THE SURVIVAL STRATEGIES OF SMALL BUSINES
ABSTRACT
This study was carried out to investigate into the Survival Strategies in small Scale Business in. Lagos State (a case study of some selected small scale industries). Information was sought on the activities and the performance of the small scale enterprises in Lagos State in the areas of loan acquisition, marketing research, personnel approaches, strategic locations, training and development. The research method used for the study was mainly descriptive with theaim of obtaining primary data on the survival strategies being designed, developed and implemented by the selected small scale industries (i.e. Becco Furniture Enterprises Nigeria Ltd. And Atlas. Drugs Company) as well as how these strategies affect each of the organization. The sources of data used for the study was primary source (i.e. interviews, questionnaires, observation etc. Secondary source was also used which ‘includes libraries, other information centers on desk studies etc. The findings of the study was based on capital, marketing research, training and development, personnel policies and location from the data collected, the research concludes that small scale business industries were unable to receive loans from financial institutions, which has been a shortcoming on the part of the entrepreneurs due to illiteracy or lack of collateral needed. Also most small scale industries do not research on the areas of marketing their product or some other promotional activities and this affects sales. Training and development also has hindrances to the effective performance of the small scale businesses, since most employers do not train their employees to acquire technical expertise. The researcher recommend that since small scale industries are very vital, to our economy, it is pertinent that, for an entrepreneur to have effective efficientfunctioning of these small scale industries in the areas of (capita1 loan acquisition, marketing research, personnel policies, implementation, training and development and strategic location) he or she must aim primarily towards a long survival of that business by implementing on the strategies and policies mapped out based on the above stated areas. The recommendation based on capital is that, since government has set up many institutions to help in providing needed capital, the entrepreneurs should endeavour to utilize these opportunities and acquire the needed capital/loan facilities. On training and development, the researcher recommends that adequate training and development of employees should be embarked upon so as to acquire the necessary skills needed for effective operations.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
In the present day Nigerian economy, small-scale businesses are predominant. The importance can only be fully appreciated when one realizes the dominant role it plays in our economic development. Small scales industries are active in all sectors of economy. However, their influence is mostly experienced in distributive trade, transportation and loca1manufacturing. Their major functions are mostly mobilizing capital for investment, providing goods and services for the society at large. Creating employment for job seekers and contributing towards the community development. In careful study of the economics of Lagos State, one will observe that the little progress made so far could not have been made without the activities of small-scale business being carried out in the State. Most of the individually owned organizations often times provide capital to some of their workers to startoff their own small-scale business as a reward for years of loyal service.
Owing to the important role of smalls scale industries in the economic development in Nigeria, ‘the Federal Government of the Federal Republic of Nigeria, introduced and established some schemes and support agencies to help in the development and solving of small scale business-problems. Some of these support agencies include the National Directorate of employment (NDE), Entrepreneurship Development Programme (EDP) Small Scale Industries Division of the Federal Ministry of Industries, Industries Development Centres (IDCS). The goal of this programme (NDE) is to grant loans directly to young graduates to establish a small-scale industry of their choice. The programme was established in 1988 and it sparked off the highest number of small-scale businesses throughout the country. The area ofproduction/operation includes soap making, cosmetics, dressmaking etc. The small-scale industries pay lower taxes, free technical advice add also the advantage of favourable government regulations and lower overhead expense.
With the introduction of structural adjustment programme for economic recovery, minimized or reduced dependence on imports and to bring the economy back on the path of steady and balanced growth. With this introduction (i.e SAP) into Nigeria by the. Federal Government, the scope of the business operations of the small-scale industries shows their strength in the sectors of economy such as the commercial sector (i.e. whole seller and retailer), service industries on contract construction industries. Nzelibe 1988 says despite all these privileges, the general economic condition of small-scale industries is that the owners are weak. The financial institutions stringent requirements in securing loans have almost squeezed the small-scale enterprises out of business.
