***** printed chpts 4 & 5 (20 pgs) x 50 = CHAPTER 1

INTRODUCTION

1.1 Background to the Study

Cost reduction is the process used by companies to reduce their costs and

increase their profits (Pierce, 2014). Sometimes, the strategies vary according

to the company’s services and products. Strategic cost reduction is central to

the long-term sustainability of a business (Bryan, 2013). Cost reduction is

driven by competition and growth. Cost-improvement practices (Gotze,

2004). Most companies use cost reduction to rapidly improve financial

results while some companies are reducing costs to gain competitive

advantage, as well as to support investment in growing areas (Coynes, 2012).

Many well-run companies view cost reduction as an integral part of their

business strategy and not as something they do only when times are tough

(Institute of Management and Administration, 2006). For both public and

privately held companies, lenders look for acceptable profitability levels in

order to deem the company a good lending risk. They may rely on reducing

costs in order to fund growth or infrastructure initiatives such as developing

new products or replacing older, inefficient business information system

(Kerr & Panwells, 2004). Cost reduction often refers to cost cutting and it is

commonly approached that firm managers use to respond to the decreasing

sustainable profitability (Anderson, 2007).

The most important managerial tools are cost reduction strategies (Zengm &

Ada, 2010), and cost reduction strategies are considered as critical factors to

increase revenue for the success of manufacturing companies (Kumar &

Shafabi, 2011). Cost reduction strategy support decision making and

improves competitive allocation (Ellram & Stanley, 2008). In addition, cost

reduction may be an integral feature of overall businesses management

effectiveness and facilitate to determine accurately estimated cost before

process starting and can help to forecast cost occurrence in the future. Cost

reduction strategy helps to finish the task with the spending of limited

allocated resources and make valuable to firm such as working capital

invested reduction, lower cost per unit, and better quality of the process and

product (Growth & Kinney, 1994). Limited resource and apparent

continuous competition influence firms to better managing cost of

production by implementing standard, costing, budget system, monitoring

cost information, and focusing added activities through supplier

coordination and emphasizing on cost structure by analyzing cost and

finding the way to reduce cost in the stage of pre-production (Brancoto,

1995). Traditional cost systems were based on controlling cost and quality

and balancing them temporary, and also focus on internal efficiency. A well

planned cost reduction strategy will provide improvement in quality, cost /

price and functionality of a product (Growth & Kinney, 1994).

The performance of an organization is appraised by how it trims down cost or

raises value (Kocaili, 2010) . Firm’s performance observation is significant;

in many industries, the supply chain signifies roughly 75 percent of the

operating budget expense. Three widespread methods of performance are

used when assessing performance: efficiency, responsiveness and

effectiveness (Skandalakis & Nelder, 2001). Efficiency implies minimization

of whole system wide cost from shipping and allocation to stock of raw

materials, work in process and finished commodities. For the firms to be

efficient they should make the most of strategies intended at generating

maximum cost efficiency and for such efficiencies to be realized, non-value

adding activities should be discarded, economies of scale followed and

optimization methods set up so as to get the greatest utilization capacity. To

be responsive means ensuring that customer needs / demands are attended to

at the precise time without delays. Effectiveness on the other hand means

doing the right thing at the right time. Firms should ensure that they do

enough research to know what their customers need and should also get the

right resources so as to serve their customers satisfactorily (Dishon,

organizational performance can therefore be best measured through

operational cost reduction and customer service delivery levels.

1.2 Statement of the Problem

Various researches carried out bring about mixed findings on the relationship

between cost reduction strategies and performance. Some argue that cost

reduction is an efficient way of improving financial performance of a firm

while others argue that cost reduction is old fashioned and based on past

information hence it cannot on its own greatly impact on financial

performance of a company. A study conducted by Omar (2013) investigating

the impact of selected firm characteristics on the performance of firms listed

under the supermarket. In his study, he measures financial performance

using ROA and the study clearly elaborates that a collection of firm

characteristics end up affecting the performance of supermarket stores.

Waithaka (2010) also did a related study and investigated the relationship

between working capital management practices and performance of

supermarkets. A research done by Kaptan (1984) stated that measurement

systems for today’s supermarket operation must consider quality, inventory,

productivity, innovation and work force. In summary, financial measures

which are generated by traditional cost accounting system provide and

inadequate summary of a supermarkets operations. The current global

competition requires that non-financial measures such as mentioned

previously should be used in the evaluation of a company’s performance.

Companies that achieve satisfactory financial performance but

show stagnant or deteriorating performance on non-financial indicators are

unlikely to become or long remain world-class competitors. Present cost

accounting and management control system rest on concepts developed

almost a century ago when the nature of competition and the demand for

internal information were very different from what they are today. After all

development and changes, in order to survive and make profit in global

competitive environment, supermarket stores have started to question their

traditional and cost management system with the aim of adaptation to global

competition and supplying quick-changing demands and expectation of

consumers. Traditional cost management and cost plus pricing strategies

have also cost their influence in this new competitive environment. Because

most of the costs are determined in projection and development phase,

traditional cost management approaches which consider only the costs in

production phase and disregard the other costs in production life cycle have

lost their importance.

1.3 Purpose of the Study

The main purpose of the study is to examine the relationship between cost

reduction strategies and performance of supermarket stores in Port Harcourt.

However, the specific objectives are as follows:

(i) To ascertain the relationship that exists between Manufacturing

Process Cost Reduction and performance of supermarket stores.

(ii) To ascertain the relationship that exists between product/service

purchasing cost reduction and performance of supermarket stores.

(iii) To examine the extent at which supermarket stores in Port Harcourt

adheres to cost reduction strategies in carrying out their operation.

(iv) To determine the impact of cost reduction on performance of

supermarket stores in Port Harcourt.

1.4 Research Questions

The following research questions are used for this research work.

(i) To what extent manufacturing process cost reduction relates to

Effectiveness?

(ii) To what extent manufacturing process cost reduction relates to

Financial Sustainability?

(iii) To what extent product/service purchasing cost reduction relates to

effectiveness?

(iv) To what extent product/service purchasing cost reduction relates to

Financial Sustainability?
1.5 Conceptual Framework

The relationship between cost reduction strategies and financial performance

of paint manufacturing company in Rivers State. Cost reduction strategies is

the independent variable; dimensions are manufacturing process cost

reduction and product/service purchasing cost reduction. Performance is the

dependent variable, the measures are effectiveness and Financial

Sustainability.

Cost Reduction Performance

Strategies

Manufacturing Effectiveness
Process Cost
Reduction

Product/Service Financial
Purchasing Cost Sustainability
Reduction

Fig. 1: The relationship between the variable under study.

Source: Conceptualized by the Researcher (2019).

1.6 Research Hypotheses

The following hypotheses have been developed around which the research

would resolve:

Ho1: There is no significant relationship between manufacturing process

cost reduction and effectiveness.

