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STRATEGIC MANAGEMENT AND PERFORMANCE OF SELECTED STONE MINING COMPANIES IN SOUTH-WEST, NIGERIA

10,000 3,000

Topic Description

CHAPTER ONE

                                                INTRODUCTION

  • Background to the Study

Over time, the perception and practice of strategic management has been adopted across all- nations due to its effective contribution to the performance of organisations. Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved: It assesses its competitors and set goals and strategies to meet all existing and potential competitors, and then reassess each strategy annually or quarterly (i.e. regularly) to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet charged circumstances, new technology, new competitors, a new economic environment, or a new social, financial or political environment (Lamb, 1984).

Achieving a competitive advantage position and enhancing firm’s performance relative to their competitors are the main objectives that business organizations in particular should strive to attain (Raduan, Jegak, Haslinda & Alimin, 2009). Sharabati and Fuqaha (2014) opined that in the globalization era, the strategic management has been considered as the most important practice which distinguishes organizations from one another. Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments. (Nag, Hambrick & Chen, 2007). Veskaisri, Chan and Pollard (2007) suggested that without a clearly defined strategy, a business will have no supportable basis for creating and upholding a competitive advantage in the industry where it operates.

For the better part of a decade, strategy has been a business buzzword. Top executives ponder on strategic objectives and missions. Managers down the line rough out market strategies. Functional chiefs lay out strategies for everything from research and development to raw materials sourcing and distributor relations. Mere management has lost its glamor in the global economy in which planners have all turned into strategists (Kaufman, 2013). All this may have blurred the concept of strategy, but has also helped to shift the attention of managers from the technicalities of the planning process to substantive issues affecting the long-term well-being of their enterprises (Walleck, 2011). The challenge of management for the needs of hundreds of different and rapidly evolving businesses, serving thousands of markets in dozen of distinct national environments, has pushed them to generate sophisticated, uniquely effective management technique that sets these organizations apart, but rather the thoroughness with which management links strategic planning to operational decision making (Gluck, 2014).

The business of the twenty first century irrespective of its size in Nigeria is going to be part of the global business community affecting and being affected by strategic management in organizations within the country. This is so, because the business environment is changing, dynamic, turbulent, discontinuous and highly competitive. Key drivers of this change have been globalization of trade, increased population and influence of corporate organizations, the repositioning of government and the rise in the strategic importance of stakeholder’s relationships, knowledge, and product reputation (Olanipekun, 2014). The competitive business environment has resulted into complexity and sophistication of business decision-making which requires strategic management. Managing various and multi-faceted internal activities is only part of the modern executive’s responsibilities. The firm’s immediate external environment poses a second set of challenging factors (Umar, 2005). To deal effectively with all that affects the ability of a company to grow profitably, executives design strategic management processes they feel will facilitate the optimal positioning of the firm in its competitive environment. Strategic processes allow more accurate anticipation of environmental changes and improved preparedness for reacting to unexpected internal and competitive demands (Muogbo, 2013).

Stone crushing and rock quarrying is a global practice, that has been occurring in the world, both emerging and developed countries. Quarrying activity is a necessity that provides much of the materials used in traditional hard flooring, such as granite, marble, sandstone, limestone, slate and even just clay to make ceramic tiles (Okafor, 2006). Many of the biggest disappointments have resulted from the failure of mineral processing and related downstream manufacturing to develop at or near the site of extraction. It is these activities which create the largest number of jobs and frequently the greatest profit. They are therefore, highly desirable from a policy perspective. It is not only governments in developing countries which have been frustrated by the minimal extent of downstream processing; state authorities within developed economies have had similar experiences. The contribution on people and culture within close proximity to the mining operation (host communities) by the industry should create an environment that will accept and encourage development (McDivitt & Jeffery, 1992).

