Over the years, business enterprises have been witnessing unparalleled and exceptional degree of transformation, conversion, intense and forceful competition, and tumultuous environment globally. These transformations emanates as a result of market fragmentation, changing technology, dynamic management, the convergence of different business enterprises, supplier attitudes, changing customer demands, changing customer expectations, reduced lifecycle of product, etc. which have direct and indirect implication on business performance. According to Ahmad, Othman and Lazim (2014), business enterprises are encountering significant challenges because of the dynamic attributes of business enterprise itself, the market, and environmental circumstances.
In fact, in the current and widespread competition and challenging economic circumstances, a practicable, feasible, dynamic, and forceful enterprise networks is vital to the economic improvement of a particular country (Zahra, Sapienza and Davidsson, 2006). In the same vein, Ahmad and Pirzada (2014) noted that enterprise networks are known to be the mechanism of growth and development which has significant roles in the establishment of laudable economic development. In the study of Hashim, Raza and Minai (2018), it was revealed that majority of the countries often reply on the performance of enterprise networks for the growth and fortification of the economy. Zhu, Cordeiro and Sarkis (2013) noted that however, enterprise networks are faced with many challenges and uncertainties in the competitive business environment and inauspicious circumstances in recent years. These have resulted into the challenges of superior and improved business performance.
According to Kayode (1989) enterprise networks are the heart of any economy. Its importance to the growth and survival of the economy cannot be overemphasized. Enterprise networks play a crucial role in the economy of most countries. In the study, it was stated that the proceeds are oftentimes products offered to customers that result into profit making when pooled together by the owners of enterprises networks. Obisi (2013) in his study added that the enterprise networks all over the world would continue to be the engine of development and industrialization.
Nigeria is among the developing nations in the world that is competing in the intensity of global market particularly in food and beverage manufacturing, and as a result of that, many business enterprises are springing up, especially those associated with large organizations. However, they need to maintain and catalyze local market for economic stability and potency. It should be of importance to note that the survival of any enterprise into the unforeseeable future, its ability to extend tentacles, and its tendency of producing significant outputs is the goal of any enterprise in particular.
The ecosystem of enterprises in Nigeria is quite competitive and challenging, and the enterprise environment is neither perfect nor encouraging for small enterprises (Beugré, 2016). Small network of enterprises have to implement the significant strategy of resources available to ensure the sustainable growth of enterprise networks in a difficult and competitive environment. The hostile conditions give confidence to the enterprise networks for the purpose of surmounting the injurious business environment when realizing sustainable intensification of enterprises (Messeni, Petruzzelli, Ardito and Savino, 2018).
Springing from the potential breakthrough in the African market with Nigeria at the core stage, several manufacturing enterprises most especially the food and beverages manufacturing are well-known are giving room for forceful competition for precincts, market share and clients. The food and beverages enterprise that are present and domesticated in the FMCGs sector has encountered different challenges from the time when there was economic meltdown, which is in furtherance to powerful, ferocious and increasing competition in the business enterprise and other macroeconomic indices such as decreasing oil prices, devaluing Naira currency, workers’ salaries that are not paid, all these result in reduced spending (Industrial Report, 2016).
At the global level, food and beverages enterprises are known to be the bedrock and engine of nation’s development. According to Okere (2012), the food and beverages enterprises are noted to be the main producers of foods and beverages that are consumed in Nigeria and the biggest sub-sector in the Nigerian manufacturing that were placed on the Nigerian Stock Exchange. Osundina (2014) further revealed that the enterprise is a dynamic and growing subsector of the Nigerian manufacturing industry which is witnessing unbendable and ferocious competition (KPMG, 2015).
According to Akpan, Ikon, Chukwunonye and Nneka (2016), the frequent and persistent changing of Nigerian food and beverages enterprises opens both opportunities and threats. In fact, the overall lapses of the food and beverage manufacturer are the pitiable operating environment in Nigeria and the high cost of production and operation. This has resulted to reduced output when compared with their counterparts in other developing nations. All these challenging issues have grave impacts on the performance of food and beverages enterprises.
