CHAPTER ONE

INTRODUCTION

1.1      Background of the study

Joint venture is a popular strategy used by two or more companies to capitalize on opportunity or to minimize threat. It is a strategy that allows companies to put their resources together in order to achieve their strategic objectives. International joint venture involves two or more companies that put their stock and/or other resources together in an agreed percentage to establish a subsidiary company in a foreign country. This strategy is used when the distinctive competencies of the two or more companies concerned complement each other (Aloko, Odugbesan, Gbadamosi and Osuagwu, 1997). On the other hand, strategic alliance is where two or more companies come together to share resources and activities together, in order to pursue a strategic objective. This option might be resorted to due to a number of reasons which include; high cost or capital requirement for the resources concerned, environmental factor, legal requirement, technical expertise required by the resources, and so forth. In Nigeria, strategic alliances have become popular as a means of surviving the ever complex environment. Its uses cuts across sectors of the Nigerian economy; banking, oil, Manufacturing, to mention but a few.

Joint venture and strategic alliances have existed in Nigeria since early 1980s. However, the two strategies became more obvious in recent years due to the effects or pressure of globalization on local firms, unfavourable rivalries among firms, global economic meltdown and lately, minimum capital requirement as demanded by regulatory authorities. For instance, the Nigerian Central Bank request for a minimum operating capital of 25 billion naira for Commercial Banks operating in Nigeria in 2005 led to a number of strategic alliances and joint venture of a number of Banks. However, while some joined their capital and formed brand new Banks, some acquired others, while the remaining formed strategic alliances. Some international business literature argued that there are benefits for companies that engage in strategic alliances. These benefits according to them include: higher return on equity, investment and improve effectiveness of the firms in the strategic alliance.

1.2      Statement of the Problem

A number of organizations across the world today are either dead completely or operating below their normal capacities due to some or most of the following challenges: cross border market penetration challenges; the challenges of raising adequate capital to acquire enough operational assets, competition among firms producing similar product and in the same market, while others are faced with vertical and/or horizontal integration challenges to minimize operational expenses that accrues to firms that are into strategic alliances. In Nigeria, the major problem asides competition facing most firms across the sectors of the economy is the minimum capital requirements as set by the regulating bodies. For instance, in 2005 the Central Bank of Nigeria fixed Twenty-five Billion naira (N25b) as the minimum acceptable capital for any commercial bank that must operate in Nigeria. The policy brought a number of them into forming strategic alliances, while those that could not were either acquired by others or went into liquidation.

1.3 Objectives of the Study

This research work titled “Sustaining Nigerian firms through strategic alliance in the emerging competitive business environment with particular reference to Federal University of Technology Yola. The specific objective of this research works includes the following;

1.  To examine the effect of strategic alliance on the development of Nigerian firms.

2.  To evaluate the relevance of strategic alliance on the performance of Nigerian firms.

3.  To ascertain the correlation between strategic alliance and the development of Nigerian economy.

4.  To identify the challenges of strategic alliance in Nigeria and also proffer possible solutions to the problems identified.

1.4 Research Questions

1.  To what extent does strategic alliance affect the development of Nigerian firms?

2.  How relevant is strategic alliance on the performance of Nigerian firms.

3.  Is there any correlation between strategic alliance and the development of Nigerian economy?

4.  What are the challenges of strategic alliance in Nigeria?

1.5  Research Hypotheses

Ho: Strategic alliance does not have any effect on the development of Nigerian firms.

H1: Strategic alliance has significant effect on the development of Nigerian firms.

Ho: There is no correlation between strategic alliance and the development of Nigerian economy.

H1: There is significant correlation between strategic alliance and the development of Nigerian economy.

1.6 Significance of the study

This research work will be of immense help to the researcher as it will help him to know more on Sustaining Nigerian firms through strategic alliance in the emerging competitive business environment. It will also be of great importance to Nigerian firms as it will enrich their knowledge on the benefits and usefulness of strategic alliance. 

This study will be of great importance to the students and other researchers since it will serve as a reference point for the upcoming researchers.

1.7 Scope Of The Study

The study shall focus on Sustaining Nigerian firms through strategic alliance in the emerging competitive business environment with particular reference to Federal University of Technology Yola.

1.8 Limitations Of The Study

The researcher in carrying out this study encountered numerous problems, which include:

a)   Money: One of the major factors that contributed to the limited scope of this study with regard to the population sample and distance is lack of fund. This research work was sponsored by the researcher and full time student prudence was the watch word and rather than expand the research it was pronged down to one company only.

b)   Time: The scarcest resources of all the constraints that besieged that researcher are time since the research was carried out at student level. The time used had to be compatible to the demand of other curses and assignments.

c)   Data collection: Another serious problem added to the above is the issue of information disclosure, companies feel relevant assisting researcher by providing adequate information. This under-operative tendency usually keeps researcher to coming to the institution until they are given audience. This statistical and logistical constraints are serious limitation that hinders a work of this type in addition of security of reliable data which might be classified as top secret by the management staff and as such would lead to getting little or no information of importance to the study.

Despite the above constraints the researcher were able to carry out extensive study on Sustaining Nigerian firms through strategic alliance in the emerging competitive business environment with particular reference to Federal University of Technology Yola.