IMPACT OF COMPETITION ON FINANCIAL PERFORMANCE OF TELECOMMUNICATION COMPANIES
A CASE STUDY OF MTN UGANDA
HAPTER ONE
INTRODUCTION
1.0 Introduction
This chapter presents background of the study, the problem statement, purpose, objectives of the study, research questions, study scope, and significance of the study.
- Background to the Study
This section includes; the historical, theoretical, contextual and conceptual background of the study.
1.1.1 Historical background
The complexity and volume of competition drastically increased globally in the recent years. Some of the causes that can be attributed to this include globalization, out sourcing, complicated and numerous partnership. Over the last fifty years many, of the world’s largest firms have advanced from being simple manufactures of hard goods, or providers of basic services, to being sophisticated vendors using advanced business models. This means that competition has been so intense that companies that are well prepared may not be able to survive (Krappe and Kallayil, 2013).
The desire to have better financial performance among companies is now increasing in importance since the financial position of an organization is essential to enable the continuous survival of the Organizations. The telecommunications sector globally is highly competitive. Some organizations are using process capability maturity models to assess, measure, and improve critical core processes, such as software development and project management (Rendon, 2016).
Dynamic business environment demands continuous change in organization practices. In today’s challenging business environment, a business must create strategies that will enable it to grow beyond its known scope. To obtain effective firm performance means getting the right mix of growth strategies, this is one of the key issues in organizations. There is a direct correlation between growth strategies and financial performance of organizations therefore this becomes a major issue to policy makers within an organization. Business is war and the best strategy wins (Craven & Piercy, 2003)
Mahmood, Azim & Zahra (2009) state that the recent developments the telecommunication industries have played a crucial role in exchanging valuable information therefore leading to growth of economies. A modern telecommunication infrastructure highly benefits companies in a country.
1.1.2 Theoretical Background
The study will use transaction cost theory. The transaction cost approach to the theory of the firm was created by Ronald Coase. Transaction cost refers to the cost of providing for some good or service through the market rather than having it provided from within the firm. Coase describes in his article “The Problem of Social Cost” the transaction costs he is concerned with:
In order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on. More succinctly transaction costs are: search and information costs, bargaining and decision costs, policing and enforcement costs. Coase contends that without taking into account transaction costs it is impossible to understand properly the working of the economic system and have a sound basis for establishing economic policy. Coase observes that market prices govern the relationships between firms but within a firm decisions are made on a basis different from maximizing profit subject market prices. Within the firm decisions are made on through entrepreneurial coordination. Coase quotes D.H. Robertson on there being,
There are a great variety of arrangements in producing goods. In agriculture often most of the labor force works on a day-to-day basis. In other industries the labor force may be permanent, tied to the firm with long-term contracts. Repair services in some firms may be supplied by an internal organization; in others it is provided by specialized firms from outside. A firm is a system of long-term contracts that emerge when short-term contracts are unsatisfactory.
The unsuitability of short term contracts arise from the costs collecting information and the costs of negotiating contracts. This leads to long term contracts in which the remuneration is specified for the contractee in return for obeying, within limits, the direction of the entrepreneur.
Coase notes that the economic theory of the production level of a plant in the short run and long run are well worked out, but the theory of the size of the firm is not well developed. This is clear in the matter of acquisition of companies by other companies.
Ronald Coase gives the origin of The Nature of the Firm as a course in the organization of the business unit which he taught in 1932. He noted that there are inconveniences of market transactions, but if transactions are not governed by the price system there has to be an organization. The object of an business organization is to reproduce the conditions of a competitive market for the factors of production within the firm at a lower cost than the actual market. But if an organization exists to reduce costs then why is there any market transactions at all? Coase gave two reasons: the costs of organizing additional transactions rise with scale and are equated with the costs of additional market transactions, the organization of bigger firms may not reproduce the effects of market conditions and Coase’s career in economics came as a result of some odd circumstances. Here is what Coase himself says:
In economics Coase single handedly pioneered a nonmathematical but deeply penetrating economic analysis. He examined questions that never occured to most economists. In the rare cases where others considered those questions they did not come to meaningful conclusions as did Coase. The uniqueness of his contribution was recognized with his being awarded the Nobel Prize in economics.
His contribution which is most widely known in economics is what George Stigler named the Coase Theorem. Coase never referred to this proposition as a theorem and its role in his article, “A Problem of Social Cost” is subsidiary to transaction cost approach. In presenting the “Coase Theorem” Coase was arguing that in the absence of transaction costs many surprising results hold. The Coase Theorem says that even in the presence of externalities (although he doesn’t use that term) if there are no transactions costs to creating private agreements the levels of productions of goods will be the same no matter which party to an externality has legal right to compensation. This means that the intervention of the government in the case of externality doesn’t affect production if there are no transaction costs. Intervention of the government in such cases does affect the distribution of income. The economics profession has focused upon the content of the proposition rather than the fact that significance of the presence or absence of transaction costs.
