MARKETING PRACTICES OF SMALL-SCALE BUSINESSES

CHAPTER 1

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Many people find the potential independence and financial rewards that can come from owning their business. Some however, hesitate to pursue their dreams because they do not think they have enough education, experience or money while some are simply afraid they might fail. Others cannot accept the idea that they can change their lives and that people like them could ever own a business. For some still, going into business is to eke-out living because they have lost their job and there are no other really available ways to earn a living or even survive.

Whatever the reason, owning your business could be one of the most challenging, satisfying, demanding and rewarding step one takes in life. However, there are real risks and difficulties in starting any new business. These necessitate a proper feasibility study and better marketing practices. Many experts recognize marketing practice as a major problem and relevant solution to the growth of small-scale business.

Small firms marketing practices have been assessed in the context of existing models based on large firm practices. Probably, this is the reasons why small-scale marketing practices have generally been criticized as non-traditional, informal, short-term, and non-strategic. However, given that the marketing discipline is undergoing a transformation in some part of African countries with new paradigms emerging as relationship marketing, it is now appropriate to assess small firm practices in a broader and more contemporary perspective. To this end, this study examines the marketing practices of small-scale manufacturing business.

Marketing practices of small-scale business involves the practical application of the marketing elements by small business enterprises. The new paradigm marketing concept as it relate to relationship marketing.

The starting point for this study was a conversation about marketing in small firms, where the researcher found out that they agreed with Hisrich and Peters (1992) comment that entrepreneurs often have a limited understanding of marketing. Yet, as Coviello et al (2002) have noted, this may be because such criticisms are based on the practices of larger firms. Furthermore, there may be an issue about the imposition of academic norms of marketing which ignore many of specific elements of the contents of small firms marketing, small firms may not practices marketing but many, nonetheless survive and grow. In any case, study agrees that most small firms seemed to use a relationship approach to marketing.

In both the developed and developing countries the government is turning to small industries as a means of economic development and a veritable means of solving problems. It is also a seedbed of innovations, inventions and employment. At present, in Nigeria small-scale business assists in promoting the growth of the country’s economy, hence all the levels of governments at different times have policies which promote the growth and sustenance of small-scale business. Small-scale industry orientation is part of the Nigerian history. Evidence abounds in the communities of what successes our great grandparents made of their respective trading concerns, yam barns, cottage industries, and the like. The secret behind the successes of a self reliant strategy does not lie in any particular political philosophy, so much as the people attitude to enterprise and in the right incentive is adequate enough to make risk worthy business a necessity for the nation. There had been many policy actions by the government, governmental agencies and the private sector to promote Small and Medium Enterprises (SMEs) in Nigeria.

SMEs have contributed greatly to Nigeria development by provision of employment, marketing of goods and services and, growth and development of rural areas. It has also brought about the growth of indigenous entrepreneurship in Nigeria.

A business whether small or big, simple or complex, private or public, is created to provide competitive prices. Business in Nigeria has been classified as small, medium and large. However, a small-scale industry can be defined by the criteria of project costs, capital cost, turnover by the employee etc. The Federal and State Ministries of Industry and Commerce have adopted, the criterion of installed fixed capital to determine what small-scale industry is, in this respect the value has varied from N60,000 in 1972 N159,000 in 1975, N250,000 in 1979 and N500,000 in 1986, to a fixed investment not more than N2,000,000 (two million naira) in 1992. These figures are exclusive of building and subject to government determination and land pervading objectives of public policy. In the wake of SAP and SFEM, this value has now been reviewed and subsequently increased to five million naira. Since this happened, there may be a need to classify the small-scale industry into MICRO and SUPER MICRO business, with a view to providing adequate incentives and protection for the former.

In the meantime, any business or enterprise below the upper limit of N250,000 and whose turnover exceed that of a cottage industry currently put at N500,000 per annum is small-scale industry. The National Directorate of Employment (NDE) concept of a small-scale industry had been fixed to a maximum of N35,000. However, there are many enterprise in Nigeria categorized as small businesses. Most of them are in the commercial sector and there is also trend now towards the service industry, hotels, restaurants, fast food etc.

