STRATEGIC PLANNING ON THE PERFORMANCE OF LISTED MANUFACTURING COMPANIES IN NIGERIA
The study examined the effect of strategic planning on the performance of listed manufacturing companies in Nigeria. The study employed the survey design and the purposive sampling technique to select 450 manufacturing companies staffs. A well-constructed questionnaire, which was adjudged valid and reliable, was used for collection of data from the respondents. The data obtained through the administration of the questionnaires was analyzed using the Pearson correlation analysis.
The study revealed that: Budgeting has significant effect on the performance of listed manufacturing companies in Nigeria. Cost control has significant impact on the performance of listed manufacturing companies in Nigeria. Capacity utilization has significant effect on the performance of listed manufacturing companies in Nigeria. Brand Awareness has significant impact on the performance of listed manufacturing companies in Nigeria. Labor Turnover Rate has significant effect on the performance of listed manufacturing companies in Nigeria.
The study concluded that strategic planning has significant effect on performance of listed manufacturing companies in Nigeria. The study further recommends that; Manufacturing companies should budget on what matters to enable on the performance of listed manufacturing companies in Nigeria. Cost Control should always be utilized to initiate performance in manufacturing companies. Investment Appraisal should be seen as necessity. Manufacturing companies should always see a to have continuous sales. Tangible Assets of Manufacturing companies should always be put in proper records historically. Manufacturing companies in Nigeria needs an urgent reappraisal. Manufacturing companies must become contextually relevant to consumers, government and communities. The Manufacturing companies needs to develop good operational principles. The Manufacturing companies needs to develop holistically.
1.1. Background to the study
World Bank’s latest edition of the “Global Economic Prospects”, (2019) assessed that global growth is expected to rise by 2.7% if we pick up in the manufacturing and trade sector. Developed nations such as Switzerland, China, and Hong-Kong as unbelieving as it may sound still strive for growth, and this growth can be seen in their performance either financially, physically or socially, the point is they perform. These developed countries continually maintain economic diversification as well as social inclusion as they rely on little or no foreign exchange this can be regarded as good overall performance of their economy.
The Chinese Revolution that took place in 1949 made China one of the world’s most powerful nations. It had to do with a total restructuring of the whole nation it caused and led to loss of lives and property, but it was for only but a time. Today, China has a prestigious population of over a billion people and a massive economy in excess of $US8 trillion per annum taking into consideration, its technological and innovate prowess( alpha story,2016) Thus it can be derived that china is of good performance. China is just a point of contact to Switzerland, Hong Kong Britain America and all those developed nations proved to have better performance
In March 2013,International Monetary Fund (IMF) identified Africa as the world’s poorest continent due to the fact that it’s entire combined GDP was not up to one-third (1/3) of the GDP of the United States only. Many Researchers have coined that the economy of Africa is based on trade, Manufacturing and agriculture. Hence it is easily susceptible to the trade blocks and issues encountered at the borders. A perfect example is the closure of the Nigeria Borders to the importation of agro-based produce. This will greatly improve the performance of the Nigerian economy as a whole. Africa is ridiculed with bribery, corruption, Lack of cutting-edge infrastructure and resources hence the rise of political instability as well as economic dwindle. Thus, the country is at risk.
The Nigerian Country Risk has crippled the performance of the Nigerian economy to nothing such that our currency is so devalued and our manufacturing sector which is supposed to be our pride has proved to have poor performance. Over emphasis cannot be laid on the fact that this poor performance can be traced back to our lack or access to the right and cutting-edge equipment needed for the production of Consumer goods and raw materials or due to the backward thinking of most Nigerian in the manufacturing sector.
Warner (1977) said that in order to guarantee sustainable economic growth it is essential to control the number of firms fail. The Manufacturing sector in Nigeria has gone through a series of shocks and distress in the recent years. It has experienced some decline but it appears to be worse in the banking sector. However more manufacturing companies have actually failed than the banking institutions of recent. In relation to poor performance, Haider et al., 2014 argued that the whole performance assessment process ought to be simple, well defined and comprehensive in all levels. Poor performance in the Nigerian economy has proved to cause overall decay in the various sectors of the economy especially the Manufacturing sector which is the basis of this research work.
In 2017 The Nigerian government has decided to put in place different reforms such as its four-year Economic Recovery and Growth Plan (ERGP). They did so to try to improve the performance via stabilization of the macroeconomic environment energy sufficiency and most of all achievement of food security. In the Manufacturing sector, phase one of the ERGP focus plan desired to tap into investments commitments in the food manufacturing as well as textile and garments and overall manufacturing. These reforms put in place help sometimes assist to get funding from World Bank.
The effect of these reforms so far, have an inelastic relationship to the current performance of the manufacturing companies, hence more needs to be done to solve this prevailing issue once and for all
Strategic Planning has been identified as an explanatory variable that can help mitigate poor performance. Bryson (2011, 7-9) defined strategic planning as a deliberative, disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is. Strategic Planning applies everywhere and in all types of organizations (Bryson 2011; Albrechts, Balducci, and Hillier, 2016). Furthermore, Strategic Planning is part of a way broader practice of strategic management that links up with planning.
