1.1 BACKGROUND TO THE STUDY
fast foods industry emerged in the early 1980’s with few restaurant
business operators who had the desire to provide the kind of meals
people desire to consume outside of their homes due to urban development
and mobility from one place to another, especially in major cities of
the nation. The trend increased more and standardized in the late 1990’s
due to increase in disposable income leading to the advancement of the
concept of restaurant to fast foods that offers confectionaries and
continental dishes. The industry attracted many investors and
entrepreneurs in the 2000’s due to the unprecedented growth the
operators of fast foods experienced. New concepts and ideas have been
introduced into the industry that began as traditional restaurant base
businesses. Nevertheless the drive to satisfy customers by creating
enabling environment to take market leadership as amongst players as a
result of competition necessitated the adoption of various outsourcing
different types of fast foods companies in Nigeria, some are
indigenously owned and they carry local brand names as desired by the
business owners while others are foreign companies with their host in
South Africa, China , United Kingdom and America being operated by
franchise agreement .
Agusto (2008) in a research conducted it was discovered that the fast
food industry of Nigeria is in its growth phase and has been on this
trajectory for the past five years. The nominal average growth rate of
the industry between 2000 and 2004 was 37% while real growth rate was
23%. This is considered impressive especially when compared to the
average real growth rate of 6% for the economy and an average nominal
growth rate of 14% and 17% for gross domestic product and disposable
income respectively Similarly, the amount spent by an average Nigerian
on Fast Food grew by over 200% between 2000 and 2004, which is
indicative of the growing acceptance of Fast Food culture and the
changing lifestyle of Nigerians.
1.2 STATEMENT OF RESEARCH PROBLEM
The Fast Food
industry in Nigeria today is a beehive of activities and is gaining a
lot of attention both within and outside the country. Industry trends
such as rapid outlet expansion, strategic alliances (especially with
companies in downstream sector of the oil and gas industry), and entrant
of foreign players amongst others lends credence to these assertions.
There exist in every economy, (whether developed, developing or less),
various type of industries; manufacturing, service, food and beverage,
textile, chemical etc. these industries compete among themselves for
resources, infrastructure, market share and relevance, for successful
competition, companies use creative and innovative weapons to compete
favourably for profit maximization.
concept of outsourcing has not received a lot of attention as considered
to be important elements that account for the growth and remarkable
performance of the fast foods industry in Nigeria. Also the effects of
outsourcing on firms’ performance are not completely clear. Previous
outsourcing studies show contradictory results; while some claim a
positive relationship between outsourcing and performance outcomes,
others report no significant or even negative effects. (Rothaermel and
without proper management control could sometimes result in job losses,
According to Ghodeswar and Vaidyanathan (2008) a large number of
employees whose organizations outsource their business activities may
have similar problems to those employees that have undergone downsizing,
while organizations claim that the basis for outsourcing is to increase
1.3 OBJECTIVES OF THE STUDY
objective of the study is to determine the extent to which outsourcing
have contributed to the performance of fast foods industry in Nigeria.
The specific objectives of the Study are to:
(i) To examine whether business outsourcing assist fast foods entrepreneurs to reduce operation cost in their business.
(ii) To find out if knowledge process outsourcing supports fast food companies to build customers relationship.
(iii) To find out if outsourcing assist firms to increase sales turnover.
(iv) To determine whether outsourcing strategies adopted by a firm assist Nigeria fast food companies to increase profitability.
1.4 RESEARCH QUESTIONS
This study intends to answer the following research questions to solve the research problem.
(i) How has business process outsourcing assisted fast foods entrepreneurs to reduce cost of operation in business?
(ii) To what extent has knowledge process outsourcing affected customers’ relationship?
iii) To find out if outsourcing assist firms to increase sales turnover?
(iv) To find out if outsourcing strategies adopted by a firm help Nigeria fast foods to increase profitability?
1.5 RESEARCH HYPOTHESES
The Research Hypotheses are indicated in their null and alternate forms.
Ho1 Business process outsourcing does not assist fast foods entrepreneurs to reduce cost of operation in business.
Ha1 Business process outsourcing assists fast foods entrepreneurs to reduce cost of operation in business.
Ho2 Knowledge process outsourcing does not affect customers’ relationship.
Ha2 Knowledge process outsourcing affects customers’ relationship.
Ho3 Outsourcing strategy adopted by a firm does not increase the profitability of fast food companies.
Ha3 Outsourcing strategy adopted by a firm increases the profitability of fast food companies.
