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1.1Background of the study
According to Grasmuck (2000), a small enterprise is a type of small business, often registered, having five or fewer employees and requiring seed capital of not more than $35,000. The term is often used to refer to a business with a single owner-operator, and having up to 20 employees. The European Union defines micro-enterprises as those that meet 2 of the following 3 criteria of fewer than 10 employees, balance sheet total below EUR 2 million and turnover below EUR 2 million. The term small enterprise connotes different entities and sectors depending on the country. In developed countries, microenterprises comprise the smallest end (by size) of the small business sector, whereas in developing countries, microenterprises comprise the vast majority of the small business sector result of the relative lack of formal sector jobs available for the poor. These micro entrepreneurs operate microenterprises not by choice, but out of necessity (Munoz, 2010).
Micro and Small Enterprises (MSE's) are important for raising the economic efficiency of a country. They are breeding grounds for entrepreneurship, innovations and inventions hence a reservoir for employment. Sustainable jobs, creates income which in turn reduces the level of poverty, (Bokea, 2005). The challenges faced by SMEs in Nigeria are; inadequate knowledge and skills, most managers of SMEs in Nigeria lack adequate education, they are not well informed in terms of managerial knowledge and skills. Lack of managerial training, More often than not small and medium enterprises establish managerial strategies through trial and error mechanism. Their managerial techniques only focus on operational plans rather than strategic plans of their organization. In addition, these managerial techniques are not standard with those of other global managers. Consequently, managers of small and medium enterprises are not able to adequately handle challenges facing enterprises. Rapid technology changes, Technology change poses a big challenge to the growth of small and medium enterprises. Most of these enterprises are not able to adopt new technology due to its high initial and installation costs. In addition, this new technology, more often than not, does not suit the needs of these enterprises. For example, a small enterprise located in a rural area cannot reap the full benefits of internet connection due to lack of rural electrification. Adopting to new technology has also been hampered by the slow rate of economic growth in Nigeria . Lack of adequate finance, many small and medium enterprises do not have access to finance and credit especially from financial institutions such as commercial banks. This is because of the lending conditions given to them such as collateral for the loan. These enterprises may not be able to provide collateral such as immovable assets due to their small asset base. Consequently, most of these enterprises resort to borrowing from friends and relatives. However, this type of finance is inadequate to cater for all the needs of the medium and small enterprises. As a result, lack of credit forces the management to use cheap and local technology which most times is inappropriate. And new laws and regulations, Everyday, the government and other stakeholders continue to introduce new regulations for industries and enterprises in Nigeria . New laws are being enacted in a bid to regulate the operations of enterprises. These laws are also meant to spearhead sustainable economic growth in the country. However, such regulations sometimes pose tremendous threat to the growth of small and medium enterprises in Nigeria . This is because some of these laws are too tough. (Viona, 2012).
Several factors are identified as limiting market access to SMEs in Nigeria and include; lack of market information, poor access to physical markets, market premises and spaces, poor linkages with export markets, weak advertising and promotional capacities, poor quality products and services that restrict entry in some markets, limited market research and analysis, narrow product diversity, weak capacity for e-commerce and imperfect markets. Stiff competition due to globalization, high transaction costs due to inefficiency, distance to markets, poor systems and concentration of activities in a few sectors making them vulnerable to risks and competition (GOK, 2005, KIPPRA, 2006). Many SMEs lack the necessary information on market opportunities limiting them to narrow local markets; on customers and market demand due to lack of market research leading to saturated markets with goods whose demand is low. Many SMEs produce goods and services without considering the market and customer needs and consequently
they are not able to penetrate the market. Lack of physical market structures to sell is another challenge for Nigeria n SMEs resulting in illegal hawking of their goods at the road side and in town streets leading to running battles with the authorities. Transaction costs remain a major problem affecting market access in SMEs. According to the Transactional cost theory, reduced transactional costs are important in marketing and in enhancing market access. The high costs arise due to market inefficiencies, poor infrastructure and information asymmetry. Stiff competition due to globalization and liberalization bar SMEs from accessing most of the local and international markets. SMEs are not able to compete effectively due to poor quality products, skewed customer preference, unconducive pricing and limited product diversity. Most SMEs in Nigeria exhibit weak linkages with customers contrary to the relationship marketing theory that argues that good customer’s relationships are essential for successful marketing. (KIPPRA, 2006).
