ABSTRACT
This research project examines the
impact of strategic planning to the development of small scale as a means of
reducing unemployment. Survey design was adopted with simple random sampling
methods as means of selection.
Primary source of data collection was
adopted with the use of a well structured questionnaire. One hundred
questionnaires were distributed to small scale business owners in lagos.
Data gathered were presented in table
in percentile. Hypotheses formulated were tested with Chi-Square analysis. The
test resulted into rejecting the null hypotheses and accepting the alternate
hypotheses.
Conclusions were made
that Small-scale business owners have significant business strategies to
differentiate themselves from competition, Small-scale business owners have
significant competitive priorities to outperform competitors and small-scale
business owners significantly undertake market analysis to determine the need
of customers.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1
BACKGROUND OF STUDY
1.2
STATEMENT OF THE PROBLEM
1.3
PURPOSE OF THE STUDY
1.4
RESEARCH QUESTIONS
1.5
STATEMENT OF HYPOTHESIS
1.6
SIGNIFICANCE OF THE STUDY
1.7
SCOPE OF THE STUDY
1.8
DEFINITION OF TERMS
CHAPTER TWO: LITERATURE REVIEW
2.1
INTRODUCTION
2.2
STRATEGIC PLANNING
2.3
SMALL-SCALE BUSINESS
2.4
BUSINESS STRATEGY OF SMALL-SCALE ENTERPRENEURS
2.5
CORE COMPETENCE OF SMALL-SCALE ENTERPRENEURS
2.6
MARKET ANALYSIS IN SMALL-SCALE BUSINESS
2.7
SUMMARY
CHAPTER THREE: RESEARCH METHODOLOGY
3.1
INTRODUCTION
3.2
RESEARCH DESIGN
3.3
SAMPLE DESIGN
3.4
METHOD OF DATA COLLECTION
3.5
VALIDITY AND RELIABILITY OF THE INSTRUMENT
3.6
OPERATIONALIZATION AND MEASURMENT PROCEDURE
3.7
METHOD OF DATA ANALYSIS
CHAPTER FOUR: DATA PRESENTATION ANALYSIS
4.1
INTRODUCTION
4.2
RESPONSE RATE
4.3
CLASSIFICATION OF RESPONDENTS (BUSINESS)
4.4
ORDER OF DATA PRESENTATION AND ANALYSIS
4.5
BUSINESS STRATEGY
4.6
ADAPTATION OF ENVIRONMENT TURBULENT
4.7
COMPETITIVE PRIORITIES
4.8
MARKET ANALYSIS
4.9
SUMMARY OF FINDINGS
CHAPTER FIVE: DISCUSSION, CONCLUSION AND
RECOMMENDATION
5.1
INTRODUCTION
5.2
DISCUSSION OF FINDINGS
5.3
CONCLUSION
5.4
RECOMMENDATION
5.5
SUGGESTION FOR FURTHER RESEARCH
REFERENCES
APPENDIX
LIST OF TABLES
3.1
DISTRIBUTION OF SUBJECTS IN SAMPLE
3.2
SPECIFICATION OF QUESTIONNAIRE ITEMS PER CATEGORY
OF ISSUES INVESTIGATED
4.1 RESPONSE
RATE OF QUESTIONNAIRE CIRCULATED
4.2 BUSINESS
SURVEYED
4.3
EXPANSIONS AND DEVELOPMENT AS GROWTH OBJECTIVES
OF SMALL SCALE BUSINESS
4.4 BUSINESS
STRATEGY OF SMALL-SCALE BUSINESSES
4.5 MEASURE
OF SUCCESS IN SMALL-SCALE BUSINESS
4.6
MEASURE OF ADAPTATION TO ENVIRONMENTAL TURBULENT
BY SMALL-SCALE
4.7
COMPETITVE PRIORITIES OF SMALL-SCALE BUSINESS
4.8
SOURCE OF VIABLE SMALL-SCALE BUSINESS
CHAPTER ONE
INTRODUCTION
1.1 Background to
the Study
Small scale businesses
have been performing below expectation despite government effort to sustain and
develop them. This is evidenced by the large proportion of the unemployed work
force. Once Small-scale businesses have been set up and developed, they are
expected to create employment for the unemployed workforce. Osuntogun and
Oramah (1992) point out that small-scale industries provide a means of creating
more employment opportunities at industries provide a means of creating more
employment opportunites at relatively low cost. When one realizes that the bulk
of unemployed in Nigeria are unskilled, the need for a greater emphasis on
small scale entrepreneurs that utilize labour in large number become evident.
