The Problems And Prospects Of Small Scale Manufacturing Businesses (A Case Study Of Aboh-Mbaise Local Government Area In Imo State)

Project and Seminar material for Public Administration

Abstract

This study investigates the problems and prospects of small scale manufacturing businesses in Aboh-Mbaise local government area in Imo state. The reason of carrying out this research is to discover, examine, study and make a redress on the problems and prospects of small-scale manufacturing businesses in the area of Aboh Mbaise local government in Imo state during the 2009/2010 academic session.

The nature of this research made the researcher to formulate research questions and summary of findings were formulated in order to achieve the objective of the study and questionnaires were distributed as a means of data collection. Data collected were analyzed using percentage for research questions and some recommendations were made after proper conclusion.

Table Of Contents

Preliminary Page(s)

• Title page
• Approval page
• Dedication
• Acknowledgment
• Abstract
• Table of contents

Chapter One

Introduction

• 1.1 Background of the study
• 1.2 Statement of problem
• 1.3 Significance of the study
• 1.4 Purpose of the study
• 1.5 Research questions
• 1.6 Scope of the study
• 1.7 Limitation of the study
• 1.8 Definition of terms

Chapter Two

Literature review

• 2.1 Problem of small scale businesses
• 2.2 Causes of the problem of small scale
• 2.3 Effects of the problem of small scale
• 2.4 Strategies for improving the efficiency and prospects of small scale
• 2.5 Summary of related literature

Chapter Three

Research Methodology and Procedure

• 3.1 Population of study
• 3.2 The sample and sampling procedure
• 3.3 Instrument for data collection
• 3.4 Method of data collection
• 3.5 Method of data analysis

Chapter Four

Data Presentation and Analysis and Findings

• 4.1 Introduction
• 4.2 Presentation and analysis of data
• 4.3 Research questions

Chapter Five

Summary, Conclusion and Recommendations

• 5.1 Summary of findings
• 5.2 Conclusion
• 5.3 Recommendations
• 5.4 Suggestion for further study
• Questionnaire
• References

Chapter One

Introduction

1.1 Background Of The Study

In many year, most of developing countries, shared a common epoch of colonialism which made them primarily agricultural exploiting countries and importers of manufactured products.

This economic epoch of began to be substituted with a new one of modern growth soon after the exist of colonialism, particularly, in the year 1950s to 1960s. The most common strategy adopted by most countries to achieve this period of modern growth was import substitution that is industrialization which has as its main goal.

The replacement of traditional imported consumer goods and services with domestic substitute or domestic production of the imported substitution, it is assumed that there is already an existing market for the domestic industrial out put. Thus, high standards of efficiency are often not considered an important requirement for the new manufacturing industry to remain in business.

Small-scale manufacturing enterprises provide the starting only serve as the spring board and training ground for the later, but they are vital of the economic and social life of the community.

As such “academicians, businessmen and other had begun to recognize how small-scale business is really but business in microcosm. As Philip Clark puts “many small-scale businesses are small remain small will not aspire to anything larger because the world in which they function is suited to small scale operation not large ones” this means that environments and nature of products or service has great influenced over the size of the business. Nevertheless, some small-scale businesses go on to secure large scale.

In developing countries like Nigeria, where multinational corporations have tended to monopolies production activities the need for small-scale enterprises owned and managed by Nigerians is perhaps too evident. It is only by the active encouragement given to such enterprises that the nation can begin to diversify her productive activities.

Small-scale manufacturing businesses are the cove of larger scale industrialization and development.
Even in the industrialized nations, the larger corporations of today often evolved from early beginning as small-scale enterprises. Only recently (1984) over 75% of the three million new jobs created in the united states economy could be attributed to the employment opportunities in small-scale enterprises considering the present level of unemployment in Nigeria.

It is easy to see how timely and appropriate the promotion of small-scale manufacturing business will be although national accounts do not provide us with any quantitative data concerning the direct economic contributions made by small-scale enterprises so far.

However, due to the spring up of scale businesses is clear that on the aggregate, they made meaningful contributions to the level of production, the level of employment, and the conservation of foreign exchange earnings.