Ho2: There is no significant relationship between manufacturing process

cost reduction and financial sustainability.

Ho3: There is no significant relationship between product/service purchasing

cost reduction and effectiveness.

Ho4: There is no significant relationship between product/service purchasing

cost reduction and financial sustainability.

1.7 Significance of the Study

The results of this study provide important implications for supermarket

stores managers as they indicate the positive relationship among cost

reduction strategies and performance of supermarket stores in Port Harcourt.

To utilize the knowledge, companies can achieve goals and attain better

performance when they implement cost reduction strategy. Therefore, these

results help companies executives specify and consider the cost reduction

strategy for implementation. The study shall provide grounds for further

research by other scholars who may want to broaden their understanding on

cost reduction strategies and their financial implication not only to

supermarket stores but also to other sectors like the banking industry and

others. The study will contribute to the existing body of knowledge in the

impact of cost reduction strategies on the performance of supermarket stores.

Supermarket stores will be in a position to boost their performance by using

the findings of the research.

1.8 Scope of the Study

The scope of the study is defined in three areas:

Content scope, geographical scope and unit of analysis.

Content Scope: The research investigates cost reduction strategies and

performance in supermarket stores in Port Harcourt. Our dimensions of cost

reduction strategies are: manufacturing process cost reduction,

production/service purchasing cost reduction while the measures of

performance are effectiveness and financial sustainability.

Geographical Scope: The study was limited to supermarket stores in Port

Harcourt.

Level /Unit of Analysis: The unit of analysis is supermarket stores. The

respondents to be covered comprise the employees of supermarket stores in

Port Harcourt.
1.9 Definition of Terms

Cost reduction which refers to an attempt to attain lower current fixed cost

and variable costs associated with an essential activity (Growth & Kinnery,

2018).

Performance: Performance is completion of a task with application of

knowledge, skills and abilities.

Cost: Cost is the price paid or required for acquiring, producing, or

maintaining something, usually measured in money, time, or energy; expense

or expenditure; outlay.

Strategy: A strategy is a general plan or set of plans intended to achieve

something.

Effectiveness: Effectiveness is the capability of producing a desired result or

the ability to produce desired output.

Financial Sustainability: Financial sustainability is a goal that all

institutions strive to achieve and it is largely used as a measure of good

performance.
 CHAPTER 2
LITERATURE REVIEW

2.1 Theoretical Framework

Various theories have been formulated on cost reduction strategies and

financial performance. They include portfolio theory; research based view

theory, efficiency structure theory. These are discussed below:

Resource Based View Theory

Pearce II and Robinson (2011) defined the Resource-Based View (RBV) as a

method of analyzing and identifying a firm’s strategic advantages based on

examining its distinct combination of assets, skills, capabilities and intangible

as an organization. This theory views the firm-specific factor and their effect

on performance. Grant(1991) views the firm as a bundle of resources which

are combined to create organizational capabilities which it can use to earn

above average profitability. Firms develop competencies from these

resources and when they are well developed, these become the source of the

firm’s competitive advantage. Penrose (1959) explains the importance of

resources including organizational processes, asserts, capabilities,

information and knowledge controlled by the firm (Daft, 1995), these

resources improve efficiency and effectiveness that will lead to higher

financial performance of firms. The desire to understand the effect of firm’s

characteristics on financial performance has been so controversial in the

research field. One side argues that the firm financial performance is

influenced by structural characteristics of the industry (Bain, 1954-1959) and

on the other hand others argue that it is influenced by firm specific resources.

Recently much focus has been given to firms level characteristics as opposed

to the industry level characteristics since it forms the basis upon which the

firms compete. For the purpose of this study, cost reduction strategies will be

the main focus since they are part of structural characteristics of firms. The

theory which explains the effect of firm’s characteristics which are internal

factors to the organization with respect to financial performance is the

resource-based view (RBV). In this study, we shall look at cost reduction

strategies and their impact on the financial performances of paint

manufacturing companies. However, the criticism put across on the use RBV

is that researchers only concentrate on one resource type: that is, intangible

assets within a single industry and examine its effect on company’s

performance (Kapelko, 2006).

Portfolio Theory

Modern portfolio theory was introduced by Harry Markowitz with his paper

“portfolio selection” which appeared in the 1952 Journal of Finance. Thirty

eight years later, he shared a Nobel Prize with Merton Miller and William

Sharpes for what has become a broad theory for portfolio selection. The

theory of portfolio management describes the resulting risk and return of a

combination of individual asset. A primary objective of the theory is to

identify asset combinations that are efficient. Here, efficiency means the

highest expected rate of return on an investment for a specific level of risk.

This simply means that they will not consider a portfolio with more risk

unless it is accompanied by a higher expected rate of return. Modern portfolio

theory was largely defined by the work of Markowitz (1952) in a series of

articles published in the late 1950s. The theory was extended and refined by

Sharpes (1963), Linter (1949), Tobin (1941) and others in the subsequent

decades. Portfolio theory integrates the process of efficient portfolio

formation to the pricing of individual assets. It explains that some sources of

risk associated with individual assets can be diversified by holding a proper

combination of assets.

Efficiency Structure Theory

The efficiency structure hypothesis states that firms earn high profits because

they are more efficient than others. There are two distinct approaches within

the efficiency structure; the x-efficient and scale-efficiency hypothesis.

According to the x-efficiency approach, more efficient firms are more

profitable since they have lower costs; such firms tend to gain larger market

shares, which may manifest in higher levels on market concentration, but

without any causal relationship from concentration to profitability

(Athanasoglou et al, 2006).

The scale approach emphasizes economies of scale rather than differences in

management or production technology. Larger firms can obtain lower unit

cost and higher profits through economies of scale. This enables large firms

to acquire market share, which may manifest in higher concentration and then

profitability.

2.2 Conceptual Framework /Review

Cost reduction is an unstoppable process of standards. Merserean (1994)

pointed out that cost reduction exist everywhere in the business. In other

words, productions, processes, manufacture, methods, organization and staff

should be considered. Moreover, cost reduction is critically examined and

reviewed with a view to improving efficiency and effectiveness and reducing

the costs (Murphy, 2009). Bruce (1992) defined cost reduction as the

application of procedures to monitor expenditures and performance against

progress of a project and manufacturing operations with projected completion

to measure variances from authorized budgets and allow effective action to

be taken to achieve minimal costs (Bruce, 1992). According to Carrol

(2009), it is essential that a firm implements the strategy of cost reduction

whenever the firm experiences tough time or to propel future growth. A lot

of literatures have been written about the methods of cost reduction.

