CHAPTER TWO

2.0     REVIEW OF LITERATURE

2.1     INTRODUCTION

In different economic periods, banks and businesses may see the need to sanitize their operations for survival and growth in response to the uncertain macro-economic environment. Mergers, take-overs, re-engineering and corporate-turn-around issues have become the central public and corporate policy issues in Nigeria banking. Corporate-turn-around issues come into play when the top management team of a bank undertakes restoration of an ailing corporate business portfolio to good health, or to improve on the already performing portfolio or repositioning and redefinition of the business focus for future market changes.

The chief executive of the management team and every staff in the firm must resolve to make a firm resolution, that is, a firm’s commitment to re-evaluation the current belief in the light of new evidence. The management team should be courageous to carry on the project to conclusion, adopting all the recommended strategies in the face of surmounting challenges. Management actions and decisions should be such that will optimize the available resources. That is why Drucker (1994:26) sees managerial action as “having synergistic effect in which they should create a productive entry that turns out more than it receives as input”.

The first task here is always the diagnosis of the underlying reasons for poor corporate performance, and curative strategies will immediately be large losses in some units like poor and non-performing portfolio, unattractive and improper or in some cases, non-existing products, ineffective products/services system etc. These factors pull together with unfriendly operative environment to result in poor performance of the organization. Depending on the roots and urgency of any problem, some of the following approaches can be used either singly or combined to achieve sanitizing objectives of banks; according to Drucker.

1.     Focus mainly on restoring profitability in the money leasing units.

2.     Implement harvest /divest strategies in the poorly performing units and allocate money and resources to expansion of better performing units.

3.     Institute across the board, economies in all business units.

4.     Revamp the composition of the business portfolio by selling off weak businesses and replacing them with new acquisition in attractive investments (investment strategy).

5.     Replace key management personnel at the corporate level.

6.     Launch profit improvement product in all units.

7.     Go into a combination (merger and take over) arrangement.

In this chapter, the researcher seeks to review the related literature to seek out what is involved in banks’ survival through sanitizing, how and to what extent they are done. Hence, the literature review is to go into relevant works to find out what and how banks achieve economic survival and growth through sanitizing strategies. To this end, the relevant and related works of various authors in the subject matter shall be reviewed. However, the operating environment for banks in Nigeria shall first be discussed.

2.2     AN OVERVIEW OF THE OPERATING ENVIRONMENT FOR NIGERIAN DEPOSIT MONEY BANKS 

An environment can be defined as those factors that are largely or totally outside the management’s control. It refers to certain uncontrollable variables that impact on an organization and therefore, must be taken into consideration in management decision making. The nature, quality and type of decision in a business organization is directed towards adapting to the environment. Nigeria banks operate in a dynamic environment and must therefore adapt to survive, because the environment creates opportunities and imposes constraints on their activities. The continual profitability and the survival of banks are therefore dependent to a large extent on management’s ingenuity in making decision that will enhance the earnings of a bank.