An Overview of Nigeria Bottling Company
The Nigerian Bottling Company (NBC) is among the largest bottlers of drinks in the non-alcoholic beverage industry in Nigeria. It is the sole franchise bottler and distributor of products of the Coca-Cola company. The organization serves more than 160 million people by producing and distributing a unique portfolio of quality brands, bringing passion into the market, and showing leadership in corporate social responsibility (Careers in Africa, 2020).
NBC began its operations in Nigeria in 1951 and is based in Lagos. In addition, the company has about 13 bottling plants across the country and employs about 4800 people. NBC indirectly creates and supports more than one million jobs in its value chain (Careers in Africa, 2020). Based on this, the organization plays an integral role in Nigeria’s economy through its direct and indirect employment of people.
NBC’s success is linked to its organizational culture, vision, and mission. The organization’s main purpose is to be the best supplier for their customers and run programs to help the more than 450,000 businesses that sell our products to consumers (Careers in Africa, 2020). The corporate vision is to become “the undisputed leader in every market in which we compete.” They want to use their resources to ensure they become the best in the industry.
The organization’s mission is “to refresh our consumers, partner with our customers, reward our stakeholders, and enrich the lives of our local communities.” NBC intends to ensure that its customers, employees, and other relevant stakeholders are satisfied (Careers in Africa, 2020). Therefore, the effective performance of the organization is attributed to its culture and values.
PESTLE Analysis of Nigeria
Political Factors
Political factors are forces within the political environment that affect businesses’ performance. Nigeria is a relatively stable country apart from the uprising of the terrorists in the northern part. The nation has had a democratic system of government without interruption for more than sixteen years (Forrest, 2019). It has more than ten political parties which can participate in the election process. The country has attracted foreign investors with a stable government and a majority of peaceful elections. In addition, Nigeria is part of the Commonwealth of Nations and the Organization of the Petroleum Exporting Countries. It has good relationships with most countries worldwide (Forrest, 2019). This has enabled the country to trade with different nations freely. As a result, the country has a stable political environment owing to its democratic process.
Economic Factors
Economic factors are variables that directly impact a country’s economy and might affect the operations of businesses. Nigeria’s economy comprises a modern part that depends on oil money and a traditional part based on farming and trading. However, Nigeria should reduce its dependence on the oil industry and diversify its economy. In 2021, the country’s GDP will be about $440 billion, an increase of $8 billion from 2020 (Macro Trends, 2022). The inflation rate of Nigeria in 2021 is 17%, which is above the accepted rate of 2% and below. Additionally, the unemployment rate in Nigeria has significantly risen over the years and has reached 9.8%, which is above the normal range of 3% to 5% (Macro Trends, 2022). This is an indication that most Nigerians are unemployed. Therefore, the country’s economy is not doing well due to its over-reliance on oil.
Social Factors
Nigeria is the most populous country in the continent of Africa. According to the World Bank, Nigeria has about 211.4 million people and is currently ranked seventh in the world in terms of population (Macro Trends, 2022). In the past several years, there has been a rise in direct investment from outside the country due to the country’s political unpredictability. For example, massive capital has been put into the telecommunications sector. The country’s population is significant enough to entice investors. English is the official language in Nigeria, and the main religions are Islam, Christianity, and indigenous beliefs. The fact that most people speak English means that the country is receptive to different cultures across the globe and can attract international businesses.
Technological Factors
Technological factors are technology changes that have an impact on the strategy of organizations. Nigeria has effectively used technology over the years to transform its operations (Onyema, Ogechukwu, and Anthonia, 2019). It holds many radio stations, TV networks, and other channels that depend on technology. Most of its industries, such as banking, energy, agriculture, and finance, have used technology to achieve efficiency in their operations (Ifinedo et al., 2020). Digital shopping is growing quickly, and, interestingly, many sellers use Facebook and Instagram to promote themselves. However, bad tech infrastructure, an electricity shortage, and a lack of skilled IT workers slow down tech growth. Therefore, Nigeria strives to ensure it becomes a tech hub by creating a good environment that supports contemporary businesses.
Environmental Factors
Nigeria is beautiful, with many sceneries, such as mountains, beaches, traditional dishes, tropical forests, the annual Durbar festival, deserts, and more. This explains why every year, millions of tourists come to the country. However, Nigeria has environmental problems like air pollution, water pollution, lead exposure, bad waste management, deforestation, desertification, wind erosion, and flooding, which adversely affect the people (Ifinedo et al., 2020). It is one of those countries with poor management of sanitary infrastructure. This is one of the main reasons why people live close to wasted areas. The main problem is that there are few interventions focused on protecting the environment.
