MODE OF ENTRY OF MULTINATIONAL CORPORATION AND THEIR PERFORMANCE IN THE NIGERIAN MARKET

CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY              

The main players in a global knowledge-based economy are corporations (MNCs). The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock (Mondo, Visione, 2008). It was also arguably the world’s first mega corporation, possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies. The history of multinational corporations in developing multinational countries is marked by its origins in policies of imperialism and Colonialism. Nigeria as a developing country has played host to MNCs long before independence till date. The number and activities of these MNCs have grown over time as Nigeria struggles to develop socio-economically as a nation Onudogo (2013).Multinational corporations are those powerful conglomerates that came into being in Nigeria after the abolition of slave trade  (Aworom, 2013). As a result, the European countries needed a market for surplus products and place to access cheap raw materials and labour, Africa especially Nigeria became the obvious destination. They dominated the Nigerian economy after her independence.

Consequently, today, Multinational Corporations like the United African Company (UAC), Toyota motors, Coca-Cola, Lever brothers, Mobil oil; Shell BP etc. dominate the landscape of Nigerian economy. These corporations are very rich in all ramifications because of the profit they make in Nigeria. For instance, Nigeria is one of the largest producers of oil in the world which accounts for over 80% of her income. Since this sector of the economy is effectively controlled by multinational corporations who make enormous profit from the industry, one expects that they should spearhead the developmental process of Nigeria but unfortunately the reverse is the case. Most of these corporations have been fingered on several occasions playing active roles in the under development of Nigeria. These corporations are distinguished on the basis of their orientation into “ethnocentric” (home-country oriented), “polycentric” (host-country oriented) or “geocentric” (world-oriented), Bernadine (2011). International business is the spur for multinationals and both are currently boosted by the wave of globalization.

The concept of globalization has given impetus to multinational corporations/enterprises to operate more easily in other parts of world other their home countries. The term globalization means integration of the world economies into one in a phenomenon aptly called “global village. No one can deny the importance of MNCs in the current global business environment-there is usually huge capital investment in major economic activities; the country can enjoy varieties of products, services and facilities, brought to their doorsteps; there is creation of more jobs for the populace; the nation’s pool of skills are best utilized and put to use effectively and efficiently; there is advancement in technology as these companies bring in state-of-the-art technology for their businesses. Most of the products we use are supplied by multinational corporations. Their presence and significance in our lives are undeniable facts. They have developed distinct advantages which can be put to the service of world development. Their ability to tap financial, physical and human resources around the world and to combine them in economically feasible and commercially profitable activities, their capacity to develop new technology and skills and their productive and managerial ability to translate resources into specific outputs have proven to be outstanding. At the same time, the power concentrated in their hands and their actual or potential use of it, their ability to shape demand patterns and values and to influence the lives of people and policies of governments, as well as their impact on the international division of labour, have raised concern about their role in world affairs. This concern is probably heightened by the fact that there is no systematic process of monitoring their activities and discussing them in an appropriate forum.

The relevance of the foreign private sector to the development of developing countries was recognized in the International Development Strategy for the Second Development Decade unanimously adopted by the United Nations General Assembly in 1970. Countries such as Singapore, Malaysia, and Thailand have encouraged foreign direct investment actively because of the tremendous positive impact which multinational corporations have created on their economies. The growth in China’s coastal sector is indisputably linked to the massive Investments by multinational corporations. However, historically, Japan and Korea have pursued more cautious policies regarding investments by multinational corporations. Most economists believe that the MNCs are exploitative as natural resources found in developing countries such as Nigeria meant for its developmental goals are not productively utilized due to de-capitalization of the economy in form of profit repatriation. Ozoigbo and Chukuezi (2011) in full support of the above claim argued that the idea of investing in foreign land is not to better the lot of the host nation but to exploit as much as possible in order to develop the home country. Hence, they are often accused of destructive activities such as damaging of the environment, complicity in human rights abuses, and involvement in corruption and stifling of infant industries autonomy. Although, Bulu and Ango (2012) reports that many MNCs are now attempting to manage these complex set, hence, they are often accused of destructive activities such as damaging of the environment, complicity in human rights abuses, and involvement in corruption and stifling of infant industries autonomy issues in the host countries by implementing corporate social responsibility (CSR) strategies; because such issues may risk the success of their operations. But it is not in the nature of the MNCs to solve social or economic problems of the host countries. This is owing to the fact that the interaction between multinational corporations and host country institutions is not well understood (Wiig and Kolstad, 2010). There is a risk that multinational corporations facilitate patronage problems in resource rich countries, exacerbating their resource base. The influence of the big businesses is so pervasive that even if you don’t want them, you may find that sooner than later their products would find you. This is influenced by the convergence of ideologies, tastes, technologies, free and easy movement of people and capital, and international political cooperation. It is under the auspices of the foregoing that this study sets out to critically examine the negative effects of multinational corporations on the economy of Nigeria. This paper also suggests ways of minimizing these negative effects and how these corporations can be managed.

