COMPETITIVE DYNAMICS AND CORPORATE PERFORMANCE OF SELECTED FLOUR MILLING COMPANIES IN NIGERIA

COMPETITIVE DYNAMICS AND CORPORATE PERFORMANCE OF SELECTED FLOUR MILLING COMPANIES IN NIGERIA

ABSTRACT

 

The intensity of competition among players in the Flour Milling industry in Nigeria necessitated the development of a business strategy to out-perform one another and achieve desired level of performance. Competitive pricing was therefore a common strategy adopted by these firms. Less attention was paid to competitive behaviour, people management practices, supply chain strategy, the external business environment and product offering which could assist in building competitive strengths and superior performance. As a result of the negative effects of competitive pricing, operations are being downsized along with attendant staff redundancy, job losses and a consistent drop in the financial results of all players in the industry. This study evaluated the competitive dynamics and corporate performance of selected flour milling companies in Nigeria.

 

The study adopted a survey research design. The population for the study consisted of 3,424 staff of selected Flour Milling companies in Nigeria. The staff were stratified into management and senior staff as respondents. A sample size of 500 was randomly drawn from the population. A validated questionnaire was adapted for the study. The Cronbach’s Alpha coefficient for the constructs ranged between 0.78 and 0.86. A total of 500 copies of the questionnaire were administered, with a response rate of 91.4%. The data were analyzed using descriptive and inferential (Pearson Product moment correlation and hierarchical regression) statistics.

 

The findings revealed that there were significant relationships between Competitive Behaviour and Corporate Performance (r=0.599; p = <0.05); People Management Practice and Corporate Performance (r = 0.697; p <0.05); Supply Chain Strategy and Corporate Performance (r = 0.633; p <0.05); External Business Environment and Corporate Performance (r = 0.647; p <0.05) and Product Offering and Corporate Performance (r = 0.733; p <0.05). It also revealed significant moderating effect of Competitive Capability on the relationship between Competitive Behaviour and Corporate Performance (F = 83.635; R² = .440; R² Change = .087; p <0.05); People Management Practice and Corporate Performance (F = 44.669; R² = 0.500; R² Change = 0.045; p = <0.05); Supply Chain Strategy and Corporate Performance (F = 66.230; R² = 0.474; R² Change = 0.067; p <0.05) and External Business Environment and Corporate Performance (F = 48.462; R² = 0.476; R² Change = 0.051; p <0.05). However, Competitive Capability did not significantly moderate the relationship between Product Offering and Corporate Performance (F = 2.296; R² = 0.598; R² Change = 0.002; p = 0.130>0.05).

 

The study concluded that competitive behaviour, people management practices, supply chain strategy, product offering and external business environment significantly relate with competitive capability and produces desired corporate performance.  It recommended that flour milling companies should strategically harness the opportunities in competitive dynamics to strengthen their competitive capability and achieve desired corporate performance.

 

Keywords: Competitive dynamics, Corporate performance, Competitive pricing, Competitive capability, Competitive behaviours.

 

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Competition in the flour milling subsector of the manufacturing sector in Nigeria technically began about ten years ago when most players, in a bid to gain more market share commenced stiff competition on the level of expansion in their production capacity (Kelikume, 2015). Their intention was to increase their product offerings by increasing their capacity to produce more and in effect gain more market share. Less attention was paid to growing the consumer based to accommodate the expansion and having invested so much billions of naira in capacity expansion, they are now being faced with capacity utilization challenges which are adversely affecting their corporate performance (Njokwu & Kalu, 2015).

 

The industry has a few number of players that can be categorized based on their capacity installation. The leading three operators have an installed capacity of 18,600mt per day and are responsible for about 70% of the market share while other operators control about 30% of the market share. Based on the industry’s high fixed cost of operation, profitability is mainly dependent on the company’s capability to increase volumes (Lead Capital, 2013). Currently, there are nine (9) active flour milling companies in Nigeria providing employment opportunities for upward of 100,000 people in Nigeria.  About 80% of market share is controlled by only five (5) of the nine (9) firms and as such, there is a lot of discrepancy between the ‘big players’, the ‘mid-size firms’ and the smaller flour milling companies (IBF Agusto & Co., 2012). The five (5) major players by market share are: (1) Flour Mills of Nigeria Plc, (2) Crown Flour Mills Ltd, (3) Honeywell Flour Mills Plc, (4) Dangote Flour Mills Plc, and (5) Standard Flour Mills Ltd.  The remaining are:  BUA Flour Mills Ltd. (recently acquired by Crown Flour Mills Ltd), Life Flour Mills Ltd, Valumbra Flour Mills Ltd. and Pure Flour Mills Ltd. 

Table 1.1: A Table Showing the Production Capacity of Sampled Companies

S/N	Sampled Companies	Production Capacity in %
1	Flour Mills of Nigeria Plc	38
2	Dangote Flour Mills Plc	18
3	Honeywell Flour Mills Plc	14
4	Standard Flour Mills Ltd	7
5	Crown Flour Mills Ltd	8
	Total	85

Source: Researcher’s field survey, 2015

 

Based on the strong grip of the total market by the ‘big 5’, there are ‘imperceptible entry barriers’ for potential and ambitious flour millers. Intense competition exists across the various levels of the market. There is however a wide gap between the top level category and the other companies in the industry (Njokwu & Kalu, 2015). The stiff competition in the industry actually reduced the number of players to 9 from the initial 17 players. Flour Mills of Nigeria acquired six (6) and merged them into Flour Mills of Nigeria while Crown Flour Mills Ltd also acquired two (2) bringing the number of active players in the market to nine (9).

