CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
One of the growing areas of major concern to management in recent times is the relationship between business and government. Business and government by far remain the most influential institutions that shape the economy of any nation, affecting both individuals and groups in diverse ways.
According to Agulana (2012), government intervenes between business and its customers, between business and its employees, between business and the general public, between business and its shareholders, and between business and business. Agulana also opined that government regulates business in space, on the land, in the air and in the sea, and further argued that the relationship between government and business is a two way affair and not one way. Many government policies are incubated and induced by business. Government needs business to achieve many of its policy goals such as economic growth and employment generation.
Akanwa and Agu (2011) define business as the creation, procurement or provision of desired goods and services at the right time, right quantity and in the right forms to satisfy the needs and wants of customers. The relationship between government and business can be viewed as complimentary in building a nation that is politically and economically independent. Government acts as a supreme authority, providing the necessary support and enabling environment.
The supreme authority of government with its legislative and control functions over all activities and institutions in the state provide another pattern of relationship (adversary relationship) between government businesses. Thus, government sometimes sees the actions of business as adversary and unethical
and therefore enacts law and designs rules to check and control business activities. Drucker (1999).
The primary function or purpose of business is to earn profit and satisfy its customers; this is only possible when its existence is guaranteed. Both business and government exist to promote individual and societal welfare. Thus, the relationship between government and business can be examined from two perspective first as institutions whose functions complement each other in advancing societal welfare and second, on the basis of government controlling business.
The effect of government regulation on business performance could be examined based on two models as stipulated by Akanwa and Agu (2011). The two models are mercantilism and constitutionalism. Both models see business activities as too important to be left in the hands of the business community. But while the mercantilists favour the support and encouragement for business, the constitutionalists oppose romance between government and business and instead support imposition of clear control and regulatory measures on business.
Both mercantilism and constitutionalism are today outdated. They no longer offer much guidance either to government or to business in understanding and handling their relationship. This is as a result of changing circumstances, particularly the evolution of mixed economy and the emergence of professional managers who are adequately equipped with the skill and knowledge necessary to take organizational decisions in a manner that will optimize government and business relationship and not limited by economic or social systems and boundaries. Akanwa and Agu (2011).
Government has a host of regulations that neither affects businesses positively or negatively. These regulatory agencies include corporate affairs commission (CAC), Standard Organization of Nigeria (SON), National Drug Law Enforcement Agency (NDLEA) and so on.
ln explaining organizational performance, Wikipedia (2011) defines it as comprising the actual output or results of an organization as measured against outputs (or goals and objectives).
According to Richard et al (2009), organizational performance encompasses
three specific areas which include;
- Profitability (returns on assets, investment etc)
- Product market performance (sales, market share)
- Shareholders return (total shareholder return, value added, economic
return etc)
System wise consulting (2009) defined organizational performance as identifying outcomes that organizations want to achieve, creating plans to achieve those outcomes, carrying out those plans and determine whether the
outcomes were achieved.
It is the intention of this research work to examine the effect of government regulations on business performance with four major indicators (OPI) namely:- profitability, market performance, corporate growth and operational efficiency.
1.2 STATEMENT OF THE PROBLEM
The primary purpose of government regulating business is to create and maintain a climate of confidence for people to freely and willingly engage in business transaction. it is also to maintain sanity and orderliness in business practice. These objectives has been truncated as most business operators are not adhering to the ethical conduct of business practice. it is the responsibility of government to compel business to become ethical in their conduct and assume some measures of social responsibility in the society.
However, it is disheartening that unethical practices are constantly being exhibited by most business operators. Also, the requirement of 25 billion naira (#25b) capital base ordered by the central bank of Nigeria (CBN) has affected the entire economy. Many employees were laid off by their employers as a result of downsizing that was embarked upon by most banks. The population of the unemployed increased, thereby increasing the rate of cyber—crime.
Government regulation has also affected productivity in recent times. Most manufacturing industries, especially the small and medium scale enterprises depend on imported raw materials for their production. It is therefore the
Intention of the research work to analyze the effects of government regulations on business performance.
1.3 OBJECTIVES OF THE STUDY
The general purpose of this research work is to analyze the effects of government regulations on business performance using Nigerian Breweries Plc.
as a Case Study. However, the following specific objectives shall be examined.
- To determine the impact of government regulation on business
profitability.
- To investigate the effect of government regulation on market
performance of the business.
iii. To ascertain the effect of government regulation on corporate growth of
the business operational efficiency.
- To ascertain the effect of government regulation on corporate growth of
the business
1.4 RESEARCH QUESTIONS
The following research questions will facilitate this research work. They are;
- How does government regulation affect business profitability
- How has government regulation affected market performance of Nigeria
Breweries Plc.?
iii. What are the effects of government regulation on business operational
efficiency?
- What are the effects of government regulation on corporate growth?
1.5 RESEARCH HYPOTHESIS
The following hypotheses have been formulated to guide the study.
HYPOTHESIS ON
H0: There is no significant relationship between government regulation and
organizational profitability.
H1: There is significant relationship between government regulation and
organizational profitability.
HYPOTHESIS TWO
H0: There is no significant relationship between government regulation and
operational efficiency of the business.
H1: There is significant relationship between government regulation and
operational efficiency of the business.
1.6 SIGNIFICANCE OF THE STUDY
This research work will be of tremendous benefit to the following group of people:
- I. The Government: The researcher believes that through the findings of
this work, the government will be able to understand the impacts of
certain policies.
- Business Organizations: This research work will benefit business
organizations in the area of awareness creation.
III. This research will also benefit other researchers who might want to
embark on further research on this topic or other related topics.
1.7 SCOPE OF THE STUDY
This research work is designed to investigate the effects of government
regulations on business performance. All businesses in Nigeria cannot be
investigated at the same time so the researcher used Nigerian Breweries Plc. as a
case study.
However, the effective and conscious effort put into this research makes it suitable enough for generalization to most other businesses especially in the area
of manufacturing.
1.8 DEFINITION OF TERMS
Business: The activity of buying and selling of goods or providing services in order to make profit.
Customer Satisfaction: The psychological feeling of value obtained from the product consumed.
Government: This is the machinery organized by the state to govern the state, manage its affairs and administer its functions and duties.
Operational efficiency: Resources input—output ratio.
Performance: The ability or tendency of an organization to achieve its goals both in the short and long term.
Profitability: Ability of an organization to earn higher revenue than her cost of operation.
Regulation: This is a control system used to hold context of the uncontrolled conditions in accordance with the predetermined program.
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