EFFECT OF GLOBALIZATION ON NIGERIA SMALL AND MEDIUM SCALE INDUSTRY
CHAPTER ONE
INTRODUCTION
Early theories on globalization were written by classical economist whose main concern was not on International trade out on the political economy of a nation. Duyile (2004) explained that “after the industrial revolution, trade mainly exports and imports between nations expanded”. As information and communication technology advance and production becoming more complex, scholars and researchers started writing about firms, producers and marketing strategies. Companies started producing for foreign markets and more complex products introduced. The system was described by Lilus (2001) as “mass production for mass market”. The control and coordination efforts brought about multinational organizations involved in production and distribution of goods and services across national boundaries.
International business research has drawn attention to globalization and its effects on national economy. As a result, a number of controversial views have been made. Questions asked included Impact on economic growth and development, introduction and expansion on small and scale business enterprise, political and social life of developing and under-developed nations. Conditions under which local or indigenous organizations choose to operate are also influenced by political, economic and complex social relationships. Schults (2004) explained that “Business activities are rapidly becoming internationalized as trade becomes more global and products seek wider and international markets for their goods and services”.
Small and Medium scale business enterprises in Nigeria are involved in various business activities and the volume is greatly influenced by many factors. The success, survival, growth and development of Small and Medium Enterprises (SMEs) can be determined by level of interactions and influence from global operations. Entrepreneurship in SMEs according to Wore (2004) is a significant factor in the process of any country’s economic development. The role involves more than increasing per capita output and income. It involves initiating and constituting changes in the structure of business and society. The change is accompanied by growth and increased output. Globalization can be said to have influenced Nigeria small and medium scale enterprise either positively or negatively and may be with no significant effect or relationship.
1.2 BACKGROUND OF THE STUDY
Economic growth according to Ajayi (2005) refers to “increase over time in a country’s real output of goods and services”. Output is measured by gross national product or national incomes with SMEs have significant contributions. Economic development implies not only real output but growth that is accompanied by changes in the structure of a nation’s economy. This include the structure of business organizations, national political and social structures, technical and institutional arrangements by which output is produced and distributed as part of economic development. dependence on globalization in some situations could not be in a form of SMEs development to the extent that there is growth in poverty. Within this view, Vernon (2001) said, “it is possible to have growth without development as growth and development of business organizations are not exactly the same”.
The economic history of any nation to Osuji (2005) also explained that “no nation has ever developed without an appreciable growth and involvement of international trade and relations”. The role of globalization in national economy also exert influence on the speed of growth of business organizations especially the SMES. Growth in finance through direct foreign investment, fiscal and monetary policies, money and financial institutions are influenced by International or global activities which also influence a nation’s Small and Medium scale business enterprises. Technology and production processes for example are “determinants of the rate at which productivity capacity and income can grow (Buckley and Ghauri, 1999). Studies have revealed that developing nations have had higher production technology than the under-developed nations. Faster growth, more investment, expansion of SMES comes partly from interdependence and globalization.
Globalization contributes to growth by improving the productivity of organizations. Prahalad (2005) explained that “SMES activities are significantly higher in growing economies especially in European and American nations”. This suggests a link between economic development and SMES. The analysis of the relationship between globalization and SMES varies and the effect can be streamlined according to entrepreneurial skills, sources of finance, training and manpower development, government policies and employment generation. However, the focus of this research work would be streamlined. Globalization has been undertaken by a number of authors and scholars including Mckinnon (1973), Gupta (1984), Vernon (2001), Prahalad (2005) among others. In the studies, there is the idea that globalization enhances a nation’s economic development through improvement in production and distribution efficiency through technology transfer, reduction in costs, availability of sources of funding g, material and financial resources from more developed economies.
Ajayi (2005) quoting Dr. Kwame Nkrumah, the then leader of Ghana that “African political and economic interdependence will be worthless unless we use it to obtain economic and financial independence”. Throughout the world, governments have taken necessary measures to ensure the integration of economic activities more closely into the machinery of carrying out policies on SMES. The roles of globalization on SMES and a nation’s economy are influenced by a host of factors. These include the characteristics of the nation’s monetary system, organization of institutions and markets, political and economic environments and level of economic development.
