ABSTRACT
The study focused on the effect of
backward integration strategy on organization performance. Nestle Nigeria Plc
was used as case study. Fifty copies of questionnaires were administered using
convenience sampling techniques for the purpose of data collection and
interviews were conducted to authenticate the information derived. The data
obtained was analysed using frequency distribution and chi-square. The findings
revealed that Backward Integration increases organization profitability. This
is to say that Backward Integration strategy streamline the organization to
provide better cost control by eliminating the middleman and lower cost of
production for the firm to became more competitive in the market place. It was
recommend among others that to justify the funds expended on this strategy, the
strategy should be well validated and evaluated. While it is proper that
research and development programme should be embanked upon.
TABLE OF CONTENT
Pages
Title page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract vi
Table of content
vii
CHAPTER ONE
INTRODUCTION
1.1
Historical Background of Nestle
Nigeira Plc 1
1.2 Statement of research problems 4
1.3
Objectives of the study 5
1.4 Statement of Research questions 6
1.5 Statements
of research hypotheses 6
1.6 Significance of the study 7
1.7 Scope and Limitations of the study 7
1.8 Operational
Definition of terms 8
CHAPTER TWO
LITERATURE
REVIEW
2.1 Introduction 9
2.2 Historical
background of strategy 14
2.3
Theoretical frame work 15
2.3.1 The classical theory of
strategy 16
2.3.2 The evolution theory of strategy 16
2.3.3 The proccessual theory of strategy 17
2.3.4 Systemic theory of strategy 18
2.4 Backward
integration strategy 19
2.5
Problems of benefits of backward integration strategy23
CHAPTER THREE
RESEARCH METHODS
3.1
Introduction 48
3.2 Research
design 48
3.3 Characteristics
of population of the study 49
3.4 Sample
size and sampling design 49
3.5 Re
statement of research questions 50
3.5 Re-statement
of research hypotheses 50
3.6 Analytical
tools 51
3.7 Test
of validity and reliability of research instrument52
CHAPTER FOUR
DATA
ANALYSIS AND PRESENTATION
4.1 Introduction 53
4.2 Frequency
table 53
4.3 Chi-square
67
CHAPTER FIVE
SUMMARY OF
FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
of findings 74
5.2 Conclusion 75
5.3 Recommendations 75
5.4 Limitations 76
Bibliography 77
Appendix 81
CHAPTER
ONE
1.1
HISTORICAL BACKGROUND OF NESTLE NIGERIA PLC
Nestle
Nigeria plc is associated with the nestle group, the single largest food
company in the world and it is known worldwide for its top quality products.
Nestle
Nigeria plc began simple trading in 1961 and has today grown into a leading
manufacturing and marketing company. It is a public quoted company listed since
1978 on the Nigeria stock exchange with about 20,500 shareholders
participating.
Nestle
Nigeria Plc of Switzerland owns about 43% of the company’s equity. Nestle
Nigeria plc manufacturing complex is located at Agbara Industrial Estate in
Ogun State.
The
main products were designed in line with modern manufacturing methods which
ensure efficient production of the following:
v Infant
cereals – nestle golden morn.
v Instant
family cereals, nestle milo – beverage drink.
v Chocomilo
– chocolate sweets, maggi cubes, maggi chicken, maggi crayfish, maggi super
onion spices.
Nestle
Nigeria plc obtains most of its agricultural raw materials locally from
contract farmers and out growers in partnering agreement that enables the
benefits from the technical advice and assistance of the company’s agricultural
services department and at the same time, guarantee to the company continuous
supply of raw materials that meet their high quality standards.
The
company pursue the use of backward integration strategy by pursuing its
sustainable agricultural initiative(SAI) where she involve herself with
collaborative research with the university of agriculture, Abeokuta(UAAB) of
popularisation of soya beans which brought into being the a selection of soya
beans varieties with improved seed colour, seed size, and seed yield.
The
company’s objective is to satisfy the requirements of the consumers with high
quality food products with long shelf life adapted to the taste and food habits
of the consumers and as a result, she has continuously invested in Nigeria by
building and commissioning in 1991 at agbara, ogun state a fully integrated
plant producing concentrated sorghum malt extract from locally malted sorghum,
and in June 1995, Nestle Nigeria plc commissioned another plant at agbara which
produces enzymatic hydrolyzed plant protein mix.(EHPPM).
The
investments represent successful and significant effort at replacing imported
raw materials in the manufacture of milo food drink and the maggi range
seasonings.
The
company being conscious of her social responsibility is committed to
environmental policies, programmes, and practices into each business as an
element of management in all functions. She always thrives to minimize the
impact of her environment through the utilization of packaging and
manufacturing process that are internationally recognized to have a minimum
impact on the environment.
With
her historical root in nutrition, wide product portfolio, strong brands,
research and development competence, skilled and motivated professionals, and
efficient management, the company is positioned to committed to the progress,
prosperity, economic development, and industrial growth of Nigeria.
Through
the use of vertical integration strategy, the company seeks to achieve a clear
cut competitive advantage over competitive products by ensuring that their
products are available wherever, whenever, and however the consumers want their
continuous attention is also given to developing the professional leadership
skills of staffs at all levels so that they can directly contribute to growth
and a higher level of performance.
