· 7 acknowledgements i sincerely thank god for his guidance throughout my stay in university of...

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OKEKE, RAYMOND NJELITA

STRENGTHENING COMPETITIVE ADVANTAGE OF

RURAL BUSINESS THROUGH QUALITY AND

ENVIRONMENTAL MANAGEMENT SYSTEM

FACULTY OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT

AVER KELVIN .M

Digitally Signed by: Content manager‟s Name

DN : CN = Webmaster‟s name

O= University of Nigeria, Nsukka

OU = Innovation Centre

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STRENGTHENING COMPETITIVE ADVANTAGE OF RURAL

BUSINESS THROUGH QUALITY AND ENVIRONMENTAL

MANAGEMENT SYSTEM


PG/Ph.D/06/46357

DEPARTMENT OF MANAGEMENT

FACULTY OF BUSINESS ADMINISTRATION

UNIVERSITY OF NIGERIA

ENUGU CAMPUS

NOVEMBER, 2012

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STRENGTHENING COMPETITIVE ADVANTAGE OF RURAL

BUSINESS THROUGH QUALITY AND ENVIRONMENTAL

MANAGEMENT SYSTEM


PG/Ph.D/06/46357

BEING A Ph.D THESIS SUBMITTED IN PARTIAL FULFILMENT OF

THE REQUIREMENT FOR THE AWARD OF DEGREE OF DOCTOR

OF PHILOSOPHY Ph.D IN MANAGEMENT, FACULTY

OF BUSINESS ADMINISTRATION, UNIVERSITY OF NIGERIA,

ENUGU CAMPUS

SUPERVISOR: PROF. U. J. F. EWURUM

NOVEMBER, 2012

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CERTIFICATION

I, Okeke Raymond Njelita, a postgraduate student in the Department of

Management with Registration Number PG/Ph.D/06/46357 do hereby certify

that the work incorporated in this thesis is original and has not been submitted in

part or in full for any other Diploma or degree of this or any other university.

……………….…………………..

OKEKE RAYMOND NJELIFA

PG/Ph.D/06/46357

Student

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APPROVAL

This is to certify that this thesis is undertaken by Okeke, Raymond Njelita with

Registration Number PG/Ph.D/06/46357 and has been prepared in accordance

with the policies and regulations governing the requirements for the award of

Ph.D in Management of the University of Nigeria Nsukka.

______________ ____________ _______________

PROF. UJF. EWURUM DATE DR. C. A. EZIGBO

Supervisor Head of Department

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DEDICATION

This thesis is dedicated to Almighty God for his infinite mercies in my academic

life and in memory of my late father Chief Solomon Nwaora Okeke, and my

mother, Madam Virginia Okeke.

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ACKNOWLEDGEMENTS

I sincerely thank God for His guidance throughout my stay in University of

Nigeria especially during this thesis work. I am very grateful and indebted to my

numerous teachers particularly my supervisor Prof. U. J. F. Ewurum, the Head

of Department Dr. C. A. Ezigbo, Dr. E. K. Agbaeze, Dr. (Mrs) Ann I. Ogbo,

Mr. C. O. Chukwu, Prof. J. U. Ogbuefi , Dr. Ugbam and Dr. V. Onodugo.

I have the pleasant task of acknowledging the help of those lovers of knowledge

who have read through this work with spirit of constructive criticism. They are

Dr. Sunday Okebaram, Mr.Cyril Ibekwe, Dr.Gideon Emerole and Mr. Osita

Obinelo. Above all, I will remain indebted to my wife Dr. Ngozi Okeke and

my brothers, Dr. Osita Okeke and Messrs, Mike Okeke, John Okeke and Engr.

Tony Okeke for their understanding and support throughout the period of this

work. You have been very wonderful.

I am also grateful to institutions that have provided materials for the work. They

include Institute of Applied Economics Enugu, University of Nigeria Enugu

Campus Library, National Library of Nigeria Enugu, National Planning

Commission, Central Bank of Nigeria and Enugu State Chamber of Comerce,

Mines and Agriculture. Finally I wish to acknowledge the contributions of our

departmental secretary Mrs. Ngozi Ofodile and the typist Miss Ugwu Nneamaka

for their efforts towards completion of this work.

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ABSTRACT

The study is on strengthening the competitive advantage of rural business through

quality and environmental management system. Business in the rural areas are facing

severe challenges with industries closing by the day as a result of inability to cope

with competition arising from products from domestic and foreign companies which

are cheaper in price and of better quality. The objectives of the study are to determine

the extent of competitive advantage impact on rural business quality and

environmental management system; to highlight competitive advantage factors that

affect sustainability of rural business; to identify competitive advantage strategies that

are used in strengthening rural business; to identify the key challenges of competitive

advantage in strengthening rural business and to ascertain the extent to which

corporate social responsibility improves competitive advantage of rural business.The

study was centred in five states of South Eastern Nigeria selected through stratified

sampling technique. The methodology of the study was descriptive survey research

design. The instruments used for data collection were the interview and questionnaire,

structured in line with 5 point likert scale. A sample size of six hundred and fifteen

(615) was obtained from a population of nine hundred and ninety nine, (999). The

findings indicated existence of a significant impact of competitive advantage on rural

business quality and environmental management system; competitive advantage

factors affect sustainability of rural business; competitive advantage strategies

strengthen rural business; there are challenges facing competitive advantage in

strengthening rural businesses, and corporate social responsibility improves

competitive advantage of rural business. The conclusion of the study is that

application of knowledge and technology, productivity, satisfaction of customer,

infrastructure, government policies and corporate social responsibility are basic

ingredient that strengthen rural business and ultimately guarantee competitive

advantage. The recommendations of the study include: knowledge and technology

application in the operation of rural business; satisfaction of customers as the purpose

of rural business; control of waste that pollute the environment and government

provision of enabling environment.

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TABLE OF CONTENTS

Certification ii

Approval iii

Dedication iv

Acknowledgements v

Abstract vi

List of Tables x

List of Figures xii

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study 1

1.2 Statement of the Problem 10

1.3 Objectives of Study 11

1.4 Research Questions 11

1.5 Research Hypotheses 12

1.6 Significance of the Study 12

1.7 Scope of Study 13

1.8 Time Scope 13

1.9 Limitations of Study 13

1.10 Definition of Terms 14

References 16

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 Introduction 18

2.2 Conceptual Framework 18

2.3 Rural Business and Quality Improvement 52

2.4 Issues in Creating an Enabling Environment for Rural

Business 73

2.5 Concept of Environmental Management System 103

2.6 Concept of Quality 137

2.7 Functions of Standard 145

2.8 Challenges of Business Definition 162

2.9 Corporate Social Responsibility of Business 173

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2.10 Theoretical Framework 176

2.11 Direction ofr Emerging Advatnage Theories 179

2.12 Empirical Framework 182

2.13 Summary of the Related Literature 188

References 191

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction 198

3.2 Research Design 198

3.3 Sources of Data 198

3.4 Tools for Data Collection 199

3.5 Population of Study 199

3.6 Sample Size Determination 199

3.7 Reliability of Instrument 201

3.8 Validity of the Instrument 202

3.9 Methods of Data Analysis 203

References 204

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND

DISCUSSION OF FINDINGS


4.2 Data Presentation and Analysis 205

4.3 Biographical Data 206

4.4 Test of Hypotheses 222

4.5 Discussion of Findings 230

References 246 [

CHAPTER FIVE: SUMMARY OF MAJOR FINDINGS, CONCLUSION

AND RECOMMENDATIONS


5.2 Summary of Major Findings 247

5.3 Conclusion 247

5.4 Recommendations 248

5.5 Contribution to Knowledge 249

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5.6 Suggested Area for Further Research 250

Bibliography 251

Appendix A 260

Appendix B 263

Appendix C 264

Appendix D 265

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LIST OF TABLES

Table 2.1: Nigeria ranking on world economic forum‟s global

competitiveness index alongside comparator countries 79

Table 2.2: Nigeria performance rankings on doing business indicators 82

Table 2.3: infrastructure indicators 83

Table 2.4: Nigerian business face the most serious electricity

constraint 84

Table 2.5: Corruption perception index, 2007 90

Table 2.6: Security services and security expenditure 92

Table 2.7: Reasons for perceiving access to land for expansion/relocation

to be a major or severe constraint – all formal sectors 95

Table 3.1: Sample size of each company 201

Table 3.2: Validity scale: 10- high, 5-medium, 0-low 203

Table 4.1: Distribution and return of the questionnaire 205

Table 4.2: Age distribution of respondents 206

Table 4.3: Sex distribution of respondents 207

Table 4.4: Respondents literacy level 207

Table 4.5 Technology and competitive advantage 208

Table 4.6 Knowledge and competitive advantage 208

Table 4.7 Organisational productivity and competitive advantage 209

Table 4.8 Constant facility improvement and competitive advantage 209

Table 4.9 Customer satisfaction and competitive advantage 210

Table 4.10 Shifting buyers need and competitive advantage 211

Table 4.11 Technological changes and competitive advantage 211

Table 4.12 Government policies and competitive advantage 212

Table 4.13 Input cost/availability and competitive advantage 212

Table 4.14: Differentiation and competitive advantage 213

Table 4.15: Pricing and competitive advantage 214

Table 4.16: Adoption of six sigma and competitive advantage 214

Table 4.17: Organization‟s adoption of recycling and competitive

advantage 215

Table 4.18: Lean manufacturing and quality environment 215

Table 4.19: Intensity of rivalies and competitive challenges 216

Table 4.20: Lack of information on environment 217

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Table 4.21: Not understanding true essence of business stand as a

challenge to performance 217

Table 4.22: Non availability of electricity as a challenge 218

Table 4.23: Settlement of business in court and conduct of business 218

Table 4.24: Community management development centre is part of social

responsibility 219

Table 4.25: Waste control and social responsibility 220

Table 4.26: Laws of host community and social responsibility 220

Table 4.27: Worker‟s care and social responsibility 221

Table 4.28: Customers product and social responsibility 221

Table 4.29: Descriptive statistics 222

Table 4.30: Correlations matrix on the relationship between comparative

advantage, business quality and environmental management

system 223

Table 4.31: Cross tabulation 224

Table 4.32:Chi-square test 225

Table 4. 33 Descriptive statistics 226

Table 4. 34: One-sample kolmogorov-smirnov test 226

Table 4.35: Cross tabulation 227

Table 4.36: Chi-square test 228

Table 4.37: Descriptive statistics 229

Table 4.38 One-sample kolmogorov-smirnov test 229

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LIST OF FIGURES

Figure 2.1: A Model of competitive advantage 52

Figure 2.2: Composition of taxes – international comparison 86

Figure 2.3: Firms perception of financial sector – International

comparism 87

Figure 2.4: Nigerian business is funded largely from retained

earnings 88

Figure 2.5: Evolution over time of Nigeria‟s percentile rank for

rule of law and control of corruption 91

Figure 5.1: Model of compeitioned advantage for rural business 249

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The end of Second World War witnessed the emergence of revolutionary ideas

that swept the African nations as they threw off the colonial yoke. The desire on

the part of the new leaders in these countries is to promote rapid economic

development coupled with the realization that „poverty anywhere is a threat to

prosperity everywhere‟, has aroused further interest in strengthening competitive

advantage of rural business (Jhingan, 2007:1). As we move into the new

millennium, we are entering an era of constant change. Becoming-and

remaining-the winner, will require an ever increasing ability to make the right

decisions and to execute those decisions more effectively than competitors.

Success arises from being different and then being prepared to change again, to

search and exploit new opportunities, for satisfying human wants and needs.

Darwin‟s law of „survival of the fittest‟ governs the survival of products,

services and societies: those most responsive to change achieve competitive

advantage (Iyer, 2009:9).

Competitive advantage is the generation of ideas, alternatives, innovations and

the transformation of those ideas and alternatives into useful applications that

lead to change and improvement that allow nations and organisations to find

position among its competitors (Carr and Johnson, 1995:62). In today‟s business

environment an essential element to an organisation‟s success is for managers to

manage at the speed of change, and that takes creativity and innovation to

sustain the competitive nature of the organization. Companies that are effective

are rapidly bringing innovative products and services to the market always to

gain a huge competitive edge in today‟s business world (Deming, 1993:8).

According to Dean (2004:114) competitive advantage means analyzing what

factors that are necessary for an organisation‟s long-term success. Relevant

areas to review are its resources and the business environment. Firm‟s resources

include all assets, capabilities, organisational processes, firm‟s attributes,

information, knowledge, etc. controlled by firms. This enables the firm to

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conceive of and implement strategies that improve its efficiency (doing things

right) and effectiveness (doing the right things). In the language of traditional

strategic analysis, firm‟s resources are strengths that they can use to conceive of

and implement their strategies. Firm‟s resources can be conveniently classified

into three categories: physical capital resources, human capital resources and

organisational capital resources. Physical capital resources include the physical

technology used in a firm, a firm‟s plant and equipment, its geographical

location, and access to raw materials. Human capital resources include the

training, experience, judgment, intelligence, relationships and insight of

individual managers and workers in a firm. The organizational capital resources

include a firm's formal reporting structure, its formal and informal planning,

controlling and coordinating systems, as well as relations among groups within a

firm and between a firm and those in its environment (Barney, 1991: 101). All

analysis done in respect of a firm‟s resources is to achieve products and

environmental quality.

Competitive advantage is a cohesive organism, which learns to adopt or adapt

or find better ways of doing things essentially in response to its environment

(Child, 1997: 67). The question then is what really should a firm do to maintain

or to optimize its situation in its environment? Should it focus on its financial

situation, its technology, or its human resources? Barney (1991: 108) suggests

that in order for a resource to qualify as a source of sustained competitive

advantage, the resource must add value to the firm, it must be rarely, it must be

inimitable and it must be non-substitutable. Producing in line with

environmental demand requires that the producer should make quality products

that invariably satisfy the needs and wants of the consumers without destroying

the environment.

Quality as a competitive advantage strategy is the sum of many methods of

institutional development, ranging from competitive hiring procedures, creating

appropriate funding opportunities, to facilitating communication and supporting

innovative initiatives geared toward meeting the demands of consumers (Sybile,

2007:1). The most limiting factor for quality enhancement is not the nature of

internal or external competitors but the limits of the resources when room for

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improvements is identified. Quality should be likened more to a set of

institutional and individual attitudes, a “quality culture”, aiming at continuous

enhancement of quality. Most importantly, it has to be emphasized that the

future of quality culture as a meaningful contribution to institutional

improvement depends on the survival of the willingness of individuals to

improve.

Deming, in Iyer (2009:86) states that quality means what will sell, what the

customer needs, what is presented in a way that he or she can use it, and what

will do him or her some good-or at least try to. Feigenbaum (2007:116)

maintains that quality is what the customer says it is in that it is quality that

begets customer satisfaction, customer delight and an edge over

competition.Siemens Corporation in Iyer (2009:90) asserts that quality is that

when customers come back and their products don‟t.Customer satisfaction is

gained by focusing attention on all aspectsof the product or service that are

meaningful to him or her.It a measure of applied values. It takes place at the

customers premises.It reflects how much more competitive one is, how much

less of a high-cost producer, or how much more of a cost-effective high share

marketer.

According to Oxford Dictionary (1990:950) quality is the standard of something

when compared to other things like it. Standard much like quality for that matter

can be defined in multiple ways and for various purposes. In addition, they are

often embedded in complex processes of definition, interpretation and

implementation, which have a lasting impact on organizational quality.Yet,

since quality itself is a complex construct with various dimensions and different

meanings. It is important to consider which quality notions we are building

upon or aim at (Harvey and Green, 1993: 206). Quality may be aimed at the

process of manufacturing which is referred to as environmental management

system.

Environmental Management System (EMS) is a manufacturing process which

advices and guides firms to reduce their environmental impact through

identification, measurement and control activities that centred on curbing waste

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generation(Minner,1997:62). An effective EMS can help a firm, manage,

measure and improve the environmental aspects of its operations. EMS has the

potential to lead to more efficient compliance with mandatory and voluntary

environmental requirements. EMS may help companies effect a cultural change

as environmental management practices are incorporated into its overall

business operations. Just as the quality cultural change has taken place over the

last twenty years, EMS has become the next extension of quality to waste

reduction.

In the words of Mark (2009:21) Environmental Management System is a

manufacturing process which adopts technique of Lean, Eco-factory,

Remanufacturing, Recycling, Reverse Logistics, etc. to maintain effective

internal capacity to check waste that result to pollution. Effective environmental

management system include, creating environmental policy, setting objectives

and target, implementing a program to achieve those objectives, monitoring and

measuring its effectiveness, correcting problems, and review the system to

improve it and its overall environmental performance. This repositions a nation,

state or an organisation towards achieving competitive advantage that will

improve their economic position and place it on the path of growth. It is a

position every nation, state, institution, organisation, etc. wishes to achieve in

order to improve the well being of its citizenry or subordinates.

In Nigeria the desire for economic growth has been encapsulated under the

fundamental objectives and directives principles of state policy. The 1999

Constitution just like the previous constitutions of the Federal Republic of

Nigeria states in the first two statements of the first schedule as follows „The

security and welfare of the people shall be the primary purpose of government‟.

„The state shall, within the context of the ideals and objectives for which

provisions are made in the constitution, harness the resources of the nation to

promote national economy in such a manner as to secure the maximum welfare,

freedom, and happiness of every citizen on the basis of social justice and

equality of status and opportunities‟.

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But last decade especially from 1980s, Nigeria has recorded massive business

failures. This has been attributed to misguided philosophy of the supposed

“Giant of Africa” which is based on no known economic, social or political

parameters, except probably on untapped, undeveloped and misused resources.

But on population which is put at 140,431,770 with average growth rate of 2.5%

going by 2006 population census and a land mass of 923,773 square kilometres.

With 2/3 of the population said to reside in the rural areas of the country

(NEEDS, 2004:20).

Based on the huge population it is a common perception that Nigeria is a large

market, and as such anything produced by industries within her territory will be

sold off not minding their prices and quality. However, this philosophy has

been proved to be untrue, because most industries have been failing because of

their inability to face competition arising from products from foreign countries

which are cheaper in prices and of better quality or simply their inability to

produce goods and services that meet the ever-changing needs and wants of the

consumer. The customer is no longer the king. She is the emperor, she desires

customer delight. Delight is a higher form of satisfaction. Delight is becoming

the surest way to achieving and retaining competitive advantage (Arora,

2007:1). The adverse consequences of not achieving competitive advantage are

loss of capital, frustration and loss of jobs.

Approximately eighty thousand businesses are started each year in the rural

areas of South Eastern Nigeria. 85 percent of these businesses actually end

within five years (David, 1990:65). They are not bankrupt, yet their owners have

decided to close shop – for a host of reasons. Many do not have the needed

investment to carry them through the start-up process (Six months to a year).

Others die out because they topple on a shaky basis of poor business planning at

the initial stage. Still others disappear due to a lack of business resources and

management expertise and/or simply dearth of experience.While others conceive

of their ventures as sideline to their real professions. They never make the

emotional and practical investment needed to ensure continued success. Most of

them are not committed leading to failure of many businesses which lead to

outflow of rural populace to urban centres.

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Of course it is not lost on the government, the social, economic and political

implications of allowing the influx of the rural populace into our few urban

centres which had already been congested. Warning about increase in numbers,

Keenleyside (1964:216) writes „the womb is slower than the bomb, but it may

prove just as deadly, suffocation rather than incineration may mark the end of

the human story‟. In a bid to boost manufacturing activities in our rural areas in

order to lessen the rate at which unemployment is spreading with urbanisation

and the spread of education, while the industrial sector has failed to expand

along with the growth of labour force thereby increasing urban and rural

unemployment. With the present average annual growth rate of 4.5% in urban

population, 30 percent of the labour force in urban areas is unemployed,

(NEEDS 2004:7).

To stem this tide, government has been setting up various intervention agencies

some of which are defunct. The first was Industrial Development Centres

(IDCs) in each state starting with Owerri and Zaria in 1963 and 1967

respectively, (Essien, CBN bullion, 2001:21). Another is National Directorate of

Employment (NDE) which was established in November 1986 with an initial

capital outlay of N10.6 billion. Its primary objective is to train people in various

skills acquisition. Also Small and Medium Enterprises Scheme was based on a

loan of N270 million made available to the Federal Government of Nigeria by

World Bank. The program was set up to support SMEs. There was also

Directorate for Food, Roads, and Rural Infrastructure (DFRRI) was set up in

1986 by then Babangida administration as a major vehicle for rural

development.

Others are Development of Rural Banking Scheme (RBS) which was initiated in

1977 by the Central Bank of Nigeria following the Okigbo Report .The first

phase started July 1980. It was meant to mobilize rural savings for investments.

Another was Better Life for Rural Women, which was setup between 6th and

16th September 1987 following a workshop titled Better Life Programme for

Rural Women that was held in Abuja under the auspices of the then First Lady,

Mrs Maryam Babangida .The workshop was also to workout strategies for

mobilising rural women for development and productivity. And finaly was

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Merging of Development Finance Institutions, (DFIs), to create Bank of

Industry with initial capital outlay of Fifty Billon Naira. This is to enable the

bank to finance businesses. Although government has setup these agencies but

inadvertently most of these agencies failed to achieved their stated objectives

because of inconsistency in policy formulation and poor implementation and

coupled with impatience to allow the program to take root before they are given

up for another program all together.

The plan for prosperity must address a startling paradox. About two-third of the

Nigerian people are poor, despite living in a country with vast potential wealth.

Athough revenue from crude oil is increasing over the past decade, our people

have falling deeper into poverty (NEEDS, 2004: X111). In 1980 an estimated 27

percent of Nigerians live in poverty. By 1999, about 70 percent of the

population had income of less than one doller a day-and this figure has risen

since than. Poverty level vary across the the country, with the highest proportion

of poor people in the North-West and the lowest in the South- East. THIS

situation has created dilemma to the various governments. The concern for all

the micro and macro issues involved in low productivity that culminate in what

is today referred to as Nigerian factor which has continued to impair efficiency

and effectiveness in production and operation in our country.This tends to

permanently keep Nigeria in state of vicious circle of poverty inspite of

enormous human and material resources endowment, should give serious

concern to all.

It is estimated that the manufacturing sector in Nigeria has to bear additional

indirect costs amounting to 16 percent of sales because of bottlenecks in the

business environment. Losses due to power outages amount to 10 percent of

sales and production cost while in transit (4% of sales) is also significant. These

losses affect every business by making their products uncompetitive both in

terms of quality and prices (Investment Climate Program, 2008:20). Ingredients

of the investment climate such as physical infrastructure, utilities, financial

markets, security and predictable public institutions create the enabling

environment for investment and business and thereby enhance opportunities and

incentives for firms to invest productively, create jobs, and expand.

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Business environment refers to the enabling conditions for private enterprises

and business competitiveness in an economy (Assessing and Benchmarking

Business, 2006:8). The ease of doing business is an important factor in the

theories of comparative advantage and countries find it difficult to achieve

powerful externalities in the absence of a low-cost business environment (Eifert

et al, 2005:60). While the business environment directly influences the firm‟s

level cost of production, the industry level impact relates to market structure and

competition. Rural business continues to face significant challenges to improve

local economics. For example, one out of every four people in the rural areas

lives in poverty, and roughly three quarter of all rural areas has been defined as

persistent poverty areas. Despite persistent poverty, there are limited

stakeholders input from residents regarding rural development, research and

extension strategies. To improve community rural business if there is going to

be progress we must listen to rural residents, institutions and other economic

development organisations.

Currently, there appears to be no effective effort to control pollution and protect

the environment. Existing policies to reduce pollution have not been

institutionalised in the villages studied. It is unclear which government agency

(at any level) actually bears the responsibility for controlling pollution from

waste, garbage and water that is generated by animal husbandry, food

processing, and other small-scale agro-industries. While the department of

Natural Resources and Environment is mandated to assume this role at the state

level, the question of how to manage the environment remains unanswered,

particularly on the level of the Local Government where no equivalent entity

exists. Rural villages bear a direct responsibility for creating and managing

pollution, the environmental management task goes beyond the local scale and

exceeds the capacity of the rural populace. Inevitably, there is conflict and

discord between people creating pollution and those who are suffering ill health

as a result of its impact.

For now, the Head of villages and Elders Association work with Youth Unions

to organise sanitation works on a regular basis. However, the scale is small and

the results are increasingly limited as pollution levels increase. In some cases

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the task is too great for the state as well in which case the Federal Government

should assume responsibility for remedial action. The issue of environmental

sustainability is becoming increasingly important to the world community. This

heightened interest has led to many new terms being added to the lexicon to

reference environmental quality management issues. These terms include

“sustainable development”, “sustain manufacturing”, “environmentally conscious

manufacturing”, “remanufacturing”, “going green”, and others.

Numerous conferences have developed standards and guidelines that are

intended to effectively manage environmental quality by minimising

environmental burdens. Examples include the UN-sponsored 1992 Earth

Summit in Rio de Janeiro and the 1997 Climate Change Conference held in

Kyoto .The United Nation General Assembly Meeting held in New-York on

22nd

of September 2009 was dominated by how to cut carbon emission by

various countries of the world. Also Common Wealth of Nations meeting which

started November of 2009 in Trinidad and Tobago had the issue of cutting

carbon emission at the top of its agenda. The same year 2009 also marked

Africa‟s Heads of States discussion on climate change which was held in Kenya.

The World Climate Change meeting came up in December the same year in

Denmark in the city of Copenhagen to discuss carbon emission and its impact on

environment. Finally in the December 2010 World Convention on Climate

Change was held in the city of Cancun in Mexico in order to find ways of

lessening carbon emission that cause climate change.

Member nations of the International Organisation for Standardisation (ISO)

have contributed by creating a set of guidelines for environmental management

systems. These guidelines known collectively as ISO (14001) parallel the

widely adopted guidelines for product quality (ISO 9001).The interest in

environmental quality management manifest itself in response to the growing

concerns about the depletion of Earth‟s non-renewable resources and

environmental burdens that are contributing to climate change .The world

continues to witness a rapid proliferation of new products which have shorter

and shorter life cycle; creation of tremendous quantity of waste that are disposed

in landfill; increase use of fossil fuel; and worsening pollution of the air, water

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and soil. As a result of these problems, an increasing number of legislative

bodies and interest groups are beginning to put pressure on corporations to

improve their environmental performance. Responsible environmental conscious

manufacturing system has been suggested as an appropriate way to respond to

these challenges.

Research suggests that economic growth is associated with environmental

pollution (Madu, 1999:60).This association contributes to a vicious cycle in

which continued economic development drives environmental pollution, while

also making it difficult to sell the idea of environmental management to

corporations whose major objective is to maximise shareholders wealth. The

Earth‟s population of roughly 6 billion people is projected to rise to 8 billion

people by the year 2025 (Furukawa, 1992:21). This is an increase of 40 percent

from the current population level. Yet Earth‟s resources are increasingly being

depleted or polluted. The decline in natural resources will make it even more

difficult to sustain a growing population.

1.2 STATEMENT OF THE PROBLEM

Increasing level of competition in the global business has created unprecedented

change and turbulence in firms operating environment regardless of national

boundaries. The firms thus become vulnerable to competitive forces. Firms in

rural areas are facing severe competitive challenges with some firms closing by

the day as a result of their inability to cope with competition arising from

products from domestic and foreign companies. Rural businesses perform

poorly, yet they pollute the environment which affect the health of rural

communities and the eco-system upon which they depend.

The desire on the part of the various governments in Nigeria to promote rapid

economic development through improvement in economic activities in rural

areas with realization that „poverty anywhere is a threat to prosperity

everywhere‟ seems not to be yielding desired result. The problem aggravates

instead because of uncompetitive nature of their products and services in

comparism with products from domestic and foreign firms which are cheaper in

price and of better quality. This situation places rural business at disadvantage

25

position thereby making it almost impossible to achieve competitive advantage

that will guarantee growth and expansion.

In Nigeria there has been uneven development and glaring inequalities of

opportunities between rural and urban areas inspite of the fact that majority of

Nigerian are rual dwellers. Rural areas still have little or no opportunity for

education, employment, medical facilities etc. It is also characterized by poverty

and malnutrition. Consequence of which is continued influx of rural populace

most especially our abled bodied young men and women into our urban centres

in search of „Greener Pastures‟. The social implications of over population in the

urban centres have created pressures on social infrastructure leading to reduction

in the standard of living.

1.3 OBJECTIVES OF STUDY

1. To determine the extent of competitive advantage impact on rural business

quality and environmental management system.

2. To highlight competitive advantage factors that affect sustainability of rural

business.

3. To identify competitive advantage strategies that are used in strengthening

rural business.

4. To identify the key challenges of competitive advantage in strengthening rural

business.

5. To ascertain the extent to which corporate social responsibility improves

competitive advantage of rural business.

1.4 RESEARCH QUESTIONS

The following are the research questions advanced by the researcher.

1. To what extent could competitive advantage impact on rural business quality

and environmental management system?

2. What are the competitive advantage factors that affect rural business?

3. What are the competitive advantage strategies that are used in strengthening

rural business?

4. What are the key challenges of competitive advantage in strengthening rural

business?

26

5. To what extent does corporate social responsibility used to improve

competitive advantage of rural business?

1.5 RESEARCH HYPOTHESES

The following are the research hypotheses:

H1: Competitive advantage significantly impacts on rural business quality and

environmental management system.

H2: Shifting buyers needs, technological changes and government regulation affect


H3: Differentiation, pricing and six sigma competitive advantage strategies

strengthen quality and environmental management system.

H4: Intensity of rivalry among existing competitors, lack of information and non

availability of electricity affect competitive advantage in strengthening rural

business.

H5 Corporate Social Responsibility significantly improves competitive advantage

of rural business.

1.7 SIGNIFICANCE OF THE STUDY

The research will be of immense benefit to the under listed groups and

institutions:

(1) Rural Dwellers: This study is not only merely to bridging the gap between

the rich and the poor but essentially to raising the standard of living of

impoverished majority who are living in the rural areas.

(2) Business Men: This research is meant to correct the psych of most of our

business men which have been corrupted by the concept of profit

maximization propounded by early economists by making them understand

that the essence of business is to satisfy customers.

(3) Government Officials: This research is intended to help government

fashion systematic strategies that are dependent on knowledge and

technology in solving problems of rural business and rural development.

(4) Environmental Protection Agency Officials: Economic growth goes hand-

in-hand with pollution. Institutions must insist on organisations adopting

modern manufacturing processes or global best practices in order to lessen

waste that destroy the environment.

27

(5) Researchers: Finally, research of this nature which is rural based will

provoke further research into the general development of rural areas of the

country.

1.7 SCOPE OF STUDY

The study seeks to find ways of strengthening the competitive advantage of rural

business through the use of quality measures and through adoption of

environmental friendly manufacturing processes. The study examined the

activities of selected private, manufacturing, extractive and poultry companies

existing in the rural areas of the South Eastern States of Nigeria. The companies

are selected one from each local government of the five states. And they include,

Consolidated Breweries Limited, Awomama in Orlu Local Government Area of

Imo State, Phinomar Nigeria Limited Ngwo in Udi Local Government Area of

Enugu State, and Roesons Industries Limited, manufacturers of plastic products

in Enugwu-Ukwu in Njikoka Local Government Area of Anambra State. Others

are S. G. Minerals which is into stone quarry and is situated at Ezziamgbo

Efiom in Efioma Local Government Area of Ebonyi State. The last but not the

least is International Glass Industries Ogbohill Aba, Abia State.

The study was conducted at the headquarters of the companies understudy.

However, the companies had no branch offices. This, situation actually helped

to really evaluate the performance of the companies and their impact within

their area of operation. The study was meant to cover large, medium and small

scale enterprises.

1.8 TIME SCOPE

The priod covered by the study was 1970-2011.

1.9 LIMITATIONS OF STUDY

In carrying out this work the researcher encountered some challenges.

Admittedly the intimate proximity of the research with the study environment

has its drawback, one of which is the subjectivity of each respondent.The means

for eliminating subjectivity in this research relate to the research design. No

28

matter how carefully written or completely tested, each survey is vulnerable to

differing interpretations of the questions.

The survey research design has the limitation that it is one shot or at most two

shots and that decreases its ability to generate data with which to test the causal

relationships of variables without resorting to rigorous statistical analysis. The

questionnaire as instrument for primary data collection has the limitation that its

structured nature could compel the respondents to give answers that they do not

fully endorsed.

Research of this nature is always very expensive. A lot of money is required in

data collection, analysis and interpretation. The researchers had to spend a lot in

order to cover his area of study. Travelling through the five states of the South

East involves a lot of money and risk. However, the challenges were overcome

through the support elicited from friends and relations.

Some of the respondents are unwilling to cooperate with the researcher since

they receive no financial benefit from the study, but through persuation and

conviction we were able to overcome the challenge. The fact that the researcher

has other things doing to earn a living, apart from schooling posed a serious

constraint. The researcher had to work to keep his job and at the same time

squeeze out time to carry out this research.

1.10 DEFINITIONS OF TERMS

In the course of this sudy the following terms and concepts were defined:

Business Environment: These are social, economic, political, etc. factors that

affect activities of business organisation.

Comparative Advantage: It refers to factors of production endowment

Competitive Advantage: It means application of knowledge and technology

on comparative advantage.

Competitive Forces: These are factors that determine intensity of competition

in an industry.

29

Competitive Strategy: This is strategy adopted by a firm in order to position its

self in the market.

Competitiveness: This refers to the ability to meet the desired needs and wants

of customers.

Environmental Burden: It refers to effluents which damage the environment.

Environmental Management System: It means a process of building internal

capacity in order to being able to curb waste.

Environmental Management: It means maintenance of a clean and healthy

environment for business and human beings.

Rural Business: This is the development of people and mobilisation of

resources to produce within the local area.

Selective Factor Disadvantage: It means lack of factor endowment.

Sustainable Development: It refers to creation of sustainable improvement in

the quality of life for all people as a principal goal of development policy.

30

REFERENCES

Albert, M. (2000), “Evaluation of the Cost and Benefit of Environmental

Management System”, Journal of Production Research, 38 (17).

Arora, K. (2007), Total Quality Management, New Delhi, Kataria Publishers.

Institute of Applied Economics (2006), “Assessing and Benchmarking

Business” A Journal of Institute of Applied Economics 10(40).

Barners, N. (2007), Article of Lousian Agriculture File:///H:/Strenghtening.htm.

“Central Bank of Nigeria Bullion” (2001), Volume 25(3).

“Doing Business in Nigeria,” (2008), A Journal Publication of World Bank and

International Finance Corporation 18(36).

Eifert, B. (2005), “The Business Environment and Comparative Advantage in

Africa: Evidence from Investment Data”, Paper Presented at the Annual

Bank Conference on Development Economics (ABCDE), Dakar, Senegal.

Enugu State Chambers of Commerce Brochure (2009).

Federal Republic Nigeria Constitution (1999).

Furukawa, S. (1992), “Japan‟s Policy of Sustainable Development”, Columbia

Journal of World Business, 27 (384).

Gardon, B. (1990), Entrepreneurship for the Nineties, New-York, Prentice Hall.

Federal Ministry of Finance, (2001), Nigeria Governance and Corruption

Survey. Abuja: Natuonal Planning Commission.

Imaga, E. (2000), Operationalizing Management Through indigenous Culture,

Unpublished Lecture Mimeograph.

Jhingan, M. (2007), The Economics of Development and Planning, Vrinda,

Hambidge Publishers.

Karl, H. (1996), New Venture Experience, New York, Prentice Hall.

Keeneybide, H. (1992), Dynamics of Development. Vrinda, Hambidge

publishers.

Madu, C. (1999), “A Decision Support Framework for Environmental Planning

in Developing Countries”, Journal of Environmental Planning and

Management, 42 (3).

Madu, C. (1999), Maintain Healthy Environment Fairfield, CT, Chi Publishers.

31

Madu, C. (2004), Competing on Quality and Environmental,Fairfield, CT, Chi

Publishers.

National Planning Commission, (2004), National Economic Empowerment and

Development Strategy (NEEDS). Abuja.

National Population Commission, (2006), Census Report.

Olewe, C. (2001), Development Administration, Enugu: Fourth Grace

Publishers.

Oxford Policy Management, (2004), Nigeria Economic Growth Analysis. Abuja:

U. K. Department for International Development (DFID).

Oxford Advance Leaners dictionary of Engish Language (1990), London,

Cambridge Publishers.

Iyer, S. (2009), Managing for Value, New Delhi, New Age Publishers.

Iyer, S. (2009), Value Engineering, How to Manual, New Delhi, New Age

International Publishers.

Feigenbaum, M. (2007), Age of Quality, Fairfield,CT, Chi Publishers.

32

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 INTRODUCTION

This section of the study is meant to explore the basic related litrature that

covers the current study under review, major areas were looked into which

include theoretical framework, conceptual framework, an overview of

competitive strategy, concept of competitive advantage, rural business and

quality improvement.Other topics examined include environmental factors,

ethics and corporate social responsibility.The gaps that were discovered to be

existing in the literature were filled.

2.2 CONCEPTUAL FRAMEWORK

2.2.1 Competitive Strategy: An Overview

In today‟s fast-paced economy competition is an issue of service and best

products. Much attention has been directed to a better service and best product

and how this can be achieved through utilising various resources (Rahim,

2008:6). In the literature on and for capitalist management, the notion of

competitive strategy and its core discipline of industrial analysis, competitor

analysis and strategic position are now an accepted part of management

practices. A large number of thoughtful practitioners have embraced the

concept as a powerful tool for fulfilling a career-long desire to influence what

happens in the real world of business (Legge, 1995:96). It has always been

central to the agenda of companies most especially in the contemporary times

where companies all over the world are struggling to cope with growing

competition.

Indeed, competition has become one of the enduring themes of our time. The

rising intensity of competition has continued to be the greatest challenges facing

business organisations. Competitive strategy therefore, offers a rich frame work

for understanding the underlying forces of competition captured in the “five

forces” (Porter, 1985:12). The framework reveals the important differences

among industries, how industries evolve and help companies find unique

position. It provides tools for capturing the richness and heterogeneity of

33

industries and companies while providing a disciplined structure for examining

them. It also signals a new direction and provides an impetus for economic

thinking which before now was stylized.

Increase attention for formal strategic planning has highlighted questions that

have long been of concern to managers: What is driving competition in our

industry or industries we thinking of entering? What actions are competitors

likely to take, and what is the best way to respond? How will my industry

evolve? How can the firm be best positioned to compete in the long run?

(Wayne, 1974:409).Every firm competing in an industry has a competitive

strategy, whether explicit or implicit. This strategy may have developed

explicitly through planning process or it may have evolved implicitly through

the activities of the various functional department of a company. Left to its own

devices, each functional department will inevitably pursue approaches dictated

by its professional orientation and the incentives of those in charge. Competitive

strategy present a comprehensive framework of analytical techniques to help

firm analyze its industry as a whole and predict the industry‟s future evolution,

to understand its competitors and its own position, and to translate this analysis

into a competitive strategy for a particular business (Porter and

Magretta,1997:37).

Essentially, developing a competitive strategy is developing a broad formula for

how a business is going to compete, what its goals should be, and what policies

will be needed to carry out those goals (Joseph, 2001: 65). In other words

competitive strategy is a combination of the ends (goals) for which a firm is

striving and the means (policies) by which it is seeking to get there. Some firms

use different words for the concepts some firms use terms like mission or

objective instead of goal and some firms use tactics instead of operating or

functional policies. Yet the essential notion of strategy is captioned in the

distinction between ends and means (Porter, 1985:1).

Abel (1999:30) maintains that competitive strategy can be viewed as building

defences against the competitive forces or finding positions in the industry

where the forces are weakest. Knowledge of the company‟s capabilities and of

34

the causes of competitive forces will highlight the areas where a Company

should confront competition and where to avoid it. Once the forces affecting

competition in an industry and their underlying causes have been diagnosed, a

firm is in a position to identify its strength and weaknesses relative to the

industry. From a strategic stand point, the crucial strength and weaknesses are a

firm‟s posture vis-à-vis the underlying causes of each competitive force. Where

does a firm stand against substitute? What are the sources of entry barriers?

How could we coping with rivalry from established competitors? Although

vision is a scarce commodity, structural analysis can help direct thinking toward

the areas of change that would yield the highest pay off (Porter, 1985:21).

Competitive strategy involves positioning a business to maximize the value of

the capabilities that distinguish it from its competitors. It follows that a central

aspect of strategy formulation is perceptive competitor analysis. Sophisticated

competitor analysis is needed to answer questions as who should we pick a fight

within the industry, and with what sequence of moves? What is the meaning of

the competitor‟s strategic moves, and how seriously should we take it? And

“what areas should we avoid because the competitor‟s response will be

emotional or desperate (Handfield et al, 1992:62). Competitive strategy

therefore can be described as a process of taking offensive or defensive actions

to create a defendable position in an industry, to cope successfully with

competitive forces and thereby yield a superior return on investment (Porter,

1985:40). Firms have discovered many different approaches to this end, and the

best strategy for a given firm is ultimately a unique construction reflecting its

particular circumstances.

Competitive strategy examines ways in which a firm can compete more

effectively to strengthen its market position. However, any such strategy must

occur in the context of rules of the game for socially desirable competitive

behaviour established by ethical standards and through public policy. The rules

of the game cannot achieve their intended effect unless they anticipated

correctly how businesses respond strategically to competitive threats and

opportunities (Kotler, 2006:210).The essence of formulating competitive

strategy is relating a company to its environment. Although the relevant

environment is very broad encompassing social as well as, economic forces the

35

key aspect of the firm‟s environment is the industry or industries in which it

competes. The industry structure has a strong influence in determining the

competitive rules of the game as well as the strategy, potentially available to the

firm. The goal therefore, is to find a position in the industry where the company

can best defend itself against the competitive forces or can influence them to its

favour (Barney, 1991:4). A strategic position is a path not a fixed location.

Companies can never stop learning about their industry, their rivals or ways to

improve or modify their competitive position.

The key for developing strategy is to delve below the surface and analyze the

sources of competitive forces. Knowledge of these underlying sources of

competitive pressure highlights the critical strengths and weaknesses of the

company, animates its positioning in its industry, clarifies the areas where

strategic changes may yield the greatest payoff, and highlights the areas where

industry trends promise to hold the greatest significance as either opportunities

or threats which are marked by the five forces of competition (Child, 1972:143,

Porter, 1980:4).

2.2.2 Five Forces Driving Industry Competition

These factors refer to the competitive forces that shape structure of industries

and their competitive intensity in line with Porter‟s (1985:32) propositions:

New Entrants: New entrants to an industry bring new capacity, the desire to

gain market share, and often substantial resources. Prices can be bided down as

a result, reducing profitability or new method of manufacturing result in

improvement in quality making the existing product obsolete. New entrants

disorganise the existing position in the industry. Using their resources to cause

check-up with the intent to build market share and position. The threat to entry

into an industry depends on barriers to entry that are present, coupled with the

reaction from existing competitors that the entrant can expect.

Intensity of Rivalry among Existing Competitors: An industry is unattractive if

it already contain numerous, strong, or aggressive competitors. It is even more

unattractive if it is stable or declining. Rivalry among existing competitors take

the familiar form of jockeying for position – using tactics like price competition,

36

advertising battles, product introduction, quality improvement, increased

fortunes and increase customer services or warranties. Rivalry occurs because

one or more competitors either feel pressure or sees the opportunity to improve

position. Intense rivalry is as a result of number of interacting structural factors,

numerous equally balanced competitors, slow industry growth, high fixed cost

or storage costs, high exit barrier and high strategic stake. [

Pressure from Substitute Products: All firms in an industry are competing, in a

broad sense, with industries producing substitute products. Substitute limit the

potential returns of an industry by placing ceiling on the prices firms in the

industry can profitably charge. Identifying substitute products is a matter of

searching for the products that can perform the same function of the product of

the industry. Some times doing so can be subtle task and one which leads the

analysts into businesses seemingly far remove from the industry.

Bargaining Power of Buyers: Buyers compete with the industry by forcing

down prices, bargaining for higher quality or more services, and placing

competitors against each other – all at the expense of industry‟s important buyer

groups depend on a number of characteristics of its market situation and on the

relative importance of its purchases from the industry compared with its overall

business. A buyer group is powerful if the following circumstances holds true: If

it is concentrated or purchase large volumes relative to seller sales; the products

is purchased from the industry represent a significant fraction of the buyer‟s cost

or purchases; the product it purchased from the industry are standards or

undifferentiated; if it faces few switching costs and if it earns low profits.

Bargaining Power of Suppliers: Suppliers can exert bargaining power over

participants in an industry by threatening to raise prices or reduce the quality of

purchased goods and services. Powerful suppliers can thereby squeeze

profitability out of an industry unable to recover cost increase in its own prices.

The condition making suppliers powerful tend to mirror those making buyers

powerful. A supplier group is powerful if the following apply: if it is dominated

by a few companies and is more concentrated than the industry it sells to; if it is

not obliged to contend with other substitute product for sale to the industry. The

37

supplier group‟s products are differentiated or it has built of switching costs and

the supplier group poses a credible threat of forward integration.

Relative power of other stakeholders: According to Wheelen and Hunger

(2009: 82) a sixth force should be added to Potter‟s five forces. It includes

relative power of stakeholder groups from the task environment. Some of these

groups are governments, local communities, creditors, trade associations, special

interest groups, unions, shareholders, and complementors. A complementor is a

company or an industry whose products work well with a firm‟s products

without which the product would lose much of its value. An example of

complementary industries is the tire and automobile industries. Key

international stakeholders who determine many of the international trade

regulations and standard are the World Trade organizations, The European

Union, NAFTA and ASCAN. The importance of these stakeholders varies by

industry. For example, environmental groups in Marine, Michigan, Oregon, and

Iowa successfully fought to pass bills outlawing disposable bottles and cans, and

thus deposits for most drink containers are now required. This effectively raised

cost across the board, with the most impact on the marginal producers who

could not internally absorb all these costs. The traditionally strong power of

national unions in US auto and railroad industries has effectively raised costs

throughout the industries.

Technology: Porter‟s five forces of competition have been expanded to include

technology because of its impact on increasing the intensity of competition in

the industry. Technological decisions integrate with business decisions. Also it

involves timing for abandoning an old technology, when its limit of exploitation

is imminent; and launching of new ones. The situation creates changes and

intensifies competition among organizations who are trying to adopt new or

latest technology in order create competitive edge. Further, technology helps to

carry out new combination, new markets, new systems of organization, new

tools and techniques, new ways of buying, selling, distributing and

communicating, new habits and attitudes, new perceived values and new

everything.

38

2.2.3 Generic Competitive Strategies

In the views of (Dean, 1998:7, Carr and Johnson, 1995:13, Porter, 1991:4) to

cope with the five forces of competitive strategy there are three potentially

successful generic strategic approaches to outperforming other firms in an

industry .They are as follows:

Overall Cost Leadership (Pricing): The first strategy, an increasing common

one in the 1970s because of popularization of experience curve concept, is to

achieve overall cost leadership in an industry through a set of functional

policies aimed at this objective. Cost leadership requires aggressive

construction of efficient – scale facilities, vigorous of cost reduction from

experience, tight cost and overhead control, avoidance of marginal customer

accounts, and cost minimization in areas like research and development,

service, sales forces, advertising, and so on. Ideal managerial attention to cost

is necessary to achieve these aims. Low cost relative to competitors because

the theme running through the entire strategy, though quality, service and

other areas, can not be ignored.

Differentiation (Quality): The second generic strategy is one of differentiating

the product or service offering of the firm, creating something that is

perceived industry wide as being unique. Approach to differentiation can take

many forms. Design or brand image, technology, features, customer service,

dealer network or other dimensions. It should be stressed that the

differentiation strategy does not allow the firm to ignore costs but rather they

are not the primary strategic target. To achieve differentiation various skills

are needed; strong marketing ability; product engineering creative flair; strong

capability in basic research; corporate reputation for quality or technological

leadership and strong cooperation from channels or distributors.

