THE SIGNIFICANCE OF STRATEGIC MARKETING PRACTICES TO THE EFFECTIVE AND EFFICIENT PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISE (SMES)

ABSTRACT

Albeit, small and medium scale enterprise (SMES); as economic and industrial stanchions for any nation inclined towards meaningful and revolution is fast gaining attention, its development and management have been treated and handled with obvious levity, and ineptitude.  This has contributed in no little way, to some of the myriad of problems facing SMEs survival and success in Nigeria.  Aside other external factors, strategic marketing management are a major determining internal factor that greatly affects the performance of SMEs.  To better appreciate the significance of this concept, this research work tries to expose the nature and result of the relationship between strategic marketing management practices and SMEs.  Chapter one, which is the introductory chapter, focuses on the nature and structure of small and medium scale enterprises (SMEs).  Also it tries to lock at the significance of strategic marketing practices to the success of SMEs. Chapter two reviews relevant literatures and previous work of scholars, theorists, and academics, on the in-depth nature and resultant effect of the relationship between SMEs and strategic marketing management practices. The third chapter discusses the methodology employed in gathering, and analyzing data for the purpose of the research. Chapter four centers on the presentation, analysis, and interpretation of gathered data for tacit and easy, more so, meaningful understanding.  State the major findings in respect of each hypothesis. Chapter five makes a summary of the study, concision, recommendation, and suggestions for further studies.

TABLE OF CONTENT

                                                                                Pages

Title page                                                                         i

Certification                                                                     ii

Dedication                                                                       iii

Acknowledgement                                                            iv

Abstract                                                                           vi    

Table of Content                                                              vii

List for Tables                                                                  x                             

CHAPTER ONE:

1.0   Introduction                                                             1

1.1   Statement of the Problem                                        5     

1.2   Objective of Study                                                    6

1.3   Research Question                                                   7

1.4   Hypothesis                                                               8

1.5   Significant of the Study                                           8

1.6   Scope and Limitations of the Study                         9

1.7   Research Methodology                                             10

1.8   Literature Review                                                     11

1.9   Plan of the Study                                                     12

1.10 Definition of Terms                                                  12

References                                                                       13

CHAPTER TWO:      LITERATURE REVIEW

2.1      Marketing in Developing Countries                          14

2.2      Industrial marketing                                                        18

2.3      Strategic Marketing                                                  21

2.4      Environments of Marketing                                     25

2.5      Organizational Performance Measures                     28

2.6      SMEs Marketing Management                                 32

References                                                               36

CHAPTER THREE:  RESEARCH METHODOLOGY

3.0      Introduction                                                             39

3.1      Restatement of Research Question                          39

3.2      Research Design                                                      40

3.3      Sampling Design and Sample Frame                               41

3.4      Characteristics of the Study Population                   41

3.5      Data Collection Instrument                                      42

3.6      Test and Validity and Reliability                              42

3.7      Administration of Data Collection Instrument         43

3.8      Procedure for processing/Analyzing collected Data  43

3.9      Limitation of Methodology Used                               44

References                                                               45

CHAPTER FOUR: DATA ANALYSIS, DISCUSSIONS INTERPRETATION AND PRESENTATION

4.0      Introduction                                                             46

4.1      Test of /Variability and Reliability                           46

4.2      Classification of Firms Based on

Activities/Operation                                                 47

4.3      Classification of Firms Based on Staff Strength               48

4.4      Gender Distribution of Respondents                                49

4.5      Age Distribution of Respondents                             49

4.6      Educational Background of Respondents                        50

4.7      Classification of Respondents based on

Work Experience                                                      51

4.8      Employment status of Respondents.                               52

4.9      SMEs strategic Marketing Practice and Environment Perception.                                                            43

4.10  Extent of Organization performance Measure          54

4.11  Hypothesis Testing                                                  56

4.11.1            Hypothesis 1                                                    56

4.11.2            Hypothesis 2                                                    58

4.11.3            Hypothesis 3                                                    59

4.12  Relationship between Strategic Marketing Practice Organizational Performance                                     61

4.13  Interpretation and Discussion                                 62

CHAPTER FIVE:     FINDINGS, SUMMARY, CONCLUSION, RECOMMENDATION AND SUGGESTIONS FOR FURTHER STUDIES

5.1      Findings                                                                  64

5.2      Summary and Conclusion                                               65

5.3      Recommendation                                                     66

5.4      Suggestion for Further Studies                                        68

Bibliography                                                            70

Questionnaire                                                          72

LIST OF TABLE

TABLE                                                                    

Table 1:    Test of Validity and Reliability

“       2:     Classification of Firms based on activities

“       3”     Classification of Firms according to Staff Strength

‘       4:     Gender distribution of Respondents.