Freedman (2013) argued that strategic planning came from the military hence it’s defined as the art of managing government affairs which involves the use of state power. In order to lay due emphasis, the continued importance of planning, not just plainly but strategically planning cannot be merely overlooked or tossed aside, as it stands as the bedrock for companies to forecast clearly how they want their organizations to look in the next years to come. The employment of strategic planning as the solution to poor performance keeps the manufacturing sector re-assuring and professional as having a long term plan before the execution of a project or working to achieve one’s goals.
Due to certain reasons, strategic planning is increasingly becoming the standard practice as it gives room for accountability as well as compliance. In the global world, the US federal authorities engage in strategic Planning via Government Performance and Results Act of 1993 (GPRA) and the Government Performance and Results Modernization Act of 2010 (GPRMA) (Radin 2006; Tama 2015).
Nevertheless it is important that strategic planning is measured correctly and accurately so as to solve the problem of poor performance in the listed manufacturing companies. These variables include Budgeting, Cost Control, Investment Appraisal, Sales Growth and Tangible assets. These variables have been carefully selected and actions will be taken to fully measure them against non-financial performance in order to evaluate its impact, thus, solving the problem at hand.
1.2. Statement of the problem
The slow but failing rate in the Manufacturing Company is getting more prevalent by the day. This failure can be traced to the decline in their performance; poor performance. The compelling desire to utilize strategic planning as the approach to proffer solutions to this prominent issue cannot be overemphasized. Drawing from the facts, the researcher has carried out numerous studies in relation to solving this problem but no absolute solution was found. It is not news that the manufacturing sector in the Nigerian economy faces so many challenges such as power generation, regulatory issues as well as infrastructural deficiencies such as lack or no access to cutting edge equipment. In collaboration all these challenges slow down work output, hence leading to a decline in performance.
The main objective of this study is to evaluate the impact of strategic planning of the performance of listed manufacturing companies.
Paraphrasing the words of the president of the Manufacturer’s Association of Nigeria, Frank Jacobs (2018), a situation where we generate our power used for production does not make us competitive , due to the fact that whatever has be manufactured here(Nigeria) has been produced at a higher cost in comparison to other parts of the world. Futhermore, in addition to the above listed challenges leading to poor performance, the National Bureau of Statistics (NBS) (2014) also spoke about them as such
Inadequate and epileptic Power supply
Supply variability of rain dependent agricultural products
Some reforms were put in place by the government such as the ERGP initiative. This reform highlights the policies fit to boost manufacturing, aiming to give incentives to support hubs and agricultural hubs. Rafiq Raji (2018) assessed that the lekki free Trade Zone has in its three (3) years of existences have led to the exportation of over US$700 finished goods worth of. Strategic Planning through the use of its measurable variables; Budgeting, Cost Control, Investment Appraisal, sales growth as well as its tangible assets will proffer rationale solutions to these prominent issues of poor performance in these listed manufacturing companies.
In conclusion, the pointer of this work as earlier stated, is to evaluate the impact of strategic planning on the performance of listed manufacturing companies in Nigeria
1.3. Objective of the study
The main objective of this study is to assess the effect of strategic planning on the performance of listed manufacturing companies in Nigeria
The specific objectives are stated as to:
i. Identify the effect of Budgeting on the performance of listed manufacturing companies in Nigeria.
ii. Establish the impact of Cost Control on the performance of listed manufacturing companies in Nigeria.
iii. Fully examine the extent Investment Appraisal on performance of listed manufacturing companies in Nigeria.
iv. Determine the impact of Sales Growth on the performance of listed manufacturing companies in Nigeria.
v. Critically evaluate Tangible Assets and its effect on performance of listed manufacturing companies in Nigeria.
1.4. Research Questions
This research work seeks to provide solutions to the statement of problem at hand. But before that can be done effectively, certain questions need to be asked:
i. In what way does Budgeting affect the performance of Listed Manufacturing Companies in Nigeria?
ii. What impact does Cost Control have on the performance of listed manufacturing companies in Nigeria?
iii. To what extent does Investment Appraisal impact on the performance of listed manufacturing companies in Nigeria?
iv. How does Sales Growth affect the performance of listed manufacturing companies in Nigeria?
v. To what degree can Tangible Assets affect the performance of listed manufacturing companies in Nigeria?
1.5. Research Hypothesis
H0 (1): Budgeting has no significant relationship on the performance of listed manufacturing companies in Nigeria.
H0 (2): Cost Control has no significant relationship on the performance of listed manufacturing companies in Nigeria.
H0 (3): Capacity Utilization has no significant relationship on the performance of listed manufacturing companies in Nigeria.
H0 (4): Brand Awareness has no significant relationship on the performance of listed manufacturing companies in Nigeria.
H0 (5): Labor Turnover Rate has no significant relationship on the performance of listed manufacturing companies in Nigeria.
1.6. Justification of the study
The impetus of this study was brought to life when the researcher read multiple articles in relation to measurement of performance in Nigerian Manufacturing companies and realized that there is little or no studies or research work on strategic planning as a factor to influence performance in the manufacturing sector.
