I Ilil; “IDA“ ”A ‘ nu .- ”“f3): n "ma“; -nc' .‘v _\\' N' ’1‘: . “I ‘ 'l' J W .m» “r3517; . I. - .3-” .'.—‘ ., —.~-r, J"l’hj "x c .‘l'§-': in: ' V- ofi‘v. o < o|~1 'w" v :- v-n\ \ 1‘. “. ‘9‘ :40. u‘fl'.".‘:. $135.? Ewan" I“: 0.x... I -.--‘-.‘. '3' ':°<;'u:::- o 'N J} 5C" E' - 7, D . . new. - ' al- v- - I. .. [nun ' '.‘ J “W 1‘ .~ . $.14. .. WI!" W3; L 1 b A xi 1": Y Michigan State University ill l l\\\\\\\\\ This is to certify that the thesis entitled The Role of the Multi-National Corporations in Nigeria's Development presented by PATRICK AMAMKE OKONKWO has been accepted towards fulfillment of the requirements for Ph.D. degree in marketing . l l _. '1 _ 09' 1 ~ ) \ Major professor Datwy/ 0-7639 OVERDUE FINES ARE 25¢ PER DAY PER ITEM Return to book drop to remove this checkout from your record. %&£;,2JE§341 1.3.. W1. 06 2008 t°2%05 © 1979 PATRICK AMAMKE OKONKWO ALL RIGHTS RESERVED THE ROLE OF THE MULTINATIONAL CORPORATIONS IN NIGERIA'S DEVELOPMENT By Patrick Amamke Okonkwo A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Marketing and Transportation Administration 1978 ABSTRACT THE ROLE OF THE MULTINATIONAL CORPORATIONS IN NIGERIA'S DEVELOPMENT By Patrick Amamke Okonkwo A dominant characteristic of the decades immediately following World War II is the evolution of the multinational corporation. This evolution necessitated a change in the perspective of the international companies. The survival of the multinational corporations depended on its world profit perspective. Because, normally the multinational corporations operate in more than two countries, decisions made by these corporations are not made only in terms of one country and its parameters, but in terms of the company's world operations and its attendant parameters. For this reason, it is usually prudent to isolate potential homogeneous parameters in its world operations and institute standardization measures to minimize marketing effort, create consist- ency and economies of scale in the world marketplace. Initially, the European countries provided the American Multinational with world trade avenues while the European multinationals established subsidiaries in Africa. Recently, both the American and the European subsidiaries have become interested in Nigeria because of its prospect as a potential market in Africa. Patrick Amamke Okonkwo Although standardization provides economic advantages, standardization can result in suboptimization of the marketplace. This disadvantage is especially sensitive in the areas of the world that is characterized as "underdeveloped." For this reason, and because of the demands of the nation-state and market persistent unique needs, multinational corporations have resorted to adapting some of their operations to the needs of individual countries. Although studies about standardization and its attendant advantages and disadvantages have been done mainly in Europe and studies about marketing adaptation have been done for individual countries in South America and in Asia, the oppor- tunity for such a study in Black Africa did not present itself because of apparent lack of long-run market potential. Since l973, Nigeria has been suddenly thrust into the position of a viable and potential market in Black Africa. Because of the uniqueness of Nigeria and because of its market and manufacturing potential in Black Africa, studies such as this is necessary in identifying the variables that influence adapation in marketing and manufacturing. Adaptation of business practices in marketing and manufacturing is important for a sustained economic foundation. Because marketing controllable variables are the benchmark for marketing strategy, the research centered its interest in the areas of product, promotion and distribution strategies. The major objective of the research is to inquire about executive judgments and decision criteria for marketing mix considerations and decisions. Also because of the uniqueness of Nigeria from the Western World in terms of its Patrick Amamke Okonkwo socio-cultural, legal, economic and political environments, executive decision criteria in.the area of manufacturing was also investigated. The findings of this study have accomplished the following goals: l. The major variables that influence adaptation in the Nigerian environment in product, promotion, distribution and manufacturing have been identified. 2. The extent to which the multinationals are willing to change and adapt to the Nigerian environment is still based on the effect of such change to the worldwide operations of the multinational. 3. Changes made in the marketplace by the multinational may enhance a limited gain for the multinational and may not enhance long-run cultivation of the Nigerian market. ACKNOWLEDGMENTS It is impossible to express my appreciation to everyone who has helped me during my many years of formal education. However, I would like to recognize certain people and institutions who have been instrumental in helping me complete this dissertation. To all of these people, I owe a debt I can never repay. First, I would like to thank all the executives in Nigeria who took time to talk to me about the different facets of their company's operation. Second, I would like to thank the General Motors Institute, Flint, Michigan, for the support and encouragement given me during my formal education at Michigan State University. I owe a special debt of gratitude to the entire marketing faculty at Michigan State University. I am especially indebted to Professor Donald S. Henley for his untiring inspiration and assistance throughout my formal education at Michigan State University. My association with him will be an influence on me for the rest of my life. I would like to single out certain of my professors who have influenced my thinking and for whom I have great respect. These are Professor Richard Lewis, Dean of the School of Business Administration; Professor Donald Taylor, Chairman of the Department of Marketing and Transportation Administration; Professor Donald Bowersox, Professor Stanley Hollander and Professor Frank Mossman. I would also like to ii express my appreciation to Professor Stokely Swanson for his support and advise throughout my doctoral work. Dean Steve Cenko and Dr. Rodney Boyes, both of General Motors Institute were very helpful and provided assistance during my doctoral work. Without the help of my dissertation committee, this dissertation could never have been completed. Dean Richard Lewis and Professor Donald Taylor gave unselfishingly their time and provided insight and advice during the course of writing this dissertation. I cannot ever estimate the amount of time Professor Donald Henley, the chairman of my committee, devoted to me. I hope that some day, I can be of help to other students as he has been to me. Finally, I would like to say that my family was of great inspiration to me during all of the years of my doctoral work. To all of these people and to many others not mentioned, I say thank you. TABLE OF CONTENTS LIST OF TABLES ......................... LIST OF FIGURES ........................ Chapter I. INTRODUCTION ...................... Standardization ................... Colonial Experience ................. Political Government ................. Manufacturing .................... Investment Climate .................. Marketing in Nigeria ................. Points of Issue ................... Scope of Study ............ ’ ........ Hypotheses ...................... Usefulness of Study ................. Some Past Research .................. Research Methodology ................. Limitations of Study ................. II. ENVIRONMENTAL STRATEGY FORMULATION ........... Stage of Economic Development ............ Nigerian Market ................... U.S. Department of Commerce Report Issued in 1976 . . Regular Wholesalers ................. Wholesale Channel .................. Retail Market .................... Advertising in Nigeria ................ Middlemen ...................... Buying and Selling .................. Transportation and Storage .............. Economic Growth ................... The Process of Economic Growth ............ The Quantity and Quality of Labor in Nigeria ..... Education ...................... Educational Objectives ................ Private Consumption ................. iv Chapter Page Distribution of Wealth ................ 39 Level of Technological Attainment .......... 41 Economic Aggregation ................. 42 Gross Domestic Product ................ ‘ 42 Inflation ...................... 43 Cultural Factors--Manufacturing ........... 5l Personal beliefs and aspirations ......... 52 Social structure ................. 52 Assumptions and attitudes ............ 54 Cultural Factors--Marketing ............. 55 Nigerian languages and people .......... 55 Urban Nigeria .................. 56 Interpersonal relationships ........... 57 Custom and tradition ............... 58 Attitudes towards bargaining ........... 58 Consumer shopping patterns ............ 59 Political-Legal Strategy Formulation . . ...... 59 Government ...................... 60 Government as a Supplier of Collective Wants ..... 60 Government Taxation ................. 63 Profits and Dividends ................ 63 Summary ....................... 64 III. PRODUCT STRATEGY FORMULATION .............. 66 Product Design Factors--Marketing .......... 66 Market segmentation ............... 69 Product differentiation ............. 71 Packaging .................... 72 Packaging and the consumer ............ 74 Brand names ................... 75 Symbolic nature of goods ............. 77 Customer service ................. 78 Credit ...................... 78 Delivery ..................... 79 Discounts and allowances ............. 80 Guarantees and warranties ............ 80 Product Design Factors--Production .......... 81 Level of technical skills ............ Bl Level of literacy ................ 83 Level of maintenance ............... 84 Availability of materials ............ 85 Summary ....................... 86 IV. DISTRIBUTION STRATEGY FORMULATION ........... 88 Description of Channels Used ............. 89 Intensive Channel Considerations ........... 89 Chapter Financial Considerations ............... Unit Value of Product ................ Average Order Size .................. Distance From the Market ............... Geographical Concentration of Customers ....... Manufacturer Responsible for Most of the Functions . . Retailer Responsible for Most of the Functions . . . . Environmental Factors Affecting Channel Design . . . . Demographic factors ............... Geographical distribution of population ..... Economic factors ................. Customer Mobility .................. Summary ....................... V. PROMOTIONAL STRATEGY FORMULATION ............ Market Information .................. Legal Restrictions .................. Vertical/Horizontal Integration/Independent Middlemen ..................... The Channel of Distribution-—Promotion ........ Environmental Factors ................ Language ..................... Cultural beliefs and aspirations ......... Social structure ................. Urban/rural ................... Lifestyles of the Target Customers .......... Summary ....................... VI. CONCLUSION ....................... Areas of Further Research .............. BIBLIOGRAPHY .......................... vi Table 10. 11. LIST OF TABLES Enrollment Targets in Universities ........... Gross Domestic Expenditure at 1974-75 Prices ...... Gross Domestic Expenditure at Current Prices ...... Government Wage Scale .................. Enrollment Targets in Primary Schools .......... Gross Domestic Product at Current Factor Cost ...... Gross Domestic Product at 1974-75 Factor Cost ...... Gross Domestic Product at 1974-75 Factor Cost-- Percentage Distribution ................. Annual Sectoral Growth Rates of the Gross Domestic Product at 1974-75 Factor Cost ............. Gross Domestic Product at Current Factor Cost-- Percentage Distribution ................. Annual Sectoral Growth Rates of the Gross Domestic Product at Current Factor Cost ............. vii 47 48 49 50 LIST OF FIGURES Figure Page 1. Enterprises Promotion Decree ............... 20 2. Federal Government Allocations for Services 1978-1979 ........................ 62 3. Cadbury Nigeria Limited--Brandnames ........... 76 4. Demographic, Market, Environmental--Product ....... 82 5. Typical Intensive Marketing Channel ........... 92 6. Typical Vertical Marketing Channel ............ 93 7. Typical Vertical Marketing Channel and Types of Customers .................... 110 8. Nigerian Product Brand Names ............... 112 9. Ciba Pharmaceutical--Brand Names ............. 113 10. Market Mix/Manufacturing Analysis ............ 123 viii CHAPTER I INTRODUCTION The marketing process is in part explained by the theory of specialization. More is accounted for by a theory concerning external or environmental influences to which management of internal factors must be adapted. The environment largely determines the marketing task to be performed, but a conceptual view of the environment must be obtained before its relevance can be appreciated. The environment is a complex of physical and spiritual factors. It is made up of things and people; economic and non-economic factors; the past and the present; attitudes, values, and customs; private and public sectors. Above all, it is subject to change.1 Entering a foreign market requires decisions regarding the appropriate marketing mix from different possible alternatives. The marketing concept indicates a marketing mix that is in congruence with the demands of the environment and the resources of the firm. The demands of the environment must be met in order for the full advantage of the marketplace to be consumated. Since competition and innovation are implicit in marketing and the consumer is the focal point of economic effort in which marketing 1Stewart Henderson, ed., Marketing Manager's Handbook (Chicago: The Dartnell Corporation, 1973), p. 448. is the essential motive power, marketing is confronted with the major responsibility of understanding and managing change in ways that must be compatible with the environment. Innovation, on the other hand, is implicit in competition because of the demands of the changing environment. The question that will ultimately be answered is that which pertains itself to the role of marketing in a socity. The marketing concept emphasizes customer needs for its market cultivation. If practiced in its fullest sense, it emphasizes want satisfaction as the economic and social justification for a company's existence. Consequently, all company activities in manufacturing and marketing must be devoted to first determining what the customers want and how this want can be made compatible in an environment while making a reasonable profit. Long-run marketing strategy will require multinationals to tailor their marketing strategy in such a way as to gain a differential advantage. A multinational wanting to be part of an environment must recognize that there are differences and restrictions implicit in nation states. Schools of Thought There are two schools of thought on the question of interna- tional standardization in the emerging nations. The first school2 is 2This school of thought is explained in detail in "Europe and Africa: Decolonization or Dependency," by I. William Zaltman, Foreign Affairs 54 (No. 2; January 1976): 325. predicated on the assumption that political independence of the less-developed countries masks the continued economic dependence on the world economic structure. Proponents of this philosophy believe that most of the emerging nations will rely on the expertise of the industrialized world for a long time. For this reason, they rely on policies that will enhance a dependence relationship. A dependence relationship is manifested in pushing the manufacturing and marketing activities towards the wealthy western and oriented class. Advocates of this school of thought believe in adapting the tastes of the upper layers of the society in the developing countries to that which pre- vails in the developed world. This conditioning, in effect, removes the physical presence of the Westerner, but is replaced by those who have been conditioned. Because the "elite" are satisfied as long as their tastes are fulfilled goods from the developed countries are then extended to meet demands by import. The other school of thought is predicated on the evolutionary process of history. It is believed by those who practice this phi- losophy that political independence is the first step towards "Full Independence" and that layers of economic dependence on the developed countries will be gradually peeled off. "Full Independence" is deter- mined when the business forces have changed their manufacturing and marketing activities to reflect the environment in which they operate. This process will require the cooperation of the developed countries and the multinational corporations. The effect will result in eventual independence of these emerging nations. Multinationals that subscribe to this idea are usually market oriented. It is believed that this strategy will help in transferring technology and managerial "know how“ to the emerging nations. However, achieving "Full Independence" is an ever ending process and change in itself is gradual. The need for interdependence is not diminished because no country is totally dependent on itself. Although there is need for complete independence, no country is fully independent of other countries. For example, the Black African countries rely to a great extent on the technologies and know-how of many countries for their manufacturing. Any improvement on their present position is progress towards "Full Independence." Standardization The importance of international standardization to the multinational corporation cannot be overemphasized. The advantages of standarization can be maximized as long as homogeneous variables are manipulated efficiently. It is not unusual to read about the tremendous virtues of standardization. The advantages of maintaining design consistency, longer production runs, economies of scale, lend legitimacy to standardization. In more practical terms, international standardization has been found successful to a degree in Western Europe because of the European Economic Community and because of the mobility of the people. Besides the increase in mobility, these countries share many similarities with the United States. However, the socio-cultural dimensions of the Black African countries, such as the style of living and lack of mobility are not common similarities shared by the Black African countries and Europe, United States and Canada. When standardization is instituted in Black African countries with the assumption that these parameters are the same as in Europe and America, the potential for a possible suboptimization of marketing decisions become apparent. Colonial Experience The experience of the emerging nations in Africa have been that of Colonial rule. The economies of these nations were fashioned solely to feed the colonial countries. This took the form of minimum investment and minimum maintenance policy. The exploitation resulted in the growth and consolidation of industrial capitalism in the colonial countries. It can be said that these colonialists neglected to lay any foundation for future development of these nations. The very uncer- tainty which is the cry of the multinationals today was created in part by the colonial governments. At the most, the emerging nations inherited the colonial infrastructure. My point of reference is Nigeria. During the pre-independence era, industrial development in Nigeria was slow. Nigeria was regarded as a rich agricultural country and was groomed to export essential raw materials for the industrial world. Throughout the fifty years prior to independence in 1960, Nigeria had only the minimum of infrastructure necessary to facilitate the export of primary products--cocoa, cotton, groundnut, palm products, tin, columbite. Efforts were directed toward developing the country as a market for the sale of finished goods from the industrialized world and there was no real effort to industrialize. The facilities required for the import/export trade were shipping, banking, and insurance, and these were fairly well established.3 Over the last decade, however, industrial growth became an important factor in the pace and pattern of Nigeria's economic devel- opment. The new burst of activities both in the petroleum and manu- facturing sectors have come to constitute the major driving force in the development process. The Nigerian economy is now faced with the challenge and Opportunity of creating an industrial base that can guarantee self- sustaining growth in the future. Marketing can play a substantial role in making this objective come through. Political Government Nigeria's political rulers are members of the armed forces. Nigeria is said to practice the free enterprise system; however, the government is active in the private sector. Nigeria has abundant supplies of raw materials, including oil, with abundant low-cost, \ easily trained labor; growing population of over 70 million which { provides the largest single market in Black Africa.