ADOPTING CORPORATE STRATEGY FOR PROFITABILITY IN THE NIGERIAN BREWING INDUSTRY

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ABSTRACT
Recently, there has been growing concern about the frequent collapse and poor performance of industries in our country. Business organisations are becoming more complex due to rapid changes in the environment. It is increasingly becoming difficult to predict the environment accurately. In such an environment characterized by high level competition, developing competitive edge for business survival and growth becomes imperative. This calls for the adopting a corporate strategy that can ensure profitability. The aim of the study was to find out the extent to which different corporate strategies contribute to the profitability of our manufacturing industry, in particular the brewery industry. The methodology adopted in carrying out the research work was the survey method. Both the primary and secondary sources of data were utilised. The population for the study was drawn from three manufacturing organisations in the brewery indusrty in the south-western part of Nigeria. The sampling technique adopted was simple random sampling. The study made use of a sample size of 250 respondents.The Statistical Package for Social Sciences (SPSS) was used to analyse the data collected. The yardsticks used in assessing the level of performance include, Return on Capital Employed (ROCE) Return on Investment (ROI), Return on Total Assets (ROTA), Return on Shareholders’ Capital (ROSC), Profitability Index, Earning per Share etc. Thus, the result of the survey confirmed that corporate strategy has impact on profitability in any organization.The folowing were the outcome: growth strategies such as mergers and acquisitions result in a brewery industry having an increased market share; joint venture as a growth strategy positively impacts strongly on return on investment; reconstructing and retrenchment has a positive effect on returns on capital employed; brewery industry will experience a higher return on capital employed when they employ any of the exit strategies i.e. divestment, harvest and liquidation; and lastly, the study reveals that adopting corporate strategy and successful implementation of an appropriate, feasible, desirable and timely strategy will create competitive advantage and also increase the profitability base.The study recommends that government should encourage declining or distressed companies to engage in merger and acquisition by providing incentives such as tax holidays, loss relief, and capital allowances. Corporate organizations should concentrate more of their resources on growth strategies; exit strategies should be applied on subsidiaries that are not too profitable; defensive strategy should be employed if it is established that the firm’s profitability problem is due to its workforce’s inability to catch up with the changing trends in the industry. These will be particularly helpful in the manufacturing industry, which is characterized by distress syndrome. Above all, government should ensure that basic infrastructure provision like electricity, telecommunications, transport, etc are provided as the provision of these by firms constitutes a huge outlay which eats deep into their profits.

TABLE OF CONTENTS

Title page
Table of Contents
List of Tables
List of Figures
Abstract

CHAPTER ONE: INTRODUCTION
1.1       Background to the study
1.2       Statement of the Problem
1.3       Objectives of the Study
1.4       Research Questions
1.5       Research Hypotheses
1.6       Significance of the Study
1.7       Scope of the Study
1.8       Limitations of the Study
1.9       Profile of Consolidated breweries Plc
1.10     Reference

CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1       The Evolution of the Concept of Strategy
2.2       Definitions of Strategy
2.3       Theoretical Framework
2.4       Corporate Strategy
2.5       Growth Strategy
2.6       Acquisition
2.7       Joint Ventures
2.8       Merger
2.9       Defensive Strategy
2.10     Retrenchment Strategy
2.11     Restructuring
2.12     Exist Strategy
2.13     BCG Matrix
2.14     Profitability Index
2.15     Summary of Related Literature Review
            References

CHAPTER THRE: RESEARCH METHODOLOGY
3.1       Research Design
3.2       Area of Study
3.3       Population of the Study
3.4       Sample Size Determination
3.5       Sources of Data
3.6       Primary Sources of Data
3.7       Secondary Sources of Data
3.8       Questionnaire Design
3.9       Validation and Reliability
3.10     Data Processing
3.11     Operationalisation of Variables
References

CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1       Presentation and Analysis of Data
4.2       Test of Hypotheses
4.3       Discussion of Result
References

CHAPTER FIVE: SUMMARY, CONCLUSSION AND RECOMMENDATIONS
5.1       Summary of Findings
5.2       Recommendations
5.3       Conclusion
5.4       Contribution to Knowledge
5.5       Suggested Area for Further Study
Bibliography
Appendix
Questionnaire

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND TO THE STUDY
A cursory look at business organisations would reveal that some are very successful, others only moderately or even marginally, while still others fail altogether. The answer lies in an organizational equivalent of the biological concept of the “survival of the fittest.” Charles & Dan, 2002; 1 have observed that “over the long run, organizations that survive are those that serve the needs of their societies effectively and efficiently; that is, that provide the benefits demanded by society at prices sufficient to cover the costs incurred in producing them.” (Charles & Dan, 2002). Organizations reflect this truism very clearly and they survive only so long as they produce goods and services that generate revenues exceeding the costs incurred in producing them, that is, only so long as they make a profit.

Unlike living things, however, organisations, including businesses, can plan and implement fundamental or structural changes although it is clear that not all do so. Such changes can be of two types: (1) those that affect the relationship between the organisation and its environment, and (2) those that affect the internal structure and operating activities of the organisation. Typically, environmentally related changes affect the organisation’s effectiveness to a greater degree than internally oriented changes, which usually have greater influence on its efficiency.


In general system theory, effectiveness is defined as the degree to which the actual output of the system correspond to its desired output, while efficiency is defined as the ratio of actual output to actual inputs. In most organisations, much of management’s time and attention is placed on internal efforts designed to make day-to-day operations as efficient as possible. One of the principal reasons for this is that inefficiency can seriously retard the overall performance of the organisation.
However, organisation depend much more for their long-run success and survival on improvements in their effectiveness (that is, on how well they relate to their environments) than on improvements in their efficiency. Peter Drucker stated this most eloquently when he suggested that it is more importantly to do the right things (improve effectiveness) than to do things right (improve efficiency). Thus, if an organisation is doing the right things wrong (that is, is effective but not efficient), it can outperform organisations that are doing the wrong things right (that is, are efficient but not effective)

A classic example of these ideas is Consolidated and Crown breweries of the 1980s and early 1990s in Ogun state of Nigeria. At that time Crown breweries was by far the most efficient brewery producer in Ogun state and some part of Oyo and Ondo state. However, the two did not see the changes occurring in the marketplace that Nigeria Breweries, and Guinness Nigeria Plc did. Consequently, in spite of their superior efficiency in the local market, they lost the battle for supremacy in their locality to Nigeria Breweries, and Guinness Nigeria Plc.
In Crown-products’ case it lack thezability to adapt to new technology of the industry. Thus, even though the total demand for breweries products increased, the demand for Crown-Product ltd decreased as a result of change in taste. Consolidated survived, however, because it eventually responded appropriately to the change, while Crown-products failed as entity because it could not, or at least did not, respond effectively to the changes in its environment. We have called such changes strategic changes because they altered the conditions for effectiveness.

Profitability is a must for any organisation through which it generates surplus for its continuity of operations (Sukul & Mishra, 2003). Companies which are strategically managed usually have profitability as one of their objectives as it is through profits alone that they can survive. Higher profit also means efficient and effective working of an organisation. Companies, which cannot....

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