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ODU and TAM "OJJIEBI. 69. Table 1: Analysis of Government Influence to the ... Odoni/Odi, Egiode-lvu Age. Bayelsa, Bayelsa, Buffer zone,. Bayelsa, Edo State.
THE EFFECT OF ENVIRONMENTAL CHANGES ON BUSINESS ORGANIZATION IN NIGERIA By

CYPRIAN C. IHUNDA

Department of Business Administration Rivers State University of Science and Technology Port Harcourt, Nigeria

and

AYODELE A. MOMODU, Ph.D Department of Banking and Finance Rivers State University of Science and Technology Port Harcourt, Nigeria

and MIEBAKA D. TAMUNOMIEIBI Department of Business Administration Rivers State University of Science and Technology Port Harcourt, Nigeria

ABSTRACT

This research work was designed to determine the extent of environmental influence on Nigerian business organization. A sample population of five production firms in the area was selected and questionnaire distributed to respondents. Oral interview, journals, company's magazines and books were also used as source of data collection. Findings show that the environmental factors in the areas under survey though dynamic and turbulent were good and favourable for business operations.

Nigerian Business and Social Review, Vol. 1, No. 2 December, 2002

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INTRODUCTION Business activities are not done in the vacuum, as such business organisation is not an Island. By this, we mean that for business organisation to carry out its activities, the environment must inject actions or life into it. It is worth nothing that environment contains all that are needed for business activities. It is the duty of the environment to breath life into business. This formed the basis of deeming it wise to note that any change in the environment will have an effect on business operations. According to Tamunomiebi and Hamilton (2001) business is seen as a set of activities organized to utilize resource for production of goods and services for the satisfaction of customers at a profit. Environment is the totality of all factors, internal or external, that impinges on its functioning. Irrespective of the kind of business undertaken, the impact of environment on business activities cannot be undermined. It is from the environment that raw materials are gotten. Transformation takes place in the environment given the factors and output is c onsumed a s a finished product in the environment or utilized a s raw material for another business organisation. Based on this, we will be more concerned with changes in the external environment, because, internal environment has a lesser impact on business organisation. This also made it clear that the relationship between business and environment can be likening to that of fish and water. Fish cannot exist in isolation. This interrelationship causes changes being experienced in the environment. Hence, we say that business is dynamic . These changes are as a result of increase in knowledge and awareness, through researches and discoveries, oil spillage, gas flaring, competitors, death, communal clashes/war, government instability, new inventions and innovations, internal influence and many others which we will examined in detail in the later part of this research work. The resultant effect of these environmental changes provides opportunities or poses threats o the business organization. One interest issue as regard this is that whenever, a given industry is facing threats as a result of environmental changes, another firm in that same environment stand to enjoy. That's what business 'B'. And this some how encourage competition in the environment, leading to new birth of companies.

urpose of the Study !:e purpose of this study therefore is to: determine the extent of ~~~nmental influence on business organization; determine the best way b.:rmonize relationship between the business organization with its'

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environment, and detern1ine the role(s) of Government, management and community in the given environment.

Hypothesis Ho 1:

Environmental changes organization in Nigeria

have

not

affected

busines s

Ho 2 :

Companies in the Niger Delta Environment have no negative influence on its environment.

Ho 3 :

Companies in the Niger delta environment have no rea son for he lping or contributing to the development of its host environment.

Ho 4 :

The Nigerian Government have not contributed to the Niger delta environment turbulence being experienced by business organi zation.