1.2 STATEMENT OF PROBLEM

In Nigeria, the activities of multinational companies have been identified as questionable or even unethical because of the harms they have caused on the society. Because of their formidable resource base, they dominate the economy, straddle the indigenous entrepreneur and in the process create a monopoly. In the oil sector which is the economic mainstay in Nigeria, these corporations perpetrate heinous activities such as pollution of the environment, inadequate technology transfer, violation of human rights, blunt refusal to discharge their social responsibilities, gas flaring which destroys wildlife, seafood’s and farmland especially in the Niger-Delta region without adequate compensation. Equally, the activities of these multinational corporations have led to increase in anti-social activities like drug abuses, prostitution, kidnapping, armed robbery and murder etc. On the effect of these kidnappings on the socio-economic development of Nigeria, Ajaero submits that Nigeria lost N2.46 trillion in 2006, N 2.69 trillion in 2007 and N2.97 trillion in 2008 through attacks on oil installations resulting in shutdowns and spillages. Nigeria has also lost billions of Naira to foreign countries through act perpetrated by multinational companies such as tax evasion, bribery, under-declaration of profit, over-invoicing, smuggling, and racketeering.

1.3 AIMS OF THE STUDY             

The major purpose of this study is to examine mode of entry of Multinational Corporation and their performance in the Nigerian market. Other general objectives of the study are:

1. To examine the reasons for multinational companies entering into Nigerian markets with different modes.

2. To examine the market entry strategies used by Multinational Corporations in Nigeria.

3. To examine the various challenges MNCs faced when 
entry into Nigerian market.

4. To examine the influence of mode of entry 
on the performance of MNCs in Nigerian markets.

5. To examine the business opportunities and barriers in Nigerian market.

6. To examine the performance of multinational corporations in Nigerian market.

1.4 RESEARCH QUESTIONS

1. What are the reasons for multinational companies entering into Nigerian markets with different modes?

2. What are the market entry strategies used by Multinational Corporations in Nigeria?

3. What are the various challenges MNCs faced when 
entry into Nigerian market?

4. What do influence the mode of entry 
on the performance of MNCs in Nigerian markets?

5. What are the business opportunities and barriers in Nigerian market?

6. How is the performance of multinational corporations in Nigerian market?

1.5 RESEARCH HYPOTHESES

Hypothesis 1                

H₀: MNCs has no reasons for entering in the Nigerian market with different modes of entering.

H₁: MNCs come into the Nigerian market for different reasons with different modes peculiar to their organization.

Hypothesis 2

H₀: There are no various challenges MNCs faced when 
entry into Nigerian market.

H₁: There are various challenges MNCs faced when 
entry into Nigerian market.

Hypothesis 3

H₀: There is no significant influence of mode of entry 
on the performance of MNCs in Nigerian markets

H₁: There is a significant influence of mode of entry 
on the performance of MNCs in Nigerian markets. 

1.6 SIGNIFICANCE OF THE STUDY

This study hopes to evaluate the market entry strategies employed by Multinational corporations in Nigeria with an aim of gaining a deeper understanding on which strategies offer greater success. The study will seek to fill the important knowledge gap existing in Nigeria. Academicians will therefore benefit from this study as it will form a basis for further exploratory and comparison research on market entry strategies. The study is also of great significance to strategic managers of multinational corporations in Nigeria. The recommendations will act as a basis for their planning, evaluation and implementations. It will therefore, be of value to strategic managers who will have a clearer insight on the advantages and drawbacks of the entry strategies that will be studied. This study will be of great importance to multinationals in Nigeria since the study will bring out entry strategies that have ensured success and those that have not. Existing multinationals may use the study as a basis of changing strategy to increase their presence while new corporations may use the study as a starting point in determining what entry strategy to employ.

1.7    SCOPE OF THE STUDY 

The study is based on mode of entry of Multinational Corporation and their performance in the Nigerian market.

1.8 LIMITATION OF STUDY

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.