Small-scale manufacturing businesses about in the Ihitte Uoboma Local Government Area, although bit business overshadows small-scale ones in manufacturing, there are none less than two thousands of small-scale manufacturing industries in the area.

They include among others, manufacturers of soap and detergents, bread, and biscuit, furniture and a host of others too numerous to mention small-scale manufacturing businesses are not without problems which can be fundamental to their birth existence and growth, that generate private and public concern.

1.2 Statement Of The Problem

IT is a known fact that all manufacturing industries concerns be it small-scale, medium or larger scale businesses engage in the production of goods and services that appeals to the society.

An organization does not exist in a vacuum it exists in its environment, which provides resources and limitations, and continue to exist only when the environment desires its outputs and will accept its activities failure to adequately adapt to the environment is a major cause of organizational failure.

The elements in the environment of an organization include persons, physical resources and climate, economic and market conditions attitudes and laws. All those element have their own inherent problems.

The personnel in the organization has to be recruited, trained and above all integrated into the organization work to be done has to be divided into manageable units called tasks and people have to be assign duties with commensurate authority be enable them accomplish the tasks. Infact, the organization has to be managed by competent personnel. To properly manage the organization, the managers have to perform their managerial functions of planning, organizing, directing and controlling the activities of the organization to achieve its main objectives.

Before the products are manufactured funds have to be acquired from both internal and external sources. In the processes of acquiring the necessary funds, the financial manager has to encounter a lot of problems.
Acquisition of funds leads to production of the goods and services.

To produce, raw materials we have to be secured, machines have to be organized in an acceptable manner to the organization and infact, the inventory has to be controlled to avoid over or under utilizations to the manager at different levels, goods and services of the organization have to be marked or converted back into money. The market has to be identified and all marketing plans and strategies employment to market the products produced. Indeed the market has to be studied carefully to know what they want and at what time.

All these means that there are problems at different stages of the organization, the functional area of the organization has their own peculiar problems at different or similar to each other. Some of these problems emanating from the environment in which the businesses operate. This study, will therefore, attempt to find suitable solutions to the numerous problems of small-scale business in Aboh Mbaise local Government Area and at the same time, make useful recommendations that will brighten the prospects of small-scale manufacturing business in general and industrialists.

1.3 Significance Of The Study

The study was an in-depth examination of identifying the problems and prospects of small-scale manufacturing businesses with a view that the study will be of immense importance in many ways.

Firstly, businessmen will find the work of the nature useful as it is hoped that through it, the small scale industries, if properly managed, can give rise to large scale industries.

The findings also were intended to enable the government alleviate the problems so far identified. It will also create a greater employment opportunity to the people in Aboh-Mbaise in general.

The study will nevertheless be of very great importance to the entrepreneurs who will find the work very useful, for it aims at examining their background in order to identify their problems and possible chance of success.

The findings will also be of great importance to economists and students who will like to carry out a research of the nature.

1.4 Purpose Of The Study

The study was an in-depth examination on the problems and prospects of small-scale manufacturing business, with a particular reference to Aboh-Mbaise local government area. Imo state with a view of ascertaining the following:

1. The problems of small-scale manufacturing businesses
2. To find out causes of the problems and prospects of small-scale manufacturing businesses.
3. To identify the effects of the problem of small-scale manufacturing businesses.
4. To ascertain the possible strategies for improving the efficiency or the prospects of small-scale businesses.

1.5 Research Questions

To facilitate the effective investigation on the stated problems, the researcher has formulated the following research questions:

1. What are the problems of small-scale manufacturing businesses?
2. What are the causes of the problems of small scale manufacturing businesses?
3. What are the effects of the problems of small scale manufacturing businesses?
4. What are the strategies for improving the efficiency or the prospect of small-scale businesses?

1.6 Scope Of The Study

The study areas consist of three zones in Aboh-Mbaise randomly selected covering the areas needed.
The three zones selected are Amainyi, Isinweke and Abueke. The study is limited to the problems and prospects of small-scale manufacturing businesses on Aboh-Mbaise Local Government Area.

1.7 Limitations Of The Study

The research has been down but not without some limitation. The researcher was confronted with some inhibiting factors during the time of study such as;

The researcher could have included many firms but because of limited time, the researcher could only study few firms.