Differentiation, if achieved is a viable strategy for earning above – average

returns in an industry because it creates a defensible position for coping with

the five forces of competition.

Focus: The final generic strategy is focussing on a particular strategy of cost

leadership or differentiation. It advocates for commitment toward a chosen

strategy instead of pursuing both simultaneously. It is of course when the

39

chosen strategy is continuously upgraded that firms achieve competitive

advantage in its industry. Focus strategy also calls for attention to a particular

buyer group, segment of a product line, or geographic market, as with

differentiation or cost leadership. Focus may take many forms. Although the

low cost and differentiation strategies are aimed at achieving their objectives

industry wide, the entire focus strategy is built around serving a particular

target very well and each functional policy is developed with this in mind. The

strategy rests on the premise that the firm is thus able to serve its narrow

strategic target more effectively or efficiently than competitors who are

competing more broadly. All these efforts mentioned above are geared toward

achieving competitive advantage. Competitive strategy, therefore lays the

foundation for competitive advantage.

Combination Strategy

Disagreeing with Porter, Dess et al (2009:175) introduced another competitive

strategy to control forces of competition which he termed combination strategy.

A combination strategy, by definition, challenges a company to carefully blend

alternative strategic approaches and remain mindful of the impact of different

decisions on the firm‟s value creating processes and its extended value chain

activities. Strong leadership is needed to maintain a bird‟s eye perspective on a

company‟s overall approach to coordinate the multiple dimensions of a

combination strategy. Because of the changing dynamics presented by digital

and internet based technologies, new strategic combinations that make the best

use of the competitive strategies just described may hold the greatest promise

for future success. Many experts agree that the net effect of the digital economy

is fewer rather them more opportunities for sustainable advantages. This means

strategic then seeking is even more important in the internet age.

Management

Although management has never been mentioned as a strategic factor that helps

organisations in coping with competitive forces, we realised the importance of

management in competitive arena. Good management works miracles. However,

mediocre management is the morn. That is because capable management is so

extraordinarily difficult. Demands on the manager are so wide and so great that

40

they are nearly impossible to meet. The manager has to acquire all the

traditional management skills: like finance, cost control, resource allocation,

product development, marketing, etc. the manager has also to master the

management arts: like writing, speaking, strategy, negotiation, appraisal, ethics,

clairvoyance, etc. Besides, the manager has to demonstrate the qualities of

leadership and integrity; and play the roles of friends, mentor and coach. The

manager today must be educated, trained and developed in what nobody knew

yesterday; and prepared for what must be known tomorrow. The manger has to

become a jack of all tools, techniques, functions and strategies and master of

every one of them: a value adder. The only asset companies have is the brain

power of the employees. One of the critical moves in business today is to

achieve just-in-time marketing in addition to just-in-time manufacturing-when

the customer wants it, with the quality features and the price the customer wants.

This can only be achieved through sound management (Iyer,2009:34).

2.2.4 Factors that Affect National Advantage

Porter (1990:166) states that as industries evolve, a nation‟s firms risk the loss

of competitive advantage. The ability of a nation‟s firms to adapt successfully to

industries changes is a function of the national diamond. Where there are

sophisticated home buyers, improving pool of technological knowledge and

skilled personnel, and intense local rivalry combined with accumulated

competitive advantages such as economics of scale, brand reputation, and

established global networks a nation‟s firm can change and adapt to retain

competitive advantage for many decade. Factor disadvantages that cannot be

handled through innovation can be offset through dispersing activities in the

value chain to other countries. National competitive advantage in an industry is

lost, however, when conditions in the diamond no longer support and stimulate

investment and innovation to match the industry‟s evolving structure. The

national industry may not perceive needed change, may fail to invest

aggressively enough to advance, or may be blocked by having assets and skills

that are specialized to outmoded ways of competing and that make responding

to change more profitable to new comers. Some of the most important reasons

for eroding advantage are the followings:

41

Caves, (1982:234) mentions factor condition deterioration. He maintains that

factor conditions can deteriorate for a variety of reasons. Most troubling is if a

nation falls behind in the rate of creation and upgrading of factors. If the skills

of specialized human resources or the base of science and technology related to

an industry deteriorate relative to another nation, then competitive advantage

will usually fade. Rising factor costs are also a common threat to competitive

advantage. They should lead to efforts to innovate, greater focus on more

advanced industry segments, and further globalization. With a proper response,

pressure from rising factor costs can lead to more sustainable competitive

advantage. Loss of competitive advantage in some segments and even industries

is inevitable, however, because improvement and innovation cannot outrun cost

increases. Where a nation‟s firms make little effort to upgrade competitive

position, however, the loss of advantage will be rapid, and serious concerns are

raised about the long term health of the economy.

Chandler, (1986:97) states that national advantage is lost when local needs fall

out of synch with global demand. Competitive advantage is threatened if home

demand conditions begin to diverge from those in other advanced nations. Local

buyers thus pull a nation‟s firms in the wrong directions (or fail to push them in

the right new direction). New buyer needs or new channels emerged elsewhere

that are slow to appear in the nation, such as desire for new features,

customization, or health concerns. As world demand for cars shifted toward

smaller, fuel-efficient, and reliable varieties preferences for larger cars delayed

the American industries response. A nation may also erode home demand

conditions by enacting unusual local regulations, or failing to deregulate an

industry that has been deregulated elsewhere.

Chenery, (1975:211) asserts that a nation‟s firms will face grave difficulties in

maintaining advantage if foreign buyers become more sophisticated than

domestic ones. In factory automation equipment, for example, the early,

advanced buyers for the most advanced equipment were once American,

pioneers in mass production technology. In the last decade, Japanese, German,

or Italian companies have been the process innovators in many industries, early

to install such new technologies as robotics and flexible manufacturing systems.

42

The difference is particularly noticeable among medium-and small-sized

companies. American process equipment companies have faced growing

difficulty competing with rivals from these nations, whose home buyers are

more receptive to new technology. Home buyers lose sophistication for a variety

of reasons. They can become complacent if rivalry in their industry is

diminished. Trade barriers can blunt the pace of innovation, or government

regulations may skew buyer needs away from innovative local customers makes

it difficult for a nation‟s firms to win the innovation race with foreign rivals.

Borner, (1986:67) states that technological change leads to compelling

specialized factor disadvantage because it can nullify old competitive

advantages and create the need for new ones. A nations firms, far advanced

along one technological track, may find it difficult or unprofitable to jump to

another one. Sometimes the effect of new technology is to shift the required

factors, creating a major disadvantage in terms of available human resources,

knowledge, or infrastructure. Other nations‟ firms may gain competitive

advantage before readjustment can take place. Technological change may also

create the need for new supporting industries that a nation does not possess such

as software, biotechnology, new materials, or electronic components. Another

nation where leading suppliers of the new inputs already exist may take over

competitive advantage. The risk to competitive advantage is greatest where a

new technology is integral to industries and the industry represents a substantial

application. Where new technologies only affect a small part of the total product

and the industry represents a narrow application, the new technologies can often

be sourced from abroad.

Bruckley, et al (1976:254) asserts that goals limit the rate of investment. The

rate of investment in the research and development, marketing, information, and

physical assets is influenced by corporate and managerial goals. These are

functions of the national capital markets, ownership structure, tax policy,

managerial incentives, social norms, and other influences. If goals in a national

industry are inconsistent with sustained investment, competitive advantage will

be lost to national industries that are more willing or better able to invest. If

investor penalizes the firm for making the investment necessary to maintain

43

advantage, the national industry will fall behind in technology and productivity.

If firms in an industry are owned by diversified corporations seeking steady cash

flow, for example, harvesting of competitive advantage is a likely result. If high

wages reduce the motivation of employees to improve their circumstances, the

rate of investment in training often slows, and labour-management relations shift

to preservation of the status quo. If a new generation of managers assume

company leadership but lack commitment to the technology and industry, and

are instead financial stewards of what has been inherited, the rate of

improvement and innovation will inheritably slacken and decline.

According to Council for Competitiveness (1988:102) firms most often lose the

flexibility to adjust. Even if a nation‟s firms know how they must change to

sustain competitive advantage, they may lose if it there are barriers to

adjustment. Often barriers to adjustment are internal. Entrenched management

may grow complacent or find it difficult or unsettling to change. Management

practices or forms of organization may become rigid and counter productive in

new circumstances. Union restriction can prevent process innovations or block

investment in foreign subsidiaries needed for sourcing new technologies or

factors. Local regulations may have frozen product standards or impeded the

introduction of new technologies. Shifts in the perceived prestige of the industry

can make it impossible for firms to attract the talent necessary to deal with

foreign rivals. Often there is an unwillingness to tamper with past success or

redirect key personnel. Sometimes a nation‟s firms fail to innovate not because

of inertia or complacency but because doing so would make their current asset

base obsolete. This is true when the fixed costs of changing, including the

necessary reconfiguration of facilities and internal organization and the

retraining of personnel, will not be recovered. The fundamental problem is that a

firm‟s assets and skills are specialized to its post strategy and technology. The

new competitor, without such a legacy, has lower cost of innovating. The

position of the established competitor is made more difficult when following

foreign rivals will hasten the rate of which its assets lose value. In many

industries, however, innovation is profitable but firms are deterred by the short-

term cost or organizational disruption of supplanting their current assets. Failure

to innovate may preserve competitive position tied to a particular asset base in

44

the short run but often will ensure that firms assets will have little value in the

long run. Sustaining competitive advantage demands that firms make their own

assets obsolete in new technology or methods before someone else does it for

them. The will to do this usually grows out of intense competitive pressure,

demand local customers, and goals that support investment and reflect an

intense commitment to the industry.

In the words of Ethier (1979:24) firms most often lose domestic rivalry which

leads to loss of national competitiveness. One of the most common and often the

most fatal, causes of lost national advantage is the ebbing of domestic rivalry,

since pressure so improve and adjust is often lost with it. While some local

industry consolidation is often proceeds too far. One or two firms come to

dominate the industry. Alternatively mark sharing, informal agreements, or wide

spread corporation can turn a group of aggressive rivals into a club. There is also

a natural and some times tendency for successive generations of managers to

want to eliminate excessive competition in order to make life more predictable.

A diminished taste for rivalry is also some times reflected in efforts to enlist

government support or intervention. Successful national industries often gain

some political power, and the temptation is great to exercise it. If protection or

insulation from competition is the result, a slowing rate of improvement and up

grading often leads to loss of competitive position. This then results in more

calls for government intervention. Loss of domestic rivalry is a dry rot that

slowly undermines competitive advantage by slowing the pace of innovation

and dynamism. Its effects are initially invisible. In fact, its onset may well be

associated with higher domestic profitability because of the low rate of

investment and self satisfaction all around. Yet the rot begins undermining the

foundation of the industry.

2.2.5 Stages of Competitive Advantage Development

According to Porter (1990:545) national economies exhibit a number of stages

of competitive development reflecting the characteristic sources of advantage of

nation‟s firm international competition and the nature and extent of

internationally successful industries and clusters. The stages address a nation‟s

position in those industries subject to international competition, though they also

45

capture the state of competition in many purely domestic industries. It is not

inevitable that nations pass through the stages. The stages do not purport to

explain everything about a nation or its development process. Some important

concerns in development are inevitable left out, and no nation will fit a stage

exactly. Instead, stages are an effort to highlight those attributes of a nation‟s

industry most important to rising economic prosperity.

Any national economy containing a range of industries with widely different

sources of competitive advantage even in advance nations there are industries

whose competitive position drives almost solely from natural resources, even

though the competitive position drives almost solely from natural resources,

even though the competitive advantages of most successful industries are much

broader and more sophisticated. This is because the state of the determinants of

national advantage is similar across a range of industries in the nation though the

specific conditions in each industry are unique. A control tendency in the nature

of competitive advantage is also present because clustering serves to make

groups of industries in a nation develop and upgraded in some what parallel

ways. Moreover, the quality of factors often develops in parallel across

industries because factor pools develop in tandem with approaching to

competing, as well as prevailing norms and values which spread from industry

to industry. Present theories suggest four distinct stages in national competitive

development. These four factors propel other economy to advance or falter and

they include the following:

Factor-Driven Stage

Deardorff (1984:467) maintains that nations at this initial stage, virtually all

internationally successful industries in the nation draw their advantage almost

solely from basic factor of production, whether they are natural resources,

favorable growing conditions for certain crops, or an abundant and expense

semi-skilled labor pool. This source of competitive advantage limits sharply the

range of industries and industry segments in which the nations firms can

successfully compete in international or local terms. Nations indigenous firms in

such an economy compete solely on the basis of price in industries that require

either little product or process technology or technology that is inexpensive and

46

widely available. Technology is sourced largely from other nations and not

created. This occurs in some industries through initiation or more often the

acquisition of foreign capital goods.

More advanced product designs and technology are obtained through passive

investments in turn-key plants or are provided directly by foreign firms that

operate production bases in the nation. In this stage, an economy is sensitive to

world economic cycles and exchange rates, which drive demand and relative

prices. It is also vulnerable to the loss of factor advantage to other nations and to

rapidly shifting industry leadership. While the possession of abundant natural

resources may support a high per capita income for a sustainable period of time,

a factor-driver economy is one with a poor foundation for sustained productivity

growth. The factor driven stage is one that has characterized virtually all nations

at some point in time. Nearly all developing nations are at this stage, are

virtually all centrally planned economies. Few nations ever move beyond the

factor-driven stage. The mix of domestically orientated industries in a factor

driven economy may widen over time through import substitution, which is

often the result of protecting the home market from foreign competition.

However, import-substituting domestic industries lack competitive advantage in

international terms, and, if protection is widespread, may actually reduce

national productivity due to their inefficiency.

1. Investment-Driven Stage

In this stage, national competitive advantage is based on the willingness and

ability of a nation and its firms to invest aggressively (Copper, 1986:362). Firms

invest to construct modern, efficient, and often large-scale facilities equipped

with the best technology available on global markets. They also invest to acquire

more complex foreign product and process technology through licenses, joint

ventures, and other means, which allows competing in more sophisticated

industries and industry segments. Such technology is typically a generation

behind international leaders, who are usually unwillingly to sell the latest

generations of technology. In this stages however, foreign technology and

methods are not just applied by improved upon.

47

The ability of a nations industry to absorb and improve foreign technology is

essential to reaching the investment-driven stages, and is a crucial difference

between the factor-and investment-driven stages. Foreign technology and

methods are mastered in-house, and firms from the nation begin developing

their own refinements including their own product models. Nations, their

citizens, and firms all invest in an investment driven economy to upgrade factors

from basic to more advanced and create a modern infrastructure. Increasingly

skilled workers and a growing pool of technical personnel, skill paid relatively

low wages, operate facilities and provide the internal capability to assimilate and

improve technology. Intense domestic rivalry in the industries in which the

nation competes‟ propels introduce new models, and modernize process.

The investment-driven stage as its name indicates, is one where the ability and

willingness to invest is the principal advantage rather than the ability to offer

unique products or produce with unique processes. At this stage, firms still

compete in the relatively standardized, price sensitive segments of the market,

and product designs often reflect foreign market needs. While it is often said

that technology travels freely worldwide, this is only partly true. Firms in an

investment-driven economy are only able to and absorb technology in some

industries. Powerful corporate interest must often be resisted to ensure adequate

domestic rivalry. Protection must be temporary despite inevitable pressures to

make it permanent, in order to spur improvement and innovation.

2. Wealth-Driven Stage

In the words of Fiaherty et al (1984:360) nations pass through the first three

stages of competitive development if they can sustain a dynamic process of

upgrading national advantage. This involves the move to more sophisticated

competitive advantages and the widening of the range of industries in which

firms can successfully compete. In the process, positions in less advanced, lower

productivity segments are lost. The wealth-driven stage is, in contrast, one that

ultimately leads to declined. The driving force in a wealth –driven economy is

the wealth that has already been achieve. The problem is that an economy driven

by past wealth is not able to maintain its wealth. This is because, most

48

importantly, the motivation of investors, managers, and individuals shift in ways

that undermine sustained investment and innovation, and hence upgrading. New

goals are set, often including some socially laudable ones that supplant those

that have sustained progress in the economy. In the wealth-driven stage, firms

begin to lose competitive advantage in international industries for a variety or

reason. Ebbing rivalry, as a result of more attention to preserving position than

to enhancing it, declining corporate motivation to invest, and the ability of

powerful firms to insulate them selves by influencing government policy, is

often at the root of the problem. Stewards ascend to senior management position

in place of entrepreneurs and company builders. Belief in competition falls not

only in companies but in unions, which both lose the taste for risk-taking.

The compulsion to innovate diminishes as the willingness so violate norms and

bear disapproval falls. Employees lose motivation as they reach high levels of

income and their aspirations broached. Management labor relations harden as

each side stripe to preserve the status quo and its entitlement. This strains the

ability of productivity improvements to keep up with rising wages. The prestige

of working in industries may fall in favor of other careers. The prestige of

working in industries may fall in favor of other career. The striving for a

practical education diminishes. Educational standards fall as societal and

parental attention wanes. The rate of factor-creating investments will tend to

decline and shift toward as less beneficial for industry. A tendency to tax wealth

as nations become highly prosperous reduces the incentive to invest in industry.

Overall chronic underinvestment in industry is an ironic manifestation of a

wealth-driven economy.

3. Innovation – Driven Stage

Freeman (1986:63) asserts that in the innovation stage, the full diamond is in

place in a wide range of industries. The mix of industries and segments in which

the nation‟s firms can successfully compete broadens and upgrades though the

specific industries and clusters will reflect the nation‟s particular environment

and history. Consumer demand becomes increasingly sophisticated because of

rising personal incomes, higher levels of education, increasing desire for

convenience, and the invigorating role of domestic rivalry. The growing

49

competitive strength of the nation‟s firms in a range of industries also leads to

the emergence at home of sophisticated industrial customers. New entry feeds

vibrant domestic rivalry in many industries, accelerating improvement and

innovation. The sophistication of established universities, research facilities and

infrastructure grows. New mechanisms emerge to create advanced and

specialized factors and so continually upgrade them, increasingly tied to

particular industry clusters.

This stage is called innovation-driven because firms not only appropriate and

improve technology and methods from other nations but create. A nation‟s

indigenous firms push the state of the art in product and process technology,

marketing, and other aspects of competing. Favourable demand conditions, a

supplier base, specialized factors, and the presence of related industries in the

nation allow firms to innovate and to sustain innovation. The capacity to

innovate opens up yet more new industr4ies. Firms in an innovation-driven

economy compete internationally in more differentiated industry segments.

They continue to compete on cost but where it depends not on factor cost but on

productivity due to high skill levels and advance technology. The innovation

driven stage encompasses nations at varying levels of advancement. Some

industries initially take the lead in the shift to the innovation-driven stage by

achieving higher-order competitive advantages. Upgrading then spreads to

others. All innovation-driven economies will have a higher domestic service

component than nations at earlier stages because of their sophistication and

affluence. It is most resistant to macroeconomic fluctuations and exogenous

events, especially when the nation gains the capacity to widen clusters.

Industries are less vulnerable to cost shocks and exchange rate movements

because they compete on technology and differentiation.

2.2.6 Preconditions for Competitive Advancement

David, P. (1975:146) maintains that nation‟s industry progresses through the

first three stages of competitive development because forces are present that

create the potential for higher-order competitive advantage and put pressure on

industry to seek and achieve them. Itiler (1990:560) states most telling

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conditions necessary for a nation to progress to more advanced stages as

follows:

Factor creation mechanisms: The competitive potential of an economy is

limited by the quality and especially the quality of its factors of production.

Well-functioning mechanisms that create and up grade factors provide the

foundation for higher-order advantage because each of the first three stages

requires more advanced and more specialized factors.

Motivation: Progressing from stage to stage requires workers and management,

who are motivated to work long hours, earn higher wages, seek greater profits,

start new companies, and create larger companies. Vital to sustaining motivation

is that citizens believe that they will be rewarded for hard work and good ideas.

Holders of capital must also be motivated to make sustained investment.

Domestic rivalry: Vigorous rivalry among domestic competitors in a wide

range of industries is necessary to drive innovation and the up grading of

competitive advantage. Rivalry overcomes inertia through creating the fear of

failure. Active rivalry among domestic firms also has important spill over

effects on the other determinants.

Demand upgrading: Upgrading the quality of demand creates the potential for

success in more sophisticated segments and in more advanced industries.

Demanding buyers also pressure improvement. Demand upgrades as the

presence of one competitive industry creates a sophisticated buyer for others. It

also upgrades as income rise and as citizens become busier and more educated.

Rising social aspirations, and investment in areas such as health care and

environmental protection, create demand-side stimulus for yet other new

industries.

Selective factor disadvantages: Selective disadvantages in less advanced

factors furnish the impetus to increase productivity as well as to upgrade the

motivation and vigorous domestic rivalry.

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Capacity for new business formation: Moving to a more advanced stage

requires that there be effective mechanisms in place to create new businesses

either through start-ups or internally by established firms. New business

formation is essential healthy rivalry, to movement into new and more

sophisticated industries, and, ultimately and more sophisticated industry

segments, to the development of suppliers and related industries, and ultimately,

to the development of clusters.

These forces are not only individually necessary but constitute a virtuous circle

in which one reinforces another. Upgrading require factor conditions that are

increasingly advanced and specialized. But deploying factor in more productive

ways depends on improving demand conditions, the impetus from selective

disadvantages, and the presence of sophisticated supporting industries. Yet these

will not actually lead to upgrading unless goals motivate sustained investment

and rivalry forces it. But rivalry and the development of both supporting and

related industries necessary for upgrading depend on active new business

formation. The mutual dependency of the process of upgrading means that all

these forces must be present.

2.2.7 Achieving Competitive Advantage through International Cooperative

Relationship

According to Agmon (1977:417) in modern international competition a firm

cannot rely sole on its national circumstances to sustain its competitive

advantage. A firm must selectively add to its advantages, through activities in

other nations. This is of course what a global strategy is all about. The goal of a

global company should not be to replicate home base advantages of other

nations. This will require moving its home base. Instead, the goal is to tap

selectively into source of advantage in other national “diamonds” to supplement

its own. A global strategy, however, is not a substitute for a weak home base.

Sustaining competitive advantage in the long run is difficult unless most of the

underpinnings of innovation are present at home. Innovating to offset local

factor disadvantages leads to more sustainable advantage than outsourcing.

Developing domestic suppliers and buyers is better for improvement and

innovation than relying solely on foreign ones. The aim should always be to

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upgrade domestic capabilities in order to make foreign activities only selective

and supplemental to overall competitive advantage. A global strategy can

minimize or offset disadvantages. Rarely can it create competitive advantage if

the home base is unsound.

Dunning (1981:197) states the importance of serving sophisticated buyers and

markets as a means of taping selective advantages in other nations. To sustain

competitive advantage in global industries, a firm must sell to all significant

country markets. Particularly important are nations that contain advance and

demanding buyers. All of the most advanced and sophisticated buyers are rarely

located at home, even under the best of circumstances. Identified sophisticated

buyers in other nations will help the firm understand the most important new

needs and create pressures that stimulate rapid progress in product and services.

Nations with sophisticated buyers may well be where leading international

competitors are based, making it all the more challenging to penetrate them.

Gaining access to sophisticated and demanding buyers in other nations often

requires a sequence of steps over a considerable period of time, and it always

demand investment. Sometimes access is as easy as establishing a marketing

presence. Once firm has access to demanding buyers, it must actively exploit the

benefit. One such benefit is the ability to test new products and services in the

most advanced market.

Buzzel (1968:113) suggests that firms should conceive of its production system

in global terms. Particular activities in value chain should be dispersed to

whatever country that enjoys advantage. There is no excuse for accepting basic

factor disadvantages. Dispersing selected production activities also facilitates

foreign market access and signals greater commitment to foreign buyers.

Process knowledge should also be sourced wherever good ideas arise, by

coordinating among international production sites. Performing activities abroad,

however, or sourcing foreign process technology, does not imply ceding

responsibility for the activities involved. The knowledge and capability

responsibility for the activities involved. The knowledge and capability to

design and upgrade the product and to improve and operate the complete

production process must be maintained at home. At the same time, continual

53

efforts should be made to upgrade capabilities inside the firm and within the

national cluster.

According to Bhagwati (1984:133) foreign sourcing is one of the factors that

promote tapping of selective advantages in other nations. Firm must be willing

to source product or equipment from foreign firms if they are superior, at the

same time as it works to upgrade local suppliers. Access to the world‟s best

inputs is necessary to sustain competitive advantage. Loyalty to domestic

suppliers, for its own sake, is ultimately self-defeating. The best form of loyalty

to domestic suppliers is to confront them in no uncertain terms with the need to

march their foreign competitors in quality and productivity in order to retain the

business. Domestic suppliers should be given some leeway to allow time for

adjustment, and be provided with active technical help and other assistance in

upgrading. Unless they are taking aggressive action to upgrade quality, boost

productivity, and globalize their own strategies supporting domestic suppliers is

to no one‟s ultimate gain.

McCraw (1986:206) maintains that firms aspiring to competitive advantage

must be aware of and ideally have some access to, all the important scientific

work going on in the world that is related to its industry. No matter how

favourable the home base, useful research is likely to be taking place outside the

home base. Today, a firm seeking competitive advantage should question its

strategy if it does not have at least one foreign technology monitoring or

research site. Such sites should be in nations with the best national “diamonds”,

not just the ones with a top laboratory. To get the benefits of tapping foreign

technology development, the quality of personnel stationed abroad must be

sufficient to understand and interpret local research directions. A critical mass of

effort in a nation is also necessary to be accepted by local scientific community.

Some level of reciprocity is always required. A firm must be willing to invest

money and personnel in local universities and in local industries efforts; as well

as provide some access to its own ideas, in order to get something in return. If

the firm conceives of its competitive advantage as resulting from continuous

improvement instead of protecting today‟s secrets, it will be much more

comfortable with this kind of interchange. A firm can only tap selectively into

54

foreign technology development, however, if it lacks domestic technical

capability, a domestic supplier base, and a knowledge base at home in core

technologies, it will be difficult to access foreign developments completely

enough to ensure competitive advantage.

Tapping selective advantages in other nation, firm must meet the best rivals in

the market place in order to sustain and upgrade its advantage capable rivals

provide the benchmark for measuring competitive advantage (Davidson 1976:

207). They are also the best stimulus for innovation and change. Ultimately, a

firm must find a way to gain advantages over the best rivals in order to assure its

market position. Another reason to meet the best rivals in all the important

markets is to deny them profits in safe markets than can be used to cross-

subsidize low profits in contested markets. Ideally, the most capable rivals are at

home. Competing with them will lead to many self-reinforcing the best rivals in

other nation as well. Korean companies for example, view Japanese rivals as

their prime competitors both for strategic and historical reasons. The result is

that there is little danger that Korean firms will fall into the classic trap of firms

in low labour cost countries that are resting on labour costs as their sole

advantage. They are setting out to challenge their Japanese rivals in terms of

product sophistication, process technology, and foreign marketing presence.

This is another example of how sustaining advantage requires that a firm create

pressure, not avoid it.

Foreign acquisitions can serve two purposes. One is to gain access to a foreign

market or to selective skills. Here the challenge of integrating the acquisition

into the global strategy is significant but raises few unusual issues. The other

reason for a foreign acquisition is to gain access to a highly favourable national

diamond (Porte 1990:612). Sometimes the only feasible way to tap into the

advantages of another is to acquire a local firm, because an outsider is hard-

pressed to penetrate such broad, systemic advantages. The challenges in this

later type of acquisition is to preserve the ability of the acquired firm to benefit

from the national environment at the same time as it is integrated into the

company‟s global strategy. There is frequently a trade off. Success in making

foreign acquisitions of this type usually implies moving in one of two directions.

55

The first is to make the acquired firm the new global home base for the company

in the industry or its particular segment, and to subordinate other units to it.

The other approach is to identify those particular activities in which the acquired

company can contribute the most over all global position, and focus its efforts

exclusively there. For example, the acquired foreign company may be given

responsibility for one item in the product line or for one stage of the production

process, where its national diamond is superior. The intermediate case that of

maintaining the acquired unit as a stand along company while attempting to

integrate it into the global strategy runs the grave risk of not succeeding at

either. Extensive integration of an acquired firm into a global strategy may well

compromise its position in national cluster by distancing it from strategy

formulation and stripping it of full research and development capability, such

solution precludes the sensitive and rapid response to local conditions that is so

necessary to reap national advantage.

According to Adams (1988:48) alliance or coalitions is a final mechanism by

which a firm can seek to tap national advantages in other nations. Alliances are

long-term agreements between firms from different nations that go beyond

normal market transactions but stop short of merger. They take many forms,

including joint venture, licenses, cross licenses, sales agreements, and supply

agreements. They have become prominent in international competition, because

they can speed the process of globalizing strategy, reap economics of scales

agreement, and supply agreements. They have become prominent in

international competition, because they can speed the process of globalizing

strategy, reap economics of scale, gain access to technology or markets, and

achieve other benefits without giving up corporate independence or acquiring an

expensive merger. They are particularly common in industries undergoing

structural change, especially when many firms feel threatened. Alliance is a

tempting solution to the dilemma of a firm seeking the home base advantages of

another nation without giving up its own.

Unfortunately, alliances are rarely a solution. They can achieve selective

benefits, but they always involve significant costs in terms of coordination,

56

reconciling goals with an independent entity creating a competitor, and giving

up profits. These costs make many alliances rather than stable arrangement.

Alliances do not shift true competitive advantage unless best home base for

competing in the industry shifts. Here, firms from the new nation frequently use

alliances to speed the process of gaining international position. No firm can

depend on another independent firm for skills and assets that are central to its

competitive advantage. If it does, the firm runs a grave risk of losing its

competitive advantage in the long run. Alliances tend to ensure mediocrity, not

create world leadership. The most serious risk of alliance is that they deter the

firms own effort at upgrading. This may occur because management is content

to rely on the partner. It may also occur because alliance has eliminated a

threatening competitor. The best alliances are highly selective, involving

particular activities in the value chain or specific product lines or market.

2.2.8 Sources of Competitive Advantage

Porter (1990:13) points out that competitive advantage grows out of the way

firms organise and perform discrete activities. The operations of any firm can

be divided into a series of activities such as salespeople making scale calls,

service technicians performing repairs, scientists in the laboratory designing

products and processes, and treasurers raising capital. Firms create value for

their buyers through performing these activities. The ultimate value a firm

creates is measured by the amount buyers are willing to pay for its product or

services. A firm is profitable if this value exceeds the collective cost of

determining all the required activities. To gain competitive advantage over its

rivals, a firm must either provide comparable buyer value but perform activities

more efficiently than its competitors (low cost), or perform activities in a

unique way that creates greater buyer value and compounds premium price

(differentiation).

The activities performed in competing in a particular industry can be grouped

into what is referred to as value chain. All the activities in the value chain

contribute to buyer value. Activities can be divided broadly into those involved

in the ongoing production, marketing, delivery, and servicing of the product

(primary activities) and those providing purchases inputs, technology, human

57

resources, or overall infrastructure functions to support the activities (support

activities). Every activity employs purchased inputs, human resources, some

combination of technologies, and draws on firm infrastructure such as general

management and finance (Little,1987:6).

Strategy guides the way a firm performs individual activities and organises its

entire value chain. Activities vary in their importance to competitive

advantages in different industries. In printing presses, technology

development, assembly and after-sales service are essential to success. Firms

gain competitive advantage from conceiving new procedures, new

technologies, or different inputs. Makita (Japan) emerged as a leading

competitor in power tools because it was the first to employ new, less

expensive materials for making tool parts and to produce standardised models

in a single plant that it sold worldwide (Levy,2001:204).

A firm is more than the sum of its activities. A firm‟s value chain is an

interdependent system or network of activities, connected by linkages.

Linkages occur when the way in which one activity is performed affects the

cost or effectiveness of other activities. Linkages often create trade-offs in

performing different activities that must be optimised. For example, a more

costly product design, more expensive components, and more thorough

inspection can reduce after-sale service costs. A company must resolve such

trade-offs, in accordance with its strategy to achieve competitive advantage.

Linkages also require activities to be coordinated. On-time delivery requires

that operations, out-bound logistics, and service activities such as installation

should function smoothly together. Good coordination allows on-time delivery

without the need for costly inventory (Lynch, 2004:75).

Gaining competitive advantage requires that a firm value chain is managed as a

system rather than a collection of separate parts. Reconfiguring the value

chain, by relocating, reordering, regrouping or even eliminating activities is

often at the root of a major improvement in competitive position. A good

example is appliances where Italian firms transformed manufacturing and

exploited an entirely new channel of distribution to become world export

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leaders in the 1960s and 1970s. In cameras, Japanese firms became world

leaders by simultaneously commercialising single lens reflex technology,

transforming manufacturing into automated mass production, and pioneering

mass marketing (Thomson.2007:27).

A prominent reason why firms gain competitive advantage is that they choose a

different scope from competitors, by focusing on a different segment, altering

geographic breadth, or combining the products of related industries. Swiss

hearing-aid producers, for example, concentrated on high amplification units

for patients with severe hearing problems, achieving superior performance

compared to less focus American and Danish competitors.

Firms create competitive advantage by perceiving or discovering new and

better ways to compete in an industry and bring in them to the market, which is

ultimately an act of innovation. Innovation here is defined broadly, to include

both improvements in technology and better methods or ways of doing things.

It can be manifested in product changes, process changes, new approaches to

marketing, new forms of distribution, and new conceptions of scope.

Innovation not only responds to possibilities for change, but forces it to proceed

faster. Much innovation, in practice, is rather mundane and incremental rather

than radical. It depends more on accumulation of small insights and advances

than on major technological breakthroughs. It often involves ideas that are not

“new” but have never been vigorously pursued (Coff, 1994: 13).

2.2.9 Causes of Innovation

The most typical causes of innovation that swept competitive advantage are the

following:

Technologies

Technological change can create new possibilities for the design of a product,

the way it is marketed, or delivered, and the ancillary service provided. It is the

most common precursor of strategic innovation. Industries are born when

technological changes make a new product possible. For example Germany first

became the leader in medical imaging products after the discovering of x-rays in

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Germany. Leadership is most likely to change in industries when a non

segmented technological change makes obsolete or nullifies the knowledge and

assets of existing leaders (Barney, 1991:62).

New or Shifting Buyer Needs

Competitive advantage is often created or shifts when buyers develop new needs

or their priorities change significantly. Established competitors may fail to

perceive the new needs or be unable to respond because meeting them demands

a new value chain. American fast-food firms gained advantage internationally,

for example, as buyers in many nations came to value convenience and

consistency, and local restaurants were slow to adapt. The operation of a fast-

food chain is radically different from that of a traditional restaurant (Rumelt,

2004:41).

The Emergence of a New Industry Segment

The opportunity for creating advantage arises when a new distinct segment of an

industry emerges or a new way is conceived to regroup existing segments. The

possibilities encompass not only new customer segment, but also new ways of

producing particular items in the product line or new ways to reach a particular

group of customers. A good example is the lift truck industry, when Japanese

firms perceived an underserved segment in small lift trucks for general-purpose

applications. By focusing on this segment, they were able to standardize designs

and transfer the manufacturing process into one employing much higher levels

of automation, (Dean, 1998:71).

Shifting Input Costs or Availability

Competitive advantage frequently changes when a significant change occurs in

the absolute or relative costs of inputs such as labour, raw materials, energy,

transportation, communications, media, or machinery. This may reflect new

conditions in supplier industries, or perhaps the possibility of using a new or

different type or quality of input. A firm gains competitive advantage by

optimizing based on the new conditions while competitors are saddled with

assets and approaches tailored to the old ones, (Ostrenga, et al. 1992:102).

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Changes in Government Regulations

Adjustments in the nature of government regulation, in areas such as product

standards, environmental controls, restrictions on entry, and trade barriers, are

another common stimulus to innovations which results in competitive

advantage. Existing industry leaders have tailored their activities to one

regulatory regime, and shift in that regime may find them unable to respond.

American securities firms are benefiting from a reduction in financial market

regulation around the world, for example, because American regulators

pioneered this trend and U.S. firms have already learned to deal with it

(Deming, 1993:61).

2.2.10 Factors Affecting a Nation’s Competitiveness

These are four broad attributes of a nation that individually, and as a system,

constitute what is termed “the diamond of national advantage “in effect, these

attributes jointly determine the playing field that each nation established and

operated for its industries. These factors are:

Factor Conditions

According to Porter in Dess et al (2009:231) classical economics suggest that

factor of production such as land, labor and capital are the building blocks that

create usable consumer goods and services. This tells only part of the story

when we consider the global aspects of economic growth. Companies in

advanced nations seeking competitive advantage over firms in other nations

create many of the factors of production. For example a country or industry

depends on scientific innovation must have a skilled human resource pool to

draw upon. This resources pool is not inherited: it is created through investment

in industry specific knowledge and talent. The supporting infrastructure of a

country that is its transport and communication system as well as its banking

system is also critical. To achieve competitive advantage, factors of production

must be developed that are industry and firm specific. In addition, the pool of

resources a firm as a country has at its disposal is less important than the speed

and efficiency with which theses resources are deployed. Thus, firm-specific

knowledge and skills created within a country that are rare, valuable, difficult to

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imitate, and rapidly and efficiently deployed are the factors of production that

ultimately lead to a nation‟s competitive advantage.

Demand Conditions

Demand conditions refer to the demands that consumers place on an industry for

goods and services force firms to create innovative, advance products and

services to meet demand. This consumer pressure presents challenges to a

country‟s industries. Therefore response to these challenges, improvements to

existing goods and services often result, creating conditions necessary for

competitive advantage over firm in other countries. Demanding consumers push

firms to move ahead of companies in other countries where consumers are less

demanding and more complacent. Countries with demanding consumers drive

firms in that country to meet high demanding consumers drive firms in that

country to meet high standards, upgrade existing products and services and

create innovative products services. Thus the condition of consumer demands

influences how firms view a market, with more demanding consumers

stimulating advances in products and services. This in turn, helps nation

industries to better anticipant future global demand conditions and proactively

responds to product and service requirements.

Related and Supporting Industries

Related and supporting industries enable firms to mange inputs more effectively.

For example countries with a strong supplier base benefit by adding efficiency

to downstream activities. A competitive supplier base helps a firm obtain inputs

using cost –effective, timely methods, thus reducing manufacturing cost. Also

close working relationship with suppliers provide the potential to develop

competitive advantage through joint research and development and the going

exchange of knowledge. Related industries offer similar opportunities through

joint efforts among firms. In addition, related industries crate the probability that

new companies will enter the market, increasing competition and forcing

existing firms to become more competitive through efforts such as cost control,

product innovation, and novel approaches to distribution. Combined, these give

the home country‟s industries a source of competitive advantage.

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Firm strategy, structure and rivalry is particularly intense in nations with

conditions of strong consumer demand, strong supplier bases, ands high new

entrant potential form related industries. This competitive rivalry in turn

increase the efficiency with which firms develop, market, and distribute

products and services within the home country. Domestic rivalry thus provides a

strong impetus for firms so innovate and find new sources of competitive

advantage. Interestingly, this intense rivalry forces firms so look outside their

national boundaries for new markets, setting up the conditions necessary for

global competitiveness. A wrong all the point on porters diamond of national

advantage, domestic rivalry is perhaps the strongest indicator of global

competitive success. Firms that have experienced intense domestic competition

are more likely to have designed strategies and structure that allow then to

successfully compete in world market. In the United States for example intense

rivalry has spurred companies such as Dell computer to find innovative ways to

produce and distribute its products. This is largely a result of competition form

IBM and Hewlett Packard (HP).

2.2.11 Sustaining Competitive Advantage

The first is the particular source of the advantage. There is a hierarchy of source

of competitive advantage in terms of sustainability. Lower order advantages

such as low labour costs or cheap raw material, are relatively easy to imitate.

Competitors can often readily duplicate such advantages by finding another low-

cost location or source of supply, or nullify them by producing or sourcing in the

same place. In consumer electronics, for example, Japan‟s labour cost advantage

has long since been lost to Korea and Hong Kong. Firms based in these nations,

in turn, are already being threatened by even lower-cost labour in Malaysia and

Thailand. Japanese consumer electronics producers have established overseas

production that follows this progression. Also at lower and of the hierarchy of

advantage is cost advantage due solely to economies of scale using technology,

equipment, or methods sourced from or also available for competitors

(Hawood,1995:117). Higher-order advantages such as proprietary process

technology, product differentiation based on unique products or services, brand

reputation based on cumulative marketing efforts and customer relationships

protected by higher customer costs of switching vendors, are more durable.

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Higher-order advantages are marked by a number of characteristics. The first is

that achieving them requires more advanced skills and capabilities such as

specialized and highly trained personnel, internal technical capability, and often,

closed relationship with leading customers.

The Second Determinant of Sustainability is the number of distinct sources of

advantage a firm possesses. If a firm rests on only one advantage, such as an

inherently loss costly product design or access to a cheap raw-material,

competitors will concentrate on nullifying or overcoming this advantage. Firms

with histories of sustained leadership tend to proliferate advantages throughout

the value chain. Japanese small copier producers, for example, have advanced

features, low manufacturing costs because of flexible automation, extensive

dealer networks providing wider sales coverage than the traditional direct sale

approach, and high levels of reliability that reduce after-sales service costs.

Numerous advantages raise the ante for competitors who seek to imitate

(Vastage,1996:61)

The third, and most important, reason competitive advantage is sustained is

constant improvement and upgrading. Virtually any advantage can be replicated

sooner or later if a leader rests on its laurels. In order to sustain advantage a firm

must become a moving target, creating new advantages at least as fast as

competitors can replicate old ones. The first task is to improve relentlessly the

firm‟s performance against its existing advantages – for example, more efficient

operation of its production facilities or more responsiveness in terms of

customer service. This makes it more difficult for competitors to nullify them

without extraordinary rate of improvement.

In the long run, however, sustaining advantage demands that its sources be

expanded and upgraded, by moving up the hierarchy to more sustainable types.

This is precisely what Japanese automakers have done. They initially penetrated

foreign markets with expensive compact cars of adequate quality, and competed

on the basis of lower labour costs. Even while their labour-cost advantage

persisted, however, the Japanese companies were upgrading. They invest

aggressively to building large modern plants to reap economies of scale.

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2.2.12 Models of Competitive Advantage

To sustain competitive advantage an organisation must be able to manage at the

speed of change, and that takes creativity and innovation (Arora, 2007:72).There

are two major models that have guided competitive advantage that have to be

considered. The first one is the position or environmental model and the second

one is the resource based view model.

The Position or Environmental Model: In order to achieve a competitive

advantage, the firm is required to make choice about the type of competitive

advantage it seeks to attain and the scope within which it will attain it. Choosing

the competitive scope or the range of the firm‟s activities can play a powerful

role in determining competitive advantage because it aims to establish a

profitable and sustainable position against the forces that determine the industry

competition. What is competitive strategy? Berney (1991:21) define competitive

strategy as the positioning of a company in its competitive environment. Berney,

posed two important questions:

What is the structure or the attractiveness of the industry which the company

is in?

What is the company‟s position in its competitive environment?

To answer the first question a company as an organisation, should analyse

their industry by focusing on the following points (Industrial analysis):

Begin with understanding the industry.

Focus attention on significant forces.

Watch out for industry change

To answer the second question (competitive position), the following

question should be asked:

How does a company achieve superior performance?

To be a superior performer in its industry or any industry, the company must

have a sustainable competitive advantage which its rivals cannot copy or

duplicate. The competitive advantage can be sustained in one of the two

ways (Porter 1990:7).

i. Either the company can be lucky enough to come up with something that

its rivals cannot copy although this is rare, or

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ii. The company is improving so fast that its rivals can not catch up.

Porter (1990:1) shows that there are five competitive forces which play a major

role in the company success or failure, the entry of new competitors, the threat

of substitutes, the bargaining power of buyers and the rivalry among the existing

competitors. The collective strength of these five competitive forces determines

the ability of firms in an industry to earn on average, a rate of return on

investment in excess for the cost of the capital.

The Resource Based Model: Firm resources include all assets, capabilities,

organisational processes, firm attributes, information, knowledge, etc. controlled

by a firm that enable the firm to conceive of and implement strategies that

improve its efficiency and effectiveness. In the language of traditional strategies

analysis, firms resources are strengths that firm can use to conceive of and

implement their strategies. Firm resources can be conveniently classified into

three categories: physical capital resources, human capital resources and

organisational capital resources (Gratton, 1997:24).

Physical capital resources include the physical technology used in the firm, a

firm‟s plant and equipment, its geographic location, and access to raw materials.

Human capital resources include the training, experience, judgement,

intelligence, relationship and insight of individual managers and workers in a

firm. The organisational capital resources include a firm‟s formal reporting

structure, its formal and informal planning, controlling, and coordinating

systems, as well as relations among groups within a firm and between a firm and

those in its environment (Barney, 1991:72).

The resources based view of firm is presently being touted as an alternative

theory of strategy to that developed by Porter 1985. Instead of focusing on

positioning in the product market, it argues that firms achieve sustainable

competitive advantage by developing resources which add unique or rare value,

which can not easily be copied by others. Thus the firm with superior access to

physical resources, which others can not buy, holds a superior advantage. For

example, a manufacturing firm, which invest a superior process technology,

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holds an advantage over its rivals. The following diagram combined there

source based and position view to illustrate the concept of competitive

advantage (Robert, 2008:41).

Figure 2.1: A Model of Competitive Advantage

Source: Quick MBA.Com

2.3 RURAL BUSINESS AND QUALITY IMPROVEMENT

The term rural area covers a multiplicity of landscapes, activities, and functions.

Rural area include natural and cultural landscapes, parks and wilderness,

villages, market, towns, research centres and commercial sites, which are mixed

with varied agricultural ones as forests ranging from intensive monoculture to

traditional systems (Peter Berkowitz et al 2000:34). Our understanding of rural

areas concerns more than how land is used by nature and man. It relates to

economic and social structures in which farming and forestry, handicraft, and

small, middle or large companies produce and trade, where services, from the

most local to the most international (such as tourism), are provided. All these

factors interact, compete, create and evolve (Willi, 2000:2).

Resource

Distinctive

Competencies

Capabilities

Cost Advantage

Or

Differentiation

Advantage

Value

Creation

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Beyond that rural areas provide living scope, not only for the people who work

there but also for many commuters who work in the city. They offer living space

for flora and fauna and fulfil important balance functions for overloaded centres

of dense development, particularly through the preservation of an ecological

balance, as buffer zones and recreation areas. All these structures and functions

together make rural areas diverse and complex places, something that is often

forgotten. This diversity and complexity is a key feature of rural areas, which

plays an important role in shaping rural development policies (Greven,

2000:87).

Rural regions were more strongly affected than non-rural regions by population

declines, and their per capita income generally lies below the national average in

most states. Many rural regions suffer from high unemployment and low activity

rates, as decline in agricultural employment were accompanied by declines in

traditional branches of industry. On average, across states the number of

employed decreased in most rural areas. As a result of these developments, we

observe out-migration of qualified young people from many rural areas. This

leads to gradual aging of the rural populations and, skill shortages in the affected

areas.

There are nevertheless a number of rural areas that completely contradict this

picture. These exceptional areas enjoy not only economic growth, but also

achieve significant job creation. In particular, some rural areas rank among the

most dynamic region in Nigeria by GDP growth. It would be therefore wrong to

equate rural areas automatically with disadvantaged economic development and

problematic labour markets (Peter, 2000:3).