“       5:     Age distribution of Respondents

“       6:     Education Background of respondents

“       7:     Classification of Respondents according to work                     Experience

“       8:     Respondents work/Employee status

‘       9:     Extent of Strategic Marketing practices and                            Environment Perception of SMEs under Survey

“       10:   Extent of Organizational Performance Measures     

“       11:   X² Contingency table (strategic Marketing Practice                  and Organizational Performance

“       12:   X² Contingency table (Environment Perception and                        Organizational Performance)

“       13:   X² Contingency table (Environmental Perception                     and Strategic marketing practice.

“       14:   Spearman rho correction (Extent of Relationship                    between strategic marketing practice and                                        Organizational Performance)

CHAPTER ONE

1.1      INTRODUCTION

Small and medium scale enterprises (SMEs) is a burgeoning horizon in the local and global arena.  The dire need and understanding of its revolutionary effects on any economy is rife.  This have made it remain very prominent in the industrial growth of the sub-sector have been intensified.  This is evident in the various attempts to inspire developing countries to accentuate and actively participate in small and medium scale enterprises.

Nigeria is a country of more than 130 million people, with a lot of human and natural resources.  The volume of trade in the Nigeria economy is very substantial and enormous, more so, are the types of economic activities becoming specialized and advanced.  The global trade activities occasioned by Nigeria’s trade development focus mainly of Nigeria in the context of West Africa.  According to Olubajo (1985) about 70% of Cargo traffic to West Africa countries from the United Kingdom is for Nigeria.  This implies that without Nigeria as a major market, adversely affected.  Nigeria also exports such products like cocoa, palm kernel, rubber, coffee, and few industrial products. If SMEs are country would earn a substantial foreign exchange.  One of the concentrating her resources on SMEs is the expectation that such investment could help attain her import substitution, and export promotion drive objectives, invariably, creating a relieve on some of the problems of her balance of payments, the National income and Gross Domestic products (GDP), low per capita income, poor standard of living, social insecurity, inter alia.

Nigerian governments have over the yeas taken actions to help increase participation and productivity in small and medium scale enterprises (SMEs).  Some of these expedient actions include provision of subsidies in form of tax holidays and other support services, integrating the bankers’ committee to address the paucity of financial resources due to low domestic savings insufficient to match with the level of investment consistent with national economic growth targets, creating enabling environment, establishing industrial development Centres (IDC), like the National economic schemes and programmes import duty draw back, export credit guarantee scheme, export development and expansion fund, import duty draw back, export credit guarantee scheme, export development and expansion fund, structural adjustment programme, (SAP) with the expectation that new entrepreneurial spirits and initiatives would be ignited to make SMEs flourish.  No doubt, much emphasis was placed on SMEs to look inward, develop and increase their raw materials supply, and boosts output and export trade.  Today, history is being made towards the creation of tomorrow’s potential multinational corporations (Sanusi, 2003).  The steps taken by various governments were predicated on the recognition of the strategic importance of SMEs to the economy, their low survival capacity, ad the need to develop entrepreneurial abilities of Nigerians, despite these efforts by the government, the participation of Nigerians in, and the performance of SMEs have been abysmally low.  This malign situation, as argued by many theorists, is traceable to inefficient and ineffective management practices.

The main motivation for being in business is to achieve organizational goals.  A lot of company decisions affect the degree of achievement of organizational goals (Osuaguwu, 2002).  As regards SMEs, decisions on products/services, and marketing affect the profitability of any SME.  The development in SMEs has always been founded on the drive to achieve organizational goals efficiently.  All management practices should, therefore, be tailored towards the achievement of organizational goals.

Challenged by the overriding need to achieve organizational goals, SMEs can explore new avenues to achieve these organizational goals.  A variety of approaches can be used by are generally called strategic management.  According to Jain (1983) as cited by Osuagwu (2002), the thrust on strategic management has given rise to strategic marketing.

Marketing considerations together with those of other functional areas of business play an important role in structuring corporate objectives and strategies.  The corporate strategy of a firm represents the pattern of resource allocation in order to achieve the desired goals, and the level of interaction of an organization with its environment.  Corporate strategy is therefore the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve stated objective (Adeleke, Ogundele, Oyenuga, 2003).