Legal Factors
Nigeria has introduced various legal factors which can have an impact on businesses. The Nigerian Labor Act stipulates that the relationship between employees and employers must always be compliant (Abomaye-Nimenibo and Timothy, 2019). Non-citizens can purchase land properties through a local firm or body. However, specialists have a consensus that the government should take additional steps to address human rights violations. In addition, it has to increase the resources allocated to the court system to decrease the amount of time spent on legal procedures. Nigeria Factories Act outlines important health rules regarding cleanliness, overcrowding, drainage of floors, ventilation, lighting, and sanitary conveniences (Johnson and Salau, 2019). Therefore, Nigeria has a legal system that exists to ensure there is law and order.
Porter’s Five Force Analysis
These five forces include competition among previously established businesses, the threat of new entrants, the power of buyers and suppliers, the possibility of alternatives, and the threat of new entrants. It is beneficial to have a thorough understanding of these forces, both on their own and in combination when making decisions about which industries to enter and determining how a company can improve its competitive position. The intensity of these forces is a major factor determining the average expected level of profitability in an industry.
The Threat of New Entrants
In the soft drink industry in Nigeria, the threat of new entrants is low due to the high capital requirement to start and operate a firm. Several things make it hard for new brands to get into the business (Amos et al., 2020). Even though no expense is involved for customers who decide to transfer brands, the beverage sector needs initial capital investments. Coca-Cola is recognized both as a beverage and as a brand in the country of Nigeria. It has kept a very big market share for a very long period, and loyal customers are not likely to try out a competing brand for the foreseeable future due to the company’s success in maintaining that market share.
Bargaining Power of Buyers
In Nigeria, there are corporate and individual buyers in the beverage industry. As the only Coca-Cola franchise, NBC has built its market on good relationships with its biggest corporate buyers, like fast-food chains (Amos et al., 2020). In addition, the organization has expanded its reach inside the target market by utilizing other distribution channels, such as vending machines and convenience stores, to sell more of its products. When it comes to retail establishments and fast-food restaurants that make significant beverage purchases, it is evident that consumers hold a greater amount of power. On the other hand, individual customers typically do not have much negotiation leverage. As a result, customers in Nigeria have a satisfactory degree of bargaining power in the market.
Bargaining Power of Suppliers
The firms that provide essential commodities to the beverage industry, such as sugar, caffeine, flavors, and other components used in the manufacturing of beverages, are known as the suppliers of the beverage industry. They have little control over the prices and cannot exert any substantial influence on the other benefits because many vendors compete for business in the market (Amos et al., 2020). The suppliers in the market view their contracts with large-scale beverage companies like NBC as an important component of their distribution. As a result, they are much less likely to exert significant influence or engage in bargaining to determine the ingredients’ cost.
Threat of Substitute
The threat posed by substitutes is the extent to which products or services can be substituted. In the beverage industry in Nigeria, Coca-Cola, produced by NBCA, experiences a high threat of substitutes. There are numerous alternatives to Coca-Cola on the market for consumers seeking the same level of satisfaction (Amos et al., 2020). The product differentiation amongst soft drinks is minor, so their flavors are nearly the same, and their pricing is comparable. Alternatives may include Mountain Dew, Pepsi, Big Cola, and numerous others. In addition, several soft drink options, beverages such as juices, and other sweet drinks can readily replace Coca-Cola to meet a consumer’s desire for something refreshing or sweet.
Competitive
In the Nigerian market, Coca-Cola, Big Cola, and Pepsi are the most important companies in the beverage industry. Both of the key participants are engaged in a heated competition with one another (Amos et al., 2020). Furthermore, there are a few players on a smaller scale, but they do not present a significant challenge to the larger players. The primary competitors are about the same size, offering comparable items and following comparable strategies. These brands have a limited amount of diversity, which contributes to the fierce pricing competition between them. These organizations put a significant amount of money into advertising and promotion. As a result, this country’s beverage sector is competitive because it can switch to products that meet its needs.
The Key Drivers
Shortage of Power Supply
NBC is among the companies that rely on the power produced by the Nigeria Electric Power Authority (NEPA). Power failure can cause an irreversible loss to these organizations because they depend on electricity to run their operations (Harjanne and Korhonen, 2019). This indicates that the company’s activities will be affected when a power outage is experienced in Nigeria. Power outages quickly interrupt production and may result in the complete shutdown of supply chains. This may result in material loss, equipment failure, and time lost from production. Although NBC has an alternative energy source from generators, this is considered expensive due to the oil price increase. Therefore, unreliable energy in Nigeria is among the most pressing issues affecting NBC.