1.1.3 Contextual background
In Uganda, most companies evidently view Financial Performance as essential in achieving the share holders’ dream of enhancing the strength of the organization a move that would further eat into their already limited profit margins (Katamba, 2018). This explains why most companies operating in Uganda still do not have CSR policies. For most of those that do, it is only on paper as there is nothing on the ground to show they are actually implementing the policy. Social and environmental problems are wreaking havoc in the country as a result of poor corporate governance practices. As a result of not taking CSR seriously, there is in the country a strong belief that generally, locally-operating companies care only for their personal economic growth and nothing about the well-being of the communities in which they operate. But labelling all profit-making companies in Uganda as selfish would not be fair, as there are some companies operating in the same economically unstable environment, but have done a lot to improve the communities in which they operate. (Katamba, 2018). According to Uganda Bureau of Statistics (2007), companies that employ over 101 employees are involved in some form of strong competition and MTN is no exception. MTN views its customers as key component in improving.
Corporate Social Responsibility initiatives as integral to its core mission and sales performance. In Mbale, corporate social responsibility has been considered important, but people have developed different perceptions towards corporate social responsibility, that is all functions of management like planning, organizing, staffing, leading and controlling are no longer effectively achieved in MTN and they expect corporate social responsibility to be the major cause, it is against such a back ground that the researcher intends to investigate the impact of competition on financial performance of telecommunication companies a case study of MTN Uganda.
1.1.4 Conceptual background
Financial performance measures are outlined in the financial statements of companies. The income statement, balance sheet and cash flow statements can be used in a variety of ways through horizontal, vertical and ratio analysis to determine the best ways for companies to grow, set goals and become more profitable. Telecommunications are the means of electronic transmission of information over distances. The information may be in the form of voice telephone calls, data, text, images, or video. Today, telecommunications are used to organize more or less remote computer systems into telecommunications networks. These networks themselves are run by computers. A telecommunications network is an arrangement of computing and telecommunications resources for communication of information between distant locations.
1.2 Statement of the Problem
The financial performance of MTN Uganda overall has been on a down ward trend since 2012. This is observed by the fact that in 2012 MTN reported a profit of 400.4 billion dollars with a large market share of more than 60% and this reduced to UGX 302 billion in 2013, though in 2014 MTN sales performance yielded a profitability higher than 2013 of 331.6 billion it was still much lower than 2012 and more to that poor financial performance has led to a profit reduction by 46.7% to UGX 176.8 in 2015 and in 2016 the profitability which is as a result of poor sales performance reduced further to 96.3 billion shillings until 2017 the financial performance of MTN Uganda overall has failed to pick up and this has led to the narrowing of the MTN financial performance this has also led to the narrowing of its market share to its main Rival (Airtell) to about 54% by 2017 (MTN Uganda, 2019).
The MTN, Records, (2017) further indicates that the percentage growth of sales of the company has been declining ever since Airtell and Warid merged this has thus made the company face stiff competition from its close competitors and this has puzzled experts of what could be the cause.
It’s against this background that this study intends to investigate into impact of competition on financial performance of telecommunication companies, with specific reference to MTN Uganda, Head office.
1.3 Purpose of the Study
The purpose of this study is to examine the impact of competition on financial performance of telecommunication companies a case study of MTN Uganda.
- To determine the different ways of improving the financial performance of an organization.
- To examine the benefits of competition to an organization.
- To examine the relationship between competition and financial performance of an organization.
1.5 Research Questions
- What are the different ways of improving the financial performance of an organization?
- What are the benefits of competition to an organization?
- What is the relationship between competition and financial performance of an organization?
1.6 Scope of the Research Study
Geographical scope
The research will be conducted at the MTN Head offices in Kampala District..
Time scope
The study will investigate a period of five years from 2015 to 2020
Content scope
The scope of the study will include; to determine the different ways of improving the financial performance of an organization, to examine the benefits of competition to an organization and to examine the relationship between competition and financial performance of an organization.
LITERATURE REVIEW
2.0 Introduction
This chapter presents an overview of the existing literature based on other writers’ opinions, findings, and viewpoints on the impact of competition on financial performance of telecommunication companies a case study of MTN Uganda.