Rural areas went through a profound change in the recent past in many parts of

Nigeria most especially Enugu and Anambra states. The development of the

Common Agricultural Policy with its consequences for agriculture has been an

important factor. Advent of democracy, changes in technology, lifestyles,

consumer expectations, and communication have also profoundly change the

rural areas, which becomes clear when we examine the developments in states

with agricultural policies of their own. This leads to two important conclusions.

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First, agricultural policy has limited scope for achieving broader objectives,

such as employment, economic growth, or environmental goals in rural areas.

Increasingly, we need to tackle the problems more directly through the rural

development policies.

Second, the forces driving change in rural areas are themselves increasingly

diverse. The need for locally tailored rural development is therefore becoming

ever more important.

2.3.1 Rural Development Policies in Nigeria

In Olisa, and Obiukwu, (1992:204) evidence of government concern for rural

development started in the 1946 – 1956 development plan. Government hoped

to achieve rural and regional development through the provision of portable

water, road construction, provision of dispensaries, etc. along with simultaneous

organization of layouts for the construction of villages and towns. In the first

and second national development plans (1962 – 1968 and 1970 – 1974) period

emphasis was placed on agricultural development and the encouragement and

sustenance of community self-help efforts to achieve rural development.

The second plant therefore, placed premium on the dual economy and export-led

growth model and by so doing assigns a very restricted meaning to rural

development. Contrary to expectations of export-led growth model of rural

development, agricultural instead of benefiting from massive injection of capital

and labour through price incentives, lost out to the urban sector through

unprecedented wave of rural-urban migration. By the end of second plan period

the dual economy model of that period has given rise to clear development of a

gap between urban and rural areas.

The third plan had to battle with the consequences of earlier plan policies in

terms of bridging the gap between urban and rural areas. The third plan mirrored

the gap and its accompanying anxiety. The rural development policy objectives

were therefore aimed at increasing rural economy and generally enhancing the

quality of life in the rural areas. The major instrument was still agricultural

improvement aimed at increasing the yield per unit area of land, through the

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dissemination of improved inputs such as high yielding, machinery and

improved storage and marketing practices. Formation of farmer cooperative

societies was encouraged while massive public investment in agriculture was

also planed.

The fourth period (1981 – 1985) dawned on the government that an isolated

emphasis on agricultural development was just not enough. The document

attributed the failure of the previous plans for the dampening effect of the

rapidly growing urban-based manufacturing and service sectors and non-

comprehensive agricultural policy and the lack of adequate supporting physical

infrastructure in the rural areas, all of which fail unprecedented rate of

urbanization. The government, therefore, planned for an integrated and multi

disciplinary approach which would take into account major factors affecting the

welfare of the rural population. An integrated urban rural development approach

was also planned for since government realized that the problems of the cities

could not be done through connecting the investment gap between urban and

rural areas.

2.3.2. Refocusing Rural Policy in the Twenty-First Century

The process of rural structured change has led to the fundamental question of

what, if anything, to do for the people who reside outside the growing urban

areas. Historically, rural development policy has been of national interest in

Canada and United States because rural people were, if not a majority, a large

minority of the population. More importantly, as long as agriculture was the

dominant rural industry there was at least the appearance of a common bond

among the rural populace that created an obvious vehicle for delivering policy.

Now however in many parts of each country the rural population is a minor

share of state or provincial populations and the nature of rural economies at the

local level is so fragmented that the old policy mechanisms are not effective

(David 2000:35).

This has led to an argument that in industrialized nations where local economies

are integrated components of the national economy and national policies reach

citizens in all parts of the nation, there is no longer any reason to have specific

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programs for rural areas, because national programs can adequately serve all the

legitimate needs of the population whether they are rural or urban residents.

However, while the problems of rural people and places are in general the same

as those in urban areas, there are important differences that justify a specific

focus (Garreau, 1982:212).

Rural areas differ from national areas in a number of ways. Rural areas have

lower labour force participation rate, which is symptomatic of their smaller

degree of integration into the broader economy. Residents of rural areas also

tend to be less well protected by the social safety net and less subject to

employment protection than their urban counterparts. Rural labour markets tend

to be there with a limited number of employers and in many remote areas the

potential supply of workers is in excess of feasible demand. Because rural

workers are predominantly engaged in the production of low wage, low stall

tradable commodities they are highly exposed to the effects of globalization.

But, because they have low skill and education levels relative to urban workers,

and there are fewer employment opportunities in rural areas, many face a

particularly severe transition to the global economy (OECD, 2000:35).

The quote from OECD suggests that a central issue in rural development policy

for all levels of government, national, state and local is how the chances to

enhance employment can be improved. Historically, rural development polices

of national governments have not had a strong direct focus on enhancing

employment. Instead rural policy in North America has tended to be defined in

terms of either sector-based policy or in terms of place-based policy. In first

case governments provided support to some specific rural industries, most

commonly agricultures .The expectation that enhances the sector would, in turn,

create direct and indirect employment effects that would benefit the rural

populace. In addition to agriculture, the most common sectors for this type

support forestry, fishing and mining. To the extent that these sectors were either

only found, or mainly found, in rural areas their support implicitly became rural

policy.

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For the second type of policy, government identified specific places and

provided resources to those places to enhance their development, in the belief

that by improving the infrastructure of the community, or by providing tax

concessions, there would be a resulting increase in economic activity and once

again employment opportunities would result. This could be justified in terms of

efforts to stimulate “growth poles” or for social equity reasons in the case of

providing assistance to specific communities that had fallen below some

performance threshold, such as average family income level or level of

unemployment (Glasmeier, 1990:48).

Industrial sector based approach have a significant record of past success, but

also no table failures. However they are less likely to be effective in the future.

Traditional rural sector, like agriculture and the other resource based industries

are shedding jobs and replacing labour with capital. In the process they not only

create less direct employment but they also provide less indirect employment

because their industrialization replaces linkages to the larger regional or national

economy as a source of inputs and markets. In a parallel development, place-

based efforts to affect new business now face lower success rates as firms

increasingly consider foreign as well as domestic sites (Glasmeier and Gaway

2000: 207). Now, even when alteration efforts are successful, they often lead to

people form outside the community receiving a large share of the new jobs,

because local workers lack the necessary skills, so the social or economic

indicator that triggered the policy initiative is not affected.

An alternative approach is that, instead of rural development policy being

structured in terms of helping places and sectors, it should be organized as a way

to help rural people. By ensuring that people have appropriate skills one ensures

that they have the best chance to lead a productive life, and by doing so, they

can contribute to a rural community if they choose to reside there. Or, if they

determine that their future lies in another place they leave the rural community

with skills to be successful somewhere else. This suggests that policy to enhance

employment opportunities in rural areas should emphasize the accumulation of

human capital. The changes we are seeing in the industrialized economies make

it clear that the set of skills a person has one major determinants of how well

72

they will live. In the United States, where unemployment rate are at record or

near record lows in most states, there are large pockets of unemployment,

mainly in rural areas and urban cores, where workers skills are limited. In a

decade of record prosperity we find that the real income and wealth of the least

skilled portion of society has declined, because they are unable to effectively

participate in the economy.

While it is clear that past policy approaches no longer fit current conditions in

most rural places, identifying new rural policies has not been an easy task. The

diversity of rural conditions, combined with large geographic areas and low

population densities in rural areas requires that each place have an almost

independent approach. But this type of complex approach is not possible to

implement a national policy. In practice only a small number of programs can be

effectively managed by any government agency, so the challenge is to design a

limited set of program that can be combined in a number of ways to address

rural development needs in different places (Stanber, 2002:67).

2.3.3 Evolution of Rural Development Policy

Rural development policy today essentially reflects three different concerns. The

first is the need to restructure and accompany change in the agricultural sector;

the second is the promotion of economic and social cohesion through regional

development policy; and the third is integration of environmental consideration

(Willi Schulz-Greve, 2005:62).

The approach to a common structural policy in agriculture were introduced at

the beginning of the 1970‟s and covered, among other things, investment grants

for the modernization of holdings; early retirement funds and retraining aids, as

well as start-up support for young farmers. In the late 1980s the need or a rural

development dimension to regional policy was recognized, and the First Reform

of the Structural Funds integrated rural development into programs designed to

reduce regional disparities. Third policy development replace, growing

environmental concerns. It was becoming accepted that farmers, in addition to

being food producers, could also be managers of natural resources and providers

of environmental services. Since farmers are not normally paid to provide such

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services by the market, a case for public intervention was acknowledged were

society values environmental services.

By the middle of 1990s, European Union had a range of instruments that

reflected the differing objectives of rural development agricultural, regional

development, and environmental integration. These instruments had evolved

over a long period and were in need of being put together into a more coherent

framework. This was achieved in Agenda 2000 – a set of reforms of the

Common Agricultural Policy and Structural Funds whose objective was to

increase the competitiveness of European agriculture, integrated environmental

concerns, and prepare for enlargement. Agenda 2000 also reflected the changes

in our understanding of the role of agriculture in Europe. It highlighted the

multifunctional role of agriculture, which in addition to producing food

commodities also has a role in producing environmental and social public goods

(Winters, 2000:40).

In the agricultural part of Agenda 2000, rural development was repeatedly

emphasized as a core task of future agricultural policy. Rural development

policy would help agriculture produce more efficiently both commodity and

non-commodity outputs (such as environmental preservation). The goal was to

create a coherent and solid framework for rural development policy to

accompany the reform of market policy. This would secure the development of a

competitive, multi-functional agriculture sector. Rural development policy

would become the second pillar of agricultural policy. In practice this was

achieved in three ways.

First, all measures were brought into a single legal framework based on the

principle of a rural development program. Second, it was decided that rural

development policy would genuinely accompany reform by operating across all

of Europe, thus complementing geographically targeted regional development

policy and national employment strategies. Third, the links between agric-

environmental measures in rural development program and environmental

requirements were made explicit; in particular, the notion of good agricultural

practice became a guiding principle (Harvey, 2004:87).

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The last point in this context concerns the LEADER – initiative for the

development of the rural area. It pursues the goals of experience, and

cooperation among countries (Easterbrook, T. 1990:300).

2.3.4 Social Programs and Rural Development

All policies are not created equal. The degree of importance that government

attach to competing issues can be measured along three dimensions. The first is

rhetoric or the extent to which government talks about an issue including

speeches by politicians, resolution, legislative proposals and program

developments. The second measure is outlays, which show how the government

spends its scarce resources indicating true priorities. This includes both direct

outlays and tax expenditures or foregone tax receipt. The final measure is the

extent of mandates by the federal governments, which compel other parties to

assist rural areas. In a sense they are a form of indirect expenditure where the

government requires others to act on its behalf (Freshwater, 1997:462),

All three measures are useful indicators of the importance of rural issues. The

first is a measure of moral suasion and indicates awareness of rural issues by

politicians. It is generally a leading indicator of the degree of rural concern,

since politicians typically test the water for support before allocating funds.

Because rhetoric is inexpensive and political issues appear and vanish

continuously, it is not a very strong indicator, nor is it one that necessarily

reflects longer term reality. The importance of rhetoric in rural policy is best

seen through the power of the perceived link between agriculture and rural

policy. For more than two decades the Rural Development Division of the

Economic Research Service of USDA, along with the majority of the university

community engaged in rural development research in Canada and the United

States, argue that the farm policy was no longer an adequate rural development

policy. Members of congress actually appeared to have become comfortable

talking about the need for a rural policy that was something other than farm

policy. Similarly, in the early 1990s the Canadian government created a Rural

Secretariat for Agriculture. That was to coordinate the activities of all ministries

where they influenced rural people and places, and the speech from the throne in

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1992 explicitly identified rural development as a significant issue for the

government. It truly appeared that perhaps inertia had finally been overcome

and there was a brighter future for rural areas and rural policy.

By the end of the 1990s, despite clear evidence to be contrary, farm policy was

once again being described as rural development policy (Stauber, 2000:111). A

new farm crisis had returned agriculture to the politicians‟ attention and the

desire to help a favoured constituency led to a revision of policy. Members of

congress in the United States once again rely upon the metaphor agriculture

when they speak of rural, the initiatives of the rural secretaries in Canada have

been greatly diminished, and the Rural Development Division of Economic

Research Service has been eliminated. Yet rural policy issues are at least as

pressing as before, and changes in public policy, including reductions in the

social safety nets and greater trade liberalization, are exposing rural residents in

Canada on the United States to far more pressures than are commonly

acknowledged (George, 1997:84).

Outlays are traditionally seen as the prime expression of government interests. It

rural programs receive increase in their spending authority, then the government

has clearly determined that these are needs that must be addressed. Outlays, per

se however, say nothing about the effectiveness of the support. Another problem

with simple look at aggregate outlays is the possibility of considerable year-to-

year, or regional, variability in what the money is spent on and who receives it.

If the opportunities for funding are fleeting and vary by category, ten

communities are unlikely to develop coherent development strategies. Instead

they will simply take whatever money is available, even if it does not really fit

their needs because that is what is available at the time (Swanson, 1999:89).

Government can influence the actions and outlays of other parties. This is

becoming a more important feature as claims on the government increase and as

discretionary revenue decline. Government can regain that particular actions be

taken through mandates or by linking assistance in one program are to be lower

in other areas. In a balance sheet sense, for a particular group or region,

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government funds can be thought of as receipts, while government mandates are

regained expenditures. Either approach can foster economic development.

A full assessment of the supply of rural policies requires looking at how these

three forces have evolved over time in the context of changing rural conditions

and differing allocations of responsibility. When one moves beyond the analysis

of rhetoric to the analysis of action, direct outlay data is the dimension which is

perhaps easiest to investigate. At present the United States but not Canada

maintains a comprehensive set of data at the country level. These data are the

basis for all sub-state analysis. However even in the United States the national

interest in collecting data at this level is shrinking. For most national purpose

data only has to be accurate at the state or provincial scale, which can be

achieved in for smaller samples. Erosion of this database will make impossible

to continue to examine differences in the performance of small areas, especially

rural ones (Marshall, 1974:78).

Social programs are by far the largest expenditure category in the national

budgets of both the United States and Canada. When expenditures by all levels

of government are considered, Canada spends an estimated 13 per cent of its

GNP on social programs, including education, compared to 11 per cent for the

US (Brooks 2000:71). The amount of social program money flowing into rural

areas in both countries is far greater than from any other single source.

In terms of the analytical framework, social policy would qualify as a

“maintenance” policy, as compared to a development policy. The existence of

these programs, however, can also be viewed as valuable social infrastructure

expenditure that increase the willingness and ability of people to stay in rural

areas and work towards their transformation. From a strict neoclassical

perspective, of course, these polices can also be viewed as an impediment to the

free flow of people to areas where jobs are available (Dillon,1998:107).

2.3.5 The Future of Rural Policy

David (1997:2) in returning to the earlier questions about the need for explicit

rural policy what can be concluded? In both the United States and Canada there

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is a residual underlying social contract which holds that people have rights to

equal opportunity. One of the strong trends in both societies is granting

recognition of this right; both as a result of new policies and as a result of

judicial decisions. While market forces remain the dominant means of allocating

resources and distributing wealth, they are not the sole means of making

decisions. Legal rulings have extended these rights in both countries and while

the rulings have not always been on the basis of unequal opportunity for rural

people, many of the decisions have clear implications for differences in

opportunity between central and peripheral regions.

In many cases we know that general social programs or specific macro-

economic policies may have adverse consequences for particular regions. Rather

than changing the programs, it may be more appropriate to compensate those

adversely affected by implementing other programs targeted for their needs.

From a pragmatic perspective it may be easier to introduce place-specific

amendments rather than restructure core macro policies .Making programs

address rural needs will require major redesign and implementation efforts.

Many current economic development programs tend to miss rural areas needs.

For example a major development interest in the United States, enterprises

zones, is almost always seen as an urban program although the legislation

authorizing these zones requires one third to be in rural areas (Ruffa,2008:115).

Providing programs that treat all parts of a nation, or all groups, equitably, may

require that the programs treat various parts or groups differently. Conditions

vary among different parts of each nation and consequently if we want to see

equal outcomes, we may need to provide different resources on the basis of local

needs. If there is going to be equality of opportunity then the federal government

in each country will have to play a major role since it is the only level of

government concerned with national standards. In the North American context

where functional regions across borders, national governments have a role in

ensuring that policies are harmonized on an international basis to meet

development needs. This may be one of the main advantages of greater

continental integration.

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National governments are also best placed to observe what is happening in other

nations and in facilitating an exchange of experiences. In United state the

growing interest in education and health care as critical factors in rural

development suggests the desirability of looking at the Canadian experience. In

Canada, the limited success of regional development programs defined on

provincial boundaries suggests looking to the United States for information on

specific rural programs. Beyond the two nations, the most likely places directly

relevant lessons are other land extensive nations, Australia, New Zealand and

the Nordic countries, since they share common problems of scale, distance, and

capital intensity.

General economic and social programs, even if extended beyond their current

levels, with the problems of distance, scale, and the loss of critical social mass in

rural areas. Only by grafting place-specific programs on to the set of core social

programs will we allow equality of opportunity irrespective of place. While the

traditional emphasis on improving human capital to allow out-migration is

important and necessary, it too requires place specific approaches. Ignoring the

attachment of people to place weakens the likelihood of success of any program

since it results in no sense of community and common purpose, and therefore

must rely solely on individual self-interest (Hill, 2004:72).

In the neoclassical policy environment of North America the most effective way

to legitimize rural policy is through appeals to increase efficiency. In this

context enhancing employment becomes the basis for rural development.

Arguments that are constructed around efforts to reduce unemployment or

underemployment by bringing rural people into the economy in more effective

ways will be more likely to gain support than arguments based upon equity

considerations. Because rural communities are open to both national and

international trade influences they are under considerable pressure to adapt to

the global economy. What they need are the resources to facilitate a speedy

adjustment, otherwise they will place a significant burden on the rest of the

nation, whether the people in rural areas remain there, or if they move to urban

centres only to find they lack the skill to find employment. Are there lessons

from North America that is applicable for other nations? Perhaps the most

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important is the difficulty of untangling agricultural policy from rural

development policy. Well after agriculture has ceased to be the dominant force

in much of rural North America it continues to drive the policy process

(Kepa,2007:63).

A second lesson is that rural places will evolve in very different ways once they

progress beyond being farm dependent. A national rural policy that does not

have a strong role for local leaders is thus unlikely to be effective, especially in

large nations like Canada and United States. A third lesson is still a need for

territory specific policies. National policies may be the most important influence

on rural development, but they are to blank an instrument to bring about uniform

growth in all parts of a country. The final lesson is that the appropriate mix of

rural policy is driven as much by social conventions as by fiscal capacity. To be

effective, rural policies have to fit within the nature of social contract between

the government and the people of a country. Countries as similar as Canada and

the United States have adopted very different development strategies because

their societies and institutions remain distinct. Pieces of the North American

experience may be useful elsewhere, but North America is not a good model for

other regions (Karen 2007:35).

2.3.6. Suggested Rural Development Priorities

James (2007:121) identifies and prioritises three areas of rural development

research and extension needs. He states that the highest priority is to address

issues related to improving education and workforce development. The general

consensus was rural communities struggle to assess workforce skills and do not

understand the role of economic incentives needed to improve business

recruitment.

In addition, participants cited the need for more emphasis on providing existing

rural business owners with technical assistance in order to spur business growth.

The second priority was for more research and extension programming aimed at

spurring economic of both agricultural and non-agricultural-based business.

Participants cited lack of an entrepreneurial environment, limited access to high-

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speed internet, drug usage and insufficient information about bio-fuels and other

value-added agricultural opportunities as significant barriers to development.

The third priority was research and extension programming in national resources

and environmental management to strengthening rural communities by

identifying new solid-waste management strategies, including water distribution

infrastructure and water quality, adopting more conservation land uses to

preserve natural resources and reducing air and water pollution.

2.3.7. Moving Forward For Rural Areas

Louisiana Centres for Rural Initiatives and Delta Rural Development Centre

(DRDC) in James N. (2007:9) assert that LCRI and DRDC faculty and

Community rural development agents are developing new and adjusting existing

extension programming to focus more on rural entrepreneurship, value-added

agricultural enterprise development and other programs aimed at providing

community leaders with tools to manage resources. Suggested initiatives

Louisiana Centre includes:

Start a business incubator program that provides access to high-speed

internet to give rural business owners the necessary technological

infrastructure to create new companies and expand into on-line markets.

Access to dial-up internet is insufficient to spur the creation and

sustainability of new rural business and job growth.

Teach adult entrepreneur how to start and manage businesses, such as

establishing store front businesses on eBay, as well as develop websites.

Educational programs can be provided using distance education technology

and regional partnerships with economic development institutions and

organizations.

Teach youth in rural areas business management skills (Marketing, sales,

finance, economics, etc.) necessary to start and grow businesses, including

how to buy and sell items on the internet. Rural youth could work with local

retailers to expand their businesses into global markets. This approach has

been piloted in West Carroll Parish.

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Develop alternative supply-chain business model arrangements for energy

crops to learn about bio-fuel opportunities.

Provide strategic planning educational presentations for producers and

others who are interested in exploring bio-fuel businesses, such as,

successful care studies in Louisiana. Non-traditional markets for crops may

yield opportunities for long term sustainability economic stability and

growth for agriculture in Louisiana.

Organize and host a regional workshop on assess to renewable energy

options for producers and others in the business community. This will

include bio-fuels and non-traditional sources of energy.

2.3.8 Innovation and Collaboration in Rural Development

Gathering information from public and private organisation as well as

understanding perspectives from residents provides new information which is

presently being used to develop new ways to organize resources within. This

organizational innovation provides at least two fundamental effects aimed at

strengthening community development in rural areas. First, stakeholder input

provides a set of suggested priorities for research and extension programming.

The stakeholder must become increasingly more relevant, timely and focused on

the most important community development needs (Brown, 2006:13).

The rural entrepreneurs will have to be able to leverage resources more

effectively when collaborating with other institutions such as universities,

polytechnics as well as other institutions like research institutions both private

and public. Similar collaboration or round table discussions will be conducted

through the area in order to identify top priorities for rural development research

extension programming in other states. The result of the diversion can be used in

a systemic way to identify other states with similar proprieties and cooperatively

develop projects which address common community rural development

problems (Gill, 2002:144).

Much of the work ahead will require significant institutional collaborations with

organizations such as police jury and school board associations, economic

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development organizations and private foundations. Resources are simply too

limited to recreate the proverbial wheels of rural economic development.

Bringing innovation in various forms of rural areas and working with

collaborative partners is a better approach. And that is exactly what it might take

to strengthen rural business (LCRI and DRDC, 2007).

2.3.9 Cork Declaration on Rural Development

The vision of a “living countryside” at the Cork conference (Ireland) therefore

was a further example of progress. The conference achieved great support in a

Ten Point Declaration, which fully incorporate these points, which in turn have

fully influenced the agreed policy for the 2000 and beyond (Lord Henry

2000:4). The Cork declaration is summarized as follows:

1. Rural Preference (Aims)

Reverse rural out-migration

Combat poverty

Equality of opportunities

Respond to demand of quality

Health, safety, leisure, general well-being

Environmental objectives

Fair balance of public spending

2. Integrated Approach

Multi-disciplinary in concept and multi-sect oral in application, with a clear

territorial dimension.

Apply to all rural areas; co-financing for areas more in need

Economic diversification: Small and medium sized enterprise

Rural services

Management of natural resources

Promotion of culture, tourism and recreation.

3. Diversification

Strengthen role of small towns and villages

Focus on providing framework for private and community based initiative

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Investment and technical assistance

4. Sustainability

Sustain quality of landscape-natural resources, bio-diversity and cultural

identity.

5. Subsidiary

Decentralize where possible

Bottom-up approach (Ares of outstanding national beauty)

6. Simplification

A limitation of red tape and regulations – greater flexibility

7. Programming

Transparent procedures

Cooperation

8. Finance

Promote productive investment and diversity of rural economies

Encourage continuation of public and private funding.

9. Management

Partnership and sharing of research

Networking between regions and between rural communities

10. Evaluation and Research

Monitoring, evaluation and beneficiary assessment

Guarantee good use of public money

Stimulate research and motivation

Enable informed public debate

The CORK Declaration has brought out possible ways, by which local capacity

building for sustainable development in rural economy can be achieved. It has

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exposed how both private and community-based initiatives can be packaged

and well-integrated into global market.

2.3:10 Agencies for Rural Development in Nigeria

Several rural agencies have been known to help in the development and

stimulation of business activities in our rural areas most especially in the South-

East of Nigeria. These agencies include the following: (Olisa and Obiukwu,

1992:204)

Cooperative Societies

Rural development can be financed through farmers cooperative and other

cooperative bodies. The cooperative in general coordinate mutual efforts, group

collectivist, and also provide a receptive medium for a comprehensive package

of services considered necessary for increased economic productivity in the

rural areas. The major benefits of group loan made possible by these co-

operative societies is that they are a method by which farmers who would

otherwise get loans are enabled to do so. If also provides the benefit of

reductions in supervisory and administrative costs.

Cooperative provide a mechanism by which the choice of borrowing is not a

decision which the bank have to make but rather it is one that can be left to a

group of farmers who are in a very good position to judge the credibility of their

members. They know the members that are hard working and lazy ones.

Cooperative societies enjoy the benefits of specialist management and that of

economics of scale and the group responsibility for loan repayments can be used

as a security for all the loans for previous year being repaid. Since any default

by an individual member may affect the society as a whole, it may impose a

strong social sanction within the group on any defaults.

Cooperative bodies can also finance extension services such as education if

members in improving farming and craftsmanship techniques and other rural

development programs. Most governments and financial institutions normally

concentrate their development efforts in the rural areas through cooperative

societies instead of fragmenting their efforts through individual craftsman or

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farmer. Cooperative group like thrift cooperative societies and other similar

groups, play the major role of providing financial bases to the rural dwellers

through financial contribution “ISUSU” (Onah, 1980:37).

Age Grades

Age grades are social institutions which constitute vital system in the social

structure of any given society. In concrete terms, an age grade comprises

persons who according to the society concerned, are regarded as people of the

same age. However, the age grade may vary from one community to the other.

In some communities, persons born within a specific period of three, four or five

years usually form an age grade. But the most important thing is that each age

grade is clearly distinguished from another. It then means that a man can only

belong to one age grade at a time, and each of course is usually associated with

specific role.

The age grade is a very important organ of social structure especially in our

traditional Nigeria Community. For example, amongst the Igbos in Anambra,

Imo, Enugu, Ebonyi, Abia and some part of Delta state. Others are the Tiv in

Benue State, the Ibibio in Cross River State, etc; the formation and membership

of an age grade is a much revered activity (Iruma, 1984:32).

The Role of Age Grade

A. Age grade engage in building of schools were there was none or building

classroom blocks, science laboratories, dormitories or modernizing already

existing schools.

B. Age grade as a social group has over the years played prominent role in

raising the standard of living of rural dwellers through construction of

markets, motor packs, and roads as a means of boosting trade in their

locality.

C. Many age grades in various communities have engaged themselves in

providing necessary basic amenities such as electricity, pipe-borne water,

hospitals, and access roads.

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Town Unions

The factor of development union arose from the fact that in most urban

centres people from different ethnic groups bind themselves together, to

unite, and posts among them a sense of belonging and stem the tide of

alienation. Because of there attachment to there rural communities, they

form a channel through which the rural communities were maintained

through the members living themselves and carrying out self help projects

in order to transfer some level of social and economic development which

characterize the urban centres to the rural areas. To achieve this, they went

home and mobilize their kiths and kins.

The organizers of town unions are group of people who are motivated by the

spirits of selfless service to make reasonable contribution to their community.

This union as it grew with leaps and bounds got the rural dwellers effectively

mobilized and people saw the need to identify with it.

The situation also engendered the disposition towards competitive orientation.

Most Nigerian communities seeing what others did tried not only to do it, but

surpass other communities in their efforts. The implication of that was the

emergence of a trend for rapid communal development project in the nation.

Town union just like Age grades involves in the building of schools, markets,

industries and provision of other social amenities such as electricity, pipe-born

water and hospitals.

Umu-Ada

The Umu-Ada is a women association formed by women born in a certain

community but who are married outside the community in which they were

born. The association is formed by women who were motivated by spirit of

selfless service to make reasonable contribution to their community in order to

uplift the living standard of the rural populace.

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The Umu-Ada is a very important organ of social structure especially in our

traditional Nigerian communities, for example, among the Igbos in Anambra,

Imo, Ebonyi, Abia, Enugu and some part of Delta state. It is a universal social

institution like Age-grade and town union but differ with the Age grade in terms

of no age bracket for being a member and again it is only for women. In spite of

these differences the two associations have similar or rather the same objectives.

Having considered quite few of the communities it becomes evident that the

formation of Umu-Ada was an age long affair. Collectively, all the association

were formed with the main objective of causing social and economic

transformation of their rural communities. Quite a good number of them have

made remarkable contributions towards the socio-economic development of

their communities.

2.4 ISSUES IN CREATING AN ENABLING ENVIRONMENT FOR RURAL

BUSINESS

2.4.1 Need for Capacity Building through Entrepreneurship Development

Programme (EDP)

Two major sources of competitive advantage in the 21st century are the

development of National Entrepreneurial capability and innovative skills,

(Obitayo, K. in CBN bullion 2001:12). Human resource (skill) development is

crucial for ensuring the survival and growth of export oriented businesses.

Entrepreneurship development is a critical aspect of skills development and key

stone for economic revival and growth. Attributable largely to unconducive

business environment and lack of entrepreneurship instinct and drive, empirical

evidence shows that less than 1/3 of the beneficiaries of subsidized and targeted

credit schemes in Nigeria survived and grew. Government should assume the

responsibility for evolving human resource development polices that will be

conducive to entrepreneurship development. Government should collaborate

with the private sector to rekindle the entrepreneurial instinct, spirit and drive

with a view to making the small scale industrialists replicate the miracles

achieved by their counterparts in South East Asia countries. There is need for

the establishment of Entrepreneurship Development Institutes (EDI) as in the

US, Japan and India. Tertiary institution should include entrepreneurship

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development studies in their course programmes. Given their conducive

investment environment, the U.S. graduates were reported to be turning

increasingly to small industries or striking out on their own. Interest of

individuals running their own business is so intense that 250 universities in the

U.S. now offer courses in entrepreneurship. In 1980s, only 160 schools offered

such courses (Levitsky, 1996:240).

2.4.2 Need to Strengthen Supporting Institutions

Provision of technical support and extension services by the technical assistance

rendering agencies such as the Industrial Development Centres, (IDCs),

Directorate of Employment (NDE), is another source of creating an enabling

environment to assist rural business to overcome their technical, management

and marketing problems. Services rendered include counselling, product design,

supply of product profiles, marketing information and preparation of feasibility

and viability studies. Recent studies reveal that the quality of support and

extension services rendered by these agencies has declined due to inadequate

resources and supervision (Obasa CBN Bullion 2001:14).

There is need for government to review and strengthen the institutional channels

employed to render support services, types of projects supported and target

group beneficiaries. There is need for strong linkages to be established among

the agencies rendering support services. With the rapid changing global

environment the private sector should play dominant role in designing and

implementing support services for rural business. Considering rural business as

a national priority, most of the US government‟s assistance to rural business is

channelled through the private sector, business associations, Universities and

non-governmental organisations (NGOs). The latter often mobilize retired

corporate executives to go round and offer counselling to rural business owners.

Furthermore, small business centres were established by the U. S. Government‟s

Small Business Administration (SBA) in some universities to offer counselling

and guidance, provide extension and advisory services and assist in diagnosing

small scale industries specific technical problems (Levistsky, 1996 in CBN

bullion 2001:7).

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The Nigeria‟s business associations such as the National Association of Small

Scale Industries (NASSI), Manufacturing Association of Nigeria (MAN) etc,

have a greater role in conjunction with government agencies and support

services rendering institutes to assist SSIs access to credit, backed with credit

insurance guarantee, management consultancy and information services. Need

to Promote Linkage and Inter-Firms Relationship (Clusters) through

Construction of Industrial Estates. Unlike the SSIs in developed economies

which are more innovative based on their involvement in strategic alliances and

non-equity arrangements, few SSIs in Nigeria play an important inter-mediating

role supplying inputs for the larger scale industries or sub-contracting for the

multinational companies. Hence, limited industrial linkages exist between SSIs

and large scale industries. The promotion of strategic sub-contractual alliances

has a bigger role to play in stimulating export drive (Otiti, CIBN 2000:31).

The dispersed nature of SSIs in Nigeria makes things difficult for them to

achieve linkages, foster inter-firm relationship to evolve new strategies and

achieve collective efficiency in tackling their problems. More than size related,

the dispersion of SSIs have limited their ability and power to influence market

and policies. Government‟s intervention has worked effectively in countries

where it was carried out in concert with the private sector. Efforts should be

made by the government in all tiers in concert with the private sector, to create

an enabling environment by constructing the industrial estates or districts for

SSIs. India has 861 industrial estimates for different categories of enterprises.

Most of the few industrial estates in operation in Nigeria, were constructed

during the colonial era and the regional governments in the 1950s and early

1960s, specifically for large scale industries. Construction of industrial estates

for SSIs by the state governments in conjunction with the private concerns will

minimize the time the project promoters use in looking for land and run after

certificates of occupancy (C of O).

Industrial estates will obviate the use of the loans secured by promoter for the

procurement of land and construction of factor buildings. Clusters firms in the

industrial estates will enhance efficiency, facilitate grouping of firms into

industrial or trade associations, promote inter-firms relationship to enable them

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discuss new strategies. Clusters of firms will facilitate provision of

infrastructure, such as energy, water, etc. and technical and financial support

services to group of firms which will enable them exploit economies of scale in

both domestic and export market. The Sinos Villey in Brazil has for the past 30

years been used as an industrial estate by over 500 export-oriented shoe-making

firms and over 100 tanneries (Schmitz 1994:72).

2.4.3 Achieving Macro Economic Stability

Achieving macro-economic stability which shapes the overall investment

climate is crucial for creating an enabling environment for industry and ensuring

the survival of rural business. Monetary and fiscal policies designed to achieve

macro economic stability especially such key cost variables as the interest and

exchange rates have exerted significant influence on aggregate demand, general

price level and savings and investment. A judicious mix of these policies is

crucial for macro-economic environment. To achieve macro-economic stability

there is need for the implementation of appropriate macroeconomic strategies

such as low inflation, more stable and competitive exchange rates, strengthening

the structural reforms including pro-savings polices to achieve relative high

domestic savings and rapid corrective responses to macroeconomic problems

(Anyanwu, 2000:42).

Government should continue to use Open Market Operation (OMO)

complemented with increases in Cash Reserve Requirement (CRR), and

minimum rediscount rate which is the interest rate anchor. There should be

increase in the sale of treasury bills and CBN‟s certificates and tightening of

government‟s fiscal operations. The high interest rate and wide-gap between

lending and the deposit rate should be reduced through judicious use of

monetary and fiscal policy instruments including moral suasion.

Concentration of production in the domestic market to the exclusion of the

export market underlies the clamour for subsidized interest rates. Countries

experience in lending to SSIs shows that small industries are capable of

borrowing at the market rates, if the economic environment is conducive and

export of manufactures expanded. Support services should be targeted at the

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export oriented small scale value-adding growth industries such as

clothing/garments, shoes, food processing, chemical, etc. which are within the

scope of goods granted duty and quota free access to the European Union (EU)

market under Lome 11 convention for 70 African, Caribbean and Pacific (ACP)

countries including Nigeria and US market under African Growth and

Opportunities Act (AGOA).

2.4.4 Need to Achieve Stability in Exchange Rate

There is apparent constraint in stabilizing the foreign exchange rate in the light

of huge fiscal deficit, speculative activities in the banking sector, low

production, declining non-oil exports and high inflation. The import dependent

private enterprises have continued to experience difficulties in sourcing needed

foreign exchange at high cost to procure raw-materials and components for the

obsolete machinery and equipment which breaks down often. A wide gap

continues to exist between the autonomous and Inter bank Foreign Exchange

Market (IFEM) and small scale industrialists continue to suffer foreign

exchange risk (Obitayo CBN Bullion 2001:18).

The Central Bank remains the largest supplier of foreign exchange to the

market. Export-oriented private sector companies are expected to supply more

foreign exchange with a view to ensuring stability in the market. If

manufacturers had increase their inward sourcing of production inputs and

produce for export market, the depreciated naira would have enabled the firms

sell their products cheaply, penetrate export markets, magnify their earnings and

possibly be the major suppliers of foreign exchange to the market. Efforts

should be mustered to boost the supply of foreign exchange and strictly monitor

demand in order to minimise speculating activities and achieve stability. There

is need to adopt a foreign exchange mechanism which will achieve a single rate

in a single market. There is need to achieve and maintain fiscal discipline and

stability in the economy. Also, foreign exchange risk should be alleviated in

proven and genuine transaction to mature the growth of SSIs.

Considering exchange rate risk as an unplanned circumstance, government

should absorb the exchange rate risk in all future loan schemes to SSIs, and as

part of efforts in creating, an enabling environment similar to the foreign

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exchange component of the loans sourced from NERFUND. The ruling

exchange rate at time the loan was obtained should apply during repayment in

all future SSIs funding scheme.

2.4.5 Rural Business and Infrastructural Stregthening Measures

Business environment denotes the full range of public policies, institutions,

regulatory and administrative systems within which people and firms operate

(Eboh and Lemchi, 2010: 12). It represents the whole gamut of publicly-

provided services and government behaviour that affect the management,

productivity, competitiveness and growth of private enterprises. In other words

it is the sum total of government and economic environment in which people

and firms make/implement decisions. The domestic business environment in a

country is critical to the ability of the national economy to compete effectively

in a globalizing world. Today, the common challenges countries face in reaping

the gain or coping with the pressures of globalization lies on improving the

policy, institutional and regulatory framework that fosters entrepreneurship and

productive investment. Like in every country, the business environment in

Nigeria affects everyone, business, investors (domestic and foreign), managers,

communities and groups. Nigeria is ranked 127 among the countries of the

world in less business competitiveness environment.

Despite macroeconomic and growth improvement in the past six years poor

business environment remained the principal drag on employment creation,

poverty reduction and accelerated achievement of the Millennium Development

Goals (World Bank Doing Business in Nigeria 2010:2). The harsh business

environment in Nigeria adversely affects everyone. To reduce the cost of doing

business and establishing Nigeria on the part of becoming one of top 20

economics by the year 2020 requires cogent measures to unlock the business

environment. A good business environment entails efficient and effective supply

of public infrastructure, institutional and regulatory services. This is primary

responsibility of the government. Never the less, the private sector and civil

society have important role to advocate for public accountability in the provision

of these services. Monitory and reporting the business environment is important

for designing and implementing policy and institutional reforms by federal, state

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and local governments. An independent and objective assessment of the

business environment is a useful.

Like in every country, the business environment in Nigeria affects everybody

including business investors (domestic and foreign). A good business

environment helps people get out of poverty and can accelerate the achievement

of MDGs (World Bank Investment Climate, 2007:6). One direct effect is that it

creates and expands opportunities to start, operate and grow business. A great

majority of poor people work in small businesses which are most hit by bad

business environment, because of lower coping ability. So, getting the

environment right is good for small business, whether in rural or urban sector, as

it creates the kind of growth in which poor people can participate. Good

business environment is particularly essential for rural productivity, incomes

and employment. About two-third of poor people in Nigeria live and work in

rural economy, consisting of mostly farm and some non-farm activities (Eboh

and Agu 2007:11). So, bad business environment-inadequate rural roads, poor

electrically poor water supply and inefficient public services-hurts the living

hoods of rural people. Bad business environment is the reason for the slow

progress of economic diversification to non-oil sectors in Nigeria. It is the main

factor why growth improvement over the past half of the decade has not resulted

in improved employment, reduction in poverty and better standards of living for

private sector and civil society to advocate and dialogue with government.

Table 2.1: Nigeria Ranking on World Economic Forum’s Global

Competitiveness Index alongside Comparator Countries

Country Ranking of “institutions”

out of 133

Ranking of “Infrastructure”

out of 133

Nigeria 102 127

Botswana 29 61

Ghana 68 87

India 54 76

Indonesia 58 84

Morocco 64 70

South Africa 45 45

Thailand 60 40

Source: World Economic Form 2009. Global Competiveness Report 2009-2010

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Data from the table suggests that institutions and infrastructure are key

constraints in the business environment in Nigeria. The performance of Nigeria

falls far behind those of Ghana, Botswana, South Africa, Thailand, Indonesia

and India. However, Nigeria was ranked 20out of 133 countries in the area of

Macroeconomic stability, far better than Ghana and India. This rating reflects

relatively better macroeconomic condition recorded at the back of higher oil

revenues of 2003-2007 period coupled with fiscal and monitory policy reform

during the last six years.

As global competitiveness heightens, countries are increasingly concerned about

the conduciveness of their business environment to private investment and their

relative goal or regional standing. The ability of governments to provide

efficient and transparent public services to businesses and investment is crucial

to the competitive advantage of an economy (African Institute of Applied

Economics, 2006:8).In Nigeria, the business environment is considered to be

generally poor. Over the years, distortions in state-economy relations created

incentive structures that hindered the necessary conditions for competitive

private enterprise. Underlying Nigeria‟s poor investment climate in the recent

years is overdependence on oil and traditional sectors, such as agriculture and

services, is partly due to the hostile business environment.

Businesses wishing to operate in Nigeria face many constraints, including poor

infrastructure, particularly road networks and electricity supply; inadequate

physical security, corruption; weak enforcement of contracts, and the high cost

of finance. These factors have deterred foreign entrepreneurs from investing in

Nigeria and induced many Nigerian to take their money and skill abroad

(NEED, 2004:30).How easy is it to do business in Nigeria? Among 178

economies compared based on the attractiveness of their business environments

in the World Bank‟s Doing Business 2008 report, Nigeria represented by Lagos

– ranks at 108. Several sub-Saharan countries place ahead of Nigeria, including

Botswana, Ethiopia, Ghana, Kenya, and South Africa. Worldwide, doing

business is easiest in Singapore, followed by New Zealand, the United States,

and Hong Kong (China). Mauritius, at 27, is the only African country among the

top 30 (Doing Business, 2008:12).

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Like in other developing countries, there is wide recognition that growing the

Nigerian private sector requires a paradigm shift underpinned by new policy

orientations to improve the investment climate. Nigeria‟s legacy of

mismanagement and corrupt governance has encouraged many people to seek

ways of sharing the national cake instead of helping to bake it. By 1999

corruption was practically institutionalized (NEEDS, 2004:36). Government is

widely regarded as a provider of large contracts, distributed by officers in power

to people wealthy enough to buy their influence. This was particularly so in the

case of the oil industry. Over time the judiciary became intimidated, as the rich

and powerful manipulated laws and regulations to their advantage.

Instead of engaging in productive activities that would help our economy grow,

people choose instead to peddle their influence and position. The legitimacy and

stability of the state suffered as people began to devise ways to survive that lay

outside the law (Assessing and Benchmarking Business Environment,

2000:9).In 2006/07 it became easier to do business in Nigeria, reflecting

improvement in two areas measured by the Doing Business Indicators. Business

registration became faster thanks to computerization of the company registry –

checking on the availability of a company name can now be done online.

Obtaining a building permit also became faster, and in Lagos the process can be

completed in 30 business days. (Investment Climate, 2008:6).

Despite these reforms, Nigeria overall ranking did not improve, because other

countries have been reforming even more vigorously. In 2006/07, 98 economies

introduced some two hundred reforms. Burkina Faso, Ghana, Kenya,

Madagascar, and Mozambique were leading reformers in Africa, facilitating

various aspects of doing business. Many large emerging economies were also

among the top reformers, including China, Egypt, India, Russia, and Vietnam.

Reforms by the Federal and state government should ideally be supported by

sound knowledge and credible evidence of business environment constraints.

Such evidence based insights are required to prioritise, design and target

reforms, monitor their implementation, review progress and evaluate impact on

the private sector. There is therefore a compelling need for greater attention to

96

the sub-national (state and local governments) jurisdictions in order to achieve a

more comprehensive and coherent approach to business environment reforms in

the country. In this regard, business environment and competitiveness across

Nigeria states (BECANS) was initiated by African Institute of Applied

Economics (AIAE) in July 2003. It is an integrated research, survey and

advocacy initiative designed to produce, benchmark and disseminate

contemporaneous evidence on the business environment across states of the

country. The environmental factors that impact on the competitive advantage of

business are as follows:

Table 2.2: Nigeria Performance Rankings on Doing Business Indicators

Indicator Performance and Ranking Rank among 175

countries

Number of

steps

(Procedure)

Time (days) Cost (naira) 2005 2006 Change in

Ranking

Doing

Business

-

-

-

108

109

+1

Starting

Business

9 43 54.4% of

income per

capita

118 115 +3

Dealing with

licenses

16 465 238.2% of

income per

capita

129 134 +5

Employing

Workers

Na Na Na 56 56 0

Registering

Property

16 80 21.1% of

property value

170 171 +1

Getting

Credit

Na Na Na 83 76 -7

Protecting

Investors

Na Na 46 43 - 3

Paying

Taxes

35 1120hrs 31.4% of gross

profit is paid in

taxes

105 99 -6

Trading

Across

Borders

Na Na Na 137 141 +4

Enforcing

Contracts

23 457 27% of debt 66 105 +39

Closing a

Business

Na Na 72 72 0

Na = Not applicable

Source: Doing Business Indicators 2006, World Bank, Publication.

97

Observation: The table shows that there is infrastructural deficiency in Nigeria,

and that is a hindrance to business activities.

2.4.6 Electricity

In Nigeria power outrages result in losses equivalent to 9 per cent of total sales.

Almost all Nigerian firms (97%) experience power outrages. On average, such

outrages lasted some 196 hours per month, that is, approximately 8 days. Large

firms and firms in the manufacturing sector are more adversely affected by such

outrages.

Faced with this situation, 86 per cent of firms have their own generators, which

produce on an average, 61 per cent of their electricity needs. Large firms have

lower electricity related indirect costs although they face the most significant

outrages. This is explained by the fact that 97 per cent of them have their own

generators. Power outrages vary by state. In Kano for instance total outrage

duration averages 393 hours per month, equivalent to 16 days. In Abuja, total

outrage duration average 127 hours per month, equivalent to 5 days (Investment

Climate Association, 2006:9).

Table 2.3: Infrastructure Indicators

Indicator Total Firm size Ownership Industry State

S M L F D M R Other More

Ind

Less

Ind

% Firms exp.

Power outrages

96 96 95 100 92 96 98 96 93 97 93

Average duration

of outrages per

month (hours)

196 198 186 223 125 197 238 188 150 212 109

% Firm with own

generator

86 84 89 97 86 86 86 85 92 87 84

% electricity

coming from own

generator

61 61 61 61 70 61 61 N/A N/A 63 55

Source: ICA Survey

98

In comparison with other countries, It is believed that the percentage of firms

experiencing power outrages is highest in Nigeria. As a consequence, generator

ownership is also higher in Nigeria than in all other comparator.

Table 2.4: Nigerian Business Face the Most Serious Electricity Constraint

Indicator Nigeria

2006

Kenya

2007

Renezudix

2008

Brazil

2003

Indonesia Malasia Singapore India

% firm

experienced

power outrage

96 85 20 64 48 N/A 77 NA

% firms

with own

generator

86 70 N/A 17 89 59 59 19

Source: ICA Survey

Infrastructure constraint which is responsible for high production cost stifles the

growth of business. The cost of doing business in Nigeria has equally been

estimated to be almost 30 percent higher than in South East Asia countries

which export consumer goods to Nigeria (UNDP 1996, Survey).

There is need to strengthen the existing physical infrastructure without which

there cannot be a successful industrialization or growth achieved by rural

business. There is need to accelerate the privatization of PHCN and its

subsequent restructuring into segments. Energy sector like telecommunication

sector should be deregulated.