According to John, Brierley, Cawton & Colin (2007), cost reduction can be

achieved through several approaches. However, there are some popular

approaches, like elimination in the form of non-essential, non-value adding

activities and modification of manufacturing activity. Cost reduction tends to

be applied on an ad-hoc basis when an opportunity for cost efficiency is

identified. Also, many of the approaches that are incorporated within the

area of cost reduction do not necessarily involve the use of accounting

techniques. Cost reduction consists of those actions that are taken by

managers to reduce costs, some of which are prioritized on the basis of

information extracted from the accounting system (Drury, 2004). According

to Holtzman (1994), trade creditors are interested primarily in the liquidity of

the firm. Their claims are short term, and the ability of the firm to pay these

claims is best judged by means of a thorough analysis of its liquidity. The

claims of bondholders on the other hand are long term. According, they are

more interested in the cash flow ability of the firm to service debts in the long

run. The bondholders may evaluate this ability by analyzing the capital

structure of the firm, the major sources and uses of funds, the profitability

over time and projections of future profitability.

2.2.1 Cost Reduction Strategies

Cost reduction is the practice of managing business expenses. (Jakub, 2004).

Cost reduction starts by the business identifying what their cost and

regulation whether those costs are reasonable and affordable, thereafter if

necessary, they can look for ways to cut cost through methods such as cutting
back, moving to a less expensive plan or changing services providers. To be

profitable, companies must not only earn revenues, but also reduce costs. If

the costs are too high, profit margin will be low, making it difficult for a

company to succeed against its competitors. Brumbang (2008) was of the

opinion that company should watch the cost and the profit will take of itself.

No firm will stay in the business if it does not employ prudent means of

checking its cost by ensuring that they do not over surpass the estimated cost

projections. If costs are not checked properly the outcome can be negative to

smooth running of the business. Company management must match

budgeted and actual cost and strive to ensure that they always remain within

the estimated projections (Martha, 2007). Many organizations have strived to

ensure that its core objective is to maximize profits and minimize cost. Sikka

(2003) was of the opinion that cost reduction consist of methods, policies,

procedures and systems that helps to regulate the cost of operating and ensure

the cost do not go beyond a certain level.

2.2.2 Manufacturing Process Cost Reduction

Miller & Vollmann (1985) state that the real driving force behind

manufacturing overhead cost is not production volume but transaction

dealing with logistics, balancing, quality, and change. Cooper & Kaplan

(1987) suggest that many of the transactions that drive costs are determined

by the complexity of plants operations. Hayes & Clark (1985) indicate that
production complexity increases with the number of product lines, the variety

of flow patterns, and number of inventory locations. If overheads costs are

generated by transactions not direct proportional to production volume but

these costs are assigned to products based on measure of volume, then

product costs may be distorted. Cooper & Kaplan (1987) warn that one

consequence of distorted product cost is the likelihood that manufacturers

will over-emphasize less profitable product lines. Business operation focuses

on highest potential and a common approach is a cost control that is expected

to produce the greatest overall financial performance (Healthcare Financial

Management Association, 2012). Cost management strategy implementation

success might generate value to the firm, for example, the greater control

production activities results in better quality of procedure and lowers the unit

cost of goods and cost variance. In addition, the consequence of the cost

management success is firm value increasing and profit improvement that

positively affects firm’s value greater than pricing (Growth& Kinney, 1994).

2.2.3 Product/Service Purchasing Cost Reduction

Purchasing in a manufacturing firm involves negotiating as well as buying

from current and potential suppliers. Purchasing provides the manufacturing

firm with quality materials, parts, factory and office supplies and services for

use in the production cycle required for the day to day operations of its

business. Through effective and efficient purchasing function, the

manufacturing firm is able to make its sales, keep production in operation,

preserve plant and equipment, reduce operating costs, enhance productivity

and improve profitability (Van, 2000). More importantly, maintaining

purchasing effectiveness is essential for business organizations operating in

competitive environment. However, in the context of increasingly

competitive business environment, sustaining an effective and efficient

purchasing function requires that the organization formulates and

implements, an effective purchasing strategy. For instance, to sustain in the

dynamic global business system, a manufacturing firm needs an effective

purchasing strategy that emphasizes on identifying and developing global

sources for procurement of quality as well as cheap raw materials parts and

components (Weele& Van, 2000). According to Johnson (2000), purchasing

is considered to be one of the most basic and important function in almost all

kinds of organizations. He defined purchasing as the process of obtaining

from external sources all goods and services which are required for running,

maintaining and managing a company’s primary and support activities at the

most favourable condition. Here, according to Lyson (2012) held that

external sources includes people, also defined purchasing as the development

of an external sourcing and supply strategy that links the total business plan

of an organization so that it is achieved and maintains a suitable position in

the total value chain. According to Lamming (2002), indicated that not all
businesses regard purchasing as a function that is best undertaken by

specialists, rather there are firms who consider this activity as more

appropriately performed close to the point of need of goods and services.

Generally, purchasing is the function responsible for obtaining by purchase,

lease meant, equipment materials, components, supplies and services required

by an undertaking for use in the production or for resale.

2.3 Performance

Performance is rapidly becoming more accepted as necessary to enhance the

productivity and profitability of organizations and is consequently expanding.

In order to deal with many of the challenges created to deal with many of the

challenges created by the macro forces more organizational development is

necessary (Drucker, 1998). Constant change is forcing companies to become

more competent at change management. This constant change is also burning

employees out, which is forcing companies to focus on the quality of work

life in order to retain their best employees. The level of competition is at an

all-time high due to changes in technology and globalization. Since

companies can quickly access the same information through technology and

benchmarking, often the competitive advantage rests in the ability of an

organization’s employees to analyze, utilize and capitalize on information.

Maximizing employee performance is accomplished by a number of

organizational development interventions including but not limited to the

following three interventions: aligning the organizational dynamics (vision,

organizational design, culture, compensation, and strategy), providing the

tools and climate that induce constant learning, helping employees obtain

strong interpersonal skills so that they can work on teams, network, and

manage conflict with all portions of the value chain.

Porter (1998), tomorrow’s business environment, competitive advantage lies

increasingly in knowledge, relationships and motivation that distant rivals

cannot replicate. Drucker et al (1998) future corporations need to focus on

making the lives of their employees better, having the willingness to enhance,

developing self-confidence in people, maximize employee performance by

developing the knowledge worker, mastering the human asset, which

includes the ability for example, in Japan, teamwork is described as “human

ware” and in France, it is referred to as “Toyotisin”

2.2.5 Financial Sustainability

Financial sustainability is a goal that all institutions strive to achieve and it is

largely used as a measure of good performance. Theoretically, this financial

sustainability enables a firm to cover recurrent or overhead costs and to

prioritize activities so as to accomplish missions, without undergoing

interminable negotiations with donors who may or may not agree with one’s

vision or cost percentages (Chalk & Hemming, 2000).

Many institutions approach donors that will allow them to set up a trust fund

or income generating opportunities that yield a profit margin above market

conditions. The ingenuity and creativity of non-profit organizations has led to

the development of many innovative mechanisms. This ability to dream and

to persuade others to realize these dreams is one of this sector’s principal

strengths. Nonetheless, the percentage of organizations that achieve financial

sustainability remains very low. This is due not to a lack of creativity or

commitment, but rather to the fact that many organizations continue to have a

donor-dependent vision.

