THE ENVIRONMENTAL ANALYSIS OF CONSULTING FIRMS IN NIGERIA

THE CASE OF D4M CONTACT NIGERIA

D4M CONTACT NIGERIA®

Contents

Contents...........................................................................................................................ii

1.0 Introduction............................................................................................................1

2.0 Macro Environment Analysis...............................................................................2

2.1 Political Factors..................................................................................................2

2.2 Economic Factors..............................................................................................2

2.3 Social Factors.....................................................................................................3

2.4 Technological Factors.......................................................................................4

2.5 Environmental Factors......................................................................................4

2.6 Legal Factors......................................................................................................5

3.0 Industry and Sector Analysis...............................................................................6

3.1 Porter’s Five Forces Framework......................................................................6

3.2 Industry life cycle...............................................................................................6

4.0 Critical Success Factors and Opportunities and Threats.................................7

5.0 Conclusion.............................................................................................................8

Bibliography.....................................................................................................................9

Appendices.....................................................................................................................10

Appendix 1: Porter’s Five Forces Analysis.............................................................10

Appendix 2: Critical Success Factors......................................................................11

Appendix 3: Opportunities and Threats..................................................................12

1.0 Introduction

D4M CONTACT NIGERIA is a firm of multi - disciplinary management professionals,

offering a wide range of professional consulting services in three practice areas:
Strategy & Planning, Organisational Effectiveness, and Change Management. Across
these three service areas, we serve small scale firms who have the ambition to grow big
within the private sector in Nigeria.

Our service offerings are classified into two broad business units such as the research
& training unit and the management support unit. The former covers knowledge
intensive business services (KIBS) such as projects & research advisory and workforce
development while the latter is involved with management support services such as
strategy management, change management, and business development services
assisting clients in achieving consistent business productivity in an efficient manner.

This analysis takes the general to particular structure by first presenting the Macro
environment analysis using the PESTEL analytical tool. This will then be followed by
analysing the Industry environment using both the Industry Life Cycle and Porters Five
Forces analytical tools and lastly, the development of critical success factors and the
identification of opportunities and threats in the market to present the background for
identifying D4M CONTACT NIGERIA’s position in the market.
2.0 Macro Environment Analysis
The PESTEL factors affecting D4M CONTACT NIGERIA at the Macro level are critically
analysed as follows:

2.1 Political Factors

As with other small scale firms in the service sector in Nigeria, D4M CONTACT
NIGERIA is faced with unfavorable government tax policies, very strict bureaucracy (red
tape), and political instability affecting the demand of consulting services in Nigeria.
Potential clients (small firms) are finding it difficult to afford professional fee for
consulting services thereby closing the available markets for D4M CONTACT NIGERIA.
The corporation tax has remained unchanged at 30% for years for both small scale and
large multinationals thereby making it difficult for indigenous small scale service firms to
compete with their foreign counterparts who are established in the country.

In addition, government’s priority for public spending is geared towards recurrent

expenditure to service its large bureaucracy rather than capital projects, which is the
aspect that impacts significantly on businesses. Moreover, the anti-business monetary
policy of the central bank of Nigeria keeping the interest rate at 12% is worrisome
considering the current economic situation presented below.

2.2 Economic Factors

The services sector accounted for the largest share of real GDP at 53.15% in the
second quarter of 2014, amounting to over N 8 million and employing 20% of the labour
force (NBS, 2014; Shu’ara, 2014). However, the GDP per capita in Nigeria is 1098 USD
compared to that of the UK at 37955 USD. The GDP growth rate is drastically
fluctuating at 8.67% in the second quarter of 2014 compared to -9.88% in February,
2014 and 4.12% in November, 2013 (NBS, 2014). Current unemployment level in
Nigeria is at 23.90%, population is 166.21 million, inflation rate at 8.10%, interest rate at
12%, comparative foreign exchange rates reaching an all time high of 165.80 NGN to 1
USD from 0.53 NGN to 1 USD in 1960 when Nigeria gained independence with the
actual current figure at 170.95 NGN to 1 USD (NBS, 2014; CBN, 2014).
The tendency for employee turnover is high as they prefer to migrate overseas to live
and work. The cost of accessing adequate relevant literature and materials is relatively
high considering exchange rate. Access to funds to grow SMEs remains very
challenging.