The private sector should be encouraged to participate in energy generation and

supply either on build-own and operate (300) or build, operate and transfer

(BOT). They should be more than one electric generation company with PHCN

capacity. The United States has 350 electric power generation companies, out of

which the private owned power plants far exceeded the public owned. Columbia

has 12 foreign owned generating companies while Ghana has 2 (Ibitoye in CBN

Bullion 2001:3).

99

However, Nigeria should try to source energy from the cheapest and cleanest

sources like hydro, wind and solar because of our level of economic growth.

Using gas to generate electricity will be very expensive as it will be subjected to

vagaries of international market just like we are experiencing in the prices of

other petroleum products. PHCN should be unbundled into distinct business

units, which will eventually be privatized. The industry should be regulated by a

new regulatory agency, and a fund will be set up to increase access to electricity

power in rural areas (NEED, 2004:7).

2.4.7 Taxes

All around the world, businesses tend to complain about tax rates. The case is

not different in Nigeria the manufacturing sector operate under burden of all

manners of taxes and rates from various governments in the country, from

Federal to State to Local Government authorities. While Federal Government

collect excise duty and vats the state collects business premises and income tax

and local government collects all manners of rates ranging from road tax, mobile

advert, loading and of loading to car radio license. All these are outside

sanitation levy, water rates and electricity bills. In facts in the states in the South

East local government authorities collect as much as eight different rates all in

the name of generating internal revenue.

However world studies maintain complaint about tax rates are not at the top of

the list of problems faced by organizations. They state that about 1 in 5 Nigerian

firms identified tax rates as a significant constraint to business, ranking it fourth

most important constraint. In international comparisons a higher percentage of

firms complain about tax rates in other countries. By using the Doing business

database we can see that the overall tax rate paid by firms in Nigeria is the

lowest of our comparator countries. And the profit tax rate is lower only in

Venezuela (12%). It is a common belief that it is only civil servants that are

actually paying taxes that are due to them.

100

Figure 2.2: Composition of Taxes – International Comparison

Source: World Bank Doing Business Indicators 2006

2.4.8 Transportation and Customs

Transportation energy as one of the major constrains to business. Its problems

generated indirect cost due to breakages, spoilage, or theft, but most

importantly, the nature of our roads in the country is nothing but a

disappointment. Our road are filed with potholes i.e. the ones that could be said

to be motorable while others are simply impassable. Most rural areas don‟t have

access roads. And this has made it difficult for most of the goods produced in

the areas to be transported to urban centres where they are sold. The problem

does not only reside on roads. The rail system is simply non-existent. Rail

system has collapsed making it difficult for rural products to be transported to

other parts of the country mostly to the Northern part.

Lack of functional rail system has resulted in a heavy pressure on our roads.

This is because most of the heavy goods that are supposed to be transported by

rail are now being transported by road .The situation has been causing easy

deterioration of our roads. This should not be surprising given the very small

share of roads in Nigeria that are repaired (estimated at about 15 per cent in

2004 compared with 80 per cent in China). And yet road transportation remains

a major means to supply factories. Almost 70 per cent of manufacturing firms in

Nigeria have their inputs and outputs delivered by road. (ICA 2008:21).Nigerian

0

10

20

30

40

50

60

70

80

90

Nigeria South Africa

Indonesia kenya Venezuela Brazil India China

101

firms import 10 per cent of their inputs, with large firms (15%) and particularly

foreign firms (39%) importing more. Efficient customs are important for firms

import directly, and it takes them approximately 13days for imports to be

cleared by customs. Exporting is speedier process taking on average 7 days to

clear customs. In comparison with other countries, the number of days needed to

clear customs is clearly high. Kenya, Basil, and India report waiting times to

clear customs approximately equivalent to that of Nigeria, whereas Indonesia,

South Africa, and China report clearly lower waiting times (Less than 8 days).

2.4.9 Access to Finance

Access to finance and to a lesser extent the cost of finance are perceived by

Nigerian firms as one of the most important constraint to doing business in

Nigeria (World Bank Doing Business 2006:8). This obstacle however does not

affect all firms equally. It is explain that smaller a firm, the bigger the problem

in access to finance and in the cost of finance.

Domestic firms complain about access to finance twice as much as do foreign

firms, which often have access to their own external financing. Similarly, small

firms complained more than do medium and large firms. Access to finance

seems to be more of a problem in less industrialized states compared with more

industrialized states. Across states there is equally a significant variation of

perceptions in regard to cost of finance. In international benchmarking only

Brazil has a worse perception of access and cost of finance than Nigeria

(Nnanna, CBN Bullion, 2007:7).

Figure 2.3: Firms perception of financial sector – International comparison

Source: ICA Survey.

020406080

100

Nigeria 206 Brazil 203 Indonesia 2003 South Africa 2003

India 2005

102

Objective indicators seem to confirm these perceptions. Nigeria entrepreneurs

rely predominantly on their own internal funds and retained earnings as well as

purchases on credit from suppliers and advances from customers. Only a very

small proportion of businesses owners borrow money from their family and

friends. It is striking that the formal financial sector, banks and other financial

institutions is used for only 1 per cent of Nigeria businesses financial needs.

Figure 2.4: Nigerian Business is Funded Largely from Retained Earnings

Source: ICA Survey 2008.

As one would expect, larger firms do tend to borrow more from the formal

sector, but even the largest firms rely heavily on retained earnings rather than

seeking bank financing. Only 2 per cent of medium and large firms choose to

borrowing from banks, and less than 1 per cent of smaller firms do same.

Interestingly larger firms rely heavily on supplier credit and advances from

customers of 35 per cent compared to 25 per cent of smaller firms.

Banks are unwilling to do business with rural business because they are

perceived as high risk ventures. As a result, working capital is still a major

constraint on production, as most businesses are restricted to funds from family

members and friends and are therefore unable to respond timely to unanticipated

challenges. Similarly, the stock exchange is yet to appreciably accommodation

the long term financial needs of the businesses. This has been attributed to low

awareness, as well as aversion to ownership dilution and disclosure of

information (Obitayo, CBN Bullion 2001:16).The financial system is burdened

25%, 25%

1%, 1%

70%, 70%

4%, 4%suppliers credit and advance from customers

bank and other financial institutions

internal funds/retained earnings

borrowed from family and friends

103

with high interest rate and exchange rate volatility. Government fiscal

indiscipline crowds out the private sector and put some banks in distress. Most

businesses have been unable to access credit at high interest rate provide the

equity contribution and adequate collateral securities.

Solutions

There is need for the reform of the financial sector and this requires the merger

or outright liquidation of distressed banks.

To minimize the frequent rejection of the collateral securities by the banks, there

is need to provide legal policy framework that will perfect the collateral

securities pledged by businesses to make them admissible for loans.

Government should establish a credit Guarantee Scheme for businesses. In

supporting and encouraging businesses, the government of Israel guarantees

80% of the credit given to businesses while the banks provide the 20 per cent

balance. There is the need to classify targeted businesses into industrial

associations to enable them seek for fund in groups.

Besides classification of targeted businesses into industrial associations

prospective beneficiaries of subsidized targeted credit facilities should be made

to go through three months Entrepreneurship Development Programme (EDP) to

minimize the rate of business failure. This is the practice in vogue in India,

Malaysia and other developing countries.

2.4.10 Corruption and Crime

Corruption is perceived to be a serious constraint in the operations of firms in

Nigeria. In an international comparison we found that a higher percentage of

comparator countries‟ firms report corruption to be a serious constraint.

Looking in more detail at corruption, we show that most firms believe that

government officials have inconsistent and unpredictable interpretation of the

law. This uncertainty may be closely linked to corruption. Firms perceive

corruption to be more of a problem. We can see that overall some percentage of

firm report informal payment or gift to be common to “get things done” in

104

customs, taxes, licenses, regulations and so on, only very few people know in

advance the amount of payment needed.

When a government contract is at stake, firms expect to have to pay some 10%

of its value in such informal gifts or payments to secure it. It is accepted that

entire Nigerian system is enmeshed in corruption, from police institution and the

judiciary. The judiciary is a system in which corruption is a problem. Most

people do not have confidence in our courts. Corruption is said to be highest in

Nigeria in our police force seconded by Power Holding Company of Nigeria.

Transparency international appear to confirm that although corruption may be

perceived as major bottleneck in Nigeria, it is not much worse than in

comparator countries. Transparency international‟s Corruption Perceptions

Index (CPI), which attempts to qualify the degree of corruption as seen by

business people and country analysts, ranges between 10 (highly clean) to 10

(highly corrupt), shows that Nigeria ranks 147th (of 180 countries), close to

Indonesia, Kenya, and Venezuela appear to be slightly worse.

Internationally, Nigeria is perceived to be a country in which corruption is a

major problem. In fact, the data from Transparency International suggests that

corruption is problematic because it ranks Nigeria 147 of 180 countries

(Investment Climate Assessment of Nigeria, 2007:30).

Table 2.5: Corruption Perception Index, 2007

Country Rank (180

countries)

Index

Nigeria 147 2.2

Kenya 150 2.1

Venezuela 162 2.0

Brazil 72 3.5

Indonesia 143 2.3

South Africa 43 5.1

India 72 3.5

China 72 3.5

Source: Transparency International

It can be argued that managers internalize corruption and hence report a lower

level of corruption even though the problem is actually higher than perceived.

105

Figure 2.5: Evolution over time of Nigeria’s Percentile Rank for Rule of

Law and Control of Corruption.

Source: World Bank Governance Indicators

Finally, Transparency International report on the Global Corruption Barometer

(2007) confirms this assessment. Nigeria appears as a country in which

corruption is a problem. However, we are optimistic and expect corruption to

become less of a problem in the future, and they consider eth government‟s

efforts to fight corruption to be effective.

Crime was also reported to be a serious constraint to business. According to ICA

survey, 20 per cent of firms in the formal sector experience losses as a result of

theft, robbery, vandalism or arson. The level of crime in Nigeria most especially

from 2008 till day has increased tremendously to the extent that the researcher

does not believe that any other place in the face of the earth has higher

incidence. The issue of kidnapping and violent crime have become not everyday

occurrence but every minute occurrence.

A side effect of crime is yet another indirect cost that would otherwise not be

borne by firms: security. In Nigeria almost 70 per cent of firms have to pay for

security services, and they spend on average 1.8 per cent of their annual sales

for such services. Large firms appear to bear higher security cost than do small

and medium firms.

0

2

4

6

8

10

12

14

16

18

20

2002 2003 2004 2005 2006

Control of Courrption

Rule of Law

106

What to Reform

The police and criminal justice system must be reformed to make our police

force more effective.

Table 2.6: Security Services and Security Expenditure

Firm size Ownership Industry State

Total S M L Foreign Don Ma Re Other More

Indices

Less Indices

Percentage of

firm that paid

for security

services

69 65 84 100 100 69 72 66 68 72 65

Security cost

at % annually

1.8 1.8 1

.

8

2.6 2.6 1.8 2.1 1.3 1.9 1.8 109

Source: ICA Survey

2.4.11 Enforcing Contracts

The judiciary‟s primary role is to enhance justice, fairness, and equity. But

efficient courts do much more – they help the economy grow. They are essential

to encourage businesses to engage with new customers. Without them fewer

transactions take place, and people must rely on social networks to decide with

whom to do business. Yet in many countries courts are slow, inefficient, and

corrupt. This is particularly the case in sub-Saharan Africa where on average

commercial disputes last nearly 2 years and cost nearly half the value of the

debt.

After years of military rule, Nigeria‟s courts were in dire need of reform. Lagos

– previously notorious for its slow, corrupt judiciary system it led the changes.

In 1997 the average commercial case took more than 4 years to resolve. Today

the Lagos court system compares favourably with others elsewhere in sub-

Saharan Africa, ranking 16 among 46 capital cities in the region in terms of

efficiency. But while Lagos fair well relative to other countries in Sub-Saharan

Africa, it will lags behind other places of the world, ranking only 93 among

107

largest cities in 178 economies that were measured (World Bank doing Business

2008:23).

World Bank analysis of efficiency of contract in 10 Nigerian states and Abuja

by examining the average resolution of simple commercial disputes Nigeria‟s

High Courts have unlimited jurisdiction over commercial cases. Small monetary

claims – which value 100,000 to 1million naira depends on the state.

Commercial cases can be heard before magistrates. In some Northern States

(Bauchi, Kaduna, Kano and Sokoto) commercial disputes can also be resolved

in Sharia (Islamic) courts.

The easiest place to resolve a commercial dispute is Bauchi, the most difficult is

Cross River. On average, it takes 577 days to enforce a contract in Nigeria. The

average duration of commercial disputes across Nigeria conceal large

differences among states. Commercial dispute resolution is fastest among states.

Commercial dispute resolution is fastest in Abia, where the filling, trial, and

enforcement can be completed in just One year. Contract enforcement is slowest

in Enugu where it takes 988 days (ICA2008:12).

Contract enforcement include court, attorney, and enforcement fees, resolving a

commercial dispute is cheapest in Kaduna, where it costs plaintiffs 13 percent of

the value of the debt, and most expensive in Cross River where it costs 53

percent.

What to Reform (Doing Business 2008:10)

Implement new high court rules: The new High court rules for civil procedures

introduced three features: frontloading evidence, pre-trial hearings, and

deadlines for actions. Abuja and Lagos adopted the rules in 2004, followed by

Anambra in 2006 and Enugu and Kaduna in 2007. All these states have reported

increased court efficiency since the introduction of the new rules. In Lagos the

reforms shortened the average commercial dispute from 2 years to 1 year and 3

months. When the new rules are introduced it is essential to ensure that all users

of the system – especially judges and lawyers – receive proper training to take

advantage of the rules full potential.

108

Overhaul Enforcement of Judgements: Implementation of the new High Court

rules will not be sufficient to enhance contract enforcement if court decisions

are not enforced quickly. Enforcement is slow and costly throughout Nigeria,

taking an average of 3months and costing 3 – 22 percent of debt value.

Create Specialized Commercial Courts: Special commercial courts result in

faster, cheaper contract enforcement. Countries that have specialized

commercial courts or specialized commercial divisions in general courts, resolve

commercial disputes about 30 percent faster than countries that do not. One

reason is that judges become experts in handling commercial disputes. In

addition commercial courts often require less formal procedures, resulting in

faster trials. Only Abuja and Lagos have introduced specialized commercial

divisions, where dispute resolution is not supposed to take longer than 6 months.

Other states, especially those with large numbers of commercial cases, should

follow.

2.4.12 Access to Land:

Access to land is identified as a significant constraint to business, particularly

for small firms as well as for foreign firms. The two main reasons that land is

perceived as constraint are, first, the cost of land and second, the procurement

process.

109

Table 2.7: Reasons for perceiving access to land for expansion/relocation to

be a major or severe constraint – all formal sectors

Percentage of firms

which identify this

as reason for access

to land for

expansion/relocation

to be an obstacle

Total Firm size

Ownership Industry State

S M L Foreign Dom Re Other More

Inds.

Less

Inds.

Cost of land 92 92 90 100 89 92 97 85 88 92 91

Procurement

process

70 71 68 67 89 70 68 72 72 69 72

Availability of

infrastructure

47 46 51 29 46 47 47 46 46 45 49

Small size of land

ownership

39 37 47 49 51 39 32 44 48 34 46

Government

ownership of land

39 37 45 80 18 39 38 37 43 45 31

Disputeownership 35 33 42 69 53 34 28 3

2

48 32 39

Note: Table include only firms which perceive access as a major constraint

Source: /CA Survey

According to the survey, 25 percent of firms have tried to acquire new land in

the previous three years, and 39 percent of those firms have identified access to

land as a major or very severe obstacle. Furthermore, almost a third of firms

who successfully purchased land still report access to land as a major or very

severe obstacle. This suggests that access to land may indeed be an obstacle;

even firms successfully in acquiring land identified it as a major or very sever

constraint.

2.4.13 Registering Property

Registering property cost as much as 15 percent of the purchased price. A much

cheaper alternative is to video the transaction – an option that some other

property buyers in Southern Nigeria also choose. While a signature can be

110

forged and a property card can “go missing” at the registry, some property buyer

feel that a video tape provide solid proof that a transaction occurred. But such

evidence would not hold up in court if ownership were ever disputed. Nor would

it be recognised by banks if buyers wanted to use their property as collateral for

business loans.

Making property transfer is essential for encouraging entrepreneurs. In most

economies land and buildings account for half to three quarter of national

wealth. Securing rights to such property strengthens incentives to invest and

facilitates commerce. Formal property titles also enable entrepreneurs to obtain

mortgages on their homes or land and start businesses.

Nigeria is one of the World‟s most difficult places to register property. A

Nigerian lawyer describes such transaction as “Herculean, tortuous, and

laborious”. In Lagos entrepreneurs must go through 14 procedures, spends

82days, and 22 percent of property value to register though this is certainly an

improvement over the 19 procedures, 9 months, and 27 per cent of property

value required before reforms introduced in 2005. Still, these demands make

Lagos the most difficult place to register property among all major sub-Saharan

cities and 6th

worst in the world (World Bank Doing Business, 2008:12).

In New Zealand – the world‟s leader on this indicator – property can be

registered online in 2 days at a cost of 0.1 per cent of property value. But easy

property registration need not be limited to rich countries. In Ghana registering

property requires just 5 procedures, 34 days, and 1.3 per cent of property value,

and in Botswana 4 procedures, 30days, and 5 per cent of property value.

In Abuja, and the 10 Nigerian states that are focus of this research, registering

property takes on average 12 procedures, lasts nearly 4 months, and costs about

15 per cent of property value. Some states make registration easier than others.

Registering business is easiest in Abuja, where it requires 9 procedures, 60 days

and cost 9.2 per cent of property value. It is hardest in Ogun, where

entrepreneurs must go through 19 procedures, spends about 174 days, and pay

nearly 17 per cent of property value.

111

What to Reform

A. Lower Fees

With the average cost of property transfers at 15 per cent of property value,

Nigeria is among the most expensive countries to register property. This is start

contrast to places where registration of property is easy and cheap. As noted, in

New Zealand the fee for registering property is just 0.1 percent of property

value, and in Saudi Arabia doing so is virtually free. To facilitate property

transfer numerous countries have switched from fees expressed as a percentage

of property value to that latest, which eliminate incentives to manipulate

property value. Greater affordability usually means more registration and fewer

evasion that in turn supports the collection of property and capital gains taxes.

After India cut its stamp duties from 10 per cent to 5 per cent, revenues jumped

20 per cent (World Bank Doing Business 2008:7).

B. Replace physical valuation of property with a standardized schedule of

property values.

Physical inspections of property are part of land transfers in almost all Nigeria

states. State governments introduced inspections to counter underreporting of

property value. But in most states such valuations are a source of delays and

create opportunities for property owners to bribe inspectors so that they lower

assessed property values. Lagos recognized this shortcoming as one of the major

bottlenecks in the property registration process, and in 2005 the Land Registry

introduced a standardized schedule of property values, eliminating the need for

physical inspections. Now every area of Lagos has an assigned rate per square

meter and building and assessments are conducted at the desk of valuation

officers.

C. Eliminate the requirement for governors consent or at Least make it easier

to obtain.

A cross Abuja and other states the requirements to obtain governor‟s consent is

the main bottleneck in the property registration process. Nigeria is one of the

only 12 countries that impose this type of restriction on land transfers.

Amending the land Use Act to allow unrestricted transfers of land and property

should be a priority for the Federal Government.

112

2.4:14 Starting a Business (Entry Regulation)

Making company registration easy, fast, and affordable is essential for private

sector development. Business registration is the first interaction between a new

entrepreneur and government regulators, and is likely to shape the future of the

business. In countries where company registration is straight forward and

affordable, more businesses operate in the formal sector. But if entrepreneurs

find registration procedures overly burdensome or expensive, some may resort

to corruption to expedite the process and others will run their businesses in the

informal sector (African Development Consulting Group,2000:15).

Starting a business in Nigeria is relatively easy in comparison to other sub-

Saharan countries. Registering a company in Lagos involves 9 procedures, takes

34 days, and costs 57 percent of income per capita, while in other major sub-

Saharan cities it requires an average of 11 procedures 57 days, and 148 per cent

of income per capita. While Nigeria compares favourably with many African

countries, it lags behind the developed world. OECD countries registration of a

business requires an average just 6 procedures, 15 days, and 5 percent of income

per capita. In Australia – the easiest place to start a business – the process takes

just 2 days and 2 simple steps: obtaining a company number and a tax number.

It cost a mere 0.8 percent of income per capita, and the entire process can be

done online.

All Nigeria companies must comply with the same registration process,

including being incorporated by the Corporate Affairs Commission, paying for

stamp duties and stamping incorporation document, registering for taxes, and

obtaining a business premises permit from state authorities. Since the

establishment of the Corporate Affairs Commission in 1990, company

registration has come a long way: operations have been decentralized, and tonal

branches have been opened in all 36 states – including all the states covered by

this study. In 2006 an online system was launched enabling company name

searches and filling of documents. And entrepreneurs in a hurry now have an

option to incorporate their companies in just one day, using the expedited

procedure at an additional cost of N50, 000.

113

Similar decentralization has occurred in Stamp Duty Offices. In recent years a

dozen new Stamp Duty offices have been established across Nigeria. In most

cases they are in the same buildings as branches of the Corporate Affairs

Commission, to make visiting the two agencies more convenient for

entrepreneurs. This is a huge improvement since the time there were just two

Stamp Duty Office (Abuja and Lagos) serving entrepreneurs from the entire

country. Today all the states covered by this report – except Cross River and

Ogun – have their own Stamp Duty offices.

Registration with tax authorities has also recently become easier. Instead of

registering first at the ministry of finance‟s Federal Board of Inland Revenue

Department for corporate income tax, and then at the Value Added Tax office,

entrepreneurs can now register for both taxes at the new Integrated Tax Office.

The One Stop Investment Centre, created in 2006 has also facilitated company

start up. The center, set up by Nigerian Investment Promotion Commission,

brings all agencies relevant to start a business to one location. So far one such

centre operates in Abuja, and two more are about to be launched in Lagos and

Port Harcourt. The centre is a major step forward, but its services are available

only to large companies and foreign investors. Small and medium – size

companies must still visit each agency separately.

What to Reform?

A. Expedite Reform to Unite Registration Procedures

Today Nigerian entrepreneurs in most states must visit 5 offices to set up new

businesses: the Corporate Affairs Commission, Stamp Duty Office, Integrated

Tax Office, State Tax Office, and state ministry of commerce. The government

is aware of the obstacles that dealing with all these agencies create for

entrepreneurs, and plans to merge procedures. The Federal Inland Revenue

Service took the first steps toward making tax registration and payments easier

by creating the Integrated Tax Office. Linking the Corporate Affairs

Commission and tax database and creating a single form that meets the

requirements of several agencies will further simplify the process and reduce

delays. It will also provide a better tool for tax authorities to track newly

114

registered companies. Similarly, requiring that incorporation documents be

stamped by the Federal Inland Revenue Service add no value to service delivery

and consumes a lot of time especially in states lacking a Stamp Duty Office. An

equivalent fee in duty could easily be collected by the state branches of the

Corporate Affair Commission, paid together with other incorporation fees, and

transmitted to the Federal Inland Revenue Service. Integrated the stamp duty

with the Corporate Affairs Commission‟s registration process could reduce the

time required to register a company by anywhere from 4 days to 2weeks,

depending on the state. Swift implementation of these plans is needed for

Nigeria to have a world-class company registration system (ICA,2008:13).

B. Monitor and evaluate performance of zonal offices

According to system users, the efficiency of the corporate Affairs Commission‟s

zonal offices varies by state. Checking the availability of a company name can

take 1 – 2 days in Sokoto, while application in Ogun wait more than 1 week.

Some users also reported that local staffers delay forwarding incorporation

applications to Corporate Affairs Commission headquarters. With the growth in

the number of zonal offices, the next challenges is to maintain high delivery

standards across the country – regardless of whether the application is submitted

in Abuja, Cross River, Kano or Ogun. Strict monitoring and evaluation of the

performance of zonal offices may be required to achieve that goal (Olorunshola,

CBN Bullion 2006:21).

C. Many legal practitioners and accountants who register companies in Nigeria

remain unaware of or unwilling to do business at the new local Corporate

Affairs Commission branches and Stamp Duty offices. Instead they use

approaches from the past, travelling to Abuja or forwarding appreciation to

affiliated law firms in the capital options that lengthen the process and make it

more costly for entrepreneurs.

2.4.15. Dealing with Licenses

Illegal construction and collapsing building are a plaque of many Nigerian

cities. If obtaining a building permit is burdensome and costly, many

entrepreneurs choose illegal, often unsafe, construction. The authorities in

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charge of building regulation respond with tighter regulations and increased

inspections – which are costly to administer for governments, and cumbersome

to comply with for entrepreneurs. But there is another way of limiting illegal

construction and making Nigerian buildings safer make building regulation

simple, transparent, and inexpensive to comply with (World Bank 2005:13).

The procedure involved in obtaining a building permit, undergoing required

inspections, and securing utility connections. In Abuja and the 10 Nigerian

states this process requires an average of 15 procedures, 124 days, and 370

percent of income per capital. This is faster and cheaper than for Sub-Saharan

Africa as whole, where entrepreneurs must go through 18 procedures and spend

262 days and 2,549 per cent of income per capita. But Nigeria companies much

less favourably to other parts of the world, especially when the costs of

obtaining a permit are considered. In OECD countries the same process costs

just 62 percent of income per capita.

The average for Nigeria, do not fully reflect the situation at the state level.

Building a warehouse is much easier and cheaper in the North than in the

southern states. Kaduna ranks first – with 12 procedures taking 61 days and

costing 142 per cent of national income per capita – followed by Sokoto and

Kano. The process of obtaining a building license is far more burdensome in the

south, with Lagos – where it takes 18 procedures nearly 1 year, and 10 times

income per capita being by far the worst difficult place to build, despite recently

introduced time limits for issuance of building permit. The long period is partly

due to difficulties in obtaining and electricity connection, which without paying

bribes takes about 9 months. These required different reflect varying cultural

attitudes toward land, which is scarce in southern Nigeria. Too often revenue

collection is the priority of town planning departments ignoring the effects that

overly burdensome regulations and expensive permits have on entrepreneurs

(Doing Business, 2008:24).

The costs of permit procedures vary greatly across states. Building is cheapest in

Cross River, Kaduna, and Sokoto – administrative fee are less than 160 percent

of income per capita. Although these fees are the lowest in Nigeria, they are

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high by international standards. In Dubai such procedure, costs the average

entrepreneur just 1.5 percent of income per capita in the United Arab Emirates,

and in Johannesburg just 30 percent of average South Africa income.

Most of the cost differences derive from building permits fees. Permits are

cheapest in Sokoto and Cross River, which have flat rates for commercial

development set at 20,000 naira and 60,000 naira, respectively. Permit fees are

highest in Lagos, where the base fee for a building permit is 120 naira per cubic

meter. Fees for electricity and telephone connections are uniform across the

country, while those for water connections vary slightly, as they are set by state

water boards.

What to Reform?

A. Make Information Easily Available

One of the easiest way to encourage legal construction and save entrepreneurs

time is to make all information readily available. Today, when first-time

applicants arrive at town planning offices to obtain building permits, they find

little instruction on how to do so. Simple organisational changes could make a

big difference. Office in charge of approving building permits should be clearly

marked. All forms, requirements, and fee schedules including step by step charts

on procedures should be readily available to town planning office and on their

websites. So far, only Abuja has developed an investment for guide providing

such information.

B. Lower Fee for Building permit

Several Nigerian states have some of the world‟s highest fees for building

warehouses. These high fees often push entrepreneurs to build illegally or when

fee are based on building size submit fake plans to lower the cost of building

permits. Such buildings may be unsafe. To fight illegal construction and ensure

compliance with submitted building plans, state government have introduced

more inspections, which are very costly to administer. An alternative is to

simply make the fees more affordable.

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C. Introduce Fast – Track Procedures and Set Time Limits for Processing

Applications

In many Nigerian states the process for building a building permit can be

expedited with informal payments. But that is also what fast-track procedure,

accomplish and do so officially. Fast track procedures help prioritize the work of

town planning authorities and allow entrepreneur to focus on their businesses. In

2006 Abuja‟s Development Control Department introduced a fast-track process

for building permit approvals. Although it costs more than a standard

application; a permit can be obtained 3 times faster. Another way to expedite

approvals of building permits is to set a time limit for applications to be

reviewed. Lagos did so by introducing operation 30/30 mandating that all

applications be approved with 30 business days, halving the average processing

time. The reform in Lagos has been successful because government officials are

monitored and evaluated on whether they meet the target.

There are several reasons to reform licensing regime. First, countries with

simpler procedures and less costly procedures have larger construction sectors.

Today, construction generates less than 1 per cent of Nigeria‟s GNP, compare

with 7.4 percent in Australia and 6.2 per cent in the United Kingdom. Secondly,

countries with simpler procedures and less costly regimes have cheaper offices

and warehouses for all business (World Bank Doing Business, 2008:22).

2.5 CONCEPT OF ENVIRONMENTAL MANAGEMENT SYSTEM

Environmental management system (EMS) is that aspect of the general

environmental studies which falls within the study of management as a body of

knowledge (Tibor, 1996:60).It is not the same with Environmental Management.

Drucker (1977:6) asserts that modern organizations arose as a result of industrial

revolution and management arose with them and therefore must operate within

an organization – that is within a web of human relation. Environmental

Management System refers to the skills applied by organizations in their

manufacturing processes in order to curb waste and still maintain proper

monitoring of their products throughout their life cycle (Okeke, 2010:4). Again,

EMS is “that part of the management system which includes organisational

structure, planning activities, responsibilities, practices, procedures, processes,

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and resources for developing, implementing, achieving, reviewing and

maintaining the environmental policy” (Tibor and Feldman, 1996: 213; Cascio,

1996: 74). In other words, EMS is a management system that plans, schedules,

implements and monitors those activities aimed at improving environmental

performance. Underlying this definition is the implicit assumption of a positive

correlation between environmental and corporate performance (Tibor and

Feldman, 1996: 56).

During the two centuries, vigorous industrialisation vastly enriched our

world.However, in doing so, it also produced a rising scrap, discards and waste.

The world is beginning to cope with the environmental problems that are

legacies of the past. Some companies have started to consider the environmental

impact of their products and servicesover their entire life and that of tgeir

manufacturing processes.They are also examining the use of their dross as raw

material and of redesigning the products to make them easier to use, recycle or

manufacture. They wish to substitute cleaner technology (Iyer, 2009:118).

As everything created must go somewhere, industry‟s traditional response was

to recycle to the extent possible and dispose of the rest by incineration or rease

into the atmosphere. They relied principally on waste disposal technologies,

end-of- pipe controls, recycling and reuse.Some tried redesigning products to

make them easier to reuse, recycle or incinerate.Good enough so far, but of poor

value, today. Wastis any work that does not add value to the customer (Iyer,

2009:119). Every company must take a hard look at its processes and identify

better ways to performthe necessary functions.All companies have fat and waste

in their system and processes therefore adoption of manufacturing processes that

will lessen waste substantially is critical.

Environmental protection has supplanted cleanliness and value has shifted to

“industrial ecology”.Common practice is to find use for the bye products.Air

pollution equipmentproduce powdery resdue of calcium sulphate and fly ash.

The former can find use vice gypsum in wall boards. Fly ash is used in concrete.

Similary boiler slag is used for abrasives. Beyond it, industry is now beginning

to find that it makes sense to pass energy, waste water and some products back

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and forth between anumber of plants,design products that are eco-friendly;and

so on. Value has been shifted to elimination of releases that are hazardous and

pollutants.

2.5.1 Processes of Achieving Environmental Management System

The Eco-Factory

Environmentally conscious manufacturing also known as the eco-factory aims to

achieve optimal utilization of natural resources without having to cause damage

on the environment or compromising the quality of the products being

manufactured. In other words, the aim is to achieve both product and

environmental quality (Madu, 2000:5).

The eco-factory strategy relies on effective utilization of natural resources,

minimization of waste, achievement of product quality and a cradle – to – grave

approach to production. This strategy is based on a holistic view of the entire

manufacturing process and involves a thorough understanding of life-cycle

assessment and it implications. It is not limited to the production process but

includes also distribution channels, consumption and recovery, and effective

disposal of potential wastes.

The eco-factory approach thus requires the manufacture to track its product

through the entire life cycle. This means following the product from the point of

design through safe disposal at the end of its useful life. Essentially, the

definition of quality has broadened to look beyond product features,

incorporating the impact of the product on its extended environment. In other

words, quality is not simply defined by the ability of the product to satisfy its

intended use, but also by it ability not to create a burden to its extended

environment.

Listening to Stakeholders

Understanding this new view of quality requires that manufacturers listen to the

voices of their stakeholders. This term includes more than just customers,

extending to the many other parties who may be affected by the product

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sometime during its life cycle. In fact the term includes interest groups,

legislators, the general public, and of course, investors.

Stakeholders must be viewed as active participants whose actions and reactions

can potentially affect the operation of the firm. Thus, rather than a firm aiming

to achieve customer satisfaction, it should aim also to achieve stakeholder

satisfaction.

This systemic thinking forces the firm to view itself as a member of a lager

society. It can promote social responsibility by helping to optimize the use of

resources. Environmentally conscious manufacturing can therefore, be seen as a

quality practice in which the emphasis is placed on waste minimization, with the

goal of achieving stakeholder satisfaction.

Waste Minimization and Optimal Use of Resources

Waste minimization is the hallmark of any quality management approach. This

was succinctly explained by the father of total quality management (Dr. W.

Edward Deming) in what is often referred to as the Deming Chain Reaction

Model. In this model, productivity is related to quality because quality is a

means of doing things right the first time – thereby minimizing or reducing

waste.

With quality practices in place, there is less rework, fewer rejects, and less

scrap. Reduction in all these areas imply that energy and materials are

conserved, thus increasing productivity and reducing the cost of production.

Clearly, environmentally conscious manufacturing calls for optimal use of

resources, especially non renewable resources. With the ability to minimize

waste and reduce the use of fossil fuels, we contribute in a substantial way to

attaining that goal. Thus, quality, productivity and environmental management

may be inseparable, it may be impossible to achieve one without the others.

Upper management continuously seek the means to demonstrate cost – cutting.

In fact, top managers delight in annual reports that show investors that costs

have been significantly cut and that the bottom line is improvingTop

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management continually seeks the means to demonstrate cost-cutting. To

achieve great reductions in cost, one has to look at operations, because the

operations unit is where costs are created. It is the engine that drives the firm.

Operations are where goods and services are created. Without operations, there

is no purpose for an organisation.

Every organisation irrespective of its mission – must therefore have an operation

unit that understands exactly how the firm‟s mission will be achieved and how

cost reduction will be realized.Managers have begun to focus on strategies such

as inventory management as a means of minimizing waste. Other techniques,

including just-in-time practices and supply chain management, are also applied

to achieve this goal.

Despite the many efforts that have been made, environmental burdens continue

to be evident in the manufacturing process. It is worth while focusing on how

such burdens could be further controlled. The sections that follow identify

specific approaches, and present examples of how these techniques have applied

to enhance both product and environmental quality.

Inverse Manufacturing

Inverse manufacturing is a closed-loop product life-cycle approach that aims to

prolong the life of a product and its constituent components (Umeda, 1995:51).

This is accomplished through disassembling the original product at the end of its

useful life, creating components that can be reused, recycled, refurbished, or

upgraded. The interest is to limit the number of components that are disposed or

discarded as waste. Yoshikama (1996:48) notes that inverse manufacturing

helps to minimize environmental costs.

The term “inverse manufacturing” refers to the techniques “reverse approach” to

recovering product components. To effectively achieve this goal, attention must

be paid at the product design stage, with a focus on designing components that

can be easily dissembled. This helps ensure that the components can be

efficiently reclaimed for reuse, thereby prolonging their useful life. Inverse

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manufacturing is gaining popularity because the techniques can be pursued

without compromising the quality of products.

Inverse manufacturing could become increasingly important to products such as

computers, which must be frequently updated to increase their capabilities. The

“life” of a computer can effectively be prolonged by extracting valuable

materials, such as sliver, platinum, and gold, from older computer units and

reusing them in building newer models. This approach limits the exploitation of

non-renewable resources and encourages the recycling of these valuable

components. This is an example of how inverse manufacturing can achieve the

three Rs – recovery, recycling and reuse of materials.

Similarly, in the paper industry, the recycling of paper rather than the use of

virgin pulp in new paper production prolongs the life of the original materials.

Inverse manufacturing contributes to minimizing waste of materials and

conserving landfill space, while at the same time extending product life.

Recycling

Recycling is of course, one of the better known strategies for sustainable

manufacturing. Many communities have now mandatory programs, and people

have now come to identify with the idea of recycling newspapers, packaging,

cans, and bottles as participants in recycling programmes. They typically

separate their recyclable products from their normal garbage and often pay fees

to support the recycling programme.

Although recycling programs have not always been as efficient as expected,

they do contribute to limiting the demand for landfill space. The earth is

composed of 30% land, while the rest is water. As land fills increasingly fill up,

policies that support the recycling, recovering and reuse of materials are

becoming of paramount importance.

Remanufacturing

Remanufacturing is another strategy that is worth mentioning. As the name

suggests, it involves the rebuilding of unit or machinery to restore it to a

condition that is “as good as new”. (Madu, 2000:69)

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Remanufacturing involves the reuse of existing product components after

overhaul, replacement of some parts, and quality control to ensure that the

remanufacturing product will meet customer expectations. Remanufacturing

products and components typically come with a new product warranty.

For remanufacturing to be effective, certain preparatory steps must be taken.

These are outline below:

Collection of Used Item: An efficient policy on the recovery of used

components must be put in place. Recycling programmes can complement these

efforts for example, drum and toner cartridges used for computer printers and

photocopying machines, and some auto parts, often are recovered from

customers and reused. Sometimes, it may be necessary to offer a token incentive

to encourage such recycling efforts.

Inspection of Recovered Production: This is necessary both for checking the

suitability of the items for remanufacturing and ensuring the economic

feasibility of manufacturing the items.

Product Disassembly: This is the key to many remanufacturing efforts. Often, it

is feasible to remanufacturing an entire product. Alternatively, product

components may be recovered and used for other manufacturing or

remanufacturing efforts. The recovery of disassembly of products must be

efficient; it is cost should not exceed the added value of recovery the material.

For example, the value of resources and energy committed to recovering the

material or component should be less than the environmental value of the

product.

Reverse Logistic or Product Stewardship: Reverse logistics offers a cradle to

grave approach to managing products. It insists that responsibility for a product

should not end with the transfer of product ownership to a customer or with

expiration of the warranty instead, the manufacturer is responsible for the pull

life of the product.

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Dillon and Raram (1991:52), refer to this approach as “product stewardship”.

Roy and Whelan (1992:23), define it as “systematic company efforts to reduce

risks to health and the environment over all the significant segments of a product

life circle”.

According to Bullard (1994:78) “product stewardship is a principle that directs

all actors in the life, cycle of product to minimize the impact of the product on

the environment”. The concept of product stewardship has evolved in response

to growing public concern about product disposal and new legislative initiatives

that are holding manufacturers accountable for the residual effects of their

products on the environment.

At first, many businesses resisted efforts to extend manufacturer responsibility.

Now, however, they are beginning to see that a focus on managing environment

content could become lucrative to their organisations, and might even enhance

long-term profitability. As such, it could offer competitive advantages to

business.

Roy and Whelan (1992:42) identified some key concepts for product

stewardship, as follows:

Recycling;

Evaluation of equipment design and material selection;

Environmental impact assessment of all manufacturing processes;

Logistics analysis for the collection of products at the end of their lives;

Safe disposal of hazardous waste and unusable components and;

Communication with external organisations (including consumer group,

legislatures, industry, and the public at large).

According to Giuntini (1997:63), about 10 – 15 percent of gross domestic

product could be affected if manufacturers developed business models to

support a reverse logistics strategy. Such developments are ultimately feasible

since, as noted earlier when managers are exposed to the value of environmental

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management they will buy into the effort. Some of the potential benefits of

reverse logistics, as identified by Giunitini, are:

A reduction by as much as 30 percent in industrial waste through effective

management of supply chain.

Reduction in industrial energy consumption and;

Control of environmental and product liability costs.

These benefits suggests that a reverse logistics strategy can help to control costs,

reduce waste, and lower energy consumption, all of which will improve

productivity while satisfying environmental management goals.

Use Stakeholder Teams

Modern corporations emphasize the use of teams. There is a good reason for

this, since teams can create value. Teams are particularly useful in knowledge

management, since team members from different worldviews and perceptions to

the table. These diverse views can often be useful in addressing (or even

predicting) problems. A stakeholder team can be particularly useful in

addressing environmental and quality issues. To compete in these areas,

organisations need to understand the views of their full range of stakeholders.

A multidisciplinary perception of environmental issues often is necessary if

problem are to be addressed effectively. Performing life-cycle assessment for

any product is difficult, since a solution to a particular environmental problem

could create another environmental burden.

Such assessment can become more effective, however, when a multifaceted

perspectives on the problem is adopted. In addition, the multiple perspective

viewpoint will obviously benefit a wide rang of stakeholders who share different

idea/views, experience and backgrounds.

Stakeholders teams can help elucidate the complex environmental problems that

corporation face. For the team to be successful in accomplishing its assigned

tasks, top management commitment is essential. This commitment must be

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shown in the resources that are committed, the empowerment of the team, and

the involvement of upper-level managers.

Teamwork has the added advantage of helping to “sell” the ideas that are

generated to other functional departments within the organisation. People are

more likely to buy into ideas they participate in generating. The use of teams

acknowledges that departments within organizations are not functional silos

with competitive agendas. Rather, they must tact as integrated and coordinated

units that work to achieve the common goals of the organisation. Using teams is

an excellent way to address complex and dynamic problems. This approach

recognises that knowledge does not reside in one person or one department, but

is distributed throughout many areas of the organisation. This diffuse knowledge

must be organized and used effectively in a team structure in order to improve

the management of the organisation.

Adopt Customer Driven Design Strategies

Corporations exist to satisfy a target audience their customers. Customers must

be satisfied for the business to thrive. In today‟s economy, quality is paramount

to achieving customer satisfaction. In fact, quality often is viewed as being

synonymous with customer satisfaction. Some businesses have managed to

excel through creating customer loyalty. Such loyalty generally must be

cultivated over a long period of time, and the reputation that leads to customer

satisfaction.

Although the idea of quality is not a new concept, what is new is our current

approach to quality. Companies today are striving to design products and

services based on the requirements to customers rather than on the perceptions

of design engineers. This represents a significant change in the corporate

approach to delivering products and services to customers.

Of course, in this new view, the customer is an integral part of the design

process. The company must discover the wants and needs of the customer before

doing any design, and must seek to integrate these factors into the design of

products and services.

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The customer-oriented thinking has influenced the way new products are

generated. This approach puts the customer at the core of production or services

development; designers become facilitators who are simply working to achieve

the expressed needs and wants of the customer.

The design stage is crucial if customer driven attributes are not identified and

incorporated into the product at this point, the needs and expectations of the

customer ultimately will not be met, and the product may fail to become

successful. Increasingly, corporations must listen to the “voice of the customer”

and develop exactly the product and services that satisfy their needs (Madu,

2000: 128).

Partner with Suppliers

Increasingly, organisations recognize that pollution must be stopped at the

source. As companies start to become product stewards, it is important that

manufacturers partner with their suppliers to ensure that both quality and

environmental stewards are satisfied. Accordingly, the diligence must be

exercised in selecting suppliers and vendors.

New environmental and quality realities create new challenges for

manufacturers in selecting their suppliers and other value-chain partners. It is

not enough to simply find a partner or supplier that offers the lowest price. It is

important to partner with those who can offer more value for less by addressing

quality and environmental issues that are important to the customer.

Companies today build strategic alliances with their suppliers. Such alliances

requires sharing of critical information and involve long-term commitment to

excellence.

Companies often maintain a few dedicated suppliers who understand and can

follow through on their long-term objectives. These suppliers also benefit from

the economies of scale that may result from working with a single large

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customer over a long period of time, enabling them to lower their production

and transaction costs.

Utilize Lean Production

The enhanced role of the supplier has given new meaning to manufacturing

strategy, and to the popular concept of learn production, “lean production” is the

term used to describe the manufacturing strategy associated with the Toyota

Production System. It is based on adding value to products or services through

the elimination of waste and incidental work. The goal is to improve

productivity by conserving resources and creating high value to the customer.

Learn production is also an environmental management strategy. Effectively

coordinating the activities of members of the supply chain and adopting just-in-

time practice can significantly reduce environmental burdens as productivity is

improved. There is less demand for energy usage, less rework, and fewer scraps.

Lean production works well with a synchronized production system that is able

to respond rapidly to customer demand on a real-time basis. A synchronized

system can potentially increase productivity and equipment utilization, reduce

cycle times, and minimize waste due to reduced scrap, rejects, and rework.

The principles of lean manufacturer as applied to managing environmental

burdens, can be summarized as follows:

Invest in People

People are the most important asset of an organisation. They understand and

operate the work processes. They also have their individual mindsets and

worldview, which can impact on the work process.

The knowledge and information embedded in workers can be a source of

organisational competitiveness. Consequently, it is important to inculcate a

culture of learn production and environmental management, they seek strategies

to realize such goals.

Organizations can enhance their competitive and advantage if they create a work

environment that fosters self actualization and empowers workers to be

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innovative. One of Deming‟s 14 points for management calls on organisations to

promote “pride of workmanship” so that employees identify with the

organisation and one motivated to improve quality and productivity. This will

also have an impact in reducing waste.

Manage the Shop Floor

The majority of organisation‟s costs are related to operations. Thus a firm that

can mange and control operational cost will be able to enhance its competitive

advantage.

Much of the waste incurred in manufacturing can be traced to the shop floor.

This waste may be in the form of materials, energy, manpower, poor quality,

pollution, or redundant activities. It is critical to re-evaluate each activity in

the production process and match its value contribution to its waste creation.

Only by these means can value-adding activities be enhanced and waste of all

kinds eliminated.

Pursue Continuous Improvement

Every effort should be made to continuously improve work processes,

employee capabilities organisational processes, productivities and quality of

production. There should be no end to achieving continuous improvement.

Moreover, continuous improvement efforts should apply to all activities,

including product design, sourcing of materials, product life cycle

management, and tracking of customer order fulfilment. By addressing each of

these stages, considerable amounts of waste can be cut.

Make Product Stewardship a Priority

As noted before, the concept of product stewardship is becoming increasingly

important to stakeholders. As such, it is highly relevant to environmental

competitiveness.

Consider one well-known example of corporate failure to take responsibility

for the fate of products: the pollution of Love Canal in upstate New York. This

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was one of the most devastating environmental catastrophes of the twentieth

century in the United States. Between 1942 and 1953, Hooker Chemical

Company, now part of Occidental petroleum and Chemical Corporation

dumped some 20,000 to 25,000 tons of toxic chemicals in Love Canal. Many

of the chemicals were pesticide waste and refuse from chemical weapons

research, including the Manhattan Project (Allan 1998: 32).

More than 2000 different chemicals and toxics were disposed. Among the

most heavily concentrated were benzene hexachloride, chlorobenzones, and

dodecyl mercaptan. Even though there is an avalanche of information on the

health effect of single chemicals, there still is relatively little knowledge about

the effects of exposures to multiple synthetic chemicals.

As a result of the dumping, dioxin and mercury seeped into the soil and

polluted the entire area. Women of childbearing age living in the area began to

experience a high incidence of miscarriages and stillbirths. There also were an

elevated number of crib deaths and children born with neurological problems

and hyperactivity disorder (Gibbs, 1999: 60).