At least three (3) out of every four (4) small-scale businesses fail each year. It is absolutely difficult if not extremely impossible to obtain statistical data on the mortality rate of small-scale businesses yearly in Nigeria. The reason being that there is no legal requirement enforcing the regulation of small-scale business failure. Only the quoted companies are required to give notice of intention to wind-up. However, many professional observations have been made on the rate of business discontinuation in Nigeria. The committee on small-scale industry administration contends that 90% of such failure could be traced to lack of proper planning; inexperience, inadequate managerial competence, inadequate financing, poor-record keeping, and weak marketing skills. The remaining. 10% are accounted for by neglect on the part of the entrepreneurs, on the part of employee and natural disaster. Examples of professional observations made on small-scale businesses that have been discontinued are that of the popular kitchen tower restaurant formerly situated at Omole Ogba Opposite Murhi House which was set up in 1998 owning to lack of proper management. The former restaurant buildings have been converted to offices. Another business was that of Textile Mills Ltd. That majored in the manufacture of textiles and fabrics and also clothing materials to cater for clothing, of the masses.
Due to mismanagement and misappropriation of fund, lack of good managerial ability on the part of the management of the company, it got folded up in March 2002. Another of such business was the Anjorin Cooperative Society Oil Mill, Odogunyan. This Co-operative society Oil Mill was owned by Group of women who initiated and sited a palm kernel produce industry in 1990 with the aim of enabling the villagers/indigenes to crack their palm kernel with ease. However, the service did not last long as the machine broke down in 1992 and has been for repairs till date. Therefore, the general aim of this study should be on formulating an effective strategy for survival of small-scale industries particularly in Lagos State.
1.2 STATEMENT OF PROBLEM
With reference to investigating into and bringing out the survival strategies in small-scale businesses in Lagos State, it is most annoying to note that despite all, the privileges from the Federal Governments schemes and support agencies established to boost the small-scale business e.g. the National Directorate of Employment (NDE) and Entrepreneurship Development Programme (EDP), the general economic condition, of small-scale industry is weak. The major problem if the worsening economic state caused by the present down tum ‘in the economy. Although, most ofour economic policies are geared towards big businesses, the risk of starting a small-scale business and rapid failure of these ventures scare many people away from starting a small- scale business or industry.
There has been low scale volume as a result of an underlying problem such as poor supervision and control by sales managers, inadequate co-ordination of the various kinds of promotion poor compensation plan and no motivation and so on. Consequently, due to the importance of small scale enterprises in our dynamic economy, it is pertinent to find out the problems .associated with these small-scale enterprise and possibly proffer a solution in termsof strategy formulation so that the aims and objectives for which such enterprises is established shall be achieved. This situation if not checked will lead to numerous adverse effect both on the entrepreneur and the society, to our economy , there will be retardation in the production of goods and services that enhances the standard of living in our society. To the entrepreneur, the objective and the economic advancement dreams shall not be accomplished.
Based on the foregoing, the researcher is interested in finding out survival strategies for small-scale businesses in Lagos State and also formulates strategies in accomplishing adequate objective by
(a) Finding out the nature and the arrangement of small-scale industry.
(b) Finding out how some selected small-scale industries in Lagos State fare in the face of the present economic hardship.
(c) Finding out how to appraise the quality of their services the survival of any of thefirm. There will be businesses failure if the planning and development of products is not made. The products to be produced must be determined i.e. there is need for especial features, colours, size and shape the package will take.
(d) To find out how to appraise the management strategies i.e. defining the objectivesdesigned to satisfy customer needs, wants and also to achieve organizational goals and objectives.
(e) To appraise the marketability /marketing skills of their services. The type of product needed by the consumers, when, where, how and under what conditions of sales should be determined. The media and the message must be such that will be persuasive, convincing the customers that physiological and physiological needs will be satisfied.
(f) To appraise their profit trend/viability, no business can succeed without raising sufficient revenue from the sale of its goods or services to its customers. Problems arise when the cost of production is greater than the revenue. Finally, where necessary. To suggest ways and means, by which small-scale industries can be improved upon for survival.
1.3 RESEARCH QUESTIONS
Based on this study (Survival Strategies) in small scale businesses in Lagos State), the following research questions are setup as guidelines: –
1. Do small-scale industries have access to loan from financial institutions and are they privately owned or public liability companies?
2. To what extend do small-scale businesses research into marketing and promotion of their product and how diversified their services?
3. Do the small-scale business industries organize training and development for ·their employees and are the services provided by them of high quality?
4. To what extent are the personnel approaches and policies being implemented in the organization and are their management well organized?