Business organi zations have always been . influenced by changes in its environment. Environment as we know provides all the inputs or resources that business organisation utilized to produce goods and services which in turn are scout back to the environment for consumption. It was that made James (1984) to say; "The success of business is dependent on manager's

being able to adapt to the surrounding". Historicall y, according to Jam es ( 1984) business has been accorded a more receptive ideology from 15000. The retreat from the limited role of government in th e economic affairs became inev itable when the frpits of laissez-faire in the industrial age included the concentration of economic power and the outcries of victims. Pragmatic experimentation with the power of the political authority reformed the free capitalistic system into the modern age of regulated capitalism. Partly, as a result of good fai th efforts to comply with societal expectations, modem business corporations seem to be developing socially, responsive attitude and practices that ma~· evolve into a responsive capitalism to forestall the ever increasin~ regulatory force of government in economic affairs. Through the histo1y of business evolvement, we have little light of understanciiDg a stages that business organizations haye passed. Since we are foe ,-i:r:..::: the external environment of business organization, we w ill in - · - n- -:· • examine the factors of the external environment giving a brief exp a::R~ -

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about them. But before then, we will continue with the contribution .:;_.. other authorities concerning business organization and its cha ngir.5 environment. According to Ibekwe (1984), he saw business as that vital organ o:"' society that is responsible to providing the society with goods and services. He continued by examining the mode of change in the environment b~ saying; "as society needs increase, the varieties of business organizatior increase too". He also said that as society becomes civilized and more complex, .its needs cease to be the basic needs of food, shelter and cloth ing. The society now have needs for modernization which is quest for this. makes the economic, and soc ial development programmes to emphasize on industrialization. Business he said cannot operate in vacuum. By thi s he mean that both business and environment influences each other. Then , the reciprocal relationship, and the ability of business to internet effectivel y with its environment determine its success. Tamunomiebi (2001 ) said that if society does not permit th e existence of a business, the business with not succeed. He went further to say that for any business to grow, there must be a support from the society or environment, which is reflected in the rate of turnover and profitability of the business. This is illustrated in Figure 1.

~

1

TRANSFORMATION OR PROCESSING

-.I

OUTPUT

FEEDBACK

Figure 1: Tra nsformation of Input into Output

The environment gives input-resources to the business organization , who process the raw material and sent it back to the environment as a finished product as output. Feedback shows the reaction, acceptance of the output by the environment. Katz and Khan (1996) in industrial Psychology stated that business success depends on the environment. Illustrating with the existence of •man being in its environment, the authors noted that, the human being oxygen which is gotten from the environment and the environment need carbondioxide which is gotten from man. Koontz et al 1984

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said "for business to succeed, managers should put into consideration the needs and desire of members of the society or external environment as we as the needs for material, human resource, technology and other requirements in the external environment. T hey went further to illustrate the relationship between the external environment and business organization.

TECHNOLOGY ENVIRONMENT

ECONOMIC ENVIRONME T BUS INESS ORGANISATION

SOCIAL ENVIRONMENT

ETHICAL ENVIRONMENT POLITICA L/LEGAL ENV IRONMENT

Figure 2: The Relationship between the External Environment and Business Organization

For them, these environmental factors inject changes in one form or the other into the business organization. Pou. Tamunomiebi and Hamilton (200 1) they observed that business and its environment influences each other. Thus, the total environment of a busi ness encompasses the sum of its interrelationships with other subsyste m of the society. Business influenced by its environment and it also influences the environment. The environment provides it with threats, challenges and opportunities and bu si ness co nfronts its threats, meet the challenges and seizes the opportunities; and in doing so sometimes trigger off a chain reciprocal effects. The environment provides inputs fo r he business and business provide it with outp!.1ts in return. When the environment changes or gets complex and dynamic, business strategi a ll_· adapt to the changes or dynamism and complexity in order to survive grow or continue to make profit. In his analysis of the total environmen of the business, he used a five environment frame work denoted b P-PE T. Factors of Business Environment:- We have just seen the factors - ~-