Another evidence that Small-scale businesses are performing below expectation
is the mad rush of rural dwellers to the few developed centers of the country.
Oguntoye (1995) argues that small industries contribute to the
industrialization of the rural areas. The inability of Small Scale businesses
in the rural areas to render the required contribution for industrialization is
a failure. In fact, most entrepreneurs of small scale businesses rush to the
few developed centers of the country to locate, thereby failing to develop the
rural areas. In general Small-Scale businesses in Nigeria have failed to create
employment opportunities, reduce regional economic imbalance, mobilize and
utilize resources effectively.
Development in the
Nigerian economy these days indicates that the survival and growth of Small-Scale
businesses are very crucial to the success of the new culture of self-reliance.
Not only are these enterprises capable of expanding production possibilities to
the economy, they equally possess relatively large potentials for creating
linkages, employment generation, technological adaptation and transfer of
skills. Indeed, like the giant industries of today, some of these
establishments will in future metamorphose into large-scale industries.
However, we cannot shy away from the fact that, in spite of government’s
continued efforts to stimulate the growth of Small-scale business activities,
their performances is still hampered by executive capability as well as
technical and financial problems.
As for the financial
problems, the government has done rough via the Central Bank of Nigeria (CBN)
to aid them. For example, the World Bank granted a loan of US$270 million to
the Federal Government of Nigeria (FGN) for the development of Small and Medium
scale Enterprises (SME’s) in the private Sector. Out of this loan, there are
lump sums lendings to SME’s through eligible participating banks. (See circular
on the Small and Medium Scale Enterprise Loan Scheme: ref: SME/01/89). Also,
the Federal Government released about N35 million through the Nigerian Bank of Commerce
and Industries (NBC) to finance Small Scale Industries. The small businesses
have been getting the finance they need (Oluwo, 1989).
Technical problems facing
small businesses owners are associated with their inability to identify viable
small businesses. As pointed out by
Oluwo (supra), the professionals who have established businesses within their
competence should not falter. An individual should not go into business just
because is lucrative. He should consider his technical ability in the venture
area. If this was done, technical problems should not really be a problem that
would hamper performance.
The problem therefore, is
that of low executive capacity. The small business owners have no good
managerial skill or core competencies to overcome environmental changes. Before
investigating business opportunities, it is necessary to do an objective
appraisal of oneself. One would need organizing ability, drive and leadership
and the good physical and mental health to withstand long working hours, often
then less comfortable. A thriving business is built on its founder’s careful
planning, perseverance, and ability to withstand a drain on finances during
periods of low income or losses. As the owner, you bear heavy responsibilities
to yourself, your family, your employees, to the people you serve, and to your
supplier and creditors. A small scale businessman should actively like the line
of work he has chosen, understand it and be cheerfully disposed to make the
sacrifices necessary for its eventual success. Oluwo (1989) explained that an
average Nigerian small business owner has been lamenting many gods for his lack
of strategic planning and good treasury management.
