CHAPTER ONE

INTRODUCTION

1.0

Background to the Study

The business landscape has changed since 1971 when Intel Corporation unveiled its 4004 semiconductor, which is the worlds first microprocessor. This development was consequent upon the brilliant idea of Ted Hoff, the young Intel engineer who thought of creating a general purpose chip: a central processing unit which can handle many different functions. The invention of the microprocessor changed the face of computing as well as commerce. Although, computers have been used in business since 1951, when J. Lyons & Company, a British catering firm operating a chain of tea shops, built and installed a mainframe in its headquarters (Carr, 2004). Mainframe computers were limited in use because they were huge in size, expensive to purchase and maintain and as such were restricted to engineering calculations, payroll processing and heavy inventory processing. The microprocessor on the other hand, unleashed the full powers of the computer, allowing it to be used by different people for almost everything.

Hoffs invention sparked off a surge in almost every aspect of business computing. From Bob Metcalfes creation of the Ethernet in 1973 to the first word processing software in 1976 by Wang Laboratory, to the introduction of Transmission Control Protocol/Internet Protocol (TCP/IP) in 1982, to the invention of World Wide Web in 1990, commercial transactions using 1

computers and associated Information Technology(ies) (IT) are assuming unimaginable dimensions. Today, hardly would anyone deny the fact that IT are the backbone of commerce in developed countries and the developing countries are trying to leapfrog into the era of IT-based transactions. Hardly can a dollar or euro be exchanged today without the aid of a computer system. Similarly, the Internet has impacted on the life of the average citizen in the developing countries in one way or the other.

In the 1980s and onwards, the strategic use of information has received considerable attention probably as a direct implication of deregulation of most world economies. The 1990s also witnessed an array of changes when corporate executives began to incorporate IT into their strategic thinking due to the impact these technologies have played in running their corporations or the ways competition has used IT to gain competitive edge. Many Chief Executives, consequently appointed Chief Information Officers (CIOs ) or IT Managers into top management with a view to provide the much needed utilization of IT for strategic advantages of the business.

These developments were aptly captured in a plethora of publications championing the potentials of IT in achieving competitive advantage (Beaumont and Sparks, 1990). However, most of these authors have made

repeated use of a limited number of well known success stories emanating from corporate giants, so much that it has become almost impossible to separate facts from fiction. Widely reported include the American Hospital Supplys use of computers in managing logistics, Dells online business 2

model, Amazon.coms revolution of Internet book-shopping etc. In fact, some of them went completely overboard and seemed to prescribe IT as the cure for all business ills. If life were that simple, virtually every organization would have moved their IT systems from the backroom to the firing line. Indeed

some did, and paid a heavy price as reflected by many failures of strategic information systems investments (McFarlan and Nolan, 1995). Thus, the significance of failed information systems investments and how to translate these failures to success have made the subject of strategic information systems and information systems strategy very important to researchers and practitioners.

Computer-based information systems play a vital role in a market economy. The contribution of these systems is often represented in textbooks through the use of a tripartite division of system types Transaction, Tactical and Strategic. (Schultheis and Sumner, 1992). Transaction Processing Systems (TPS) do the routine, but essential, record keeping of the business, and are particularly useful in executing routine business processes as found in accounting, inventory management and sales functions. They form part of the early information systems to be adopted in many organizations. Tactical

information systems provide information necessary for management decisionmaking in the day-to-day operation of the business and for decisions involving resource allocation at middle management levels. Strategic information

systems (SIS) have been described as information systems used to support or shape an organizations competitive strategy, or its plan for gaining and maintaining competitive advantage (Rackoff et al, 1985). Strategic information 3

systems help upper level managers chart a course through the constantly changing business environment of the firm. Industrial firms, service

companies and financial institutions in market economies the world over rely on these information systems extensively, without which modern market economies could not exist in their present form. Furthermore, these systems have been suggested to impact on business performance in many ways: they can help organizations attain competitive advantages in their business approach or fundamentally change the industry structure of a business.

When used strategically, information systems can be applied to lower cost, build barriers to entry and tie in customers and suppliers (Duhan et al, 2001). When information systems draw from the point of a strategic resource of a firm, then the firm is able to accumulate resources and capabilities that are rare, valuable, non-substitutable and difficult to imitate. When used in this

perspective, information systems have empirically been shown to transform failure into success in manufacturing firms (Irani et al, 2001).

There has however been continuing debate on how organizations need to transform to adapt to current changes in their operating environments. These changes include increasing global competition, deregulation of markets, increasing frequency and unpredictability of stakeholders expectations and rapid technological development. In such turbulent environments,

organizations need information systems planning and implementation processes to help them choose the most appropriate information systems and successfully manage their implementation in a way to support the business 4

aims of the organization. These planning and implementation processes are encapsulated in what is known as information systems strategy, which is just gaining wide acceptance among Nigerian businesses. These information

systems strategies need to be developed and implemented in a way to support the corporate and/or the business unit strategies. Since a firms strategy comprises specific elements or attributes that describes the firms operations in respect of its business, market (i.e. product), target customers, information systems strategies must at the least support the successful execution of these elements. Consequently, good strategy formulation and execution increasingly are becoming the yardstick for separating blue chip firms from failed ones.

1.1

Business and Information Systems Strategy

Several attempts have been made to describe organizational strategy. Most authors defined organizational strategy from different perspectives. These include some definitions highlighting the processes involved in forming organizational strategy as given by Simon (1977). Porter however, while

noting that operational effectiveness is not strategy, explained that strategy is the creation of unique and valuable position, involving different set of activities (Porter, 1996). Strickland and Thompson (1998) looked at strategy from the perspective of the constituents or components of an organization strategy. They defined a firms strategy as the game plan management has for positioning the firm in its chosen market arena, competing successfully, pleasing customers and achieving good business performance. (Thompson & Strickland, 1998). Strategy therefore is a collection of specific, hard-to-imitate 5

activities or efforts an organization makes in its chosen business in order to gain competitive edge. According to Thompson & Strickland, strategic

management entails five interrelated tasks spanning visioning process for the organization, setting objectives and devising ways (strategy) of achieving the desired objectives. Others are implementation and evaluation of the results in order to determine whether the objectives set out are realized.

To the researcher, strategy is a conscious analysis of an organizations current state, a description of the desired state and an analysis of the roadmap to bridge the gap. It emphasizes the how in deciding on which internal competencies to leverage onto, while analyzing the environment for opportunities it can translate into gains.

An essential element of most organizational strategies is the how, how to grow the business, how to satisfy customers, how to outplay competition, how to respond to changing market conditions, how to manage each functional piece of the business, how to achieve strategic and financial objectives etc. In the competitive business world, firms have a choice to diversify into other markets and businesses whether related or unrelated to their core business. This can be by way of acquisition, divestments, joint venturing, and partnering or even internal start-ups. Hence, descriptions of the content of the firms

strategy necessarily have to cut broadly across many aspects of the business in order to be complete.

In other words, a firm depending on whether it is a single-business firm or has diversified into other businesses, will have game plan(s) addressing the various aspects of its business. For diversified organizations, there are four strategies that are distinctly visible viz: Corporate Strategy (CS), Business (Unit) Strategy (BS), Functional Strategy (FS) and Operating Strategy (OS). However, in a single-business firm, there are only three: Business Strategy, Functional Strategy and Operating Strategy because the business unit strategy translates into the corporate strategy.

The Corporate Strategy extends firm-wide i.e. an umbrella over all of an organizations diversified businesses. It consists of the programs and

activities made to establish business positions in the different areas to which the organization has diversified. Often times, drawing corporate strategies is the responsibility of corporate-level managers and is ratified by the board of directors of the firm. For diversified firms the business strategy or businesslevel strategy comprises the tactics and approaches management has initiated to achieve desired objectives in a specific line of business. For singleline firm, the business and corporate strategy are the same since there is only one firm or business to draw strategy for. Thus, the distinction between

corporate and business strategies is only relevant for organizations that have diversified. Hofer and Schendel (1978) suggest that business unit strategy has four distinct components: competitive advantages, distinctive competencies, synergy or internal fit, and scope or product-market combinations. Information systems can be used to derive strong market positioning and/or product differentiation, harmonize information collection 7

and processing in an organization to ensure intra-organization harmony and effectiveness or better still improve a firms product/market offerings. Furthermore, functional strategies are those that address the various organizational functional activities like Research & Development (R&D), Production, Information Systems (IS), Human Resources (HR), etc. Functional strategies while narrower in scope than business strategies, add relevant details to the overall business game plan by setting forth the actions, approaches, and practices employed in managing a particular functional department or business process or key activity. Lastly, operating strategies comprise further narrower strategic initiatives and approaches for managing key operating units (plants, distribution centers, etc) and for handling daily operating tasks with strategic significance.

From the explanation above, information systems strategy therefore is a functional level strategy, which helps to support the firms overall business strategy and competitiveness. Well-formulated and implemented information systems strategies enable the organization valuable competitiveness which can be used competitively to transform the functions role in the organization and ultimately the firms performance. Consequently, functional strategy in

the Finance unit will address how financial activities will be managed in supporting the business strategy as well as achieve the finance departments objectives and mission. Information Systems strategies being a functional

strategy will represent the game plan to enable the development and use of information resources to complement and support the business/corporate 8

strategy of the organization. This implies the need for a fit/congruence of the information systems strategy with the business/corporate strategy.

There are various aspects of business strategy that are of importance to Information Systems research and practice. Distinction has been made between the content of strategy and strategy making process. Mintzberg (1978) also pointed out that a strategy formulated or intended does not necessarily translate to a strategy realized. In addition, Learned et al (1965) noted that strategy has two equally important aspects: formulation and implementation. They noted that the two aspects are equally important and IS researches may focus on either or both of these aspects as a means of investigating the importance of strategy on firm performance. Differences in opinion also exist on how to perceive strategy either as encompassing means and ends or as encompassing means alone. IS researchers must decide early in the study whether to focus on firm goals alone or on goals as well as means (Chan, 1992). Competitive strategies have been argued to be better studied (where possible) in single-industry firms and not in multi-industry corporations. Lastly, Chief Executive Officers (CEOs) and high ranking personnel in the organizations to be studied are better used as respondents to increase the reliability of the findings of the study.

Similarly, several authors have defined Information Systems Strategy (ISS) using several approaches, as has been the case in the definition of business strategy. Wilson (1989) states that an Information Systems Strategy (ISS) brings together the business aims of the firm, an understanding of the 9

information needed to support those aims, and the implementation of computer systems to provide the information. It is a plan for the development of systems towards some future vision of the role of information systems in the organization. This definition is qualified by Reponen (1993) who argues that an ISS is something which is essentially a planning process in the mind of decision-makers, users and developers of the systems. The researcher

defined ISS as the way and manner technological and non-technological applications and processes are planned and deployed to collect and utilize information that are of importance to the organization.

Information Systems Strategy is concerned primarily with aligning information systems content, development and implementation with the business aims of the firm. It could exist at the business unit level, wherein it is referred to as

Business Unit Information Systems Strategy(ies), and also there may be a corporate Information System Strategy, which concentrates on group application needs and especially on determining the corporate information systems requirements.

In most situations, information systems strategy has been described along the characteristics and issues relating to IT applications that are found in an organization. This approach at describing components of an information systems strategy is largely deficient as it does not take into consideration the various issues surrounding the planning and implementation of the information systems, as well as the relationship of the structure and functions of the IT department on the successful implementation of the strategy. In this 10

regard, Galliers (1991, 1993) proposed a framework defining the components of an information systems strategy and the relationship between them. This approach takes a holistic, socio-technical stance, rather than the traditional mechanistic approach, that places more emphasis on the information technology (hardware) aspect of the information system. Galliers (1993)

states that the information systems strategy has four distinct components: the information strategy, the information technology strategy, the information management strategy and the change management/implementation strategy.

The information strategy is the glue between the organization strategy and the information systems strategy. It tends to answer questions like what

information are required and where is the information required to support the primary tasks, or key goals, of the organization strategy? The information technology strategy is concerned with the technical details, applications and platforms of how to provide the information. Information management

strategy focuses on policy issues regarding the organization of information services, and change management strategy identifies the various organization changes that will be needed for the information systems strategy implementation to be successful.

The beauty of this all encompassing approach to defining ISS over the narrower IT-focused definitions is illustrated in the submission of Chan and Huff (1993), that, it is important to gather data on key firm and environmental contingency factors which are important in explaining the strategy-technologyperformance relationship. For instance, the information content of a business 11

or information systems strategy is key to understanding, formulating and implementing the strategy. These pieces of information are found within and outside of the organization and must be identified, collected, processed, stored and retrieved for utilization in the right context and time. Change management attributes are also important in explaining differences in a number of factors which are hitherto unexplained in past studies that have focused only on the array of IT applications to operationalize ISS.

1.2

Information Systems Planning, Implementation and Evaluation

Information Systems planning is the process of identifying the computerbased applications that will assist an organization in executing its business plans and realizing its business goals. (Lederer & Sethi, 1988). The extent to which IS planning meets its objective offers a means of assessing its success (Raghunathan & Raghunathan, 1994). One way to do this is to assess the accomplishments of individual IS projects initiated on the basis of planning.

Consequently, two competing theories of information systems planning are evident in the literature. The traditional planning theory predicts that organizations using comprehensive, formal planning will be more successful in coping with a turbulent environment (Raghunathan and Raghunathan, 1991). The critics of this view have proposed an alternative theory which predicts that organization using an informal, incremental approach will be more successful in a turbulent environment (Sambamurthy et al, 1994). Salmela et al, (2000), however, concluded from action research that in 12

turbulent environments, comprehensive IS planning may be more successful than incremental planning.

For the purpose of this study, the term implementation will be defined in line with the definition of Fuglseth and Grnhaug (1994, p.275). To these authors, implementation means carrying out business activities according to the courses of action/guidelines which we consider to be part of the formulation of strategy. Both empirical and prescriptive research studies have highlighted the strategic importance of improved ISS implementation because a good strategy can be poorly implemented. To this end, Gottschalk (1999), in a

Norwegian study, identified ten content characteristics of formal IT strategy as being potential implementation success predictors. Furthermore, he proposed an IT strategy implementation matrix to illustrate the relationship between expired time horizon and the IT strategy implementation extent.

While planning and implementation of information systems is of concern to IS practitioners, another major task confronting Information Systems Managers and Chief Information Officers (CIOs) in developed and developing nations is the ability to effectively evaluate the impact of expenditure on information systems products or services.

For profit-oriented organizations, Return on Investment (ROI) is a key parameter which comes to mind anytime an investment decision is to be made. The evaluation of information systems investments in terms of costs and benefits however is difficult and hazardous (Powell, 1996). The reasons 13

behind this opinion stems from the particular characteristics of this technology. These include substantial economies of scale and scope of information systems (Dewan et al, 1995), imposition of significant switching cost on its participants (Buxmann and Konig, 1997), production of network externalities (Nault, 1998) and multiple effects, so that both income and costs are hard to quantify, and are prone to a number of errors and uncertainties. Furthermore, there seems to be a further realization of the fact that the benefits of information systems are not merely either 100% technical or 100% organizational, but that they are interrelated.

In order to gain a good understanding and interpretation of information systems evaluation and to expand the traditional view of tangible costs and benefits the contextualism framework (Davis and Hammann, 1988) and interpretative approach (Kanellis et al, 1999) have been proposed by several authors (Farbey et al 1998, Smithson and Hirschheim, 1998). These

approaches to information systems evaluation focus on business changes and business values that information systems enable rather than the conventional and narrow accounting appraisal techniques.

Studies have been conducted in developed nations to investigate the impact of information systems strategy on financial performance metrics like Return on Assets (ROA), Return on Equity (ROE), profitability ratios etc. However, it must be consciously noted that there is no single best method for all information systems evaluation situations and that the characteristics of an information systems project and its organization environment affect the way 14

an information systems investment decision is handled. Evaluation-in-context therefore must be a process of organizational change which accompanies the development of the project (Serafeimidis and Smithson, 1994).

1.3

Information Systems and Organizational Performance

Organizations invest in computers and information technologies to improve their competitiveness and consequently their economic performance. Information technology investments can improve information sharing, decision-making, coordination, product quality, responsiveness and distribution (Brynjolfsson and Hitt, 1996). Previous research in developed economies have shown that on average, IT increases productivity (Dewan and Min 1997; Rai et al 1997). However, it must be noted that the benefits of ICT investments may vary enormously from firm to firm. Some firms are highly productive with high ICT investments, but other firms are less productive with similar investments (Brynjolfsson and Hilt, 1998). However, it is difficult for firms to capture those benefits as profits. Even though information technology may facilitate better coordination and output performance (or productivity), these benefits seldom result in improved financial performance (or profitability) especially in countries where studies have been carried out. Using an economy-wide United States firm-level data set, Shin (2001), showed empirically that increased information technology spending improves net profit, but not performance ratios such as Return on Asset (ROA) and Return on Equity (ROE) especially in firms with decreased vertical integration and higher diversification. There are several explanations, which can be adduced for this observation. One explanation is that as organization invests 15

in Information and Communication Technologies (ICT), customers or consumers of the organizations products/service also make parallel investments in Information and Communication Technologies (ICT) or systems thus offsetting the potential benefits that would have accrued to the organization as a result of the ICT investments. The resultant effect of

customers investment in ICT is that it enables them to get low-cost product alternatives. Another explanation is that ICT investments are sometimes

necessary simply to keep up with market changes. Thus, the lower price that buyers pay for products or services may reduce profitability, even though the reduced input costs may contribute to productivity increases (Hitt and Brynjolfsson 1996). Another explanation is that as organization introduces new information systems or technologies, sooner or later competitors copy these systems/technologies and the gains arising therefrom are either redistributed or even at times disappeared. (Brynjolfsson, 1993, Tam 1998). Furthermore, singular investments in ICT may not automatically improve financial performance. Although IT is an essential tool, it must often be synchronized with other organizational factors such as business strategies, organization structure or contexts, etc., to be truly effective.

In a Bruneian study, Seyal et al (2000) found that different business sectors have different levels of IT integration. Organizations involved in services provision have higher intensity of computer usage compared to those involved with product manufacturing and distribution. Burn (1990) and Valida (1994) also found that IT was being used for competitive advantages in Hong Kong and Malaysia, while Saxena and Sahay (2000) showed that IT has been used 16

to achieve the manufacturing objectives of Indian manufacturers. Chowdhury and Wolf (2003) found that investments in ICT had a positive impact on general market expansion in some East African SMEs. Studies are however needed in Nigeria to see the impact of strategic information systems on business performance especially in manufacturing where information intensity is generally lower than in many of the sectors investigated by the studies above.

1.4

Linking Strategy to Business Performance

There is hardly any study on strategic management that will not highlight the importance of some congruence or alignment or fit between one (business) strategy and another (functional strategy). This importance stems from the fact that ISS, being a functional level strategy, is important to the extent of how positively it can impart on organizational performance. This perhaps led Parker and Benson (1988) to submit that the proper role of IT in a firm is often characterized as a fit or alignment with the strategic goals of the firm. Information Technology is properly aligned when its strategy supports the organizations strategy and when the infrastructure put in place to implement the IT strategy is adequate for the job and successfully supports the organizations processes. Consequently, it is important to measure this fit or alignment to determine when it has been achieved and/or its impact on business performance. The measurement of alignment is a very complex process explaining why most studies have attempted only qualitative measurements with only a few attempts at quantitative measurements of alignment. 17

It is important to link business performance with business strategy in any study of IS strategy, or vice-versa. This importance will necessarily lead to the need to measure or operationalize business strategy and information systems strategy in an attempt to measure the impact of these strategies on the performance of a firm. While financial measures (as measurement metrics) have been dominant in most strategic management literature with its own inherent advantages, non-financial measures of business performance enable the researchers and practitioners to focus on the impact of IS-strategy on some specific aspects of the business. Wherever possible, other subjective performance data can be complemented with objective financial measurements from both primary and secondary sources. To enhance reliability of findings in studies involving business performance, it is necessary to use multiple respondents in each firm to assess business performance or at the least report the level of respondents agreement where multiple responses could not be achieved (Chan and Huff, 1993).

1.5

Information Systems and Global Manufacturing Characteristics

World-class manufacturing has often been characterized by three core strategies of customer focus, quality and agility (i.e. the ability to quickly, efficiently and effectively respond to change), and six supporting competencies employee involvement, supply management, technology and product development, environmental responsibility, employee safety and corporate citizenship (Kinni, 1996). Furthermore, Saxena and Sahay have

measured world-class manufacturing readiness in terms of three attributes: 18

manufacturing intent, manufacturing practices and the supporting information technology infrastructure (Saxena and Sahay, 2000). These researchers

believe that manufacturing strategy readiness is a function of what the firms want to do (their intent), what they are doing (practices) and what they are capable of doing (infrastructure).

Sahay et al, (1997) reported that intra-organizational problems in manufacturing firms in developing economies include fragmentation of information processing even in computerized applications. This is due to the use of multi-vendor hardware and software platforms as well as functional boundaries within the firms. Therefore, the decision-making process in most of these firms is still based on traditional information processing - information gathering with paper and pencil and from inconsistent sources. From this researchers own experience, most departments in Nigerian manufacturing firms are still usually managed according to departmental sub-goals rather than to synthesized enterprise goals.

The implications of the foregoing for manufacturing firms in developing economies is that their abilities to face the world-class challenge will depend on their readiness to move from their hitherto protected domestic strategies to globalized manufacturing business strategies.

1.6

The Nigerian Business and Manufacturing Situation

Nigerian business environment, as well as most developing economies throws substantial impediments in the way of manufacturing firms to sustain and 19

compete amidst stringent operating conditions. Inflation in August, 2005 was 28 per cent (CBN, 2005a). Although net credit to private sector has improved to an unprecedented annualized level of about 39 per cent (CBN, 2005a), inflationary pressure have eroded these gains as the purchasing power of the average Nigerian is growing weaker year on year. Wages paid to workers have not kept pace with inflation and the real wage, even though it has increased nominally, has not improved employees standard of living. Many firms have experienced considerable conflict with labor unions and wildcat strikes are common. Foreign exchange is very scarce and expensive and has resulted in difficulty to obtain manufacturing inputs from abroad. Industrial

output has dwindled with average capacity utilization in 2004 December being 45 per cent (CBN, 2005b). A kind of gridlock has developed with suppliers being slow to deliver products and services, as well as rising debt profile of many Nigerian manufacturing firms.

The manufacturing segment of the Nigerian economy consists of organizations engaging in the transformation of raw materials into tangible finished product. The Manufacturers Association of Nigeria lists over 2500 firms as registered manufacturers of different types of finished products in Nigeria. The Nigerian manufacturing sector has expanded quite considerably since the 1960s. However, the sector is yet to make significant impact on the structure of the economy by way of contribution to Gross Domestic Product (GDP), provision of employment, foreign exchange earnings and conservation, and promotion of effective linkages among the various sectors of the economy. For instance, the manufacturing sector has never contributed 20

more than 8.5% to GDP (Ojo, 1997, p.35-55).

The Structural Adjustment

Program (SAP) introduced by the Babangida administration in July, 1986 supported export promotion strategy, especially as it relates to non-oil exports. Also, due to the observed mutilated development scenarios in the entire manufacturing sector, a strategy of balanced development was emphasized by the administration in order to promote greater linkages in the sector.

These manufacturing objectives seemed not to have been realized. Amongst others, several factors were responsible which include rising cost of business operations, poor demand and declining profits and sales ratios. Others

factors include infrastructure inadequacies, high level of business inventories as a result of inappropriate business/operating strategies, industrial unrest etc. Others are inconsistent government policies, high lending rate and capacity underutilization.

Despite these problems in the operating environment of Nigerian manufacturing however, there are a few players in the sector that have been recording some growth, albeit minimally. More recently, one of the objectives of budget 2005 was aimed at expanding production and productive capacity in the manufacturing sector towards ameliorating the problem of low industrial capacity utilization.

1.6.1 Nigerian Manufacturing Challenge in a Liberalized Economy 21

Further liberalization of the Nigerian economy which began with the current democratic government means that, Nigerian manufacturing firms must, as a matter of necessity, begin planning to transit from domestic to world-class status. This is necessary in order to cope with the challenges brought about by liberation and changing value expectations of stakeholders.

Huge investments in IT without a commensurate impact on business performance is one of the many challenges facing manufacturing firms world over. In Nigeria, given the myriads of problems highlighted above, this concern seems escalated and is currently manifesting in reversals of some management decisions taken in the hype of IT era. From the researchers experience in manufacturing investments in Nigeria, information technology applications have been introduced in some manufacturing firms, but mostly in an uncoordinated way without long-term integration plans. It is also believed that in these firms where Information and Communication Technologies (ICT) have been introduced, individual departments introduced computers and purchased/developed software to support their own departmental operations. This fragmented approach perhaps divided the firm into small and almost autonomous enterprises, each with the goal to deploy ICT to make their departments and its associated activities work more efficiently. It soon

become clear that the smooth transfer of information among platforms and across functions in the organization was difficult, if at all possible.

To improve productivity in Nigerian manufacturing firms, a revisit must be made to the role of factors of production in economic theory. Capital today is 22

mentioned in terms of investments in technology and processes which have been shown to transform industry structure and competitiveness. Land as a factor of production hardly varies and labor is nowadays highlighted not in the aggregate number of workforce but in terms of production-assisted tools found in robotics and other computer-aided manufacturing tools. The importance of human capital, no doubt is important in the effective and efficient management of these factors. Consequently, as a result of the centrality of technology (which are often information driven), Nigerian manufacturing firms can improve their productivities and productive capacities by upgrading their technologies. This will enable these firms to reduce

production time and costs, derive and utilize better methods and process controls leading to innovative products that can withstand competition from imported brands and of export qualities.

1.7

Statement of the Problem

The civilian government in Nigeria has made efforts in recent times to address the myriads of problems confronting manufacturing in Nigeria. Government strategies have included infrastructural development as exemplified by the GSM revolution, increase in energy supply and the strengthening of regulatory agencies such as the National Agency for Foods and Drugs Administration and Control (NAFDAC) and the Standard Organization of Nigeria (SON). Other manufacturing-friendly programs of government include the privatization agenda, increase of required minimum bank capitalization from N2 billion to N25 billion and import prohibition or high tariff on some essential items that 23

can be manufactured locally. Needless to say, government must be committed and sincere with the implementation of these programs.

Given the external and intra-organizational problems facing manufacturing firms in Nigeria and the global manufacturing challenges, it is clear that there are lots of issues to be confronted in analyzing the characteristics of information systems strategic planning and implementation in Nigerian manufacturing firms. The implication of Nigerians membership of the World Trade Organization (WTO) inescapably imposes on Nigerian manufacturers the need to compete with world-class players in global markets that are perhaps facing little or none of the problems being faced by Nigerian manufacturing firms. Nigeria, no doubt is a potentially huge market, which

has been attracting world-class marketers from other countries. Hence, Nigerian manufacturing firms must be willing and ready to tackle these challenges effectively in order to turn the challenges into opportunities. Achieving a world-class status is thus both a great opportunity and also a serious challenge for Nigerian manufacturers.

In view of the fact highlighted above that modern manufacturing is information technology driven, it becomes highly important to facilitate this transition by first evaluating the existing information systems intent, practices and infrastructure in Nigerian manufacturing firms. Intent refers to the strategic planning and/or strategies of information systems in the organization, while practices are the ways and manners by which these information systems are actually implemented. Information systems infrastructure in this context refers 24

to the capabilities of current information systems in Nigerian manufacturing. Furthermore, it is important to relate intent, practices and infrastructure to business and/or financial performance in the sector.

Furthermore, Nigerian business strategists are unsure whether strategic information systems plans and models originating in developed countries like UK (Hussin et al 2002), and even in other developing economies like India (Saxena and Sahay, 2000) will be suitable in Nigeria given the peculiarities of the Nigerian environment. Accordingly, this study aimed at analyzing empirical data on business and information systems strategy, planning and implementation characteristics and its impact on performance in Nigerian manufacturing. This exercise will attempt to fill the knowledge gap in the

dearth of literature on empirical studies on these subjects in Nigeria. The study will also attempt to evaluate whether Nigerian manufacturing firms are on the right track to becoming world-class judging from the perspective of information systems strategic readiness in the context of their business strategies.

The results of the study will enable Nigerian manufacturing businesses to know what to do and what not to do in order to realize investment gains from IT. The availability of empirical data and recommendations from this study will no doubt enhance decision making in these important areas of business management in the Nigerian manufacturing sector.

1.8

Research Objectives

25

The broad objective of this study was to investigate the performance impact of the relationships between business and information systems strategies in Nigerian manufacturing firms.

To this end, the specific objectives of this study are as follows: 1. Investigate the existence and types of business and information systems strategies in Nigerian manufacturing firms. 2. Examine the existence of a fit between Information Systems Strategy and the business strategies of the manufacturing firms and its implications on performance.
3.

Determine the information systems planning approach adopted by Nigerian manufacturing firms.

4. Investigate the critical success criteria for Information Systems Strategy implementation in Nigerian manufacturing firms. 5. Assess the impact of information systems spending by investigating the relationship between information systems spending and some performance metrics (net profit and turnover). 6. Develop a model of (a) the relationship between business performance and the alignment of business strategy and information systems strategy and (b) the relationship between business performance and the IS planning approach adopted in Nigerias turbulent business environment.

1.9

Research Questions

26

Towards meeting the objectives stated above, the study collected and analyzed data to answer the following specific research questions.

1. What IT applications and systems are deployed and used in Nigerian manufacturing firms? 2. What is the level of computerization in Nigerias manufacturing firms. 3. Do Nigerian manufacturing firms have IT policies? If yes, what are the major contents of such policy documents? 4. What proportions of Nigerian manufacturing firms have in-house IT departments? What is the mix of IT skills possessed by IT managers in the firms? 5. What levels of management and departments are mostly supported by IT in Nigerian manufacturing firms? 6. Do Nigerian manufacturing firms outsource IT development and implementation? What are the major IT skills outsourced in Nigerian manufacturing? 7. What is the relationship between industry competitiveness and business performance in different sub-sectors of Nigerian manufacturing? 8. What is the relationship between IT investments and business performance in different sub-sectors of Nigerian manufacturing?

1.10

Test of Hypotheses 27

The following, six hypotheses are stated for empirical testing in the study: Hypothesis 1: There is a relationship between firm performance, business strategy and IS strategy. Hypothesis 2: Firm size is a moderator of the performance impact of the relationship between business strategy and information systems strategy. Hypothesis 3: Firm size is a moderator of the performance impact of the extent of alignment between business strategy and information systems strategy. Hypothesis 4: Comprehensive IS planning approach increase performance in a competitive business environment more than a piecemeal planning approach. Hypothesis 5: Increased IT spending is positively related with: (a) Profit After Tax and (b) Turnover. Hypothesis 6: CEOs IS involvement increase implementation success of IS/IT projects in Nigerian manufacturing firms. The outcome of this study is envisaged to contribute to research in strategic management by providing primary data on the performance impact of aligning business and information systems strategies in Nigerian manufacturing firms. The findings of the study are also expected to serve as the basis for IT investment decisions within the manufacturing sector of the Nigerian economy. Given the twin benefits of this study, researchers and practitioners alike will be able to make reference to this work in future research, and it will as well as give Chief Executive Officers (CEO) and Chief Information Officers (CIO) insights into the information technology dimension of business strategy and success in the Nigerian context. 1.11 Definition of Operational Terms 28

Organizational Strategy: The game plan management has for directing its activities in its chosen market areas and businesses in order to gain competitiveness and achieve desired business goals.

Information: Data that have been processed for subsequent use as business resource.

Information Systems: A computerized system designed to collect process and output information with a view to adding value to the information so collected. In this study, this term is used interchangeably with Information

Technology (IT).

Business Strategy: A conscious analysis of an organizations current state, a description of the desired state and an evaluation of the roadmap to bridge the gap.

Information Systems Strategy: The way and manner technological applications and processes are structured to collect and utilize information that are of importance to the organization.

Manufacturing: A series of tasks in which some form of material is converted, assembled processed or reconstituted into a more developed finished form (MAN, 1994).

Capacity Utilization Rate: Percentage of a firms production capacity, which is actually used, over some period of time. This is also called operating rate. 29

Information Systems Planning: The process of identifying computer-based applications that will assist an organization in executing its business plans and realizing its business goals (Lederer and Sethi, 1988).

Information Systems Implementation: Process of undertaking information systems activities according to courses and guidelines, which are necessary to achieve a desired set of objectives.

Environmental Turbulence: The frequency and unpredictability of changes in the business operating environment.

Return On Assets (ROA): A measure of the return on total investment in an organization. Calculated as: Profit after taxes of interest divided by Total asset Return on Stock (ROS): A measure of the rate of return on stockholders investment in the enterprise.

Return on Equity (ROE): A measure of the rate of return on the investment the owners of the common stock have made in the enterprise.

CHAPTER TWO
LITERATURE REVIEW 30

2.0

Introduction

This chapter is presented in four parts:

a) A

review of various concepts, models and frameworks which have been

articulated for understanding, modeling and predicting the characteristics of information systems planning and implementation in business firms.

b) Review

of empirical findings and conclusions that have been reported in

the literature on the characteristics and role of business strategy and information systems strategy on the performance of manufacturing firms.

c) Review

of global and Nigerian manufacturing situations and the

associated information systems challenges.

d) Presentation

of a research framework integrating key operational

variables, concepts and frameworks that have been highlighted in (a) and (b) which were considered important for directing this work.

2.1

Organizational Strategy

Business (organizational) strategy has been defined along various perspectives. This observation led researchers such as Robinson and Pearce (1988) and Blair and Boal (1991) to submit that there are two distinguishable perspectives in most strategy researches, strategy as process and strategy as content. Most definitions and studies have focused on either perspective

while previous researchers had not simultaneously studied both perspectives 31

(Robinson and Pearce, 1988). This is perhaps due to operational challenges of implementing both approaches in strategic management research.

Following the perspective of viewing strategy as a process, Thompson & Strickland (1998), stated that a firms strategy is the game plan management has for positioning the firm in its chosen market arena, competing successfully, pleasing customers and achieving good business performance (Thompson & Strickland, 1998). Deviating from the perspective of strategy as a process, Codington and Wilson (1994) submitted that a complete strategy will define the product line, the markets and market segments for which products are to be designed, the channels through which the operation is to be financed, the profit objectives, the desired size of the organization and the image which it will project to employees, suppliers and customers. This definition is apparently viewing strategy from the content perspective. Hofer and Schendel (1978, p.12) while answering the question what is strategy stated that strategy is the match an organization makes between its internal resources and skills (sometimes collectively called competences) and the opportunities and risks created by its external environment. Strategy therefore is a collection of specific, hard-to-imitate activities or efforts an organization makes in its chosen business in order to gain competitive edge. According to Thompson & Strickland (1998), strategic management entails five interrelated tasks:

32

1. Forming a strategic vision of what the firms future business make-up will be and where the organization is headed so as to provide long-term direction and infuse the organization with a sense of purposeful action. 2. Setting Objective, which entails converting the strategic intents into actionable outcomes for the firm. 3. Crafting a strategy in order to achieve desired outcomes. 4. Implementing and executing the chosen alternative paths (strategies) in an efficient and effective manner. 5. Evaluation of results of the above four actions in order to initiate (if need be) corrective actions in response to intra- and interorganizational dynamics.

Thus, from the approach of Thompson and Strickland, strategy making can also be viewed as sequential and incremental and also rational and comprehensive. Bourgeois (1980) however submitted that strategy, when viewed as a rational and comprehensive task, is characteristic of the old strategic planning school and that when strategy is viewed as incremental and sequential, results in a more adaptive view of strategy. More recently in an award wining Harvard Business Review (HBR) article Porter (2000), noted that operational effectiveness is not strategy. Consequently, Porter distinguished operational effectiveness as performing business activities better than rivals (faster, or with fewer inputs and defect) while strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a firm. It means performing different 33

activities from rivals or performing similar activities in different ways (Porter, 1996; p.2). The author went further to stress that three key principles underline strategic positioning:

a)

Strategy as a process being the creation of unique and valuable position, involving different set of activities.

b)

Strategy from the content perspective requiring the need to make trade-offs in competing i.e. to choose what not to do.

c)

Strategy as a process involving creation of fit or alignment among various firm activities.

Decisions take place at various levels in the organization and can be of different types. There are strategic, managerial and operational level decisions and actions targeted at various levels of the organization. Strategic decisions are usually made at the top, while the execution of the various activities needed to implement strategies mostly take place at lower levels in the organization. (Fuglseth and Grnhaug, 1994). The activities conducted, and how these activities are conducted, reflect the organizational strategy.

Mintzberg (1987) highlighted the distinction between formulated and realized strategy. While the latter is the extent and how the former has been implemented, unplanned patterns of behavior may occur during the strategic implementation process. In another dimension, environmental turbulence

implies higher expectations on the need for strategy to be adjusted in order to adapt the organization to changing conditions. This perspective gives rise to 34

the concept of actual strategy, which turns out to be more or less different from the planned strategy as new strategy features are added and others removed in response to environmental turbulence.

The concept of planned and actual strategy was brought home also by Learned et al (1986), who noted that strategy has two important distinct aspects: planning and implementation. Chan and Huff (1992) claimed that while information systems can be used to gather data to assist with strategy formulation, the impact of information access, flow and process are important concepts which IS researchers should examine. Beath and Ives (1986) and more recently, Lederer and Nath (1990) observed however that to date, only a few studies have focused on strategic systems implementation issues.

2.1.1 Types of Organizational Strategies An essential element of most organizational strategies is the how to grow the business, how to satisfy customers, how to outplay competition, how to respond to changing market conditions, how to manage each functional piece of the business, how to achieve strategic and financial objectives etc. In the competitive business world, firms have a choice to diversify into other markets and businesses whether related or unrelated to their core business. This can be by way of acquisition, divestments, joint venturing, and partnering or even internal start-ups. Hence, descriptions of the content of the firms strategy

necessarily have to cut broadly across many units of the business in order to be complete. 35

A strategy is needed for the firm as a whole, for each business the firm is engaged in, and for each functional piece of the business - Research and Development, Production, Sales & Marketing, Finance, Purchasing, Information Systems etc. A diversified firm has two levels of strategy: business unit (or competitive) strategy and corporate (or firm-wide) strategy. Corporate strategy denotes what businesses the organization should go into and how to improve the performance in the various businesses the firm has diversified into. Business unit strategy, on the other hand concerns the ways and

manner crafted by management to competitively perform in the specific line of business. Functional strategies in turn are specific approaches and actions stipulating how each of the organizations functional arms intends to direct its activities, such that it supports the business and/or corporate strategy. Functional units of an organization include finance, sales & marketing, information systems, and production. Consequently, there will be as many functional strategies are there are strategically important functions in the organization. Operational strategies on the other hand concern how to

manage frontline organization units within a business (plants, sales districts, distribution centers) and how to perform strategically significant operating tasks (material purchasing, inventory control, advertising campaigns, maintenance, shipping etc).

In other words, a firm, depending on whether it is a single-business firm or has diversified into other businesses will have game plan(s) addressing the various aspects of its business. For diversified organizations, there are four strategies that are distinctly visible: Corporate Strategy (CS), Business 36

Strategy (BS), Functional Strategy (FS) and Operational Strategy (OS). However, in a single-business firm, there are only three: Business strategy, Functional Strategy and Operational Strategy. Some authors however, prefer to merge functional and operational strategy resulting in two levels of strategy for mono-business organizations. This is because, the hows of managing frontline organizational units are contained in the functional strategy.

The Corporate Strategy extends firm-wide i.e. provides an umbrella for all of an organizations diversified businesses. It consists of the programs and

activities made to establish business positions in the different areas to which the organization has diversified. Often times, drawing corporate strategies is the responsibility of corporate-level managers and is ratified by the board of directors of the firm. For diversified firms the business unit strategy or

business-level strategy comprises the tactics and approaches management has initiated to achieve competitive positioning in lines of business of the organization. Hofer and Schendel (1978) suggest that business unit strategy has four separate components: competitive advantages, distinctive competencies, synergy or internal fit and scope or product-market combination. In what appears like a fine-tuning of Hofer and Schendels approach, Porter (1996) also mentioned these attributes or what Hofer and Schendel called components of business unit strategy. Information and information systems have unique and valuable roles to play in each of these components and can itself offer or confer strategic advantage on firms who have mastered the art of playing around information collection and use and the associated technologies involved in the process. Morrison (1988) 37

however, asserted that these four components can be reduced to two: competitive methods (the means by which the firm obtains competitive advantages) and scope.

Functional strategies are those that address the various organizational functional activities like Research & Development (R&D), Production, Information Systems (IS), Human Resources (HR), etc. Functional strategies, while narrower in scope than business strategies, add relevant details to the overall business game plan by setting forth the actions, approaches, and practices employed in managing a particular functional department or business process or key activity. Lastly, operating strategies comprise further narrower strategic initiatives and approaches for managing key operating units (plants, distribution centers, etc) and for handling daily operating tasks with strategic significance.

From the above illustration, information systems strategy therefore is a functional level strategy, which helps to support the firms overall business strategy and competitiveness. Well-formulated and implemented information systems strategies enable the organization to competitively carry out its business activities to improve the firms performance. Information Systems

strategies, being a functional strategy, will represent the game plan to enable the development and use of information resources to complement and support the business/corporate strategy of the organization. This implies the need for a congruence of the information systems strategy with the business/ corporate strategy. 38

The distinction between corporate and business strategies is only relevant for organizations that have diversified. When relevant, researchers investigating business unit strategies may need to examine different sub-strategies of business unit strategy (competitive sub-strategy, investment sub-strategy and integration sub-strategy). For example, Chan and Huff (1992) submitted that investigators working with domestic industries may need to focus only on competitive sub-strategy because firm investment and political environments may be relatively homogeneous and firm integration issues may be less critical.

Other aspects of business strategy research in the literature include the distinction between the use of single-industry firms and multi-industry corporations as the unit of analysis. Beard and Dess (1981) advised researchers to use single-industry firms rather than single-industry sub-units of multi-industry firms, while Miller (1988) used undiversified, autonomous firms in his study. Dess and Davis (1984) on the other hand chose not to work with single-industry firms and instead used standard industrial classification (SIC) codes to identify firms concentrated in one line of business or industry.

2.2

Information Systems Strategy

An Information Systems Strategy (ISS) defines the information systems (IS) that an organization needs to be competitive (Earl, 1996; Galliers, 1991). This range from systems to improve efficiency and effectiveness internally focused to those that lead directly to competitiveness, with an external focus (Earl, 1996; Sinclair, 1986). Wilson (1989) suggests that ISS should combine 39

business aims, related information needs, and the computer systems through which information may be provided to satisfy those needs. Walsham (1993, p. 4-5) also showed the importance of recognizing the difference between the intended ISS identified from the business strategy and the realized ISS, which depends on appreciating organization issues that inhibit success.

