Description
The modern business manager operates in a more dynamic environment. The change in the environment has been rapid and unpredictable. Economic variables have been complex both in form and impact on the practice of business in Nigeria.
British Journal of Arts and Social Sciences
ISSN: 2046-9578, Vol.6 No.2 (2012)
©BritishJournal Publishing, Inc. 2012
http://www.bjournal.co.uk/BJASS.aspx
194
Impacts of External Business Environment on
Organisational Performance in the Food and Beverage Industry
in Nigeria.
*Adeoye, Abayomi Olarewaju
School of Management, I nformation Technology and Governance,
University of KwaZulu-Natal, Durban, South Africa.
[email protected], +234-7057115063, +27723849542
**Elegunde, Ayobami Folarin
Department of Business Administration and Management Technology
Lagos State University, Ojo, Nigeria.
[email protected], +234-8029087821
Abstract
This paper examines the impact of external business environment on organisational performance in the
food and beverage industry in Nigeria. The minor objective of the paper is to investigate the influence
of economic and political environment on organisational performance. A questionnaire was developed
to collect information from the respondents based on a sample of 3 companies with 150 sample size.
Data collected were analysed using multiple regression analysis. The findings of the analysis shows
that the external business environment (political, economic, socio-cultural, technological, e.t.c.) have
impact on organisational performance (effectiveness, efficiency, increase in sales, achievement of
corporate goals e.t.c.).Thus, organisations should pay more attentions to their environment by doing
periodic scanning.
Keywords: External Business Environment, Economic Environment, Political Environment,
Organisational Performance, Food and Beverage Industry, Nigeria.
British Journal of Arts and Social Sciences
ISSN: 2046-9578
195
1. Introduction
The modern business manager operates in a more dynamic environment. The change in the
environment has been rapid and unpredictable. Economic variables have been complex both in form
and impact on the practice of business in Nigeria. Consumers and clients having been showing
complex behaviours both in local and international markets. The most dramatic change has been that
exhibited by competitive pressures. Competitors have been applying one strategy or the other to adapt
to the dynamic and unpredictable nature of the business environment.
The most single significant influence on organisational policy and strategy is the environment
outside and inside the organisation (Duncan, 1972 and Grant, 1999). Organisations are institutions
deliberately designed to achieve and accomplish certain goals. The activities in these organisations are
affected by both the situations within the organisation and also, the situations within the larger society
or environment in which the organisations operate. Currently, business environment is perceived to
have been rarely exceeded in complexity, turbulence and rapid in change, all Nigerian organisations
(large or small) must pay greater attention than ever before to their environments when formulating
and implementing policies and strategies in order to survive and grow (Otokiti & Awodun, 2003).
In contemporary Nigerian business environment, performance of Nigerian companies is
predicated on factors such as low-sales, high cost of production, low capital utilisation, lack of foreign
exchange to source needed inputs, poor power supply, and low quality of goods and services, among
others. These issues have led to lack of proper integration and coordination of various corporate
subsystems in Nigerian organisations, resulting in the failure to achieve the stated goals and
objectives. Enterprises are subsumed in the environment with which they interact by importing inputs
and exporting outputs. Thus, the vagaries and the extremities of the environment affect the fortunes of
organisations (kennerly & Nelly, 2003).
Considering that performance is crucial objective of an organisation, it is generally accepted
that the structure and decision making in an organisation is influenced by environmental complexity
and volatility (Miles & Snow, 1978; May et al., 2000). Furthermore, it is argued that the alignment of
strategies of organisations with the requirements of their environment outperform organisations that
fails to achieve such alignment (Chaganti et al., 1989, Venkatraman & Prescott, 1990; Beal, 2000).
Thus, business organisations had perceived the environment as opportunities and threats
presented by such external environment as variables as socio-cultural, legal, political, economic,
technology and infrastructural factors. This is not to conclude that other factors found in the micro
(internal) and intermediate business environments are not important. It shows how important the
scanning of the macro (external) environment is, because this in turn affects the other two
environments.