2.3 Social Factors

The current Nigerian population is 166.21 million of which the middle-age is the
predominant age group (NBS, 2014). Coupled with the high rate of unemployment, self-
employment is at the all time increase. Education literacy is at 72% with majority holding
a B.SC equivalent qualification (Shu’ara, 2014). Majority of the educated fellows prefer
a white-colar office job. However, Nigerian graduates are generally evaluated to be
unemployable due to poor quality of education and the fact that they do not meet up
with the required competency level expected by employers (Nkinyangi, 1991; Kolawole
and Arikpo, 2004).

SMEs make up about 97% of the entire economy with majority being either micro/one-
man business. Most SMEs are failing within the first 5 years of starting operations due
to poor or no formal planning. Skills gap is high especially within the knowledge-
intensive business services (KIBS) sector. The need for proper business planning is
rising but owner-managers do not have enough confidence in the quality/value business
planning done by indigenous consulting firms may impact on their businesses. This is
due to the belief that multinational firms and expatriates are the ones who can provide
the quality services that are needed.
2.4 Technological Factors
The rise of availability of information technology, internet services, search engines,
online communities, free online resources, virtual businesses across the globe with
established brand have made indigenous consulting firms struggle for customers in the
local market who do not believe in the quality of local services. Businesses in Nigeria
are fond of accessing hard data from the internet to inform decision making rather than
conducting systematic research with the help of external consultants.

In addition, the major technological factor affecting all businesses in Nigeria is the lack
of infrastructural facilities such as power-supply, good roads, and the cost of production.
There is no constant electricity to work with and workers need to struggle with traffic to
commute to and fro spending unreasonable hours on the road. Nigeria is relatively cost
intensive with little or no incentive from the government. Internet data connectivity could
be very slow at times yet expensive. Consulting firms are left to build their own
technology capabilities.

2.5 Environmental Factors

The ecological factors such as the weather and climate change in Nigeria are favorable
for the consulting industry. The hot temperature is manageable and won’t cause any
major disruption to work. Although some field works e.g. market research that requires
door to door data collection might most times be disrupted by constant rain.
Furthermore, epidemic is known to be uncontrollable in most African countries due to
poor management, poor infrastructure, illiteracy and poor number of qualified health
practitioners.

However, the case is now different especially in Nigeria as the health sector and
research in both health and environmental sciences is radically advancing. The most
recent example is the surprising way Nigeria was able to curtail and eliminate Ebola
outbreak in the country some weeks ago. Insecurity in Nigeria is however very poor
especially in the northern part of Nigeria that is infested with terrorist insurgents. With
respect to environmental law, documents are not printed unless it is necessary to keep
the environment clean and the same is communicated to our clientele via email.
2.6 Legal Factors
The legal framework upon which D4M CONTACT NIGERIA operates is not quite strict.
Research ethics compliance in Nigeria is not as strict as the western world and this
makes business and management research easier compared to researching in the
developed countries. However, the D4M CONTACT NIGERIA is highly ethical in its
research processes as ethical standards are taken very seriously to build her brand in
the Nigeria market. The national minimum wage in Nigeria may also not be favorable in
relation to ad hoc research activities like seasonal data collection when part-time
workers will only be needed to collect face-to-face data for a couple of weeks.
3.0 Industry and Sector Analysis
Based on Porter’s five forces model, the task environment in which D4M CONTACT
NIGERIA operates is examined. According to Meyer et al. (2007), a task environment is
regarded as the set of forces that directly affect the ability of an organization to acquire
resources and deliver its offerings on a daily basis, emanating from its immediate
environment such as the suppliers, distributors, customers and competitors.

3.1 Porter’s Five Forces Framework

The level of rivalry among organisations in the management consulting industry and the
potential for entry in Nigeria can be likened to a targeted city without walls. The economy is rich
with resources, the population and its demography is very attractive for any market. The
industry is wide open only to new entrants who have the strength to survive because foreign
firms with established brands are the current market leaders and are in the business of building
barriers to entry. Gartner’s 2013 Market Share Analysis of consulting services firms
worldwide reported that the consulting services global market grew by 4.5% from
$114.1 billion in 2012 to $119.3 billion in 2013.

However, of this growth rate only 4 top multinational firms within the global consulting
industry contributed about 40.4% (Gartner, 2014). Indigenous consulting firms in Nigeria
mostly SMEs are seeking ways to increasing their market share striving to compete
both nationally and globally as well as with market leaders who have their presence
established in the Nigeria market. There are numerous suppliers of inputs as human
resources and Information Technology is the basic inputs. There is large demand for
consulting output especially now that corporate profit is recovering from economic
downturn. However, there are few substitutes available for consulting services from
other industries such as Government parastatals, Research institutes, and Educational
institutions. However, buyers’ preferences are more toward consulting firms. See
Appendix 1 for an illustration of the Porter’s Five Forces model as applied.

