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Advances in Social Sciences Research Journal – Vol.7, No.7

Publication Date: July 25, 2020

DOI:10.14738/assrj.77.7894.

Onaolapo, A. R., & Adeyinka, A. E. (2020). Effect of Firms’ Competitiveness on the Performance of selected Manufacturing Firms in

Nigeria. Advances in Social Sciences Research Journal, 7(7) 216-255.

Effect of Firms’ Competitiveness on the Performance of selected

Manufacturing Firms in Nigeria

Adekunle R. Onaolapo

Ladoke Akintola University of Technology,

Ogbomoso

Adedeji Elijah Adeyinka

Federal University of Technology, Akure

ABSTRACT

The study of firms’ competitiveness has drawn so much attention among

business practitioners and academic researchers in the last two decades

as globalization came fully into limelight. However, in Nigeria, there are

few empirical studies conducted to investigate the relationship between

firms’ competitiveness and firm performance. Thus, the main objective

of this study was to provide further evidence on the effects of Firms’

Competitiveness (FC) on the performance of manufacturing firms in

Nigeria. Ten large-scale quoted manufacturing firms were selected. The

study relied on primary data which were obtained using structured

questionnaire administered to 300 purposively selected respondents of

the selected firms. The data collected was analysed using Chi-Square

Analysis and correlation analysis as well as descriptive analysis in

pursuance of the stated specific objectives of the study. The result

showed that firms’ competitiveness had significant effects on the

profitability and operational performance of the selected

manufacturing firms. Also, firms’ competitiveness had positive

relationship with the level of competition of the firms. This study

concluded that the practice of firms’ competitiveness is sine qua non in

boosting firm performance in the manufacturing firms in Nigeria.

Keywords: Firms’ Competitiveness, Profitability, Operational Performance,

Manufacturing Firms.

INTRODUCTION

In today’s world, the size of a firm is crucial to its success due to the phenomenon of economies of

scale. Modern corporate firms look to increase their size so as to get a competitive edge over their

competitors by reducing production costs and increasing their market share. Bigger firms can

manufacture items at much lower costs than smaller firms can. Abdurahman (2003) argue that the

nature of the relationship that exists between firm size and profitability is a key element in business

success, which may shed some light on the factors that boost profits. Shaheen and Malik (2012)

described firm size as the quantity and array of production capability and potential a firm possesses

or the quantity and diversity of services a firm can concurrently make available to its clients. Firm

size plays a significant and crucial role in explaining the kind of relationships the firm has within

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Advances in Social Sciences Research Journal (ASSRJ) Vol.7, Issue 7, July-2020

and outside its operating environment. Babalola (2013) argues that the larger a firm is, the more

the influence it has on its stakeholders.

Manufacturing activities have significant impact on the economy of a nation. In developed

economies, manufacturing activities account for a considerable proportion of total economic

activities. In Nigeria, the sub-sector is responsible for about 10% of total GDP annually and in terms

of employment generation, manufacturing activities account for about 12% of the labour force in

the formal sector of the nation’s economy. This is why manufacturing statistics are relevant indices

of the economic performance of a nation. Manufacturing firm refers to those firms that are involved

in the manufacturing and processing of items and indulge in either creation of new commodities or

in value addition (Adebayo, 2010). Manufacturing firms creates employment which helps to boost

agriculture and diversify the economy in the process of helping the nation to increase its foreign

exchange earnings. Manufacturing firms are categorized into engineering, construction, electronics,

chemical, energy, textile, food and beverage, metalworking, plastic, transport and

telecommunication firms. Charles (2012).

In today’s world, there is a rapid change in the business environment such that the product-market

competition is ever increasing among industries, information technology improving in various firms

as the day goes by in a way that firms use internet facilities and social network to advertise and

market their products and services. To compete successfully in this present competitive business

environment, firms continually need to make some strategies and take some actions by improving

product quality and productivity, reducing product cost, promoting product and process

innovations, and improving product speed to the market and customers’ goodwill. Firms therefore

need to strive to be at par with the global change, achieving competitive advantage position and

enhancing performance relative to their competitors. Zemplinerova and Hramadkova, (2012)

Firms’ competitiveness is the process of making decision, planning, coordinating and taking some

actions by the top managers of a company in order to achieve set goals and objectives. Decisions are

of little use unless they are acted upon. Yussuf, (2010) articulated that initially strategic

management was of most use to large firms operating in multiple firms. Increasing risks of error,

costly mistakes, and even economic ruin now forced today’s professional managers in all

organisations to take firms’ competitiveness seriously in order to keep their firms competitive in an

increasingly volatile environment.

