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THE PROBLEMS AND PROSPECTS OF MANAGEMENT OF SMALL-SCALE
BUSINESS IN NIGERIA
EZE TOBECHUKWU CORNELIA
PG/MBA/10/54826
A DISSERTATION SUBMITTED TO THE DEPARTMENT OF MANAGEMENT,
FACULTY OF BUSINESS ADIMINISTRATION, IN PARTIAL FULFILMENT FOR
THE AWARD OF MASTER OF BUSINESS ADIMINISTRATION (MBA) DEGREE
IN MANAGEMENT
DEPARTMENT OF MANAGEMENT, FACULTY OF BUSINESS
ADIMINISTRATION, UNIVERSITY OF NIGERIA ENUGU CAMPUS
DR. C.O. CHUKWU
MAY, 2012
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CERTIFICATION
This is to certify that this work titled the problems and prospects of management of small-
scale business in Nigeria was carried out by me Eze Tobechukwu Cornelia
PG/MBA/10/54826 for the award of Master of Business Administration (MBA) Degree in the
Department of Management, Faculty of Business Administration University of Nigeria,
Enugu Campus.
__________________________
Eze Tobechukwu Cornelia
PG/MBA/10/54826
Date: ____________________
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APPROVAL
This work, titled the problems and prospects of management of small-scale business in
Nigeria by Eze Tobechukwu Cornelia PG/MBA/10/54826 has been approved for the award
of Master of Business Administration (MBA) Degree in the Department of Management,
Faculty of Business Administration University of Nigeria, Enugu Campus.
__________________________ _______________________
Dr C.O Chukwu Dr. C. A. Ezigbo
Project Supervisor Head of Department
Date: ____________________ Date: ____________________
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DEDICATION
To God Almighty, for his infinite mercy
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ACKNOWLEDGMENTS
I am very grateful to God Almighty for the gift of life and strength to complete this stage of
education. My special thanks go to my supervisor Mr C.O Chukwu for his academic advice.
I owe a special thanks to every member of my family for their constant prayer and support,
most especially my amicable husband Mr Chiagoziem Aneke. Am particularly grateful to my
mother, late Mrs Veronica Eze who in her hospital bed will always care and whose words of
encouragement can never ever be erased. May your soul rest in peace.
I sincerely express my gratitude to my uncle Rev. Fr. Gerald whose immense support will
forever be remembered and to my grand mama who said that the exits of my mother shall not
cause any vacuum.
Am also grateful to my colleges in the office whose help saw my work to a successful
completion; Lynda Eme, Chekwube, Emeka and Sylvester.
Am delightful to have special friends that helped me through the program as I had no time to
even see my result; Chinyere Aninweze, Amadi Izuchukwu and Eziaku.
Finally, I appreciate in a special way Mr Agbaeze for his advice and fatherly support.
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ABSTRACT
This project is a review of The problems and prospects of management of small-scale
business in Nigeria. The Statement of Problem identified were management problem caused
by poor planning, finance problem caused by lack of financial support and poor funding and
multiple and high Taxes. While the prospects of Small Scale Business in Nigeria can be sub-
divided into: employment opportunities, job creation and contribution to total Gross
Domestic Product (GDP). To meet the general objective, the study will focus on the
following specific objectives: To identify the effect of poor planning to the management in
small-scale business, to examine how lack of financial support and poor funding can lead to
Finance problem of small-scale business and to determine how Multiple and High Taxes
influence the management of small-scale business. The descriptive survey method was used
and the research tool was questionnaire. 9 respondents answered the questionnaire. Data
analysis using likert scale and presentation was done by the use of tables. The findings from
the study showed mainly that there is evidence to prove that poor planning affects the
management in small-scale business. Finally, solutions and recommendations were proffered
on how the poor planning to the management in small-scale business should be improved to
help their productivity by combination of critical success factors. The write up is duly
summarized.
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TABLE OF CONTENTS
Tite Page i
Certification Page ii
Dedication iii
Acknowledgement iv
Abstract v
CHAPTER ONE: INTRODUCTION
1.1: Background of the Study 1
1.2: Statement of the Problem 3
1.3: Objective of the Study 3
1.4: Research Hypotheses 4
1.5: Significance of the Study 4
1.6: Scope of the Study 5
1.7: Limitations of the Study 5
CHAPTER TWO: LITERATURE REVIEW
2.0: Nature of Management in Small-Scale Business 6
2.1 Types of Management in Small-Scale Business 19
2.2: Principles of Management in Small-Scale Business 31
2.3: Concept of Small-Scale Business 33
2.4: Brief History of Small-Scale Business in Nigeria 48
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CHAPTER THREE: RESEARCH METHOD
3.0: Research Design 54
3.1: Area of Study 54
3.2: Population of the Study 54
3.3 Procedure for Data Collection 55
3.4: Sample and Sampling Technique 55
3.5: Data Collection Instrument 56
3.6: Validation of Instrument 57
3.7: Method of Data Analysis 58
CHAPTER FOUR: PRESENTATION AND ANALYSES OF DATA
4.1: Presentation of Data 60
4.2: Analyses of Data 60
CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATIONS AND
CONCLUSION
5.1: Summary of Findings 67
5.2:Conclusion 68
5.3: Recommandations 69
REFERENCE 71
APPENDIX 1
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY.
Small and Medium Industries (SMIs) have been widely acknowledged as the springboard for
sustainable economic development. According to UNDP (1974), developing countries
including Nigeria, have since the 1970s shown increased interest in the promotion of small
and medium scale enterprises for three main reasons: the failure of past industrial policies to
generate efficient self-sustaining growth; increased emphasis on self-reliant approach to
development and the recognition that dynamic and growing SMIs can contribute substantially
to a wide range of developmental objectives. These objectives include efficient use of
resources, employment creation, mobilization of domestic savings for investments,
encouragement, expansion and development of indigenous entrepreneurship and technology
as well as income distribution, among others. Consequently, programmes of assistance in the
areas of finance, extension and advisory services, training and provision of infrastructure
were designed by the government for the development of SMEs to enhance the attainment of
these objectives. However, the full potential of the SMIs in the developmental process have
not been realized, owing to various constraints.
Since the 1960s to date, small and medium sized enterprises (SMEs) have been given due
recognition especially in the developed nations for playing very important roles towards
fostering accelerated economic growth, development and stability within several economies.
They make-up the largest proportion of businesses all over the world and play tremendous
roles in employment generation, provision of goods and services, creating a better standard of
living, as well as immensely contributing to the gross domestic products (GDPs) of many
countries.
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However, it appears that considering the enormous potentials of the SMEs sector, and despite
the acknowledgement of its immense contribution to sustainable economic development, its
performance still falls below expectation in many developing countries.
This is because the sector in these developing countries has been bedevilled by several factors
such as management inability militating against its performance, and leading to an increase in
the rate of SMEs failure. These factors include the unfavourable and very harsh economic
conditions resulting from unstable government policies; gross undercapitalisation, strained by
the difficulty in accessing credits from banks and other financial institutions; inadequacies
resulting from the highly dilapidated state of Infrastructural facilities; astronomically high
operating costs; lack of transparency and corruption; and the lack of interest and lasting
support for the SMEs sector by government authorities.
The thrust of this paper is, therefore, to articulate the management challenges posed to the
development of a dynamic SME sub-sector arising from some lingering constraints despite
previous and current government measures, which were aimed at facilitating the sub-sector‘s
development.
The very ownership of a business tends to create elitist attitudes and self-orientation. It
imposes a monocular vision which limits the company's capacity to respond positively and
aggressively to business opportunities and changing business conditions. A person who
stands head and shoulders over his colleagues in perceived authority can create benefits as
well as disadvantages for the business. In cases where he is a poor manager even though a
good entrepreneur, his domination might prevent the enterprise from obtaining the skills and
methods which are needed for further growth.
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1.2 STATEMENT OF THE PROBLEM
Presently, small-scale business enterprises in Nigeria are faced with problems that hamper the
growth and development of these enterprises. This support the saying that, the successes of
any business whether small, big or mega depends largely on the performance of people which
is management, finance and multiple and high tax
To ensure the achievement of this management objective in Small-scale business, this
research has been proposed to address the following challenges:
Management problem caused by poor planning
Finance problem caused by lack of financial support and poor funding
Multiple and High Taxes
The prospects of Small Scale Business in Nigeria can be sub-divided into:
Employment opportunities
Job Creation
Contribution to total Gross Domestic Product (GDP)
1.3 OBJECTIVES OF THE STUDY
1.3.1 General Objective of the Study
The general objective of the study is to determine the problems and prospects of management
in small-scale business in Nigeria.
1.3.2 Main Objectives of the Study
To meet the main objective, the study will focus on the following sub objectives:
I. To identify the effect of poor planning to the management in small-scale business.
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II. To examine how lack of financial support and poor funding can lead to Finance
problem of small-scale business.
III. To determine how Multiple and High Taxes influence the management of small-scale
business.
1.4 RESEARCH HYPOTHESES
Given the objective of the study, the following hypotheses are formulated:
Ho1. There is evidence to show that poor planning affects the management of small-scale
business.
Ho2. There is evidence to prove that lack of financial support and poor funding can lead to
Finance problem of small-scale business.
Ho3. There is a significant relationship to show that Multiple and High Taxes and the
management of small-scale business.
1.5 SIGNIFICANCE OF THE STUDY
1. The findings of this study will enable management of small-scale businesses to
appreciate better the need for a proper feasibility study and business plan before
starting up a business for easy management.
2. The study will enable the government, private sector and prospective small-scale
business entrepreneurs to come up with policies that will improve the management of
small-scale business.
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3. The study will be of immense help to other people and students who wish to carry out
other research in the field or related field.
1.6 SCOPE OF THE STUDY
The scope of this research is limited to the problems and prospects of management of small-
scale business in Nigeria.
1.7 LIMITATIONS OF THE STUDY
In carrying out this research many factors served as constraints:
1. Time Limitation: time factor constitutes a major limitation of this research study. It
relates to the fact that the time for this research work.
2. Negative attitude of respondent- The problem facing the researcher with regards to the
respondents relates to the non-cooperation and uncompromising attitude of some
respondents in giving out relevant information or facts. The researcher was able to get
the relevant information at the end of the day.
3. Fund - Due to high financial involvement of this project work, the researcher has
narrowed the study to A.K Block Industry, Abakpa Nike, Enugu.
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CHAPTER TWO
LITERATURE REVIEW
This chapter review previous research studies which have been done on the problems and
prospects of management in small-scale business in Nigeria.
The review will be divided into the following sub-headings;
2.0 NATURE OF MANAGEMENT IN SMALL-SCALE BUSINESS
2.1 TYPES OF MANAGEMENT IN SMALL-SCALE BUSINESS
2.2 PRINCIPLES OF MANAGEMENT IN SMALL-SCALE BUSINESS
2.3 CONCEPT OF SMALL-SCALE BUSINESS
2.4 BRIEF HISTORY OF SMALL-SCALE BUSINESS IN NIGERIA
2.0 NATURE OF MANAGEMENT IN SMALL-SCALE BUSINESS
Small business management requires business owners to provide oversight for several
functions in the business. Purchasing, human resources, sales, customer service, marketing
and product development are a few major departments or functions business owners must
manage. Larger business organizations often have more departments or divisions to manage.
Business owners in large organizations often delegate management responsibilities to
employees. Delegation ensures individuals provide oversight for business functions in
accordance with the business owner‘s management style.