“ ' In his 1976-77 budget speech, the Nigerian Head of Government, Lieutenant-General Olusegun Obasanjo made this remark: 3Industrial Directory, 7th ed. (Lagos, Nigeria: Published by the Investment Promotion Center, Federal Ministry of Industries, 1975), p. 170. I'Ibid., p. 171. We are aware that in order to achieve our plan targets, we need the cooperation of all well-meaning people. Our primary aim is to modernize the Nigerian economy. Modernize, not in the sense of copying the structure of the so-called developed countries, but in the sense of bringing to bear upon and adapting the relevant experiences of other economies. The modernization of our economy will involve a substantial amount of transfer of technology. A large proportion of this transfer will take place through mutual partnership with foreign, private, and public enterprises. We welcome such contributions and will continue to provide adequate incentives in that regard.5 The cooperation of the multinationals in making Nigeria's development objectives come true cannot be overstated. The multi- national "is the best instrument we have for generating entrepreneural, managerial, and technical competence in the developing nations" and "also for calling forth and training genuine patriots willing and able to give leadership to their countries and their own communities."6 Manufacturing Nigeria's manufacturing sector is characterized by a limited range of diversification (textiles, drugs, apparel, food, etc.), substantial geographic concentration, mainly in Lagos and a relatively high degree of private ownership, largely foreign.7 Manufacturing has been a rapidly expanding sector in the economy. Between 1958-59 and 1966-67 value added in this sector rose at an annual rate of more than 5Head of the Federal Military Government, His Excellency Lieutenant General Olusegun Obasanjo, Budget Speech, 1976-77, March 1976. 6Floyd C. Lawrence, "Multinationals Search for One World," International Business, 1975, a selection of current readings, Industry Week, January 1973, p. 217. 7More on this can be found in Survey_of African Economies, IMF, Washington, D.C., 1975, p. 298. 12 percent at constant prices, or at a faster pace than the Gross Domestic Product. Consequently, the ratio of manufacturing to GDP increased from 4.4 percent to 7.0 percent over this period.8 Mea- surements of overall performance trend during these years are not available; however, it can be assumed that manufacturing increased marginally because of the internal conflict present at that time. Since 1965, the capitalization in industrial firms has increased. Original book value per establishment, which averaged $446,440 in 1965 rose to $698,860 in 1970 and to $747,360 in 1971. Fixed capital expenditure of industrial firms has also been on the upswing.9 Within the industrial sector the larger enterprises have been growing the fastest.'° The public has made substantial investments in manufacturing. Data for 1967 indicated that about 18 percent of the consolidated paid-up capital of the manufacturing sector was held by the government. The dominance of foreign-owned companies has been quite marked. In 1967 about 70 percent of the paid-up capital of limited companies was of foreign origin, while private Nigerians accounted for 12 percent. However, these figures have changed somewhat since 1973. As noted earlier, Nigeria welcomes foreign investment in different facets of the economy. The government is intensifying 8Ibid., p. 300. 9Ibid.. p. 301. 1°Ibid., p. 303. efforts to see that the projected Nigeria Iron and Steel Complex takes off as planned, by or before 1980 to enable the country to achieve her industrialization goals. The government is also pushing ahead for a petrochemical complex, two gas liquidation plants, and two additional refineries." The question of power for Nigeria's development will not be a problem for a multinational that intends to manufacture and market in Nigeria. Investment Climate Since joining the Organization of Petroleum exporting countries, Nigeria's earning power has increased. It is said that this sudden wealth opens up the investment opportunities in Nigeria. Although it is said that Nigeria provides one of the best environments in the developing world,12 it does also limit foreign participation in some of its industries.13 Therefore, it cannot be said to "offer some of the most liberal incentives for prospective investors."'“ Marketing in Nigeria Nigeria is characterized by a large market and a diversified people. National development is entrenched in the people's belief. 11Federal Nigeria 3 (No. 1; April-May-June 1977): 14- 12Ibid., p. 14. 13The Nigerian Enterprises, Promotion Decree published in 1977; Classify businesses into three categories: (a) Enterprises exclusively reserved for Nigerians, (b) Enterprises in respect of which 60% of the equity must be owned by Nigerians, and (c) Enterprises in respect of which 40% of the equity must be owned by Nigerians. 1"Federal Nigeria, p. 14. 10 Marketing can play a decisive part in providing the market with those needs which are compatible with the needs of the Nigerian people and help enhance their being. Marketing includes the action and processes by which busi- nesses, institutions, and governmental agencies creatively and systematically identify the needs and wants of their respective customers or clients, design and develop the goods, services, and/or ideas to satisfy these identified needs and wants, communicate the facts about them, and deliver need-satisfying goods and/or services to customers before and after purchase, with the objective of maximizing customer satisfaction and creating maximum values at minimum cost to the respective systems involved.15 Obviously, marketing institution building is essential in building long-range implicit solutions to the problems of the environ- ment. It is important to know if the multinationals are changing their marketing and manufacturing activities to reflect the Nigerian environ- ment. It is felt by Nigerians that the multinational's adaptation policy is most important in Nigeria's desire for a sustained economic foundation. Points of Issue 1. To what extent are the manufacturing multinationals oper- ating in Nigeria adapting their manufacturing and marketing activities to reflect the Nigerian environment. In other words, what are the multinationals doing in their marketing decisions and how does it reflect the environment in which it is operating. For example, what type of distribution channel is most feasible in Nigeria given the 15James Hlavacek, Claire Cabin, Marketing Definitions Committee, April 1975. 11 prevailing circumstances, or what type of promotional mix or price and price ranges are used in lieu of the level of income, socio- cultural dimensions, or what type of machinery can best suit the Nigerian environment in lieu of the level of education of the people? The question that would be addressed is that which would concern what is being done by the multinationals and whether these actions are compatible with the environment in the areas of manufacturing, product, place and promotion. (Price will not be considered because of price control instituted by the Government.) 2. To what extent are the manufacturing multinationals operating in Nigeria adapting their manufacturing and marketing activities to reflect the Nigerian environment and to what extent can these changes be said to be fostering a non-dependence relationship. The extent to which it fosters a non-dependence relationship begins with changes adopted for reasons of environmental conditions. In other words, are the changes made for the reasons of environmental conditions? For example, if a multinational builds market-positioned warehouses, could it be because the road or the transportation infrastructure is poor? Changes in market operation which are made so as to assure availability in spite of the poor infrastructure is said to foster non-dependence. 3. Is the multinational's ability to adapt to the Nigerian environment affected by the structure of the decision making system? In other words, how does the structure of the multinationals affect their adaptation policy in Nigeria? 12 4. Is there any relationship between the length of existence of the subsidiary and its adaptation policies? The issue here is that which pertains to the cultural aspects of adaptation. Have the "old" subsidiaries subscribed to adapting to the environment in which they have invested a long time period? Scope of Study Primarily the scope of this study will be restricted to: l. Seeking to identify clusters of variables that influence adaptation in product, promotion, distribution and manu- facturing in the Nigerian environment. In other words, seeking to identify the environmental variables that influence the subsidiary to institute changes which are compatible with the environment. (Price is not included because of the price control decree instituted by the Government of Nigeria.) 2. Seeking to identify the adaptation of the subsidiaries of the multinationals operating in Nigeria and to see whether they are consonant with the Nigerian environment. Often changes in marketing may be made that may not enhance the subsidiaries in relation to its relevance to the Nigerian environment. 3. Attempt to gauge to what extent adaptation is important to the multinationals in Nigeria. The conclusions reached here will be based on the nature of the answers received from the multinationals and the interviewer's judgment of such answers. 13 Hypotheses l. The changes made by the multinational corporations in product planning, place of sale considerations, promotion, and manufacturing are made in order to reflect its activities to the Nigerian environment. 2. The changes made by the multinational corporations have resulted in fostering a degree of non-dependence relationship. 3. The length of time engaged in business in Nigeria is a sign that the subsidiary of the multinational will adapt its marketing and manufacturing activities to reflect the Nigerian environment. 4. The predominance of the decision to adapt is made by the executives in Nigeria and not in the multinational headquarters. Usefulness of Study No Black African country has ever found itself so positively positioned to build a strong economic foundation. The value of such a study can be seen by the added body of knowledge it will contribute to the existing knowledge about Nigeria. As investment and trade between Nigeria and the rest of the world increases, it becomes more important to investigate and report more frequently, the multinational and host country's mutual needs. The multinationals in Nigeria are going through a unique circumstance and need periodically to be reminded of the responsibility they owe to the environment and the people. This study recognizes the importance of the multinational as a very important factor in economic development in the underdeveloped world. This study will only make its conclusions about Nigeria. 14 Some Past Research There have been a number of studies that have devoted themselves only to the general management problems in the developing countries. E. R. Barlow in his Mexico study observed that "the necessity for adaptation was particularly noticeable in the marketing area. The companies studied were following much the same methods of marketing their products in Mexico as in the United States." He went on to say that "despite the basic similarities, a United States mar- keting program could not be transferred intact to Mexico."16 In a study by Skinner of American manufacturing firms in developing countries, he concludes that manufacturing equipment for the developing countries should be geared towards them. Factors should be geared so that system is not left to relatively inexperienced foreign managers.l7 Although these studies lend some insight into the broader aspect of management as opposed to marketing, they do not fully address them- selves to marketing and manufacturing questions. Even if they did answer these questions, there shall still be a need for the study of adaptation of marketing and manufacturing in Nigeria. Lack of study about Nigeria may have been a result of Nigeria's recent gaining of independence from Great Britain after about half a century of colonial rule. 16E. R. Barlow, Management of Foreign Manufacturing,Subsidiaries (Boston: Harvard University, Graduate School of Business Administra- 17For more on Skinner's findings, see Wickham Skinner, American Industry in Develgping Economies (New York: John Wiley and Sons, Inc., 1968). 15 Research Methodology This is a qualitative research because of the objective nature of the study. The universe is comprised of all the foreign owned companies in Nigeria. Ten companies were selected judgmentally. Personal interviews with company officials were conducted in Lagos, Nigeria, between November 22 and December 22, 1977. The ten firms comprise companies with their headquarters in Europe and the United States of America. The dominance of Europe as the headquarter site can be accountedyfor by the historical ties that Nigeria had with Britain, in particular, and Europe in general. _ Limitations of Stugy It is difficult to know if the responses received from the company officials are an accurate description of the situation as they see it from the eyes of the corporation. The data that was collected is qualitative by nature and does not lend itself to statistical proof. Therefore, the findings cannot be conclusive. Because the selection of the firms to be interviewed was judgmental, no generalization can be made. Time constraint was a constant limiting factor and the diffi- culty in getting the company officials to give the interviewer more time was always present. CHAPTER II ENVIRONMENTAL STRATEGY FORMULATION Stage of Economic Development A thorough description of Nigeria's stage of economic development is difficult because of the lack of sufficiently com- prehensive statistical series. In the period immediately after the { civil war, Nigeria made rapid economic recovery which placed it as the wealthiest Black country. Although primarily agricultural, Nigeria \ receives most of its wealth from the oil sector of the economy. The agricultural sector suffered a temporary setback between 1973 and 1976 because of the oil boom. The agricultural sector had been the backbone of the Nigerian economy until that time. Great improvements have occurred in the last year since, through public effort, the sector is gradually returning to its pre-1973 situation. In the 1975-76 fiscal year, Nigeria spent about $8 billion on importation of food and manufactured products.1 One great source of satisfaction as noted by Lieutenant General Olusegun Obasanjo, Nigeria's Head of State in his 1977-78 Budget Speech, is that agriculture contributed significantly to growth in 1976-77. lLevi Nwachuku, "Nigeria's Uncertain Future, Current History, March 1976, p. 167. 16 17 Compared with an increase of only 1 percent in 1975-76, farmers increased their production by some 3 percent in the past year.2 Nigeria's Head of State continued by emphasizing that Nigeria is in a transition. In the past year, investment in machinery and equipment (transport) continued to grow relatively faster than invest- ments in buildings and construction and land improvement. Machinery and equipment jointly grow by about 50 percent while building and construction and land improvement together improved improved by 32.8 percent. This pattern of our fixed capital formation is consistent with reasoned expectation that during periods of rapid industrialization, the growth of machinery and transport equipment should exceed that of other types of formation. In short, the nation is entering a period of industrialization.3 Nigerian Market There is a question as to what Nigeria's population is. The estimate is between 76.6“ and 82.0 million5 with a rate of population growth of 2.5 percent.6 The majority of the population is rural since most of Nigeria's population are farmers. There is considerable migra- tion to urban areas, mostly in the southern part of the country.7 The 2Federal Nigeria 3 (No. l; April-May-June 1977): 7. 3Ibid., p. 7. ''New African Development (Africa) 11 (No. 11; November 1977): 1083. 5Nwachuku, "Nigeria's Uncertain Future,“ p. 166. 6Ibid., p. 166. 7Walter Schwarz, Nigeria (New York: Praeger Publishers, 1969), Chapters 9, 10, ll. 18 Nigerian market has a large growth potential, especially when one considers that for every four Black Africans, one is a Nigerian. Nigerians themselves are as varied as their environment, though tribal groups are divided more by language, culture and history than by race.8 0f the three predominant tribal groups, Hausa-Fulani is the language of some 28 percent of the population; Ibo of some 18 percent; and the Yoruba of some 16 percent.9 Because of language and cultural differ- ences, opportunity exists for the multinational to segment its pro- motional messages, product designs and end-use considerations. For example, the dairy and chocolate industry is experiencing difficulty penetrating the southern Nigerian market. The reason for this is that traditionally, the southerners live in rain forests where cattle raising is not practiced. Therefore, milk-based products are not favored when consumed. However, the southerner can be made aware of the fact that the same milk-based product can be mixed with other ingredients to make palatable southern meals. Nigeria is relatively new in the race for industrialization. In its quest for rapid industrialization, the Nigerian government, by its proclamations, limits competition in the marketplace. For example, "import duties on consumer goods and, where feasible, on imported raw materials, are being raised or imposed where it is felt that undue dependence on imports exists.'° This type of action by the government helps protect the local industries. 8Ibid., p. 4. 91bid. 1°For example in his 1978 Budget Speech, Lt. General Olusegun Obasanjo imposes import prohibition. 19 Since Nigeria has only a few industries," and since the trend is towards their protection, competition from the import markets does not appear to pose a threat to the domestic market. Governmental protection practices have created an oligopolistic market structure at the manufacturing level in Nigeria. At the retail level, Nigeria is characterized by many buyers and sellers offering very similar and homogeneous products. The retailers are small and many in number. The Nigerian environment is further limiting competition from external sources by limiting the type of business and amount of investment a foreigner can engage in. The relevant decree is named "The Nigerian Enterprises Promotion Decree 1977." Under this decree all enterprises in Nigeria are classified into three categories: . Schedule 1 consists of enterprises exclusively reserved for Nigerians; . Schedule 2 consists of enterprises in respect of which 60 percent of the equity must be owned by Nigerians. . Schedule 3 lists enterprises in respect of which 40 percent of the equity must be owned by Nigerians. Below in Figure l are the full lists of the three schedules: 11Industrial Directory, 7th ed. (Lagos, Nigeria: Published by the Investment Promotion Center, Federal Ministry of Industries, 1975 . 20 Figure 1. Enterprises Promotion Decree Schedule 1: Enterprises Exclusively Reserved for Nigerians 1. CALM Advertising and public relations business. All aspects of pool betting business and lotteries. Assembly of radios, radiograms, record changers, television sets, tape recorders and other electric domestic appliances not combined with manufacture of components. Blending and bottling of alcoholic drinks. Blocks and ordinary tile manufacture for building and construction works. Bread and cake making. Candle manufacture. Casinos and gaming centres. Cinemas and other places of entertainment. Commercial transportation (wet and dry cargo and fuel). Commission agents. Departmental stores and supermarkets having an annual turnover of less than N2,000,000. Distribution agencies excluding motor vehicles, machinery and equipment and spare parts. Electrical repair shops other than repair shops associated with distribution of electrical goods. Establishments specializing in the repair of watches, clocks and jewelry, including imitation jewelry for the general public. Estate agency. Film distribution (including cinema films). Garment manufacture. Hairdressing. Ice-cream making when not associated with the manufacture of other dairy products. 1 Laundry and dry-cleaning. Indenting and confirming. Manufacturer's representatives. Manufacture of jewelry and related articles, including imitationi jewelry. Manufacture of suitcases, brief cases, hand-bags, purses, wallets, portfolios and shopping bags. Municipal bus services and taxis. Newspaper publishing and printing. Office cleaning. Passenger bus services of any kind. Poultry farming. Printing of stationery (when not associated with printing of books 21 Figure l--Continued Protective agencies. Radio and television broadcasting. Retail trade (except by or within departmental stores and supermarkets). Rice milling. Singlet manufacture. Stevedoring and shorehandling. Tire retreading. Travel agencies. Wholesale distribution of local manufactures and other locally produced goods. Schedule 2: Enterprises in Respect to Which Nigerians Must Have aim-pr—a Majority Interest Banking-commercial, merchant and development banking. Basic iron and steel manufacture. Beer brewing. Boat building. Bottling of soft drinks. Business services other than machinery and equipment rental and leasing such as business management and consulting services; fashion designing. Clearing and forwarding agencies. Canning and preserving of fruits and vegetables. Coastal and inland waterways shipping. Construction industry. Departmental stores and supermarkets having annual turnover of not less than N2,000,000. Distribution agencies for machines and technical equipment. Distribution and servicing of motor vehicles, tractors and spare parts thereof of similar objects. Fish and shrimp trawling and processing. Fertilizer production. Grain mill products except rice milling. Industrial cleaning. Insecticides, pesticides and fungicides. Internal air transport (scheduled and charter services). Insurance--all classes. Lighterage. Manufacture of bicycles. Manufacture of biscuits and similar dry bakery products. Manufacture of cement. Manufacture of costmetics and perfumery. 22 Figure 1--Continued 36. 37. 38. 