Saturday, 13 April 2013
How firms grow the economy
Posted by: Our Reporter on March 15, 2013 in Brand week Leave a comment http://thenationonlineng.net/new/business/brand-week/how-firms-grow-the-economy-3/ Over the years, brands and their parent companies have succeeded in building the economy of their countries and foreign hosts. This is possible because of the profits the brands make, employment opportunities they generate for citizens and Corporate Social Responsibility (CSR), including provision of electricity, roads, pipe-borne water and manufacturing plants. Such is the value they add to natural economy that the companies are really supported by the host countries in period of economic adversity. Between 1998 and 2007, Nokia contributed a quarter of Finnish growth rate and in the early part of the 21st century it employed more than 24,000 people. In a country where only natural resources are its vast forests, Nokia succeeded in putting Finland on the world map. It is the first phone manufacturer to own a care centre in Nigeria. The company also partnered with the Lagos State government to implement the house-numbering project. That is why Nokia users have access to a detailed offline map of Lagos State. They connect with their consumers, sell more with the new improved application that provides detailed offline map. Yet, Nokia has no manufacturing or even assembly plant in Nigeria. Among many Chinese companies, Huawei has distinguished itself as a telecommunications’ equipment manufacturer. Today, it is the largest telecoms equipment manufacturer. In 2010, the company announced a net profit of over $3 billion. In addition, Huawei runs a training facility in Abuja, where people are being trained. This facility is the first of its kind in West Africa. Samsung Group, which has about 80 subsidiaries with Samsung Electronics as its main firm, is responsible for 20 per cent of South Korea’s Gross Domestic Product (GDP). Samsung has a care centre in Nigeria for the servicing, repair and maintenance of its products. In partnership with the Lagos State government, the company also owns a Technical School in Ikeja, Lagos. After training, however, beneficiaries still have to go hunting for jobs. In effect, its impact on alleviating unemployment in the country is minimal. If Samsung had a manufacturing plant, the students would have qualified to work there since they already have the technical-knowhow. For instance, Nestlé—the consumer-goods company—contributed 15 per cent of Switzerland’s GDP in 2012. It has a vibrant Nigerian subsidiary with a functional manufacturing plant that employs many Nigerians. It has just opened a multi-billion centre in Agbara, Ogun State. Guinness storehouse, the home of Guinness, welcomed over one million visitors last year and served as Ireland’s major international major tourist attraction. Guinness Nigeria owns a manufacturing plant in the country and undertakes many CSR projects in the community. Coca-Cola has over 90,000 employees across more than 200 countries; it contributes immensely to the economy through the employment of many people and execution of projects spread across communities. With Toyota as its spearhead, Japan’s automobile industry contributed 10.5 per cent growth to that country’s economy in 2009. It has more than 300,000 employees with the majority being Japanese. Toyota has no manufacturing or assembling plant in Nigeria, yet it is the top selling automobile in the country. Same goes for Germany’s Mercedes Benz. Every year, Nigeria churns out graduates in their thousands from different universities with no assurance of employment. Yet, different foreign brands have turned the country into a cash cow. It is projected that the sales of smartphones in Nigeria would hit N900 billion by 2015, yet unemployment is at its all-time high, crime in increasing and government is complacent in tackling the malaise. These companies have defended their corporate actions. They are shortage of electricity as a crippling factor. The cumulative effect of the staggering cost of generating power in Nigeria is a substantial increase in the cost of production, which means that the goods produced are more expensive than expected. Setting up manufacturing and assembly plants should serve to help cut costs for manufacturers since it would mean a reduction in overhead costs such as transportation. But when weighed against the astronomical cost of generating power in Nigeria, locating plants outside the country seems a more logical and cost effective choice. The recent spate of insecurity in the country, has served as a further encumbrance as far as this goal is concerned. Would Nigeria continue to be a dump site for these brands? Who is to blame for this misfortune – the government or the companies? A Professor of Economics, Makinwa Olusegun, said: “A nation that would grow must first of all grow its manufacturing sector, encourage foreign investors to build their manufacturing plants in the country. Countries such as India grew like that. If we continue to be consumers and not producers, we would end up being stagnant and may not be able to cope with the level of unemployment that would hit the country in another 10 years. “The government should first of all create an enabling environment for local brands to grow, and also for foreign brands and investors; make importation almost impossible and make foreign companies see the cost effectiveness of stabling their either manufacturing or assembly plant in the country. “For example, many companies are running to Ghana to produce and then come to Nigeria to sell. They sell 90 per cent of what they produce in Ghana here, that fact is quite unnerving. This would surely continue if it does not get worse if the government doesn’t do anything about it on time to salvage the crisis,” he said.