 

The level of competition within the industry is extremely intense. With the accomplishment of each distinct player hinged on its capacity to gain market share, industry actors go through various extents and dimensions to grow capacity. Also, as an oligopolistic industry, the pricing is until recently being regulated by the Flour Millers Association of Nigeria who fixes a price which the flour manufacturers are not permitted to surpass. This fixed price is nonetheless often dishonored particularly by the players who control major share of the market. As a primary food with many alternatives within the consumer goods sector, the foodstuffs are characterized by high resistance of demand (Kelikume, 2015). Any small increase in price of these products could lead to a decrease in quantity demanded as consumers will promptly shift their favorite to other cheaper substitutes.

 

Because the success of each company in the industry hinges on its capacity to gain market share, industry actors in the last three years have gone through to great length to increase production capacity. Today, because there is no significant growth in the consumer base of these flour millers, they have resulted to the prevailing competitive pricing that threatens expected performance and survival of most players in the flour milling sub sector of the manufacturing industry in Nigeria. From the study, competitive pricing is the only competitive strategy and tool being deployed first by the major players and others follow suit without any consideration to the resultant effect on their profit margins. As a result of this unbridled competitive pricing, compounded by the recent devaluation of naira by the Central Bank of Nigeria,  profit margins are thinning out and flour milling operations are being downsized along with its attendant staff redundancy and job losses (Kelikume, 2015).

 

Competitive dynamics in the sector has overtime focused mostly on pricing strategy with varied incentives and promotional tools to the trade (IBF Agusto & Co., 2012). Although, managing competitive behaviour, people management practices, supply chain strategy, external business environment and product offerings are being leveraged upon to an extent, good attention is not being paid to the capabilities of these variables in producing desired corporate performance. This study shall therefore evaluate the competitive dynamics and performance of manufacturers in the flour milling industry in Nigeria

 

1.2 Statement of the Problem

The overall problem that necessitates this study is the prevailing competitive pricing strategy that threatens the performance and survival of most players in the flour milling industry in Nigeria. As a result of this unbridled competitive pricing strategy (Kelikume, 2015), profit margins are thinning out and flour milling operations are being downsized along with its attendant staff redundancy and job losses.  The focus on competitive pricing strategy suggests a contradiction to the business expectations of companies in the industry as this has been shown to reduce their profit margins. Findings from the annual reports and literature also revealed a consistent drop in the financial results, increase in the overhead cost and cost of sales, reduction in the staff strength, more pressure from the regulatory agencies, poor infrastructural support, and shrinking product offering  of all players in the industry despite their various competitive moves and responses, mostly in competitive pricing strategy (Flour Mills of Nigeria, 2014; Dangote Flour Mills Plc, 2014; Honeywell Flour Mills Plc, 2014 & IBF Agusto & Co., 2012).

 

A review of the competitive behaviours of key players in the industry revealed that they are relentlessly altering the competitive landscape to the detriment of other players. In the same vein, firms contemplating imitation of a competitor’s innovation face a dilemma, imitate a new, unproven offering, or forgo imitation and perhaps miss out on the “next big thing”   (IBF Agusto & Co., 2012). In spite of the improved market statistics of Flour Mills of Nigeria,   the shareholders of the company do have every reason to be concerned based on the company’s nine months results ended December 31, 2014. Its net profit went down by about 44 % in 2014 matched to corresponding period of 2013 (Egene, 2015). The question of whether reactive response to competitive moves produce value addition and sustainable competitive strength therefore come to bear in determining Flour Millers competitive behaviour and this study intend to provide an empirical answer to this question.

 

Manufacturing firms in the flour milling industry in Nigeria in a bid to gain a sizable market share have engaged in competitive behaviours that have generated stiff competition and have made a good number of millers to wind down their operation. A good example is the expansion projects of Flour Mills of Nigeria completed in 2012 (Flour Mills of Nigeria Plc, 2013) that has made it capable of supplying the flour requirements of the entire nation and parts of West Africa countries. This giant stride has put competitors at the disadvantaged position and they are reactive in a bid to sustain their market shares and survive. If the competitive behaviours of companies in the flour milling companies in Nigeria is not strategically managed to know when to initiate competitive action, react or respond to competitive moves and how and to what extent the action must take, there is a high probability of losing out of the targeted corporate performance.    Companies such as Honeywell Flour Mills Plc, completed in 2013 (Honeywell Flour Mills Plc, 2014), Crown Flour Mills Ltd. completed in 2013 (Lead Capital, 2013) and Dangote Flour Mills Plc are at the forefront of reactive response to competitive moves (Dangote Flour Mills Plc CEO, 2013), while Bendel Flour Mills Ltd., Eagle Flour Mills Ltd, Supreme Flour Mills Ltd are gasping for survival in the heat of competition. This study therefore examined the relationship between competitive behaviour and corporate performance and the moderating effect of competitive capability on the relationship between competitive behaviour and corporate performance of selected flour milling companies in Nigeria.

 

To cope with the problems caused by undue attention on competitive pricing strategy, some players have begun to downsize their operations and staff strength. In February 2015, Flour Mills of Nigeria retrenched about 600 people from their employment (Flour Mills of Nigeria Plc, 2015), Standard Flour Mills Ltd also retrenched about 50 of their sales workforce, while other players are also following suit with the exemption of only Honeywell Flour Mills Plc. The adverse employment effects of acquisitions are also looming as acquisition talks are being concluded between Crown and BUA Flour.  This signals great danger for the economy at large and the labour market specifically.    According to Armstrong (2009), people management practices is basically about the relationship between people management and strategic management. It also affirms, that people management is the overall direction a firm intends to chart in order to accomplish its objectives using its people.

