A Study on the Strategies for Managing Environmental Factors in Business Organisaitons in Nigeria

A STUDY ON THE STRATEGIES FOR MANAGING ENVIRONMENTAL FACTORS IN BUSINESS ORGANISAITONS IN NIGERIA  (A STUDY OF SOME SELECTED MANUFACTURING FIRMS IN ENUGU STATE)

• INTRODUCTION

This chapter is all about what other authors and scholars have said about the study, under review and it will be discussed under the following sub-headings:

• Historical overview
• Sources of strategies
• Types of strategy
• Importance of strategy
• Criteria for effective strategy
• Strategic management process
• Business strategy and environment
• Environmental consideration for business
• The external business environment

 2.1     HISTORICAL OVERVIEW

The word strategy is a derivative word from Greek (stratum), which means general its usage according to James (1979:105) dates back to 400 BC.  Unfortunately, there is no consensus about the meaning of the word strategy, either in management, literature and/or practice.

Stanier et al (1999:200) posited that strategy is the forging of company’s missions, setting objectives for the organisation in light of external and internal forces, formulating specific policies and strategies to achieve objective with and assuring their proper implementation so that the basic purposes and objectives of the organizations will be achieved.

Udaze (1996:27) said that strategies means for all practical purposes on and the same things.

Churchman (1997:307) saw strategic management as encompassing all the decisions and actions leading the attainment of long-term objectives.  The entire organization is considered as a system with its interacting elements, which include its external environment.  He went further to say that without this system perspective, managers ten see problems in isolation failing to recognize the dynamic inter-relationship among subsystems of the organization and with other external systems.  These external forces include economic, political cultural E.B.C, which affects the success of the organization.

The environment is a major sources of uncertainty to a business manager and influences an organizations in many ways its understanding is of great importance to the growth of the business, therefore in order to ensure survival of the business, the manager must adopt to environment and also allow for exchange of values which create opportunities and solutions to problems arising from different types of environment.

Onwuchekwa (1993:128) quoting Churchman (1968:307) in his book “Business Policy”, defines environment as something that lies outside the organization, he went further to say that “the environment of the system is what exists outside of it and this environment partly determines the performance of this system”.  He maintained that the environment is a fixed constraint for the organization and that managers cannot change/avoid or do anything about it.

Infact, environment is important because it helps or leads to success of an organization, if properly managed.

Onwuchekwa defined environment of a business organization as those elements, institutions, organization, system etc, whose activities and services are essential for the effective subject to the control of the organisation.  Despite all those known facts about the business environment its components are not static especially those of the external.

External environment, which makes the future to be very uncertain for business organization, makes adaptation to changes very mandatory for business managers, and even when the future is certain, there is need for planning especially in the choice of strategy.  Organizations of response towards environmental changes are not always obvious because according to Wilso (1989:215) much depends on managerial philosophy profitability and life cycle of the organization and the manager’s perception of the environment.  The environmental influence is extremely complex and can dramatically bring an unexpected and negative impact to the business.  This means that for successful existence of an organization in its environment the manager must not only scan their environment continuously but must also be quick to develop appropriate policies and strategies in managing the uncertain and dynamic environments they operate within.

• SOURCES OF STRATEGIES

To understand and ascertain the sources of strategies in a typical business organisation, it might be worthy to renew their major sources and they may be classified as:

ORIGINATED:  The most logical source of strategy is the top management of an organisation, they originate strategy with the purpose of guiding the subordinate in the operations, originated strategy may be broad in scope, because it allows key subordinate to give them clearer definition or they may be promulgated so completely as to leave little room for definition and interpretation.

However, some skillful managers originate strategy and secure compliance by allowing subordinate managers to leave a conference believing that they themselves originated it.  But most often a strategy is imposed upon subordinates with out a force and clarity that permits no deviation.

APPEALED

Some strategies stem from the appeal of exceptional cases up the hierarchy of managerial authority if on any occasion, a manager is some how confused on how to carryout a particular task, he appeal to the higher authority.  As appeals are taken upwards and decisions are made on them, a kind of common law is established, precedents developed and becomes guide for future managerial action.

IMPLIED

It is not unusual for strategy to be developed from actions which people see about themselves and believe to constitute them.  Employees will readily understand what is real policy if they work for an enterprises that has a policy to produce high quality product maintain plant cleanliness and yet permit the contracting actions its reality or lack of them are implied.  Different circumstances account for the development of implied strategy or policy; it may be that, stated strategy is simply not put into practice.  It may be that the enterprise states certain strategy in order to create a desired image, but it is unable to enforce it.