If a trust fund is obtained, it is usually through an outside source. Moreover,

attaining a profit margin that exceeds market conditions generally requires

appealing to the organization’s non-profit status in order to obtain special

concessions. While it is important to consider this capacity for access to

capital or preferential terms as a competitive advantage enjoyed by a non-

profit organization, attaining financial sustainability through a single source

or mechanism is a stroke of luck. On the threshold of the twenty-first

century, faced with an increasingly competitive market, a globalized

economy, and a context in which change is a constant rather than a variable,

one must employ more sophisticated methods to attain financial

sustainability.
The survival of the sector depends on a nation’s ability to achieve this goal

(Chalk & Hemming, 2000; Artis & Marcellino, 2000). The corporate sector

offers the most successful model to date to be adapted to one’s reality. The

main difference between the two sectors is that the surplus generated in the

corporate sector is used to create individual wealth. In the non- profit sector,

this surplus is reinvested to accomplish a mission. After all, “not-for-profit”

does not mean “for losses.” If the corporate sector is efficient, in theory, non-

profit organizations must be even more efficient to reach their objectives.

Financial sustainability measures an organization’s ability to meet all its

resource and financing obligations, whether these funds come from user

charges or budget allocations to fulfill its mission and serve its stakeholders

over time. Sustainability should be seen as a measure of an organization’s

ability to fulfill its mission and serve its stakeholders over time.

Sustainability issues are increasingly gaining attention within the financial

sector.

The financial sector of any economy occupies a prominent place in its policy

framework, and there is no leeway to bypass it when heading towards a

paradigm shift. The conceptual differences, if any, between the strategies for

financial sustainability and the performance of a nation are not yet clear

(Gerster, 2012; Thompson, 2001). IMF (2013) observes that the sustainability

approach to any economy is challenging the economic focus of both the

public and private sector governance systems. For instance, the providers of

financial services, such as banks, Micro-financing institutions, and

intermediaries, increasingly realize that sustainable financial practices in the

public and private sectors have a positive potential impact on performance in

a number of ways; namely; increasing revenues, reduction of risks,

development of human capital and improvement of access to capital.

2.2.6 Effectiveness

Effectiveness is difficult to define because it means different things to

different people depending on perspectives and frames of references. Any

definition is a function of who is defining or who is evaluating effectiveness

and why he or she is doing so. As there are problems with its meaning, so

also are there problems with the measures because each perspective

introduces a different dimension to the meaning. Other problems with the

issue of organizational effectiveness as enumerated by Ivancevich and

Matteson (2002) include the criteria for its identification and the best models

to guide research and practice.

There is no single criterion to measure effectiveness. There is no agreement

among the experts as to its meaning and indicators; some measures contradict

each other, say for example, is it more rewards to shareholders or more

compensation to employees? At times, the system is very complex with many

wanted and unwanted by different constituents, making a unitary view of

effectiveness inadequate and unrealistic (Katz and Kahn,1978). Effectiveness

is also a function of the internal function, dynamics and values of any given

organisation and each organisation runs its affairs in such a way it believes

will lead to effectiveness.

Initial attempts to unravel the concept of effectiveness viewed it as the

attainment of an objective or some ultimate criteria and as earlier as 1949,

Thorndike has already identified productivity, net profit, mission

accomplishment, and organisational growth and stability. By the time

Campbell delved into the matter in 1973, 19 indicators had emerged which

included emerging terms as conflict-cohesion, internalisation of

organisational goals, evaluation by external entities, utilisation of

environment, readiness and the usual ones like productivity, efficiency,

quality, profit, growth absenteeism and staff turnover. The most prominent of

these were overall performance, productivity, employee job satisfaction,

return on investment and employee withdrawal.

Beyond this approach which Steers (1977) calls univariate, there is another

approach based on relationships between key variables that affect

organizational success. He reviewed 17 of these models and the most popular

evaluation criteria in order of importance were adaptability/flexibility,

productivity, satisfaction, resource acquisition and absence of strain. Thus,

there are serious problems in defining and measuring organisational

effectiveness and some of these problems stem from construct validity,

criterion stability, time perspective, multiple criteria, measurement precision,

generailisability, theoretical relevance and level of analyses (Steers,

1977:55). With this in the background, we attempt to define effectiveness.

Effectiveness generally refers to the extent to which an organisation is able to

achieve its goals. Bernard (1938) defines effectiveness as the

accomplishment of recognized objectives of cooperative effort and adds for

emphasis that the degree of accomplishment is the degree of effectiveness.

But these goals are at times difficult to define and measure, inconsistent, seen

differently by different organisational members or even used as camouflage

for the hidden agenda of the powerful forces within the organizational.

Furthermore, Steers (1991) reminds us of the difference between operative

goals (what organisations actually do) and official goals (what they claim

they do) and that what matters are the operative goals. To address some of

these shortcomings Zamuto (1984) adopts a stakeholder approach by defining

organisational effectiveness as human judgments about the desirability of the

outcomes of organisational performance from the vantage position of the

varied constituencies directly and indirectly affected by the organisation. But

stakeholders change over time; the preferences of stakeholders change and

the society itself also changes. Organisations can also only achieve their

objectives if they are able to survive and the primary condition for survival is

enough profitability to enable them maintain their wealth creating

capabilities. An organisation that is not profitable cannot even survive, not to

think of the level of its effectiveness, There are also other basic requirements

for organisational stability, predictability and overall survival and these

include resource acquisition, efficiency, production or output, rational

coordination, renewal and adaptation, conformity and constituency

satisfaction (Steers, 1991).These are perquisites for effectiveness. The issue

became more complicated when Robbins and Coutler (2002) added another

B.E.A. Oghojafor, F.I. Muo and S.A. Aduloju 87 dimension; that effectiveness is

also concerned with „how appropriate the goals are’! Apart from the fact

that appropriateness is subjective and value-laden, the question is appropriate

from whose judgment and/or for whom or what group of people?

Thus whichever way effectiveness is defined or measured, it must take these

basics into consideration and that is why it is a multi-dimensional affair.

Friedlander and Pickle (1967) express this succinctly when they assert that

effectiveness criteria must take into account, the profitability of the

organisation, the degree to which it satisfies its members and the degree to

which it is of value to the larger society. These three perspectives include

system maintenance and growth, subsystem fulfillment and environment

fulfillment.

