EFFECTS OF BACKWARD INTEGRATION STRATEGY ON ORGANIZATIONAL PERFORMANCE IN MANUFACTURING INDUSTRY (A CASE STUDY OF NESTLE NIGERIA PLC)
HISTORICAL BACKGROUND OF NESTLE NIGERIA PLC
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.
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
Nigeria Plc of Switzerland owns about 43% of the company’s equity. Nestle
Nigeria plc manufacturing complex is located at Agbara Industrial Estate in
main products were designed in line with modern manufacturing methods which
ensure efficient production of the following:
cereals – nestle golden morn.
family cereals, nestle milo – beverage drink.
– chocolate sweets, maggi cubes, maggi chicken, maggi crayfish, maggi super
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.
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.
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).
investments represent successful and significant effort at replacing imported
raw materials in the manufacture of milo food drink and the maggi range
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.
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.
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.
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.
OF RESEARCH PROBLEMS
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.
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.
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:
employees’ performance as an integral part of the work.
metrics that were not focused on customers.
effect of contraction in output that slackening global demand is generating.
of availability of skilled workforce.
OF THE STUDY
objective of this research study includes the following:
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
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.
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
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.
OF RESEACH QUESTIONS
effect does backward integration has on organizational performance in
do manufacturers key into the need of the growing market through integration
backward integration strategy and organizational performance related to growth
backward integration strategy focuses on customers’ satisfaction?
1.5 STATEMENT OF RESEARCH
H0 : Backward
integration strategy does
have significant effect on organization’s performance.
H1 : Backward
integration strategy have significant
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
H1 : Backward integration strategy does not
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.
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
industries, services and professional industries that are constantly looking
for competitive strategies and individuals can benefit from the study as it
enhances organizational performance.
AND LIMITATION OF STUDY
study wants to look at the effect of backward integration strategy and
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.
study will therefore be restricted to manufacturing sector and whose ownership
structure is strictly Nigerian.
DEFINITION OF TERMS
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.
ADVANTAGE: This is the getting ahead of others
by outsmarting them in the course of rivalry.
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.
This is a group of people working together to achieve a special purpose which
cannot be achieved by an individual working alone.
The action of carrying out or complete an action or function.
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.
The process of putting a plan into action.