Where the is absence of good understanding of the external business environment, the
attendance effect of this on organisational performance cannot be over emphasised. After all, it is the
good performance (effectiveness, efficiency and responsiveness) that can guarantee the sustainability
of the organisation in relation to its corporate goals and objectives.
It must be noted, that amidst the environmental scanning and considering the fact that the
Nigerian business environment is fast changing which deserves the means by which future
opportunities and problems can be anticipated by organisation and company executives and
administrators needs adequate attention.
2. Review of Literature
In the literatures, there had been divergent views about the concept of environment through
contributions of different authors and scholars. Okoh and Munene (1986) posited two views of
perceived environment in the literature. The first is inter-organisational view, which considers the
environment as a collection of person, groups and other organisations that provides inputs to, or
British Journal of Arts and Social Sciences
ISSN: 2046-9578
196
receives outputs from a local organisation. The second consideration is that environment is a set of
general, social, economic and technological conditions. Obasan (2001) says environment is the sum
total of the physical and social forces and institutions that are relevant to the organisational goal
setting and goal attainment which are taken directly into consideration by members of the organisation
when making business decisions and plans. According to Osuagwu (2001) environment has been seen
as the totality of the factors that affect, influence, or determine the operations or performance of a
business. The environment determines what is possible for the organisation to achieve. In summary,
environment is the combination of many factors both tangible and non-tangible that provides the
lifeblood for the organisations success by providing a market for its products and services and also by
serving as a source of resources to others.
2.1. Environmental Factors
According to Milliken (1987), environmental uncertainty arises from the organisation’s
inability to predict its environment, or in other words, to predict the factors that characterise its
environment. These factors are usually classified into two groups (Bourgeois, 1980) i.e. ‘‘general’’
and ‘‘task’’ external business environmental factors.
2.2. Factors of the General External Business Environment
The general environment is a relatively remote environment and the elements that compose it
have an indirect influence on the organisation. This environment is typically composed of factors such
as social values, educational, political, economic, legal, behavioural, demographic, natural
environment, natural resources, and technological (Asheghian & Ebrahimi, 1990; Grant, 1999).
2.3. Factors of the Task Environment
Asheghian & Ebrahimi (1990) and Grant (1999) argued further that the task environment is the
closest environment of the organisation and the elements that made it is influencing the organisation
directly. This environment is made up of factors such as consumers, competitors, suppliers, labour
market, industry and financial resources. Daft et al.(1988) and Auster & Choo (1993) opined that
factors in the task environment usually create greater and perceived uncertainty to organisations than
factors in the general environment. This is because it is believed that the task environment, which is
connected with the short-run, is more volatile than the general environment that is connected with the
long-run.
2.4. Types of External Business Environment
Duncan (1972) viewed external business environment as the totality of factors outside an
organisation that are taken into consideration by an organisation in its decision making. These factors
depend largely on the complexity and dynamism of the environment (Duncan, 1972; Dess & Beard,
1984). Thus, external business environment has been classified as being stable when it does show any
changes, unstable when it shows relative changes, and dynamic when it shows changes continuously
(Aguilar, 1967).However, perceptions of the organisations about the type of the external business
environment to a large extent depends on their size and industry in which it operates.
2.4.1. Economic Environment
Ogundele (2005) says that is vital concern to an organisation. He further said that, the
economic environment goes a long way to determine and define the opportunities for an organisation;
this is because an expanding economy provides operational scope for the organisational existence as
well as for the establishment of new ones. However, a period of recession can bring about failures and
British Journal of Arts and Social Sciences
ISSN: 2046-9578
197
probably liquidation of the organisation. It is of paramount importance that the management should be
able to distinguish between short-run phenomena and more fundamental changes in its assessment of
the overall economy.
2.4.2. Political Environment
The political environment is viewed via the legal framework where the organisation operates
and this is done through the laws and regulations that guides the operations of the business in question.