Recent literature emphasizes that an ISS should be an integral part of business planning (Earl, 1996; Galliers, 1991). Unless this is done, it is likely that strategic systems will be developed in a piecemeal manner, neither contributing to strategic vision nor enhancing organizational flexibility to respond to market changes (Avison et al., 1998). ISS need to encompass not only the systems that an individual organization requires to compete in the marketplace, but also about those that provide the means to improve competitiveness along the industry value chain (Porter and Millar, 1985). When organizations improve information exchange with stakeholders (customers, suppliers, staff, etc.), there is tendency for the organization to build stronger relationship with the stakeholders. To support this opinion,

Kanter (1994) argues that organizations may look for collaborative advantage, and that the sharing of information systems is a key part of the openness necessary for the development of such collaborative relationships. However, rapid technology changes often render it unfeasible for firms to attempt to gain competitive advantage through the introduction of information technology (Feeny and Ives, 1990). Feeny and Ives (1990) argue that firms should not base their competitive strategy on information technology unless they are confident that it is not easily replicable. 40

2.2.1 Information Systems Strategy Process Similar to the approach in categorizing business strategy into the content and process forms of business strategy, IS strategy also follow this categorization. Chan and Huff (1992) and Das et al (1991) provided a good basis distinguishing between IS strategy as a process and IS strategy as content. While there exist a mammoth of literature on IS strategy as a process, there are only few empirical investigations into the content form of IS strategy in information systems studies (Chan and Huff, 1992). IS strategy as a process focuses on the hows by asking questions like how does the organization devise an appropriate IS strategy and how will this strategy best be implemented to support the business aim of the firm?

2.2.2 Information Systems Strategy Content From the content perspective, perhaps the most elaborate view of IS strategy was provided by Galliers (1991). Galliers (1993) gave a four-component model of an ISS. These components are the information strategy, the

information management strategy, the information technology strategy and the change management/implementation strategy.

41

Information Strategy

Information Management Strategy

Change Management/ Implementation Strategy

Fig. 2.1: Components of an ISS - Galliers (1993)

Information Strategy

The information strategy acts as the linchpin between the business strategy and the IS strategy. It answers the questions: what information is required? And where is the information required to support the primary tasks, or key goals, of the business strategy. It also questions the critical assumptions behind the business strategy in light of the changing environment and changing perceptions. This assessment and review process is one of the core concepts behind this model. Thus, for Galliers, strategy should have both deterministic and emergent elements. Galliers (1993) while developing an information strategy for the UK Open University sees information (as an aspect of ISS) as key to the development of an effective Information Systems Strategy (ISS). He identifies the need to measure the success of the

business strategy and he thought this could only be done through

42

identification of relevant information. strategy thus forms the basis of the ISS.
Information Technology Strategy

The information content of an IS

The information technology strategy is, for Galliers, of secondary importance: it is concerned with applications and platforms, the 'nuts and bolts' of how to provide the information in the information strategy. Thus, IT strategy is concerned with the technological infrastructure necessary to fulfill the requirements of the information strategy. Most information systems strategy definitions and perspectives have traditionally been built along information technology applications and platforms in the organization. IT applications in this context include the various Information and Communication Technologies (ICT) found in the organization (servers, desktops, internet and intranet gateway devices, fax machines and printers, etc.), and the associated platforms (software) on which these systems run (operating systems, network platforms, various application-specific programs etc). Nowadays, a number of these applications and platforms have been converged and there are fewer array of ICT unlike several decades ago where each application operated separately.

Information Management Strategy

The Information Management Strategy is concerned with how the information services are organized for the different units of the organization (i.e., centralized, distributed, out-sourced) and policy issues such as who gets access and what level of access they receive, management responsibilities and controls, performance measurement issues etc. Earl (1989) thus 43

summarized the first three components as follows: Whereas the information strategy is about what and the IT strategy about how, the IM strategy is about the wherefores which way? Who does it? Where is it located? (Earl, 1989, p.65).

Change Management/ Implementation Strategy

The Change Management (Implementation) Strategy will identify what organizational changes will be needed for the information systems strategy to be successful. In addition, it also specifies when the strategy will be implemented and by whom. Importantly, those who will implement the strategy should be involved in its formulation and specific plans and budgets should be drawn into the process. Brugha (1998) while discussing change management in information systems using the Galliers and Sutherlands (1991) revised stages of growth model provided the basis for a meta-model generic change management system. Galliers used simple decision maker tools in helping organizations position themselves on a nomological map, as well as in recommending an inside-out approach on how to facilitate change. (Brugha, 1998). Apart from Galliers and Suntherlands revised growth model, McKinseys seven Ss (Waterman, 1982) is an example of an empirically founded set of adjustment activities. The seven Ss (style, skills, superordinate goals, strategy, staff, structure and systems) have been used by Galliers as a basis for describing what occurs in their six stages of growth model (Peters and Waterman, 1991; Waterman et al, 1980).

44

The beauty of Galliers model over existing frameworks is its holistic approach to the components of an ISS, rather than explicitly focusing on IT strategy as being synonymous with ISS. Galliers and Swan (1997) reiterated more

recently the need to place greater emphasis on informal as well as formal information flows, both within and outside the organization.

2.3

Strategic Information Systems

A resource may not be necessarily strategic i.e. gives the organization specific advantages even though it may prove useful to the organization. Barney (1991) submitted that for a resource to be strategic, it must be rare among the organizations current and potential competitors, it must be perfectly immutable, and it must be difficult to find strategically equivalent substitutes. Parker (1996) describes strategic alliance as the coming together of equals to jointly produce some products or service to increase competitiveness in the global marketplace. It may be between

organizations, an organization and its stakeholder, or even within the organization. Lee and Kim (1996) argues that the role of IS has changed

dramatically over the last three decades, from passive automation or support tool to a strategic and competitive device for transforming organizational structures and functions. Literature abound on studies of strategic IS in developed countries. First Direct, the first UK organization to offer armchair banking would not have achieved this feat without IT (Avison et al, 2000). Furthermore, there were other key strategic projects like the American Airlines SABRE ticket reservation system, United Airlines Apollo, Baxters (American Hospital Supply) ASAP customer ordering system, Federal 45

Expresss COSMOS, McKessons Economost, Citicorps GTN, Merrill Lynchs CMA and the Philadelphia National Banks MAC which were widely reported in the literature as success stories of the transformational ability of IT. (Avison et al, 1996). In the UK, smart cards are being used in BP petrol stations, selfscanning of products purchased using bar code scanners at SafeWay supermarket, data warehousing at Woolworth and virtual reality for warehouse planning at Boots (a chain store). These and others are reported as uses of IT to gain competitive advantage (Avison et al, 1996). Porter (1985) captured these developments aptly when he submitted that a firm derives competitive advantage when it creates value from IT investments and the cost of such value creation is less than the value derived by buyers of the service.

Another dimension of strategic IS pertains to organizational decision making. Most organizational decision-making involves complex, series of unstructured decision-making processes. In such situations, human judgment alone may not be sufficient and may need to be backed up by computational power and decision support systems to aid understanding of cause-effect relationships. Keen and Scott-Morton (1978) believed that human actors and IS can provide a more effective decision in these circumstances than either alone. An

organization-specific IS will thus contain elements that are primarily of value for that organization alone. When the system design is particularly suited and when its attributes are geared to boosting organization performance, the IS reality becomes an important strategic resource difficult to imitate, where a straightforward replica will be of lesser value for the imitating competitor (Barney, 1991; Wernerfeldt, 1984). Following this line of argument, Fuglseth 46

and Grnhang (1994) argue that IS can attain the status of being an important strategic resource and the researchers demonstrated their position through the design of a new system for credit evaluation in a Norwegian bank.

While the strategic focus of information systems dominated information systems strategy research in the 1980s, more recently, organizational perspectives are now becoming obvious as a necessary condition for ISS to be successful. More often, ISS need to fit with some organizational parameters like culture, structure, etc in order to impact on firm performance. Checkland and Howell (1998) argue that understanding relationships in an organization is critical to the adoption of successful IS. In a similar context, some strategy literature emphasizes human resources issues (culture, CEO attributes etc.) in relation to IS as crucial to organization performance (Itami and Roehl, 1987; Eliasson, 1990). Saeed et al (2005) in a survey of over 100 companies using primary and secondary data investigated the relationship between electronic commerce competency as pre-purchase driver and business performance. The researchers concluded from the results that firms could enhance short-term performance by providing electronic commerce competency to improve customer value and exhibit superior performance.

With the advancement of mobile technologies, IS has also been shown to have a place in leveraging on the benefits of the technology to confer competitive advantages on the organization. Hong et al (2005) concluded using a value-focused thinking approach in a leading publishing firm that mobile technology has strategic implications for the business on three main 47

frontiers: to improve working process, increase internal communication (and knowledge sharing) and enhance sales and marketing effectiveness.

2.4

Information Systems Strategy Planning and Implementation

2.4.1 Information Systems planning Information Systems planning is the process of identifying the computerbased application(s) that will assist an organization in executing its business plans and realizing its business goals. (Lederer & Sethi, 1988). The extent to which IS planning meets its objective offers a means of assessing its success (Raghunathan & Raghunathan, 1994). One way to do this is to assess the accomplishments of individual IS projects initiated on the basis of planning (Bergeron et al, 1991; Fitzgerald, 1993; Raghunathan and Raghunathan, 1994). Thus, IS planning is successful when it identifies valuable IS projects and ensures sufficient organizational support for their implementation. It is

less successful when it promotes IS projects with only marginal business value and when it identifies valuable projects but fails to inspire sufficient support for their implementation.

Two competing theories of information systems planning are evident in majority of literature on information systems planning characteristics. The

traditional planning theory predicts that organizations using comprehensive, formal planning will be more successful in coping with a turbulent environment (Ansoff and Sullivan; 1993; Raghunathan and Raghunathan, 1991). The

critics of this view have proposed an alternative theory which predicts that 48

organization using an informal, incremental approach will be more successful in a turbulent environment (Quinn, 1980; Minzberg and Quinn, 1996). Environmental turbulence is described as a state characterized by the frequency and unpredictability of changes in stakeholder s expectations (Sambamurthy et al, 1994). Environmental turbulence

increases the risk of investment failure and without appropriate IS planning, organizations may fail to realize the anticipated benefits of their information systems investments (Clemons & Weber, 1990).

Salmela et al (2000), concluded empirically from action research that in turbulent environments, comprehensive IS planning may be more successful than incremental planning. This study, which has implications for both

practice and research, was careful to state that more studies would however, be needed in many more organizations and that the competing theories be examined from other organizational perspectives before firm conclusions can be drawn.

In summary, turbulence increases the risk of IS planning failure. Changes in business objectives and priorities threaten the business value of IS projects (Clemons and Weber, 1990) as well as the commitment for their implementation (Lederer and Mendelow, 1990, 1993) Thus, IS planning must be rigid enough to permit the completion of large projects yet flexible enough to adjust to environmental change (Lederer & Mendelow, 1993).

49

Most research on strategic information systems planning (SISP) has been carried out in North America, where the focus is on large organizations (Rackoff et al, 1985), while European contributions have tended to concentrate on developing frameworks that assist in identifying the position of SISP within the organization environment (Earl, 1989; Walsham, 1993). To date research interest in the role of ISS in SMEs in general and manufacturing in particular is surprisingly sparse and underdeveloped (Levy et al, 1999). This view is corroborated by Levy and Powell (2000) who cautioned on the paucity of IS research in small and medium sized enterprises (SMEs) and the dangers of assuming that current ISS models are of the one size fits all variety. Furthermore, the authors claimed that SMEs

embody a different set of difficulties in ISS development that renders many large firm processes inappropriate.

2.4.2 IS Implementation For the purpose of this study, the term implementation will be defined in line with the definition of Fuglseth and Grnhang (1994). To them, implementation meant, carrying out business activities according to the courses of action/guidelines which we consider to be part of the formulation of strategy. Both empirical and prescriptive research studies have highlighted the strategic importance of improved ISS implementation. Wilson (1991) surveyed Times 500 companies as well as 47 financial services firms in 1988 to determine the nature of barriers to IS design and implementation among other objectives. Wilson found measuring

benefits, difficulty in recruiting, political conflicts and doubts about benefits as top barriers to IS implementation. Further to this, Gottschalk (1999) in a Norwegian study identified ten content characteristics of formal IT strategy as being potential 50

implementation success predictors. Furthermore, he proposed an IT strategy implementation matrix to illustrate the relationship between expired time horizon and the IT strategy implementation extent. More specifically, Enterprise

Resource Planning (ERP) implementation has been considered to rely on behavioral processes and actions. ERP implementation is a process that

involves macro-implementation at the strategic level, and micro-implementation at the operational level. Al-Mudimigh et al (2001) proposed an integrative

framework for ERP implementation based on an extensive review of the factors and the essential elements that contribute to success in the context of ERP implementation.

2.5

Strategic Information Systems and Business Performance

Many empirical studies have been carried out on the relationship between strategic IS and organizational performance (Cron and Sobol, 1983; Turner, 1985; Bender, 1986; Shin, 2001; Dawson & Watson, 2005). Majority of these

studies have focused on the relationship between IS investment and only one organization performance measure e.g. financial performance. There were

however differing conclusions from these studies which have made it practically difficult to render one line of submission in respect of the relationship between IS and organizational performance characteristics.

2.5.1 Measuring Business Performance A review of literature reveals several ways to assess business performance. A firms performance can be measured using financial measures (e.g. profitability, sales growth etc), operational indicators (e.g. market share), stock price or a 51

combination of factors (Dawson and Watson, 2005). While financial performance measures have been dominantly used in the past, non-financial measures have not enjoyed the same widespread use. Within the domain of financial measures, there are four major categories as noted by Venkatraman (1986). These are profitability ratios, cost ratios, growth ratios and valuation ratios. Weil (1988) was of the view that it is better for researchers to ask business executives which measure of performance is important to them. Venkatraman (1986) also made arguments about using secondary sources to operationalize financial data; a situation that the researcher believes improves the operationalization of this variable especially when used as the dependent variable. Thirteen ratios are

commonly used to measure financial impact and each of them has theoretical support and is demonstrated elaborately by the works of Karahanna and Chen (2004). Burn (1990) however pointed out a drawback of financial measures to its inability to reflect the true position of things as there are numerous versions of a published financial data, each intended to serve different audiences and purposes. On the limitations of using financial performance, Bharadwaj, (1999) also lend his voice by highlighting the ratios sensitivity to changes in accounting practices.

Venkatraman and Ramanujam (1986) pointed out the need to use multiple respondents to assess business performance in order to improve construct validity because business performance is an organizational level construct. Phillip (1981) recommends that researchers should ask questions relating to business performance as straight as possible in order to remove or reduce ambiguity in response. Similarly, Fredrickson and Mitchell (1984) suggest that when there is 52

sufficient disagreement in the responses of multiple respondents, such data should be discarded.

Venkatraman and Ramanujam (1986) pointed out the pluses and minuses of using primary versus secondary data. They argue that no approach is superior and that perceptual data from senior managers tend to correlate strongly with objective data and can as well be employed as acceptable operationalization of business economic performance. Ford (1979) also warned of the distinction between using questionnaire data and institutional records arguing that questionnaire data tend to tap more emergent phenomena compared to institutional records.

2.5.2 Performance Impact of Strategic Information Systems Cron and Sobol (1983) examined the impact of IT investment on financial performance for medical wholesale supplies. They found that on the average, the impact of IT was not significant, and that there was either very strong or weak effects on financial performance for firms with large IT investments. While

agreeing with Cron and Sobol, Bender (1986) also found a curve-linear relationship between IT investment and firm performance in the insurance industry. For instance they found that firms with IT expenditures of 15% to 20% of total expenses were the best performers whereas firms with either very low or very high expenses performed poorly relative to those with IT expenses in between. Turner (1985) found very little evidence to suggest that there was a strong relationship between organizational performance and IT expenses or usage. 53

In an attempt to deviate from measuring the impact of IT spending on just one performance yardstick, Rai et al (1977) examined the performance of different types IT investment on multiple performance measures. They used three

different measures of IT investments aggregate IT, client/server systems, and IT infrastructure and three different types of performance measures firm output (sales and value-added), financial [Return on Assets (ROA) and Return on Equity (ROE)] and intermediate (labor productivity and administrative productivity). They found that IT investments were positively associated with firm output, but a clear association seemed lacking between IT investments and business performance as measured by ROA and ROE. According to them, only IT capital and client/server expenditure were positively associated with Return on Assets (ROA).

In another study, Tam (1998) examined the impact of IT investments on business performance ratios such as Return on Asset (ROA) and the stock market returns of the firms in four newly industrialized countries. Based on his findings, he

argued that performance gains could easily disappear because novel applications soon become routine operations and are copied by imitating competitors. Furthermore, the link between IT investment and performance ratios could be diluted by institutional and societal factors, among others. In a more recent

study, Shin (2001) investigated in the USA, the contribution of IT to financial performance as measured by net profit, ROA and ROE while focusing on the alignment of IT with business strategic dimensions such as vertical disintegration and diversification. Shin (2001) submitted that increased IT spending improves net profit, but not performance ratios such as ROA and ROE, of firms with 54

decreased vertical integration and higher diversification. In Australia, Sohal and Lionel (1988) studied the role and impact of IT in 530 Australian businesses and found that IT usage was positively related to organizational performance. Several studies have also attempted to evaluate the proportion of IT expenditure in firms in different countries. For instance, Information technology expenditure has been estimated at making up to 2% of turnover in England and UK (Willcocks and Lester 1994). In Italy, around 1.75% of turnover is spent on information

technology with an annual growth rate of 8.05% (Francalaru and Maggiolini, 1995) and around 1.25% of turnover is spent on information technology in Spain (Huerta and Sanchez, 1999). Data could not be found on the quantum of turnover spent on IS in Nigeria.

Rivard et al (2005) attempted to balance the two main perspectives (strategy positioning perspective and resource-based view perspective) of looking at the contribution of IT to business performance. The researchers adapted Spanos and Lioukass model, in a survey of 96 SME firms to illustrate and test the models capability to encapsulate the effects of both IT support for business strategy and IT support for firm assets on firm performance.

From a developing country viewpoint, Chowdhury et al (2003) in a survey of SMEs in three East African countries (Kenya, Tanzania and Uganda) found that the diffusion of ICT is both industry and country specific. In addition, their empirical findings suggested that investments in ICT has a negative impact on labor productivity and a positive impact on general market expansion and no significant impact on the firms returns nor does it determine firms exporter (non55

exporter) status. In another study conducted in Singapore, by Ang and Koh (1997), user information satisfaction correlated with job satisfaction and this was shown to have implications on firm performance. Similarly, in the Asia-Pacific region, Valida et al (1994) studied IT utilization among 230 business organizations in Malaysia. They concluded that the use of IT in Malaysian organizations was strategic in order to gain competitive advantage. In Hong Kong, Burn (1990) studied the strategic use of IT in Hong Kong SMEs and found that IT strategy was related to Porter and Miller model of competitive advantage. 2.5.3 Evaluation of Impact of Information Systems Spending The evaluation of information systems investments is difficult and hazardous (Powell, 1996). The reasons behind this opinion stems from the particular

characteristics of this technology. These include substantial economies of scale and scope of information systems (Dewan et al, 1995), imposition of significant switching cost on its participants (Buxmann and Konig, 1997), production of network externalities (Nault, 1998) and multiple effects, so that both income and costs are hard to quantify, are prone to a number of errors and uncertainties. Furthermore, there seems to be a further realization of the fact that the effects of information systems are not merely either 100% technical or 100% organizational, but that they are interrelated.

In order to gain a good understanding and interpretation of information systems evaluation and to expand the traditional view of tangible costs and benefits the centextualism framework (Davis and Hammann, 1998) and interpretative approach (Kanellis et al, 1999) have been proposed by some authors (Farbey et 56

al 1998, Smithson and Hirschheim, 1998).

These approaches to evaluating

information systems focuses on business changes and business values that IS enables rather than the conventional and narrow accounting appraisal techniques.

2.6

Frameworks for Information Systems Strategy Research and Practice

Many other researchers such as Cash and Konsynski (1985) and Earl (1989) have expanded and built upon the work of Porter (1985) with a view to analyzing the opportunities that Porters model provides for top executives, in analyzing the strategic potentials of information technology systems in business. Earl (1989), Barney (1991) Learmonth and Ives (1987) have argued that information technology can be used in either a defensive or offensive manner in order to exploit the five competitive forces of Porters model. In chapter three of his book: Management Strategies for Information Technology, Earl (1989), highlighted awareness, opportunity and positioning frameworks for analyzing and demonstrating the strategic impact of information technology or suggesting how strategic advantage might be sought. Earl (1989) proposed that each of the three classes of frameworks has its own purpose, scope and uses. None of the models offer a complete answer; equally most of them are helpful if used appropriately. Table 2.1 summarizes the purpose, scope and uses of the three categories of frameworks.

57

Table 2.1: A Framework of Frameworks Framework/attribute Purpose Scope Use Awareness Vision Possibility Education Opportunity Ends Probability Analysis Positioning Means Capability Implementation

Source: (adapted from Earl, 1989)

2.6.1 Awareness Framework The awareness frameworks aim at demonstrating the use of IT in strategic visioning for the organization. In addition, it also helps executives assess, by reference to general models, the potential impact of information technology on their business, as well as open up thinking and discourse on the technologystrategy relationship. Thus, the awareness framework is more conceptual than prescriptive or instrumental. These frameworks are high-level frameworks, which will often need much decomposition and follow-up investigations before it can be utilized in real world applications. Consequently, the awareness frameworks are primarily used in teaching and illustrating the technology-strategy connection. There are three sub classes of the awareness framework: refocusing, impact, and scoping models (Earl, 1989).

(i)

Refocusing Framework

These frameworks help to change mind-sets of the information system strategist by asking strategically important questions about the way to use IT in improving the business. Several researchers have inductively developed refocusing frameworks by rationalizing exemplars of strategic information systems. Benjamin et als (1984) strategic opportunities matrix is an early, typical example. 58

The researchers cited Merrill Lynch and the American Hospital Supplys model of significantly changing the structure of the business and product and service offerings respectively. These are widely quoted cases to demonstrate the practical uses of the refocusing model.

(ii)

Impact Models

The second sub-class of the awareness framework is the impact models, which suggests the scale of strategic change that may be possible. The work of Parson (1983) provides detailed examples of an impact model where he reminds us that information technology can be influential at the industry, firm or strategic levels. Parsons impact frameworks argue that IT truly does have strategic impact on the business, and that it can be tailored to a particular industry or firm, and particularly at the strategic level to test if investments in information systems are supporting the business strategy of the firm. A practical example of these

frameworks is the innovative use of FRETEL (an online quotation service to brokers) by the UK insurance company, Friends Provident (Earl, 1989).

(iii)

Scoping Model

Scoping model is the third sub-class of the awareness framework.

Scoping

models indicate what might be the overall strategic scope of IT for a business or sector. Porter and Millars information intensity matrix (See Figure 2.2) provides a useful example of a scoping model (Porter and Millar, 1985). However and

more recently, in what seemed a clear and targeted challenge to the information intensity matrix, Phillip et al (1995) in a survey of a large number of Canadian firms submitted that there is no difference in deployment of information 59

technology systems for any one of the strategic reasons between manufacturing and the service-oriented companies.

Information content of the product LOW HIGH Newspaper Banking Airline

HIGH

Oil refining

Information intensity of the value chain

LOW

Cement manufacturing

Figure 2.2: Porter and Millars information intensity matrix 2.6.2 Opportunity Frameworks

The opportunity frameworks are particularly designed to be analytical tools, which lead to firm specific strategic opportunities. They in addition help in clarifying business strategies in order to demonstrate options for using information technology strategically. They are more instrumental and practical than

awareness frameworks. In principle, opportunity frameworks aid the process of analytical discovery of ideas for strategic information systems. There are four sub-classes of the opportunities framework: systems analysis, application search tools, technology fitting and business strategy frameworks.

(i)

Systems Analysis framework

The first sub-class of the opportunities framework is the Systems Analysis framework, which provides generic analytical tools for investigating the information flows, impediments, gaps and opportunities in business processes 60

and activities. An example is Porter and Millars value chain analysis, which divides organization processes into a set of value activities. For an organization to derive competitive advantage, it must either perform these activities cheaper than rivals or perform them in distinctively different ways from competitors.

(ii)

Application search tools

These frameworks probe the characteristics of specific application areas for goodness of fit with the potentials of information technology in general, or of specific technologies. A useful example of the application search tools is the A practical

Customer Resource Life Cycle of Ives and Learmonth (1984).

application of this model using Ives and Learmonths example is Chevrolets touch-screen microcomputer system, which asks showroom customers about their driving habits and type of vehicles desired. Furthermore, the works of Runge and Earl (1988) have taken the application search tools a step further, in terms of telecommunications technology. Application diagnosis techniques, a form of

application search tools are particularly useful in eliminating technological solutions which do not add much value (do not fit with the main applications), as well as suggests future directions which application development should follow. In 2003, Earl modified the application search tool to develop the application development portfolio matrix, which illustrates better ways of integrating business and IT (Figure 2.3). In his contribution to Jerry Luftmans book Align in the Sand, Earl (2003) noted that whether firms choose to integrate their formal business and IT strategies or not, they certainly need to integrate their business and IT thinking. He introduced a T-portfolio matrix that tries to balance

61

investments that are competing for today and competing for tomorrow or put simply ensuring that IT is both supporting business strategy and shaping it.

IT SHAPING BUSINESS LOW HIGH

HIGH
IT SUPPORTING BUSINESS

LOW

TODAY

TOMMOROW

Figure 2.3:

Portfolio Template (Adapted from Earl, 2003)

(iii)

Technology Fitting frameworks

These frameworks attempt to match the attributes of specific technologies to problems or opportunities. An early and valuable example of such technology fitting is an opportunities matrix developed by Runge (1985) for the exploitation of Telecommunication Based Information Systems (TBIS) linking the firm with its customers to achieve competitive advantage. The framework is a derivative of Ives and Learmouths Customer Resource Life Cycle. Runge found in a study of 36 TBISs that linked firms to customers that 12 linkages potentially exist. Each linkage provides opportunities for development of TBIS, which either differentiate the supplier from his rivals or create switching costs for the customer. Another good example of the technology-fitting framework is the computability profile of McCosh, Rahman and Earl (1981), which assessed the capabilities of mainframe 62

computers with the information requirements of management planning and control systems.

(iv)

Business Strategy framework

These frameworks evaluate the business strategy context of an enterprise and suggest where information technology has a payoff. Porters five forces model for analyzing industry competition is relevant here which organizations can use to determine the force(s) that portend great danger to the organization in order to derive appropriate counter measures. Porter and Miller (1985), McFarlan (1984) and Cash and Konsynski (1985) are amongst those who have built upon Porters model to suggest how information technologies can limit and enhance the five competitive forces of a firm. A more comprehensive, procedural example of a business strategy framework is Wisemans Strategic option generator (Wiseman, 1985). Practical applications of the business strategy framework are Merrill Lynchs cash management account which erected a barrier to entry in a service market scenario, and Citibanks (now Citigroup) ATMS to expand its retail banking business in the USA.

2.6.3

Positioning Frameworks

The last of the frameworks providing a means of analyzing the strategic impact of information system are the positioning frameworks. They are best seen as tools to help executives assess the strategic importance, the particular character, and the inherent situation of information technology for their enterprise. The

positioning frameworks are not very useful in searching for opportunities for strategic application of information systems; rather they focus more on 63

implementation issues regarding information systems deployment in the organization. The following subclasses of the positioning frameworks are highlighted in the literature: scaling frameworks, spatial frameworks and temporal frameworks.

(i)

Scaling Frameworks

The McFarlan and McKenney (1983) strategic grid is a very useful scaling framework available. They are mainly analysis tools, and are useful in education, and consulting to assess the importance of IT for a business unit. (ii) Spatial Frameworks

The Earl sector framework is an example of spatial framework and is valuable in assessing the IT and information management implications for a particular type of business (Earl, 1989). Given that industries vary in their information intensity and processing requirements, the spatial frameworks when combined with positioning analysis, offer a very useful method of analyzing management actions required to deal with various information processing perspectives of the business.

(iii)

Temporal Frameworks

The temporal frameworks help executives assess the current practice of information management and its consequences. They may then highlight either inconsistencies or suggest that a next stage should be anticipated and planned. The generic assimilation of technology model developed by McFarlan and McKenney (1983) is very valuable in plotting stage positions in the evolution of information management.

64

It is not possible to synchronize positions on all three frameworks since they record overlapping dimension and different dynamics. However, some

combinations are clearly dangerous and others suggest a more detailed, sophisticated information management program than does any one framework alone. Experience shows that a selection works best, whether in education or practice, but that in order to achieve success, the right framework must be used for the right purpose in the right context (Earl, 1989). In an attempt to apply

Earls (1989) work to the strategic information systems development frameworks for SMEs, Levy et al (1999) concluded that many lessons from large organizations in the adoption and use of the frameworks are also applicable to SMEs. However, since SMEs differ from large firms in a number of ways, (lack of IT department, operational focus, etc.), strategic IS development framework may fail in its ability to apply stage models for growth and management of IS in SMEs.

Land (1994) makes an interesting comparison between the work of John Kay (1993) and Scott Morton (1991) in the area of corporate success. The work of MIT researchers led by Scott Morton had highlighted the centrality of information technology in the emerging organization of 1990s. According to Kay (1993, p.34) however, there are no recipes and generic strategy for corporate success and that success will depend on a range of factors such as architecture, innovation, reputation and strategic assets of the company. Kay emphasizes the point that the match between the capabilities of the organization and the challenges it faces was the most important issue in understanding corporate success and corporate failure.

65

2.7

Alignment of Information Systems Strategy and Business Strategy

Galbraith and Nathanson (1979, p. 266) observed that although the concept of fit is a useful one, it lacks the precise definition needed to test and recognize whether an organization has it or not. However, some attempts have been made at defining alignment. For Cash and Woolfe (1992), strategic alignment occurs when a firm has harmonized its overall strategy and its IT systems. For Chan and Huff (1993) the achievement of strategic alignment involves passing through three stages: awareness, integration and alignment. Pap (1995) defines strategic alignment as the appropriate use of IT in the integration and development of business strategies and corporate goals. According to Chan (2002), two wellreceived definitions of alignment include the one given by Reich and Benbasat (2000, p.82). These authors defined alignment as the degree to which the information technology mission, objectives and plans support and are supported by the business mission, objectives and plans. Henderson and Venkatraman (1993, p.5) defined alignment as involving fit and integration among business strategy, business infrastructure and IT infrastructure.

Today, there is hardly any study on strategic management that will not highlight the importance of some congruence or alignment or fit between one strategy and another in order to derive maximum competitive advantage from these strategies. The focus on alignment stems from the fact that the ultimate success of ISS depends on how positively it can impart on organizational performance, which is largely directed by the organizations corporate/business strategy. This perhaps led Parker and Benson (1988) to submit that the proper role of IT in a firm is often characterized as a fit or alignment with the strategic goals of the firm. 66

Information Technology is properly aligned when its strategy supports the organizations strategy and when the infrastructure put in place to implement the IT strategy is adequate for the job and successfully supports the organizations processes (Franz and Klepper, 1995). Porter (1996) while trying to illustrate the domains of strategy also argue for the need for a fit among the various elements of strategy, as well as a fit of the strategy with other organizational characteristics. When strategies are well aligned with other organizational competences, imitation of the strategy becomes more difficult if at all possible, because it will be difficult for the competitor to copy both the strategy and the other organizational variables that aligned with the strategy to return good performance.

The importance of alignment to researchers and practitioners in strategic management made Luftman (2003, p.3) to note that alignment is the perennial chart topper on top-ten lists of information technology issues and that for about 15 years, it has remained number one in studies conducted by IS academics, consultants and research firms.

Several studies have argued that business-IT alignment has advantages for firms (Chan et al, 1997 and Henderson and Venkatraman, 1993). Henderson and

Venkatramans (1993) strategic alignment model identifies four domains of strategic choice: business strategy, IT strategy, organization infrastructure and IT infrastructure. They argue that these domains require the organization to

manage the fit between business and IT strategies. Different researchers have consequently focused on different dimensions of the Henderson and 67

Venkaramans model.

For example, Chan et al (1997) focused on the link

between business strategy and IT strategy, while Raymond et al, (1995) focused on the link between organization structure and IT structure. More recently

Bergeron et al (2001) have included environmental uncertainty in exploring the links between all four domains and business performance, using alternative perspectives for alignment. 2.7.1 Dimensions of IS Alignment

Some studies on business-IS alignment have focused on the process of achieving alignment while others have focused on the content, i.e. of how well firms have aligned their information systems strategy with business strategy. Attempts have also been made to measure strategic alignment (or fit), based on various typologies. For example Atkins (1994) developed a survey using three different models to measure strategy and to assess alignment (McFarlan, 1984; Miles and Snow, 1978). Lefebvre et al (1992) used Porters (1985) typology and found encouraging evidence that this classification scheme was applicable to small firms. However, these investigators also concluded that small firms were not as strategically oriented as larger organizations which makes the identification of strategy more difficult.

Another angle from which some other investigators have looked at business-IS strategy alignment is in respect of type of business strategy adopted by the organization vis--vis their IS strategy. Franz and Klepper (1995) identified a

strategy continuum ranging from staying with traditional markets, which they described as survival strategy to expanding into global markets, which they called 68

growth strategy.

In this light, these authors submitted that alignment for an

organization pursuing a strategy of growth means developing systems that support successful competition against the advanced firms of Western Europe, North America and the Far East. It also means systems that assist with productivity, quality and marketing issues. Conversely alignment for a firm

pursuing strategy of survival implies simpler and more basic support activities and less emphasis on systems that support marketing.

Kaplan and Norton (2000) also noted that firms might pursue productivity improvement strategy and/or revenue growth strategies as levers for improving shareholders value. They claimed that productivity improvement strategies are short term and usually involves improving cost structure and/or improvement in asset utilization. Revenue growth strategies on the other hand are long-term and are usually built around creating revenues from new sources and/or increasing firms profitability.

Researchers of the concept of fit in strategic management research must decide on two fundamental measurement issues. The first issue is the choice of the degree of the specificity of the theoretical relationships, which ultimately indicate the level of precision in the functional form of fit. Typically when two variables are involved, better precision is achieved in specifying the relationship (fit) than when larger sets of variables are analyzed. Gupta and Govindarajam (1984) worked on two variables (strategy and managerial characteristics) while Miller and Friesen (1984) explored different patterns of configuration using a larger set of variables between successful and unsuccessful firms (Venkatraman, 1989). The second 69

issue that fit-based researcher must address is whether to anchor the concept and consequently the measurement of alignment on a specific criterion or adopt a criterion-free specification.

Chan et al (1997), in a survey of North American financial and manufacturing firms, concluded that business strategic orientation, IS strategic alignment, and IS effectiveness have positive impacts on business performance. Chan (2002, p.98) distinguished between two components of alignment: strategic alignment and structural alignment and their relative importance to improving IS performance. Chan (2002) noted that strategic alignment focuses on the fit between the priorities and activities of the IS function and those of the business unit. Structural alignment examines the degree of structural fit between IS and the business, specifically in the areas of IS decision-making rights, reporting relationships (de) centralization of IS services and infrastructure, and the deployment of IS personnel. Other dimensions of fit include focusing fit on internal or external factors relative to the firm or both. Alignment can also be studied by focusing on the content or process of achieving fit (Venkatraman and Camillus (1984).

2.7.2 Enablers and Inhibitors of Alignment In a recent study, Reich and Benbasat (2000) attempted to x-ray factors which influence the social dimensions of IT. They observed the following five major

social dimensions of IT: shared domain knowledge between business executives and IT executives; IT implementation success and communication between business and IT executives; connections between business and IT planning processes; and strategic business plans. In 1999, Luftman et al (1999) also 70

reported the following enablers of strategic alignment: senior executive support for IT, IT departments being involved in strategy development, ITs understanding of the business, business IT partnership, and well prioritized IT projects. Chan (2002) noted that perhaps alignment has eluded us simply because alignment is not a state, but a journey involving potentially daunting tasks. Relationship between business partners and IS executives are paramount and appropriate reward systems must be put in place to encourage continuous harmony among elements of a firm structure and function, process and people that are in alignment. Earl and Feeny (2000) while answering the question Is your CIO adding value concluded that CIO attributes (personality, knowledge and training, influence in the organization etc) could act as promoters or inhibitors to IS strategic alignment. Chan (2002) also showed a surprising importance of informal organization structure in improving IS performance. The challenge from these studies for IS and business managers is thus how best to implement measures to promote the enablers of alignment while discouraging the inhibitors of alignment in the work place. Table 2.2 summarizes some of the enablers and inhibitors of IS strategic alignment. Table 2.2: Enablers and Inhibitors of IS Strategic Alignment
SN 1 2 3 4 5 6 Enablers Senior executives support for IT IT involved in strategy development IT understands the business Business-IT partnerships Well prioritized IT projects IT demonstrates leadership Inhibitors IT/business lack close relationship IT does not prioritize well IT fails to meet commitments IT does not understand the business Senior executives do not support IT IT management lacks leadership

Source: Luftman et al, 1999

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.3

Measurement of Alignment between IS Strategy and Business Strategy

Measurement of IT alignment or degree of alignment is a very complex task because of the complexities associated with the measurement of the associated variables. In addition, alignment is not a state, but rather a journey whose end is difficult to predict and determine. Earlier efforts have discussed fit in qualitative terms with only a few attempts at quantitatively measuring fit. Drazin and Van de Ven (1985) reviewed three approaches to measuring fit: natural selection, bivariate interaction and the systems approach. The natural selection approach hypothesizes that there should be some agreement (congruence) between IS strategy and business strategy without addressing performance implications of this congruence, i.e. the measurement should be criterion-free. The bivariate interaction approach attempt to explain variations in performance by examining the interaction of specific strategy and IS factors. The systems approach relies on multivariate analyses to examine patterns of consistency among multiple strategies and IS characteristics, and their impacts on performance. The bivariate interaction and systems approaches are therefore criterion-based, highlighting the implications of business strategy and IS strategy on business performance.

Consequently, within the three broad approaches, Venkatraman (1989) identified six perspectives for conceptualizing and measuring fit. These perspectives are moderation, mediation, matching, gestalts, profile deviation and covariation. Figure 2.4 illustrates the relative positioning of the six perspectives in terms of (a) number of variables (b) degree of specificity and (c) the importance of criterion.

72

a) Moderation The moderation perspective is based on the notion that there is a relationship between two variables, which predicts a third variable. This invariably states that an interaction exists between two variables and this interaction is important in predicting the outcome of a third variable. For example, the impact of strategy (predictor) varies across different levels of the environment (moderator) is the primary determinant of performance - the criterion (if a criterion-based approach is specified and used). The moderator can however be viewed categorically (e.g. type of business environment, organizational types etc.) or characteristically (degree of business relatedness, degree of competitive intensity etc.). The distinction between the form and strength of moderation is also important when this perspective is chosen and has implications for testing fit/alignment. Strength of moderation (e.g. predicting that strategies vary across different sectors of manufacturing) is measured using sub-group analysis. Conversely the form of moderation (e.g.

hypothesizing that performance outcome is jointly determined by the interaction of the predictor and moderator), is tested using Multiple Regression Analysis -MRA, (Arnold, 1982; Sharma et al, 1981). The limitation of the moderation perspective has been identified to be the difficulty on separating the existence of fit from the effect of fit. To that extent, Venkatraman (1989, p.428) suggested if a researcher is not interested in the performance effect of fit, but is interested in the existence of fit in different subsamples, this perspective is inappropriate. The second limitation of this perspective is the challenge involved in attaching theoretical meanings to the

73

interaction terms especially multiple sets of interaction or higher order interactions.

LOW

MANY

Profile Deviation

Gestalts

Degree of specificity

Mediation

Covariation

Number of variables

Moderation
HIGH
Criterion-specific

Matching
FEW

Figure 2.4: Choice of anchoring the specification of the fit-based Criterion-free relationship (Venkatraman, 1989) b) Mediation The mediation perspective is conceptualized when there is an intervening mechanism (e.g. organization culture of innovation) between an antecedent variable (e.g. strategy) and the consequent variable (e.g. performance). This in effect implies that a culture of innovation is mediating in the performance effect of strategy on performance. Path-analytic frameworks (Alwin and Hauser, 1972; Duncan 1972) have been used to analyze fit using the mediation perspective.

c) Matching

74

This perspective departs from the previous two because fit is specified here without any criterion, although its effect on a set of criterion variables could subsequently be examined. This perspective defines alignment as a match between one variable (e.g. strategy) and another (e.g. structure) without reference to a specific criterion. An example of the matching perspective in theory is Chandlers (1962) classical thesis that a diversification strategy requires a multidivisional structure, whereas a geographical expansion strategy requires the use of field units and the absence of such a match between strategy and structure leads to administrative inefficiency or weaker performance. The analytical approaches for this perspective involves using deviation score analysis, residual analysis and the analysis of variance (ANOVA) (Venkatraman, 1989).

d) Fit as Gestalts This perspective is suitable when multiple variables are involved in the explanation of the relationship and role of alignment. As stated by Venkatraman (1989, p.433), when multiple variables are involved the degree of specificity must be relaxed and consequently gestalts can be identified in terms of the degree of internal coherence among a set of theoretical attributes that are frequently recurring as separate variables or linearly associated variables. Thus this perspective is criterion-free and less precise (See Figure 2.2). Analytic framework for this perspective involves the descriptive and the predictive validities of these gestalts using C-H index (Milligan and Cooper, 1985) and the identification of subsamples of high and low predictive performance abilities respectively. 75

e) Fit as Profile Deviation Venkatraman (1989, p.433) stated that fit in the profile deviation perspective is the degree of adherence to an externally specified profile. This profile is illustrated as follows: if an ideal strategy profile (e.g., the level of resource deployment along a set of strategy dimensions) is specified for a particular environment, a business units degree of adherence to such a multidimensional profile will be positively related to performance if it has a high level of environment-strategy coalignment. Conversely, deviation from this profile implies a weakness in environment-strategy coalignment, resulting in negative effect on performance. The analytic issues involve the challenge to develop the ideal profile, addition of weights to the multiple dimensions and the need to use a baseline model to assess the power of the test. Different authors have addressed different aspects of this perspective (Porter, 1980; Drazin and Van de Ven, 1985 etc.).

f) Fit as Covariation According to Venkatraman (1989), this perspective is best described using the illustration that best performance effect of strategy is obtained through the consistent and continuous application of some strategy elements (resource deployment, research and development efforts, manufacturing standardization, marketing excellence etc) and one element of the strategy is not sufficient or will result in weaker performance. Analytically, co-variation are modeled in two ways: as Exploratory Factor Analysis (EFA) or as Confirmatory Factor Analysis (CFA). More recently, Jouirou and Kalike (2004) 76

used the covariation perspective to model fit using structural equations to test fit between strategy and structure. The researchers concluded from results obtained from 381 Small and Medium Enterprises (SMEs) operating in different sectors that alignment of IT with corporate strategy and organization structure could generate the best performance levels for an SME.

While submitting that no one perspective is superior to the other, the choice of a perspective should be based on explicit justification of the specification of fit, rather than adopting random and convenient statistical method. Consequently, Hofacker (1992) proposed two concepts for measuring alignment: matching and moderation. The matching concept is based on the difference between two measures, and alignment is thus the level of similarity between the two measures. The moderation concept looks at alignment from the synergy

between two strategies, for example, information systems strategies and business strategies. Alignment in the moderation concept is thus calculated as

the interaction between the two measures, where for example, ISS has a different impact on a high value for the business strategy compared with a low value. The findings of another study by Chan et al (1997) supported the moderation approach; Bergeron et al (2001) explored six perspectives of alignment and found support for both the matching and moderation approaches in parts of their model. They however concluded that more research was needed on the different perspectives. Kanellis et al (1999) attempted an interpretive approach to The formative part of the

measurement by developing a two-part framework.

framework sought to collect data relating to the fit of the information systems with its environment along the dimensions of decision-making, innovation and 77

information acquisition and distribution.