Why were companies like Hooker Chemical so complacent about the effect of

their waste disposal? Bullord (1994:32) attributes it to the environment

policies of the time, which focused on how to manage, regulate, and distribute

risks.

This led to a dominant viewpoint that characterized environmental

management efforts as expensive, wasteful, and harmful to competition. Given

this perception, upper-level managers were reluctant to engage in efforts that

minimized environmental burden.

Today, corporation are much more likely to be held accountable for such

short-sightedness. Regulatory enforcement actions and stakeholder lawsuits

force them to pay for the pollution they create. Even more importantly, they

stand to lose public relations war. Interest groups are quick to identify and

boycott manufacturers whose products fail to show sensitivity to

environmental concerns.

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Environmental costs should, therefore, be viewed from a comprehensive

perspective, and seen in the context of a product‟s interaction with the

extended environment throughout its life cycle.

Business managers tend to underestimate the impact of environmental costs

and liabilities. In addition to the potentially huge costs associated with

litigation and cleanup liabilities, companies also face the danger of losing

customer good will. The negative publicity and word of mouth that may be

generated as a result of environmental pollution can create an enormous

economic burden that can even threaten the survival of the business.

Thus, environmental costs must be evaluated by looking at all their facets,

internal and external. By understanding the true range of environmental costs,

managers can make purposeful decisions on how to effectively manage

environmental burdens.

Follow the ISO/4001 Standards

The growing interest in environmental issues has motivated the international

community to develop guidelines for achieving environmental quality. The

International Organisation for Standardization is at the forefront of this

development.

ISO, already enjoyed an international reputation for its widely adopted

guidelines on product quality (the ISO9001 series standards), developed the

14001 series for environmental management in the 1996. This is the most

current of the guideline and principles of environmental management systems.

In the years since their introduction, the ISO14001 standards have made

businesses more aware and concerned about the growing need for

environmental protection. More, by becoming eligible to affix ISO

certification at their names and brands, organisations can win the “public

relations war” against their competitors.

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ISO 14001 environmental standards include guidelines for environmental

management systems, environmental auditing, environmental labelling,

environmental performance evaluation, life-cycle assessment, and

environmental aspects in product standards. They also include a number of

specific terms and definitions.

Even if an organisation does not want to seek formal certification under ISO

14001, it can use the standards to audit its operations and ensure that its core

processes are indeed pursuing the goal of environmental quality.Because the

interest in environmental quality management is growing rapidly, companies

need to develop core competencies in this area in order to compete effectively.

The ISO 14001 guidelines can serve as a launching pad to reaching this gaol.

The ISO 14001 guidelines provide direction and allow companies to take a

concrete set of steps toward achieving enhanced environmental quality.

Companies that audit themselves against these guidelines stand to benefit.

These firms learn how to improve their products and processes to increase the

level of “environmental content”. They also learn how to effectively manage

their resources in order to become more competitive.

Learn to “Sacrifice”

Achieving environmental quality is not a simple procedure because of the

interdependent relationships that exist between process inputs and outputs. An

output from one process can have an impact as an input to another process.

It is also very difficult to assess the implications of outputs to effectively

estimate their environmental impacts. Even life-cycle assessment is limited in

its ability to effectively assess overall impacts.

Some environmental impacts generated through a process may also be

unpredictable, undeterminable, and inestimable. Thus, trying to optimize

environmental strategies may be very time consuming.

Firms often find that it makes sense to seek a “satisfying” solution to an

environmental problem – that is, a solution that is “good enough” even if it is

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not optimal. In many cases, such an approach can lead to an environmental

solution that works quite efficiently.

2.5:3 Information and Environmental Decision Making

Knowledge is key to making sound and effective decisions in today‟s

competitive environment. Environmental decisions are among the most complex

that organisations face, especially since they often affect diverse groups and

domain outside the immediate firm.

The unpredictable nature of environmental impact and effects can also make full

assessment difficult. In order to deal with the complex environmental

management issues that contemporary corporations face, an environmental

decision support system is needed to assist managers (Frysinger, 2000: 72).

Information on environmental issues may reside in many different quarters,

including entities and agencies outside the immediate organisation. It is

important to be able to access and organise relevant information, while

providing an integrated system that makes the information available to decision

makers when needed. The quality and timeliness of environmental information

can be crucial when attempting to resolve problems.

2.5:4 Environmental Decision Problems

Frysinger (2000:23) categorised environmental decision problems into six

categories: spatial, multidisciplinary, quantitative, uncertain, quasi-procedural,

and political. Each is discussed briefly.

Spatial Problems

Environmental problems are sometimes location – and situation – specifics. In

such cases, the solution employed many also be specific to the particular

problem.

Consider the example of the land rotation systems used by farmers in many

developing countries. Especially where farmers lack mechanized methods, such

approaches often arise in response to the decreasing yields that are realized as a

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soil nutrients become depleted through overuse of the land. Understanding such

agricultural conditions can enable environmental planners to develop

appropriate strategies that help protect the quality of the soil and surrounding

areas such as forests.

Appropriate environmental strategies recognize that policies that encourage

mining or drilling for mineral resources, and processes that lead to deforestation,

can severally affect the availability of land and water resources, and the quality

of the soil, thereby compromising the agricultural fertility of the land. Such

practices can also destabilize societies as peasant farmers migrate to other areas

with “greener pastures” or abandon farming altogether to move into cities.

Each environmental strategic action taken must be balanced against the social

destabilization that may result from it. The social costs incurred as the result of

an environmental decision may also affect the competitiveness of the

corporation making the decision.

Multidisciplinary Problems

Environmental issues are multifaceted and involve aspects that go beyond the

environmental professional‟s traditional focus on natural and physical science.

A few years ago, we could not even have viewed environmental management

approaches as a potential competitive weapon. Today, corporations recognize

that “pollution prevention pays” and understand that the environment must form

part of the organisation‟s strategic vision. Many organisations have been able to

improve corporate profitability by perfecting their environmental strategies and

showing social responsibility toward their communities.

Environmental decisions must borrow from the knowledge that resides in all

functional areas. These decisions often touch on wide range of mattes, including

managements, economic, sociology, legal issues, and political matters. The need

for a broader view of environmental issues has led many organisations to form

cross-functional teams to analyze and develop their environmental strategies.

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Companies also have learned to partner with organisations they previously

might have viewed as adversaries. Most of us are familiar with the best known

examples: when fast-food restaurant giant McDonald‟s switched its packaging

from polystyzene containers to paper wraps in order to reduce the amount of

solid waste generated, it worked with the Environmental Defence Fund (EDF).

Pacific Cras and Electric Company regularly consult with the Natural Resources

Defence Council when developing environmental strategies. The New England

Electric System worked with the conservation Law Foundation to develop a

20year strategic plan.

Corporation have begun to realize the essential value strategic alliances with

environmental interest organisations, which often can provide dependable and

valuable information from different customer constituency groups. Such

information is key to developing and designing products that minimize

environmental impacts while meeting customer needs and helping business to

become more competitive.

Quantitative Problem

In the past, environmental science focused almost exclusively on objective

metrics, ignoring the many variables that cannot be easily quantified. Today,

environmental decision-makers are more likely to take a holistic view of

environmental problems.

Objective metrics are still an essential part of the decision-making process, but

they are not the only element. Also, important are social and political issues, as

well as even more intangible “human” elements. Many organisations have

sought ways to expand objectives metrics to include quantitative factors, and

have developed multi-criteria-decision-making models.

Uncertain Problems

The organisational decision-making environment typically is complex, dynamic,

and highly uncertain. Information on environmental issues changes daily. In

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addition, managers‟ scope for action often is limited by the particular

technology that is available when the decision is made.

Decisions often must be made with incomplete information. Organisations must

continually explore ways to acquire better information, increase their

understanding of the operating environment, and develop more flexible

environmental strategies that will be able to respond to future developments.

Quasi-Procedural Problems

Organizations recognize the increase role of regulatory agencies and must

continue to adapt their corporate policies to satisfy legal and regulatory

requirements. In addition, the environmental decision-making process should

incorporate industry-specific and international policies.

As noted above, organizations should also consider utilizing the ISO 14001

series of standards if they have not already begun to do so. Increasingly, these

standards are coming to be viewed as de factor laws in many areas. In addition,

many large corporate customers now require their suppliers to become certified

to ISO 14001.

Political Problems

One cannot overstate the impact that public opinion has had on the growth of

environmental regulation. Most of the new regulations that have been adopted in

the recent years were triggered by public demands for enhanced environmental

protection.

Legislators enact laws primarily in response to the concerns of their

constituents. Corporations can learn to adapt their police to public concerns by

listening to the voices of their stakeholders; concerns expressed today may lead

to new legislation tomorrow.

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2.5:5 Environmental Information System (EIS) Frameworks

As is apparent from the discussion above environmental information interface

with many different areas, making it difficult to manage effectively. But a few

principles can be outlined:

The framework is based on grouping information into six data base. This

categorization makes it efficient to update information in a timely manner. The

six categories are discussed below (Madu, 1999:38, Zutshi, 20043:11).

Production Database

This database maintains information on actual production practices and their

potential environmental impacts. It provides specific information on resources

needed for production (such as water and energy requirement), as well as

environmental aspects (for instance, expected gas envisions, potential disposal

problems, solid waste creation). It also includes inventory documentation on

resources that are consumed, expended, and emitted.

When different production strategies are available, the organisation may conduct

a life-cycle assessment to select the most appropriate production plan; such

assessment requires a decision support system based on a multi-criteria

approach.

Because of the problems presented by life-cycle assessment, and the difficulties

involved in assessing whether one form of pollution is “better” than another, it

may be impossible to identify an optimal production plan. The firm can,

however, use its best judgement and critically evaluate alternative production

paths.

Process Database

This database focused on the process itself and the stage at which decisions on

process selection or machinery for production are being made. Specifically, it

helps address issues such as the following:

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How does the equipment used in the production process, and the way humans

interact with it, contribute to the generation of waste and creation of pollution?

What process design issues may be contributing to the environmental burden?

What materials were used in designing and manufacturing the machinery that is

being used?

Are these materials environmentally friendly?

Using this approach, the organisation compare alternative processes based on

environmental burdens and future impacts they may create, such as waste

generation and pollutant emissions.

Delivery Database

The transportation, delivery and distribution of a product throughout the various

stages of its useful life can contribute a major portion of the waste that is

attributable to the product. This database includes information dealing directly

with product distribution, recovery, and disposal strategies, and offers access

sites that customers may contact.

Increasingly, manufacturers are finding that they must develop effective

networks for recovery and reusing materials in their products. Many companies

that reclaim or recycle parts offer repurchased programs to avoid having

recyclable materials dumped into landfills.

Packaging offers another avenue for controlling environmental burdens, with an

increasing number of companies using recycled packaging.

Product Database

This database evaluates the product by looking at its constituent parts. Its life

cycle and its stages of environmental burden and management recycle

reclamation, and disposal as well as its interaction with the extended

environment. The aim is to understand the sources of environmental problems

and find ways to minimize environmental impacts.

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Organizations often conduct competitive analysis, such as benchmarking, in

order to understand world-class environmental products being offered by

competitors. Benchmarking studies may also investigate the production and

delivery channels of world-class products, and identify what can be learned

from such practices.

Government Database

This system can access and link to the enormous environmental databases that

government agencies maintain on environmental issues. For example, the United

States Environmental Protection Agency (EPA) maintains an enormous database

on toxic pollutants and their environmental consequences. Access to this

information can help companies in their quest to develop sustainable products

(Madu, 1996).

The governmental database should also maintain documentation on the

legislative activities of and environmental laws adopted by state, national, and

international governments. Violation of such laws can lead to heavy fines,

financial liability, and additional penalties for companies, as well as jail term for

the company‟s executives.

By making sure it is up-to-date on all applicable laws, the organization and its

strategic alliance partners can work to design and develop products that meet the

required standards.

International Database

This database includes information on international standards, such as ISO

14001. Although the ISO14001 series of standards is recognised internationally,

there may be implementation variations from country to country. Corporations

must know their own national and regional standards, and understand the

country-specific environmental law ion areas where they operate.

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Using the EIS Database

As noted, the system is designed to be open to strategic partners of the company

such as customers, suppliers, and vendors. However, the company may limit

access to certain information within the EIS in order to protect sensitive data and

trade secrets.

For example, customers may have access to product disposal database without

necessarily having access to information on product environmental quality

assessment.

2.5:6 Advantages of the EIS Framework

There are several advantages to the EIS framework which include the following:

(Hawey, 2006:125).

Consistency of Information: It is important that all strategic partners, such as

suppliers and vendors, have access to the same environmental information. This

allows partners to be consistent in their application of environmental standards.

Accuracy of Information: As EIS framework can help ensure that information

contained in organizational databases is validated and acceptable, and that there

are no ambiguities or misunderstandings.

Centralization of Information: With an EIS framework, information that

previously may have been scattered throughout the organisation, or that might

even have resided with one or more of the firm‟s strategic partners, can be

centrally organized, shared and made available to anyone who needs it. This

eliminates the need to waste time searching for information from several sources

and helps facilitate the decision-making process.

i. Data Mining: With an EIS framework in place it becomes easier to

retrieve archival data.

ii. Timeliness: Information can be updated in a timely manner and made

available on a real time basis.

iii. Elimination of Information Barriers: Barriers that may previously

have existed because of distance or geographical location can be

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eliminated when databases are electronically accessible via the

internet. Better management of information also reduces

misconceptions and misunderstandings.

Efficiency of Information Process: Efficiency is improved when quality

information can easily be obtained and updated on a timely basis.

Cross-Unit Efficiency: When high quality information is readily available

throughout the organisation, all departments within the firm can become more

efficient and have a better chance of achieving optimal environmental goals.

Cost Reduction: An organization‟s processes and products are more likely to

meet environmental and quality standards when decisions about them are based

on sound information. Maintenance of high standards can reduce waste, rework,

and pollution, allowing costs to be easily contained.

2.5.7 Challenges of Environmental Management System

The Forces for Green Business

When asking firms about the importance of the environment, it was discovered

that it is more than some will admit and less than some would hope. The

proponents of more environmental regulations for business have gained support

from Porter (1991:6), who briefly discussed the question of whether strict

environmental standards make American industries less competitive in

international markets.

He views conflicts between environmental protection and economic

competitiveness as a false dichotomy. Strict environmental regulations do not

inevitably hinder competitive advantage against foreign competition indeed they

often enhance it (Rondinelli, Berry and Vastag, 1997:31). It is here that we can

see the paradox of the view that EMS is only a cost to a firm.

The view that EMS is only a cost to the firm surfaced in other forms in the

literature. Multinational corporations that invest in the emerging market

economies are often accused of seeking pollution heavens and exploiting local

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conditions to gain quick profits at he expense of the poor and vulnerable

(Korten, 1996: 60).

Rondinelli and Vastag (1998:23) argue that the leading multinational

corporations make substantial contributions to human and natural resources

development in emerging market economies – focusing on longer term goals

and competitive gains and putting aside short-term cost considerations.

It has been claimed that firms involved in proactive environmental programs can

lead the way into environmental stewardship, and new regulatory requirements

(Rondinelli et al, 1997: 16). While there are cost/benefit tradeoffs associated

with being the standard setter and being a follower, there are also times, when

government or the competitors seek “best in practice” environmental companies

as a benchmark.

Firms that are laggards in adopting new standards and conforming to existing

regulations will spend value resources in order to stay abreast of the active

development of their competitors, and new governmental regulation. The

United States alone have passed 20,000 page threshold during 1993 and

continues to add exponentially to the number of environmentally related pages

of regulations since 1993. This increase in the federal laws does not even

include the state and local level regulation which tend to compound the already

complex issue of legal compliance.

Those firms who choose to be reactive to environmental legislation and

implement end-of-pipe solutions to pollution problems will consume more

resources just to comply with these new regulations. It should be easy to see that

compliance is a minimum requirement for competitive advantage. For those

firms who are already exceeding regulatory compliance, the proactive

investments in previous environmental initiatives can help defend the firms

against new compliance issues, costs, and competitors (Sharma, 1998: 729).

Additional evidence of the growing importance of environmental business

practices is seen in the Environmental Protection Agency‟s published of a code

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of Environmental Management Principle (CEMP) for all Federal Agencies. The

intention of this code is to move federal agencies towards a “systems” approach

to environmental management that will mirror private sector initiatives such as

EMS standard (Anonymous, 1997: 18).

Examples of international government‟s recognition of environmental

importance may also be seen in Indonesia‟s recently introduced program for

pollution control, Evaluating and Rating (Wheeler and Afsah, 1996: 20). This is

a landmark initiative under which polluters are assigned environmental

performance ratings that are announced to the public.

The main objectives of the program which went into effect in June 1995, are to

increase compliance with environmental regulations, promote adoptions of clean

technologies, create incentives for polluters to strengthen their in-house

environmental management capabilities, and prepare companies in Indonesia for

ISO 14000 certification. Due in part to governments recognising the importance

of environmental business practices, corporations now must evaluate the

appropriate corporate environmental policies for their plants and supply chain

partners while being consistent with new international standards (Rondinelli and

Vastag, 1996).

Aside from the looming environmental legislation, firms still have to handle the

delicate issues of special interest groups, stakeholders, customers, and

communities around the firm. The recent United Nations Climate conference

discussing the controlling of global warming, and specifically reduction of

carbon dioxide and other green-house gases to below 1990 levels has brought

growing attention to the environmental impacts of business in many countries.

So how come a firm keeps track of all the environmental complexities it needs

to while meeting the specialised internal and external information needs of the

firm? To see how this can be accomplished, one needs to better understand the

risks and issues involved in the decision to implement an EMS.

While some models of firm performance and the relationship to environmental

constraints have been introduced (Porter and Van Der Linde, 1995), research has

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not yet adequately resolved the EMS paradox. As pointed out by Pool and Van

De Ven (1989), when paradox is encountered, it can be resolved in one of four

ways. The first and least desirable is to ignorer the paradox.

The second is to ensure that the paradox reflects differences in organisational

levels. That is, what is done on the shop floor differs from what is done by top

management, when carrying out strategic planning. The third is that the paradox

reflects temporal differences. Firms at one stage of development behave

differently from firms that are at observed at another point in time or stage in

development. The fourth and final option is to revisit the theory and to revise it

so that it can cope with the paradox.

Four Environmental Policies

Reactive Policy is found when there is a small level of endogenous risks

and a small level of exogenous risk. Reactive forms can be likened to

Hart‟s compliance strategy, and require corrective environmental

management action as regulations and norms change.

Proactive Policy is present when endogenous risks are large and

exogenous risks are small. Proactive environmental policies seek

immediate corrective environmental management action as regulations and

norms change and try to anticipate these changes.

Crisis Prevention Policy is present when endogenous risks are small and

exogenous risks are large. Crisis prevention usually entails environmental

management action due to public exposure, where there are continuous

emergency monitoring procedures and immediate intervention if an

emergency occurs.

Strategic Policy is present when endogenous risks are large. Much the

same as Hart‟s second prevention based policy environmental management

actions include continuous improvements in all aspects of business activity

toward pollution prevention and waste elimination.

The resolution of the paradox that EMS is only a “cost”, may be true

where there is not a strong environmental corporate culture and the system

was not designed¸ developed, or implemented correctly. Naysayers

(2004:26) points to failed environmental initiative, but this myopic

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approach overlooks the many benefits available to firms who choose to

implement an EMS.

Without capturing waste information we are left with few tools, or facts, and

many opinions to fight environmental battles. The tendency to focus on the

failures and overlook those benefits may be due to several factors.

Environmental Mindset

The categories of firms identified by Rondinelli and Vastag (2002:61), point to a

dichotomy among firms. These firms may be aware of EMS as either a “cost”

or an opportunity. These firms looking at EMS as a cost tend to do the

minimum amount of investment in EMS, or may try to get by with no system at

all. These cost oriented firms typically have low exogenous risks. Opportunity

seekers tend to be more aware of the benefits of an EMS, and attempt to realise

the competitive advantage and isolating mechanisms EMS can bring about.

Opportunity seekers tend to be found in situations where exogenous risks are

high.

Technical Realities of EMS

Looking inwards, endogenous factors such as existing technology and metrics

contribute greatly to the complexities of issues surrounding EMS. The

awareness to top management will play a significant role in the strategic impact

of an EMS. However, awareness in itself is not enough. Endogenous risks

related to the existing technology may change the environmental mindset to a

great extent.

Moreover, if firms are not measuring the wastes associated with their production

processes and do not have an integrated approach to managing these wastes,

then many of the costs are not captured and subsequently placed into overhead.

Overhead allocation is a potential problem because if you do not measure the

wastes associated with your processes, you can manage it, and no one is

accountable for it.

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Environmental issues tend to be very opinionated, data helps to remove the

opinions and uses facts as the basis of decision making. Other endogenous

issues impacting the firm include the foreign ownership, the history of the firm

and the amount of hazardous materials on site. Additionally, the amount of

change in the industry, coupled with environmental pressures, will impact

equipment selection, product or process selection and especially the decision to

certify an EMS (Alberti, 2000: 38).

The early adopters of EMS stand to gain an advantage over other firms who are

not seeking systems development early. This advantage may well be the ability

to shape regulatory policy or standards because the firm is benchmarked as an

environmental leader in industry. Dean and Brown (1995) claim that some

firms may acquire strategic benefit in this manner. This argument relies on the

potential for environmental regulations to affect certain types of firms more

severally than others.

Environmental regulation may create entry barriers for new firms through a

number of mechanism that include increased capital required for effective entry

to pollution intensive industries and increased capital for EMS certificate

processes. Other barriers include the added complexities involved in business

operations. The expanded difficulties and costs in identifying and permitting

new operations, sticker regulatory standard that often apply to more modern

facilities (Angell, 1999:63).

2.5.8 Environmental Problems Associated with Business Activities

The environmental problems of a country depend on it stage of development,

economic structure, production techniques in use and its environmental policies

the following are some of the environmental problems facing the less developed

countries: (Jhingan, 2007:32)

2 Air Pollution: Urbanisation which is the concomitant result of economic

development and industrial growth has led to atmospheric pollution increase

vehicular traffic is the most important source of air pollution in big cities.

Other reasons for this are two stroke energies, old vehicles, traffic congestions,

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bad roads and obsolete automotive technologies and lack of traffic

management system.

The problem of industrial pollution is acute in areas where petroleum

refineries, chemicals, iron and steel, non-metallic products, pulp and paper,

and textile industries are concentrated. Even small scale industries like

foundries, chemical manufacturing and brick making are significantly air

polluters. Another important source of air pollution is thermal power

generation plants.

People residing in shanty towns, slums and poorly ventilated houses and using

household stoves, wood and coal for cooking further increase air pollution in

cities.

Thus air pollution is a serving problem in cities and urban manufacturing

areas. There is particulate matter in the form of dirt, dust and solid waste

thrown in the air that is harmful for humans, animals and plants. Acid rain on

forests and water bodies destroys them in the long run. So are chemicals in

gaseous form harmful. Some are directly poisonous such as carbon monoxide

which is also produced by automobiles. Other gases damage the ozone layer

of the atmosphere pollution in cities.

2. Water Pollution: Water pollution is similarly as a result of economic growth.

The main sources of water pollution are flues ling waste down the domestic

sewage, industrial effluents containing organic pollutants, and wastes if

chemicals, heavy metals and riming activities. The major water polluting

industries are refineries, fertilizers, pesticides, chemicals, leather pulp and

paper, and metal plating. Sewage waste and industrial effluents flow into

lakes canals, rivers, coastal areas and underground water sources. Since they

are untreated, they endanger aquatic resources like fish and other water

creatures and commercially important marine flora and fauna. The polluted

and untreated water causes water borne disease, like diarrhoea, hepatitis,

gastro-enteritis, trachoma, etc. Moreover, prodding safe drinking water to

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people increases the costs of municipal corporations. Water shortages lead to

inconveniences and retard economic activities.

3. Solid and Hazardous Waste: Solid washes also create air and water pollution

unregulated urban or rural growth without such facilities as collection,

transportation, treatment and disposal of solid waste pollutes the atmosphere

and water resources. Rotten garbage and blocked drains spread communicable

diseases and pollute ground water resources.

4. Deforestation: Deforestation also causes environmental problems.

Deforestation leads to felling of trees and of natural plant growth for setting up

industries, and building towns, roads, highways, and dams, etc. this destroys

flora and fauna. It leads to localised flooding in hilly and adjoining areas.

This is loss of human and animal like. The green landscape changes into

factories, residential and commercial buildings. They produce move heat,

noise and pollution which bring environmental degradation and ultimately,

result in death up humans and cause of birth defects and genetic mutations.

5. Soil Degradation: Another environmental problem is of soil degradation

which is caused by water and wind soil erosion in hilly areas is caused by rain

and rivers, thereby leading to landslides and floods. Deforestation, organizing

and set farming in hilly areas further cause soil erosion. Floods in rivers in the

plains cause soil erosion. Water logging on irrigated lands and intensive

agriculture lead to salivation and soil degradation. Areas in the proximity of

deserts suffer from wind erosion caused by expansion of desert, dust storms,

and whirlwinds. All types of soil degradation reduce soil fertility.

6. Loss Bio-diversity: Poor country is endowed with unique phytogeographical

and agro-economical diversity comprising of a wide variety of agro-climate

zones and plenty of plant and animal species. The biodiversity is found in

forests, grasslands, mountains, wet lands, deserts and marine ecosystem.

Economic growth leading to expansion of agriculture, ---exploitation of forest

and mineral weak and development of prefects in biodiversity areas has led to

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the destruction of habitats. Consequently there has been extinction of plant,

animal and neurobiological species and loss of genetic resources.

2.5.9 Causes of Environmental Degradation

Environmental degradation caused by such diverse factors as population growth,

poverty rural development, urbanisation, etc (Ohigem, 2007:15). They are

discussed under.

1. Population Growth: Rapid population growth is a major cause of

environmental degradation and rapid use of resources leads to undue pressure

on the use of country‟s resources with the result that there is air and water

pollution, loss of biodiversity and soil degradation. Rapid population growth

development. Thus rapid population growth and environmental degradation

go hand in hand.

2. Poverty: Poverty is both the cause and effect of environmental degradation.

Poverty encourages sustainability because the poor use and deplete more

natured resources than others because they have easy access to them. They

work for substance on land and water in mines and forests. On the other hand,

degraded environment generates more poverty because the poor depend

directly on natural resources for their livelihood.

3. Agricultural Development: Agricultural development in underdeveloped

countries has been a major factor in environmental degradation. Intensive

farming and excessive use on\f fertilizers and pesticides had led to over

exploitation of land and water resources. These have led to land degradation

in the form of soil erosion, water logging and salivation.

4. Industrialization: To industrialize rapidly, undeveloped countries are causing

environmental degradation. The establishment such undulates as fertilizers,

iron and steel, chemicals, refineries etc. has led to land, air and water

pollution. The use of fossil final, animals and timber as sources of industrial

energy is depleting these natural resources degrading natural eco-system.

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5. Transport Development: Underdeveloped countries are developing transport

facilities for the expansion of trade and commerce but they are also bringing

about environmental degradation in the form of air pollution, noise pollution

and sea pollution. The development of port and harbour have led to oil spills

from ships and adversely affected fishers, coal reefs man grows and landscape.

6. Urbanisation: Rapid and unplanned urbanisation has led to degradation of

urban environment slum and shanty towns, pollute air and water and

generation of solid and hazardous wastes have contributed to environmental

degradation in vast scale.

7. Foreign Indebtedness: Foreign indebtedness is another cause of

environmental degradation in underdeveloped countries. In order to repay their

debt they produce commercial crops for export that die place subsistence crops

which are subsequently grown on marginal lands. They also export unseals by

exploiting them recklessly, thereby depleting them at a great cost to future

generations.

2.5.10 Advantages of the Environmental Information System Framework

There are several advantages to the EIS framework which include the following:

(Hawey, 2006:125).

Consistency of Information: It is important that all strategic partners, such as

suppliers and vendors, have access to the same environmental information.

This allows partners to be consistent in their application of environmental

standards.

Accuracy of Information: As EIS framework can help ensure that information

contained in organizational databases is validated and acceptable, and that

there are no ambiguities or misunderstandings.

Centralization of Information: With an EIS framework, information that

previously may have been scattered throughout the organisation, or that might

even have resided with one or more of the firm‟s strategic partners, can be

centrally organized, shared and made available to anyone who needs it. This

151

eliminates the need to waste time searching for information from several

sources and helps facilitate the decision-making process.

i. Data Mining: With an EIS framework in place it becomes easier to

retrieve archival data.

ii. Timeliness: Information can be updated in a timely manner and made

available on a real time basis.

iii. Elimination of Information Barriers: Barriers that may previously

have existed because of distance or geographical location can be

eliminated when databases are electronically accessible via the

internet. Better management of information also reduces

misconceptions and misunderstandings.

Efficiency of Information Process: Efficiency is improved when quality

information can easily be obtained and updated on a timely basis.

Cross-Unit Efficiency: When high quality information is readily available

throughout the organisation, all departments within the firm can become more

efficient and have a better chance of achieving optimal environmental goals.

Cost Reduction: An organization‟s processes and products are more likely to

meet environmental and quality standards when decisions about them are

based on sound information. Maintenance of high standards can reduce waste,

rework, and pollution, allowing costs to be easily contained.

2.6 CONCEPT OF QUALITY

As globalization and a changing workforce become drivers of today economy,

companies seek a better way to manage people, plants and processes while

keeping their promise to consumers of quality and safety. That better way is an

enterprise-wide quality-based compliance approach that satisfies the needs of

consumers, regulators, and the general public (David, and Denise, 2008:1)

Product quality and regulatory compliance are fundamentals of business

operations and profitability. In recent years, the industry has become

increasingly global. Factors contributing to this globalization include dispersed

physical manufacturing locations, the reliance on outside partners such as

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contract manufacturing organisations and the use of multiple active suppliers.

As the manufacturing industry becomes increasingly competitive, it faces new

quality and compliance challenges.

Everyone is for quality. But, what they usually have in mind is a product or

service free of defects. This is a narrow view and quite dangerous today‟s

market place. The class concept of quality, involves perfecting the process,

rather than weeding out the defectives. Quality also means that the product or

service is produced quickly and with the features and benefits that the customer

wants. There should be as little waste as possible. Quality should also be at price

that is fair, delivered when the customer wants it and with excellent follow-up

provisions(Iyer, 2009:92).

Quality has always been a criterion for value-be it in defense consumer

products, or services. If people are not in quality process today, they may not be

in business in the future. Determining what the customer wants is not as easy as

it might sound. Besides, until recently, customer lacked means to objectively

evaluate product performance. Conditions have changed. Now manufacturers

have to contend with better-educated customers and consumer advocates or

protection groups, who assess global market and rate quality by relative

comparison.

According to Hammel (1994:78) with out quality, there is no value. Quality

adds value at each step of the product creation. It is something that has to be

measured at the customer‟s end and not in the manufacturing plants. Quality is

integrity to the manufacturing system. It has to be built during the production

phase. Quality is not just eliminating what is not good. Many characteristics of

unacceptable quality in manufacture are traceable to the absence of such an

approach in design and in management of the business process. The least cost

remedy lies before the fact during design. However, it can also be had after the

fact, during manufacture and service, though to a lesser degree of return.

In the worlds of (Iyse, 2009:93) quality does not means quality of the product

and service alone. It means total quality. That is, it includes such items as

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quality reliability quality of communication, quality of relationships, quality of

guarantees etc. Conformance to specification is only the beginning. The concept

has progressed from “fitness to specification” to “fitness to need” and currently

“fitness to latent need” i.e., what the customer might truly value but have never

experienced or could never think to ask for. The real test of quality will be how

the customer perceives the specification and what it means to him to work with

products and services conforming to those specifications. If there are no

complaints on quality from the customers, it may not prove that the quality

offered is the best. It might reflect customer apathy-living with the quality

problems created by the product or service and not complaining. Interaction

with the customer will open out wide vista of quality improvements that are

possible and desirable. More often than not it will be seen that value can be

added through appropriate, but small changes or improvement, most of which

could be costing little money.

Many companies maintain decentralized, global networks of virtually

independent plant with the following; varying operational and management

processes; diverse monitoring and reporting systems; dissimilar equipment or

infrastructure; and multiple local or regional suppliers, contractors, and vendors.

However, these companies recognize that, just as their sales and distribution

programmes have evolved to meet global opportunities, their quality assurance

and regulation must change to suit the objective realities of the time, (Harvey

and Green, 1993:32).

With ultimate responsibility for assuring the quality and compliance of their

products, sponsoring companies must manage a complex web of assets in an

ever-changing regulatory framework. Companies are confronted with a growing

list of requirements imposed by organisations such as the Stand Organisation of

Nigeria (SON), National Agency for Food and Drug Administration and Control

(NAFDAC), Manufacturers Association of Nigeria (MAN), Environmental

Protection Agency of Nigeria (EPAN), and National Environmental Standards

and Regulatory Agency (NESRA). Others are foreign regulatory agencies like,

European Medicine Agency (EMA), and the US, Food and Drug Administration

(FDA). The US, the European Union, and Japan have an ongoing goal of

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creating a harmonized regulatory compliance standard. And, the International

Conference on Harmonization (ICH) has produced its Q8, Q9, and Q10,

guidelines to address quality assurance and risk management issues (Madu,

1993:72).

Agility and cohesive thinking are critical for any company facing the volatility

of the global market place, regulatory expectations, and scientific discoveries.

What had been a collection of national and regional economies has emerged as a

single, interconnected, interdependent global economy. What had been a local

workforce, in which longevity and stability were prized, has become a dispersed

network of employees with vastly different levels of experience, knowledge, and

seniority. And what had been a relatively stable business environment for the

industry now reflects an explosion of mergers and acquisitions that necessitates

cultural integration, overlapping regulatory requirements, and increase use of

outside contractors and subcontractors geared towards achieving competitive

advantage using quality as its strategy (The European Standard and Guidelines,

ENQA, 2007:60).

Quality is so omnipresent and its vocabulary so pervasive nowadays in

organizations policy and discourse that one forgets how relatively recent the

enthronement of the term “quality” actually is. Clearly, quality enhancement is

the sum of many methods of institutional development, ranging from

competitive hiring procedures, creating appropriate funding opportunities, to

facilitating communication between disciplines and supporting innovative

initiatives through institutional incentives (Sybille, 2006:91). Often in various

meetings with different people – among armatures and among quality experts –

there are lengthy discussions about the definition and substance of the quality

concept. Everyone can understand quality without explanations or formal

definitions. Quality is a much used word in general everyday language. When

something is associated with quality it is purposed to bring out positive features

incorporated with that. Quality is a concept of good and success. However, if we

will analyze the concept in details what does it include strictly speaking in

different situations it comes out a very wide range of viewpoints. This multi-

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mindedness is a self contained character of quality concept. A variety of

approaches to the definitions of quality concept may be grouped as follows:

Definition Based on Product Characteristics

Quality means measurable properties of a product. Quality means speed,

efficiency, good content, economy/business class, etc. Difference in quality

depends on differences in these characteristics. Quality may be examined

objectively. Such a concept of quality is often associated with price and cost,

so that better quality means higher cost. For the same reason, a high price can

be justified by the quality of the product. In this way the quality concept is

often understood by the marketing people (Godfrey, 1999:6).

Definition Based on Production Performance

Quality is fulfilment of the specific requirements. This definition has been

used in traditional quality engineering, which has its roots strongly in the

manufacture of material products and prevention of manufacturing defects.

Quality means the degree in which the product meets the design and

manufacturing or contractual requirements. Quality is an objectively and

unambiguously measurable quantity. It is expressed as a rate of non

conforming units or rate of number of the production is an acceptable quality

limit, AQL, or zero defect level. Quality cost due to defects can be avoided

only by doing everything right first time (Pyzdek, 2003:10).

Monetary (Financial) Value Based Definition

Quality is the use-value (utility) of an object. It is a measure of the relative

satisfaction from the use of a product in fulfilling some body‟s records. In this

case, quality of the products is in connection with the added-value created by

the producer. In classic free-market economics equilibrium, added-value

corresponds to the exchange value (the purchase price). Quality describes the

ratio of use-value to price (Madu, 2004:78).

Real Economy Value Based Definition

Quality of an item equals the real experienced and perceived benefit or

advantage obtained by its user even during its entire lifetime – regardless of

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what is paid (i.e. what is its exchange value) and how much added value it

represents. E.g. quality is a human service may be achieved by right attitude of

the service personnel without any additional cost. According to this definition,

quality is an item‟s ability to meet the user‟s genuine-even implied – needs

and expectations. Quality of a product traces back to the producer‟s and the

user‟s needs and, therefore, it is always a subjective and also time-varying

concept. Quality can only subjectively be assessed. Quality does not

necessarily imply high costs of production. Quality is based on producer‟s

excellence in the skills and customer-centred activities and by delighting each

customer individually.

Philosophical and Mythical Definitions

Quality is of excellent goodness or luxury. Quality can not be measured nor

even defined explicitly. We know what it is. Quality is based on the platonic

ideas. Love is the arch type of all quality considerations. Such a quality is the

establishment of idealistic philosophy. In this way, the quality concept also

brought up a lot in advertising and the activities of “excellence” organizations.

The multi-mindedness is included in the nature of quality concept. Quality can

not be forced into a single inflexible definition framework. Quality is always

what you want it to be although this may also cause confusions or problems.

However, quality is also one of the basic concepts of business, production and

marketing. For this reason, it is justified to have the international standard

definition published in the ISO 9000 standard: Quality = “degree to which a

set of inherent characteristics fulfils needs and expectations”. This definition

reflects the practice and the multi-minded character of the concept.

In business context it is appropriate that the quality concept is understood in

such a way that will support the organisation‟s business objectives. In this case,

quality should be attached to the company‟s products (goods and services) in a

positive way. It is also often necessary to demonstrate quality undisputedly to

organization‟s customers or other stakeholders. Quality has a strong impact to

customer satisfaction. This can be achieved in a low-cost and competitive

manner, when the company manages properly the production and product –

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related business processes and activities, i.e. the company‟s quality management

is effective and efficient. Just in the same way it can be argued in public and

third sector organisations.

The term quality means different things to different people. For example, a

quality automobile may be one which has no defects and works exactly as we

expect. Such definition would fit with often-repeated definition by J. M. Juran

(1988); “Quality is fitness for use”. However, there are other definitions widely

discussed. Quality as “conformance to specifications” is a position that people in

the manufacturing industry often promote because manufacturing can do

nothing to change the design.

Others promote wider views (Gitlow et al; 1989:72, Ozeki and Asaka,

1990:103), which include the expectations that the product or service being

delivered (1) meets customer standards (2) meets and fulfils customer needs, (3)

meets customer expectations, and (4) will meet unanticipated future needs and

aspirations. Still others imply ignore definitions and says

I will know quality when I see it” it seems that we all now or feel somehow

what quality is. A product or service that exceeds our preconceived idea about

the quality of that product or service is likely to be judged as having “high

quality”. It is equally clear that the best of a group of bad products is not likely

to be perceived as a quality product (Hunt, 1992:26).

According to Wikipedia, The Free Encyclopedia (2009:16) quality refers to

planned and systematic production processes that provide confidence in a

product‟s suitability for its intended purpose. Merriam – Websters (2000) further

describes quality as a set of activities intended to ensure that products (goods

and services) satisfy customer requirements in a systematic, reliable fashion. It

is important to realize that quality is determined by the intended users, clients or

customer, not by society in general: it is not the same as expensive or high

quality. Even goods with low prices can be considered quality products if they

meet a market need.

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It has to be stated that concept of quality is still underdeveloped in terms of

theory, especially with regards to the meaning of culture within the overall

framework, even though this deficit seems to have gained increased attention in

recent times (Harvey and Stensaker, 2007:26, Lueger and Vettori, 2008:82). In

their previous work defined quality cultures as stakeholder dependent,

historically grown and learning oriented social phenomena that can be barely

managed and make it difficult to predict future developments. Such a

participative quality culture is never homogeneous since it reflects the

complexity of the interactions and interpretation the cultures emerge from each

having its own standards.

Quality standards are of undisputed importance within all types (i.e.

organisational, institutional, regional, national or international) of quality

assurance systems. They can be found though in various forms and differently

labelled on hundreds of products. They can be read about in various quality

assurance guideline (European Standards and Guideline, ENQA, 2007:60); and

they are a regular component of political statements concerning manufacturers.

Furthermore, the urge for institutions to continue their efforts to enhances

quality of their activities through systematic introduction of internal mechanisms

and direct correlation to external quality assurance (Bergen Communiqué,

2005:112).

Without any doubt, any set of general formal standards (often in the form of

minimum standard) is able to constitute a framework for quality assurance

systems by establishing points of reference for measurement procedures and

comparative purposes. Needless to say such strategies do not only meet public

accountability demands but also accommodate the increased competitive

tendencies within industries, by providing a basis for various ranking or rating

procedures. Yet, somehow, the introduction of quality standards rarely goes

according to plan and al too often the unintended consequences of their

implementation thwart the initial intentions.

In our opinion, one of the main reasons for such difficulties and shortcomings

can be found in an inadequate specification of the underlying constructs.

Standards – much like quality for that matter – can be defined in multiple ways

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and for various purposes. In addition, they are often embedded in complex

processes of definition, interpretation and implementation, which have a lasting

impact on the organisational quality development. In this research we delve

deeper into the question, how to avoid such counts productive effects and how

to make sense of quality standards within a participative quality culture

framework (Harvey, 2006:110).

As a concept, standard are rather difficult to grasp, and often get lumped

together with similar concepts such as indicators, benchmarks, measures and

norms. Definitions of standards vary internationally, which may be attributed to

linguistic peculiarities as well as to differing contexts of application and use

(Justi, 2000:31).

Yet, in principle, all standards have normative function (Lassnigg and Gruber,

2001:420). Whether they provide consistent scales and measures, regulate

actions, set limits to facilitate comparisons. It is necessary, though, to take a

closer look at how much norms are handled. On the one hand, standards can be

addressed as fixed parameter, which do not give much leeway to the actors

involved while, on the other hand, they can be used as adaptable concepts which

react sensitively to change of their base of reference (Upper/Lower Limit

Standards or standards with a board range of tolerance). Extra consideration

should be paid to the political aspects involved, especially if standards are

mainly used to assist central management for controlling and steering processes.

2.7 FUNCTIONS OF STANDARD

According to Lueger (2007:7) standard has three functions which can be

functionalised in various ways:

Easing Manageability

This function is among the most visible ones, as it aims at verifying whether

quality goals have been achieved. It provides orientation and establishes a

basis for action routines. In this regard, the compliance with standards is

considered to allow conclusions about the quality of a firm, its activities,

processes and outcomes which are assessed against the standards.

Paradoxically, standards used in this way have some counterproductive effects

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as well: the more precisely they are defined, the more necessary it will become

to specify them even further in other to include any potential circumstances (or

exclude unwanted alternative). In addition, the actors bound to such standards

are dispossessed of a considerable degree of autonomy as all important

decisions are already pre-made (Lueger, and Vettori, 2007:7).

Permitting Comparability and Assessments

Standards can be used for comparative purposes as well as for assessments

within various contexts (providing evidence whether certain quality goals have

been met or presenting a basis for accreditation procedures). In order to make

such comparisons/assessments possible, standards should be defined quite

clearly and allow easy verification whether they have been met (Stake, R.

2004:106). On the other hand, this may cause some problems as well, because

standards fulfilling this function tend to be restricted to the aspects that are

easily measurable, potentially overlooking aspects that might be at least

equally important but are also more difficult to assess (Lueger and Veltori,

2007:67). And, last but not least, as most firms can be characterised as

organisations with a high degree of internal differentiations/heterogeneity,

comparative standards can rarely claim general validity.

Meeting Accountable Demands

Firms that want to claim (and prove) that they conform to the requirements for

high-quality education, research and administration, can support such claims

(and provide evidence) by formulating and implementing quality standards,

thus making their quality efforts visible to the outsider. Standards fulfilling

such as accountability function ensure transparency and demonstrate what is

being done in order to legitimate public trust. On the downside, this learning

toward externally accepted success factors and best practices may very well

lead to increased levels of standardisation and homogenisation within the

business community. Strategies and activities that have proven useful

elsewhere get adopted and copied without sufficient reflection on contextual

factors and aspects of organisational culture, potentially leading to completely

different outcomes (Crumply, 2001:7).

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Raising Quality Awareness and Empowering Quality Promoters

Quality standards can also direct the attention of institutional actors towards

quality – relevant aspects of their daily work and interactions, thus

encouraging them to consider these aspects in their actions and decision

making processes. Such process oriented standards may unfold their full

potential by supporting the development of localised, customised quality

strategies which pay attention to the diverging interests, quality notions and

subcultures within a firm.

It is clear that the establishment of quality standard can provoke a multitude of

differing –even opposite effects: they can encourage individual and institutional

engagement for quality development or discourage it; they can contribute to

product homogenisation or promote differentiation in the sense of localised

quality standards; they can support the fulfilment of external requirements or

focus on internal developments. Not everything can be achieved at the same

time and with the same means. Yet, within such zones of ambiguity, it is

necessary to be aware of the benefits and costs of each option and to make sure

that they suit the overall strategy (Veltori, et al 2007:38).The overall goal is to

strengthen a certain kind of quality culture, some ways of functionalising quality

standards may hinder than help. It is therefore important to know different types

of standards.

2.7:1 Types of Standards

In order to gain a better understanding of how quality standards can fulfil the

functions described above, it may be necessary to take a look at different types

of standards on a very abstract level. In the following, we propose a

classification of standards depending on their contribution to a firm‟s quality

assurance/quality improvement. This leads us to three different types of

standards (Stensaker, 2007:18).

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Standard as Minimum Thresholds

This type of standard constitutes some kind of minimum level as a basis for

further actions/developments. Minimum threshold standards are usually

intended to reduce uncertainties and induce trust; in a way, they can be

regarded as quality seals that work very much like conditional models: If “A”

is given, then “B” will very likely occur. Such standards can be used for two

types of regulatory actions: First, by making clear what has to be done in order

to meet the standard; second, by specifying how something has to be done in

order to meet the standard. Finally, minimum threshold standards make rather

small contributions to an organisation‟s quality improvement/quality

development. Even though as Harvey states, “the threshold standards approach

to quality implies that quality is improved if thresholds are raised”, the scope

of such improvements seem very narrow, confining them to areas that can be

easily measured and influenced (Harvgy, 2007:8).

Standards as Broad Objectives

The second type of standard is more output oriented, defining certain outcome

or performance – oriented objectives that should be achieved yet without

necessarily specifying them or oven breaking them down to palpable

indicators. Consequently, such standard can often be found in mission

statements or agreement – on – objectives documents. The actors guided by

such standards are autonomous in their decision – making choices. On the

other hand, they face increased pressure for substantiating and justifying their

decisions and actions, especially if the results deviate from the requirements –

which can have various reasons. Broad objectives standards usually adhere to

long-term perspective and are intended to offer orientation. In most cases, how

such standards should be met is not regulated. In other words, even though the

„end‟ is given, the means are not. Nevertheless, their implementation can well

be accompanied by guidelines and recommendations. In general, the broad-

objective type of standard seems to get along well with a development –

oriented perspective, yet we should keep in mind that the direction and

outcome of such developments is difficult to forecast and even more difficult

to manage with or without standards (Madu, 2006:121).

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Standards as Descriptions for Good Practice

This type of standard usually emerges from broadly accepted routines and

gains most of its legitimacy from them: some principle has proven to be

effective and is therefore at some point declared a standard. Such good-

practice-standards are usually procedures oriented, meaning that, in contrast to

broad-objectives, standards, they rather focus on question, how to achieve a

certain aim. On the other hand, good – practice – standards have the major

advantage of being accepted by and relevant for the people concerned by

them. On the minus side, thy can be difficult to put into question and are often

bound to a specific context, i.e. cannot easily be transferred to other contexts.