Organisational effectiveness is a complex and contentious concept. No two

authorities agree on what constitutes effectiveness or on how it is measured

although they all agree that it involves attention to goals, satisfaction of

constituents and relationship with the external environment. But we live in a

world tyrannised by effectiveness. Workers, managers, departments and

organizations are always asked to be effective and that simply means to

produce some form of results. Early management thinkers believe that

effectiveness is the ultimate measure of managerial and organisational

performance. Barnard (1964) believes that effectiveness relates to the

accomplishment of the cooperative purpose which is social and non-personal

in character, insisting that organisations cannot continue to exist without

effectiveness and that this effectiveness can easily be measured. Drucker was

more emphatic that the society and individuals within it cannot satisfy their

needs without effectiveness. In his own words: “Only executive effectiveness

can enable this society of ours to harmonise its two needs: the needs of

organization to obtain from the individual, the contribution it needs and the

need of the individual to have organisation serve as his tool for

accomplishing his purposes” (Drucker, 1967:177).

Herbert Simon had earlier argued that the behavior of people in organisations

should be integrated and purposive. In his words: “A great deal of behavior,

and particularly the behavior of individuals within administrative

organisations, is purposive- oriented towards goals and objectives. This

purposiveness brings about an integration in the pattern of behavior, in the

absence of which administration will be meaningless; for if administration

consists in getting things done by groups of people, purpose provides a

principal criterion in determining what things are to be done” (Simon,

1957 :4). But while we all seek and demand effectiveness, its meaning is

contentious and how it is measured is even more problematic. The

deceptively simple, but actually complicated question, given the cacophony

of voices as it concerns organizational effectiveness is: whom and what do

we believe? The objective of this paper is to examine some of the

perspectives on organisational effectiveness, establish the divergence and

convergence between them and suggest some practical ways of escaping

from the tight-corner into which the complexities have pushed management

practitioners and scholars.

2.4 Empirical Review

Karim & Jhantasana (2005) investigated cost efficiency of Thailand’s Life

Insurance Industry and studied the relationship between profitability and cost

efficiency. The purpose of their paper was to evaluate the cost efficiency and
its relationship with profitability in Thailand’s Life Insurance. They

examined the association between profitability and inefficiency by examining

the association between annual profitability and inefficiency. They found that

the mean inefficiency was negatively correlated to size and ROE and ROA

ratios showing that efficient firms on average had higher return on equity and

on assets indicative of inefficiency effect on profitability of insurance

companies. Karim & Jhantasana (2005) also found that the mean

inefficiency is negatively correlated with size suggesting the need for

rationalization in the insurance industry in Thailand. These results imply that

consolidating the large number of smaller measures should be high on the

government’s agenda, and the capital requirements for life insurers need to be

increased. The results also revealed that inefficiency is negatively correlated

with ROE and ROA ratios. This shows that efficient firms, on average, have

high return on equity and non-assets. This indicates that inefficiency has

substantial effects on the profitability of life insurance companies. A

research done by Ondick (2010) investigating on the relationship between

capital structure and financial performance of firms listed at the NSE. She

did her analysis using multivariable regression analysis and used various

variables. However, in her regression models, she established that the firm

size and sales growth were positively related to profitability. A research done

by Kaplan (1984) stated that measurement systems for today’s manufacturing

operation must consider quality, inventory, productivity, innovation and work

force. In summary, financial measures which are generated by traditional cost

accounting systems provide and inadequate summary of a company’s

manufacturing operations; the current global competition of a company’s

financial performance. Companies that achieve satisfactory financial

performance but show stagnant or deteriorating performance on non-financial

indicators are unlikely to become or long remain world-class competitors.

Present cost accounting and management control systems rest on concepts

developed almost a century ago when the nature of competition and the

demands for internal information were very different from what they are

today.
 CHAPTER 3

METHODOLOGY

3.1 Introduction

This chapter discusses how data generated were applied in investigating the

true nature of the relationship that exists among variables. A thorough

examination of the sources of data, the method used in data collection and

data analysis is carried out.

3.2 Research Design

A study design is the plan of action the researcher adopts for answering the

research questions. This is in line with Orodho (2003) description of a

research design as a plan, structure and strategy of investigation to obtain

answers to research questions and control variance. It sets up the framework

for study and is the blueprint of the researcher (Kerlinger, 1973). Survey

research design was used because of the following reasons: the design is

useful in describing the characteristics of a large population make use of

large sample, thus making the results statistically significant even when
analyzing multiple variables, many questions can be asked about a given

topic giving considerable flexibility to the analysis, the design allows use of

various methods of data collection like questionnaire and interview methods

and it also make use of standardized questions where reliability of the items

is determined (Owen, 2002).

3.3 Population of the Study

A population is any set of persons or objects that possesses at least one

common characteristic (Basha and Harter, 1980). The target population for

this study consisted of 97 employees of supermarket stores in Port Harcourt.

For a high degree of accuracy and adequacy in presentation of the sample the

stratified sampling method proportional allocations was adopted.

3.4 Sampling Procedure/Technique

A sample is a smaller group or sub-group obtained from the accessible

population (Mugenda, 1999). This subgroup is carefully selected to be

representative of the whole population with the relevant characteristics. Each

member or case in the sample is referred to as subject, respondent or

interviewees. Sampling on the other hand is a procedure, process or technique

of choosing a sub-group from a population to participate in the study (Ogula,

2005). It is the process of selecting a number of individuals for a study in

such a way the individuals selected represent the large group from which they

were selected. This study applied both probability and non-probability

sampling procedures to obtain the respondent for questionnaires and

interviews.

3.5 Data Collection Method

Data for this study were collected from two sources namely: primary source,

and secondary data source.

Primary Data: Primary data was used to collect ninety-seven (97)

questionnaire distributed to the respondent aimed at drawing empirical

inference on cost reduction strategies and performance of supermarket stores

in Port Harcourt.

3.6 Validity/Reliability Instrument

3.6.1 Validity of Instrument

This is the degree to which evidence and theory support the interpretation of

test scores entailed by using of tests (Nachmias, 1996). It can also be taken

as the extent to which the research instrument measures what it is supposed to

measure. According to Mugenda (1999), validity is the accuracy and

meaningfulness of inferences, which are based on the research results. It is

the degree to which results obtained from the analysis of the data actually

represent the variables of the study. The researcher validated the research

instruments in terms of content and face validity.

3.6.2 Reliability of Instruments

The term reliability points to the level of internal consistency or stability over

time of a research instrument. Therefore, for a research instrument to be

reliable, it must be capable of yielding consistent results when used more

than once to collect data from two samples drawn randomly from the same

population (Mugenda, 1999). To establish the reliability of the research

instruments, the researcher carried out a pilot test of the instruments using

another similar group with the same characteristics as the one targeted in the

study. The split-half method was used to establish reliability of the

instruments.

3.7 Data Analysis Techniques

The collected data was analyzed using both quantitative and qualitative data

analysis approaches. Quantitative approach was descriptive where simple

frequencies and percentages were used. Data was presented in tables and

figures. The quantitative data was derived from the students’ questionnaires

which covered information from the following areas: government owned

enterprises. Qualitative data analysis approach was used to analyze data

which was collected using interview method from selected supermarket

stores in Port Harcourt.