2.1 Different ways of improving the financial performance of an organization
Given that financing development has become one of the key cornerstones for the SDGs and the need to widen the scope of development finance through stakeholder diversification, the philanthropic sector is expected to contribute towards addressing the SDGs’ annual investment gap of about US$5 trillion US$7 trillion (UNCTAD, 2014). Private philanthropy is therefore expected to build on the complementarity of other funding mechanisms by leveraging their innovative capacity in raising additional financial resources (African Development Bank et al., 2015; SDG Philanthropy Platform, 2015). The Addis Ababa Action Agenda (AAAA) explicitly acknowledges the importance of philanthropy in achieving the SDGs in paragraphs 10 and 42 by stressing the need for philanthropic donors to give towards local and national development priorities (AAAA, 2015).
Understanding corporate philanthropy’s effect on the firm’s reputation for corporate social performance (CSP) is important for many reasons. Studies have long contended that a reputation for CSP is a significant determinant of many positive organizational outcomes, such as overall reputation (Brammer & Millington, 2005), organizational attractiveness to potential employees (Lin, Tsai, Joe, & Chiu, 2012), favorable corporate evaluations and product impressions from consumers (Lii & Lee, 2012), and partial buffering from scandal revelations (Janney & Gove, 2011).
From an historical point of view, corporate sustainability has been viewed upon by businesses as predominantly a cost or an obligation that slows down efficiency and hinders development of profitable growth. However, over the past fifty years, business leaders have begun to perceive corporate sustainability as an opportunity rather than as a necessity gradually redefining the way that businesses interpret and create value (Ludema, Laszlo & Lynch, 2012). This development has been driven and encouraged by higher expectations and requirements from various stakeholders concerning the level of transparency of corporations’ operational activities (Fischer & Sawczyn, 2013). Furthermore, the rise of different corporate sustainability reporting standards (e.g. Global Reporting Initiative, GRI) and stricter public regulations (Directive 2014/95/EU1) are placing additional pressure on corporations to develop or expand their sustainability practices.
Moreover, in the extensive literature investigating the effect of CSP on financial performance (Griffin & Mahon, 1997; Margolis & Walsh, 2003; Orlitzky, Schmidt, & Rynes, 2003; Roman, Hayibor, & Agle, 1999), a firm’s reputation for CSP is often seen as a mediating variable between CSP and financial performance. Of course philanthropy is one of many aspects of CSP (Waddock & Graves, 1997), but philanthropy is particularly important as it is characterized by a great degree of discretion (Hadani & Coombes, 2015). Understanding the effect of corporate philanthropy, which can be seen as a voluntary, nonobligatory, and nonreciprocal transfer of wealth from the corporation to its external stakeholders (Godfrey, 2005; Hadani & Coombes, 2015; Seifert, Morris, & Bartkus, 2004), on the firm’s reputation for CSP is also critical as increasing resource scarcity is making firms increasingly strategic in their philanthropic donations (Liket & Maas, 2016; Saiia et al., 2003).
Following extensive work in the reputation literature (Rindova et al., 2005), we conceive a firm’s reputation for CSP as the estimation in which the firm’s various stakeholders hold its CSP. A firm’s reputation for CSP results from the accumulation of various positive and negative CSP signals, which enhance and diminish reputation, respectively (Janney & Gove, 2011). It can shape overall corporate reputation, as stakeholders use the firm’s CSP activities as signals that allow them to evaluate the firm and its activities under conditions of incomplete information (Fombrun & Shanley, 1990). Moreover, reputation for CSP has been found to enhance several positive organizational outcomes such as attractiveness to labor markets and favorable product impressions by consumers, inter alia (Janney & Gove, 2011; Lii & Lee, 2012; Lin et al., 2012).
Overall, corporate reputation has been mainly viewed from an economics and an institutional perspective. These perspectives jointly propose that reputation is a bidimensional concept consisting of stakeholders’ awareness and perception. For our purposes, we draw on prior literature on CSP reputation (Gardberg & Schepers, 2008) to propose that reputation for CSP consists of two dimensions: CSP awareness and CSP perception. Asper the study of reputation from an institutional perspective (Rindova et al., 2005), CSP awareness refers to stakeholders’ “collective awareness and recognition” regarding the firm’s CSP. CSP perception refers to the stakeholder evaluations of the firm’s CSP as good or bad. As per the study of firm reputation from an economics perspective (Rindova et al., 2005), CSP perception can be seen as reducing the uncertainty caused by information asymmetries that stakeholders face in dealing with firms (Lopatta, Buchholz, & Kaspereit, 2016).