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Management can be defined as all the activities and tasks undertaken by one or more persons
for the purpose of planning and controlling the activities of others in order to achieve an
objective or complete an activity that could not be achieved by the others acting
independently (Manfred F.R. Kets de Vries,2000:181).
Management is here simply defined as the way a commercial/business activity is organized.
While it is realised that management in small enterprises normally is personalised rather than
being institutionalised, still the management of small enterprises can improve their position
vis-a-vis competitors by introducing management practices that give consistency and viability
to the administration of the entire business.
The very ownership of a business tends to create elitist attitudes and self-orientation. It
imposes a monocular vision which limits the company's capacity to respond positively and
aggressively to business opportunities and changing business conditions. A person who
stands head and shoulders over his colleagues in perceived authority can create benefits as
well as disadvantages for the business. In cases where he is a poor manager even though a
good entrepreneur, his domination might prevent the enterprise from obtaining the skills and
methods which are needed for further growth. A gap is thus created between the
manager/owner's perception of the situation and his own abilities on the one hand and of the
actual needs of the business on the other.
Management support to the small enterprise sector covers the whole range of issues from
identification/selection of entrepreneurs, initial management training, support through
extension services and functional support to strengthening of small enterprise development
agencies and development of national policies on promotion of small enterprises.
According to Wikipedia encyclopedia, Management in all business and organizational
activities is the act of getting people together to accomplish desired goals and objectives
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using available resources efficiently and effectively. Management comprises planning,
organizing, staffing, leading or directing, and controlling an organization (a group of one or
more people or entities) or effort for the purpose of accomplishing a goal. Resourcing
encompasses the deployment and manipulation of human resources, financial resources,
technological resources and natural resources.
Since organizations can be viewed as systems, management can also be defined as human
action, including design, to facilitate the production of useful outcomes from a system. This
view opens the opportunity to 'manage' oneself, a pre-requisite to attempting to manage
others.
Henri Fayol (1841–1925), considers management to consist of six functions: forecasting,
planning, organizing, commanding, coordinating and controlling. He was one of the most
influential contributors to modern concepts of management.
Another way of thinking, Mary Parker Follett (1868–1933), defined management as "the art
of getting things done through people". She described management as philosophy.
Management is often included as a factor of production along with machines, materials, and
money. According to the management guru Peter Drucker (1909-2005), the basic task of a
management is twofold: marketing and innovation.
Running a business takes copious amounts of time and effort. Small business owners are
responsible for managing all aspects of their company. Management is commonly defined as
the alignment and coordination of multiple activities in an organization. Business owners use
management skills to accomplish the goals and objectives of their company. Small business
management requires business owners to use a mix of education, knowledge and expertise to
run their company.
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According to F. John Reh (2009:131), A Manager is the person responsible for planning and
directing the work of a group of individuals, monitoring their work, and taking corrective
action when necessary. For many people, this is their first step into a management career.
This management definition is more in depth and tailored toward business management.
Notice that it consists of three primary activities. First, management establishes a plan. This
plan becomes the road map for what work is going to be done. Second, management allocates
resources to implement the plan. Third, management measures the results to see how the end
product compares with what was originally envisioned. Most management failings can be
attributed to insufficient effort occurring in one of these three areas.
The definition goes on to talk about how management is responsible for measuring details
that may not be required presently, but may be useful later on. These measurements often
help determine the objectives in the planning stage.
When management is following this type of sequence, it becomes a continuing cycle. Plan,
execute, and measure. The measurements become the basis for the next planning stage and so
on.
Small business management requires business owners to provide oversight for several
functions in the business. Purchasing, human resources, sales, customer service, marketing
and product development are a few major departments or functions business owners must
manage.
2.0.1 Management Practices: Historical Perspective
Studies on management practices are either prescriptive (Fayol, 1949), or descriptive
(Mintzberg, 1975). The analysis of management practices may rest on development of
models (Boyalziz, 1982; Farmer and Richman, 1964; Iyanda, 1987; Koontz, 1972; Neghandi,
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and Estafen, 1965) or systematic observation and research into the types of people in
management jobs (Morse and Wanger, 1976).
Although, the practice of management dated back to pre-historical time, a systematic study of
management commenced in the 19th century. Since this period, attempts have been made by
practitioners and writers from different disciplines to develop principles and practices that
underline organizational effectiveness.
The variety of approaches to management thought has led to what Koontz (1961) described
as ―management Theory Jungle‖. To cut through the jungle and bring light to some issues and
problems of management theory, management writers like (Koontz, 1978; Stoner, 1978,
Haynes, Massie and Wallace, 1975) have classified the various contributions into schools of
thought.
Haynes, Massie and Wallance (1975) regarded the early management writers who attempted
to establish a set of organizational principles that appeared to them as universal in application
as the classical school. The Social Scientists who questioned the assumptions of the classical
school between 1930 and 1960 on the basis of empirical research and considered human
elements as the most important factor in the work place are known as the organic Scholl
(Stoner 1978).
With lines drawn between the conflicting theories, studies led by Burns and Stalkers (1961).
Woodward (1965), Lawrence and Lorsch (1967) revealed that the two extremes are neither
completely valid nor invalid but that organizational theory must include what Mary Parker
Follet called the ―Law of Situation‖ (Haynes, et al 1975).
Stoner, Freeman and Gilbert (1995) extended the approach to management of organisations
by developing the ―dynamic engagement approach‖. This theory is based and the premise that
time and human relationships are forcing management to rethink traditional approaches in the
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face of constant rapid changes. Six different themes about management of organisations that
emerged under the umbrella of dynamic engagements are:
New Organizational Environment. The idea that environment does not comprise
fixed and impersonal forces. Rather, it is a complex, dynamic web of people
interacting with one another.
Ethics and Social Responsibility. Paying attention to values that guide people in
their organisations, the corporate culture and value held by people outside the
organisation.
Globalisation. Recognizing that the world is at the doorstep of managers.
Investing and Re-inventing Organisation. Continually searching for ways to
unleash the creative potential of employees and managers –reengineering.
Culture and Multi-Culturalism. Recognizing the various perspectives and values
that people of different cultural background bring into their organizations.
Quality Management. Integrating Total Quality Management (TQM) culture into the
operations of organisations.
2.0.2 Management Practices in Developing Countries
Management as a pervasive function has been recently recognized as the most crucial
element for industrialization. As clearly commented by Koontz (1961),
―Assuring development was thought to be one of transforming capital, technology and
education from developed to developing countries, but recently, transfer of managerial know
how has been considered as crucial to economic development‖.
Several studies have been conducted to determine how feasible and useful it is to transfer the
―management know-how‖ of industrialized nations into industrial enterprises in the
developing countries. The results reveal mixed findings and recommendations.
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Neghandi (1981) carried out one of such studies. She examined the feasibility and utility of
transferring advanced management practices to industrial enterprises in Taiwan. The research
carried out in twenty-seven firms in Taiwan; nine US subsidiaries, seven Japanese
subsidiaries and eleven local firms showed that many advanced management practices found
in United States industries are not necessarily dysfunctional or useless when applied to
enterprises in Taiwan or to enterprises in other developing countries.
Waldmals (1981) descriptive study of management practices in Pakistan showed that modern
management practices of decentralized decision-making process and strategic planning are
ill-practiced due to shortages of qualified manpower, nepotism, different standard of
integrity, family pre-eminence and excessive government control of business environment.
The utilization of modern management techniques of management by objective
(M.B.O.) pay-off matrix and decision tree has been demonstrated by Zahrudeen (1985) to be
useful in the management of higher institutions in Nigeria. He contended that utilisation of
these techniques in all organisations; particularly management of institutions could to a great
extent assist in achieving some measures of improved performance and better monitoring.
Ekpo-Uffot (1986) designed a study aimed at exploring the relationship between the practices
of personnel functions and productivity. In a judgmental sampling techniques, the study of
ten business organisations in Lagos revealed that both in terms of volume of activity and
importance attached to the functions; of compensation ad discipline, management of labour
union relations and training and development dominate the personnel management practices
in participating organisations while personnel engagement, personnel research and
preparation of organizational context are relatively weak and at the bottom are work
motivation, productivity and quality of work life.
It is worthy to note that one will not find something African or Nigerian in the Nigerian
management practices, despite the fact that lots of management functions of planning,
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discipline, motivation and conflict resolution had been performed before colonization.
Inegbenebor (1987) attributed this to the transplantation of colonial institutions in Nigeria
during the 19th Century. These institutions adopted American management concepts and
practices through their Colonial personnel who dominated the management hierarchy. Even
the so-called technical assistance for human resources during the period concentrated mainly
on the propagation of techniques, practise, methods and procedures that were used in the
―experts‖ home countries. This situation according to Udo-Ada (1986) is one of the vicious
circles in which Africa finds herself and which have impeded the development of her
management thought.
To solve this problem Inegbenebor (1987) offered three fundamental suggestions.
The first is that the management practices of the transferring society should be adapted to the
values and other cultural traits of the receiving society.
Alternatively, the values of the receiving society should be altered. The third option is a
compromise strategy, which requires management practices and values of the transferring and
receiving society to mutually adjust to one another until and acceptable level of equilibrium is
achieved. These suggestions can be regarded as extension of Iyanda‘s (1987) universality of
Management and Culture bond options for improving Management Effectiveness in
Contemporary Organisations.
Meanwhile, a close examination of the Nigerian management practices will reveal that the
country is still at the second stage of management practices development as classified by
Stiefel and Paplofozoz (1974). The indications that Nigeria has recognized the need for
giving grater attention to cultural factors in management development can be noticed from
the following developments:
The attempts made by the government to establish indigenous training institutions like Centre
for management development (CMD), Administrative Staff College of Nigeria (ASCON) and
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Industrial Training Fund (ITF) as a means of boosting participation of Nigerians in the
ownership and control of Nigerian business enterprises.
The call by Nigerian management writers, (Ejifor 1984; Maduabum, 1985 and Iyanda 1987),
for indigenising management concepts.
2.0.3 Basic Functions of Management
Management operates through various functions, often classified as planning, organizing,
staffing, leading/directing, controlling/monitoring and motivation.
Planning:
Deciding what needs to happen in the future (today, next week, next month, next year, over
the next five years, etc.) and generating plans for action. Planning involves selecting missions
and objectives and the actions to achieve them; it requires decision making that is, choosing
future courses of action from among alternatives. There are various types of plans, ranging
from overall purposes and objectives to the most detailed actions to be taken, such as to order
a special stainless steel bolt for an instrument or to hire and train workers for an assembly
line. No real plan exists until a decision—a commitment of human or material resources or
reputation—has been made. Before a decision is made, all we have is a planning study, an
analysis, or a proposal, but not a real plan.
Organizing:
(Implementation) pattern of relationships among workers, making optimum use of the
resources required to enable the successful carrying out of plans. People working together in
groups to achieve some goal must have roles to play, much like the parts actors fill in a
drama, whether these roles are ones they develop themselves, are accidental or haphazard, or
are defined and structured by someone who wants to make sure that people contribute in a
specific way to group effort. The concept of a "role" implies that what people do has a
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definite purpose or objective; they know how their job objective fits into group effort, and
they have the necessary authority, tools, and information to accomplish the task.
Organizing, then, is that part of managing that involves establishing an intentional structure
of roles for people to fill in an organization. It is intentional in the sense of making sure that
all the tasks necessary to accomplish goals are assigned and, it is hoped, assigned to people
who can do them best. Imagine what would have happened if such assignments had not been
made in the program of flying the special aircraft
The purpose of an organization structure is to help in creating an environment for human
performance. It is, then, a management tool and not an end in and of itself. Although the
structure must define the tasks to be done, the roles so established must also be designed in
light of the workers' abilities and motivations.
