MANAGING INTELLECTUAL CAPITAL FOR COMPETITIVE ADVANTAGE IN SELECTED BREWING FIRMS IN SOUTH EAST NIGERIA

CHAPTER ONE

INTRODUCTION

Background of the Study

The commencement of the Industrial Revolution is linked to a number of innovations, beginning in the second half of the 18th century. By the 1830s the following gains had been made in important technologies: textile, steam power, iron making, machine tools, chemicals, cement, gas lighting, glass making, paper machine, agriculture, mining, others are transportation, canals, roads and railways and these increased the standard of living, nutrition, housing, clothing, consumer goods and population increase (Evans and Ryden, 2005).

There was industrial revolution because of availability of leaders with the right skill, ability, intelligence and competence to turn around the nation’s economy.

In 1911, Frederick W. Taylor published his work, The Principles of Scientific Management, in which he described how the application of the scientific method to the management of workers greatly could improve productivity. Scientific management methods called for optimizing the way that tasks were performed and simplifying the jobs enough so that workers could be trained to perform their specialized sequence of motions in the one “best” way.(Jones and George,2009)

Prior to scientific management, work was performed by skilled craftsmen who had learned their jobs in lengthy apprenticeships. They made their own decisions about how their job was to be performed. Scientific management took away much of this autonomy and converted skilled crafts into a series of simplified jobs that could be performed by unskilled workers who easily could be trained for the tasks. Taylor succeeded because he was able to train his workers, which is human capital development, an aspect of intellectual capital management.

The term knowledge industries, knowledge work and knowledge worker are nearly fifty years old, they were coined around 1960 simultaneously but independently (Drucker, 2008). Before that time knowledge was typically considered the province of training and was thought of as an individual capability. However, in the mid-90s Peter Drucker began to write about “knowledge workers” and the “knowledge economy” and proposed the idea that knowledge was a critical organizational asset that was as important as capital or property (Drucker, 2008).

The initial idea of knowledge management (explicit knowledge) was that an organization’s knowledge needed to be documented and then placed in a database where everyone could access it whenever they needed it – no longer would employees only be able to learn when attending a training class.  Given the limitations of content management, by 2000 there began to be glimmers of a new perspective on knowledge within organizations. This new perspective (experiential knowledge) held among others that:

• much of an organization’s knowledge is in the heads of employees, with only a small percentage residing in documents, still recognizing that some explicit knowledge is needed and should be maintained.
• much of an organization’s knowledge is dynamic and rapidly changing so that what is “captured” is soon out-of-date.
• knowledge is essentially social and is developed and held by groups of people who engage together in a specific practice (Nonaka, Toyama and Nagata 2000).

Intellectual capital is an offspring of the knowledge era, which is still in its formative phase (Leif, 2011).  Intellectual capital was formally recognized in 1991 when the large Swedish corporation Skandia started implementing a comprehensive set of innovative knowledge practices to account for its intangible assets (Leif, 2011).  Intellectual capital includes the skills and knowledge that a company has developed on how to make its goods and services. The pioneering initiative, championed by Ian Carendi and Bjorn Wolrath, resulted in Leif Edvinsson being appointed as the world’s first director of Intellectual Capital (Adelman, 2011). Though systems for recording intellectual capital are now proliferating (growing), the concept is still mysterious to most wage-earners.

The importance and effect of effective management of intellectual capital can be evidenced by the economic growth of United States of America and Japan Economy. The United States of America is the world’s largest single national economy. The United States’ nominal GDP was estimated to be $17.311 trillion as of Q2 2014, approximately a quarter of nominal global GDP. Its GDP at purchasing power parity is also the largest of any single country in the world, approximately a fifth of the global total figure (Bureau of Economic Analysis, 2014). The United States has a mixed economy and has maintained a stable overall GDP growth rate, a moderate unemployment rate, and high levels of research and capital investment. It had the worlds ninth-highest per capita GDP (nominal) and sixth-highest per capita GDP (PPP) as of 2013. U.S. real GDP contracted by 2.1% in the first quarter of 2014, the first decline since 2011 However in the second quarter of 2014, the U.S. real GDP grew by 4.2%, reversing the contraction seen in the first quarter and is higher than previous estimates (U.S. Economy – Basic Conditions & Resources , 2011).

Also the economy of Japan is the third largest in the world by nominal GDP  the fourth largest by purchasing power parity and is the world’s second largest developed economy. According to the International Monetary Fund, the country’s per capita GDP (PPP) was at $35,855 or the 22nd highest in 2012 (World Economic Outlook Database,  2013). Japan as the world’s third largest automobile manufacturing country, has the largest electronics goods industry, and is often ranked among the world’s most innovative countries leading several measures of global patent filings. Japan is the world’s largest creditor nation, generally running an annual trade surplus and having a considerable net international investment surplus. As of 2010, Japan possesses 13.7% of the world’s private financial assets (the 2nd largest in the world) at an estimated $14.6 trillion. As at 2013, 62 of the Fortune Global 500 companies are based in Japan (Japan OECD Library, 2013).The growth in Japanese economy is as a result of effective management of their intellectual capital assets.

Nigeria is a middle income, mixed economy and emerging market, with expanding financial, service, communications, and technology and entertainment sectors (Nigeria Rebase Economy, 2014).  It is ranked 26th in the world in terms of GDP (nominal: 30th in 2013 before rebasing, 40th in 2005, 52nd in 2000), and is the largest economy in Africa (based on rebased figures announced in April 2014). It is also on track to become one of the 20 largest economies in the world by 2020. Its re-emergent, though currently underperforming, manufacturing sector is the third-largest on the continent, and produces a large proportion of goods and services for the West African region. Nigeria recently changed its economic analysis to account for rapidly growing contributors to its GDP, such as telecommunications, banking, and its film industry. As a result of this statistical revision, Nigeria has added 89% to its GDP, making it the largest African economy (Nigeria Rebase Economy, 2014).