Additional difficulties may arise if the implementers forget about adapting the

practices to their specific organisational culture and environment (Lueger,

2007:17).

It can be easily seen that each type of standard has different advantages: there

success in terms of improving (or better, influencing) quality in the intended

way is strongly dependent embedding them within the overall quality

framework of a firm and how they are adopted. Again the major question is

whether these standards are centrally defined, implemented from top down and

monitored in order to ensure their persistent functioning, or rather negotiated

among different actors and stakeholders, introduced in a way that pays close

attention to differing claims, concerns and issues and being constantly revised

and flexibly redesigned if necessary. Since quality standards will only be fully

functioning if the actors concerned actually adhere to them (even better, accepts

and support them), such question of emergence and development seem to be of

paramount importance (Harvey and Green, 1993:7).

But let us first take a more detailed look at the relationship between a centralised

quality management approach and a decentralised. Centrally organised quality

assurance systems show a tendency to establish rules that are generally binding,

not least to signal to the external stakeholders that a firm management is paying

close attention to the firm‟s quality deficits. One popular means of achieving

this effect is the implementation of threshold-standards as some minimum basis

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for future improvements and the definition of very clear and easily measurable

objectives.

For locally organised quality assurance systems, however, it is more important

to encourage quality awareness on different levels than to establish institution-

wide system rules, regulations and procedures. Based on such sensitivity for

quality – related issues, the firm members can develop local strategies of quality

assurance and quality improvement that may very well be subjected to a system

of central monitoring to some degree. Within such a framework, good practice-

standards and broad-objective – standards can provide inspiration and

orientation, whereas minimum threshold – standard would be more process

oriented, demanding the development of local strategies without succumbing to

purely formal and number-based approach.

Whereas centralised systems tend to focus on the top-down implementation of

generalised quality management strategies and models, decentralised systems

rely strongly on delegating decision – making power and monitoring duties to

those actors that are ultimately the ones who establish quality within a firm. In

this latter approach, quality standards are mainly regarded as a participative

instrument for organisational development oriented towards flexibilisation”

rather than towards standardisation (Stake, 2004:48).

2.7.2 Best Practices for Integrated Quality and Compliance

Companies pioneering enterprise – wide quality and compliance initiatives

maintain a series of best practices anchored by centralized quality-management

controls. Returns on investment arise not only from product quality and

regulatory compliance, but also form optimized resources and profitability.

Company experiences, combined with the observations and knowledge of

industry experts, provide a blue print for implanting best practices in achieving a

global GMP compliance program based on quality. Key elements of the

blueprint include: consistent messaging and common nomenclature,

certifications of employees and subcontractors, enterprise-wide training,

centralized documentation and distribution, vendor certification, integrated

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systems management, and quality system inspection approach (Danise, and

David, 2008:2).

Consistent Messaging and Common Nomenclature

Consistent messaging and common nomenclature are critical for any

organisation that has the following: dispersed facilities, employee of different

cultures and language; a changing workforce with varying levels of skills,

education, and industry experience; and a growing reliance on outside

partners. The mergers and acquisitions common place in the industry the pasta

five years have further complicated the task of creating an enterprise – wide

culture of quality and compliance, (Phil,1998:47).

For one company, a change in corporate ownership produced a significant

challenge and an important response. The merger of two firms was quickly

followed by an acquisition by the third company. The resulting organisation

was immediately responsible for 50 plants around the world, more than 60,000

employees, and three distinct corporate cultures, each with its own policies,

procedures, and philosophy. The new firm response was to create an enterprise

– wise culture built on quality and compliance.

More than 70 standard operating procedures (SOP) from the different

companies were completely rewritten to create a single harmonized standard

of quality for new organisation. The company developed an online training

programme that enables global distribution of the new SOPs to more than

5000 managers. Each manager was expected to set up meeting to review the

documents and integrate their cultural messages communicating with

employees about the new standards and expectations. This year – long

initiative produce an organisation with a cohesive, reinvigorated workforce

that shared a common culture heard the same messages, and performed to the

same standards.

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Certification of Employees and Subcontractors

Optimum performance requires the demonstrated competency of employees,

subcontractors and suppliers. To ensure that competency, a company or a firm

must follow a multi step process of initial assessment to accurately identify

knowledge gaps and competency level, develop role – based curricula, and

target distribution of relevant training materials, testing for comprehension,

and certification of the qualification necessary for specific job functions. With

the goal of reducing human error and assuring compliance with corporate

standards and regulatory requirements, a firm will develop a unique online

operator certification solution that integrates training with the company‟s

manufacturing execution system (MES). System parameters are set to

recognize whether operators have complete training and met defined

proficiency thresholds. If not, the system denies equipment access to those

individuals (Morgan, 2005:143).

Enterprise – Wide Training

For an enterprise with dispersed facilities and personnel of different cultures

and languages, online training as part of blended learning programme is

virtually indispensable in assuring consistency of knowledge throughout the

organisation. The term training is typically associated with skill training.

However, it also applies to a range of educational needs that are likely to

confront any organisation. These needs may involve issues as diverse as SOPs,

regulatory updates, equipment operations and non-GMP requirements such as

sexual harassment and facility security. Failure to follow established SOPs is

one of the most frequently cited violations in FDA 4835 and warning letters.

The frequency of SOP-related violations points to the need for all regulated

companies to review their SOPs, their methods for distributing compliance

SOP training curricular, their methods of validating receipt and testing for

comprehension of the materials, and their documentation of SOP training

activities. Additionally, enterprise –wide training programmes must include

automated methods for new employee on board and for annual refresher

training.

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Centralized Documentation and Distribution

Centralized documentation organized in an audit-ready format enables rapid

access to requested data by regulatory inspectors. It also minimizes the risk of

lost, unavailable, or incomplete records. This centralized documentation and

distribution is especially important for regulatory updates. As regulations

change – and they do so with great frequency – it is critical that the changes be

disseminated to those people whose work will be affected. It is also vital that

changes be accurately validated and documented, particularly in a company

with dispersed facilities and partners. A company cannot afford to base it

product quality and regulatory compliance on a system that is vulnerable to the

limitations of paper-based records, illegible signatures, and lost validations.

Vendor Certification

With regulatory attention now focusing on CMOs and other suppliers, some

sponsoring firms require contractors to the same quality and compliance

systems as those implemented for employees. By promoting the use of

common training curricula, distribution, and tracking systems with audit-ready

documentation, the sponsoring firm supports a seamless extension of its own

activities, thereby minimizing risk. Equally important is a centralized database

that confirms vendor qualifications, because such information can assure any

facility in the enterprise that a given vendor has been adequately vetted.

Integrated Systems Management

Enterprise – wide quality and compliance can be streamlined by a single

database and management structure, or through a system of integrated tools.

Information about training, vendor qualifications, subcontractor competency,

and quality deviations must be monitored from an enterprise perspective,

instead of from a plant specific view. Most importantly, problem identified at

one plant can be investigated and resolved proactively at other plants; this can

prevent a significant finding that can lead to citation during a regulatory audit.

Interoperability of the quality and compliance functions with other IT-based

systems such as purchasing, human resources, document management, and

enterprise resource planning, assures consistency of the quality programme

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and promote cohesive oversight of all functions. For example, many

companies are integrating document management with their training systems,

enabling a document update to automatically trigger actions for employees.

This solves the compliance challenges of how to efficiently distribute and

track new and updated SOPs and other critical documents. Once alerted,

typically by e-mail, an employee must not only read the SOP changes, but

must demonstrate understanding by passing a quiz; this increases operational

efficiency and document-based compliance. Because hundreds of changes a

year to SOP‟s are not uncommon, a manual approach to distribution is

unmanageable and is a significant area of risk for the company.

Quality Systems Inspection Approach

The FDA has recently embraced a risk-based approach designed to minimize

consumer safety hazards caused by quality problems. The approach prioritizes

risk to optimize the FDA‟s inspection and enforcement resources. This risk-

based approach signals a focus on enterprise-wide inspections that span

country boundaries based on violations found at a single plant.

2.7.3 Means of Controlling/Tracking Quality in Organization

Quality Assurance Versus Quality Control

Quality control emphasizes testing of products to uncover defects, and

reporting to management who make the decision to allow or deny the release.

Whereas quality assurance attempts to improve and stabilize production, and

associated process to avoid, or at least minimize, issues that led to defects in

the first place. To prevent mistakes from arising, several QA methodologies

are used. However, QA does not necessarily eliminate the need for QC: some

product parameters are so critical that testing is still necessary. QC activities

are treated as an integral part of the overall QA processes. For example,

although there were many individuals trying to lead United States industries

towards a more comprehensive approach to quality, the U.S. continue to apply

QC concepts for inspection and sampling to remove defective product from

production lines essentially ignoring advances in QA for decades. (Watter,

1996:296).

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Failure Testing

A valuable process to perform one a whole consumer product is failure testing

or stress testing. In mechanical terms this is the operation of product until it

fails, often under stresses such as increasing vibration, temperature, and

humidity. This exposes many unanticipated weaknesses in a product, and the

data are used to drive engineering and manufacturing process improvements.

Often quite simple changes can dramatically improve product service, such as

changing to meld-resistant paint or adding lock-washer placement to the

training for new assembly personnel. (Arora, 2007:62).

Statistical Control

Many organisations use statistical process control to bring the organization to

six sigma level of quality, in other words, so that the likelihood of an

unexpected failure is confined to six standard deviations on the normal

distribution. This probability is less than four one-millionths. Items controlled

include clerical tasks such as order-entry as well as conventional

manufacturing tasks. Traditional statistical process controls in manufacturing

operations usually proceed by randomly sampling and testing a fraction of the

output. Variances in critical tolerances are continuously tracked and where

necessary corrected before bad parts are produced. (Montgomerg, 1992:91).

Total Quality Management

Hindo (2003:56) maintains that deep analysis of Quality Assurance (QA)

practices and premises used about them is the most necessary inspection

control of all in cases, where, despite statistical quality control techniques or

quality improvements implemented, sales decrease. The major problem which

leads to decrease in sales was that the specifications did not include the most

important factor, “what the specifications have to state in order to satisfy the

customer requirements?” The major characteristics, ignored during the search

to improve manufacture and overall business performance are reliability,

maintainability, safety and strength. Total quality management must be based

on the following:

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i. Marketing had to carry out their work properly and define the

customer‟s specification

ii. Specifications had to be defined to conform to these requirements.

iii. Conformance to specifications i.e. drawing, standards and other

relevant documents were introduced during manufacturing, planning

and control.

iv. Management had to confirm all operators and equal to the work

imposed on them and holidays, celebrations and disputes did not affect

any of the quality levels.

v. Inspections and tests were carried out, and all components and

materials, bought in or otherwise, conformed to the specifications, and

the measuring equipment was accurate, this is the responsibility of the

QA/QC department.

vi. Any complaints received form the customers were satisfactorily dealt

with in a timely manner.

vii. Feedback from the user/customers is used to review designs.

viii. Consistent data recording and assessment and documentation integrity.

ix. Product and/or process change management and notification.

If the specification does not reflect the true quality requirements, the product‟s

quality cannot be guaranteed. For instance, the parameters for a pressure

vessel should cover not only the material and dimensions but operating,

environmental, safety, reliability and maintainability requirements.

Models and Standards

ISO 17025 is an international standard that specifies the general requirements

for the competence to carry out tests and or calibrations. These are 15

management requirements and 10 technical requirements. These requirements

outline what a laboratory must do to become accredited. Management system

refers to the organisation‟s structure for managing its processes or activities

that transform inputs of resources into a product or service which meets the

organization‟s objectives, such as satisfying the customer‟s quality

requirements, complying with regulations or meeting environmental

objectives. The CMMI (Capability Maturity Model Integration) model is

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widely used to implement Quality Assurance (QA) in an organization. The

CMMI maturity levels can be divided into 5 steps, which company can

achieve by performing specific activities within the organization. (Madu,

2004:61)

Company Quality

During the 1980s, the concept of company quality with focus on management

and people came to the fore. It was realized that, if all departments approached

quality with an open mind, success was possible if the management led quality

improvement process. The company-wide quality approach places an

emphasis on four aspects:

i. Elements such as controls, job management, adequate processes,

performance and integrity criteria and identification of records.

ii. Competence such as knowledge, skills, experience, qualifications.

iii. Soft elements, such as personnel integrity, confidence, organizational

culture, motivation, team spirit and quality relationships.

iv. Infrastructure (as it enhances or limits functionality)

The quality of the outputs is at risk if any of these aspects is deficient in any

way. It comprises a quality improvement process, which is generic in the sense

it can be applied to any of these activities and it establishes a behaviour

pattern, which supports the achievement of quality. This in turn is supported

by quality management practices which can include a number of business

systems and which are usually specific to the activities of the business unit

concerned. Still in the system of company quality, the work being carried out

was shop floor inspection which did not reveal the major quality problems.

This led to quality assurance or total quality control, which has come into

being recently. (Fogile, 1999:71)

Using Contractors and/or Consultants

It has become customary to use consultants and contractors when introducing

new quality practices and methods, particularly where the relevant skills and

expertise are not available within the organisation. In addition, when new

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initiative and improvements are required to boost the current quality system,

or perhaps improve upon current manufacturing systems, the use of temporary

consultants becomes a viable solution when allocating valuable resources.

There are various types of consultants and contractors available in the market,

most will have the skill needed to facilitate improvement activities such as

Quality Management Systems (QMS) auditing and procedural documentation

writing. More experienced consultants are likely to have knowledge of

specialized quality improvement activities such as CMMi, Six Sigma,

Measurement System Analysis (MSA), Quality Function Deployment (QFD),

Failure Mode and Effects Analysis (FMEA), Advance Product Quality

Planning (APQP) (Warren, 2009:32).

2.7.4 Outcome of a Well Run Quality Organisation

Ruffa (2008:201) maintains that organization that maintain continuous or

conscious quality in their operations achieve the following:

Visibility: By visibility, the more mature the testing organisation is, the faster

and more effective problems are found and the impact of problems is

understood. For example, when a problem occurs, a mature organisation can

analyse the frequency and impact of such an issue, then once it is analysed,

creates an effective automated test to ensure that once the issue is fixed, it stays

fixed. Visibility is more than just detecting the problem as well – the

requirement for a feature may be ambiguous or incomplete leading to

inefficiencies in development. And then other processes such as code reviews,

project planning, and release processes could all have areas that if improved, not

only ensure a product is shipped of good quality but that the process to do so is

lean, mean and very effective – less waste of one of the most precious

resources: time. There are other advantages too – once you have visibility you

can find opportunities for new features and understand what the customer is

really asking for, not what you are assuming they are asking for. One many find

that one‟s customers always use one‟s product in one way, or one feature that is

really important to them. You may also find areas in the development process

that if you improve, dramatically improve overall team productivity.

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Control: Control is achieved by clearly defined milestones and acceptance

criteria to validate that milestone. It is easy to say you have your first beta build

with no qualifications, however, if you state the beta build needs to have certain

functionality and bug thresholds, then one can ensure the team aims for those

goals and can keep a project health in good shape. One can also ensure that

when on releases a product to the market, one clearly understands its state and

can more confidently predict revenue. Also, public beta‟s advertise how ones

organisation cares about a product, and customers can feel part of the

development process – as well as help other customers learn and use the

product.

2.7.5 Establishing Quality System in Organisation

US Food and Drug Administration (FDA) (1983, 21CFR820) has identified in

Quality System regulation the essential elements that a quality system shall

embrace for design, production and distribution, without prescribing specific

ways to establish these elements. These elements include:

1) Personnel training and qualification

2) Controlling the product design

3) Controlling documentation

4) Controlling purchase

5) Product identification and traceability at all sages of production and

process

6) Controlling and defining production and process

7) Defining and controlling inspection, measuring and test equipment

8) Validating processes

9) Product acceptance

10) Controlling nonconforming product

11) Instituting corrective and preventive action when errors occur

12) Labelling and packaging controls

13) Handling, storage, distribution and installation

14) Records

15) Service

16) Statistical techniques

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All above listed points are overseen by Management Responsibility and Quality

Audits. Because the QS regulation covers a broad spectrum of devices and

production processes, it allows some leeway in the details of quality system

elements. It is left to manufacturers to determine the necessity for, or extent of,

some quality elements and to develop and implement procedures tailored to their

particular processes and devices (Pyzdek,. 2003, ISBN 0824746147).

2.7.6 QualityManagement Organizations and Awards

Gibbs (2006:42) observes that International Organization for Standardization‟s

ISO 1991-2008 series describes standard for a QMS addressing the principles

and processes surrounding the design, development and delivery of a general

product or service. Organizations can participate in a continuing certification

process to ISO 9001:2000 to demonstrate their compliance with the standard,

which includes a requirement for continual (i.e. planned) improvement of the

QMS.

ISO 9000:2005 provides information on the fundamentals and vocabulary used

in quality management systems. ISO 9001(2000) provides guidance on

improvement methods. Neither of these standards can be used for certification

purposes as they provide guidance, not requirements.

The Malcolm Baldrige National Quality Award is an award which recognizes

top-quality U.S. companies. This model addresses a broadly based range of

quality criteria, including commercial success and corporate leadership. Once an

organization has won the award it has to wait several years before being eligible

to apply again.

The European Foundation for Quality Management‟s EFQM Excellence Model

supports an award scheme similar to the Malcolm Baldrige Award for European

Companies.

In Canada, National Quality Institute present the Canada Awards for Excellence

on an annual basis to organisations that have displayed outstanding performance

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in the areas of Quality and Workplace wellness, and have met the Institute‟s

criteria with documented overall achievements and results.

2.7.7 The Six Sigma of Quality

According to Wikipedia (2009:23), Six Sigma is a business management

strategy originally developed by Motorola. As of 2009 it enjoys widespread

application in many sectors of quality, although its application is not without

controversy. Six Sigma seeks to improve the quality of process outputs by

identifying and removing the causes of defects (errors) and variability in

manufacturing and business processes. It uses a set of quality management

methods, including statistical methods, and creates a special infrastructure of

people within the organization (“Black Belts”, Green Belts”) who are experts in

these methods. Each Six Sigma project carried out within an organisation

follows a defined sequence of steps and has quantified financial targets (cost

reduction or profit increase).

One key innovation of Six Sigma involves the professionalizing of quality

management functions. Prior to six sigma quality management in practice was

largely relegated to the production floor and to statisticians in a separate quality

department. Six Sigma borrow martial arts ranking terminology to define a

hierarchy (and career path) that cuts across all business. It identifies several key

roles for its successful implementation (Hindo, 2007:10).

Executive leadership includes the CEO ad other members of top management.

They are responsible for setting up a vision for Six Sigma implementation.

They also empower the other role holders with the freedom and resources to

explore new ideas for breakthrough improvements.

Champions take responsibility for Six Sigma implementation across the

organization in an integrated manner. The executive leadership draws them

from upper management champions also act as mentors to Black Belts.

Master Black Belts, identified by champions, act as in-house coaches on six

sigma. They devote 100% of their time to it. They assist champions and guide

Black Belts and Green Belts. Apart from statistical tasks, they spend their time

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on ensuring consistent application of Six Sigma across various functions and

departments.

Black Belts operate under Master Black Belt to apply Six Sigma methodology

to specific projects execution, whereas champions and Masters Black Belts

focus o identifying projects/functions for Six Sigma.

Green Belts, the employees who take up Six Sigma implementation along with

their other job responsibilities, operate under the guidance of Black Belts.

Yellow Belts, trained in the basic application of Six Sigma management tools,

work with the Black Belt throughout the project stages and are often the

closest to the woke.

2.8 CHALLENGES OF BUSINESS DEFINITION

According to Nnabuko in Imaga and Ewurum (1998:32), business and

government are dominant and dynamic forces in any society. Being a chief user

of a nation‟s resources, business is primary source of employment, income and

taxes, and so affects all either social, economic, physical or other values.

Wheeler (1968:21) states that business is a social institution organised and

operated to provide goods and services under the incentive of private gain.

Supporting the issue of profit as a determinant of business, Irvin Smith

(1997:61) maintains that in everyday speech the word business does not have a

clear-cut meaning. He applys it rather vaguely to commercial and manufacturing

operations as distinguished from the arts and professions which however, can

also be regarded as business if their objectives are to earn profit.

In the words of Frederick (1961:32) the term business refers to the whole

complex field of commerce and industry, the basic industries, processing and

manufacturing industries, and the network of ancillary services, distribution,

banking, insurance, transport, and so on, which serve and interpenetrate the

world of business as a whole. It includes the management operation of a firm,

and the environment and general climate within which business is done

(Unamka and Ewurum, 1995:39). Unamka, P. and, Ewurum, U. J .F. (1995:42)

describe business as an all commercial activities seeking profit. By this criterion

they have eliminated certain other types of organizations. This definition

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excludes such institutions as charitable organizations, churches, social groups,

such as Girls Guide or Boys Scout. Organizations that are non – profit making

are dropped when organizations with profit criterion are only accepted as

business. The same definition also excludes organizations such as labour unions

and government. Agreeing with the profit criterion of business, The Lexicon

Webster Dictionary defines business as any gainful occupation in which profit is

the goal and in which there is risk of loss.

However, Drucker (1977:50) asserts that a business cannot be define or

explained in terms of profit. Ask what a business is, a typical business man is

likely to answer, “An organisation to make a profit.” An economist is likely to

give the same answer. This answer is not only false it is irrelevant (Drucker,

1977:55).The prevailing economic theory of business enterprise and behaviour

is the maximization of profit which is simply a complicated way of phrasing the

old idea of buying cheap and selling dear. It may adequately explain how

business enterprise operates, but it can not explain how it should operate. Profit

and profitability are indeed crucial for society even more than for the individual

business.

Yet profitability is not the purpose of, but a limiting factor on, business

enterprise. Profit is not the explanation, cause, or rationale of business decisions,

but the test of their validity. The profit motive and its offspring, maximization of

profits, are just as irrelevant to the function of a business, the purpose of a

business and the job of managing a business. It does harm. It is a major cause

for the misunderstanding of the nature of profit in our society which is among

the most dangerous diseases of an industrial society. It is largely responsible for

the worst mistake of public policy which is squarely based on the failure to

understand the nature, function, and purpose of business enterprise.

To know what a business is Drucker (1977:68), states that we have to start with

its purpose, its purpose must lie outside of the business itself. In fact, it must lie

in society, since business enterprise is an organ of society. Therefore, there is

only one valid definition of business purpose, which is to create customer. It is

the customer who determines what a business is. It is the customer alone whose

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willingness to pay for a good or for a service converts economic resources into

wealth, things into goods. What the business thinks it produces is not of first

importance – especially not to the future of the business and to its success. What

the customer thinks he or she is buying, what he considers value, is decisive – it

determines what a business is, what it produces, and whether it will prosper.

And what the customer buys and considers value is never a product. It is always

utility - what a product or service does for him. Customers are the foundation of

business and keep it in existence. They alone give employment. To supply the

wants and needs of a customer, society entrusts wealth – producing resources to

the business enterprise.

Aligning with Drucker, Harvard‟s farmed marketing Professor Ted Levitt in

Kotler (2009: 83) argues that companies must see their business as a customer

satisfying process, not a goods- Producing process. He maintains that products

are transient; basic needs and customer groups endure foreverEchoing Drucker,

Liz Jackson and Mick Spain (2006: 75) assert that a business is not a business if

it does not have customers. The more customers you have coming to you more

regularly, and spending more money each time they come, the faster one will

grow .Growth cannot be achieved unless everything you are doing for the

customer meets or exceeds their needs and expectations. Deming (1990: 116)

states that profit in business comes from repeat customers; customers that boast

about our product or service, and that bring friends with them.Liz , summarized

by maintaining that we are in business to win and retain customers, nothing else.

2.8.1 Challenges of Ethics in Business

Elegido (2000:9) asserts that ethics is a practical discipline. Ethics he maintains

tries to help in deciding how people should act not just in order to attain a given

objective or objectives but rather, all things considered. The focus of ethics is to

determine how to behave in order to ensure that our life is flourishing,

successful, worth living and fulfilling. Solomon in Elegido (2000:18) provides

an excellent description of the aim of ethics. Ethics he says is the quest for, and

the understanding of the good life, living well, a life worth living. It is largely a

matter of perspective, putting every activity and goal in its place, knowing what

is worth doing and what is not worth doing, knowing what is worth wanting and

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having and knowing what is not worth wanting and having. Also it involves

keeping in mind what is ultimately important and essential and what is not, what

serves our overall career, goals and what does not, what is part of business and

what is forbidden to business, even when increased profit - the more obvious

measure of business success is at stake. Ethics also considers what ends are

worth pursuing and under what conditions it is worth pursuing them. A person

who acts without thinking, getting carried away by anger, interest or fear, is not

likely to act ethically in this sense.

Frankenga (1980:90) argues that behaving in a morally upright manner is

nothing but being fully rational. A morally up right or intelligent person would

never allow the pull of emotion to cause him or her to act in a less than entirely

reasonable manner. This does not mean that behaving intelligently or morally

demand that one strives to kill all feelings and emotions. In order to ensure that

our intelligence occupies the driving seat our emotions have to be controlled and

disciplined, but they do not need to be uprooted. Full rationality demands that

we weigh intelligently not only the adequacy of the means but also the value of

the ends. Acting irrationally means being driven exclusively by the positive or

negative urges and emotions aroused by performing an action or by

contemplating it in ones imagination, while acting intelligently basically means

guiding oneself by a consideration of human fulfilment that immediately one

can achieve or promote through ones action (Elegido 2000:7). In order words

acting intelligently means: allowing our intelligence rather than feelings,

emotions or passions to play the ultimate directive role in choosing both our

ultimate objectives and the means to attain them.

Besides shaping our feelings and emotions, our choices and decisions have also

an impact at even deeper levels of our personality, as are our basic spiritual

dispositions as a rational agent and what we value. Each time we choose to

disregard the well being of others for reasons of business we reduce, at least

marginally, the importance of that well being for us and the strength of the bond

which unit them with you choosing to act in that way also reduces the

importance we give to acting on the basis of knowledge and understanding as

opposed to being carried away by flights of emotion. Treating others as if they

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had no intrinsic worth or dignity all in the name of business automatically

reduces our own value in our eyes and lessen our self-respect and self-esteem

(Garelli, 2006:126).

Drucker (1977:361) states that developing people still requires a basic quality in

manager which cannot be created by supplying skills or by emphasizing the

importance of the task. It requires integrity of character. They command more

respect than the most likeable person ever could. They demand exacting

workmanship of themselves and of her people. They set high standards and

expect that they will be lived up to. They consider only what is right and never

who is right. And though often themselves persons of brilliance they never rate

intellectual brilliance above integrity in others. The manager who lacks these

qualities of character- no matter how likeable, helpful, or amiable, no matter

even how competent or brilliance- is a menace who is unfit to be a manager.

What a manager does can be analyzed systematically. What a manager has to be

able to do can be learned. But one qualification the manager cannot acquire but

must bring to the task is not genius: it is character. Countless sermons have been

preached and printed on ethics of business and the business person. Most have

nothing to do with and little to do with ethics. One main topic is plain, everyday

honesty. Business people, we and told solemnly, should not cheat, steal, tell lies,

bribe or take bribe. The problem is one of moral values and moral education.

Manager we are told, have an ethical responsibility to take an active and

constructive role in their community, to serve community causes, give their time

to community activities and so on.The first, responsibility of profession was

spelled out clearly, in Greece, 2500 years ago, in the „Hippocratic Oath‟ which

every young physician still swears: premium non nocere- “Above all, not

knowingly to do harm” (March et al 1958:420).

No professional whether doctor, lawyer, or manager can promise that he or she

will indeed do good to their client. All they can do is to try. But they can

promise that they will not knowingly do harm. Professionals have to have

autonomy. They cannot be controlled, supervised or directed by the client.

Decisions have to be entrusted to their knowledge and judgment. But it is the

foundation of their autonomy, and indeed its rationale, that they see themselves

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affected with the client‟s interest. Professionals, in other words, are private in

the sense that they are autonomous and not subjected to political or ideological

control. But they are in public in the sense that the welfare of their client sets

limits to their deeds and words. And premium non nocere „not knowingly to do

harm‟ is the basic rule of professional ethics.

There are important areas where managers and especially business managers

still do not realize that in order to be permitted to remain autonomous and

private they have to impose on themselves the responsibility of the professional

ethics. They still have to learn that it is their job to scrutinize their deeds, words,

and behaviour to make sure that they do not knowingly do harm. The manager

who fails to think through and work for the appropriate solution to an impact of

the business on the environment or try to build internal capacity to lessen the

impact of the activities of his or her business shows gross violation of

professional ethics.

Domini and Kinder (1984:112) raise questions as to how do the ethical

standards of a firm affect its effectiveness as an economic agent? They raised

the second question, does honesty pay? Some people argue that ethics is fine

from the point of view of upholding one‟s personal standards, but that from the

point of view of business effectiveness it makes no discernible difference. To

back this view they point out that often firms which seem honest do not succeed

in business, while firms that seem to disregard ethical issues may be quite

profitable. There is no denying such observations. However, all they are saying

is that honesty, by itself, does not guarantee business success (Rita 2004:35).

The relevant question is whether ethical behaviour, by itself, contributes

positively to business success. It seems clear that it does so by fostering three

key ingredients of that success. Ethical behaviour contributes to the good

reputation of a firm and to other parties being ready to trust it, and it promotes

employee commitment to success of the firm. Besides contributing to business

success these factors also have the highly desirable characteristics of not being

easily imitable and therefore can provide a sustainable competitive advantage

(Hindo, 2003:41).

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New products or service, organizational structures, compensation policies,

exploitation of new markets, possession of valuable assets, are all factors that

can provide a competitive advantage. Unfortunately, however, they are often

easily replicated by ones competitors. On the contrary, factors like reputation,

trust and commitment, in so far as they spring from the fact that a firm acts in a

consistently ethical way, are far harder to imitate and can provide competitive

advantages that last for decades. What may need some more explanation is the

way in which reputation, trust and commitment are linked to firm acting

ethically (Sparkes 1995:68).

Reputation and Trust

A firm has a reputation, which depends on its past actions, among all the people

with whom it relates in the course of its activities. It not only has a reputation,

good or bad, among its present and potential customer, but also among present

and potential employees, investors, suppliers and distributors, it will as well be

perceived in certain way by government officials, regulators, mass media and

the public. In so far as its actions have consistently sought to take fairly into

account the interests of all concerned, the firm will have won the trust of many

of those with whom it relates and it will find it easier to enter into productive

relations with them. In so far as its actions have only reflected the interests of

the people who control the firm, its reputation will be poor and other parties will

tend to mistrust it. People will not be willing to enter into business relations with

a firm which does not have a good reputation. They will be ready to pay a

premium for dealing with a firm they can trust (Nozick, 1974:45).

Employee Commitment

This refers to the readiness of employees to devote their efforts to promoting the

common interest of the firm, rather than focusing exclusively on adorning their

own individual interests, at the cost of the firm if need be. There is a strong

positive relationship between the ethical standards of a firm and the commitment

of its employee to the common good of the firm. Where a firm is managed in

selfish manner, that is to say in a manner that takes into account only the interest

of those who control it, its employees will tend to adopt the same attitude. This

is in part spontaneous” doing as you are done by”, and in part a natural response

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to the character of the firm‟s objectives; after all, why should employees

sacrifice their own individual interests in order that some other people may

enrich them Selves? On the contrary, in unethical firm employees have reasons

to trust that if the firm prospers they will share in that prosperity. By offering

meaning as well as money, they give their employees a mission as well as a

sense of feeling great. The firm provides guiding belief and create a sense of

producing something of quality that is generally valued. The motivating power

of a firm like the pharmaceutical valued. The motivating power of a firm like the

pharmaceutical company Merck, flatly states in its internal management guide

“we are in the business of preserving and improving human life”. It is known

that the company wants to be assessed based on the above statement. All their

actions must be measured by the above statement. All their actions must be

measured by their success in achieving this goal (Axelrod, 1984:77).

Business Morality

In the words of Finnis, Boyle and Griosez (1987:210) ethical rules which readily

come to mind are “One should not tell lies,” “One should help people in

distress,” “one should not steal,” “one should not commit murder”. Many of

these ethical rules are controversial, at least to some extent. For example

situation and circumstance will determine whether statement is a lie or not. A

statement is said to be a lie if it is meant to harm people or deceives and/or if it

is tends to undermine mutual trust among people. Those are the justification to

tell lies. In order to use systematically this procedure in problems of business

ethics we will first have to identify the more fundamental ethical principles. This

issue is very complex and controversial. Fortunately, we are going to

concentration on business ethical principles which have special importance in

order to make right decision in business life, without entering in the question of

how far each of them is truly ultimate. With these in mind we offer the

following as constituting a reasonably complete list of business ethics (Parfit

1984:72).

Principle of solidarity: This principle states that as human beings we should be

concerned with promoting the well being of all human beings, not only our own.

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In so far as we fail to do so we undermine our fulfilment and destroy the

business environment.

2.8.2 Other Challenges Facing Business

According to 1yer (2009: 84) information, correctly used, is power that is why

today people go to information, rather than information coming to them. With

the right information one can do almost anything. Lack of information can be

due to:

Failure to get sufficient relevant facts.

Lack of knowledge or misunderstanding of the full requirements.

None transmittal of information in suitable form

Misinterpretation of available information.

Inaccurate definition of the problem or the project itself.

Limited information.

System bias, channeling information narrowly.

Information that is most frequently lacking is technical information on changes,

to keep-up with the technological explosion; and cost information on

comparable costs of various solutions to a given problem. Usually, these are

neither compiled, nor up-dated; and, when done not in a form that would help

decision making, especially, when new processes, materials and methods are

tried for the first time. Because new products, new processes and new materials

are constantly entering the market it becomes a difficult task to remain

knowledgeable on all changes. To investigate number of different processes or

materials to look for standard parts, to compare costs, etc need time, the lack of

which breeds unnecessary costs. “Lack of information and the relative cost

“therefore in these cases is estimated to “add something like 25 percent to the

cost of a component”, (Raven, 1971:62).

Customers are on the move too. Their needs and tastes are charging. They seek

greater variety and quality, durability, convenience and customized alternatives

with special features that suit individual requirements. To remain responsive to

their changing needs, to add customer friendly features, widespread availability

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of information is necessary. For effective, day-to-day, problem-solving, visual

display of information speeds up dissemination and spurs actions knowing how

to focus or refocus information to improve performance is equally important.

Few companies do. Too often their managers are moved in the complexity of

their tasks. They believe that every employee understands the basic building

blocks of how their business works. Most do. However, many do not. They do

not realize how important the fundamentals cash, margin, velocity, improvement

and growth are. This is a cost- free opportunity for prospering especially when

the economy is in the doldrums. To quote a Nigerian proverb to explain the

importance of information, “not knowing is bad; not wanting to know is worse”.

Lack of time

Another component of competitive advantage is time. Time is truly money and

one of the best ways to save money is to save time. Time waste is most difficult

to identify and isolate, as it does not litter the floor. Lack of time is most

common and universal Raven, (1971: 68). When a project is finally approved,

there is pressure to provide it as quickly as possible. Time pressure is so great

that the designer‟s prime objective becomes getting a solution off the board

within the allotted time. Time is not available to make every study or

comparison desire. There is little or not effort to consider properly, if at all, the

value of the design approach being developed. Or, to optimize the many

solutions to given design, based on cost, or to comb through and develop fully

even the one in hand. Seldom is there time to sit back and contemplate ideas, or

to design alternative approaches or solutions. The design proposed is more

likely to be either a scaled up or scaled down version of a successful

predecessor. Naturally, it will include the faults and deficiencies of the previous

design, difficulties of manufacture, assembly, servicing, testing and inspection;

high scrap rate; wrong choice of materials and so on.

Iyer, S. (2009:88) states that dead lines are helpful to complete the job on time.

However, they generally do not permit complete searching, testing and seeing

and whistling information which would otherwise have enabled accomplishing

customer needs at the lowest cost-be it in design, engineering, purchasing or

manufacturing. Inertia prompts choosing a rather traditional fastening, finish, fit

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or tolerance-rather than checking it for appropriateness, before specifying. The

message is on the time spent. The time one spends on every item is a measure

often intensity, priority and concern for the item.

Honest wrong Beliefs

Mile, H. (2001: 112) asserts that some decisions are based on someone beliefs,

rather than on facts. A situation is often assumed to be impossible, for

erroneous, but sincere reasons. For example, Planners who make decisions on

what a project should accomplish may not have properly gauged the public‟s

needs. Designers who make decisions on what material, process, fastener or

factor of safety to use, may be biased against some specific items, because of

one or more unfortunate experiences of failure. A sound improvement could be

abandoned, because it was thought it might cost too much. An equally sound

reduction on cost could be turned down because it was thought it could hurts

performance. Product worth is improved in the sincere belief that the added cost

would be reasonable. And, the product cost is reduced with the fervent hope that

the reduction would not lower the product worth.

Habitual Thinking

Thinking and doing things in the same way is a frequent cause of poor

competitive advantage. However, it is extremely difficult to undo the things one

has been doing for years. Most people have a habit of re-using what worked the

last time or copying a standard set by others. They duplicate a success, repeat a

good experience and avoid a bad one. This is a defensive measure, to minimize

risks, and is prevalent because of rigid use of standard designs, rules and

procedures, customs, tradition, etc (Carlyle, 2006: 201). The deepest law of

human nature is habit: it works more constantly and with greater force than

reason.

Which (reason) is seldom fairly consulted and more rarely obeyed.

According to Locke (2004:301) often the forces of habit result in developing a

pattern of thinking of doing things, of solving problems and so on. Habit

solutions are often obsolete solutions. No doubt the advantages gained are

speedier preparation of drawings and easier meeting of time schedules.

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However, the disadvantages do not become apparent immediately. For, the

unnecessary cost that the habit solution breeds does not manifest until much

later and is, often, unknown to the planner. Traditions and habit are hard to

break. Habits are what we use to build basic skills; and so, many are beneficial.

Like excellence, which according to Aristotle, “is not an art, but a habit” Habit

supported by attitudes and becoming roadblocks are disadvantageous.

Unquestioned conventions and unchallenged precedents get entrenched as

managerial habits.

2.9 CORPORATE SOCIAL RESPONSIBILITY OF BUSINESS

According to McWilliams et al in Armstrong (2009:166) Corporate Social

Responsibility refers to the actions taken by business that further some social

good beyond the interests of the firm and that which is required by law.

Corporate social Responsibility is excised by organizations when they conduct

their business in an ethical way, taking account of the social environmental and

economic impact of their operation. Corroborating with McWilliams, Porter and

Kramer (2006:62) describes CSR as a process of integrating business and

society. They argued that to advance CSR, it should be rooted in a broad

understanding of the interrelationship between a corporation and society while

at the same time anchoring it in the strategies ands activities of specific

companies.

Remington (2005: 261) places more emphasis on Corporate Social

Responsibility in the work place when it defined it as the continuing

commitment by business to behave ethically and contribute to economic

development while improving the quality of life of the workforce and their

families as well as of the local community and society at large.

CSR activities as listed by McWilliams et al (2006) in Michel Armstrong (2009:

167) include incorporating social characteristics or features into products and

manufacturing process, adopting progressive human resource management

practices, achieving higher levels of environmental performance through

recycling and pollution abatement and advancing the goals of community

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organization. The list was derived from the CSR activities of 120 leading British

companies, Business in the community in 2007.

Community Skills ands education, employability and social exclusion were

frequently identified as key risks and opportunities. Other major activities are

support for local community initiatives and being a responsible and safe

neighbor.

1. Environment-most companies reported climate change and resource use as key

issues for their business, 85 percent of them managed their impacts though an


2. Market place: The issues most frequently mentioned by companies were

research and development, procurement and supply chain responsible selling,

responsible marketing and product safety. There was a rising focus on fair

treatment of customers, providing appropriate product informational and

labeling, and on the impacts of products on customer health.

3. Work place: This is the strongest management performing areas as most

companies have establish employment management frame works that can carter

for workplace issues as they emerge. Companies recognized the crucial role of

employees to achieving responsible business practices. Increasing emphasis is

placed on internal communications and training to raise awareness and

understanding of why CSR is relevant to them and valuable for the business.

More attention is being to health and well being issues as well as the traditional

safety agenda. More work is being done and diversity, both to ensure the

business attracts adversity, both to ensure the business attracts adverse

workforce and to communicative business case for diversity internally.Business

institutions intend to achieve the under listed activities (Unamka and Ewurum,

1995:42):

Creation of development centres.

Training of the poor and imparting skills to the unemployed.

Obedience to the laws of the land.

Payment of salaries.

Supporting medical research and social research.

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Providing quality products and providing information on them.

Preventing pollution emanating from waste through production.

The views supporting the social responsibility of business can be expressed by

corporation, like all good citizen should extent the palm of charity to the

unfortunate and should be good neighbor by maintain ethical code in the

manufacturing of products and improve business activities based on ethical

practice. Church, nor army, nor school, nor state does that. Any organization

that fulfils itself through marketing a product or a service is a business. Any

organization in which marketing is either absent or incidental is not a business

and should never be managed as if it were one (Drucker, 1977:41).

A business enterprise can exist only in an economy which considers change both

natural and acceptable. And business is the specific organ of growth, expansion

and change. The second function of a business is, therefore, innovation – the

provision of different economic satisfactions. It is not enough for business to

provide just any economic goods and services; it must provide better and more

economic ones. It is not necessary for a business to grow bigger; but it is

necessary that it constantly grow better. This is possible in environment where

the true meaning of business is appreciated.

Drucker (1977:68) appreciates the understanding of business in the third or

developing countries of the world thereby introduces the concept of ethics and

morality in the conduct of business. He states that a manager is an example.

What he does is important. And equally important is who he is - the dimension

of personality, example and integrity. He asserts that in business integrity is

more valued than genius. There is equal stress on business manager‟s task and

his character. Aligning with Drucker, Unamka (2000:5) in his unpublished

lecture note describes African business as lacking in integrity. We therefore

recognise the need for ethics in business operation most especially in third world

or developing countries who are still struggling to build trust and confidence in

their operation. The vision, dedication and the integrity of managers determine

whether there is management or mismanagement.

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2.10 THEORETICAL FRAMEWORK

The theoretical framework of the research is premised on the determinants of

competitive advantage for organizational growth. Competitive advantage though

a sub-set of strategic management, yet it is the live wire of strategic

management in that all efforts of SWOT analysis are geared towards achieving

competitive advantage. Resource- based theory of competitive advantage starts

by looking at the relative position of a firm in specific industry. It starts by

considering a firm‟s environment and then tries to assess what strategy is the

one that may maximize a firm‟s performance (Barney,1991:42).

The resource- based (RB) theory, by contrast, can be seen as an “inside-out”

process of strategy formulation. It starts by looking at what resources a firm

possesses. Next, it assesses their potential for value generation and ends up by

defining a strategy that will allow an organization to capture maximum value in

a sustainable way (Robert 199:62).This is achieved through:

Identifying and classifying a firm‟s resource; appraising strengths and

weaknesses relative to competitors; identify opportunities for better utilization

of resource.

Identify a firm‟s capabilities. What can the firm do more effectively than its

rivals? Identify the resource inputs to each capability, and the competitiveness

of each capability.

Appraise the rent generating potential of resources and capability in terms of

there potential for sustainability and the appropriateness of their resource.

Select a strategy, which best exploit the firm‟s resources and capabilities relative

to external opportunities (Barney 2004:14).

Hameland and Prafalad (2006:8) refer to “core competences” as those resources

that are crucial for achievement of competitive advantage. They are regular and

predictable patterns of activities which are made up of a sequence of

coordinated actions by individuals. It is also as a result of the repeated

interaction between people and other resources of a firm (Jane, 2006:112). The

capacity of the organization to cooperate and coordinate resources can be seen

itself as an intangible resources. This includes knowledge which limits the level

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by which organization capabilities can be articulated. Advantage of an

established firm over a new comer is its great experience. This was reflected in

the 1960-70s with the emphasis on learning curves (Boston Consulting Group

experience curve) complexity of capability pose a huge barrier for other firms to

enter the market making it easier to sustain its competitive advantage-

complexity is relevant for the sustainability of competitive advantage.

Grant (1991:6) gives some of the traits of resource base theory. For the theory to

earn positive returns on the value of resource is dependent on its sustainability

and appropriatability. The four main elements for the sustainability competitive

advantage derives from resources are: durability, difficulty to indentify and

understand, imperfectly transferable, not easily replicated and in which a firm

possesses ownership and control. The crux strategy formulation is to define a

strategy that makes the best used of these resources and capability. Two issues

that come up often in the theory have to do with the limits of a firm- do we only

get into the business for which we are well endowed and leave everything else

out of the picture and with the relevant strategic time frame- for how long will

the present resources and capability of my firm provide competitive advantage

over their compactor?

In the words of James (1990:62) sustaining a firm‟s competitive advantage is

necessary in nurturing and developing its resource base. Resources can be seen

as stock that depreciate with time and that have to be replaced and upgraded.

Here we find a parallel with Porter (1990:17) diamond in that in both models,

the only means to stay in the work is through upgrading the resources pool-

round that Porter considers innovation as the force creating competitive

advantage. This resource pool can be upgraded organically or through

acquisition. It is consistency in innovation that is the key to sustainable

competitive advantage. It is crucial for management to be committed to the

necessary investment to carry its process out.

According to Dimesh (2009:17) the competitive advantage theory suggests that

every one is better of, if its decisions are made based on the competitive

advantage at all levels, national, corporate, local and individual. Simply stated, it

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is nothing more than asking for optimal utilization of resources and the

globalization of manufacturing and service across the world in a borderless

world. (Unfortunately, we don‟t live in borderless world since there are

politicians and thick boundaries that defend the territory of nations and

politicians, hence the issue surrounding the loss of jobs due to off shoring and

use of protectionist measures. In a perfect world, letting some one do the work

who has an advantage over you (due to natural or human resources capabilities,

competencies cost) is not zero sum game as it offer better pay off per every one

involved, thereby creating a win-win situation. However, this does assume that

resources and capital can flow freely across the world if market forces were

allowed to operate freely. That could automatically be the case in the real

world, that is not necessarily the case as these several friction which prevent

not only the free flow of resources but also the ability to capitalize on gains

resulting from the use of competitive advantage.

Goel (2009:27) maintains that the theory is based on fundamental assumption

that adequate employment opportunities are available to those who are engaging

themselves to leverage on competitiveness of others to the degree that they can

optimize their potential- for instance move up the value chain if they were

constrained so far due to capacity instead of capability. Similarity, it assumes

that resources will move to where they find their best employment opportunities

irrespective of social-cultural differences. That is not necessarily the case on the

real world, but it is not altogether untrue either. What we observe is that, at a

macro level, those forces will be at play in people will redeploy themselves to

the best possible opportunities available and relocate if necessary. However at

an individual level, these may be adjustment pain due to lack of societal support,

capability gaps and personal financial situations. While that is true at the micro

level, the trend does not negate the fact that it is beneficial to everyone at a

macro level. Man-made obstacle can slow it down but not reverse the trend that

offers a beneficial outcome to everyone involved.

The theory advocates for application of knowledge and technology on endowed

resources in order to achieve competitive advantage. Porter (1990:72) highlights

the crucial distinction between broader concept of competitive advantage as a

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source of wealth and the notion of comparative advantage by David Ricardo

which had long dominated thinking about international – competition.

Comparative advantage as it had come to be understood rests on endowment of

factor in puts. Factor input themselves have become less and less valuable in an

increasingly global economy. Neither is competitiveness secured by size or

military might, because neither is decisive for productively. There has been

growing sentiment, however, that comparative advantage based on factor of

production is not sufficient to explain patterns of trade. Evidence hard to

reconcile with factor comparative advantage is not difficult to find.