The following steps were employed in the analysis: recording to data, with

prior consent from the respondents. The recorded data was transcribed. This

is conversion of taped or recorded data into a written or electronic text

document. Representation of audible and visual data into written form is an

interpretive process which is therefore the first step in analyzing qualitative

data.

The second stop involved grouping the responses according to their

respective themes. The themes basically fell under respective research areas

which were informed by research objectives. The key responses based on

respective data were presented based on narrative forms and integrated within

the quantitative data. The Pearson correlation coefficient was used in testing

the hypotheses.

r =
 CHAPTER 4

4.1 DATA PRESENTATION, ANALYSIS AND DISCUSSION

OF FINDINGS

This chapter assesses the result of the analyzed data collected from the field.

The study relies on data collected exclusively using a questionnaire, the

findings in this chapter are presented using table, figures and Pearson

Correlation Coefficient.

4.2 Analysis of Data

In an attempt to satisfy the objective of the study which were stated in

chapter one, the researcher now proceed to present and analyze the relevant

information collected through the questionnaire that were distributed. The

statistical tools used in testing the hypotheses is Pearson correlation

coefficient.

Table 4.1: Manufacturing process cost reduction relates to Effectiveness.

S/N Options Responses Response %

A Strongly Agree 26 26.80
B Agree 32 32.99
C Undecided 4 4.12
D Disagree 21 21.65
E Strongly disagree 14 14.43
Total 97 100
Source: Survey Data 2019.
The data presented in table 1 above indicated that 26(26.80%) of the

respondents reported that manufacturing process cost reduction relates to

Effectiveness. 32 (32.99%) agree, 4(4.12%) undecided, 21(21.65%) disagree

while 14 (14.43%) strongly disagree.

Figure1: Pie Chart for the Distribution.

14 (14.43%)
persons
Strongly 26(26.80%)
Disagree persons 26.80%
Strongly Agree
21 (21.65%) 32.99%
persons
Disagree 4.12%

32 (32.99%)
persons 21.65%
Agree
ns

14.43%
ed so
id er
ec p
nd )
U 2%
.1
(4
4

Table 4.2: Manufacturing process cost reduction relates to Financial Sustainability.

Options Responses Response %
Strongly Agree 16 16.49
Agree 33 34.02
Undecided 16 16.49
Disagree 26 26.80
Strongly disagree 6 6.19
Total 97 100
Source: Survey Data 2019.
The data presented in table 2 above indicated that 16(16.49%) of the

respondents reported that manufacturing process cost reduction relates to

Financial Sustainability, 33 (34.02%) agree, 16(16.49%) undecided,

26(26.80%) disagree while 6(6.19%) strongly disagree.

Figure 2: Bar Chart for the Distortion

40

35 (34.02%)

(26.80%)

25

20

(16.49%) (16.49%)
15

10
(6.19%)

Strongest Agree Undecided Disagree Strongly

Agree Disagree
Table 4.3: Product/service purchasing cost reduction relates to effectiveness.

S/No Options Responses Response %

A Strongly Agree 16 16.49

B Agree 48 49.48

C Undecided 12 12.37

D Disagree 14 14.48

E Strongly disagree 7 7.22

Total 97 100

Source: Survey Data 2019.

The data presented in table 3 above indicated that 16(16.49%) of the

respondents strongly agree that product/service purchasing cost reduction

relates to effectiveness, 48(49.48%) agree, 12 (12.37%) undecided,

14(14.48%) disagree while 7(7.22%) strongly disagree.

 Figure 3: Histogram for Distribution

60

48(49.48%)
50

40

30

16(16.49%)
20 14(14.48%)
12(12.37%)
7(7.22%)

10

Stronges Agree Undecide Disagree Strongly

0 t Agree d Disagree

Table 4.4: Product/service purchasing cost reduction relates to Financial

Sustainability.

S/No Options Responses Response %

A Strongly Agree 50 51.55
B Agree 10 10.31
C Undecided 5 5.15
D Disagree 10 10.31
E Strongly disagree 22 22.68
Total 97 100
Source: Survey Data 2019.
 The data presented in table 4 above indicated that 50 (51.55%) of the

respondents reported that product/service purchasing cost reduction relates to

Financial Sustainability, 10(10.31%) agree, 5(5.15%) undecided, 10(10.31%)

disagree, 22 (22.68%) strongly disagree.

Figure 4: Histogram for Distribution

60
(50.51%)

50

40

30

(22.68%)

20

(10.31%) (10.31%)

10
(5.15%)

Strongest Agree Undecide Disagree Strongly

Agree d Disagree
Table 4.5: Analysis of Age distribution of the respondents.

Variables Responses Response %

20 – 30 years 30 31

31 - 40 years 40 41

41 years and above 27 28

Total 97 100

Source: Survey Data 2019.

Table 5 indicated that the active workforce in age 20-30 years, 31-40 years,

41 years and above.

Figure 5: Pie Chart for Distribution.

41years and 20-30 years (30)

above (27)

31 - 40 years (40)
Table 4.6: Analysis of Educational Background

Variables Responses Response %

SSCE/GCE 35 36.1

OND 45 46.4

HND/B.SC 10 10.3

Other higher certificate 4 7.2

Total 97 100

Source: Survey Data 2019.

Table 6 indicated a total of35(36.1%) respondents that have sound

educational background, ranging from OND, HND/B.SC and Higher

Certificate as a great understanding of cost reduction strategies and

performance of supermarket in Port Harcourt.

Figure 6: Bar Chart for the Distribution

50
(46.4%)

40

(46.4%)1
30

20

(10.3%)
10
(7.2%)

SSCE/GCE OND HND/B.Sc Other higher

Certificate

4.3 Test of Hypotheses

The data collected were analyzed by use of tabulation and person correlation

coefficient, the level of significance is given as 0.05 or 5% with degree of

freedom in the contingency table.

Hypothesis 1

There is no significant relationship between manufacturing process cost

reduction and effectiveness.

x y x2 2
y xy

26 5 676 25 130

32 4 1024 16 128

4 3 16 9 12

21 2 441 4 42

4 1 196 1 14

97 15 2353 55 326

r=

r=

r=

r=

r=

r=
r=

r= ; N = 97

t = r

t = 0.51

t = 0.51

t = 0.51

t = 0.51 x 11.33

t = 5.8

Since the computed value of Pearson Correlation is greater than cut off mark

5.8 > 3.0, this implies that manufacturing process cost reduction relates to

effectiveness.

Hypothesis 2

There is no significant relationship between manufacturing process cost

reduction and financial sustainability.

x y x2 2
y xy
16 5 256 25 80
33 4 1089 16 132
16 3 256 9 48
26 2 676 4 52
6 1 36 1 6
97 15 2313 55 318
r=

r=

r=

r=

r=

r=

r= 0.41, N = 97

t = r

t = 0.41

t = 0.41

t = 0.41

t = 0.41 x 10.7

t = 4.37

Since the computed value of Pearson Correlation is greater than cut off mark

5.8 > 3.0, this implies that manufacturing process cost reduction relates to

financial sustainability.
Hypothesis 3

There is no significant relationship between product/service purchasing cost

reduction and effectiveness.