Investigations carried out by Humann (2004) revealed the Luka community (South Africa) representatives staunchly opposed the proposed Impala open cast mine on the grounds that the community has not benefited from the company’s historical activities in the area and has not been adequately compensated for negative impacts caused by the company activities in the area. The research also revealed that the company efforts to communicate directly with community representatives in the local government ward committee, including constructing a small office building to facilitate community meetings and interaction with the company yielded little or no result due to tribal faction.

According to Laurence (2001) minerals exploitation has an essential role in global development, by raising and maintaining living standards. Also, extracting minerals is one of the oldest and essential human endeavours because it provides the raw ingredients for the world and, like agriculture and helps civilization (Eagles, 1984). Furthermore, mining affects our regular items because of the ingredient that are used in homes, offices, transportation, communication, as well as for national defence (Bureau of Mines, 2002). Indigenous and organized mining operations have been ongoing in Nigeria since the 20th century, shortly before the 1st World War (Ajakpo, 1986). However, the interest in the exploitation of these resources is on the increase and has the widespread and increasing numbers of abundant mines of minerals (Limestone, Gemstones, Iron Ore & Gemstones). The cumulative effect of these reduction of performance in mining activities, as they gained prominence, has been abandonment of the mine sites (Ashawa, 2007).

In setting up a successful stone mining business, the need for strategic management must be put forward which consists of basic competences like Operations competence, Commercial competence, Marketing competence and Administrative competence (Anaekwe, 2012). With regard to this, running a quarry involves total commitment, responsibilities and courage to take risk, as well as putting up required machines for operations and keeping up with maintenance and recruiting the right people for the right service (Nnamdi, 2010). Furthermore, mining industry is a global industry with many countries competing for funds. The fierce international competition suggests that mining companies and their investment funds would go to those countries where the enabling environment would allow the private sector to flourish without hindrance (Obiora, 2007). It is the realization of this fact that is driving the recent efforts of the Federal Government of Nigeria towards the creation of an orderly sustainable development of Minerals Resources. At present, quarry industries in south-west states are not performing up to expectation because of improper strategic management in the system (Ishola, 2007).

  • Statement of the Problem

The need for manufacturing companies to properly coordinate its environment in order to know its actual market size has been a problem in stone mining companies. According to Babatunde and Adebisi (2012), stone mining companies in Nigeria are facing the problem of customer shortage as a result of lack of proper environmental scanning, this inadequacy of not getting reliable information for production constantly denied these organization to produce inaccurate number which reduces the market size. Popoola (2000) notes that, environmental scanning has assumed a serious dimension lately, due to the increase in rash environmental changes which has become so frequent and necessitated the demand and needs for recent information to make accurate decisions. Stone mining companies depend on their environment for operations and survival. However, environmental scanning is now more volatile and challenging than those of centuries before it and has increased complexity of business surroundings on Market size exposing organization to hyper competition (D’Aveni, 2010; Brown & Eisenhardt, 2007).

Organizations in Nigeria today are being shut down as a result of non-performance, necessitated by sudden environmental changes and poor formulation of strategy. Manufacturing organizations in Nigeria just like the stone mining companies encounter several problems as a result to slow response to strategic changes in the organizations (Thompson, 2003). Despite the fact that strategy formulation has brought tremendously transformed in most business landscape, it is still plagued with some constraints in the Nigerian mining industry. Some of these constraints include wrong application of strategy formulation by Nigerian mining companies, bad implementation of strategy, poor organizational structure in the Nigerian mining industry and non-conformity of laid down plans by the workers of the mining company towards actualization of profitability of the firm. (Onwuchekwa, 2000). Furthermore stone mining companies formulate strategies to meet up with certain lacuna but fail as a result of failure to inform this workers on what ought to be done. This causes reduction in performance and lack of machine maintenance where the organization structure of the company does not go in line with strategy being formulated (Onwuchekwa, 2000).

