Management And Operation On Small Scale Business

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Management And Operation On Small Scale Business


Abstract


The purpose of the study was to assessed operations and management on growth of small and medium enterprises in Nigeria. The Study was based on following objectives: To determine operations management and growth SMEs in Nigeria and to determine the effect of innovation on growth of SMEs in Nigeria. Descriptive survey design was adopted to obtain a complete and an accurate description of situations, persons and events. The study was conducted on operations management issues in growth of small and medium enterprises in textile unit inEnugu metropolis, with target population being 300 respondents and sample size of 30 respondents. The data collection instruments were questionnaires. The study concluded that; Difficulties in accessing loans for business growth was reason for slow and retardation of business growth and that startup loan could have positive impact on the growth of the business. Study concludes that sales revenues had very largest achievement as result of loans accessibility due to availability of enough stocks, profitability had minimal achievement, and this could also mean the cost of accessing loan could be higher meaningless profit. SMEs operators has no training, education and or vocational training are better placed to adapt the constantly changing business environment. Technology and efficiency impact more positively on the growth of SMEs. The quality of management is important for small and medium-sized enterprises (SMEs), which must be able to adapt quickly to evolving markets and changing circumstances, but which often have limited resources. Agency banking has resulted in financial incursion in the region of the study, eliminating financing challenge that has been found to limit growth of small and medium enterprises. Study recommends that Given that accessing loans for business growth was reason for slow and retardation of business growth and that startup loan could have positive impact on the growth of the business. The study recommends that financial institution should make available financial resources to SMEs to enhance business growth. Government, relevant ministries in trade and industrialization should come up with policies on SMEs training on areas of financial management since the study found out that, SMEs operators has no training on the financial management. And given that training impact positively on growth of entrepreneurs with large stocks of capital that includes education and or vocational training are better placed to adopt the constantly changing business environment. Given that agency banking has resulted in financial incursion in the region of the study, eliminating financing challenge that has been found to limit growth of small and medium enterprises, the study recommends that the model can be replicated by government in financing SMEs in rural areas of Nigeria.


Chapter One


Introduction

1.1 Background to the Study

Small scale businesses are those businesses which are independently owned and operated requiring limited capital with few employee and non-sophisticated technology and which is not dominant in its field of operation. Small businesses constitute those sole proprietorships, privately owned corporations, partnershhips with fewer employees and less annual revenue than a regular-sized business or corporation. Types of small business include those engaged in trade and commercial activities, services, and small scale manufacturing .Examples include service or retail operations such as delicatessens, hairdressers or convenience stores, small grocery stores, bakeries trade people (eg. carpenters, electricians), very small-scale manufacturing and Internet-related businesses. Small business can be started with very minimal capital and without any formality .many small business are operated as family business and can be combined with regular employment. The research therefore seek to investigate the Management and operation on small scale business (A case study of Textile unit)


1.2 Research Problem

Companies currently need to function in the changing surroundings where there is scarcity of fundamental resources and great uncertainty exists in business undertakings. Great efficiency standards are imposed by the market and companies which fail to meet them and are marginalized quickly. In such cases, a interior resource careful optimization is essential each company which wishes to remain competitive. To achieve this goal, skills and knowledge management improvement processes plays a main role, especially for (SMEs). This particularly effects internal knowledge and real biosphere to a large extent; such a method is very significant since it enables for the rapid solution and analysis of operative difficulties and also knowledge gap awareness that requires to be occupied (Grimaldi et al., 2012).

The expansion of Small Medium Enterprises (SMEs) is important for Nigeria to attain Vision 2030, an initiative to be internationally prosperous and competitive country with high life quality by the year 2030. Statistics by G.O.K economic survey (2006) show that the SME segment contributed to 64 percent of the county‟s urban employment and 50 percent of the new jobs created in 2005 were from the SME segment. Therefore SMEs are critical for touching the country forward. This is particularly emphasized by the SMEs in Nigeria Market who as indicated by Nigeria National Bureau of Statistics economic study (2012) provide employment to 50,000 individuals and contribute to 18% of Nigeria‟s GDP from micro small enterprises.

Over the years, the Taiwan‟s SME segment has been characterized by arguments like dynamic, diverse, innovative, as well as creative. Their influences to the Taiwanese economy are far and wide, bearing in mind SMEs make up 97.83% of all enterprises, with 1.4 million in process at the end of 2003 (Small plus Medium Enterprise Administration, 2004a). This number is expected to remain growing. According to Taiwan‟s Small and Medium Enterprise Administration (SMEA), SMEs have backed to the diversity of Taiwan‟s private sector, employment levels, as well as gross production.