 

From Armstrong (2009), one may logically deduce that strategic people management practices is a strategic method to managing human resource capability of a company to achieve competitive edge and corporate performance. This agrees with various allusions to the fact that people are the most valuable assets by all players in their annual reports (Flour Mills of Nigeria Plc, 2014; Dangote Flour Mills Plc, 2015; Honeywell Flour Mills Plc, 2014, Standard Flour Mills Ltd., 2012  and Crown Flour Mills Ltd., 2013). If this affirmation is genuine and they all pay good attention to their people management practices, one may begin to wonder why most flour millers are recording decline in their performance with attendant job losses across levels in most of these companies (Flour Mills of Nigeria Plc, 2014; Dangote Flour Mills Plc, 2014 & Standard Flour Mills Ltd, 2015).

 

Oludayo and Omonijo (2013) also agree with these companies’ statements on the centrality of people, that organizational people are the major determining factors of competitive advantage and the need for effective workforce administration has become more significant than what it used to be. Wright and Snell (2001) also stressed that people management practices could lead to increased corporate performance and be the core of continued competitive advantages. The question of why these same most valuable assets are the first to be disposed whenever the company is under economic pressure was examined in this study by examining the relationship between people management practices and   corporate performance and assessing the moderating effect of competitive capability on the relationship between people management practices and corporate performance.

 

The influence of effective supply chain strategy on the performance of manufacturers in the flour milling industry in Nigeria has been very visible in the face of recent competition as companies with less competence in supply chain strategy are recording consistent decrease in their performance indices (IBF Agusto & Co., 2012). Corroborating IBF Agusto’s position, Iyer, Germain and Claycomb (2009) shows that consequences of supply chain strategy on competitive performance diminishes as product instability and demand volatility mutually improved. Inbound and outbound areas of supply chain strategy was not being handled as strategic with a view to effectively managing the cost of inputs. And this has directly increased the cost of production and hinders the companies’ ability to compete favourably. There is an increasing demand from the Board of directors and shareholders to the operators of companies in the industry   to increase values on their investments and at the same time the customers are requesting for  lesser prices and improved quality; it therefore mean that these companies have to consistently find means of managing their operating and cost of sales in all areas with good focus on supply chain strategy (Honeywell Flour Mills Plc, 2015; Dangote Flour Mills Plc, 2013 & Flour Mills of Nigeria Plc, 2014).

 

In the competitive landscape of the flour milling industry in Nigeria, all players patronise the same machinery and other resources, the same raw materials and sources of raw materials. Ability of any player to leverage on strategic sourcing with a view to buying right, superior quality, right price, right place, appropriate time and the most efficient transportation system, will therefore determine the extent to which any player can go in the battle for market share and corporate performance.  This is so because getting things wrongly at any of these stages will disable the competing firms from producing at the minimal cost and erode values and in effect lead to poor performance. Almost all companies in the industry have been concentrating on competitive pricing at the end point, rather than strengthening their end –to-end supply chain strategies and producing optimally (Lead Capital, 2012).  The less attention being paid to end-to-end supply chain strategy has been responsible for undue attention to competitive pricing resulting in dwindling profit margins, job loses, employees’ dissatisfaction and reduced capacity utilization in the flour milling industry in Nigeria (Egene, 2015). The question of the relationship between supply chain strategy and corporate performance was answered in this study by determining the relationship between supply chain strategy and corporate performance and the moderating effect of competitive capability on the relationship between supply chain strategy and corporate performance.

 

In the external business environment of the industry, despite the recent 25% increase in duty on wheat importation leveled by the Federal Government, consistent devaluation of naira with its resultant effects on prices of imported raw materials as a result of increase in exchange rate  (Kelikume, 2015), basic economic principle would teach that the associated increase in the cost of production will be shared or transferred to the consumers. The industry is rather not only absorbing the increased costs, players are also dropping prices of their finished goods for competitive pricing strategy. In effect, the third quarter of 2015 financial results of almost all players in the flour milling sub sector was in the negative as the biggest player, Flour Mills of Nigeria top the list of loosers. Specifically, Flour Mills of Nigeria profit before tax reduced by 55.73% to N3.70billion, from N8.35 billion in 2014 with a corresponding reduction in pre tax margin to 1.51% matched with 3.45% in the same period of financial year 2013. The effective management of the external business environment would have reduced the negative impact on the performance of flour milling companies

 

In addition, in spite of an 83.40 % decline in income tax provision, post tax profit contracted by 44.46 % to N3.30billion from N5.93billion in the financial year 2012. Consequently, post-tax profit margin fell to 1.35 per cent from 2.47 % recorded in the financial year 2012. (Flour Mills of Nigeria, 2014).  Onuoha (2013) in his study of “Factors Militating Against the Global Competitiveness of Manufacturing Firms in Nigeria”, also highlighted the key issues and difficulties of the industry to include: failing and poor infrastructures; high production costs; unpredictable government rules on the sector; severe competition from imported goods; incomplete scope of operation; financial challenges; amongst a innumerable of other weaknesses. Onuoha posits that despite the government policies and inducements on entrepreneurship growth mostly and on the manufacturing sector specifically, they are yet to contribute meaningfully to the nation’s Gross Products or compete internationally therefore appears plausible. This study examined the relationship between external business environment and corporate performance and the moderating effect of competitive capability on the relationship between external business environment and corporate performance.

 

Flour millers in the industry are facing the risk of products and services substitution from direct and indirect competitors (IBF Agusto & Co., 2012).  This has compelled flour millers to consistently innovate and increase their product offering in a bid to compete favourably.  Unfortunately for the millers, some of their new products are cannibalizing the existing ones and this portent great danger for the effective sales of all their brands. For example, ‘whole wheat meal’ as a ball food portent to serve as a close substitute of ‘semo’  and in effect reduces the volume sales of ‘semo’. Some flour millers who have difficulty in adjusting their manufacturing equipment to suit the production of innovative food products are being edged out of the market and in effect losing their market share and have their continuous existence threatened. The major product of companies in the flour milling industry in Nigeria is bread and confectionary flour which constitute over 80% of contributions to their performance. Others products that constitute the balance of 20% are ball foods such as ‘semo’ and whole wheat meal and Strand foods such as noodles, macaroni and spaghetti (Egene, 2015).  In effect, Bread and confectionary bakers constitute the major users of the industry flour products and as such, the flour millers are constantly under pressure to satisfy the bakers who are themselves very sensitive to competitive moves of millers for their own business advantage. The commoditized nature of this flour has also made the competition so stiff to the extent that bakers will insist that ‘flour is flour’ just as ‘salt is salt’ irrespective of brands or the manufacturer. The reality of the commoditized nature of flour has also compelled the flour millers to focus more on competitive pricing in their strategic moves, sometime without minding the resultant adverse effects of competitive pricing but in a bid to retain or gain market share, keep running promotions, give commissions, incentives and more often than not, outright price reduction (IBF Agusto & Co., 2012).

