ABSTRACT

This research study is concerned with An Appraisal of the Impact of Cost Minimization on the Growth and Profitability of Manufacturing Companies in Nigeria using Nigerian Bottling Company (NBC) Plc. Enugu Branch as a case study. Due to the increasing complexity of down fall, instability, and non growth of so many companies which usually results in winding up of these companies, this study is aimed at finding out if proper management and an Appraisal of the impact of cost minimization on the growth and profitability of manufacturing companies in Nigeria and if it can affect the growth of these companies by solving problems facing companies and ensuring solidarity. Such problems like high rate of inflation, intense competition by capacity utilization, depreciation and depletion value of Naira, etc. and the objective is to determine the relationship between effective cost minimization measures and growth of Nigerian Manufacturing Firms. Based on the problems and objective, hypothesis was formulated. Data was obtained from respondent through personal interviews and questionnaires and the chi-square was employed for the statistical analysis. The study revealed that An Appraisal of the Impact of Cost Minimization on the Growth and Profitability of Manufacturing Companies in Nigeria can actually affect the growth of manufacturing companies positively. The study covered 9th Mile Plant in Enugu. Finally, recommendations were made on ways of Ensuring Effectiveness and Efficiency, by Encouraging An Appraisal of the Impact of Cost Minimization on the Growth and Profitability of Manufacturing Companies in Nigeria to provide these information to management on time.

 

 

 

 

 

 

CHAPTER ONE

INTRODUCTION

1.1††††† BACKGROUND TO THE STUDY

††††††††††† The primary aim of every business is to make maximum profits and minimize cost. In order to achieve the basic objective most firms especially those that engage in manufacturing activities struggle hard to carryout smooth and successful production and sales operations.

††††††††††† There are numerous factors that hinder firms from the realization of their profit motives. Such hindrances include; the enormously large rate of inflation, depreciating value of Naira, low capacity utilization and intense competition. As a result of the Afore-mentioned, many firms struggle to maintain satisfactory earnings in a situation where costs are rising but price increases are becoming more and more difficult to achieve.

††††††††††† As a way of stemming the rate of economic activity and in order to maintain improved profitability and remain afloat in business, many manufacturing firms in Nigeria now adopt one measure as the other aimed at controlling their cost or better still reducing such costs as a result of efficiency of operations leading to enhanced growth and probability which will in turn help to maximize the wealth of shareholders. These measures includes: sourcing and developing row materials locally instead of importing them, obtaining quantity discount through bulk purchase and using cost minimization strategies such as work-study to improve labour efficiency, just-in-time (JIT) to eliminate waste and advanced manufacturing Technology (AMT) which uses the best technology to achieve high quality standard.

††††††††††† This study will examine the impact of effective cost minimization measures on the growth and profitability of manufacturing firms in Nigeria using the Nigerian bottling company (NBC) Plc as a case study. The company was formed in 1951, it started bottling operations in 1953 as a subsidiary of A.G. events Plc. The Nigerian Bottling Company is the sale of bottler of Coca-Cola in Nigeria. The Nigerian Bottling Company produces and sells coke, Fanta, sprite, Eva water and five alive and has remained the market leader in the food and beverage sector with the focus on training, developing and retraining itís people. As the Beverage Industry is experiencing intense competition with new entrants, new bands and new packages being introduced, the companyís focus in itís strategic plan is to grow volume, profit and ensure that itís return on investment out-weights itís cost of capital.

††††††††††† Coca-Cola first came into Nigeria in 1983 when Nigeria Bottling Company set up itís first plant in Lagos. Nigeria Bottling Company PLC is today one of the Nigeriaís number one bottlers of soft drinks selling more than six million bottles per day, a figure which is still growing with the continuing expansion of the existing 12 plants with opening of brand new plant in part of the federation. Our goal is to be the best in all that we do.

 

1.2††††† STATEMENT OF THE PROBLEMS:

††††††††††† Manufacturing firms in Nigeria now operate with in a turbulent business environment which has been characterized by high rate of inflation, intense competition by capacity utilization, depreciation and depreciation value of Naira, etc. As a result of the afore mentioned, many firms struggle to maintain satisfactory earnings in a situation where costs are rising but price increases are becoming more and more difficult to achieve.

††††††††††† The economic woes have so much negative impact on the operations of these firms that many of them are now engulfed in the ugly trap of profit squeeze with some of them on path of demise.