Marketing, both as a discipline and a way of life, has a germane role lot play in the economy of a developing country like Nigeria.  Without effective marketing activities, there may be little progress in the national economy of Nigeria.  It may be justified to assert that it is through efficient and effective marketing practices that a developing country like Nigeria can participate efficiently and effectively in small and medium enterprises (SMEs).  With advancing technology and increasing productivity, coupled with an ever changing environment (with its attendant shocks and surprise), the future growth of an economy can be said to be a function of the effectiveness and efficiency of its marketing practices.

As a result of the recent economic reforms in the country, e.g deregulation, privatization and commercialization exercises, SMEs are undergoing rapid and radical changes.  They are adjusting to these economic shifts.  To understand and take advantage of the shifts, which may be threats or opportunities, management of SMEs first need to understand the important trends shaping the SMEs environment and the strategic responses of competitors.  Strategic decisions by SMEs must take into account economic, political, competitive, technological, legal, social, and cultural pressures.  Among all the organic business functions in a company marketing is the most exposed to changes in the external environment (Mann, 1980).  It is important to note that the success of SMEs through their effective and efficient performance means that the numerous benefits of industrialization will not elude Nigeria.  Suffice it to say that small and medium scale enterprises (SMEs) are behind the laudable economic success, growth and development of today’s newly industrialized countries (NIC) such as China, Japan, Singapore, Korea, etc.

1.1      STATEMENT OF THE PROBLEM

The low performance of small and medium scale enterprises (SMEs) in Nigeria consequent o lack of strategic marketing know – how initiated the need for this research.  It is perhaps pertinent to say that functional marketing practices in SMEs play a vital role in the achievement of organizational goals.

Lack of marketing perspective makes optimum corporate strategies unsuccessful when there are environment changes and shifts, the influences of the environment (in terms of threats and opportunities), and the marketing practices used in achieving objectives in the face of the environmental influences.  The importance of marketing strategies varies form one industry to another, just as, the impact of the Nigeria business environment on particular industries varies often.  Effective understanding of industry dynamics will go a long way in aiding management practices in specific industries.

Environment of business and its strategy have been empirically demonstrated to have significant impacts on organization performance.  According to Henderson and Poole (1991), entrepreneurship involves more than invention, inventions have treated strategy to be under the control of organizational managers, while business environment have been seen as constraints, which under certain conditions, organizational managers can proactively, change.

Some researchers have been interested in explaining variations in business firms’ performance across industries.  Many have assumed that variable relationships may be appropriately estimated by analyzing data from a cross-section of firms representing various industries.  In these researches, natural business laws are assumed in exist regardless of industry classification.  However, some have argued that the homogeneity assumption laws may exist only in the context of similar strategies within an industry.

In the light of the above, three key areas of environment perception, marketing strategies, and organizational performance are to be investigated. An organization’s marketing strategy is tied to its organization goals and environment perception.  Differences in organizational goals and perception of environment characteristics result in a variety of marketing strategies.  The standards of performance by which over all marketing operations are generally evaluated are marketing profit, sales, volume, market share, and marketing cost.

1.2      OBJECTIVES OF STUDY

The primary purpose of this research is to identify areas of small and medium scale enterprises (SMEs) marketing practices, which require strengthening in order to cope with the complex and dynamic nature of SMEs environment.  Pertinently, the objectives of this research study are to:

i.            Determine the strategic marketing practices of SMEs in Nigeria.

ii.          Determine the perception of environment impacts by SMEs in Nigeria.

iii.        Determine the relationship between strategic marketing practices and organizational performance measures

iv.         Determine the relationship between environment perception and strategic marketing practices.

v.           Determine the relationship between environmental perception and organizational performance measures.

1.3      RESEARCH QUESTION

In order to achieve the objectives of this research, the study will attempt to provide answers to the following question.

i.            What is the relative degree of importance attached to specific aspects of strategic marketing?

ii.          What is the relative degree of importance attached to specific aspects of strategic marketing?

iii.        What is the relationship between strategic marketing practices and organizational performance?

iv.         What is the relationship between strategic marketing practices and environment perception?

v.           What is the relationship between environments perception and organizational performance measures?

1.4      HYPOTHESES

To provide answers to the research question, the following hypothesis will be tested.

i.            That the relationship between strategic marketing practices and organizational performance measure is high and positive.

ii.          That the relationship between environment perception and organization performance measures is high and positive.

iii.        That the relationship between environment perception and strategic marketing practices is high and positive.

In the entire situation the null (H_o) hypothesis will be tested against the alternative (H_A) hypothesis.