To cope with the competitive challenge in product offering, most manufacturers have had to imitate others without due attention to the competitive capabilities of those they are imitating. For example, Honeywell Flour Mills Plc introduced a special brand of pasta “Cavatto” into the market and this brand altered market demand for pasta in favour of Honeywell. Within the first few months of this favourable move, Flour Mills of Nigeria imitated the brand and named its own “Twist”. When the market sensed that Honeywell and Flour Mills of Nigeria are taking over the market in that brand, BUA Flour Mills also imitated the brand and named its own “Cavatto-Twist”. Today, most imitators are losing out in that brand and their market shares are being eroded in other brands where they have comparative advantage. (IBF Agusto & Co., 2014). This study therefore found out the relationship between product offering and corporate performance and evaluated the moderating effect of competitive capability on the relationship between product offering and corporate performance.

Although, managing competitive behaviour, people management practices, supply chain strategy, external business environment and product offerings are being leveraged upon to an extent, it would appears that good attention is not being paid to the capabilities of these variables in producing desired corporate performance. Inadequate attention being paid to these sub independent variable has made competition so stiff that the only focus has been on competitive pricing strategy and this has brought an unimaginable pressure on the Flour Millers’ performance, job loses, increased cost of sales, low profit margins and financial loses.   Given these hydra headed and paradoxical competitive pressures occasioned mainly by competitive pricing strategy for market share, this study intends to focus on evaluating the competitive dynamics and corporate performance of selected flour milling companies in Nigeria.

 

1.3 Objective of the Study

The general objective of this study is to evaluate the competitive dynamics and corporate performance of selected flour milling companies in Nigeria. The specific objectives are to:

1. find out the relationship between competitive behaviour and corporate performance of flour milling companies in Nigeria;
2. examine the moderating effect of competitive capability on the relationship between competitive behaviour and corporate performance of flour milling companies in Nigeria.
3. examine the relationship between people management practices and corporate performance of flour milling companies in Nigeria.
4. assess the moderating effect of competitive capability on the relationship between people management practices and corporate performance of flour milling companies in Nigeria.
5. determine the relationship between supply chain strategy and corporate performance of flour milling companies in Nigeria.
6. determine the moderating effect of competitive capability on the relationship between supply chain strategy and corporate performance of flour milling companies in Nigeria.
7. evaluate the relationship between external business environment and corporate performance of flour milling companies in Nigeria.
8. examine the moderating effect of competitive capability on the relationship between external business environment and corporate performance of flour milling companies in Nigeria;
9. find out the relationship between product offering and corporate performance of flour milling companies in Nigeria; and
10. evaluate the moderating effect of competitive capability on the relationship between product offering and corporate performance of flour milling companies in Nigeria.

1.4. Research Questions

The following statements reflect the research questions:

1. What is the relationship between competitive behaviour and corporate performance of flour milling companies in Nigeria?
2. What is the moderating effect of competitive capability on the relationship between competitive behaviour and corporate performance of flour milling companies in Nigeria?
3. How does people management practices affect corporate performance of flour milling companies in Nigeria?
4. How does the moderating effect of competitive capability affect the relationship between people management practices and corporate performance of flour milling companies in Nigeria?
5. What is the relationship between supply chain strategy and corporate performance of flour milling companies in Nigeria?
6. What is the moderating effect of competitive capability on the relationship between supply chain strategy and corporate performance of flour milling companies in Nigeria?
7. How does external business environment significantly relate with corporate performance of flour milling companies in Nigeria?
8. How does the moderating effect of competitive capability affect the relationship between external business environment and corporate performance of flour milling companies in Nigeria?
9. What is the relationship between roduct offering and corporate performance of flour milling companies in Nigeria?
10. What is the moderating effect of competitive capability on the relationship between product offering and corporate performance of flour milling companies in Nigeria?

1.5 Hypotheses

The following null hypotheses were formulated for testing:

H_O1 –           There is no significant relationship between competitive behaviour and corporate performance of flour milling companies in Nigeria

H_O2 –           Competitive capability has no significant moderating effect on the relationship between competitive behaviour and corporate performance of flour milling companies in Nigeria

H_O3-            There is no significant relationship between people management practices and corporate performance of flour milling companies in Nigeria

H_O4 –           Competitive capability has no significant moderating effect on the relationship between people management practices and   corporate performance of flour milling companies in Nigeria

H_O5 –           There is no significant relationship between supply chain strategy and corporate performance of flour milling companies in Nigeria

H_O 6 –          Competitive capability has no significant moderating effect on the relationship between supply chain strategy and corporate performance of flour milling companies in Nigeria,

Ho 7 –       There is no significant relationship between external business environment and corporate performance of flour milling companies in Nigeria

Ho 8 –          Competitive capability has no significant moderating effect on the relationship between external business environment and corporate performance, and

Ho 9  –         There is no significant relationship between product offering and corporate performance of flour milling companies in Nigeria

Ho 10 –        Competitive capability has no significant moderating effect on the relationship between product offering and corporate performance of flour milling companies in Nigeria.