Small-scale business, small-scale industries and small-scale entrepreneurship are used interchangeably to mean a small industry firm and will be used as such in this paper. Its deliberation was to refer to the operational definition. In Nigeria and worldwide the seem to be no specific definition of small business different authors, scholars, and school have different ideas as to differences in capital outlay, number of employees, sales turnover, fixed capital investment, available plant and machinery, market share and the levels of development these feature equally vary from one country to another.

1. In Nigeria, Third National Development Plan defined a small-scale business as a manufacturing establishment employing less than ten people or whose investment in machinery and equipment does not exceed six hundred thousand naira.
2. The Central Bank of Nigeria in its credit guidelines, classified small-scale as those businesses with an annual income asset of less than half a million naira (N500,000).

• The Federal Government Small-scale Industry Development Plan of 1980 defined a small-scale business in Nigeria as any manufacturing process of service industry with a capital not exceeding N150,000 in manufacturing and equipment alone.

1. The Small-Scale Industries Association of Nigeria (1973) defined small-scale business as those having investment (That is, capital, land, building and equipment and of up to N60,000 pre SAP value) and employing not more than fifty persons.
2. The Federal Ministry of Industries defined it as these enterprises that cost not more than N500,000 (pre-SAP value) including working capital to set up.
3. The Centre for Management Development (CMD) definition on small-scale industry in the policy proposed submitted to federal government in 1982 defined small-scale industry as a manufacturing, processing or servicing industry involved in a factory at production type of operation, employing up to 50 full-time workers.

Lastly, in the United State, the Small Business Administration defines a small business as one that is independently owned and operated is not dominant in its field, and meets employment or sales standard develop by the agency. For most industries, these standards are as follows; this also shows the small trend as in Nigeria although the exchange value makes the financial criteria to be different.

1. Manufacturing: Number of employees range up to 1500, depending on the industry.
2. Retailing: Small dollars
3. Wholesaling: Small if yearly sales are not over 9.5 to 22 million dollars.
4. Services: Annual receipt not exceeding 2 million to 8 million dollars.

This in general, the specific characteristic criteria used in describing small-scale business are:

1. The number of people employed. It is usually a small business because four people are employed.
2. Annual business turnover-because initial capital is low, then annual turnover will also below

• Local operations – for most small firms the area of operation is local, the employees live in the community in which the business is located.

1. The sales volume is minimal.
2. Financial strength is relatively minimal.
3. The manager are independent and they are responsible only to themselves.

• The managers are also the owner.
• The owner of the businesses actually participates in all aspects of the management (that is, the management of the enterprise is personalized).

1. They are relatively small when compared to other industries
2. The amount of employees is relatively small when compared to the bigger companies in a similar venture.
3. The capital is mainly supplied by an individual.

• They usually have one, but many have several shop location all in the same city or metropolitan areas.

• STATEMENT OF THE PROBLEM

Nigeria rich human and material resources endowment give her the potential to become Africa’s largest economy and a major player in the global economy. But much of its potential has remained untapped, putting attainment of the millennium development goals by 2020 in jeopardy.

Without a doubt, the private sector and of course Small and Medium Enterprises (SMEs) is the primary engine of growth of nation’s economy, in other to meet vision 2020. The very low productivity of the private sector and the lack of diversification of the economy are due mainly to the inhospitable business environment, infrastructure deficiencies, poor security of lives and property and the use of obsolete business methods all acting as constraint. But many experts recognize marketing as a major problem and relevant solution to growth of small-scale business. Hence, what are the marketing practices of small-scale manufacturing businesses in Akwa Ibom State?

1.3     OBJECTIVE OF THE STUDY

The general objective of the study is to determine the set of marketing practices adopted by and responsible to the success and growth of the small business sector in Nigeria, with particular reference to Uyo metropolis.

