THE IMPACT OF STRATEGIC PLANNING TO THE DEVELOMENT OF SMALL SCALE AS A MEANS OF REDUCING UNEMPLOYMENT


Content

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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