The political stability of the environment is also a necessity for effective and efficient operation of the
business. The management of the organisation must take cognisance of these constraints, actual and
potential, and seek out the implications for the business organisation from legal advisers (Ogundele,
2005).
Hypothesis: economic and political environments have no impact on organisational performance.
2.5. Organisational Performance
Organisational performance (OP) has been taught with many conflicting definitions and it is
not a new phenomenon among the academics and the industrialists as well as public institutions. OP
has been a source of influence to the actions taking by companies and the degree to which an
organisation realises its goals as well as the stated objectives of the organisation through the strategies
and policies of the organisation (Folan & Browne, 2005; Etzioni, 1964). The idea of OP is hanged on
the position or premise that it is a combination of productive assets made up of human, physical, and
capital resources, for the major reason of fulfilling a dream, vision or accomplishing a shared purpose
(Barney, 2002; Carton & Hofer, 2006). OP is also viewed as the measure of how a manager utilises
the resources of the organisation efficiently and effectively to accomplish the goals of the organisation
as well as satisfying all the stakeholders (Jones & George, 2009). In their own contribution, Richard et
al. (2009) described OP as the real output measured against the intended or expected output. They
viewed OP as a term that is made up of three major areas of firm outcomes and these three areas are:
? Financial Performance that is made up of profits, return on assets (ROA), return on
investment (ROI) etc.
? Product Market Performance such as sales, market share, etc.
? Shareholders return such as total shareholder return (TSR), economic value added (EVA).
Selden & Sowa (2004) looked at OP as what is designed to assume that organisations are to
accomplish certain goals that are both specified intrinsically and implicitly. Perrow (1961)
distinguishes between two kinds of organisational goals, official goals which are the general purposes
of the organisation’s founders and leaders, while the operative goals designates the end sought through
the actual operating policies, the modifications and subversions of these ends by personnel in decision
making positions and by the forces of pressure from the external environment. Kast & Rosenzwig
(1985) argued that performance is a function of ability, effort and opportunity. Ability is dependent
upon knowledge and skills and technological capabilities that provide an indication of range of
possible performance. Effort is a function of needs, goal- expectation and rewards and it depends on
the degree to which individuals and/or groups are motivated to aspirant effort. Opportunity must be
provided by the managers for individual’s ability and effort to be used in ways that will result in the
achievement of goals. OP can be summarised to be an approach used in assessing the progress made
toward goals, identifying and adjusting factors that has limit the progress of the organisation in a
competitive environment.
British Journal of Arts and Social Sciences
ISSN: 2046-9578
198
3. Methodology
The survey research method was adopted in this study. A sample of 3 organisations in the
Food and Beverage industry were randomly selected from the list of quoted companies in this sector.
The sample was obtained by employing the stratified sampling techniques. Each company was divided
into strata. The stratification variables are based on homogeneity and relatedness. One hundred and
fifty (150) questionnaires were administered to the respondents in these 3 companies. One hundred
and twenty-four (124) completed questionnaires were returned back by the respondents which is the
actual for this study. Thus, 84% of the questionnaires were returned successfully.
4. Analysis
In analysing the data collected from the respondents, multiple regression analysis was
employed. The variables of the study can be expressed in algebraic form. Thus,
OP = F (E, P, T, S …………………………………………U)
Where
OP= organisational performance which include efficiency, effectiveness, increase in
sales, achievement of short and long-term goals, and achievement of customer/client
satisfaction.
E= economic environment (monetary policies, interest rate, availability of funds)
P= political environment (political terrain in the country, legal framework, authority
relationship)
T= technological environment (technological innovation, technological development)
S= socio-cultural environment (values, norms, belief, attitudes, religions)
In order to provide an answer to the research question and hypothesis; that the economic and
political environment has no impact on OP.