X y x2 2
y xy

16 5 256 25 80

48 4 2304 16 192

12 3 144 9 36

4 2 196 4 28

7 1 49 1 7

97 15 2946 55 343

r=

r=

r=

r=

r=
r=

r= 0.50

r= ; N = 97

t = r

t = 0.50

t = 0.50

t = 0.50

t = 0.50

t = 0.50 x 11.26

t = 5.6

Since the computed value of Pearson Correlation is greater than cut off mark

5.8 > 3.0, this implies that product/service purchasing cost reduction relates

to effectiveness.
Hypothesis 4

There is no significant relationship between product/service purchasing cost

reduction and financial sustainability.

X y x2 2
y xy

50 5 2500 25 250

10 4 100 16 40

5 3 25 9 15

10 2 100 4 20

25 1 484 1 22

97 15 3209 55 347

r=

r=

r=

r=

r=

r=
r= 0.48

r= 0.48; N = 97

t = r

t = 0.48

t = 0.48

t = 0.48

t = 0.48

t = 0.48 x 11.11

t = 5.3

Since the computed value of Pearson Correlation is greater than cut off mark

5.8 > 3.0, this implies that product/service purchasing cost reduction relates

to financial sustainability.

4.4 Discussion of Findings

The data presented in table 1 above indicated that 26(26.80%) of the

respondents reported that manufacturing process cost reduction relates to

Effectiveness. 32 (32.99%) agree, 4(4.12%) undecided, 21(21.65%) disagree

while 14 (14.43%) strongly disagree.

The data presented in table 2 above indicated that 16(16.49%) of the

respondents reported that manufacturing process cost reduction relates to

Financial Sustainability, 33 (34.02%) agree, 16(16.49%) undecided,

26(26.80%) disagree while 6(6.19%) strongly disagree.

The data presented in table 3 above indicated that 16(16.49%) of the

respondents strongly agree that product/service purchasing cost reduction

relates to effectiveness, 48(49.48%) agree, 12 (12.37%) undecided,

14(14.48%) disagree while 7(7.22%) strongly disagree.

The data presented in table 4 above indicated that 50 (51.55%) of the

respondents reported that product/service purchasing cost reduction relates to

Financial Sustainability, 10(10.31%) agree, 5(5.15%) undecided, 10(10.31%)

disagree, 22 (22.68%) strongly disagree.

Table 5 indicated that the active workforce in age 20-30 years, 31-40 years,

41 years and above.

Table 6 indicated a total of35(36.1%) respondents that have sound

educational background, ranging from OND, HND/B.SC and Higher

Certificate as a great understanding of cost reduction strategies and

performance of supermarket in Port Harcourt.

Based on the hypotheses tested, manufacturing process cost reduction relates

to effectiveness, manufacturing process cost reduction relates to financial

sustainability. Product/service purchasing cost reduction relates to

effectiveness. Product/service purchasing cost reduction relates to financial

sustainability.
 CHAPTER 5

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Summary

Cost reduction consists of those actions that basis of information extracted

from the accounting system. Although cost reduction seeks to reduce costs, it

should not be at the expense of customer satisfaction. Ideally, the aim is to

take actions that will both reduce costs and enhance customer satisfaction.

Cost reduction has become an essential emphasis in today’s highly

competitive business environment. According to Padey, (2004), a firm may

produce a relative high profit margin by adopting cost reduction

management. Cost reduction strategies helps firms to produce the standard

high-volume product or service at the most competitive price to customers. It

also helps to create higher financial performance for firms competing in the

emerging economies, such as China, India, etc. as firms can gain a relative

advantage and manufacture (Aulakh, et al, 2000).

Laitinen & Poppinen (2006), in their report, found out the cost-management

indicators, statically explain better on the short-term financial which has an

effect on long-term financial performance and turnover growth in the future.

They conclude that, cost reduction is a prerequisite for the business, and the
latest worldwide economic recession is just the best example to confirm the

validity. Cost reduction often refers to cost cutting and it’s commonly

approached that firm managers use to respond to the decreasing sustainable

profitability h(Anderson, 2007). The most important managerial tools are cost

management strategies (Zengin & Ada, 2010). Cost reduction strategies

supports decision making and improves competitive advantage that results in

a better resource allocation (Ellram & Stanley,2008).

5.1 Conclusion

Cost reduction is an important and has always been an important issue but

perhaps most important in today’s unpredictable market with few exceptions,

at no other time in history has the business market been more dynamic

(Adam, 2005). Moreover, one of the most important traits for business

success in a recession economy especially Nigeria is that more and more

manufacturing companies had been chased out of market and are thus using

cost reduction as a competitive weapon. Once we understand the meaning of

cost, it controllability, main areas where cost arises, then we can think of how

to reduce the cost. We can classify the cost according to the nature,

behaviour then we can easily know the cost which can be reduced. One of

the benefits of cost reduction is the ability of a company to keep cash flow at

necessary level of operations, that is, with cost reduction, excessive amount

of cash are not too tied up in inventory, it prevents over supply of stock or
over staffed departments and this keeps cash available for other purposes

including navigating economic waves, expansion needs or repairs and

maintenance of equipment.

5.3 Recommendations

Based on the result of this study:

(1) Supermarket stores policy makers and transaction advisors should be

keen on making cost reduction policies to be applied since they greatly

impact on performance of the businesses.

(2) Supermarket stores policies regarding to performance should

incorporate various cost reduction strategies since they greatly impact

on performance.

(3) Policies regarding cost reduction strategies should be formulated and

be used keenly and with a lot of control to avoid critical financial loses.
 REFERENCES

Anderson, Shannon, W. (2007). Managing costs and cost structure

throughout the value Chairo: Research on strategic cost management.
Handbook of management accounting research, Elsevier Ltd.

Athanasodou, P.P. & Staikouras, C.K. (2006).The determinants of bank

financial performance in the South Eastern European Region, MRP
Paper No. 10274.

Bain, J. S. (1994). Economies of scale, concentration and the condition of

entity in twenty manufacturing industries. American economic review.

Bruce, A.M. (1992).Aspects of cost reduction, Journal of cost Engineering.

Carroll, P. (2009). How to control production costs, New York, McGraw-

Hill.

Cooper, R. & Kaplan, R. S. (1987). How cost accounting systematically

distort product costs, in: W. Bruns & R. Kaplan, ds, Accounting &
Management: Field Study experiments (Harvard Business school press,
Boston, MA).

Daft, R. L. (1995). Organizational theory and design (5thed.). Minneapolis,

St. Paul: Mal West Publishing Company.