Staffing:
Job analysis, recruitment and hiring for appropriate jobs. Staffing involves filling, and
keeping filled, the positions in the organization structure. This is done by identifying
workforce requirements, inventorying the people available, recruiting, selecting, placing,
promoting, planning the career, compensating, and training or otherwise developing both
candidates and current job holders to accomplish their tasks effectively and efficiently.
Leading/directing:
Determining what needs to be done in a situation and getting people to do it. Leading is
influencing people so that they will contribute to organization and group goals; it has to do
predominantly with the interpersonal aspect of managing.
All managers would agree that their most important problems arise from people—their
desires and attitudes, their behavior as individuals and in groups— and that effective
managers also need to be effective leaders. Since leadership implies followership and people
tend to follow those who offer a means of satisfying their own needs, wishes, and desires, it is
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understandable that leading involves motivation, leadership styles and approaches, and
communication.
Controlling/monitoring:
Checking progress against plans. Controlling is the measuring and correcting of activities of
subordinates, to ensure that events conform to plans. It measures performance against goals
and plans, shows where negative deviations exist, and, by putting in motion actions to correct
deviations, helps ensure accomplishment of plans. Although planning must precede
controlling, plans are not self-achieving.
The plan guides managers in the use of resources to accomplish specific goals. Then
activities are checked to determine whether they conform to plans.
Control activities generally relate to the measurement of achievement. Some means of
controlling, like the budget for expense, inspection records, and the record of labor hours lost,
are generally familiar. Each measures and shows whether plans are working out. If deviations
persist, correction is indicated. But what is corrected. Nothing can be done about reducing
scrap, for example, or buying according to specifications, or handling sales returns unless one
knows who is responsible for these functions. (Compelling events to conform to plans means
locating the persons who are responsible for results that differ from planned action and then
taking the necessary steps to improve performance.
Thus, controlling what people do controls outcomes.
Motivation:
Motivation is also a kind of basic function of management, because without motivation,
employees cannot work effectively. If motivation does not take place in an organization, then
employees may not contribute to the other functions (which are usually set by top-level
management).
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2.0.4 Levels of Management
Most organizations have three management levels: first-level, middle-level, and top-level
managers. These managers are classified in a hierarchy of authority, and perform different
tasks. In many organizations, the number of managers in every level resembles a pyramid.
Each level is explained below in specifications of their different responsibilities and likely
job titles.
Top-level managers
Consists of board of directors, president, vice-president, CEOs, etc. They are responsible for
controlling and overseeing the entire organization. They develop goals, strategic plans,
company policies, and make decisions on the direction of the business. In addition, top-level
managers play a significant role in the mobilization of outside resources and are accountable
to the shareholders and general public.
According to Lawrence S. Kleiman, the following skills are needed at the top managerial
level.
Broadened understanding of how: competition, world economies, politics, and social
trends effect organizational effectiveness.
Middle-level managers
Consist of general managers, branch managers and department managers. They are
accountable to the top management for their department's function. They devote more time to
organizational and directional functions. Their roles can be emphasized as executing
organizational plans in conformance with the company's policies and the objectives of the top
management, they define and discuss information and policies from top management to lower
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management, and most importantly they inspire and provide guidance to lower level
managers towards better performance. Some of their functions are as follows:
Designing and implementing effective group and intergroup work and information
systems.
Defining and monitoring group-level performance indicators.
Diagnosing and resolving problems within and among work groups.
Designing and implementing reward systems supporting cooperative behavior.
First-level managers
Consist of supervisors, section leads, foremen, etc. They focus on controlling and directing.
They assigning employees tasks, guide and supervise employees on day-to-day activities,
ensure quality and quantity production, make recommendations, suggestions, and upchannel
employee problems, etc. First-level managers are role models for employees that provide:
Basic supervision.
Motivation.
Career planning.
Performance feedback.
2.0.5 Five elements of Management
Fayol's definition of management roles and actions distinguishes between Five Elements:
1. Prevoyance. (Forecast & Plan). Examining the future and drawing up a plan of
action. The elements of strategy.
2. To organize. Build up the structure, both material and human, of the undertaking.
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3. To command. Maintain the activity among the personnel.
4. To coordinate. Binding together, unifying and harmonizing all activity and effort.
5. To control. Seeing that everything occurs in conformity with established rule and
expressed command.
2.0.6 Styles of Management
Autocratic, paternalistic, democratic and laissez-faire are a few common styles of
management. Autocratic management allows a business owner to be the main individual
responsible for making decisions and driving the company through the business environment.
Paternalistic management looks to create the best work environment for every employee.
Business owners use a democratic management style when they allow employees to have
input or feedback on business decisions. Laissez-faire creates the most employee autonomy,
and allows decisions to be made with little business owner oversight
2.1 TYPES OF MANAGEMENT IN SMALL-SCALE BUSINESS
Towards the end of the 20th century, business management came to consist of six separate
branches, namely:
Human resource management
Operations management or production management
Strategic management
Marketing management
Financial management
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Risk management
Human Resource Management.
The concept of human resource management has its roots in the traditional thinking in the
field of personnel management and administration but represents contemporary sophisticated
views and ways of managing people at work.
The practice of effective personnel management is one that small businesses need to develop
and improve as they expand and grow. The vast majority of businesses in the United States
today employ fewer than 100 people and yet current research conducted in the personnel field
tends to focus on larger firms (over 100 employees) that employ full-time personnel
specialists.
One study of personnel functions in smaller firms found that the areas of accounting, finance,
production, and marketing all take precedence over personnel management (McEvoy 1984).
In many cases, the owner of a small business handles the personnel functions since they are
usually limited when the firm employs only a few people. Obviously, an extremely small firm
with two or three employees may not develop sophisticated personnel systems; however,
there are numerous business that are categorized as "small" that employ a large number of
people and need effective personnel policies for their workforce.
A survey conducted by Hess (1987) showed that small business owners rank personnel
management as the second most important management activity next to general
management/organizational work. However, while small business owners/managers consider
personnel management to be an important issue, business management textbooks do not
devote enough coverage to the relevant
29
Personnel management concerns for small businesses. Even though personnel management
was the second highest ranked management activity, Hess found that small business
management textbooks only devoted a small percentage of space to discussion of personnel
management topics as compared to other topics such as finance, marketing, or planning.
Thus, as personnel practices begin to emerge in importance for smaller firms, the literature is
beginning to show an increase in actual empirical data on this topic. The purpose of this
article is to examine the future trends in personnel practices as perceived by the owners of
small firms. In order to examine any changes in perceived concern as a small business grows,
this study focuses on three sizes of small businesses: 1-50 employees, 51-100, and 101-150.
The recent literature is replete with articles on various issues in personnel management that
relate specifically to small business. Topics include benefits (Nation's Business, December
1988), training (Curran 1987), employee leasing (Bacas 1988), selection (D & B Reports,
May-June 1987), and strategies for human resource management (Finney 1987).
As illustrated by these articles, the bulk of the recent literature dealing with personnel issues
specific to small businesses appears to be more conceptual in nature than empirical/data-
based. However, a few researchers have examined particular aspects of the personnel field
through empirical research. Amba-Rao and Pendse (1985) surveyed the compensation and
maintenance practices of 78 small firms ranging in size from fewer than 25 employees to 300
employees. Their study found that most small firms lacked any systematic or rational
approach in their compensation practices. Little (1986) examined the personnel functions in
275 small firms employing fewer than 100 employees and, more specifically, who in the
organization performed those functions. This study found that typically the owner of a small
business with up to fifty employees handles all of the personnel duties himself. Sixty-two
percent of firms employing 50-100 employees had one or more full-time personnel managers.
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However, even in these larger firms, the owners retained certain important personnel
functions for themselves. This indicates that personnel is one of the functional roles handled
by most small business owners.
Other articles have concentrated on a variety of personnel topics. Fairfield-Sonn (1987)
constructed a three-stage, decision-based, strategic process model for guiding small firms in
establishing a training and development program. Maurer and Fay (1986) concentrated on the
legal appropriateness of selection methods in small businesses, whereas, Holley and Wolters
(1987) examined the employment-at-will concept as an issue for small firms. Finally,
Gatewood and Field (1987) surveyed 100 small business owners' perceptions of their firm's
personnel problems, finding that many owners are not even aware of their own failure in
dealing with personnel issues.
Human resource management evolved from personnel management. This never term
according to Ikeagwu (1999:58) assumes a different position and tackles organizational
problems from a different direction. It takes into account activities like planning, monitoring
and control rather than mediation between employee and management of small business.
This means that human resource management involves every aspect of dealing with employee
as resources. This view was upheld by Colby and Alkon (1991:103) and Byars and Rues
(1991:6) in their attempt to come up with a meaningful definition of human resource
management.
Colby and Alkon‘s views were more or less in line with personnel functions or human
resource functions in that they stated in their text that human resources management involves
every aspect of dealing with employee as resources as such as planning, staffing, training and
development, performance appraisal and compensation.
31
Their views however differs from those of Byars and Rues conclusion in that the latter sees
human resource management in the aspect of wages and salaries and still support the former‘s
view by including recruiting, hiring, and training as the major functions of human resources
management.
Human resource management can also be seen as that which involves all management
decisions and practices that directly affect or influence the people who work for the small
business. This definition of human resource management is broader and more practical
oriented than personnel management put by Fillipo (1979:75).
Wikipedia defines Human Resource Management (HRM) as the management of a small
business 's employees. While human resource management is sometimes referred to as a
"soft" management skill, effective practice within an organization requires a strategic focus to
ensure that people resources can facilitate the achievement of the small business goals.
Human resource management is defined as a strategic and coherent approach to the
management of a small business‘s most valued assets – the people working there who
individually and collectively contribute to the achievement of its objectives.
Storey (1989) believes that HRM can be regarded as a ‗set of interrelated policies with an
ideological and philosophical underpinning‘. He suggests four aspects that constitute the
meaningful version of HRM:
1. a particular constellation of beliefs and assumptions;
2. a strategic thrust informing decisions about people management;
3. the central involvement of line managers; and
4. Reliance upon a set of ‗levers‘ to shape the employment relationship.
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Human resource management according to Fisher et al (1990: P6) involves all management
decisions and practices that directly affect or influence the people who work for the small
business. According to Ikeagwu (1999) the two terms human resource management and
personnel management are synonymous but personnel management is the older and more an
established name while human resource management is the more up to date title for the field.
Human Resource Management (HRM) is a planned approach to managing people effectively
for performance. It aims to establish a more open, flexible and caring management style so
that staff will be motivated, developed and managed in a way that they can give of their best
to support departments‘ missions. Good (HRM) practices are instrumental in helping achieve
departmental objectives and enhance productivity.
Susan M. Heathfield (2011:12), Human Resource Management (HRM) is the function within
a small business that focuses on recruitment of, management of, and providing direction for
the people who work in the small business. Human Resource Management can also be
performed by line managers.
Human Resource Management is the organizational function that deals with issues related to
people such as compensation, hiring, performance management, organizational development,
safety, wellness, benefits, employee motivation, communication, administration, and training.
Human Resource Management is also a strategic and comprehensive approach to managing
people and the workplace culture and environment. Effective (HRM) enables employees to
contribute effectively and productively to the overall small business direction and the
accomplishment of the organization's goals and objectives.