EXTERNALLY IMPOSED

To a rapidly increasing extent strategy is being externally imposed by government and its agency, trade union and trade associations whether in the form of direct regulation, the competition of government – owned or government supported business.  This result in circumscribing and dictating many aspects of strategy or policy.

• TYPES OF STRATEGIES

According to Stainer, there is no classification of strategies that is generally acceptable that is generally acceptable, but however certain groups where used in clarifying some dimensions of strategies.

First, is the classification based on scope, strategy may be defined broadly in terms of master strategies.  Some writers refers to those as grand strategies or it may be more narrowly defined as programme strategies and these might be developed as sub strategies.

Second, strategies may be classified in terms of level of the organization in a divisionalised company for instance, one would find at least two levels, corporate headquarters strategies and divisional strategies, if the latter are developed in pursuit of the former, they might be called sub-strategies.

Thirdly, strategies may be classified as to whether they are concerned with material or non-material resources, most strategic deals with physical resources.  But strategy can deal with use of manager’s scientific personnel and other employees.  Strategy can also be concerned with styles of management on such matters as company’s attitudes towards social responsibilities.

Fourth, strategies may be classified as to purpose or function. Growth for instance, is a major objective of most companies and there are many strategies to secure growth.

Guth (1980), Clifford (1983) and Cultiman (1986) opined that product – market strategy is another important classification, and they include strategies designed to develop and expand sales and markets, diversification strategies and strategies related to product life cycles.  Financial strategies are important to the survival and growth o a company, indeed all strategies are successfully dependent on the event to which they affect the financial position of the company.  It includes divestment of unwanted assets, customer credit sources of funds, dividend policy capital allocation etc.

Fifth are the manager’s personal strategies, the higher the level of the manager, the more significant these strategies constitute a fundamental and generally unwritten framework within which business strategy is developed.

Mefraland (1962:207) pointed out other strategies that relate to timing a personal power dealing with other career paths and son on.

• IMPORTANCE OF STRATEGIES

It is widely agreed that the development and communication of strategy are among the most important activities of top management strategies, which helps to shape an organization towards having its purpose and mission accomplished.

The importance of strategies are summarized by Rose and Kawi in their insightful book on the “lack of success of many large companies in the United States”.

According to them, without strategies the organization is like a ship without a radar going round in circles.  They ascribed failure to organisation as a result of lack of strategy or wrong strategic plan or lack of implementing a proper/good strategy.  They concluded therefore that without an appropriate strategy, effectively implemented, failure is a matter of time.  This agrees with the views of Stainer et al when they posited that strategy is the forging of company’s mission, setting objectives for the organisation in high for external and internal forces, formulating specific policies and strategies to achieve objective and ensuring their proper implementation so that the basic purpose and objective of the organisation will be achieved.

• CRITERIA FOR EFFECTIVE STRATEGY

According to Mintzberg and Quinn (1991) effective strategies contain three essential elements.

• The goals (or objectives) to be achieved.
• The major actions (or programs) that are to be accomplished.

Strategy determines the direction and action focus of an organization goal development is an integral part of strategy formulation.  Strategy deals with the generation and alignment of programs to meet predetermined goals.

Certain initial criteria for evaluating a strategy include its clarity, motivational impact, internal consistency, compatibility with the light of resources degree of risk and workability.  In addition, effective strategies should of a minimum measure encompass certain other critical factors and structural elements which include:

1. CLEAR, DECISIVE OBJECTIVES: The overriding goals of the strategy for all organizational units must remain clear enough as to provide continuity and cohesion for tactical choice during the horizon of the strategy.  All goals need not to be written down or numerically precise, but they must be understood and decisive.
2. MAINTAINING THE INITIATIVE: A prolonged reactive posture breed’s inverse, lowers moral and other elements to competitors.  Any strategy must preserve freedom of action and enhance commitment.

iii.      CONCENTRATION:  These questions are been posed for answer, does the strategy concentrate superior power at the place and time likely to be decisive?  Has the strategy been precisely defined?  What will make the enterprise a superior one?  A distinctive strategic competency can yield greater success with fewer resources and it is the essential basis for higher profit making.

1. FLEXIBILITY: Strategies are purposely built to allow for flexibility and maneuver.  A planned maneuverability and repositioning allows a manager to use minimum resources while keeping competitors at a relative disadvantage they permit the strategy planner to reapply the same forces to selected positions at different times.