In addition to this work, the researcher was faced with other problems such as attending lecturers, take home assignment in preparation for the forth-coming final examinations.

Secondly, it had been financial constraints, more questionnaires could have been printed and more places could have been covered to get more factual position of things.

Thirdly, some managers refused to give the actual information about their financial position as they thought it was for taxation purposes.

Also transportation problems should not be over looked, with the recent increase in transport fairs.
Because of the sensitivity of the topic, as it involves business secrets, the management of most of the companies approached by the researcher bluntly refused to give information especially those pertaining to the company’s balance sheets and income statements notwithstanding the researchers’ guarantee of confidentiality.

The purpose of this was for the researcher to asses the financial performance of the firm through the use of profitability ratios to see the change in the capital structure over time.

1.8 Definition Of Terms

Industry:

This refers to the manufacturing of goods and thus being different from agriculture. It is also a branch of trade or manufacture contracted with distribution and commerce.

Small-Scale Business:

This is industries consisting f small firms ranging from household and cottage establishment of medium sized factories. And this type of industries start business with small initial amount of money.

Infrastructural Facilities:

Things necessary to facilitate industrial operation such as pipe borne water, electricity, good road etc.

Chapter Five

Summary Of Findings, Conclusions And Recommendation

The purpose, the problems and prospects of the study, steps taken in data collection and analysis have been summarized in this chapter

Based on the data analysis, conclusion were drawn from the major issues raised from the statement of problems, followed this, therefore, recommendations and areas of further research study.

5.1 Summary Of Findings

In this study, some of the problems that affect small-scale manufacturing industries are highlighted as follows: lack of capital, shortage of certain raw materials, poor management and planning as a result of low education, loan acquisition problem. Inadequate manpower, lack of market research, lack of efficient transportation and unsteady power supply for their production work

The findings showed the extend to which the above enumerated factors are positively answered.

In research question 1, the findings answer positively that finance is problem facing small-scale businesses. This is to show that small-scale business in Aboh-Mbaise local government area fail due to insufficient capital to run their businesses. It is worthy of note that these industries find it difficult to obtain loan from the financial institution, this is due to the fact that they do not have enough collateral securities to provide most of these entrepreneurs said that they resort to borrowing because sometimes when they apply for loan it is not granted. Small – scale businesses in Aboh-Mbaise L.G.A lack capital to adopt new ideas, this was confirmed in the table one where 91% indicate that they are poor and lack capital most of the investors don’t possess the knowledge to improve their business and this constitute ban inability to give loan to small-scale industries contributed to the failure of their business as positively responded and this show that small-scale industries don’t keep adequate record keeping, therefore, there is no other way a small-scale business organization’s performance can be evaluated. The reason is that, they are not instructed financially to attract bank loan.

The findings also agreed that shortage of certain raw materials created problem to small-scale business. This was confirmed because 94% responded positively to the problem. This is because most of the small-scale businesses lack certain raw materials and was at the industries detriment.

Again, the industries resorted to buying generating plants, machines with the little amount of money they have due to constant takes of electricity, this is not even enough to buy the type of plant that will be suitable for their industries.

Furthermore, the findings also indicated that poor management is a problem to small-scale businesses; this is because most of the executive directors are illiterate. Their failure to consult business attributed to their problems.

Finally, it is pertinent to know that all the states research questions, were founded valid as shown in the tables contained in chapter four because almost all the respondents, respond positively and few of them declined to the questions.

5.2 Conclusion

Conclusively, the results of our finding have proved that there are various problems of small-scale manufacturing businesses in Aboh-Mbaise L.G.A. These problems adversely affect the expansion of the lack of finance, insufficient capital to run these businesses, inability of the government to give grants / aids, negative attitude of banks towards giving loan to these industries.

Inspite of these problems, small-scale businesses still have some prospects.

If the experience India, South Korea and Taiwan are anything to go by, then the prosperity of the Nigerian small-scale industrialist has no limit. The youths of this country are today faced with the greatest challenges of their existence. We must use what we have to get what we want. It is the researcher’s humble submission that the diversification of the country’s economy can early be achieved through the operation and development of the numerous small-scale industries now grossly under-developed and under utilized. Japan had a similar establishments in Japan today started as a one man, bed-room factory before they attained their present status.