39. Manufacture of cocoa, chocolate, and sugar confectionery. Manufacture of dairy products, butter, cheese, milk and other milk products. Manufacture of food products like yeast, starch, baking powder, coffee roasting; processing of tea leaves into black tea. Manufacture of furniture and interior decoration. Manufacture of metal fixtures for household, office and public buildings. Manufacture of leather footwear. Manufacture of matches. Manufacture of metal containers. Manufacture of paints, varnishes or other similar articles. Manufacture of plastic products such as plastic dinnerware, tableware, kitchenware, plastic machinery parts, bottles, tubes and cabinets. Manufacture of rubber products, rubber footwear, industrial and mechanical rubber specialities such as gloves, mats, sponges and foam. Manufacture of tires and tubes for bicycles and motorcycles; of tires and tubes for motor vehicles. Manufacture of soap and detergents. Manufacture of wire, nails, washers, bolts, nuts, rivets, and other similar articles. Other manufacturing industries such as non-rubber and non- plastic toys, pens, pencils, umbrellas, canes, buttons, brooms and brushes, lampshades, tobacco pipes and cigarette holders. Mining and quarrying. Oil milling, cotton ginning and crushing industries. Paper conversion industries. Plantation sugar and processing. Plantation agriculture for tree crops, grains and other cash crops. Printing of books. Production of sawn timber, plywood, veneers and other wood conversion industries. Petro-chemical feedstock industries. Publishing of books, periodicals and such like. Pulp and paper mills. Restaurants, cafes and other eating and drinking places. Sugar refinery and packaging. Screen printing on cloth, dyeing. Inland and coastal shipping. Slaughtering, storage associated with industrial processing and distribution of meat. Tanneries and leather finishing. 23 Figure 1-—Continued 56. Wholesale distribution of imported goods. 57. Photographic studios, including commercial and aerial photography. Schedule 3: Enterprises of Which Nigerians Must Own 40 Percent l. Distilling, rectifying and blending of spirits such as ethyl alcohol, whiskey, brandy, gin and the like. 2. Tobacco manufacture. 3. Manufacture of basic industrial chemicals (organic and inorganic) except fertilizers. 4. Manufacture of synthetic resins, plastic materials and man-made fibres except glass. 5. Manufacture of drugs and medicines. 6. Manufacture of pottery, china and earthenware. 7. Manufacture of glass and glass products. 8. Manufacture of burnt bricks and structural clay products. 9. Manufacture of miscellaneous non-metallic mineral products such as concrete, gypsum and plastering products, including ready-mixed concrete; mineral wool, abrasive; asbestos products; graphite products. 10. Manufacture of primary non-ferrous metal products such as ingots, bars and billets; sheets, strips, cirales, cecrous, rods, tubes, pipes and wire rods, casting and extrusions. 11. Manufacture of (fabricated metal) cutlery, hand tools and general hardware. 12. Manufacture of structural metal products--components of bridges, tanks, metal doors and screens, window frames. 13. Manufacture of miscellaneous fabricated metal products, except machinery and equipment, such as safes and vaults; steel springs; furnaces; stoves, and the like. 14. 'Manufacture of engines and turbines. 15. Manufacture of agricultural machinery and equipment. 16. Manufacture of metal and wood working machinery. 17. Manufacture of special industrial machinery and equipment, such as textile and food machinery, paper industry machinery, oil refining machinery and equipment, and the like. 18. Manufacture of office, computing and accounting machinery. 19. Manufacture of other machinery and equipment except electrical equipment, pumps, air and gas compressors; blowers; air- conditioning and ventilating machinery; refrigerators, and the like. 20. Manufacture of electrical industrial machinery and apparatus. 21. Manufacture of radio, television and communications equipment and apparatus 24 Figure l--Continued 22. Manufacture of electrical appliances and housewares. 23. Manufacture of electrical apparatus and supplies not elsewhere classified, such as insulated wires and cables, batteries, electric lamps and tubes, fixtures and lamp switches, sockets, switches, insulators, and the like. 24. Ship building and repairing (excluding boat building). 25. Manufacture of railway equipment. 26. Manufacture of motor vehicles and motorcycles. 27. Manufacture of aircraft. 28. Manufacture of professional and scientific and measuring and controlling equipment, such as laboratory and scientific instruments, surgical, medical and dental equipment, instru- ments and supplies and orthopaedic and prosthetic appliances. 29. Manufacture of photographic and optical goods. 30. Manufacture of watches and clocks. 31. Ocean transport/shipping. 32. Oil servicing companies. 33. Storage and warehousing--the operation of storage facilities and warehouses (including bonded and refrigerated warehouses) for hire by the general public. 34. Textile manufacturing industries. 35. Hotels, rooming houses, camps and lodging places. 36. Data processing and tabulating services (on a fee or contract basis . 37. Production of cinema and television films (or motion picture production). 38. Machinery and equipment rental and leasing. 39. All other enterprises not included in Schedule 1 or 2 not being public sector enterprises. (The Decree was deemed to have come into force since June 29, 1976.) 25 U.S. Department of Commerce Report Issued in 1976 The following is an excerpt from the U.S. Department of Commerce Report issued in 1976 following a three-month visit of four officials of the Department to Nigeria on an economic survey: Spectacular growth. With nearly a third as many people as the United States, Nigeria is the most populous country in Black Africa. It is also the wealthiest, with annual oil revenues of some $7.5 billion available for underwriting massive infra- structure, industrial and agricultural development programs. Spending potential. Nigeria, unlike most developing countries, can finance its deve10pment needs without relying on foreign capital. This makes Nigeria a vastly more dynamic and lucrative market than those which must depend on supplier credits and international loans to pay the foreign exchange cost of needed equipment and services. One Nigerian Government,corporation boggled an American supplier by insisting on paying cash for a recent $10 million shipment. This spending power has important implications for American competitors in the Nigerian market. First, it means Nigerians can follow their tendency to go first class. Nigerians are very conscious of their country's wealth; they want its air- ports, offices, highways, and hotels to reflect its prosperity. Secondly, Nigerian financial independence virtually wipes out any competitive advantage to third-country firms stemming from their ability to offer soft credit terms. Competition for Nigerian business will be between the American and third-country suppliers rather than between their respective export banks. So Nigeria is not the typical developing country, but it does not fit the popular image of the OPEC member State either. The smaller or more sparsely populated OPEC States can have the luxury of a more deliberate pace of deve10pment spending; some can afford to limit production to conserve oil resources for the future, to shore up prices, or exert political leverage. But for Nigeria, petroleum-financed deve10pment is impera- tive. Most observers predict that the Nigerian Government would not artificially limit oil production if it might threaten economic progress. So far, however, Nigeria appears to be a long way from the point at which revenue shortfall might jeopardize advancement. Since 1973, revenues have increased even faster than imports. 26 By April 1975, Nigeria's foreign exchange reserves were about $6 billion, compared with an annual import bill of about $3 billion. It is unlikely that spending will prove a limiting factor. Regular Wholesalers In Nigeria, the merchant wholesaler does not operate a full function enterprise as is the case in the Western developed countries. The firms are independently owned, and they purchase in large quantities from producers and manufacturers, accept delivery at one or more of its warehouses, breaks down and stores its purchases, assembles orders in relatively small quantities. They do not send out sales force to canvass the trade, deliver orders to its customers, extend credit, offer advice to its customers or supply marketing information to both customer and suppliers. In Nigeria, the wholesaler's job is virtually limited to the storage of goods. The Nigerian environment is characterized by cash-and-carry wholesalers who operate on cash basis with no merchandise delivery. By employing almost none or very few salespersons, and eliminating delivery service and credits, such middlemen can economically serve the small retailer. To take advantage of such services, the retailer must travel to the warehouse, pay cash, and transport the order to the retail location. Although they serve the small retailer well, they do severely limit the number of retailers that can take advantage of their service. The demand side of the vicious circle more typically is ignored, however, and that leads to poor planning and business failure.12 12E. Jerome McCarthy, Effective Marketing Institutions for Economic Development, AMA Proceedings, 1964, p. 393. 27 Wholesale Channel Consumer products customarily pass through many hands before they reach the retail level. Goods, such as consumer products that require local inventory, may be kept within the trading firm's operation all the way to the retail level, since many of these companies have retail as well as wholesale outlets.13 This is typical of the European channel model. If goods are carried through the Nigerian channel, however, many buyers of wholesalers may be involved.'“ Nigeria has, to a certain extent, been the victim of accelerated rapid development. As mentioned earlier, it relied on its agricultural sector until 1973. The sudden rise in oil prices and the subsequent increase in demand thrust Nigeria into rapid development. Marketing institutions necessary for Nigeria's stage of economic development probably can be characterized best as traders and merchants. These traders and merchants sell in small quantities in the urban and rural areas. In a growing market and especially with a market with buying power, financing function is very critical. This is because in underdeveloped economies money resources are not always present to the individual businessman. In Nigeria this difficulty is compounded by increased demand. In such cases, the middlemen will poorly or 13Louis Stern and Adell El-Ansary, Marketing Channels (Englewood Cliffs, N.J.: Prentice-Hall, 1977), p. 539. 1"Ibid. 28 grudgingly, if at all, offer any services. Selling is treated more as trading than aggressively seeking to expand the market.15 Retail Market The retail market in Nigeria is characterized by many small and independent businessmen who go back and forth between the warehouse selecting necessary assortments for their market. He is a small businessman who cannot afford the luxuries of warehouses or other functionaries as found in the developed world. The retailer is not organized in any way. Entry is not difficult. Many Nigerians engage in the retail business. This market can be classified as free compe- tition. The present retail system as it functions does not individually have the capacity to service the market. Because of limited resources, individual businesses are not able to fully cultivate a market. There are two distinct retail markets in Nigeria. One is the urban-retail outlets in the larger cities, whose composition much resembles similar commercial districts of other large cities. Only the wealthy Nigerians contribute to this sphere of retail operations consisting of department stores and specialty stores.16 The other, more popular retail center, is the collective market Operating out of temporary facilities. Some of the metropolitan areas have permanent structures for these traders.17 15McCarthy, p. 393. 16Stern and El-Ansary, p. 539. 17Ibid. 29 Advertising in Nigeria Informal communication by word-of—mouth reaches many more people than does a mass-advertising campaign. Nevertheless, advertising in newspapers and magazines and outdoor advertising is usually effective as well as inexpensive. It is estimated that these sources reach over six-million inhabitants.18 Radio remains the principle instrument of communication since illiteracy is not a hindrance to this media. The radio programs are broadcast in languages spoken by the listening area. Television is gaining popularity, although only a few households have them. Middlemen There are many kinds of middlemen. Almost everyone, in fact, is different from any other one. However, middlemen cannot be charac- terized as full function or limited function wholesalers. Each middle- man decides what is necessary for him. However, most of the middlemen are cash and carry middlemen. The middlemen perform mostly the storage function. The middlemen serve as collection points for different goods. Most of the wholesalers and the big retailers are located in the urban areas while the small retailers are located predominantly in the rural areas. Buying and Selling Generally, the buying function is composed of those activities necessary to assemble goods for ownership and control. The primary 18Stern and El-Ansary, p. 540. 30 purpose of buying is to bring commodities together, upon demand. Buying in Nigeria is not consummated as a "result of demand satisfaction activities of members of marketing channel systems--from producer to intermediary and ultimate consumers."19 Because of the relative scarcity in the Nigerian market, buying is usually initiated by the buyer and not the seller. Selling in Nigeria does not involve locating buyers. Nego- tiations are usually limited to allocation or the assortment sought by the buyers. Price negotiations are not common in the wholesale level. Negotiating with buyers is found to be important, but the buyer must seek out the seller-~not vice-versa. Transportation and Storage The process of marketing exchange of products from seller to buyer is normally accompanied by a change in their locations.2° The locations of the manufacturers or even the wholesalers in Nigeria are principally in Lagos. This is why the importance of transportation is keenly felt in Nigeria because the greater the distance between buyers and sellers, the greater the cost of transportation and often a loss to the seller with regard to creating place utility. As mentioned earlier, it is the buyer's responsibility to seek out the seller. Since the buyers buy in small quantities, transportation is usually 19J. Taylor Sims, J. Robert Foster, and Arch A. Woodside, Marketing Channels, Systems and Strategies (New York: Harper and Ross, 1977), p. 30. 2°Ibid., p. 32. 31 not the responsibility of the seller. The function of making sure that the maximum place utility is obtained is left strictly to the buyers. Since the retailers buy in small quantities, they do not have much need for storage. Economic Growth Economic growth can be defined most simply and directly as the expansion of a nation's capability to produce the goods and services its people want.21 Since the productive capacity of an economy depends basically on the quantity and quality of its resources as well as its level of technological attainment, economic growth involves the process of expanding and improving these determinants of productive capacity.22 I Sustained economic growth is the objective of Nigeria. It is believed that a sustained economic growth and expansion will, in the end, increase the material welfare or well-being of Nigerians. The increase in the material welfare and well-being of Nigerians will depend on the availability of goods and services to all Nigerians. The Process of Economic Growth The fundamental determinants of economic growth on the 1 potential for production of any economy are: (l) the quantity and quality of labor force; (2) the quantity and quality of natural i i 21Wallace C. Peterson, Income, Employment and Economic Growth, rev. ed. (New York: W. W. Norton and'COmpany, Inc., 1967), p. 401. 22Ibid., p. 401. 32 resources; (3) the quantity and quality of capital; and (4) the level of technological attainment of the society.23 There are other vari- ables that contribute to this determination. For example, the dis- tribution of wealth, the pattern of consumer tastes and some factors such as capital formation patterns that are essentially institutional by nature. The Quantity and Quality of Labor in Nigeria The importance of education in the determination of qualtity of labor cannot be overemphasized.2“ Because the Western type of formal education first penetrated the southern part of Nigeria, more educated Nigerians are to be found in the South than in the North. This phenom- enon is rapidly changing because of Nigerian's acceptance of education for all its citizens as a pre-requisite to economic development. Education is valued highly by the people of Nigeria. Nigerian families make incredible financial sacrifices to get their children educated. The multinational must adapt itself to this reality in the determination of its marketing mixes and the determination of manu- facturing machinery. What type of manufacturing plant will give the multinational the greatest contribution to Nigeria's economic develop- ment putting into consideration its level of education? Can the 23Ibid., p. 402. 2"Joseph L. Massie and Jan Luytjes, Management in An Inter- national Context (New York: Harper and Row PubTishers, 1972), p. 288. 33 multinational rely on its Nigerian marketing decision-makers to initiate marketing strategies that are consonant to the environment? It cannot be emphasized enough that the quality of education has some relationship with the quality of labor and consequently economic development. Although Nigeria has a large population, it does not neces- sarily mean that there is an abundance of labor. An abundance of labor will depend on the type of work and the geographical location of the manufacturing entity and marketing effort assignment. Most of the multinationals are located in the metropolitan areas whereas only about 20 percent of the Nigerians live in the metropolitan area. This means that most of the multinationals share this small amount of qualified people. The quantity of Nigeria's labor force and the geographic location of the manufacturing entity has some bearing on the level of economic development as it pertains to the peoples' welfare. For example, about 70 percent of the country's population live in rural areas. Of this, approximately 44 percent constitute the rural labor force drawn from the age groups of 15 to 55. In absolute terms, the agricultural sector is the primary source of employment in the country. Nevertheless, the sector is characterized by general under-employment due to the seasonal nature of agricultural activities and the divison of labor between the sexes.25 25The Third National Development Plan, 1975-1980, vol. 1 (Lagos, Nigeria: Published by the Central Planning Office, Federal Ministry of Economic Development, p. 64. 34 Education Historically, education has enjoyed a high priority in Nigeria's development planning. In the First National Development Plan 1962-68, it ranked fifth, judged by the magnitude of financial resource alloca- tion. In the Second Plan, 1970-74, the sector attracted more emphasis. Out of the gross public sector investment of about N2.000 billion, it accounted for N77.8 million or 13.5 percent of that total investment. In physical terms, the achievements of these past development efforts have, however, been very modest. Greater attention was paid to the consolidation and improvement in the quality of education at the various levels. To the extent that in some cases these improvements meant the raising of fees as well as merger, and in some cases, outright closure of substandard institutions, their immediate impact was a reduction in the number of schools and enrollment (Table 1).26 Educational Objectives The objectives of the educational program under the 1975-1980 plan are: l. to expand facilities for education aimed at equalizing individual access to education throughout the country; 2. to reform the content of general education to make it more responsive to the socio-economic needs of the country; 3. to consolidate and develop the nation's system of higher education in response to the economy's manpower needs; 4. to streamline and strengthen the machinery for educational development in the country; 26Ibid., p. 237. 35 .mvu .a . pewEQoFo>oo oFEocoom mo acuchF: Faceted .mumeo mcheaFa Fagucmu ecu Fa vongFnaa "nFcusz..momm4V F .Fo> ommF1mFmF cmFm u: on>wo FacoFuuz ugFgF ocF "eucaom ooo.mm e MFF.m~ o FFm.¢F m mFF.o m mam.F N FopoF vcmcw .56 e -- -- 1- 1- -- 1- 1- 1- 11 11 11 11 11 11 11 11 monchm>Fca 3m: Lao; omv.m 11 men F omm F 11 11 11 1- :chm Fo Auchm>Fc= mo¢.F 11 moo.¢ F <2 F mmm F 11 11 wa mo auFme>Fca ovm.m 11 Fum.¢ F mom.m F mm¢.~ F mmm F mwgmez mo prmgm>Fca oem.w 11 mFo.v F owm.m F emN.N F mmF.F F coumnF mo AuFme>Fca omm.F 11 oo¢.m F vmm.~ F mmm F 11 11 mommg mo qumcm>Fcz omm.m -1 mum; F mam F a: F -1 1- 3333.5 2me .625 om1mFmF mcoFuap acme mcoFusu acme mcoFusp acme mcoFuzu acme mcoFuzu mcoFuzqumcF acmeFFoccm 1FpmcF 1FFoccm -FumcF 1FFoccm 1FumcF -FFoczu 1FumcF -FFoccm 1Fpm=F zmz Lo .oz mo .oz 10 .oz mo .oz co .oz om1mFmF MFmF FFmF eme oomF muwmch mucwcF ucwomz muFucho>Fcz =F muumcmF ucmsFFogcu .F wFaaF 36 5. to rationalize the financing of education with a view of making the educational system more adequate and efficient; 6. to make an impact in the are of technological education so as to meet the growing needs of the economy.27 Private Consumption It is projected that domestic expenditure in both constant and current prices will rise from about $10.08 billion in 1974-75 to $24.48 billion in 1969-80 (see Tables 2 and 3). The implied average annual rate of growth is about 19 percent. If this growth performance can be sustained, the standard of living of the average Nigerian should double in seven years.28 This projection may be optimistic; however, the recent increase in oil prices and the avowed determination of the Nigerian people for economic development calls for some type of hope. The recent oil glut, due to Alaskan oil and the reduction of oil production in Nigeria from 2.2 million barrels a dayto 1.5 million barrels a day, is a cause for concern. Nigeria is a member of the Organization of Petroleum Exporting Countries and has enjoyed in the last five years a measure of financial buoyancy arising from escalated earnings from crude oil of which she is the world's sixth largest producer.29 Therefore, the aggregate quantity of its resources is large as compared to other Black African 27Nigerian-American Economic Relations, Jarboe Printing Co., Inc., 1978, p. 23. 