In the view of Sola, Obamuyi, Adekunjo, and Ogunleye (2013), varieties of approaches have been adopted by the Nigerian government towards the enhancement of efficiency, productivity, and output of the enterprise networks so as to enhance economic growth and development. In the report of CBN (2003), the import substitution industrialization strategy took off and was adopted by the Nigerian nation during the First National Development Plan (1962–1968) with the aim of plunging the degree of finished products that were imported and the enhancement of foreign exchange savings by producing locally some of the imported consumer goods. In the same vein, the Second National Development Plan period (1970–1974) signifies the consolidation of Nigeria’s import substitution industrialization strategy during the era of oil boom. Sola et al., (2013) noted that during the wake of world oil market that was collapsed in the beginning of 1980s, there was a rigorous/severe decline in the earnings accrued from oil exportation, which further lead to the inability of the nation to uphold the emerged import-dependent industrial arrangement because of the enormous import bills.
In order to rescue the abovementioned economic challenges, a variety of policy measures in terms of context and contents were employed, which seems unsuccessful. Among the policy measures were the 1982 stabilization policy, the 1984 restrictive monetary policy and stringent exchange control. The collapse of the policy measures resulted to the acceptance and implementation of 1986 Structural Adjustment Programme (SAP) (CBN, 2003). In order to reduce the over reliance of the nation’s economy on crude oil which is the major foreign means of getting income, SAP was established by endorsing non-oil exports, most especially the enterprise networks. Sola et al. (2013) noted that the performance of the enterprise networks has been worrying the government in spite of a variety of efforts they was exerted.
Accordingly, the Federal Government of Nigeria (FGN) begin with an economic programme referred to as NEEDS (National Economic Empowerment and Development Strategy) in 2003, this was to promote private sector participation in growth strategies (Essien and Bello, 2007). Though the policy document of NEEDS tend to be more entrepreneurial, the idea was basically useful for the large scale industries. Additionally, it was identified in the policy document that there was “ineffective nexus between industry and the research institute/universities” and “lack of engineering and technical capacity to translate and decode research results into finished products and maintain existing machinery as well as low level of entrepreneurial capacity, technological support, and paucity of trained artisan skills”. These are major impediments to the development of enterprise networks (Essien and Bello, 2007). The document was proferring solution to the shortage of technological capabilities associated with enterprise networks which are needed to influence the level efficiency.
The performance of enterprises in their business networks is quite affected by several factors such as reduced sales, high cost of production, reduced capital utilization, shortage of foreign exchange to procure the needed inputs, pitiable and unstable power supply, reduced quality of goods and services, incessant taxation among others (Adeoye and Elegunde, 2012). Among other issues associated with enterprise networks are high import dependency, political instability, deceitful governance, and political bias with resource distribution, decentralization practices, high cost of funds, weak, defect, and unsound policies formulation and implementation, high level of fake and counterfeited goods that are imported, micro-economic instability, deformed business atmosphere, invisible governance, etc. According to Olamade, Oyebisi and Egbetokun, (2013), the penalties of these issues on the national economy include among others, the loss of enterprises ‘pull effect’ on other sectors of the economy, and the loss of chances to partake in global economy when participating in the value chains at international level.
In many of the enterprise networks, there is an understanding that the world’s economy is passing through a period of colossal transformation alongside improbability that is full of uncertainties. In fact, incremental transformations are activated in many of the cost structure, supply chains and business models of enterprises (Dobbs, 2012). One of the chief issues that are often encountered in enterprise networks is the dimension of creating value and achieving competitive advantage in the respective industry sector. These concepts of value creation and competitive advantage are germane to business strategy. The quest and reality of creating value and competitive advantage are at the basis of organizational performance and hence the indulgence of sources to the sustenance of value creation and competitive advantage is now a crucial area and dimension of study when it comes to strategic management (Barney, 1991; Porter, 1991).
Global competition has revealed the level of technological changes and the dynamics of customers demand for superior quality products/services at reduced prices (Dirisu, Iyiola and Ibidunni, 2013). As competitive advantage is becoming less valuable, the performance of Nigerian enterprise networks are highly influenced as many networks are facing drastic and unexpected transformations, emanating from technological advancement, change in customer demand, new regulations and diffusion of new practices (Wilden, Gudergen and Lings, 2007; Helfat, Finkelstein, Mitchell, Peteraf, Singh, Teece, and Winter, 2007; Rhema and Saeed, 2015; Akpan, 2016). It is obvious in the literature review and practices of strategic management that meagre control of resources and capabilities are insufficient to maintain competitive advantage.
The tumultuous nature of enterprise networks’ environment results to a large number of new challenges which must be examined with the use of dynamic capabilities. Attention must be centred on the inimitable resources that may lose their inimitability in the dynamic environment. Consequently, uninterrupted organizational rejuvenation recommends only valuable and effectual mechanism for competitive advantage by erecting on dynamic capabilities. A number of value created and related to dynamic capabilities have become known in strategic management, such as product development, strategic decision-making, knowledge creation, product innovation capability, technological capability, top managers capability, alliance and acquisition and strategic flexibility (Zhang, 2007; Ibidunni, Iyiola and Ibidunni, 2014; Oghojafor, Owolabi, Ogunkoya and Shobayo, 2014).
