefits of strong home presence to MNCs

The results showed that majority of the respondents agreed that Comcraft benefited

from its strong home presence in Kenya. These benefits were found to accrue from

good basic infrastructure and relative security. Further findings indicated that majority

of the respondents at Comcraft Group were satisfied by the benefits accruing from the

company’s strong presence in Kenya. The benefits were found to impact Comcraft’s

operations very much. The implication of the benefits on the company’s operations

manifested in company’s operation in the country for the last 100 years and its plan to

invest in a strong home presence for the next 100 years. An underlying theme from the

study finding is macroeconomic stability which in turn leads to growth as implied by

the company’s expansionary strategy.

From the findings, there seems to be an interrelationship between a country’s

government action and benefits an MNC derives from a strong home presence. This is

because it was found that the company’s strong home presence was not without

challenges as interviews with Comcraft’s directors revealed that cost of doing business

arising from security concerns, double taxation and cost of electricity emerged as major

concerns. This is in line with the assertion by Madura (2012) that Government policies

in the home country such as restrictions on imports; increase in tariffs on imported

goods that in turn increase the country’s current account or the government’s reduction

in the country’s imports by enforcing quotas among others affect trade flows that affects

the benefits of maintaining a strong home presence by an MNC. The findings also agree

with Chaminade and Gomez (2016) that an MNC’s investment portfolio is affected by

taxation rates, interest rates and exchange rates. This means that an MNC’s strong home

64

presence can be supported through the provision of incentives like subsidies and tax

breaks as suggested by Rugman et al. (2006).

The results indicated that most of the respondents at Comcraft agreed that CSR was one

of Comcraft’s strongest focus in Kenya. This agrees with the observation made by Chan

(2014) that many multinational companies have developed a well-established corporate

social responsibility to the society as a program. In return, the company benefits in

terms of overall return on assets. Past studies by Abels and Martell, (2012) have proven

that Return on Assets highly correlates to social responsibility. This was corroborated

by inferential analysis which indicated that strong home presence in Kenya was

significantly correlated to respondents’ satisfaction with benefits, importance of

benefits from Kenya government and impact of benefits on Comcraft operations;

meaning that the stronger the home presence of Comcraft in Kenya, the more the

benefits derived from operations. This was further corroborated by regression results

which revealed that MNC strong home presence explained a significant proportion of

the variability in benefits to the MNCs. Since majority of the respondents agreed that

Comcraft had strategy in place to maintain a strong home presence in Kenya, it can be

inferred that the benefits the company enjoyed were significant.

5.4 Conclusions

5.4.1 Extent country of origin benefits from an MNC retaining a strong home

presence

Country of origin enjoys a number of benefits from an MNC retaining a strong home

presence, suggesting the need for all MNCs to retain a strong home presence in their

country of origin. The benefits of country of origin from an MNC retaining a strong

home presence were significant, very satisfying and very important to the country of

origin’s economy. A strong home presence leads to the creation and retention of jobs

directly through employment opportunities to citizens and indirectly through business

transactions with the MNC. Further, through the MNC’s CSR activities, the

government of the country of origin enjoys relief from the MNC’s involvement in the

eradication of social and environmental problems in the sectors of interest to MNC.

65

Among these are: the provision of healthcare services to the poor, education and

training as well as rehabilitation of drug addicts.

5.4.2 Extent host country benefits from an MNC’s active presence

Host country benefits from an MNC’s active presence mainly through foreign direct

investment and to a lesser extent, better foreign relations. Through foreign investments

brought about by the MNC, the host country also benefits in terms of job creation and

access to quality products and services that raises the host country’s competitiveness in

the international market. In addition, besides transfer of skills and technology, the

labour standards of the host country are consequently improved.

5.4.3 Extent an MNC benefit from retaining a strong home presence

Base on the case of Comcraft Group, it can be concluded that MNCs benefit

significantly by maintaining a strong home presence. The benefits accruing to MNCs

however depended on a myriad of factors such as strategic location, basic infrastructure,

government policies and actions related to ease of doing business, tax regimes, political

stability and cost of doing business in terms security and electricity costs. These

benefits are mutual in the sense that the MNC enjoys protection and favourable

government policies whereas the host government gains in terms of job creation and

socioeconomic development.

5.5 Recommendations

5.5.1 Recommendations for Improvement

5.5.1.1 Extent country of origin benefits from an MNC retaining a strong home

presence

The government of country of origin should create policies that promote ease of doing

business in order to make the country attractive for MNCs to retain a strong home

presence. Of immediate review should be the policy of double taxation where the

holding company and its subsidiaries are both liable to corporate tax. The government

should also initiate measures that reduces the cost of doing business in the country with

66

respect to the quality and cost of energy, taxation policies to avoid double taxation as

well as security of both physical and intellectual property.