According to Aidoo, (2012), Informal giving or horizontal philanthropy has been part of Ghanaian historical, traditional and religious contexts where people give to support the poor in society. In most traditional societies, horizontal philanthropy is an important tool for addressing poverty and social exclusion because it is considered as self-help. While giving is mostly in kind such as emotional support and the provision of food, clothes and advice, these acts are important social protection mechanisms. This is informed by the belief that the wellbeing and welfare of members is a communal responsibility. Therefore, the aim of giving is to promote redistribution, especially in traditional Ghanaian societies informed largely by the understanding of economy of affection. Here community structures and mechanisms are developed to ensure resource distribution, which is also informed by future expectations of reciprocity. This form of philanthropy is akin to the idea of ‘philanthropy of community’ where community members support each other (Wilkinson-Maposa et al., 2005). Giving also serves as an initiator and stabiliser of social relationships as well as an assertor of social status. For this reason, traditional leaderships including chiefs and queen mothers have been instrumental in acts of giving by playing both coordinating and care-giving roles with regard to the welfare of their people. This supports the observation by UNDP (2017) that chieftaincy institutions in Ghana have served as an important governance structure by becoming centres for philanthropy and charity in society.
Moir (2001) and Wilson (2000) argued that there are a multitude of reasons behind the motivation of an organization to engage in Corporate Social Responsibility. According to William et al (1997), often organizations tend to seek for appropriate information to increase their sales volume. However as they go for new markets, they forget and ignore the existing ones, defect to the competition for the support and service that was promised by the selling organizations. Therefore he urges organizations to always conduct after sale service and investigations about their customers to obtain information about whether satisfaction has been obtained or not. This helps them to cope up with new strategies to maintain their customers to increase their sales volume. Albert (1993) argued that buyers especially of high class services tend to resist new services for fear of quality. He therefore recommends organizations to establish such information through marketing research to break through that fear to be able to realize an increased level of sales.
Ramani and Kumar (2008) commented that organizations need to develop and adopt a business orientation that allows them to survive in an increasingly competitive market place. They further reiterated that Corporate Social Responsibility may be conceptualized as a business orientation.
If an organization prescribes to a business orientation, then it is assumed that the firm will exhibit corresponding capabilities that are aligned with that orientation (Day 1994).
From marketing studies which were conducted, ceteris paribus, a company’s practices of CSR can actually attract customers. In a national survey done by Smith and Alcorn (2009) found that 45.6% of the participants indicated that they were likely to shift brands in favour of those who donates to charitable events. This implies that CSR investment can positively affect market share of any entity leading ultimately leading to increases in revenue. Revenue increases can be reached indirectly through improvement in brand image or directly through market development.
Before making any purchase decision, customers consider a company’s CSR activities (Bhattacharya and Sen 2004, Penn Schoen Berland 2010). Their research suggests that customers are willing to spend an extra amount for products of those firms with high CSR engagement and practices. Work from other authors in the same discipline argue that although consumers are not prepared to pay a higher price, they are more likely to purchase goods from organizations which are into corporate social responsibility. These results support Baron’s (2001) insight that “a practice that is labelled as socially responsible raises the demand for the firm’s products”. Some companies carry out strategic CSR activities which positions themselves to maximize firm value.
A majority (77%) of consumers think that companies should be socially responsible, according to a survey by branding company Landor Associates cited by the University of Pennsylvania’s Wharton School. Consumers are drawn to those companies that have a reputation of being a good corporate citizen. Research at Tilburg University in the Netherlands showed that consumers are prepared to pay a 10 percent higher price for products they deem to be socially responsible. CSR practices must have a direct financial impact which refers to cumulative financial impact, where there is improved access to capital, reduced penalty payments, direct cost savings due to proactive measures, improvements in investors’ relations and shareholder value, and also impact on returns and revenues directly attributable to responsible business practice.
Simplified logistics and supply chain process. The introduction of ERP systems has not only simplified the logistics process but has also improved on the whole supply chain process including control over suppliers, improved process cycle time, close cooperation relationships, improved supply chain efficiency, raw materials on time for suppliers. According to (Kenneth Lysons 2000), simplified logistics and supply chain process has brought about shorter lead times and has enabled the materials to be available as and when they are required by the buyers for production purposes.