Hence, from the regression analysis, the regression line is:
Y= -85.31 + 4.69
- 3.01
This implies that the economic environment and political environment has a positive and
significant impact on OP in the food and beverage industry. Thus, the change in the economic
environment will have a greater contribution on the OP. The value of
is 0.93 and
is 0.68.
This indicates that the economic environment has 93% significant impact on OP while the political
environment has 68% impact on OP. The value of R² is 1.28. This implies that external business
environment has 128% impact on OP i.e. they have combined effect on OP in the food and beverage
industry in Nigeria. Thus, the null hypothesis of this study will be rejected. Hence, the economic and
political environment has impact on OP.
5. Conclusion
The main aim of this paper was to examine the impact of external business environment on
organisational performance in the food and beverage industry in Nigeria. Thus, the findings of the
study reflect that external business environment has an impact on organisational performance. Hence,
the external business environment of Nigerian organisation impinges upon the operations of a business
other than the availability of capital and the ability of the manager or businessman himself. The study
also revealed that all things being equal, controlling of the external business environment can be done
to some extent. This entails and calls for constant monitoring and conducting environmental scanning
always.
British Journal of Arts and Social Sciences
ISSN: 2046-9578
199
However, a company that wants to succeed must develop a clear understanding of the trend of
external business environment and forces that shape competition. The understanding will enable an
organisation to choose the appropriate strategy or strategies that fit the trend in the external business
environment. Also, given the dynamic and rapidly changing environment in which most organisations
compete, it is important that organisations maintain their performance measurement system so that
remains appropriate and provides information that is relevant to the issues that are of current
importance.
The conclusion of this study should be considered in the light of its limitations. First, the
sample used was rather small; if we consider that the study covers other sectors of the economy.
Second, the generalisation of the results was rather limited due to the fact that the sample covers only
the food and beverage industry in Nigeria. Thirdly, there might be element of biasness in the
information given by the respondents. This however does not rob this study of its generalisation.
Hence, the frontier of this study could be expanded by using other environmental variables and
combining other sectors of the economy.
British Journal of Arts and Social Sciences
ISSN: 2046-9578
200
References
[1] Aguilar, F.J. 1967. ‘‘Scanning the Business Environment’’. McGraw-Hill, New York,
NY.
[2] Asheghian, H.P. and P., Ebrahimi, 1990. ‘‘International Business’’. Harper Collins,
New York, NY.
[3] Auster, C. and C.W., Choo, 1993. ‘‘Environmental Scanning by CEOs in two
Canadian Industries’’. Journal of the American Society for Information Science and
Technology, 44(4), 194-203.
[4] Barney, J.B. 2002. ‘‘Gaining and Sustaining Competitive Advantage’’. 2
nd
ed. Upper
Saddle River, New Jersey, Pearson Education.
[5] Beal, R.M. 2000. ‘‘Competing effectively: environmental scanning, competitive
strategy, and organisational performance in small manufacturing firms’’. Journal of
Small Business Management, 38(1), 27-47.
[6] Bourgeois, L.J. 1980. ‘‘Strategy and environment: a conceptual integration’’.
Academy of Management Review, 5(1), 25-39.
[7] Carton, R.B. and C.W., Hofer, 2006. ‘‘Measuring Organisational Performance:
Metrics for Entrepreneurship and Strategic Management Research’’. Edward Elgar,
Northampton, MA, USA.
[8] Chaganti, R., R., Chaganti, and V., Mahajan, 1989. ‘‘Profitable small business
strategies under different types of competition’’. Entrepreneurship, Theory and
Practice, 13(1), 21-35.
[9] Daft, R.L., L., Sarmunen, and D., Parks, 1988. ‘‘Chief executive scanning,
environmental characteristics and company performance: an empirical study’’.
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[10] Dess, G.G. and D.W., Beard, 1984. ‘‘Dimensions of organisational task
environments’’. Administrative Science Quarterly, 29(1), 52-63.
[11] Duncan, R.B. 1972. ‘‘Characteristics of organisational environments and perceived
environmental uncertainty’’. Administrative Science Quarterly, 17, 313-327.