28Third National Development Plan 1975-80, vol. 1, p. 45. 29Federai Nigeria 3 (No. l; April-June 19771= 14- 37 .Nm .q .chmanFm>mo oFeocoom mo FguchFz Focused .moFFFo mchcmFa Focucmu we“ xa umcmFFnza "chmsz .mommov F .Fo> .ommF1mFmF :mFa ucmsaoFm>mo chonmz chgF "moczom m.NFm.mN F.mFN.FN w.wa.mF o.¢mo.FF F.m¢F.mF N.¢mm.eF mmcha “execs on panacea uFummeou mmoco .o m.mmm.m m.mmF.¢ F.¢¢m.m F.mem.m o.mow.m F.0nmww mmoF>cmm copome1co: use muoom mo pcoasF mmmg .m m.m¢F.m F.FNm.m m.omm.F F.me.F m.me.F N.me.m mqu>cmm couomm1coc ecu muoom Fo mucoaxm .e m.omo.m N.Nmm.¢ N.mmm.¢ F.omo.m N.wFN.m o.ooo.m :oFFmELOF FmpFamu umeF mmoco .m o.omm.~ N.Foo.m o.mmm.m m.mFF.N m.mFF.F F.~F¢.F mcauFuchxm :oFFa53mcoo chFm geesecm>ou .N m.mom.FF F.mFo.oF o.owm.m 0.0mm.F ¢.omm.o «.mmm.o mczuFucmaxm :onaszmcoo mpm>Fca .F -1--- ...... .1............. 22:2. 5-1-1-1----1111111111 ow1oFmF mF1meF wF1FFmF FF1oFmF om1mmmF mu1¢FmF EouF mmoch mF1¢FmF um mczanchxm oFmeeoo mmocw .N mFamF 38 ms» Fa uwngFnzm .mm .a .FucmEQoFm>wo oFeocouu Fo chmwch Fugue u .muFFFo mcwccan Facucwu “.chsz .mommsv F .Fo> .ome1mFmF cmFa pcmsmoFm>mo Paconaz ULFsF "mocaom o.~mw.om m.oom.om m.om¢.mm o.mF¢.mF m.eFo.FF N.mmm.¢F mmcha pmxcme Fm “esteem oFummeou mmocw .o F.Foe.w o.mmo.o o.owo.m m.mom.m w.mmo.m F.omm.m mmuF>cwm Louume1co: new muoom mo mucoaeF mmmg .m m.mmF.FF F.oFF.oF F.¢¢F.m m.mom.m N.mmm.F «.me.m mmuF>cmm couomm1co: ecu muoom mo mucoaxm .e Fooo.mv Foee.~v Fomm.Fv Fom¢.Fv FOON.FV Fooo.Fv opm>Fca Fae Fomo.mv FoFm.¢v Fme.mv FmFo.mv Foem.mv Fooo.Fv uFFnam Fwy o.omo.m o.om~.F o.moo.m o.mo¢.¢ o.o¢m.m o.oom.~ :oFFmELoF FmFFamu umeF mmoew .m F.moF.m m.~wF.m N.omF.N ¢.¢om.m F.mow.F F.NF¢.F mcauFucqum cona53m=ou chFF acme:1m>ow .N o.mFm.mF o.me.NF o.F¢m.m m.NwF.m F.moF.F «.mmm.o mcspFucmaxm :oFFQ53mcoo chFm mum>Fc¢ .F 11111111111111111111111 FcoFFFFE zv1111111111111111111111 om1mFmF mF1mFmF wF1FFmF FF1oFmF oFumFmF. mF1¢FmF empF mmcha ucmcczu Fm mczchchxm uFumeoo mmocw .m anmF 39 countries. However, aggregate figures usually mask other considerations such as the distribution of wealth. Distribution of Wealth Information about the distribution of wealth in Nigeria is sketchy, but Nigeria has been known to be characterized by poverty and affluence. The most educated Nigerians enjoy at this time Government scale wages (see Table 4). These wages are pegged in the Government sector. This middle group is small; the exact count is not available. There are indications that this middle group will grow. The reason for this optimism is the continued growth of the economy (Table 3). Most of the working Nigerians share the responsibility of not only their nuclear family, but the extended relatives as well. He sends money to relatives frequently, thereby reducing the differential and at times equating spending power between the rural and urban population. Because purchasing power is shared, this group cannot represent any concerted economic purchasing group by themselves. This cultural phenomenon is not understood properly by some of the multinationals. Product pricing and packaging become very important considerations. For example, the cosmetics and cigarette multinationals are responding favorably in this respect by packaging products in the quantity that can be purchased given the peoples' purchasing capacity. The majority of Nigerians live in the rural areas and can be / characterized as being the lower income group. They are usually engaged in subsistence living and receive constant help from sons l and daughters or relatives who are living and working in the urban 40 Table 4. Government Wage Scale Salary Levels Grade Level ($) 16 ........... 19,872 15 ........... 17,644 14 ........... 15.724 13 ........... 13,968 12 ........... 12,403 11 ........... 11.174 10 ........... 10,291 9 ........... 8,544 8 ........... 6,662 7 ........... 5.203 6 ........... 4.032 5 ........... 3,052 4 ........... 2,323 3 ........... NA 2 ........... 1,651 1 ........... NA Source: West Africa, No. 3129 (Buckinghamshire, England: West Africa Publishing Co., 27 June 1977). 41 areas. This group can be said to have as much purchasing power as the middle group because the family's wealth is shared. The middle class and lower class can be differentiated by education and/or technical knowledge. This phenomenon can help the multinational in its promo- tional adaptation policies. For example, in product differentiation, one manufacturer with one product can vary the sales appeal to reach different market segments. The upper class is characterized by the professional group and wealthy businessmen. Although this group shares their wealth to an extent with the lower groups, they have discretionary income which can be used for luxuries. This is the traditional target of the multina- tionals. This group represents the elite group. They are also the smallest group. Level of Technological Attainment Nigeria relies on the Western World for its development plan. A large amount of the expenditure for economic development is geared towards setting up of manufacturing or assembly industries. The level of technology is still underdeveloped. The technological knowledge attained by Nigerians is learned from the Developed World. Nigeria will rely on the Western World for knowledge, training and research and development in this area for the foreseeable future. For example, "in the 1975-1980 Development Plan, an investment expenditure of N30.00 million will be devoted to the improvement of industrial research and the commercial utilization of the results of 42 industrial research. To this end, in order to hasten the indigenization of technology, steps will be taken to ensure that Nigerians are exposed to advanced technology so that they will be able to take over operations from the expatriates within the shortest possible time. The government will, in this connection, strengthen the industrial technology through the effective use of the industrial research institutions.3° Although the Nigerian government is working towards this end by formal education, the multinational can better achieve this diffusion of technology through competition in the marketplace. However, free enterprise which characterizes the multinationals' environment would be a better forum to technological innovation because of competition. Economic Aggregation Top management personnel at the headquarters of the multina- tional corporation have the responsibility of looking after the survival and growth of their subsidiaries. This means that the multinational must monitor the economic aggregations and then attempt to weigh the impact of its actions on the environment.31 For this reason, a description of economic aggregations in Nigeria is pertinent. Gross Domestic Product The real gross domestic product grew in Nigeria at an annual average rate of 10.6 percent between 1960 and 1973, reaching $23,243 million in 1975. The real income between 1973 and 1975 also grew at 3°The Nigerian Trade Journal 22 (NO- 4; 1975): 21- 31Arving V. Phetak, Managing Mulinational Corporations (Baeger Publishers, 1974), p. 31. 43 an annual rate of 9.6 percent. In real terms, the national economy grew by 10 percent in 1976/77 compared with the growth rate of 2.8 percent in 1975.32 The projected gross domestic product, valued at l974-75 factor cost is presented in Table 5 for each of the activity sectors and for the economy as a whole. The projected growth rate over the five year period averages 9.5 percent. The result of this cumulative growth performance is to raise gross domestic product at factor cost from a base of $14,411 billion in 1974-75 to $22.692 billion in 1979-80. In per capita terms, income projected to rise from 205 estimated in 1974-75 to about 290 in 1980 representing a cumulative real growth of almost 40 percent. Nigeria has a population of over 70 million.33 Inflation Inflation will be referred to in its broadest possible sense, that is any increase in the general price level which is sustained and non-seasonal in nature.3“ The Nigerian economy has, for the past several years,35 been characterized by steadily rising prices. In comparing the constant and current projections of the gross domestic product, Tables 6 through 11, it is clear that inflation is high. In 32To the Point International 5 (No. l; 9 January 1978): 18 33Third National Development Plan. 1975-1980. V01- 11 P- 43- 3“Wallace C. Peterson, Income, Employment, and Economic Growth (New York: W. W. Norton and Company, Inc., 1967), p. 384. 35Third National Development Plan, 1975-1980, vol. 1, p. 43. 44 co scumF=_x Fntmcma .achco mcFucha Facacmu an» en nocmcFaaa Amm~1.q .FucueaoFm>oO1oFso=oum "uFLosz .mommov F .Fo> .ommF1mFmF caFm acmeaoFosmo FucoFaaz uchF ”oucaom (ill oom.F~m.FF mom.omF mom.o¢F.¢ mmm.¢F mmm.¢¢m.m emm.mF mme.oem.~ oFm.eF mFo.~Fm.~ MOF.mF FouOF ucocw ooxqomo.~ omm.FN coedowm Fow.m moF.mom mcmaml oFF.mmF mFMJQ 11 11 :Loumox oo~.mFo mmm.~ FmF.eFe omm.F Fmo.mFe mFm.F moF.FFm Fow.F me.¢~F.F oem.o :Loumoz1qu 00F.mFm omm.F Fv~.om~ «Fe mmF.o¢~ emu mFo.mFF mmF woe.eF NFF moan; oom.FFm mmF.~ Fmo.m¢N omm NmF.m Noe 11 11 11 11 .1 mcm>Fm oom.va meo.F mmo.F~m mmv.F NNm.Fm¢ Noe.F FFN.MFF.F omm.m va.ome.F Fm¢.o :Lmumam1guaom oom.omo.F mv¢.w ome.wo~.F mmF.~ www.mFa Fem.m 11 11 11 11 FocucoU1umnm oo~.mmo.F mom.F~ omm.mmF FFw mFo.~m mwm 11 11 11 11 :cmumo31gucoz ooo.omm.F mom.m~ mmF.FFF NFF eFm.eeF com 11 11 11 11 accumum1cucoz oom.mFF mmm.vF ooo.ooF wee Nao.emF New mFm.Nm¢ «mo.~ mcm.mm~ oom.~ Focucmu1gucoz oo~.mm¢ mmm.~ Nov.FmF FFo oeF.omF me 11 11 11 11 ocuzx QOF.FFo.F ocm.FN oF~.o~F Nmm eoe.Fm aFm 11 11 11 11 ocox ooF.omF mom.~F FFo.FFN com mem.aFF oFF 11 11 11 11 :omuuFa1mzcmm acoeFFoccu msoocmmoFu acoeFFoccu mFoozum ucweFFoccm mFoo;um ucoeFFoccm mFoogom ucoeFFoccm mFoogum manuscco>ow 39: mo .oz eo .oz mo .oz mo .oz we .oz om1mFaF mFmF FFmF vmmF oomF mumocmF mucwcF acmowm mFoogom xcocha :F mummLMF acoeFFoccu .m mFamF 45 .om .a .FucmEQoFm>mo uFeocoom Fo AcuchFz chmumu .muFFFo mchcmFa Facucmu ms» Fa nmngFnam ”chmez .mommov F .Fo> .ommF1mFmF :mFa pcmsmoFm>mo choFumz uchF "muczom m.eme.m~ F.FmF.m~ m.NFm.F~ m.moe.mF m.wm~.mF F.oFe.eF FaaoF w.-e F.mmm F.~mm ~.mm~ F.me~ m.mF~ mouF>Lam emcee .FF m.m~m ¢.FFN m.eN~ «.mmF m.mmF o.NmF gpFamI .oF m.woo.F m.mFm N.Fme o.~em m.Fe¢ «.mFm conaozum .m m.omo.~ m.F_N.F F.Fme.F o.~mF.F F.Fmo.F m.Fom p=m5=L8>ou "Faemcmw .m o.mFo.F «.mFF e.mmm «.oue m.me o.m~m :oFoauF==EEOU ecu proamcmeF .F F.¢_e.m ~.e©m.F c.mom.F «.omm.F ¢.NmF.F N.FFm conancomFo .o N.me.m m.eme.~ m.mmw.F m.mmm.F m.~mo.P e.FNw conuchmcou new mcFuFFzm .m m.wmp ¢.oNF e.FoF e.Fw N.me F.mm sFaaam tape: ecm apFuFLpumFm .e o.mmm.m N.©NF.P m.me.F F.meo.F m.omm m.mmo mpcaeo use mcFeapuacacoz .m o.moo.FF 0.1mw.m o.eem.m m.mFm.n m.omm.F m.~mm.o mc_sgca=c new mchFz .N m.Fme.m m.Fom.e ¢.©Fm.e ¢.wmo.e F.ooN.m F.NFm.m mchch use Fcpmmcom .mcapFaoch< .F 11111111111111111111111 AcoF_FFE zv11111111111111-11-1-11 om1m~mF mk-mFmF wF1FFmF FF1on. oe1mFmF mF1eFmF Louuom “moo genome ucmcczu um Fuzuocm uFummeoo mmocu .m mFaoF 46 .mv .a .chwanFm>ma uFEocoom we Fcmech chmvmd .woFFFo mchcmFe chchu as“ so vagmcFaaa "accmsz .momwSV F .Fo> .omm_-mmmF cmFa pcmsmoFo>mo chonaz cLFgF ”motaom e.~mo.NN m.Fem.om m.Nmm.wp F.mmF.ep m.Fee.m_ F.oFe.eF FmSOF e.oem N.Nom m.mFN e.emm «.mmm m.mFN mauF>me Lacpo .FF e.wmm e.FFN m.¢NN ¢.mmF m.mmF o.NmF zmem: .o_ m.woo.F m.mFm N.Fmo o.~em m.Fee «.oem conmuaum .m m.omo.~ e.FFF._ N.Fme.F o.~oF._ _.Nmo.P m._om Seasccm>ow "Farmcmw .m m.mNF «.1mm w.Fme “.mme m.mmm o.m~m conmachesou use “Loamca1F .1 o.emo.F m.NFe.F o.mFm.F m.meP.F m.moo.F N.FFm :onanFmeFo .m m.meo.~ o.Fmo.F o.mem._ m.eF_._ F.¢mm 4.2Nw cowpuscpmcoo we. mcFuFFzm .m o.emF A.NNF e.wm o.om m.Fo “.mm sFaasm Lope; use spFaFLpomFm .e e.mmm.F m.mmN.F o.wmo.F o.me o.mme m.mmm mpcmtu new mchapumcacmz .m m.oom.m m.mmo.w m.mme.n e.eeN.F m.omw.o m.~mm.o mchngsc new mchFz .N o.mom.e m.mFo.e m.emm.m N.meo.m F.ome.m “.mem.m mcFech new Fcummcom .mczszoch< .F 1-11-11----------111--1 A:OFPFFE zv111111111111-111111111 om1memF mF1man mF1FFmF NF1onP 0F1mFmF me1eemF rogumm “moo genome mF1¢FmF pm Foanoca uFummeoo mmocu .F anmF 47 .mq .a .FucwEQoFm>oo uFeocoum mo Fcmech1chmumu .muFFFo mchchn meucmu mew Fa nwngFnza uchmsz .mommov F .Fo> .ommF1mFmF :mFm pcmeaoFm>wo chonmz nchF "muczom o.ooF o.ooF o.ooF o.oop o.ooF o.ooF F~BOF m1~11 .w1fl11 wma11. .m1fl11 wmgw1. .wqw11 mmuF>me emcee .FF ¢.F m.F N._ F.F o.F m.o SSme: .oF e.e o.¢ ©.m N.m ¢.N o.N conmuacm .m F.m m.m w.F F.F 1.0 m.o Seascem>oo "Fatmcmw .m N.m m.~ N.N m.~ e.N m.N coFumoFcaeeou ecu proamcaLF .A m.F N.F N.N o.F m.o N.o coFoaaFcmeo .o o.m F.m m.“ 1.0 F.o F.m conuzromcou ecu mcFuFFam .m N.o 0.0 m.o m.o «.0 e.o sFaazm raga: new spFuFLpumFm .e m.e N.o F.m N.m m.e F.e mucmcu new mthzuumcacmz .m m.Fm o.mm m.Fe «.me e.ee m.me mchngac new mchcz .N 0.0F F.o~ o.FN m._~ o.NN e.m~ mchch new acummcoe .mcauFachm< .F 1111111111111111111111 mechmocmav1111111111111111111111 om1mNmF ¢F1mNmF mF11FmP “~10FmF mF1mNmF mF1eFmF Locumm :onancamFo mmmwcmocma11umou coeomd mF1¢FmF no peacocg uFummeoo mmoco .w anmF 48 .¢¢ .a .FucmerFm>mo oFeocoom mo FguchFz chmumu .muFFFo mcFucha chucmu as» An cmcmFFnza ”chmsz .mommbv F .Fo> .ome1mFmF :mFa acmeaoFm>wo choFumz uchF "mucsom m.m m.FF o.oF m.m m.m ~.F mum; cpzocm szccm opmamcmm< .NF o.m m.oF N.oF m.m o.m e.m mmuF>cmm cmguo .FF o.o~ o.FN o.F~ o.FN o.mF o.wF sume: .oF m.F~ o.¢~ o.m~ o.~m o.FN o.mF :onmuavm .m o.mF o.om o.om o.o~ o.mF o.mF acmE:Lm>ow "chwcmo .m m.FF m.FN o.om m.FF m.mF m.NF :onmocheeou new pcoqmcmcF .F m.FF m.NF o.NF o.FF m.oF o.oF :onancumFo .o F.om o.¢~ o.m~ m.o~ o.wF ¢.¢F :onuacumcoo new mchFFzm .m o.FN m.m~ F.¢~ o.mN o.mF m.mF FFaaam cope: ecu quchpomFm .e o.mF w.m~ N.FN F.wF m.mF v.oF muemcu use mchzuomwzcmz .m m.m o.m m.m ¢.m ~.m F.m mchccmzc new mchFz .N o.m m.m m.m m.m o.m m.m mchmFF new Fcpmmcow .mczquchm< .F 111111111111111111111111 mempcmocmav111111111111111111111111 ow1mFmF ow1mFmF mF1meF wF1FFmF FF1mFmF oF1mFmF copumm mama cpzocu Fmacc< mmmcm>< umou Louomd mF1¢FmF Fm uuzeoca qummEoo mmoco mg» Fe mmpmm :pzocw chouumm szcc< .m anwF 49 .me .a .FgcmEQoFm>mo oFeocoum F0 chchF2 chmumd .moFFmo mcFFcha chpcmu any so umngFnza ”chmsz .mommov F .Fo> .ommF1mFmF :mFa acmeamFm>mo choFumz uLFcF "moczom o.ooF o.ooF o.ooF o.ooF o.ooF o.ooF quoF fll m4: .ml._|1 flFl miFl 1mI..F.I 83:3 55o .: ~.F F.F F.F o.F o.F m.o :ume: .oF ¢.m N.m F.m m.N F.N m.m :oFumoaum .m o.o m.m m.m m.o ¢.o m.o y:mEccm>om ”chmcmo .m ¢.m o.m m.~ m.N ¢.N m.m :oFquFc:EEou new pcoqmcmcF .F N.m m.F m.F N.F m.o F.o :oFusnFcumFo .o m.FF m.m m.m ¢.F m.m F.m coFuuscumcoo new mcFuFFzm .m m.o m.o m.o «.0 «.0 ¢.o xFaqzm swam; use proFcuomFm .e o.m F.F m.o o.m F.m F.e muemco new mchzuummzcmz .m F.Fm N.mm F.Fv m.~¢ ¢.¢e m.m¢ mcFFgcozc ecm mchFz .N 3: mi 0.; 9% 5% 4.8 82...; van Fcpmmcoe .mczszoch< .F 1111111111111111111111 mempcmucmav1111111111111111111111 ow1mFmF mF1mFmF mm1FFmF FF1oFoF mF1mFmF mF1eFmF coaumm :onsnFcFmFo mmmacmucma11umoo genome Femccnu pm pozeoca uFummEoo mmocw .oF anmF 50 .Fm .s .FusmEsoFe>eo oFeosoum mo asFmFst Fecmuem .eumeo mststs Fecusmu esp an uengFnss ”eresz .momeuv F .Fo> .ommF1mFmF ser “seemoFe>eo Fesonez ungF ”mocsom m.mF o.wF m.oF u.mF N.uF o.mF wees suzocm Feasse epemecmm< .NF F.FF F.mF o.mF m.FF m.mF m.mF meuF>cem ceseo .FF o.om o.FN o.FN o.Fm o.mF o.wF spFee: .oF m.FN o.¢m o.mN o.NN o.FN o.mF soFFeusum .m o.mF. o.om o.om o.om o.mF o.mF useEsLe>oo HFecesew .m w.m~ «.Fm u.m~ F.mm m.NN N.mF sonequzeeou use “cosmsecF .F F.o~ o.m~ N.NN m.om o.wF u.uF sonanFsmeo .u m.mm F.mm m.mm m.mm o.Fm N.mm sonozsumsou use msFuFFsm .m F.NN m.m~ F.4N m.e~ m.NF m.eF s_ss=m Laue; use seFuFLeuepe .4 m.m~ F.mm m.om «.mm m.um o.FN mpwegu use mstsuoemssez .m o.FF o.FF «.FF m.oF m.oF «.oF mstsgesc use mstFz .N I: as 0.2 NS 3: 5m 82...: use msamesoe .wgauFaqum< .F 11111111111111111111111 1 Femepseucesv 11111111111111111111111 ow1mFmF om1mFmF mF1mFmF mF1FFmF FF1oFoF eF1mFmF soyuem ewes spzosw Fezss< emecm>< pmoo segues psess:u ue pusuoss onmmEoo mmocw es“ Fo mmuem suzoso Feeouuem Fezss< .FF ereF 51 his 1977-78 Budget Speech, the Nigerian Head of State, Lt. General Olusegun Obasanjo, proclaimed that: Although much work still has to be done, I am pleased to report that developments in the economy 1976-1977 indicate that impressive progress was made in one National fight against the high rate of inflation which declined from 35 percent in 1975-76 to about 20 percent in 1976-77. An encouraging aspect of the prices development is that virtually all the major components of the consumer price index recorded slower rates of growth in the outgoing financial year.36 Cultural Factors--Manufacturing Traditionally, direct exports have necessitated little in the way of real involvement of the exporter with the importer. For a long- run profit motivated marketing enterprise, culture should be viewed as the totality of the environment to which it plans to operate and must, therefore, involve itself in it. If operations are to be successful, culture must be viewed as the "sum total of what human beings learn in common with other members of his group to which they belong."37 The Nigerian environment is characterized by tribe, language, extended family relationships, formality, authority bestowed on the elders and work and material gain. Comparing these cultural attributes with those of the peoples of the United States with Western Europe, Japan and other countries with which Nigeria trades, many differences can be seen. It is the inherent cultural differences between countries 36Federal Nigeria 3 (No. 1; April-May-June 1977): 7- 37Conrad M. Areasburg and Arthur M. Niehoff, Introducing Social Change (Chicago: Aldine Publishing Company, 1964), p. 15} 52 and the marketing and manufacturing actions that are the focus of this section. The multinational has no choice but to acknowledge these basic cultural differences. Cultural differences, particularly in the people's assumptions and attitudes, personal beliefs and aspirations, interpersonal relationships and social structure affect the traditional manufacturing management practices of a multinational company.38 Personal beliefs and aspirations. The beliefs of the people about right and wrong, their source of pride, their sources of fear and concern, the extent of their hopes and the relationship between the individual and the society must be strong environmental guidance to the multinational in the manufacturing sector. If a multinational is to be consistent with the environment in which pride is cherished, he must institute incentive programs, good wages, and would encourage group actions in the form of labor unions. The latter is particularly important because of the belief that the individual's needs must be, at certain times, subordinate to the whole group and because Nigerian society is group oriented. Social structure. If a multinational is gearing its operations for long-run growth in the Nigerian environment, factors such as urban- village-farm origins, determinants of status and social classifications of the people must be used to determine management decisions. For example, the urban-village-farm origins ought to determine equipment selection because of background in upbringing and because of the necessity in understanding the use and purpose of equipments. The 38Phatak, p. 138. 53 selection of equipment is very crucial in Nigerian manufacturing. The selectors of equipment for Nigerian manufacturing must determine the proper mix between specialization and intensive labor. Many of the workers in Nigerian factories are of the rural-village background and needed constant and vigilant supervision. The multinational must decide whether to trade intensive labor for more efficiency. Because of the level of education and especially technical education of the factory workers, selected machines should be suited to that level. The machine should also be flexible enough to accommodate economies of scale requirements necessitated by economic growth. One very important determinant in the developing countries is the large pr0portion of migration to the large cities that is taking place. In Nigeria, this large movement of the population has taken place in the last five years. The migration is from rural to the urban areas. Most of the rural people who migrate to the cities make up the manufacturing work force. These workers come to the cities with their attitudes and beliefs. Because the factory worker is usually not the educated Nigerian, the multinational must design the machines to ensure minimum repairs and frequent and constant maintenance requirements. One other cultural factor that would have necessitated the management to institute labor intensive manufacturing factories would be in terms of the Nigerian's orientation to group-work environment rather than individual work 1 environments. In the rural aeas, reliance to extended family structure and high individual reliance on group structures necessitated labor- intensive manufacturing entites. 54 Assumptions and attitudes. The assumptions and attitudes of people constitute, to a large extent, their reason for being. It is in this area that the Nigerian environment and the multinational, as it relates to manufacturing can see great differences. The profit- motivated multinational must then balance their goals when they are in conflict with the pe0ple's assumptions and attitudes. For example, what considerations can the multinational make in the area of manufac- turing because of the Nigerian's attitude towards time? Nigerian's attitude towards time is not characterized by the rigidity of adherence to exactness as found in the United States and Britain, or in the Western World. What changes are the multinationals making in the areas of production scheduling, materials management to accommodate this attitude dimension: The concept of time as viewed by the multinational is consistent with free-enterprise environment where the loss of time is viewed as an opportunity loss. The work force of the manufacturing enterprises is made up of rural-farm migrant workers. To many of them, it may have been the first time that they have worked together with Nigerians of other ethnic ' affiliation and Nigerians who speak different languages. In addition, he now works with "sophisticated" instead of the relatively simple equipment he is used to. Would his attitude toward work be compromised by the type of machine that is used? For example, would he be a better worker if a less sophisticated machine was needed? Both the Nigerian \ and the multinationals have different basic beliefs and attitudes. 