Nigerian education system from pre-colonial era to date was structured around general education and the business was mainly to equip Nigerians with an education that prepares them to become employees. Schools according to Onoh (2004) “do not equip individuals to cope with demands and problems of an emerging technological society”. Political and opinion leaders as well as students have found that Nigeria educational system is bookish and restricted. It could be said to b e irrelevant to the pressing economic, social cultural and entrepreneurial needs of the nation. A research on the effect of globalization on Nigeria Small and Medium scale industry is to examine education aspect, effect of globalization through education, training and development of entrepreneurs of SMEs in Nigeria. The study is to ascertain and determine the effect of globalization as an avenue for cross – fertilization of ideas on SMEs in Nigeria. To know how globalization efforts have assisted in promoting functional education for SME entrepreneurship, for creativity, providing marketable and salable skills, education for self-reliance and self-actualization and total independence.
1.3 SCOPE OF THE STUDY
In the history of Nigeria since political independence, the nation’s under-developed economy has made remarkable impact on Small and Medium scale enterprises’ development. Most critics of Nigeria’s economic programmes cannot but attribute the problems to educational system. Olannye (2002) holds the view that “teaching and learning of entrepreneurship assist in the production and distribution of goods and services compared to over dependence on imported products”. Since, 1999, under a democratic system of government, Nigeria have experienced true trade and investment opportunities due to globalization
The owner or entrepreneur of a Small or Medium scale enterprise could in fact be an illiterate, semi-literate or a person trained in a discipline order than management science. An entrepreneur in the opinion of Steinthof (2003) is “a person who starts or organizes a commercial enterprise especially in one involving financial risk”. In modern day realities, individuals educated in pure and applied sciences do find themselves in business management responsibilities either by design or by accident. It is easier, less time consuming, less waste generation that are more beneficial to the enterprise if the organizer is equipped with basic principles of management.
The key position of globalization in small and medium scale enterprises education for economic growth has been widely acknowledged. Odebusuyi (2000) describes “SMEs as the springboard for sustainable economic development”. One of the pressing problems of SMEs in emerging nations of Africa and Asia is the lack of management capability for planning and organization of bushiness organizations for delivery of goods and services. Quality of SMEs and their management techniques can be improved through the concept of globalization.
This research study will focus on globalization effects on education and training for SMEs to ascertain the effect of globalization on SMEs entrepreneurship. Competences education and training related to SMEs status. Determine the content, design of SME education as provided by globalization activities. The scope also include entrepreneurs of SMEs in Lagos metropolis, commercial nerve centre of the country in anticipation that the findings will be applicable to Nigeria SME industry.
1.4 STATEMENT OF THE PROBLEM
Globalization concept and literacy involves entrepreneurs’ ability to learn, acquire specific skills and general knowledge to operate and maintain business information. Small and medium scale enterprises organized on bases of sound principles and guidelines would be able to get fair and adequate information to work with. Todaro (2003) insisted that when entrepreneurs are literate and discipline, they provide enough managerial capabilities to monitor and direct the affairs of the business.
With poor educational background of entrepreneurs of SMEs, many business decisions are not well analyzed, poor record keeping, inadequate working capital arrangement, inadequate exposure to explore opportunities. Management of an organization largely depends on what Duyile (2004) described as “business know-how”. Business know-how entails achievement drive, control mechanism, tolerance and effective decision-making processes. Small business in Nigeria have potentials and know-how for survival, success, growth and expansion. They have large markets to penetrate, expand sales volume, maximize profit and with access to various sources of financing. With poor, low educational background, they stumble, collapse and fail.
Problem for survival and growth of SMEs in Nigeria could result from inadequate planning, ignorance of the concepts of globalization, technology and competition. These organizations are constantly withdrawing and new ones entering business. Some withdraw because business is doing badly and to some, because of other opportunities for gain. Hisrich (1985) agreed that there are many reasons for SMEs failures, withdrawals, survival and growth. “Globalization may have a significant relationship with SMEs operations in Nigeria. The research study is to ascertain if education and training of SMEs entrepreneurs contributes positively to SMEs growth and development as influenced by globalization, to determine, education as a concept of globalization and its effect on Nigeria small and medium scale industry.