The latter part of the framework uses

repertory grids to gain understanding of what is perceived as wrong with the system and what is perceived as wanted in the system; the latter being a basis for corrective action. perspectives. Table 2.3 summarizes key characteristics of the six

In a comprehensive approach to analyzing the components of alignment, Luftman (2003) identified twelve components grouped into four categories: (i) business strategy, (ii) organizational infrastructure and processes, (iii) IT strategy and (iv) IT infrastructure and processes. Luftman devised a strategic alignment maturity assessment using six maturity criteria as elements to measure and improve business strategy and IS alignment. The six criteria used are communication, competency/value measurement, governance, partnership, scope and architecture, and skills. Each of these criteria is measured by a set of operational variables, which the author had evaluated and validated using 25 Fortune 500 companies to arrive at a 5-level alignment maturity stages. The lowest of the alignment maturity level is the initial/ad-hoc process followed by the committed process. Level three is the established focused level, level four is termed improved/managed process, while the final level five is an optimized stage where each of the six maturity criteria are at the optimum performance levels.

78

Table 2.3: Comparison of the alternative perspectives of the concept if fit in strategy research
Key Perspectives Characteristics Fit as Fit as Fit as Fit as moderation mediation matching Gestalts Underlying Interaction Intervention Matching Internal conceptualizatio congruence n of fit Verbalization of The Market share is The match The nature of strategy interactive a key between internal effects of intervening strategy and congruence strategy variable structure among a set and between enhances of strategy managerial strategy and administrative variables characterist performance efficiency differs across ics have high and implication low s for performance performanc businesses. e. Number of Two Two to multiple Two Multiple variables in the fit equation Analytic scheme ANOVA, Path-analysis ANOVA, Numerical (s) for testing fit Moderated Deviation taxonomical Regression Score and methods Analysis Residual cluster and Analysis analysis, Subgroup factor analysis. analysis Measures of fit Statistical Statistical Interval-level Ordinal/ derivation derivation measure interval measure Illustrative Gupta & Prescot, Kohl Chandler Miller & references Govindaraj and (1962), Friensen am (1984) Venkatraman Bourgeois (1984) and and (1986) (1985), Joyce, Hambrick Prescot Solcum & Von (1984) (1986) Glinow (1982) and Dewar & Werbel (1979)

Fit as Profile Fit as Deviation Covariation Adherence to Internal specified consistency profile The degree of The degree adherence to of internal a specified consistency profile has in resource significant allocations effect on has performance significant effect on performance

Multiple

Four to multiple

The Sedondcalculation of order factor deviation as analysis eucledian (confirmator distance in an y) n-dimensional space MDS Interval Interval measure measure Van de Ven & Venkatrama Drazin (1985) n (1986) and Venkatrama n & Walker (1989)

Source: Venkatraman, 1989

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.8

Global and Nigerian Manufacturing Contexts for ISS Research

2.8.1 Global Manufacturing Context and Challenges Given the avalanche of challenges facing manufacturing world over, it was important for this study to take a quick review of the concept of world-class manufacturing in developed and developing economies.

Todd (1995, p.3) defined world-class simply as being the best in your field in the world. In relation to manufacturing, Todd stated that being the best can be in terms of product design performance, quality and reliability, least manufacturing cost, shorter lead times, customer service etc. He highlighted the need for manufacturers intending to play in world markets to try to achieve world-class status in their manufacturing processes in order to be able to compete in these markets. He suggested some world-class improvement techniques to include Total Quality Management (TQM), Just in Time (JIT), lean production, teamwork, continuous improvement etc. Central to the achievement of these techniques is the need to have a strategy in place to harness and manage people issues, the need for efficient processes and the use of appropriate systems and technologies to carry out tasks faster and cheaper.

Kinni (1996) characterized world-class manufacturing by three core strategies of customer focus, quality and agility (i.e. ability to quickly, efficiently and efficiently respond to change, and six-supporting competencies - employee involvement, supply management, 80 technology, produce development,

environmental responsibility and employee safety and corporate citizenship. Rockford Consulting (1999) stated that World Class Manufacturing is a different set of concepts, principles, policies and techniques for managing and operating a manufacturing firm. The concept is driven by the results achieved by the Japanese manufacturing resurgence following World War II, and adapts many of the ideas used by the Japanese in automotive, electronics and steel companies to gain a competitive edge. It primarily focuses on continual improvement in quality, cost, lead-time, flexibility and customer service. Smthacker (2000) also defined world-class manufacturers as those that demonstrate industry best practice. To achieve this, firms should attempt to be best in the field at each of the competitive priorities (quality, price, delivery speed, delivery reliability, flexibility and innovation). Organizations should therefore aim to maximize performance in these areas in order to maximize competitiveness. However, as resources are unlikely to allow improvement in all areas, organizations should concentrate on maintaining performance in 'qualifying' factors and improving 'competitive edge' factors. In the 21st century manufacturing, time-based competition becomes the highest priority to gain responsiveness and flexibility (Meyer, 1990). In addition,

knowledge management is of high importance to manufacturing in this millennium.

Data from India, a developing country, as reported by Saxena and Sahay (2000) showed that most of the companies have fragmented (rather than integrated) information management systems which may not enable them deliver superior value to their customers and lead to world-class status. They 81

recommended that Indian manufacturing firms must align their IT initiatives towards facilitating agile manufacturing rather than IT to merely automate their conventional operations. The Indian scenario typifies the situation in most developing countries, including Nigeria.

The challenge for Nigerian manufacturing firms is to try to achieve world-class status in order to be able to compete in world markets occasioned by the free trade policy of the Nigerian government. Nigerian manufacturers should

consider adopting Gunns (1987) three pillars recommendation to support world-class manufacturing alongside Kinnis (1996) characterization of worldclass manufacturing. These pillars include computer-integrated manufacturing (CIM), Total Quality Control (TQC) and Just-in-time (JIT). It may however be necessary to conduct studies to establish the manufacturing readiness of Nigerian firms along Gunns (1987) framework.

2.8.2 Nigerias Socio-economic Situation The Nigerian economy has performed poorly since the late 1970s (Marchat et al, 2002) resulting in stagnation and increasing poverty. With a population of 129.9 million people (in 2004), whose life expectancy (at birth) was 54 years and adult literacy rate of 57%, Nigeria is ranked the 19th poorest country (World Bank, 1997). The Gross Domestic Product (at current market prices) was US$44.7 billion in 2000 and US$64.1 billion in 2004 (CBN, 2005b). The GDP per capital of Nigeria in 2000 was US$388.1, which improved in 2004 to US$493.2. On the external sector the countries balance of payment (as a percentage of GDP) also increased from 6.9 to 13.7 largely occasioned by 82

increase in world prices of oil and the increase in oil quota granted to Nigeria by OPEC. The countrys external reserve (US$ million) has also improved from its 2000 figures of 9,910.4 to 10,415.6 in 2001 and to 16,955.0 in 2004 (Table 2.4). Average crude oil price (US$ per barrel) in 2000 was $28.6 per barrel, $25 per barrel in 2002 and the price has hit almost 70 as at September 2005 occasioned by the speculations due to rising tension in the Middle East and the boom experienced by Chinese and Indian economies. Net credit to private sector however declined from 30.9 per cent in 2000 to 26.6 percent in 2004 even though it went up to 43.5 per cent in 2001. Domestic and external debt stock reduced from 19.8 per cent of GDP and 68.1 per cent of GDP in 2000 to 16.7 percent of GDP and 59.2 per cent of GDP in 2005. Recently, the Paris Club of creditor countries granted Nigeria debt pardon of about $18bn (BBC, 2005). This debt relief package is widely speculated to have great positive economic consequences on the nations economy.

Real sector statistics showed that the sector recorded a relatively impressive performance (CBN, 2005b) in 2004 as the real GDP grew by 6.1 per cent, but this was lower than the 10.2 per cent growth in 2003. The major sources of growth were agriculture, industry, building, construction and the services sub sector (CBN, 2005b).

Year-on-year inflation rate dropped from 23.8% in 2003 to 10.0 per cent in 2004, and currently hovers around 28.0 per cent as at August 2005 (CBN, 2005a). The manufacturing capacity utilization graph has shown a downward curly-curve pattern from 1990 to 2003 (MAN, 2005), with an ending level of 83

45.0 per cent in 2004 and 45.6 per cent in 2003 (Table 2.4). Unemployment level remained high while industrial relations suffered a setback as a result of strike actions by the labor unions. Manufacturing contribution to GDP at Nigerias independence in 1960 was 3.8 per cent and achieved a record mark of 9.9 per cent during 1975-1981 with capacity utilization consistently above 70 per cent (MAN, 2005). By 2003, a MAN survey claimed that capacity utilization of members was back to independence level of 4.7 per cent.

Table 2.4: Selected Nigeria Macroeconomic and Social Indicators Indicator 2000 84 2001 2002 2003 2004

Domestic Output and Prices Real GDP Growth (Growth Rate %) Oil Sector Non-oil Sector Oil Production (mbd) Manufacturing Capacity Utilization (%) Gross National Savings (% of GDP) Gross Fixed Capacity Formation (% of GDP) Inflation Rate (%) (Dec-over-Dec) Inflation Rate (%) (12-month moving average) Federal Government Finance (% of GDP) Overall Fiscal Balance Primary Balance Retained Revenue Total Expenditure Domestic Debt Stock External Debt Stock Money and Credit (Growth Rate %) Net Domestic Credit Net Credit to Government Credit to Private Sector Narrow Money (M1) Broad Money (M2) External Sector Overall Balance (% of GDP) Current Account Balance (% of GDP) GDP) External Reserves (US $ million) Average Crude Oil Price (US $/barrel) Average AFEM/DAS Rate (=N=/$1.00) Average Bureau de Change Exchange Rate (=N=/$) Social Indicators GDP at Current Mkt Prices (=N= billion) GDP at Current Mkt Prices (US $ billion) GDP per Capita (=N=) 3/ GDP per Capita (US$) 3/ Population (million) Population Growth Rate (%) Life Expectancy at Birth (Years) Adult Literacy Rate (%) Incidence of Poverty 4,547.1 44.7 39,851.5 388.1 115.2 2.8 54.0 57.0 70.0 5,187.9 46.4 44,228.0 390.3 118.8 2.8 54.0 57.0 *** 5,465.3 45.2 45,317.8 369.0 122.4 2.8 54.0 57.0 *** 7,191.1 55.6 57,992.3 440.7 126.2 2.8 54.0 57.0 *** 8,553.3 64.1 67,137.2 493.2 129.9 2.8 54.0 57.0 54.4 5.4 11.3 2.9 2.2 36.1 *** 7.3 14.5 6.9 -2.3 3.0 13.1 15.4 19.8 68.1 -25.3 -170.1 30.9 62.2 48.1 6.9 15.7 9,910.4 28.6 110.1 111.1 4.6 5.2 4.3 2.2 39.6 11.3 7.2 16.5 18.9 -4.3 4.2 15.4 19.6 19.6 61.2 79.9 95.2 43.5 28.1 27.0 0.5 5.2 -4.5 10,415.6 24.5 113.5 133.0 3.5 -5.7 7.9 2.1 44.3 15.6 9.1 12.2 12.9 -5.5 0.4 13.1 18.6 21.3 72.0 64.6 6,320.6 19.7 15.9 21.6 -10.5 1.3 -11.6 7,618.1 25.0 126.9 137.8 10.2 23.9 4.5 2.3 45.6 13.6 12.0 23.8 14.0 -2.8 5.5 13.9 16.7 18.1 61.1 29.1 58.4 18.4 29.5 24.1 -2.3 15.2 17.4 7,467.8 29.2 137.0 141.4 6.1 3.3 7.5 2.5 45.0 15.3 16.2 10.0 15.0 -1.7 6.9 14.9 16.7 16.7 59.2 12.0 -17.9 26.6 8.6 14.0 13.7 16.6 -2.8 16,955.0 38.5 132.9 140.8

Capital and Financial Account Balance (% of-8.6

Source: CBN Annual Report, 2004

CBN Annual Report 2004 stated that net credit to the private sector fell from N30.9 per cent in 2000 to 26.6 per cent in 2004, whilst net credit to government decelerated drastically from -170.1 per cent in 2000 to -17.9 per cent in 2004 even though what is important to manufacturing is the relative 85

share of the amount to private sector was made available to manufacturing. In 2004, the Central Bank of Nigeria (CBN) raised the minimum capital base for banks operating in Nigeria from N2 billion to N25 billion. This development, which has shaken the banking and invariably the financial services sector, is believed to be pro-manufacturing because of its effects on interest rate.

In the area of infrastructure, independent power stations have improved electricity generation and made noticeable contribution to national grid. Electricity supply has improved at least in major industrial cities. This however, may not translate to lower operating cost as the unit electricity consumption cost was increased by over 200 per cent for industrial consumers. However, it may translate to more stable production lines, and reduction in losses at changeover and damage done to electricity sensitive production equipment. The recent licensing of a second telecom national

carrier and other mobile operators of fixed wired and wireless including GSM is undoubtedly a welcome development for Nigerian manufacturers. At least Nigerian manufacturers with foreign partners can easily reach out to their offices abroad. There is also going to be improved communication among stakeholders in the manufacturing firms. Customer producer communication, staff communication, as well as supplier customer communication improvements will also have some positive contribution to manufacturing activities in Nigeria. Pre-destination inspection of imports and the removal of VAT on some essential raw materials are all part of the cardinal objectives of the 2002 budget, which are aimed at reinvigorating the real sector. The government also set aside funds from the profit of banks to 86

promote the development of Small and Medium Industries in an initiative called the Small and Medium Industries Equity Investment Scheme (SMIEIS).

Recent efforts by the government of Nigeria to address some of the challenges faced by manufacturing include ban on some items that government believed the country has capacity to produce. This is in a bid to curb excessive dependence on primary products and be food dependent. The recapitalization of banks to N25 billion due by December 2005 is also believed to positively impact on interest and lending rates obtained by manufacturers. There is also increased regulation in the banking and food and drugs sectors. Although there seems to be some level of inconsistency on the part of government, the sector specific concessions or waivers granted to sectors like pharmaceuticals, educational materials, etc and the reduction of VAT on industrial machinery should go a long way to address some of these challenges. Other manufacturing friendly fiscal and monetary policies of the government in 2005 include tariff reduction on major industrial raw materials, abolition/reduction of excise duties on some products, abolition of dual exchange rates and elimination of import license scheme.

2.8.3

Current Manufacturing Situation in Nigeria

The prolonged military rule brought in some dark days for manufacturers in Nigeria, as most of the economic policies were not favorable to manufacturing. The contribution of manufacturing to GDP fell from 8.2 per 87

cent in 1990 to 6.0 per cent in 2000 (Table 2.4) and further down to 4.7 per cent in 2003 (MAN, 2005). The capacity utilization was over 75 per cent during the period 1975 80 and was below 30 per cent during the peak of military rule in 1994 1995. Capacity utilization now stood at 48.8 per cent in 2003 (MAN, 2005) even though CBN reported 45.0 per cent for 2004 (CBN, 2005b). MAN summarized the state of manufacturing in its publication of 2005 titled Nationwide Forum on reviving the Nigerian Industries that 30 per cent of manufacturers have closed down operation, 60 per cent are ailing and only 10 per cent are operating at sustainable level. Manufacturers operating at sustainable level are mostly in the food, beverages and tobacco, leather, pharmaceutical and household products sub-sectors. Ailing sectors, according to MAN, are textile, vehicle assembly, cable manufacturing, paint manufacturing, steel and the petrochemical sub-sectors. Although firms that have closed down operations cut across all industrial products, but badly hit are the manufacturers of chalk, candle, dry cell and automotive batteries, matches, shoes polish etc. MAN also listed constraints to the sector as follows:

(i) (ii) (iii) (iv) (v) (vi) (vii)

High import dependency Policy inconsistencies of government Multiple taxation problems High cost of capital Influx of fake, substandard and counterfeit products into the country Poor sales occasioned by low purchasing power of consumers Import clearing delays 88

(viii)

Manufacturing challenges of the implementation of the Common External Tariff (CET).

2.8.4 Nigerian Manufacturing Structure, Processes and Performance The membership of the Manufacturers Association of Nigeria (MAN) is open to companies employing more than ten persons in a permanent establishment involved in manufacturing activity in which some form of material is converted, assembled, processed or reconstituted into a more developed form or finished product (MAN, 1996). There are over 2500

members of MAN organized into eleven sub-sectors of manufacturing activity. A sub-sectoral analysis according to the 2003 performance indicators released in the 2003 MAN annual report and accounts showed that capacity utilization reduced from 51.3 per cent in 2002 to 48.8 per cent in 2003 (MAN, 2004). Table 2.5 shows a detailed breakdown of capacity utilization in the

manufacturing sector from a survey of over 2000 firms spread across ten major sectors of MAN. Capacity utilization of manufacturers in the Food and Beverages sub-sector reduced from 58.5 per cent in 2002 to 53.7 per cent in 2003 and same reduction in capacity utilization was noted in the Electrical and Electronics sub-sector. The reason for the reduced capacity utilization can be traced to dilapidated infrastructure, inability of manufacturers to access longterm funds and influx into the market of cheap and sub-standard imported products.

Table 2.5: Industrial capacity utilization by sector for 2002 & 2003

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Sector

Jan June

July Dec Jan June 2002 63.1 46.2 54.3 66.7 53.3 51.5 54.4 41.7 51.1 42.5 52.5 2003 61.0 46.8 53.1 57.7 64.6 54.0 51.2 36.4 52.2 31.5 50.8

July Dec. 2003 46.4 54.7 53.8 41.6 47.4 61.0 59.6 27.8 45.4 28.8 46.7

Food Beverages & Tobacco Textiles and Wearing Apparels Wood & Wood Products Pulp Paper & Products Chemicals & Pharmaceuticals Non-Metallic Mineral Products Domestic & Industrial Plastics, Rubber Etc. Electrical & Electronics Basic Metal, Iron & Steel Motor Vehicle & Miscellaneous Assembly Sectoral Average

2002 54.6 43.6 57.5 64.8 50.3 48.6 52.8 40.5 48.2 40.1 50.1

Source: MAN Annual Report and Accounts, 2004

An analysis of sectoral contribution to GDP (Table 2.6) shows that between 1996 and 2001, the sectoral contribution of manufacturing to GDP was highest in 1998 with a 5.14 per cent contribution. In the same year, agriculture also recorded the highest contribution to GDP among the sectors with a 35.3 per cent contribution to GDP and mining/quarry activities contributed the least (0.12 per cent).

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Table 2.6: Sectoral Contribution to GDP at Current Factor Cost (N Billion)

S/N SECTORS 1 2 3 4 5 6 7 1 9 9 6% 1 9 9 7% 1 9 9 8% 1 9 9 9% 2 0 0 0% 2 0 0 1%

GDP GDP GDP GDP GDP GDP MANUFACTUR 132.55 4.84144.11 5.08142.23 5.14150.97 4.73166.32 3.43 184.59 3.36 G CRUDE OIL 1194.56 43.61102 38.9781.29 28.3904.57 28.32301.35 4 7 . 5 2325.67 4 2 . 3

2 8 AGRICULTURE841.46 30.7953.55 33.61057.58 38.21127.69 35.31192.91 2 4 . 6 1603.82 2 9 . 2 SERVICES 196.38 7.16221.4 0.5818.78 3 2 7.81311.47 11.3 493.09 15.4618.93 1 2 . 7 679.89 1 2 . 3 0.6624.88 0.9 27.53 0.8630.6 8 0.63 41.85 9 0.76 11 . 7 7 0.11

BUILDING&CO 16.04

NS WHOLE/RETL 357.05 13 392.34 13.8444.48 16.1485.67 15.2527.49 1 0 . 8 646 SALE MINING&QUA 2.42 RRING TOTAL 2704.46 0.092.83 2835.67 0.1 3.74 2765.67 0.124.15 3193.67 0.134.59 4842.19 9 0.09 6.18S 5487.99

Source: MAN Annual Report and Accounts, 2004

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Local Sourcing of Raw Materials

Manufacturers ability to source raw materials locally improved from an average of 51.8 per cent in 2002 to 54.1 per cent in 2003 (See Table 2.7 for sectoral breakdown of local raw materials sourcing). Two sectors, Chemicals and Pharmaceuticals and Basic Metal, Iron and Steel recorded improvements in their ability to source raw materials from 44.35 per cent in 2002 to 49.25 per cent in 2003 and 26.0 per cent in 2002 to 46.1 per cent in 2003 respectively. The reason for the improvement is due in part to manufacturers conscious effort to reduce import dependence on raw materials and the recent governments initiative of local content development program. However, there are still great challenges for the Raw Materials, Research and Development Council (RMRDC), Nigerian Universities and other research centers to devise strategies to improve local sourcing of manufacturing raw materials, a situation which will help manufacturers tremendously. For example, the motor vehicles and miscellaneous assembly had just 32.25 per cent local raw material content in 2003. The Government of Nigeria has banned the importation of some primary inputs of production like starch, which the government believes the country has capacity to produce. The 2002 and 2003 figures of local sourcing are great improvements over the 2001 and 2002 figures, which are in turn improvement over the 1999 average figures of 48.42 per cent (MAN, 2000).

Another effort of government worth mentioning and applauding is the Small and Medium Enterprise Investment Scheme (SMEIS) initiative. This initiative carried out a baseline study covering all the states of the federation

highlighting the availability, sources and whether in commercial quantity or not and grade of raw materials available in each location. This huge database was facilitated by the Central Bank of Nigeria (CBN) and made available online (www.smi-nigeria.org) and on CD-ROM for potential investors in Small and Medium business (especially manufacturing) in Nigeria.

Table 2.7: Local Sourcing of Raw Materials by Sector

Sector Food Beverages & Tobacco Textiles & Wearing Apparels Wood & Wood Products Pulp, Paper & Products Chemicals & Pharmaceuticals Non-Metallic Mineral Products Jan June July Dec Jan June July Dec. 2002 2002 2003 2003 82.6 71.3 70.1 75.4 59.6 89.6 33.4 46.9 68.7 57.6 88.9 28.7 41.8 68.9 58.7 30.7 23.3 34.9 50.5 60.5 88.3 42.3 51.6 62.0 57.0 31.0 36.8 37.3 53.7 76.8 62.5 49.1 46.9 68.0 49.9 33.1 55.4 27.2 54.4

Domestic & Industrial. Plastics 53.9 Rubber Etc. Electrical & Electronics 34.2 Basic Metal, Iron & Steel 28.7 Motor Vehicle & Miscellaneous 32.2 Assembly Sector Average 53.1

Source: MAN Annual Report and Accounts, 2004 Production and Business Inventories

Information available from the MAN survey of 2004 showed that nominal output by firms was highest for electrical and electronic sub-sector during January to June 2001 accounting for 17.43 per cent of total manufacturing output in the period under review. The lowest nominal output of 1.3 per cent came from Basic Metal, Iron and Steel sub-sector during July to December 2001.

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Table 2.8:

Unplanned Business Inventory by Sector (N Billion)

SECTOR UNPLANNED BUSINESS INVENTORY (N000M) J A N - J U N J U L - D E C J A N - J U N JUL-DEC 02 01 01 02 31,430.70 27,128.93 26,713.80 39,464.55 10,929.15 9,087.98 8,984.70 8,055.45 2,016.68 1,809.23 1,540.13 1,403.55 4,465.35 49,645.35 4,398.08 3,614.18 5,167.80 47,419.21 70,859.70 223595.81 3,233.70 71,998.43 3,209.40 3,171.38 7,384.05 24,528.82 78,487.65 229252.07 4,405.95 132,773.62 3,835.58 6,485.63 10.766.93 52,688.03 86,116.05 345995.34

Food Beverages & Tobacco Textiles & Wearing Apparels Wood & Wood Products Pulp, Paper & Products

Chemicals & Pharmaceuticals 4,761.90 Non-Metallic Mineral Products 51,927.53 Domestic & Industrial. Plastics Rubber 4,373.10 Etc. Electrical & Electronics 3,791.48 Basic Metal, Iron & Steel 5,618.70 M o t o r Ve h i c l e & M i s c e l l a n e o u s 42,677.33 Assembly Food Beverages & Tobacco 63,861.98 TOTAL 221388.55

Source: MAN Half-Year report, 2003

Nominal output is the relativity of nominal production output for each sector and its pattern is similar to capacity utilization pattern. The Food, Beverages and Tobacco sector showed consistent increase from January 2001 to December 2002, while sectors like Wood and Wood products as well as Textile and Wearing apparels showed a decreasing nominal output. These sectors were badly hit as a result of massive importation of products produced by manufacturers in the sector including smuggling of textile materials from neighboring West African countries.

By December 2001, the value of unplanned inventory (raw materials and finished goods) stood at N223.59 billion with an increase of about 55 per cent as at December 2002 to become N345.99 billion. This huge inventory has been a problem for a while. For instance, in 1998 unplanned inventory was 94

N5.767 billion and N2.354 billion in December 1999 representing about 59 per cent drop between 1998 and 1999 and 55 per cent increase from 2001 to 2002. However, unplanned business inventory reduced in 2003 from N287.6 billion in 2002 to N211.7 billion in 2003 (Table 2.8). This reduction of about N75.9 billion was attributable to the ban placed on the importation of some goods forcing Nigerians to patronize locally made goods. Huge unplanned inventories have implications for manufacturing production output. A figure of N346 billion is huge for the size of the Nigerian manufacturing sector, even though manufacturers indicated preference to keep inventory in the form of raw materials rather than in finished goods. The reason for the huge inventory of finished goods can be traced back to the weak buying power of the citizen in addition to preference for cheap imported equivalents of locally made goods. MAN study (MAN 2004) showed that two sectors namely Chemicals and Pharmaceuticals and Motor Vehicles and Miscellaneous Assembly were badly hit by the huge unplanned inventories (Table 2.8).

Manufacturing Investment and Employment

Manufacturing investments in 2002 by the industries surveyed by MAN stood at N27.14 billion compared with a figure of N2.054 billion in 1999. The astronomical jump in investment was as a result of some manufacturingfriendly policies of the government. For example, tariff concessions granted in 2001 to bona fide manufactures to import machineries at 2.5 per cent duty rate helped to boost investment. Table 2.9 shows that investments in plant and machinery in 2002 stood at N17 billion compared to N1.743 billion in 1999. MAN survey further showed that all capital expenditures were in the

95

area of capacity expansion, replacement and efficiency improvement. Deeper analysis of investment patterns showed that investments in land and buildings were also high (N4.17 billion) with little or no investments in research and development (N 77 million). This observation has significant implications for Nigerian manufacturing because world-class manufacturing is predicated on innovation, which comes largely through investments in research and development. Furthermore government should create incentives for research institutes to carry out more research to support manufacturing, especially the SMEs.

Table 2.9:
SECTORS

Manufacturing Investments by Sector and Type (N Million) for Year 2002

L A N D & PLANT & EQUIPMENT BULDG MACH 392.92 282.15 26.27 0.00 1,384.43 98.57 3,302.27 285.16 19.51 639.48 7,126.76 391 89.97 422.28 4003.88 990.29 17270.6 376.77 0 2.19 0 592.09 0 5.94 0 7.82 671.39 1656.2 SPARE PARTS 376.1 2.54 53.18 49.27 360.27 16.42 9.19 0 211.22 5.87 1084.06 RESEARCH & VEHICLE DEVT. 17.6 0 0 0 87.19 13.69 0.98 1.76 1.39 254.93 377.54 1,241.62 0 1.45 4.15 287.78 8.29 13.53 6.3 200.97 632.87 2396.96 OTHERS

Food Bev. & Tobacco Text. & Wear Apparels Wood & Wood Products Pulp & Paper Prod Chem. & Pharm. Non-Metallic Mine

158 0 0 0 4.3 0 0 0 19.55 0 181.85

Dom. & Industrial Plastics 491.17 Elect. & Elect. Basic Metal, Iron Motor Vehicles & Misc. TOTAL 0 610.04 883.89 4169.35

Source: MAN Half-Year report, 2003

In respect of manufacturing employment, the results of MANs study showed that aggregate manufacturing employment by sectors reduced from 1,395,419 in 2002 to 1,310,557 in 2003. Compared to previous years, 115, 660 jobs and 50,245 jobs were lost in the manufacturing sector in 2001 and 2002 respectively. The sub-sector worst hit during this period was textile and wearing apparels, while food, beverages and tobacco had the highest

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workforce of 322, 630 by December 2003. The wood and wood products as well as electronics sub-sector managed to keep its workforce intact by recording only marginal improvements from 165, 814 in December 2002 to 166, 892 staff by December 2003 (Table 2.10).

Table 2.10: Manufacturing Employment by Sector (2002 and 2003)

MANUFACTURING EMPLOYMENT BY SECTOR FOR 2002 & 2003 SECTORS JAN-JUN 2002 JUL-DEC 2002 JAN-JUN JUL-DEC 2003 2003 Food Beverages & Tobacco 371,871 372,209 379,565 322,630 Textiles & Wearing Apparels 99,856 80,392 81,631 88,088 Wood & Wood Products 167,541 165,814 166,892 Pulp, Paper & Products 152,300 Chemicals & Pharmaceuticals 162,436 Non-Metallic Mineral Products 100,231 Domestic & Industrial Plastic, 149,428 Rubber, Etc. Electrical & Electronics 75,136 Basic Metal, Iron & Steel 99,650 Motor Vehicle & Miscellaneous 67,215 Assemblies, Etc. TOTAL 1,445,664 152,863 142,896 94,038 148,302 76,000 87,149 75,756 1,395,419 152,768 147,908 94,562 145,817 75,832 88,205 73,585 1,405,687 128,172 122,468 101,181 158,066 69,318 82,181 71,561 1,310,557

Source: MAN Annual Report and Accounts, 2004 Sales and Profit Profile

According to MAN 1999 half year Economic Review, un-audited report from 14 publicly quoted companies provided a useful basis for evaluating the sales and profit performances of manufacturing firms during the first half of 1999. Six of the firms witnessed a decline in their sales turnover when compared with the corresponding period of 1998. With respect to profit performance, six firms registered an improvement in profit before tax. These are clear signs of market difficulties, which were reflected in the deterioration of gross profit margins of eight of the fourteen firms covered by the study.

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Infrastructure Situation

From a survey conducted by MAN in 2003, firms in Nigeria witnessed an average of 13.53 hours of power outages per day. Table 2.11 shows that on the average, energy supply for manufacturers was 43.69 per cent from the National Electric Power Authoritys (NEPA) grid while 56.37 per cent was from alternative sources of power. (NEPA is now known as Power Holding Company of Nigeria, PHCN). This energy supply situation is a major disincentive for manufacturing investment and production output. Consequently, MAN in 2004 instituted an infrastructure committee to meet with government and devise means of providing adequate infrastructure for manufacturers. The prices of petroleum products which have been on the increase have also impacted on production cost since manufacturers utilize alternative energy sources more than supply from the national grid. Lots of man-hours are lost due to deplorable state of many Nigerian roads because of the length of time spent in traffic and the wear and tear impact on the vehicles used in transporting raw materials and finished products.

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Table 2.11: Energy Supply Situation to Industries from July to December 2003
ENERGY SUPPLY SITUATION TO INDUSTRIES FROM JULY TO DECEMBER 2003 AVERAGE SUPPLY OF ENERGY SUPPLY (%) SECTOR Food Beverages & Tobacco Textiles & Wearing Apparels Wood & Wood Products Pulp Paper & Products Chemicals & Pharmaceuticals Non-Metallic Mineral Products NEPA 41.20 40.30 43.80 35.00 37.70 50.20
ALTERNATE SOURCES

59.40 59.70 56.30 65.00 62.40 49.70 50.60 54.20 43.90 62.50 56.37

AVERAGE POWER OUTAGES FROM NEPA PER DAY HOURS 14.26 14.33 13.51 15.60 14.98 11.93 12.14 13.01 10.54 15.00 13.53

Domestic & Industrial Plastic, 49.50 Rubber Etc. Electrical & Electronics 45.80 Basic Metal, Iron & Steel 56.10 Motor Vehicle & Miscellaneous 37.30 Assemblies Sectoral Average 43.69

Source: MAN Nationwide Forum Publication 2005

Manufacturing Financial Requirements and Interest Rates

Data from Table 2.12 shows that while manufacturers desired to obtain funds at an average of 9.83 per cent, funds are actually obtained at an average of 29.34 per cent in 2003. Despite some macroeconomic initiatives of government in the 2003 budget, interest rates were still frustratingly high with great impact on manufacturers ability to generate the needed working capital requirements as well as the capital required for expansion in the manufacturing sector.

Table 2.12: Manufacturing Sector Funding Requirement/Rate of Interest

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MANUFACTURING SECTOR FUNDING REQUIREMENT/INTERST RATE FOR 2003 SECTORS Average Requirement Average Average Funding s (Nbillion) preferred existing Rate of Of Interest interest (%) (%) Working Expansion capital Food Beverages & Tobacco 44.0 31.1 10.6 30.2 Textiles & Wearing Apparels 29.7 5.7 10.0 29.5 Wood & Wood Products 3.0 6.1 5.0 28.1 Pulp Paper & Products 9.7 Chemicals & Pharmaceuticals 2.8 Non-Metallic Mineral Products 1.0 Domestic & Industrial Plastic, 12.2 Rubber Etc. Electrical & Electronics 3.1 Basic Metal, Iron & Steel 22.3 Motor Vehicle & Miscellaneous 7.9 Assemblies. Sector Average 34.30 41.9 16.6 39.7 9.9 26.9 7.2 10.4 10.6 10.7 10.7 10.0 10.0 10.3 9.83 28.0 31.0 29.0 29.0 28.5 30.1 30.0 29.34

Source: MAN Nationwide Forum Publication, 2005

Empirical data was not available on the state of information systems in these firms perhaps because MAN did not focus on this aspect of technology utilization in manufacturing. Efforts to obtain published literature on

information systems research in Nigerian manufacturing did not yield much result, thereby corroborating the need for empirical studies to generate primary data on information systems strategy investments and strategy and their relationships with business strategy towards understanding the impact of this relationship on performance in Nigerian manufacturing firms.

2.8.5

Manufacturing Challenges in the 21st Century Nigeria

Nigeria is acclaimed to be the most populous black nation. With abundant natural and human resources and a huge population, Nigeria holds the potential to be a world giant in the various sectors of world economy. Manufacturing, or more precisely the real sector, has consequently been 100

tipped to be the engine of real economic growth, especially for developing economies. Several challenges however confront manufacturing

organizations world over. While some challenges are localized to some parts of the world, others cut across geographic boundaries. Intense competition as a result of globalization and very demanding customers are some of the general manufacturing challenges. In Nigeria, inconsistent government policies, poor infrastructure, high cost of funds are rampant. Therefore, manufacturing firms world over are now fashioning innovative ideas to deal with these challenges. The Manufacturers Association of Nigerian (MAN) at the Nationwide Forum in 2005 on reviving the Manufacturing Sector articulated a number of strategies grouped into several headings (enabling environment, long term funding, competitiveness through technology, repositioning Nigerias private sector, public-private sector partnership etc).

Developing the real sector requires bold actions at micro and macroeconomic levels. At the firm level, firms must drastically improve their productivity by smartly utilizing the factors of production land, labor, capital and technology. Increasing firm productivity has been used by similar nations like Japan, Singapore and Korea to launch themselves in world markets. These production inputs however must be intelligently deployed in order to realize investment gains. There is often a huge cost associated with the purchase and deployment of these production technologies. The absence of appropriate strategies to ensure the efficient and effective utilization of these inputs could translate such investments into wasteful ventures.

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Technologies have been used in manufacturing at almost all levels and business processes to improve productivity. From the production floor (computer-assisted manufacturing and designs) to the model-driven decision support systems, technologies have impacted on the business of manufacturing. The big question however is whether these firms have found results commensurate with the spending on technologies (especially Information Technologies). Several reasons could be found for this observation. In some cases, IT investments were made in an uncoordinated manner and soon became clear that the smooth transfer of information among platforms and across functions in the organization was difficult, if at all possible.

Nevertheless, given the global manufacturing challenges as well as the peculiar local external and internal challenges, manufacturing firms in Nigeria are unsure whether the strategic information systems plans and models originating in developed countries like UK (Hussin et al 2002) and even in other developing economies like India (Saxena and Sahay, 2000) will be suitable in Nigeria.

Manufacturing firms in Nigeria need to take these challenges and turn them into opportunities by achieving world-class status in their operations. Some Nigerian manufacturing firms that are posting impressive balance sheets seems to have risen to tackle these challenges, but for others, success will depend on their readiness to move from a protected domestic to a world-class manufacturing status quickly and very quickly too.

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Nigerian manufacturing firms can facilitate this transition by evaluating and monitoring their existing information systems intent, practices and infrastructure using appropriate analytical frameworks and practical strategies. Intent refers to the strategic direction (strategy planning) of business and information systems strategy while practices are the ways and manners by which Nigerian firms deploy Information Technology (strategy implementation). Nigerian firms also need to carefully audit their infrastructural and external environments with a view to implementing the most appropriate IS strategies to turn themselves into world-class firms.

CHAPTER THREE

METHODOLOGY 103

3.0

Introduction

This chapter introduces the population investigated and a brief discussion of their attributes. The sampling procedure is also presented along with a justification of the various data collection instruments that were used. Data validation as well as data aggregation methods that were used are also discussed and justified. Lastly, the statistical analysis methods that were used to analyze the studys findings are presented.

This study combined qualitative and quantitative research techniques. The manufacturing sector was selected for this study as the sector that can provide a wide range and levels of IT sophistication (Craig and King, 1992).

3.1

Population and Sample

3.1.1 The Population The population of study comprised of all firms in the manufacturing sector of Nigeria. An overview of the structure, processes, performances and challenges of the Nigerian manufacturing sector was presented in the last section of the previous chapter.

3.1.2 Sample Population In May 1971, a group of manufacturers came together in Lagos to form what is today known as the Manufacturers Association of Nigeria (MAN). From its

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small beginning in 1971, MAN has blossomed into a multi-facetted umbrella industrial association comprising several hundreds of industrial concerns. There are about 2500 members of MAN organized into eleven groups of manufacturing activities. The register of members of the Manufacturers Association of Nigeria (MAN) was the sampling frame for selecting candidate firms for this study. Any firm that is not a member of MAN was not included. Further to this, MANs definition of manufacturing was adopted for this study. MAN, for the purpose of membership admission, defines manufacturers as companies employing more than ten persons in a permanent establishment involved in manufacturing activity in which some form of material is converted, assembled, processed or reconstituted into a more developed form or finished product (MAN, 1996). Table 3.1 provides a listing of MANs sub-sectoral groupings and numbers of manufacturers per sub-sector as at 1994. This publication is the latest MAN directory available and efforts have been ongoing since 2003 to publish a newer directory. Although the Public Affairs Manager of MAN in a telephone conversation, indicated that current membership is about 2500, while the MAN 2003 Annual Reports and Account listed 1480 names of financial members as at December 2003.

Table 3.1: S/No Sector 1.

MAN Sectoral Classification and Membership per Sector Number of Firms per Sector 286

Food, Beverages and Tobacco

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2. 3. 4. 5. 6. 7. 8. 9. 10. 11 TOTAL

Textiles, Wearing Apparels, Footwear, Leather Products 216 and Carpets/Rugs. Wood and Wood Products including Furniture 53 Pulp, Paper and Paper Products, Printing and 226 Publishing Chemicals and Pharmaceuticals 385 Non-metallic and Mineral Products Plastic, Rubber and Foam Products Electrical Electronics 71 320 110

Basic Metal, Iron & Steel, and Fabricated Metal 326 Products Motor Vehicles and Miscellaneous Assembly. 106 MAN Export Group 2099

Source: NIGERIA INDUSTRIAL DIRECTORY (MAN, 1994)

3.2

Sample Size and Sampling Procedure

3.2.1 Sample Size The study focused on the six most active of the eleven sectors of MANs grouping. This is done in order to ensure that data is obtained only from active manufacturing given the high level of inactivity being experienced by some sectors. The included and excluded sectors are as follows:

Sectors included Food, Beverages and Tobacco Basic Metal, Iron & Steel, and Fabricated Metal Products Chemicals and Pharmaceuticals Textiles, Wearing Apparels, Footwear, Leather Products and Carpets/Rugs Pulp, Paper and Paper Products, Printing and Publishing Plastic, Rubber and Foam Products Sectors Excluded

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Motor Vehicles and Miscellaneous Assembly Wood and Wood Products including Furniture Non-metallic and Mineral Products Electrical Electronics MAN export group

These five sectors were omitted because of the following reasons: 1. Given the recession witnessed in the Nigerian economy in the last decade, these sectors were the most badly hit. Consequently, most firms within the sector had collapsed and the few that has survived were doing so with very little capacity utilization.

2. The liberalization of the Nigerian trade borders and free trade agreements of World Trade Organization (WTO) has made products made by firms in the excluded sectors to flood the Nigerian market. Furthermore, the few firms that were functioning in the excluded sectors were not really producing, but were busy selling imported products to survive the recession. For example, some firms in the electrical and electronic sectors making refrigerators, air conditioners, electric bulbs and fittings became mere retail shops for imported electrical and electronics products. The importation of fairly used vehicles and furniture are good examples of the fate that befell firms in the motor vehicles and miscellaneous assembly sector and furniture and wood products respectively.

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3. The MAN export group was excluded simply because this sub-sector was mainly created to serve the export needs of members and therefore does not so qualify for inclusion in this study.

After the sectoral exclusion, firms were further removed on the basis of annual turnover and staff strength. Firms whose turnover was less than N50m, and firms whose staff strength was less than 50 were excluded from the study. The National Council of Industry Classification of the Federal Ministry of Industries provided the basis for classification of firms into Micro, Small, Medium and Large (Table 3.2).

Table 3.2: Industry Classification of Firms

Micro Capital employed (Nm) Staff strength Less than 1.5 Less than 10 Small 1.5 50 11 - 100 Medium 50 - 200 101 - 300 Large Over 200 Over 300

Source: Federal Ministry of Industries

Micro firms (having an annual turnover of less than N50 million) were excluded from the study following the submission of Hagman and McCahon (1993), who claimed that SMEs do not, for a variety of reasons, develop or exploit information systems strategies as levers for growth or profitability. Similarly, Blili and Raymond, (1993) have highlighted the differences between SMEs and large firms. Firstly, they mentioned the uncertainty regarding IT and competition in SMEs, where the limited knowledge of owners makes decision on strategic IS difficult if at all it is taken. Secondly, SMEs may not be able to respond to the introduction of strategic IS due to limited resources, including

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implementation and training capabilities. Finally, SMEs may not be able to identify the potentials from IT due to limited operation focus. However, whilst the claims of these authors are valid, SMEs constitute a significant portion of Nigerian manufacturers. Therefore, only micro firms were excluded while small, medium and large firms were included. Staff strength was the only criterion used in firm classification, as it is almost impractical to obtain the cost of capital of responding firms.

Once these eliminations and groupings were done, a multi-stage sampling process was used to arrive at the sampled firms as follows. A stratified random sampling of the remaining 377 firms was done. In each sector, using systematic random sampling technique, every 5th firm among the large firms was selected and every 13th small firm was selected from each stratum of ownership (public and private). This exercise resulted in a proportional to size number of firms per group. At the end, twenty firms were selected per sector except in the Foods, Beverages and Tobacco, Basic Metal, Iron and Steel and Chemicals and Pharmaceuticals sub-sectors where 25 firms were selected each. The selection also ensured that manufacturing plants of respondents firms were randomly distributed across the geo-political zones (North East, North West, North Central, South West, South East, South South. Similarly both publicly quoted companies and private firms were included in each stratum since ownership structure was indicated in the MAN directory. See Table 3.3 for the number of firms by sector and the number of firms randomly selected as well as responding firms per sector.