 

1.3††††† OBJECTIVES OF THE STUDY:

††††††††††† The general objectives of the study is to appraise the impact of effective cost minimization measures on the growth and profitability of manufacturing firms in Nigeria.

††††††††††† The specific objectives are as follows;

1.     To determine the relationship between effective cost minimization measures and growth of Nigerian Manufacturing firms.

2.     To ascertain the accounting systems which are designed to control costs.

3.     To ascertain the areas where costs maybe reduced

4.     To establish if there is a significant difference in material, labour and overhead costs of manufacturing firms in Nigeria.

 

Research questions

††††††††††† They are as follows:

1.     What is the impact of effective cost minimization measures on the growth and profitability, of Nigerian manufacturing firms?

2.     What are the differences in material, labour and offer embarking on cost minimization strategies?

3.     What are the accounting systems designed to control costs?

4.     What are the applicable areas in which costs maybe reduced?

5.     What is the relationship between effective cost minimization strategies and growth and profitability of manufacturing firms in Nigeria.

 

Research Hypothesis

††††††††††† The following hypothesis were formulated to guide the research study:

H1:††††† There is significant impact of effective cost minimization measures on the growth and profitability of Nigerian manufacturing firms.††††††††††

H0:††††† There is no significant impact of effective cost minimization measures on the growth and profitability of Nigerian manufacturing firms.††††††††††

H1:††††† There is significant difference in various elements of costbefore and after embarking on cost minimization strategies.

H0:††††† There is no significant difference in various elements of costbefore and after embarking on cost minimization strategies.

 

1.4††††† SIGNIFICANCE OF THE STUDY

††††††††††† Against the backdrop of high rate of inflation, depreciating and depletion value of the naira and turbulent business climate, many manufacturing firms now adopt strong measures which are society and developing raw-materials locally instead of importing them, obtaining quantity discount through bulk purchase, etc. so as to reduce costs, climate waste and inefficiency in order to increase productivity and maintain satisfactory earnings to help them remain afloat in business. In this regards, the results of the research study will no doubt help the entire society to purchase any product as a result in the increase in productivity made by manufacturing firms and also help institution through the lecturers to their student to impact knowledge on how to obtain quantity discount through bulk purchase and also tell the students to source raw-material locally instead of importing them.

††††††††††† The research study will add to the pool of knowledge and help to instill cost consciousness amongst manufacturing firms in Nigeria and identify the cost control systems and cost minimization tools that suit the organization such that they qill no longer claim ignorance or be left in the dark.

 

1.5††††† SCOPE OF THE STUDY

††††††††††† The research study is limited tyo Nigerian Bottling Company (NBC) PLC 9th Mile in Enugu State.

 

1.6††††† LIMITATIONS

††††††††††† The following limitations of the study are as follows:

1.     Time: - This is the first limitation that affected the research study badly because carrying out the study requires time and one canít afford to miss lecture and embark on a journey to the cost study.

2.     Finance: - It is another limitation because the study requires enough funds to carry out the research and without the funds the study will not be fruition.

3.     Exeat: - Getting permit to visit the case study is another limitation because before you find the supervisor to endorse and move down to the authority for approval was not easy on the study.

4.     Uncorporative staff: - Some of the staff at the Nigerian Bottling Company were very uncoorporative and some even refused to accept my questionnaire and those that accepted, some of them did not summit back their questionnaire.

 

1.7††††† DEFINITION OF TERMS

††††††††††† Advanced Manufacturing Technology, this helps organizations to be innovative and flexible and able to deal with short product lift cycles. It is therefore a new approach designed to offer greater product variety whilst maintaining/reducing costs of production and wastes.

††††††††††† Budgetary control: This is ďthe establishment of budgets relating the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results either to secure by individual action the objective of that policy or to provide a basic for itís revisionĒ (CIMA).

Cost control: means keeping costs within presented limits

Cost Reduction: An attempt to bring costs down from a previously accepted level.

Investment centre: A centre where managers are not only accountable for sales revenue and expenses but also responsible for capital investment decisions.

Just-In-Time (JIT): A manufacturing system that reduces the time that products spend in the production process by eliminating waste.

Value Analysis: A cost reduction technique which attempts to reduce the manufacturing cost of a product with reducing itís quality performance or value to the customer (ICAN Pathfinder, 2005).

Work Study: A scientific techniquesmethod of determining the most efficient method of using labour, material and machinery.


 

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