CHAPTER ONE
INTRODUCTION
For a business to succeed, knowledge of certain management, techniques is ver necessary.
Mastering the techniques that can help one to achieve the basis objectives of building up a business and making it profitable,
1.1 BACKGROUND OF THE STUDY
The aim of all production is to satisfy peoples wants, however in carrying out this production, certain costs are incurred I order to achieve the stated organisational objective be it to satisfy peoples wants according to Hanson J. L to maximizes profit. For any business to achieve it s set objective there have to be adequate, strong and effective cost reduction measures (formal or informal) which should be adopted.
The effectiveness of the these measures however may have heaped some of these companies to still remain in business irrespective of the hash condition like inflation among others.
Many Nigerian business establishments presently, especially the manufacturing sectors are in serious profit squeeze. A number of factors account for this into ward condition which include, the increasing cost of running business in Nigeria, drastic fall in Nigerian foreign exchange market did not help matters. The situation is further aggravated by tripple digit inflation present in our (Nigeria) economy. The structural adjustment programme, ban on importation of certain basic raw materials, payment of long excise duties have caused some companies either to have closed indefinitely or produce at high cost, thereby making even the local goods high and sale volume low.
All have result in poor profit margin payout, retrenchment, compulsory leave and retirement with or without benefit which invariable affects the company as well.
Firms therefore are struggling to maintain satisfactory pay-off where costs are using and o price increase becoming more and difficult to sustain. To maintain earnings in the face of thee conditions, there is the need for these companies to make decision with regard to cost maintenance culture, increase productivity to enhance profitability and diversification into a complete new market area.
In addition to these, it will enhance competitive ability and generate reasonable profit margin for survival, growth and expansion of the business.
It is the view that most industries do not have approved they exist, are not well organisation.
This analysis therefore is designed to explore the various strategies and evaluate them and well as open to manufacturing firms in reduction system can go a long way at improving profitability and over coming inflation.
It is appropriate therefore to say that the identification of these problems of some industries and the solution to them will not only improve the profitability of its operations but also helps largely towards the improvement of the Nigerian economy.
This work therefore is assumed to be of some benefits to manufacturing firms and help than improve further than returns on investment and improving the Nigeria economy generally.
1.2 STATEMENT OF PROBLEM
The firms are in business to make profit. It does this by producing and selling some commodities.
Essentially, every activity whether productive of not, consumes resources. According to Lipsey (2009) “there are insufficient productive resources in the world to produce the amount of goods and services that would be required to satisfy every ones want”. The scarcity of these productive resources eg (human and material) made it imperative that there should be product and judicious use of them.
Most firms in Nigeria are faced with raising cost of production and low contribution margin.
Small firms in particular have peculiar problems and easily swept off their feet by conditions that other companies could accommodate,
Factors that can disrupt the profitability of Nigerian Breweries Plc in this our economy of hyper inflation includes:
i Inadequate capital structure
ii Inadequate to enjoy economies of purchase
iii Tiny market share r loosing their market share
iv Higher cost of research and development.
Having considered the above factors, certain questions needed to be answered include:
1. Is there any possible means of installing a cost reduction system so as to eliminate avoidable cost and or waste and enhance the Nigeria Breweries Plc’s profitability.
2. Do this firm have any cost reduction scheme or programme and if present, how effective and efficient are they ? Are they producing the desired result ?
3. Can the cost per unit of production of a given product be realized wit out affecting h quality and usefulness of product.
4. Are the firm resources being fully utilized or some of them lying idle and thus going to waste.
5. How, out of the various alternatives do we employ our limited resources to produce this assertments as efficiently as possible.
6. In a manufacturing set-up, what specific area requires reduction in cost and what level of cost reduction is require in a given cost level.
1.3 OBJECTIVE OF THE STUDY
Having identified these problems above, and the operational environment surrounding the company, which the researcher is aimed at solving, the following as what this study is aimed at achieving:
– To find out how effective, the resources of Nigerian Breweries PLC are being utilized to improve profitability.
– To know of cost reduction scheme are being applied in the industry.
– To find out the specific strategies adopted, the level of application and the specific areas where they are being administered their evaluation.
– To ascertain whether there is a systematized cost reduction schemes/programme under the personnel and or accounting department.
– To know if certain specific cost reduction techniques applied in one industry will still achieve some result elsewhere.
– To offer suggestions ion the specific cost reduction techniques to the company under review as well as providing an assistance where firms including the low ones.