Industrial societies are changing at an unprecedented speed, influenced mainly by globalisation or rather by global interdependence. They are also influenced by technology, education, commerce, social networking and so on.
In the heart of these changes are businesses which have continued to grow unhindered even in the midst of all sorts of adversities. The more they grow the more they build immunity around them to prevent failures. As they grow, they acquired enormous political clout and power. They go into mergers and acquisition and some of those M&A are hostile.
They enter host countries in different ways and different strategies. Some enter by exporting their products to test the market and to find whether their existing products can gain sizeable market share. For such firms, they rely on export agents. These foreign sales branches or assembly operations are established to save transport costs because there is a limit to what foreign exports can achieve for a firm owing mainly to tariff barriers and quotas and also owing to logistics or cost of transportation. Most of the firms are encouraged by the low wage rates and other environmental factors.
To meet the growing demands in the foreign countries, the firm considers other options such as licensing or foreign direct investment which are critical steps. Some continue with export even when they have settled for the FDI option. Every step takes strategic planning and is motivated by profit through sales growth. For instance, a company may have reached its limits in satisfying domestic demand and would look for new markets.
FDI, which connotes finding a way around protective instruments in the importing country, is one of the ways to expand. Typically, investment flows from regions of low profit to those of anticipated high returns.
These businesses that opt for foreign production eventually grow into corporations and into multinational and transnational corporations. The size of some corporations is larger than the size of most developing countries.
These multinational corporations have also learnt to live peaceable with their host governments and host communities through the concept of Corporate Social Responsibility. They are compelled to behave by laws governing their operations and activities.
They are, indeed, change agents. Every country needs them and to have them, the country concerned must create an enabling environment that will attract them and keep them. The reality of the changing world has dawned on everybody and there is nowhere to hide.
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. Young people nowadays identify more with products more than with countries. Coca-Cola products are in every nook and cranny of the planet. The same can be said of many other products such as Jeans, Nike, Red Bull, Power Horse, Levi and other designers dresses and fashion accessories. Apple products like computers, iPad, iPod, and so on are in high demand everywhere in the world. Sony playstations are equally in high demand. Blackberry is all over and young people identify with all their series. HP, HPCompaq, Sony, Dell and Acer Computers and their components are all over the world and nobody really bothers where they are made any more and who really owns them.
This phenomenon brings rise to the growing belief that traditional nation state would inescapably lose influence over individuals. Consequently, the question being asked is whether globalisation would bring about the end to the traditional nation state as societies tend to use technology to connect with global partners and achieve goals once realised at the local level.
Similarly, trade and commerce in one country have become dependent on trade and commerce in many other states.
In all of these, Nigeria has had a good taste of multinational corporations defined as companies that implement business strategies in production, marketing, R&D, financing and staffing that transcend national boundaries. In other words, multinational corporation is a parent company that engages in foreign production through its affiliates located in several countries.
Incidentally, Nigeria is very much affected by the influence of the multinational and transnational corporations. It is well known that nearly all the famous global oil and gas players operate in Nigeria in one way or the other. The companies include Shell, ExxonMobil, ChevronTexaco, TotalFinaElf (now Total), Conoco, BP, Agip, Eni and Snamprogetti. Nigeria also had many of the global pharmaceutical companies before 1970. Some pulled out and those who remained were indigenised to become fully Nigerian companies such as Pfizer, May & Baker, Parke Davies, and so on.
The socio-political and economic history of Nigeria cannot be told without the mention of the erstwhile Royal Niger Company which is now called the UAC of Nigeria Plc. It is the mother company of so many other companies such as GBOlivant, Vitaform, Nigerian Breweries, Guinness, Kingsway, GM, Tractor and Equipment, to name a few. Other early multinationals that played and are still playing in Nigeria’s economy include but not limited to John Holt, Lever Brothers (now Unilever), UTC, Paterson and Zochonis (now PZCussons), CFAO, SCOA, NESTLE.
The story of UAC as told by the company reads as follows:
uac of Nigeria Plc has a rich and varied history of successful enterprise that pre-dates the geographical entity called Nigeria. The rumps of the company's early days can be traced to the activities of European traders and commercial activities.
The company has evolved through a series of mergers and acquisitions and restructurings as the various entrepreneurs sought to enthrone profitable and enduring enterprises.