 

1.6. Rationale for the Hypotheses

H_O 1 –          There is no significant relationship between competitive behaviour and corporate performance of flour milling companies in Nigeria.

According to Park (2011), competitive response is not being considered as a key phase of competitive behaviour in relation to corporate performance in most organisations. The factors that predicts imitation in competitive behaviour is an important but yet underexplored, environmental context in strategic management studies and especially in competition (Semadeni & Anderso, 2010).   Semadeni and Anderso (2010) further posit that firm decision makers contemplating imitation of a competitor’s innovation face a dilemma to imitate a new, unproven offering, or forgo imitation and perhaps miss out on the “next big thing and posit that inasmuch as higher offering innovativeness resultein a lower imitation, radical innovation appears to be a significant driver of differentiation and one can assert on this premise that same goes for the flour millers who in the bid to defend market share imitate at every opportunity.  Chen et al. (2007) on the other hand provided a new avenue for the study of competitive behaviour and the connection between competitor analysis and inter-firm competition. They provided a distinguished structure of competitor analysis by distinguishing the changing degrees of pressure each of a firm’s competitors inflicts on the firm. Most fundamentally, competitive pressure and connected thoughts, such as intensity (Barnett, 1997), danger (Michell, 1989), and burden have been adopted interchangeably in extant literature without methodical conceptualizations or operationalization.  It is meant to be an action taken by an organisation who intended to advance a competitive benefit in a market space with the nature of competitive act taken based on the organisation’s strategy imperatives. Since competitive behaviour has been confirmed as critical to firms’ strategic action in competitive business environment, it will therefore be appropriate to determine the relationship between competitive behaviour and corporate performance. Hence the formulation of Hypothesis 1, H₀ 1 – there is no significant relationship between competitive behaviour and corporate performance.

H_O 2 –  Competitive capability has no significant moderating effect on the relationship between competitive behaviour and corporate performance of flour milling companies in Nigeria.

Most manufacturers in the flour milling sector have been found of reacting to competitive moves by the first movers, especially, competitive moves of the big players and game changers in the industry such as that of the Flour Mills of Nigeria and Honeywell Flour Mills Plc (IBF Agusto & Co., 2012). For example, the financial performance of Flour Mills of Nigeria for the year ended March 2013, showed a revenue of N302 billion, showing as growth of 16 per cent above the N258 billion in 2012. However, profit before tax and after tax declined marginally from N11.801 billion to N11.163 billion and N7.762 billion to N7.726 billion respectively.  According to Egene (2013), the decline resulted from an increase of 20.7 per cent in costs of sales and 33.9 per cent increase in selling and distribution expenses.  This trend has continued unabated as evident in the 25% decline in the company profit between 2013 and 2014 (Flour Mills of Nigeria, 2014). The increase in the cost of sales and distribution that led to the decline in the profit margin was attributed to the reactive responses and counter response in terms of competitive pricing strategy and sales promotion programs in a bid to fight for market share and so competitive capability appears not to influence the relationship between firms’ response to completion and performance (Egene, 2013).  It will therefore be essential to conduct a scientific enquiry to test the moderating effect of competitive capability on competitive behaviour and corporate performance. Hypothesis 2, H_O 2- Competitive capability has no significant moderating effect on the relationship between competitive behaviour and corporate performance was tested. 

H_O3 –          There is no significant relationship between people management practices and corporate performance of flour milling companies in Nigeria.

People management practice is associated with concepts, theories, models, policy plans, programmes, strategies, processes, rules and principles that should be employed in gaining and application of men towards the accomplishment of organizational strategic objectives (Fajana, 2002). Emphasizing the importance of people management to strategy in competitive dynamics, Greer (2001) highlighted people management practices  as becoming more important to strategic management, though not yet being fully considered as a tangible asset in relation to corporate performance.  Lordwell (2014) asserts that effective people management practices is a foundation of continued competitive advantage for organizations.  It would then mean that as soon as business managers realize the potentials human resource have on the organisational’s competitive moves, they should do everything possible within their capacity to integrate their business strategies with people management strategy. The fundamental postulation being that people management is distinctive to the extent that competitors cannot adapt or adopt though the direct impact of people management on organizational performance has not been given required attention in literature (Barney, 1991; Huselid, Jackson, & Schuler, 1997). For flour milling industry firms to benefit from the strengths of  their people, an empirical study of the relationship between people management practices and corporate performance will be of value, hence the formulation and testing of hypothesis 3 H₀  3 – there is no significant relationship between people management practices and corporate performance 

Ho4 –      Competitive capability has no significant moderating effect on the relationship between people management practices and   corporate performance of flour milling companies in Nigeria..

Waiganjo, Mukulu and Kahiri (2012) examined the extent to which planned human resource management impacts firm performance from numerous critical viewpoints and discovered that effective human resource management strategy methodically systematizes all distinct human resource management processes to directly impact employees’ attitude and behaviour in such a way that assist business to achieve its competitive strategic objectives but not being treated as such by most employers. According to IBF Agusto (2012), most players in the flour milling sub sector of the manufacturing industry have also affirmed that their people occupy central point in their business strategies. (Honeywell Flour Mills Plc, 2014, Dangote Flour, 2014, Flour Mills of Nigeria Plc, 2014, Crown Flour Mills Ltd., 2014) but in  times of business challenges often rationalized people, forgetting their commitments to people management practices and so not being treated as a competitive capability.  If this affirmation is genuine and they all pay good attention to their people management practices, one may begin to wonder why most flour millers are recording decline in their performance, this hypothesis would therefore test if competitive capability has any moderating effect on the relationship between people management practices and corporate performance. Hypothesis 4, H_O 4 –    Competitive capability has no significant moderating effect on the relationship between people management practices and   corporate performance was tested. 