Drury, C. (2004). Management and Cost Accounting, Sixth Edition.

Thompson Press.

Ellram, M. & Stanley, L. (2008).Integrating strategic cost management with a

3DCE Environment: Strategies, and benefits. Journal of Purchasing
and Supply Management

Grant, R. M. (1991). The resource based theory of competitive advantage:

Implication for strategy formulation. California Management Review.

Groth, John, O. & Kinney, Michael R. (1994). Cost Management and value
creation. Journal for Management Decision.
Hayes, R. H. & Clark. M. (1965), Explaining observed productivity
differentials between plants. Implications for operations research,
interfaces Nov. – Dec.

Kepelko, M. (2006). Evaluate efficiency in the framework of resource –

based view of the firm: Evidence from Polish and Spanish Textile &
Clothing Industry. Bellaterra.

Omar, A. (2013). Effect of selected firm characteristics on financial

performance of firms listed under the agricultural sector. International
Journal of Accounting Information System.

Penrose, E.T. (1989). The theory of the growth of the firm. Oxford: Basil
Blackwell.

Pierce, M. (2014). The combined effect of costing and performance

management systems on performance moderated by strategy;
Australian context. Accounting, Accountability and Performance.

Waithaka, A. (2010). The relationship between working management

practices and financial performance of agricultural companies listed at
the Nairobi Securities Exchange. Unpublished MBA project.

Zengin, C. & Ada, E. (2010). Cost management through product design:

target costing approach. International Journal of Production Research.
 Appendix I

Department of Accountancy
Faculty of Management Sciences
Rivers State University
Nkpolu-Oroworukwo
Port Harcourt.

2nd February, 2019.

Dear Respondent,

The researcher is a student of the above mentioned University, she is

undertaking a study on “Cost Reduction Strategies and Performance of
Supermarket in Port Harcourt”.

This questionnaire is solely designed to aid her fulfill the requirement for the
award of a Bachelor of Science (B.Sc) Degree in Accountancy. You are
please requested to respond accordingly to the attached questionnaire.
Please be assured that information given will be used purely for the purpose
of academics.

I gratefully anticipate your timely reply to the questionnaire and pledge to

treat them confidentially.

Thanks.

Yours faithfully,

Ogbonda Chinedu
(Researcher)
 QUESTIONNAIRE

Instruction: Please fill the blank space boxes

SECTION A

DEMOGRAPHICS

1. What is your name?__________________________________________

2. What is the name of your organization? _________________________

3. What is your gender?

(a) Male ( ) (b) Female ( )

4. What is your age range?

(a) 20 – 30 years ( ) (b) 31-40 years ( )

(c) 41 years and above ( )

5. What is your status?

(a) Single ( ) (b) Married ( )

(c) Widow ( ) (d) Divorced ( )

6. What is your qualification?

(a) SSCE/GCE ( ) (b) OND ( )
(c) HND/B.SC ( ) (d) Other higher certificate ( )
SECTION B

7. Manufacturing process cost reduction relates to Effectiveness.

(a) Strongly Agree ( ) (b) Agree ( )

(c) Undecided ( ) (d) Disagree ( )

(e) Strongly Disagree ( )

8. Manufacturing process cost reduction relates to Financial

Sustainability.

(a) Strongly Agree ( ) (b) Agree ( )

(c) Undecided ( ) (d) Disagree ( )

(e) Strongly Disagree ( )

9. Product/service purchasing cost reduction relates to effectiveness>

(a) Strongly Agree ( ) (b) Agree ( )

(c) Undecided ( ) (d) Disagree ( )

(e) Strongly Disagree ( )

10. Product/service purchasing cost reduction relates to Financial

Sustainability.

(a) Strongly Agree ( ) (b) Agree ( )

(c) Undecided ( ) (d) Disagree ( )

(e) Strongly Disagree ( )

COST REDUCTION STRATEGIES AND PERFORMANCE
OF SUPERMARKET IN PORT HARCOURT

OGBONDA CHINEDU

DE.2015/1806

A PROJECT PROPOSAL SUBMITTED TO THE

DEPARTMENT OF ACCOUNTANCY, FACULTY OF
MANAGEMENT SCIENCES, RIVERS STATE
UNIVERSITY. IN PARTIAL FULFILLMENT OF
THE REQUIREMENTS FOR THE AWARD
OF BACHELOR OF SCIENCE DEGREE
(B.SC) IN ACCOUNTANCY.

SUPERVISOR:

PROF. D. KIABEL

MAY, 2019
 ABSTRACT

This research has examined cost reduction strategies and performance of Supermarket in
Port Harcourt. Based on the nature of the identified problems, the study is designed to
achieve the following objectives. To ascertain the relationship that exists between
Manufacturing Process Cost Reduction and performance of supermarket stores. To
ascertain the relationship that exists between product/service purchasing cost reduction
and performance of supermarket stores. To examine the extent at which supermarket
stores in Port Harcourt adheres to cost reduction strategies in carrying out their operation.
To determine the impact of cost reduction on performance of supermarket stores in Port
Harcourt. The research design used for this work is survey research design and the Pearson
correlation Coefficient was used to analyze the data. Population of this study consists of
ninety-seven (97) employees of supermarket stores in Port Harcourt. Primary and
secondary data were used. Based on the hypotheses tested, manufacturing process cost
reduction relates to effectiveness, manufacturing process cost reduction relates to financial
sustainability, product /service purchasing cost reduction relates to effectiveness. Based
on the research findings, the researcher recommended that: Supermarket stores policy
makers and transaction advisors should be keen on making cost reduction policies to be
applied since they greatly impact on performance of the businesses. Supermarket stores
policies regarding to performance should incorporate various cost reduction strategies
since they greatly impact on performance. Policies regarding cost reduction strategies
should be formulated and be used keenly and with a lot of control to avoid critical
financial loses.

ii
 TABLE OF CONTENTS
PAGES

Title Page i
Table of Contents ii

CHAPTER 1 - INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of the Problem 4
1.3 Purpose of the Study 5
1.4 Research Questions 6
1.5 Conceptual Framework 7
1.6 Research Hypothesis 8
1.7 Significance of the Study 8
1.8 Scope of the Study 9
1.9 Definition of Terms 10

CHAPTER 2 - LITERATURE REVIEW

2.1 Theoretical Framework 11
2.2 Conceptual Framework/Review 14
2.3 Performance 19
2.4 Empirical Review 28

CHAPTER 3 - METHODOLOGY
3.1 Introduction 31
3.2 Research Design 31
3.3 Population of the Study 32
3.4 Sampling Procedure /Technique 32
3.5 Data Collection Method 33
3.6 Validity/Reliability of Instrument 33
3.7 Data Analysis Techniques 34
References 36
 Questionnaire 38

************COST REDUCTION STRATEGIES AND FINANCIAL

PERFORMANCE OF PAINT MANUFACTURING COMPANIES IN
RIVERS STATE