1.2 Statement of Problem
SMES are the major agents of economic growth and employment, and they lead to increased participation of indigenous people in the economy in the economy, use mainly local resources, promote the creation and use of local technologies and provide skills training at low cost to society (ILO 1989). In Nigeria over 60% of small businesses are estimated to fail each year (Nigeria National Bureau of statistics, 2007). Mead (1998) observes that the Heath of the economy as a whole has strong relationship with the health and nature of SMEs. However, despite government efforts in Nigeria to promote SMEs service delivery, not much progress seems to have been achieved, judging by the performance of the informal sector. When the state of the macro economy is less favorable, by contrast, the opportunities for profitable employment expansion in SMEs are limited. Not many small enterprises grow into medium-scale and large scale enterprises to significantly contribute to employment creation and economic growth. This study sought to investigate the factors influencing the performance of SMEs that may have on service delivery improvement in the Central Business District (CBD) Uyo municipal.
1.3 Purpose of the study
The purpose of the study was to investigate the factors influencing the performance of Small and Medium Enterprises in Uyo municipal.
1.4 Objectives of the study
The objectives of the study were:
1. To determine how entrepreneur characteristics influence the performance of Small and Medium Enterprises in Uyo Municipal.
2. To establish how business characteristics influence the performance of Small and Medium Enterprises in Uyo municipal.
3. To determine how the adoption of Information Communication Technology influence the performance of Small and Medium Enterprises in Uyo municipal.
4. To assess how the availability of finance influence the performance of Small Medium Enterprises in Uyo municipal.
1.5 Research Questions
1. In what ways do entrepreneur characteristics influence the performance of Small and Medium Enterprises in Uyo municipal?
2. How do business characteristics influence the performance of Small and Medium Enterprises in Uyo municipal?
3. How does the adoption of Information Communication Technology influence the performance of Small and Medium Enterprises in Uyo municipal?
4. To what extent does the availability of finance influence the performance of Small and Medium Enterprises in Uyo municipal?
1.6 Assumptions of the study
Assumptions are conditions or events that the researcher takes for granted although they might affect the outcome of the research. These could be beliefs or ideas that one holds to be true without any evidence and therefore, the study assumed that:
The selected sample represented the population of interest who cooperated and adhered to the rules stipulated on the questionnaire forms and interview schedule that gave optimum time to obtain responses from the research tools.
1.7 Significance of the study
The SME sector plays a critical role in the social-economic development of Nigeria and as such, the government expects it to deliver on its several development strategies in terms of employment creation, poverty eradication and industrialization. This requires that the sector remains competitive to deliver. It is imperative that the various constraints to the sector’s competitiveness especially market access are effectively addressed if the sector is to remain relevant to economic development as envisioned. ICT is taking centre stage in the growth and competitiveness of all sectors globally and there is need to apply ICT to improve SMEs competitiveness and finance related challenges. Financial and banking that advance credit facilities to SMEs will be in a better position to review their lending policies and adjust them to the needs of the SMEs where possible. By exploring the opportunities offered by ICT to improve market access in SMEs, this study provides the necessary knowledge required for improving the sector’s competitiveness to enable it deliver to the country’s expectations. The knowledge is important for policy makers, SMEs as well as researchers/ academicians. Research has shown that small and medium enterprises in Nigeria either collapsed prematurely or grew at a very low rate due to finance related challenges. A study that looks into the influence of Small and Medium Enterprises on the improvement of service delivery was key to improving business at individual/proprietor level. On completion of this document, the study may be used as a point of reference by future researchers who have an interest in the line of SMEs. Any person reading this document gains the present status on performance of Small and Medium Enterprises in Uyo municipal. Because both the central government and the County government depend on Small and Medium
Enterprises to spur economic growth and accelerate economic development, an understanding the factors influencing performance of Small and Medium Enterprises in Uyo municipal was important.
1.8 Definition of terms
Small and Medium enterprises: Enterprises, business organizations employing between one and fifty workers. They include all the self-employment endeavors and dynamic enterprises operating a vast array of activities in both rural and urban areas
Entrepreneur characteristics: Involving the observable features of the business owner such as gender, age, education level, initiative among others
Business characteristics: Involving the observable features of business such as size, number of staff, nature of business, and location among others
Information Communication Technology: It is a term that stresses the role of unified communications and the integration of telecommunications, computers as well as necessary software, middleware, storage and audiovisual systems, which enables users to access, store, transmit and manipulate information
Finance: Involving the sources of money to start, run and expand the business and the ease of accessing money from the sources.
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