Human Resource Management is moving away from traditional personnel, administration,
and transactional roles, which are increasingly outsourced. (HRM) is now expected to add
33
value to the strategic utilization of employees and that employee programs impact the
business in measurable ways. The new role of (HRM) involves strategic direction and (HRM)
metrics and measurements to demonstrate value.
Gale (1991:56) sees Human Resource Management (HRM) as a term used to describe formal
systems devised for the management of people within a small business. These human
resources responsibilities are generally divided into three major areas of management:
staffing, employee compensation, and defining/designing work. Essentially, the purpose of
(HRM) is to maximize the productivity of a small business by optimizing the effectiveness of
its employees. This mandate is unlikely to change in any fundamental way, despite the ever-
increasing pace of change in the business world.
As Edward L. Gubman observed in the Journal of Business Strategy, "the basic mission of
human resources will always be to acquire, develop, and retain talent; align the workforce
with the small business; and be an excellent contributor to the small business. Those three
challenges will never change."
Until fairly recently, an organization's human resources department was often consigned to
lower rungs of the corporate hierarchy, despite the fact that its mandate is to replenish and
nourish the small business's work force, which is often cited—legitimately—as an small
business's greatest resource. But in recent years recognition of the importance of human
resources management to a company's overall health has grown dramatically. This
recognition of the importance of (HRM) extends to small businesses, for while they do not
generally have the same volume of human resources requirements as do larger organizations,
they too face personnel management issues that can have a decisive impact on business
health.
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Operation or Production Management
Operations management is an area of management concerned with overseeing, designing, and
redesigning small business operations in the production of goods and/or services. It involves
the responsibility of ensuring that small business operations are efficient in terms of using as
little resources as needed, and effective in terms of meeting customer requirements. It is
concerned with managing the process that converts inputs (in the forms of materials, labor,
and energy) into outputs (in the form of goods and/or services). The relationship of
operations management to senior management in commercial contexts can be compared to
the relationship of line officers the highest-level senior officers in military science. The
highest-level officers shape the strategy and revise it over time, while the line officers make
tactical decisions in support of carrying out the strategy. In business as in military affairs, the
boundaries between levels are not always distinct; tactical information dynamically informs
strategy, and individual people often move between roles over time
Strategic Management
Strategic management is a field that deals with the major intended and emergent initiatives
taken by general managers on behalf of owners, involving utilization of resources, to enhance
the performance of small business in their external environments. It entails specifying the
small business's mission, vision and objectives, developing policies and plans, often in terms
of projects and programs, which are designed to achieve these objectives, and then allocating
resources to implement the policies and plans, projects and programs. A balanced scorecard
is often used to evaluate the overall performance of the small business and its progress
towards objectives. Recent studies and leading management theorists have advocated that
strategy needs to start with stakeholders expectations and use a modified balanced scorecard
which includes all stakeholders.
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Strategic management is a level of managerial activity under setting goals and over Tactics.
Strategic management provides overall direction to the enterprise and is closely related to the
field of Organization Studies. In the field of business administration it is useful to talk about
"strategic alignment" between the small business and its environment or "strategic
consistency." According to Arieu (2007), "there is strategic consistency when the actions of a
small business are consistent with the expectations of management, and these in turn are with
the market and the context." Strategic management includes not only the management team
but can also include the Board of Directors and other stakeholders of the organization. It
depends on the organizational structure.
―Strategic management is an ongoing process that evaluates and controls the small business
and the industries in which the company is involved; assesses its competitors and sets goals
and strategies to meet all existing and potential competitors; and then reassesses each strategy
annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it
has succeeded or needs replacement by a new strategy to meet changed circumstances, new
technology, new competitors, a new economic environment., or a new social, financial, or
political environment.‖ (Lamb, 1984:ix)
Marketing Management
In marketing management, the analysis, planning and decision making that a marketing
manager must carry out to implement a marketing plan is considered to improve the growth
of the small-scale business.
This achieved by doing the following:
Determining or reassessing the business‘s offerings,
Preparing a business plan,
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Designing a marketing plan
Writing a financial plan- forecasting, planning and budgeting the future course of the
small business.
Financial Management
As China's rapid economic development, social and economic life in the private sector has
become an important part. It is in the promotion of market competition, increasing
employment opportunities, promote technological innovation, promoting economic
development and maintaining social stability, has played an important role. Enterprise
management, including production management, marketing management and Financial
Management and many other aspects, while the Financial Management is the core of the
whole management system, enterprise financial management objectives, namely the
enterprise goal. Can be seen only with financial management as the center to coordinate all
aspects of operational management systems in order to effectively strengthen enterprise
management, and promoting enterprise development. From the country as a whole, the large
number of private enterprises, distributed widely different characteristics, coupled by the
macroeconomic environment and institutional impact of the private enterprises in
strengthening financial management encountered some resistance, such as: policy of
"discrimination" to make private enterprises and large enterprises cannot be fair competition,
local governments, industry, management's intervention in the financial management of
private enterprises to make short-term goals, then that is the main owner of private enterprise
financial management by the impact of the excessive number of subjective factors such as the
existence of, resulting in neglected the importance of financial management. There are many
factors affect the development of private enterprises, both external factors, there are internal
factors, including enterprise financial management level is affecting their development as an
37
important internal factors. Specification to improve private sector financial management, will
help to promote their healthy development.
Risk Management
Enterprise involves taking risks. The time and money you spend developing a new product or
service could prove to be a wise investment as the finished item makes your company a lot of
money, or it could be an expensive flop. Every decision you make carries a risk, and only
time will tell whether you made the correct choice.
There a number of differing types of risk that can affect your small business investments.
While some of these risks can be reduced through a number of avenues – some of them
simply have to be accepted and planned for in any investment decision.
Macro Risk Levels
On a macro (large-scale) level there are two main types of risk, these are systematic risk and
unsystematic risk.
* Systematic risk is the risk that cannot be reduced or predicted in any manner and it is
almost impossible to predict or protect yourself against this type of risk. Examples of this
type of risk include interest rate increases or government legislation changes. The smartest
way to account for this risk, is to simply acknowledge that this type of risk will occur and
plan for your small business investment to be affected by it.
* Unsystematic risk is risk that is specific to an assets features and can usually be
eliminated through a process called diversification (refer below). Examples of this type of
risk include employee strikes or management decision changes.
Micro Risk Levels
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While the above risk types are the macro scale levels of risk, there are also some more
important micro (small-scale) types of risks that are important when talking about the
valuation of a stock or bond. These include:
* Business Risk - The uncertainty of income caused by the nature of a company‘s business
measured by a ratio of operating earnings (income flows of the firm). This means that the less
certain you are about the income flows of a firm, the less certain the income will flow back to
you as an investor. The sources of business risk mainly arises from a companies
products/services, ownership support, industry environment, market position, management
quality etc. An example of business risk could include a rubbish company that typically
would experience stable income and growth over time and would have a low business risk
compared to a steel company whereby sales and earnings fluctuate according to need for steel
products and typically would have a higher business risk.
* Liquidity Risk – The uncertainty introduced by the secondary market for a company to
meet its future short-term financial obligations. When an investor purchases a security, they
expect that at some future period they will be able to sell this security at a profit and redeem
this value as cash for consumption – this is the liquidity of an investment, its ability to be
redeemable for cash at a future date. Generally, as we move up the asset allocation table – the
liquidity risk of an investment increases.
* Financial Risk - Financial risk is the risk borne by equity holders (refer Shares section)
due to a firms use of debt. If the company raises capital by borrowing money, it must pay
back this money at some future date plus the financing charges (interest etc charged for
borrowing the money). This increases the degree of uncertainty about the company because it
must have enough income to pay back this amount at some time in the future.
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* Exchange Rate Risk - The uncertainty of returns for investors that acquire foreign
investments and wish to convert them back to their home currency. This is particularly
important for investors that have a large amount of over-seas investment and wish to sell and
convert their profit to their home currency. If exchange rate risk is high – even though a
substantial profit may have been made overseas, the value of the home currency may be less
than the overseas currency and may erode a significant amount of the investments earnings.
That is, the more volatile an exchange rate between the home and investment currency, the
greater the risk of differing currency value eroding the investments value.
* Country Risk - This is also termed political risk, because it is the risk of investing funds
in another country whereby a major change in the political or economic environment could
occur. This could devalue your investment and reduce its overall return. This type of risk is
usually restricted to emerging or developing countries that do not have stable economic or
political arenas.
* Market Risk - The price fluctuations or volatility increases and decreases in the day-to-
day market. This type of risk mainly applies to both stocks and options and tends to perform
well in a bull (increasing) market and poorly in a bear (decreasing) market (see bull vs bear).
Generally with stock market risks, the more volatility within the market, the more probability
there is that your investment will increase or decrease.
2.2 PRINCIPLES OF MANAGEMENT IN SMALL-SCALE BUSINESS
The 14 Management Principles from Henri Fayol (1841-1925) are:
1. Division of Work. Specialization allows the individual to build up experience, and to
continuously improve his skills. Thereby he can be more productive.
40
2. Authority. The right to issue commands, along with which must go the balanced
responsibility for its function.
3. Discipline. Employees must obey, but this is two-sided: employees will only obey
orders if management play their part by providing good leadership.
4. Unity of Command. Each worker should have only one boss with no other
conflicting lines of command.
5. Unity of Direction. People engaged in the same kind of activities must have the same
objectives in a single plan. This is essential to ensure unity and coordination in the
enterprise. Unity of command does not exist without unity of direction but does not
necessarily flows from it.
6. Subordination of individual interest (to the general interest). Management must see
that the goals of the firms are always paramount.
7. Remuneration. Payment is an important motivator although by analyzing a number
of possibilities, Fayol points out that there is no such thing as a perfect system.
8. Centralization (or Decentralization). This is a matter of degree depending on the
condition of the business and the quality of its personnel.
9. Scalar chain (Line of Authority). A hierarchy is necessary for unity of direction. But
lateral communication is also fundamental, as long as superiors know that such
communication is taking place. Scalar chain refers to the number of levels in the
hierarchy from the ultimate authority to the lowest level in the organization. It should
not be over-stretched and consist of too-many levels.
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10. Order. Both material order and social order are necessary. The former minimizes lost
time and useless handling of materials. The latter is achieved through organization
and selection.
11. Equity. In running a business a ‗combination of kindliness and justice‘ is needed.
Treating employees well is important to achieve equity.
12. Stability of Tenure of Personnel. Employees work better if job security and career
progress are assured to them. An insecure tenure and a high rate of employee turnover
will affect the organization adversely.
13. Initiative. Allowing all personnel to show their initiative in some way is a source of
strength for the organization. Even though it may well involve a sacrifice of ‗personal
vanity‘ on the part of many managers.
14. Esprit de Corps. Management must foster the morale of its employees. He further
suggests that: ―real talent is needed to coordinate effort, encourage keenness, use each
person‘s abilities, and reward each one‘s merit without arousing possible jealousies
and disturbing harmonious relations.‖
2.3 CONCEPT OF SMALL-SCALE BUSINESS
Small business management requires business owners to provide oversight for several
functions in the business. Purchasing, human resources, sales, customer service, marketing
and product development are a few major departments or functions business owners must
manage.
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Starting and operating a small business includes a possibility of success as well as failure.
Because of their small size, a simple management mistake is likely to lead to sure death of a
small enterprise hence no opportunity to learn from its past mistakes. Lack of planning,
improper financing and poor management have been posited as the main causes of failure of
small enterprises (Longenecker, et al., 2006).
