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Running head: KENYAN ECONOMY ANALYSIS

KENYAN ECONOMY ANALYSIS

Part 3: Kenyan economy and market distribution for a McDonald's fast food and beverages franchise

Bhavik Patel

GDP

Kenya is the country of choice to start a McDonald's fast food and beverages franchise. The country is located at the horn of Africa in the greater Eastern Africa region, and it is the most developed country among its peers. According to data from the World Bank, the country's Gross Domestic Product (GDP) was estimated at $95.5 billion in 2019, representing 0.08 percent of the world economy. The GDP is expected to fall due to the harsh effects of COVID-19 (Market Overview. 2016).

Population and per capita.

Being the most developed country in eastern Africa, Kenya is recognized as the region's commercial, economic, and logistical hub. The country has a population of approximately 47.5 million people as of 2019, out of which the larger percentage is educated and English-speakers. Therefore, the market has many multi-lingual professionals with the necessary skills to support the intended franchise. Kenya has a strong entrepreneurial base and tradition, which is complemented by its young population, over 70% of the 47.5 million living in the country. It is estimated the country’s GDP per capita is $2,010 nominal and that over 50% of Kenyans live below the poverty line (Sunday, 2017).

Strengths.

The country’s strengths include; human resource, strategic location, and natural assets, 2020 has been a mixed year for the country economically because the GDP had grown by 4.9 % in the first part of the year, but in the last few months, it has plunged by 5.7%. Kenya’s inflation rate has fallen gradually from 7.99% in 2017 to 5.2% in 2019. The country is at the bottom of the wage scale, and thus it is adversely affected by high inflation as a result of the high per-unit cost of goods (TRADING ECONOMICS. n.d.).

Their agricultural sector.

The agricultural sector is the leading employer in the country and contributes to about 34.15 percent of GDP in 2019. Kenya's unemployment rate was approximated to be 2.64 percent in 2019, which represents a decline from previous years (Market Overview. 2016). Exports are the primary source of foreign exchange for the country, and it is the world's leading exporter of black tea with a share of 23%.

Infrastructure.

Kenya has a well-developed transportation infrastructure and comprehensive air routes; however, these facilities' quality is uneven in different parts of the country. The country's capital city is Nairobi, which is an ideal place to start McDonald's fast food and beverages franchise because it is in a strategic place. Nairobi is an undisputed hub of eastern and central Africa due to its size and location (it is the largest city between Cairo and Johannesburg). Its deep-water port is essential to the region because it serves several countries (Trade, 2020).

Tourism in Kenya.

Kenya is one of the world's leading tourist destinations, and 2019 saw the industry grow by 1.16 percent. The number of tourists visiting the country in 2019 was over two million, with most of them visiting from the united states. This is a good sign because these tourists, together with their visiting from Europe, will be potential customers claims Sunday (2017).

Distribution.

Kenya requires a pre-shipment verification of conformity and an import standard mark as stipulated by its laws. Most foreign companies operating in the country use distributors or agents to cut costs on staffing, information, infrastructure, market transactions, logistics, and leverage dealers contracts. This will be ideal for the product because McDonald's can use existing infrastructure rather than investing extensively in developing its means (Trade, 2020).

Laws.

Kenya does not have laws that require foreign firms to have or retain a local distributor or agent. U.S. Department of Commerce export assistance center (USEAC) is active in the country and willing to assist U.S. based business to locate a suitable agent or distributor through their International Partner search (IPS) and Gold Key Service (GKS). The company will have to register with the Kenyan Registrar of Companies as a foreign entity. They will receive a certificate of compliance to show that they meet the standards (Market Overview. 2016). The approval is essential because it allows the business to obtain trading licenses from local authorities.

Franchising.

Franchising is a growing trend in Kenya, with household names such as KFC and Domino's Pizza gaining popularity and market share. However, it is essential to note that franchising is new to the market, and thus new entries should expect little support from the courts on the issue of intellectual property protection.

Challenges in franchising.

According to Sunday (2017), other franchising issues in Kenya include; limited knowledge of the concept and a narrow customer base. There are not franchise laws, and thus one must rely on commercial rules instead. However, there is an increase in local inquiries about fast foods, particularly those prevalent in the united states. Direct marketing is also an option that presents a penetration level, but this is limited to major-purchase items.

Laws.

There are no laws that stipulate or regulate commercial joint ventures in the country on joint ventures, and thus local guidance and personal judgments are recommended. Express delivery is becoming popular in Kenya due to reduced lead time. The rise of online fast-food market places such as Glovoapp and Jumia food Kenya has also helped the country's franchise industry (TRADING ECONOMICS. n.d.).

Reference

Market Overview. (2016, February 8). U.S. Embassy in Kenya. https://ke.usembassy.gov/business/getting-started-kenya/market-overview/

Sunday, F. (2017). Kenya's economy groans under the weight of its jobless youth. The Standard Digital, 25.

Trade, I. (2020, September 13). Kenya - Distribution & Sales Channels. International Trade Administration | Trade.Gov. https://www.trade.gov/knowledge-product/kenya-distribution-sales-channels