PROJECT TOPIC: PROFIT MAXIMIZATION: A STRATEGIC TOOL FOR SURVIVAL OF BUSINESSES IN NIGERIA (A CASE STUDY OF DANGOTE CEMENT INDUSTRY).
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- Department: Business management
- Study Level: Undergraduate
- Number of Chapters: 5
- Number of Pages: 57
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1.0 BACKGROUND OF STUDY
The ultimate goal of every firm in business is profit i.e. (Profit Maximization) and cost minimization in order to maximize shareholder wealth. Many industries today are facing problems due to the expansion through increases sales and the introduction of new product. Some on the other hand are facing problem of contraction owing to the introduction of substitute material. It is vital that management should be in position to plan for these changing levels of activities.
Apart from the problem of contraction and expansion during economic depression, an enterprise may be faced with the alternative of closing down or selling it at a price below the total cost.
Hence profit planning and control becomes difficult as a result of product offered and the action of competitor. In order to solve the problem created by the above situation profit, planning, cost, and their behaviour at different separating level, one of the most important tools developed by accountants to assist management in meeting the challenges is cost volume profit analysis.
According to I.M Pandey the analytical technique used to study the behavior of profit in response to changes in volume, cost and price, is called “Cost volume profit analysis” It is a device used to determine the usefulness of the profit planning process of the firm.
The entire field of profit planning has become associated with the cost volume profit relationship in organization. In micro-economics course, profit maximization is frequently cited as the goal of the firm; Profit maximization stressed the efficient use of capital resources but it is not specific with respect to the time frame over which profit are to be measured; Profit maximization function largely as a theoretic goal with economist using it to prove how firms behave rationally to increase profit.
Unfortunately, it ignores many real-world complexities that financial management firms must deal everyday with. Two major factors not considered by the profit maximization are Uncertainty and timing.
1.1 STATEMENT OF PROBLEM
The rising magnitude of the incessant profit or loss in Nigeria business organization over the year has become a thing of concern to managers; government, Policymakers, academia, entrepreneurs, financial analysis, economist and other stakeholders in the country’s economy. Various studies have been carried out to explain with empirical evidence, the factors driving profit and loss in business organization
The challenges facing most firms is numerous particularly during the period of economic depression or recession characterized by high liquidation of many , merger and acquisition, low technological powers, shortage of foreign exchange to buy needed raw material, high cost of production, erratic powers supply, high volume of imported goods and the advanced state of competition has affected drastically the maximization profit and cost maximization in most business organisation.
In a competitive world the key factors are cost price turnover and profit and these are factors which no business organization can ignore.
Management is faced with the problem of how to make effective and efficient use of their available scarce resources in order to achieve the objective of profit maximization.
Most management and organization lack under-standing on the importance of cost minimization as an effective tool or technique that has help in the sustainability on most business organization.
Most organization is faced with high cost of production which has led to inefficient utilization of the cost volume profit analysis technique.
1.2 OBJECTIVE OF THE STUDY
Profit planning and control are essential ingredients of every successful business in the world. The efficiency of management is measured by the amount of profit or loss in a given accounting year. The general objective of this study therefore will be;
1) To find a way of making use of scarce resource in order to achieve profit maximization.
2) To highlight the importance of profit using cost volume profit analysis over other forms of technique.
3) To identify the problems encountered in the economy that leads to lack of practical application of profit maximization.
4) To evaluate the extent to which the use of profit maximization on Dangote Cement Plc has been efficient.
1.3 RESEARCH QUESTIONS
1) Does your organization use cost volume profit analysis as a tool for profit planning and control?
2) Apart from cost volume profit analysis; what other techniques do you employ in the profit planning and control?
3) What problems does Dangote Cement Plc encounter in the profit planning and control?
4) In what ways specifically has the application of cost volume profit analysis helped the organization to achieve efficiency and effectiveness?
1.4 STATEMENT OF HYPOTHESIS
HO: Cost volume profit analysis as a tool for profit planning and control is not used in Dangote Cement Plc.
H1: Cost volume profit analysis as a tool for profit planning and control in Dangote Cement Plc.
1. HO: The application of cost volume profit analysis has not helped Dangote Cement Plc to be efficient and effective in its operations.
H1: The application of cost volume profit analysis has helped Dangote Cement Plc to be efficient and effective in its operations.
1. HO: Dangote Cement Plc does not employ other techniques in profit planning and control apart from cost volume profit analysis.
H1: Dangote Cement Plc employs other techniques in profit
planning and control apart from cost volume profit analysis.
1.5 SIGNIFICANCE OF THE STUDY
It is hoped that this study will be of importance to students (Accounting, Banking and Finance, Business Administration, Economics etc) staff and management of business organization, the individuals in banking profession and the shareholders of the companies.
The students are to be aware of the role played by profit maximization in business organization. Profit maximization is an essential tool in all business organization.