[12] Etzioni, A. 1961. ‘‘Modern Organisations’’. Englewood Cliffs, New Jersey, Prentice
Hall.
[13] Folan, P. and J., Browne, 2005. ‘‘A review of performance measurement: Towards
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[14] Grant, R.M. 1999. ‘‘Contemporary strategy analysis’’. 2
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Publishers.
[15] Jones, G.R. and J.M., George, 2009. ‘‘Contemporary Management’’. 6
th
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ed., McGraw-Hill, New York, USA.
[16] Kast, F.E. and J.E., Rosenzwig, 1985. ‘‘Organisation and Management: a systems and
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Edition.
[17] Kennerley, M. and A., Nelly, 2003. ‘‘Measuring performance in a changing business
environment’’. International Journal of Operations and Production, 23(2), 213-229.
[18] May, R.C., W.H. Jr., Stewart, and R., Sweo, 2000. ‘‘Environmental scanning
behaviour in a transitional economy: evidence from Russia’’. Academy of
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[19] Miles, R.E. and C.C., Snow, 1978. ‘‘Organisation strategy, structure, and processes’’.
McGraw-Hill, New York, USA.
[20] Milliken, F.J. 1987. ‘‘Three types of perceived uncertainty about environment: state,
effect, and response uncertainty’’. Academy of Management Review, 12, 133-143.
[21] Obasan, K. 2001. ‘‘Small Business Management: An Entrepreneurial Approach’’,
Higher Education Books Publishers, Lagos.
[22] Ogundele, O.J.K. 2005. ‘‘Management and Organisation: Theory and Behaviour’’,
Sabte Book Series, Lagos, Nigeria.
[23] Okoh, P.E. and J.C., Munene, 1986. ‘‘The Organisation Dynamics, Environment Size,
Managerial Values and Decision Choice’’, Nigeria.
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Organisational Performance: Towards Methodological Best Practices’’. Journal of
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[28] Selden, S.C. and J.E., Sowa, 2004. ‘‘Testing a multi-dimensional model of
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11(1), 1-23.
doc_380288204.pdf
The modern business manager operates in a more dynamic environment. The change in the environment has been rapid and unpredictable. Economic variables have been complex both in form and impact on the practice of business in Nigeria.
British Journal of Arts and Social Sciences
ISSN: 2046-9578, Vol.6 No.2 (2012)
©BritishJournal Publishing, Inc. 2012
http://www.bjournal.co.uk/BJASS.aspx
194
Impacts of External Business Environment on
Organisational Performance in the Food and Beverage Industry
in Nigeria.
*Adeoye, Abayomi Olarewaju
School of Management, I nformation Technology and Governance,
University of KwaZulu-Natal, Durban, South Africa.
[email protected], +234-7057115063, +27723849542
**Elegunde, Ayobami Folarin
Department of Business Administration and Management Technology
Lagos State University, Ojo, Nigeria.
[email protected], +234-8029087821
Abstract
This paper examines the impact of external business environment on organisational performance in the
food and beverage industry in Nigeria. The minor objective of the paper is to investigate the influence
of economic and political environment on organisational performance. A questionnaire was developed
to collect information from the respondents based on a sample of 3 companies with 150 sample size.
Data collected were analysed using multiple regression analysis. The findings of the analysis shows
that the external business environment (political, economic, socio-cultural, technological, e.t.c.) have
impact on organisational performance (effectiveness, efficiency, increase in sales, achievement of
corporate goals e.t.c.).Thus, organisations should pay more attentions to their environment by doing
periodic scanning.
Keywords: External Business Environment, Economic Environment, Political Environment,
Organisational Performance, Food and Beverage Industry, Nigeria.