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Koontz et el (1994); Tamunomiebi and Hamilton (2001) have outlined as the factors found in the business environment. But for the purpose of this research, we will be using factors earlier mention in work. We will give a brief explanation of each of the factors, analytically. Business environment encompasses: (1) physical environment; (2) social-cultural environment; (3) political/legal environment; (4) techno logical environment; (5) economic environment; (6) international environment. These factors are factors greatly influencing business organization in the Niger Delta Area, mostly the production sectors. The Niger Delta Area is known to be greatly endowed with natural resources which are the main raw materials to production companies in Nigeria. According to Tamunomiebi and Hamilton (2001 ), physical environment consists of all the natural resources such as land area, climate, topography, vegetation, rivers and lake and mineral deposit. It provides perishable and sometimes non-replaceable resources for business in form of raw materials and land for the location of industries . With its resources opportunities. are available for all type of industries such as "agro" and "agro-allied industries, oil and coal industries, manufacturing and construction industries and other supportive business" . The social, cultural and moral factors also influence business functioning. Socially, we talk of population size, structure, age, sex, distribution and other characteristics affecting business. According to Tamunomiebi and Hamilton (2001) high population size means high demand for the products and labour for business . Young population creates a boom for industries for yo ung people product while aging population create wider business opportunities for the production of goods for the old. Rural population boost rural business and urban popl,llation creates constraints for rural business. Male and female population has different implication for business. Culturally, the values, beliefs, attitudes, customs, habits, practices , traditions etc of a people affect the types of products produced and sold, the purchase and consumption patterns, location of industries and demands upon business. Nwokoye and Ahiauzu (1984) have shown that "Colonial mentality" extended family relations, excessive individualism, status puffing up and "machine avoidance complex" are some of the cultural factors that affect the operation of business in Nigeria. Awujo and Urieto (1995) have alluded to the belief unionization, feeling of not to work longevity, value for authority, shared power and collective loyalty as rnrne of the socio-cultural factors that influence business. Political/legal Environment of business encompasses acts of governments that affect business in one way or the other. The

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administrative division of a country into Federal, State and Local or Municipal Government creates multiple authorities, with which business must interact, enjoying multiple oppo1iunities or suffering multiple constraints. Changes in administration or system of government sometimes come with political instabilities and unstable govemm({nt policies and programmes, posing challenges to business. Nwokoye and Ahiauzu (1984) opined that the state and local government area creation exercise has indeed offered opportunities ·to the business community in participating in all kinds . of government projects such as construction, supply and industrial. The technology environment of a business consists of the state of scientific knowledge evident in the methods, processes, machines and techniques of production: It is one in which scientific principles are applied to solve the problems of business and sometimes result in creating some problems. The availability of technology affects business in several ways. A technology that . involves improvement in machineries, materials, production methods and management and other support systems such as communication and record keeping offers business opportunities for variety of quality goods and services, increased efficiency in operations etc . Robot and Computer technology provide us with good example of how the technology environment affects business. The economic env'ironment of a business consists of the economic system, state and policies that affect business operations. An economicystem offers different threats and opportunities to a business depending on \ hether it is a capitalist, socialist or mixed economy. While capitalism , ermits competition and profit, socialism abhors them and mixed economy restrains them. The greatest opportunities exist for business in a market or free enterprise economy. As economy offers different threats and opportunities to a business depending on whether or not it is in a state of ' oom, recession, depression or recovery (the business cycle). In a state of ooom, demand for goods and service, employment and output, workers :..._~ome and living standard are high and business enjoys a lot of o. portunities for growth and profit. In a state of recession, demand ::mployment and output, income and living standard fall ; and business _:!ffers contraction of activities and opportunities. In a state of depression, :: -e:ything is at 1ts lowest ebb, or floor of the valley; and business faces -·-eats to its survival. In a state of recovery, the economic indices start to \:ith business enjoying increasing scope for expansion towards a boom -: 2.1'. of the mountain. International Environment is also an important factor in busines e- .ironment since no nation can develop in isolation. Large firnr ;::-

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particularly may rely on overseas raw materials and equipment. The choice of appropriate sources of material, equipment and technology will depend on a sound knowledge of international environment. Factors to take into consideration in studying international environment are the adaptability of foreign technology aind equipment to a local environment, the different level of inflation and the relative cost of international markets; international politics and the possibility of wars and conflicts, and fluctuating exchange rates.

