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.
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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.
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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.
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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
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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
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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)
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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.
58
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.