5.5.1.2 Extent host country benefits from an MNC’s active presence

In order to derive meaningful benefits from an MNC’s active presence in the host

country, the government of host countries should liberalize their economies and come

up with policies that cut down on government bureaucracy and reduces legal risks to

foreign investors. Host country governments should also provide tax benefits and

incentives especially import and export taxes at the customs. Host governments should

also negotiate mutually beneficial bilateral trade agreements with the MNC’s country

of origin to leverage on each other’s comparative advantage.

5.5.1.3 Extent an MNC benefit from retaining a strong home presence

MNCs should consolidate their market power in the country of origin by maintaining a

strong home presence and by leveraging on the goodwill they accrue from corporate

responsibility activities. They should also negotiate and influence policy reforms that

makes a strong home presence sustainable. For instance, local MNCs in Kenya can

sponsor initiatives that leads to the development alternative low cost energy and also

lobby for better property rights laws.

5.5.2 Recommendations for Improvement

This study has been limited in scope to the case of Comcraft Group in Kenya, thus the

findings may not generalized to other countries and multinational companies.

Therefore, other case studies in other countries could be conducted to establish whether

the need for strong home presence is context specific. A survey approach could also be

adopted in future studies to provide a broad perspective from the experiences of

different multinational corporations.

67

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APPENDICES

APPENDIX A: INTERVIEW GUIDE COMCRAFT GROUP OF COMPANIES

1. What position do you hold at Comcraft? How many years have you worked for

Comcraft?

2. How many employees work at Comcraft Group Head Office in Nairobi?

3. From your experience what benefits has Comcraft group realized from

maintaining a strong home presence? Kindly give examples?

4. What challenges has Comcraft faced in maintaining a strong presence in Kenya?

5. What role does the Kenyan government play to ensure Comcraft’s active

presence in Kenya and are you satisfied with the support?

6. From various articles, CSR seems to be a major focus for Comcraft group.

Kindly advise the allocated budget for CSR?

a) Which are the major CSR projects that you have undertaken in Kenya?

7. To ensure long-term sustainability in retaining a strong Kenyan presence, has

Comcraft put in place long-term structures to foresee this?

8. What are the benefits derived from host countries? And to host countries?

9. What are the challenges faced when initially investing in the host countries and

during operations?

10. From experience, which is better, the home country operations and investments

or more investments in other countries? Why?

11. Does the Kenya government promote Comcraft Group to invest in foreign

countries? What systems have they put in place to ensure foreign investments?

73

To the Ministry of Trade, Industry and Cooperatives.

1. What position do you hold at the Ministry? How many years have you worked

at the Ministry?

2. How many employees work at the Ministry of Trade, Industry and Cooperatives

– Nairobi head office?

3. Kindly advice the number of multinationals we have in Kenya? A list will be

appreciated.

4. From your experience what benefits has Kenya derived from strong home

presence by local multinationals? Kindly give examples?

5. What policies has Kenya put in place to ensure stronger presence of its

multinationals?

6. What are the common complaints or requests or recommendations that local

multinationals give the ministry to ensure more support from the government?

7. What are the future plans of the Ministry to ensure local multinationals still

maintain a strong home presence? Is there a strategic plan?

8. What are your views when local MNCs expand to other host countries?

a) How does the ministry encourage the movement of local MNCs to host

countries?

b) What benefits does the nation gain from local MNCs moving or expanding

to other countries?

9. Which countries have our local MNCs invested in the most?

74

APPENDIX B: QUESTIONNAIRES

The Need for strong home presence (country of origin) for all

Multinationals. A case study of Comcraft Group.

Participation in this study is voluntary and feedback received will be anonymous and

confidential.

SECTION A: BACKGROUND INFORMATION

1. What is your gender? Male[ ] Female [ ]

2. How old are you?

18-27 [ ] 28-37 [ ] 38-47 [ ] 48-57 [ ] 58-67 [ ]

3. What department do you work in? _____________

4. How long have you worked for Comcraft Group?

Less than 3 years [ ] 3-5 years [ ] 6-8 years [ ] 9-11 years [ ] More

than 12 years [ ]

5. What is your employment status?

Full Time [ ] Contract [ ] Part time [ ] Casual Worker [ ] Intern [ ]

6. How many subsidiaries does Comcraft Group have in Kenya?

1-3 [ ] 4-6 [ ] 7-9 [ ] 10-12 [ ] More than 13 subsidiaries [ ]

7. Which industry is Comcraft Group strong in?

Steel [ ] Plastics [ ] Aluminium works [ ] IT [ ] Consultancy [ ]

8. Which market offers greater returns to Comcraft Group investment?

East and Central Africa [ ] South and West Africa [ ] Asia [ ] Northern

Africa [ ] European and America [ ]

75

SECTION B: COMCRAFT’S RELATIONSHIP WITH HOME COUNTRY

Please tick in appropriate box.