The concept of small enterprise could be traced back to when man graduated from the
wandering life style to a more settled life and engaged in fruit gathering and agriculture for
his survival. From there, other sectors were explored in a bit to improve his standard of
living.
According to Boswell (1978), the most functional definition of small scale business is the one
given by the United Nations Industrial Development Organization (UNDO), which suggests
that a small-scale business is one that possesses at least two of the following features:
Ownership and management are usually vested in the same individuals; that is the
management is not independent and managers are usually also the owners.
The business controls a small share of the market and therefore constitutes a little
quota in the large size market.
Capital is made available by the owner and policy decisions are in the hands of the
individuals or small group of entrepreneurs.
The area of operation is localized and workers concentrate on the local community; of
course some do have branches in other towns but most of such branches serve as their
depots.
The owner participates very actively in all decision making on a day to day
operational basis with a high degree of rigid control.
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From the foregoing, it will suffice to define cooperative small-scale business as those small
businesses:
Whose operations and practices are largely dependent on the fundamental cooperative
principles and aimed towards the improvement of the living conditions of the
members.
Operated at small-scale level.
In which there is active participation of members.
Whose sources of capital to financial growth are largely internal.
Whose areas of operations are localized.
In which the capital is made available by the owners and policy decisions are taken by
the members.
Whose ownership and management are vested in the same individuals that are
owners, managers and users.
Small and Medium Enterprises (SMEs) in Nigeria, as defined by Small and Medium
Industries Equity Investment Scheme (SMIEIS), are enterprises with a total capital employed
not less than N1.5 million, but not exceeding N200 million, including working capital, but
excluding cost of land and/or with a staff strength of not less than 10 and not more than 300.
A business whether small or big, simple or complex, private or public, etc is created
to provide competitive prices. Business in Nigeria has been classified as small, medium and
large. However, a small scale industry can be defined by the criteria of project costs, capital,
cost turnover by the employee, etc. The federal and state ministries of Industry and
Commerce have adopted the criterion of value of installed fixed capital to determine what a
small scale industry is, in this respect, the value has varied from N60, 000 in 1972, N159,
44
000in 1975, N250.000 in 1979, N500, 000 in 1986, to a fixed investment of not more than
N2, 000,000 (two million Naira) in 1992.
There is no generally accepted definition of a small business because the classification of
businesses into large-scale or small-scale is a subjective and qualitative judgement. In
countries such as the USA, Britain, and Canada, small-scale business is defined in terms of
annual turnover and the number of paid employees. In Britain, small-scale business is defined
as that industry with an annual turnover of 2 million pounds or less with fewer than 200 paid
employees.
In Japan, small-scale industry is defined according to the type of industry, paid-up capital and
number of paid employees. Consequently, small and medium-scale enterprises are defined as:
those in manufacturing with 100 million yen paid-up capital and 300 employees, those in
wholesale trade with 30 million yen paid-up capital and 100 employees, and those in the
retail and service trades with 10 million yen paid-up capital and 50 employees.
In Nigeria, there is no clear-cut definition that distinguishes a purely small scale enterprise
from a medium-scale enterprise. The Central Bank of Nigeria, in its Monetary Policy Circular
No. 22 of 1988, defined small-scale enterprises as having an annual turnover not exceeding
500,000 naira. In the 1990 budget, the federal government of Nigeria defined small-scale
enterprises for purposes of commercial bank loans as those with an annual turnover not
exceeding 500,000 naira, and for Merchant Bank Loans, those enterprises with capital
investments not exceeding 2 million naira (excluding cost of land) or a maximum of 5 million
naira. The National Economic Reconstruction Fund (NERFUND) put the ceiling for small-
scale industries at 10 million naira.
Section 37b(2) of the Companies and Allied Matters Decree of 1990 defines a small company
as one with:
45
(a) an annual turnover of not more than 2 million naira;
(b) net asset value of not more than 1 million naira.
For the purposes of this study, small and medium-scale enterprises are defined as those with
investments in machinery and equipment not exceeding 500,000 naira and 2 million naira,
respectively, with not more than 50 and 100 paid employees, respectively. This definition
does not reflect the characteristics of typical Nigerian small-scale enterprises in terms of their
capital base and number of employees.
In attempting to conceptualize small and medium enterprises (SMEs) in Nigeria, some points
need to be stressed. First, there is no generally accepted definition of small or medium
businesses because of the classification of businesses into large, medium or small scale is a
subjective and qualitative judgement (Ekpenyong, 1997). Secondly, small businesses are
generally quite responsive to their environment and our environment changes fast. Changes
in the environment therefore affect what constitutes a small business at a particular point in
time. Thirdly, what the definition aims at is to set some limits (lower and upper) that will
assist in achieving the set purpose. Such limits can be in terms of level of capitalization, sales
volume, number of employees, etc.
A clear definition may be useful in a particular national context but it may not be practical to
attempt a universal definition. An attempt is made to present some definitions of SMEs to
demonstrate the divergence in definition across countries.
The Bolton report I published in the UK in 1971 with an expressed aim of eliminating
difficulties associated with definition of SMEs at the sectoral level, gives three essential
characteristics which any 'small firm' ought to posses. First, by definition, such firm's share of
capital ought to be small; Second, it must be managed by its owner(s), who must do so in a
46
personalized way, as opposed to a formalized management structure; and third, it must be
independent in that it does not form part of large enterprise and that the owner or manager(s)
must be free from outside control in taking principal decisions.
Lim (1992) argued that it is quite possible, for instance, that within the same sector, a
business can be 'small' by capitalization and may not be deemed small by virtue of numbers
of peopled employed.
Therefore definitions and concepts of SMEs continue to evolve according to particular
scholars, environment and disciplinary backgrounds as well as their perceptions of present
day realities.
Conceptualizing SMEs in some countries and in Nigeria in particular form the basis of this
section of the chapter.
In the developed or industrialized countries like United State of America and Canada, small
business is defined in terms of annual turn over and the number of paid employees. In 1987
for example, the manufacturing sector of the United State of America has as small scale
business when the number of employees is between 20 and 49, while the medium employ
between 50 and 499 employees in the manufacturing sector. In the UK that same year, small
business is said to employ between 1 and 99 employees and medium scale 100 to 499
employees in the manufacturing sector. In 1990, Japan level of employment in the small scale
ranges between 20 and 49 and medium as 50 to 499 in the manufacturing sector (Ekpenyong,
1997).
In the New Industrialize Countries, the definition of SMEs also varied and is mostly based on
the number of employees and the value of assets. In Taiwan, the small scale business was
defined as a business with less than 5 employees and the medium as the business with
47
between 10 and 499 employees in 1991 in the manufacturing sector. The South Korea
defined small scale enterprise in 1988 as any business that employ 5 to 19 and medium scale
enterprises as employing between 20 and 199 without Sectoral specification. In Bangladesh a
micro firm employed less than 20, while small firm employed from 20 to 99 in the
manufacturing sector without mentioning of medium scale enterprises in 1986. In Bolivia, a
small scale employed 1 to 9 and medium scale 10 to 99 employees in 1992 (Hallberg, 1999).
The European Economic Commission (EEC) and the European Investment Bank generally
used the following definitions; an SME is any firm with a workforce not exceeding 500, with
net assets of less than ECU 75 million, and with more than one third of its capital held by a
larger company. These three conditions are said to be cumulative.
As such, more than two-third of total employment approximately 50 percent in industry and
in excess of 75 percent in service is in the SME sub-sector (Aryeetey, 1995).
The working definition by International Labor Organization (ILO) and United Nations
Development Programme (UNDP) for SMEs and large enterprises indicates that: employing
less than 5 employees including the owner is a micro enterprise; employing 5 to 20
employees is a small enterprise; employing 21 to 99 employees is a medium enterprise; and
employing above 99 employees is a large enterprise (UNDP, 2001). The International
Finance Corporation (IFC) defined small scale enterprises as the enterprise employing
between 10 and 15 employees and with asset base of less than US$2.5 million. The medium
scale employed between 51 and 100 (IFC, 2002).
In Philippines, small industry is defined qualitatively, in terms of employment or asset size.
Qualitatively, small scale industries are manufacturing and/or industrial service enterprises in
which the owner manager(s) are not actively engaged in production but perform the varied
range of tasks involved in guidance and leadership without the help of specialized staff. The
48
employment size is 5 to 99 employees and the asset size of p250,000. In 1986, the definition
was drastically changed to cover all enterprises except agricultural farms which have assets
of p500,000 to p5million (US$25,000 to US$250,000) (Ekpenyong, 1995).
Given this overview of SME definition by the industrialized and newly industrialized
countries, the general consensus has been that the statistical definition of SMEs differs by
country and mostly based on the number of employees or the value of assets. However, one
should be overly concerned about the lack of consistency in employment based SME
definitions, since the number of employees, viewed in isolation from the size of markets or
the economy, may be misleading. For example, a 50 employee firm in the U.S. would be
considered 'smaller' (relative to the size of the U.S. economy) than a 50 employee firm in
Bolivia or Taiwan. Moreover, other characteristics of the firm, such as the degree of
informality or the level of technological sophistication, may matter more than the number of
employees as a segmentation factor in advanced countries.
The study will also examine other definition of SMEs in the context of the African countries
as Nigerian contemporaries for the sake of clarity. In Ghana, the Ghanaian Enterprise
Development Commission defined a small industry as one requiring a loan of not more than
c250,000 (if the borrowers equity were 30 percent including land and building). The Bank of
Ghana, which operated a Credit Guarantee scheme (CGS), defined a small scale business by
its sales volume (turnover) and by size of its investment in plant and equipment. To qualify
for the CGS, an enterprise must have annual turnover not greater than c300,000 (three
hundred thousand cedis) and plant and buildings valued at no more than c 1 00,000 in 1988.
The National Board for Small Scale Industry in Ghana defined Small scale enterprise as a
company having an asset valued at c10,000 (excluding land, building and vehicle) and
employ 9 persons or less (Okraku and Croffie, 1997).
49
In Cameroon, the center for Assistance to Small and Medium Scale Enterprises (CAPME)
defined SME as a company that is wholly owned and managed by the Cameroonian, owned
capital of at least 52 percent in the business, has a turn over equal to or less than 1,000
million CF A, total investment not exceeding 500 million CFA, and short term outstanding
cash credit not exceeding 2 million CF A in 1989 (Enquobahrie, 1997, p.88). In Sierra Leone,
the National Development Bank (NDB) defined, SME as those with total investment of
between Le500,000 and Le1million excluding cost of land but including working capital.
While the National Industrial Development Finance Company (NIDFC) defined as SME a
business with a capital not exceeding US$5,000 and with employees not exceeding 16 (US$1
= Le680) in 1991 (Rogers-Wright, 1997, p.150).
In a similar manner, various organizations or institutions in Nigeria have at specific times,
defined SMEs in different ways but the definitions have as common measures fixed assets,
gross output, and number of employees. In the 1979 Credit Guidelines to commercial and
merchant banks, the Central Bank of Nigeria (CBN) defined small scale enterprises
(excluding general commerce) as enterprises in which total investment (including land and
working capital) does not exceed N500,000. In its monetary circular No. 22 of 1988, the
CBN redefined small Scale enterprises (excluding commerce) as enterprises in which total
investment (including land and capital) does not exceed N500,000 and/or annual turnover
does not exceed N5 million.
Following the persistence depreciation of the naira, capital investment was raised to N5
million and turnover to N25 million (FRN, 1988).