One of the most significant developments in the company's history was the setting up of the Royal Niger Company, which was chartered between 1672 and 1750 to administer the territory that would later become Nigeria.
In 1879, the United African Company was found following the merger of four Companies trading up the River Niger: Alexander Miller Brothers & Company, Central African Trading Company Limited; West African Company Limited and James Pinnock.
Following the intense rivalry among the European nations in the 1880s, The National African Company Limited was floated to take over the assets of The United African Company. In 1886, The National African Company Limited was Chartered and Limited when the British government issued it a Charter after the Berlin Conference.
The logo of The Royal Niger Company was a device with three arms symbolizing the main waterways of the territory; on each arm was a single short word: 'ARS', 'JUS', 'PAX'
PAX stood for “peace and order” which the Company evolved to stem the “anarchy and barbarism of the Niger Territories” and safeguard the “numerous British and French trading interests in the Niger, which unity of action was an absolutely necessary antecedent to successful trade….”
ARS refers to "the skill in trade and liberal arts", which practical benefit European civilization brought to the millions in Central Africa. The subjective aspect is ingenuity - commercial and political - without which Unity and Equity would have failed.
JUS is "the actual law and legal rights" established by public authority (the Royal Charter), without which peace would be unstable and the progress of commerce and arts hopeless. It represented just conduct and equity a pre-requisite for legitimacy.
In 1889, The African Association was incorporated by the merger of eight firms that were operating in the Oil Rivers area. In 1892, The Royal Niger Company brought in Captain Lugard (later to be known as Lord Lugard) to help protect its interest in Nigeria. Lord Lugard would later become the first Governor-General of Nigeria.
Following the revocation of the charter, Royal Niger Company changed its Company name to The Niger Company Limited in 1900.
In 1919, The Niger Company Limited was bought by Lever Brothers Limited. That same year, The Miller Brothers Limited and the African Association United merged to form the African & Eastern Trade Corporation.
On March 3, 1929, The United Africa Company was formed by the joint agreements of The African & Eastern Trade Corporation and the Niger Company (Owned by Lever Brothers Limited).
uac was first incorporated in Lagos, Nigeria under the name Nigerian Motors Ltd on April 22, 1931 as a wholly-owned subsidiary of the United Africa Company Ltd. (a subsidiary of Unilever), which later became UAC International. The Company's name was changed to United Africa Company (Nigeria) Ltd on 23rd July 1943.
It became The United Africa Company of Nigeria Ltd on 1st February, 1955 and started acquiring, over a period of five years, a large part of the business of UACI. In 1960, C.W.A. Holdings Ltd, England also a subsidiary of Unilever, acquired UACI's interest in the company.
The name was changed to UAC of Nigeria Limited on 1st March, 1973.
In compliance with the Nigerian Enterprises Promotion Act 1972, 40 per cent of the company's share capital was acquired in 1974 by Nigerian citizens and associations and in accordance with the provisions of the Nigerian Enterprises Promotion Act 1977, an additional 20 per cent of the uac's share capital was publicly offered in 1977, increasing Nigerian equity participation to 60 per cent.
The name UAC of Nigeria Plc was adopted in 1991.
In 1994, following the divestment of 40 per cent interest in the company by Unilever Plc, the company became a wholly-owned Nigerian company. The transformation of uac from a trading behemoth into a leading manufacturing concern, even though it took root in the 1980s, was given serious impetus in the 1990s, following the exit of the company from its trading businesses.
In early 2000, uac further embarked on a series of business restructuring with a thorough portfolio review and switch of focus to value-adding operations. This has led to an era of focused growth on the foods, real estate, logistics and automobile sectors.
uac has an active foreign investor, Actis, which holds 20 per cent of the company's equity.
Today, uac has become a food–focused conglomerate with leading brands such as Mr Biggs, Gala, Grand Oils, Supreme, SWAN Natural Spring Water and Gossy Spring Water. The company's brand portfolio also includes franchised international food brands such as Nando's, Creamy Inn, Chicken Inn, Pizza Inn and Dial-A-Delivery.
Unilever is rightly mentioned in the story of UAC and it is important to explain that the two companies were together until recently, when unfortunately UAC International had to wound up in London. If not for Chief Earnest Shonekan GCFR, CBE; perhaps, UAC of Nigeria Plc would not have still been in existence today as a holding company. In fact, UAC appears to be more visible in the Nigerian economy and playing in more sectors than Unilever Nigeria Plc.