Forces for Environmental Change Research showed that more and more organisations today face a dynamic and changing environment. This in tum, is requiring these organizations to adapt, change or die is the rallying cry among managers worldwide. According to Kurt Lewin (1951 ), three forces were noted which stimulates change in the environment. He categorized them as; Unfreezing, Moving or Changing, Refreezing. 1.

Unfreezing Forces are those forc es that create motivations for change. Example, if people feel uncomfortable with the present situation, they may see the need for change. However, in some cases an ethical question may arise regarding the legitimacy of deliberately creating discomfort that may initiate change.

2.

Change Itself may occur through assimilation of new information, exposure to new concepts or development of a different perspective.

·3.

Refreezing stabilizes the change. Change to be effective, has to be congruent with a person ' s self-concept and values . If the change is incongruent with the attitudes and behaviours of others in the organization, chances are that the person will revert back the old behaviour. Thus , reinforcement of the new behvaiour is essential.

Robbins (1999) has summarized the forces into six specific actors as stimulants for change, they are ; Nature of the workforce, Economic shocks, technology, Competition, Social trends, World politics. These stimulants for change· are further broken down thus: Nature of the workforce; he said consists more of cultural diversity, increase in professionals and many new entrants with inadequate skills. These are

'\

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noticed in business organizations in a present situation where every organization has to adjust to a multicultural environment. Human resource policies and practices have to change in order to attract and keep this ,more diverse workforce . And many companies are spending large sum of money on training to up grade reading mathematics, computer and other .skills of employees. The technology forces could be noticed from more computer and automation, TQM (Total Quality Management) program, and reengineering program. From early pa1i of this work, we noted technological changes. Technology is changing jobs and organizations. The substitution of computer control for direct supervision and sophisticated . information technology is also making organization more responsive. Economic shock could be noticed as a forc e for change through security market crashes, interest rate fluctuations and foreign currency flu ctuations. Robbins noted that beginning in the early 1970s, with the overnight quadrupling of world oil prices, there was an economic shock experience which imposed change on organization. What more can be said also, that the attack on World Trade Centre at America on the 11 th September 2001 by terrorist is another stimulant of economic shock. Competition was noticed as stimulant of change than there are global competition, .mergers and consolidations and growth of specialty retailers. There is now need for organizations to defend themselves against both traditional competitors who are developing new products and services, and entrepreneurial firm with innovative offerings. For organization to overcome this trend of change, they have to be flexible. Social trends displaying itself as a force for change through increase in college attendance, delayed marriages by young people, and increase in divorce rate. The last two sub-factors under social trend was found to result an increasing number of single household and demand for housing by singles. This is an important determinant for those in the house building business to be able to determine the size and design of home. There are basically two approached to research design known as; the case study approach and the survey approach. The case study approach involves the study of one group or a section of a large population at one point in time and arriving at onclusion in relation to the situation or the findings of the group analysis. The problem of generalization is a major limitation or set back to this approach. Adoki (1985) says, the case study has at least an advantage in the rea of in-depth, far reaching and intensive analysis and determination of what goes on in that i:iarticular group. It is precisely at the level of · dividual experiments, gaining infomrntion on the perceptions an

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expectations of those involved in them that further research can greatly clarify the detailed process at work (Ramsey, 1977). Large and small population are studied by selecting and studying the sample chosen from :l:e population, in order to discover the relative · incident, distribution and · ter-relation of sociological, psychological, economical, technological and emironmental variables applied to the phenom~non being studies, _Jaclayton, 2000). In this particular research work, the survey method becomes pertinent in that the nature of the research requires making generalizations, and for the fact that not all the organizations in the production industry in Niger Delta Area, not even all in Port Harcourt can be visited to get facts. Then the need to have a general population and smaller sample size becomes the only resort.