H_O 5 –   There is no significant relationship between supply chain strategy and corporate performance of flour milling companies in Nigeria.

Huo, Qi, Wang and Zhao (2014) assert that the trend of concentrating on fundamental competences and subcontracting the rest has provoked an growing number of organisations to gaze outside own limits for supplier and consumer assets that might be utilized to generate additional value and this assertion was supported by Flynn, Huo and Zhao (2010); Swink, Narasimhan and Wang (2007); and Zhao et al., 2011). Huo, Qi, Wang and Zhao (2014) assertion suggests that organisations may not necessarily need to devote much resources to managing their supply chain strategy in relation to corporate performance. Supply chain strategy is a systematic and fact‐based approach for optimizing an organization’s supply base and improving the overall value proposition (Fraering & Prasad, 1999).  The strategic moves can be understood as comprised of two dominant strategic dimensions: the choice amongst various supply markets and the choice among numerous supply channels.  According to Bolisani and Scarso (1996) in-effective supply chains strategy does not provide business enterprises a competitive advantage in the market of their products and may not help to moderate risks related with acquiring raw materials and delivering products or services. By implementing supply chain strategy, businesses are able decrease waste, overhead costs and delays in shipping in a systematic way. The benefits of this systematic approach impacts areas ranging from product quality to order turn-around times and the overall corporate performance. Horvath (2001),  Huo, (2012), Pettersson and  Segerstedt (2013) observed that  there is high burden on companies to increase revenue and at the same time the customers are requesting for  lower prices and the companies therefore have to cut cost in all areas. In his view, cost management with profit in focus should cut across all aspect of business. Horvath, Huo, Pettersson and Segerstedt did not see the relationship between supply chain strategy and corporate performance but focus on cost management as a driver of corporate performance. It will therefore be valuable to the industry to conduct a scientific study to examination on the relationship between supply chain strategy and corporate performance. Hence the formulation and testing of hypothesis 5 H₀ 5 – There is no significant relationship between supply chain strategy and corporate performance. 

H_O 6 – Competitive capability has no significant moderating effect on the relationship between supply chain strategy and corporate performance of flour milling companies in Nigeria.

One of the important issues in supply chain management extant literature is if the connection between supply chain management and performance is general or dependent on environments or stratagems. The general viewpoint proposes that some forms of supply chain management are more real than others in increasing competitive performance (Frohlich & Westbrook, 2001; Flynn et al., 2010; Huo, 2012). However, the dependent viewpoint proposes that the effectiveness of several types of supply chain management is controlled by the level of dependent factors (Wong et al., 2011). For instance, Iyer et al. (2009) demonstrated that the effect of supply chain management on competitive performance reduces as product commotion and demand volatility jointly improved. Valipour,   Birjandi and Honarbakhsh (2012) in their paper, the effects of cost leadership strategy and product differentiation strategy on the performance of companies, investigated the effects of business strategies on the relationship between financial leverage and the performance of companies and discovered that there were constructive relationships between leverage; cost management strategy and dividend  with performance. Somuyiwa et al. (2012) in their paper, business’s competitiveness  through supply chain receptiveness and supply chain management practices in Nigeria, examined how firms respond to changes so as withstand and further generate competitive advantages and their result showed a positive association between Supply Chain Receptiveness (SCR), supply chain management practices and competitive advantage. This hypothesis is being postulated to test the relationship between supply chain strategy and competitive capability and corporate performance. Hypothesis 6, H_O 6 – Competitive capability has no significant moderating effect on the relationship between supply chain strategy and corporate performance was tested.

Ho 7 – There is no significant relationship between external business environment and corporate performance of flour milling companies in Nigeria. 

Onuoha (2013) in his study titled, factors working contrary to the universal effectiveness of manufacturing firms in Nigeria, highlights the main challenges and difficulties of the industry to include: failing and deprived infrastructures; high operating costs; unpredictable government policies and regulations on the industry; stiff competition from imported goods; inadequate scope of operation; financial limitations; among a myriad of other weaknesses and concluded that there is no constructive relationship between Nigerian business environment and corporate performance.  Ibitayo (2001) in the same vein confirmed that the main difficulty of the manufacturing sector was insufficient supply of imported inputs and spare parts, culminating  in massive underutilization of available capacity and in effect asserts that there is also no positive relationship between external business environment and corporate performance.  Opawole et al. (2013) examined road infrastructure development in Osun State, Nigeria between1999 and 2008 and revealed that poor implementation incidence of road projects in the State which is attributed to funding and coordination issues has made road infrastructure to hinder economic activities in the state.  In the same vein, Izueke and Eme (2013) in their study of urban planning problems in Nigeria, identified deficits in infrastructure delivery and waste management, environmental problems arising from the incapability of public sector establishments to enforce regulations. All these authors have seen no positive relationship between external business environment and corporate performance and in a bid to scientifically situating the relationship of external business environment and corporate performance, hypothesis 7  H0 7 – there is no significant relationship between external business environment and corporate performance was tested.

Ho 8 –   Competitive capability has no significant moderating effect on the relationship between external business environment and corporate performance of flour milling companies in Nigeria.

Chete, Adeoti and Adeyinka (2014) in their study on industrial development and growth in Nigeria: learnings and challenges drew policy makers’ attention to the fact that the industrial sector in Nigeria, including mining, manufacturing and utilities accounts for a tiny proportion of economic activity 6% while the manufacturing sector contributed only 4 percent  to Gross Domestic Produc in 2011. Electricity outages, transport blockages, crime and corruption are the key factors creating inhibitions to firm growth. From their study Chete, Adeoti and Adeyinka did not see competitive capability as having any moderation relationship between external business environment in Nigeria and corporate performance. Bayode, Adebola and Adebisi (2012) also studied strategic environmental perusing and corporate performance in a competitive business environment and assert that companies where management focus less attention to environmental scanning recorded less organizational performance. Hypothesis 8, Ho 8 – Competitive capability has no significant moderating effect on the relationship between external business environment and corporate performance was tested. From the above, the result of a scientific test of the relationship between external business environment and corporate performance of firms in the manufacturing sector would assist the flour millers in leveraging on the competitive business environment to favourably compete for improved corporate performance.

