Adopting corporate strategy for profitability in the nigerian brewing industry

Thesis Abstract

Recently, there has been growing concern about the frequent collapse and poor performance of industries in our country. Business organisations are becoming more complex due to rapid changes in the environment. It is increasingly becoming difficult to predict the environment accurately. In such an environment characterized by high level competition, developing competitive edge for business survival and growth becomes imperative. This calls for the adopting a corporate strategy that can ensure profitability. The aim of the study was to find out the extent to which different corporate strategies contribute to the profitability of our manufacturing industry, in particular the brewery industry. The methodology adopted in carrying out the research work was the survey method. Both the primary and secondary sources of data were utilised. The population for the study was drawn from three manufacturing organisations in the brewery industry in the south-western part of Nigeria. The sampling technique adopted was simple random sampling. The study made use of   a sample size of 250 respondents. The Statistical Package for Social Sciences (SPSS) was used to analyse the data collected. The yardsticks used in assessing the level of performance include, Return on Capital Employed (ROCE) Return on Investment (ROI), Return on Total Assets (ROTA), Return on Shareholders’ Capital (ROSC), Profitability Index, Earning per Share etc. Thus, the result of the survey confirmed that corporate strategy has impact on profitability in any organization. The folowing were the outcome growth strategies such as mergers and acquisitions result in a brewery industry having an increased market share; joint venture as a growth strategy positively impacts strongly on return on investment; reconstructing and retrenchment has a positive effect on returns on capital employed; brewery industry will experience a higher return on capital employed when they employ any of the exit strategies i.e. divestment, harvest rand liquidation; and lastly, the study reveals that adopting corporate strategy and successful implementation of an appropriate, feasible, desirable and timely strategy will create competitive advantage and also increase the profitability base. The study recommends that government should encourage declining or distressed companies to engage in merger and acquisition by providing incentives such as tax holidays, loss relief, and capital allowances. Corporate organizations should concentrate more of their resources on growth strategies; exit strategies should be applied on subsidiaries that are not too profitable; defensive strategy should be employed if it is established that the firm’s profitability problem is due to its workforce’s inability to catch up with the changing trends in the industry. These will be particularly helpful in the manufacturing industry, which is characterized by distress syndrome. Above all, government should ensure that basic infrastructure provision like electricity, telecommunications, transport, etc are provided as the provision of these by firms constitutes a huge outlay which eats deep into their profits.