CHAPTER ONE: INTRODUCTION
1.1 Background of study.
When developing strategies to create business growth, perhaps you are on the brink of launching a new range of services, rolling out a new brand of product, or perhaps you just need to make more profit. However, the type of strategy you adopt will depend on the type of business your into, who your target audiences are, and what resources and skills you have at your disposal. The proper co-ordination of human resources, labour and capital will result in a firm’s growth (Chibundu, 2006).
Managing growth of SMEs is a major strategic issue for any growing firm (Arbaugh, and Camp, 2002). However, this research work explores the growth strategies of small and medium scale enterprises in Calabar Municipality using the following firms as a case study; Tun 7 Nigeria Limited and Mornirose Bakery Ventures.
Thompson (2001:563-565) presented four growth strategies necessitated for small and medium scale enterprises (SMEs) growth as “(1) organic growth i.e. been efficiently organised; (2) acquisitions i.e. skills development; (3) strategic alliance i.e. association of groups with common aims, and (4) joint venture i.e. jointly undertake business enterprises with firms of common interest”. This strategy gives an entrepreneurs edge in his market niche, and help them grow steadily.
Moreso, proper planning is another vital strategy that also helps SMEs growth. Inyang (2004:27) noted “planning is an attempt by most organisations to predict the future by as much as possible reducing the future uncertainty. It includes establishing the organisation’s objectives and formulating strategies, programmes, policies, and standards which are needed to accomplish the set objectives.” It is fundamental for SMEs to embark on planning. Becham (2011:39) stated that “small and medium scale enterprises are often too busy dealing with day-to-day issues to have time to worry about the future”. The lack of planning culture has been the major hindrance to SMEs growth in Calabar municipality. Sauser (2005:4) noted “starting a business is a risky venture, and the chances of SMEs owners making it past the five year mark are very slim. They should develop both long-term and short-term strategies to guard against failure”. Moreso, SMEs firms would experience immense growth if the entrepreneurs nest strategies that best suit their firm’s goals and objectives and imbibe a planning culture.
The problems affecting SMEs growth in Calabar municipality as identified by respondents, researchers and scholars ranges from low capital, lack of managerial and entrepreneurial skills, governmental restrictions and regulations, and internal factors etc. The research work hopes to identify strategies that would help SMEs in Calabar municipality overcome these challenges, and attain steady growth rate.
1.2 Statement of problem
Most SMEs have folded up or crumbled today because of lack of growth strategies for long-term actualisation of their goals and objectives. Some small and medium scale business enterprises formulate wrong or short-term goals or strategies without taking into consideration the long-term benefit and future of the firm. Lack of creative and innovative business ideas, underdeveloped entrepreneurship culture and limited understanding to modern production technologies, marketing and business techniques makes their strategies to failure.
The reason why some small and medium scale enterprises loose their customers or remain stagnated is because there is no sound strategy laid down for good customer relationship and firm’s image. Some business enterprises have sound strategies but do not know how they can be effectively applied.
Administrative problems was also identified has the major causes of SMEs growth strategies failure. Researchers identified poor recordkeeping, inexperience in the field of business owners, particularly a lack of technical knowledge, lack of planning culture, and lack of market research (Kazooba, 2006; Mambula, 2002; Eeden et al., 2004).
Objectives of the study.
The objectives of this study are as follows:
i. To analyse some growth strategies for the Small and Medium scale enterprises in Calabar Municipality.
ii. To bring to limelight or to the awareness of general public, and small and medium scale business owners how growth strategies can lead to the growth and development of their businesses.
iii. To make case or show how valuable growth strategies are to the stability and long-term future of any firm.
iv. To compare some growth strategies adopted by some small and medium scale enterprises with one another.
v. To choose and analyse goal oriented strategies for small and medium scale enterprises.
1.4 Research question.
i. How has growth strategies helped in the growth of small and medium scale enterprises in Calabar Municipality?
ii. To what extent has growth strategies contribute to the attainment of goals and objectives of small and medium scale enterprises in Calabar Municipality?
iii. To what extend will the analysis of growth strategies for small and medium scale enterprises increase the output and income of SMEs in Calabar Municipality?
1.5 Research hypothesis.
The hypotheses for this study are stated as follows:
H0: There is no significant relationship between growth strategies and the growth of small and medium scale enterprises in Calabar Municipality.
H1: There is a significant relationship between growth strategies and the growth of small and medium scale enterprises in Calabar Municipality.
H0: There is no significant association between growth strategies and the attainment of goals and objectives of small and medium scale enterprises in Calabar Municipality.
H1: There is no significant association between growth strategies and the attainment of goals and objectives of small and medium scale enterprises in Calabar Municipality.