In a competitive world, the key factors are cost, price turnover and profit, and these are factors which no business organization can ignore. Therefore, the significance of the study is as follows:
How the study of profit maximization and cost minimization of Dangote Cement Plc knows how their profit margin is increasing over time.
2. It is useful to student in schools since it will serve as a source of reference to them in the nearest future.
1. It is useful to the state since it is used by government in making decision for improvement of the states.
2. It is useful to the economy as a whole since it is used by policy makers to maximize profit in the economy.
3. It is a basis for understanding, contribution, margin pricing, related short run decisions and transfer pricing.
1.6 SCOPE OF THE STUDY
This study is to analyze the effectiveness of profit maximization tool in business growth in Nigeria as a tool for profit planning and control in general but with particular reference to Dangote Cement Plc. This is with the view of finding out how the company, has been able to manage cost in order to maximize profit.
1.7 LIMITATION OF THE STUDY
The study of the effectiveness of profit maximization as strategic tool in business growth in Nigeria using Dangote Cement Plc., Lagos State. In carrying out this study, I was faced with number of constraints some of which are:
FINANCE: Inadequacies of funds affected expenses on distribution and collection of questionnaires to respondent and from respondents; printing of questionnaires and other transport expenses in conducting the research.
TIME: There is need to observe lots of protocols in respects to levels of management before the collection soring that the primary data collected would be dependable to some extent, also the rationing of time so as to accommodate my other courses.
Nevertheless, these constraints were taken care of and with limited errors and variances.
1.8 ORGANISATION OF THE STUDY
The study is presented in five chapters. The first chapter introduces the study and establishes the problem to be addressed in the study. The background, the scope as well as the significance of the study is also discussed. Chapter two explores the review of literature; the third chapter reviews the research methodology and theoretical framework to be used. The fourth chapter presents the result of the analysis data and trend of Dangote activities in Nigeria during the years under review; while chapter five presents the conclusion, summary and recommendation of the study.
1.9 HISTORICAL BACKGROUND OF DANGOTE CEMENT INDUSTRY
Dangote Group of Companies was established in May 1981 as a trading business with, an initial focus on Cement, the group diversified overtime into a Conglomerate trading, salt, flour, sugar and fish. By the early 1990s, the Group had given into one of the largest trading conglomerate operating in the country.
In November 1992, Dangote Cement was incorporated on 4th, it was formally known as the Obajana Cement Plc and it was commissioned in 2003 as the largest cement plant in sub-Saharan Africa.
In comparison to local peers, Dangote Cement Plc significantly outplays other cement manufacturers, as it presently control about 57% of local manufacturing capacity, this is expected to rise even further to about 67% on completion of Ibese plant and Obajana’s 3rd and 4th by Q1.11 combining manufacturing (excluding BCC) and imports, Dangote Cement accounted for about 40% of total Cement supply as at 2009; overall market share rose to about 49% with the inclusion of BCC.
In line with Nigeria’s Millennium Development Goals, the huge deficit in infrastructure especially adequate housing and transportation – roads, rails and ports, present a major case for continuing growth in cement consumption in Nigeria over the next 10 years at least. Based on a broad base argument that cement demand is more likely to continue rising. In the medium to long term,
we assess in this report, the key scenario, undergirding our expectation for cement demand in Nigeria, and present our outlook for Dangote cement’s revenue and profitability in the near to long term.
The company was granted a pioneer status for a period of 3 years with effect from January 1st 2009. The company is therefore exempted from payment of income tax in respect of profit accruing from manufacturing and sales of cement during the period to December 1st 2011.
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myProject.ng (2022). Profit maximization: a strategic tool for survival of businesses in nigeria (a case study of dangote cement industry).. myProject.ng: retrieved December 7, 2022, from https://www.myproject.ng/business-management/profit-maximization-a-strategic-tool-for-survival-of-businesses-in-nigeria-a-case-study-of-dangote-cement-industry/index.html
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Accessed 7, December, 2022
myProject.ng. "Profit maximization: a strategic tool for survival of businesses in nigeria (a case study of dangote cement industry)." , 7, December, 2022. Web. 7 December, 2022. https://www.myproject.ng/business-management/profit-maximization-a-strategic-tool-for-survival-of-businesses-in-nigeria-a-case-study-of-dangote-cement-industry/index.html .
myProject.ng, . "Profit maximization: a strategic tool for survival of businesses in nigeria (a case study of dangote cement industry)." (2022). Accessed 7, December, 2022. https://www.myproject.ng/business-management/profit-maximization-a-strategic-tool-for-survival-of-businesses-in-nigeria-a-case-study-of-dangote-cement-industry/index.html .;
myProject.ng (2022), . Profit maximization: a strategic tool for survival of businesses in nigeria (a case study of dangote cement industry). [Online] myProject.ng (2019). Available at: https://www.myproject.ng/business-management/profit-maximization-a-strategic-tool-for-survival-of-businesses-in-nigeria-a-case-study-of-dangote-cement-industry/index.html . ( Accessed 7, December, 2022 ).