Bad Tech Infrastructure
Effective information and communication technology networks are essential to expanding national economies and fundamental to the global economy’s infrastructure. It is essential to raise the overall living level and improve other industries’ productivity and efficiency (Afonasova et al.,2019). As a result, countries and enterprises would become less competitive and fall further behind other entities if they did not have access to communications and the technologies that support their operations. Nigeria’s technical prowess is low due to poor tech infrastructure. This indicates that the organization will struggle to perform its operations, especially in communication.
High Inflation in The Country
High inflation in Nigeria is among the issues threatening NBC’s operations. When inflation is high, prices for goods and services across the board tend to increase (Adaramola and Dada, 2020). The rising expenses of rent, utilities, and employee compensation are all factors that contribute to an increase in an organization’s overhead expenditures. When gasoline costs rise, deliveries cost more. The cumulative effect of these escalating expenditures can pressure a corporation with thin profit margins. Due to the rise in operating expenses, many firms have little choice but to raise their pricing. However, if prices go up too much, demand may be reduced. This is especially true if consumers begin reevaluating their financial priorities and looking for places where they can save money.
Unemployment
Unemployment adversely impacts the disposable income of households, erodes purchasing power, and lower’s economy’s output. It occurs when workers who want to work are unable to find jobs (Iwuoha, 2020). When there is a higher unemployment rate, the income of many households will decrease as a direct result. Based on this, sales for many companies will drop because customers will cut back on their spending. With a high unemployment rate, NBC will not be able to profit due to a decline in the demand for its products. This is because households will be forced to purchase basic needs to survive the economic downturn. Therefore, due to the high unemployment rate in Nigeria, NBC is likely to struggle to sell its products, and the fact that it is not necessary makes it worse.
Poor Environmental Condition
In a bad environment, all businesses and individuals are adversely impacted. Pollution may affect the business tactics that corporations use to run their operations. Major environmental catastrophes brought on by pollution may have the impact of disrupting supply networks and driving up the price of raw materials. There is a possibility that climate change is to blame for these disasters that have occurred in Nigeria, such as flooding. In a flood, buildings, transportation networks, utility infrastructure, and automobiles may sustain physical damage. As a result, the bad weather conditions in Nigeria are one of the factors that could negatively impact the operations of businesses such as NBC.
Intense Competition
High competition experienced in the beverage industry in Nigeria is among the drivers that could hinder the performance of NBC. The main competitors of the organization are Pepsi and Big Cola because it has the financial strength and market share to compete effectively. For NBC to survive in the market, it must adopt appropriate strategies such as increasing its expenditure on marketing techniques. In addition, intense market competition can reduce NBC’s profitability because consumers will likely purchase products that meet their needs. For example, with high inflation, there is a possibility that customers will buy cheap products. This means they may purchase from Pepsi and other brands if they offer a low price in the market.
High Bargaining Power of Suppliers
The bargaining power of suppliers in the market is one of the forces that define the level of competition present. A high supplier power makes a sector less appealing overall and reduces the potential for profit because purchasers are forced to rely more heavily on those providers (Dertwinkel-Kalt and Wey, 2020). The existence of dominant suppliers brings in a reduction in the possibility for profit in an industry. Competition among suppliers is increased when they threaten to either raise prices or lower the quality of the goods and services they offer. In the beverage industry in Nigeria, NBC could experience the impact of high supplier bargaining power. Therefore, they impair profitability in fields where businesses are unable to recuperate cost increases through increases in their prices.
Insecurity in the Northern Part of Nigeria
The existence of terrorist groups in the northern part of Nigeria could hurt NBC. Foreign investors are more likely to put their money into multinational corporations that do not pose a danger to the investments already made. In addition, terrorism in the country could raise the cost of security for organizations, resulting in a lower return on investments made in these companies. Acts of terrorism hurt the expansion, development, and financial performance of these global companies. Insecurity in the northern part of Nigeria could affect these corporations’ daily operations, reducing the return on investments, growth, and development of NBC.