1.5 PURPOSE OF THE STUDY
It is the purpose of this study to evaluate and appraise the roles and effects of globalization on Nigeria Small and Medium Scale. The study is structured and streamlined to examine globalization effects on the growth and development of SMEs. Education on related variables like skills and general knowledge on SMEs organization, legal aspects, government guidelines and policies on SMEs as influenced by globalization concepts and philosophy. The study’s purpose also stem from the interests to analyse and apply philosophy of international concepts of developed nations to Nigeria’s system.
Approach to this research study is skewed towards the orientation of education of the entrepreneurs of SMEs as an integral part of the survival and development of the business. Perhaps, because of the importance of SMEs in any national economy, if a hundreds of SME operators in the sub-sector are asked questions on operational, general, financial knowledge of SMEs as emphasized by globalization, no less than ninety will claim ignorance of the concept and its application. Joyce (2004) described small scale businesses as “the springboard for sustainable economic development that is influenced by national and International factors”, SMEs position can be illustrated as vehicles for industrialization, poverty eradication, employment generation and economic development. Consequently, operators and Nigeria entrepreneurs need training and education on SME and globalization concepts for the sustenance and growth of the organizations.
1.6 RESEARCH QUESTIONS
To provide a clear understanding of the study’s statement of the problem, provide focus and framework, and to assist in data collection and procedures, the following research questions are formulated.
1. What is globalization and how does it influence the survival, growth and development of Nigeria small and medium scale industry?
2. What is the role of entrepreneurs’ education and awareness of globalization and to what extent does it affects business operations?
3. How is small and medium scale business in Nigeria influenced by globalization?
4. What is the relationship between globalization and SMEs and how does it affect the operators and entrepreneurs?
5. Are Nigerian small scale business entrepreneurs trained and educated on business management and globalization?
6. To what extent has education influenced young Nigerians to own and manage their small scale businesses and has globalization contributed to such decisions and management of the business?
7. What is the effect of globalization on Nigeria small and medium scale industry?
8. What is the importance and relevance of SME and globalization to a nation’s economy especially the economic development of Nigeria?
1.7 AIMS AND OBJECTIVES
The research study has among its aims and objectives the following:
1. To determine the meaning and operational system of globalization, small and medium scale business enterprises.
2. To determine how the training and education of Nigeria young entrepreneurs assist in the establishment, management, growth and development of small and mediums scale enterprises.
3. To ascertain how small business organizations in Nigeria are structured and organized for optional results and efficiency as influenced by globalization.
4. To evaluate effects of SMEs entrepreneurs’ education and skills to manage resources, maximize profit, sales and production volume, and to enlarge market share.
5. To ascertain if entrepreneurs level of education can enhance management of SMEs to operate at national and international markets.
6. To know the effect of globalization, performance rating, management efficiency and where necessary to recommend how performance can be improved on to ensure survival and growth of small scale businesses in Nigeria.
7. To know the influence of globalization on SMEs in Nigeria in relation to technology transfer, exploring market and marketing opportunities, sources of funds, management strategies and economic variables.
8. To determine the role of modern information communication technology to globalization, education and tracing of Nigeria entrepreneurs and SMEs.
1.8 RESEARCH HYPOTHESES
The following research hypotheses are assumptions upon which data and information are collected, analyzed for interpretations. The Null and alternative stated such that the acceptance of one would means the rejection of the other. The assumptions are also stated to guide data collection and determine statistical tool for analysis and interpretation.
Hypothesis One
1. HO: That globalization does not influence the technology of small and medium scale enterprises in Nigeria.
2. H1: That globalization do influence the technology of small and medium scale enterprises in Nigeria
1.9 SIGNIFICANCE OF THE STUDY
The research study is positioned to appraise the impact of globalization on Nigeria’s small and medium scale enterprises industry. The appraisal and study is to assess globalization on the education and training of Nigeria entrepreneurs for efficient system of SMEs, the purpose of determining how the nation’s economy has responded to global trends in educating Nigeria entrepreneurs in financial and monetary, technological advancement, production capacity and market expansion principles and concepts.
