ASSESSMENT OF DIVERSIFICATION AS A SURVIVAL AND GROWTH STRATEGY: A CASE STUDY OF NIGERIAN BOTTLING COMPANY PLC
The competitive nature of the economy, cause many products and services to lose their distinctiveness, the competitors’ offering of lower prices, and the deteriorating public perception of the business organizations have called for the strategies, and public relations in the marketing of consumer goods. The concept of Diversification strategy is that, the organization’s eggs are kept in different basket so that the risk of becoming bankruptcy will be reduced. This research examined the significant impact of Diversification to the Nigerian Bottling Company. The objectives of the study were to assess the success of Diversification strategy to the organization and to also assess those problems associated with Diversification strategy. The methodology included Survey Design to gather primary data from the 60 questionnaires for the study, Percentage used in presenting and analyzing the gathered data, and Chi-Square used in testing the null hypotheses. The major findings of the study were that; Diversification strategy has a significant impact on the survival and growth of the Nigerian Bottling Company, Diversification adopted by the organization is said to be effective and efficient but has not attained it optimal point due to low attention being given to some element of Diversification such as; horizontal and vertical integration. Some recommendations proffered were that; the management of the Company should improve more on their core competencies so as to vibrant competitive strength , the company should carry out the review of performance of its various sales of new product at different point in time in other to detect weakness with a view to take corrective measures, the company should embark on comprehensive public relations to build a good public image, and should be socially responsible to have the support of its environment.
TABLE OF CONTENT
Cover page i
Approval Page ii
Table of Content v-vii
CHAPTER ONE: General Introduction
1.0 Introduction 1
1.1 Historical Background of the study 1-3
1.2 Statement of the Problem 3
1.3 Objectives of the Study 3
1.4 Hypothesis of the Study 3-4
1.5 Scope and Limitation of the study 4
1.6 Significance of the Study 4-5
1.7 Limitation of the Study 5
1.8Brief History of The Organization 5-9
1.9 Definition of Terms 9
CHAPTER TWO:Literature Review
2.0 Introduction 10
2.1Concept of Strategic Management 10-19
2.2 Concept of Diversification 19-22
2.3 Assessment of Diversification 22-33
2.4 Relationship between Diversification, Growth and Survival 33
2.5 Summary of the chapter 34
CHAPTER THREE: Research Methodology
3.0 Introduction 35
3.1 The population of the study 36
3.2 Sampling Techniques and Sampling Size 36
3.3 Method of Data Collection 37
3.4 Instrument used in Data Analysis 37
3.5 Summary of the chapter 38
CHAPTER FOUR: Data Presentation, Analysis and Interpretation
4.0 Introduction 39
4.1 Data Analysis and Presentation 39-52
4.2 Testing of Hypothesis 52-55
4.3 Discussion of Findings 56
4.4 Summary of the chapter 56-57
CHAPTER FIVE: Summary, Conclusion and Recommendation
5.0 Introduction 58
5.1 Summary 58-59
5.2 Conclusion 59
5.3 Recommendations 60-61
CHAPTER ONE: GENERAL INTRODUCTION
The essence of this research work is centered on assessment of diversification as a survival and growth strategy using Nigeria Bottling Company as a case study. It should be noted that, we are in a competitive environment where competition is much stronger than ever. For this reason, there is need to adopt some strategies which will enhance the growth and in the long run, the survival of a business set up in order to meet up with standard if such firm would still remain in the market.
Therefore, the study is purposely to see how this diversification can be helpful for survival and growth.
1.1 Background to the Study
The economy of the world is ever changing, due to the fact that the world is becoming a global village. The customers are becoming highly sensible and receptive to change. This situation has posed a lot of challenges to many business organizations which left them with no any other option than to look for other alternative solution to the problem. Any alternative solution chosen by an organization is known as a strategy, and the strategy must be effective and efficient enough to enable them achieve what they want to achieve. Business organizations to day seek to embark on a strategy that will enable them to; exploit the market opportunities, expanding their scope of operation, invention of new product and have a large market share. When taking into cognizance the prevailing nature of economy, organization need to device a suitable strategy that will enable them to survive and grow depending on the resources within their reach. Strategies include: geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures (Fred R. David, 2010). These are the most essential type of strategy which an organization will take depending on the current situation of the organization if at all they want to survive and grow.
The aim and objective of every organization is geared toward survival and growth. For any organization to remain relevant or in existence it must always do what it competitor cannot do, that is in the area of: quality of product, affordability of the product, and distribution of the product. Therefore, organization will want to make sure that anything that has to do with the organization progress is well taking care off.
Organization that are large and strong today have a strong and effective management who strive and work hard to ensure that the custom, regularities and the standard of the organization are maintain. For a company like the Nigerian Bottling Company (NBC) Plc. to be where it is now is the major concern of this study. The NBC Plc. has taken three types of the strategies suggested by Fred R. David (2010), which are; Diversification, Product Development and Market Penetration. These strategies chosen by the company have actually helped them a lot and turn their fortunes for good. This is the reason why the company remain strong and vibrant despise the economic challenges.
1.2 Statement of the Problem.
The major obstacle faced with Diversification Strategies is the inability of organization to manage diverse business activities. In relation to the affirmation above, organizations find it more difficult to choose a production line that will suit their Diversification Strategy. The organization under study, encounter difficulties in managing their various brands of product. The study is set out to identify these problems and will proffer solution through the employment of some management principles so as to ensure effective and efficient implementation of the strategy.
