CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The business environment of the 21st century has been more volatile and challenging than earlier centuries (Onodugo and Ewurum, 2013). Zuzana (2006) asserts that today’s organizations have to deal with dynamic and uncertain environments. In order to be successful, organizations must be strategically aware of the changing environment. They must understand how such changes in their competitive environment are unfolding. They should actively look for opportunities to exploit their strategic abilities, adapt and seek improvements in every area of the business, building on awareness and understanding of current strategies and successes. Organizations must be able to act quickly in response to opportunities and barriers (Pearson, 1990; Robbins and Stuart-Kotze, 1990). In a hyper-competitive environment, companies must continually improve their people, processes, and technologies to create a competitive advantage. The ability to accurately predict consumer demand in addition to the capability to rapidly react and readjust to environmental changes, supply and demand fluctuations; separates the winners from the losers (Rai, 2005).

Jonathan (2011) submits that in this highly competitive environment at present, businesses are always coming up with new ideas that turn markets upside down. Hence organizations’ management are put under pressure not only to sustain current trading performance but to improve it through increased margins, reduced costs and greater market share. Too often, companies employ strategies to exploit external opportunities rather than first looking internally to see what operational inefficiencies are there to be improved. Business firms operate in a society to satisfy individual and societal needs through the production of goods and services. Their decisions are influenced by what is happening in the society. The social, economic, and political institutions that make up a society constitute in a broad sense, the environment of business enterprises, and the way they work affect the operations and fortunes of every business unit.

The motivating factor for the entrepreneur to go into business is to make profit. The objectives of a business firm, goes beyond profitability only. It includes growth in size, increase in market share, innovation, and social objective. The realization of these objectives will be determined largely by events in the environment. Specifically, the environment of business comprises those activities that can hinder or facilitate the achievement of its objectives. They include population, technology, social infrastructure, economic system and competitors. To this end, this study focuses on the impact of the activities of the competitors on a business organization, its survival and growth strategies adopted.

Customers have a choice to go elsewhere if a particular firm’s products or services do not meet their needs. They can switch brand and patronize a competitor who may claim to provide a better product or service. This means that the activities of the competitors in the same industrial sector may invariably affecta firm’s prospects and operations. The type and quality of product that competitors offer, the prices they charge for their products or services, their size, locations, reputation, distribution channels and usual stock level are some of the things about competitors which shape the operations of a business. No organization can ignore the actions and decisions of its competitors in a modern economy characterized by competition.

Nigeria operates an open market economy where competitions thrive. Increased competition is being driven by many factors, including the emergence of a global market place, the risein the number of firms, new technology that makes it easier for firms to enter new markets and ever- increasing pressure from markets to raise shareholders’ value. In particular, the frenetic atmosphere of mergers and acquisitions, along with the increased number of large institutional investors, imply that firms which do not cut costs and improve financial performance face swift action in equity markets. This also indicates that such companies are less able to insulate workers or invest in public goods such as research or employee training. For instance, in the United States of America, three-fourth of 531 corporations surveyed, identified economic pressure from competitors as one of the primary factors enhancing motivation in their organizations (Cappelli, 2003).

In 1965, IBMfaced 2,500 competitors for all its markets. By 1992, it faced 50,000. However, IBM is not alone in feeling outside pressure as industries that were formerly sheltered from significant competition such as telecommunication companies now faced growing competition. For instance, NITEL has been kicked out of the market by an array of competitors in the Nigerian telecommunication market such as MTN, Airtel, Globacom, Starcomm, Etislat, Intercellular etc. Stable industries have become dynamic. For example, insurance was once a stable industry in Nigeria with a distribution system of local insurance agents;now, it isundergoingsignificant change, with competitions emerging from foreign companies and banks selling insurance, etc.

Adesina, (2003) notes that competition ensures that we change our way of doing things. It ensures that we raise our quality bar to international standard. Again, it can also be said that fair and equitable competitors help to achieve appropriate pricing level.As a result of fierce business competition in the market, the number of firms being born and dying every year had grown as more innovative and efficient companies take their place, while firms that cannot grow fast are knockedout of the market easily and quickly. Fiercebusiness competitors are also causing companies to constantly develop new products and services in order to gain new market and by extension benefit the consumers because their needs are more specifically addressed.

Advertising and sale’s promotion play major role in influencing competition in Nigeria to the extent that it can determine the fortune of any company. A company that fails to advertise will remain in obscurity and may find it difficult to grow and expand. This accounts for the reason why many multinationals as well as indigenous companies which are regarded as market leaders such as Coca-cola, Guinness (Nig) Plc, Nigerian Breweries Plc, Nigerian Bottling Company Plc, MTN communications, West Africa Milk Company Plc, First Bank of Nigeria Plc, etc. budget millions of naira annually for advertisements and sales promotion. This development has resulted in aggressive competition in the Nigerian Banking industry.Consequently, researchinginto the growth strategies adopted by some of the leading Banks in Nigeria to survivebecomes very crucial considering the strategic growth-inducement roles played by competition in the overall growth and survival of any organization in modern economy.

1.2 Statement of Problem

Recently, the Nigerian business environment as an emerging economy has been characterized by competition which is now threatening the growth and survival of many corporate establishments and such establishments need to wake up from their present state if they must survive in the next millennium. Prior to the industrial revolution, producers were regarded as kings and could produce anything since there were ready markets for them irrespective of quality, price etc. After the industrial revolution however, productivity increased beyond measure and competition became tense. As a result, the royal crown of producers disappeared forcing them to be at the mercy of consumers. Mere production of goods and services was no longer sufficient to give a company a competitive edge over others but polices and strategies put in place to achieve market leadership.

In view of the rigorous competition that has characterized the economic system, it is essential for companies to exploit circumstances and to deal with the actual and potential opportunities. Formulation of policies and strategies that will give them competitive edge has become a must in order to grow and survive. In addition, business activities in the world today take place under conditions of great risk, uncertainties and intense competition. It is no longer possible to rely on an “invisible hand” to regulate business operations and place any firm in a relatively strong footing in the market place.

The greatest challenge for a successful organization is change. Many good ideasupon which products and services should be offered, how they should be produced and delivered, have suddenly become obsolete in the face of change. Many organizations find it difficult to cope with changing customer needs, new technology, innovation, etc.and as a result, they fold up or are taken over by more aggressive competitors. Business failures and near failures are frequent occurrences. Often the plights of failing firms come as a great surprise to managers and shareholders alike. What may result in constant business failures therefore is the inability to recognize opportunities and not so much the non-existence of opportunities in any business line or any sale whatsoever. Business failures like all mundane failures are never divine. Therefore, in recognition of the above challenges, this research is undertaken to critically look at the causes of high risk of business failure and suggest practical business strategies for growth and survival of Corporations in a competitive business environment in Nigeria.