In Zimbabwe, even though SMEs are currently under local financial developments are maintained to solve socio economic difficulties. Although entrepreneurs -SMEs may act as entire economy‟s‟ activity catalysts (Chichoni, 2011), most fail. Above 75% of new businesses fail in Zimbabwe (Chichoni, 2011)), though it hard to assess the true nature of failure in SME because of lack correct data on this aspect.

Furthermore, financial institutions tend not to lend SMEs because of inadequate collateral which is a barrier to growth ability of small enterprises to raise capital, market uncertainty, higher transaction costs and information asymmetries due to serving customers who are far thus restricting flow to finance to SMEs (URT- National Economic Empowerment Policy, 2009).

In Nigeria, employment within the accounts sector for 87 percent of all the created new jobs and employs 77 percent of all employees in the country (GOK, 2005). Despite its relevance, in five SMEs businesses three fail within its first five years in operation. Of those that are left, four out of five fail within the next four years. They are either closed down, liquidated, merged, acquired, change direction or become a new business. Of the remaining businesses, only 15% will be making a profit, the remaining will barely be surviving (SMIDEC, 2009).

The SME‟s in Nigeria experience some impeding factors that prohibit SMEs not accessing financial services from financial institutions like lack of collateral, lack of entrepreneur skills, poor documentations, and high interest rates. These impeding factors are assumed to be major practical problems particularly in Nigeria. The SME‟s require financing and management skills for their day to day activities. The commercial banks provide initial as well as working capital, financial skills training, role models and mobilize savings to the SME sector. These services offered by commercial banks are expected to aid in the growth of SMEs eventually ensuring success of these businesses. What is the effect of operation management on growth of SMEs in Nigeria?


1.3 Objectives of the Study

  1. To determine the nature of small scale business
  2. To determine the Management and operation of small scale business (A case study of Textile unit

Small business can be started with very minimal capital and without any formality. Many small business are operated as family business and can be combined with regular employment.


1.3 Research Questions

  1. What is small scale business
  2. What is the level of impact of the management and operation of small scale business?

1.4 Significance of the Study

The study shall appraise the nature , management and operation of small scale business which shall serve as a vital source of information to investors


1.5 Research Hypothesis

  • Ho The level of impact of the Management and operation of Textile unit small business is low
  • HI The level of impact of the Management and operation of Textile unit small business is high

1.6 Scope of the Study

The study focuses on the appraisal of Management and operation of small scale business with a case study Textile unit


1.7 Limitations of the Study

The study was confronted by some constraints including logistics and geographical factors.


1.8 Definition of Terms

Small Business Defined

Small scale businesses are those businesses which are independently owned and operated requiring limited capital with few employee and non sophisticated technology and which is not dominant in its field of operation. Small businesses constitute those sole proprietorships, privately owned corporations, partnerships with fewer employees and less annual revenue than a regular-sized business or corporation.

Franchise Business

Franchising is a way for small business owners to benefit from the economies of scale of the big corporation (franchiser). McDonald’s and subway are examples of a franchise. The small business owner can leverage a strong brand name and purchasing power of the larger company while keeping their own investment affordable

Retailers’ cooperative

A retailer’s cooperative is a type of cooperative which employs economies of scales on behalf of its retailer members. Retailers’ cooperatives use their purchasing power to acquire discounts from manufacturers and often share marketing expenses. It is common for locally owned grocery stores, hardware stores, and pharmacies to participate in retailers’ cooperatives. Ace Hardware, True Value and NAPA are examples of a retailers’ cooperative.


Chapter Five


Summary of Findings, Conclusions and Recommendations

5.1 Introduction

The chapter presents findings, discussion, conclusion summary derived from findings and recommendations suggested. The conclusions and recommendations arrived at based on the study.


5.2 Summary of Findings

5.2.1 Operation Management Issues

Study findings show that half of the respondents had borrowed from banks, 45 percent had accessed loan for business growth from microfinance, while only 5 percent had accessed loan from friends and relatives. The study findings established that 60 percent of the respondent indicates that great difficulties in accessing loans for business growth these were the majority, 35 percent indicated that there were difficulties in accessing loans, while only 5 percent of the respondents had no difficulties in accessing loans for business growth.

According to the study findings majority of the respondents 75% indicated that it was very important to access the startup loan for the business growth while 25 percent were for the opinion that startup loan was not important in the business growth. Respondents were to rate the above business achievement as result of loan accessibility, the findings indicate that Sales revenues had the largest achievement as result of loan accessibility, shown by mean of 4.5, Physical assets and Market coverage had large achievement due to loan accessibility as shown by point 4 on the scale, financial assets had moderate achievement as result of loan accessibility shown by mean of 3 while profitability has less achievement due to financing as shown by mean of 2.