The essence of this work is to evaluate the impact of Strategic Planning on the performance of Listed Manufacturing Companies. In other scholarly articles, the effect of management as a whole on performance has been studied. The use of financial analysis was employed to get result for the study. However in this study, the researcher hopes to make use non-financial measure to see the effect of Strategic planning, also breakdown management as a whole a selected one of its core; Strategic Planning.
Thus, this research work is justified as it seeks to provide evidence for the users of information as well as the future generation of researches to come.
1.7. Significance of study
The essence of the research study cannot be overemphasized, hence its significance. This study would contribute to the knowledge bank of the national corporate world as a whole in relation to corporate strategy.
Potential and existing stakeholders: the information gained from this study will enable to make appropriate decisions as they are fully aware that there are problems or consequences that may affect the firm performance if not adequately informed.
Employees and members of staff: The result of this study could also bring to light employees and members of staff who are unaware about the positive effects on the performance of the organization as a whole.
Investors, financial management experts: Furthermore, this study seeks to contribute immensely to those who need to be assured that business activities are carried out effectively and efficiently, thus show full understanding of the working of these manufacturing companies as a whole.
Government, its parastatals and accounting/ sub-accounting officers: they will benefit from this study as it value to them entails appropriate and detailed presentation of its budget and all other related statement of accounts duly prepared as of the basis of strategic planning
The manufacturing sector: as a whole shall find the result of this study beneficial as it will enable them use and plan for organizational resources more effectively and efficiently
Students, fellow researchers and other scholars: those who may want to undergo further studies and research based on this or in relation to the strategic planning and its performance on these manufacturing companies, will have detailed literature pertaining to it.
1.8. Scope of the study
This study examined the extent in which Strategic planning has impacted on the performance of listed manufacturing companies. For the purpose of this study, 5 listed manufacturing companies out of a population of 10 listed Manufacturing Companies.
The Geographical Location for this Study is Nigeria thus, the sample has been drawn thereof. The Independent Variable employed is Strategic Planning which entails sub variables which are quantitative in nature they include; Budgeting(BGTN), Cost Control(CCTR), Investment Appraisal(INTA), Sales Growth (SGWT), Tangible Assets(TNAS).
Purposive sampling technique was employed for this study. This simply means that the researcher purposively selected relevant manufacturing companies. The researcher also made sure to take all other factors into through consideration before selection was finally made.
1.9. Limitations of the study
This research work has been faced with certain challenges which have proved to limit the researcher and its study. Strategic Planning and Performance for the purpose of this research is quantitative in nature hence, it proved tough to collect accurate data on the performance from respondents.
Furthermore, time proved to be a major constraint as the deadline for the submission was at hand, more extensive analysis could not have been carried out.
Lack of access to the, much needed materials, as the materials and articles found on the internet went not recent (1998-2002)
In order to mitigate this limitations, 1the Population was purposively selected ranging from 5 out of 10 listed manufacturing companies 2 Adoption of stringent efficiency measures 3 the data used was carefully collected and collated via the questionaries’ which were given to the corporate planning departments in the selected listed manufacturing companies.
1.10. Operationalization of Variables
The Primary Objective of this research is to ascertain the impact of Strategic Planning on performance of Listed Manufacturing Companies. To facilitate this, both an endogenous and exogenous variable will be employed. The endogenous variable connotes Performance and the exogenous variable connotes Strategic Planning.
Functional Relationship is as follows:
Y will represent Performance (PER) which is the dependent Variable
X will represent Strategic Planning (SP) which is the Independent Variable
This means PER is a function of SP
We represent it mathematically as:
Y=y1, y2, y3, y4. y5
X=x1,x2 ,x 3,x4 ,x5
These sub-variables can be written as:
y1= PRQT=Product Quality x1= BGTN=Budgeting
y2= CTSF=Customer Satisfaction x2= CCRT=Cost Control
y3=BRAW=Brand Awareness x3= INTA=Investment Appraisal
y4= CAPUT=Capacity Utilization x4= SGWT= Sales Growth
y5=LBTR=Labor Turnover Rate x5= TNAS=Tangible Assets
y1 (PRQT) =f (BGTN, CCRT, INTA, SGWT, TNAS) ……………………………..equation 1
y2 (CTSF) =f (BGTN, CCRT, INTA, SGWT, TNAS)……………………………… equation 2
y3 (BRAW) =f (BGTN, CCRT, INTA, SGWT, TNAS)……………………………… equation 3
y4 (CAPUT) =f (BGTN, CCRT, INTA, SGWT, TNAS)……………………………… equation 4
y5 (LBTR) =f (BGTN, CCRT, INTA, SGWT, TNAS)……………………………… equation 5
PRQT = β0+ β1 BGTN+ β2CCRT+β3INTA +β4SGWT+β5TNAS+µ
CTSF = β0+ β1 BGTN+ β2CCRT+β3INTA +β4SGWT+β5TNAS+µ
BRAW = β0+ β1 BGTN+ β2CCRT+β3INTA +β4SGWT+β5TNAS+µ
CAPUT = β0+ β1 BGTN+ β2CCRT+β3INTA +β4SGWT+β5TNAS+µ