In concrete terms, the
problem with small-scale business owners is lack of strategic planning, which
calls for the entrepreneur to define the business that the company will pursue,
new opportunities, and threats in the environment, and the growth objectives it
should achieve. Krajewski and Ritzman (1999:28) stated also that the strategic
planning for small scale businesses must define the business that will be
pursued, identify the threats and opportunities in the environmental, and also
define the growth objectives that will be achieved. It is doubtful whether
small business owners ever sit down to think of the business to pursue,
identify the opportunities and threats in the environments and the growth
objectives to achieve. If they do, the extent to which it is done should be
very limited to guaranteed success. Oluwo (1989) also supports this view when
he stated that many entrepreneurs, without previous knowledge of commercial
activities, are “Executive Chairman and Managing Director” of Kwashiorkor
Industries Nigeria limited with subsidiaries in Civil and building engineering
industry, obtaining mobilization fees from all state governments governed by
his political party or his kinsment.
The lack of strategic
planning and business strategy are evidenced by the non-existence of mission
statements in small-scale businesses. Every business no matter how small,
should have a mission statement, which must answer the questions of ‘what
business are we in?’ “Where should we be in ten years from now?” “What are the
key performance objectives by which we measure success? (Urieto, 1999). The
small business owners should define the business he is into and the line of
business he would expand into in the future. Resources could then be planned
and utilized in such a way as to aid the expansion. This is strategic planning.
The small business owners
should also know that the external business environment is turbulent. That is
to say, the external business environment in which a firm competes changes
continually. The small business owner needs to adapt to these environment in
which a firm competes changes continually. The small business owner needs to
adapt to these environmental changes. In management literature, adaptation
begins with environmental scanning. This is the process by which managers
monitor trends within the socioeconomic environment, including the industry,
the market place, and society, for potential opportunities or threats
(Krajewski and Ritzman, 1999). It is doubtful whether small business owners
have any defined way(s) to adapt to environmental changes. As Krajewski and
Ritzman (supra) pointed out, good managerial skill can be used to overcome
environmental changes. Environmental scanning can be used to determine changes.
The core competences of the firm can also be used to overcome environment
changes (Kazmi, 1992). “Core Competence” refers to the organization’s unique
strengths. The unique strength may be found in the workforce, facilities,
market and financial know how, systems, and technology. What could be the core
competencies of small-scale business owners to adapt to environmental changes?
It is plausible to assert that the skill of the small business owner and
ability to do very well what is being done, are the core competence of small
entrepreneur.
Small business owners
could also form strategic alliance to adapt to environmental changes. This is
an agreement with firm that may take the form of a collaborative effort, joint
venture or licensing of technology. For example, the small business owners can
team with another business owner to form strategic alliance in the form of
joint ventures.
It is also doubtful
whether small business owners have any competitive priorities. According to
Krajewski and Rizman (1999), a firm gains an advantage with its operating
system by outperforming competitors in terms of costs, quality, time, and flexibility.
The small business owner could operate to gain low cost advantage, or high
performance design, or consistent quality. All these give priority over other
firms. It could even operate on fast – delivery basis or on-time delivery.
Customization and volume flexibility are areas that the small business owners
could operate to gain competitive advantage.
It is also doubtful
whether small business owners undertake market analysis before jumping into
business. Most of them are in business because they heard that the business is
generally lucrative. The goal of market analysis is to understand what the
customer wants, and how to provide it better than competition does. In market
analysis (George et al, 1992), we first divide the firm’s customers into market
segments and then identify the needs of each segment. The businessman could
then provide the goods or services to meet the needs of the segment.
It is on the above
background that the study seeks to establish the extent to which small business
owners practice planning as a corporate strategy.
1.2
Statement of the Problem
Small-scale businesses
have failed to contribute meaningfully to the development of the Nigerian
economy, despite government’s continued efforts to stimulate their growth. The
study, therefore, examine the poor performance of Small-scale business owners.
The study also examined the extent to which Small-scale business owners
practice strategic planning, in order to establish the causes or causes of the
poor performances. The aspects of strategic planning that was examined are
business strategy, environmental adaptation techniques, competitive priorities,
and market analysis.
