EFFECT OF INTERNAL ENVIRONMENTAL FACTORS ON THE PERFORMANCE OF SMALL SCALE BUSINESS ENTERPRISES IN NASARAWA STATE

EFFECT OF INTERNAL ENVIRONMENTAL FACTORS ON THE PERFORMANCE OF SMALL SCALE BUSINESS ENTERPRISES IN NASARAWA STATE

ABSTRACT

This study examines effects of internal environmental factors on the performance of small scale business enterprises in Nasarawa state. Specifically the study seek to assess the effect of capital on small scale business enterprises performance in Nasarawa state, examine the effect of entrepreneurial skills  on the performance of small scale business enterprises and examine the effects of marketing strategy on the performance of Small Scale Business Enterprises in Nasarawa state. The population of the study consists of 1753 registered SME’s in Nasarawa but the study sampled only 95 of them randomly selected using Yamane (1967) formular. The research design adopted for this study is survey design and experimental research. The research analyzed the respondent’s opinion using tables while hypothesis was tested using regression analysis (OLS).  The findings of this study shows that internal environment factors have significant effects on the performance of small scale business enterprises in Nasarawa state. Specifically, the study shows that capital, entrepreneurial skills and marketing strategy have significant effect on small scale business enterprises performance in Nasarawa state. Finally the study recommends that the federal government should come up with economic policy and regulatory framework that will make capitals available for owners of small scale business enterprises or entrepreneur to enhance their performance and also entrepreneurs should ensure they acquire all the necessary skills and marketing strategies that will promote their performance.

Keywords: Internal environment, small scale business, enterprises, capital, entrepreneurial skills, marketing strategy

CHAPTER ONE

INTRODUCTION

1. Background to the study

The role of small and medium scale enterprises in the most developing nations cannot be overemphasized. Worldwide, Small scale business enterprises are regarded as the engine for growth, job creation and human development, particularly in developing countries. Available studies have over the years confirmed that Small scale business enterprise provides a strong foundation for economies around the world providing about 60% of employment and constitute about 95% of enterprises around the globe (Keynes, Kolstad & Wiig, 2017). A report released by the World Bank Group on registered formal SMEs is that they contribute up to 45% of employment and 33% to GDP in developing economies.

Small and medium scale enterprises comprise of business that employed little capital for establishment and operate small scale business with the objective of making profit. Small and medium scale enterprises have continued to increase and survive because they require few capitals for establishment, less labour, low technological knowledge and little managerial capacity for establishment (Essien, 2014). Also, small and medium scale enterprises are seen as major tool for reducing unemployment and poverty through the generation of employment, contribution to rapid economic growth and export earnings, industrialization and utilization of local resources.

A business internal environment plays the most significant part in charting out the direction and the unique qualities that define it from others (Aldrich, 2015). This micro environment comprises of factors which a firm can effectively use in adapting to the ever-changing external environment. Unlike the external, the internal environment factors are largely within control of the management of a business enterprise. Such factors as tangible business resources, its workers, its management, competencies, production, marketing and strategic choices are so strong conventional contributors to the effective and efficient operation of any business (Kibera, 2016).

Each of the internal factors whether tangible or not are significant to the success of the business, based on how each firm employs and maintains them (Nzomo, 2015). A business plant, machinery, equipment or tools for instance should be those that are cost effective in terms of their acquisition, installation, maintenance, repair and replacement. This would make an entrepreneur to retain some funds for other operational plans. These facilities are equally important for the quality and quantity of product output, market size and niche, companies / firm image and general public approval of the company’s product. All these translate into sales, profit and size of a business which effectively define the business success or failure (Karingiti, 2019).

SMEs performance is the ability of a firm to provide value to its stakeholders such as owners, customers, society and government. Aminu and Shariff (2015) defined firm performance as the procedures of quantifying business actions in terms of accomplishing its objectives. According to Abdulmalik, Moahammed and Salem (2014) financial performance such as profit maximization, maximizing profit on assets and maximizing shareholders’ benefits are the core of the firm’s effectiveness. Operational performance measures such as growth in sales and growth in market share provide a broad definition of performance as they focus on the factors that ultimately lead to financial performance.

The performance of small and medium scale enterprises can be significantly influenced by both internal and external environment factors. The success and failure of an organization is solely not determined by the firm’s specific characteristics but also, prevailing factors in the environment in which the firm operates. Small and medium scale enterprises operate in a complex and multi-facet environment which shape organizational objectives and could have a wide effect on the performance of the organization (Eruemegbe, 2015).