Process Automation With the use of ERP components such as bar coding, Satellite, internets and Image processing among others in the process of managing logistics efficiency, there has been reduction on paper work thereby leading to a substantial reduction of errors, as well as increased capability to obtaining and exchanging real time information. This is possible through the use of information technology systems such as Bar code and scanners which represents a series of alphanumerical characters, bar code readers to interpret bar code symbology, and bar code printers to reliably and accurately print bar codes on labels, cartons, and/or picking /shipping documents. This review is included here because bar code systems are the foundation for many paperless warehousing systems, but the review is meant only as a brief introduction to bar code system. In logistics, bar coding is useful in receiving inbound materials. This helps in quick and accurate data entry, faster checking and clearing of shipments, automatic tracking of the shipments throughout the logistics. (Trent and Monczka 2000)
Improved Logistics process. Logistics management is the process of managing the efficient, costs effective way of transporting goods, supplies and related information from the point of origin to the point of consumption Kenneth Lysons (2000). The introduction of ERP has brought in tremendous improvements in the flow of materials from the point of origin to the point of consumption including reduced arrangement costs and handling times, shortened response time for purchasing, improved order process speed and reduced labor costs.
Improved warehousing facilities. Warehousing is the primary link between the producers and the consumers; it is used for storing products (raw materials, in process inventory and finished goods) before they are finally worked upon or delivered to the ultimate consumers. Through the implementation of internet, ware house efficiency and effectiveness has improved greatly through using opportunities such as e- warehousing, e- receipts and e- issuing. These have brought about accurate operations in the warehouse hence complementing logistics management efficiency (Carter, 2010)
2.2 Benefits of competition to an organization.
Consumers not only want good and safe products, but would also like to know that what they buy was produced in a socially and environmentally friendly way, and are sometimes willing to pay more for products that are produced in a socially and environmentally friendly manner. Loyalty is a combination of product or service quality, price and intellectual or emotional bonding. More and more customers are considering the environmental and social impacts of companies’ activities when they are making purchasing decisions. Customer loyalty can be created through cause promotions, cause related marketing. The companies need to identify and implement the initiative. Brand visibility, recognition and awareness among the stakeholders can be achieved by putting a good CSR plan in place. Cause branding is intended to reinforce or improve a company’s image by demonstrating the company’s support for a particular cause.
In 2013, 62.6 million volunteers participated in community service around the nation (Corporation for National & Community Service, 20 1 5). Volunteers participated in many different types of service including tutoring, office servicing, fundraising, and many more (Corporation for National & Community Service, 20 1 5). In recent years, participation in community service has taken on an integral role in the development of a well-rounded college student (Case, Henck, Schreiner, & Herrmann, 2011). Trends show that male companies are less likely to participate in club and organizations on campus, including community service (Case et al., 2011). The trends also show that males are missing out on cognitive development because of these missing pieces, while females continue to get involved in campus activities (Case et al.2011).
Participating in community service activities has allowed companies to integrate the community development agenda into their companies policy this has thus made it possible for these organizations to make themselves popular (Hoffman, 2018 ). It is not only important to the companies but it is also beneficial to the community surrounding (Spalding, 20 13).
Companies take up voluntary activity for a range of reasons (Francis, 2011; Gage & Thapa, 2012). Passion for a cause and feelings of obligation have been found to underpin volunteering across all types of volunteers. Companies may also undertake volunteering to enhance their resume, to seek out employment opportunities, or to find out if their chosen profession or pathway will suit those (Lee & Won, 2011). For the university, it is important not only to attract companies to volunteering, but also to keep them for future events. Proper human resources policy, the use of existing experience in attracting and retaining volunteers will allow universities to work more effectively with young volunteers. Motivational policy.
According to Callan and Thomas (2009), there is therefore need for more research concerning the relationship between sustainability performance and financial performance. This, to be able to determine the level of generalization that is possible between various empirical studies. There is also, to a certain degree, need for updated research, since several previous studies could be considered as dated, due to the fast development of sustainability practices and the surrounding context in recent years (Callan & Thomas, 2009). Furthermore, previous research has focused almost exclusively on U.S. firms (Surroca, Tribó, & Waddock, 2010). Thus, more research should be conducted on non-U.S. companies to be able to establish whether there are any differences between nations; where societal or cultural traditions may differ in regards to how corporations should respond to environmental and social concerns (Callan & Thomas, 2009).
Friedman (2018) argues that corporations engaging in sustainability activities incur more costs, thus reducing their net financial performance (Friedman, 2018). Since these additional costs and administrative burdens may affect the corporation’s bottom line negatively it may potentially lead to competitive disadvantages for the firm (Friedman, 1970; McWilliams & Siegel, 1997; Jensen, 2001; Barnett & Salomon, 2006). Therefore, a focus on corporate sustainability challenges the traditional main objective of corporations, which is to maximize shareholder value. More specifically, according to this view, it is believed that any manager who makes investments that is not beneficial for employees, shareholders or its customers, is believed to abuse the firm’s resources (Friedman, 1970). Instead, the cost of social issues and inequality are perceived as problems that may best be solved by others, for instance the government (Waddock & Graves, 1997) and that corporations, thus, should do no more than to abide the law (Friedman, 1970). Jensen (2001), however, has suggested a more nuanced view on value maximization, in which companies should satisfy the needs of their stakeholders as long as the cost of doing so does not distort shareholder value.