Organizations like the stone mining industry have been very dependent on their implementation strategy based on  several techniques to analyze and formulate strategies such as strengths, weaknesses, opportunities, and threats (SWOT) and Porter’s competitive strategies (Okumus, 2003).  The reduction in sales level of some stone mining companies is being caused by absence of strategy implementation where workers are not trained  for   the  new  strategy  initiated  to  the  system as  well  as machine  to  be used which  leads to a  fall  in performance (Urom, Antai & Osim, 2004).  Miller (2002) reveals that organizations have failed as a result of stoppage to implement over 70% of their strategic initiative. Discussion on the problems and difficulties of strategy implementation in the recent years has been highly fascinated by the strategic management discourse since the implementation of strategic plans and decisions have not been as successful as their designers expected.    Most times in these industries, there are shortcomings in the organizational structure which affects the performance of production because employees tend to be very slow at changing to new strategy ready to be implemented, which reduces the productivity and not all quarries have the ability to train workers to the sudden changes based on skill system, flexibilities, mentalities (Porter & Kramer, 2006).

The manufacturing sector, just like other sectors in Nigeria has been ineffective (Akinmulegun, 2013) There has been a reduction in the number of stone mining industries as a result of inadequate evaluation of customers satisfaction hindering the organizations from knowing the level of satisfaction the customer derives from consuming their product reducing the productivity (Brown & Iverson, 2004). Customers are deemed to be reliable and important measure of success in stone mining companies (Chakrabarty, 2006).  Some of the measures for this quality of service as one of the indicator of customer satisfaction, provision of quality services after which ensures retention and survival of companies. These organizations fail to do proper evaluation and control causing them to lose customers as a result of not being able to meet customer’s demand which in turn reduces sales of production. Furthermore, dissatisfied customers make complaints which frequently tends to chase other customers (Kitapci & Dortyol, 2009).

  • Objective of the Study

The main objective of this research is to determine the effect of strategic management on performance of selected Stone mining companies in South-west, Nigeria. The specific objectives are to:

  1. evaluate the effect of environmental scanning on firm’s market size;
  2. investigate the relationship between the company’s strategy formulation and profitability;
  3. ascertain the influence of strategy implementation on company’s sales volume and
  4. determine the effect of company’s strategy evaluation on customer satisfaction.

 

  • Research Questions

The research question based on the variables to be considered in this study are as follows:

  1. How does environmental scanning affect firm’s market size?
  2. What is the relationship between the company’s strategy formulation and profitability?
  3. How does strategy implementation influence sales volume?
  4. What effect does strategy evaluation have on customer satisfaction?

 

  • Hypotheses

The hypotheses were tested at 0.05 level of significance

The research hypotheses for this research are as follows:

H01: Environmental Scanning has no significant effect on market size.

H02: There is no significant relationship between strategy formulation and profitability.

H03: Strategy Implementation has no significant influence on sales volume.

H04: Strategy evaluation has no significant effect on customer satisfaction.

 

 

 

 

  • Scope of the Study

This study focused on the effect of strategic management on performance of selected stone mining companies in South-west, Nigeria. The study covered selected stone mining companies operating in South-west, Nigeria. Moreover, this study focused on twenty-five (25) stone mining companies operating in South-west, Nigeria and the choice of this geographical location is due to the fact that most stone mining companies operating at this region have common characteristics such as functions and working environment. The target population for this study is the secondary population that is, the management level (Top and Middle management level) with the population 179. The study adopted the use of total enumeration sampling technique. The justification for choosing this sampling technique is because the population is small.

  • Significance of the Study

The work provides useful information for the managements within individual company and the insight into employee’s view of strategic management and practices within such organizations. It gave detailed recommendations for the management of the selected companies on how to accomplish and enhance performance. The result of the study provides management with better knowledge of strategic management which would aid in the long run activities, growth and development of different mining companies. The importance of this study to the government would facilitate the creation of jobs arising from operations in quarries and reduce the population of unemployment. Employees would experience improvement in their standard of living as they would be able to feed their families. The results from this study also seek to give an appropriate strategy on how to increase production level and provides more knowledge to industry in this field, on how to accomplish their goals and help the growth of the economy in which they operate.

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