• STRATEGIC MANAGEMENT PROCESS

The strategic management process consists of three (3) stages namely;

1. STRATEGY FORMULATION: This is the process of establishing a business mission conducting research to determine critical internal and external factors, establishing long-term objectives and choosing among alternative strategies.  Sometimes, it is referred “strategic planning” it consists of various activities, which David (1991) classified into three groups.

• Conducting research
• Integrating intuition with analysis
• Making decision

1. STRATEGY IMPLEMENTATION: This involves the activities and decisions that are made to be swung or install or pulten into action.  Some refer to it as operational management or support of already existing strategies.  Strategy implementation is often called action stage of strategic management, it involves three activities which include:

• Establishing annual (short – term) objectives
• Devising policies
• Allocating resources

According to David (1991) successful strategy implementation is determined by the manager’s ability to motivate.

1. STRATEGY EVALUATION: This involves the activities and decisions that keep the process on track.  Evaluation and control include following up goal accomplishment and giving feedback to the decision makers on the result achieved so far.  Strategy evaluation includes three activities.

• Reviewing bases of strategy
• Measuring organizational performance
• Taking corrective actions

According to Glucck (1980), the product of a business strategy evaluation are answers to the three questions below.

• Are the objectives of the business appropriate?
• Are the major policies and plans appropriate?
• Do the results obtained with data confirm or refute critical assumption in which the strategy rests?

• BUSINESS STRATEGY AND ENVIRONMENT

The modern business manager operates in a dynamic environment.  The change in the environment has been rapid and unpredictable.  Consumers and clients have been showing complex behaviour both in local and international markets.  The most dramatic change has been that exhibited by competitive pressures.  Competitors have been applying one strategy or the other to adapt to the dynamic business environment.

Weakness in competitive practice can be observed in any aspect of business operation.  In a Nigerian firm it can be shown in form of old or obsolete products.  In another company, it may be in form of inadequate strategic management practices in the organizations functional areas.  No matter the form of competitive weakness, it is inability of the business organization to adapt to changes in its environment that is the salient problem.  The consequence from this weakness is decline in performance measures or even outright death of the company in some areas.

The constant competitive change today in Nigerian business environment requires greater organizational adaptability there is increasing complexities as well as accelerating rate of change in environments and there are conviction that future of environment is unpredictable.  Strategies of planned innovation and long-range planning are undermined by unpredictable changes.

Baker and Hart (1999:120) said economic, social, governmental and technological changes affect markets, creating opportunities in some and threats in others.  In Nigeria, the deregulation of the various sectors has led to intense competition in such industries, also the fluctuation in the supply and prices of all, have been instrumental in altering opportunities for many Nigerian business.

Market changes and new forms of competition have led to impressive growth and performance for those forms where management has incorporated strategic concepts and analysis new business strategy development and implementation.  It should be noted particularly that strategy is vital to survival and growth of the business in the rapidly changing Nigerian business environment.  To a much greater degree than in the past organizations strategies are being influenced by many forces in the environment.

• ENVIRONMENTAL CONSIDERATION FOR BUSINESS STRATEGY

Environment literally means the surrounding, external objects, influences or circumstances under which some one or something exists.  The environment of any organization is the aggregate of all conditions, events and influences that surrounds and affect it.

Since the government influences an organization in many ways.  Its understanding is of crucial importance to business strategy.  It is important for strategists to study and dictate the influences of these environmental factors so as to determine the opportunities and various problems, which the company might understand by looking at some of its characteristics.

CHARACTERISTICS OF ENVIRONMENT

• Complexity: The business environment consists of a number of factors, events conditions and influences arising from different sources. All these interact with each other to create new sets of influences on corporate strategy.
• Dynamic: The environment of a business cannot be predicted because it is constantly and ever changing. There is dynamism in the environment, thereby causing a continuous change in its shape and character.
• Multi-faceted: The shape and character of an environment to an organization depends on the perception of the strategist or observer. A change or new development in the environment may be viewed different by different observers especially where such new development is seen as an opportunity by one company and as a threat for another company.

The environment for corporate policy and strategy could be either internal or external.  Internal environment includes all factors within an organization, which impact strength or cause weakness of strategic nature, while the external environment includes all the factors outside the organization, which provide opportunities or pose threats to the organization.  The strengths, weaknesses opportunities and threats in the environment can be discerned through the mechanic of SWOT analysis.