British Journal of Arts and Social Sciences
ISSN: 2046-9578
195
1. Introduction
The modern business manager operates in a more dynamic environment. The change in the
environment has been rapid and unpredictable. Economic variables have been complex both in form
and impact on the practice of business in Nigeria. Consumers and clients having been showing
complex behaviours both in local and international markets. The most dramatic change has been that
exhibited by competitive pressures. Competitors have been applying one strategy or the other to adapt
to the dynamic and unpredictable nature of the business environment.
The most single significant influence on organisational policy and strategy is the environment
outside and inside the organisation (Duncan, 1972 and Grant, 1999). Organisations are institutions
deliberately designed to achieve and accomplish certain goals. The activities in these organisations are
affected by both the situations within the organisation and also, the situations within the larger society
or environment in which the organisations operate. Currently, business environment is perceived to
have been rarely exceeded in complexity, turbulence and rapid in change, all Nigerian organisations
(large or small) must pay greater attention than ever before to their environments when formulating
and implementing policies and strategies in order to survive and grow (Otokiti & Awodun, 2003).
In contemporary Nigerian business environment, performance of Nigerian companies is
predicated on factors such as low-sales, high cost of production, low capital utilisation, lack of foreign
exchange to source needed inputs, poor power supply, and low quality of goods and services, among
others. These issues have led to lack of proper integration and coordination of various corporate
subsystems in Nigerian organisations, resulting in the failure to achieve the stated goals and
objectives. Enterprises are subsumed in the environment with which they interact by importing inputs
and exporting outputs. Thus, the vagaries and the extremities of the environment affect the fortunes of
organisations (kennerly & Nelly, 2003).
Considering that performance is crucial objective of an organisation, it is generally accepted
that the structure and decision making in an organisation is influenced by environmental complexity
and volatility (Miles & Snow, 1978; May et al., 2000). Furthermore, it is argued that the alignment of
strategies of organisations with the requirements of their environment outperform organisations that
fails to achieve such alignment (Chaganti et al., 1989, Venkatraman & Prescott, 1990; Beal, 2000).
Thus, business organisations had perceived the environment as opportunities and threats
presented by such external environment as variables as socio-cultural, legal, political, economic,
technology and infrastructural factors. This is not to conclude that other factors found in the micro
(internal) and intermediate business environments are not important. It shows how important the
scanning of the macro (external) environment is, because this in turn affects the other two
environments.
Where the is absence of good understanding of the external business environment, the
attendance effect of this on organisational performance cannot be over emphasised. After all, it is the
good performance (effectiveness, efficiency and responsiveness) that can guarantee the sustainability
of the organisation in relation to its corporate goals and objectives.
It must be noted, that amidst the environmental scanning and considering the fact that the
Nigerian business environment is fast changing which deserves the means by which future
opportunities and problems can be anticipated by organisation and company executives and
administrators needs adequate attention.
2. Review of Literature
In the literatures, there had been divergent views about the concept of environment through
contributions of different authors and scholars. Okoh and Munene (1986) posited two views of
perceived environment in the literature. The first is inter-organisational view, which considers the
environment as a collection of person, groups and other organisations that provides inputs to, or
British Journal of Arts and Social Sciences
ISSN: 2046-9578
196
receives outputs from a local organisation. The second consideration is that environment is a set of
general, social, economic and technological conditions. Obasan (2001) says environment is the sum
total of the physical and social forces and institutions that are relevant to the organisational goal
setting and goal attainment which are taken directly into consideration by members of the organisation
when making business decisions and plans. According to Osuagwu (2001) environment has been seen
as the totality of the factors that affect, influence, or determine the operations or performance of a
business. The environment determines what is possible for the organisation to achieve. In summary,
environment is the combination of many factors both tangible and non-tangible that provides the
lifeblood for the organisations success by providing a market for its products and services and also by
serving as a source of resources to others.
2.1. Environmental Factors
According to Milliken (1987), environmental uncertainty arises from the organisation’s
inability to predict its environment, or in other words, to predict the factors that characterise its
environment. These factors are usually classified into two groups (Bourgeois, 1980) i.e. ‘‘general’’
and ‘‘task’’ external business environmental factors.