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Table 3.3: Sectors, Number of Firms per Sector and Number of Respondents per Firm
S/N 1. 2. 3. 4. Number of Number of No of target No of firms per firms firms per responding Sector remaining after Sector firms per exclusions sector F o o d , B e v e r a g e s a n d 286 109 25 16 Tobacco Basic Metal, Iron & Steel, 216 78 25 15 and Fabricated Metal Products Chemicals a n d 53 31 25 10 Pharmaceuticals Textiles, Wearing Apparels, 226 88 18 13 Footwear, Leather Products and Carpets/ Rugs. Pulp, Paper and Paper 385 49 15 9 Products, Printing and Publishing Plastic, Rubber and Foam 71 22 15 9 Products TOTAL 1237 377 123 72 Sector

5. 6.

Source: Fieldwork

3.3

Sampling of Respondents in Firms

Data collection in the sampled firms targeted two categories of respondents viz: business and information system respondents. The business

respondents included the General Manager/Chief Executive Officer (where this is possible) or his/her assistant, minimum of two functional directors/ managers reporting to the CEO, (where possible) and three persons in the information systems department including the information system manager and his/her assistants. In the end, at least one of each of these categories of respondents were obtained per sector even though only a few CEOs made themselves reachable despite strenuous efforts. The attempt to reach the CEOs invariably dragged the data collection period to close to 14 months (Table 3.4).
Table 3.4: Target Respondents (Business and Technical)

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S/No. 1.

Sector In each sector

Target Business Respondents i. Chief Executive ii. Finance Director/Controller/ iii. Manager iv. Sales/Marketing Director/ Manager v. Senior officials in any other function/department outside of IT i. ii.

Target Technical Respondents IT Manager Assistant IT Manager

iii. Any other senior personnel in the IT department. iv. Any other senior IT personnel in other departments

Source: Fieldwork

The respondents were sampled from the head office of the responding firms. Where respondents were not based in the head office, the questionnaires or interview sessions were administered or conducted at the branch/regional offices where such respondents could be found.

3.4

Data Collection Instruments

3.4.1 The Questionnaires Two different questionnaires were designed: Business respondents completed one questionnaire, while the Technical respondents completed a different one. The reasons for this questionnaire design and administration were many. Firstly, the types of questions needed to operationalize the variables were not generic questions, which anybody in the organization could respond to. There were some technical questions that only IT personnel could answer, and conversely, some business related questions could best be answered by people in such functions. For example, non-IT personnel would probably not know the contents of an IT policy (Sabherwal and Chan, 2001), neither would 111

a HR staff know the total expense budget of his/her organization, except such Human Resources staff is a senior member of management. These types of questions were placed in the appropriate questionnaire type. In addition, merging the two questionnaire types increased its length to 11 pages, a situation which would have discouraged most of the respondents, given the characteristics of the respondents, who are all very busy executives.

The questionnaires were designed to comply with the recommendations of Hoinville and Jowel (1978) to engage interest, encourage cooperation, and elicit responses as close to the truth as possible through its flow, structure and length. Similarly, the questionnaire was carefully constructed to limit the time needed for completion by respondents, by enabling respondents to answer questions without much cross referencing within their organization. (Phillip et al, 1995). While deviating from Robins (1965) strategy where he

recommended mailing covering letters before mailing the questionnaire, the questionnaires used in this study were personally administered with a covering letter from the Africa Regional Centre for Information Science (ARCIS) explaining the purpose of the study. Another covering letter was obtained from MAN to its members laying credence to the importance of the study to Nigerian manufacturing. (Appendices 9 and 10 provide copies of these letters).

Business and Technical Questionnaires The two questionnaires are provided in Appendices 1A and B. Items in the two questionnaires were designed to collect data on the variables of focus in the

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study, following the specific definitions and operationalization of variables described in Section 3.9.

In most instances, and where possible, the researcher endeavored to personally administer the questionnaire in the form of an interview. This was because experiences from the pre-testing exercises showed that it was more difficult to collect the questionnaire if they were dropped with respondents. In some cases, there were as many as over fifteen repeated visits before the questionnaires could be retrieved if they were initially dropped with the respondents.

A minimum of six copies of the questionnaires (three technical and 3 business-typed questionnaires) were administered in each firm to the two groups of respondents. In the firm where the action research took place, 10 copies of the questionnaires (5 technical and 5 business) were administered. In all, a total of 545 copies of the questionnaires were administered. At the end of fieldwork, 337 copies of the questionnaires were collected, representing a 61.84 percent response rate. A response rate of almost 62% was possible because of the longer duration of time allowed. This quantity of response is considered good enough for this kind of study involving senior executives (Chief Executive Officers, Chief Information Officers, and Chief Finance Officers etc) as well as multiple respondents per firm in multiple geographical locations (Raghunathan and King 1988, Venkatraman 1989a). Of the 337 copies of the questionnaire returned, 36 were rejected on account of incomplete responses, wrong respondents (completed by persons outside

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the studys targets, e.g. personal assistant, office assistant etc.), IT personnel completed the business questionnaire, etc.

3.4.2 Interview Letters of solicitation for an interview with the CEOs were mailed alongside introduction letters from MAN and ARCIS to the executives. The letters solicited appointments to conduct interviews to be voice recorded on tape. This was followed by follow-up phone calls describing the study and eliciting the firms support (Sabherwal and Chan, 2001). The responses to these requests were low and another set of requests for interview letters were mailed again, followed by several phone calls. In some cases, personal friends of the CEOs were used to persuade the CEOs to give appointments for interviews. Sixty requests for interview letters were sent to 24 manufacturing firms across the six sectors investigated. In all, at least two interviews per sector were achieved and in some cases, for example the Food and Beverages sector, nine interviews were achieved. Efforts to conduct at least one interview in the Basic Metal, Iron & Steel sector did not yield any result (Table 3.5 lists successful interviews).

A simple, but structured interview guide (See Appendix XII) was developed to guide the oral interviews conducted with the CEOs, Finance Controllers and IT managers of the responding firms. The aim of the interview was to gather more information on the open-ended questions in the questionnaire. This type of interview was considered appropriate to this study as the interactive sessions with the interviewees brought out information that ordinarily would

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not have been captured with the questionnaire. The interview sessions were recorded with Sony Microcassette-corder M-560V voice recorder, and subsequently transcribed for analysis.

Several informal meetings with various professionals involved in the subject of strategy were also scheduled and conducted. The professionals include officials of MAN, consultants, lecturers at business schools (Lagos Business School (LBS) and Enugu State University of Technology (ESUT) Business School as well as strategy practitioners. The exercises were carried out to obtain more information on the subject of strategy as it relates to manufacturing firms.

Table 3.5: List of Responding Firms by Sector and Officer Interviewed

Firm Name 1 2 3 Cadbury Nigeria PLC Litramed Publishers Ltd Officer Interviewed MD MD Sector Food, Beverages Chemicals and Pharmaceuticals Pulp, Paper Publishing

May & Baker Nigeria PLC MD

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4 5 6 7 8 9 10 11 12 13 14 15 16

Vitafoam Nigeria PLC. SIO Industries Asaba

Corporate Planning & Development Director Finance Controller

Chemicals and Pharmaceuticals Textile & Wearing Apparels Food & Beverages Food & Beverages Food, Beverages Food, Beverages Food, Beverages Food & Beverages Food, Beverages Domestic & Industrial Plastics Chemicals and Pharmaceuticals Chemicals and Pharmaceuticals Food & Beverages

British American Tobacco IT Director Nigerian Bottling Company IT Director Procter & Gamble Nigeria Finance Controller Ltd UAC of Nigeria PLC Guinness Nigeria PLC Dunlop Nigeria PLC DN Meyer Nigeria PLC Vitafoam Nigeria PLC Guinness Nigeria PLC. Group IT Manager IT Manager IT Manager IT Manager IT Manager Competitive Intelligence Manager

Rivers Vegetable Oils PLC IT Manager Jos International BreweriesIT Manager

Source: Fieldwork

3.4.3 Action Research (Rapoport, 1970, p499) noted that action research in IS aims to contribute both to the practical concerns of people in an immediate problematic situation and to the goals of social science by joint collaboration within a mutually acceptable ethical framework This twofold view of the objectives of action research to solve a problem for a client and to advance science is, perhaps, the most fundamental feature of action research (Checkland, 1991; Gummesson, 1988; Reponen, 1992; Baskerville & Wood-Harper, 1998).

Action research was selected because of the in-depth and firsthand understanding that the researcher can obtain from organizational change processes and strategies by using it (Benbasat et al, 1987; Reponen, 1992). Furthermore, action research provides an opportunity to learn about practice and alternative ways of carrying it out (Argyris et al, 1987; Wood-Harper, 116

1992). Hence, action research has been used in developing IS planning methods such as Evolutionary Model for Information Systems Strategy (Reponen, 1993) and a large number of systems development methods such as ETHICS (Mumford, 1979), Soft Systems Methodology (Checkland, 1991), Multiview (Wood-Harper, 1992) and comprehensive/incremental IS planning approach (Salmela et al, 2000), to mention only a few.

The researcher was working at the time of this study as Information Systems Manager of a multinational pharmaceutical manufacturing firm in Nigeria. Thus the particular form of action research used in this study could be described as personal involvement where the research is the researchers day-to-day work and at the same time is advancing the course of science (Salmela et al, 2000). For example, the type of IS planning approach used by the organization was monitored during 2001 to 2005 with a view of observing the performance impact of the chosen planning approach within the turbulent business environment of Nigeria. To achieve this, the IS planning approach of the action research firm was devised to follow a comprehensive practice using a modified form of Salmela et als (2000) characterization of comprehensive planning. Table 3.6 highlights the operationalization of comprehensive IS planning in the pharmaceutical manufacturing firm.

Table 3.6: IS Planning Characteristics Monitored during 2001 2005 in the Action Research Firm
SN Planning Characteristics Planning Approach

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Plan comprehensiveness

The IS plan was drawn from the corporate strategy of the firm using same parameters for measurement of performance. Thus a high level of integration was achieved

Planning organization

with overall strategy (Premkumar & King, 1994) To derive the IS plan, a team of planners was drawn from one representative from each business function under the headship of the Finance Director. This is following the

Basis for decisions

recommendations of Earl (1988). To arrive at decisions during planning meetings, formal methods and analysis of options were carried out using the measurement parameters stated in the corporate strategy document. For example, any IS project of over N5m worth are subjected to rigorous ROA and impact analyses as specified in the strategy document.

SN 4

Planning Characteristics Plan control

Planning Approach To ensure that IS implementations and purchases are consistent with plan, the IS Manager, being a member of executive management was reporting progress of plan during monthly management meetings. In addition, major IS projects are brought before the capital project approval committee for scrutiny and approval. This is following the

Plan evaluation

recommendation of Galliers (1987). A monthly progress/performance report on the IS plan was written and sent to the CEO and copies sent to all Executive Directors for consideration during the Directors meetings.

Source: Fieldwork

In addition to IS plan formulation and implementation carried out, the performance impact of the business strategy adopted was also monitored in the action research firm. During the action research period, the organization was pursuing mainly, a strategy of productivity improvement and a few growth

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initiatives. The impact of the strategy formalization and implementation on turnover and PAT were monitored.

3.5

Data Reliability and Validation

Extensive pre-testing (Dillman 1978) of the research instruments was done. The pre-testing involved questionnaire item sorting exercises (Gary and Benbasat (1991) as well as sending the questionnaire to the target respondents seeking for their comments. This was done only in the action research firm. Pilot testing of the questionnaire and interview were done in the action research organization as well as two other firms in chemical and plastic sectors. The exercises resulted in minor revisions of the contents of the questionnaire and interview. The objective of the pilot test exercise was to determine, among others, the ease of obtaining some pieces of information that were considered strategic. In addition, pilot test enabled the study to observe respondents likely disposition to the structure and length of the questionnaires. Other factors in favor of the pilot-testing include justification of the need for a semi-structured interview, nature and type of questions to be asked and need for informal discussions, etc. Twenty pilot test questionnaires were administered in Lagos only. A retest exercise was later conducted among the same respondents in the pilot test. The aim of the retesting was to determine consistency in the information provided by respondents.

Trial interview sessions were also held with one IT manager in the Food and Beverages sector and another Director (Corporate Planning) in the Chemical

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sub-sector. These pre-test sessions enabled the study to prune down some of the interview questions in order to manage the length of the interview.

3.6

Constraints in the Field 1. Given the nature of this study (multi-respondents per firm), it was difficult getting multiple responses from some firms. 2. The respondents being very busy executives, it was quite challenging to get them to complete questionnaires and interview sessions. In some cases, up to 15 repeated visits were made to some firms. 3. Some information required for the study are classified as strategic and as such firms were not readily disposed to releasing such information. 4. Some firms (especially the ones owned by expatriates Indians and Chinese) did not want to be part of the study. They believed the researcher was a taxman in disguise!

3.7

Research Model and Variables

3.7.1 Key Concepts The reviewed literatures on business strategy, information systems strategy, and manufacturing firms in Nigeria have articulated seven concepts for empirical investigation in this study. These concepts are (a) Business Strategy (b) Information Systems Strategy (c) Information Systems Sophistication and Management (d) Business Performance (e) IS Planning characteristics (f) IS implementation characteristics and (g) IS alignment. A number of constituent

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variables are drawn from each concept as well as variables that can be used to operationalize the constituent variables. In all, 20 constituent variables were drawn from the seven main concepts and 42 operational variables were used to empirically investigate the relationship between business and information systems strategy and its impact on performance in Nigerian manufacturing firms. Table 3.7 provides a listing of the concepts, constituent variables, and operational variables used in the study.

.2

The Research Model

Critical Success Factors (Firm Size)

Revenue Growth Strategy

Business Strategy

IS Strategy

Productivity Strategy

PAT

Figure 3.1: The research model

The business objectives or owners requirements, drawn from a firms mission/vision are usually used to draw up the business strategy for the organization. Business strategies usually take two forms: productivity 121

improvement strategies and revenue growth strategies.

These business

improvement levers are in turn used to formulate other functional strategies like information systems strategy, finance strategy, human resources strategy, etc. The fit between ISS and any of the business improvement levers generates a coalignment term which a moderating variable (internal or external to the organization) can act upon to jointly determine/influence the performance of the organization. Hence the moderating variable becomes a critical success factor, which nonetheless is as important as the business and/ or information systems strategies.

Therefore, the model used in this study sought to investigate the performance impact of the relationship between business and information systems strategies as well as the appropriate critical success factor which would jointly determine the success of Nigerian manufacturing firms.

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Table 3.7: List of Concepts, Constituent and Operational Variables Used in the Study
SN 1 M a i n C o n s t i t u e n t Operational Variables Concept Variables B u s i n e s s Levers for financial Strong ties with customers Strategy strategy: Product/service differentiation Detailed business analyses Revenue Growth Increase capacity before competition. Strategy First to market in introducing new products Adopt innovation early Emphasis on long-term business effectiveness/budget allocation Sacrifice current profitability for market share gains Use cheaper pricing to increase market share Productivity Develop strong ties with suppliers improvement Improving operating efficiency strategy Analytical and number-oriented in business operations Require detail fact to support day-to-day decision-making Conservative in major business decisions Adopt less risky mode of business operation compared to competition

123

2.

Information a. Information S y s t e m s Strategy Strategy (ISS)

Degree of importance of the following pieces of information to respondents business operations: Education and skill of staff Competitors remuneration Productivity and performance of staff Sensitivity of customers demand to changes in price Alternative foreign sources of imported raw materials Alternative local sources of imported raw materials Waste recycling avenues Global R&D trends and opportunities Innovations from local universities and research centers Criteria for ISO certification Information about West African markets Domestic markets not currently dominant Market conditions for products not related to existing products Market conditions for products related to existing products Opportunities for introducing products not currently producing How to design and package products in totally distinct way from competition Detailed demographic, social and psychological studies of customers (e.g. brand loyalty, advert impact studies, preferences etc). Information about middlemen in the raw material supply chain Time to market for products/services

SN 2

M a i Concept

n C o n s t i t u e n t Operational Variables Variables b . Existence of the following technologies in the Information organization: Technology Accounting based applications Strategy. Office support systems Database management systems Computer Aided Design/Manufacturing applications (CAD/CAM). Local Area Networks (LAN) Wide Area Networks (WAN) Internet connectivity

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3.

4.

In-house information management resources: Number of IT professionals in the organization Percentage of software developed in-house Number of IT training programs attended by IT staff External dependence for management of information resources: External dependence for information management resources Existence of IT department Frequency of using consultants to obtain advice on IT issues IT policy comprehensiveness The IT Managers characteristics: Reporting relationship Organization level of IT manager Professional bias Membership of executive management CEOs knowledge and familiarization with a range of software packages C h a n g e / Plan implementation discipline implementation End user involvement in IT projects management Change uniqueness strategy Constitution of a project team for IT project implementation Membership of IT project committees Consideration for appointment of IT project team head Extent of involvement of CEO in IT project implementation IS Planning Frequency of review of IS plans Information approach Existence of IT department systems Analysis of organization needs before Planning investing in IS projects characteristi Existence of vision/mission cs Frequency of discussion of IT matters at senior management level I n d u s t r ya . C o m p e t i t i v e Threat of new domestic entrants competitiven i n t e n s i t y i n t h e Threat of new foreign entrants ess industry Bargaining power of suppliers Bargaining power of customers Rivalry within the industry Threat of substitute products Impact of regulation
c . Information Management Strategy

SN 5. 6.

M a i n C o n s t i t u e n t Operational Variables Concept Variables B u s i n e s s a. Net profit Profit After Tax Performance b. Turnover Total sales/turnover I Sa . C E O s I S implementatio participation and n involvement in IS characteristics projects CEOs familiarity and knowledge of IS applications CEOs frequency of involvement in IT selection and implementation CEOs extent of involvement in IT selection and implementation

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7.

b . Implementation success Business and a. Criterion-based i n f o r m a t i o n view of alignment s y s t e m s s t r a t e g y alignment. b. Form of alignment

Percentage of successful IS projects implemented in the last 2 years Moderation of business strategy variables and IS strategy variables in a Moderated Regression Analysis using firm size as moderating variable Moderation of business strategy variables and IS strategy variables in a Moderated Regression Analysis

3.8

Data Analysis

Information from completed questionnaires were analyzed using a computerized statistical data analysis tool, the Statistical Package for Social Scientists (SPSS), Version 11.0. Information from recorded interviews and

informal discussions were transcribed for analysis, and impact of the action research was monitored using the various reports issued on a monthly basis. Frequency analysis was done to show distributions and appropriate nonparametric tests were carried out (Friedman and Kruskal Wallis) to highlight statistical differences among related and independent groups of responses.

3.9

Tests of Hypotheses

Tests of hypotheses were carried out using linear regression analysis for hypotheses 1 4, and chi-square tests for hypotheses 5 & 6. Linear regression analysis was chosen in order to examine the strength and type of relationship between the independent and dependent variables. In addition, the study was able to develop a mathematical equation describing the relationship quantitatively. Linear regression was appropriate since complete and partial log variables of the regression equations did not show significantly better results. Regression analysis is also consistent with the approach of 126

Venktraman (1989) and Chan and Huff (1991) in examining relationships in studies relating the alignment of business and information systems strategy to performance. To measure hypotheses six and seven, the study is only interested in the extent of association and correlation between the dependent and independent variables, hence, chi-square analyses were carried out to test these hypotheses.

3.10

Operationalization of Variables

This section explains how the variables of focus in the study were defined in the questionnaire.

3.10.1 Measuring Business Strategies Recent works by the popular inventor of The Balanced Scorecard Robert S. Kaplan and David P. Norton in 2000 submitted that firms have two basic levers for improving their businesses: revenue growth and productivity improvement strategies. In general, productivity strategy yields results sooner than the growth strategy (Kaplan and Norton 2000). Question asking for the strength to which responding firms utilize each of these business strategies in their operations were posed to the respondents. On the basis of the description of each of the strategies by Kaplan and Norton (2000), responses to these questions were grouped under appropriate strategy as highlighted below. However, in practice each of these business improvement levers cannot be merged but can be analyzed and implemented simultaneously.

Productivity Improvement Strategies in Responding Firms

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 Develop strong ties with suppliers Improving operating efficiency Analytical in operations Require detail, factual information to support decision making Follows tried and true paths in business decision Conservative in major decision making Generally adopt a less risky mode of business operation

Revenue Growth Strategies in Responding Firms Developing strong ties with customers Product/service differentiation Increase capacity before competition Comprehensive analyses of business challenges/opportunities First to introduce products/service into the market Adopt innovations early Emphasis on long term business effectiveness Long-term considerations in criteria for budgetary allocations Sacrifice current profitability to gain market share Emphasis on gaining market share than cash flow Frequently use cheaper pricing to increase market share

3.10.2 Measuring Information Systems Strategies To measure Information Systems Strategies (ISS), Galliers (1993) model was adopted for this study. Galliers identified ISS to consist of four distinct components: Information Strategy, Information Systems Strategy, Information

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Management Strategy and Change Management Strategy. The merit of this model over existing ones is its holistic approach to ISS as against seeing ISS only from the technical (IT strategy) angle. Four candidate variables were used for measuring the different components of ISS. These are enumerated below.

i.

Information Strategy

Respondents were asked the strength to which they consider the following pieces of information critical to the achievement of their organizations goals. These pieces of information describe the information intensity of the firms ISS.

Information about Education, knowledge and skills of your staff Your competitors remuneration package Performance and productivity of individual staff Competitors sales and product performance Sensitivity of customers demand for your products to changes in your prices Alternative foreign sources of your imported raw materials Alternative local sources of your imported raw materials Avenues to recycle waste products for reuse possibilities Global R&D trends and opportunities Innovations from local Universities and research centers Criteria and processes for ISO certification

129

 West African markets Domestic markets which your firm is not currently dominant in Conditions in the markets for products related to your existing products Conditions in the markets for products not closely related to your existing products Opportunities for introduction of totally new products not currently produced by any other firm in your industry How to design, formulate and package your products in totally distinct way from competition Detailed demographic, social and psychological studies of your customers (e.g. brand loyalty, preferences, advert impact, cultural influences etc.) Intermediaries (middlemen) in the raw material supply chain Time to market for our products and delivery time to our customers

ii.

Information Technology Strategy

This variable was measured by the aggregation of the data on the following variables to obtain an index of each firms array of IT resources.

Existence of, and use of the following technologies and systems (IT Array): Accounting based applications Office Support Systems Database Management Systems (DBMSs) Computer Aided Design/Manufacturing applications (CAD/CAM) Local Area Networks

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 Wide Area Networks (WAN) Internet connectivity

Iii.

Information Management Strategy (IMS):

This variable was obtained by aggregating five variables (in-house information management resources, external dependency for managing information resources, IT policy comprehensiveness, IT managers attributes and CEOs knowledge and familiarity with IT applications). a. In-house information management resources: Number of IT professionals within the organization Percentage of software developed in-house Number of training programs attended by each IT staff b. External dependency for information management resources. External dependency for information resources management Existence of IT department Frequency of using consultants to obtain advice on IT issues c. d. IT policy comprehensiveness. IT Managers characteristics IT head reporting to Organizational level of IT head Professional bias of IT head Is head of IT a member of executive management?

e.

CEOs knowledge and familiarity with software packages. 131

iii.

Change Management Strategy (CMS):

The change centricity of a firm was captured using Galliers change management strategy, which is a component of information systems strategy. Change centricity of a firm was measured by the following operational variables: Plan implementation discipline End-user involvement in IT project implementation Each changes uniqueness is captured in handling the change Constitution of a project team for IT project implementation Membership of IT project committees Consideration for appointment of IT project team head Extent of involvement of CEO in IT project implementation

3.10.3

Measuring Business Performance

Profit After Tax (PAT) was used to measure business performance following Venkatraman (1986), Govindarajam (1988); Miller (1988) and Dawson and Watson (2005).

3.10.4 Operationalizing and Measuring Fit/Alignment. Hypotheses 1 3 were tested without incorporating the concept of alignment as advocated in IS strategy literature. Therefore, hypothesis four introduced alignment between business and information systems strategies in order to observe the nature, strength and the statistical significance of the relationship.

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In order to empirically test the concept of fit, this study opted to anchor the test on a specific criterion, firm performance. This researcher believes that alignment is more often than not intrinsically connected to specific criterion or contextual variable. Consequently, rather than adopting a criterion-free specification of fit for universal applicability, the study opined that the size of a firm can be a moderating variable that can moderate the alignment between business strategy and IS strategy (predictor variable) to determine the performance (criterion variable) of a firm (See Figure 3.1).

Continuing on the need for descriptive guidelines early in IS researches involving alignment, this study decided to choose a high degree of specificity of the functional form of the fit-based relationship. To this extent, a precise functional form of the relationship between the underlying variables was specified as shown in Figure 3.2. This model of just two variables (BusinessIS strategies co-alignment and size of a firm) set out to test that the interactive effect of Business-IS strategies co-alignment and size of a firm have implications for organizational performance as measured by PAT of Nigerian manufacturing firms. Hence the study concentrated on the form of alignment rather than the strength of alignment.

To that extent, the alignment model adopted for this study is illustrated in Figure 3.2.

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BS (A)

Predictor Business-ISS

ISS (B)

PAT (Y)
Moderator S Size of a firm (Z) Criterion

X.Z (Interaction)

Figure 3.2: Schematic representation of the moderation alignment model used in this study. (i) Measurement of Alignment

This study adopted the moderation perspective (Venkatraman, 1989) as its conceptualization and testing framework. This decision is hinged on the understanding of the theoretical basis of the specification of fit-based relationship used in this study. In addition, moderation has been submitted as the most appropriate alignment measurement perspective since it captures the interaction between businesses and IS strategies (Tallon and Kraemer, 2003, p.18). This interaction is depicted in Figure 3.2 as the product term X.Z.

The moderation perspective is one of six perspectives highlighted by Venkatraman (1989). This perspective is hinged on the premise that the impact that a predictor variable (business-ISS co-alignment) has on a criterion variable (Profit-After-Tax), is dependent upon the level of a third variable termed the moderator (size of a firm). Therefore, the fit between the predictor (business-ISS co-alignment) and the moderator (firm size) is the primary 134

determinant of the criterion variable. A mathematical representation of the moderation perspective is as follows:

Y = f (X, Z, X. Z) . (i)

where Y = performance (e.g. PAT), X is business-IS strategies co-alignment, and Z is the contextual variable (firm size) that must fit with the strategy for performance improvement and X.Z reflects the joint effects of X and Z.

Venkatraman (1989) stated that when two variables are involved, it is possible to be more precise than in multivariate studies. For example, Gupta and Govindarajam (1984) specified fit between two variables strategy and managerial characteristics in terms of the interactive effects.

(ii)

Testing Strength and Form of Moderation

Since the study is interested in investigating the form of moderation rather than the strength of moderation, we carried out a moderated regression analysis (MRA), which is commonly used in strategic management research to test the form of moderation (Arnold, 1982; Sharma, Durand & Gur-Arie, 1981; Gupta & Govindarajan, 1984, 1986; Hitt, Ireland & Palia, 1982; Hitt, Ireland & Stadter, 1982; Prescot, 1986). MRA can be represented by the following equations: Y = ao + a1X + a2Z + e .ii Y = ao + a1X + a2Z + a3X . Z + e iii

135

In order to empirically analyze the results obtained from this study to reflect the equation above, the independent variables were computed as follows: (a) Revenue Growth ISS co-alignment

Following Chan et als (1997) submission that statistical interaction or product term was more appropriate to model moderation than the more complex polynomial forms, revenue growth strategy which is a business strategy variable was paired with (multiplied) by the IS strategy to produce a co-alignment term or variable. The IS strategy variable is itself an aggregation of the data on the components of the IS strategy (information strategy, information technology strategy, information management strategy and change management strategy).

(b)

Productivity ISS co-alignment

Productivity improvement strategy, a business strategy was paired with (and multiplied by) the IS strategy to produce a co-alignment term or variable. IS strategy is in turn a sum of each of the components of the IS strategy as specified above.

(c)

Business-ISS co-alignment Firm Size interaction term

The interaction term (X.Z) in the moderated regression model was derived by pairing each of the business-ISS co-alignment variables with (and multiplying

136

by) the moderator or contextual variable (firm size), where {X is business-IS strategies co-alignment, and Z is the contextual variable (firm size)}

Hypotheses three was tested using the natural log of the variables in the regression equation. The logged variables were then tested in a log-linear regression model to observe the relationship between the dependent and independent variables. The decision to use natural logs of the dependent and the independent variables was based on the observation that the natural log of the variables provided a better regression relationship (R2), as well as a better scatter plot compared to when the previous two hypotheses were tested without using the natural log function.

3.11

Hypothesis 4

This hypothesis relates the industry competitiveness and IS planning approach to firm performance. The variables used for validating this hypothesis are discussed below.

(a)

Industry Competitiveness

The competitiveness of an industry was measured using a modified description of Porters (1985) forces that shape industry competitiveness. The modifications were done to reflect the realities of the Nigerian business environment. For example, Porters threats of new entrants in the original model were broken into threats of new foreign entrants and new domestic entrants. In addition, the impact of regulation is believed to be strong in shaping manufacturing businesses in Nigeria.

137

Industry Competitiveness was operationalized in this study using: Threat of new domestic entrants Threat of new foreign entrants Bargaining power of suppliers Rivalry within the industry Bargaining power of customers Threat of substitute products or services Impact of regulation

(b)

IS planning approach

The IS planning approach of a firm could take two forms according to Salmela et al (2000) - comprehensive or incremental IS plan. These authors also provided the characteristics of each planning approach. These characteristics were then used to form questions that were used in measuring IS planning approach. These characteristics are highlighted below:

Frequency of review of IS plans Existence of IT department Analysis of organizational needs before IS investment Existence of Vision/Mission Frequency of discussion of IT matters at senior management level

In order to test hypothesis four, a linear regression was carried out and the model equation provided an explanation of the form of relationship between the dependent (PAT) and the independents (industry competitiveness and IS

138

planning approach).

The log version of the regression equation did not

provide a better regression model and/or scatter plot.

3.12

Hypothesis 5: IT spending and firm performance

This hypothesis relates the performance of a firm with its IT spending. Consequently, to operationalize the hypothesis, the following variables were used:

(a)

Firm Performance Profit After Tax (PAT) Turnover

(b)

IT Expenditure

IT budget spent was used to operationalize IT expenditure. To determine the IT budget spent, respondents were asked to indicate (on a 5-point Likert scale) the quantum (in percentage) of IT budget spent in the last financial year. Given the strategic nature of this piece of information as well as the difficulty respondents may face in remembering actual figures, a manual calculation of each response was done to determine the value of IT budget spent. This value was subsequently used in the regression analyses. To derive this value, the mean of the response to question on amount budgeted for IT was obtained (e.g. if IT budget specified by the respondent was between N10-50, the mean value for IT budget would be N30m i.e. 10 plus 50 divided by 2). Similarly, the mean of quantum of IT budget spent was also calculated in the same way. The value obtained for each questionnaire

139

respondent was then summed and averaged to get an aggregate value for the firm. A Pearson chi-square test was then carried out on the variable to determine the strength of the relationship between IT spending and firm performance.

3.13

Hypothesis 6: CEOs IS involvement and project implementation

success. The following variables were used in validating the hypothesis:

(a)

CEOs IS participation and involvement

This was measured by three operational variables: CEOs familiarity and knowledge of IS applications (adapted from Magal and Lewis, 1995) CEOs frequency of involvement in IT selection and implementation CEOs extent of involvement in IT selection and implementation (adapted from Craig and King, 1992).

(b)

Implementation success

This was simply operationalized by: Percentage of successful IS projects.

Hypothesis 6 was tested using a Pearson chi -square test, the variables used in measuring CEOs IS participation were summed and recoded into Low, Average, and High by using the first one-third of the frequency distribution, next one-third and the last one-third respectively.

140

3.14

Data Aggregation

Data were aggregated at two main levels: all sampled firms (manufacturing sector level) and firms in different sub-sectors (sub-sector level). At the manufacturing level, frequencies of important variables were observed across the entire sampled manufacturing sector. For example, the study was able to observe the relative importance of Porters (1985) competitive forces in the sector. Aggregation at the sub-sector level enabled comparison of variables across the different sub-sectors (e.g. the relative importance of each of Porters forces among the sub-sectors).

At the sectoral level, inter-sector analyses were carried out to determine patterns of relationships using three grouping variables: firm size, PAT and sector. These analyses were carried out using non-parametric tests and the results brought out differences on a number of important variables/concepts (CEOs characteristics, state of computerization, impact of IT on business processes, etc) across the sectors in order for the study to examine which sector ranked high or low on which criteria.

The study however, could not aggregate lower than the sector level because doing so would have violated the commitment to maintain firm anonymity. This commitment was given at the data collection stage and was re-emphasized during the interview sessions.

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CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA 4.0 Introduction

This chapter comprises six parts. Part one introduces the chapter, including a description of the various types of statistical analyses used in the study. Part two highlights the characteristics of respondents like sex, qualification, length of service, designation and job function. Part three presents firm data (sectoral classification, location of headquarters and manufacturing plant, principal lines of business, etc). Parts four and five present responses from the business and technical questionnaires respectively, while part six reports the findings in respect of the various tests of hypotheses carried out in the study.

.01 Statistical Analyses For this study, the following statistical analyses were carried out:

(a)

Frequencies

The frequency distribution of each of the variables was extracted and analyzed to identify patterns and trends in each variable.

(b)

Non Parametric Tests

Friedman Test: The Friedmans test was used to determine if there are significant differences among several related samples or related responses to questions. For example, in order to know if there are

142

significant differences in the relative impact or importance of each of Porters competitive forces, on Nigerian manufacturing, Friedman mean ranks and the p-values were used in making inferences from the data.

Kruskal-Wallis Test: This statistical test was used to compare two or more independent groups of respondents data on one variable at a time. Relevant variables were compared on three grouping variables firm age, firm size and Profit after Tax (PAT). A firms age gives a reflection of the age of its ideas, organizational culture etc. A firms size is believed to reflect its flexibility, bureaucratic nature and management approach to running the business. PAT, on the other hand, gives a picture of productivity and profitability of the firm. For example, the Kruskal-Wallis test was used to determine how different firms grouped by age, size or PAT were affected by each of Porters competitive forces.

(c)

Test of Hypotheses

Six hypotheses were specified for testing in this study. Four of the hypotheses were modeled by regression equations. In testing these hypotheses, it was considered important to determine the existence of correlation as well as the strength of the relationships, between the dependent and independent variables. The remaining two hypotheses (Hypotheses 5 and 6) were tested using chi-square tests between the variables in focus. As highlighted in chapter three, some of the theoretical

143

variables could be operationalized with more than one operational variable. In other instances, the operational variables were summed to obtain an index for measuring the theoretical variable. For instance, CEOs IT awareness was measured by a group of six operational variables. Data on these six variables were weighted and summed into a single variable before it was used in the chi-square analyses for testing the hypotheses.

Subsection 4.2 reports the results from the Business questionnaire, while subsection 4.3 reports results from Technical questionnaire.

4.1

Respondents Demographics

4.1.1 Responses by Questionnaire Types As explained in Chapter three, there are two categories of respondents in this study - business respondents and technical respondents. The business respondents comprised respondents in selected departments/job functions except the Information Technology (IT) department. Business related questions were presented to these respondents from the questionnaire that had been pre-coded Business. Another questionnaire coded Technical was presented to respondents who worked in the IT departments. In all 53.5 per cent of respondents belonged to the business category while 46.5 per cent were in the technical (IT) category. See Figure 4.1.

144

Figure 4.1: Responses by Type of Questionnaire

4.1.2 Sectoral Groupings of Respondents The highest number of responses was received from the Food, Beverages and Tobacco sector with a 20.6 per cent of total responses, while Basic Metal, Iron and Steel sector had a 20.3 per cent response rate. The least number of responses received was from Domestic and Industrial Plastic sector with valid responses of 10.6 per cent. Table 4.1 shows the sectoral classification of respondents. The list of responding firms and the number of respondents per firm are presented in Appendix 1.

SECTOR Food, Beverages and Tobacco Basic Metal, Iron and Steel Chemical and Pharmaceuticals Pulp, Paper and Paper Products Textile and Wearing Apparels Domestic and Industrial Plastics Total Source: Fieldwork

FREQUENCY PERCENT 62 61 45 56 45 32 301 20.6 20.3 15.0 18.6 15.0 10.6 100.0

Table 4.1: Sector Classification of Respondents

145

Sectoral Classification of Respondents

60
Number of Firms

45 30 15 0
s er M et al til e s ge al ap Te x ve he si lp ,P c m Pa ra ic pe r

Be

Ba

Fo o

d,

Sector
Figure 4.2: Sectoral Classification of respondents

4.1.3 Gender of Respondents The male respondents accounted for 82.7 per cent of the total respondents while the female sex accounted for 13.6 per cent. The remainder (3.7 per cent) did not indicate their sex. See Table 4.2.
Table 4.2: Gender Classification of Respondents
FREQUENCY PERCENT Male Female Total 249 41 301 82.7 13.6 3.7 100.0

No Response 11

Source: Fieldwork

4.1.4 Age of Respondents It is interesting to note that a third of the respondents are young executives (25 30 years old) while about another quarter were between 51-60 years

Pu

146

old. Overall, 63.3 per cent of the respondents were below the age of 40 years, while 74.4 per cent were below the age of 50 years (Table 4.3).
Table 4.3: Age of Respondents FREQUENCY Below 25 years 25-30 years 31-40 years 41-50 years 51-60 years No Response Total 4 98 86 33 76 4 301 1.3 33.0 29.0 11.1 25.6 100 PERCENT

Source: Fieldwork

4.1.5

Qualifications of Respondents

Respondents were asked to indicate their basic educational qualifications, professional qualifications, and other qualifications that do not clearly fall into educational or professional. 42.3 per cent of the respondents had postgraduate qualifications, while 30.1 per cent had Bachelors degrees. (See Table 4.4a - c for the distribution of academic and professional qualification of respondents).

Table 4.4a

Academic Qualification of Respondents FREQUENCY PERCENT 1.0 24.6 27.9 39.2 7.3 100.0

O/L or A/L Certificate Undergraduate Diploma Bachelor's degree Postgraduate qualifications No Response Total Source: Fieldwork

3 74 84 118 22 301

The respondents in this study possess professional management and computing qualifications. One of the respondents has a Ph.D. degree, and 147

another respondent is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN). (See Appendix 2 for other qualifications of the respondents). The array of qualifications in the manufacturing industry in Appendix 2 shows that majority of workers in the sector had at least a Bachelors degree (Table 4.4a c).

Table 4.4b: Non-computing Professional Qualification of Respondents FREQUENCY NIMN MBA ACA CISA Total No response 46 1 7 1 55 246 301 Source: Fieldwork PERCENT 15.3 .3 2.3 .3 18.3 81.7 100.0

Table 4.4c: Professional Computing Qualification of Respondents

FREQUENCY PERCENT Professional Computing Certificate - Not specified DBA MCSE MCP Total No response 39 1 3 1 44 257 301 88.6 2.3 6.8 2.3 100.0

Source: Fieldwork

148

4.1.6 Respondents Length of Time in Employment A third of the respondents (35.6 per cent) had spent between 1 - 5 years in employment, while a further 29.0 per cent had spent over 10 years in employment (Table 4.5a and Figure 4.3). Although the target respondents were top executives in business and IT functions, most respondents had spent less than 10 years in employment suggesting that they were recruited recently. This finding is in agreement with the earlier observation that the period of lull in manufacturing witnessed little or no recruitment of manpower in the sector. The respondents included CEOs (0.7 per cent); Finance Controllers (3.3 per cent); Human Resources Directors (1.3 per cent) and IT Managers (12.6 percent).

Table 4.5a:

Respondents Length of Time in Employment FREQUENCY PERCENT 14.3 21.3 35.3 29.0

Less than 2 years 2-5 years 6-10 years Above 10 years No Response Total Source: Fieldwork

43 64 106 87 1 301

149

90
Number of Respondents

68 45 23 0
<2 yrs 2-5yrs 6-10yrs >10yrs

Length of time (in years)

Figure 4.3: Length of time of respondents in employment

4.1.7 Designation and Job Function of Respondents Respondents were asked to provide up to three job functions they carry out on a day-to-day basis. Majority of the respondents provided more than one job function, which was categorized into three levels within each functional area. For instance, all Finance and Accounts related jobs were categorized into three levels: Directing Finance and Accounts functions, Managing Finance and Accounts functions and Executing Finance and Accounts functions, a synthesis elucidating whether the respondent is a Director in Finance and Accounts department, or Manager or Officer respectively. Consequently, the list of the first job functions mentioned by the respondents irrespective of level (directing, managing or executing) was further categorized. A large proportion of the respondents were in the IT function (38.7 per cent), followed by Finance function staff (16.7 per cent) and Human

150

Resources (8.7 per cent) (Table 4.5b). See Appendix 5 for a complete list of respondents job function categories.

Table 4.5b: Job functions of respondents

JOB FUNCTION FREQUENCY 5.9 16.7 12.2 8.7 6.9 36.9 12.7 100 PERCENT

Administration (including corporate 18 planning) Finance and Accounts Functions 50 Sales and Marketing Functions Human Resources Function 37 26

Production (including Quality Control and 21 Engineering) IT Functions 111 Others Totals 38 301

Source: Fieldwork

4.2
4.2.1

Firm Characteristics
Firm Size

The National Council of Industrial Classification of the Federal Ministry of Industries (FMI) classified firms into Small, Medium, Large and Very Large firms as shown in Table 3.2.

A small proportion (7.1 per cent) of the respondents firms had a staff strength between 50 and 100 persons. Given the fact that manufacturing is an activityintensive operation, most manufacturing firms that qualified for inclusion in this study had a staff size of more than 50. Majority of the responding firms fell within the Very Large firms categories given the staff strength defined in Table 3.2. For example, 17.3 per cent of the respondents firms had staff strength above 500 people while 45.5 per cent of the firms had staff strength

151

of between 200 - 500 employees (See Table 4.6). Although staff strength and cost of capital were used in the FMIs classification, the study did not collect data on cost of capital of respondents firms for two reasons: First, this data is considered strategic and as such respondents might not be willing to release the information. Secondly, in cases where respondents might be willing to release such information, they might not remember the amount except for public companies which are obliged to report such information by law.
Table 4.6: Staff Strength of respondents firms FREQUENCY Less than 100 100-200 200-300 300-500 500-1000 Over 1000 Don't Know Total 11 25 41 30 27 22 1 156 100.0 7.1 16.0 26.3 19.2 17.3 14.1 PERCENT

No Response 4

Source: Fieldwork

152

40

30

Number of Firms

20

10

<100

100-200

200-300

300-500

500-1000

>1000

Range of staff strength

Figure 4.4: Staff strength of respondents firms

.2

Age of Responding Firms

Respondents were asked for the age of their firms in order to classify the responding firms into age categories. Very few of the firms that participated in this study were less than 5 years old (2.5 per cent), whereas 36.4 per cent were between 5 - 20 years, 48.4 per cent were between 20 - 50 years, and 12.6 per cent of the firms were over 50 years old (See Table 4.7).