Also, in 1979, the Small Scale Industries Division of the Federal Ministry of Industries
defined small scale industries as enterprises having investment capital (investment in
building, machinery, equipment and working capital) of up to N60,000 and employing not
50
more than 50 persons. This was later revised to embrace any manufacturing, processing or
service industry with capital not exceeding N150,000 in machinery and equipment.
The Nigerian bank for Commerce and Industry (NBCI) in the same year defined small scale
enterprises as those businesses (for the sake of revolving loan schemes) investing not more
than N500,000 (excluding the cost of land but including working capital). In 1985, NBCI
redefined small scale enterprises as firms whose capital costs do not exceed N750,000
(including working capital but excluding land). In the 1990 budget, the Federal Government
of Nigeria defined small scale enterprises, for the purpose of commercial bank loans, as those
enterprises with an annual turnover not exceeding N500,000 and for merchant bank loans, as
those with a capital investment of not less than N2 million (excluding cost of land) or a
maximum of N5 million.
The National Economic Reconstruction Fund (NERFUND) puts the ceiling for small scale
industries at N10 million. Section 37(2) of the Companies and Allied Matters decree of 1990,
defined a 'small company' as one with annual turnover of not more than N2 million, and net
assets value of not more than Nl million (Ekpenyong, 1997).
The 1995 Monetary, Credit, Foreign Trade and Exchange Rate Policy Guidelines, defined
small scale businesses as "those whose total cost excluding cost of land but including
working capital is above N1 million but does not exceed N10 million and including cottage
industries which was defined as enterprises whose total cost excluding cost of land but
including working capital does not exceed N10 million (CBN Monetary Policy Circular No.
29).
In the above definitions, there was no distinction between micro, small and medium scale
enterprises. The only distinction was drawn between small and large enterprises. However, in
1997, industries in Nigeria were reclassified by the National Council on Industry as cottage,
51
small scale, medium scale and large scale: by the new classification (Iniodu and Udomesiet,
2004, p. 171);
a. A cottage industry is one which has a total cost, including working capital (but
excluding cost of land) of not more than Nl million with a maximum of 10 employees.
b. A small scale enterprise industry is defined as a firm with capital ranging between N4
million and N7 million, and with a labor force of between 11 and 35 employees.
c. A company with a total cost of over N40 million but does not exceed N 150 million,
is classified as a medium scale industry.
d. A company with a working capital of more than N150 million and a work force of
over one hundred people is classified as a large scale enterprise.
The CBN of recent puts the employment level of the small scale businesses at less than 50
and medium scale businesses as less than 100. In terms of asset-based, small scale has less
than N 1 million while medium scale has less than N150 million (IFC, 2002). The SMIEIS
defined SME as any enterprise with a maximum asset base of N200 million excluding land
and working capital and with the number of employees not less than 10 or more than 300.
This definition did not distinct between small scale and medium scale enterprises.
There is the need to define the SME sub-sector and understand the peculiarities that influence
the need for assistance and support in order to ensure the implementation of measures and the
provision of adequate services for the promotion and the development of SMEs in the light of
diverse definitions. This task however, has been a key problem, and attempts to come up with
a standard definition has not been practicable; thus, SME definitions are based on the purpose
for which they are sought and vary from country to country or within a country from
institutions to institutions, etc. Nevertheless, some basic factors have been considered to
define the borders within which SMEs are categorized.
52
A proper definition of SMEs is important to distinguish between the different categories of
the production units in terms of factors like; number of employee, value of fixed assets,
production capacity, basic characteristics of the inputs, level of technology used, and capital
employed, etc., (Enquobahrie, 1997, p.85). These elements and others help to delineate SMEs
target groups and introduce specific policy measures to cater for the needs of the enterprises.
For example, a study conducted by the Georgian Institute of Technology (USA) has
identified more than 50 definitions in 75 countries and the definitions are dictated by the
interest of the user, purpose of the definition and the stage of development of the particular
socio-economic environment (Nchari, 1991, p.138).
Therefore, it has become clear even in Nigeria the changing pattern of the definition of SMEs
in response to the changing environment. The more stable the economic environment, the
more lasting the definition would be; the definition use in this study consider as small scale
any business with capital base of between N1 million and N0 million (excluding the cost of
land) and employing 10 to 50 employees. The medium scale enterprises is any business with
capital base of between N40 million and NI50 million (excluding the cost of land) and
employing 50 to 100 employees excluding commerce. On this basis any enterprise short of
requirement for the small scale is a micro enterprise while above the medium enterprise is a
large enterprise. This choice of definition is adopted based on the definition of Small and
medium scale enterprises by the Central Bank of Nigeria in 2000.
Small Scale Industry – Its Role in the Economic Development in Nigeria
Small scale industries have a lot of important contributions to make to the economic
development of the country. Shokan, O. O. (1997) writes some of them as follows:
The provision of employment, innovation and areas marketing for goods and services which
are offered for sales. A lot of youths, retired workers and out of school graduates are now
53
gainfully employed, thereby reducing the unemployment rate and its attendant‘s social
complication of armed robbery and white collar crimes. It helps to bring about new goods and
services and supply the needs of large industries, who have to rely on the small scale
operators for business success.
The represent the overwhelming majority of industrial capacity in developing countries. A
fact confirmed by Olabisi Ajayi (1977), Ayozie, Daniel O, et al (1997)and Akinseye, C. A.
(1997) where it was postulated that presenting small scale business in Nigeria constitute over
80 percent of all registered companies, occupying positions in agro based and allied
industries, rubber based, leather shoes industries, chemical, electronics, general
merchandising, restaurants, dress making, hair dressmaking, cane-chairs, leather products,
pomade and toiletries, animal feeds and husbandry, printing, etc. They promote the
development of indigenous manpower as well as increasing local participation in the
manufacturing sector. Small scale business checks the effect of polarization by a planned and
systematic development of rural areas. The much talked about urban migration is reduced by
the introduction of small scale industries in rural area.
The activities of small business firms have resulted in the mobilization of these sources of the
environment and thereby improving on the standard of living of the population.
They contribute to the labour market by absorbing an ever growing supply. In doing this, they
have sufficiently helped to curtail the rising unemployment in Nigeria. They have accounted
for a large percentage of all businesses and a favourable percentage of the nations is gross
national product. This fact is more relevant in the developed countries of Great Britain and
United Kingdom where proper accounting system is kept. Other noticeable impacts are its
contribution to the development of indigenous entrepreneurship. Mention is being made of
the Dantatas, Fajemirokuns, Igbinedions, EkeneDili Chukwus, Lodibes, Dankabos and the
54
Amazus.Its contribution to the mobilization of domestic savings and utilization of local
resources is also a noticeable factor. They serve as good agents for disposal of industrial
products and some services and have contributed immensely to the production of raw
materials in the form of semi-processed goods for use by bigger industries. It is a base for the
development of appropriate technology and provides a veritable ground for skilled, unskilled
and semi-skilled workers. It has provided productive self-employment to a number of
educated and less educated young men and women coming out of schools, colleges,
polytechnic, and universities. Ayozie (2001) specifically mentioned the role in the
accelerated industrial development by enlarging the supply of entrepreneurs and the enlarging
of small and medium enterprise sector, which offers better potential for employment
generation and wider dispersal of industrial ownership. It has assorted in improving the
performance of small industries by enlarging the supply of carefully selected and trained well
rounded entrepreneurs and diversifying sources of entrepreneurship and business ownership.
Marshall (1970), Cole (1959), Cantilon and Schmpter (1934), enumerated that the
entrepreneur viz a viz the small scale business person is the most critical factors in the
economic development of any Nation. Entrepreneur organizes, and utilizes the various factors
of production and finally sets productive machinery in action towards overall economic
development; consequently, the availability of the small scale industry is therefore the
undisputed precondition for economic growth. Schumpeter 91934) noted that the supply of
entrepreneurs depends on the rate profit at the social climate seeking out activities and
opportunities which will give him profit or reward, induces the entrepreneur to be innovative
and to take on purposeful calculated risks.
55
The Importance of a Small Business
Small scale industries generate employment for a lot of Nigerian. A lot of unemployment for
a lot of Nigerians. A lot of unemployed people and youths, have found employment in small
scale industries. A lot of small retail shops, cottages, restaurants, poultry farms, and
telecommunication/telephone shops have been established and managed profitably by
Nigerians who would have been unemployed till date. The entrepreneurs have in turn
provided jobs for other Nigerians, who serve as support, technical and administrative staffs
for them.
It has encouraged self employment for many youths both in the rural and urban areas.
The spirit of successful entrepreneurship has taken over the mind of Nigerians, who
believe in themselves and in the goal of self employment, instead relying on
government jobs. In the telephone retail and rental jobs, a lot of youths and Nigerian
have remained self employed. Their businesses have expanded to the level of
employing some other unemployed people.
Through the establishment of manpower development support schemes, and their
involvement in the training and retraining of entrepreneurs, small scale industries
have provided a pool of potential entrepreneurs and business people who are well
equipped to start and successfully manage industries whether small or large, not only
in Nigeria, but overseas. Successful business people in Nigeria like the Aliko
Dangotes, the Ibrus, Mike Adenuga, Illodigwe and the Orji Kalus started as SMES,
before the growth of their various businesses into conglomerates.
It has reduced the dependence on government and large firms on salaried
employment. This is evidenced from the liberalization policy of the government in the
56
telecommunication and education sectors as a lot of companies have been established
to provide support staff and employment for Nigerians.
Small scale industries have stimulated rural development and the achievement of a
meaningful level of broad economic and rural development. To reduce the migration
from rural to the urban centers, some infrastructural facilities which promoted small
scale industries were provided in the rural areas, such as the provision of access road,
increased improvement in communication facilities like telephone, postal services and
the internet facilities, construction of industrial layouts and estates, and the provision
of electricity and water expansion schemes.
It has uplifted the dignity of labour. There is the spirit of ―ME TOO‖, I can do it
attitude. People deriving joy in working for themselves and seeing their businesses
grow and mature to conglomerates and deriving joy in being a source of employment
to other Nigerians.
It has upgraded the social status of Nigerian youths, by showcasing them as very
successful entrepreneurs and operators of small scale industries. This is evidenced in
them any success stories of small scale industries as recorded by the print and
electronic media houses.
2.4 BRIEF HISTORY OF SMALL-SCALE BUSINESS IN NIGERIA
Small scale industry orientation is part and parcel of Nigeria. Evidence abound in
our respective communities of what successes our great grandparents made of their respective
trading concerns, yam barns, iron smelting, farming, cottage industries and the likes. So the
secret behind their success of a self reliant strategy does not like in any particular
57
political philosophy, so much as in the people‘s attitude to enterprise and in the right to which
the right incentive is adequate enough to make risk worth taking are provided.
Economic history is well stocked with enough insights into the humble beginnings of present
day Grand Corporation. Evidences abound that almost all of the multinational giant
corporations were cottage enterprises, growing as their industry grew, and through their own
sheer ability either reproduce existing products more cheaply or improve their ability. Even at
the international level, in the early stages of her industrialization, Japan‘s economy was
dominated by traditional industries, cottage firms, and by a large number of small scale firms,
drawing their strength not from abundance of capital but rather from her supply or labour.
Back home in Nigeria, the respective government policies accorded and gave priority to the
country‘s small scale enterprises. This has been in recognition that they constitute the
fountain head of vitality for the variation economy and consequently their problems
have been viewed as those of the nation, by virtue of their number, diversity, penetration in
all sectors of production and marketing contribution to employment and to the prosperity of
the particular areas in which they operate. In concrete terms, small scale industries constitute
a greater percentage of all registered companies in Nigeria, and they have been in existence
for a quite long time. Majority of the small scale industries developed from cottage industries
to small enterprises and from small scale to medium and large scale enterprises.