55 Cultural Factors--Marketing The success of a manufacturing entity is affected by the perception of the product in the marketplace. The marketplace provides the firms with a guide for market action and the extent of marketing effort. Nigerian languages and people. The great variety of cultures and of physical types produced by the intermingling of the Nigerian people over time has made it difficult to develop a scientific clas- sificatory system for the peoples of Nigeria. For descriptive purposes, ethnic distinctions have been drawn on the basis of language, aided to some extent by evidence of similarity in custom or other criteria. Language is very misleading. For example, the majority of those listed as Fulani--the cattle ranching Nigerians speak Hausa. Therefore, some- times it would be inaccurate to give ethnic attributes to linguistic categories.39 However, linguistic categories will be used here for clear delineating differences. Style of living can be said to match linguistic differences. The Northerner has had Arab world influences and the Southern Nigerians have basically not intermingled with other influences. His style of living and cultural values are somewhat different from those of the Northerner. In recent times, there has been movements of Northerners to the southern regions and vice-versa. Moreover, the government's determination of maintaining compulsory education will further help 39James S. Coleman, Nigeria: Background to Nationalism (Berkeley: University of California Press, ), pp. 13-16. 56 to diminish the differences that have accrued by virtue of language, style of living and ethnic differences. Urban Nigeria. The relation of urbanization to economic development has always been an important topic in the literature on the problem of the developing world."0 Early studies of African urbanization, in the 19505 were concerned with the effects of indus- trialization and urbanization on traditional tribal society and with the rural migrant's adaptation of modern life in the town."1 Because of the belief that there is a relationship between urbanization and economic development, the urban areas represented progress and forward looking, and the farm-village represented traditional values and back- 2 The colonial masters believed that urbanization was an wardness.“ important part of the process of industrialization and modernization, and therefore, thought it necessary and desirable. Most Nigerians live in the village-farm environment. This urban phenomenon is especially predominant in the southwestern states. The nation's capital, Lagos, as well as the largest urban city in Black Africa, Ibadan,"3 is located in this state. The social structure prevalent in this environment is different from those found in the rural states. Also, the greatest intermingling between the different “°See UNESCO, Social Implications of Industrialization in Africa South of the Sahara, London, 1956. “'Gavin Williams, ed., Nigeria, Economy and Society_(London: Rex Collins, 1976), p. 55. “21bid., p. 55. “3Walter Schwarz, Nigeria (New York: Praeger Publishers, 1969), p. 8. 57 peoples of Nigeria take place in the urban setting. The urban setting also is characterized by a high number of educated Nigerians. The urban setting does not actually portray the Nigerian tradition. The multinational information base about the environment will almost always be based on the observations of the urban setting rather than both the urban and the rural setting. The infrastructure for collecting market information in Nigeria has not quite evolved. The Nigerian urban market can be a profitable market. The people in the urban setting in Nigeria are usually very willing to adapt to change. The urban individual was once a village farmer and had to adapt to the urban setting. For this reason, adapting to the multinational's products or services for his livelihood is a part of that adaptation. This fact alone is deceiving. The Nigerian consumer is, by nature, very conservative because of his rooted traditional beliefs and biases. Implementation of relevant marketing and manu- facturing strategies will have the possibility of a long-run positive economic effect if this once village farmer's adaptation to the multi- national's product and manufacturing is made without losing some of his rooted beliefs and biases. Interpersonal relationships. The Nigerian environment is characterized by extended family relationships, authority to the elders, importance of family obligations, respect accrued from group perception, objects of loyalty, tolerance to personal and group differences. The Nigerian market is characterized also by protracted loyalty. Promo- tional adaptation is particularly suited in this type of environment. 58 Promotional differential can convey this consonancy of multinational product and services to the Nigerian environment as it pertains to interpersonal relationship of the Nigerian people. Custom and tradition. In the marketplace, multinational should adopt a management system designed to monitor the customs and traditions of the people that it intends to serve. This is particularly important in crucial questions that pertain to product design. Product design is a key factor determining success in international marketing.““ Attitudes towards bargaining. The Nigerian shoppers believe in bargaining for the "real" price in the marketplace. Most market transactions are consummated in this way. The multinational non- negotiable pricing structure has always remained the multinational's mode of operation. To adapt to this phenomenon, the multinational must design efficient and fair systems which will direct an economic flow of goods and services from producers to consumers and accomplish the objec- tives of the society."5 To be effective, the multinational must perform those activities which direct the flow of goods and services from the producer to consumer or user to satisfy customers and accomplish the company's objectives. The non-negotiable pricing structure does not include the normal discounts allowed, if any. The multinational's attitude towards pricing is consistent with Western business habits. I"'Warren J. Keegan, Multinational Marketing Manngement (Englewood Cliffs, N.J.: Prentice-Hall,—Inc.,41974), p. 223. l'5E. Jerome McCarthy, Basic Marketing, 5th ed. (Homewood, 111.: Richard D. Irwin, Inc., 1975), p. 18. 59 One of the important reasons for non-negotiable pricing structure is that it affords the multinational with the minimum value base. Although non-negotiable pricing system is predominant at the manufacturer's level, the flexible price system is predominant in the retail and sometimes at the wholesale level. If the manufacturer wishes to maintain the non- negotiable pricing system, he must control the channel of distribution. For example. he can have a franchised system. However, bargaining is the practice in Nigeria and this practice replaces the non-negotiable pricing system as soon as the manufacturer sells his products to independent wholesalers and retailers. Consumer shoppinggpatterns. Nigerians usually purchase most of their products in a "market." A market is a place constructed in a section of the city where the seller and the buyer can consummate a transaction. Most of their purchases are made here, but many Nigerians buy from department stores, variety stores and even supermarkets. The multinational must evaluate its physical distribution based on this factor. Consumer shopping patterns and their buying habits should aid the multinational in designing their physical distribution policies. Such a policy will directly serve and meet the needs of the customer. Political-—Lega1 Strategy Formulation Understanding the legal implications of operating a multi- national organization is vital because of the restrictions and/or opportunities these laws will bear on the operation. Nigerian political situation since independence has been characterized by civil war and military coups. The political process 60 of free election has been withheld by the military rulers since the end of the civil war in January 1970. Therefore, in this report, government will be used synonymously with politics. Government The Government of Nigeria has been actively involved in the business environment since its independence on October 1, 1960. The Nigerian economy is characterized as a mixed economy because the mar- ketplace is characterized by free movement of goods, competition and free entry; however, the Government of Nigeria takes part in business enterprises and competes with other business firms. The Government's involvement is not deemed to be intervention because they are usually in the form of partnership with other firms. The reason why this arrangement has been necessary is because individual businesses in Nigeria cannot finance at this time these types of businesses because they require large investments. Government as a Snpplier of Collective Wants A private enterprise economy is inconceivable without a public sector in which the state satisfies so-called collective wants which cannot be taken care of in the private sector of the economy because no price can be charged for services rendered. Since private enterprises cannot operate where prices cannot be charged or profit made, the gov- ernment must step in, make the necessary arrangements, pay for them and distribute the costs among the citizens through taxation. 61 Often we take for granted the extent to which aids and spending programs influence market interaction between buyers and sellers. How- ever, it is not difficult to recognize the many government activities that help customers in their buying and business firms in the perfor- mance Of their marketing Operations. For example, market interaction could not take place without the protection Of private property by the courts and law enforcement. By providing transportation networks, in the form Of highways, railroads, waterways, and airway development and regulation, the government of Nigeria makes possible the low-cost trans- portation Of goods from point Of production and trade to points Of use and consumption. The Nigerian Government provides these services. There are collective wants which could technically be satisfied in the private sector because a price can be charged. Nevertheless, the Nigerian Government is involved because the nature Of production process favors Government ownership. This situation exists in the Oil and Oil-related industries, electricity, telephone, and telegraph. Another reason for the collective satisfaction Of wants, which could conceivably be taken care Of in the private sector, can be found in the fact that private demand Often tends to remain inadequate as long as it has to be satisfied at regular market prices. Outstanding is the case Of education. The demand by the people of education may be far too low either because incomes are so limited that there is no room left for educational expenses in the individual's demand schedule or else the person requiring education has an erroneous conception or does not understand why having an education is necessary. The Nigerian 62 Figure 2. Federal Government Allocations for Services 1978-1979 Service N Agriculture ..................... 83,225,940 Livestock ...................... 29,400,000 Forestry ....................... 13,210,000 Fisheries ...................... 2,566,000 Mining and Quarrying ................. 544,150,000 Manufacturing and Craft ............... 490,863,000 Power ........................ 509,863,000 Commerce and Finance ................. 13,880,000 Land Transport System ................ 641,213,000 Water Transport System ................ 240,314,000 Air Transport System ................. 155,311,000 Post and Telegraph .................. 294,260,000 Education ...................... 301,400,000 Health ........................ 49,573,000 Information ..................... 12,000,000 Labor ........................ 500,000 Social Development, Youth and Sports ......... 5,051,000 Water Resources ................... 245,785,000 Environment (estimate) ................ 10 Housing ....................... 120,705,000 Town and Country Planning .............. 132,851,000 Cooperatives and Supply ............... 10,500,000 Prisons ....................... 11,148,000 Defense ....................... 708,512,000 General Administration ................ 351,735,000 External Financial Obligations ............ 203,948,000 Source: West Africa, NO. 3129 (Buckinghamshire, England: West African Publishing Co., 27 June 1977). 63 Government, because it is highly interested in educating its people has been forced to take education, at least in part, out of the Nigerian's preference function and the private sector Of the economy. Government Taxation Multinational companies are allowed higher depreciation allowance for their capital assets in the early years Of operation under the "Companies Income Tax" Of 1961."6 The aim Of this policy is to enable the companies to be able to amortize their capital assets during their beginning years so that they can build liquid assets early. The initial percentages for the depreciation allowance for capital assets in the case Of machinery are now 20 percent. This is in addition to the annual depreciation allowance Of 12.5 percent."7 Profits and Dividends Capital directly invested in Nigeria is granted approved status after careful assessment Of its economic benefits to the country. Profits and dividends arising from an investment may be freely trans- ferred to the country Of origin in accordance with the exchange control regulations after payment Of income tax."8 In the 1978-79 Government directives, the rate Of company tax was increased from 45 to 50 percent. The existing level Of allowable dividend Of 16.5 percent has been “sNigerian-American Relations, Jarboe Printing Company, Inc., 1978, p. 78. l"’Ibid. “elbid. 64 increased to 20 percent (i.e., 40 percent gross on tax rate Of 50 percent).“9 Summary A description Of the Nigerian environment is essential in order to understand why executive actions are made. Marketing executive decisions are particularly dependent on the perception Of the environ- ment at the time the decision is made. These environmental factors also affect the firm's ability to make marketing decisions. The economic environment is considered important because Of relative potential considerations, long-run profit potential and the effects that economic conditions can have on developing marketing mix planning. Social factors relate to the cultural attitudes Of society, level Of education and technical skills and conditions Of product use. Political factors relate to the laws that can affect marketing deci- sions. Although there are no anti-trust laws in Nigeria at the present time, there are restrictions about market entry and taxes. The external factors influence and affect marketing decisions. These decisions are made after considerations Of the variables individually and in combina- tion with one another. Marketing decisions which are aimed at OPtl' mizing the marketplace also must consider such parameters as the resources of the firm and the existing business conditions. Although these external variables are beyond executive decision- maker control, they profoundly affect strategy planning. Some ”9West Africa, NO. 3129 (Buckinghamshire, England: West African Publishing Company, 27 June 1977), p. 10. 65 uncontrollable variables change faster than others. But all can change, requiring adjustments in plans. Marketing mix considerations are also influenced by the extent or lack Of resources possessed by the firm and by the Objectives it has established for itself. CHAPTER III PRODUCT STRATEGY FORMULATION Product Design Factors--Marketing Companies that Operate in one or more foreign markets must decide how much, if at all, to adapt their product and marketing mix to local conditions.1 Product adaptation is defined as altering the product to meet local conditions or preferences. Product adaptation involves the creation Of satisfaction because the product must meet real customer needs. Although product extension strategy has economic and management control advantages, the strategy does not necessarily produce products or services that are designed to meet fully the desires Of the customers. Rather it assumes that the target consumers in the home country of the multinational and abroad have the same desire and the same environmental conditions or can be made to adjust to sub- optimal product Offerings.2 Often in a foreign market product planning situation, multi- national corporations are faced with problems pertaining to product design, quality or some other feature Of marketing their product. 1Philip Kotter, Marketing Management, Analysis, Planning and Control, 2nd ed. (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1972), p. 477. 2Warren Keegan, "Multinational Product Planning: Strategic Alternatives," Journal of Marketing, January 1969, pp. 58-62. 66 67 Management is always not sure whether the demand will Offset the additional cost Of designing, producing and marketing the modified product. It was discovered, for example, that in the Nigerian market in appraising the Opportunity for product design, the manufacturer should pay special attention to the relative importance consumers attach to different product features. For example, the textile industry maintains a constant trial and error system for product design competitiveness. Because information gathering in the market- place is very difficult, the textile industry relies on the system of trial and error. The most successful designs have become traditional Nigerian product designs. Another example is found in the style Of the phannaceutical marketing in Nigeria. Although the basic ethical pharmaceutical products remain the same, packages have been redesigned to meet the needs Of the consumers in terms Of inadequate storage facility or in terms Of low level of education. Product features are the component elements of the package design--size, shape, mate- rials, color, text, and brand mark. A design strategy requires analysis Of product features. Business managers build into products features designed to influence customers. Taken together, these features constitute the product image. Almost without exception, the product variety carried by the multinationals investigated was very narrow. In some of the companies, they carried only a few singular litems. The multinational's reason for adopting this policy is that proliferation Of product features is interrelated with the production and financial functions Of a firm as 68 well as with other marketing activities. Production runs will be shorter and thus more costly if goods are manufactured in several varieties instead Of one. Financial risks and inventory costs increase as the variety of sizes and colors increase.3 The investigation revealed also the perception of the multinational as it pertains to product features. The investigated multinationals believe that the Nigerian consumer is a conservative consumer. Although generally an increase in variety will increase financial risks, so also may an increased marketing effort increase consumption in the marketplace given the existence of demand (present- potential and latent). Failure by the multinational to adapt to the different needs in a given product Of product line can be partially accounted for by the newness Of the Nigerian market and the political uncertainty since the end Of the civil war. For example, proponents Of few or singular variety argue that proliferation in the Nigerian marketplace will cause the demand for the present varieties to be diluted thus causing the economy greater hann. However, Nigeria cannot be said to be a country Of homogeneous 1 preferences and wants. Preferences can be attributed to the background ~ Of the individual. The different ethnic groups and cultural backgrounds in Nigeria can be attested by the many different languages spoken.“ 3William J. Stanton, Fundamentals Of Marketing, 4th ed. (New York: McGraw-Hill Publishers,71975), p. 213. “Although Nigeria has three major spoken languages, there are over twelve other spoken languages in Nigeria. 69 Because of the varied backgrounds a Nigerian can possess, the argument for product satisfaction by Offering preferred variety has some merit. The multinationals investigated carried one or few varieties and dO not Offer other varieties whose demand are present in the marketplace but not serviced by the companies. For example, in the cosmetic and the tobacco industries interviewed, the varieties are limited. The cosmetic industry Offers prestige varieties because it is thought that cosmetics are a luxury and the tobacco industry Offers western style cigarettes ignoring the other product lines such as pipe tobacco, mouth tobacco, and the varieties inherent in the differences found in the Nigerian environment. The fact is that perfumes and cosmetic products are widely used by almost half Of the Nigerian population who are Moslems and who traditionally use cosmetic items frequently. Also tobacco is widely used in all parts of the country in different forms, especially in the rural areas. Market segmentation. The lack Of depth of the multinational's product line can be said tO be a strategy Of market segmentation. Market segmentation is the categorical delineation of the marketplace in terms Of specific needs for a particular product. Significant modifications are made in the product to meet the specific needs Of one or more segments of the market. Market segmentation strategy assumes that markets are made up Of buyers Of various characteristics and that a single product will rarely meet the diverse needs Of a total market. Therefore, the firm develops products and services with attri- butes preferred by a smaller part of the total market. 