On the issue of related party alone, according the company’s account, “Unilever Nigeria Plc principally involved in the manufacture and marketing of foods and food ingredients, home and personal care products is controlled by Unilever Plc incorporated in the United Kingdom, which is the ultimate parent of the Group. There are other companies that are related to Unilever Nigeria Plc through common shareholdings or common directorships.
“Unilever Plc, London has given Unilever Nigeria Plc exclusive right to the know-how, manufacture, distribution and marketing of its international brands namely: OMO, CLOSE-UP, LIPTION, SUNLIGHT, BLUEBAND, VASELINE, LUX, KNORR, ROYCO, etc. In consideration of this, a Royalty of 3 per cent of Net Sales Value is payable by the company Unilever Plc London.
“Unilever Nigeria Plc also has a Management Services Agreement with Unilever Plc London for the provision of corporate strategic direction and expert advise/support on legal, tax, finance, human resources and information technology matters. In consideration of this, a fee of 2 per cent of Profit before Tax is payable by Unilever Nigeria Plc to Unilever Plc, London
PZ Cussons Nigeria Plc
PZ Cussons Nigeria Plc, the largest subsidiary of PZ Cussons, has enjoyed tremendous business success in Nigeria for over a century.
According to the company, “no other consumer goods company possesses heritage in Nigeria or understands its customers better than we do. Our approach to Nigeria, our customers, our consumers and to our business is designed to sustain us far into the future.
“Our prime business objective in Nigeria is sustainable and profitable growth and our drive to be world-class in every aspect of our business life will be relentless.
“To achieve this, we have adopted a Strategic Business Unit (SBU) structure, in which each SBU has clear focus on its markets; developing a deep understanding of the needs and aspirations of its consumers and the dynamics of the marketplace, which it can exploit to deliver its objectives.
“Our business policies, systems and actions (procedures and processes, corporate and personal ethics, corporate image, employee development, equality of opportunity, remuneration, services provided to distributors, etc.) are harmonised between all our SBUs, ensuring the sharing of best practice and operational synergies.
“By combining our financial strength and the commercial acumen encouraged at all levels amongst our people, we are positioning ourselves to seize profitable new opportunities within our chosen sectors.
“We firmly believe that our people are our greatest asset. As we strive for world-class standards in every aspect of our enterprise, our employees are encouraged to manage and delegate appropriately, to accept responsibility and to recognise that they are both empowered to act and accountable for their actions.
“Our long-term people development programme has the clear objective to improve the quality of our management resource both by development from within and by external recruitment.
“Exactly in line with the policy of our parent Group, our commitment is to establish a working environment which is based on a transparent meritocracy and the full engagement and involvement of excellent people”.
There are many other multinational corporations operating in Nigeria. There would have been a lot more if not for the Nigerian Enterprises Promotion Decrees of 1972 and 1977, and more broadly if not for the process of indigenisation in Nigeria which elicited a retreat, especially by the American multinational corporations in the manufacturing sector. It is an example of the negative impact on the process of indigenizing the ownership structure of an economy. Nigeria lost companies like Colgate-Pamolive, Abbott Laboratories and so on.
The benefits of multinational corporations to an economy are numerous. Nigeria would have been more developed than Malaysia, Indonesia and even Brazil if not for policy reversals and inconsistencies.
Multinational corporations transfer technologies, capital and the culture of entrepreneurship. They increase investment levels and income in the host countries; they promote improvement in their immediate environment; create access to high quality managerial skills; improve the balance of payment of host countries by increasing exports and decreasing imports; help to equalize the costs of factors of production. They stimulate domestic production and enhance efficiency and effectiveness in the production process; they stimulate positive responses from local operators.
Most of the well known Nigerian entrepreneurs started by working for the multinational corporations, where they acquired relevant skills and knowledge that gave them the impetus to launch out.
Multinational corporations also acquire raw materials with ease from any overseas source at competitive prices and can easily export components and finished goods for assembly or distribution in foreign markets. They create several other opportunities in the host country that create employment and improve living standards of the host communities.
Looking at Fortune 500 companies, only very few play big in the Nigerian economy, although their products are sufficiently visible. Nigeria is a big consumer of the products and services of multinational and transnational corporations and deserves to host a good number of them at this stage of our development.