CHAPTER ONE INTRODUCTION

1.1       Background to the Study

The need to focus on the performance metrics and competitiveness of businesses in terms of quality of products or services, sustained profits, expanding growth frontiers and investment; timeliness of investment, and accountability is a primary characteristic of the process of growth. Apart from being a critical aspect of the fundamentals of the growth process such focus in turn, help businesses to improve their organizational systems and adopt more globally competitive and strategic management approaches that could ensure business growth and sustainability. Again, concern about business competiveness in Nigeria is shared both by government and the private sector. The concern of the government borders mainly on the ability of domestic businesses to compete both at the local and global market space. Because, growing business competitiveness is a potential growth driver in terms of income and employment creation, especially for a developing economy as Nigeria. Also, competiveness of domestic businesses serves as a strong signal for foreign direct investment and creates location attractiveness for investment in general (Doyle and Philip, 2006).

Business competitiveness pertains to the ability of a business to provide products or services that meet the quality standards of local and global markets at prices that compare favorably with other businesses, and provide adequate returns on the resources employed or consumed in producing them (Porter, 1988). Competitiveness has to do with a business being able to maintain its market share by offering the best value to its customers. Again, a business is said to be competitive compared to its competitors when the following features are present; provision of high quality products and/or services to its customers valued at a minimum price, maintain its profit margin, meet the needs of its customers at appropriate time and have a growing market share.

The features of business competiveness are basically influenced by certain factors such as type of market, market environment and availability of basic infrastructure. Therefore, any assessment of business competitiveness must take into account the type of market structure in which the business operates. This is because competition strategy differs across markets; and thus, determines the attitude of businesses and its customers in terms of response to market signals and corporate choices. A business environment that readily stimulates an effective and profitable               enterprise                    development                         provides    the     requisite     foundation    for    business competitiveness. In essence, a good business environment is a major determinant for competitiveness (Lynch, 2006). The provision of adequate and relevant infrastructure ensures

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that businesses can operate efficiently and competitively. When infrastructural facilities are poor or weak; businesses more often than not resort to self-help to provide them; which puts them at disadvantage, raises their cost of doing business and affects their pricing policy (Orisewezie, 2010).

The fact that business competitiveness is a key element in the growth process defined in terms of sustained profits, income and employment generation makes it an important issue in the evaluation of growth drivers, entrepreneurship potentials and opportunities in a developing economy like Nigeria. Business growth and development strongly depend on competitiveness that forces firms to develop new products, services, technology and innovation which would give consumers opportunities for greater selection. Many businesses in Nigeria are not developing within the metrics of these variables (Adenikinju, 2012). Therefore, this study finds it necessary to evaluate business competitiveness in Nigeria that enhances business growth in terms of growing rate of profit, long-run business survival, quality products and services, better pricing policy, net income for citizens and job creation.

1.2       Statement of Research Problem

Business failures are a common feature in a developing economy; especially the Sub-Saharan Africa. The common factors identified for such failure ranges from weak infrastructure like erratic electricity supply and poor transport system; and low technology and innovation, poor managerial approach, heavy government regulation, weak incentive structures and low investment in research and development (Dwivedi, 2006).

Weak and poor infrastructure is the bane of the business environment in Nigeria with severe consequences for competitiveness in terms of price stability, efficiency and operating cost; and growth in income and employment. For instance, epileptic and unpredictable electricity power supply in Nigeria has become a common experience since the early 1990s had lowered production efficiency and raised production cost of goods and services. Enweze (2001) showed that about 25% of total investments in machinery and equipment by small firms, and about 10% by large firms in Nigeria, were on privately installed infrastructure; that has raised cost of production and consequently the final consumer price that has left these firms uncompetitive with their foreign counterparts who sell in the same markets. This study finds its relevance to evaluate the implications of falling production efficiency and rising production cost for business competitiveness in Nigeria.

Plant closures and business shut downs, poor business growth and developments are issues that have characterized the business landscape in Nigeria (Orisewezie, 2010). Some business analysts (Orisewezie, 2010) have argued that these have resulted from businesses‟

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inability to meet the goals of profit maximization, non growing market share, poor business growth rate, inappropriate pricing policy, rising cost of production, weak out sourcing of raw materials and inadequate new product development (research and development; R&D). This raises the question of competitiveness both in the domestic and global business space for Nigeria businesses. Clearly, a lack of business competitiveness has implications for both public and private business growth and development; and consequently public and private income and employment growth. Therefore, this study raises the following question; why are businesses in Nigeria unable to meet their goals of growing profit maximization, quality standard, and growing market share, growth rate, appropriate pricing policy, low cost of production, new product development and out sourcing of raw materials?

It is important to note that for over a decade now all attempts to sell Nigeria Telecommunication (NITEL) have been futile. Irrespective of the fact that some of the bids had been successful at some point, there was public outcry that indicated undervaluation of NITEL. The argument that has been put forward in support of the undervaluation is the fact that it will take massive investment to make NITEL work again, especially in the face of hash business environment in Nigeria. Why is M-TEL a mobile firm subsidiary of NITEL unable to compete favorably with the likes of MTN, AIRTEL and GLO? The inability of NITEL and M-TEL to compete in the telecommunication space in Nigeria led to heavy job cuts, massive loss of public and private income, and social dislocation for families which impact have lasted to the present time.

Research Questions