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STRENGTHENING COMPETITIVE ADVANTAGE OF RURAL BUSINESS THROUGH QUALITY AND ENVIRONMENTAL MANAGEMENT SYSTEM

Business Administration & Management Project Topics

CHAPTER ONE

INTRODUCTION

 

  • 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 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 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 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’

 

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.

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 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.

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 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 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.

 

  • 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.

 

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