3.2 Industry life cycle

The global management consulting industry is in its maturity stage where products are
becoming more standardised and there is low growth. The western market seems
saturated and firms are expanding markets and getting themselves established in new
markets. The Nigeria market is also getting congested at its shake-out stage, forcing out
a lot of weaker players and gradually entering its maturity stage.

4.0 Critical Success Factors and Opportunities and Threats

The methodology used in developing the critical success factors (CSFs) is the inputs-
process-outputs framework, which is considered in the light of both the Macro and
Industry conditions analysed above. As identified above, the major inputs from suppliers
are Human Resources and Technology. Without the efficient management of these,
value cannot be created for the customer. Value is created through business processes
with the use of technology for the clients. The diagram in Appendix 2 gives a simple
overview of the CSFs which must go right for D4M CONTACT NIGERIA to compete
successfully in the dynamic environment it operates.

The opportunities and Threats are identified based on the PESTEL analysis above.
Attractive opportunities abound in the Nigeria consulting Industry, as much as there are
threats. The above PESTEL economic statistics means a lot for D4M CONTACT
NIGERIA to remain competitive. Inflation rate at 8.10% for example could mean
company must achieve a minimum growth rate of 8.10% to retain last year’s bottom line
value, plus the fact that cost of production is relatively high, which could effect on price.
Prices may also need to be increased by a minimum of 8.10% to retain the value of
previous year’s prices of services. To retain the value of employee’s earnings for last
year, there may be need for a minimum increment of up to 8.10% and so on. On the
other hand, high population is an opportunity for reasonable demand for service.
Coupled with high unemployment rate, it is an indicator for workforce availability with the
fact that the predominant highest qualification of B.Sc. equivalent is just what is needed
for staffing. However, the fact that graduates are unemployable due to poor education
would mean initial cost of training. Other opportunities and threats are as shown in
Appendix 3 below.
5.0 Conclusion

The PESTEL analysis, Porter’s Five Forces, and Industry life cycle consideration show
how dynamic the external environment of the consulting industry is and how it may
determine the strategic position of firms operating in or intending to operate in such
environment. Overall, D4M CONTACT NIGERIA is in a manageable environment, which
when constantly monitored and with focus on the critical success factors will lead to
business prosperity and sustainability for the organisation.
Bibliography

Appelbaum, S.H., and Steed, A.J. (2005). The Critical Success Factors in the Client-Consulting
Relationship. Journal of Management Development. Vol. 24, No. 1, pp.68-93.

Adeoye, A.O., and Elegunde, A.F. (2012). Impacts of External Business Environment on
Organisational Performance in the Food and Beverage Industry in Nigeria. British Journal of
Arts and Social Sciences. Vol. 6, No. 2, pp.194-201.

CBN. (2014). Central Bank Of Nigeria Report 2014.

Gartner. (2014). “Market Share Analysis: Consulting Services, Worldwide, 2013.” Gartner
publications.

Kolawole, C. O., and Arikpo, P. A. (2004). “Predictors of Self-Employment Efforts Among

Unemployed Nigerian graduates”.

Meyer, E., Ashleigh, M., George, J.M., and Jones, G.R. (2007). “Contemporary Management,
European Edition.” UK: McGraw-Hill Higher Education.

NBS. (2014). Nigerian Gross Domestic Product Report, Issue 2, Quarter Two 2014. National
Bureau of Statistics Nigeria.

Nkinyangi, J.A. (1991). Student protests in sub-Saharan Africa. Higher Education, Vol. 22, No.
2, p. 157.

Ogunro, V.O. (2014). Nigeria’s Business Environment: Issues Challenges and Prospects.
International Journal of Academic Research in Business and Social Sciences. Vol. 4, No. 4, pp.
132-138.

Shu’ara, J. (2010). Higher Education Statistics- Nigeria experience in data collection. Paper
presented at the UNESCO Institute of Statistics Workshop on Education Statistics in
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Wernerfelt, B. (1984). A Resource-based View of the Firm. Strategic Management Journal, Vol.
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Appendix 1: Porter’s Five Forces Analysis
Appendices
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Appendix 2: Critical Success Factors

Appendix 3: Opportunities and Threats

Critical Success
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