The study is also significant as it involves identifying and defining globalization processes of educating and creating awareness, skills, knowledge, capacity building and effects on production and distribution of goods and services by Small and Medium Scale enterprises. Among various theories, no particular concepts can be said to be wholistic and sufficient to appraise globalization and SMEs influence on a developing economy. Consequently, this research study borrowed heavily from management, International studies, administration in structural composition and analysis of the effect of globalization on Nigeria’s SMEs sector.
The study is significant in its attempt to appraise education and training variables to the roles and objectives of globalization to SMEs in Nigeria. Variables adopted for analysis include technology, market, labour, investment opportunities, constraints and challenges. The study is however descriptive in nature and therefore embraces detail description of globalization, small and medium scale enterprises, entrepreneurship, training and education. The study is also expected to help fill the gaps of unidentified variables created by previous studies. To realize this, the study attempted providing a clear and vivid understanding of the relationship between globalization and performance of SMEs entrepreneurs’ education and training.
The research work is positioned to increase and expand the knowledge of performance and survival or otherwise of SMEs through entrepreneur education and training on globalization. The study is to provide a platform upon which benefits of globalization can be realized, wherein SMEs policies can be re-positioned in terms of training on skills acquisition programmes, planning, goal setting and implementation. The study is also significant as it will enhance the understanding of globalization, its strategies and philosophy on education of entrepreneurs to benefit individuals, corporate organizations, government agencies and national economy.
1.10 DEFINITION OF TERMS
Business Organization: Small and medium scale enterprise as an entity with no corporate identity, where the entrepreneur is liable to business actions, decisions and liabilities, SMEs established by one or group of persons to make and provide goods and services with the aim of making and maximizing profit. Also used synonymously to business organization are SME, concern, organization and business.
Development: Human and material expansion, capacity building, extension of business operations resulting from education and training on globalization, use of operational standards, adherence to given regulations and guidelines on business management, expansion of business activities due to SME entrepreneurs know-how, knowledge and skills formally or through informal system.
Direct Foreign Investment: The inflow of capital resources from foreign investors or foreign government for the purpose of assisting SMES in production of goods and services and their distribution, the flow of financial and material resources in and out of a country for investment purposes and specifically on SMEs.
Economy: Production, distribution and consumption of goods and services in a country, it entails production capacity, channels of distribution, consumer’s behaviour, small and medium scale business and rate of consumption. Economy of a nation that includes real and financial sectors.
Entrepreneur’s Education: Small and medium scale entrepreneur’s attitude, mental state of mind, general knowledge and skills that propel him or her to act and operate the business in a particular way; knowledge and skills through which an entrepreneur focuses on business information, management, operations, production and distribution.
Frustrations: State of entrepreneurs’ mind, actions and behaviour when investment drive and motivation are blocked, stopped or prevented, inability to attain predetermined business objectives and goals. SMEs’ standard and target set by the entrepreneur deprived by lack of education, training and information.
Globalization: Production, distribution and consumption of goods and services at international level, business global activities that emphasize technology transfer, trade across national boundaries, even distribution of resources and availability of scarce products, global business activities including training and education of entrepreneurs to stimulate economic activities.
Organizational Development: Utilization of human and material resources by small and medium scale business management to survive, grow and develop. Integration of general education, training for specific skills acquisition. Education and skills of entrepreneurs to enhance business expansion, performance and for enhanced scope of operations.
Poverty : Deprivation with indicators like poor clothing, insufficient food, crowded accommodation, dirty shelter, low level of education and illiteracy, brief life style, low income that falls below standard. Living less than a standard that propels an individual to be discipline and go into ownership of a small scale business.
Productivity: Better and enhanced utilization of SMES resources matched with better work methods, procedures and waste saving devices. Entrepreneurs’ predetermined target for efficient operations and maximizing profit.
Training: Process of encouraging and effecting transfer of skills, knowledge experience and technology, transfer of knowledge and skills from one party to another aimed at improving performance for small scale business survival, growth and development.