1.6 Scope and limitations of study.
The scope of this study was restricted to studying the growth strategies of selected small and medium scale enterprises in Calabar municipality. Tun 7 Nigeria Limited and Mornirose Bakery Ventures are the SME firms used in the research work.
The researcher envisaged some constraints that affected the success of the study. These included: time constraints, which affected the adequate attention needed for academic activities. Also, the attitude of the respondents in giving the required and sincere responses to the questions asked. They thought that revealing or answering such question would expose their managerial inefficiencies. Another constraint was finance, due to its relative scarcity; it reduced the pace of the study.
1.7 Significance of the study.
The study is significant in the following ways:
i. It will guide on investigation of the effect or analysis of growth strategies for small and medium scale enterprise.
ii. The study will also create awareness among businessmen and women or small and medium scale business enterprises on the best strategies available for them to make their business grow.
iii. It will also provide small and medium scale enterprises with the strategies of dealing with their customers and attract them to their business environment.
iv. The study will also arouse feelings of concern for business owners, those interested in business establishment etc.
v. This study would be of immense help to future researchers who are interested in the subject matter.
1.8 Historical background of the companies studied.
Tuns 7 Nigeria Limited.
Preamble: the organisation was established in 2000, by Mr. Tunde Osisanya, with the major scope of dealing on furniture item and electronics. Now a section of the firm is devoted to clothing.
Business location: the business is located at Ibom layout Marian Calabar, Calabar municipality local government area, where its resources are easily transported to the firm because of good roads. The location of the firm was influence by the choice of the model of business which needed to be constantly seen by customers who drive or walk pass to stimulate the desire to buy.
Staff strength: The firm boost of staff strength of forty (40) workers employed to carry out their daily operation of furniture or electronic delivery, manager, sales representative, marketing agent, security and cleaner.
Product delivery: The firm’s products are sold to its customers on small or large quantity. In the case of small-scale are usually for personal use, while, large-quantity are for organisation or government contracts. The distribution department ensures that the truck or vans are used to deliver the goods at the customer’s location on request.
Sales and profitability: Sales are done on either the basis of cash and carry or cash on delivery. The profit ratio of the firm has been unstable as a result of governmental regulations and restriction. According to the manager the unstable Government policies on ban and unban furniture goods at short intervals is a major problem for his business. This makes profit margin unstable and growth rate of the firm slow. This also cause in consistency in the firms market strategies and long-term policies.
Mornirose bakery ventures.
Preamble: The business organisation was established in 1995, with the major aim of manufacturing and distributing all kinds of bakery products such as cake, bread, all assorted snacks, and bakery made confectioneries.
Business location: The business is located in Calabar Municipality local government area, where it can source its raw materials and other valuable resources (such as human capital) to enhance its production.
Products: The organisation’s product ranges from Duke Bread, Mornirose bread, Supreme gift bread, Royal bread, meat-pie, roasted meat, egg and meat roll, etc.
Staff strength: The organisation’s workforce is made up of forty-five (45) workers, distributed across all the functional areas of their operations. These workforces articulates their various skills into making sure that their assigned duties are carried out daily in the most efficient and effective way.
Distribution strategy: The organisation’s products are distributed within and outside the local government area. The organisation institutes an inclusive distribution strategy, which ensures that the prices of their products are affordable and commensurate with the value of the product whenever they need them. Their price ranges from between 30-60 Naira, depending on the product to be purchased by the customer. The prices are fixed at an affordable way so as to facilitate increased patronage by customers.
Management: The management of the business operates an open door policy, where other members are allowed to contribute their own quota into the affairs of the business. They create a clearly defined communication system, such that the employees easily understand the policy and strategy of the business.
1.9 Definition of terms
The keywords used in this research are defined as follows:
Enterprises: Microsoft Encarta dictionary (2009) defines enterprise as an organised business activities aim specifically at growth and profit.
Management: Aluko, et al. (2007:122), defines it as “the direction of an enterprise through planning, organising, coordinating and controlling of its human and material resources towards the achievement of a predetermined objective”.
Small and medium scale enterprises (SMEs): Hallbery (2006:1) defines SMEs as “statistically, SMEs is usually based on the number of employees or the value of assets. The lower limit for small-scale enterprises is usually set at 5 to 10 workers and the upper limit at 50 to 100 workers. The upper limit for medium scale enterprises is usually set between 100 and 250 employees”.
Strategies: Johnson (2010:218) defines strategies as “the scope and direction of an organisation over the long-term; which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations”.
Business growth: Slywotzky (1998:8) defines business growth as “when a business grows by stretching its business designs to serve customers that the business designs were not intended to serve”.
Entrepreneur: Aluko. et. al. (2004:201) defines entrepreneur as “a person that combines the factors of production (land, labour and capital) to create products, services and job opportunities”.
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