2.2. Factors of the General External Business Environment
The general environment is a relatively remote environment and the elements that compose it
have an indirect influence on the organisation. This environment is typically composed of factors such
as social values, educational, political, economic, legal, behavioural, demographic, natural
environment, natural resources, and technological (Asheghian & Ebrahimi, 1990; Grant, 1999).
2.3. Factors of the Task Environment
Asheghian & Ebrahimi (1990) and Grant (1999) argued further that the task environment is the
closest environment of the organisation and the elements that made it is influencing the organisation
directly. This environment is made up of factors such as consumers, competitors, suppliers, labour
market, industry and financial resources. Daft et al.(1988) and Auster & Choo (1993) opined that
factors in the task environment usually create greater and perceived uncertainty to organisations than
factors in the general environment. This is because it is believed that the task environment, which is
connected with the short-run, is more volatile than the general environment that is connected with the
long-run.
2.4. Types of External Business Environment
Duncan (1972) viewed external business environment as the totality of factors outside an
organisation that are taken into consideration by an organisation in its decision making. These factors
depend largely on the complexity and dynamism of the environment (Duncan, 1972; Dess & Beard,
1984). Thus, external business environment has been classified as being stable when it does show any
changes, unstable when it shows relative changes, and dynamic when it shows changes continuously
(Aguilar, 1967).However, perceptions of the organisations about the type of the external business
environment to a large extent depends on their size and industry in which it operates.
2.4.1. Economic Environment
Ogundele (2005) says that is vital concern to an organisation. He further said that, the
economic environment goes a long way to determine and define the opportunities for an organisation;
this is because an expanding economy provides operational scope for the organisational existence as
well as for the establishment of new ones. However, a period of recession can bring about failures and
British Journal of Arts and Social Sciences
ISSN: 2046-9578
197
probably liquidation of the organisation. It is of paramount importance that the management should be
able to distinguish between short-run phenomena and more fundamental changes in its assessment of
the overall economy.
2.4.2. Political Environment
The political environment is viewed via the legal framework where the organisation operates
and this is done through the laws and regulations that guides the operations of the business in question.
The political stability of the environment is also a necessity for effective and efficient operation of the
business. The management of the organisation must take cognisance of these constraints, actual and
potential, and seek out the implications for the business organisation from legal advisers (Ogundele,
2005).
Hypothesis: economic and political environments have no impact on organisational performance.
2.5. Organisational Performance
Organisational performance (OP) has been taught with many conflicting definitions and it is
not a new phenomenon among the academics and the industrialists as well as public institutions. OP
has been a source of influence to the actions taking by companies and the degree to which an
organisation realises its goals as well as the stated objectives of the organisation through the strategies
and policies of the organisation (Folan & Browne, 2005; Etzioni, 1964). The idea of OP is hanged on
the position or premise that it is a combination of productive assets made up of human, physical, and
capital resources, for the major reason of fulfilling a dream, vision or accomplishing a shared purpose
(Barney, 2002; Carton & Hofer, 2006). OP is also viewed as the measure of how a manager utilises
the resources of the organisation efficiently and effectively to accomplish the goals of the organisation
as well as satisfying all the stakeholders (Jones & George, 2009). In their own contribution, Richard et
al. (2009) described OP as the real output measured against the intended or expected output. They
viewed OP as a term that is made up of three major areas of firm outcomes and these three areas are:
? Financial Performance that is made up of profits, return on assets (ROA), return on
investment (ROI) etc.
? Product Market Performance such as sales, market share, etc.
? Shareholders return such as total shareholder return (TSR), economic value added (EVA).