7O Segmentation in Nigeria is based on geographical location, social and cultural background. Also, in general, the different languages can also be used as basis for segmentation. For example, the textile industry adapts tO broad regional product design differences in its marketing strategy. While the eastern and western states like bright but subdued colors, the northern states like white, bright yellow and dark colors. The texture Of the material in both cases are differ- ent. While the multinational broadly segments the market, it rarely practices product differentiation. The costmetic industry segments its market on the basis Of geography. The two markets aimed at are the affluent who generally live in the cities and the northern Nigerians who traditionally use cosmetic products. Again here segmentation is urban/rural. In the enamelware industry, basic differences between the three major ethnic groups is highlighted. The inscriptions in the enamelware are basically in ethnic languages. Traditional symbols that are char- acteristic of enamelware inscriptions are tailored to particular ethnic groups and consequently a particular geographic area. With many lines Of tobacco products, segmentation by geography is very difficult. However, because of the preponderance of preferences which has manifested itself in the Nigerian marketplace, specific brands may receive more marketing effort in a particular market area. For example, although the high priced brands are sold everywhere, the lower priced brands receive aggressive push in the rural areas as Opposed to the urban areas. It is felt that the closer the gap between price and 71 taste, the more the market niche is cultivated. Therefore, the tobacco industry has, to a degree, been successful in providing low cost tobacco products to the rural poor. In the tobacco industry in Nigeria, manage- ment actions are motivated by the consumers' environmental conditions. Product differentiation. In the first place, a high degree of competition has not yet been manifested in the Nigerian environment. This is because Of the few enterprises that are present in Nigeria. For example, American increased involvement in the Nigerian market only dates back to 1973. Therefore, instituting product differentiation in an economy Of relative scarcity may be a questionable strategy. Because the multinationals use segmentation based on geography and language, the differences that are implicit are Often ignored and overlooked. For example, the textile industry has totally ignored the many differences within a particular region. Although the Opportunities for expansion are present, economic feasibilities have necessitated delay. For example, the liquid diet industry found it nonfeasible to market yams in cereal form because the workers wasted the product during the manufacturing process. Another problem uncovered during the process of this research pertains to available people--workers who can direct a successful differentiation strategy. It was said that differentiation may mean production change and therefore increased capital expense and more training. At this time in Nigeria, product differentiation strategies are not practiced. 72 Packaging. A product is a collection Of physical, service, and symbolic attributes which yield satisfaction, or benefits to a user or buyer.5 A product can also generally be defined as a physical entity--a bundle Of potential services with many elements in addition to those inherent in the physical Object and finally as the wants and needs the product satisfies. Packaging can be viewed as an inherent part of a product. A package has two functions: containment and promotion.6 Containment is essential to efficiency in physical distribution, while the promotional aspects Of packaging operate to influence demand. Problems of containment generally tend to be tech- nical and reasonably Objective, such as requirements as to strength and size and resistance to moisture and other chemical elements, whichever is appropriate. Containment function is a very important element in packaging in Nigeria. This is because handling and protection functions are paramount in the Nigerian environment. A package protects a product during transportation and inventory processing on the one hand, and satisfies the ultimate consumers end use needs on the other. Such protection yields Obvious economic benefits to all parties by reducing damage in transit and diminishing perishability. This is particularly important since the Nigerian road system is still undergoing drastic changes from the colonial roads. Handling is very important in package SKeegan, p. 215. 6Stewart H. Revoldt, James D. Scott and Martin R. Warsaw, Introduction to Marketing Management: Text and Cases, rev. ed. (New YOrk: Richard D. Irwin, Inc., 1973), p. 267. 73 design considerations. It is not unusual for a package to be handled many times before it reaches the ultimate consumer. Even after it reaches the ultimate consumer, the package fulfills some functions. For example, nearly all the multinationals investigated view their packaging activity seriously. For example, in one Of the selling brochures of one Of the packaging companies responsible for furnishing packaging material for Nigerian industries, the following was stated: "At every stage Of production, quality is fully controlled and main- tained. Raw materials are constantly weighed and analyzed . . . colour printing register is checked . . . finished products are subjected to toughness tests.“ Well designed packages protect the products they enclose. These packages provide protection in the warehouse Of the producer, in transit, in the storage facilities Of wholesalers, on retail shelves, and in the hands of consumers. One Of the considerations Of the package designer then is to insure that the package furnishes the ingredients with adequate protection. Investigation revealed a strong trend towards designing packaging that is compatible with the environment that the product is being used in. However, when consumers select their product from the Open market or from store shelves, packaging becomes an important promotional tool and sales are enhanced by packages that are visible, informative, emotionally appealing, and workable.7 Investigation revealed a strong 7Dick Warren Twedt, "How Much Value Can Be Added Through Packaging," Journal Of Marketing 32 (January 1968): 58-61. 74 trend towards designing packaging that is compatible with the Nigerian environment. Packaging and the consumer. Consumer considerations play an important role in developing a package design. In Nigeria, con- ditions Of use and end use considerations are paramount. For example, the size Of the pharmaceutical products have been decreased because it is thought that larger sizes will increase spoilage, especially if refrigeration is necessary for preservation. Also, in the tobacco industry, the size of the package Of cigarettes has been reduced from twenty tO five. In the cosmetic and detergent industries, the sizes of detergent have been downsized almost to the size of a "cup" Of detergent. Also in the textile industry, the traditional eight yard cuts now are packaged at six yard cuts. The unit price versus package considerations are paramount to the Nigerian market. It is assumed that price considerations are pri- mary tO Nigerians and mostly for rural Nigerians. It is also assumed that effective demand is present. It is also assumed that unit considerations are primary because Of end-use considerations. Size and package is very important to the Nigerian ultimate consumer. This is because he usually buys in small quantities. The Nigerian consumer buys in small quantities partly because Of the absence Of appropriate storage facility and partly because of price considerations. Most Nigerian consumers regard price as an important factor because Of their low wages. He also buys in small quantities because he has learned to do so by watching the patterns Of parents, 75 relatives, and friends in their purchasing behavior. This investigation revealed a strong and concerted trend towards designing, packaging that is compatible with the conditions Of use and end use considerations as it pertains to the Nigerian consumers. Brand names, The package, product and brand complement one another and each has an important impact on product image.8 The seller seeking to Obtain the loyalty of existing customers or tO gain new ones wants to distinguish his products from those Of competitors. Since Nigeria is a young market and since competition is not very intense, branding is not used mainly as a competitive mix. Branding is used mainly for identification. This means that brand names are crucial for the attainment Of this Objective. When a seller chooses a brand name he is making an important one-time choice. Prices and advertising appeal may be changed but brand name is there for the product's life- time. The introduction Of a brand name compatible with the environment can be regarded as the stimulus for a learning process and the easier the process, the more readily the name should be accepted. The iden- tification Objective is particularly important because of the level Of education. Implicit in identification is the visual aspect of branding considering the low education environment. In Nigeria, where the English language is commonly spoken and Officially accepted, research results indicate that the majority Of the brands are English names and 8Glenn L. Narayane and Ron J. Markin, "Consumer Behavior and Product Performance: An Alternative Conceptualization," Journal Of Marketing 39 (October 1975): 1-6. words. For example, one Of the pharmaceutical companies requires that whenever possible, the brand name in a local country be meaningful to the people Of that country. The use Of traditional Nigerian names is rare; however, some multinationals will use English words or names that have pronouncements characteristic Of Nigerian sound (e.g., see Figure 3). Product Product Brandnames Bournvita 01d brandnames (international brands) Pronto T a omapep PoundO-Yamb Goody-Goodya Tom-Tomb Miki-Mikib Hip-Hipb c Bazooka Brandnames characteristic Of Nigerian sound Brandname recently extended to Nigerian environment aTomapep and Goody-Goody were introduced in 1966. b Tom-Tom, Miki-Miki, and Hip-Hip were introduced in the early 1970s followed by Poundo-Yam. CBazooka bubble gum is marketed as an international brand. It was introduced in the Nigerian market in 1974. 77 The tobacco industry has decentralized the function of branding, but import some Of its worldwide brands. The enamelware industry in Nigeria, for example, does not use branding at all. They rely on generic names and volume types. Generally, the Older brand names are still being widely recognized, but new products are being branded to reflect the Nigerian environment. Symbolic nature Of goods. It has been suggested by some that consumer goods are really social tools or symbols that serve as a means Of communication between the individual and his significant references.9 Making purchase involves, at least implicitly, making assessment Of this symbolism, Of deciding whether or not a given product symbol is consistent with the customer's perceived sense Of self or self—image. The purchase and consumption Of goods can be self-enhancing. While self enhancement results from a personal, internal intra-action process, the effect on the individual is ultimately dependent upon the product being a publicly recognized symbol. Because Of their recognized meaning, public symbol elicit a reaction from the individual that sup- ports his original self-feelings. Goods as symbols serve the individ- ual, becoming means to cause desired reactions from other individuals. 9The concept of goods as symbols has been discussed in the literature. For example, see Sidney J. Levy, "Symbols by Which We Buy in Advancing Market Efficiency," in Marketing Proceedings, ed. Lynn H. Stockman (Chicago: American Market Association, 19591, pp. 409-416; and Montrose S. Sommers, "Product Perception and the Perception of Social Strata," in Towards Scientific Marketing, ed. Stephen A. Greyer (Chicago: American Marketing Association, 1969), pp. 266-279. 1°John Douglas, George A. Field, and Lawrence X. Tarpay, Human Behavior in Marketing (Columbus, Ohio: Charles E. Merrill Books, Inc.,11967), pp. 47-64. 78 The old multinational symbols are widely used and new symbols Of local stature are not widely used in the multinationals interviewed. It was almost a concensus that because Of relative scarcity, use Of local symbols may not yet be the concern Of the consumers in Nigeria. Customer service. Customer service may be defined as all Offering Of value to an organization's customers or clients beyond the generic physical business Offering.11 This definition can be particularized to the Nigerian context if customer service will specifically be concerned with terms Of sale, that is, credit, delivery, discounts, and guarantees. In advanced economies, customer service is regarded as an integral part Of the "total product." Level Of customer service is regarded as an important differential advantage in the marketplace. However, in the less developed economies where relative scarcity is present, customer service is not considered a significant measure Of marketing strategy. This finding is true as it pertains to the multinationals investigated. gnegip. The Nigerian culture demands a strong relationship between the borrower and lender. This type Of transaction usually takes place in the spirit Of friendship or in the case Of a relation, in the spirit Of family strength. These types of transactions are usually closed affairs. The average Nigerian is not familiar with the bank or credit transactions because basic Nigerian attitude towards credit is negative. Although this attitude is changing, 11Alfred R. Owenfeldt, Executive Action in Marketing (Belmont, Calif.: Wadsworth Publishing Co., Inc., 1966), p. 599. 79 it is still not acceptable to engage in credit. The multinational also does not Offer a different motive for their action. Delivery. The Nigerian multinationals usually dO not offer delivery service to its customers. The channel customers make their own transportation arrangements. The reasons for the multinationals' action are as follows: 1. They do not want to be responsible for damages and pilferage. 2. They do not want to be responsible for insuring the products in transit. 3. Divestment Of total responsibility at the delivery point. For example, the Enamelware industry in Nigeria is mainly located in Lagos, but its customers are equally located in all parts Of Nigeria. It has a policy Of no delivery and its point Of delivery is in Lagos only. Under these conditions, although enormous advantages are present, the damage caused by handling is prohibitive. The common carriers are not regulated in Nigeria either by the Government or by themselves. Often damages cannot only be attributed to handling. The nature Of the roads is another important factor and mode Of transportation breakdowns is another. Order cycle and materials cycle considerations are not pertinent to the multinational since he sells F.O.B. plant. The multinationals investigated have not adapted their delivery policies to the Nigerian environment. Control Of finished products in transit by the multinationals will tremendously increase supply of needed items. Creating good warehouses in pertinent points will negate traveling long distances by the channel customers; this may reduce 80 damages and pilferages, thus increasing availability. However, this strategy may not be economically feasible in lieu Of the price decree. The tobacco multinational has geared its marketing effort to reaching their customers wherever they may be. Trucks, vans, and even bicycles are used by delivery agents to reach the desired customer. Discounts and allowances. Payments are encouraged on cash basis. Discount structure would have been appropriate because cash discounts are used to encourage prompt payment. However, Nigerian multinationals do not Offer any type of discounts. Offering cash or quantity discounts during periods of little or no competition and relative scarcity is not good economic business in the short-run. However, discounts and allowances are means Of reducing prices. Marketers grant discounts to consumers who are willing to accept a lesser bundle Of satisfaction than are consumers who do not receive the discount. Guarantees and warranties. Guarantees, express or implied, are promises made by a seller to buyers assuring them that they will receive certain services or satisfaction. Warranty Offers the pro- tection to the consumer against losses due to the purchase Of a defective product. Because Of the nature of the Nigerian market and because market information and interaction with customers are very hard to maintain on a constant basis, the multinationals inves- tigated have adapted to this situation by instituting very stringent quality control measures. Most of the multinationals investigated maintain high priority for quality control. It is felt that a good 81 quality product will compensate for constant maintenance and repairs. Making a quality physical product is more important to Nigerians than making promises in the form Of guarantees or assuring replacement of defective parts. The Nigerian multinationals that were investigated were willing to accommodate these changes, that is, changes that pertain to size, package, design, color and sometimes brand name. These types of changes have been characterized as minor adaptation.12 Although, not all the companies have made these changes, there was no Opposition to product feature adaptation. Product Design Factors--Production Manufacturing a product in a foreign country requires that the product be examined critically, deliberately and systematically from the point Of view Of the environment-~Nigeria. Figure 4 lists the major factors that need to be considered in relation to the design of a given product. Level Of technical skills. The Nigerian multinationals investigated placed emphasis on training Nigerian workers to be able to run the machines and are now beginning to train maintenance workers. Training Of local employees including maintenance workers is partic- ularly a difficult job for the multinational because Of the level Of 12Ralph Z. Sorenson, "An Analysis Of Competition Among Local and International Firms in Two Central American Industries (Ph.0. disserta- tions Graduate School Of Business Administration, Harvard University, , p. 209. 82 Figure 4. Demographic, Market, Environmental-~Product Demographic, Market, Environmental Product and Manufacturing Level Of technical skills Product simplification Level Of literacy Remaking and simplification Attitude towards maintenance Change in tolerance Availability Of materials Change in product structure Source: Adapted from: Richard D. Robinson, "The Challenge Of the Underdeveloped National Market," Journal Of Marketing, October 1961, p. 22. general education and awareness and because culturally, Nigerians do not regard maintenance as a crucial factor in decision making. However, the Nigerian manufacturing worker must adapt to change in machinery when the need occurs. Most Of the machinery used in Nigeria comes from the developed world and investigation revealed that the relationship between speed Of line and rate of production is very much considered because of the problem of level of technical skills in Nigeria. For this reason, labor intensive machinery is used in Nigeria. In the Enamelware and the textile industries, the types Of machines used required many workers. Use Of labor intensive machinery is necessary because Of the low level Of technical skill available and also because culturally, Nigerians are oriented towards group work rather than the individual work environment. The multinationals investigated also indicated that 83 the level Of technical skill determined production Of some types Of product line. For example, the pharmaceutical industry only produces certain brands and types in Nigeria because of the nonavailability Of technical people to do the work that is necessary for the completion Of the product. The textile industry only produces certain kinds and grades Of products too. The liquid diet industry has abandoned many lucrative products because Of lack Of qualified technical people. As much as the multinationals are using labor intensive machines and in most cases produce few items and varieties, the low level Of technical skills has been a deterrent to multinationals willing to penetrate a market need. For example, one Of the companies investigated could not profitably market a local staple because the machine workers were unable to Operate the machine properly. In the process of manufacturing and packing this staple, a large proportion of the product was being wasted and therefore not economically feasible to be made. Because of the great amount Of handling that takes place in a typical Nigerian industry, quality control is being instituted by some of the multinationals. Quality control is also necessary because of the traditional long channels. Long channel also necessitates many handling and quality controls at the originating point and is being practiced by the Nigerian multinationals. Level of literaoy. The machines that are used are as useful as they are understood to be. The workers employed in these industries are required to complete the grade school level for the assembly line jobs and their supervisors are usually higher in education and usually 84 given special training. The level of literacy is considered to play a part in determining how simple the manufacturing process should be. For example, the textile industry, which is usually low paying and attracts workers, recently migrating from the rural to the urban area, uses very simple machinery for the purpose of fulfilling their Opera- tion. The cosmetic industry also uses simple machinery and its workers are usually paid less and have less formal education. Knowing the level Of literacy is particularly important because of the diversity present in the Nigerian environment. The multinationals are adapting themselves to employing the available work force at the expense of speed and economies Of scale. Level of maintenance. The machinery used for Nigerian manu- facturing has high maintenance rates. The situation in Nigeria requires that the multinationals introduce machinery which will have low mainte- nance rates and less incidence Of repair. This is because of the low level of technical skills and education available. Another reason why low maintenance rate is necessary is because of the Nigerians' attitude towards maintenance. Maintenance Of physical Objects is not held as strictly as an American or as a German would. Maintenance is not as respected as and as important in itself as the physical Object. Because of the Nigerian attitude towards maintenance, a low rate maintenance machinery would be best for the Nigerian environment. However, research reveals that the machines used in most of the cases had high maintenance rates. This type Of strategy does not go well with the low level Of education, technical skills, and the attitude Of the Nigerians towards maintenance. 