2.3 Relationship between competition and financial performance of an organization.
Standardized transportation process, including improved quality control, shorter delivery time, and greater efficiency through the use of various ERP systems like the internet enabled tracking and tracing of the goods in transit, during shipment as well as giving up to date information to the buyers about the goods. This according to (Kotler 2000) enables the trading parties to minimize inefficiencies such as pilferage, theft among others during the logistics of the goods hence improving logistics efficiency and effectiveness.
Simplified logistics and supply chain process. The introduction of ERP systems has not only simplified the logistics process but has also improved on the whole supply chain process including control over suppliers, improved process cycle time, close cooperation relationships, improved supply chain efficiency, raw materials on time for suppliers. According to (Kenneth Lysons 2000), simplified logistics and supply chain process has brought about shorter lead times and has enabled the materials to be available as and when they are required by the buyers for production purposes.
Process Automation With the use of ERP components such as bar coding, Satellite, internets and Image processing among others in the process of managing logistics efficiency, there has been reduction on paper work thereby leading to a substantial reduction of errors, as well as increased capability to obtaining and exchanging real time information. This is possible through the use of information technology systems such as Bar code and scanners which represents a series of alphanumerical characters, bar code readers to interpret bar code symbology, and bar code printers to reliably and accurately print bar codes on labels, cartons, and/or picking /shipping documents. This review is included here because bar code systems are the foundation for many paperless warehousing systems, but the review is meant only as a brief introduction to bar code system. In logistics, bar coding is useful in receiving inbound materials. This helps in quick and accurate data entry, faster checking and clearing of shipments, automatic tracking of the shipments throughout the logistics. (Trent and Monczka 2000)
Improved Logistics process. Logistics management is the process of managing the efficient, costs effective way of transporting goods, supplies and related information from the point of origin to the point of consumption Kenneth Lysons (2000). The introduction of ERP has brought in tremendous improvements in the flow of materials from the point of origin to the point of consumption including reduced arrangement costs and handling times, shortened response time for purchasing, improved order process speed and reduced labor costs.
Improved warehousing facilities. Warehousing is the primary link between the producers and the consumers; it is used for storing products (raw materials, in process inventory and finished goods) before they are finally worked upon or delivered to the ultimate consumers. Through the implementation of internet, ware house efficiency and effectiveness has improved greatly through using opportunities such as e- warehousing, e- receipts and e- issuing. These have brought about accurate operations in the warehouse hence complementing logistics management efficiency (R.J Carter, 1990)
Reduce product delivery time. Through the implementation of ERP in organizations Company the organizations’ processes of making payments to their suppliers have improved greatly including faster payment systems like using ATMS, credit cards among others. This reduces among others interest rate, credit risk among others (Aberdeen group 2005).
Improved distribution process. According to Donald W Dobler and David Burt (2001)With improved tracking and tracing as a result of using ERP systems like the internet, satellites among others, the company that is to say the distributing company is assured of efficiency and effectiveness in the distribution process as their trucks are properly tracked and traced so that in case the deliveries are made to a different location, the mistake can easily be rectified.
Proper monitoring. The introduction of ERP in international trade has brought about efficient and effective monitoring of the materials during transit to their various destinations. This is done through use of technologies that allows communication across a very wide geographical area.
Faster information transfer. ERP enables a speedy transfer of information between the supplier and the buyer. Therefore, all the necessary information that the supplier needs to give to the buyer regarding how the goods in transit should be handled, stored and packed are given to the buyer prior to delivery so that special attention is taken by the buyer where necessary( Van Horne 1994)
Reduce inventory levels. According to ( (ThomsonSingh2001; thompson, 2014)) ERP helps the buying organisation to order the needed items at the right time and once the need arises then an order will be placed. This helps the organisation to do away with bulk stock levels hence solving the problem of inventory costs like obsolescence and dampness leading to losses this leads to efficiency and effectiveness in the logistics operations.
Globalization, According to (oketcho, 2010), ERP has not only brought the world closer together, but it will allow the world’s economy to become a single interdependent system. This means that we will not only share information quickly and efficiently, but we will also bring down barriers of linguistic and geographic boundaries. The world will developed into a global village due to the help of information and communication technology, allowing countries like Chile and Japan who are not only separated by distance but also by language to share ideas and information with each other.