Technology has given firms the power to circumvent scarce factors via new

products and processes have nullified, or reduced, the importance of certain

factors of production that once boomed large. Flexible automation, which allows

for small lot sizes and easy model changes, is reducing the labour content of

products in many industries. Access to low local wage rates and abundant

factors of production are less important in many industries than the technology

and skills to process them effectively.

Competitive advantage theories also involve setting a proper stage to produce

adequate base for rural business. A systematic understanding of current or

prevailing conditions in the rural area is inevitable. The popular term for the

initial activities is known as a situational analysis. The essentiality of the process

is to help the planner to gain useful insight concerning the prevailing

circumstances which could help him to consider how changes could be made in

order to achieve desired goals and ideals. Such an analysis is expected to cover

various areas of rural business to set the stage for project development and

provide an opportunity to understanding the dynamics of rural community

(Richard, 2008:4).

2.11 DIRECTION FOR EMERGING COMPETITIVE ADVANTAGE THEORIES

According to Porter (1990:18) emerging theories of competitive advantage

should be directed towards explaining why firms based in particular nation

achieve international success in distinct segments and industries. The search is

for the decisive characteristics of a nation that allow its firms to create and

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sustain competitive advantage in particular fields, that is, the competitive

advantage of nations. The globalization of industries and the internationalization

of companies leave us with a paradox. It is tempting to conclude that the nation

has lost its, role in the international success of its firms. Companies, at first

glance, seem to have transcended countries. Competitive advantage is created

and sustained through a highly localized process. Differences in national

economic structures, values, cultures, institutions, and histories contribute

profoundly to competitive success. The role of the home nation seems to be as

strong as or stronger than ever. While globalization of competition might appear

to make the nation less important, instead it seems to make it more so. With

fewer impediments to trade to shelter uncompetitive domestic firms and

industries, the home nation takes on growing significance because it is the skills

and technology that under pin competitive advantage. Any new theory of

national advantage in industries must start from premises that depart from

previous work. First, firms can and do choose strategies that differ.

A new theory must explain why firm from particular nations choose better

strategies than those from others for competing in particular industries. Again

successful international competitors often compete with global strategies in

which trade and foreign investment are integrated (Danielson, 1988:250). Most

previous theories have set out to explain either trade or foreign investment. A

new theory must explain instead why a nation is home base for successful global

competitors in a particular industry that engage in both. Many of the underlying

causes of exports and foreign investment prove to be the same. The home base is

the nation in which the essential competitive advantages of the enterprise are

created and sustained. It is where firm‟s strategy is set and the core product and

process technology are created and maintained. Usually though not always, most

sophisticated production take place there. Firms often perform other activities in

a variety of other nations. The home base will be the location of many of the

most productive jobs, the core technologies, and the most advanced skills. The

presence of the home base in a nation also stimulates the greatest positive

influences on other linked domestic industries, and leads to other benefits to

competition in the nation‟s economy. The nation that is the home base will also

usually enjoy positive net exports. While the ownership of firms is often

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concentrated at the home base the nationality of shareholders is secondary. As

long as the local company remains the true home base by retaining effective

strategic, creative, and technical control, the nation still reaps most of the

benefits to its economy even if the firm is owned by foreign investors or by

foreign firm. Explaining why a nation is the home base for successful

competitors in sophisticated segments and industries, then, is of decisive

importance to the nation‟s level of productivity and its ability to upgrade

productivity over time.

Belassa, (1979:12) asserts that a new theory of competitive advantage of nations

must starts from the premise that competition is dynamic and evolving. Much

traditional thinking has embodied an essentially static view focusing on cost

efficiency due to factor or scale advantages. Technological change is treated as

though it is exogenous, or outside the purview of the theory. As Schumpeter,

(1964:331) recognizes many decades ago, however, that there is no

“equilibrium” in competition. Competition is a constantly changing landscape in

which new products, now ways of marketing, new production process, and

whole new market segments emerge. Static efficiency at a point in time is

rapidly over come by a faster rate of progress.

A new theory must make important improvement and innovation in methods and

technology a central element (Ampbell,1985:224).It should explain the role of

the nation in the innovation process. Since innovation requires sustained

investment in research, physical capital, and human resources, it also explains

why the rate of investments are more vigorous in some nations and not others.

The question is how a nation provides an environment in which its firms are

able to improve and innovate faster than foreign rivals in particular industry.

This will also be functional in explaining how entire national economies

progress, because technological changes, in the broad sense of the term, nation‟s

factors of production are fixed. Firms deploy them in the industries where they

will produce the greatest return. In actual competition, the essential resources to

where the returns are greatest, the real issue is how firms increase the returns

available through new production, a more important issue is how firms and

nations improve the quality of factors, raise productivity with which they are

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utilized and create new ones. Where factors are mobile and can be tapped

through, global strategies, moreover, the efficiency and effectiveness with which

factors can be used become even more central. Answers to the questions will

emerge as decisive in understanding why nations succeed in particular

industries.

Firms play a central role in the process of creating competitive advantage the

behavior of firms must become integral to a theory of national advantage. A

good test of a new theory is that it makes sense to managers as well as to policy

makers and economists. From a manager‟s perspective, much of trade theory is

too general to be of much relevance. A new theory must give firms insight into

how to set strategy to become more effective in international competition.

2.12 EMPIRICAL REVIEW

There has been no shortage of explanation for why some nations are competitive

and others are not. Yet these explanations are often conflicting. There has been

intense debate in many nations about whether they have competitive problem in

the first place is a sure sign that the subject is not completely understood (Porter,

1990:3). Some see national competitiveness as a macroeconomic phenomenon,

driven by such variable as exchange rates, interest rates, and government

deficits. But nations like Japan, Italy, Germany and Korea have enjoyed rapidly

rising living standards despite budget deficit and high interest rates. McGahan

(2004:61) argues that competitiveness is a function of cheap and abundant

labour. Yet nations such as Germany, Switzerland and Sweden have prospered

despite high wages and long period of labour shortage. Japan, with an economy

supposedly build on cheap, abundant labour, has also experienced pressing

labour shortages. Its firms have succeeded internationally in many industries

only after automating away much of the labour content. Another view is that

competitiveness depends on possessing bountiful natural resources. Recently

however, the most successful trading nations among them Germany, Japan,

Switzerland, Italy, and Korea have been countries with limited natural resources

that must import most raw materials. Yet they perform better than Nigeria and

other African countries that have huge natural resources.

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More recently, many have also argued that competitiveness is most strongly

influenced by government policy this view identifies, targeting, protection,

export promotion and subsidies as the key to success. Significant government

policy intervention has occurred in only a subset of industries and it is far from

universally successful even in Japan and Korea. In Japan, for example,

government‟s role in such important industries (Facsimile, Copiers and Robotic)

has been modest. Even the sustained targeting by Japan of industries such as

aircraft and chemicals has also failed to yield meaningful international position.

Looking across industries in which Government is indeed an actor show that

government is not a good manager of business (Barney 2004:71). Finally

popular explanation for national competitiveness is differences in management

practices, including labour- management relations. The problem with this

explanation, however, is that different industries require different approaches to

management. What is celebrated as good management practice in one industry

would be disastrous in another. Clearly, none of these explanations for national

competitiveness is sufficient by itself in rationalizing the competitive position of

a nation‟s industries. Each contains some truth but will not stand up to close

examination.

The search for a convincing explanation of both national and firm prosperity

should centre on the principal economic goal of a nation to produce a high and

rising standard of living for its citizens. The ability to do so depends on the

productivity with which a nation‟s resources (Labour and Capital) are employed

(Barney 1990:32). Productivity is the value of output produced by a unity of

labour or capital (Pearce and Robinson 2004:33). It depends on both the quality

and features of products and the efficiency with which they are produced.

Productivity is the determinant in the long run of a nation‟s standard of living,

for it is the root cause of national per capita in come. The productivity of human

resources determines their wages, while the productivity with which capital is

employed determines the return it earns for its holders. High productivity not

only supports high level of income but allows citizens the option of choosing

more leisure instead of long working hours. It also creates that national income

that is taxed to pay for public services which again boosts the standard of living.

The capacity to be highly productive also allows a nation‟s firms to meet

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stringent social standards which improve the standard of living, such as in health

and safety, equal opportunity and environmental impact (Ghemawat and

Srinivasa 1995:7).

The only meaningful concept of competitiveness at the local and national level

is national productivity. Our task is to understand why this occurs. Sustained

competitiveness or productivity growth requires that an economy continually

upgrade itself. A nation‟s firms must relentlessly improve productivity in

existing industries by raising product quality, adding desirable features,

improving product technology, or boosting production efficiency (Kotler and

Jatusripitak 1997:68).

According to Porter (1990:2) competitive advantage is increasingly a function

not of factors but of the ability to create and apply knowledge and technology to

industry competition. Porter aligning with, Drucker (1977:64) asserts that

management is not a common sense. It is not a codified experience, but

potentially an organized body of knowledge. Also agreeing that knowledge is

the foundation for achieving competitive advantage Chester, I. Benard in Arthur

Baiden (1982:211) maintains that organisations are formed in order to take

advantage of accumulated knowledge of the past. Buttressing these statements

Porter cited a case of Germany. Germany was defeated in war for the second

time in less than Thirty years. Its industrial base was badly damaged. Germany

lost about half of its land area notably that containing some of the most

abundant natural resources as well as some of the most modern part of the

industrial base. Many German patents were confiscated as were foreign assets in

variety of industries. During the war, their firm were cut off from most world

markets, a circumstance that often allowed the development of strong rivals

based in such countries as America, Sweden and Switzerland. German efforts to

build international market positions faced difficulties in obtaining export

licenses from the Allies, who kept many German firms out of world market until

1950s as well as continued resentment by foreign buyers in some industries.

There circumstances were overcome within a few decades. It became a surprise

to the world that Germany was able within a decade to overcome all these

difficulties to emerge as one of the leading competitive industrialized nations of

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the world. Today, Germany is the largest economy in Europe. It is true that

Germany lost their infrastructure but the most essential which is knowledge was

intact.

Knowledge is the distinct resource of any business or industry. From the start of

recorded history to date, it has been growing exponentially. It is estimated that

information, is doubling every eighteen months. Technical knowledge is said to

double itself every six to eight years. Eighty to ninety percent of the scientists,

Engineers, Technicians and professionals who ever lived are alive today, and are

endeavouring to unravel new truths. Reading is the path to knowledge.

Knowledge is not only power, but also, the crux of competitive advantage. Even

in this technology age. Anyone can copy others plans, products, processes and

procedures. However no one can duplicate a company‟s intellectual capital-

knowledge and know how-the real source of values (Iyer, 2009: 3). Expanding

knowledge is at the core of everything: everything of value. Learning from the

past, we progress into the future, escalating endeavours to discover ever more

effective ways of turning knowledge into commercially useful new products and

services of value.

Technology is knowledge, systematically applied to useful purposes (Iyer,

2009:3). Evolving in leaps and bounds, it will only be advancing and

accelerating. The evolution and successful acceptance of technology will be

directly proportional to the ability of the technology to improve the quality of

human life. A firm is a collection of activities that employ technology, in some

form or the other, for its performance. Technological change, shortening the

average life cycle of products, leads to new products, new equipment that

produce them, and new tools that assist production. It also reduces the time-

distances between two points on the earth, and so, increases the speed with

which one transacts business. Technology has powerful effect on cost and

differentiation and pervades the value chain. It is more than robots replacing

people. It is aiding people to do more with same talent and item. That is why,

customers and users prefer products and services with latest technology and

producers favour technological changes. In the 19th century, industrial

revolution demonstrated technology‟s power in improving human existence. In

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the 20th century, science, transformed into useful industrial technology,

continued to hold mastery over the material world, with spectacular wealth-

creating additions.

Explaining further the importance of technology, Hicks in Jhingan (2007:4)

points out in this conection that the problems of underdeveloped countries are

concerned with the development of unused resources, even though their uses are

well-known, while those of advanced countries are related to growth, most of

their resources being already known and developed to a considerable extent.

Porter (1985:21) asserts that post war industrial history is not a story of

exploiting abundance but of creating abundance. It is a story not of enjoying

advantage but of coping with selective disadvantage. National adversity, when

combined with the right underlying circumstances, has been an energising force

for innovation and change. Pressure and challenge, not “a quiet life” has led

firms and nations to achieve competitive advantage. Barney (1991:53) observes

that when a firm is implementing a value creating strategy not simultaneously

being implemented by any current or potential competitors, that is when a firm

has competitive advantage. And when a firm is implementing a value creating

strategy not simultaneously being implemented by any current or potential

competitors and when these other firms are unable to duplicate the benefits of

this strategy that one can say that the firm has a sustained competitive

advantage.

Dean (1993:27) points out that when a firm sustains profits that exceed the

average for its industry, the firm is said to possess a competitive advantage over

its rivals. The goal of much of business strategy is to achieve a sustainable

competitive advantage. A competitive advantage exists when a firm is able to

deliver the same benefits as competitors but at a lower cost (cost/price

advantage), or deliver benefits that exceed those of competing products

(quality/differentiation advantage). The cost of quality is real limiting factor in

what can practically be achieved in terms of delivering excellence to the

customer. The practical steps involved in guaranteeing product or service

quality do inevitably require an associated cost and overhead which has

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traditionally been balanced against the reduction in real cost associated with

failure and remake from poor quality.

Thus competitive advantage enables the firm to create superior value for its

customers and superior profit for itself (Dean, 1998: 10). Related to Dean‟s

observation Rahim (2006:3) states that in today‟s fast-paced economy,

competition is an issue of services and products. He maintains that much

attention has been directed to a best service and the best product as a sure means

of achieving competitive advantage. Schumpeter (1964:72) emphasised many

decades ago that competition is profoundly dynamic in character. The nature of

economic competition is not “equilibrium” but a perpetual sate of change.

Improvement and innovation in an industry are ever-ending processes, not a

single, once-and-for-all event. Today‟s advantages are soon superseded or

nullified. Why few firms sustain their position is because change is

extraordinarily painful and difficult for any successful organisation.

Complacency is much more natural. The past strategy becomes ingrained in

organisational routines. Information that would modify or challenge it is not

sought or filtered out. The past strategy takes on an aura of invincibility and

becomes rooted in company culture.

According to Porter (1995:4) modern global economic prosperity is a nation‟s

choice. Competitiveness is no longer limited to those nations with a favourable

inheritance. Nations choose prosperity if they organise their policies, laws, and

institutions based on productivity. Nations choose prosperity if, for example,

they upgrade the capabilities of all their citizens and invest in the type of

specialised infrastructure that allow commerce to be efficient. Nations choose

poverty, or limit their wealth, if they allow their policies to erode the

productivity of business. They limit their wealth if skills are reserved only for a

few. They limit their wealth when business success is secured by family

connection or government concessions rather than productivity (Carand,

1995:14). The aim therefore is to produce something of equal or better worth at

lower cost, and this means eliminating waste and unnecessary expenses. By

distilling the very essence of what customers wanted redesigning both process

and product to deliver at a zero waste.

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Competitive advantage advocates new, constructive, and actionable role for

government and business in the pursuit of competitiveness and prosperity.

Government, first and foremost must strive to create an environment that

supports rising productivity. This implies a minimalist government role in some

areas (e.g. trade barriers, pricing) and an active role in others (e.g. ensuring

vigorous competition, providing high quality education and training). Alongside

government, the private sector has a role to play in investing in some of the

collective assets or public goods that reside in particular locations (Ostenga, et al

1992: 72).Competitive advantage also argues for far more tangible and proactive

role for industrial associations, research and other business institutions in

making such investments. More broadly, there is an inevitable mutual

dependence between government and business in national productivity.

An ongoing dialogue is needed to remove obstacles, lower unnecessary business

costs, and create appropriate inputs, information and infrastructure. Tension,

distrust existing between government and private institutions are counter

productive and a hidden cost of doing business (Ansof, 1964: 82).Sustaining

competitive advantage for very long demands that its sources be up graded

(James, 1998: 56). Upgrading advantage demands more sophisticated

technology, skills and methods and sustained investment. Firms succeed in

industries where the skills and resources necessary to modify strategies are

present. Firms that rest on a static conception of advantage are eventually

imitated and they lose market position.

2.13 SUMMARY OF THE RELATED LITERATURE REVIEW

In this paper, attempt has been made to assess the contributions of competitive

advantage in strengthening rural business through quality and environmental

management system. The theoretical frame of the research is based on resource-

based view which takes inside-out processes of analysis. It starts by assessing

the internal resurces of the organisation and then matches it with the situations

in the environment.

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The chapter reviewed competitive strategy in order to build a foundation for

competitive advantage. At competitive strategy level organisations choose a

particular strategy as their means of competition. To an economist this is the

level refered to as comparative advantage. However, this level does not

guarantee achievement of competive advantage. These strategies are quality,

price and the newly included management. These factors are used to control

the forces of competition which include, new entrants, intensity of rivalry

among existing competitors and pressures from substitute products. Others are

bargaining power of buyers, bargaining power of suppliers and recently

technology.

Having outlined the critical factors of competitive strategy the foundation was

therefore laid for competitive advantage. Competitive advantage is the very

essence of competition in that every action of any business is to achieve

competitive edge within its industry. This is achieved by continuous upgrading

of the chosen strategy. Competitive advantage is increasingly a function not a

factor but of the ability to create and apply knowledge and technology to

industrial competition. Competitive advantage is dependent on the ability of a

firm to achieve product or service that can not easily be imitated by its fellow

competitors. It can also be achieved by being the first to discover new products

or new and better ways of manufacturing.

The review tries to draw a relationship between the Nigerian environment and

performance of businesses. Nigeria environment is adjudged to have constituted

a serious constraint to the performance of businesses. This situation actually

renders most of the business uncompetitive in the market place. Almost all the

businesses in Nigeria are suffering from lack of electricity, double taxation, poor

road infrastructure and corruption, others are violent crime which is becoming

uncontrollable in the South Eastern part of the country and the inability of banks

to advance credit to entrepreneurs.

Attention is also drawn to the concept of rural which deals with rural business

and rural development. This is developmental change geared towards individual

institutional, development partners, industrial associations and government to

204

bring social, economic and cultural change within rural communities that host

them. The emphasis on rural business is towards achieving an improvement in

the living standard of the rural populace. To achieve this, the review touched on

many conference papers and World Bank Presentations on the related issues.

Among all the conference papers are the Cork (A city in Ireland) declaration

which states ways forward for rural development; Louisiana Centre for Rural

Initiatives and Delta Rural Development Centres.

Quality as strategy for achieving competitive advantage is discussed as driver of

today‟s economy. Companies seek a better way of managing people, plants and

processes while keeping their promises to consumers of quality and safety.

Product quality and regulatory compliance are assumed as fundamentals of

business operation and profitability. Generally quality refers to planned and

systematic production processes that provide confidence in product suitability

for its intended purpose. Standard is taken to be a control mechanism for quality

and how standards are used to measure the level of compliance product to the

stated quality. Other means of controlling quality in organization are discussed

which include quality control, failure testing and statistical control. Others are

total quality management, model and standards and company quality.

The new concept of Environment Management System including its message of

controlling the impact of activities of businesses on the environment is

necessary to take a serious look at the activities of business in order to check

mate pollution which damages the eco system upon which we live. In as much

as we cherish or clamour for economic growth which has a direct relationship

with pollution there is the need for us to preserve and protect our environment in

order for us to achieve our economic desires and at the same time preserve our

environment for future generation.This calls for corperate social responsibility

by organisations operating in rural areas in order to create harmonious

relationship with their host community.

Finally gap discovred in the five forces driving industry competition, generic

competitive strategies and the concept of quality were filled.

205

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212

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 INTRODUCTION

This chapter covers the research design, sources of data tools for data collection,

and population of study. Other items discussed in this chapter include sample

size determination, reliability of instrument, validity of instrument and method

of data analysis.

3.2 RESEARCH DESIGN

Research design is simply a map or plan action showing what and how the

researcher will carry-out the step – by – step procedure for accomplishing the

research work. That is, it is the blue print and / or a plan of action defined for

collecting presenting and analyzing data in a research work (Agbaeze, 2004:

56).

The descriptive survey design was used for the study. Under this method a cross

section of the entire population will be sampled for study given the limitation

high lighted in chapter one. The method is considered adequate and most

appropriate in that it helped the researcher to describe, examine, record, analyze

and interpret the variable that exists in the study to draw conclusions.

Furthermore, the researcher also finds it reasonable to also employ oral

interview because of its factual implication on the subject matter under study.

Some historical documents were also reviewed for a more in depth and extended

coverage of five rural businesses under study which ranges from large, medium

and small scale industries.

3.3 SOURCES OF DATA

The data for this study are of two kinds primary and secondary data.

3.3.1 Primary Sources

This is the most authentic and reliable data gathered purposely for the subject

matter under study. The primary data were gathered from the respondents

through direct interviews and questionnaire method.

213

3.3.2 Secondary Sources

Secondary data are data sourced from already published works.

These are relevant facts, which have been in existence before the need for this

study, for the purpose of contributing their quota to the problem under study.

Specifically, the materials used for extracting secondary data for this study

include: journals, magazines, periodicals, textbooks and the internet.

3.4 TOOLS FOR DATA COLLECTION

The questionnaire was divided into two parts the first part contains the profile of

the respondent and the company. While the second part deals with questions

relating to the subject under study. In designing the questionnaire careful effort

were made to exclude ambiguous and offensive questions. The numbers of

questions were kept to a minimum by asking only short, clear and relevant

questions.

3.5 POPULATION OF STUDY

Here, population could be defined as the portion of the total universe to which

the researcher has access to (Udeze, 1992:12). The target population covered by

this study was 999 people made up of 359 employees of Consolidated Breweries

Ltd, 71 employees of Phinomar Nigeria Ltd, 137 employees of SG Minerals

Ltd,199 employees of Roesons Industries Ltd and 223 employees of

International Glass Industries Ltd.

3.6 SAMPLE SIZE DETERMINATION

The computation of the sample size was based on the Taro Yamane (1964)

model. The following processes were involved:

(1) n = N

1 + N(e)2

Where

n = sample size

N = population

e = error margin

214

n = 999

1 + 999(0.25)2

n = 615

(2) 𝑛 = 𝑍2𝑝𝑞

𝑒2

Where

Z = table value

P = proportion of the respondents that either strongly agreed

or agreed with a question or statement related to an

objective fot from a pilot study, p+q = 1, so q is the

proportion that either disagreed or strongly disagreed

For Z = 1.645

p = 0.9

q = 0.1

(1.645)2 9.0 (0.1)

(1.05)2 = 174

Since the Taro Yamene‟s formula gave a higher sample size of 615, it is

preferable.

The table below indicates the sample size proportion using Bowley‟s

proportional allocation statistical technique.

Formula is nh = nNh

N

Where nh = the number of unit allocated to each stratum

Nh = the number of staff in each category

n = the total sample size

N = the actual/total population

215

Table 3.1: Sample Size of Each Company And Their Percentage

Contribution

Companies Managers Subordinates Computation %

Computation

Computation Sample

Consolidated

Breweries

20 339 359𝑋 100

999

36 36

100x 615 221

Phinomar

Nigeria Ltd

10 61 71 𝑋 100

999

7 7

100x 615 43

SG Minerals 12 125 137𝑋100

999

14 14

100x 615 86

Roesons

Industries

15 184 199𝑋100

999

20 20

100x 615 123

International

Glass Industries

17 216 233𝑋100

999

23 23

100x 615 142

Total 74 925 = 999 100 615

Source: Field Survey 2010.

3.7 RELIABILITY OF INSTRUMENT

Reliability refers to the consistency of scores obtained by the same individuals

when presented with the same test on different sets of equivalent items, or under

other variable examining conditions (Ikeagwu, 1998: 105). The researcher used

test re-test method.After two weeks of questionnaire administration a second test

was re-administered to the same test group. This is to ascertain the consistency

in the first and second responses. However, there was consistency in the

responses provided by the respondents.

The researcher employed Pearson Ranking Order Correlation Coefficient (R) to

assess relationship.

R = 1−6εd2

N(N2−1)

Where:

N = 25

N2 = 625

∑d2

= 327.9925

216

: = 1−6(327.9925)

25 625−1

= 1−1967.955

25(624)

= 1−1967.9925

15600

= 1- 1967.9925

15600

= 1-0.126151

= 0.873849

= 0.87

= 0.87 is close to 1.0, hence we can conclude that 1st scores and the

2nd

text scores agree very much with each other in their

ranking. The table is in the appendix.

3.8 VALIDITY OF THE INSTRUMENT

In the views of Chionali (1989:61), validity is the extent to which a measuring

instrument measures what it tends to measure.The instrument was validated by

given it out to my supervisor and also to10 experts who examined the items

contained in the questionnaire and ensured that they serve the purpose for which

it was intended.The reviewers returned all the instrument of the validity

assessments, thus, a100% returned rate.

217

Table 3.2: Validity Scale: 10- High, 5-Medium, 0-Low

Question

No

Validity

Enquiry

10 9 8 7 6 5 4 3 2 1 Total

responses

10(100)

%

V

1 On a scale of

1through 10,

how would

you assess

questions in

the

questionnaire

3

10(1)

3

9(2)

2

8(4)

2

7(3)

-

6(0)

-

5(0)

-

4(0)

-

3(0)

-

2(0)

-

1(0)

10

87

81

2 On a scale of

1 through

10,to what

extent is the

instrument

adeguate for

data

collection

1

10(3)

2

9(3)

4

8(2)

3

7(2)

-

6(0)

-

5(0)

-

4(0)

-

3(0)

-

2(0)

-

1(0)

10

81

87

3 On a scale of

1 through 10,

to what extent

can the

questions

measure what

it intend to

measure

2

10(2)

4

9(4)

3

8(3)

1

7(1)

-

6(0)

-

5(0)

-

4(0)

-

3(0)

-

2(0)

-

1(0)

10

87

87

Toal 6 9 9 - - - - - - - 10 85

Source: Field survey, 2010

Thus the result of empirical analysis of instrument validity yielded 85%. This result,

going by the contemproary validity stewardss is considered high, reasonable and

adequate for a study at this level. The structure and language of the questionnaire

were modified as necessary to reflect their correction.

3.9 METHODS OF DATA ANALYSIS

The completed questionnaire collected, coded and subsequently analysed using

both descriptive and inferential statistics. In analyzing the data from the

questionnaire administered, simple percentage was used by the researcher. To

test the hypotheses put forward by the researcher, test statistics such as Pearson

Product Moment Correlation Coefficient was used in testing hypothesis one,

while chi-square was adopted in testing hypothesis two and four and z-test

employed to test hypothesis three and five.

218

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219

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

4.1 INTRODUCTION

This chapter covers data presentation, analysis and discussion of finding. The

discussion of finding will draw from basic inputs from responses of the

respondents in the tables.

4.2 DATA PRESENTATION AND ANALYSIS

A total of six hundred and fifteen (615) copies of questionnaire were prepared

and administered to the respondents of the selected organizations. Out of these,

a total of five hundred and eighteen copies were duly completed and returned.

Therefore, the researcher based his analyses on 518 copies of questionnaire.

Table 4.1: Distribution and Return of the Questionnaire

Organizations No

Distributed

No

Returned

No not

Returned

%

Returned

% not

Returned

ConsolidatedBreweries 185 164 21 87 11

Phinomar Nigeria Ltd 74 68 6 92 8

S.G Minerals Ltd 98 79 19 81 19

Roeson Industries Ltd 123 94 29 79 24

Int. Glass Ind. 135 113 22 84 16

Total 615 518 97 84 16

Source: Field work 2011

Table 4.1 shows that 84% of the distributed copies of questionnaire were

returned and accepted for analysis, while 16% were not returned.

Percentage Calculation

Returned 518 x 100 = 84

615

Not Returned 97 x 100 = 16

615

220

Table 5: Oral Interview Response

Company Managers Staff

Consolidated Breweries 7 20

Phinomar 4 11

SG Resources 5 10

Roesons 3 10

Inter. Glass Company 5 15

Total 24(21.6%) 66(59.4%)

Grand Total 90

Sources: Field Survey, 2011

From the oral interview response table the interview was conducted between

managers and subordinates from the five companies selected for the study. Managers

were 24 in number representing 21.6% while subordinates were 66 representing

59.4%. The total number of the participants was 90.

4.3 BIOGRAPHICAL DATA

Table 4.2: Age Distribution of respondents

Range C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

21-30 41 16 31 17 40 145 28

31-40 38 21 28 29 57 173 33

41-50 62 19 10 33 10 134 26

51 & above 23 12 10 15 6 66 13

Total 164 68 79 94 113 518 100

Source: Fieldwork, 2011

In table 4.2, 145 of the respondents representing 28 percent were within the age

bracket of 21-30 years. 173 and 134 respondents fell within the age bracket of

221

31 to 40 and 41 to 50 years representing 33 percent and 26 percent respectively.

66 respondents were above 50 years representing 13 percent.

Table 4.3: Sex Distribution of Respondents

Sex C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

Male 100 40 50 50 70 316 61

Female 64 28 29 44 43 202 39

Total 164 68 79 94 113 518 100


From table 4.3, 316 respondents representing 61% were male while 39 percent

of the respondents were female.

Table 4.4: Respondents L//iteracy Level

Organizations

Qualification C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

WASC 15 20 43 16 17 111 21

OND/NCE 29 11 16 28 21 105 20

HND 17 8 8 17 24 74 14

B.Sc 41 15 8 28 41 133 26

MBA 34 9 3 5 8 59 12

M.Sc 20 5 1 - 2 28 5

Other 8 - - - - 8 2

Total 164 68 79 94 113 518 100


Table 4.4 indicates that 11(21%) of the respondents were holders of WASC

105(20%) were holders of OND/NCE, while 74(14%) and 133(26%) of the

respondents were holders of HND and B.Sc respectively, 59(12%) and 28(5%)

were holder of masters degree and 8(2%) were with higher qualification.

222

Hypothesis one

Competitive advantage significantly impact on business quality and

environmental management system

Question 1: Do you agree that application of technology improve performance

of your organization

Table 4.5: Technology and competitive Advantage

Organizations

Option C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

Strongly

agree

118 51 58 67 85 379 73

Agree 32 13 16 18 21 100 19

Undecided 8 2 - 7 6 23 4

Disagree 3 1 4 2 - 10 2

Strongly

disagree

3 1 1 - 1 6 1

Total 164 68 79 94 113 518 100


Table 4.5 shows hat 379(73%) strongly agree while 100(19%) agree out of 518

respondents with the statement that technology impacts on rural business quality

and environmental management system. However, 23(4%) were indifferent,

10(2%) and 6(1%) disagree and strongly disagree respectively.

Question 2: Do you agree that your organization depends on the knowledge and

skills of its employees to achieve growth.

Table 4.6: Knowledge and competitive advantage

Organizations

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 123 30 58 83 86 380 73

Agree 35 27 17 9 19 107 21

Undecided - 3 - 1 2 6 1

Disagree 4 3 - - 1 8 2

S. Disagree 2 5 4 1 5 17 3

Total 164 68 19 94 113 518 100


223

Table 4.6 indicates that 380(73%) of the respondents strongly agree that

organization depends on the knowledge and skills of its employees to achieve

growth. 107(21%) also affirmed to the statement. In contrast, 6(1%) and 8(2%)

disagree and strongly disagree while 17(3%) were indifferent.

Question 3: Do you agree that your organizations productivity impacts on its

comparative advantage.

Table 4.7: Organisational productivity and competitive advantage

Organizations

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 95 40 47 59 68 309 60

Agree 55 18 28 31 37 169 33

Undecided 7 5 - 2 4 18 3

Disagree 6 3 4 - 3 16 3

S. Disagree 1 2 - 2 1 6 1

Total 164 68 79 94 113 518 100


As regards to table 4.7, 309(60%) and 169(33%) of the respondents out of 518

strongly agree and agree respectively with the statement that organizations

productivity impacts of its comparative advantage while 18(3%) and 16(3%)

strongly disagree and disagree respectively. 6(1%) were undecided.

Questions: Do you agree that constant improvement of the facilities impacts on

its position in the market.

Table 4.8: Constant facility improvement and competitive advantage

Organizations

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 105 24 47 66 100 342 66

Agree 59 40 26 18 11 154 30

Undecided - 1 2 3 - 6 1

Disagree - 2 - 3 2 7 1

S. Disagree - 1 4 4 - 9 1

Total 164 68 79 94 113 518 100

Source: Fielwork, 2011.

224

As shown in the table 342 (66%) and 154(30%) of the respondents consented to

the statement that constant improvement of the facilities impact on its position

in the market while 7(1%) and 9(2%) have an opposing view to this statement.

However, 6(1%) of the research subject were not committed to either view.

Question 5: Do you agree that customer satisfaction is essential in achieving

competitive advantage.

Table 4.9: Customer satisfaction and competitive advantage

Organizations

Rating C.

Breweries

PH S.G.

Mineral

ROCSON Glass

Industry

Freq Total

S. Agree 101 38 40 39 96 314 61

Agree 49 30 29 48 13 169 33

Undecided 9 - 6 4 2 21 4

Disagree 5 - 1 1 1 8 1

S. Disagree - - 3 2 1 6 1

Total 164 68 79 94 113 518 100


Table 4.9 shows that 314(61%) and 169(33%) of the respondents out of 518

strongly agree and agree with the statement that customer satisfaction is

essential in achieving competitive advantage. However, 21(4%) were indifferent

while 8(1%) and 6(1%) disagree and strongly disagree respectively.

Hypothesis Two

Shifting buyers need affect competitive advantage of rural business

Question 6: Do you agree that shifting buyers needs affects sustainability of

competitive advantage

225

Table 4.10: Shifting buyers need and competitive advantage

Organizations

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 125 45 29 55 99 353 68

Agree 30 20 49 35 10 144 28

Undecided 3 3 1 4 2 13 2.5

Disagree 6 - - - 2 8 1.5

S. Disagree - - - - - - -

Total 164 68 79 94 113 518 100


Table 4.10 indicates that 353(68%) and 144(28%) of the respondents consented

to the statement that shifting buyers need affect suitability of competitive

advantage while 8(1.5%) had on opposing view to this statement. However

13(2.5%) were indifferent.

Question 7: Do you agree that technological change affect sustainability of


Table 4.11: Technological changes and competitive advantage

Organizations

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 97 55 48 81 92 373 72

Agree 60 10 22 13 15 120 23

Undecided - 3 1 - 2 6 1.3

Disagree 4 - 6 - - 10 92

S. Disagree 3 - 2 - 4 9 1.7

Total 164 68 79 94 113 518 100

Source: Fielwork, 2011

As shown in table 4.11, only 373 (72%) and 120(23%) of the respondents

affirmed to the statement that technological change affect sustainability of

competitive advantage, 6(1.3%) were undecided, 10(2%) and 9(1.7%) disagreed

and strongly disagreed respectively.

226

Question 8: Do you agree that your organization competitive advantage

sustainability is being influenced by new government policies.

Table 4.12: Government policies andcompetitive advantage

Organizations

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 117 51 46 44 79 337 65

Agree 43 14 24 47 30 158 31

Undecided 4 3 1 - 3 11 2

Disagree - - 3 3 - 6 1

S. Disagree - - 5 -- 1 6 1

Total 164 68 79 94 113 518 100


As regards to table 4.12, 337(65%) and 158(31%) of the respondent out of

518affirmed that their organization competitive advantage sustainability is

influenced by new or a shift in buyers‟ needs 11(2%) were undecided while

6(1%) and 6(1%) disagree and strongly disagree.

Question 9: Do you agree that input cost or availability is essentially for

competitive advantage sustainability

Table 4.13: Inpute cost/availability and competitive advantage

Organizations

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 77 35 48 54 69 283 55

Agree 78 25 24 34 40 206 40

Undecided 6 6 - - 4 16 3

Disagree 3 7 3 - 13 2

S. Disagree - - - - - - -

Total 164 68 79 94 113 513 100

Source: Fielwork, 2011

227

Table 4.13 shows that 283(55%) and 206(40%) of the respondent strongly agree

and agree respectively on the statement that input cost or availability is essential

for competitive advantage sustainability while 13(2%) disagree and strongly

disagree on the statement while 16(3%) were indifferent.

Hypothesis Three

Differentiation competitive advantage strategy strengthens rural business.

Question 11: Do you agree that differentiation is a strategy to achieve


Table 4.14: Differentiation and competitive advantage

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 117 42 32 54 77 322 62

Agree 43 18 43 35 28 102 32

Undecided - 3 1 3 6 167 3.0

Disagree 2 5 2 - 2 11 2

S. Disagree 2 1 1 2 - 6 1

Total 164 68 79 94 113 518 100

Source: Fieldwork 2011.

Questions 11, was set to validate or disprove the assertion that differentiation is

a strategy to achieve competitive advantage. Out of 518 respondents of the firms

under study, 322(62%) and 167 (32%) strongly agree and agree respectively.

13(3%) respondents were indifferent, while 11(2%) Disagreed with the

statement and 6(1%) supported them.

Question 12: Do you agree that pricing is a strategy that improves competitive

advantage of your organization.

228

Table 4.15: Pricing and competitive advantage

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 69 35 47 49 78 272 53

Agree 89 29 42 35 32 209 40

Undecided 4 2 3 6 15 3

Disagree 2 - 5 5 3 15 3

S. Disagree - 2 - 5 7 1

Total 164 68 79 94 113 518 100


Table 4.15 reveals that out of 319 respondents, 225 (71%) strongly agree that

pricing is a strategy that improves competitive advantage in their organization,

58(18%) agreed with the statement, 4(1%) were indifferent in their response,

while 19(6%) disagree with the statement and 13(4%) strongly disagreed with

the statement.

Question 13: Do you agree that adoption six sigma by your organisation is

strategy that boosts its competitive advantage.

Table 4.16: Adoption of six sigma and competitive advantage

Rating C.

Breweries

PH S.G.

Mineral

ROCSON Glass

Industry

Freq Total

S. Agree 69 15 7 8 48 147 416

Agree 29 29 4 5 32 99 31

Undecided 4 5 3 1 7 20 6

Disagree 9 2 5 1 5 22 7

S. Disagree 4 4 - 5 18 31 10

Total 115 55 19 20 110 319 100


From table 4.16 shows that out of 518 respondents, 272 (53%) of the

respondents claimed that adoption six sigma by their organization is a strategy

that boost quality. 15(3%) were indifferent about the statement while 15(3%)

disagreed with the assertion and 7(1%) strategy disagreed with the statement.

229

Quetion 13: Do you agree that recycling will improve your process.

Table 4.17: Organization’s adaption of recycling and competitive advantage

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 121 38 47 38 59 303 58

Agree 37 18 31 5 36 175 34

Undecided 4 3 1 2 5 17 3

Disagree 1 7 - - 6 14 3

S. Disagree 1 2 - 1 7 11 2

Total 164 68 79 94 113 518 100


Table 4.17 indicates that out of 518 respondents, 303(58%) strongly agreed that

their organization‟s adoption of recycling manufacturing process and improve

its manufacturing process will improve its competitive advantage, 175(34%)

agreed with the statement, 15(3%) were indifferent about the statement while

14(3%) disagreed with the assertion and 11(2%) strongly disagreed with the

statement.

Question 15: Do you agree that lean manufacturing process is a strategy that is

essential fro maintaining quality or environment.

Table 4.18: Lean manufacturing and quality environments

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 95 27 43 51 58 274 53

Agree 47 31 34 40 41 193 37

Undecided 2 3 - 2 5 12 2

Disagree 11 5 1 - 7 24 5

S. Disagree 9 2 1 1 2 15

Total 164 68 79 94 113 518 100


From table 4.18 out of 518 respondents, 274(53%) affirmed that lean

manufacturing process is a strategy that is essential for maintaining quality of

230

environment, 193(37%) agreed with the statement, 12(2%) were indifferent

about the statement while 24(5%) disagree with the statement and

15(3%)strongly disagreed with the assertion.

Hypothesis four

Intensity of rivalries among existing competitors affects competitive

advantage in strengthening rural business.

Question 16: Do you agree that intensity of rivalries among existing competition

poses serious challenges to your organization.

Table 4.19: Intensity of rivalies and competitive challenges

Rating C.

Breweries

PH S.G.

Mineral

ROCSON Glass

Industry

Freq Total

S. Agree 75 40 40 69 84 308 59

Agree 84 20 37 20 17 178 34

Undecided 3 3 - 2 5 13 3

Disagree 2 2 1 2 1 8 2

S. Disagree - 3 1 1 6 11 2

Total 164 68 79 94 113 518 100


Question 4.19 was administered to find out if intensity of rivalries among

existing competition posses a serious challenges to their organization. Out of

518 respondents, 308(59%) strongly agreed that intensity of rivalries among

existing competitors pose a serious challenge to their organization, 178(34%)

respondents agreed on the same view, 13 (3%) were indifferent 8(2%) disagreed

while, 11 (2%) strongly disagreed with the assertion.

231

Question 17: Do you agree that lack of information from the environment is a

challenge to your organization.

Table 4.20: Lack of information on environment

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 124 45 50 61 68 348 67

Agree 34 15 21 25 30 125 24

Undecided 3 4 6 - 7 20 4

Disagree 2 2 1 4 2 11 2

S. Disagree 1 2 1 4 6 14 3

Total 164 68 79 94 113 518 100


Table 4.20 indicates that out of 319 respondents, 348 (67%) strongly agreed that

lack of information from the environment is a challenge to their organization,

125(24%) were also in support with this view, 20(4%) were indifference while

11(2%) disagreed about the assertion and 14(3%) strongly disagree with the

view.

Question 18: Do you agree that not knowing true essence of business stand as

challenge to performance of your organization.

Table 4.21: True essence of business stand and challenge to performance

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 135 39 30 68 55 327 63

Agree 17 20 47 17 47 148 29

Undecided 9 4 1 5 4 23 4

Disagree 1 2 - 4 2 9 2

S. Disagree 2 3 1 - 5 11 2

Total 164 68 79 94 113 518 100


Table 4.21 reveals that out of 319 respondents under study, 327 (63%) strongly

agreed that not knowing true essence of business stand as a challenge to

performance of their organization, 148(29%) were in the same view, 23(4%)

232

were indifferent about the statement while 9(2%) disagreed with the statement

and 11(2%) strongly disagreed with the assertion.

Question 19: Do you agree that non availability of electricity poses a challenge

for your operation

Table 4.22: Non availability of electricity and challenges

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 121 46 29 51 87 324 63

Agree 36 14 47 50 11 158 31

Undecided 7 1 - - 4 12 2

Disagree - 6 2 - 9 17 3

S. Disagree - 1 1 3 2 7 1

Total 164 68 79 94 113 518 100


Table 4.22 indicates that out of 518 respondents, 324(63%) strongly agreed that

non availability of electricity poses a challenge in their operation system,

158(31%) agreed with the statement, 12(2%) were uncertain about statement

while 17(3%) disagreed with the assertion and 7(1%) strongly disagreed with

the statement.

Question 20: Do you agree that settlement of business in the court poses a

serious challenge in conduct of business.

Table 4.23: Settlement of business in court and conduct of business

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 107 23 47 41 55 273 53

Agree 42 34 31 41 23 171 33

Undecided 13 2 - 9 9 33 6

Disagree 2 3 1 1 19 26 5

S. Disagree - 6 - 2 7 15 3

Total 164 68 79 94 113 518 100


233

Questions 20 was administered to find out it settlement of business in the court

poses a serious challenge in conduct of business, but out of 518 respondents,

273(52%) strongly agreed that settlement of business in the court posses a

serious challenge in conduct of business, 171(33%) agree with the statement,

33(6%) were uncertain about the statement while 26(5%) disagreed with the

assertion and 15(3%) strongly disagreed with the statement.

Hypothesis five

Corporate social responsibility does effectively improve competitive

advantage of rural business.

Question 21: Do you agree that community management development centre is

part of your social responsibility.

Table 4.24: Community management development centre is part of your

social responsibility

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 100 45 48 56 95 344 66

Agree 55 15 31 32 6 27

Undecided 1 3 - 4 4 139 2.3

Disagree 6 3 - 1 7 12 3.3

S. Disagree 2 2 - 1 1 17 1.4

Total 164 68 79 94 113 518 100


Table 4.21 reveals that out of 518 respondents, 344(66%) strongly agreed that

community management development centre is part of their social responsibility,

139(27%) agreed with the statement 12(2.3%) were indifferent about the

assertion. While 17(3.3%) disagreed with the statement and 6(1.4%) strongly

disagreed with assertion.

234

Question 22: Do you agree that your organization engage in waste control as part

of its social responsibility.

Table 4.25: Waste control and social responsibility

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 82 23 39 45 89 278 53

Agree 67 40 39 23 19 185 36

Undecided 7 1 2 10 4 24 5

Disagree 7 1 1 7 - 16 3

S. Disagree 2 3 1 9 1 15 3

Total 164 68 79 94 113 518 100


The essence of the question was to validate or disprove an assertion that your

organization engage in waste control as part of its social responsibility. Out of

518, respondents under study 278(53%) strongly agreed that their organization

engage in 319 respondents waste control as part of the social responsibility,

185(36%) agreed with this view, 16(3%) disagreed and 15(3%) strongly

disagreed with the assertion.

Question 2.3: Do you agree that operating in accordance to the law of the host

community is a social responsibility.

Table 4.26: Laws of host community and social responsibility

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 75 35 40 72 74 296 57

Agree 85 12 37 20 28 182 35

Undecided 4 12 1 1 6 24 5

Disagree - 6 1 1 - 8 1.5

S. Disagree - 3 - - 5 8 1.5

Total 164 68 79 94 113 518 100


235

Table 4.23 indicates that of 518 respondents under study, 296(57%) strongly

agreed that operating in accordance to the law of the host community is a social

responsibility, 182(35%) agreed with the same view, 24(5%) were indifferent

about the statement, while 8(1.5%) disagreed and 8(1.5%) strongly disagreed

with the statement.

Question 24: Do you agree that it is essential that organization take proper care

of its workers as a part of its social responsibility.

Table 4.27: Worker’s care and social responsibility

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 101 47 49 65 87 349 67.4

Agree 49 13 25 13 16 116 22

Undecided 6 4 4 16 4 34 7

Disagree 6 1 1 1 4 12 2.3

S. Disagree 2 3 - - 2 7 1.3

Total 164 68 79 94 113 518 100


Table 4.24 shows that out of 518respondents, 349(67.4%) strongly agreed that it

is essential that their organization to take proper care of its workers as part of its

social responsibility, 116(22%) agreed with the statement, 34(7%) were

indifferent about the statement, 12(2.3%) disagreed with the assertion and

7(1.3%) strongly disagreed with statement.

Question 25: Do you agree that production of product that meet the desire of

customers is part social responsibility.

Table 4.28: Customers product and social responsibility

Rating C.

Breweries

PH S.G.

Mineral

ROESON Glass

Industry

Freq Total

S. Agree 125 35 58 71 76 365 70

Agree 30 27 19 15 22 113 22.1

Undecided 6 3 - 7 7 23 4.4

Disagree 2 1 2 - 3 8 1.5

S. Disagree 1 2 - 1 5 9 2

Total 164 68 79 94 113 518 100


236

Table 4.28 shows that out of 518 respondents, 365(70%) strongly agreed that

production of product that meet the desire of customers is a social responsibility

activity; 113(22.1%) agreed with the statement 23(4.4%) were indifferent about

the statement while 8(1.5%) disagreed with the assertion and 9(2%) strongly

disagreed with the statement.