85 Availability Of materials. The aspect Of overall logistics concerned with the procurement of raw material, parts, and merchandise for resale is materials management. Materials management is essential to manufacturing because timely and economical delivery is necessary 3 Nigeria relies tO maintain efficient and continuous production.1 on the multinational's world resources for the supply continuity Of the essential products, especially components, spare parts and capital equipments. Most Of the items imported cannot be made in Nigeria. The items that are available in Nigeria, for example, cotton and cocoa, are used by the multinational in Nigeria. However, some products are imported, for example, spare parts. Some Of the multinationals engage in backward integration. It is felt that backward integration will help in assuring supply continuity. TO avoid erratic availability, it is deemed necessary to establish and maintain a dependable source of supply. They also encourage private independent suppliers by providing necessary advice with regard to the said material. For example, this strategy is practiced in the cosmetic, textile and the tobacco industries by encouraging the maintenance of their respective high quality raw material. However, the lack Of availability Of needed material is also a deterrent to adapting to the environment. Most of the multinationals investigated agreed that their product-mix would have had more depth 13Donald F. Bowersox, Logistical Management, 2nd ed. (New York: Macmillan Publishing Co., Inc., ), p. 65. 86 and breadth if needed raw material and component parts were locally available. Summary The multinationals investigated exhibited interest in making their marketing Operations compatible with the environment and are more apt tO respond in matters relating to the color, taste, size/ weight, guarantees, package, and sometimes brand name Of a product in the Nigerian environment. In almost all the cases, warranties are virtually not given. However, most of the multinationals investigated have maintained unchanged, the trademark, quality, technical specifi— cations, symbols, and sometimes brand names. It is believed that the changes made by the multinationals are changes made specifically for the Nigerian environment and which by themselves would not have any negative difference in the multinational's world operation. These u 110 HOW- types Of changes have been characterized as "minor changes. ever, the multinationals have not changed areas which they believe will affect or disrupt their world Operation. These product features which have not been changed are deemed to be very important because they are standardized. That is, the same feature is used in more than one country. By not changing these features to meet the needs of a specific country, the multinational will enjoy the economies of scale, reduced cost and consistency all over its market. ll'Sorenson, p. 209. 87 In manufacturing, the multinationals recognizing the cultural bases that can be important in manufacturing, have adapted their man- agement procedure to suit. However, the machinery for production is made in the develOped world, and the maintenance Of the machine is largely in the hands Of non-Nigerians. CHAPTER IV DISTRIBUTION STRATEGY FORMULATION Decision makers in every marketing channel establishment are continuously challenged by changing environmental conditions. This chapter will examine the impact of demographic social and economic changes and technological deve10pments on the structure of the mar- keting channels in Nigeria. In addition, government intervention and regulations alter the flexibility of decision making in channel rela- tionships. These changing external conditions require the development of managerial approaches for handling responses to environmental pres- sures as well as the recognition that the various demand and supply situations created by environmental changes lead to variations in the channel decision required. The environmental conditions in Nigeria aare recognized by the multinationals as having great impact in the irnplementation Of effective and efficient marketing channels. For example, the degree to which a firm can effectively focus its mar- ln1—1—+;om< ‘ UMHDJUCDMHZH I Manufacturer] ‘—J Independent [Wholesaler k — l Manufacturer _ .rJ Independent Wholesaler Independent Retailer 1 I Retailer} Small Independent Retailers 111 producer Of liquid diets, uses sounds that are acceptable to most Nigerians. For example, see Figure 8. Nigerians are fond of two vowel words and the multinationals interviewed have started changing their brands. It is noted in Figure 8 that most Of the changes in names are just recent. The pharmaceutical industries that were inter- viewed have two different views on this topic. The American multina- tional view is that health products' names and brands should be standardized so as to assure worldwide credibility and image. The American multinational ruled out the geographic branding strategy except where such is beneficial tO the corporation worldwide. The Swiss pharmaceutical multinational view the sale Of/and use of health products in tenns Of the customers' everyday environment (see Figures 8 and 9). Sometimes branding may not be specifically important in the Nigerian market. For example, in the textile and the enamelware industries, the physical appearances Of these products make up for the local language branding. These products are amenable to implicit promotion because local languages or images or proverbs are imprinted or engrained in the products. For example, the enamelwares used in Nigeria have decorations and written words in local languages. It is not uncommon to find popular words or pictures or rules to be engraved or imprinted into these products. The products themselves are amenable to use in continuous promotion especially since Nigerians generally like bright colors. The products generally sell themselves. The cosmetic industry, one of the vertically integrated multi- nationals, use both local and standardized branding. For example, 112 Figure 8. Nigerian Product Brand Names Product Name Bournvitad Pronto Tomapep (R) and (G)a Poundo Yamb Goody-Goodya Tom-Tomb Miki-Mikib Hip-Hip ButtermintC Bazookab aTomapep and Goody-Goody were introduced in 1966. * b Tom-Tom, Miki-Miki and Hip-Hip were introduced in the early l970s followed in 1974 by Poundo- Yam and Bazooka. Bazooka is marketed as an international brand. CButtermint, the company's newest product, was introduced in 1976. d . . . . Bournv1ta 15 an 1nternat1onal brand. 113 Figure 9. Ciba Pharmaceutica1--Brand Names Variant Standard Trade Mark Antasten ................ Antistine Cibalen ................ Cibalgin Cibalena ................ Cibalgin Desverin ................ Desferal Elfanex ................ Adelphane-Esidrex-K Eplusim ................ SpasmO-Cibalgin compositum Ermonil ................ Yermonil Esidrix ................ Esidrex EspasmO-Cibalena ............ SpasmO-Ciblagin Espasmoplus .............. SpasmO-Ciblagin compositum Follicyclin .............. Ovocyclin Gammacorten .............. Millicorten Laxaform ................ Peristaltin Locorten ................ Locacorten Losalen ................ Locasalen Mertandren ............... Perandren Mexafe rment .............. Mexase Microcyclin .............. Anacyclin 101 NeO-Bradoral .............. Bradoral Nuvacthen ................ Synacthen Orisulf ................ Orisul Otriven ................ Otrivin Perandrone ............... Perandren Pericianal ............... Nupercainal Psocortene ............... Locacorten Tar Regitol ................ SpasmO-Cibalgin compositum Rilatin ................ Ritalin Rogitine ................ Regitine Salena ................. Locasalen Serpasol ................ Serpasil Spasmoplus ............... SparmO-Cibalgin compositum Tacital ................ Tacitin 114 because its target market is made up Of the urban dwellers of the western part of Nigeria and the Nigerians Of the northern part of Nigeria, this multinational uses local northern or Hausa names for some products and the standardized name for the urban market. The decision of the language to be used for a product with markets in the urban and rural areas must include the consideration about acceptable languages in specific areas. For example, English is the predominant language used in business transactions and adapting to this environmental factor will be acceptable in the urban areas whereas it may not in the rural areas because Of their level Of education and their strong entrenchment in their traditional norms and traditions. Cultural beliefs and aspirations. The best type of promotion to the rural Nigeria is through their trial and then acceptance of the product. It is very difficult to convince rural people through the use of media. First, they do not own televisions, only very few own radios. They rarely read the newspaper; the few that do, do so because of the news value, not the promotion that may be contained in the paper. Magazines in most parts are only sold in the cities. 50 in order to convince the rural villagers about a product, the product must satisfy a specific end use. For example, the tobacco in Nigeria is passed out to visitors in one's home and it is used as part Of social- izing. The end use is twofold. First, it satisfies the entertainment beliefs of the people; second, the type Of tobacco used completes positively the socializing function. This is why the tobacco industry 115 does have a good future because cigarettes are not only for smoking; they satisfy other functions too. Another example can be found in the cosmetic industry. Cosmetics among the Moslems Of Northern Nigeria are not viewed only from its aesthetic functions alone. The use of cosmetics is implicit in the traditional belief. This is why the cosmetic industry gives special attention to the Moslem market and tries to differentiate by color, smell, and package. Social structure. In Nigeria, social structure is based on age-tradition, money, income and education. The multinationals that were interviewed were questioned in regard to their selection of middlemen and the extent Of reseller support anticipated. Although level Of education and general understanding Of business and the money income were generally important in the multinational's choice Of middle- men, age and cultural standing in the community was the most important criteria. Selection of middlemen is based heavily on age plus factors like education and money wealth. Also this goes for the Old wholesalers. Those wholesalers are automatically targeted as a channel mostly based on their long standing in their communities. For example, in the franchise system used by the tobacco industry, most of their dealers' mean ages were above forty-five.3 In addition, especially in the northern part Of Nigeria, these dealers are devout Moslems and are entrenched in the traditions Of their environment and their community. Also, in the liquid diet industry, most Of the customers have good standing traditionally with their communities. In the textile industry, 3Information received from an official Of the tobacco industry in Lagos, Nigeria. 116 the traditional vertically integrated channels are used because Of their long establishment in the Nigerian community. These wholesalers have been in Nigeria for at least fifty years and have established long standing ties with the people. This means that the selection Of the resellers or the wholesalers is crucial in the Nigerian context. The mere selection Of the reseller following the Nigerian culture of age and long standing automatically assures promotion Of the product. These wholesalers or resellers are drawing grounds for other whole- salers and retailers that product lines carried by these wholesalers virtually sell themselves. In the pharmaceutical industry, the same strategy is used. In interviewing two pharmaceutical multinationals, it was disclosed that the credibility that Nigerians give to age plays a big factor in their sales strategy. For example, the salesmen are told to use soft sell because hard selling to Older doctors and pharmacists may produce adverse effect to the selling Objective. It is also thought that the Older doctors serve as references to the younger ones and that any adverse statement about a company by him may be literally taken for its face value by the younger ones. The selection Of resellers and the approach is crucial in the Nigerian environment. Urban/rural. The urban/rural delineation can be very important promotional strategies. Although there is limited use Of advertising media like television, newspaper, magazines, and mail, their use is usually limited to a large extent to the urban areas. The cosmetic, textile, and tobacco industries make very limited use Of these media 117 in the urban areas. The outdoor advertising is predominant in the tobacco industry in the urban areas. Bright colors will help expose product especially in the retail "Open markets." Most Of the Older Nigerians live in the rural areas. The demography of the urban areas is characterized by young and more edu- cated Nigerians. In terms Of personal selling, the same consideration given with respect to social structure is given here; however, the approach to personal selling in the urban areas is different from the approach used in the rural areas. For example, the approach strategy in the urban area is that Of convincing while in the rural area, awareness and use direction are emphasized. For example, the textile multinationals use the same wholesalers. Therefore, one of the textile industries competes on the basis of selling designs to the wholesalers before it makes it, in which case almost everything they make is sold. The textile industry is forced to be conscious of the choice the people will like. Lifestyles of the Target Customers The Nigerian consumer usually buys in small quantities. This is partly because of the absence of adequate and proper storage space. This is also partly due to low disposable income,” especially as it pertains to wealth distribution due to extended family considerations. Therefore, size considerations in the Nigerian environment are stra- tegic. Large sizes Of products would have the effect of discouraging l'Figures on disposable income of Nigerians are not available. 118 purchase first because Of lack of space and second because Of the high unit price. Consumption habits are also very important in delineating what sizes should be produced. The multinationals inter- viewed were particularly sensitive to this topic. The pharmaceutical industry promoted dosage sizes to the doctors because they felt that the level of education is low and that use directions may not be fol- lowed properly by the consumers Of ethical drugs. The American multi- national interviewed used this strategy in its personal selling effort. The tobacco industry is promoting the ten package and the five package cigarettes. This package consideration is especially important in the rural areas where cigarette smokers purchase one cigarette at a time from street hawkers whose average margin on a twenty package is about five cents. In the enamelware industry, lifestyle considerations in pro- motion are very necessary. Sizes of the enamelware are a strategic decision. Unlike the tobacco and the pharmaceutical industries, large sizes Of enamelware are condusive to the Nigerian's lifestyle. First Of all, Nigerians have large families. Second, polygamy is widely practiced both in the urban and the rural areas. In the northern part of the country, the Moslem law permits more than two wives. Therefore, small sizes Of enamelware will not satisfy the need of a large and polygamous family. Moreover, Nigerian families will generally eat out Of one large dish.5 The type Of enamelware is also an important 5This practice is prevalent in the Ibo and the Hausa culture. 119 consideration for promotional purposes. For example, durability is considered important because Of the Nigerian use conditions such as cement floors and shelfless kitchens, and lack Of adequate storage facilities. Catering to these factors in themselves, provides enamel- ware multinationals with built-in promotion since media promotion may not have a positive effect because Of the buyer's level of education, especially in the rural areas. Summary The Nigerian subsidiaries Of the multinational corporation regard language as being important to the Nigerian market although care is taken not to alienate the ethnic groups by the use of a sectional language for branding and/or promotion. For this reason, some multinationals have used sounds characteristic Of the Nigerian. Because Of the uniqueness Of the Nigerian culture compared to the Western culture, and because of the general low level of education, the multinationals have, to some extent, adapted their resources and effort to the Nigerian situation. Respect for age is generally respected and promotional activities are to some extent geared to highlight respect for Old age. The urban/rural delineation has special significant problems for the multinational. Promotion in the urban areas is, to some extent, geared towards the young. This is because most Of the retired and older people usually move back to their respective villages. Also, in the urban areas, the level of education is higher than in the rural 120 areas. For this reason, the multinationals use radio, television, and newspapers in promotion. However, in the rural areas, where about 80 percent Of the Nigerians live and where the level Of education is generally lower, personal selling is usually highlighted. Usually the selection of the company sales representative or the franchised dealer is a respected, usually Older citizen Of the given area. The selection of this individual is of vital importance because initial product acceptance chiefly depends on the credibility Of the franchise dealer or the manufacturer‘s representative. Promotion in the Nigerian context must weigh heavily on the urban/rural delineations. CHAPTER VI CONCLUSION As outlined in Chapter I, the points Of issue in this study are: 1. TO what extent are the manufacturing multinationals Operating in Nigeria adapting their manufacturing and marketing activities to reflect the Nigerian environment? In other words, what are the multinationals doing in their marketing decisions and how does it reflect the environment in which it is operating? For example, what type Of distribution channel is most feasible in Nigeria given the prevailing circumstances, or what type Of promotional mix or price and price ranges are used in lieu Of the level of income, SOCiO- cultural dimensions, Or what type of machinery can best suit the Nigerian environment in lieu of the level of education Of the people? The question that would be addressed is that which would concern what is being done by the multinationals and whether these actions are compatible with the environment in the areas of manufacturing, product, place, and promotion. Price will not be considered because Of price control instituted by the Government. 2. To what extent are the manufacturing multinationals operating in Nigeria adapting their manufacturing and marketing activ- ities to reflect the Nigerian environment and to what extent can these 121 122 changes be said to be fostering a non-dependence relationship? The extent to which it fosters a non-dependence relationship begins with changes adopted for reasons of environmental conditions. In other words, are the changes made for the reasons Of environmental conditions? For example, if a multinational builds market-positioned warehouses, could it be because the road or the transportation infrastructure is poor? Changes in market operation which are made so as to assure availability in spite Of the poor infrastructure is said to foster non-dependence. 3. Is the multinational's ability to adapt to the Nigerian environment affecting the structure Of the decision-making system? In other words, how does the structure Of the multinationals affect their adaptation policy in Nigeria? 