Ease of Doing Business and Globalization in Nigeria
Chapter One
Research Objectives
The objectives of this research are to study the ease of doing business and globalization. However, to evaluate the firms’ performance, their internal and external factors will also be studied and taken into account in this study. The specific objectives of this study following the research questions are as follows:
- To identify the impact of globalisation on Nigeria businesses
- To identify the pragmatic ways and means that are relevant to Nigeria conditions to improve and sustain the competitiveness of Nigeria SMEs
- To identify what Nigeria SMEs can learn and adopt from the experience of SMEs in other countries and in other industries to sustain competitiveness
- To develop strategies for formulating national industrial policies to improve the competitiveness of Nigeria SMEs in general and the clothing and textile industry, in particular.
CHAPTER TWO
LITERATURE REVIEW
Definition of Globalisation and the Free Trade Phenomenon
The first part of this section will briefly examine the definition of globalisation and its repercussions, including free trade.
Globalisation
Globalisation is not a recent socioeconomic trend influencing the daily life of everyone. It has impacted human growth and development for many millennia. Even though globalization has been a phenomenon in operation for millennia, itdid not receive formal attention from the academic community and recognition from the political system until the late 1900, with the global social and economic integration (Das, 2009). Economies of all sizes, inclinations and convictions are racing to benefit from enhanced international transactions, part of which is providing optimal environments to maximise the benefits. Attempts are also being taken to lower the barriers to international transactions in general and trades in goods and services, in particular. By the late 1990s, the global economic integration had acceleratedin most nations in order toenhance international trade and investment flows (Das, 2009), which was further enhanced by the establishment of WTO. The main contribution of WTO has been the removal of ill-conceived protectionist trade barriers which introduced market distortions and the associated inefficiencies. The regulatory and policy changes initiated by the establishment of WTO have resulted in the removal of market distortions, and as importantly, the removal of protection for inefficient and uncompetitive industries. The resulting reallocation of resources and factors of production has enabled many countries to reduce costs by achieving economy-wide gains in efficiency and become more competitive globally(Cirera et al, 2013, p.1).”
Globalisation has not only affected segments of societies but it also pervades all social activities and, even more so, all businesses. There are different concepts of globalisation, but essentially, it encompasses the idea of the integration of national economic, financial and market activities (Goyal 2006; Lee & Vivarelli 2006). It also envelops the interconnection of social and cultural aspects of integral societies, and their subsequent political interdependence, which ultimately will result in their mutual liberalisation of trade, technological development and later changes in trade policies at the governmental level (Thoumrungroje & Tansuhaj 2004). However, the effects of globalisation might not be felt to the same degree by each of the integrated countries, or by every business in a single country, but will depend on economic background; size and other attributes (Hartungi 2006).The effects of globalisation on a country’s economy and trade have placed emphasis on the factors of foreign direct investment (FDI). With greater liberalisation of trade, there have been significant increases in FDI and this has had numerous effects on local businesses, especially in developing countries (Lee & Vivarelli 2006). The differences in the intention of FDIs have differential effects on local businesses, the community and the economies of the recipient countries.
There are two different types of FDI, namely, efficiency-seeking investment and market-seeking investment (Farrell 2004; Zhouying 2005). Efficiency-seeking investment seeks to lower its cost of production by seeking to optimise its production in developing countries with lower wages and low-cost materials. In contrast, market-seeking investment seeks out new markets. These two types of investment have different effects on the FDI recipient or host countries. Efficiency-seeking investment has many positive effects on the host countries and apparently very few negative effects (Farrell 2004; Zhouying 2005). It helps raise manufacturing standards and living standards but does not threaten local producers. However, market-seeking investments do have more negative effects on local producers, although they help to improve the economy of host countries. This kind of investment results in direct competition with the local producers and firms (Farrell 2004; Zhouying 2005). With more advantages in technology and with the same labour costs, the developed countries’ firms create a great threat to local firms, especially the SMEs.
Governments, in general, but those of developing countries, in particular, provide incentives to attract FDIs because of their positive effects on the economy, the standard of the industry and the standard of living. However, many studies report that these incentives play a far lesser role than the macroeconomic stability of the country (Lipsey & Sjöholm 2011; Zhouying 2005).