1.3
Purpose of the Study
The purpose of this study
is to examine the extent to which small-scale business owners practice
strategic planning. The aim is to establish the cause(s) of the poor
performance of small-scale business owners. On the basis of this, appropriate
recommendations could be worked out on how to inculcate the right attitude into
small business owners to undertake strategic planning in their businesses. On
the other hand, if small-scale business owners undertake strategic planning,
future researchers could then direct their attention to other variables in
management literature.
1.4
Research Questions
The problem to be
investigated was operationalized by the use of the following questions.
RQ1: Do small-scale
business owners have clearly defined business strategy to differentiate
themselves from competition?
RQ2: How do small-scale
business owners adapt to environmental changes?
RQ3: What are the
competitive priorities of small-scale business owners?
RQ4: Do small-scale
business owners undertake market analysis?
1.5
Statement of Hypotheses
The research questions
were answered via the verification of the following hypothesis:
H1: Small-scale business owners have no significant business strategies
to differentiate themselves from competition.
H2: The small-scale business owners use skill as the core competence
to significantly adapt to environmental changes.
H3: Small-scale business owners have no significant competitive
priorities to outperform competitors.
H4: Small-scale business owners do not significantly undertake
market analysis to determine the need of customers.
1.6 Significance of the Study
Development in the
Nigerian economy these days indicate that the survival and growth of small-scale
businesses are very crucial to the success of the new culture of self-reliance.
The small-scale businesses are capable of expanding production possibilities of
the economy as well as possess relatively large potentials for creating
linkages, employment generation, technological adaptation and transfer of
skills. There is therefore the need to guide the business owners on how to
operate in order to metamorphose them into large-scale industries.
In previous times, the
attention of the government was on inadequate finance to small-scale business
owners but it is now glaring that small-scale businesses are not starved of
funds. This study is therefore called for, as it will direct the mind of the
government and scholars generally to a different dimension-strategic planning.
The re-think or
redirection of what to do to sustain the survival and growth of small-scale
businesses has been called for by Oluwo (1989) but there had been no empirical
study to buttress the call. This may just be one of such studies.
According to Oluwo
(1989:63), “I do not see any financial gap in Nigeria as there is no evidence
in this country that the small businesses sector has been starved of loanable
funds deliberately. I consider this an abstract, which you must put behind you
immediately and review your plan. You require a growth management programme on
the sector of your business activity”
In essence, Oluwo was
crying out for the lack of strategic planning in Small scale businesses. Thus,
the significance of this study is derived from the fact that it will address
the issue of strategic planning, and equally adds to the existing literature on
corporate strategy and small-scale business.
1.7 Scope of the
Study
The scope of this study
is defined in terms of the small-scale businesses covered and the strategic
planning variables investigated.
Small-scale businesses
were drawn form the area of food processing, textiles, soup making, building
business, and cosmetics. These sampling areas were marked by the Federal
Institute of Industrial Research (FIIR) Lagos.
The response variable of
this study is poor performance of small-scale business owners. The explanatory
variables investigated were business strategies, environmental adaptation
techniques, competitive priorities, and market analysis. The adequacy of these
research variables was necessitated by finance and time constraints.
1.8 Definition of
Terms
The following terms are
peculiar to the study:
1. Small Scale
Businesses
The study classified a
business as small if it employs less than 50 persons, has few customers of
about twenty or less, or a limited market for its products.
2. Business or
Industries
These two terms were used
interchangeably in this study. In management literature, “Businesses” are often
regarded, as those not involving manufacturing while “industries” are
associated with manufacturing. Business only needs high acumen while industries
require technology. However, the study takes “Business” to be synonymous with
industry.
3. Technology
The study use this term
to mean “know-how” of small-scale operations.
4. Core
Competencies
Anywhere this terms
appears in the study context, it refers to the unique skill of the small-scale
business owner.
5. Strategic planning and corporate strategy were used
interchangeably in the study.
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