153

Table 4.7:

Age of Respondents Firms FREQUENCY PERCENT 3.0 5.2 51.5 25.4 13.4 1.5 100.0

Less than 5 years 5-10 years 20-50 years 10-20 years No Response Total

4 7 69 34 2 134

Above 50 years 18

Source: Fieldwork

70

53
Number of Firms

35

18

0
<5 yrs 5-10 yrs 10-20 yrs 20-50 yrs >50 yrs Age of companies

Figure 4.5: Age of respondents firms

4.2.3 Turnover of Respondents Firms Almost half (48.3 per cent) of the firms were very large businesses returning turnover in excess of N1b. (See Table 4.8). A further 30.4 per cent of the responding firms were recording sales turnover in the range of N101m N500m annually. Eleven per cent of the firms had an annual sales turnover of between 50 - N100m. 154

Table 4.8

Annual Sales Turnover of Respondents Firms FREQUENCY PERCENT 10.4 6.7 18.7 6.0 33.6 12.7 8.2 1.5 2.2 100.0

Less than N100m N(101-200)m N (201-500)m N (501m-1b) N (1-10)b Above N 10b No Response Not Applicable Don't Know Total

14 9 25 8 45 17 11 2 3 134

Source: Fieldwork (m=million; b=billion)

4.2.4 Profit After Tax (PAT) of Respondents Firms A significant 31.4 per cent of the firms posted a PAT of less than N100 million while 7.3 per cent made over N10 billion in PAT (See Table 4.9 and Figure 4.6). The data shows that the firms ranged from the small to very large in terms of PAT.

Table 4.9: Profit After Tax of Respondents Firms PAT Less than N 100m N 101-200m N 201-500m N 501m-1b N 1-10b Above N 10b Total 43 25 22 25 12 10 137 FREQUENCY 31.4 18.2 16.1 18.2 8.8 7.3 100.0 PERCENT

Source: Fieldwork (m=million; b=billion)

155

50

38

m = N million b = N billion

Number of Firms

25

13

0 <100m 101-200m 201-500m PAT 501-1b 1-10b >10b

Figure 4.6: Profit After Tax of Respondents Firms

4.2.5 Firms Total Annual Expense Budget Slightly over a quarter (25.9 per cent) of the responding firms had an expense budget of between N101 million to N200 million. Another quarter (25.2 per cent) were spending between N501 million to N1 billion in expenses annually, while almost equal proportions (17.8 and 17.0 per cent) were spending annually less than N100 million and between N201-N500 million respectively. Just a few of the firms (about eight in number) had expense budgets of above N10 billion (See Table 4.10).

156

Table 4.10:

Total Annual Expense Budget of Respondents Firms FREQUENCY PERCENT 17.8 25.9 17.0 25.2 8.1 5.9 100.0 100.0

Less than N50m N 50-250m N 251-500m N 501m-1b N 1-10b Above N 10b No Response Not Applicable Total

24 35 23 34 11 8 25 1 135

Source: Fieldwork (m=million; b=billion)

4.2.6 Location of Headquarters and Manufacturing Plants Respondents were asked to indicate the geographical location of the headquarters of their organization as well as the geo-political regions where their firm had manufacturing plants. The results indicated that the bulk of manufacturing activities was concentrated in the South Western region of Nigeria. 83.5 per cent of the firms had their headquarters in Lagos (Table 4.11a).

Table 4.11a: Location of Headquarters of Respondents Firms. LOCATION Lagos Ibadan Osogbo Asaba Kano Kaduna Port Harcourt Total No response 131 8 4 2 7 4 1 156 145 301 FREQUENCY 83.4 5.1 2.5 1.3 4.5 2.5 0.6 100.0 PERCENT

157

Source: Fieldwork

The localization of manufacturing plants of the responding firms is as shown in Table 4.11b. This pattern is similar to that of the location of headquarters.

Table 4.11b: Localization of Manufacturing Plants of Respondents Firms.

GEO-POLITICAL ZONE South West North East North West North Central South South South East No response Total FREQUENCY 131 8 18 22 16 26 80 301 100.0 43.5 2.7 6.0 7.3 5.3 8.6 PERCENT

Source: Fieldwork

4.2.7 Principal Lines of Businesses Respondents were asked to indicate three principal lines of businesses of their firm. Appendix 6 contains the full array of the principal lines of businesses of the responding firms.

4.2.8 Existence and Nature of Vision and Mission Statements Almost 77 per cent of the responding firms had vision and/or mission statements, while 15.7 percent had no vision/mission statements (Table 4.12a). 10.5 per cent did not respond to the question.

Table 4.12a

Firms with Vision/Mission Statements FREQUENCY PERCENT 76.9

Yes

103

158

No

21

15.7 7.5 100.0

N o 10 Response Total 134 Source: Fieldwork

Differences by Sector, Firm Size and PAT A Kruskal Wallis test was carried out to examine significant differences between this variable (existence of vision/mission statement) and the grouping variables (sector, size of firm and PAT). The result shown in Table 4.12b indicates that there are no significant differences on this variable across size of firm and Profit After Tax. However, there are significant differences among these responding firms on the sector to which they belong. The implication of this finding is that certain sub-sectors (Domestic and Industrial Plastic) of Nigerian manufacturing have not taken time to define a vision for their organization. Firms however do not vary on the other grouping variables (Firm size and PAT).

Table 4.12b: Kruskal Wallis test of Existence of Vision/Mission by Sector, Firm Size and PAT
EXISTENCE OF VISION GROUPING AND/OR MISSION VARIABLES STATEMENTS KRUSKAL WALLIS STATISTICS

SECTOR

Existence of Vision/ Mission statement Existence of Vision/ Mission statement Existence of Vision/ Mission statement

Firm Size PAT Sector

Chi square df 2.870 5 6.395 12.445 5 5

Asymp sig 0.720 0.270 0.029

High NS NS

Low NS NS

Te x t i l e a n d Domestic and W e a r i n gI n d u s t r i a l Apparels Plastics

Source: Fieldwork

(NS = Not Significant)

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4.2.9 Industry Competitiveness Respondents were asked their opinion on the importance of each of the modified Porters (1980) five competitive forces that determine industry profitability: the power of buyers, the power of suppliers, the threat of new entrants, the threat of substitute products, and the rivalry among existing competitors. Porter also noted that the collective strength of these forces varies from industry to industry, as does average profitability (Porter, 1980). To reflect the peculiarities of the Nigerian business environment, Porters five forces were extended into seven by splitting threats of new entrants into threats of domestic and threats of foreign entrants. Impact of adequate/ inadequate regulation on the industry was also introduced because in the Nigerian environment, regulation or lack of it can impact on Industry profitability as well as vary from industry to industry. The pharmaceutical sector in Nigeria is an apt example when the sector witnessed growth following improved regulation by the National Agency for Foods and Drugs Administration and Control (NAFDAC).

Friedman Test of Competitive Forces in Nigerian Manufacturing The results from Friedman Non-parametric test showed that there are significant differences in the way Nigerian manufacturing firms are confronted by each of these threats (Table 4.13a). (Chi-Square = 34.379, p<0.01).
Table 4.13a: Friedmans Test Result of Competitive Forces in Nigerian Manufacturing
COMPETITIVE FORCES LEVEL OF SIGNIFICANCE (% Frequency) NS 1 7.6 2 22.3 3 40.1 VS 4 29.9 FRIEDMAN MEAN RANK

Power of Customers

4.41

160

Rivalry within the industry. Lack of/inadequate regulatory mechanism Power of Suppliers Threats of Foreign Entrants Threats of Domestic Entrants N = 149 ; df = 6 ; X2 = 34.379; p = .000

19.5 15.4 11.9 28.8 30.8

15.1 23.0 24.4 27.0 21.9 15.7

32.1 21.7 31.4 37.1 23.1 32.1

33.3 37.9 28.8 23.9 26.3 21.4

4.29 4.27 4.05 3.97 3.55 3.47

Threats of substitute products/services 17.4

Source: Fieldwork (NS = Not Significant and VS = Very Significant)

This implies that there are significant differences in the ways Nigerian manufacturing firms are confronted by the different competitive forces. The manufacturing firms surveyed rated bargaining power of customers (mean rank of 4.41) as the most threatening competitive force. This was followed by rivalry within the industry with mean rank of 4.29 and threats of substitute products with a mean rank of 4.27. Threats of domestic entrants were the least competitive force with a mean rank of 3.47. Differences by Sector The study went further to determine if there were significant differences in the degree each of these competitive forces were threatening the sectors under study. For this analysis, a Kruskal Wallis test was carried out. The result of the test is presented in Table 4.13b:

Table 4.13b: Test Statistics results of Kruskal Wallis Test of competitive forces by Sector
COMPETITIVE FORCES Threats of Domestic Entrants Threats of Foreign Entrants Bargaining Power of Suppliers Rivalry Within The Industry Bargaining Power of Customers C H I SQUARE 5.714 11.459 7.121 27.537 4.953 - DF A S Y M P . SECTOR SIG. High 0.335 0.043 0.212 0.000 0.422 NS Chemicals & Food NS Food & Beverages NS

Low NS Basic Metal & Plastics. NS Plastics NS

5 5 5 5 5

161

Threats of Substitute Products/ Services Impact of Regulatory Mechanism

3.354 12.005

5 5

0.646 0.035

NS Chemicals & Food

NS Plastics

Source: Fieldwork

(NS = Not significant)

The Kruskal Wallis test result (Appendix 7a) revealed that rivalry within the industry varied the most among the sectors under study. Rivalry as a competitive force is highest in Food, Beverages and Tobacco (mean rank = 101.69), followed by Pulp, Paper and Paper product sector (mean rank = 94.22). The sectors with the lowest mean rank is Domestic and Industrial Plastics (mean rank = 43.68). Other competitive forces with sectoral

variability include threats of foreign entrants and impact of regulation on the sector. Taken together, the Friedman and Kruskal Wallis tests result brought out rivalry within the industry as having the second highest mean rank after bargaining power of customers (Tables 4.13a and b).

Differences by Firm Size The Kruskal Wallis test of perception of industry competitiveness by firm size shows that firms did not vary on this criterion (See Table 4.13c).

Table 4.13c: Test Statistics Results of Kruskal Wallis Test of Competitive Forces by Firm Size COMPETITIVE FORCES Threats of Domestic Entrants Threats of Foreign Entrants Bargaining Power of Suppliers Rivalry within the Industry CHIDF SQUARE 6.379 5 8.976 4.877 4.517 5 5 5 ASYMP. SIG. 0.0271 0.110 0.431 5.032

162

Bargaining Power of Customers Threats of Substitute Products/Services Impact of Regulatory Mechanism Source: Fieldwork

3.523 3.523 7.055

5 5 5

0.412 0.620 0.217

Differences by PAT However, the situation was different when firms grouped by profitability were compared. On this criterion, low profit organizations perceived the threat of domestic entrants into the business lower than mid-profit firms. Table 4.13d shows that there are no significant variations in perceptions of the threat of the other competitive forces among firms grouped by their profitability (PAT).
Table 4.13d: Test Statistics Results of Kruskal Wallis Test of Competitive Forces by PAT
COMPETITIVE FORCES CHISQUARE 14.077 6.964 3.308 7.715 5.191 5 5 5 5 5 5 DF ASYMP. SIG. High 0.015 0.223 7.715 0.173 0.393 0.324 0.216 PAT Low Less than N100m NS NS NS NS NS NS

Threats of Domestic Entrants Threats of Foreign Entrants Bargaining Power of Suppliers Rivalry within the Industry Bargaining Power of Customers

N101-200m NS NS NS NS NS NS

Threats of Substitute Products/ 5.820 Services Impact of Regulatory Mechanism 7.070 Source: Fieldwork

(NS = Not significant)

4.2.10

Business Strategy of Nigerian Manufacturing Firms

Business strategies of the responding firms were operationalized using the levers of business productivity identified by Kaplan and Norton (2000). Questions were asked in respect of these variables to identify the major strategies that were used by Nigerian manufacturers. Kaplan and Norton

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identified these levers as either revenue growth strategies or productivity improvement strategies.

Friedman Test of Business Strategies of Firms From the Friedman result shown in Table 4.14a, it is apparent that Nigerian manufacturing firms employ both revenue growth and productivity improvement strategies in their operations. Cost cutting, a productivity improvement strategy, tops the list of strategies used in Nigerian manufacturing with a mean rank of 13.05, followed by a revenue growth strategy, developing strong ties with customers (mean rank of 12.86). This is then followed by another cost cutting strategy, developing strong ties with suppliers with a mean rank of 12.51. The least used strategy is cheaper pricing of products to gain market share. This strategy, which is a revenue growth strategy, has a mean rank of 5.0, and is closely followed (from the bottom) by the strategy of adopting a conservative view in major decision making (Mean rank of 6.43).

Table 4.14a: Business Strategies of Respondents Firms Business Strategies Drive ourselves to improving operating efficiencies Strong ties with customers Strong ties with suppliers Strive to differentiate products/services from competitors Require details facts to support day-to-day decision making Develop comprehensive analysis of each business challenge Tend to be analytical in operations Adopt innovations early Reflect long-term considerations in budgetary allocations Mean Rank 13.05 12.86 12.51 12.07 11.47 10.60 9.94 9.83 9.80

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Follow performance measures to emphasize long-term business 9.75 effectiveness Increase capacity before competition 9.35 Follow tried and true paths in business decision First to introduce products/services in the market 8.69 8.00

Adopt a less risky mode of business operation compared to 7.88 competitor Sacrifice current profitability to gain market share 6.95 Place emphasis on market share than cash flow Adopt conservative view in major decision making Use cheaper pricing to gain market share. N =132; Chi-square = 553.496; df = 17; asymp. Sig. = 0.000 Source: Fieldwork 6.82 6.43 5.00

Business Strategy by Sector The test statistics showed that there are significant differences among Nigerian manufacturers in the way in which they go about their businesses at the strategy level. Further tests were performed on the extent of application of these business strategies across firms grouped by sector, size of firm and PAT. The Kruskal Wallis test results (Table 4.14b) showed that there are sectoral differences in the use of some of these business strategies.
Table 4.14b: Kruskal Wallis Test Result of Business Strategies by Sector
BUSINESS STRATEGIES Developing strong ties with customers Developing strong ties with suppliers Improving operating efficiency Product differentiation Analytical in business operations Require detail facts to support day-today decision-making Develop comprehensive analyses of each business challenge Follows tried and true paths in business decision Adopt conservative view in major decision-making Adopts less risky mode of business operations when compared to competitors Chi square 11.876 5.119 7.892 7.611 23.229 4.262 4.584 6.857 3.567 19.511 5 5 5 5 5 5 5 5 5 5 df Asymp sig 0.037 0.401 0.162 0.179 0.000 0.512 0.469 0.232 0.613 0.002

HIGH LOW C/P Textile NS NS NS Paper NS NS NS NS Textile NS NS NS Textile NS NS NS NS Plastics

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Increase capacity before competition First to introduce products/service into the market Adopt innovations early Follow performance measures to emphasize long-term business effectiveness Reflect long-term consideration in budgetary allocations Sacrifice current profitability to gain market share Place emphasis on market share than cash flow

7.680 4.712 17.368 2.046 6.927 6.521 11.825

5 5 5 5 5 5 5

0.175 0.452 0.004 0.843 0.226 0.259 0.037

NS NS Paper NS NS NS

NS NS Food NS NS NS

M e t a l s , Plastics Iron NS NS

Use cheaper pricing to gain market 4.462 share C/P is Chemicals and Pharmaceuticals.

0.485

Source: Fieldwork

(NS = Not significant)

Business Strategy by Firm Size Size of a firm was used as a grouping variable in a Kruskal Wallis test, to determine if there are differences on the use of different business strategies. The result is shown in Table 4.14c.
Table 4.14c: Kruskal Wallis Test result of Business Strategy variables by Firm Size
BUSINESS STRATEGIES Chi square df 5 5 5 5 5 5 5 5 5 5 5 5 Asymp. Sig. HIGH Developing strong ties with customers 4.036 Developing strong ties with suppliers Improving operating efficiency Product differentiation Analytical in business operations Require detail facts to support day-today decision-making Develop comprehensive analyses of each business challenge Follows tried and true paths in business decision Adopt conservative view in major decision-making Adopts less risky mode of business operations when compared to competitors Increase capacity before competition 4.742 2.506 1.801 3.782 8.194 4.735 8.628 12.825 3.230 2.190 0.544 0.448 0.776 0.876 0.581 0.146 0.449 0.125 0.025 0.665 0.822 0.064 NS NS NS NS NS NS NS NS LOW NS NS NS NS NS NS NS NS

Less than 100 1 0 0 - 2 0 0 staff staff NS NS NS NS NS NS

First to introduce products/service into 10.417 the market

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Adopt innovations early Follow performance measures to emphasize long-term business effectiveness Reflect long-term consideration in budgetary allocations Sacrifice current profitability to gain market share Place emphasis on market share than cash flow Use cheaper pricing to gain market share

3.411 4.875 2.781 5.007 5.838 11.703

5 5 5 5 5 5

0.637 0.431 0.734 0.415 0.322 0.039

NS NS NS NS NS

NS NS NS NS NS

500-1000 staff 2 0 0 - 3 0 0 staff

Source: Fieldwork

(NS = Not significant)

The result from table 4.14c indicates that there are significant differences among differently sized manufacturing firms in the use of adopting a conservative view in major decision making as well as the use of cheaper pricing to gain market share across size of the firm. Conservatism in decisionmaking is used as business strategy mostly in small firms and least in small/ medium sized firms. Large firms use more of cheaper pricing in gaining market share as a business strategy, while small/medium sized firms hardly use this strategy.

Business strategy and PAT The result of a Kruskal Wallis test on the business strategy variables using PAT as grouping variables is presented in Table 4.14d.

Table 4.14d: Kruskal Wallis Test Result of Business Strategy Variables and PAT
BUSINESS STRATEGIES Chi square df 9.848 5 1.062 6.624 6.067 3.341 5 5 5 5 Asymp sig 0.080 0.957 0.250 0.300 0.648

Developing strong ties with customers Developing strong ties with suppliers Improving operating efficiency Product differentiation Analytical in business operations

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Require detail facts to support day-to-day decision-making Develop comprehensive analyses of each business challenge Follows tried and true paths in business decision Adopt conservative view in major decision-making

3.738 9.163 1.740 3.739

5 5 5 5 5 5 5 5

0.588 0.103 0.884 0.588 0.547 0.544 0.339 0.661 Asymp sig 0.689 0.559 0.724 0.762 0.194

Adopts less risky mode of business operations when compared 4.015 to competitors Increase capacity before competition 4.037 First to introduce products/service into the market Adopt innovations early BUSINESS STRATEGIES 5.681 3.253

Chi square df Follow performance measures to emphasize long-term business 3.069 effectiveness Reflect long-term consideration in budgetary allocations 3.931 Sacrifice current profitability to gain market share Place emphasis on market share than cash flow Use cheaper pricing to gain market share 2.846 2.596 7.385 5 5 5 5 5

Source: Fieldwork

(NS = Not significant)

This result from Table 4.14d however indicates that there are no differences in the use of different business strategies across firms of different profitability.

4.2.11

Information Strategy

The information component is a vital component of any strategy. Porter (1980) claimed that the information revolution is impacting competition in three ways. Firstly, it changes industry structure and, in so doing, alters the rules of competition. Secondly, the information revolution creates competitive advantage by giving firms new ways to outperform their rivals and, lastly, it spawns whole new businesses, often from within a firms existing operations.

In order to be able to check the relevance of Porters claims, respondents were asked to rate the importance of some pieces of information to the achievement of their firms goals using a 5-point Likert scale (Dont Know

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responses have been excluded from the 4.15a). The Freidman result is presented in Table 4.15a.

Table 4.15a: Information Component of IS Strategy of Nigerian Manufacturing Firms LEVEL OF CRITICALITY (% FREQUENCY) IMPORTANCE OF INFORMATION ABOUT L HIGH 1 Education, knowledge and skills of your staff 11.3 Performance and productivity of individual staff 7.5 Competitors sales and product performance 11.5 D e t a i l e d d e m o g r a p h i c , s o c i a l a n d 18.2 psychological studies of your customers (e.g. brand loyalty, preferences, advert impact, cultural influences etc.) Sensitivity of customers demand for your 11.5 products to changes in your prices Time to market and deliver products How to design, formulate and package your 24.1 products in totally distinct way from competition Global R&D trends and opportunities 11.5 Domestic markets which your firm is not 19.5 currently dominant in Competitors remuneration package 17.9 Alternative foreign sources of your imported 16.1 raw materials Conditions in the markets for products related 18.6 to your existing products Alternative local sources of your imported raw 20.9 materials West African markets 20.0 Criteria and processes for ISO certification 19.7 Opportunities for introduction of totally new 23.9 products not currently produced by any other firm in your industry Avenues to recycle waste products for reuse 34.0 possibilities Intermediaries (middlemen) in the raw material 27.7 supply chain Innovations from local Universities and 34.7 research centers Conditions in the markets for products not 41.7 closely related to your existing products N = 107 ; df = 19 ; X = 255.199 ; p = .000 O 2 5.6 9.4 16.0 17.5 3 4 21.3 61.9 21.9 61.3 28.8 43.6 23.4 40.9 W 14.21 14.13 12.22 11.65 FRIEDMAN MEAN RANK

17.2

37.6 33.8

11.53 11.10

18.4 28.4 21.4 25.6 21.3 22.4 24.8 19.3 20.4 18.1 17.3 27.1 22.4 34.4

22.8 34.8 30.4 29.7 30.5 28.6 28.2 28.2 28.4 34.2 28.2 30.8 24.8 29.4 26.7 34.0 32.4 27.5 29.0 29.0 22.0 26.7 26.5 18.7 23.8 19.0 16.6 7.3

11.00 10.96 10.59 10.57 10.45 10.41 10.28 10.21 9.96 9.77 8.61 8.10 8.08 6.17

Source: Fieldwork

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Information about the education, knowledge and skills of individual staff came out to be the most important information that manufacturing firms considered critical to the achievement of their goals. This piece of information had a mean rank of 14.21. This implies that Nigerian manufacturers place a lot of emphasis on the skills and knowledge of their staff. On whether these skills and knowledge bases are translated into productivity gains is another question, which may be worth investigating. Information about the productivity and performance of individual staff was indicated as the next most important piece of information to Nigerian manufacturers, with a mean rank of 14.13. Information on conditions in the market for products not closely related to respondents existing products had the least mean rank implying that most manufacturing firms in Nigeria hardly care about information on products outside their business lines. Majority of the firms used in this study had multiproduct lines in related business lines/sub-sectors (Appendix 6), and the Friedman results seem to confirm this observation.

Furthermore, results from the study showed that Nigerian manufacturing firms tend not to care about innovations from local universities and research centers (Table 4.15a). This reflects the fact that in recent times, Nigerian universities and research centers have not been strong in the evolution of findings that are commercially viable. Moreover, in cases when these institutions produce studies that are of potential commercial value, such findings hardly get to the manufacturing industry for utilization. On the other hand, Nigerian manufacturing has also not been active in research and development given the high cost of this venture. Most of the time, Nigerian

170

manufacturing firms rely on Research and Development (R&D) efforts of their parent companies which they emulate/translate into local use. In addition, it was observed that information about intermediaries in the raw material supply chain are of little or no significance to Nigerian manufacturing. This piece of information has a mean rank of 8.10, which implies that manufacturing firms in Nigeria may not be taking close look at their supply chains with a view of eliminating unnecessary intermediaries. This observation may also imply that most of the firms have direct contacts with source(s) of their raw materials.

Given the high rivalry within the manufacturing industries as illustrated in Table 4.13a, Nigerian manufacturing firms consider information about competitor sales and product performance, as well as information on demographic, social and psychological studies of customers critical to the achievement of their goals. These two variables had mean ranks of 12.22 and 11.65 respectively. This trend also agrees with the premium placed on information about the sensitivity of customers to changes in prices, which had a mean rank of 11.53. Information about global R&D trends, time to market and deliver products, alternative foreign sources of imported raw materials are also of importance to Nigerian manufacturing firms with mean ranks of 10.96, 11.10 and 10.45 respectively.

Nigerian manufacturers also realize that information about time to market, as well as West African markets (which hitherto firms may not consider critical) are important for the achievement of their goals. This is due to the impact of information revolution on changing industry structure and, in so doing, altering

171

the rules of competition as noted by Porter (1980). For instance, information about how to design, formulate and package products in totally distinct ways from competition has a high mean rank of 11.00 indicating that Nigerian manufacturers are sensitive to new ways of out-competing rivals within and outside their industry.

Information Strategy by Sector It was important to determine if there are sectoral differences in the way firms in different manufacturing sub-sectors perceive the importance of the different pieces of information to the achievement of their firms organizational goals. The Kruskal Wallis test results gave the mean ranks of each of the information strategies when grouped by sector. Some Nigerian manufacturers consider information about avenues to recycle waste for re-use possibilities very critical to their success. This implies that these firms are ready and perhaps may have started to spawn whole new businesses from existing operations. Firms within the Domestic and Industrial Plastic group go a long way to attract used plastics for re-use possibilities, and the same goes for the Basic Metal, Iron and Steel sector. These two sectors had the highest mean ranks of 107.59 and 78.69 respectively. See Table 4.15b for a summary of the Kruskal Wallis test results showing types of information emphasized more or less by the different sectors. The full result is shown in Appendix 8a.

Table 4.15b: Kruskal Wallis Test Result of Information Component of Business Strategy by Sector
I N F O R M A T I O N C O M P O N E N T O F C h i df BUSINESS STRATEGY square Education, knowledge and skills of your staff 2.075 Competitors remuneration package 6.520 5 5 Asymp SECTORS sig HIGH LOW 0.839 NS NS 0.259 NS NS

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Performance and productivity of individual 0.953 staff Competitors sales and product performance 8.107 Sensitivity of customers demand for your 7.184 products to changes in your prices Alternative foreign sources of your imported 22.496 raw materials Alternative local sources of your imported 7.690 raw materials Avenues to recycle waste products for reuse 15.036 possibilities Global R&D trends and opportunities 6.886 Innovations from local Universities and 0.839 research centers Criteria and processes for ISO certification 11.492 West African markets 14.466 Domestic markets which your firm is not 8.000 currently dominant in Conditions in the markets for products 4.326 related to your existing products Conditions in the markets for products not 21.389 closely related to your existing products Opportunities for introduction of totally new 3.577 products not currently produced by any other firm in your industry How to design, formulate and package your 7.654 products in totally distinct way from competition D e t a i l e d d e m o g r a p h i c , s o c i a l a n d 11.561 psychological studies of your customers (e.g. brand loyalty, preferences, advert impact, cultural influences etc.) Intermediaries (middlemen) in the raw 10.417 material supply chain Time to market and deliver products 18.254

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

0.966 0.150 0.201 0.000 0.174 0.010 0.229 0.975 0.042 0.013 0.156 0.504 0.001 0.612 0.176 0.041

NS NS NS

NS NS NS

C h e m i c a l s Plastics & Pharm. NS NS Plastics NS NS Paper NS NS

Metal, Iron Plastics & Steel Textile Plastics NS NS NS NS &

Metal, Iron P u l p & Steel Paper NS NS NS NS

C h e m i c a l s Domestic & & Pharm. I n d u s t r i a l Plastics NS NS

5 5

0.064 0.003

C h e m i c a l s Domestic & & Pharm. I n d u s t r i a l Plastics

Source: Fieldwork

(NS = Not significant)

From the test statistics in Table 4.15b, it can be concluded within a confidence interval of 0.05 that there are significant differences in the way firms in some sectors consider the criticality of some of these pieces of information as a component of the business strategy. Table 4.15b shows that there are significant differences in the way Nigerian manufacturing firms consider the following pieces of information: alternative foreign sources of imported raw materials emphasized more by Chemicals and Pharmaceutical firms and less by Plastic firms; information about conditions in the market for products not

173

closely related to firms existing products emphasized more by Metal, Iron and Steel firms and less by firms in the Pulp and Paper sub-sectors; The emphasis on information about time to market and deliver products is similar to that of alternative foreign sources of imported raw materials. Information about opportunities in the West African markets are emphasized more by firms in the Chemicals and Pharmaceuticals sub-sector and less by Domestic and Industrial Plastic firms.

Information Strategy by Firm Size Manufacturing firms also vary in their preferred information strategy when grouped by firm size. Variability is noted in respect of five types of information: These are information about the education, knowledge and skill of staff; competitors remuneration package; information on criteria for ISO certification; information about West African markets and information about how to cut down material input cost. For competitors remuneration package, firms with a staff strength of between 100 200 emphasized this type of information more than small firms (staff strength of less than 100). Medium sized firms (200 300 staff) are highly interested in information on Industrial Standard Organization (ISO) certification as well as information on market/ sales opportunities in West African markets. Small firms are however not much interested in information about ISO certification and West African markets. This is probably due to their size and their capability to meet the challenges of export markets and ISO certification requirements. Large firms (500 to 1000 staff) rated highly information about intermediaries in the raw

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material supply chain, whereas small firms rated the information low in importance to their business operations (Table 4.15c).

Table 4.15c: Kruskal Wallis Test Result of Information Component of Business Strategy by Firm Size
INFORMATION COMPONENT OF BUSINESS STRATEGY Education, knowledge and skills of your staff Competitors remuneration package. Performance and productivity of individual staff Competitors sales and product performance Sensitivity of customers demand for your products to changes in your prices Alternative foreign sources of your imported raw materials Alternative local sources of your imported raw materials Avenues to recycle waste products for reuse possibilities Global R&D trends and opportunities Innovations from local Universities and research centers Criteria and processes for ISO certification West African markets Domestic markets which your firm is not currently dominant in Conditions in the markets for products related to your existing products Conditions in the markets for products not closely related to your existing products Opportunities for introduction of totally new products not currently produced by any other firm in your industry How to design, formulate and package your products in totally distinct way from competition Detailed demographic, social and psychological studies of your customers (e.g. brand loyalty, preferences, advert impact, cultural influences etc.) Intermediaries (middlemen) in the raw material supply chain Time to market and deliver products Chi square 11.411 14.707 7.943 7.578 4.093 2.572 6.822 10.801 9.562 7.129 13.196 13.549 9.692 6.397 10.537 9.516 3.000 8.311 df 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Asymp sig 0.044 0.012 0.159 0.181 0.536 0.766 0.234 0.055 0.089 0.211 0.022 0.019 0.084 0.269 0.061 0.900 0.700 0.140 FIRM SIZE HIGH 100-200 100-200 NS NS NS NS NS NS NS NS 200-300 200-300 NS NS NS NS NS NS LOW 300-500 Less than 100 NS NS NS NS NS NS NS NS Less than 100 Less than 100 NS NS NS NS NS NS

15.137 6.016

5 5

0.010 0.305

500-1000 Less than 100 NS NS

Source: Fieldwork

(NS = Not significant)

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Table 4.15d: Kruskal Wallis Test Result of Information Component of Business Strategy by PAT
INFORMATION COMPONENT OF BUSINESS STRATEGY Education, knowledge and skills of your staff Competitors remuneration package
Performance and productivity of individual staff

Chi square

df

Asymp sig HIGH NS NS NS NS NS

PAT LOW NS NS NS NS NS

9.393 3.753 2.997 9.846 7.198 11.121 17.091 6.046 1.065 1.801 6.014 7.013 9.063 16.422 11.505

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

0.094 0.585 0.700 0.080 0.206 0.049 0.004 0.302 0.957 0.876 0.305 0.220 0.107 0.006 0.042

Competitors sales and product performance Sensitivity of customers demand for your products to changes in your prices Alternative foreign sources of your imported raw materials Alternative local sources of your imported raw materials Avenues to recycle waste products for reuse possibilities Global R&D trends and opportunities Innovations from local universities and research centers Criteria and processes for ISO certification West African markets Domestic markets which your firm is not currently dominant in Conditions in the markets for products related to your existing products Conditions in the markets for products not closely related to your existing products

N501m -1billion Less than N201-500 100m m NS NS NS NS NS Over N1b Over N1b NS NS NS NS NS N501m N1b N501m N1b

N1-10b

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Opportunities for introduction of totally new products not currently produced by any other firm in your industry How to design, formulate and package your products in totally distinct way from competition Detailed demographic, social and psychological studies of your customers (e.g. brand loyalty, preferences, advert impact, cultural influences etc.) Intermediaries (middlemen) in the raw material supply chain Time to market and deliver products

11.709 7.750 9.080

5 5 5

0.039 0.171 0.106

Over N1b NS NS

N501m N1b NS NS

8.019 9.191

5 5

0.155 0.102

NS NS

NS NS

Source: Fieldwork

(NS = Not significant)

Information Strategy by PAT Firms of different profitability differed in their preferences for the following five types of information: alternative foreign and local sources of information, conditions in the markets for products related and those not related to the firms existing products, and opportunities for introduction of totally new products not currently produced by any other firm in the firms industry. High profit firms (N1-10b) rated such types of information very high, while firms of between N501 million - N1 billion in profit rated the information low (Table 4.15d).

4.2.12

CEOs Use of IT

Empirical studies have shown that the CEOs computer awareness and personal use of the computer has effect on the implementation success of some IT strategies in some firms (Craig and King, 1992). To this extent, the study probed into the CEOs use of major IT infrastructure found in manufacturing firms. The results, presented in Table 4.16 indicate that there are significant differences in the use of IT by CEOs of the firms under study. Majority of the respondents believed that their CEO is familiar with the use of e-mail (mean rank of 4.72) followed by Internet (mean rank of 4.60). A greater

177

majority of the CEOs also utilizes word processing software (mean rank of 4.13), while CEOs were not very familiar with some information systems like database applications (mean rank of 2.62) and account/payroll applications (mean rank 3.65). This might probably be because account, payroll and database applications are not frequently used by these top executives except executives from the Account/HR and Information Technology departments.
Table 4.16: CEOs Use of IT Infrastructure in Nigerian Manufacturing Firms.
EXTENT OF USE INFORMATION SYSTEM Word Processor (MS-Word) Spreadsheet (MS-Excel) NF 1 0.7 2.3 EK 2 3.4 8.5 25.5 16.2 9.2 2.0 3.0 2.2 3 43.8 48.8 39.2 51.5 43.8 43.5 38.8 4 52.1 40.3 19.6 26.9 41.5 54.4 56.0 FRIEDMAN RESULT 4.51 4.03 2.62 3.65 3.88 4.60 4.72

Database Applications (Oracle, MS- 15.7 SQL etc.) Account/GL/Payroll Applications 5.4 Business Planning Tools Internet E-mail only 5.4

Source: Fieldwork
Knowledge)

N=78; df=6; = 107.290 ; p=.000 ( Key: DK= Dont Know; NF= Not Familiar; EK= Extensive

.13

CEOs Involvement in IT Selection and Implementation

From Table 4.17a, it is clear that most of the time, CEOs of Nigerian manufacturing firms are involved in IT selection and implementation. The reason for this may be as a result of the need to commit funds at inception and during implementation of IT projects.
Table 4.17a: Frequency of CEO's involvement in IT Selection and Implementation LEVEL OF INVOLVEMENT FREQUENCY Always As needed 60 50 PERCENT 38.0 31.6

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Rarely Sometimes Never Total Source: Fieldwork

24 21 3 158

15.2 13.3 1.9 100.0

However, when the study requested for the extent of involvement of the CEO in IT selection and implementation, we observed a different scenario as shown in Table 4.17b.

Table 4.17b: Extent of CEO's involvement in IT selection and Implementation EXTENT OF INVOLVEMENT OF CEO CEO involvement is only when needed CEO is part of project team Only when cost is to be discussed Only in Preliminary selection Total Source: Fieldwork 49 39 25 6 145 FREQUENCY 33.8 26.9 17.9 17.2 4.1 100.0 PERCENT

CEO is involved from selection to sign off 26

From Table 4.17b, it came out clear that CEOs, being very busy people, are involved only when there is need (33.8 per cent). This need may be when a decision that has policy implication is about to be taken or when there are major variations to the project resources. It was also observed that almost 27 per cent of respondents claimed that their CEOs were part of the project team. This however may be explained better if the degree of involvement of the CEO (when they are part of project teams) is known. The degree of involvement of CEOs might include attendance at project meetings, carrying out project tasks, etc.

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4.2.14

Need Analysis before IS/IT Investments Decisions are Made

Respondents were asked whether there is a clear-cut policy statement compelling manufacturing organizations to carry out need analyses before IS/ IT investments are made. The answers to this question are presented in Table 4.18a.
Table 4.18a: Existence of clear-cut policy for need analysis of IS/IT investments. FREQUENCY Yes 83 No 65 Total 148 Source: Fieldwork PERCENT 56.1 43.9 100.0

Only about half of the 301 respondents (49.2 per cent) answered the question, out of which as many as 43.9 per cent claimed that their organizations make blind IS/IT investments.

Need Analysis before IT investments are made by Sector, Firm Size and PAT

There were no significant differences in the frequency of implementation of need analysis before IS/IT investments decisions are made in firms with different PAT, or in different sectors. However, differently sized firms varied in their use of need analysis with the large-sized firms (500 1000 staff) using it more than the very large firms (over 1000 staff) (Table 4.18b).

Table 4.18b: Kruskal Wallis Test Result of Need analysis of IS/IT investments by Grouping Variables
DEPENDENT Grouping VARIABLE Variables Need analysis before Firm Size IS/IT investments are made Chi square df 25.480 5 Asymp. sig. 0.000 High Sector Low

300 -500 Over 1000 staff staff

180

Need IS/IT made Need IS/IT made

analysis before PAT investments are analysis before Sector investments are

8.762 9.848

5 5

0.119 0.080

NS NS

NS NS

Source: Fieldwork

4.3

Technical Responses

4.3.1 Existence of IT Department Respondents were asked if their organization has an IT department. Seventy per cent of the respondents claimed that their firms had IT departments (Table 4.19a).
Table 4.19a: Existence of IT Dept/Unit

Yes No Total

FREQUENCY 113 48 161

PERCENT 70.2 29.8 100.0

Source: Fieldwork

Differences by Sector, Firm Size and PAT Kruskal Wallis tests were carried out to see if there are differences in the existence of IT department among firms grouped by sector, size of firm and PAT. The results shown in Table 4.19b, shows that Nigerian manufacturing firms, when grouped by sector, PAT and firm size vary significantly on the existence of IT department.
Table 4.19b: Kruskal Wallis Test Result of Existence of IT Departments by Sector, Firm Size and PAT
DEPENDENT VARIABLE Existence of IT department Existence of IT department Grouping Chi df Asymp. High Variables square sig. Sector 26.974 5 0.000 Plastics Firm Size 23.861 5 0.000 Low C/P

L e s s t h a n 500 1000 100 staff staff

181

Existence of IT department

PAT

21.575

0.001

N101-200m A b o v e N 10b

C/P = Chemical & Pharmaceuticals Sector

Source: Fieldwork

4.3.2 Organizational Level of IT Manager Most IT Managers are at mid-management level, as 41.8 per cent of the responding firms had their IT managers at the level of manager or assistant manager, whereas 38.5 per cent of the IT managers were senior managers. Equal proportions of respondents claimed to have IT managers at the level of Executive Director and Supervisor level (4.1 per cent), while 9.8 per cent were at General Manager or Assistant General Manager levels (See Table 4.20a).

Table 4.20a: Organizational Level of IT Managers ORGANIZATION LEVEL Executive Director General Manager/AGM Senior Manager Manager/Assistance manager Supervisor Grade Others Total Source: Fieldwork 5 12 47 51 5 2 122 FREQUENCY 4.1 9.8 38.5 41.8 4.1 1.6 100.0 PERCENT

Organizational Level of IT Manager by Sector, Firm Size and PAT

From Table 4.20b, it can be seen that variation exists in the level/cadre of IT managers among firms grouped by size or by sector. There were however, no significant differences in the level/cadre of IT managers among firms grouped by PAT (Table 4.20b).

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Table 4.20b: Organization level of IT Manager by sector, Firm size and PAT
DEPENEDNT VARIABLE Organizational cadre of IT Manager Organizational cadre of IT Manager Organizational cadre of IT Manager G r o u p i n g C h i df Variable square Sector 12.067 5 Firm Size PAT 17.876 8.535 5 5 A s y m p . High Low sig. 0.034 P u l p &F o o d & Paper Beverages 0.003 Less than Over 1000 100 staff staff 0.129 NS NS

Source: Fieldwork

(NS = Not significant)

4.3.3 Head of IT Reporting Relationship Almost forty per cent of the respondents (38.0 per cent) claimed to have their IT head reporting to the CEO, while about half of that number (19.8 per cent) claimed that their firms IT head report to either a GM/AGM or Executive Director (Table 4.21a).
Table 4.21a: Reporting Relationship of IT Head REPORTING LEVEL Managing Director Executive Director General Manager/AGM Principal Manager/Senior Manager Manager Others Total Source: Fieldwork FREQUENCY 46 24 24 20 5 2 121 PERCENT 38.0 19.8 19.8 16.5 4.1 1.7 100.0

183

Kruskal Wallis Test of IT Reporting Relationship by Sector, Firm Size and PAT

Kruskal Wallis test result shows that there are no differences in whom the IT manager reports to among firms in different sectors or of different sizes, but there were significant differences among firms of different Profit After Tax (See Table 4.21b).
Table 4.21b: Kruskal Wallis test of Reporting Relationship of IT Manager by Sector, Firm size and PAT
DEPENDENT VARIABLE G r o u p i n gC h Variable square R e p o r t i n g r e l a t i o n s h i p o f I T Sector 2.376 Manager R e p o r t i n g r e l a t i o n s h i p o f I T Firm Size 2.645 Manager R e p o r t i n g r e l a t i o n s h i p o f I T PAT 13.500 Manager i df 5 5 5 A s y m p . High sig. 0.795 NS 0.745 0.019 NS N101 200m Low NS NS N201 500m

Source: Fieldwork

(NS = Not significant)

4.3.4 Frequency of Discussion of IT matters at Senior Management Level Almost half of the respondents (48.4 per cent) indicated that the frequency of discussion of IT matters depended on need, while 16.4 per cent of respondents said that IT matters are discussed quarterly at senior management level. 12.5 per cent, 14.9 per cent and 5.5 per cent of respondents claimed that IT matters are discussed weekly, rarely and monthly respectively (Table 4.22). The data shows that IT does not feature regularly on the agenda of respondents firm meetings like sales, finance or HR.

Table 4.22: Frequency of discussion of IT matters at senior management level FREQUENCY OF DISCUSSION FREQUENCY PERCENT

184

Depending on need Quarterly Rarely Weekly Monthly Bi-annually Total Source: Fieldwork

62 21 19 16 7 3 128

48.4 16.4 14.9 12.5 5.5 2.3 100.0

4.3.5 IT Manager Being a Member of Executive Management When respondents were asked whether IT managers of responding firms are members of executive management, 35.5 per cent responded in the affirmative, 64.5 per cent responded in the negative, and 16.7 per cent did not know if their IT managers were members of executive management (Table 4.23).
Table 4.23 Executive Management Membership of IT Managers PERCENT 35.5 64.5 100.0

FREQUENCY Yes 39 No 71 Total 110 Source: Fieldwork

.6

Professional Lineage of the IS/IT Manager

This study sought to determine the mix of business and IT skills and experiences possessed by the IS/IT Manager. The findings are presented in Table 4.24 along with the mean ranks from Friedmans Non-parametric comparison of the responses to the alternative mix of business and IT skills by IS/IT managers.