4. Is there any relationship between the length of existence of the subsidiary and its adaptation polices? The issue here is that which pertains to the cultural aspects of adaptation. Have the "old" subsidiaries subscribed to adapting to the environment in which they have invested a long time period? Before we can determine whether any of these questions have been answered, a review will be made of the major findings presented in Chapters II, III, IV, and V, and attempt to conclude why a particular marketing mix is used or not used. As summarized in Figure 10, one can see the first two points of issue are delineated. Many questions have been answered. These are the questions that pertain to changes which have been characterized 123 Figure 10. Market Mix/Manufacturing Analysis Decision Areas Target Market Product Distribution Promotion Market Segmented market/ Imitation of prod- Intensive distri- Push strategies is strategy region, language. ucts produced else- bution is consonant most suitable because Product differen- where in the world. with the environment promotional media for tiation is rarely because of the peo- "pull" is not used. ples' buying habits. developed. Market Market is viewed as Product/market Selling requirements. Market characteristics emphasis distinct within the placement is pre- for example. package and product attribute Nigerian environment. ferred. Selling size. is emphasized. promotion are not of Demographic dimension product charac- Market requirements priority concern to is used to delineate teristlcs are not are not regularly the multinationals. separate markets. emphasized. considered. Personal selling and Cultural dimensions selection of franchise are implicit and are dealers are of prime considered given. concern to the subsid- However, target iaries. Training of markets are usually sales force is neces- defined from the dem- sary because of the ographic standpoint. level of the workforce. Control NO market measured. Product/market in- Proper evolution is The results of adver- of firket information formation is not not taking place tisementare very diffi- effort and communication is solicited because because of apparent cult to measure because not yet developed. of lack of proper lack of the right the level of the under- comnunications net- information on standing in the language work in Nigeria. which to plan. in which it is written Also because of and because of relative apparent scarcity, scarcity of these goods. there is no incen- The emphasis on using tive on the part of elderly distributors the multinational give rise to some market to seek it. consolidation and con- certed marketing effort as a result. Product Because of relative Design changes in Nigeria's infra- Since most Nigerians design scarcity in the the areas of: structure is in its live in the rural areas, Nigerian market, the 1. Packaging infancy. However, word of mouth is best consumer is not yep 2. Labeling since most sales are suited to the situation. interested in physical 3. Branding FOB Plant, product especially with low product changes refleca 4. Unit size design should con- level of education. The ting his environment. 5. Package size sider quality as product design is very The changes made are are commonly seen. implicit because of important selling point irrespective of the In many cases. the the bad road system but rarely are they physical product. For physical product is and the amount of evoked. Subsidiaries example, brand, sell- npp changed. product handling in do not see any incentive ing techniques. an intensive channel. in using advertising since relative scarcity of their product exists in the marketplace. Channel Although the market in Changes in packaging Manufacturer's ware- Using the channel mem- consid- the rural areas may be are made based on houses serve as dis- bers as a promotional erations responsive to certain channel considera- tribution points. source is achieved products, decisions tions. Long channel Other subsequent because alternative about the channel are is dominant in Nige- transfers are made choices are scarce. made: ria. High damage in small quantities Product receives unso- 1. On the basis of results as a result by channel customers licited word of mouth urban location and of accidents and because Nigerians advertising at the where it can be packing methods. buy in small retail level. Design controlled. quantities. considerations also 2. Location-prefer- count on the private ably the urban dealers and the manufac- area because it turer's representatives is thought that to represent certain there is a captive pride and cultural role market there. there by assuring market acceptance of the prod- uct based on that. Market Knowledge about pro- Use considerations Manufacturer has no Product package at the infornm- file of target market are difficult to control over product consumer level serves tion and is not available. canmuficate because and promotion of prod1as promotional device. promo- Information about of level of educa- uct once the goods Word of mouth is very tional market is difficult tion of user. Main- are sold. Manufactur- important because of design to get especially when tenenance policy is er cannot protect lack of available media the multinationals are located in urban area only. Market close- ness is not practiced. Urban markets are regarded as target markets most of the time. difficult to cannu- nicate because of Nigeria's attitude towards maintenance. Quality monitoring difficult to implement. product image or design promotional messages consonant to this desired image. Sometimes manufacturers are unaware Of where and by whom the products are used. Adequate channel customer information profile and because of diffi- culties in comunicating to the target consumers. is not kept 124 Figure lD--Continued Decision Areas Target Market Product Distribution Promotion Manufacturing Market Knowledge about Use considerations Manufacturer has Product package infar- profile of target are difficult to no control over at the consumer mation market is not communicate product and level serves and pro- available. Infor- because of level promotion of as promotional motional mation about mar- of education of product once the device. word design ket is difficult user. Maintenance goods are sold. of mouth is to get especially policy is diffi- Manufacturer very important when the multi- cult to communi- cannot protect because of lack nationals are cate because of product image or of available located in urban Nigeria's atti- design promotional media and because areas only. tude towards messages consonant of difficulties Market closeness maintenance. to this desired in conmunicating is not practiced. Quality monitor- image. Sometimes to the target Urban markets are ing difficult to manufacturers are consumers. regarded as target implement. unaware of where markets most of and by whom the the time. products are used. Adequate channel customer infor- mation profile is not kept. Social Can be based on Consideration of Vertical inte- Has high possi- Respect for age class urban concept: product attri- gration helps in bility of use in Job assignment and l. Health butes is crucial placing product in the future. and training. culture 2. Education. here. Use of at proper selling Presently not Manufacturing Can be based on local symbols is point. Usually so important. plant not so geography: paramount. Use the elderly will Symbols, sophisticated. 1. Region of local brand- purchase in language, local Horkers not used 2. Language. name is proper familiar grounds, brands, other to complicated Can be based on here. Taste, preferably in the pertinent prod- machinery. Group culture: color, packaging "market.“ The uct design will work is essential 1. Age are important wealthy may help to create because of: 2. Tradition. considerations. purchase in the mass market when extended family department stores, relative scarcity relationships and variety stores, begins to Nigerians' desire etc. disappear. to be subordinated to group norms. Labor union rep- resentation may be palatable to Nigerian workers. Urban/ About 80 percent Product consid- Rural market is Urban promotion More educated rural of Nigerians live eration is most not concentrated. is characterized migrate to the in the rural important because Served by small by media adver- urban areas. More area. This market of the level of retailers who tisment. Promo- amenable to tech- is not yet devel- education. Use sell in small tional innovation nology. The urban oped. Urban tar- of local symbols quantities. is tolerated in worker is more gets are easier is important for Urban market more the urban areas. tolerant and to reach. Urban the rural market. concentrated and The rural areas adaptable. Most market behavior Use conditions distribution more are characterized manufacturing more understood. must be simple coordinated. Dis- by symbols, word located in the Rural market and understood. tribution infra- of mouth and urban city largely repre- Use of local structure located brand promotion. centers. For sents potential branding will in the urban Personal selling example. Lagos. market. help in the urban areas. For exam- may be important area. Use will ple, warehouse, in the rural increase product transportation areas. awareness. facilities. Economic Rural customers Product size Some wholesaler's Most media reach Lack of necessary are farmers. considerations and most retail- only very few material may Income not high. are important ers sell in small customers. cause delays. Rural dewellers because of quantities FOB Rural customers Frequent power receive money from relatives in the city. Generally characterized by poverty. Can only afford to buy in small quantities. Urban dwellers generally more affluent. The wealthy elite live in the urban areas. relative low level of income. Package consid- erations are important for the same reasons. Demand for prod- uct is more concentrated in urban areas. plant. Transport to rural areas important in detenmining list price. Scale transportation necessary for rural penetration. are susceptible to brand insis- tance and brand loyalty. failure consti- tutes loss of production and income. Frequent maintenance nec- essary because of use conditions. Low technology production facil- ity adequate. Low maintenance machines neces- sary because of the conditions of use. 125 as "minor" changes. For example, changes in brandname, symbols, etc. have been partially made. Most of the changes have been made to enhance the marketing technique of the multinational. For example, a product with a Nigerian language name or a familiar Nigerian sound is more apt to be accepted by the Nigerians. It seemed as if these changes are made because they are necessary for the creation of a Nigerian marketing atmosphere and image. However, these changes are not being promoted and used as demand creation strategy because of all the limiting environmental factors as delineated in Figure 9. The multinational sometimes is blamed for not instituting changes. However, conditions in the environment must be agreeable for any change to be instituted. For example, almost all the multi- nationals investigated decried the lack of market information, but added that there is nothing they can do about it because of the limiting environmental factors. Another example can be seen in the need for more diversified warehouse systems. Most of the multi- nationals decried the high incidence of damages on the Nigerian high- way but indicated that not enough manpower to run their warehouses can be generated to run and maintain warehouses in the rural areas. Moreover, the necessary infrastructure to maintain a warehouse may not even be available in the rural areas. The multinational has not made many changes in the physical products themselves. The products are usually imitations of a product which may yet still be produced in the Western world or production shifted to other countries including Nigeria. The physical product remained the same in almost all the cases investigated. 126 Although the physical product remained the same, the necessary marketing ingredients, for example, color, and brand are being changed gradually. Therefore, it can be said that the changes that have been made by the multinational corporations in product planning, place of sale considerations, promotion, and manufacturing are made in order to reflect its activities to the Nigerian environment. The degree of change may be called to question, but the changes made reflect the environment. Reflection of the Nigerian environment by marketing mix changes create Nigerian nationals to manage and foster these changes. Future changes now have a base relevant to Nigerian experience and thus fostering a degree of nondependence relationship. However, Figure 10 does not show the relationship between the length of time a multinational has engaged in Nigeria and its adaptation policies. The extent of adaptation policy inclination was not apparent from the investigation. The policy as stated by all of the multina- tionals investigated centered around a strong willingness to make sure that the subsidiary is successful and be profitable in the long-rang. However, the "old" colonial business houses have been in Nigeria the longest and have to a certain extent created a "niche." The extent to which these "old" colonial businesses succeed may not be dependent on their ability to adapt to change but on their loyal conservative wealthy class customers. Because the "old" companies have been in Nigeria for over half a century does not mean that they have adapted to business conditions 127 in Nigeria. Their market niche was created long ago when awareness about multinational adaptation was not relevant to the Nigerian customers'buying decisions. The length of time a multinational engages in business in Nigeria does not seem to have any relevance to their degree of adaptation. Except for two companies interviewed, the other companies have been in existence only since Nigeria's independence in 1960. There was no difference in the attitude towards adaptation on the part of the multinationals and there was no evidence in the Nigerian marketplace that the older multinationals are responding more to environmental adaptation than the others. Decision making in the Nigerian multinational from the companies investigated was found to be of two types as it relates to marketing. Decisions about brand name, color, etc., have been decentralized to the subsidiary level. These decisions are usually made by the company officials at the subsidiary level. These type of decision decentral- ization facilitates implementation of marketing changes that must be made in order that certain marketing tactics can be used. For example, the decision to use a certain brand name may be made at the subsidiary level in order that the probability of choosing the right brand name or the success of initial brand awareness among the people is enhanced. The other type of marketing decisions are those that pertain to the types of products, depth and width of products, and the control factors necessary for evaluation of performance. These kinds of deci- sions are partly centralized and are made in the multinationals 128 regional or headquarter office with inputs from the decision makers in the subsidiary. For example, decisions about produdt line extension was found to be made in the regional or headquarters of the multi- nationals in the majority of the multinationals investigated. Other types of decisions made are those that pertain to manufacturing considerations. Investigation revealed that there are two types of decisions that are made in manufacturing. The first type is concerned with type of machinery and all the attending advantages and disadvantages as it pertains to the Nigerian environment. Inves- tigation revealed that such decisions have not been decentralized. The type of machinery used is tied to financial considerations. Financial decisions usually are centralized. The other type of manufacturing deciéions that are made are those that pertain to the work environment and how the workers adapt, to the technological environment. For example, decisions about work- load, group versus individual work assignments are decentralized and the decisions are made at the subsidiary level. Structure of the multinationals, that is the type and form of the organization does not seem to impact one way or the other in terms of what the multi- nationals do in the marketplace. For example, most of the multina- tionals interviewed believe that decisions regarding specific tactics have been decentralized but decisions regarding strategies are either shared with the subsidiary or totally centralized. 129 Areas of Further Research Since information about marketing executive decisions in Nigeria is not available, this research fulfills, in general, the general tendencies of decision making criteria as they pertain to Nigeria. However, further investigation is needed in the area of Nigerian rural markets and its long-run potential. Although the urban market provides relatively adequate market at the present, future growth of the multinationals within Nigeria may hinge on rural market cultivation. BIBLIOGRAPHY BIBLIOGRAPHY Alymer, Richard. "Who Makes Marketing Decisions in the Multinational Firm?" Journal of Marketing, October 1970. Areasburg, Conrad M., and Niehoff, Arthur M. Introducing Social Change. Chicago: Aldine Publishing Company, 1964. Barlow, E. R. Management of Foreign Manufacturing Subsidiaries. Boston: Harvard University School of Business Administration, 1953. Bowersox, Donald F. Logistical Management. 2nd ed. New York: Macmillan Publishing Company, Inc., 1978. Buzzell, Robert D. "Can You Standardize Multinational Marketing?" Harvard Business Review, November-December 1968. Coleman, James S. Nigeria: Background to Nationalism. Berkely: University of California Press, l969. Douglas, John; Fields, George A.; Tarpay, Lawrence X. Human Behavior in Marketing. Columbus, Ohio: Charles E. Merrill Books, Inc., 1967. Greyer, Stephen A., ed. Towards Scientific Marketing. Chicago: American Marketing Association, 1969. Henderson, Stewart, ed. Marketing Maneger's Handbook. Chicago: The Dartnell Corporation, 1976. Henley, Donald. Multinational Marketing: Present Position and Future Challenges. AMA Proceedings. Keegan, Warren J. Multinational Marketing Management. Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1974. . "Multinational Product Planning: Strategic Alternatives." Journal of Marketing, January l969. Kotter, Philip. Marketing Management, Analysis, Planning and Control. 2nd ed. Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1972. Lawrence, Floyd C. "Multinationals Search For One World." Industry Neek, January 1973. 130 131 Levy, Sidney J. “Symbols by Which We Buy An Advancing Market Experience." In Marketing Proceedings. Edited by Lynn H. Stockman. Chicago: American Marketing Association, l959. Massie, Joseph L, and Luytjes, Jan. Management in An International Context. New York: Harper and Row Publishers,l972. McCarthy, Jerome E. Basic Marketing: A Managerial Approach. 5th ed. Homewood, Ill.: Richard D. Irwin, I975. . Effective Marketing Institutions for Economic Development. AMA Proceedings, 1964. Narayane, Glen L., and Marking, Ron J. "Consumer Behavior and Product Performance: An Alternative Conceptualization." Journal of Marketing 39 (October 1975). Nwachuku, Levi. "Nigeria's Uncertain Future." Current History, March 1976. Owenfeldt, Alfred R. Executive Action in Marketing. Belmont, Calif.: Wadsworth Publishing Company, Inc., l966. Peterson, Wallace C. Income Employment and Economic Growth. Revised ed. New York: W.IW. Ninton andTCompany, Inc., 1967. Phetak, Arving V. Managing Multinational Corporations. New York: Beeger Publishers, l974. Revoldt, Stewart H.; Scott, James D.; and Warshaw, Martin R. Introduction to Marketing Management: Text and Cases Homewood, Ill.: Richard D. Irwin, Inc., 1973. Robinson, Richard D. "The Challenge of the Underdeveloped National Market." Journal of Marketing, October l96l. Roston. The Concept of a National Market and Its Economic Growth Implications. AMA Proceedings, 1965. Schwarz, Walter. Nigeria. New York: Praeger Publishers, l969. 'Simms, J. Taylor; Foster, J. Robert; and Woodside, Arch A. Marketing Channels, Systems and Strategies. Harper and Ross, 1977. Skinner, Wichman. American Industry in Developing Economics. New York: John Wiley and Song, Inc., 1968. 132 Slater. "Marketing Processes in Developing Latin America." Journal of Marketing, July 1968. Sommers, Montrose, and Kernan, Jerome. "Why Products Flourish Here, Fizzle There." Columbia Journal of World Business, March-April 1967. Sorenson, Ralph Z. "An Analysis of Competition Among Local and International Firms in Two Central American Industries." Ph.D. dissertation, Graduate School of Business Administration, Harvard University, 1966. Stanton, William J. Fundamentals of Marketing. 4th ed. New York: McGraw Hill Book Co., 1975. Stern, Louis, and El—Ansary, Adell. Marketin Channels. Englewood Cliffs, N.J.: Prentice Hall, Inc., 19 . Stockman, Lynn H., ed. Marketing Proceedings. Chicago: American Marketing Association, 1959. Twedt, Warren D. "How Much Value Can Be Added Through Packaging?" Journal of Marketing 32 (January 1968). Wells, Louis T., Jr., ed. The Product Life Cycle and International Trade. Boston: Division of Research, Graduate School of Business Administration, Harvard University, 1972. Williams, Garvin, and Collins, Rex., eds. Nigeria: Economy and Society. London, 1976. Zaltman, I. William. "Europe and Africa: Decolonization or Dependency." Foreign Affairs 54 (No. 2; January 1976). Nigerian Government Publications Federal Nigeria 3 (No. l; April-May-June 1977). Industrial Directory. 7th ed. Lagos, Nigeria: Published by the Investment Promotion Center, Federal Ministry of Industries, 1975. The Nigerian Trade Journal 22 (No. 4; 1976). The Third National Development Plan 1975-1980. Vol. 1. Lagos, Nigeria: Published by the Central Planning Office, Federal Ministry of Economic Development. 133 The Third National Development Plan 1975-1980. Vol. 2. Lagos, Nigeria: IPUblished by the Central Planning Office, Federal Ministry of Economic Development. United Nations Publications Survey of African Economies. International Monetary Fund, Washington, D.C., 1975. UNESCO. Social Implications of Industrialization in Africag_South of the Sahara. London, 1956. African or Nigerian Magazines New African Development 11 (No. 11; November 1977). Nigerian--American Economic Relations. Jarboe Printing Company, Inc. 1978. To the Point International 5 (No. 1; 9 January 1978): 18. West Africa. West Africa Publishing Co., Ltd. Buckinghamshire, England. 27 June 1977. HICHIGGN STQTE UNIV. LIBRRRIES 111|111111||1111111111||l||Hl||11111111111 31293103167833