Communication, Chaffey (2007) asserts that with the help of ERP, communication becomes cheaper, quicker, and more efficient. We can now communicate with anyone around the globe by simply text messaging them, or sending them an email, for an almost instantaneous response. The internet has also opened up face-to-face direct communication from different parts of the world, thanks to the help of video-conferencing.
CHAPTER THREE
METHODOLOGY
This chapter will include the research design, study population area, sample size, sampling techniques and procedure, data collection methods, data collection instruments, validity and reliability, data quality control, data analysis, data measurements, ethical considerations and limitations of the study and it will provide justifications of the methodology that will be used for the study. The research design and analytical path of any research project should have a specific methodological direction based on its research objectives and framework.
According to Johnson & Christensen (2019) research design is the conceptual blueprint within which research is conducted, while Fisher (2007) states that a research design is defined as a detailed outline of how an investigation takes place. The study will adopt a descriptive survey design which will provide descriptions of the variables to answer the research questions. This study will use two approaches; the qualitative and quantitative research design. Quantitative design also allows comparisons between respondents, giving the right perspective on the variables under study (Riffe, et al., 2019). quantitative design is based on measurement of quantity hence this will be used in calculating simple percentages and the number of respondents (Gray, 2019). The choice of this technique is also guided by the fact that the study aims at generating findings, which would facilitate a general understanding and interpretation of the problem. The quantitative data will be triangulated with Key Informant Interviews to provide explanatory information to the statistical data.
Martin, (2019) defines a study population as the group in which a researcher wants to pick a sample from in order to make generalizations. The study will specifically focus on the employees of MTN since they are the people who have clear information regarding the subject under study.
This study will employ both probability and non-probability sampling techniques. Probability sampling techniques will include simple and stratified random sampling which will be used to select key respondents of the study. This will ensure that there is representativeness. Besides, it will provide an equal chance to all of being selected. Non-probability sampling techniques will include purposive; namely key informants to ensure people with particular information about the subject under study are selected. Snow ball sampling will be used to reach respondents through referrals and enable the researcher interview respondents who can provide data on the topic under study.
3.4 Determination of the sample size
Mugenda and Mugenda (2003), argue that it is impossible to study the whole targeted population and therefore the researcher shall take a sample of the population. A sample is a subset of the population that comprises members selected from the population. Using Krejcie and Morgan’s (1970) table for sample size determination approach, a sample size of 148 employees will be selected from the total population of 239 employees.
Table 1: Population, Sample size and Sampling technique
Source: MTN Employee List, (2013)
Source: MTN head office Employee List, (2016)
3.5.0 Data sources and collection instrument
Majorly, two types of data sources – primary and secondary will be used for this study
3.5.1 Data sources, Collection Procedure and Instruments
Two types of data namely primary and secondary data will be used to collect data using different methods. Primary data will be collected using questionnaires and direct interviews. The study will adopt a mixture of qualitative and quantitative methods to obtain data on the topic under study. Qualitative data will be collected using interview guides and will be used to collect data on feelings, beliefs and attitudes regarding the subject under study. Quantitative methods will be used to generate quantifiable data, using a questionnaire, which will be the main instrument used because of its convenience and efficiency in data collection. The different tools and data sources will be used to make triangulation feasible (Amin 2005).
Secondary sources of data that will be reviewed include scholarly books, magazines, dissertations journals and articles. This source is useful in collecting data from already written literature for example e-books, journals, published articles and periodicals as part of literature review. Documentary resources will be classified in order to facilitate the data collection and textual analysis (Mubazi, 2008).
3.6 Data Collection Methods and Instruments
The study will adopt a mixture of qualitative and quantitative methods. Qualitative data will be collected using interview guides. The use of interview guides to enable data collection on feelings, beliefs and attitudes regarding the subject under study. While quantitative data will be collected using a questionnaire.
Ahuja (2009) defines a questionnaire as a structured set of questions that are given to people in order to collect facts or opinions about something. The researcher will use closed-ended questions because they are easy and quick to answer, and they are helpful in improving consistence of the responses.
According to Ahuja (2009), an interview is a two-person conversation initiated by the interviewer for the specific purpose of obtaining research-related information. It focuses on the content specified by the research objectives, description and explanation. An interview guide, which is referred to as a set of questions for which answers, will be used by a researcher to interview respondents. The use of this tool gives the researcher control over the line of questioning hence time saving. Interviews will be conducted in a quiet place without noise with the key informants
Like parents.