Pre-Independence Historical Development
Prior to Nigerian Independence, the business climate was almost totally dominated by the
Colonial and other European Multinational companies like United African Company
(UAR),GB Olivant, Unilever Plc, Patterson Zechonics, Leventis, etc. These companies
primarily engaged in bringing into Nigeria finished goods from their parent companies
overseas. These companies have vast business experience and strong capital base, and
58
dominated the Nigerian economy. The government of those days encouraged them to become
stronger by giving incentives as favourable traffics and tax concessions. Towards the tail end
of the 1950s, the Nigerian Industrial Development Bank (NIDB) was founded to assist
potential entrepreneurs to get involved in Agriculture exploration of national resources,
Commerce and Industrial production. This time and the early 1960s saw the massive increase
in Nigeria import market, while the Nigerian economy became largely dominated by very
few large foreign firms. However, few Nigerians mostly the Semi-illiterates benefited from
the generous government attitude of this time. The educated Nigerians then were not
interested in entrepreneurship mainly because their focus was on the positions being vacated
by the expatriate staffs, who were leaving the civil service to return home because of the
imminent independence in 1960.Even then, Nigerians considered the civil service to be more
prestigious than business despite the creation of the colony development loans board, by the
colonial administration.
1970 – 1976
A major/remarkable breakthrough in small scale business came about through the
indigenization Decree 1972 and later in Nigeria Enterprises Promotion Act 1977.These were
genuine attempts by the Federal Government to make sure that Nigerians play an active and
worthwhile role in the development of the economy. In its 1970-74 National Development
Plan, the Federal Government gave special attention to the development of small scale
industries particularly in rural areas. This was in recognition of the roles of small and medium
scale industries, as the seedbeds and training grounds for entrepreneurship.
The cardinal point of the development plan was:
a) Accelerating the pace of industrialization and dispersal of industries.
59
b) Generating substantial employment opportunities.
c) Promoting individual initiatives and entrepreneurship among the populace.
d) Developing and increasing export traders, and
e) Complementing large scale industries.
An amendment to the decree made in 1997 provided than in order to be economically self-
reliant. Nigerians need to take care from economic history, which is well stacked with enough
insight into the humble beginnings of the present day giant conglomerates which started as
small scale industries.
1980 – 89
Within this decade, the government policy measures placed emphasis on the technological
aspects of industrial development of small scale industries in Nigeria. Various Nigeria
governments within this decade embarked on corrective measures to divert efforts towards
the maximum exploitation or natural resources, and tried to discourage capital intensive mode
of production in the light of the abundant resources available. In this regards, the industrial
policy tried to focus its attention mainly on local resources utilization through various forms
of incentives worked out by governments.
Some of the basic policy strategy aimed at revitalizing the industrial sector included the:
(a)Encouragement in the use of more local materials in our industrial development activities.
(b)Encourage greater capacity utilization in Nigerian industries.
In addition, both the third and forth national development plans, the government then tried to
increase her support for and contributions on;
60
(i)The establishment of research products development company to provide a bridge between
research and commercial development of results and cooperate with manufacturing
establishment to adopt imported machines to Nigerians conditions and eventually develop the
capability for fabricating such machines;
(ii)The federal institute of industrial research and other institutions as the project
development agency, Enugu.
(iii)The industrial development centres
(iv)The provision of funds to implement feasible projects emanating from policy paper,
prepared by the Nigerian Councils for Science and Technology
(v)The Industrial Research Council of Nigeria to get organized for coordinating industrial
research efforts.
The focal point of these policy measures as construed place a great emphasis on the
technological aspects of industrial development and development of small scale industries in
Nigeria. It is worthy of note that the introduction of the Structural Adjustment Programme
(SAP)during the Babagida regime made matters worse for employers of labour and created
averitable ground for self-employment.
1990-99
The federal and state government have both contribute to the growth of small scale industries
in Nigeria especially in the rural areas. Of recent time, various fiscal and non-fiscal incentive
shave been established for investors and entrepreneurs in the small scale sectors of the
economy. Of special mentioning was the strategy adopt by the federal government towards
the training and motivation of the unemployed graduates, to be gainfully employed in out of
school entrepreneurship development programmes. Thus on the presentation of viable
61
feasible projects, approved loans are disbursed through pre-selected commercial banks
assisted by the National Directorate of Employment. The Peoples Bank of Nigeria (PBN) was
also in the vanguard of granting of soft loans to unemployed youths and artisans, and this
aimed at diverting the attention of youths from government salaried jobs, to that of gainful
self solely employment. NDE and the People Bank of Nigeria were solely charged with the
responsibility of generating employment through their various programmes for thousands of
unemployed Nigerians. To show its seriousness, the Federal Government through its
educational agencies like the National Board for Technical Education (NBTE), the Nigerian
University Commission(NUC), and the National Youths Service Corps (NYSC) programme
give a directive that entrepreneurship development courses be incorporated into the curricular
of tertiary institutions and NYSC programme.
62
CHAPTER THREE
RESEARCH METHODS
This chapter is organised under the following sub-headings;
Research design, Area of Study, Population for the Study, Instrument for Data collection,
Validation of the instrument, Method of Data collection and Method of Data Analysis.
3.0 RESEARCH DESIGN:-
The study was purely a survey research design. According to Longman Dictionary of
Contemporary English, Survey is defined as –a set of questions that you ask a large number
of people in order to find out about their opinion or behaviour.
Hence, it focuses on finding the problems and prospects of management in small scale
business using A.K Block Industry, Abakpa Nike, Enugu as a study.
3.1 AREA OF THE STUDY:-
The study was carried out at the branch office of A.K Block Industry, Abakpa Nike, Enugu
which is situated at #31B Nike Lake Road, Abakpa Nike, Enugu
3.2 POPULATION FOR THE STUDY:-
The target population for the study include all the nine (9) employees of A.K Block Industry,
Abakpa Nike, It is important to note that out of these 10 employees, 3 are junior staffs which
include a sale girl, 1 Delivery Truck Driver, and a Tipper Driver. Furthermore, out of the
remaining 6 senior staff, 1 Technical supervisor, an Accounting Supervisor and 3 Technical
assistants with 1 manager.
63
Thus, there was no sampling carried out in the study.
3.3 PROCEDURE FOR DATA COLLECTION
In collecting information for the study, the researcher used both primary and secondary
source of data.
3.3.1 Primary Sources
These are original data collected basically for the purposes of the problem under
investigation. It played a very significant role in dealing with human problem in managing
public sector organization.
According to Uzoagulu (1998), it contains the data originally assembled by the person who
actually observed the phenomenon. Primary data mainly come from direct observation of
events, manipulation of variables, contrivance of research situations including performance of
experiments and responses to questionnaire (Asika, 1991). The researcher sources her
primary data via observation and survey methods.
3.3.2 Secondary Source
These comprise sources of data which, though needed for the current study, were collected
primarily from another study. Data from these sources were not original to the researcher;
they were assembled by other people.
3.4 SAMPLE AND SAMPLING TECHNIQUES FOR THE STUDY
Sample is a fraction or segment of the total population whose characteristics is used to
represent the entire population. The idea of sample arises because, in most cases, it is difficult
to study the entire population. The process of selecting a number of study units from a
64
predefined study population is called sampling (Eboh, 2009; Polit and Hungler, 1978). The
smallest unit of the population from which sample can be composed of is called Elements. In
social science surveys, element is usually composed of the individuals that are drawn from
the population.
3.5 DATA COLLECTION INSTRUMENT
The research made use of the following procedures in gathering data: Questionnaire,
Interviews and Observations.
3.5.1 Questionnaire:
A questionnaire is a list of questions designed to elicit information from specified target
respondents. This they do, by filling in answers in spaces provided for that purpose.
Administration of the questionnaire was face-to-face method. Here, questionnaires were filled
by the respondents either directly or by another person in the presence of the researcher. The
major advantage is that it is taken seriously by the respondents since the researcher is right
there. It is faulted because of its proneness to bias. The presence of the researcher could
influence the responses given by the respondents.
Classification or the basis of how the questionnaire is structured is closed-ended
questionnaires. These provide fixed answers to the questions asked and require the
respondents to fill the ones thought suitable. Of course, this type limits the flow of answers
that can be obtained from respondents. It is however, easy to collate and analyse. This type
depends on the nature of data being sought for and the characteristics of respondents.
Therefore, questionnaires were drawn to enable proper responses to be given to the
instrument,
65
3.5.2 Interviews:
This is a question and answer situated between the researcher and respondents with a view to
eliciting relevant data for certain contradictory issues in the schools. It is done between the
interviewer and the interviewee on one-on-one basis. The questions and the way they are
asked are predetermined and follow a stereotyped pattern, therefore, it is structured.
Structured questions help the interviewer to keep focused and save time in the process of the
interview.
3.5.3 Observation:
This is the process of gathering data through direct notice and close watch. As a technique for
gathering data, it is reputed for being the most difficult and most unreliable (Anikpo, 1986).
But the researcher did not have any difficulty because she is a member of staff. Participant
observation was used in gathering her data. In this case, the researcher tries to integrate into
the group she is observing. This reduces suspicious and helps her to get at a close range some
attributes that are not easily manifest.
3.6 VALIDATION OF THE INSTRUMENT:
The instrument used was developed by the researcher in accordance with the research topic:
Problems and Prospect of management of small scale business.
The content validity of the instrument was determined by the experts in test and measurement
who marched the variables of the instruments with the research questions in order to
determine whether or not the instruments measured what they were supposed to measure. The
questionnaire was presented to experienced personnel and experts in administration and
supervision. They considered the instrument and made suggestions.
66
The suggestions were taken care of and changes made where it is necessary. This idea was to
make sure that questionnaire covered what it is supposed to cover.
3.6.1 Reliability of the Instrument:
The reliability was determined through the test-retest reliability technique. In doing this, the
instruments were administed to all nine (9) employees of A.K Block Industry, Abakpa Nike,
It is important to note that out of these 10 employees, 3 are junior staffs which include a sale
girl, 1 Delivery Truck Driver, and a Tipper Driver. Furthermore, out of the remaining 6
senior staff, 1 Technical supervisor, an Accounting Supervisor and 3 Technical assistants
with 1 manager. After a period of two weeks, the instruments were re-administered. The data
collected on the two tests were analysed using the person product moment correlation.
The scores from the administration were correlated and a reliability coefficient of it was
obtained.
3.6.2 Administration of Data:
In order to ensure maximum return of the questionnaires, the researcher distributed the
instruments personally. Copies of the questionnaires were distributed to all the nine (9)
employees of A.K Block Industry, Abakpa Nike, It is important to note that out of these 10
employees, 3 are junior staffs which include a sale girl, 1 Delivery Truck Driver, and a
Tipper Driver. Furthermore, out of the remaining 6 senior staff, 1 Technical supervisor, an
Accounting Supervisor and 3 Technical assistants with 1 manager. Returns were received
from (9) nine respondents out of which (2) two were badly completed and hence discarded.
Returns from the remaining 7 respondents were duly completed and used for the study.