In order to sustain and thrive in the unendingly dynamic and changing environment, the enterprise networks must constantly develop new resources and capabilities that will deal with the new demands (Teece et al., 1997; Eisenhardt and Martins, 2000; Rindova and Kotha, 2001). The dynamic enterprise network environment with its capricious fast changing environments (internal and external) provides privileges for growth and development, and value/ wealth creation wealth which often poses some level or form of threats to the most networks (Obiwuru, Oluwalaye and Okwu, 2011). The view on dynamic capabilities has risen to deal with the rigorous issue militating against the sustainable competitive advantage in the dynamic environment (Teece, Pisano and Shuen, 1997; Eisenhardt and Martin, 2000).
The formation, rations and victuals of value created and competitive advantage is realized when enterprise networks are able to recognize new and further opportunities, resources and capabilities that are in line with recognized opportunities and change (Teece, 2009). The dominant competitions have obligated several enterprise networks for new approaches to arrive at a competitive edge. What was previously referred to as strategies has been modified in the modern era (Chirico and Salvato, 2008). Dynamic capability, according to Rehman and Saeed (2015) is a mainstay for any organization to thrive in the present dynamic environment. Enterprises that are responsive in product innovation and capability to effectively coordinate and redeploy competencies from within and without would be able to improve business performance. Such enterprises will have the power to build, join together, and renew their competencies to acclimatize to the transforming market needs (Wong, 2013).
Enterprise networks place more emphasis on the aim of providing and securing competitive advantages by reaching sustainable business intensification (Seung, 2014), and creating value. It is unfortunate that enterprise networks often face high level and predominant collapse worldwide. Past literatures revealed that about 40 percent of enterprises often encounter collapse during the first two years of start-ups in different countries of the world (Hashim, Raza and Minai 2018). In the same vein, scholars have emphatically argued that the rate of failure or collapse of small network enterprise is much higher in the developing countries than in the developed countries (Sherazi, Iqbal, Asif, Rehman and Shah, 2013).
Enterprise networks are strategic resources that are essential for permitting the growth of businesses in a dynamic and competitive business environment (Machirori and Fatoki, 2013). The authors further states that enterprise networks consist of small business owners and with other businesses to acquire and share information and resources. Enterprise networks according to Hedvall, Jagstedt and Dubois (2019); Guo, Xu, Tang, Liu-Thompkins, Guo and Dong (2018) are set up to strengthen their dynamic capabilities in a competitive business environment. The survival of enterprises depends on the performance of enterprises which could be strengthening as a result of cordial networks that is associated with its economic growth (Rodrigo-Alarcón, García-Villaverde, Ruiz-Ortega and Parra-Requena, 2018).
In order to deal with the drastic transformations in market dynamics, technologies, and competition, top managers mostly rely on the strategic decision making ability to deal with the changing external factors that could aid the survival of transforming environment. Enterprise networks have been able to accomplish competitive advantage over time in the course of embracing technological innovation as a strategic drive to realizing competitive advantage and creating value (Oghojafor et al., 2014). In due course, enterprise owners and managers will make strategic decisions and engage in thoughts that are innovative so as to cope with the changing dynamics of environment to realize the successfulness of enterprise networks (Ibidunni and Inelo, 2015).
According to Dreyer and Gronhaug (2004), in order for enterprise networks in a ferocious competitive environment to phizog the increasingly complex environment, growing demands from customers, changes in regulatory frameworks and technological encroachment, will catalyze strategic managers to be flexible in dealings, most especially in a complex contemporary business environment that requires a short product life cycles, swift changing preferences and increasing demand of customers, technological progression and others (Shimizu and Hitt 2004).
For this reason, it is against this background that this study seeks to examine the impact of dynamic capacities on enterprise performance using food enterprises and beverage enterprises in Lagos, Nigeria as case studies. It is important to note that the interconnections between the attributes or constructs of dynamic capacities will be tested on the attributes of enterprise performance. In the study, dynamic capacities will be captured with respect to strategic decision-making capacity, product innovation capacity, strategic flexibility, competitive intensity, technological turbulence, and technological capability. The performance of enterprise will be captured with sales growth, enterprise survival, enterprise efficiency and competitive advantage.