To
stimulate industrial growth, the company has a policy of long term
sustainability business practice. Over 75% of their raw materials are sourced
locally by their selves through the use of employed farmers and suppliers and
also support an ever increasing standard of living through employment
generation, increased income, infrastructure improvements, and a growing
concern for the interest of the community here in Nigeria through the
application of the nestle environmental management (NEM) and complies with
applicable environmental legislation.
1.2
STATEMENT
OF RESEARCH PROBLEMS
In
this twenty first century, the world is a global market (Diacon, 2003)
characterized by competitiveness where a firm has to compete against another
firm all over the world. Backward integration strategy has helped to identify
the things that need to be done, gives idea, redefined by experience, as to how
they should be done and achieve competitive advantage for the organization.
Backward
integration strategy is known and accepted as the process by which a firm takes
ownership or increased control of its supply system. It serves to streamline
the organization to provide better cost controls, and to eliminate the
middleman, because of efficiency and lowered cost of production as it is
possible for the firm to become more competitive in the market place.
Although
backward integration strategy improves organizations performance, but there are
still doubts on the assertions that backward integration strategy is more
applicable to manufacturing firms as compare to service companies. Therefore,
the assertions can be made to the followings:
v Managing
employees’ performance as an integral part of the work.
v Quality
metrics that were not focused on customers.
v The
effect of contraction in output that slackening global demand is generating.
v Lack
of availability of skilled workforce.
1.3
OBJECTIVE
OF THE STUDY
The
objective of this research study includes the following:
v To
compose manufacturing industry to the usefulness of Backward integration
strategy as designing a management policy that documents the expectations of
individual and organizational which provides a meaningful process by which
employees can be rewarded for noteworthy contributions to the organization and
also provide a mechanism to improve individual/organizational performance as
necessary.
v To
ensure that industries, especially the manufacturing ones sees the usefulness
of Backward integration strategy and how it can help in maximizing the net
profit of the organization which is achievable by strategizing very simple
strategies for both product lines and production processes as per making
difficult decisions to cutting costs quickly and cheaply to avoid repeated
morale sapping cuts.
v To
make sure that manufacturers are alerts to opportunities for expansions as
valuation drops when owners look for quick exits. Research and marketing may
also be the key, enabling strong positioning to take advantage of the future
upturn.
v To
provide suggestions and recommendations on the effect of backward integration
strategy on organizational performance and also make appropriate
recommendations for future researches on the area of its specialization.
1.4
STATEMENT
OF RESEACH QUESTIONS
v What
effect does backward integration has on organizational performance in
manufacturing industries?
v How
do manufacturers key into the need of the growing market through integration
strategy?
v Is
backward integration strategy and organizational performance related to growth
and profitability?
v Does
backward integration strategy focuses on customers’ satisfaction?
1.5 STATEMENT OF RESEARCH
HYPOTHESES
H0 : Backward
integration strategy does
not
have significant effect on organization’s performance.
H1 : Backward
integration strategy have significant
effect
organization’s performance.
H0 : Backward
integration strategy is the same as organization’s growth and expansion.
H1 : Backward
integration strategy is not the same as organization’s growth and expansion.
H0 : Backward
integration strategy increases an
Organization’s profitability.
H1 : Backward integration strategy does not
increases
an
organization’s profitability.
1.6
SIGNIFICANCE
OF STUDY
A
study of this kind is expected to make theoretical and practical contributions
to the manufacturing industries. This study provides a basis for closer
scrutinizing of the formulations and application of backward integration
strategy in use.
The
study is likely useful for department of interior rating officials to assist
with the management performance that is aligned with and in support of the
organizational goals.
Manufacturing
industries, services and professional industries that are constantly looking
for competitive strategies and individuals can benefit from the study as it
enhances organizational performance.
1.7
SCOPE
AND LIMITATION OF STUDY
This
study wants to look at the effect of backward integration strategy and
organizational performance.
However,
it shall be limited to manufacturing firms in ogun state alone (nestle Nigeria
plc). The reason for the limiting this study to manufacturing firms is because
their actions have tremendous effect on the national economy.
The
study will therefore be restricted to manufacturing sector and whose ownership
structure is strictly Nigerian.
1.8
OPERATIONAL
DEFINITION OF TERMS
Various
terms are expected to be constantly used in this study. Some of them are
briefly defined below:
v INTEGRATION STRATEGY:
This is the acceptance of a plan or a course of action which is of vital
pervasive or continuing importance to the organization as a whole.
v COMPETITIVE ADVANTAGE:
This is the getting ahead of others by outsmarting them in the course of
rivalry.
v GROWTH:
This is an expansion of the organization in one or more dimensions without
changes in its structures and development as an innovative process leading to
the structural transformation of the social system.
v ORGANIZATION:
This is a group of people working together to achieve a special purpose which
cannot be achieved by an individual working alone.
v PERFORMANCE:
The action of carrying out or complete an action or function.
v DEVELOPMENT:
The quantity of changes in the process of production which shall be slow at the
initial, but will later increased over a long period of time.
v IMPLEMENTATION:
The process of putting a plan into action.
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