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’sprofitability.
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.