1. Statement of the Problem

Small Scale Business Enterprises are the engine of growth and development of most developed and developing nations in the world, but unfortunately the state of economic growth of Nigeria appears to be very low despite the large concentration of businesses in the country. The poor performance of small scale business enterprises in Nigeria and its low contribution to the development of the country is due to some economic and environmental factors such as high unemployment rate, low income level, high inflation, low interest rates, high tax rates, fluctuation exchange rate, poor consumer confidence levels, recessions size of the available market, low demand for the company’s products or services, competition, etc. Small and medium enterprises (SMEs) in Nigeria have not performed creditably well and hence have not played the expected vital and vibrant role in the economic growth and development of Nigeria, (Basil, 2005). Year in year out, government at federal, state and local level make an effort in support of entrepreneurship development, but still the contributions of SSBs to economic development is low. It is worrisome that despite the incentives, favorable policies, regulations and preferential support by government aimed at improving SSBs, the sub-sector have performed below expectation in Nigeria (Abiodun, 2011). Inspite of the large volume of studies on Small Scale Business Enterprises in developing countries, there is a death of literature on studies relating to internal environmental factors on the performance of small scale business enterprises.

1. Objectives of the Study

The main aim of this study is to evaluate the effects of internal environmental factors on the performance of small scale business enterprises in Nasarawa state. Thus, the specific objectives of this study are to:

1. Assess the effect of capital on the performance small scale business enterprises performance in Nasarawa state.
2. Examine the effect of entrepreneurial skills on the performance of small scale business enterprises in Nasarawa State.
3. Examine the effects of marketing strategy on the performance of Small Scale Business Enterprises in Nasarawa state.

1. Research Questions

The study was designed to seek answers to the following research questions:

1. What are the effects of capital on small scale business enterprises performance in Nasarawa state?
2. What are the effects of entrepreneurial skills on the performance of small scale business enterprises?
3. What are the effects of marketing strategy on the performance of Small Scale Business Enterprises in Nasarawa state?

1. Statement of Hypothesis

In order to achieve the stated objectives of the study, the following formulated hypotheses are proposed for testing:

H₀₁: Capital has no significant effect on the performance small scale business enterprises in Nasarawa state.

H₀₂: There is no significant relationship between entrepreneurial skills and performance of small and medium scale business enterprises.

H₀₃: Marketing strategy has no effect on the performance of Small Scale Business Enterprises in Nasarawa State

1. Scope and Limitations of the Study

This study assesses the effects of internal environmental factors on the performance of small scale business enterprises in Nasarawa state. The emphasis is to identify the influence of factors such as capital, entrepreneurial skills and marketing strategy on the performance of small scale business enterprises.

The major limitations of this project are the difficulty in obtaining data as is usually the case with most project.

The lack of data is further compounded by the fact that the researcher has a very tight schedule programme.

For instance, time is too short for the research considering the time within which to submit the project and combined with academic work load could not enable the researcher to carry out wide research on the general environmental impact on small scale business. Finance is another hitch encountered during the course of study.

1. Significance of the Study

Given the importance of small scale business enterprises to the nation’s economic growth, and also the role they plays in reducing poverty and unemployment, the result of this study would be of great importance to government, researchers and major stakeholders such as investors, staffs, managers, business consultants, financial analyst and consumers. It’s expected to contribute to small scale business enterprises sub-sector development process in developing countries and even developed countries that share similar environmental factors influencing business performance.

In a globalized economy, there is increase recognition that identifying the factors hindering small scale business enterprises performance in a developing country may be meaningful in terms of assistance developed countries provide to developing countries in the area of small scale business enterprises development. Thus, the result of this study is expected to help both Nongovernmental organizations (NGOs) and international agencies that assist in the area of Small Scale Businesses and entrepreneurship development.

The study would draw the management and policy maker’s attention to the urgent need for specific management practice to enhance the effectiveness and sustainability of small scale business enterprises in Nasarawa town and states at large. The study can also assist local entrepreneurs in formulating strategies that will guide against poor business performance.

1. Definition of Key Terms

Small Scale Business: Is defined as some of all activities which involve distribution of goods and services to making of profit in the business.

Some of the terms used in this study include political economic factor and cultural factor.

Internal Environment:  The internal business environment comprises of factors within the company which impact the success and approach of operations.

Capital: Capital is the money or wealth needed to produce goods and services. In the most basic terms, it is money. All businesses must have capital in order to purchase assets and maintain their operations. Business capital comes in two main forms: debt and equity.

Entrepreneurial Skills: Entrepreneurship is ‘an individual’s ability to turn ideas into action. It includes creativity, innovation and risk-taking, as well as the ability to plan and manage projects in order to achieve objectives.

Marketing Strategies: A marketing strategy refers to a business’s overall game plan for reaching prospective consumers and turning them into customers of the products or services the business provides. A marketing strategy contains the company’s value proposition, key brand messaging, data on target customer demographics, and other high-level elements.

Performance:  A Performance is an act of staging or presenting a play, concert, or other form of entertainment. It is also defined as the action or process of carrying out or accomplishing an action, task, or function