CHAPTER THREE
RESEARCH METHODOLOGY
Research Methods
‘Quantitative research is designed specifically for the identification and description of variables with a view to establishing the relationship between them’ (Garner, Wagner & Kawulich 2009, p. 62). For this type of method, the study involves a larger number of participants than the qualitative method to test the validity and reliability and to generalise the findings of the study (Garner, Wagner & Kawulich 2009). The analysis methods used during quantitative studies are usually descriptive, correlation, quasi-experimental and experimental. These analyses are usually performed through a program such as SPSS or Excel, or another statistical computer-aided program. Then the results are drawn from the processed data (Garner, Wagner & Kawulich 2009).
In contrast, the qualitative method is a process that cannot be measured in terms of quantity, amount or frequency (Garner, Wagner & Kawulich 2009). This type of method focuses on obtaining in-depth details and an understanding of the issues in the particular research or study. This method usually involves a smaller number of participants but a larger and higher-quality response. The data collection for qualitative research is normally undertaken via interviews, observation or focus group discussion.
These two types of methods are used in this research to obtain answers or results that cover all of the research questions. The mixed method was used in this study because it is not possible to answer all the research questions using only one of the methods.
Quantitative Method
The quantitative method uses numbers and statistics to determine the results of the study. Quantitative research ‘tends to be based on numerical measurements of specific aspects of phenomena; it abstracts from particular instances to seek general description or to test causal hypotheses; it seeks measurements and analyses that are easily replicable by other researchers’ (Thomas 2003, p. 2).
The quantitative method used in this study is the questionnaire survey. This type of method provides an overview of the research participants and a bigger picture of the questions asked in this study. The questionnaire survey was conducted on SMEs in the textile and clothing industry in Nigeria. The questions include general information about the firms and their competencies.
CHAPTER FOUR
DATA ANALYSIS AND RESULTS
Introduction
The data collection and analysis for the research was conducted in two stages. The first was a questionnaire survey among 157 SMEs in the clothing and textile sector of Nigeria. The criteria used to categorize the firms as SMEs are as follows:
CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
Conclusions and Recommendation
The objectives of the study were achieved by testing four main hypotheses incorporating 15 sub-hypotheses. The hypotheses involved establishing the relationship between firm performance and a range of factors, both internal and external to the firms.
The SMEs and their culture gave them the unique qualities that made them react in a uniquewaytotheirenvironment.
The results show that the internal and external factors affected the SMEs in different ways than they affect large firms and corporations. The main reason for this differential impact appears to the differences in business culture.
Many of the SMEs that participated in this study were not able to take much advantage of the changes resulting from globalisation. This is due to a lack of awareness of the new opportunities presented by globalisation. There are many programmes available to the SMEs from the private and public sectors for helping SMEs with their operations and internationalisation of their businesses. It is recommended that SMEs join these programmes to learn about the opportunities that are available to them and the benefits presented by these programmes.
With the changes in the market dynamics and increase in the cost of labour compared to others developing countries, in order to gain competitive advantage and to be sustainable, the Nigeria SMEs have to improve the quality of their products. Nigeria SMEs have to improve the quality of their exports and target new markets. They should focus on specialized products targeting niche markets and improve economy-wide efficiencies to compete against countries such as India.
In the current environment, branding, as a source of information, is gaining greater importance. This is one area where Nigeria SMEs are lagging behind compared to their internal competitors. Steps must be taken at a national level to provide training and other forms of assistance with brand development.
Contributions of the Study
There are numerous studies on the effects of the free trade environment and globalisation on businesses, but only a handful focus on small and medium businesses (Julien, Joyal & Deshaies 1994; Luostarinen et al. 1994). The studies reported in the literature also focus mainly on small and medium businesses in developed countries and on how they compete in this environment, especially in high-technology industries(Svetliaia, Jacklia & Burger 2007).
The present study was conducted to fill the gaps in knowledge regarding the effects of the free trade environment on the SMEs of a developing country, in particular,a local manufacturing industry, and how the local businesses in this country (Nigeria) can adjust or adopt strategies to implement changes to their business model or practices to survive and prosper under free trade conditions.
From this study, an operational framework has emerged whereby Nigeria SMEs can adopt or adjust their management to the perceived consequences and possible outcomes of the free trade environment and globalisation. Effectively, this research represents an original, scholastic study of the perceived impact or consequences of the free trade environment on Nigeria SMEs in the clothing and textile industry and how they can sustain competitiveness to survive and prosper.
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