A systematic approach to understanding the environment is crucial for the existence, growth and profitability of an organisation.  Such an approach is the SWOT analysis and is used for formulating effective policies and strategies that capitalize on the opportunities through the use of strengths and neutralizes the threats by minimizing the impact of weaknesses.

• THE EXTERNAL BUSINESS ENVIRONMENT

The external environment consists of those factors that affect a firm from outside its organizational boundaries (Mondy & Premeanx, 1993:206) external environment include the following.

1. ECONOMIC ENVIRONMENT: A close interaction of business with the economic environment is hardly surprising since one of the objectives of business is economic.  The economic structure in a country (e.g. capitalist, socialist or mixed economy) are various factors which management of an organization has to evaluate, the value of imports and exports and economic situation prevailing in a country also have a far-reaching impact.  For instance a depressed economy might pose problem to the managers of an organization if they do not take time to analyze the factors predominantly responsible for that.
2. TECHNOLOGICAL ENVIRONMENT: This consists of those factors related to applied knowledge, plus the materials and machines used in the production of goods and services.  Such factors have an impact on the business strategy in an organization and include technological development communication infrastructure and managerial technology.  Organizational strategists cannot afford to ignore the technological environment, since technology, customer groups and customer function defines the business functions of an organizations.  This can create new market and new business segments and it can collapse or mere previously.  Independent business by reducing or eliminating their segment cost barriers.

iii.      MARKET ENVIRONMENT:        Factors related to the groups and other organizations that complete with, and have an impact on, an organization’s market and business are found in the market environment.  Some of such factors include needs, preferences, attitudes and values of customers, product factors demand, price, promotion etc.  Competitors can influence the market environment, size and segmentation of market demand Thompson and Strickland (1996:66) said the big complication in most industries is that the success of any on firms strategy hinges on what strategies its rivals employ and the resources rivals are willing and able to put in their market strategy.

1. SUPPLIER ENVIRONMENT: The supplier environment consists of factors related to the cost reliability and availability of the factors of production or services that have an impact on the business of an organization.  The cost and availability of raw materials, finance, energy, human resources, plants and machinery & substitutes should all be considered when analyzing the supplier environment.
2. REGULATORY ENVIRONMENT: This includes the planning, promotion and regulation of economic activities by the government that has an impact on corporate business.  Factors operating in this environment include policies related to imports and exports distribution, pricing and their control, licensing monopolies foreign investments and environmental pollution.  The constitutional framework, derivative principle and division of legislative powers between tiers of government should be considered for organizational policies and strategies.
3. POLITICAL ENVIRONMENT: Nigeria is a democratic country, where the government plays an active role as a planner, promoter and regulator of economic activities.  Because of this, businessmen are very conscious of any sensitive to the political environment.  The federal, state and local government take various actions that have positive or negative impact on business.  Some governmental decision affecting business may have been made out of political considerations.

Kaznu (1992:101) gave the following factors as that which operates in the political environment.

• The political system and its features like nature of the political system, ideological forces, political parties and centers of power.
• Political structures, its goal and instability.
• Political processes such as the operation of the party system, elections funding of elections and legislation with respect to economic and industrial promotion and regulation.
• Political philosophy, governments role in business, its policies and interventions in economic and business development

RESPONSES TO BUSINESS ENVIRONMENT

In general response to their environment, business organization adopts different strategic approaches; some adopt defensive and protective approaches.  In this case, their interests and the measures could be crafted around their products, process, promotions, distribution channels and protection of their strategic interests.

• New product or new product designs and features could be introduced in reaction to other competitor’s product.
• Existing products could be eliminated as a defensive measure.
• New uses could be found of existing products.
• Prices could be reduced in reduced in response to other price reduction by other companies.
• Promotools could be intensified to keep customers alert to the existence of the product.
• Distribution could be increased by creating new channels or finding more effective ways of getting to the customers on other hand, companies can also adopt offensive strategies crafted around the 4ps to choke off competitors. Sometimes, they intensify their research and development efforts to come out with innovative products that keep them on top of competition.

In summary, in responses to external environment, companies maneuver strategically by

• Strengthening their strengths (s)
• Weakening their weaknesses (w)
• Exploiting the available opportunity (o) and
• Confronting the threat (T) to their strategic interests by playing around the 4ps – product prices, places and promotions, in other words, marketing mix policy or strategy.

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