67
3.7 METHOD OF DATA ANALYSIS:
The data collected were analysed by indicating the opinion of the respondents in their relative
frequencies in tabular form. Mean scores were employed for data analysis. A mean score up
to 2.5 was regarded as acceptable or positive while mean score below 2.5 is low and
unfavourable or negative. The cut off mark of 2.5 was obtained by adding the sum of the
nominal rating values and dividing that by the number of rating items-
Thus
Decision rule = 2.50
Mean = x = 𝑥
𝑁
i.e. Total sum of Score
Number of respondent
At the end, all the mean score per each question was taken together and divided by the
number of questionnaire meant for each research question to get the grand mean.
Decision Rule: - A cut off point was determined by finding the mean of the value assigned to
the options and dividing the numbered options.
5+4+3+2+1 =
From the decision rule, 3 points become the average score. Any score below 3 is considered
low, unfavourable and negative while score above 3 is considered high; favourable and
positive.
4+3+2+1=10
10
4 = 2.5
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CHAPTER FOUR
PRESENTATION AND ANALYSES OF DATA
4.1 PRESENTATION OF DATA
This study made use of questionnaires. In this chapter, the data collected from the
respondents regarding the basic issues involved in the research work are presented and
analyzed.
A total of nine (9) questionnaires were disturbed out of which seven (7) were duly completed
and returned, thus giving a response rate of 77.8%. For a study of this nature, such a
percentage is very high thereby indicating the willingness of the respondents to co-operate.
The summary of the response rate is presented on the table 4.01 below.
Table 4.01; QUESTIONNAIRE RESPONSE RATE
Features of Questionnaire Number Percentage
Questionnaires administered 9 100
Questionnaires collected 7 77.8
Questionnaires rejected 2 22.2
Questionnaires used for analysis. 7 77.8
4.2 ANALYSES OF DATA
The analyses and subsequent conclusion were based on the outcome of the seven (7)
questionnaires that were collected, returned and accepted, which for the purpose of this study
constitute my one hundred percent (100%). The analyses of data collected were carried out
69
mathematically and statistically by applying likert scale which will be analyzed by
calculating the mean of the frequencies.
DEMOGRAPHIC CHARACTERISTICS
Items 1, 2, 3, 4 were used to address the characteristics
Table 4.02: Showing the Demographic profile of the respondents n = 7
Characteristics Frequency %
1. Sex
Male 6 85.7
Female 1 14.3
7 100
1. Years of experience
0-5 yrs 5 71.4
5-10 2 28.6
10 and above 0 0
7 100
3. Qualification
F. S. L. C 2 28.6
WACE or its equivalent 3 42.9
70
OND or its equivalent 1 14.3
Degree or its equivalent 1 14.3
Masters Degree 0 0
7 100
Results:
From the table above, 85.7% of them are males while 14.3% of respondents are female; this
shows that (7) seven staff selected, in A.K Block Industry, Abakpa Nike, Enugu, is largely
made up of males. 71.4% of the staffs fall within 0-5 years of experience, 28.6% of them fall
within 5-10 years of experience and 0% for 10 and above.
The table 4.03 above indicates that the majority of staffs in A.K Block Industry, Abakpa
Nike, Enugu have WACE or its equivalent. They constitute 3 respondents representing 42.9%
of the total sample size. It is closely followed by staff with FSLC or its equivalent, which
constitute 2 respondents representing 28.6% of the total sample size. Staff with OND or its
equivalent and B. Sc or its equivalent follows next with 1 respondents each representing
14.3% of the total sample size. Those with M.Sc or its equivalent constitute have 0
respondents representing the lowest percentage of 0% of the total sample size.
This chapter was concerned with the presentation of the analysed data and the results. They
are presented on table 1-7 below.
71
Research Question 1
HOW DOES POOR PLANNING AFFECT THE MANAGEMENT OF SMALL-SCALE
BUSINESS?
Table 5
Mean responses to poor planning and the management of small-scale business
n= 7
S/N ITEMS SA A U D SD Total X Remark
1
2
3
Management of small firm can be
affected when filled with family
relatives that are unqualified to
work.
Small firm management requires
little or no formalization.
Poor planning can affect the
management of the firm.
3
4
6
3
5
7
2
4
3
4
4
3
5
2
2
17
19
21
2.4
2.7
3.0
Disagree
Agree
Agree
72
Table 5 above shows the mean responses of show that poor planning affect the management
of small-scale business. It could be seen from the table that most respondents are in
agreement with all especially No 3 with a mean score of 3.0.
Research Question 2
HOW DOES THE FINANCIAL SUPPORT AND POOR FUNDING AFFECT THE
MANAGEMENT IN SMALL-SCALE BUSINESS?
Table 6
Mean responses on financial support and poor funding and how it affect the management in
small-scale business n= 7
SN ITEMS SA A U D SD TOTAL X REMAKE
1
2
3
Money is need to keep the
business moving
Lack of fund can kill the
business in no time
The nature of work required in
the business will determine the
funding of the firm.
9
8
7
7
6
5
3
4
3
2
3
4
1
2
1
22
23
20
3.14
3.29
2.86
Agree
Agree
Agree
73
From the table above, it was discovered that all the arguments made on how financial support
and poor funding affect the management in small-scale business is high with a high mean
score of 3.29 which is Lack of fund can kill the business in no time.
Research Question 3
HOW DOES MULTIPLE AND HIGH TAXES INFLUENCE THE MANAGEMENT OF
SMALL-SCALE BUSINESS?
Table 7
Mean responses to There is a significant relationship to show that Multiple and High Taxes
and the management of small-scale business. n= 7
SN ITEMS SA A U D SD TOTAL X REMAKE
1
2
Small-scale business find it
difficult to make profit at the end
of the day
Staffs in small-scale are reduced
due to high level of tax for their
staffing capacity.
8
8
11
9
6
8
3
4
3
2
5
5
1
4
0
23
27
27
3.29
3.00
3.00
Agree
Agree
Agree
74
Table 7 above shows mean responses to There is a significant relationship to show that
Multiple and High Taxes and the management of small-scale business. It could be seen from
the above table that the respondents were in agreement with all the items because their mean
score were above the cutoff point of 2.5.
75
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.1 MAJOR FINDINGS
The following findings were made based on the data collected and analysis made.
Objective One:
This objective determined respondent‘s opinion concerning poor planning to the management
in small-scale business.
This study reveals the nature of work and how it affects the influence on the human resource
management of small firms through:
1. Management of small firm can be affected when filled with family relatives that are
unqualified to work.
2. Small firm management requires little or no formalization.
3. Poor planning can affect the management of the firm.
Small-scale planning is the specific type of project management of small-scale projects.
These projects are characterized by factors such as short duration; low person hours; small
team; size of the budget and the balance between the time committed to delivering the project
itself and the time committed to managing the project
Objective Two
This objective determined respondent‘s opinion concerning financial support and poor
funding and how it affect the management in small-scale business
The study also reveals that financial support and poor funding contributes to the factor that
determines the management of small-scale business is high. These include:
76
1. Money is need to keep the business moving
2. Lack of fund can kill the business in no time
3. The nature of work required in the business will determine the funding of the firm.
It could be inferred that all the arguments made on financial support and poor funding
contributes to the factor that determines the management of small-scale business is high.
Objective Three
This objective determined respondent‘s opinion concerning multiple and high taxes influence
on the management of small-scale business
The study further reveal there is a significant relationship to show that multiple and high
taxes influence the management of small-scale business
This was proved under these:
1. Small-scale business find it difficult to make profit at the end of the day
2. Staffs in small-scale are reduced due to high level of tax for their staffing capacity.
5.2 CONCLUSIONS
Different SMEs meet the above mentioned challenges in different ways. Clearly there is no
magic bullet in achieving success. Business success is a consequence of embracing the whole
package of strategies in order to succeed. Selling a variety of products or offering a variety of
services is just as important as embracing prudent financial management systems.
The development of SMEs and its effective promotion have not been approached seriously in
Nigeria; hence, the lack of their impact in the economy. In Nigeria, various governments
instituted various programs aimed at developing SMEs sector. The Non-Governmental
77
organization and Donor Agencies are currently involved in the promotion of SMEs in
Nigeria.
Access to credit continues to pose a major problem to SMEs sector in Nigeria. The traditional
financial institutions have not been able to meet the credit needs of the SMEs. Since the
introduction of economic reforms, more SMEs have been forced to the informal institutions
for credit. But the supply of credit from the informal institutions is often so limited to meet
the credit needs of the SMEs.
5.3 RECOMMENDATIONS
Based on the finding, the following recommendations were made. Finally, based on the
survey findings and available literature, we propose the following guidelines and strategies
that SMEs can use to boost their performance.
It is appreciated that each business has its own unique combination of critical success factors,
but some are important for all businesses. First small businesses should have a ‗global
outlook‘. Businesses of all sizes across the globe can interact and share information,
technology and products. Small businesses should consider what global trends are affecting
availability of resources, increasing or decreasing demand for products or service and where
there is an unfilled need one might be able to meet. This may prove a challenge to SMEs but
the government can step in here to provide information on business trends.
Government can accelerate the development of markets for financial services suited to the
special characteristics of SMEs by promoting product innovation and building institutional
capacity. In financial markets, improving SMEs access to credits requires an increase in the
number of financial institutions that find lending to SMEs to be profitable and therefore
sustainable.
78
Easy accessibility to credit through specialized or development oriented banking or financing
institutions. Funds being made available through these sources should be given at preferential
interest rates.
The government could also assist by establishing a well funded National Credit Guarantee
Fund that will act as buffer for credit facilities from banks and other financial institutions
over and above the equity provided under SMIEIS.
79
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APPENDIX 1
Department of Management,
University of Nigeria,
Enugu Campus.
81
7th
April, 2012.
Sir/Madam
QUESTIONNAIRE ON THE PROBLEMS AND PROSPECTS OF MANAGEMENT
OF SMALL-SCALE BUSINESS IN NIGERIA USING A STUDY OF A.K BLOCK
INDUSTRY, ABAKPA NIKE, ENUGU, ENUGU STATE
These questions are designed to supply answers to research problems. The exercise is purely
academic and answers given below would be treated as confidential.
Kindly indicate your answer by ticking a good in the box
Thank you.
Yours Faithfully,
EZE TOBECHUKWU C.
QUESTIONNAIRE
Instruction: please tick (√) against the correct answer in the appropriate box.
SECTION A: PERSONAL DATA
1. Name:
Optional:-------------------------------------------------------------
2. Sex:
(a) Male (b) Female
82
3. Years of experience:
(a) 0-5 yrs (b) 5-10 yrs
(c)Above 10 yrs
4. Qualification:---------------------------------------------------------
SECTION B
Use the following scale in answering; SA for strongly Agree, A for Agree, U for Undecided,
D for Disagree and SD for Strongly Disagree.
Indicate your answer with a tick ( ) in the spaces provided
83
S/N ITEMS SA A U D SD
1
2
3
HOW DOES POOR PLANNING AFFECT THE MANAGEMENT
OF SMALL-SCALE BUSINESS?
Management of small firm can be affected when filled with family
relatives that are unqualified to work.
Small firm management requires little or no formalization.
Poor planning can affect the management of the firm.
1
2
3
HOW DOES THE FINANCIAL SUPPORT AND POOR
FUNDING AFFECT THE MANAGEMENT IN SMALL-SCALE
BUSINESS?
Money is need to keep the business moving
Lack of fund can kill the business in no time
The nature of work required in the business will determine the funding
of the firm.
HOW DOES MULTIPLE AND HIGH TAXES INFLUENCE
THE MANAGEMENT OF SMALL-SCALE BUSINESS?
84
1
2
Small-scale business find it difficult to make profit at the end of the day
Staffs in small-scale are reduced due to high level of tax for their
staffing capacity.