1.5   SIGNIFICANCE OF THE STUDY

A study of this kind is expected to make theoretical and practical contributions to small and medium scale enterprises (SMEs) marketing activities.  This study provides a basis for closer scrutiny of the formulations and applications of the different relevant aspects of strategic marketing in existence and in use.  Answers could then be sought regarding contemporary applications of strategic marketing, its degree of applicability in specific business concerns.  The research will, also, contribute to strategic marketing acceptability and applications in industrial marketing and other similar sectors.

This study is likely to be useful to SMEs organizations, manufacturing, service, and industrial companies, and professional managers who are constantly looking for marketing approaches that can be used to achieve organizational goals.  Also, government, organization, and individuals concerned with formulating business policies can benefit from this study.  Finally, this research study is expected to stimulate research interests in other aspects of small and medium scale enterprises  (SMES) in general, and marketing, in particular.

1.6      SCOPE AND LIMITATIONS OF THE STUDY

The foundation on which this study is based is that organizational performance of SMEs in Nigeria is dependent on efficient and effective strategic marketing practices.  This study will concentrate on strategic marketing practices of SMEs in Nigeria, and the relationships existing between these practices and organizational performance measures.

Marketing perspective has been extended to profit and non-profit, product and services organization, etc.  This study will be limited to profit making SMEs in Nigeria.  This is because their (SMEs) actions have tremendous effect on the national economy.

The exploratory nature of this research work should be noted so that its limitation can be understood.  More so, the usual problems associated with survey research methodology my constitute some of the limitation of this research.  The inadequacy of secondary data from SMEs necessitated the need to acquire such from other external secondary sources that may likely give a perception of SMEs performance from a distance.  Also the time frame of the study restricted the research to some industrial areas in Lagos state.

1.7      RESEARCH METHODOLOGY

This research study is concerned with the strategic marketing practices of small and medium scale enterprises (SMEs) in Nigeria.  For the purpose of collecting necessary data for this research, primary and secondary date collection methods will be used.  The primary data will be collected with the aid of be asked to indicate their level of agreement or disagreement with specific statements.  The secondary data will be collected from reports and documents from SMEs.  Secondary data will also, be collected from reports outside the companies and from literatures.

A total of twenty (20) indigenous small and medium scale enterprises (SMEs) in Ikeja (10 companies), and Ilupeju (10 companies) industrial areas of Lagos state were used for this study. Questionnaires were administered to officers and managers in these companies that are in the marketing/commercial department.

Question were based on strategic marketing practices and environment perception.   For strategic marketing practices, questions will cover such areas as marketing objectives, marketing resources, market segmentation, product, pricing, promotion, and distribution decisions.  Environments perception questions will cover areas as the impacts of the economic, technological, buyer behaviour, competitive, social, political, and legal factors.

Strategic marking practices and environment perception will constitute the independent variables while organizational performance measure will constitute the dependent variable base on:

i.            Return on investment

ii.          Market share

iii.        Marketing expenditures

iv.         Investment intensity

v.           Customers’ satisfaction, the questions will be based on the firms’ performance and operations for a period of five (5) years (2001 – 2005).

Responses to the question were analyzed using frequency, percentages (%) chi-square, and spearman rho correlation analysis.  Findings from this research will be comprehensively discussed in the light of the research problem, hypotheses, purpose and objectives, research questions, literature of the research, and other relevant issues to the research.  Conclusions will be drawn and recommendations made.  Areas for further research studies will be suggested.

1.8      LITERATURE REVIEW

A review of relevant literatures was made in the following areas:

i.      Marketing in Developing Countries

ii.     Industrial Marketing

iii.    Strategic Marketing

iv.         environment of Marketing

v.           Organizational Performance Measure

vi.         Small and Medium Scale Enterprise Marketing Management

1.9      PLAN OF THE STUDY

The research work will be divided into five (5) parts: part one (1), introduction; part two (2), Review of related Literatures; part three (3) research methodology; part four (4) interpretation, analysis and discussions; part five (5) Conclusion, recommendations and suggestions.

1.10     DEFINITION OF TERMS

Idest:               That is

Inter alia:                Among other things

Life blood:       necessary requirement which given support

Marketing –mix: the expedient marketing elements/functions                              that enhance effect and efficient marketing.

Niche:              Suitable, comfortable, advantageous position,                                 place situation.

Operational zed:     breaking up a complex system into                                 functional parts

Synergies (synergistic): a pool of collective efforts, galvanized                               towards achieving set goals and objectives.

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