To meet this general objective, the study would address the following specific purposes.

1. To examine whether the success of the thriving nature of small-scale manufacturing enterprise has a direct consequence of the marketing practices adopted by the operators.
2. To investigate and appropriately assess small firm practices in a broader and more contemporary perspective whether it conform with relationship marketing and marketing concept.
3. To ascertain whether the incidence of business failure suggest a deficiency in the application of the appropriate marketing practices.
4. Identify how small-scale business apply the 4”I”s marketing concept in their day to day operations.
5. Evaluate how much socio-economic contributions the small-scale business makes to the well being of Uyo in particular and Nigeria in general.

1.4     RESEARCH QUESTIONS

1. Does the marketing practices of small-scale business in any way have influence on the overall success of the sector?
2. To what extent has the small-scale manufacturing enterprise practices modern marketing concept including relationship marketing?
3. In Akwa Ibom State is marketing of finish goods a problem facing small-scale manufacturing businesses?
4. What are the marketing strategies used by small-scale businesses?
5. What effect does marketing has on profit level of small-scale manufacturing enterprise?
6. What effect does relationship marketing has on consumer patronage?
7. To what extent have the small-scale business operators in AKS utilize marketing concept in their operations in terms of 41s of small business marketing? namely:

*        Innovation: (increasing adjustment to products)          service and market opportunities.

*        Identification (of market targets)

*        Interactive (marketing methods)

*        Informal Information (gathering through network)         or           small  group of individuals person or shareholders

1.5     STATEMENT OF THE HYPOTHESES

The following hypotheses will be considered in the course of this research work.

1. HO: There is no significant relationship between marketing  practices and the profit level of a small-scale business.

1. HO: Small-scale business do not apply relationship marketing in  their operations.

1.6     SCOPE AND LIMITATION OF THE STUDY

The study covers the following area of project development.

1. Relationship marketing strategies
2. Overcoming customer complaints/objections and handling them.

• The role of small-scale industry in national development in Nigeria.

1. Marketing problems of small business enterprises
2. The impart of environmental forces on the performance of small-scale business.

The study is concerned with small-scale businesses who operate within Uyo metropolis, therefore a study of this nature would by implementation have spanned beyond Akwa Ibom State and would have required duration exceeding two years to enable adequate survey to be carried out in ascertaining the marketing practices across the length and breath of the country, Nigeria.

The limitation of the study therefore include time, geographical delineation and inadequate financial resource for logistic, the general lukewarm attitude of respondent also constituted a hindrance to the study. The lack of material for the study also equally, limited its scope. Such materials included reference work done in the field and related fields.

1.7     SIGNIFICANCE OF THE STUDY

The results of the study would provide an insight into the kind of marketing practices adopted by small-scale in accordance with the traditional expository tendencies of marketing concept, which focuses in satisfying the need and wants of target market profitably. This knowledge would no doubt help entrepreneurs, academics, scholars and marketing practitioners alike to keep abreast of current marketing practices of small-scale business.

Essentially, the study would contribute immensely to the expansion of and improvement of the theoretical base of marketing teachers in terms of practices common in small-scale businesses.

Consequently, the marketing graduates would through the help of this study be able to understand the marketing implications in small-scale businesses and also be aware of attracting, maintaining, building customers’ relationship and also efficiently and effectively handling customers’ complaint. Most especially translate theories into practices especially should he/she decides to run a small business outfit.

1.8     ORGANISATION OF THE STUDY

The research study is organized into five chapters Chapter one being the introduction contains: background of the study, statement of the problem, objectives of the study, research questions, statement of the hypotheses, scope and limitation of the study, significance of the study and the organisation of the study.

Chapter two is a review of related literature, which leads to Chapter three that presents the design of the study. In Chapter four, the data collected is presented, analyzed and interpreted through the use of table and figures to fittingly explain the findings. Chapter five is the final chapter and contains the summary, conclusion and recommendations.