 

Ho 9 – There is no significant relationship between product offering and corporate performance of flour milling companies in Nigeria.

Hashem, Hamid  and  Samira (2012) in their paper titled, the impacts of cost leadership strategy and product distinction strategy on the performance of companies investigates the effects of business strategies product differentiation on the relationship between financial influence and the performance of firms and posits that in firms with cost leadership strategy, there were positive connections between leverage; cost leadership strategy, and dividend payout with performance. The results also advocates that there were positive relationships between leverage and firm’s size with performance in the firms with product differentiation strategy, but the relationship between product differentiation strategy and dividend payout with performance was adverse. A study of the effect Product offering on corporate performance in the flour milling industry will therefore be of greater contribution to the industry. Beneke (2010) in his study of  customer perceptions of product private label products investigated the perceptions of fast moving product private label products and the found out that consumers seems to be hesitant to embrace product private label brands to the full. There is a skepticism surrounding the quality of the complete range of such brands, with significant heterogeneity between specific private label brands and in effect sees no relationship between product offering and corporate performance. It was therefore considered of value to test for the relationship between product offerings and corporate performance, hence the formulation and testing of hypothesis 9, H₀ 9 – there is no significant relationship between product offering and corporate performance. 

Ho 10 – Competitive capability has no significant moderating effect on the relationship between product offering and corporate performance of flour milling companies in Nigeria.

Eboreime and Adedoyin (2013) in their study of strategies for making competition immaterial in the global market for developing countries, examined how the developing economies such as Nigeria can make competition immaterial and in the long run compete favourably with other industrialized regions. In their findings, the developing countries, especially Africa, are unable to cope with the global competition because of their endemic problems. They posit there no significant relationship between array of products and services being offered and the performance of companies in developing economies and that they can ultimately manage with the global market competition if they originally create products or services for which they have no direct competitor in form of blue-ocean strategies and thereby make competition irrelevant. Lead Capital ( 2013) in its evaluation of the performance of the flour milling industry assert that  on the industry’s high fixed cost administration, profitability is largely reliant on on the company’s capability to increase volumes and not necessarily on the variety of products offered to the market. Lead capital therefore sees no significant relationship between competitive capability as a moderator between product offering and corporate performance. Considering the fact that flour millers’ products are commoditized, it is therefore relevant to test the relationship between flour millers’ product offering and their competitive capability and corporate performance. Hypothesis 10, Ho 10 –   Competitive capability has no significant moderating effect on the relationship between product offering and corporate performance was tested.

1.7 Operationalization of Variables

For competitive dynamics, questions covers such components as competitive behaviour, people management practices, supply chain strategies, external business environment, product offering and competitive capability. On performance variables, questions covers such components as profitability, market position, brand visibility, customers’ loyalty, volume sales and annual growth

The operationalization of the research variables are presented below:

Independent Variable

X = Competitive dynamics practices of Flour Milling Companies

X = (x1, x2, x3, x4, x5)

Where

x₁ = competitive behaviour (CB)

x₂ = people management practices (PMP)

x₃ = supply chain strategies (SCS)

x₄ = external business environment (EBE)

x₅ = product offering (PO)

Dependent Variable

Y = Corporate Performance of Flour Milling Companies (CP)

 

Moderating Variable

Z = Competitive Capability (CC)

1.8 Scope of the Study

This study covers competitive dynamics and corporate performance of flour milling companies in Nigeria using qualitative approach to study competitive dynamics. Particular attention however was paid to competitive dynamics, capability and performances of major players in the flour milling companies in Nigeria. Five selected flour millers in the manufacturing industry were studied to show their performances vis-a-vis competition, in terms of turn-over earned for ten years. The top five players were selected based on their performance reports as revealed by their respective Annual Financial Reports. The five (5) major players by market share are: Flour Mills of Nigeria Plc, Dangote Flour Mills Plc, Honeywell Flour Mills Plc, Crown Flour Mills Ltd and Standard Flour Mills Ltd.

The respondents were selected among the management and senior staff whose scope of duty relate to corporate strategy formulation and implementation in the flour milling industry in Nigeria. Majority of the flour milling companies in Nigeria are located in Lagos area. This is as a result of the proximity to the sea port through which their raw materials come into Nigeria. (IBF Agusto and Co., 2012). Even though some of them have some factories in other parts of Nigeria, Lagos is the base for all of them and that is where strategic decisions are being made.  This study concentrated on Flour Millers in Lagos State. The competitive moves, actions and behaviours of these millers were studied vis-à-vis their performances during this period.

1.9 Significance of the Study

The significance of the research study was drawn from its objectives, research questions, and hypotheses such that when tested, provide the following contributions:

1. This study contributes to the body of knowledge by developing a model for value addition and sustainable competitive strength in strategic response to competitive moves in the manufacturing sector in general and in the flour milling industry in particular. As such, practitioners would be able to adopt the model for healthy competition and attain the desired corporate performance while adding values to every stakeholder.

1. It also contributes to knowledge by, enhancing sparse strategic management literature that links people management to competition with rivals and establish a framework to help manufacturing firms and other sectors in aligning people management strategy with competitive strategy. Human Resource Management practitioners adopting the findings would better able to align people management practices with the business strategy thereby gaining competitive advantage through people.

 

• This study contributes to knowledge by developing a model that links supply chain strategy with sustainable competitive advantage among selected manufacturing firms in Nigeria and managers and operators in the industry would find it handy for business decision making.