185

Table 4.24: Professional Lineage of IT Manager

RESPONSES PROFESSIONAL LINEAGE OF IS/IT MANAGER SA 1 IS/IT Manager is a Business Executive 25.9 with IT expertise IS/IT Manager is an IT professional with 19.5 business experience IS/IT Manager has IT skills but no 2.0 business management skills IS/IT Manager has Business management 1.0 skills and no IT skills IS/IT Manager is inadequate in IT skills 5.0 and Business management skills N=96; df=4; X= 189.965; p=.000 2 49.1 51.7 8.0 11.1 5.0 3 9.5 13.6 18.0 13.1 11.0 4 11.2 11.0 52.0 45.5 35.0 FRIEDMAN RESULT SD 5 4.3 3.95 4.2 3.60

20.0 3.47 29.3 2.09 44.0 1.89

Source: Fieldwork

One major observation from the analysis of responses to this question is that a significant number of the respondents did not respond to the question. In some cases, the proportion of no response was as high as 29.5 per cent. This was observed for questions that probed the adequacy of either business management or IT skill of the IS/IT manager. In addition, a further one-eighth of the respondents were also Undecided on questions that probed the adequacy of IT or business management skills of their IS/IT manager. What can be deduced from this is that most respondents were either afraid or unable to evaluate the competence of their IS/IT managers. However, data from Table 4.24 shows that majority of respondents believed that their IS/IT manager is a business executive with IT expertise (mean rank of 3.95), while only a small proportion of respondents believed that their IT managers lack business and IT management skills (mean rank of 1.89).

Differences by Sector

186

Tables 4.24b and 4.24d also shows that there were generally no significant differences among firms grouped by sector and PAT in the proportions of respondents who believed their IT managers had the different mix of skills.
Table 4.24b: Kruskal Wallis Test Result of Professional Lineage of IS/IT Manager by Sector
Professional Lineage of IS/IT Manager IS/IT manager - business executive with IT expertise Chi-Square Df 6.488 5 5 5 5 5 Asymp. Sig. 0.262 0.880 0.180 0.118 0.610

IS/IT manager - seasoned IT professional with business 1.769 experience IS/IT manager - IT skills with no business management 7.590 skills IS/IT manager - business management skills and no IT 8.778 skills IS/IT manager - inadequate of IS/IT skills and 3.588 inadequate business management skills

Source: Fieldwork

Differences by Firm Size Firms vary by respondents who believed that their IS/IT manager is a business manager with IT skills. However, very large firms (over 1000 staff) reported that their IS/IT managers is a business manager with IT skills, while very small firms (less than 100 staff) reported this mix of skills less often (Table 4.24c).

Table 4.24c: Kruskal Wallis Test Result of Professional Lineage of IS/IT Manager and Size of Firm
Professional Lineage of IS/IT Manager Chi-Square IS/IT manager - business executive 11.246 with IT expertise IS/IT manager - seasoned IT 6.297 professional with business experience Df 5 5 Asymp. Sig. 0.047 0.278 High Low Over 1000 Less than staff 100 staff NS NS

187

IS/IT manager - IT skills with no 3.021 business mgt skills IS/IT manager - business mgt skills 2.322 and no IT skills IS/IT manager - inadequate of IS/IT 0.397 skills and inadequate business mgt skills

5 5 5

0.697 0.803 0.995

NS NS NS

NS NS NS

Source: Fieldwork

(NS = Not significant)

Differences by PAT There are however no variation in firms when grouped by PAT in respondents beliefs in the mix of skills of their IT/IS managers. Table 4.24d gives the chisquare result and the asymptomatic sig. figures for the Kruskal Wallis test result of professional lineage of IS/IT manager grouped by PAT.

Table 4.24d: Kruskal Wallis Test Result of Professional Lineage of IS/IT Manager and Profit After Tax (PAT) Chi-Square Professional Lineage of IS/IT Manager Df Asymp. Sig. IS/IT manager is a business executive with IT 4.304 5 0.507 expertise IS/IT manager is seasoned IT professional with 7.900 5 0.162 business experience IS/IT manager has IT skills and no business 4.636 5 0.462 management skills IS/IT manager has business management 1.983 5 0.852 skills and no IT skills IS/IT manager has inadequate of IS/IT and 2.994 5 0.701 business management skills Source: Fieldwork

4.3.7

Number of IT Professionals

Table 4.25: Number of IT professionals in the organization

NUMBER OF IT PROFESSIONALS 1-2 3-5 6-10 11-20 21-50 Above 50 FREQUENCY 31 45 34 20 4 1 PERCENT 23.0 33.3 25.2 14.8 3.0 0.7

188

Total

135

100.0

Source: Fieldwork

The results (from Table 4.25) shows that the IT departments of the firms of a third of the respondents had between 3-5 professionals, while another quarter of the respondents firms reported having between 6-10 professionals. Almost a quarter (23 per cent) of the respondents were in firms that had just 1-2 professionals.

4.3.8 Stage of Computing Evolution Nolans (1979) developed a 4-stage computing evolution model along which an organization can move from lowest to highest in its stage of computing evolution. Nolans model was subsequently modified by other researchers like King and Kraemer (1984) to reflect the need to integrate computing state to the organizations strategy. Respondents were therefore asked to determine on a 5-point Likert scale, the level of computerization of their firms. Each level was described with a set of statements describing each stage of evolution of computing listed in Table 4.25a. The distribution in Table 4.25a shows that the majority of Nigerian manufacturing firms are still at the bottom of Nolans scale. 31.5 per cent and 27.5 per cent of respondents indicated that their firms were at level 1 and level 5 respectively, while 18.8 were at level 4 and only 5.4 per cent were at level 3 where stringent control procedures are applied and meticulous IS planning is undertaken.
Table 4.25a: Stages of Computing Evolution of Nigerian Manufacturing Firms

189

LEVEL 1 2 3 4 5

DESCRIPTION Few users, much autonomy, little planning Many users, rapid expenditure, informal planning Stringent control procedures, meticulous IS planning Integration of IT applications, better planning from integration Refocusing and repositioning of IT applications for vision /mission support Total

FREQUENCY PERCENT 47 25 8 28 41 149 31.5 16.8 5.4 18.8 27.5 100.0

Source: Fieldwork

Refocusing and repositioning

Integration of IT applications

Stringent Control procedures

Many users, rapid expenditure

Few users, much autonomy

0 15.00.0 3

Figure 4.7: Stages of Computing Evolution in Nigerian manufacturing Firms

Differences by Sector, Firm Size and PAT Given the observation that Nigerian manufacturing firms are at different levels of computing evolution on Nolan's (1979) scale, a Kruskal Wallis test was performed on the variable against the grouping variables. It was observed that there are no significant differences in the stages of computing evolution on two of the grouping variables: size of firm and PAT. However, significant differences were observed by the sector to which the firm belongs with food, beverages and tobacco sector ranking high and domestic and industrial plastics ranking low (chi-square = 19.136, p = 0.05) (Table 4.25). 190

Table 4.25b: Kruskal Wallis Test of Stages of Computing Evolution in Nigeria Manufacturing by Sector
DEPENDENT VARIABLE Stages of computing evolution Stages of computing evolution Stages of computing evolution Grouping C h i df Variable square Sector 19.136 5 Firm Size 8.887 PAT 7.123 5 5 A s y m p . High sig. 0.002 Food 0.114 0.212 NS NS Low Plastic NS NS

Source: Fieldwork

(NS = Not significant)

4.3.9 Total Annual IT Budget of Nigerian Manufacturing Firms When respondents were asked for their IT budgets, it was observed that half (50.8 per cent) of the respondents had IT budgets less than N10 million. A good number (30 per cent) also spent between N10 50 million on IT annually (Table 4.26a).
Table 4.26a: Total Annual IT Budget IT BUDGET Less than N10m N (10-50) m N (51-200) m N 501m-1) b Above N 1b Total 61 36 14 1 2 120 FREQUENCY 50.8 30.0 11.7 5.0 0.8 1.7 100.0 VALID PERCENT

N (201-500) m 6

Source: Fieldwork

Differences by Sector The result of Kruskal Wallis test shows that there are no significant differences in the annual IT budgets across sectors of Nigerian manufacturing (Chi

191

Square = 15.812, p = 0.05). However, not enough valid cases could be generated to run the Kruskal Wallis test on the other two grouping variables, PAT and firm size. This was because when business and technical questionnaires were merged, variables like PAT and firm size did not feature in the technical questionnaire. However, since sector to which a firm belongs could be identified from the firm name, this variable was used to link the business and technical questionnaires.

Table 4.26b: Kruskal Wallis Test Result of Total Annual IT Budget by Sector T O TA L A N N U A L I T SECTOR BUDGET High Low Chi-Square Df Asymp. Sig. 15.812 5 .007 C h e m i c a l &P u l p , P a p e r a n d Pharmaceuticals Paper Products.

Source: Fieldwork

4.3.10

Proportion of IT Budget Spent in Previous Year

The study also sought to see what proportion of the IT budget was spent in the immediately preceding financial year. A rather interesting result was obtained as shown in Table 4.27a. Even though IT budgets were made, only a fraction of the budgeted amount was actually spent when it was time to commit the resources. 42.5 per cent of the respondents claimed that below 40 per cent of the IT budget was actually spent. However, 4.2% of the respondents also indicated that IT spending was over 100 per cent of the budgeted amounts.

Table 4.27a: Proportion of IT budget spent in previous year

192

QUANTUM OF IT BUDGET SPENT FREQUENCY 0-20% 21-40% 41-60% 61-80% 81-100% Above 100 Total Source: Fieldwork 19 32 18 24 22 5 120

PERCENT 15.8 26.7 15.0 20.0 18.3 4.2 100.0

Differences in Proportion of IT Budget Spent in Previous Year by Sector

From Table 4.27b, it can be seen that there were significant differences in the proportion of IT budget spent in the previous year among the sectors. Chemicals and pharmaceutical sector ranked high on this variable while domestic and industrial plastics ranked low. There are however, not enough valid cases to run a Kruskal Wallis test against the other two grouping variables, PAT and firm size for the reason specified above.

Table 4.27b: Kruskal Wallis Test Result of Quantum of IT Budget Spent in the Previous Year by Sector C h i - Df Asymp. SECTOR Square Sig. High Low Proportion of IT Budget 16.847 Spent in Previous Year Source: Fieldwork 5 0.005 C h e m i c a l & Domestic & Pharmaceuticals I n d u s t r i a l Plastics.

.11

Existence of IT Policy Document

A large percentage (71.0) of respondents claimed to have an IT Policy document, while 29.0 per cent claimed otherwise (Table 4.28a).

193

Table 4.28a: Existence of IT Policy Document FREQUENCY Yes 93 No 38 Total 131 Source: Fieldwork PERCENT 71.0 29.0 100.0

Differences by Sector

Following the frequency result that 71.0 per cent of respondents claimed to have an IT policy document, the study sought to see if there were differences in this variable across the grouping variables: sector, firm size and PAT. The results from Kruskal Wallis test (Table 4.28b) shows that there were indeed significant differences in the number of respondents who claimed to have IT policy documents across sectors. (Chi Square = 36.228, p = 0.01).

Table 4.28b: Kruskal Wallis Test Result of Existence of IT policy Document by Sector C h i - df Asymp. SECTOR Square Sig. High Low Existence of IT Policy 36.228 Document Source: Fieldwork 5 0.000 D o m e s t i c &C h e m i c a l & I n d u s t r i a l Pharmaceuticals Plastics.

4.3.12

Adherence to IT Policy

Questions were asked to determine the extent users adhere to the IT policy. 69.2 per cent of the respondents said that IT users in their organizations were adhering to the IT policy whereas, 30.8 per cent said No (Table 4.28c).

Table 4.28c: Adherence to IT Policy

194

FREQUENCY Yes 74 No 33 Total 107 Source: Fieldwork

PERCENT 69.2 30.8 100.0

.13

Contents of IT Policy Document

The content of IT policy document of responding firms was subjected to a Friedman test and the mean ranks are presented in Table 4.28d.

Table 4.28d: Content of IT Policy Documents in Nigerian Manufacturing

CONTENTS OF THE IT POLICY DOCUMENT RESPONSES
YES NO NOT SURE

FRIEDMAN RESULT 3.69 3.46 3.23 3.23 3.23 3.15

Usage of IT resources/Penalties for 20.3 abuse Virus/anti-virus handling procedure 26.6 Specification for hardware purchases Procedure for software purchases Backup and Recovery procedures 23.6 23.6 26.6

5.6 1.3 3.3 1.0 1.3 0.3

4.0 2.0 4.0 4.7 3.0 -

Others e.g. Business Continuity 4.0 Planning N=13; df=5; X= 13.276; p=0.021

Source: Fieldwork

From the mean ranks shown in Table 4.28d, it is clear that majority of the IT policy documents focused on stipulating conditions for usage of IT hardware, software and telecommunication resources. This is explainable given the potentials for abuse of IT infrastructure by IT users. The next popular content of IT policy document is virus/anti-virus handling procedure with mean rank of

195

3.46. Specification for hardware and software purchases as well as backup and recovery procedures both have mean ranks of 3.23, while contents like business continuity planning, Helpdesk procedure, conditions for entry into IT (server) rooms etc. featured less prominently in IT policy documents of the firms.

.14

IT Training

It was considered important to determine if the firms had policies in place to train and update the skills of IT staff. It is generally believed that the knowledge of an individual is a product of the information available to such individual, and that training is a key element of updating the knowledge of staff. Consequently, training becomes a key variable to the achievement of IS goals. Table 4.29a summarizes data on responses to questions on the existence of such policy.

Table 4.29a: Existence of Policy to Update Skills of IT Staff FREQUENCY Yes 96 No 44 Total 140 Source: Fieldwork PERCENT 68.6 31.4 100.0

Close to 70 per cent of respondents claimed that they had a policy to update skills and knowledge of their IT staff. The results in Table 4.29b however show that almost a quarter of the respondents said they had not attended any IT training in the last one year. 20.0 per cent had attended at least one IT

196

training in the previous year, and 28.1 per cent had attended at least two IT trainings in the previous year. 69.5 per cent had attended one, two or three training courses in the past year.
Table 4.29b: Number of Training Programs Attended by Each it Staff in The Previous Year FREQUENCY 1 2 3 4 5 None 27 38 24 10 1 32 PERCENT 20.0 28.1 17.8 7.4 .7 23.7 2.2 100.0

More than 3 5 Total 135 Source: Fieldwork Differences by Sector

Table 4.29c indicates that there were significant differences among the sectors in whether a policy to train and update the skills of IT staff existed. (Chi-square = 18.155, p = 0.01). Domestic and Industrial Plastics had the highest mean rank while Food, Beverages and Tobacco had the lowest (Table 4.29c).
Table 4.29c: Kruskal Wallis Test Result of Existence of Policy to Train IT Staff by Sector C h i - df Asymp. SECTOR Square Sig. High Low Existence of Policy to 18.155 Update Skills of IT Staff Source: Fieldwork 5 0.003 D o m e s t i c & Food, Beverages I n d u s t r i a l & Tobacco Plastics

4.3.15

IT Applications

197

Table 4.30a shows that there were significant differences in the extent of use of IT applications by the sampled manufacturing firms. (Chi-square = 144.631, p 0.001). The result in Table 4.30a indicated Office Support Systems (Word processing, spreadsheet, presentation applications) as the most utilized applications, followed by Finance/Accounting-based applications. The least utilized applications are External networks/Wide Area Networks and Computer Aided Design/Computer Aided Manufacturing (CAD/CAM).

Table 4.30a: IT Applications in Nigerian Manufacturing Firms

RESPONSES ARRAY OF IT APPLICATIONS Office Support Systems Finance/Accounting based applications Internet Database Systems (Oracle, MS-SQL, Informix etc.) Computer-assisted production management tools LAN CAD/CAM External Networks/WAN N=104; df=7; X2= 144.631; p=0.000 NO 1 2.2 2.2 9.5 14.6 20.0 21.2 40.0 43.9 YES 2 97.8 97.8 90.5 85.4 80.0 78.8 60.0 56.1 FRIEDMAN RESULT 5.25 5.18 5.02 4.64 4.45 4.41 3.60 3.45

Source: Fieldwork

Differences by Sector

The study investigated further to determine differences in the use of IT applications, if any, among firms grouped by sector. The results shown in Table 4.30b indicate that there existed sectoral differences in the use of Computer-assisted production management tools (Chi Square = 18.304, p 198

0.005), LAN (Chi Square = 12.540, p 0.05) and WAN (Chi Square = 15.576, p 0.05). The explanation was provided during the interview sessions where some big firms in the Food, Beverages and Tobacco sector indicated that they have computerized their production facilities and consequently reduced the workforce on the production floors. The use of external networks including Wide Area Network (WAN) also differed among some sectors. Food, Beverages and Tobacco sector, Basic Metal, Iron and Steel and Chemical and Pharmaceuticals sectors, which also had very large firms tended to operate WANs more than firms in other sectors. This may perhaps be because of the size of these firms or the competitive advantages of having multiple manufacturing plants and/or extensive distribution and supply chains.

Table 4.30b: Kruskal Wallis Test Result of IT Applications by Sector

IT APPLICATIONS FOUND IN C H I - DF RESPONDENTS FIRMS SQUARE IT Applications in use Accounting-based applications IT Applications in use Database Systems IT Applications in use - Office Support systems IT Applications in use Computer-assisted production management tools IT Applications in use - CAD/ CAM IT Applications in use LAN 7.110 8.894 4.855 18.304 5 5 5 5 A S Y M P. SECTOR SIG. High 0.213 0.113 0.434 0.003 NS NS NS

Low NS NS NS

Food, Beverages Domestic & & Tobacco Industrial Plastics NS NS

2.690 12.540

5 5 5 5

0.748 0.028 0.008 0.648

IT Applications in use - External 15.576 Networks/WAN IT Applications in use - Internet 3.336 Connectivity

C h e m i c a l s & Domestic & Pharmaceuticals I n d u s t r i a l Plastics Basic Metal, Iron T e x t i l e & & Steel Wearing Apparels NS NS

Source: Fieldwork

(NS = Not significant)

4.3.16

IT/IS Strategy Implementation

199

Galliers (1991) IS strategy model adopted by this study identified change management as a key component of IS strategy. Furthermore, it was important to investigate the process(es) of the introduction of major IS infrastructure or services with a view of determining the IS planning and change management approaches used in the firms studied. The results of the analyses of the data are presented in Table 4.31a.
Table 4.31a: Process of Introducing/Changing IT infrastructure
PROCESS OF INTRODUCING/ CHANGING IS INFRASTRUCTURE RESPONSES U 3 15.4 18.7 20.9 9.6 8.3 A 4 16.2 13.4 23.9 34.8 31.8 SA 5 3.7 6.0 8.2 9.6 14.4 FRIEDMAN MEAN RANK 3.53 3.26 2.92 2.69 2.60

SD D 1 2 Followed a documented step-by-step 31.6 33.1 procedure. Each change carries its own 14.2 47.8

peculiarities. MD determines direction of 9.0 change.

38.1

We use judgment of a few key 8.1 37.8 individuals. 13.6 31.8 Everyone is involved. N=125; df=4; X2= 40.836 ; p=.000

Key:

SD = Strongly Disagree; SA = Strongly Agree; A = Agree; U = Undecided; D = Disagree Source: Fieldwork

In order of Friedman mean rank, the following are the processes that were adopted to introduce/change IS infrastructure in Nigerian manufacturing firms: Following a documented step-by-step procedure Each change process carries its own peculiarities The CEO determines the nature and direction of change Using judgment of a few individuals Everyone is involved in the change process

200

Differences by Sector

Table 4.31b shows that responding firms when grouped by sector differed on four of the five IS change characteristics. Documented step-by-step procedure as a means of introducing/changing IS infrastructure, being the most frequent IS change management approach, was highly used in the chemical/ pharmaceutical sector and least used in domestic and industrial plastics sector. MD determines the direction of change was the change management approach for IS infrastructure implementation preferred by firms in the pulp, paper and paper products sector, and this approach was least preferred by firms in the textile and wearing apparels sector (Table 4.31b).

Table 4.31b: Kruskal Wallis Test Result of Change Management in Nigerian Manufacturing by Sector
C H I - DF A S Y M P. SQUARE SIG. Process of introduction/change of IT infrastructure Follow a documented step-by- 28.582 step procedure Use judgment of a few key 9.755 individuals E a c h c h a n g e w i t h o w n 21.070 peculiarities Everyone is involved 18.356 Our MD determines direction of 14.804 change 5 5 5 5 5 0.000 0.082 0.001 0.003 0.011 SECTOR DIFFERENCES High Low

C h e m i c a l &D o m e s t i c & Pharmaceuticals I n d u s t r i a l Plastics NS NS Food, Beverages Pulp, Paper & & Tobacco Paper products C h e m i c a l &D o m e s t i c & Pharmaceuticals I n d u s t r i a l Plastics Pulp, Paper & T e x t i l e & Paper products W e a r i n g Apparels

Source: Fieldwork

NS = Not significant

4.3.17

Frequency of Review of IT Plans

Majority (39.8 per cent) of the respondents in this study indicated that they review their IT plans annually, 23.0 per cent quarterly and 12.4 per cent monthly (Table 4.32). The data in the table shows that IT plans are reviewed mostly annually, with mid-year and quarterly reviews when necessary. 201

Table 4.32:

Frequency of Review of IT plans FREQUENCY PERCENT 8.0 2.7 12.4 23.0 13.3 39.8 .9 100.0

Weekly Bi-monthly Monthly Quarterly Bi-annually Annually Never Total

9 3 14 26 15 45 1 113

Source: Fieldwork

4.3.18

IS/IT Projects Implementation

Number of IT Projects implemented in the last two years

Results from the study show that 38.5 per cent of respondents claimed they have implemented 1-3 major IT projects in the last two years, while about 7 per cent of the respondents had not implemented any IT projects in the last two years (Table 4.33).
Table 4.33: Number of IT projects implemented in the last 2 years FREQUENCY 47 29 20 17 9 122 8 161 179 301 Source: Fieldwork 38.5 23.8 16.4 13.9 7.4 100.0 PERCENT

IT PROJECTS 1-3 4-5 Above 10 5-10 None Total Don't Know Not applicable Total

202

Percentage of Successful IS Projects

Out of the IT projects implemented in the last two years, 17.8 per cent of the respondents claimed that less than 50 per cent of these projects were successful. About 43 per cent said that between 50 75% of implemented IS projects were successful, while almost 40 per cent claimed that 75 100 per cent of their major IT projects were successful (Table 4.34a).
Table 4.34a: Percentage of Successful IT/IS Projects PERCENTAGE OF SUCCESSFUL IT/IS PROJECTS 50-75% 75-100% Less than 50% Total Dont Know Not applicable Total Source: Fieldwork FREQUENCY 55 51 23 129 11 161 172 301 PERCENT 42.6 39.5 17.8 100.0

Differences by Sector In order to determine if there are significant differences in the rate of IT implementation success across sectors, a Kruskal Wallis test was carried out and the result is presented in Table 4.34b:
Table 4.34b: Kruskal Wallis Test Result of Percentage of Successful IT Projects by Sector
C H I - DF A S Y M P. SECTOR SQUARE SIG. High Percentage of successful IT/IS 29.171 projects 5 0.000 Low

F o o d ,D o m e s t i c & B e v e r a g e s &I n d u s t r i a l Tobacco Plastics

Source: Fieldwork

203

From table 4.34b, it can be deduced that there are significant differences in the percentages of successful IT projects across sectors of Nigerian manufacturing. Firms in the Food, Beverages and Tobacco sector had high mean ranks (more successes) while firms in the domestic and industrial plastic sector had low mean ranks (Table 4.34b).

IT Projects Implemented in the Last Two Years

The study asked for the type of IT projects implemented in the last two years. It is interesting to note that hardware purchases had the highest percentage frequency of 42.5 per cent. This implies that Nigerian manufacturing firms are heavily investing in IT hardware purchases. The results also showed that a good number of the firms are installing new information systems like Internet, intranet etc. This type of IT project is closely followed by regularization of major software licenses as IT projects (22.3 per cent of respondents). This may imply that the recent efforts of Microsoft and the Nigerian Copyrights Commission (NCC) may be yielding results since a number of manufacturing firms had started embracing a culture of using licensed software (Table 4.35).
Table 4.35: IT Projects Implemented in the Last Two Years
ARRAY OF IT PROJECTS IMPLEMENTED IN THE LAST 2 P E R C E N T YEARS RESPONSE Hardware purchases Introduction of internet, intranet, new IT policy etc. Regularization of software licenses Turn-key applications In-house applications Others (e.g. WAN/VSAT or Radio installations 42.5 23.9 22.3 21.9 18.9 5.0

Source: Fieldwork End User Involvement in IT/IS Project Implementation

204

End user involvement in IT project implementation is often mentioned in the literature as having important effects on the success of IT projects (Gottschalk, 1999). To this extent, respondents were asked to indicate the basis for involving end users in IT project implementation. The results are shown in Table 4.36.

Table 4.36:

Extent of Involvement of End Users in IT Project Implementation FREQUENCY PERCENT 42.4 5.6 20.8 31.2 100.0

All IT Projects Only in major IT Projects

53 26

Only when User show interest 7 W h e n I T S t a ff t h i n k i t ' s 39 necessary Total 125 Source: Fieldwork

The results show that 42.4 per cent of respondents claimed that users are involved in all IT projects while about a third of respondents (31.2 per cent) claimed that end users are involved only when IT staff think it is necessary. Respondents who claimed that end users are involved only in major IT projects also had a frequency of 20.8 per cent. Given the observation of Gottschalk, the result in Table 4.36 probably explains the high success rate of IS/IT projects in Nigerian manufacturing as observed in Table 4.34a.

Constitution of a Project Team for IS Implementation Top management commitment and the existence of a project team are some of the ten IS implementation success predictors identified by Gottschalk in 1999. Consequent upon this, respondents were asked to indicate whether a

205

project team is always constituted for the acquisition/development of an inhouse or off-the-shelf application, almost two-third (65.2 per cent) answered in the affirmative (Table 4.37).
Table 4.37: Constitution of a Project Team for Software Implementation (inhouse or turn-key) FREQUENCY Yes 90 No 48 Total 138 Source: Fieldwork PERCENT 65.2 34.8 100.0

Following Gottschalks (1999) study of IS implementation success predictors, the study went further to probe into the composition of IT project committees and the result is presented in Table 4.38.

Table 4.38: Organization Level of Members of IT Project Committees

M E M B E R S H I P O F I T P R O J E C T FREQUENCY COMMITTEES Senior Managers General Managers/Executive Directors 50 38 % FREQUENCY

16.6 12.6 8.3 8.0 7.3 3.7

All of CEO, Exec. Directors, Senior 25 Managers and Managers Managers 24 Not Sure of membership CEO 22 11

Source: Fieldwork

From Table 4.38, it can be seen that number of times when top management staff were included in IT project committees decreases down the organizational pyramid. This suggests that IT matters are often entrusted to high-powered committees comprising of mostly senior-level managers and other higher level positions. 206

Frequency of Top Management Attendance at IT Project Meetings

Gottschalk (1999) ranked top management commitment to IT projects very high as a top-ten implementation success predictor. This study investigated the level of top management commitment in terms of attendance by top management at IT project meetings. Attendance at IT project meetings is believed to be a good measure of the level of commitment of these top executives. This is because it is during IT project meetings decisions are made about the project and the presence or absence of these top executives can make or mar the IT project. Lack of top management commitment can also help expand the scope of the project beyond its initial projected scale. The frequency of attendance by top management at IT project meetings is summarized in Table 4.39.
Table 4.39: Sometimes Often Always Rarely Very often Total Source: Fieldwork Frequency of Top Management Attendance at IT project meetings PERCENT 29.6 27.8 18.3 13.0 11.3 100.0

FREQUENCY OF ATTENDANCE

The result in Table 4.39 shows that top management of Nigerian manufacturing firms attend IT project meetings between often (27.8 per cent), sometimes (29.6 per cent). Only 18.3 per cent of respondents perceive that top management attend such meetings always. Adding up the frequencies for Very Often and Always to reflect adequate commitment from 207

top management gave a frequency of 29.6 per cent compared with 56.4 per cent total frequency for Sometimes and Often. 13.0 per cent of the respondents perceive that top management attend IT project meetings Rarely.

Factors considered in the appointment of IT Project Team Head Tables 4.40 indicate the importance of different factors that were considered in the appointment of IT project team head. The factor that ought to be considered most when appointing headship of IT project committees is knowledge of project being implemented, and this came tops as expected.

Table 4.40: Factors used in the Appointment of IT project Team Head

P E R C E N TA G E RESPONSES 32.2 7.3 4.7 2.7 2.0

CONSIDERATION FOR APPOINTMENT OF IT PROJECT TEAM HEAD Knowledge of Project External Consultants recommendation Top Management Status Other considerations (For example, responsibility for benefits) Influence within the organization

Source: Fieldwork

This result also is in agreement with this researchers experience as Head of IT of a multinational manufacturing firm for about 6 years. In the implementation of a major Enterprise Resource Planning (ERP) business application, the Finance Director was appointed as Project Director of the Project Implementation team. The Head of IT was appointed Project Manager and the CEO took active part in the project implementation. This careful

208

selection of the leadership of the project implementation team was a major factor responsible for the success witnessed in the ERP implementation. Resistance to Implementation of IS/IT Projects In order to determine the nature and types of resistance to implementation of IT projects, respondents were asked to indicate if there were any experiences of major resistance to the implementation of IT projects. Almost 80 per cent of respondents said that there had not been any major resistance to the implementation of IT projects (Table 4.41a).

Table 4.41a: Existence of Resistance to Implementation of IT Projects FREQUENCY No 111 Yes 28 Total 139 Source: Fieldwork PERCENT 79.9 20.1 100.0

For the 20.1 per cent of respondents that reported resistance, the study probed further into the source and type of resistance to IT implementation efforts. The frequencies of the potential sources of resistance are shown in Table 4.41b.

Table 4.41b: Sources of Resistance to IT Implementation SOUCE OF RESISTANCE FREQUENCY PERCENT

209

Users Top Management Middle Level Managers Lower Level managers Total Source: Fieldwork

15 10 2 1 26

57.7 38.5 8.0 3.8 100.0

Users of IT projects were the chief source of resistance to IT project implementation efforts with a frequency of 57.7 per cent. This was followed by resistance from top management staff (38.5 per cent). There were minimal resistance from middle and lower level managers with frequencies of 8.0 per cent and 3.8 per cent respectively (Table 4.41b).

Table 4.41c shows that lack of or low commitment came out tops as the first major type of resistance to IT implementation in the sampled Nigerian manufacturing firms with a frequency of 25.0 per cent. This low level of commitment was mainly from either users or top management (See Table 4.41b). The second major source of resistance was lack of required resources for project implementation. It has already been noted from Table 4.38 that senior management staff were normally included in IT project committees. Such categories of staff might, however, show no/low level of commitment to IS project implementation by refusing to provide required resources (funds, information, release of subordinates etc).

Table 4.41c: Types of Resistance to IT Implementation

TYPE OF RESISTANCE No/Low commitment Lack of required resources 6 5 FREQUENCY 25.0 20.8 PERCENT

210

Low attendance at project meetings Fear of job loss Non Availability during project Managing Change Resisting Change Lack/low capacity Rejection of Output of project Total

4 3 2 1 1 1 1 24

16.7 12.5 8.3 4.2 4.2 4.2 4.2 100.0

Source: Fieldwork

This findings could explain the 17.8 per cent of respondents from Table 4.34a who claimed that below 50 per cent of IS implementation were successful. Respondents also indicated low attendance at project meetings and fear of job losses (16.7 and 12.5 per cent respectively) as reasons for resisting IT project implementation.

Specification of Sanctions for Implementation Tasks Defaulters

From this researchers experiences in the implementation of a major ERP in a leading pharmaceutical manufacturing firm in Nigeria, it was observed that the specification and application of sanctions for default in assigned project tasks ahead of the commencement of the project went a long way in ensuring the level of success that was recorded during the implementation of the project. This is also in one of Gottschalks (1999) IS implementation success predictors. To this extent, respondents were asked to indicate if sanctions were specified for implementation task defaulters. The responses obtained are presented in Table 4.42a.

211

Table 4.42a: Specification of Sanctions for IS Implementation Defaulters FREQUENCY No 116 Yes 20 Total 136 Source: Fieldwork PERCENT 85.3 14.7 100.0

However, the frequencies in Table 4.49a show that in most cases (as claimed by 85.3 per cent of the respondents) sanctions were not defined ahead of time for defaults of implementation tasks.

4.3.19

Outsourcing of IT Development and Support Services

Computing Support Skills

Outsourcing as means of carrying out IT development and support services is fast becoming popular in all industries. The study thus set out to find out the types of IT services mostly outsourced, the frequency of outsourcing these services, and whether there are costs savings from outsourcing. Tables 4.43 summarize the data.

Table 4.43a: Use of External Contract Computer Engineers to Resolve IT Problems

FREQUENCY Yes No 110 29 PERCENT 79.1 20.9 100.0

Total 139

Source: Fieldwork

212

Almost 80 per cent of the responding firms use external computer engineers to resolve IT problems (Table 4.43a). Such external computer engineers are also used very regularly (always and sometimes) as shown in Table 4.43b, while a negligible 4.3 per cent had never used external computer engineers to resolve IT problems.

Table 4.43b: Frequency of Use of External Computer Engineers

FREQUENCY Sometimes Always Rarely Never Total 73 31 28 6 138 PERCENT 52.9 22.5 20.3 4.3 100.0

Source: Fieldwork

Differences by Sector The Kruskal Wallis tests indicate that there are sectoral differences in the outsourcing of IT services. (Chi-Square = 22.308, p 0.001). The Textile and wearing apparels sector had the highest mean rank of 93.41 (i.e. used outsourcing most) while Pulp, paper and paper product sector had the lowest mean rank (Table 4.43c).

Table 4.43c: Kruskal Wallis Test Result of in-sourcing Software Development Jobs by Sector
INDEPENDENT VARIABLE GROUPING VARIABLE (SECTOR) Use of external computer Textile and Wearing Apparels engineers to resolve IT Chemical and Pharmaceuticals problems Domestic & Industrial Plastics Basic Metal, Iron and Steel Food, Beverages and Tobacco Pulp, Paper and Paper Products N 22 21 13 24 31 28 MEAN RANK 93.41 75.36 71.54 64.19 62.23 60.46

213

Total Chi-Square=22.308; Df=5; Asymp. Sig. = 0.000

139

Source: Fieldwork Types of IT Services Outsourced

Of interest to the study is the range and frequency of IT services outsourced. Table 4.44 shows the categories of IT services outsourced and the frequency in percentages for each service. This table shows that the higher the complexity of the IT service involved, the higher the frequency of outsourcing. This is expected because most minor hardware problems (UPS connection, changing of toners, connecting PCs etc) are handled in-house. Very complex IT services like running network cabling, preparing network operating systems, etc., are outsourced more of the time than moderate hardware problems and much more than minor hardware problems which are hardly outsourced.

Table 4.44: Category and Frequency of IT Services Outsourced

PERCENTAGE FREQUENCY OF OUTSOURCING IT SERVICES Minor hardware/software Moderate hardware problems problems 26.6 34.1 12.9 20.9 39.6 100.0 8.7 29.0 28.3 100.0 Major hardware problems 43.5 26.8 22.5 7.2 100.0

Sometimes Always Rarely Never Total

Source: Fieldwork Proportion of Software Needs Satisfied by in-house Development

Software development is a major aspect of IT service provision in manufacturing firms. It has been reported by a number of authors that for IS to be strategic; it must be rare and perfectly imitable. To achieve this, manufacturing firms must be able to satisfy to some extent their need to 214

develop applications that are tailor-made for their business processes. This situation, the author claimed, is better than purchasing turnkey applications, which have generic applications across firms. Given this background, respondents were asked for their opinion on how much of their software development need was being satisfied by in-house development. The results are presented in Table 4.45a.

Table 4.45a: Proportion of Software Needs Satisfied by in-house Development Jobs

PROPORTON OF SOFTWARE NEEDS SATISFIED IN-HOUSE 50-75% 25-50% Less than 10% 10-25% 75-100% Total FREQUENCY PERCENT 39 32 27 22 15 135 28.9 23.7 20.0 16.3 11.1 100.0

Source: Fieldwork

It can be seen that over half (60.0 per cent) of the responding firms were not able to meet up to half of their software development needs in-house. Only 28.9 per cent are able to meet between 50-75% of their software development needs while only about 11.1 per cent achieved between 75-100 per cent of their software needs in-house.

Differences by Sector To determine sectoral differences in the proportions of software needs satisfied by in-house development jobs, the Kruskal Wallis test was performed (Table 4.45b).

215

Table 4.45b: Kruskal Wallis Test Result of Quantum of Software Needs Satisfied by in-house Development by Sectors
INDEPENDENT VARIABLE GROUPING VARIABLE (SECTOR) N 31 24 20 26 21 13 135 MEAN RANK 66.66 79.42 82.88 40.02 83.57 58.04 Quantum of software needs Food, Beverages and Tobacco s a t i s f i e d b y i n - h o u s e Basic Metal, Iron and Steel development efforts Chemical and Pharmaceuticals Pulp, Paper and Paper Products Textile and Wearing Apparels Domestic & Industrial Plastics Total Chi-Square=22.657; Df=5; Asymp. Sig. = 0.000

Source: Fieldwork

The result of Kruskal Wallis test indicates that there are significant differences across the sectors on the proportion of software development needs satisfied by in-house development jobs. Textile and wearing apparels sector again had the highest mean rank (83.57) while Pulp, paper and paper products had the least mean rank of 40.02.

Cost Savings from Outsourcing

The study also sought to investigate respondents opinion on the cost saved as a result of outsourcing IT services. Almost half of the respondents (46.0 per cent) did not think that their organizations were making cost savings from outsourcing IT services, while 54.0 per cent thought they are saving costs from outsourcing and would go for it rather than provide the services in-house (Table 4.46).
Table 4.46: Cost savings Due to Outsourcing IS/IT Services FREQUENCY Yes 64 No 75 PERCENT 46.0 54.0

216

Total 139 301 Source: Fieldwork

100.0

.20

IT Support for Organizational Level

Table 4.47a: IT Support for Organizational Levels

RESPONSES GS 1 5.7 5.7 12.7 2 8.2 7.6 20.9 3 11.4 10.8 16.5 4 24.1 32.3 14.6 NS 5 50.6 43.7 35.4 FRIEDMAN RESULT

IT SUPPORT ORGANIZATIONAL LEVELS

AND

IT support for people at strategic levels IT support for people at management level IT support for people at operational level N = 157 ; df = 3 ; X = 75.676 ; p = .000

2.70 2.60 1.97

Source: Fieldwork

(Key: NS =

No IT support; GS = Greatest support)

The Freidman result shown in Table 4.47a shows that IT support for different organization levels decreases down the organizational pyramid. (Chi-square = 75.676, p 0.001). IT supported mostly people at Strategic level (mean rank, 2.70) followed by people at management level (mean rank, 2.60), and lastly people at operational level (mean rank, 1.97). This reflects the situation that IT applications in Nigerian manufacturing are almost always restricted to the top executives with little or no application of IT on the shop floor (manufacturing floor). Nevertheless, a few large manufacturing firms have automated their production processes.

Differences by Sector

217

In order to determine differences among Nigerian manufacturing firms, Kruskal Wallis tests were carried out for the test variables against Sector, Firm Size and PAT. Such analyses were possible because data on the variables IT support for organizational levels and IT support for business processes as well as data on sector, firm size and PAT were obtained through the same business questionnaire (Table 4.47b). When sector was used as the grouping variable, some significant differences were found among some sectors. Domestic and Industrial Plastics sectors had the lowest mean ranks for IT support for strategic and operational levels, while Chemicals & Pharmaceutical Sector and Basic Metal, Iron & Steel had the highest mean ranks for those levels respectively (See Table 4.47b).
Table 4.47b: Kruskal Wallis test result of IT support for organizational levels by Sector
IT Support for Organizational Levels ChiSquare Df Asymp. Sig. High IT support for you in your 6.975 job IT support for people at 11.319 strategic level IT support for people at 10.068 management level IT support for people at 12.909 operational level 5 5 5 5 0.222 0.045 0.073 0.024 NS SECTOR Low NS

Chemical &D o m e s t i c & Pharmaceuticals Industrial Plastics NS NS Basic Metal, Iron & D o m e s t i c & Steel Industrial Plastics

Source: Fieldwork Differences by Firm Size

(NS = Not significant)

There is no significant difference in the way IT is supporting people at different organizational levels (operational, management and strategic) across firm size (Table 4.47c).
Table 4.47c: Kruskal Wallis Test Result of IT Support for Organizational Levels by Firm Size
IT Support for Organizational Levels C h i - Df Square Asymp. Sig. Firm Size

218

High IT support for you in your 7.869 job IT support for people at 3.168 strategic level IT support for people at 3.681 management level IT support for people at 2.705 operational level 5 5 5 5 0.164 0.674 0.596 0.745 NS NS NS NS

Low NS NS NS NS

Source: Fieldwork Differences by PAT

(NS = Not significant)

There were significant differences among firms grouped by Profit After Tax (PAT). Firms with very large PAT had the highest mean ranks for IT support for the management and operational levels, while firms with mid-range profits had low mean ranks on those variables (Table 4.47d).
Table 4.47d: Kruskal Wallis Test Result of IT Support for Organizational Levels by PAT C h i - df A s y m p . Profit After Tax IT Support for Square Sig. Organizational Levels
High IT support for you in your 14.236 job IT support for people at 3.462 strategic level IT support for people at 11.404 management level IT support for people at 13.299 operational level 5 5 5 5 0.014 0.629 0.044 0.021 N1-10b NS N1-10b Above N 10b Low N 101-200m NS N 501m-1b N 201 500m

Source: Fieldwork

(NS = Not significant; b=billion, m=million)

4.3.21

IT Support for Business Processes

It was also important to determine which business processes received the highest level of IT support among business processes typically found in manufacturing. Results obtained indicated that Finance and Accounts as a business process received the highest level of IT support with Friedmans mean rank of 6.04 (Table 4.48a). The least supported business processes were customer and supplier relationship management with mean ranks of 3.59 and 3.63 respectively. 219

Table 4.48a: IT Support for Business Processes

RESPONSES IT SUPPORT FOR BUSINESS PROCESSES Finance/Account Production/Manufacturing Sales/Marketing Administration Human Resources / Corporate Affairs Research and Development Suppliers Relations Management Customer Relations Management N = 146 ; df = 7 ; X2 =187.181 ; p = .000 NONE 1 0.6 2.5 5.1 5.1 9.7 9.2 13.5 13.5 LOW 2 3.2 14.6 9.6 11.5 15.6 20.9 22.6 22.6 3 26.1 34.4 40.1 42.0 40.9 36.6 39.4 39.4 FRIEDMAN RESULT HIGH 4 68.8 6.04 48.4 45.2 41.4 33.8 33.3 24.5 24.5 4.97 4.90 4.80 4.10 3.97 3.63 3.59

Source: Fieldwork

The results shown in Table 4.48a confirms the trend that Finance/Account department is usually the first to be computerized in most firms, especially manufacturing. The least business process that IT supports in Nigerian manufacturing is Customer Relations Management (CRM) with mean rank of 3.59. This is due, perhaps to the prohibitive cost of these CRM applications and the inability of decision makers to match the potential benefits of these applications with the high cost. The low mean rank of IT support for CRM applications when combined with the high frequency of respondents who claimed that their firms develop strong ties with their customers as a business strategy suggests that the firms had mostly not been using CRM applications to manage their customer relations probably because of the high cost of acquisition and deployment of the applications.
Differences by Sector

Following the Friedman test result (Table 4.48a) highlighting differences in the way IT is supporting each of the under listed business processes, Kruskal

220

Wallis tests were used to highlight differences among firms grouped by sector, firm size and PAT. The results are shown in Tables 4.48b - d. When sector was used as the grouping variable, the firms differed in the way IT was supporting at least three business processes: Production/ Manufacturing, Customer and Supplier Relations Management functions (Table 4.48b).
Table 4.48b: Kruskal Wallis Test of IT Support for Business Processes by Sector
IT SUPPORT FOR BUSINESS PROCESS Administrative process Production/Manufacturing Research & Development Sales/Marketing Finance/Accounts HR/Corporate Affairs CHISQUARE 3.259 11.462 7.166 7.591 11.026 5.122 DF ASYMP. SIG. High 5 5 5 5 5 5 5 5 0.660 0.043 0.209 0.180 0.051 0.401 0.007 0.006 NS SECTOR Low NS

Textile & Domestic & Wearing Industrial Plastics Apparels NS NS NS NS NS NS NS NS

Customer Relations Management 15.998 Suppliers Relations Management 16.421

Food, Domestic & Beverages Industrial Plastics & Tobacco Textile & Chemicals & Wearing Pharmaceuticals Apparels

Source: Fieldwork Differences by Firm Size

(NS = Not significant)

For firm size, firms differed only on IT support for the Human Resource (HR) function. Chi-Square = 11.280, p 0.05 (Table 4.48c). Large firms (staff strength of 500 1000 staff) had the highest mean rank, while small firms had the lowest mean ranks on IT support for the HR and Corporate Affairs process.