1. Does Comcraft Group receive any benefits in maintaining a strong home

presence in Kenya? Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree

[ ] Strongly disagree [ ]

2. Are these benefits satisfying? Strongly Agree [ ] Agree [ ] Neutral [ ]

Disagree [ ] Strongly disagree [ ]

3. If yes, kindly advise the level of satisfaction?

Very much [ ] Somewhat [ ] Undecided [ ] Not Really [ ] Not at All [ ]

4. How important are the benefits accrued from the Kenya Government important?

Very important [ ] Important [ ] Neutral [ ] Not important [ ] Not at

All Important [ ]

5. Do the benefits impact the way Comcraft performs its operations?

Very much [ ] Somewhat [ ] Not Sure [ ] Not Really [ ]

Not at All [ ]

In the following section, please choose a number from 1-5 and write it next to each

statement to indicate how much you agree with the statement.

1 2 3 4 5

Strongly Disagree Strongly Agree

1. _____ Comcraft has not faced any challenge in maintaining a strong home

presence in Kenya.

2. _____ Kenya government plays an active role in ensuring Comcraft’s active

presence in Kenya.

76

3. _____ CSR is one of Comcraft’s strategic focus in Kenya.

4. _____ Comcraft has put in place a strategy to maintain a strong presence in

Kenya.

SECTION C: COMCRAFT’S RELATIONSHIP WITH HOST COUNTRIES

1. How many Global subsidiaries does Comcraft Group have?

1-3 [ ] 4-6 [ ] 7-9 [ ] 10-12 [ ] More than 13 subsidiaries [ ]

2. Which market offers greater returns to Comcraft Group investment?

East and Central Africa [ ] South and West Africa [ ] Asia [ ] Northern Africa

[ ] European and America [ ]

3. There are great benefits when Comcraft Group invests in other countries.

Very much [ ] Somewhat [ ] Not Sure [ ] Not Really [ ]

Not at All [ ]

4. Comcraft faces great challenges in host countries.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

5. The benefits accrued in other host countries outweigh those from Kenya.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

6. Comcraft Group has many CSR activities in other host countries compared to Kenya.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

77

7. Host countries benefit from Comcraft Group investments.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

THANK YOU.

78

The Need for strong home presence (country of origin) for all

Multinationals: Ministry Of Trade, Industries and Cooperatives.

Participation in this study is voluntary and feedback received will be anonymous and

confidential.

SECTION A: BACKGROUND INFORMATION

1. What is your gender? Male[ ] Female [ ]

2. How old are you?

18-27 [ ] 28-37 [ ] 38-47 [ ] 48-57 [ ] 58-67 [ ]

3. What department do you work in? _____________

4. How long have you worked for the Ministry? ________

Less than 3 years [ ] 3-5 years [ ] 6-8 years [ ] 9-11 years [ ] More

than 12 years [ ]

5. What is your employment status?

Full Time [ ] Contract [ ] Part time [ ] Casual Worker [ ] Intern [ ]

6. In which Industry does Kenya have the largest number of multinationals?

Manufacturing [ ] Construction [ ] Banking & Consultancy [ ] IT [ ]

None of the Above [ ]

b) If none of the above, kindly advise the industry? _______

7. How many multinationals do we have in Kenya? __________

SECTION B: KENYA GOVERNMENT IMPACT TO LOCAL MULTINATIONALS.

Please tick in appropriate box.

79

1. Kenya government receives benefits from local multinationals strong home

presence?

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

2. Are these benefits satisfying?

Very much [ ] Somewhat [ ] Not Sure [ ] Not Really [ ]

Not at All [ ]

3. How important are the benefits accrued from the local multinationals?

Very important [ ] Important [ ] Neutral [ ] Somewhat important [ ]

Not important [ ]

4. Do the benefits from local multinationals impact how the Kenya government

drafts its policies?

Very much [ ] Somewhat [ ] Not Sure [ ] Not Really [ ] Not at All [ ]

5. Kenya government reviews its policies annually to accommodate growth of

companies to bigger multinationals.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

6. In the drafting of policies for multinationals, Kenya government involves all

stakeholders.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

SECTION C: IMPACT OF LOCAL MULTINATIONALS STRONG

PRESENCE IN HOST COUNTRIES

80

1. The Kenya government promotes local multinational investment in other

countries.

Very True [ ] True [ ] Not Sure [ ] False [ ] Very False [ ]

2. Through local multinational investments in other countries, Kenya’s relations

with these nations has greatly improved.

Very True [ ] True [ ] Not Sure [ ] False [ ] Very False [ ]

3. Most Kenyan multinationals focus more in foreign country activities to Kenya.

Very True [ ] True [ ] Not Sure [ ] False [ ] Very False [ ]

4. Kenya government has set-up policies supporting local companies to move to

foreign countries.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

5. Kenya government derives more benefits from Kenyan companies that invest

in foreign countries.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

6. Kenya receives requests from foreign countries, asking for specific companies

to invest in their country.

Strongly Agree [ ] Agree [ ] Neutral [ ] Disagree [ ] Strongly disagree [ ]

7. Sometimes expansion of a Kenyan company to a foreign country has caused

some companies to have stronger operations in the foreign country than its

home country.

Very True [ ] True [ ] Not Sure [ ] False [ ] Very False [ ]

THANK YOU.