1.3 Objective of the Study.
The objective of the research study is to assess the success of Diversification Strategy in the NBC. In addition, this study will seek to assess those problems that the company encounters in the implementation of diversification strategies.
1.4 Hypothesis of the Study.
In order to be able to achieve the above objectives the following null hypothesis is formulated:
Ho: Diversification strategy has no significant impact on the survival and growth of NBC Plc.
1.5Scope of the Study.
The scope of this study will be restricted to Nigeria Bottling Company (NBC), with particular focus on how it has served its huge customer base and managed its dynamic environments through its diversification strategy, from 2008 to 2013.The study will be limited to the Nigerian Bottling Company in Kaduna, because the Company is a multi-National company, operating in other countries. As such, it will be cumbersome taking the Bottling Company as a whole for ease of data collection and the effective handling of data, for proper evaluation and analysis of the subject matter.
1.6 The Significance of the Study.
The study will be of a great significance to organizations that want to grow and have a large market share in the prevailing and dynamic economy we have today. The research study is equally important to every organization that is craving for an alternative solution or strategy to the problem of diversification.
The Management, Staff and the Customers of NBC will benefit a lot from this Research study, as it will give them a foresight with regards to the prospect of the company. Furthermore, the Research study shall enormously add or contribute to the existing literature. The Research study will also add to the body of knowledge and reference to those who may wish to embark on similar research in the future.
1.7 Limitation of the Study.
The research study is only limited to the Nigeria Bottling Company (NBC), though it is limited to NBC but cannot make the findings irrelevant. Poor response from the respondents and obtaining up-to-date information about the company is a great limitation. The time frame within which the research study is to be carried out is also another limitation.
1.8 Brief history of the Organization under Study
Nigerian Bottling Company PLC was established by a Greek, A.G. Leventis, who came to Nigeria as a trader and settled in Abeokuta. He was granted the franchise to bottle Coca Cola products in Nigeria in 1950. He expanded his operations in Nigeria, forming the Leventis Group. The Companies making up the Leventis Group as at then included: Leventis Technical; Leventis Stores; Crown Products; Beta Crown Division; Delta Glass; and Nigerian bottling Company Plc.
Nigerian Bottling Company became autonomous from the group in 1995, and in 1999, joined the Coca Cola Helemi Bottling Company Group, the second largest Coca Cola anchor bottler worldwide. It is interesting to note that the first bottle of coke was produced in what is now the Head Office of the Company at Oyingbo, and the first beverage plant was cited in Apapa, Lagos. The company presently has sixteen bottling facilities, eighty-two sales depots, and over 150,000 distribution outlets. It has staff population of about 6,300 employees as at January, 2013.
The overall objective of the company and its mission statement is: To be a world-class selling organization, and the best bottler in Africa.
Its business operations in Nigeria are managed from NBC House, Oyingbo, Lagos. The company is headed by the managing director, with eight functions heads, reporting to him, namely: Heads of Commercial; Production; Quality; Logistics; Human Resources; Information Systems; Finance and External Affairs.
The product line includes:
i. Coca-cola- classic, diet coke, and vanilla coke;
ii. Fanta-orange, apple, lemon, pineapple, and blackcurrant;
iv. Schweppes- bitter lemon, soda, and tonic water;
v. Eva water;
vi. Five Alive fruit juice- citrus burst, berry blast, and tropical hit flavours;
vii. Limca; and
viii. Burn energy drink.
They continuously review opportunities to expand their product portfolio in order to offer consumers in Nigerian and increasing range of choices (wwwnbcltd,com). Every measure is taken to ensure that their products are of the highest quality.
The Company’s SWOT Analysis
The SWOT analysis is a concept that is use to evaluate an organizations’ prospect. This concept actually helps an organization to know whether they need to re-strategize or to continue with the particular production line they are into. The word SWOT means:
S = Strengths
W = Weakness
O = Opportunities
T = Threats.
Strength: The strengths of the organization are the below few points:
1. The best global brand in the world in terms of value ($77,839 billion)
2. World’s largest market share in beverage
3. Strong marketing and advertising
4. Most extensive beverage distribution channel
5. Customer loyalty
6. Bargaining power over suppliers
7. Corporate social responsibility.
1. Significant focus on carbonated drinks (that is single line of production)
2. Undiversified product portfolio
3. High debt level due to acquisition
4. Negative publicity
5. Brand failures or many brands with insignificant amount of revenues.
1. Bottled water consumption growth
2. Increasing demand for healthy food and beverage
3. Growing beverages consumption in emerging markets
4. Growth through acquisitions.
1. Change in consumer preferences
2. Water scarcity
3. Strong dollar
4. Legal requirements to disclose negative information on product labels
5. Decreasing gross profit and net profit margins
6. Competition from PepsiCo
7. Saturated carbonated drinks market.
1.9 Definition of Terms
(1) Assessment: this refers to a form of check and balances on a particular subject matter.
(2) Diversification: it implies a change from one form to another form.
(3) Growth: moving from one lower level to a much higher level.
(4) Survival: it means the sustainability in a particular environment.
(5) Strategy: this means the techniques put in place to combat or improve a field.
(6) Management: this a body of persons saddled with the responsibility of managing the affairs of a firm.
(7) Respondents: these are those who proffer answers to questions.
(8) Customers: these are regular buyers of a product or service.
(9) Significance: the relevance of something.
(10) Obstacle: this implies problem..