5.2.2 Operation Management / SMEs

From the findings majority of the respondents 55% had no any training on the financial management skills, while only 45% of the respondents had training on the financial management skills. Respondents indicated that to very large extent training makes entrepreneurs adapt to constantly changing business environment as shown by mean of 5.0, largely financial skills training impact positively on growth of enterprises this is shown by mean of 4.0, respondents indicated that moderately financial training programs can improve the incomes of SMEs as shown by mean of 3.0, and to a less extent financial skills can improve productivity and incomes of entrepreneurs as shown by mean of 2.0.

According to the findings respondents indicated that technology and efficiency are operations management issues that have very large impact on the growth of SMEs as shown by mean of 4.8 and 4.5 respectively, loaning and cost had large impact as indicated by the respondents shown by mean of 4.006 and 4.282 respectively, respondents indicated that production design and competition aspects had a moderate impact on the growth of SMEs this is shown by mean of 3.48 and 3.47 respectively, flexibility and inventory control had less effect on growth of SMEs as shown by mean of 2.098 and 2.056 respectively. From the study findings majority of the respondents 68% indicated that they had no training on the SMEs management while only 32% said that they had SMEs management skills.

5.2.3 Innovation in Operations

Study findings show that half of the respondents stated that innovation in operations had impacted on the business growth by increasing customer loyalty, 35 percent indicated that innovation in operations created increase in customers numbers while only 15 percent said that innovation in operations created good reputation and hence business growth. From the study findings showed that technology has aided on the growth of business to the very large extent this is shown by mean of 4.620, respondents indicated that competition to large extent was lower as result of innovation and hence business growth this is shown by mean of 4.164, further response indicated that production design, inventory control as well as efficiency had a moderate effect on the growth of businesses as result of innovation, this is illustrated by mean of 3.234,3.056 and 3.002 respectively, and lastly respondents said that cost and flexibility had less effect on business growth as shown by mean of 2.402 concurrently.

From the findings respondents agreed strongly that agency banking has contributed to financial inclusion in Nigeria as shown by 1.438 mean , respondents agreed that Access to appropriate financial products and services, has a negative impact on SMEs firms‟ performance, as shown by, mean of 2.380, further responses were neutral on whether an appropriate banking environment was a key pillar of SMEs growth as illustrated by mean of 3.100 and finally responses disagreed on the fact that agency banking has eliminated capital constrains to SMEs as shown by the mean of 4.140.

From the regression calculation established, taking all issues into account (Innovation in operations, Operation management /SMEs and Operation management issues) constant at zero, Growth of small and medium enterprises in Enugu metropolis was 1.147. The data findings examined similarly showed that taking all extra independent variables at zero, a unit increase in Innovation in operations lead to a 0.752 increase in Growth of small and medium enterprises in Enugu metropolis; a unit increase in Operation management /SMEs lead to a 0.487 Growth increase of small and medium enterprises in Enugu metropolis, a unit increase in Operation management issues lead to a 0.545 increase in Growth of medium and small enterprises in Enugu metropolis.


5.3 Conclusions

5.3.1 Operation Management Issues

The study concludes that businesses in the Enugu metropolis that participated in the study had opted for microfinance and banks for financing. This data shows that a majority of the enterprises are boosted by funds from financial institution and banks with Microfinance and banks helping a very large group of entrepreneur‟s access loans for growth. Difficulties in accessing loans for business growth was reason for slow and retardation of business growth. This finding concured with Agency banking model is intended to enhance access to financial facilities by allowing small businesses to work as satellite branches.

Startup loan had positive impact on the growth of the business, therefore banks and other financial institution need to make available startup loans to SMESs to facilitate their growth. These findings illustrated that sales revenues had largest achievement as result of loans accessibility due to availability of enough stocks, profitability had minimal achievement, and this could also meant that the cost of accessing loan couldhave been higher meaning less profits. Therefore the banks and other lending financial institutions needed to consider lowering the rate of lending to SMEs so as to increase the profitability margins for entrepreneurs.

5.3.2 Operation Management / SMEs

Education is among the factors which impacts positively entrepreneurs growth with large capital stocks that includes vocational training and education were well structured to constantly adapt to dynamic business environment. SMEs needs training on financial management skills given that financial education can have positive impact on their business growth, this will encourage SMEs from borrowing more form lenders and thereby encouraging business growth. Financial training is a very important catalyst in business growth and therefore lending to the SMEs banks and other financial institution needs to consider financial training to make loans have positive impact in growth of businesses, technology and efficiency impacts more positively to SMEs growth. This finding shows that SMEs needs to adopt technology and be effective in their daily running of their business in order to realize growth of their businesses.

Study concludes that respondents had no training on SMEs management which could be the cause of business failures in the region of the study. Respondents with skill on SMEs management indicated that workers including managers had better understanding on business performance in economies that are knowledge based.