Table 4.48c: Kruskal Wallis Test of IT Support for Business Processes by Firm Size IT SUPPORT FOR BUSINESS C H I - DF A S Y M P. FIRM SIZE PROCESS SQUARE SIG. High Low

221

Administrative process Production/Manufacturing Research & Development Sales/Marketing Finance/Accounts HR/Corporate Affairs Customer Relations Management Suppliers Relations Management

7.229 4.310 2.838 6.704 8.906 11.280 8.299 7.870

5 5 5 5 5 5 5 5

0.204 0.506 0.725 0.244 0.113 0.046 0.141 0.164

NS NS NS NS NS

NS NS NS NS NS

500 1000 Less than staff 100 staff NS NS NS NS NS NS

Source: Fieldwork Differences by PAT

(NS = Not significant)

Table 4.48d shows that there were no significant differences among firms grouped by PAT.
Table 4.48d: Kruskal Wallis Test of IT Support for Business Processes by PAT
IT SUPPORT FOR BUSINESS PROCESS Administrative process Production/Manufacturing Research & Development Sales/Marketing Finance/Accounts HR/Corporate Affairs Customer Relations Management Suppliers Relations Management CHISQUARE 10.926 5.977 9.696 5.309 8.902 7.289 4.749 6.020 DF ASYMP. SIG. High 5 5 5 5 5 5 5 5 0.053 0.308 0.084 0.379 0.113 0.200 0.447 0.304 NS NS NS NS NS NS NS NS PAT Low NS NS NS NS NS NS NS NS

Source: Fieldwork

(NS = Not significant)

4.4

Top Management Perceptions of Strategic IT Variables

In order to obtain more information especially those considered as strategic, interview sessions were held with some CEOs and/or Finance Director/ Finance Controllers of the firms. (See Appendix 2 for the Interview Guide and Table 3.5 for the list of responding firms and the officers interviewed).

222

Most of the CEOs interviewed had a vivid description of the role of information systems in supporting their firms vision and mission. They were also able to describe near accurately the array of information systems in their organizations. This is probably because they were invariably the approving authority especially for major IS installations which would have impact on the organizations finance and other processes. However, some of the CEOs interviewed could not ascertain what processes were involved before the implementation of IS in their organizations. What this imply is that either these organizations did not have a procedure for analyzing needs before IS investments are made or that the CEOs were not aware of these need analysis procedures before investing in information systems.

4.5

Test of Hypotheses

Six hypotheses were stated and evaluated in this study. For the purpose of testing, the hypotheses are stated in their null forms. The hypotheses are:

Hypotheses 1-3: Business and IS Strategies and Firm Performance

4.5.1

Hypothesis 1:

There is no relationship between firm performance, business strategy and IS strategy

The hypothesized relationship was modeled as follows: Y = f(X, Z), .(i) where Y = PAT, X = Business strategy and Z = IS strategy.

223

Each of the two main categories of business strategy was tested independently resulting in testing hypothesis 1 in two parts as follows:

i.

H o 1a: There is no relationship between PAT of Nigerian manufacturing firms, productivity improvement strategies and information systems strategies.

ii.

Ho 1b: There is no relationship between PAT of Nigerian manufacturing firms, revenue growth strategies and information systems strategies.

Test of Ho1a
Regression of PAT on Productivity Strategy and ISS

From Table 4.49a (model summary), information systems strategy and productivity improvement strategy as predictors could predict only 3.3 per cent of the variations in dependent variable (PAT). The ANOVA (Table 4.49b) indicates that the model is not a good model (Sig. = 0.117) to explain the relationship between PAT and the independent variables. The coefficients table (Table 4.49c) shows that productivity improvement strategy is not a significant variable (Sig. = 0.955), but that information systems strategy has a significant (Sig. = 0.039) relationship with the PAT of firms. In conclusion, the model proposing PAT to be dependent on information systems strategy and productivity improvement strategy (when used independently of each other) is not good (from ANOVA table) and is also very weak in explaining relationship between PAT and the independent variables (adjusted R2 = 3.3 per cent).

224

Table 4.49: Regression of PAT on Productivity strategy and Information Systems Strategy
(a) Model Summary
R Model 1 .246 .060 R Square Adjusted R Std. Error of C h a n g e Square the Estimate Statistics R Square F Change df1 Change .033 1.67347 .060 2.217 2

df2 69

Sig. Change .117

a. Predictors: (Constant), Information Systems Strategy, Productivity Strategy

Source: Fieldwork

(b) ANOVA Statistics

Model 1 Regression Residual Total b. Dependent Variable: (PAT) Sum of Squares 12.417 193.236 205.653 Df 2 69 71 Mean Square 6.209 2.801 F 2.217 Sig. .117

a. Predictors: (Constant), Information Systems Strategy, Productivity Strategy

Source: Fieldwork

(c) Regression Coefficients

Unstandardiz e d Coefficients B Std. Error (Constant) Productivity Strategy a. Dependent Variable: (PAT) -2.252 3.595E-03 2.947 .063 .014 .007 .245 S t a n d a r d i z e dT Coefficients Beta -.764 .057 2.102 .447 .955 .039 Sig.

Model 1

Information Systems Strategy 2.999E-02

Source: Fieldwork

The coefficients in the regression analysis gave an intercept of 2.52 and 0.004 for productivity improvement strategy and 0.03 for information systems 225

strategy. Although the correlation of the dependent and independent variables are weak, it is a positive one showing that improvement in productivity improvement strategies and information systems strategy will result in increase in PAT. However, in practice, it is almost impracticable that these strategies (business and information systems) will be drawn and implemented independently of one another.

Test of hypothesis Ho 1b To test hypothesis Ho 1b, the model summary, ANOVA and coefficient results are presented in Tables 4.50 a c. From Table 4.50a (model summary), the predictors of firm performance (information systems strategy, and revenue growth strategy) could predict only 3.3 per cent of the outcome of the dependent variable (PAT). The ANOVA (Table 4.50b) also confirms that the goodness of fit is poor (Sig. = 0.117) and that information systems strategy is the only variable among the two independent variables that had a near significant relationship with PAT (Sig. = 0.049) (Table 4.50c).
Table 4.50: Regression of PAT on Revenue Growth Strategy and Information Systems Strategy
(a) Model Summary
R Model 1 .246 .060 R Square Adjusted R Std. Error of C h a n g e Square the Estimate Statistics R S q u a r eF df1 Change Change .033 1.67351 .060 2.215 2

df2 69

Sig. F Change .117

a. Predictors: (Constant), Revenue Growth Strategy, Information Systems Strategy.

Source: Fieldwork

(b) ANOVA Statistics

Model 1 Regression Sum of Squares 12.409 Df 2 Mean Square 6.205 F 2.215 Sig. .117

226

Residual Total b. Dependent Variable: (PAT)

193.243 205.653

69 71

2.801

a. Predictors: (Constant), Revenue Growth Strategy, Information Systems Strategy

Source: Fieldwork

(c) Regression Coefficients

Unstandardized Coefficients B Std. Error (Constant) -2.178 2.606 .015 .039 .245 .003 I n f o r m a t i o n S y s t e m s 2.992E-02 Strategy Revenue Growth Strategy 8.388E-04 a. Dependent Variable: (PAT) S t a n d a r d i z e dT Coefficients Beta -.836 2.008 .022 Sig.

Model 1

.406 .049 .983

Source: Fieldwork

Therefore, it can be concluded from the tests of hypotheses Ho 1a and b, that firm performance, measured by PAT cannot be modeled with business strategies and IS strategies as independently acting variables with the data collected by the study.

Firm Size as a Contextual Variable The study introduced firm size as a contextual variable following the poor results obtained with the models in Hypothesis 1. It is widely reported in the literature that a moderating or contextual variable (such as firm size) is needed more often to match/align or fit with the appropriate strategies. Hypothesis 2 was therefore postulated as follows:

.2

Hypothesis 2: There is no relationship between firm performance and (a) Firm size; (b) Business strategy and (c) information systems strategy.

227

Modeled as follows: Y = f(W, X, Z), (v) where Y = PAT, W = Firm Size, X = Business strategy and Z = IS strategy.

This hypothesis was also tested in two parts and the results are presented in Tables 4.51 and 4.52.

i.

H o 2a: There is no relationship between PAT of Nigerian manufacturing firms, productivity improvement strategies, information systems strategies, and firm size.

ii.

Ho 2b: There is no relationship between PAT of Nigerian manufacturing firms, revenue growth strategies, information systems strategies, and firm size.

Results for Ho2a From Table 4.51a (model summary), the information systems strategy and productivity improvement strategy along with firm size as the contextual variable could predict 27.8 per cent of the variations of the dependent variable PAT among the firms. The ANOVA (Table 4.4.51b) suggests that the model is a good one at (p 0.001) in explaining the relationship between PAT and the independent variables. The coefficients table (Table 4.51c) reveals that among the independent variables, information systems strategy and firm size had significant relationships with PAT (Sig. = 0.013 and 0.000 respectively). The relationship between productivity improvement strategy as business strategy and PAT was however not significant at p 0.05 (Table 4.51c).

228

Table 4.51: Regression of PAT on Productivity Improvement Strategies, ISS and Firm Size
(a) Model Summary
R Model 1 a. .556 .309 R Square Adjusted R Std. Error of C h a n g e Square the Estimate Statistics R Square F Change Df1 Change .278 1.44583 .309 10.126 3

df2 68

Sig. F Change .000

Predictors: (Constant), Productivity Strategy, Firm Size, Information Systems Strategy

Source: Fieldwork

(b) ANOVA Statistics

Model 1 Sum o f Df Squares Regression 63.504 3 Residual Total 142.149 205.653 68 71 M e a nF Square 21.168 10.126 2.090 Sig. .000

a. Predictors: (Constant), Productivity Strategy, Firm Size, and Information Systems Strategy b. Dependent Variable: (PAT)

Source: Fieldwork

(c) Regression Coefficients

Unstandardized Coefficients B Std. Error (Constant) -6.432 2.683 .012 .310 .054 .256 .499 .016 I n f o r m a t i o n 3.128E-02 S y s t e m s Strategy Firm Size 1.533 P r o d u c t i v i t y 8.693E-03 Strategy Dependent Variable: (PAT) S t a n d a r d i z e dt Coefficients Beta -2.397 2.537 4.944 .160 Sig.

Model 1

.019 .013 .000 .873

a.

Source: Fieldwork

Accordingly, a regression equation for the relationship modeled by hypothesis Ho2a will therefore look like:

229

PAT = -6.432 + 1.53Firm Size + 0.03ISS + 0.009Productivity Strategy (vi) This equation implies that for every one unit increase desired in PAT, firm size will have to be improved by 1.53 folds, combined with 0.03 fold improvements in ISS and 0.009 fold improvements in the business strategy.

Results for Ho2b The regression equation for Ho2b will therefore look like: PAT = -6.043 + 1.54Firm Size + 0.03ISS + 0.009Revenue Growth Strategy

From Table 4.52a (model summary), information systems strategy and revenue growth strategy along with firm size as the contextual variable could predict 27.9 per cent of the variations in the dependent variable (PAT). The ANOVA (Table 4.52b) shows that the model is good one. The coefficients of the independent variables in Table 4.52c show that information systems strategy and firm size are the only significant predictors of performance at the 0.015 and 0.000 levels of significance respectively.

Table 4.52: Regression of PAT on Revenue Growth Strategy, ISS and Firm Size
(a) Model Summary
R Model 1 .556 .309 R Square Adjusted R Std. Error of C h a n g e Square the Estimate Statistics R Square F Change df1 Change .279 1.44541 .309 10.145 3

df2 68

Sig. F Change .000

a. Predictors: (Constant), Revenue Growth Strategy, Firm Size, and Information Systems Strategy

Source: Fieldwork

230

(b) ANOVA Statistics

Model 1 Regression Residual Total b. Dependent Variable: PAT Sum of Squares 63.587 142.066 205.653 Df 3 68 71 Mean Square 21.196 2.089 F 10.145 Sig. .000

a. Predictors: (Constant), Revenue Growth Strategy, Firm Size, and Information Systems Strategy

Source: Fieldwork
(c) Regression Coefficients
Unstandardized Coefficients B Std. Error (Constant) -6.043 2.383 .013 .311 .034 .264 .500 -.027 I n f o r m a t i o n 3.230E-02 Systems Strategy Firm Size 1.537 Revenue Growth -8.576E-03 Strategy Dependent Variable: (PAT) S t a n d a r d i z e dt Coefficients Beta -2.536 2.508 4.949 -.255 Sig.

Model 1

.014 .015 .000 .799

a.

Source: Fieldwork

Test Statistics Results for the Combined Business Strategies In practice and as shown by the results of this study, most firms employ both productivity improvement and growth strategies simultaneously; Hypotheses Ho2a and Ho2b were merged by combining the two business strategies in one regression equation. The results shown in Tables 4.53 reveal that the predictive power of the model incorporating both strategies (revenue growth and productivity improvement) reduced marginally (adjusted R2 reduced by 0.0085) even though the R2 improved slightly by 0.002. The import of this is that it is better and recommended for manufacturing firms to have a clear strategic focus when they are using any of the strategy variables. The results can also be understood in the context of the explanation by Kaplan and

231

Norton (2000), who stated that revenue growth strategies are more futuristic and do not yield results soon, compared to productivity improvement strategies that are short term and, hence often employed by firms looking for immediate returns from their investments.

Table 4.53: Regression of PAT on Productivity Improvement and Revenue Growth Strategies, ISS and Firm Size (Combined Business Strategies)
(a) Model Summary MODEL R 1 R SQUARE ADJUSTED R SQUARE STD. ERROR OF THE ESTIMATE .270 1.45450

.557 .311

a. Predictors: (Constant), Firm size, Productivity Strategy, Information Systems Strategy, Revenue Growth Strategy

Source: Fieldwork

The ANOVA results showed that the model is a good one (See Table 4.53)

(b) ANOVA Statistics

MODEL 1 Regression Residual Total SUM OF SQUARES 63.910 141.743 205.653 DF MEAN SQUARE 4 71 15.978 67 2.116 F SIG.

7.552 .000

a. Predictors: (Constant), Firm size, Productivity Strategy, ISS, Revenue Growth Strategy b. Dependent Variable: PAT

Source: Fieldwork

(c) Regression Coefficients UNSTANDARDIZED COEFFICIENTS Model 1 (Constant) -6.537 B Std. Error 2.710 .042 .069 STANDARDIZE D COEFFICIENTS Beta T SIG.

-2.412 .019 -.058 .050 -.438 .391 .663 .697

R e v e n u e G r o w t h -1.857E-02 Strategy Productivity Strategy 2.682E-02

232

Information Systems Strategy Firm size

a. Dependent Variable: PAT

3.323E-02 1.545

.013 .313

.272 .502

2.521 .014 4.934 .000

Source: Fieldwork

The partial and full LOG versions of the regression equation models were tried for hypotheses 2, but there were no major improvements in the model results.

Although the models for Hypothesis 2a & b were reasonably good (from ANOVA and R2 values), the study went further to investigate the impact of alignment as indicated in strategic management literature. Therefore, to illustrate alignment, Hypothesis 3 was postulated thus:

4.5.3 Hypothesis 3:

There is no relationship between firm performance

and (a) firm size (b) business strategy - IS strategy coalignment and (c) coalignment-firm size interaction.

The hypothesis was modeled as Y = f(X, Z, X.Z), .(i) where Y = PAT, X = Business strategy - IS strategy coalignment, Z = firm size and X.Z = coalignment-firm size interaction (i.e. the product of X and Z). The results for the test of Hypothesis Ho 3a are presented in Table 4.54a-c below:

From table 4.54, it can be seen that the independent variables interplay to predict/determine 28.6 per cent of the variations in the dependent variable, 233

which was slightly better than 27.9 per cent from the regression equation without an alignment variable. However, when the log of hypothesis 3 was tried, the model summary result was much better. Hence, logged values are reported for hypothesis 3.

The model summary, ANOVA statistics and regression coefficients are shown in Tables 4.54:

Table 4.54: Regression of PAT on Productivity-ISS coalignment and Firm Size

(a) Model Summary
R Model 1 a. .553 R Square Adjusted R Std. Error of C h a n g e Square the Estimate Statistics R Square F Change df1 Change .306 .286 .22453 .306 15.231 2

df2 69

Sig. F Change .000

Predictors: (Constant), Log of coalignment - Firm size interaction, Log of Productivity - ISS coalignment, and Log of Firm Size.

b. Dependent Variable: Log of PAT

Source: Fieldwork

(b) ANOVA Statistics Model 1 Regression Residual Total

a. b.

Sum of Squares df 1.536 3.479 5.014 2 69 71

Mean Square F .768 .050

Sig.

15.231 .000

Source: Fieldwork

Predictors: (Constant), Log of coalignment - Firm size interaction, Log of Productivity - ISS coalignment, and Log of Firm Size. Dependent Variable: Log of PAT

(c) Regression Coefficients

Unstandardize S t a n d a r d i z e dt d Coefficients Coefficients B S t d . Beta Error -2.942 1.493 -1.971 .235 .524 5.225 Sig. Collinearity Statistics Tolerance VIF

Model 1 (Constant)

.053 .000 .999 1.001

Log of Firm 1.225 size

234

Log of prod- .342 I S S coalignment a. Dependent Variable: Log of PAT

.177

.194

1.937

.057

.999

1.001

b. Excluded variable is Log of co-alignment-Firm size interaction

Source: Fieldwork

The regression model is thus represented below: PAT = -2.942 + 1.225Firm_Size + 0.342Productivity-ISS co-alignment (vii) The interpretation of this is that every unit increase desired in PAT is associated with 1.23 increase in firm size. Similarly, every one unit in PAT is associated with 0.342 unit increase in the productivity-ISS co-alignment index. The coefficient table shows that firm size is the only independent variable that has a significant relationship in predicting performance with t value significant at the 0.05 level. The alignment of business and information systems strategy, even though included in the coefficient table, was not significantly related with PAT.

Illustratively, the partial plots of the regression relationships are shown in Figures 4. 8a and b. The scatterplots of the regression relationships threw out a few outliers in the data set. This probably explains the variations observed in the intercept of the plot which is slightly different from figures reported under the plot.

235

a = -3.04 and b = 1.66 Figure 4.8a: Scatterplot of PAT (dependent), Firm Size (independent).

a = -2.942; b= 0.342
Figure 4.8b: Scatterplot of PAT (dependent) and Productivity-ISS co-alignment (independent)

Multi-colinearity has been identified as an issue in multiple regression analysis. Multi-colinearity refers to the degree of correlation among 236

independent variables in regression (Wesolowsky, 1976). Venkatraman (2000) has noted however that the impact of collinearity or multicollinearity should not be a discouraging factor from using the moderation perspective to operationalize fit.

Consequent upon this, the option for collinearity diagnostic was specified during analysis. The results are shown in Table 4.54a:

Table 4.54d: Collinearity Diagnostics for the regression model

Eigenvalue Model 1 Dimension 1 2 3 2.946 5.427E-02 1.578E-04 C o n d i t i o nV a r i a n c e Index Proportions (Constant) Log of Firm Log of prod-ISS size coalignment 1.000 .00 .01 .00 7.367 136.607 .00 1.00 .99 .00 .00 1.00

a. Dependent Variable: Log of PAT

Source: Fieldwork

Although, there is no agreement as to how high the correlation is (SAS Institute, 1996; Fox, 1991), Neter, Wasserman, and Kutner (1990) recommended that a Variance Inflation Factor (VIIF) value greater than 10 is an indication of potential multi-collinearity problems. Since, the tolerance for each of the independent variables (firm size and business-ISS co-alignment) is 0.999; the VIF is 1.001, which is considered very low. Some other opinions have claimed that a correlation as high as 50% indicates potential correlation among the variables. To this end, following the submission of Venkatraman (2000) that the impact of collinearity or multi-collinearity should not be a discouraging factor from using the moderation perspective to operationalise fit. Should multi-colinearity becomes a problem, the investigator may consider means of transforming the 237

scale of origin of the data (especially for interval level data), which will reduce the level of correlation among the independent variables (Southwood, 1978). Other approaches suggested include removing one or more of the independent variable, performing a principal component regression or computing the regression using a singular value decomposition approach (NIST, 2002).

The results for Hypothesis Ho3b are presented in table 4.55 and Figures 4.14 a-c below: From the model summary (Table 4.55), it can be seen that the independent variables interplay to predict/determine 28.6 per cent of the outcome of the dependent variable. The ANOVA and coefficient tables are shown in Tables 4.55:

Table 4.55: Regression of PAT on Revenue Growth-ISS Coalignment and Firm Size
(a) Model Summary R R Square Adjusted R Std. Error of C h a n g e Square the Estimate Statistics Model R Square F df1 Change Change 1 .554 .306 .286 .22451 .306 15.241 2
a. Predictors: (Constant), Log of Revenue growth-ISS coalignment, Log of Firm size b. Dependent Variable: Log of PAT

df2 69

Sig. F Change .000

Source: Fieldwork
(b) ANOVA Statistics Model 1 S u m o f df Squares Regressio 1.536 2 n Residual 3.478 69 M e a nF Square .768 15.241 .050 Sig. .000

238

Total

5.014

71

a. Predictors: (Constant), Log of Revenue growth-ISS coalignment, Log of Firm size b. Dependent Variable: Log of PAT

Source: Fieldwork
(c) Regression Coefficients
Unstandardize Standardizedt d Coefficients Coefficients B Std. Error Beta (Constant) -2.579 1.303 .515 .195 -1.979 5.136 1.941 Log of Firm 1.204 .234 size Log o f .286 .147 Revgrowth I S S coalignment Dependent Variable: Log of PAT. Sig. Collinearity Statistics Tolerance VIF 1.000 1.000 1.000 1.000

Model 1

.052 .000 .056

a. b.

Excluded variables: Log of co-alignment-Firm size interaction.

Source: Fieldwork

The regression model can thus be represented as:

PAT = -2.579 + 1.204Firm_Size + 0.286Revenue Growth-ISS co-alignment (viii)

The interpretation of this is that every unit increase in Firm size is associated with 2.58 increase in PAT. Similarly, every one-unit increase in the revenue growth-ISS alignment index is associated with a 0.286 unit increase in PAT.

The ANOVA table suggests that the model is a good one in explaining the relationships between the dependent and independent variables. The coefficient results (Table 4.55) highlights the variables that were entered and those excluded in the regression model. Firm size was the only variable that had a significant relationship with PAT (Sig. = 0.000) while co-alignment between business and information systems strategies had no significant 239

relationship with PAT (Sig. = 0.056). However, the interaction term, X.Z was excluded in the regression model.

The scatterplot

partial plots of the regression relationships are shown in

Figures 4.9a and b:

a = -2.579 and b = 1.204 Figure 4.9a: Scatterplot of PAT (dependent), Firm Size (independent).

240

a = -2.579 and b = 0.286 Figure 4.9b: Scatterplot of PAT (dependent) and Revenue growth -ISS co-alignment (independent). Due to the impact of multi-colinearity among the independent variables, option for collinearity diagnostic was specified during analysis. The results are shown in Table 4.55d:

Table 4.55d: Colinearity Diagnostics for the regression model

Eigenvalue Model 1 Dimension 1 2 3 2.946 5.412E-02 2.067E-04 C o n d i t i o nV a r i a n c e Index Proportions (Constant) Log of Firm Log of Revgrowth-ISS size coalignment 1.000 .00 .01 .00 7.378 119.370 .00 1.00 .99 .00 .00 1.00

a. Dependent Variable: Log of PAT

Source: Fieldwork

241

Combining both revenue growth and productivity improvement strategies in one regression equation produced the kind of result reported in hypothesis 2 (Table 4.53).

In conclusion, combining the results of hypotheses 3a and b, it was found that the results showed that firm performance depends on business-ISS coalignment and the contextual variable (firm size). Although, the results for the model in hypothesis 2 also supported a relationship between firm performance, business-ISS coalignment, and firm size, a better R2 was obtained. By contrast, when business and information systems strategies were used independently and alone in the regression equation without contextual and/or coalignment variables (Hypothesis 1), this study did not find a relationship between firm performance and business and information systems strategies.

.4Alternative Regression Scenarios

The study however also considered the possibility that other contextual variables other than firm size could be important in explaining the relationship between business strategies, IS strategies and the impact of the relationship on performance of the firm.

In order to observe the potential impact of some of the other contextual variables (industry competitiveness, stage of computerization, firm age, sector groupings etc.) on the alignment of business and information systems strategy

242

as well as the effect of the relationships on business performance, several regression analyses were also run. The results of the analyses are summarized in Table 4.56. All the regression scenarios offered good models and good predictive powers except CEOs IS attributes which gave a 6 per cent explanation of the variations in the relationship between PAT and independent variable (CEOs IS attributes). Interestingly, the age of the firm provided a good predictive power (28.8 per cent), and passed the goodness of fit test (ANOVA Sig. = 0.000) and the interaction term (X.Z) also had a coefficient that was significant at p 0.001 (Table 4.56).

Table 4.56: Regression Scenarios of Some Moderating Variables on the Performance Impact of Business IS Strategies Alignment
Regression Moderator Models Variables 1 a. LN Industry Competitiveness b. LN Business-IS Strategy c. Constant a. LN Stage of computing evolution b. LN Business-IS strategy c. Constant a. LN Firm Age b. LN Business-IS strategy c. LN of BusinessIS strategy-Firm Age interaction d. Constant 4 a. LN CEO IS knowledge b. LN CEOBusiness-IS Strategy c. CEO-Business-IS strategy interaction d. Constant Sig. of R R2 Adjusted R2 ANOVA Regression Statistics Coefficients 0.557 0.555 0.308 0.277 0.000 0.341 0.000 0.921 0.320 0.000 0.000 0.377 0.000 0.279 0.911 0.713 0.196 0.366 0.245 0.060 0.19 0.237 0.564 0.318 0.288 0.000 0.552 0.304 0.274 .0000

LN= Natural LOG; Source:

Fieldwork

4.5.5 Hypothesis 4: IS Planning and Industry Competitiveness 243

Two competing theories of IS planning hypothesizes that comprehensive IS planning will be more successful than incremental IS planning in a competitive industry. Salmela et al (2000), in an action-based research, submitted that comprehensive IS plan will likely be more successful in an environment where the frequency of change and stakeholders expectation are highly unpredictable.

To this extent, this study sought to investigate through hypothesis 4 which planning approach will be more successful in the specific context of the degree of industry competitiveness faced by Nigerian manufacturing. The study then hypothesized as follows:

Ho: There is no relationship between use of comprehensive IS planning methods, degree of industry competitiveness and performance of a firm.

In a regression model, the following results (Table 4.57a-c) were obtained using Profit After Tax as indicator of performance (dependent variable) and industry competitiveness as independent variable.

The result in Table 4.57a shows that there is a weak relationship (only 6.5 per cent) between industry competitiveness and IS planning approach as independent variables and PAT as dependent variable. Only 6.5 per cent of the variations in the dependent variable are explained by the interplay of the two independent variables.
Table 4.57: Regression of PAT, IS Planning approach and degree of industry competitiveness

244

(a) Model Summary

R Model 1 .303 .092 .065 R Square Adjusted R Std. Error of C h a n g e Square the Estimate Statistics R S q u a r e F Change 1.64535 Change .092 3.483 df1 1 df2 69 Sig. Change .036 F

a. Predictors: (Constant), IS planning approach, Industry competitiveness b. Dependent Variable: PAT

Source: Fieldwork

(b) ANOVA Statistics

Model 1 Sum o f df Squares Regression 18.857 2 Residual Total 186.795 205.653 69 71 M e a nF Square 9.429 3.483 2.707 Sig. .036

a. Predictors: (Constant), IS planning approach, industry competitiveness b. Dependent Variable: (PAT)

Source: Fieldwork

(c) Regression Coefficients

Unstandardized S t a n d a r d i z e dt Coefficients Coefficients B Std. Error Beta (Constant) IS planning approach a. Dependent Variable: (PAT) .661 .154 1.170 .054 .062 .027 .294 .565 .228 2.464 Industry competitiveness 1.239E-02 Sig.

Model 1

.574 .821 .016

Source: Fieldwork

The results of the ANOVA (Table 4.57) indicate that the model is a good one in explaining the relationships between the dependent and independent variables (Sig. = 0.036). However, the coefficient table shows that only IS planning approach has a significant relationship with PAT (Sig. = 0.016) while

245

industry competitiveness (Sig. = 0.821) is not correlated with performance as measured by the PAT of the firms (Table 4.57).

Consequently, the regression equation looks thus: PAT = 0.661+ 0.012Industry competitiveness + 0.154IS Planning approach ...(ix) Figure 4.10a and b show the scatterplot of the relationship between PAT and the two independent variables in the evaluated model.

a = 0.661 ; b = 0.012
Figure 4.10a: Scatterplot of Industry competitiveness and performance of a firm.

246

a = 0.661 ; b = 0.154
Figure 4.10b: Scatterplot of IS Planning Approach and performance of a firm

The results from the ANOVA table (Sig. = 0.036) suggest that the null hypothesis postulating that there is no relationship between a firms performance and the industry competitiveness and IS planning approach adopted will be rejected and the alternative accepted. 4.5.6 Hypothesis 5: IT spending and Firm Performance To investigate the relationship between IT spending and firm performance, hypothesis 5 was constructed in two parts as follows: Ho (a): There is no relationship between IT spending and net profit. Ho (b): There is no relationship between IT spending and turnover.

247

IT Expenditure and PAT To test these hypotheses, Chi-Square analyses were carried out on the two variables in each of the hypothesis. The Pearson Chi-Square was significant (p 0.001) implying that the null hypothesis should be rejected (Table 4.58). Consequently the alternative hypothesis, which stipulates that there is a relationship between performance (PAT) and IT spending, is accepted.

Table 4.58a: Cross tabulation Results of PAT and IT Expenditure

IT expenditure Low IT spent Low profit organization PAT Total 11 5 9 6 20 Average IT spent 4 4 16 24 High IT expenditure 20 21 24 65 Total

Medium profit 8 organization Highly profit organization 2 21

Pearson = 18.267; df = 4; Asymp. Sig. = 0.001; N = 65

Source: Fieldwork

IT Expenditure and Turnover There was also a significant association between performance (measured by turnover) and IT spending. Table 4.58b shows that increased IT spending increases turnover (p 0.01).

Table 4.58b: Crosstabulation of Turnover and IT Expenditure

IT expenditure Low IT spent Average IT spent High IT expenditure Total

248

Turnover

Low Performing organizations Medium Performing organizations High performing organizations

11 7 6

7 9 6

5 4 17

23 20 29

Pearson = 11.969; df = 4; Asymp. Sig. = 0.018; N = 72

Source: Fieldwork

.6

Hypothesis 6: CEOs IS Involvement and IS Project Implementation Success in Nigerian Manufacturing Firms

In order to investigate the relationship between CEOs IS attributes and IS project implementation success, the null form of hypothesis 6 was postulated thus: Ho: There is no relationship between CEOs IS involvement and IS project implementation success. To test this hypothesis, a Chi-Square analysis on the two variables listed above was carried out. The Pearson Chi-Square was not significant (p 0.05) implying that the null hypothesis should be accepted (Table 4.59). The null hypothesis postulated that there is no relationship between CEOs IS involvement in IS implementation success.

Table 4.59: Crosstabulation of IT Project Implementation Success and CEOs IS Involvement

CEO IS Total involvement L o w C E O I S Average CEO IS High CEO IS involvement involvement involvement Implementation Low IS implementation 4 6 3 13 success success rate

249

Total

Average IS implementation 11 success rate High IS implementation 8 success rate 23

10 6 22

10 8 21

31 22 66

Pearson = 1.431; df = 4; Asymp. Sig. = 0.839; N = 66

Source: Fieldwork

CHAPTER FIVE
DISCUSSION 5.0 Introduction

250

This chapter highlights and evaluates the results of the data analyses reported in the previous chapter, and discusses the implications of the results for IT policymaking and management in Nigerian manufacturing.

The issue of justification of investments in information systems is an old controversy of high significance to practice and research. Practically, CEOs and CIOs are always eager to see the implications of every Naira spent on Information Systems or Technology. Accordingly, the topic quickly caught the attention of CIOs and CEOs of the organizations studied in this research. A number of respondents praised the initiative of this kind of study in Nigeria given the absence of empirical findings on this subject in the context of the Nigerian business environment. The topic has also grown in popularity in IS research worldwide as exemplified in the burgeoning literature on the subject. Strategy researchers keep fine-tunning the definition of alignment and the measurement of alignment in IS research. Although there are several publications justifying the need for congruence between business strategy and information systems strategy, only a few have devised methods and methodologies for measuring alignment between information systems strategy and business strategy. No study was found on information systems strategy in Nigeria. However, there are publications on this subject in other developing nations (Saxena and Sahay, 2000; Seyal et al, 2000 and Chowdhury and Wolf, 2003).

The Nigerian business environment can be characterized as challenging. This is exemplified by unpredictable government policies that are manufacturing-

251

unfriendly, socio-politically unstable, and infrastructurally deficient. These characteristics are what this study described as turbulence which is a departure from Salmela et als definition of environmental turbulence (Salmela et al, 2000). These authors defined turbulence as the frequency and unpredictability in stakeholders expectations and this definition relates to the business environment in developed economies to which these authors refer. Politically stable environment, predictable government plans and actions, and working economic programmes are typical of developed economies, which probably informed their definition of turbulence in terms of stakheholders expectations. Hence, turbulence in the Nigerian environment is defined by this study differently to mean the frequency of changes in the business operating environments. It is in the context of such turbulent business environment that this study was undertaken to identify important relationships between business strategies, ISS, environmental turbulence and business performance in Nigerian manufacturing sector. Chapter four provided details of the results of the analyses of the data collected during the study whereas this chapter discusses the findings.

5.1

Vision & Mission Statements

The importance of having a set of statement describing the direction for an organization is comparable to an aircraft having a compass. It is the vision that gives direction of where the organization is heading to and why the organization exists. Organizations that have no vision or wherein the

252

employees are unaware of the vision definitely has a long way to go on the strategic management journey. It becomes difficult to evaluate these organizations on their strategic management efforts because the dependent variable (business objective) is clearly missing. This study found that about 80 per cent of the responding firms had vision and/or mission statements, which is commendable, although the optimal situation is where all firms have business and IS strategies and a well thought out vision and mission statements.

5.2

Lines of Business and Product Diversification

The location of headquarters and manufacturing plants is concentrated in the South Western part of the country. This region localized the majority (43.5 per cent) of manufacturing activities in Nigeria. This is however not a plus for any nation to have the engine of its economic growth concentrated in a region. This region becomes the source of attack during insurgencies between nations. The study asked respondents to indicate whether they have multiple lines of businesses. The results showed that most Nigerian manufacturing firms have multiple lines of business. None of the responding firms is a monoproduct organization. This may be explained from the fact that since manufacturing is a series of activities involving transformation of raw/semifinished to finished product, there are high chances that there will be other products or by-products that may have commercial value or be transformed to a commercial valued product. For example, it makes sense for a pharmaceutical firm to make/sell bottled water because there is already an

253

investment in treatment plant and liquid filling lines for the pharmaceutical range of products.

5.3

Industry Competitiveness

Porters five competitive forces model that collectively determine industry profitability was adopted in this study: the power of buyers, the power of suppliers, the threat of new entrants, the threat of substitute products, and the rivalry among existing competitors. To reflect the peculiarities of the Nigerian environment, Porters five forces was extended into seven by splitting threats of new entrants into threats of domestic and threats of foreign entrants. Level of industrial regulation was also introduced as a competitive force/threat/ opportunity, because in the Nigerian economy, regulation or lack of it can impact on Industry profitability. The pharmaceutical sector in Nigeria is an apt example. The sector witnessed growth (turnover from sales) following improved regulation by the National Agency for Foods and Drugs Administration and Control (NAFDAC).

Porter (1979) had noted that the individual and collective strength of these forces varies from industry to industry. The study investigated whether differences existed in the impact on manufacturing of the competitive forces in the expanded Porters model or whether differences existed in the way and manner firms in different sectors were confronted by these determinants of industry profitability. The results showed that there were sector differences implying that some sectors are facing more turbulence than others. From Table 4.12 and Appendix 7, it can be seen that the threat of new entrants

254

(domestic or foreign) were high for the Chemicals and Pharmaceutical sector. This is in line with the observed situation in Nigeria where importation of chemicals and drugs from Asia is a booming business. To that extent, local manufacturers face this threat, and had identified it as a strong competitive force. The Domestic and Industrial Plastic sector faced low threat of foreign entrants, bargaining power of customers, rivalry among the players and regulatory harassments (Table 4.12). Firms in this sector were, therefore, having a great time among themselves. Noticeable also is that the sector is predominantly dominated by foreigners (Asians). The impact of the regulatory organ of government, i.e. the Standard Organizations of Nigeria (SON) has not been felt here, and as such customers in this sector have little choice to make in their purchase of domestic or industrial plastic products, including tyres. The impact of National Agency of Foods and Drugs, Administration and Control (NAFDAC), which has been on the limelight in recent times, was revealed by the results of this study. Respondents in the Chemicals and Pharmaceuticals sector identified regulation (NAFDAC) as having the highest impact on their firms. By contrast, firms in the Food, Beverages and Tobacco sector faced high threat of substitute products and rivalry among players in the sector. This can be explained in the context of the myriads of products produced locally and, until recently, imported in the sector as well as the fact that substitutes can easily be found among products in this sector. For instance, there are several beverages from which consumers can pick from as there are several firms manufacturing beverages. Basic Metal, Iron and Steel sector faced low threat of bargaining power of customers and threat of substitute products, while the Pulp, Paper and Paper products sub-sector

255

faced intense pressure from customers bargaining power (Table 4.12). Manufacturers of paper products (greeting cards, diaries and book publishers) are selling at near zero margins as a result of the threat of imported variants (until recently) of these products.

5.4

Business Strategies

Recent works by the popular inventor of The Balanced Scorecard Robert S. Kaplan and David P. Norton in 2000 submitted that firms have two basic levers for improving their businesses: revenue growth and productivity improvement strategies. In general, the productivity improvement strategy yields results sooner than the revenue growth strategy. However, firms have to balance the two strategies to ensure that cost and asset utilization (productivity strategy) do not compromise a firms growth opportunities with customers (growth strategy) (Kaplan and Norton, 2000).

Majority of the responding firms employed both types of business strategies to outperform competition (Table 4. 13). The top five strategies were a mix of both revenue growth and productivity improvement strategies. Comparing the sub-sectors however, variability was noticed in respect of the strategy analytical in business operations, which is a productivity strategy. Firms in the Pulp, Paper and Paper products ranked a number of productivity improvement strategies very high. Both revenue growth and productivity improvement strategies varied according to firm size, whereas no variations existed when PAT was used as grouping variable.

256

5.5

Information Component of IS Strategies

Information is a vital component of any IS strategy. Porter (1996) claimed that information revolution is impacting competition in three ways: (i) It changes industry structure and, in so doing, alters the rules of competition. (ii) It creates competitive advantage by giving firms new ways to outperform their rivals. (iii) It spawns whole new businesses, often from within a firms existing operations. Information about education, knowledge and skill of individual staff came out to be the most important information that manufacturing firms considered critical to the achievement of their goals. Productivity and performance of individual staff was returned as the next most important information to Nigerian manufacturers. Conditions in the market for products not closely related to respondents existing products had the least mean rank implying that most manufacturing firms in Nigeria do not care about warehousing information on products outside their business lines. Majority of the firms used in this study has multi-product lines in somewhat related business lines (See Appendix 6), and the Friedman results (Table 4.15a) imply that although firms might have multiple products, they nonetheless tend to focus on them.

Furthermore, results from the study showed that Nigerian manufacturing firms tend not to care about innovations from local universities and research centers (Table 4.15a). This might reflect the fact that Nigerian Universities and research centers need to do more in respect of marketing the outputs of their researches to the industry for utilization. Nigerian manufacturing has itself 257

also not been very active in research and development given the cost implications of this venture. To that extent, they have not been sponsoring research and developments in the Universities and research centers. Many Nigerian manufacturing firms also rely on research and development inputs from their multinational or strategic partners. In addition, it was observed that information about intermediaries in the raw material supply chain are of little or no significance to Nigerian manufacturing. This implies that manufacturing firms in Nigeria may not be taking close look at their supply chains with a view of eliminating unnecessary intermediaries, or that most of the firms have direct contacts with source(s) of their raw materials.

Given the deep rivalry within the manufacturing industries as illustrated in Table 4.13a, Nigerian manufacturing firms consider information about competitor sales and product performance as well as information on demographic, social and psychological studies of customers critical to the achievement of their goals. This finding is in agreement with the premium placed on information about sensitivity of customers to changes in price, which also had a reasonably high mean rank. Information about global R&D trends, West African markets, alternative local sources of imported raw materials are of comparatively average importance to Nigerian manufacturing firms. This findings is however in agreement with the most recent report from the Manufacturers Association of Nigeria (MAN Annual Report 2003), which highlighted a reduction in import dependence of local manufacturers on imported raw materials. The report, for example highlighted an improvement

258

in the utilization of local raw materials for the Basic Metal, Iron and Steel sector from 26% in 2002 to 46.1% in 2003.

Nigerian manufacturers also realize that information about time to market and deliver products, as well as West African markets (which hitherto firms may not consider critical) are important for the achievement of their goals. This is due to the impact of information revolution on changing industry structure and, in so doing, altering the rules of competition, as noted by Porter, (1985). For instance, information about how to design, formulate and package products in totally distinct way from competition had a comparatively above average mean rank indicating that Nigerian manufacturers are sensitive to new ways of out-competing rivals within and outside their industry. If Nigerian manufacturers consider information about avenues to recycle waste for re-use possibilities, it implies that they are ready or already spawning whole new businesses, often from within a firms existing operations. Most firms within the Domestic and Industrial Plastic group would go a long way to attract used plastics for re-use possibilities, and same goes for the Basic Metal, Iron and Steel sector. These two sectors had the highest mean ranks on the need for such information which were the highest among the sectors for that piece of information (Appendix 7a).