1. In addition, the study enhances literature in strategic management that links the external business environment to the competitive capability of firms in the manufacturing sector and provide a framework for annexing the business environment to formulate effective competitive strategy for business performance. As such, operators would be able to understand every factor that may help or hinder competitive capability in the business environment.
2. This study extends extant literature and theories in strategic management in relation to competitive dynamics. It also established a framework for enhancing competitive strategy in the flour milling sub sector of the manufacturing industry in Nigeria. Academics and researchers would be able to use the gaps identified for criticisms, and advocate further concepts and theories in the areas of competitive strategy.

1. Federal and State Governments would be guided on the appropriate policies formulation for healthy competition and regulatory matters for the survival of the real sector.

• Strategy consultants and researchers would have a global view of competitive dynamics as it affect the manufacturing sector in Nigeria and possibly carry out further studies on it.

 

1.10 Operational Definition of Terms

Competition: Rivalry where every seller attempts to get what other sellers are seeking at the same time: sales, profit, and market share by offering the best feasible combination of price, quality, and service.

Competitive Rivalry: Competition between organizations who are in the same area (industry, business) or who want the same thing. Competitive rivalry is the continuing set of competitive activities and competitive responses happening between competitors as they compete against each other for an advantageous market position.

Competitive Dynamics: competitive dynamics has been defined as the integration of competitive actions in competitive behaviour, people management, supply chain strategy, external business environment and product offering in creating a competitive capability for corporate performance.

Survival: The situation of continuing to exist/thrive especially in difficult conditions or environment.

Competitive pricing strategy: this refer to competitive strategy that focuses mainly on pricing, such that each player in the competitive landscape is deploying all its resources to ensure lowest price for all its product range whether or not it is sustainable, with a view to outperforming competitor in market share.

Corporate Performance: corporate performance has been defined as the delivery of organizational goals and strategic objective to all stakeholders despite all internal and external business challenges.

Flour Milling: This is the grinding of grains such as wheat, maize and millet, between stones or steel wheels to extract flour.

Competitive Strengths:  An ability which empowers a company to function in a more competent or otherwise higher-quality manner than the companies it competes with, and which results in benefits accruing to that company.

Organisational slacks: This can be defined as the excess capacity maintained by an organisation. This can be created by an organisation consciously as well as unconsciously. Slack can be said to exist when resources are ordinarily not being completely utilized, employees are being paid more than the amount required to retain them within the organisation, and the firm is charging less for its products than it would be possible to charge without losing its customers.

Profitability: The state or condition of yielding a financial revenue or improvement. It is often measured by price to earnings ratio.

Market Position: A position of a brand, product, or company, in terms of its sales volume relative to the sales volume of its competitors in the same market or business.

Brand Visibility: This is the people’s ability to recognize specific brands and to know what those brands are. It also stands for vision, view, opinion, preferences, and positioning of brands in market places and in the minds of Consumers.

Customers’ Loyalty: This is an attitudinal and social inclination to favour one brand over all others, whether due to gratification with such product or service, its suitability or performance, or simply understanding and comfort with the product.  Its encourage consumers to buy more constantly, spend a greater portion of money and feel confident about a shopping experience.

Growth: The procedure of improving some degree of a business’ success and  this can be achieved either by increasing the top line or revenue of the business with greater product sales or service income, or by increasing the bottom line or profitability of the operation by minimizing costs.

Awareness: Measure of how well known a brand, firm, or product is. Companies usually set a target for the degree of awareness they intend to achieve, and then plan a promotional campaign to reach that target. Awareness is the degree to which competitors identify the amount of their shared interdependence that results from market commonality and resource similarity.

Motivation: Derived from the word ’motive’ which means needs, requirements and wishes. It is the process of inspiring people to actions to achieve a  goals.

Capability: A capability is the ability to perform or achieve certain actions or outcomes through a set of controllable and measurable faculties, features, functions, processes, or services.

Resource Similarity/Dissimilarity: Resource similarity refers to how analogous a firm’s concrete and intangible resources are positioned to competitor’s in terms of both categories and quantities. Companies with comparable types and amounts of resources are likely to have similar strong points, similar weaknesses and use comparable tactics, vice-versa for dissimilarity.

Market Commonality: Market commonality is the number of different markets that the company and the competitors are equally tangled with. It also relates to the level of importance of the individual markets to each. It is concerned with the amount of markets with which the company and a competitor are equally involved and the degree of reputation of the individual markets to each.

Brand: This is a name, term, sign, symbol or scheme, or a mixture of   these with the intention to recognize the goods or services of one vendor or cluster of vendors and to distinguish them from those of competitors in the trade..

Competitive action: This is a planned or pre-emptive action an organisation takes to shape or defend its competitive advantages or advance its market standing.

Competitive response:  This is a calculated or planned action an organisation takes to work against the implications of a competitors’ competitive actions and schemes.

Sourcing: This refers to a number of procurement activities, with the objectives of discovering, appraising and attracting suppliers of goods and services for business benefits.

People Management Practices: people management practices has been defined as the whole spectrum of activities, initiatives in attracting, retaining, utilizing, training, developing, and engaging value adding employees to achieve desired corporate performance.

Supply Chain Strategy: This refers to organizations’ agendas and initiatives targeted at efficient management of its logistics and supplies in inbound and outbound operations with a view to ensuring optimal use of its resources for values.

External Business Environment: This refers to all environmental factors outside the organizational control such as infrastructure, government regulations and security that may directly or indirectly affect the organisations’ activities and results.

Product Offerings: has been defined as the total value creation by the organisation in exchange of values from the trade with a view to achieving desired corporate performance.

Competitive Capability: has been defined as the general and specific strengths that an organization has or can leverage on in comparism with competitors in a competitive business environment. The strengths may be tangible, such as machineries or technology or financial base or intangible such as the knowledge and skills of its employees or brand equity.