Selden & Sowa (2004) looked at OP as what is designed to assume that organisations are to
accomplish certain goals that are both specified intrinsically and implicitly. Perrow (1961)
distinguishes between two kinds of organisational goals, official goals which are the general purposes
of the organisation’s founders and leaders, while the operative goals designates the end sought through
the actual operating policies, the modifications and subversions of these ends by personnel in decision
making positions and by the forces of pressure from the external environment. Kast & Rosenzwig
(1985) argued that performance is a function of ability, effort and opportunity. Ability is dependent
upon knowledge and skills and technological capabilities that provide an indication of range of
possible performance. Effort is a function of needs, goal- expectation and rewards and it depends on
the degree to which individuals and/or groups are motivated to aspirant effort. Opportunity must be
provided by the managers for individual’s ability and effort to be used in ways that will result in the
achievement of goals. OP can be summarised to be an approach used in assessing the progress made
toward goals, identifying and adjusting factors that has limit the progress of the organisation in a
competitive environment.
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3. Methodology
The survey research method was adopted in this study. A sample of 3 organisations in the
Food and Beverage industry were randomly selected from the list of quoted companies in this sector.
The sample was obtained by employing the stratified sampling techniques. Each company was divided
into strata. The stratification variables are based on homogeneity and relatedness. One hundred and
fifty (150) questionnaires were administered to the respondents in these 3 companies. One hundred
and twenty-four (124) completed questionnaires were returned back by the respondents which is the
actual for this study. Thus, 84% of the questionnaires were returned successfully.
4. Analysis
In analysing the data collected from the respondents, multiple regression analysis was
employed. The variables of the study can be expressed in algebraic form. Thus,
OP = F (E, P, T, S …………………………………………U)
Where
OP= organisational performance which include efficiency, effectiveness, increase in
sales, achievement of short and long-term goals, and achievement of customer/client
satisfaction.
E= economic environment (monetary policies, interest rate, availability of funds)
P= political environment (political terrain in the country, legal framework, authority
relationship)
T= technological environment (technological innovation, technological development)
S= socio-cultural environment (values, norms, belief, attitudes, religions)
In order to provide an answer to the research question and hypothesis; that the economic and
political environment has no impact on OP.
Hence, from the regression analysis, the regression line is:
Y= -85.31 + 4.69
- 3.01
This implies that the economic environment and political environment has a positive and
significant impact on OP in the food and beverage industry. Thus, the change in the economic
environment will have a greater contribution on the OP. The value of
is 0.93 and
is 0.68.
This indicates that the economic environment has 93% significant impact on OP while the political
environment has 68% impact on OP. The value of R² is 1.28. This implies that external business
environment has 128% impact on OP i.e. they have combined effect on OP in the food and beverage
industry in Nigeria. Thus, the null hypothesis of this study will be rejected. Hence, the economic and
political environment has impact on OP.
5. Conclusion
The main aim of this paper was to examine the impact of external business environment on
organisational performance in the food and beverage industry in Nigeria. Thus, the findings of the
study reflect that external business environment has an impact on organisational performance. Hence,
the external business environment of Nigerian organisation impinges upon the operations of a business
other than the availability of capital and the ability of the manager or businessman himself. The study
also revealed that all things being equal, controlling of the external business environment can be done
to some extent. This entails and calls for constant monitoring and conducting environmental scanning
always.
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However, a company that wants to succeed must develop a clear understanding of the trend of
external business environment and forces that shape competition. The understanding will enable an
organisation to choose the appropriate strategy or strategies that fit the trend in the external business
environment. Also, given the dynamic and rapidly changing environment in which most organisations
compete, it is important that organisations maintain their performance measurement system so that
remains appropriate and provides information that is relevant to the issues that are of current
importance.
The conclusion of this study should be considered in the light of its limitations. First, the
sample used was rather small; if we consider that the study covers other sectors of the economy.
Second, the generalisation of the results was rather limited due to the fact that the sample covers only
the food and beverage industry in Nigeria. Thirdly, there might be element of biasness in the
information given by the respondents. This however does not rob this study of its generalisation.
Hence, the frontier of this study could be expanded by using other environmental variables and
combining other sectors of the economy.
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