EXTERNAL ENVIRONMENT AFFECTING

BUSINESS IN NIGERIA

PRESENTED BY

KAYODE OLADIPUPO OLAYEMI

A PROJECT ANALYST
08058573347; 07063796484

IBADAN

FEBRUARY, 2016
1

1.1

INTRODUCTION

The Nigerian business environment in the last one decade has witnessed unsatisfactory
progress cumulating into retarded growth rate, high rate of unemployment, low
industrial output, coupled with poor demand in terms of services and tangible products.
Energy crisis continued unabated forcing majority of the organisations to depend wholly
on generator as a constant source of generating electricity, supply of petroleum product
is epileptic in addition to frequent changes in pump price resulting into increase in the
general price level of all products without any exception due to cobweb effect; most of
the organisations are ravaged with strikes from time to time. The relationship between
industrial representatives and government institutions and representatives keep nosediving virtually on all matters, criminal activities increasing at alarming and
uncontrollable rate, exercising excessive control through plethora of rules and
regulations with stringent conditions, tax policies without adequate provision of
infrastructural facilities to ameliorate business operations. In the face of all these
challenges, how effectively can a business organisation respond to its basic operational
functions of survival, growth and profit maximisation, hence the need to examine the
environmental factors in business environment of manufacturing organisations with
implications on the survival and growth of business organisations in the Lagos
metropolitan area of Nigeria.

The Concept of Business Environment

The Concept of Environmental Scanning Environmental scanning is the monitoring,
evaluating, and disseminating of information from the external and internal environment
to key people within the corporation or organization. (Kazmi, 2008). Environmental
scanning is a process of gathering, analyzing, and dispensing information for tactical or
strategic purposes. The environmental scanning process entails obtaining both factual
and subjective information on the business environments in which a company is
operating or considering entering.
There are three modes by which organizations scan their environment:
i.

Aad-hoc scanning - short term, infrequent examinations usually initiated by a

crisis: organizations scan it environment as a result of crisis that is affecting
the company at the moment and analyze the situation to know if the problem

ii.

is internal or external;
Regular scanning - studies done on a regular schedule (e.g. once a year): most
very conscious organizations can see environment scanning as a program that
should be done regularly and as such, most of such organizations do it every

iii.

year;
Continuous scanning (also called continuous learning) - continuous structured
data collection and processing on a broad range of environmental factors.
(Kazmi, 2008).

Importance of Environmental Scanning

Environmental scanning is the process of dealing with the measurement, projection and
evaluation of changes in the different environment variables (Oladele 2006).Most of the
organization today are developing different types of strategies that will sustain them in
their business environment, and this can only be achieved through the analysis of the
environment.(Opportunity and Threats). Oladele (2006) stated some importance to
environmental scanning as follows: o the environment is dynamic in nature, therefore
scanning is necessary to keep abreast of change; o it reveals the elements or factors that
constitute threats and opportunity to the overall objectives of the organization; o
competitors activities can be monitored and appropriate strategies put in place to check
market incursion; o it gives necessary inputs to the formulation and implementation of
potent marketing strategies.

SWOT Analysis Application

A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified as
strengths (S) or weaknesses (W), and those external to the firm can be classified as
opportunities (O) or threats (T). Such an analysis of the strategic environment is referred
to as a SWOT analysis. The SWOT analysis provides information that is helpful in
matching the firm's resources and capabilities to the competitive environment in which it
operates. As such, it is instrumental in strategy formulation and selection.
4

3.1

Summary

The failure rate of business is very high in Nigeria. The high failure rate negatively
impacts on the ability of business to contribute meaningfully to job creation, economic
growth and more equal income distribution in Nigeria. The literature revealed that there
are many reasons for business failure. Failure factors are both internal and external.
Internal factors are factors that are largely controllable by the organisation and include
lack of management experience, marketing problem, infrastructural deficiency, lack of
finance and financial assistance from banks and poor staff training and development and
poor attitudes towards customers. External factors are factors largely uncontrollable by
the organization and include Insufficient Government Policies, Problem of Acceptability
of Locally Made Products, Failure to Studies Environment non-availability of a logistics
chain and a high cost of distribution, competition, rising costs of doing business, lack of
finance and crime.