The study of firms’ competitiveness has drawn so much attention among business practitioners and

academic researchers in the last two decades as globalization came fully into limelight. As more

firms become global, firms’ competitiveness now becomes an increasingly important tool to keep

track of international developments and position the firm for long term competitive advantage. In

developed countries as well as in developing ones, much has been written on firms’ competitiveness

in form of books. However, Nigeria in particular, there are few empirical studies conducted to

investigate the relationship between firms’ competitiveness and firm performance.

The specific objectives of the study were to examine the effect of firms’ competitiveness on the

performance of selected manufacturing firms in Nigeria. It is therefore hoped that the evidence from

this study would serve as important quantitative information into the cauldron of business policy

and also add to the existing body of empirical literature from a developing nation like Nigeria.

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URL: http://dx.doi.org/10.14738/assrj.77.7894 218

Onaolapo, A. R., & Adeyinka, A. E. (2020). Effect of Firms’ Competitiveness on the Performance of selected Manufacturing Firms in Nigeria. Advances in

Social Sciences Research Journal, 7(7) 216-255.

Hypotheses of the Study

In order to achieve the objective designed for this study, the research hypotheses was tested in null

form based on the revelations in the review of literature concerning firms’ competitiveness on the

performance of selected manufacturing firms in Nigeria.

Hypothesis

There is no significant relationship between firm’s competitiveness and return on investment on

selected food and beverages firms in Nigeria.

LITERATURE REVIEW

The Concept of Firms Competitiveness

Competitive environments are a source, and a consequence, of firm performance. All three

operational components mentioned previously: debtors, inventories and creditors, are related to

the competitiveness of the industry, and impacted by the country. Payments and collection are

deterministic in the profitability, and have impact in the ability to deal with customers (Paul, Devi

and Teh, 2012). However, in situations of financial and competitive uncertainty, credit and debtor

management has significant influence in firm performance (Bastos and Pindado, 2013). There is

also reported evidence that collection policy has significant impact in these credit transactions, but

not only customers, but also suppliers (Bastos and Pindado, 2007), hence contributing to the

competitiveness environment. There is evidence that product variety is significant for higher lead

times and higher inventories (Salvador, Forza and Rungtusanatham, 2002), which can be associated

with the brewing industry for firms of a wider variety of finished product brands. Lall (2001) argues

that the use of the World Economic Forum, and its competitiveness indicators, is viable in

Developed economies, since they consider it market friendly and free trade oriented. In the case of

the sample population in question for this study, this does not represent such issue.

In a financial context, Turi, Goncalves and Mocan (2014) have argued that in Europe, specifically in

the European Union, the regulatory environment in the food industry, which affects the supply chain

overall, has a direct effect on not only the operational performance, but also the financial one. This

is also extended to quality standards (Clarke, 2010), imposed by the distribution, affecting

competitiveness. In a global context, Sala-I-Martin, Bilbao-Osorio, Blanke, Drzeniek Hanouz and

Geiger (2011) mention that a significant factor for a competitive environment is a financial market,

which reportedly channels resources in rate of return context, rather than having political or social

exposures. With the premise set by Li, Ragu-Nathan, Ragu-Nathan and Rao (2006), that claims that

the supply chain structure of businesses and the industry are to towards competitiveness, which

reportedly is linked with higher customer satisfaction (Stanley and Wisner, 2001), and

subsequently to market share (Frohlich and Westbrook, 2001), and costs efficiencies (Qi, Zhao and

Sheu, 2011). In the same manner, it can be argued that in high levels of competition, lower profit

persistency is visualized (Hirsch and Hartmann, 2014). This however can be inversely argued, if

there is significant proportion of market share (Chen and Lu, 2015), however this is contradicted

when an incoming significant actor disrupts the market (Vrontis, Thrassou and Rossi, 2011). On an

industry perspective, the literature provides background in connection with competitiveness

within the beer, the wine and the spirits industries. In a wine contest, Crescimanno and Galati

(2014) argue, among other factors, that distribution channels as a mechanism towards

competitiveness for Italian wines. However, in regards to market share, firm size, although

significant, does not discard small enterprises can create a competitive environment, or participate