5. Are the small-scale business industry premises strategically located and are they enjoying comfortable sales level?
1.4 PURPOSE OF STUDY
The small-scale industry is of upmost important in the economic development in Nigeria. We must realize that out of (3) million business firms in Nigeria, 2 million firms are small-scale industries. This shows that greater majority of Nigerian business firms are still small scale business industries and this evidence makes it clear that small-scale business industries constitute is the backbone of free enterprise, which this country operates. The purpose of this study is to investigate in to and find out the survival strategies in enhancing the success of small-scale industries in Lagos State. Also, the study should proffer solutions to the problems of small scale business and identifies possible gains, which accrue to it by:-
i. Investigate the present economic state of the lines of business under study with a view to identifying the major problem that poses danger to their survival and growth.
ii. Attempt to discover strategies employed by surviving and successful small-scale business among others.
iii. Study the demands of the environment and technology that faces small-scale industries.
iv. Identify approaches to personnel policies and programmes to be adopted in enhancing the growth and survival of business.
v. Recommend some survival strategies to embark upon and antidotes, which can contribute to successful operation of small concerns in the face of economic hardship and truculent economic times.
1.5 SIGNIFICANCE OF STUDY
Following the importance of small scale business industries in our economy, it is significant to study the survival strategies for small-scale business in Lagos State. It has been realized that most of the small-scale businesses survival depends on the extent the business understands the influence of technology and environment on the structure of the organization. This study is also important because it will help in throwing more light on ·the nature of small-scale business for future investors and entrepreneurs. It will also expose the weaknesses and pitfalls in the quality of services provided by these small-scale business firms and come up with suggestions on how to remove the weakness and pitfalls in the quality of services provided.
To the researcher, the study will broaden his mind on the management of small-scale business, his access to credit facilities, approach to personnel politics and programmes, location, competitive weakness, marketing skills and research, operational expenses, employee development and training since several recommendations/suggestions will be made towards the end of this research, the study all determines or serve as a guide to survival strategies for success of small-scale business. This improved system of small-scale business industry will be of economic importance to the government, entrepreneurs and the society at large.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
This study concerns the survival strategies of small-scale business in Lagos State. The scope of the study is limited to selected small-scale industries in Lagos State. These companiesinclude:-
i. Becco Furniture Enterprise Nigeria Ltd
ii. Atlas Drug Company Ltd.
Concluding an empirical research of this nature is not an easy task even for a research expert, Environmental problem may vary from one place to another depending on such factors as temperament of the reliability of the raw data. Despite the above factors, personal constraints such as time, finance and unavailability of necessary materials militated against my progress.
(a) Financial constraints: The researchers encounter some financial problems due to high transportation fare to move about for proper conduct of research work.
(b) Non-Availability of data: One of the limiting factors to this study was the problem of data collection. During the researchers visit to the companies, most of the data needed were not readily available. Since the respondents are mainly senior officers in the management cadre. They were not always on seat, even when they were available, they will only spend little or no time at all to discuss with you. In some cases, they win tend to hide some facts and data needed for easy and quick work, which they, tend to think, on the contrary will amount to divulgence of official secrets. This attitude exhibited by some managers makes them unapproachable, for data or information collection. Most of them taught that the work is designed to ascertain from them their income for taxpurposes.
(c) Time Constraints: Due to the combination of the researchers work and academic stress, the writer faces problem of time. Constraint in gathering enough data needed for the research work.
1.7 DEFINITION OF TERMS
LOCAL GOVERNMENT AREA: This is a geographical area or division carved out of a state or a large area of administration purpose.
PUBLIC SECTOR: This sector can be defined as that sector of the economy established and operated by the government or, its agencies distinguishable from the private sector, and organized on behalf of the whole citizens.
ENTREPRENEUR: This is an individual who is willing and able to take business risk with the aims and objectives of profit maximization.
BUSINESS ENVIRONMENT: This is an environment of organization, systems etc. whose activities and services are essential for the effective performance of the organization but is not subject to the control of the organization.
STRATEGY: This is defined as the basic goals and objectives of the organization and the major programmes of action chosen to reach those goals and objectives and the major pattern of resource allocation used to relate the organization to its environments.
PRIVATE SECTOR: This can be defined as that sector of the economy established and operated or owned by individual entrepreneurs who has the aim and objectives of’ profit maximization.
CORPORATE PLANNING: This involves planning by the organization in order to meet the demands of the environment. Organisation planning may be in short or long term planning.
MANAGEMENT: This is getting things done through others. It is the ability of an individual to solicit for or draw out the best desired result in others so as to achieve the objectives and goals of the organization.