3.2

Conclusion

It has been widely recognized that business growth and survival depend both on external
and internal factors. While most of the challenges which a business will face may be
foreseeable, some will be completely unpredictable. It is hereby concluded that poor
management affects the growth of small scale enterprise. Management determines the
cause of failure of small scale business in Nigeria. Organisation have poor attitude to
5

training, Government does not always create conducive environment for small scale
businesses. Management failed to develop policies for solving the problems of business
organization. Competent hands are sometimes involved in business strategies.
Management does not always have financial management strategies. The profitability of
small scale organizations has not greatly improved and that Marketing strategies and
financial strategies are not strong enough to run the business.
However, if a business is to succeed, management must be mindful to all matters which
are likely to have a material impact on its viability, and must then demonstrate skills
both in exploiting opportunities and mitigating threats.
3.2

Recommendations

The write up therefore recommends the following:

i.

That poor management of business resources should be avoided.

ii.

Government agencies should organise training for business owners or

manufacturers on how to prepare business plans and business management.

iii.

Awareness should be created for the training programmes through advertisements

in local and national media.

iv.

Government should try as much as possible to provide/create a conducive

environment for business activities.

v.

Workers should ensure that they abide by the rules, regulations, policies laid
down by the management.

vi.

Management should have a good financial strategies which encompasses revenue

generation and how it should be spent.

vii.

Organizations should always strive hard in order to make sure that the
organizations profit base is increased.

viii.
ix.

Management should have a viable marketing strategy.

There should be a laid down procedure on how to solve problems facing small
scale enterprises.

References
Ahmad, N.H, and Seet, .P. (2010); Dissecting Behaviours Associated with Business
Failure: A Qualitative Study of SME Owners in Malaysia and Australia. Journal
of Social Science. 5(9): 98-104.
7

Ayozie, D. O. (2004); The Role of SMEs in the Development of Nigeria. Journal of

Development Universal Consortia Ikot-Ekpene, Nigeria. Pp1-20
Bickerdyke, I, Lattimore, R, Madge, .A. (2000); Business Failure and Change: An
Australian Perspective. Research Paper of Management. Australia.
Canberra.Vol. 3 Pp10-23
Gholami, M. (2008); Survey of the Failure Causes of Unsuccessful Entrepreneurs in
Iran. M.Sc. Dissertation. Sharif University of technology. Tehran. Iran
(in Persian). Pp15-30
Iwu, A. S. (2004); Small Business Management in Nigeria. Aba; Chudy Publication.
Pp1-10
Khan, S. (2006); The Chief Cause of Business Failure & Success. Journal of Small
Business, Entrepreneurs Development., USA. 9(1): 17-27.
Liao, J. Welsch, H,. Moutray, C.H. (2009); Start up Resources and Entrepreneurial
Discontinuance: The Case of Nascent Entrepreneurs. Journal of Small Business
Strategy. 19(2): 1-15.
Maclayton, D. (2004): Introduction to Business Statistics, Port Harcourt. Man Philip
Publications, London. Pp1-12
Olawale, F. (2014); The Causes of the Failure of New Small and Medium Enterprises
in South Africa. Mediterranean Journal of Social Sciences, CSER Publishing,
Rome-Italy. Vol 5 No 20. Pp. 1-6
Ooghe, H. De Prijcker, S. (2008); Failure Process and Causes of Company Bankruptcy:
a Typology. Journal of Management Decision, Italy. 46(2): 223-242.
Oparanma, A.O., Hamilton, D.I., Zep-Opibi, I. (2010); Diagnosis of the Causes of
Business Failures: A Nigerian Experience. International Journal of
Management. Innovation. 2(1): 31-44.

KAYODE OLADIPUPO OLAYEMI

A PROJECT ANALYST
8

08058573347; 07063796484