What Nigeria needs is the pool of resources by the youths, irrespective of tribe. The coming together of a mechanical engineer, electrical engineer, and accountant, a designer, agruate of marketing and management and an unskilled worker would work wonders if they can use their heads to think.

The researcher hereby, calls on all banks, non-banking institutions, investors, governments and young graduates to put all heads on deck in order to ameliorate the problems of small-scale industrialists. There can be no better period that now to give serious attention to the instruction and implementation of the necessary policies and measures, conclusive to the growth and development of the country’s small-scale and medium scale industries. Only these can save the nation’s economy and solve the unemployment problems.

5.3 Recommendation

An investigation has been made to find out the problems and prospects of small-scale manufacturing businesses in Aboh-Mbaise L.G.A. These problem have been highlighted and examined, having done these, the important suggestion have been made to solve these problems by the government and the individuals concerned, and thereby make the following recommendation, the implementation of which will ensure survival and growth of small-scale businesses.

The management of small-scale businesses should consider the employment of a full-time accountant and administrator of their firms. This will ensure a proper accounts records of the firm’s accounts on a periodical bases to help management to establish how much profit has been made and how much should be reinvested. It is, will also instill confidence on bank in granting loans to them.

Secondly, government should consider the need for the articulation of dynamic and culturally relevant definition of what really constitutes small-scale enterprises in Nigeria, particularly for the purpose of eligibility for preferential by government. This is because of the inflationary effects on the cost of capital. For the effectiveness of any policy, directed at small-scale industries, the researcher believed that any relevant and meaningful definition must take into consideration such other factors as the number of employees, total assets, local contracts, turnover or a combination of two or more of these factors.

Thirdly, that greater effort is required on the part of the federal government of Nigeria to protect small-scale entrepreneurs in the country from unfair competition from multi-national companies and imported foreign products. The government should therefore; involve a policy that would make it mandatory for its agencies and beneficiaries of its contract to patronize the products of small-scale industrialists.

Again, a group of young talented graduates in management, economist, finance, accountancy and engineering should be set up to provide small-scale industrialists with management and industrial consultancy services.
Institutions such as Nigeria institute of social and economic research (NISER) should also be commissioned to conduct feasibility studies and profiles of priority ventures for the small-scale industries, such studies to be made available free of charge to interested small-scale industrialists.

Furthermore, a quality control agency should be instituted to ensure that quality of products of small-scale industries does not fall below standard.

In addition, the establishment of national technology trust fund (NITE) for purpose of finding research and development relevant to small-scale and other enterprises. All companies with turn-over in excess of certain minimum amount should be compelled to contribute a fixed percentage of their profit or turn-over to such a fund which would be used for supporting relevant and applied technological research and development.

Again, it is noted that consultancy organization in Nigeria products feasibility reports that are stereotypical and do not address pertinent issue with respect to the market, technology of production, economic and financial analysis of projects.

It is therefore, necessary in the opinion of the researcher, that government and industrial consultancy and consultancy agencies.

Finally, small-scale industrialists should not sabotage the efforts of government on the development of the sub sector. The national Association of small-scale industrialists should bring to look unscrupulous entrepreneurs who not only produce substandard products, but also defaults in repaying loans granted them by financial institution and government.

5.4 Suggestion For Further Study

For the avoidance of doubt, studies concerning small-scale industries in Aboh-Mbaise local government aria are not restricted to the problems and prospects alone. But the researcher decided to re-restrict the study so as to be able to make a critical research study and to obtain on unbootable information.

Furthermore, this has been the most pressing study in the mind of the researcher right from the onset and since the duration for the study is less than a year.

It is necessary to know first of all what are actually wrong with the industries (small-scale) found in Aboh-Mbaise local government area Imo State, for not living up to expectation, from this standard points, therefore, the researcher whishes to reveal other area or aspects of industries worthy of study to those who may wish to make similar investigation in Aboh-Mbaise in question such as aspect include development of small-scale industries in Aboh-Mbaise local government area.

Another researchable area could be the role of small-scale industries towards the growth and development of Aboh-Mbaise.

Further research could be an investigation into the extent of influence of land tenure system on the establishment of vital industrial projects in Aboh-Mbaise local government area.

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