5.6

CEO and Use of IT

Three attributes of the CEO were measured in the context of this study. First, the knowledge and familiarity of CEO to major IT applications found in manufacturing was investigated and analyzed in terms of the grouping

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variables sectors, PAT and firm size. CEOs frequency and extent of involvement in IT selection and implementation were also investigated as the former reflect how often CEOs are involved in IT selection and implementation, while the latter gives an idea of how much the CEO participates in IT matters. Several studies have investigated several attributes/ parameters of the CEO in relation to information systems. (Thong and Yap, 1995; Ang and Koh, 1997). CEO parameters that has been studied in the context of IS research include Palvi et als set of variables for accessing the computer skills of CEO. (Palvi et al, 1994). The study found that majority of CEOs are familiar only with e-mail, internet applications and Word processing applications are consistent with the belief that these are the most widely used applications by these executives. However, this finding is in contrast with the findings of some researchers who found that experience with word processing dominates CEOs IT use and also determines CEOs positive effect on the organizational use of IT (Nazem & Price, 1984; Soh, 1990; OBrien & Wilde, 1996). The explanation for this contrast could perhaps be because Internet and e-mail applications use were not pervasive at the time of some of these studies.

The frequency and extent of involvement in IS matters were combined with the knowledge and familiarity of CEO in major applications to derive a variable named CEO attributes. No significant relationship was found between this variable and IS implementation success, which would have suggested that the higher the value of the CEOs IS attributes, the higher the chances of IS implementation success. This finding is in contrast with the works of Delone

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(1988) who defined computer literacy in terms of computer experience through training or prior use and concluded that CEOs knowledge of computers and involvement in computerization leads to more successful computer use. Although, CEOs knowledge and familiarity with applications vary significantly among the sectors studied, there is no significant relationship between CEOs extent of involvement in IS matters and two of the grouping variables: PAT and sector, while a significant relationship existed with firm size.

From Table 4.22b, it came out clear that CEOs, being very busy people, were involved in IS matters only when there is need. This need may be when a decision that has policy implication is about to be taken or when decisions on major variations to the project resources are to be taken. It was also

observed that many CEOs (almost 27 per cent) are part of the project team. The involvement of CEOs includes attendance at project meetings, carrying out project tasks etc. Earl and Feeny (1995) have offered that it pays for CEOs to institutionalize business values for IT and also manage IT as an integral rather than an adjunct aspect of the business The CEO is also advised to build an executive team for IT that includes the CIO or IT manager.

Barely over half of the respondents agreed that their firms carry out need analysis before IS investments are made. The implication of this is that a significant proportion of the firms might be making blind IS investments.

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5.7

IT Governance

IT governance is about how the processes and authority for resources, risk, conflict resolution, and responsibility for IT are shared among business partners, IT management and service providers (Luftman, 2003). Central to the theme of IT governance is the organization of the management of IT resources i.e. who makes what decision, for what reason(s) and how. A key aspect of this theme is the question of who is charged with the responsibility of management of IT resources in the organization the CIO or IT manager. The findings from this study showed that 70 per cent of responding firms had IT departments, which indicates a strategy of centralized management of IT resources. Opinion differs on whether centralized or decentralized management of IT will produce best performance. However, depending on the operational context, Brown (2003) highlights the expanded model of IT management to include federal and customized arrangements. Some of the responding firms that do not have IT department are operating a decentralized IT management strategy where each department manages its IT resources. Decentralization, even though fast loosing popularity in Nigerian manufacturing firms facilitates local control of strategic application development and maintenance, thereby enabling users to gain control of their application development process.

It has been conceptualized that the personal characteristics of the IT manager or CIO are critical to the success or failure of IT to meet the business expectations of management. To this end, this study probed extensively into some personal characteristics of the CIO, which are considered important to 262

the concept of management of IS resources. Henderson and Venkatraman (1999) submitted that the criteria to assess the performance of the IT function should be re-conceptualized and re-focused on the need to evaluate the IT manager using a mix of four criteria based on the evaluation of the IT function as cost centre, service centre, profit centre and investment centre. These researchers submitted that in the absence of such a fundamental shift in the criteria to assess the performance of the IT function, the IS organization would not have emerged as a serious and significant member of top management team. Therefore the empirical results of this study that most IT managers in the manufacturing firms are at the level of manager/senior managers and not members of top management shows that IT matters is not accorded a critical role in the firms.

This study also probed into the professional lineage of the IT manager, following the submission of Earl and Feeny (1995) that IT managers that add value to the business often tend to be skilled analyst, natural tutors, good business theorists and systems thinkers. The IT manager needs to communicate his ideas to business management and an inability to strike optimum executive relationship is unlikely to add value to the organization. Earl and Feeny went further to profile the CIO who adds value as being loyal to the business, goal oriented, good communicator and had played an IT analyst role in the past. It was interesting to find out in this study that some respondents agreed that their IT managers had inadequate IT and business management skills. In addition, a good number of the respondents (as high as one eight of them) were also Undecided on questions bothering on the

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adequacy of IT or business management skills of their IS/IT manager. What can be deduced from this is that either the respondents have not had the opportunity of closely observing their IT manager, or that they are unwilling to comment on the competence of their IT managers openly to strangers.

5.8

IT Training

Various authors have investigated the impact of computer literacy and training on the productive use of information systems in organizations. While stressing the importance of IT training, Montazemi (1988) indicated that the level of an end users computer literacy correlates with the users participation in the systems development process. Given the fact that the organizations need to actively support end-user computer training to maximize the impact of IT investments, it is not surprising that almost 70 per cent of respondents in this study indicated that their organizations had a policy to update their IT skills. This is in line with the submission of Henderson and Treacey (1993) who believed that effective organizational support and comprehensive user education is important and that the different types of users need different types of training. Similarly, Montazemi (1988) found that end-user computer literacy positively correlated with user satisfaction in small business environments. The important submission however is whether the policy on IT training for staff is put to use.

5.9

Stages of IT Computing

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The results of this study indicated that IT is visible in almost all the firms investigated but that IT is mostly deployed in an uncoordinated and unstructured manner in these firms. More often individual departments introduce computer systems to meet their own departmental needs without regard to integrating them with other applications in other departments. Integration of these disparate applications need to be addressed if the applications are to support or drive the entire business through information and sharing, systems networking, etc. Nolan (1979) introduced the notion of developmental integration in order to achieve optimum IT support for the business. Almost equal proportions of the responding firms were at levels one and five of Nolans five level stages (Table 5.1). This shows that most of the firms were either just commencing IT development (small and medium firms) or had proceeded very far in IT development (mostly large firms) with very few firms in between. The findings of this study are consistent with the findings of a similar study in India by Saxena and Sahay (2000).

Table 5.1: Nolans Stage of Computing Evolution in Nigerian Manufacturing Firm

STAGE 1 2 3 4 5 Total FREQUENCY PERCENT 15 10 13 19 15 72 20.8 13.9 18.1 26.4 20.8 100.0 20.8 13.9 18.1 26.4 20.8 100.0 VALID PERCENT

Source: Fieldwork

5.10

Outsourcing IT Services

Outsourcing in IS strategy research has both research and practice dimensions. To the researcher, outsourcing is important as a variable that can 265

impact on IS structure, management and performance. To the CIO, outsourcing is an important aspect of IT governance. To some CEOs, outsourcing is viewed as the answer to their dissatisfaction with IS (Earl and Feeny, 1995) and a strategy for improving the benefits/cost profile of IS investments and operations.

Outsourcing is popular in Nigerian manufacturing firms as almost 80 per cent of the respondents agreed that their firms outsource one computer services or the other. Although there are sectoral differences in the outsourcing of IT, services outsourced included moderate to major IT repairs.

Software development is another in-sourcing or out-sourcing decision that manufacturing firms must take. It has been reported by a number of authors that for IS to be strategic it must be rare and perfectly non-imitable (Barney, 1991; Wernerfeldt, 1984). This is because IT products and services are easily commoditized (Carr, 2004). To achieve this, manufacturing firms must be able to satisfy to some extent the need to develop applications to suit or enhance their business processes rather than purchasing turn-key applications which have generic applications across firms. Following this premise, the study

investigated and found that almost 60 per cent of respondents are able to meet their software development needs from in-house software development. However, more than half of the respondents did not believe outsourcing saved cost. Several reasons may be adduced for this observation that outsourcing is more expensive than in-sourcing despite the high success rate being reported for outsourcing arrangements as a whole. Some barriers to success with

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outsourcing have been identified to include the management of customer/ supplier relationship (Lacity and Willcocks, 2000). Alders (2001) also suggested that once a decision has been made on which IT function(s) to outsource, the owner of the decision right should be included in the vendor selection process. Lacity and Hirschheim (1995) have also noted that even though senior IT managers are normally given the responsibility to manage outsourcing contracts and vendors, many organizations often underestimate the management costs associated with managing an outsourcing contract. Consequently, Brown (2003) agrees that two critical success factors for outsourcing IT functions are the sourcing of contracts and management of relationship with the supplier of outsourced functions.

5.11

IT Support for Business Processes

In Indias manufacturing industry, the departments that are computerized to the greatest extent are Finance and Accounts, Stores, and Purchasing/Vendor development (Saxena and Sahay, 2000). This reflects a transaction processing dominance of IT deployment. The findings of this study perfectly agree with the findings of Indian situation as most of the surveyed firms are also transaction processing-focused, with Finance and Accounts and Production/Manufacturing applications dominating. This finding is not surprising as the Finance/Account department is usually the first to be computerized in major industries, especially manufacturing.

The least business process that IT supports in the firms is Customer Relations Management (CRM). This is due, perhaps to the prohibitive cost of CRM

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systems, and the inability of decision makers to match the potential benefits of these applications with the high cost. Nevertheless, about half of respondents claimed that they develop strong ties with customers as a business strategy. It is clear that the way ties are operationalized is probably through manual systems, and not through CRM applications.

This study also found that firms in some sectors have deployed computerassisted production management utilities in their factories. During the interview sessions, a couple of big firms in the Food, Beverages and Tobacco sector indicated that they had computerized their production facilities and consequently reducing the workforce on the production floors.

The least used IT application found among Nigerian manufacturers from this study is the use of Wide Area Networks (WANs). The use of external networks including Wide Area Network (WAN) is almost distinguishable along sectoral lines. Firms in the Food, Beverages and Tobacco, Basic Metal, Iron and Steel and Chemical and Pharmaceuticals sectors often tended to operate WANs. This may be because of the large size of the firms in these sectors or the competitive advantages of having multiple manufacturing plants and/or integrated supply chain based on electronic networks.

5.12

IT Strategic Planning

Strategic Information Systems Planning (SISP) is the process of identifying a portfolio of computer-based applications that will assist an organization in executing its business plans and realizing its business goals (Gottschalk and

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Hogskolen, 1999). Salmela et al (2000) have also noted that IS planning literature suggests two competing theories of effective planning in turbulent environments. One of such theory predicts that organizations using a formal, comprehensive planning approach will be more successful. The alternate theory predicts that organizations using informal, incremental approach will be more successful in such environments. The results of this study show that the planning characteristics of the majority of Nigerian manufacturing firms are of the incremental planning type. The characteristics of the incremental planning approach, according to Salmela et al (2000), include: plans are simple and loosely integrated with overall strategy, personal experience and judgment of a few key individuals are used to derive plans, basis of decision is the understanding of a few key individuals, etc. Samela et al concluded in their own study that in a turbulent environment, comprehensive IS planning may be more successful than incremental IS planning. However the researchers were also quick to submit that their results and conclusion appears surprising and invited more research to examine the theories from alternative perspectives.

The thinking of most IS researchers is that comprehensive IS planning costs too much and takes too long to carry out. They predicted that management would soon loose interest in implementing plans with rapid environmental changes. Hence most researchers view incremental IS planning as the most promising alternative in turbulent environments. The findings in this study support this thinking as this study found that incremental IS planning was more frequently used by Nigerian manufacturing firms in their unpredictable,

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competitive and turbulent Nigerian business environment in contrast to the expectations of Salmela et al (2000).

5.13

Industry Competitiveness and IS Planning Approach

Business environment can be classified as (i) simple, static and predictable, (ii) dynamic and/or complex and (iii) fundamentally unpredictable and thus turbulent or hypercompetitive (Volberda, 1996). In turbulent environments, changes are not only frequent and unpredictable, but the environment is also seen as hostile. Firms, whose responses are slow, inappropriate, incomplete, or too slow, are severely punished, and their ability to experiment, learn and adapt is reduced (Hanssen-Bauer and Snow, 1996).

Salmela et al (2000) in an action-based research submitted that comprehensive IS plan will likely be more successful than incremental planning in an environment where the frequency and stakeholders expectation is highly unpredictable. However, an alternative hypothesis claim that incremental IS planning will be more successful in such environments. To this extent, this study sought to investigate empirically the appropriateness of the competing hypotheses in the Nigerian manufacturing situation, using industry competitiveness as a measure of environmental turbulence. This was the origin of the hypothesis stating that there is no relationship between use of comprehensive IS planning methods, sector competitiveness and the performance of manufacturing firms in Nigeria.

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Most IS planning researchers had opined that incremental IS planning will be more successful in a turbulent business environment. This is because in environments where stakeholders decisions change frequently and unpredictably, IS planning using step by step, detailed analysis might not succeed as a result of high costs and length of time required to complete planning. The results of this study showed that (i) the Nigerian manufacturing business environment is both highly competitive and unpredictable and (ii) that most Nigerian manufacturing firms used incremental IS planning method. The probable reason for this could be as a result of (i) above, but also possibly because these firms may be unwilling or unable to devote resources and discipline required for comprehensive planning. Thus, the results of this study showed that there is substantial support for incremental IS planning approach in turbulent environments.

Incremental planners formulate initial interpretations of the planning issues and share them with each other to develop a common understanding of the issues (Sambamurthy et al, 1994). Incremental planning can be based on informal contacts and face-to-face interaction and communication (Pyburn, 1983). Furthermore, incremental planners search for satisfactory solutions that deal with environmental threats and opportunities within the limits of the organizations current resources (Vitale et al, 1986). Decisions thus rely on personal experiences and judgments (Sambamurthy et al, 1994). The individualized nature of planning allows decision makers to choose a time horizon appropriate to current circumstances (Pyburn, 1983). In general, the initiating process is kept highly efficient, and implementation is emphasized

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(Vitale et al, 1986, Earl, 1993). Through informal contacts, planners are able to remain continually appraised of ongoing problems and opportunities (Pyburn, 1983) and decisions can be made at any time (Earl, 1993).

Majority of the firms in this study share the characteristics described above because only a few are very large firms where the resources required for comprehensive IS planning might be available. Nevertheless, even in some large firms, the opinions of only a few key individuals (CEO, Finance Director and/or the IT manager) count in major IS decisions. During the interview sessions, a number of IT managers expressed bitterness in the ways and manners IT/IS suppliers are imposed upon them by higher management without consideration for supplier performance history or for formal competitive selection process.

Incremental IS planning however have some reported difficulties. Earl (1993), mentioned that senior managers express concern that incremental IS planning fails to address critical needs. Some IS managers have also warned about poor definitions of IS requirements and infrastructure (Pyburn, 1983), while others have worried about how future planning themes would be generated. Program and policies might also change when there is turnover of the champion(s) of previous plans. Earl (1993) has warned that organizations adopting incremental IS planning may fail simply because a new CEO/IT manager, management team or management style could erode the incremental planning process.

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5.14

IS Strategy Implementation

Studies on IS plan implementation identify a number of reasons for IS implementation failure. Among the cited causes are: management involvement was lacking (Earl, 1993; Teo, 1994); recruiting IS specialists was difficult (Galliers, 1994); there was lack of project champion (Galliers, Pattison and Reponen, 1994); the duration of systems development was too long (Lederer and Mendelow, 1993); the plan was not sufficiently useful (Lederer and Salmela, 1996); commitment for implementation was lacking (Lederer and Sethi, 1992); the plan did not fit the organization (Lederer and Sethi, 1996); organizational characteristics prevented implementation (Premkumar and King, 1994); management had insufficient competence (Raghunathan and Raghunathan, 1991). This study found that the almost 40 per cent of respondents claimed that their firms had between 75-100% success rate as a result of reasons related to the role of management support and/or involvement. These reasons are also prominent in a study by Gottschalk (2000), who ranked top management commitment to IT projects very high as a top-ten implementation success predictor. This study investigated the level of top management commitment as exemplified by the frequency of their attendance at IT project meetings. Attendance at IT project meetings is believed to be a good measure of the level of commitment of these top executives. This is because it is at project meetings that decisions are made about the project and their presence or absence at critical stages of project implementation can make or mar project. Other findings of Gottschalk (2000) that are consistent with the findings of this study include whether a project team was constituted or not, placing premium on knowledge and relevant

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skills in the appointment of project team members and the specification of sanctions (ahead of implementation) for implementation tasks defaulters. 5.15 IT spending and Firm Performance

There have been several studies investigating the relationship between IT spending and firm performance. These studies have come up with varying findings making it practically difficult to make a singular conclusion on the impact of IT on organizational performance. Previous research have shown the relationship to be weak, negative or mixed (Cron and Sobol, 1983; Turner, 1985; Bender, 1986; Markus and Soh, 1993; Rai et al, 1997 and Tam, 1998). The reason may be that although IT may impact on some productivity levers like better coordination, higher factory volumes, etc, it is often difficult to translate these benefits into profits. Several other reasons have been adduced for the failure of IT to impact on business performance. One explanation is that competitors quickly match IT investments thereby eroding the initial competitive advantages of IT investments. Hence, performance gains become unsustainable. Another reason is that IT investments by selling firms are paralleled by IT investments by buying firms (Shin, 2001). The potential increases in profits are thus offset by the fact that buyers are able to use IT to reduce the costs of searching for low-cost products or services and selecting alternative more competitive suppliers.

Recently, Shin (2001) submitted however, that increased IT spending improves net profit, but not performance ratios such as Return on Asset (ROA) and Return on Equity (ROE) of firms with higher vertical integration

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and higher diversification. This study sought to investigate the relationship between IT spending and organizational performance as measured by Turnover or Profit-After-Tax (PAT). The results showed that increased IT spending does not lead to increased PAT neither does it lead to increased turnover. This finding is opposite to Shins results, but is consistent with several other authors (Cron and Sobol, 1983; Turner, 1985; Bender, 1986; Markus and Soh, 1993; Rai et al, 1997, and Tam, 1998).

5.16

Business-IS Strategic Alignment and Firm Performance

The term alignment or fit or congruence has grown so much in popularity in IS strategy research and practice. Simply put, alignment refers to some form of cohesion or synchrony between one thing and another in such a way that the association impact positively on the outcome of the association. Alignment is increasingly becoming unavoidable in the context of business and information systems strategies research and practice. To the researcher, business IT strategy alignment is central to the study of interrelationship among variables acting singly or in combination to determine the outcome of another variable. Alignment is relevant when these variables act in combination and as such researchers are often interested in determining the optimum form or strength of the association. IS researchers have responded by examining the need to align IS with business and/or align business with IS as well as the nature and form of the alignment (Camillus and Lederer 1985; Chan et al, 1997; Gilbert 1995; Henderson and Venkatraman 1992; King and Teo 1997; Lederer and Mendelow 1989; Luftman et al. 1999; Reich and Benbasat 1996;

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Sambamurthy and Zmud 1999; Segars and Grover 1998). To practice, alignment is critical to a firms success as has been shown to impact on the business value of a firm and industry researchers have argued that a firms inability to realize sufficient value from its IT is due in part to an absence of strategic alignment (Henderson and Venkatraman, 1997; Chan et al. 1997). These researchers have used different performance metrics (net margin, market share, revenue growth, return on investment, cash flow and profitability) to illustrate the impact of IT-Business alignment. In addition, business executives are increasingly becoming skeptical or wary in approving IT spending perhaps because IT practitioners have not been able to demonstrate the impact of such spending on business performance as highlighted by Henderson and Venkatraman (1997). The results of this study showed that business strategies (revenue growth or productivity improvements) might result in improved performance. However, when these strategies are combined (aligned) with a functional strategy like IS strategy, this alignment results in better performance of the business.

5.17 Firm Size as a Moderating Variable in Business-IS Strategy Alignment Furthermore, the role of a moderating factor in business-IS strategy alignment has also been widely investigated. Different moderators have been shown to have impact on the alignment of business and IS. For example, Venkatraman (1989) noted that a moderator can be viewed categorically (type of operating environment, stages of product life cycle, types of organizations etc.), or characteristically (degree of business-relatedness, degree of competitive

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intensity etc).

Prescott (1986) investigated the moderating role of the

environment and concluded that the environment in which a firm operates moderate the form of strategy-performance relationship and not the strength of the relationship. In a more recent study, Chan (2002) examined the techniques organizations used to monitor and improve IS alignment within the context of organizational structure. She found that informal organizational structure played a far more important role than expected in improving IS performance. In 2004, Jouirou et al (2004) concluded that aligning IT strategy with partnership strategy and organizational structure generates best performance levels in small and medium industries.

This study used firm size as a moderator of the performance implications of aligning business and IS strategies. The study found that firm size was strongly correlated with performance measured by PAT, (t=5.18, p0.01) and this can be explained as follows. First, firm size gives an indication of the bureaucracy in an organization. Bureaucracy is anti-fit and to that extent, small organizations are likely to be more efficient in their business operations. For example, a field force staff in a small firm may likely not need to burrow through a cloud of reporting lines to grant discount to customers or take onthe-spot product related decisions. The route to decision taking process has implications on the flow of information in an organization and information efficient organizations are healthier than organizations whose flow of information is clogged (Gate 2001). This ease of information flow and its implication for business decisions could have a moderating effect on the performance impact of business IS strategy relationship.

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Secondly, manufacturing being manpower intensive requires large workforce. There will be performance implications of this workforce number in the competitive use of automated manufacturing operations using ComputerAided Manufacturing and Computer-Aided Designs (CAM/CAD). The distinction between firms using large workforce and others using lean work force reflected in lower costs (salaries and wages, etc), less disruption to business arising from trade disputes among management and staff, lower challenges associated with dealing and managing people of diverse background and educational attainments, etc).

Thirdly, in Nigerian manufacturing, the pattern of ownership of manufacturing firms is such that small and medium firms are largely privately owned while large and very large firms are publicly owned. Firm regulations are likely to constrain large firms in their human capital management practices and competitive approaches. For instance, large firms are likely not to attempt sharp and unwholesome practices like tax evasion, illegal importation, evasion of import duties, etc. All these activities are likely to influence the performance of the organization, which invariably will vary firms on the basis of profitability. Fourthly, given the submission of Hagman and McCahon(1993) and Blili and Raymond (1993), small firms are likely to be more operationally focused and pursue less of strategy making and implementation. Various reasons were given for this observation ranging from the owner-takes-all-decisions syndrome associated with small firms to high focus on cost, which usually

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militate against strategic investments etc. These distinctions between small and large firms will certainly have implications (from the regression equation) on performance of firms.

Fifthly, firm size has been shown to correlate with IT investments and integration (Brynjolsson et al, 1994) and IT can be used to reduce internal coordination costs (Brynjolsson et al, 1994, Dewan et al, 1998). Therefore, large firms that have diversified into several businesses can distinguish themselves in performance by appropriately using IT to effectively coordinate their internal business operations by appropriately using resources such as LAN, WAN, intranet and internet-based enterprise portals, etc.

5.18

Business-IS Strategic Coalignment

Hypotheses relating Business- IS strategy co-alignment was tested with and without firm size as a moderating variable by operationalizing business strategy with revenue growth strategies and productivity improvement strategies. Using productivity improvement strategies as a business strategy, the model appears weak in explaining the relationships between the dependent variable (performance measured by PAT) and the independent variables (business-IS strategy co-alignment and firm size); although statistically significant at 0.05. The R2 was 0.270 indicating that the independent variables in the model explained 27 per cent of the variations in the dependent variable. The results also indicated that a unit increase in firm size is associated with 1.66 increase in PAT, and a one unit increase in Productivity-ISS co-alignment - Firm Size interaction index results in 0.00003

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unit increase in PAT. By contrast, a unit increase in the productivity-ISS alignment index results in a concomitant (but negligible) 0.005 unit increase in performance. This result suggests that coalignment is more predictive in the context of firm size as a contextual variable and less so in the absence of that context.

However, using revenue growth as the business strategy, a different result was obtained. Even though, firm size was a moderating factor influencing the relationship between business-IS strategy co-alignment, a unit increase in the interaction effect between business-IS co-alignment and firm size results in a decline in PAT. The full model can be explained thus: a unit increase in firm size results in 2.52 units increase in PAT. Similarly, a unit increase in the revenue growth-ISS alignment index will result to a concomitant (but negligible) 0.0006 unit increase in performance. However, a unit increase in Revenue growth-ISS co-alignment - Firm Size interaction effect results in a (negative) 0.0002 impact on PAT, i.e. decline in PAT. The independent variables in the linear regression model explained 27.2 per cent of the variations in the dependent variables. A probable explanation for this observation is that since revenue growth strategies are long-term futuristic strategies, its alignment with IS strategies to form an index may not result in improved performance (as measured by PAT) on the short term. Since most IS installations and applications that are focused on growing the business for long-term gains are expensive (ERP installations, IT-driven strategic initiatives, etc), profit may actually decline on the short run and performance effects of these installations and initiatives will be realized in the future.

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The test of significance for hypotheses Hoa and Hob were found to be significant at the 0.05 level; hence, the alternative hypotheses stipulating that there is a relationship between performance and business-IS strategy coalignment in the context of firm size was accepted. These findings have several implications for research and practice. Even though the literature is full with plethora of cases on the impact of IT on business productivity, a careful review of such cases highlighted the importance of a context for such productivity gains. Recent studies on impact of IT on US productivity growth by McKinsey Global Institute (MGI) in 2001 reported that the acceleration of the mid 1990s in the US was concentrated in only six sectors and that IT was one of key factors contributing to the productivity jumps. The study highlighted some of the specific roles IT played in enabling businesses. Large retailers like Wal-Mart and Target leveraged IT to manage the increasing complexity of their operations and to improve efficiency in the face of competition. Similarly in the semiconductor sector, IT when used to build design capabilities as embedded in manufacturing and testing equipment, enabled the sector to respond to the demand surge of the mid-1990s as well as offer new products. These illustrations from the McKinsey report illustrated that IT is important to productivity, but in a context. The context according to a study of three sectors (retail, retail banking and semiconductors) concluded that IT is critical in enabling productivity growth, but it does so in the context of a broader set of managerial decisions.

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Consequent upon the importance of a relevant context in investigating the impact of IT or business-IT strategic alignment on performance, this study decided to use firm size as the criterion or context upon which business and IS strategic alignment can interplay to determine firm performance. The results of the analyses of the hypotheses and models pertaining to alignment in Chapter 4 of this study showed that the interaction of business and IS strategy in the context of firm size is a significant predictor of firm performance measured by PAT. This conclusion was derived using a Moderated Regression Analysis (Venkatraman, 1989). Out of six perspectives for measuring alignment highlighted by Venkatraman (1989), the moderation perspective was chosen and this is consistent with the approach of Tallon and Kraemer (2003). The form of moderation was tested rather than the strength of moderation given the theoretical postulation of this study that the performance of a firm is jointly determined by the interaction of business-IS strategic co-alignment (predictor variable) and firm size (moderating variable) and thus the choice of MRA as against subgroup analysis which is suitable in testing the strength of moderation. (Arnold, 1982; Sharma, Durand and GurArie, 1981).

The finding that business-IS strategic co-alignment is a predictor of firm performance using firm size as moderating context supports earlier studies that a criterion based measure of impact of business-IS strategic alignment has impact on a firms performance. However, no previous study was found reporting the impact of business-IS strategic co-alignment and firm size on performance as measured by PAT. The only study found was one by Seyal et

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al (2000) highlighting the impact of firm size on use of IT in Brunei. In the review of literature several other contexts (environment, managerial decision, business strategy dimensions, organization structure, etc) have been used to explain the impact of business-IS alignment on firm performance. Therefore, this study could not specifically relate the dependent variable (PAT) and the independent variables (firm size, business-IS strategic co-alignment and interaction between firm size and business-IS strategic co-alignment) in the context of previous researches.

5.18.1 Measuring Business-IS Strategy Coalignment Using Moderated Regression Analysis (MRA) within the moderation perspective to test the form of alignment between information systems strategies and business strategy with firm size as the moderator, the study found that the alignment of business and information systems strategies could to some extent predict the performance of a firm in the Nigerian manufacturing context. The findings of this study suggests the following

framework for understanding the relationship between business strategies and information systems strategies and the definition of the concept of business-IS Strategy Coalignment Maturity Criteria (SCMC). SCMC is defined as the key variables that describes each of the components of the coalignment maturity criteria as illustrated in Figure 5.1
Revenue Growth Strategies Productivity Improvement Strategies

Business-IS strategic co-alignment maturity criteria (SCMC)

Information Intensity

Array of IT applications

IT governance 283 issues

Change Management Strategies

Figure 5.1: Business-IS strategic co-alignment maturity criteria

5.19

Performance-Alignment Maturity Grid

The results, interpretations and findings of this study were subsequently used to devise a performance-alignment maturity framework, which Nigerian manufacturing firms could use to develop and mature on their alignment journey. The grid is also useful to predict the implications of aligning business and IS strategies (using an index) on the different measures of performance in the contexts of turbulent Nigerian manufacturing business environment.

High 4 Alignment index 5 6

Low 1
Financial

2
Business Performance

3
Non-financial

Figure 5.2: Performance-Alignment Grid

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The alignment index obtained from the SCMC for each firm is then used to position manufacturing firms on a six-quadrant grid relating the impact of business and IS strategies alignment on the performance of the firm. Business performance ranges from financial (easily measurable) and nonfinancial (not-easily measurable) is on the vertical axis of the grid and the alignment index is on the horizontal axis. Each quadrant in the grid is uniquely described with a set of characteristics clearly distinguishing it from the other quadrants as well as a set of recommended actions that the firm can undertake to move up on the alignment ladder (Table 5.2).

Table 5.2: Alignment Characteristics for each of the Six Stages of Alignment Maturity of a Firm
STEP 1 CHARACTERISTICS Alignment-blind: Customer-supplier alignment not recognized nor measured, needless for business-IT alignment. No defined structure and/or processes. Typical of small sole proprietorship where owner takes all decisions along unstructured processes. Recommendations: Put in place structure and processes for the firm by defining business direction for the business: vision, mission, goals, objectives, policies and procedures etc. Alignment suspect: Firm is aware of alignment but has not made efforts (formal or informal) towards alignment. Recommendations: Map processes to identify critical processes and structures needed for realization of goals/objectives. Alignment prospect: Firm is aware of alignment, but low on alignment index. Looking for alignment outcomes in business performance, but no formalized approach to pursue outcome. Unsustainable business performances as a result of weak alignment between business strategies and functional strategies (e.g. ISS). Recommendations: Map processes, Devise and implement customer-supplier alignment by defining Service Level Agreements (SLAs) taking into consideration organizational and environmental contexts (e.g. firm size).

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Alignment stars: Firm is aware of alignment and high on alignment index. Firm has made some efforts (formalized vision, values, strategies etc.) on alignment journey. There is largely a mismatch or incongruence in strategies. Performance outcome is largely financial. Recommendation: Re-map processes. Examine functional strategies for fit with corporate and/or business strategy/direction. Alignment advocates: Firm is aware of alignment. Formalized strategies and strategies are aligned to supporting vision/mission of the firm. Performance outcome is essential financial but some non-financial gains are becoming evident (customer satisfaction, teamwork, innovation, etc). Recommendations: Continuous improvements in fine-tuning and adapting strategies to meet the dynamics of turbulence within the organization and its business environment. Alignment warlords: Eldorado! Formalized strategies are aligned to supporting the aims of the firm. Performance outcome has transcended beyond financial and nonfinancial gains are clearly seen supporting the vision/mission. IT drives business and business impact IT to achieve the 2-way synergy between business and IT. Desired but rarely attained.

Source: Authors synthesis of field data

CHAPTER SIX
SUMMARY, CONCLUSION AND RECOMMENDATIONS 6.0 Introduction

This study investigated the relationship between business and information systems strategies and the impact of the relationship on the performance of Nigerian manufacturing firms. The study used data from 72 Nigerian manufacturing firms in six active subsectors of Nigerian manufacturing industry. Data were collected through 301 valid responses from a semistructured questionnaire, supplemented with face-to-face interviews with CEOs and CIOs as well as action research.

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6.01

Summary of Findings

The major findings of the study are: 1. The Nigerian manufacturing business environment of today is characterized by policy inconsistencies, heavy import and oil dependencies, weak infrastructure base, unfavorable lending rates, multiple taxes etc. all leading to high cost of production. These challenges are responsible for the declining contribution of manufacturing to national Gross Domestic Product (GDP). Contribution to GDP declined to 4.7 per cent in 2003 and capacity utilization stood at 48.8 per cent. (This Day Newspaper, Vol. 11. No. 3621, pg 27). Manufacturers Association of Nigeria (MAN) opines that the cruel reality confronting its members is that 30 per cent of its 2500 members have closed or suspended production, 60 per cent are considered ailing, and only 10 per cent are operating at sustainable levels. 2. The study found that the majority of the firms had vision statements and that most of the firms employ a combination of revenue growth and productivity strategies. 3. Given the characteristics of the Nigerian business environment, this study adjudged such operating environment as turbulent in terms of the unpredictability of stakeholders expectations and a hostile business environment. Planning within the context of such an environment requires the use of appropriate business models and tools like scenario planning or decision aids to aid planners cope with environmental vagaries and competitive forces, which varied across sub-sectors.

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4. The forces that collectively determine industry profitability varied among the sub-sectors of the manufacturing industry in Nigeria based on the results of this study. A regression of performance (PAT) against sector competitiveness and IS planning method used reveals that these independent variables interplay to predict 9.1 per cent (R2 is 0.091) of the relationship with the dependent variable PAT. Using a general linear correlation test, the study also found that the relationship between a firms performance and its IS planning method and business competitiveness was statistically significant at the 0.01 level. 5. Maintaining consistency with most previous studies, this study did not find any positive relationship or association between IS spending and performance (PAT). This is no surprise as several reasons has been given for this findings and there are recent calls for defining an appropriate context before IS investments can be justified in terms of resultant PAT, ROE or ROA. The context is provided by organizational variables and/or environmental variables. 6. This study gained a lot of insights from oral interviews with CEOs, as well as action research findings by the researcher on why previous studies have found significant relationships between CEO-IS relationships and IS implementation success. However, this study did not find any significant relationships between CEO IS attributes (knowledge of software, involvement in IS project meetings etc) and IS implementation success.

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7. This study also found that for the CIO to add value s/he must familiarize with the business colleagues and, to quote Earl and Feeny (1994), be skilled analyst, natural tutors, good business theorists and system thinkers. This study found that most CIOs of the responding firms are business executives with IT expertise, a mix of skill that is better suited for realization of a firms objectives through information systems and/or technology. 8. Outsourcing is another important area this study found interesting results. A good proportion of firms studied can be said to be on-track on the business-IT strategic alignment journey as they source 60 per cent of their software needs in-house. This is critical because for any resource to be strategic, it must be rare and off-the-shelve applications do not meet this requirement. 9. Majority of the firms studied are either at the bottom or at the top of Nolans five stages of computing evolution (Nolan, 1979). In fact equal proportions (20.8 per cent) are at stages one and five. The implications of this is that some about one-fifth of the responding firms have not begun their IT journey while another one-fifth is up there where IT applications are being refocused and repositioned to better support the firms vision/mission. As expected, IT dominates the Finance and Accounts function and Customer Relations Management tools are rarely used in Nigerian manufacturing probably because of their associated acquisition and deployment costs. 10. Business and information systems strategies had very little positive impact on business performance as measured by PAT (R2 = 0.033).

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However, when a moderator variable (firm size) was introduced as a critical success factor to moderate the impact of business-IS strategy coalignment on performance, a significantly better model at the 0.001 level was obtained with substantial improvements in the predictive power (R2 = 0.286) of the model. 11. The results of the various regression tests and the patterns of findings from the study were used to devise a co-alignment maturity criteria using the set of operational variables used in the study. The index obtained from these criteria can be used to place firms on a performance-alignment grid with the index score on the horizontal axis and some measures of performance on the vertical axis. Six possible categories ranging from alignment-blind to alignment warlords are derivable from the alignment grid.

The study has bridged an important gap in the dearth of literature on Information Systems Strategy (ISS) research in Nigeria. Whilst few empirical studies exist on ISS research on developing countries (Singapore, India, Brunei and some east African countries), no literature was found on this subject in Nigeria.

6.2

Limitations of the Study

Whilst this is a modest contribution to strategic management research, the results are only meaningful in the context of the environmental and operational variables used in this study. To this extent, the following suggestions are being made for future studies:

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a. Firm performance can be measured objectively (financial) and subjectively (non-financial i.e. managers opinion). Miller (1987) opined that subjective measurements are better than objective financial measures because accounting information is not readily available (being strategic) and, secondly they are not reliable since owners of such information could manipulate them for various reasons. Consequently, future studies can use subjective measures of firm performance e.g. improved production, customer satisfaction, ability to innovate, impact on performance management etc. in relating IT investment with firm performance. b. Whilst firm size is used as the moderating variable in this study, future studies can use other variables such as state of computerization, organization structure or culture, and manufacturing capacities. c. Future studies might investigate the strength of moderation using subgroup analysis rather than the form of moderation as was done in this study. In addition, other studies can employ the theoretical basis and analysis of alignment using other perspectives of fit - fit as mediation, fit as matching, fit as gestalts, fit as profile deviation and fit as covariation (Venkatraman, 1989). d. This study has utilized data from the manufacturing sector of the Nigerian economy. Future studies can investigate the predictive ability of business-IS strategic co-alignment and firm size on the performance of organizations within the services sector of the Nigerian economy, as had been done by others in developed economies.

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.3

Recommendations

For Nigerian manufacturing to move out of very challenging situation it has found itself, the government through its current reform programs must address some of these challenges. The manufacturers on their own should also ensure that the sector transit from playing in the local market to achieve world-class manufacturing status. The following are some recommendations that were derived from the findings of this study, which are considered important for Nigerian manufacturing.

1. Business leaders should justify IS investments by attempting to align/fit/match their business strategy and Information Systems Strategies, while ensuring that their strategies are concomitantly appropriate to their organizational and environmental contexts. 2. The competitiveness of an industry/sub-sector and the IS planning methods used can jointly determine the Profit After Tax of a manufacturing firm. Consequently, firms must first analyze the nature of the competitive forces facing their industry to determine the most appropriate IS planning methods in order to be able to derive maximum payoff from their spending on IS. 3. IT spending alone may not necessarily lead to better performance because competitors can easily reproduce IT resources and applications. Therefore, firms must devise custom frameworks as the basis of their business and IS strategies; so that the impact of their IS involvements can be

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sustainable in their competitive environments and not easily reproducible by competition. 4. The Chief Information Office (CIO) must add value, and the CIO must understand the language of the CEO as well as be able to win top management support for IS strategies that will effectively support the vision of the business. This is important in order to ensure that IT supports the business and that the business shapes IT. 5. Out-sourcing is good, but cannot be taken as an automatic, error-free alternative to a non-performing in-house IS function. The in-sourcing capabilities of a firm must be firmly developed as the foundation of a sustainable IS strategy. Furthermore, outsourcing options must carefully investigated and managed to the firms advantage.

Table 6.6 is a summary of recommendations synthesized from the findings of the study. This is further linked to the objectives that were set out in a bid to present in a single view the relationships among the objectives, findings and recommendations.

Table 6.1: Linking Objectives, Findings and Recommendations

Objectives Findings Recommendations

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1.Investigate the .1 existence and types of business and information systems strategies. .2

Nigerian manufacturing .1 Information systems strategy like firms have business and any other functional strategy information systems should derive from the business strategies (formalized or strategy for it to be meaningful not). and contributory to firm Firms employ a mix of performance. productivity improvement .2 While productivity improvement and revenue growth strategies are short term, firms strategies. should strive towards growing the .3 There are sectoral business for long term growth. differences in the .3 Firms in the Food and Plastic existence and use of sub-sectors must seek new ways business and information of doing business as a means of systems strategies. out-performing rivals.

Objectives

Findings

Recommendations

2.Investigate the .1 The Nigerian business .1 Given the turbulence in Nigerian impact of industry climate can be described business climate and the fact competitiveness as turbulent given the that sectoral differences exist, and IS planning impact of competitive firms must carefully analyze their approach on firm forces on manufacturing competitive strength and performance. firms. weaknesses before choosing .2 Customers bargaining sectors in which to play. power and rivalry are .2 While incremental IS planning strong competitive forces method has been supported while threat of domestic given the speed of responding to entrants is a weak force in environmental changes, firms Nigerian manufacturing. using comprehensive IS .3 Comprehensive IS planning approach may be more planning method is mostly successful (returning higher PAT) used by responding firms in Nigeria. compared to incremental IS planning. .4 There is a positive relationship between industry competitiveness and IS planning approach and firm performance as shown by the regression equation.

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3.Examine the .1 Business or information .1 existence of fit systems strategies did not between business impact on performance and IS strategies when they exist and are and its implication used singly. on performance. .2 When used together and in the context of another firm .2 characteristics, these variables were found to account for 27.85% of the impact the independent variables have on the dependent variable. .3 However, the interaction between business and IS strategies coalignment showed a better model (R2 is 28.6%) even though the interaction term was excluded in the regression model.

Business leaders must justify IS investments by attempting to align/fit their information systems strategies with their business strategies and in the context of a moderating (or CSF) variable. Firm size has been shown to be a moderating variable upon which business-IS strategies coalignment can thrive to impact positively on performance.

4.Investigate the 4.1 CEOs IS involvement was 4.1. The head of the implementation critical success f o u n d n o t t o h a v e a n y team must be knowledgeable about factor for IS project relationship with IS project the project to be implemented. implementation implementation success. success. 5.Investigate the .1 I T s p e n d i n g h a s a 5.1 Firms can spend money on IT, relationship relationship with PAT. but seek ways of deploying these IT between IT .2 I T s p e n d i n g h a s a in a strategic manner to confer spending and firm relationship with turnover. unique and valuable propositions to performance. the firm. Source: Authors synthesis of objectives, findings and results

.4

Conclusion

This study has been to provide empirical data on the practices and array of information systems infrastructure found in Nigerian manufacturing. The findings of this study has important implications for research and practice especially at this crucial period when Nigerian manufacturing firms are preparing to migrate from domestic to world-class manufacturing status. To research, this study has filled a knowledge gap in the dearth of literature on empirical studies analyzing the impact of information systems strategy on business performance. It has also provided areas of similarity and differences between and among developed and developing countries in the various aspects of Information Systems Strategy research. To practice, business

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managers in Nigerian manufacturing (CEOs, CIOs, etc.), will find this study useful as a basis for analyzing the potential business impact of the relationship between their business and information systems strategies

This study proposed an alignment framework using six alignment maturity criteria to analyze the relative positioning of Nigerian manufacturing firms on a performance-alignment grid. This framework also recommends appropriate strategies that firms may undertake to improve the performance impact of their business and IS strategic planning and implementation efforts. Since alignment is a journey and not a state, this study concluded that Nigerian manufacturing firms can transit from domestic to world-class status through continuous efforts at achieving fit between their business strategy and information systems strategy under appropriate organizational contexts.

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