ASSESSING THE PERFORMANCE OF SMALL AND MEDIUM-SCALE BUSINESSES IN EBONYI STATE FOR THE PAST THREE YEARS (2004-2006). A CASE STUDY OF SOME SELECTED SMALL AND MEDIUM SCALE BUSINESSES
1.1 BACKGROUND OF THE STUDY
Most countries in the world have attained advanced stage in industrial development because they started their industrialization process with programmes in the small and medium scale business (SMBs) particularly the manufacturing sector. These countries attached serious consideration to small and medium scale enterprises through the provision of efficient banking services, and infrastructural facilities like portable drinking water, efficient power supply, good road network and transport system, and effective communication. Given the foregoing, the advancement of any economy lies in the ability of this category of businesses to perform. According to the World Bank report on Third World Countries (2001:124) “most of the countries in Africa, Asia and Latin America are developing rapidly due to the private sector contribution” which small and medium scale businesses constitute a significant part of.
Apart from the role of small and medium scale business in the economy, the owners of these small and medium scale businesses do set for themselves some objectives. These objectives include: making high profits, insurance of continuous growth of the firm, providing useful services for the society and performing their social responsibility effectively.
There is need therefore, for government, owners and the general public to assess the extent to which the businesses are effective to their goals and objectives. One method of doing this is to ask whether the roles and objectives of these businesses are understood, whether achievable targets have been established and whether organisational structure is adequately set up to carry out such targets.
The study attempts to assess the performance of SMBs in Ebonyi State for three years (2004-2006). In assessing there performance, level of productivity and effectiveness in achieving their goals and objectives is considered. Basically criteria are set to determine the performance of these businesses in relation to their productivity, goal accomplishment and capacity utilization. These criteria are as follows:
- Financial capital input
- Sources of raw materials used and equipment procured
- The amount of goods produced
- The level of employment
- The location of the business.
1.2 STATEMENT OF THE PROBLEM
The centre of gravity of any nation’s industrial development is, needless to say, the small and medium scale businesses. Microsoft, General Electric, Yahoo etc. in the United States of America started from this category of businesses. Today, these companies are not only leaders in America, but global leaders. Without the presence of small and medium scale businesses in any nation, the survival of the leading businesses will be stymied. The bi-lateral relationship that exists between the small and medium scale businesses, and the leading businesses brings about an agglomeration economy. The benefits of these includes increased demand for goods and services produced, full employment of both human and material resources, increased income and wages (and associated disposable income that arises as a result), equitable wealth and population distribution, to mention but a few.
Observably, most small and medium scale industries in the state have been unable to accomplish the standards or objectives set by their owners because of the environment in which they operate has adverse effect on their performance, productivity and profitability. A common factor is lack of infrastructure which is a stepping-stone for continuous improvement of operations of these businesses. These infrastructures can only be provided if necessary and adequate information is available to the government in order to guide their provision.
The lacklustre performance of these SMBs can also be traced to the fact that most so called “Businessmen” go into business without adequate information, planning, preparation and commitment as though the business is an avenue to show-off their wealth or launder money.
Nigeria, as a nation, has taken giant steps in the promotion of small and medium scale business. Favourable policies have been formulated which have given rise to the establishment of many small and medium scale businesses. Unfortunately, what initially appeared gloomy are now doomed, with most of them performing at a sub-optimal level while the rest have experienced demise. They are beset with unfriendly economic conditions, like price distortion, unmaximising welfare conditions, high inflation rate, etc. This, and other collaborating factors, has made goods and services produced by these businesses to be placed at a high price in the market. Hence the continuous “nose dive” of aggregate demand which in turn leads to low capacity operation.
It is on the above assertions that this research project attempts the assessment of the performance of small and medium scale businesses, with particular reference to Ebonyi State of Nigeria.
1.3 OBJECTIVE AND PURPOSE OF THE STUDY
Attention has been drawn to the fact that small l and medium scale businesses in Nigeria have achieved very little success, whereas it provides employment for a larger number of people, as well as playing the role that is crucial to our developing economy. The lack of attention in the operations of small and medium scale businesses has resulted to lack of knowledge of how their performance has matched expectations. To this end, this study is expected to achieve the following objectives:
- Assess the performance of small and medium scale businesses for the past three years based on their effectiveness and productivity in operation.
- Highlight the problems, which militate against their success.
- Analyse the steps, which small and medium scale businesses should take towards improving their effectiveness and productivity level.
1.4 RESEARCH QUESTIONS
- Do small and medium-scale businesses have the required structure?
- How cost effective are they?
- What is their level of utilization of input?
- Have they lived up to expectation of both owners and economy?
- How can they be improved?
1.5 SIGNIFICANCE OF THE STUDY
The need to assess the performance of small and medium scale businesses cannot be over emphasized. Performance at this level stems from the need to assess the attainment of goals and objectives of the businesses.
Achievement of goals and objectives, suggests effectiveness. Thus, performance as far as effectiveness is concerned helps managers, investors, government and researchers to measure the extent to which organisations achieve their goals and objectives. A close study reveal that small and medium scale businesses in Nigeria in general have not optimised their goals over time and have failed in their roles to sustain the economy.
The significance of this study is therefore identified as follows:
- It will help enlighten the small and medium scale businesses on the extent to which they can be effective.
- It will help enlighten the small and mediums scale businesses understand the various problems impeding their success and how to surmount them.
- It will help managers carry out all their activities and successfully monitor performance at all levels of the organisation.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
Small and medium scale businesses are found in all sectors of the economy, namely; agriculture, building, commerce, construction, manufacturing, etc. Small and medium scale businesses have been chosen to cover all these sectors and also those located in urban and rural areas. Such scope is chosen, so as to represent small and medium scale businesses in the state in particular and Nigeria in general.
In carrying out this research, efforts are made to assess extension information necessary for carrying out a comprehensive work. However, some limiting factors present themselves. Among them, the most disturbing problem is the uncooperative attitude of many respondents towards the researcher. Many of them are afraid to give out information about their business, thinking that research is for tax or other assessment purpose. It becomes a difficult task for the researcher to convince them to give out such information. Those who agree to give out information concerning their business, were unable to communicate well.
Other limitations include the lack of financial records in most small and medium scale businesses. Lack of data on SMBs in government institutions, (although this project aims to fill such gap). In addition lack of time and finance, contributed to limiting the scope of the study. However, despite all these constraints, great patience and determination were put in to acquire the amount of information that enabled the production of this work, which is hoped would make some contributions to future work on this study.
1.7 DEFINITION OF TERMS
In this section, an attempt is made to define some of the terms used which seem ambiguous. They are defined in the context in which they are used in this study.
ASSESSMENT: This is used in this study to mean that means of examining the operation of businesses in order to determine the level of achievement of their operation or their inability to achieve their objectives.
BUSINESS: This refers to any gainful activity which might be commercial, financial or productive engaged in personal development and financial gains. In this study it is used to define the activities of small and medium industries.
EFFECTIVENESS: For this study, it means the extent to which businesses have been able to optimize their set goals over a period of time.
EFFICIENCY: In this study, it is used to imply the result of the activity of a business in relation to its established goals, and to determine the rate at which it can produce goods and services.
PLANNING: Here it is used to mean the various strategies and schedules used by these businesses in appraising the factors crucial within and outside the firm in order to attain set goals.
PROFITABILITY: This is used in ascertaining the level of profit made by the business and their ability to measure up with certain percentage of return on investment as was set.
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