The Most Important Drivers
One of the most important drivers identified is the high inflation rate in Nigeria. When inflation is high, prices for all goods and services tend to increase (Adaramola and Dada, 2020). The costs of rent, utilities, and employee pay are all going up, which means that an organization’s overhead costs are also going up. When gasoline costs rise, deliveries cost more. These rising costs can put pressure on a company, especially one with a small profit margin. Because their operating costs are rising, many businesses have no choice but to raise their prices. On the other hand, if prices go up too much, people may not want to buy as much. This is especially true if people start to rethink how they spend their money and look for ways to save money.
The second most crucial driver identified in the analysis is the high unemployment rate in the country. When the unemployment rate goes up, many households’ incomes will go down as a direct result (Iwuoha, 2020). Because of this, sales for many businesses will go down because customers will spend less. With a high unemployment rate, fewer people will want to buy NBC’s products, so the company will not be able to make money. This is because people will have to purchase the basics to stay alive during the economic downturn. Thus, because Nigeria has a high unemployment rate, it’s likely that NBC will have a hard time selling its products. The fact that they are not necessary does not help.
The Four Scenarios
Description of the Four Worlds
Recommendations
To deal with high inflation, NBC should prioritize the most profitable products. Many businesses cannot meet customers’ needs as well as they would like. They cannot find the people they need to work there and cannot get their suppliers to send more goods. The most common thing to do is by no means the best thing. Many companies give priority based on when the order was placed, regardless of how much money they will make.
To handle the situation caused by high unemployment, the organization should begin to target the employed population in the country. They should conduct a market analysis to determine the preferences of most wealthy people and develop products that meet their needs. This will enable the organization to survive the wave of unemployment that might reduce its profitability. They should ensure that the products can be purchased by everyone regardless of their financial position.
For the intense competition, NBC should strive to position its product as healthy and beneficial to the people to attract customers in the market. Since many individuals’ decisions to purchase a product are influenced by their emotions, they should adopt strategies that appeal to the customers. For example, they should make customers understand that the products are quality and that the organization acts in customers’ best interest.
It is recommended that NBC investigate the possibility of participating in activities that would improve its reputation. It should include corporate social responsibility into the company’s culture to strengthen its brand in the marketplace. For instance, in the event of a natural disaster, they should make donations of home goods to the individuals, families, and companies impacted. People will feel more inclined to purchase the company’s interests if it can be demonstrated that the organization is concerned about the community.
References List
Abomaye-Nimenibo, W.A.S. and Timothy, G.M. (2019) ‘The Interface of Public Policy in Nigeria and Its Upshot on the Nigerian Economy’, Global Journal of Human–Social Science: E-Economics, 19(6).
Adaramola, A.O. and Dada, O. (2020) ‘Impact of inflation on economic growth: evidence from Nigeria’, Investment Management and Financial Innovations, 17(2), pp.1-13. Web.
Afonasova, M.A., Panfilova, E.E., Galichkina, M.A. and Ślusarczyk, B. (2019) ‘Digitalization in economy and innovation: The effect on social and economic processes’, Polish Journal of Management Studies, 19.
Amos, N. B., Ariguzo, V. A., Egwakhe, A. J., & Abiodun, A. J. (2020) Lean manufacturing and production efficiency of the food and beverages sector in Nigeria. International Journal of Advanced Operations Management, 12(4), pp. 330-350.
Careers in Africa (2020) Nigerian Bottling Company. Web.
Dertwinkel-Kalt, M. and Wey, C. (2020) ‘multi-product bargaining, bundling, and buyer power’, Economics Letters, 188, p.108936.
Forrest, T. (2019). Politics and Economic Development in Nigeria: Updated Edition. Routledge.
Harjanne, A. and Korhonen, J.M. (2019) ‘Abandoning the concept of renewable energy’, Energy Policy, 127, pp.330-340.
Iwuoha, J.C. (2020) ‘Rising unemployment in Nigeria: Public debt to the rescue?’, Current Research Journal of Social Sciences, 3(2), pp.280-290.
Ifinedo, E., Rikala, J., & Hämäläinen, T. (2020) Factors affecting Nigerian teacher educators’ technology integration: Considering characteristics, knowledge constructs, ICT practices, and beliefs. Computers & Education, 146, 103760.
Johnson, I. and Salau, J.O. (2019) ‘Human Rights and Governance in Nigeria, 2011-2015’, African Research Review, 13(1), pp.14-25.
Macro Trends. (2022). Nigeria GDP 1960-2022. Web.
Onyema, E.M., Ogechukwu, U. and Anthonia, E.C.D. (2019) ‘Potentials of mobile technologies in enhancing the effectiveness of inquiry-based learning approach’, International Journal of Education (IJE), 2(01), pp.1-22.