5.3.3 Innovation in Operations

Innovation in operations needs to be implemented in the path of ordinary operational activities in day to day running of business, the cumulative result of innovations in operations will be sufficient to sustain a competitive position should the changes in markets follow predictable sequence and hence realize SMEs growth. SMEs need to be encouraged to understand the significance of technology as an innovation in operations which is a principal means of winning to a competitive advantage as well as more profitability to their businesses.

Study concludes that agency banking as resulted in financial incursion in the region of the study, eliminating financing challenge that has been found to limit medium and small enterprises growth. Finally Innovation in operations contributes most to the Growth medium and small size enterprises in Enugu metropolis, followed by Operation management /SMEs. At 5% significance level and 95% level of confidence, Innovation in operations had a 0.0192 significance level , Operation management / SMEs showed a 0.0269 level of significance, Operation management issues showed a 0.0251 level of significance, therefore the factor that was most significant in the Growth of medium and small enterprises in Enugu metropolis was Innovation in operations.


5.4 Recommendations

5.4.1 Government Interventions

Study recommends that Government, relevant ministries in trade and industrialization should come up with policies on SMEs training on areas of financial management since the study found out that, SMEs operators has no training on the financial management.

And given that training impact positively on growth of entrepreneurs with large stocks of capital that includes education and or vocational training are better placed to adopt the constantly changing business environment. From the finding agency banking as resulted in financial incursion in the region of the study, eliminating financing challenge that has been found to limit growth of small and medium enterprises, the study recommends that the model can be replicated by government in financing SMEs in rural areas of Nigeria.

5.4.2 Financial institutions

From the study findings accessing loans for business growth was reason for slow and retardation of business growth and that startup loan could have positive impact on the growth of the business. The study recommends that financial institution should make available financial resources to SMEs to enhance business growth.


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Frequently Asked Questions


How do small businesses manage their operations?

Small business operations are often developed informally and by trial and error. Operations management can make or break a business. As your business grows there will be a need to ensure the effectiveness and efficiency of its operations.

What is operations management and how can it help my business?

As your business grows there will be a need to ensure the effectiveness and efficiency of its operations. Operations management techniques, which have their origins in large organisations, can be applied with great results in small businesses. This course is a practical guide to how these proven techniques can be used in small businesses.

What is the Small Business Management course?

This course is a practical guide to how these proven techniques can be used in small businesses. This course will take you on a journey through: The course is aimed at owners and managers of small businesses. It is also suitable for business studies students, at any level, who are keen to run or work in a small business.

What are the areas of weakness in small businesses?

In my judgment, there are three principal areas of weakness in small businesses that cause trouble, all of them management centered. 1. Growth of sales is commonly seen as the solution to all problems. There is an unawareness that, except in the short run, there is no such thing as fixed overhead.

What is small business operations?

What Is Operations? Operations is the work of managing the inner workings of your business so it runs as efficiently as possible. Whether you make products, sell products, or provide services, every small business owner has to oversee the design and management of behind-the-scenes work.

Do you need an operations management strategy for Your Small Business?

If you run a small business, and you’re struggling to manage the resources you need for your products and services, then deploying an operations management strategy and cloud-based software can help. There are a lot of benefits to gain from doing this.

How to manage a small business effectively?

Managing a small business presents some unique challenges for the owner. Apart from the knowledge of the basics of small business principles, you also need to know financial management, human resource management and the laws and regulations related to your business.

What is operations management?

Operations is the work of managing the inner workings of your business so it runs as efficiently as possible. Whether you make products, sell products, or provide services, every small business owner has to oversee the design and management of behind-the-scenes work.

What are the weaknesses of a small business?

No documented systems and procedures. As a result, critical activities including marketing, sales, hiring, service delivery, billing and customer care are not easily repeatable by others and are often inconsistent, inefficient and ineffective.

Why are your strengths and weaknesses important in business analysis?

But your strengths and weaknesses are the most vital part of any business analysis, because when you are in control of your internal processes, you’re better prepared to face external challenges and turn them into opportunities. It isn’t always easy to recognize your business strengths and weaknesses.

What are the biggest challenges facing small business owners?

Finding a pace that keeps the business humming without grinding down the owner is a challenge that comes early (and often) in the evolution of a small business. It is generally better for a business to have a diversified client base to pick up the slack when any single client quits paying. 4. Founder Dependence

What are your weaknesses when applying for a job?

This usually means soft skills that have no measurable impact on the role you are applying for. After stating your weaknesses, follow up with how you are improving or plan on improving on them, all while being as honest as possible without sharing too much.

Is business management considered an easy degree?

When it comes to easy business degrees, business administration is the most basic. An undergraduate degree in business administration is a degree program that aims to equip students with a comprehensive foundation in all aspects of administration needed to operate and grow an organization successfully. 

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