METHODOLOGY AND FINDINGS The population which is large group supposed · to be studies. The generalization in this research work will cover the whole organizations in the production industry (both Agro and Agro-allied Industries) in Nigeria. While the sample size being the little selected group to be systematically studied and findings ruled to co1 er the large population, are those in Port Harcourt operating or having branches in different areas in the Niger delta States. Companies selected are; Shell Petroleum Development Company (SPDC), Total Fina Elf Nigeria Limited, Michelin Nigeria Limited, Nigeria Bottling Company Plc, Farmers. Data for this research was collected through primary (structured questionnaires), secondary (library approach and personal interviews with Chief Executives, Functional Managers and Field workers of selected organizations. In-depth interviews were also conducted with Chief Executives, Functional Managers, Field Workers and Farmers who may not have time to attend to our questionnaire or could not write. The personal interview was used not only as additional information but also to buttress the data to be obtained from the questionnaire and other sources: From the analysis shown below, 85.6% of those that answered our questionnaire said that Nigerian Government has contributed to the turbulence of Niger Delta Area. When we talk about Government, we are observing how political environment is contributing to erratic changes in this region of Nigeria. The inter-play between the Government, host communities and the business ,rganization ~an be likening to the adage that the grass suffers where two elephants fight. The government and the communities metaphorically are the =:=?hants while the business organizations are the grasses in the field. 1

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Analysis of Government Influence to the Environmental Turbulence

Table 1:

Response

No. of Response

% of Respondent

Yes

101

85 .6

No

17

14.4

Total

118

100

Source: Research Questionnaire 2003

Table 2: Extent of Destruction by Government Conflict Type

CONFLICT

SPECTRUM

SOUTH ZONE

Ethnic/Comrnima

Values/Goals Land (Bordicr & Farm Land)

Portagonist Bekware-lluibori, ldorniUgop-Bnete-Tiv, Iysle-Izi , Eket-lbeno, Ikot-Urno , Essien-Nkwan, Agbere/Beseni, Odoni/ Abere, Odoni/Odi, Egiode-lvu Age.

State Rivers, Cross Cross Rivers, River/Benue, Cross Rivers/Ebonyi, Bayelsa, Bayelsa, Bayelsa, Edo State

Location of administrative H/Q (LGA) control of LGA chainnarishio Timbers/benefits from oil production (employment) social welfare inrrastructure Clan factions Clan factions

Ijew-Itsekiri, Akpobuyo LGA, Ika LGA Emohua LGA

Delta, Cross Akwa Rivers, !born, Rivers

Odukpani/Itu LGA, IbenoEket, Oogni Fgri, Eket-Mobil, Ogoni-Shell

Akwa !born, Cross Rivers, Akwa !born, Rivers Akwa !born Rivers

Judicial Inquiry, Rectification, Unresolved, Unresolved

Akpabuyo LGA Ernohua LGA

Cross Ri.vers Rivers

Uncertain Uncertain

Political Conflict

Resource war

Dethronement succession (traditional institution)

Outcome Buffer stone, Unresolved, Unresolved, Unresolved, Buffer zone, Buffer zone, Buffer Zone , Bufter zone Armed Peace, Unresolved, Unresolved, UnresolvP.d

Source. Environment Watch. Vol. 2, No. 15, Page 7.6. 16tn 030,m November, 2001 The g ovemment policies inmost cases do not put companies and' os:communities into consideration: While the host co1nmtmities will say no to ct.eru and the business organiza\ion in that area will pay dearly for the disagree:::::ie1r See the case where land ownership decree of the Federal Govemmen of:'\1"' · claim ownership of land and resources in them. Government collects ren companies and do not give those companies conditions of what and ho · eir communities should develop for the well being of inhabitants of