The researcher will obtain a recommendation and an introductory letter from Kyambogo University, after which he will seek permission from the university.
3.9 Data Quality Control of the Instrument
3.9.1 Reliability of the questionnaire
According to Mugenda and Mugenda, (2003) reliability is the measure of the extent to which research instruments are able to provide the same results upon being tested repeatedly. Crobach’s coefficient alpha (a) as recommended by Amin, (2005, P.302) will be used to test the reliability of the research instrument. The instrument is deemed reliable if reliable of 0.7 and above is obtained and therefore, it will be adopted for use in the data collection.
Formula for reliability is
= ()
Where = alpha reliability co efficiency.
K=Number of items included in the questionnaire
= sum of variance of individual items
= variance of all items in the instrument.
To ensure credibility and trust worthiness of qualitative data the researcher will ensure that only the officials who are employees of MTN will be interviewed.
The coefficient ranges between a=0.00 for no reliability, a =1.00 for perfect reliability. The closer alpha gets to 1.0 the better. If the study findings result to Cronbanch’s Alpha of 0.7 and above, this will signify that research instrument is good enough for the study. According to Amin (2005), all the measurements in the instrument that show adequate levels of internal consistency of cronbach’s alpha of 0.77 and above are accepted as reliable.
3.9.2 Validity of the questionnaire
Validity is defined as the extent to which results can be accurately interpreted and generalized to other populations (Oso & Onen, 2008). While Borg & Gall, 1989 as cited in Onyinkwa, (2013) validity is defined as the degree to which results obtained by the research instrument correctly represented to the phenomenon understudy and Mugenda & Mugenda, (2019) as the accuracy and meaningfulness of inferences which are based on the research results.
Amin, (2005) recommended minimum CVI of 0.7 to be used. Validity will be tested using content validity index which involves judges scoring the relevancy of the questions in the instruments in relation to the study variables.
The formula for Content Validity Index is;
CVI =
Where CVI = content validity
n= number of items indicated relevant.
N = total no. of items in the instrument
In this study, validity will be achieved by establishing content validity. The researcher will achieve content validity by using the experts to assess the validity of the research instrument. The experts especially research supervisors and consultants from Kyambogo University will be given data collection tools to assess whether the items in the instruments are valid in relation to research topic, objectives, and questions. From the instruments they will declare some items valid and others invalid. Those declared invalid will be dropped, others adjusted, while the valid ones will be maintained. Then content validity index (CVI) will be computed by dividing the number of items declared valid by total number of items/questions in the data collection instrument.
3.10 Data Collection Procedures
The researcher will obtain an introductory letter from Kyambogo University to seek permission and enable easy access of information by the researcher from MTN Head offcie branch, after the permission is granted from, the researcher will go ahead and administer questionnaires and interviews will be done for the selected respondents however the researcher will seek the consent of the respondents before being given questionnaire and the respondents will be informed that the study is strictly for academic purposes.
3.11 Data Processing and Analysis
This section covers methods of data processing and analysis.
In order to ascertain the accuracy, consistency, uniformity, proper arrangement and completion of the data, the researcher will use the computer for data entry, editing and data coding. The computer will be used because it increases the speed of computation and data processing and handles huge volumes of data, which is not possible manually. It facilitates copying, editing, saving and retrieving the data easier and validation, checking and correction of data.
Data collected will be checked, coded and edited for completeness and accuracy. Data will be analyzed using the statistical package for social scientists (SPSS) version 21.0 for Windows. It will be analyzed using frequency distribution tables, excel spread sheets and Spearman correlation to determine the degree of relationship between variables. Qualitative data will also be used to analyze descriptive statistics using opinions and attitudes of respondents and developing themes.
Ethical considerations will be taken care of by, first seeking authorization from the Kyambogo University administration and other relevant authorities. Questionnaires will be structured in such a way that there is no mention of the interviewee’s name which ensures strict confidentiality in data.
Further, responses will be optional and respondents will not be given any inducements to participate in the study. Ethical considerations will be taken care of by the researcher by briefing the respondents on the purpose of the research, their relevance in the research process, and expectations from them as explained by Lloyd Bevan (2009).
Informed consent will be ascertained from informants/respondents. They will be promised confidentiality about the information they provide. The researcher will explain to the respondents the purpose of the study as purely academic and that the information obtained will be treated with utmost confidentiality. If anybody other than the University authority is to have access the information, the researcher will first seek the consent of the respondents.
- The respondents may fear to answer the questions asked as they feel that their security may be at stake.
- Respondents may not have enough time to answer the questions
- The respondent may expect to be given some money during the research process