4.4 TEST OF HYPOTHESES

The hypotheses formulated in chapter one of this study adopted the following

statistical tools to test them i.e, Pearson Product Moment Correlation

Coefficient, Kruskal – Willis Chi-square, and z-test aided by computer

Microsoft special package for social sciences (SPSS).. Pearson Product Moment

Correlation was used in testing hypotheses one. Chi-square was used in testing

the hypothesis two and four, while z-test was used in testing hypothesis three

and five and below are the test of the hypotheses formulated to answer the

research questions asked to guide the study.

Hypothesis one

Ho: Competitive advantage does not significantly impact on business


H1: Competitive advantage significantly impact on business quality and


The Test

Our goal is to determine the extent of competitive advantage impact on rural

business quality and environmental management system.Pearson‟s product

moment correlation coefficient was used in testing hypothesis one.

Table 4.29: Descriptive Statistics

Mean St. Deviation N

Competitive ad vantage 1.4942 .97699 518

Business quality 1.5734 .91274 518

Environmental management 1.4324 .75555 518

Source: SPSSWIN 17.00 Version output

237

Table 4.30: Correlations Matrix on the relationship between Comparative

advantage, Business Quality and Environmental management system

Competitive

advantage

Business

quality

Environmental

management

Competitive advantage

Pearson Correlation

Sig. (2-tailed)

N

1

518

.770**

.000

518

.755**

.000

518

Business quality

Pearson Correlation

Sig. (2-tailed)

N

.770**

.000

518

1

518

.896**

.000

518

Environmental

management

Pearson Correlation

Sig. (2-tailed)

N

.755**

.000

518

.896**

.000

518

1

518

Correlation is significant at the 0.01 level (2-tail).


In table 4.29 the descriptive statistics of mean (m), standard deviation (std.

deviation) and number of cases (respondents) (N) are displayed for competitive

advantage, business quality and environmental management system.

Competitive advantage has mean of (1.49), std. deviation (0.92) and number of

respondents (518); business quality had mean of (1.57), std. deviation (.91) and

number of respondents (518): environmental management had mean of (1.43),

std. deviation (0.75) and number of respondents (518). By careful observation of

the standard deviation values, there is no much difference in terms of the

standard deviation scores. This implies that there is about the same variability of

data points amongst the dependent and independent variables.

Table 4.30 is the Pearson correlation matrix of competitive advantage, rural

business quality and environmental management system, showing the

correlation coefficients, significant values and the number of cases. The result in

the multiple correlation matrix show that there is a relationship between

competitive advantage and business quality (r = .77); relationship between

comparative advantage and environmental management (r = .75). The computed

correlations coefficient of the relationship between competitive, business quality

and environmental management(r =.77; r = 75) respectively are greater than the

238

table value of r = .195 with 518 degrees of freedom (df. = n-2) at alpha level

for a two-tailed test ((r = .77, p< .05; r =.75 p<.05).

Decision Rule

The decision rule is to accept the null hypothesis if the computed r is less than

the table r otherwise reject the null hypothesis.

Decision

Since the computed r = .77, r = .75 are greater than the table value of .195, reject

the null hypothesis. Therefore, we conclude that there is a significant

relationship between competitive advantage, business quality and environmental

management system. Besides, competitive advantage significant impact on rural

business quality and management system as reported probability (r = .77 p< .05;

r =.75 p<.05).

Hypothesis Two

Ho: Shifting buyers needs, technological changes and government regulation do

not affect competitive advantage of rural business.

H1: Shifting buyers needs, technological changes and government regulation

affect competitive advantage of rural business.

The Test

Our goal is to determine the extent to which shifting buyers needs, technological

changes and government regulation affect competitive advantage of rural

business.

Chi- square was used in testing hypothesis two

Table 4.31: Cross Tabulation Organizations

Breweries

Phinomar

SG.

Minerals

Roeson

Int Glass

Indust.

Total

Government policies

affect competitive

advantage of rural

business

Strongly

agree

Count

Expected Count

125

108,6

45

47.3

29

53.9

55

59.3

91

75.9

345

345.0

Agree Count

Expected Count

31

43.1

20

18.8

49

21.4

27

23.5

10

30.2

137

137.0

Undecided Count

Expected Count

3

4.1

3

1.8

1

2.0

4

2.2

2

2.4

13

13.0

Disagree Count

Expected Count

2

3.5

2

1.5

2

1.7

3

1.9

2

2.4

11

11.0

Strongly

disagree

Count

Expected count

2

3.8

1

1.6

0

1.9

0

2.1

9

2.6

12

12.0

Total Count

Expected Count

163

163.0

71

71.0

81

81.0

89

89.0

114

114.0

518

518.0


239

Table 4.32:Chi-Square Test

Value

Df

Asymp. Sig.

(2-sided)

Pearson Chi-Square

Likelihood Ratio

Linear-by-Linear

Association

N of Valid Cases

95.586a

91.156

3.497

518

16

16

1

.000

.000

.061

15 cells (60%) have expected count less than 5.The minimum expected count is 1.51.


Table 4.31 displays the cross-tabulation of observed and expected frequencies

ranging from strongly agreed to strongly disagree. By careful observation

shifting buyers need affect competitive advantage of rural business.

Table 4.32 shows the chi-square statistic computed from frequency distributions

of table 4. The chi-square computed value X2

c= 95.586 is greater than chi-square

table value X2

t =24.06 with 12 degrees of freedom at 0.05 level of significance.

Decision

Since the chi-square computed X2

c = 95.58 is greater than tabulated X2

t =24.06

the null hypothesis should be rejected. Therefore, we conclude hypothesis that

shifting buyers needs, technological changes and government regulation

positively affect competitive advantage of rural business.

Hypothesis Three

Ho: Differentiation, pricing and sixsigma competitive advantage strategies

does not strengthen rural business.

H1: Differentiation, pricing and sixsigma competitive advantage strategies

strengthens rural business.

The Test

Our target is to find out whether or not differentiation, pricing and sixsigma competitive

advantage strategies effectively strengthen quality and environmental management

system. Z-test was employed using to relevant area of the computer special

240

package for social sciences (SPSS) as related to research question three and

hypothesis three respectively. The result below emerged.

Table 4. 33: Descriptive Statistics

N Mean Std. Deviation Minimum Maximum

Competitive

advantage

strategies

strengthen

rural

business

518

1.4942

.97699

1.00

5.00


Table 4. 34: One-Sample Kolmogorov-Smirnov Test


strategies strengthen

rural business

N

Normal Parametersa,b

Most Extreme

Differences

Kolmogorov-Smimov Z

Asymp. Sig. (2-tailed)

Mean

Std. Deviation

Absolute

Positive

Negative

518

1.4942

.97699

.410

.410

-.306

9.325

.000

a. Test distribution is Normal.

b. Calculated fromdata.


Decision

From the table 4.34 the computed Z-value of 9.325 against 1.645 and a

significance of 0.000, the null hypothesis should be rejected and alternate

accepted. Thus differentiation, pricing and sixsigma competitive advantage

strategies effectively strengthen quality and environmental management system.

241

Hypothesis four

Ho: Intensity of rivalry among existing competitors, lack of information

and non availability of electricity do not affect competitive advantage

in strengthening rural business.

H1: Intensity of rivalry among existing competitors, lack of information

and non availability of electricity affect competitive advantage in

strengthening rural business.

Our goal is to determine how intensity of rivalries among existing competitors,

lack of information and non availability of electricity affect competitive


Chi- square was used in testing this hypothesis

Table 4.35: Cross tabulation

Organizations

Consolid

ated

brewerie

s

Phinomar SG Roesons Interg

lass

Total

Intensity of ravarities among existing competitors affect competitive

advantage in strengthening rural business

Strongly agree Count

Expected

Count

125

99.1

33

43.2

29

49.3

37

54.1

91

69.3

315

315.0

Agree Count Expected Count

31 44.1

23 19.2

49

21.9

27

24.1

10

30.8

140

140.0

Undecided Count Expected Count

3 6.9

12 3.0

1

3.4

4

3.8

2

4.8

22

22.0

disagree Count Expected Count

2

5.3

2

2.3

2

2.7

9

2.9

2

3.7

17

17.0

Strongly

Disagree

Count

Expected

Count

2

7.6

1

3.3

0

3.8

12

4.1

9

5.3

24

24.0

Total Count

Expected

Count

163

163.0

71

71.1

81

81.0

89

89.0

114

114.0

518

518.0


242

Table 4.36: Chi-Square Test

Value

Df Asymp. Sig.

(2-sided)

Pearson Chi-Square 157.553a 16 .000

Likelihood Ratio 142.311 16 .000

Linear-by-Linear

Association 9.688 1 .002

N of Valid Cases 518

A .11 cell (44.05%) have expected count less than 5. The minmumexpected count

is 2.33.


Table 4.35 displays the cross-tabulation of observed and expected frequencies

ranging from strongly agreed to strongly disagree. By careful observations

intensity of rivalries among existing competitors, lack of information and non


business.

Table 4.36 shows the chi-square test statistics computed from the frequency

distributions of table 4. The chi-square computed value X2

c= 157.553 is greater

than chi-square table value X2

t=26.30 with 16 degree of freedom at 0.05 level of

significance.

Decision

Since the chi-square computed X2

c= 157.553 is greater than tabulated X2

t=

26.30. The null hypothesis is rejected therefore we conclude that intensity of

rivalries among existing competitors, lack of information and non availability

significantly affect competitive advantage in strengthening rural business.

Hypothesis five

Ho: Corporate social responsibility does not effectively improve


H1: Corporate social responsibility effectively improves competitive


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The Test

Our goal is to find out whether or not corporate social responsibility

significantly improves competitive advantage of rural business. Z-test was

employed using the relevant area of the computer special package for social

science (SPSS) as related to research question five and hypothesis five. The

result below emerged.

Table 4.37: Descriptive Statistics

N Mean Std.

Deviation

Minimum Maximum

Corporate social

responsibility effectively

improves competitive

advantage

518

1.7683

1.16377

1.00

5.00


Table 4.38 One-Sample Kolmogorov-Smirnov Test

Corporate social responsibility

effectively improves competitive

advantage

N

Normal Parametersa,b

Most Extreme

Differences

Kolmogorov-Smimov Z

Asymp. Sig. (2-tailed)

Mean

Std. Deviation

Absolute

Positive

Negative

518

1.7683

1.16377

.317

.317

-.255

7.212

.000

A.Test distribution is normal.

B.Calculated from data


244

Decision

From the table 4.44 the computed Z-value of 7.212 against 1.96 and a

significance of 0.000, the null hypothesis should be rejected and alternate

accepted. Thus corporate social responsibility effectively improves competitive

advantage.

4.5 DISCUSSION OF FINDINGS

In discussing the findings arising from each objective, effort will be focused on

relating findings to the objectives and the conclusion from review of literatures

for the purposes of consistency. Each objective of study has a statement of

hypothesis formulated to reflect the expectation.

Discussion of Result-1

To determine the extent of competitive advantage impacts on rural business


In order to investigate the extent of the impact of competitive advantage on rural

business quality and environmental management system enquiry was made

using the questionnaire with responses highlighted in table 4.5, 4.6, 4.7, 4.8 and

4.9.Table 4.5 was studied in order to state the extent of competitive advantage

impact on rural business. The table indicates that 379(73%) of the respondents

strongly agree that technology has significant impact on rural business. This

finding aligns with Porter‟s (1990:2) assertion that technology has given firms

the power to circumvent scarce factors of production via new products and

processes. Access to state-of- the-art technology is becoming more important

than factors of production endowment. In the 19th

century, industrial revolution

demonstrated technology‟s power in improving human existence. In the 20th

century, science transformed into useable industrial technology, continued to

hold mastery over the material world, with spectacular wealth-creating

additions. It has now become managing with technology, to search and exploit

new opportunities, for satisfying human wants and needs. Technology decisions

245

have integrated with business decisions. Also involved is the timing for

abandoning old technology, when its limit of exploitation is imminent, and the

launching of new ones (Iyer,2009:23).

A good example of power of technology was demonstrated by Isreal by turning

its territory that is more of desert into highly agricultural environment. Another

example is Japan. The country without any known mineral resources has

through technology overcome their disadvantages (Porter1990:6).According to

Hicks in Jhingan (2007:4) technology is what distinguishes developing nations

from developed nations. He maintains that the problem of underdeveloped

countries are concerned the development of unused resources, even though their

uses are well known, while those of advanced countries are related to the

growth, most of their resources being already known and developed to a

considerable extent.

In table 4.6 380(73%) and 107(21%) respondents strongly agree and agree

respectively that knowledge and skills of employees impact on the competitive

advantage of rural business. This finding is in harmony with Iyer (2009:12)

which states that success stem from knowledgeably applying a combination of

available resources to the needs of each individual situation.Intellectual property

of the firm is based on ideas and concepts not machinery and processes. People

are the greatest asset. Human capital is the collective skills and knowledge of

the firm‟s workforce. Every company that is worth anything derives it from the

efforts, knowledge and ingenuity of its employees. The only unique asset

companies have is the brainpower of their employees. Now, it is a search for

creativity and incentives that help employees to become more creative.

Deregulation, globalization of trade and adoption of international standards

opened unlimited opportunities for business and industries. They are now able to

produce a variety of goods and services, with little to differentiate between

them. That has shrunk today‟s competitive advantage to matters of knowledge

and skill.

246

They would have to assimilate the scientific discoveries, technologies,

inventions and innovations, in such a way that practical values flow to the user

and the customer, in the most orderly and economical way. A good example of

knowledge impact on competitive advantage is seen in the fit achieved by

Germany after the Second World War. Germany was defeated in two wars and

all their technologies, infrastructure and patents we all destroyed. But Germany

was able to overcome these challenges because despite the fact that material

things were destroyed their knowledge was intact. Therefore, Germany was able

to recover within few decades and today Germany is the largest economy in

Europe.

The result in table 4.7 shows that 308(60%) and 169(33%) of the respondents

out of 518 strongly agreed and agreed respectively that productivity

significantly impact on rural business competitive advantage. This finding

supports Pearce and Robinson (2004:33) claim that productivity is the value of

output produced by a unit of labour or capital. Productivity is the determinant in

the long run of a nation‟s standard of living, for it is the root cause of national

per capita income. It also creates that national income that is taxed to pay for

public services which again boosts standard of living. Wealth is governed by

productivity, or the valued create per day of work, dollar of capital invested, and

unit of nation‟s physical resources employed. The roots of productivity lie in the

national and regional environment for competition. Prosperity depends on

creating a business environment along with supporting institutions, that enable

the nation to productively use and upgrade its inputs. In the modern global

economy, productivity prosperity is a nation‟s choice. Competitiveness is no

longer limited to those nations with a favourable inheritance. Nations choose

prosperity if they organize their policies, laws and institutions based on

productivity.

While table 4.8 indicates that 342(66%) of respondents consented to the

statement that constant improvement of facilities impact on the rural business.To

stay in business, one must continue to improve, enhance current products or

services, and develop variations and incremental improvements that can make

all different in style, shapes, quality, cost and sales appeal. Manufacturing adds

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value to raw material and creates wealth. To maximize, the key is to use slick

production techniques, matching technical leads, and making painstaking

improvements. Doing better anything being done begets efficiency. Increasing

efficiency is a minimum condition for survival after achieving success. Early

efforts focused primarily on efficiency improvements. One of the most critical

moves in business today is to achieve just-in-time marketing in addition to just-

in-time manufacturing-when the customer wants it, the way the customer wants

it, with the quality, features and the price the customer wants. The continuous

improvement has triggered numerous work-design changes that are leading to

blurring of job descriptions, elimination of distinctions, even between

managerial and non-managerial work. It takes the winners a steady stream of

concepts, ideas, strategies, approaches, tools and techniques to stay on the top of

relentless waves of changes over time (Iyer, 2009:23).

And, table 4.9 shows that 314(61%) respondents opted to strongly agree with

the statement that customer satisfaction impacts on business performance. This

statement agrees with Drucker (1977:112) assertion that the only purpose of

business is the creation of customers. He maintains that it is satisfaction of

customers that bring profit to business. According to Arora (2007:1) the

customer is no longer the king. She is the emperor, she desires customer delight.

Delight is a higher form of satisfaction. It is surest way of achieving competitive

advantage. This is the age of customization. Gone are the days of producing

what you want to make or what your want to sell. It was conventionally market

research that survey what the customer wants and defines what the customer

trends are today, it is the customer, who says what is wanted or needed, and the

manufacturer makes it. The onus is on the manufacturer to increase the value of

their offerings and cozy up to the customer on his own terms. Companies

capable of mass customerizaiton optimize the relationship with customer. They

close the gap between producers and customers. They involve customers right at

the design stage, so that better specifications are drawn up for products to cater

more effectively to customer needs.

Winning customers is more than a matter of providing superior quality and

services. The customers now want ever-better quality, ever-quicker response,

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ever-greater flexibility, and ever-greater fail safe and ever-larger return” or, in

one word, ever-higher value. Product or service must take the customer beyond

mere satisfaction to true enthusiasm: superior customer value. Customer delight

is emerging as the single powerful tool for achieving and sustaining competitive

edge. Customer satisfaction derive from designing, making and providing

products and services that meet and satisfy as much of their needs and

requirements as possible. Highest customer satisfaction beets large market

shares, high employee satisfaction, productivity gains and high cash flow.

Customer focus begins with direct customer involvement at the front end of

development, tracking orders through production operations and quality as

judged by the end users.

From the oral interview conducted it is revealed that 50 respondents

representing 56% agree that knowledge and technology create the ability to

increasingly achieve industry competition while 40 respondents representing

46% are of the view that knowledge and technology boost production efficiency.

See the table in the appendix.

Assessment of Hypothesis-1

Null hypothesis (HO): Competitive advantage does not significantly impact on

rural business quality and environmental management system.

Alternative hypothesis (Hi): Competitive advantage significantly impact on

rural business quality and environmental system.

The Pearson Product Moment Correlation matrix of competitive advantage rural

business quality and environmental management system shows the correlation

coefficients, values and the number cases. The result in the multiple correlation

matrix shows that there is a relationship between competitive advantage and

business quality (r= .77); relationship between competitive advantage and

environmental management system (r = .75).The computed correlation

coefficient of relationship between competitive, business quality and

environmental management system(r = .77; r = .75) respectively are greater than

the table value of r = 195 with 317 degrees of freedom (df = n-2) at alpha level

for a two-tailed test (r = 77, P<.05; r - . 75, P < 05).

The decision rules is to accept the null hypothesis the computed r is less than the

table r otherwise reject null hypothesis. Since the computed r = 77, r = 75 are

greater than the table value of .195, reject the null hypothesis. Therefore, we

conclude that there is a significant relationship between competitive advantage

impact on rural business quality and environmental management system.


To highlight competitive advantage factors that affect sustainability or rural

business.

249

In discussing the findings from the objective effort will be focused on tables

4.10, 4.11, 4.12 and 4.13. The highlighting of competitive advantage factors that

affects sustainability of rural business was studied in order to discover those

factors that create constant change in business environment thereby altering

competitive position in an industry. It affects product features, design and test.

The result of the finding as shown in table 4.10 indicates that 353 (68%) of the

respondents accepted that shifting buyers needs affect sustainability of

competitive advantage. This result is in harmony with, Rumelt (2004:41)

proposition that competitive advantage is often created or shifted when buyers

develop new needs or priorities change. Established competitors may fail to

perceive the new needs or be able to respond because meeting them demands a

new value chain. The power of the buyer is growing exponentially. They

increasingly want a broad assortment of incentives. Buyer‟s tastes are not only

changing, but often even becoming unpredictable. Buyers increasing awareness

of the relationship between design, quality, price and delivery has led them to

have a greater appreciation of value.

They research all attributes, shop more strategically: using coupons, marketing

flyers of sales and remaining loyally to price; and work hard to get the best

value for their money from everything. They are not afraid to bargain their way

to a better deal. They look for value-added items: like extra benefits and bottom

line capabilities, quality consistency, extended warranties, quick delivery,

hassle-free services etc. Their goal is to have a product that is unique for them

and tailored exactly for what they want it to be, and at the lowest price. With

constant shift in the buyers needs, organizations should be able to adjust their

activities inline with buyer‟s current testes in order to stay in business. The

organization that first discovered buyers shifting needs and move fast to meet it

achieve competitive advantage. Customers are on the move. Their needs and

testes are changing. They seek greater variety and quality, durability,

onvenience with features suiting individual requirements.

Table 4.11, reveals that 373 (72%) of the respondents affirmed to the statement

that technological changes affect sustainability of competitive advantage. The

finding acknowledges, Barney (1991:62) statement that technological changes

can create new possibilities for the design of a product, the way it is marketed,

or delivered, and the ancillary service provided.Technological change shortens

the average life cycle of products, leading to new products, new equipment that

produce them, and new tools that assist production. Developing of processes,

products, and materials make available constantly changing, and many times

lower costs, ways of performing the necessary functions. Individuals find it

difficult to keep up, be completely current, even in their own field of

specialization. When a revolutionary new technology arrives, it will be wise to

250

scrap the old. Established companies tend to become euphoric with their

successes. The better the company, the more efficient its operations are, the

more tightly it locks into its current operations. They cling to their products and

pour resources into existing businesses, irrespective of promises. Continuous

tracking of the relative technical performances of the old and news approaches

seems the only way to get timely warnings.

While table 4.12 shows that 337(65%) and 158 (31%) agreed that government

policies affect sustainability of competitive advantage. The finding is in line

with Deming (1993:61) assertion that adjustments in the nature of government

regulation, in areas such as product standards, environmental controls,

restrictions on entry, and trade barriers are another common stimulus that

changes competitive environment.Business environment denotes the full range

of public policies, institutions, regulatory and administrative system provided by

government within which people and firms operate. It represents the whole

gamut of publicly-provided services and government behaviour that affect the

management, productivity, competiveness and growth of private enterprises.

Monitory and reporting the business environment is important for designing and

implementing policy and institutional reforms by federal, state and local

governments. A great majority of poor people work in small businesses which

are most hit by bad business environment, because of lower coping ability. So

getting the environment right is important for rural businesses for survival.

Good business environment is particularly essential for rural productivity,

incomes and employment. Businesses face many constraints, including, weak

enforcement of contracts and the high cost of finance. These factors have

deterred or retard the growth and expansion of rural business.

251

And table 4.13 indicate that 283(55%) and 206 (40%) of the respondents

strongly agreed and agree respectively on the statement that input cost is

essential for competitive advantage sustainability. The finding is in common

alliance with Ostrenga et al (1992:102) which maintains that competitive

advantage frequently changes when a significant change occurs in the absolute

or relative cost of inputs such as labour, raw materials, energy, transportation

etc. This field response was subjected to statistical test of hypothesis to ascertain

there impact.

Oral interview table shows that 55 respondents representing 61% maintain that

productivity determines an employee earning return to increase organizational

performance. While 35 respondents representing 39% assert that equal

opportunity and environmental impact improve organizational performance


Ho: Shifting buyers needs, technological changes and government

regulation do not affect competitive advantage of rural business.

Hi: Shifting buyers needs, technological changes and government

regulation affect competitive advantage of rural business.

Decision is, since the chi-square computed 𝑐2 = 98.58 is greater than tabulated

𝑡2 = 24.06 the null hypothesis is rejected.Therefore we conclude that shifting

buyers needs, technological changes and government regulation positively affect



To identify competitive advantage strategies that strengthen rural business.

Identifying competitive advantage strategies were studied in order to understand

those strategies that would improve the performance of an organization. Strategy

is the determinant of success or otherwise of an organization. To discuss these

strategies consideration would be place on tables, 4.14, 4.15, 4.16, 4.17 and

4.18. In table 4.14 the result of the analysis shows that 322(62%) and 167 (32%)

strongly agree and agree respectively that differentiation competitive advantage

strategy is a strategy that companies competing on functionality and quality

adopt. This finding is in line with the views of Iyer (2009:67) and Porter

252

(1990:4) which state that a company‟s differentiation stems also from how its

value chain relates to the value chain of the customer downstream, the supplier

upstream, and the channels of distribution in between. These can be used to

control the way technology diffuses through the different chains; and the

rapidity of making innovations. Differentiation sets an item apart from its

competitor. But, concentration on points of differentiation alone may not suffice

to add value. What is needed is a reassessment of the points of parity from time

to time. Because, attributes that were once differentiators can become minimum

requirement. Products that are undifferentiation in value become commodities. It

pays handsome dividends to differentiate by developing unique products and

services that closely satisfy specific customers‟ needs lowering customers‟ costs

or customers‟ performance-the value of the market place. Nurture activities that

earn above average returns, which reflect their success at achieving improved

values. Appropriate performance requires that the products have a

predetermined level of quality reliability, durability, interchangeability,

appearance and maintainability and that the satisfied all of these requirements of

that level at a reasonable cost.

While in table 14.15, 360(69%) respondent strongly agree that pricing is a

strategy that improves the position of an organization in a competitive arena.

Pricing is an age long strategy. However this strategy is easily imitated unless it

is dependent on innovation which other competitors cannot copy easily. The

finding also agrees with Porter (1991:4) assertion that quality requires

aggressive construction of efficient facilities, cost minimization in areas like

research and development, services, sales forces, advertising etc.

With responses highlighted in table 4.16 the respondents 272 (53%) indicated

that adoption of six sigma quality measures will improve their products

performance. Six Sigma is a business strategy originally developed by Motorola

(Wikipedia, 2009:6). It seeks to improve the quality of process outputs by

identifying and removing the causes of defects (errors) and variability in

manufacturing and business processes. SixS igma uses a set of quality

management methods, including statistical methods, and creates a special

infrastructure of people who are experts in these methods (Hindon, 2009:10).

253

Table 14.17 reveals that 303(58%) and 175(34%) strongly agree and agree

respectively that adoption of recycling strategy will help in curbing waste that

pollute the environment. Recycling is of course, one of the better known

strategies for sustainable manufacturing. Although recycling programs have not always

been as efficient as expected, they do contribute to limiting the demand for landfills

(Madu, 2000:69). As everything created must go somewhere, industry‟s

traditionally response is to recycle to the extent possible and dispose of the rest

by incineration or release into the atmosphere. They relied principally on waste

disposal technologies, end-of-pipe controls, recycling and reuse. Some tried

redesigning products to make them easier to reuse, recycle and incinerate. Every

company must take a hard look at its processes and identify better ways to

perform the necessary functions. All companies have fat and waste in their

system and processes. Common practice is to find use for bye products. Beyond

it industry is now beginning to finds that it makes sense to pass energy, waste

water and some products back and forth between a numbers of plants; design

products that are eco-friendly. Value has this shifted to elimination of releases

that are hazardous and pollutants.

Table 14.18 reveals that 274(58%) and 175 (34%) strongly agree and agree

respectively that lean strategy is essential in manufacturing process for

achieving both products and environmental quality. This finding supports Madu

(2001:206). “Lean production” is the term used to describe the manufacturing

strategy associated with Toyota production system. It is based on adding value

to products and services through elimination of waste and incidental work. By

this learn helps in achievement of products and environmental quality. This field

response was subjected to hypothesis testing in order to show consistency in

result.

Oral Interview reveals that 62 respondents representing 69% maintains that

upgrading of technology creates the potential for success in more sophisticated

segment. While 38 respondents representing 31% are of the view that upgrading

of technology boost environmental protection and sustains the differentiation

capacity of organization

254


Null hypothesis (Ho) differentiation, pricing and sixsigma competitive advantage

strategy do not strengthen quality and environmental management system.

Alternate hypothesis (Hi) differentiation, pricing and sixsigma competitive

advantage strategies strengthen rural business.

From table 4.31 computed Z-value of 9.325 against 1.96 and a significance of

0.00, the null hypothesis is rejected and alternate accepted. Thus differentiation,

pricing and sigxsigma competitive advantage strategies effectively strengthen



To identify the key challenges of competitive advantage in strengthen rural

business.

The identification of the key challenges facing competitive advantage in

strengthening rural business has created effective strategic development of

firms.The identification and understanding of competitive advantage in

strengthening rural business has created effective strategic development of

firms. It is through the identification and understanding of competitive

challenges that industries plan a strategy that will lead them to competitive edge.

In table 4.19, 308(59%) respondents strongly agree that intensity of rivalries

among existing competitors pose a serious challenge to their organization. An

industry is unattractive if it already contains numerous strong or aggressive

competitors. Rivalry among existing competitors take the familiar form of

jockeying for position- using tactics like price competition, advertising battles,

product introduction, quality improvement, increased fortunes and increase

customer services or warranties (Porter, 1986:68). This situation if not properly

handled will reduce profit accruing to various competitors thereby rendering the

industry unattractive.

255

Table, 4.20 indicates that lack of information about environment creates

challenges for business. This was demonstrated by the 348(67%) of respondents

who strongly affirm that lack of information about an environment poses a great

challenges to the activities of business. This finding agrees with 1yr, (2009:83)

assertion that information correctly used is power. Information that is often

lacking is technical information on changes, to keep up with the technological

explosion, and cost information on comparable costs of various solutions to a

given problem.While table 4.21 reveals that 327(63%) and 148(29%)

respondents strongly agree and agree respectively that lack of understanding the

true essence of business remain a bane in the operation of most businesses. This

finding aligns with Druckers (1997:114) statement that to know the true essence

of business we have to start with its purpose, its purpose must lie outside of the

business itself. In fact, it must lie in the society, since business is an organ of

society. Therefore, there is one valid definition of business purpose, which is

customer satisfaction. It is customer satisfaction that brings profit to the business

and not the other way round. The fundamentals of business have changed. A

comparison of what it was in the past and what it is today covers some important

aspects. They are now speed and flexibility, instead of size and scale‟

effectiveness, in addition to efficiency; team work and empowerment, instead of

command and control; collaboration and sharing information, instead of

monopolising; contracting and outsourcing instead of self-sufficiency. In the

ultimate analysis, all business operations can be reduced to three Ps-people,

product and profits.

Table 4.22 shows 324(63%) strongly agree that non availability of electricity

poses a challenge to operation of business. In Nigeria power outages result in

losses equivalent of 9 percent of totals sales. Almost all Nigeria firms (97%)

experience power outages. On the average such outages lasted some 196 hours

per month that is 8 days. Faced with this situation, 86 percent of firms have their

own generators which produce on an average, 61 percent of their electricity

needs (NEEDS, 2004: 7). Finally table 4.23 concludes that length of time often

taken to resolve a business dispute in the courts remain a challenge to business.

This was affirmed by 273(53%) and 171(33%) representing the responses of

respondents who strongly agree and agree respectively that courts are slow in

256

resolving business disputes. Therefore we conclude that there are several

challenges facing business in Nigeria.

The figures in the oral interview show that 38 respondents representing 42%

are of the view that customer satisfaction is an essence of business, but profit

maximization is motive for business. While 52 respondents representing 58%

maintain that customer is the foundation of business and keeps its existence.


Ho: Intensity of rivalry among existing competitors, lack of information

and non availability of electricity do not affect competitive advantage

in strengthening competitive advantage of rural business.

Hi: Intensity of rivalry among existing competitors, lack of information

and non availability of electricity affect competitive advantage in

strengthening rural business.

Chi-square was used in testing this hypothesis. The chi-square 𝑐2 = 157.55 is

greater than chi-square table value.𝑡2 = 26.30 with 16 degree of freedom at

0.05 level of significance. Since the chi-square computed 𝑐2 = 157.55 is greater

than tabulated 𝑡2 = 26.30. The null hypothesis is rejected. Therefore we

conclude that intensity of rivalries among existing competitors, lack of

information and non availability of electricity significantly affect competitive



To ascertain the extent to which corporate social responsibility improves


In discussing the finding from the objective we will focus on tables 4.24.

Corporate social responsibility is excised by organization when they conduct

their business in an ethical way, taking account of the social environment and

economic impact of their operation. The study finding seeks to find a way

organization should be shouldering some responsibility for its host community.

In the table 344(66%) respondents strongly agree that community management

development centre is part of their social responsibility. This finding is in

257

harmony which Mcwilliam et al, in Armstrong (2009:166). Community-skills

and education, employment and social inclusion are frequently identified as key

risks and opportunities. Other major activities of corporate social responsibility

for rural community are given support for local community initiatives and being

a responsible and safe neighbour.

Table 4.25 indicates that waste control is a social responsibility issue. This

analysis is undertaken in order to safe guard environment which is being

degraded daily by the activities of business institutions. 278(53%) and 185(36%)

of the respondents strongly agree and agree respectively that waste control is

part of social responsibility. This conclusion agrees with Armstrong (2009:170),

assertion that understanding how business operates in the broader context and

knowing the social and environmental impact that the business has on society

helps organisation build and maintain healthy relationship with the host

community.

Table 4.26 also shows that 286 (57%) and 116(22%) strongly agree and agree

respectively that obedience or living in line with the laws of the land is part of

social responsibility. Institutions and corporations are corporate citizens which

are being regulated by laws. It is the law that states what business is and what is

not. Law distinguishes business from criminality. These statements align with

Taiwo (2004:6).

Table 4.27 shows the relationship between workers care and social

responsibility. 349(67%) strongly agree that it is essential that their organization

take proper care of their workers as a way of motivating them. This finding

agrees with Armstrong (2009:207) which states that motivated workers are an

indispensible asset of an organization. When a worker is motivated they will put

in their best. According to Fillipo (1982:306) human beings are the only factor

of production that is not regulated by the law of mechanics. This means that

human being is the only factor of production that can produce more than its

input. Management is also responding to the fact that, with today‟s people and

today‟s technology, command-and-control no longer works best. Their

approaches are changing to seek employee collaboration across the organization,

258

to allow them to be more involved in the management of their respective

activities, to permit them to professionally express their capabilities and to effect

changes that contribute to the success of the business, to share risk and rewards,

to gamer all human, intellectual and information assets, for creative use. What

they look for are set of values or principles which guide the employees‟ conduct

in his or her every day life and which directly motivates and inspires him or her.

Most profound changes in industry relate to what to expect from workers and

what they expect from the job. Worker involvement and participation have

become standard operating procedure to achieving social responsibility for

workers.

Finally table 2.28 indicates that 370(70%) of respondents strongly agree that

production of products that meet desire of customer is a social responsibility

activity. Production of products that meet the standards of recommended quality

by regulated agency is always encouraged. But manufacturing of substandard

products is a crime against the public. Satisfaction of customers is the essential

purpose of business. The finding aligns with Kotler (2009:98) which states that

satisfaction of customers guarantee competitive advantage. Every business or

industry is based on a value proposition. That value proposition contains a

number of elements that the company puts together and delivers to the

customers. The customers purchase the value proposition to meet their needs.

The goal of the company is to create and supply a value proposition that meets

the customers‟ requirements of value. What are of value, are importantly,

function, performance and cost. Different customers buy different kinds of

value. Some view products uniqueness as crucial. Others seek product results

and trouble-free performance. Some others go for specific attributes: better like,

reliability, and dependability. Some prefer more relevant product features.

While, others may attach higher weight to availability of spares, after-sales

services and faster support services. Some may go after combinations, like low

price and good quality; or low price and high dependability or low price, speeds

and ease of use etc. However, all will invariably demand lower prices and

progression more of everything. As seen already, by analysing the customers‟

value chains, a company can identify where it can specialize or focus resources

259

to provide a material, a process or an activity for a variety of customers, at lower

cost and superior performance. Organizations should explore the various ways

in which the customers‟ functional needs might be better met and even go a step

further, to make significant contribution to customer perceived value. Customer

perceived value will usually be lower than value delivered by the an

organization.

From the oral interview conducted it is revealed that 53 respondents

representing 59% assert that differentiation and low cost activities can reshape

competitive position. While 27 respondents representing 41% agree that

performing activities in a unique way enhances competitiveness


Ho: Corporate social responsibility does not effectively improve


Hi: Corporate social responsibility effectively improves competitive


The computed Z-value of 7.212 against 1.96 and significant of 0.000, the null

hypothesis is rejected and alternate accepted. We therefore conclude that

corporate social responsibility effectively, improves competitive advantages.

References

Iyer, S. (2009), Managing for Value, NewDelhi, New Age International

Publishers.

Iyer, S. (2009), Value Engineering, New Delhi, New Age International Publishers.

Jhingan, M. (2007), Development Economics, London, Verinda Press.

Kotler, P. (2009), Marketing Management, New York, Pearson Prentice Hall.

Micheal, A. (2009), Hand Book of Human Resources Management, USA,

KoganPress.

260

Porter, M. (1985), Competitive Advantage: Creating and Sustaining Superior

Performance, New York, Free Press.

Porter, M. (1990), Competitive Advantage of Nations, New York, Free Press.

CHAPTER FIVE

SUMMARY OF MAJOR FINDINGS, CONCLUSION AND

RECOMMENDATIONS

5.1 INTRUDUCTION

This chapter covers summary of major findings, conclusion and

recommendations.

5.2 SUMMARY OF MAJOR FINDINGS

The summary of the major research findings in relation to the objectives of the

study are as follows:

261

1 Competitive advantage significantly impacts on rural business quality and


2 Shifting buyers needs, technological changes and government regulation affect


3 Differentiation, pricing and six sigma competitive advantage strategies

strengthen quality and environmental management system.

4 Intensity of rivalry among existing competitors, lack of information and non


business.

5 Corporate Social Responsibility significantly improves competitive advantage

of rural business.

5.3 CONCLUSION

The findings of this study serve as the basis for the conclusion reached.

Application of knowledge and technology has significant impact on

strengthening rural business and ultimately guarantee competitive advantage.

Furthermore the survival of rural business and sustainability of competitive

advantages is dependent on the business capacity to produce goods and services

that meet and surpass the expectations of the customer.

In another development rural business environment poses a serious challenge to

growth and expansion of business in the rural areas i.e, lack of infrastructure -

electricity, information and government policies remain a threat to business.

Activities of businesses create waste that pollute the environment and destroy

the eco-system upon which the rural people depend.

Corporate social responsibility is essential for businesses seeking to build good

reputation in rural areas where they operate in order to achieve competitive

advantage.

5.4 RECOMMENDATIONS

Based on the findings and conclusion the the following recommendations are

made:

262

(1) Rural business managers or owners should collaborate with research

institutions and other educational institutions in order to take advantage of

knowledge and technology from research findings that are laying waste in

various institutions and/or to be abreast of current trends in the field of their

endeavour.

(2) Government should not get involved in the management of businesses but

should improve the environment of rural areas in order to improve their level

of productivity.By improving the quality and efficiency of business inputs,

infrastructure and creating policies and a regulatory framework that

stimulate upgrading and innovation in rural business operation.

(3) As we move towards industrialization efforts should be made to monitor the

activities of various industries in the rural areas in order to protect our

environment from harmful wastes that pollute and destroy the eco-system.

Any company whose activities are found to endanger the environment

should be meant to face a stiff penalty to serve as a deterent to others.

(4) Organisations should involve in corperate social responsibility in order to

create harmonious relationship with the rural community in which they

operate.

(5) In consideration that finance is very important in entrepreneurial development

efforts should be made to fashion a system that will guarantee availability of

funds to rural businesses by adoption of American model of financing small

businesses whereby loans provided by banks to small businesses are under

written by government in onder to protect banks and entrepreneurs from the

impact of business failure. Again German model can be adopted whereby

banks are part owners of businesses. This is to ensure that finance and expert

advice are made available to investors at all times.

5.1 CONTRIBUTIONS TO KNOWLEDGE

The following contributions to knowledge were made.

Rural business and

environment

management

system

Factors that affect

sustain ability of

rural business

Corporate

social Effective

competitive

263

Figure: 5.1 Model of competitive advantage of rural business

Source: The Researcher

In the model rural business environment offers both opportunities and threats. It

dictates the tempor of business activities and at the same time set limit of growth

for various businesses. To take advatnge of opportunities in the environment

businesses try to use their strengths to overcome their weaknesses in order to beat

their competitors and find a leading position in the market. This they attempt

through application of competitive advantage strategies.

Application of competititive advantages goes with several constraining factors.

These factors are both internal and external factors. Internal factors emanate from

the weaknesses businesses have which are constraining them from taking

advantage of opportunities in the environment. External factors are the one they

can take advantage of or circumvent if they can overcome their weakness. These

contraining factors grow to stand as a challenge to rural businesses.

Such situations affect the relationship of businesess with their host communities.

Therefore social responsibility is being needed to restore cardial relationship with

its various public which include, consumers, competitors, government etc. When

good relationship or repution for quality, fair prices, quick service delivery, after

264

sales services, etc. are achieved rural businesses stand better chance of achieve

competitive advantage. Competitive advantage is the aspiration of every business.

(1) The gap existing in the five forces of competition as propounded by Porter

(1985:32) was filled with the inclusion of technology as one of the

competitive forces.

(2) The generic competitive strategy to tackle forces of competition is also

expanded by inclusion of management as a factor in the control of

competitive forces.

(3) Alignment of product quality with environmental quality remains the means

of achieving real or true quality.

5.6 SUGGESTED AREAS FOR FURTHER RESEARCH

The following areas are suggested for further studies

(1) Challanges of competitive advantage in strengthening rural business

(2) The influence of technology and social factors in sustainability of rural

business

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APPENDIX A

QUESTIONNAIRE

This questionnaire is designed for Ph.D thesis as authorised by the Department

of Management, Faculty of Business Administration, University of Nigeria,

Enugu Campus. Please treat this document with honesty and sincerity it

deserves as all information will be treated with absolute confidentiality.

274

The response options in this questionnaire are “strongly agree”, “agree,”

“undecided”, “disagree” and “stronglydisagree” respectively.

Section A

Information about respondent and His/Her organization.

(1) How old are you?.............................................................................................

(2) What is your sex?..............................................................................................

(3) What is your level of education?......................................................................

Section B

From the following statements please tick [] in the box that matches your view

most closely.

S/N SA A UND DA SD

Objective One: To determine the extent of

competitive advantage impact on rural business

quality and environmental management system

1 Application of technology improves performance

of your organisation

2 Your organisation depends on the knowledge and

skills of its employees to achieve growth

3 Your organisation productivity impacts on its


4 Constant improvement of your facilities influences

your position in the market

5 Customers satisfaction is a determinant and/or

essential in achieving competitive advantage

Objective Two: To highlight competitive

advantage factors that affect sustainability of

rural business

6 Your organisation competitive advantage

sustainability is being influenced by new or shifting

buyers needs

7 Technological changes affect sustainability of

275

competitive advantage in your organisation

8 Government regulations affect sustainability of


9 Competitive advantage sustainability is affected by

new industry segment

10 Input cost or availability is essential for

competitive advantage sustainability

Objective Three: To identify competitive

advantage strategies that are used to strengthen

rural business

11 Differentiation competitive advantages is a strategy

that strengthens rural business

12 Your organisation adoption of pricing strategy

helps in achieving competitive advantage

13 Quality of products can be enhanced through six

sigma process

14 Recycling helps in curbing waste that pollute the

environment

15 Lean manufacturing system guarantees product and

environmental quality

Objective Four: To identify the key challenges

of competitive advantage in strengthening rural

business

16 Intensity of rivalries among competitors in your

business environment poses a challenge to


17 Lack of information constitute a key challenge of

competitive advantagte in strengthening rural

business

18 Not knowing the true essence of business creates a

serious challenge for your business

19 Non availability of electricity has retarded your

organisation‟s competitive advantage

276

20 Long process it takes in settling business disputes

in courts remains a challenge to your business

Objective Five: To ascertain the extent to which

corporate social responsibility improves

competitive advantage of rural business

21 Organisation community management development

centre is part of your social responsibility

22 Corporate social responsibility can be achieved

through waste control.

23 Acting in line with laws of the host communities is

an act of social responsibility

24 Improvement in the welfare of workers in your

organisation is part of its social responsibility

25 Satisfaction of the needs and wants of consumers is

a corporate social responsibility issues

APPENDIX B

INTERVIEW SCHEDULE

1 Is application of knowledge and technology basic to achieving

competitive advantage? .........................................................

2 Does productivity contribute to improving organisational

277

performance? .......................................................................

3 Does upgrading of facilities improve competitive position

4 Do you agree that customer satisfaction is the essence of

business? ............................................................................

5 Is it possible for changing buyers need to alter competitive

position? ..............................................................................

6 Can government policies and regulations affect performance of

business? ............................................................................

7 Do you accept that differentiation strategy can achieve

competitive advantage? .......................................................

8 Do you agree that lean manufacturing process reduce waste that

pollute environment? ..........................................................

9 Do you agree that intensity of rivalries among competitors

changes the structure of industries? .....................................

10 Has lack of information affect the quality of your

decision?.............................................................................

APPENDIX C

Questionnaire

No

1st test

Scores

(X)

2nd

test

scores

(Y)

Rank

X=dx

Rank

Y=dy

Rank

d=du-dy

d2

1 31 39 2 2 O O

278

2 75 70 19.5 15.75 3.75 14.06

3 80 85 21.75 21.66 0.9 0.81

4 49 41 7 4 3.0 9.0

5 40 50 3.5 7.5 -4.0 16.0

6 50 60 8.5 11.5 -3.0 9.0

7 30 35 1 1 0 0

8 40 45 3.5 5 -1.5 2.25

9 60 70 11.5 15.75 -3.75 14.06

10 70 50 16.66 7.5 9.56 91.39

11 80 90 21.75 24.5 -2.75 7.5625

12 65 60 15 11.5 3.5 12.25

13 45 55 5.5 10 -4.5 20.25

14 80 85 21.75 21.66 0.9 0.81

15 50 50 8.5 7.5 1.0 1.0

16 60 70 11.5 15.75 -4.25 18.06

17 70 75 16.66 19.5 -2.84 8.06

18 61 70 13 15.75 -2.75 7.56

19 55 65 10 13.5 -2.5 6.25

20 90 90 25 24.5 .5 .25

21 75 65 19.5 13.5 6.0 36

22 62 50 14 7.5 6.5 42.25

23 45 40 5.5 3 1.5 2.25

24 80 85 21.75 21.66 0.9 0.81

25 70 75 16.66 19.5 -2.84 8.06

Appendix D

Data Analysis of the Interview Reponses

Questions Responses Frequency Percentage

(%)

279

1 Application of

knowledge and

technology are basic in

achieving competitive

advantage.

(A) Knowledge and technology

create the ability to

increasingly achieve industry

competition.

(B) Knowledge and technology

boast production efficiency

50

40

56

44

2 Does productivity

contribute to improving

organizational

performance

A) Productivity determines an

employee earning return to

increase organizational

performance.

B) Equal opportunity and

environmental impact improve

organizational performance

55

35

61

39

3 Does upgrading of

facilities improve

competitive position

A) Upgrading of technology

creates the potential for success

in more sophisticated segment

B) It boost environmental

protection and sustains the

differentiation capacity of the

organization

62

28

69

31

4 Do you agree that

customer satisfaction is

the essence of business

A) Customer satisfaction is an

essence of business but profit

maximization is motive of

business

B) Customers are the foundation

of business and keep it in

existence

38

52

42

58

5 Is it possible for changing

buyers needs to alter


position

A) Differentiation and low cost

activities can reshape

competitive position

B) Performing activities in a

unique way enhances

competitiveness

53

37

59

41

6 Can government policies

and regulatuions affect

performance of business

A) Yes to a fair extent

B) Yes to a greater extent

19

71

21

79

7 Do you accept that

differnciation strategy can

achieve competitive advantage

A)Yes strongly agreed

B)Yes agreed

58

32

64

36

280

8 Do you agree that lean

manufacturing process

reduces waste that can

pollute the environment

A)Agreed it enhances the role of

suppliers

B)Strongly agreed it adds value to

products and service through the

elimination of waste and incidental

work

21

69

23

77

9 Do you agree that

intensity of rivalries

among competitors

changes the structure of

industries

A) Strongly agreed

B)Agreed

51

39

57

43

10 Has lack of information

affect the quality of

decision

A)Lack of information leads to

lack of knowledge and

understanding decision making

B)Lack of information results to

system bias and channelling

information narrowly

48

42

53

47

Source: Field Survey, 2011

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