1.6 SIGNIFICANCE OF THE STUDY
economy particularly the food and beverage sector which the fast food is
a sub sector faces a major challenge of performance in terms of
efficient and effective utilization of the available resources to
generate adequate output that can compete globally. Agusto (2004). The
study would help fast food investors to embrace the uniqueness of
outsourcing strategy to venture into the business with lesser stress. It
will also help them to see the opportunities that exist in embracing
innovation technique as outsourcing that could help build customers
relationship, increase productivity and efficiency of employee and
assist in adoption of outsourcing strategies by Nigeria fast foods to
increase turnover and profit.
becomes significant because it would provide a framework for fast food
entrepreneurs and managers to be able to adopt outsourcing strategies in
a unique manner to stay ahead of competition in their industry and also
be able to compete globally with foreign fast foods in developed
countries thereby being in a model for the advanced world in any
substantial form they desire which could be in form of developing unique
menu that would be desired and demanded for globally by enterprise
1.7 METHODOLOGY OF THE STUDY
In other to
accurately capture the effects of outsourcing strategies on the
performance of Nigeria fast food industry, selected fast foods in Ilorin
state was considered based on the registration of such fast foods
outlet with the appropriate regulatory authority. The fast foods
consisted of Tantalizers, Mr. Biggs, Tetrazzini, Chicken Republic,
Tastee Fried Chicken, Munchies, Sweet Sensation, Mama Cass and Big
Treat. Reduction in cost of business operation was used to measure
business process outsourcing, customers’ relationship and employees’
productivity was used to measure knowledge process outsourcing, and
profitability was used to measure the outsourcing performance of fast
foods as regards adoption of new technology in fast food businesses.
1.8 THE SCOPE OF THE STUDY
The scope of
the study was limited to companies in the fast food sector mostly
registered ones with the appropriate authorities like Association of
Fast Food Confectioners of Nigeria. (AFFCON) and the National Agency for
Food and Drug Administration and Control (NAFDAC). Indices like stock
exchange quotation was not considered because it is only about 2 to 3
fast foods firms that are listed and many others are not listed but are
prominent and doing great in the industry in terms of expansion and
turnover based on findings and observations. (AFFCON) and the National
Agency for Food and Drug Administration and Control (NAFDAC). There are
about 46 companies identified in Association of fast Food Confectioners
of Nigeria. It was discovered that the AFFCON list did not only contain
leading fast foods but also other fringe players in the fast foods
industry. The AFFCON list was used to validate the existence and
location of the companies sampled. However, for the purpose of this
study, ten (10) fast food companies which includes, Mr. Biggs, Sweet
Sensation, Tantalizers, Chicken Republic, Tetrazzini, Big Treat, Mama
Cass, Tastee Fried Chicken, Munchies, Kenturkey Fried Chicken
constituted the scope of the study.
for data gathering were limited to managers or directors and middle
level staff in charge of production and business process in the study
organizations. These managers are expected to be knowledgeable about
outsourcing. The focus of the study was the fast foods industry of the
Nigerian economy because of the importance of the sector to the overall
economy of the country and its impact in helping the country to generate
employment and increase revenue base.
1.9 LIMITATION OF THE STUDY
This study is
limited by a number of variables. Some of these variables range from the
use of only fast food companies registered with the Association of fast
Food Confectioners of Nigeria. (AFFCON) and also the National Agency
for Food and Drug Administration and Control (NAFDAC). The inability to
capture the innovation and outsourcing contributions of small fast food
corporations because most Nigerian fast foods outlets especially those
owned by some Nigerians are not registered and were not willing to give
necessary information as regards their operations due to the cost of
registration with appropriate agencies. Also Most indigenous fast food
companies are out of business due to energy consumption cost and low
human capital capacity to stay ahead of competition as a result of
growing overhead cost.
1.10 DEFINITION OF TERMS
is the process by which an organization contracts with another
individual or company to get some of its work done. Outsourcing simply
means to transfer work responsibilities and decision rights to someone
outside the business.
Business Process Outsourcing (BPO): It
is a situation in which a particular process task is outsourced. An
example could be payroll. Business process outsourcing work could be
either back office related or front office work.
Information Technology Outsourcing (ITO): This
is usually overseen by the Head of information technology of an
organization. However the head of IT is often called in to manage BPO
and KPO operations where no significant IT skills are involved.
Knowledge Process Outsourcing (KPO): A
situation of work that needs higher levels of involvement from the
worker. The worker has to employ advanced levels of research, analytical
and technical skills and has to make decisions of a higher order.
Examples are marketing research, branding of products and services,
advertising and patent/ intellectual property research.