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STRATEGIC APPROACH TO THE MANAGEMENT OF SMALL BUSINESS ENTERPRISES IN NIGERIA

CHAPTER ONE

INTRODUCTION

 Background to the Study

Small and medium enterprises (SMEs) have increasingly become a powerful engine for economic growth and development in today’s rapidly growing and dynamic competitive global economy (Khan, Obaidullah & Alam, 2011). On the contrary, the performance and effectiveness of small and medium scale enterprises as an instrument of economic growth and development in Nigeria has long been under academic scrutiny. This intense scrutiny has been against the backdrop of the low performance and inefficiency that characterized small and medium scale enterprises particularly in assessing its role on economic growth and development (Small and Medium Enterprises Development Agency of Nigeria, SMEDAN;2010).The future of entrepreneurship is a moving target and a work in progress that is widely expected to lead through innovation and adaptation for the development of entrepreneurs (Snyder, 2011).

The work of Snyder (2011) further noted that majority of job losses in America occurs in large companies which form less than 20% of American businesses while majority of jobs were created  by small businesses. An entrepreneur is an innovative person who maximizes his/her profit by following strategies on venturing into commercial undertaking (Dabson & Wilcox, 2012). The characteristics of an entrepreneur include risk taking, curiosity, imaginative, persistence, goal setter, hardworking, confident, flexible and independent. A study by Kauffman foundation in 2011 examined the relationship between economic growth and entrepreneurship and came to the conclusion that nations with higher level of entrepreneurship activity have better rate of economic growth. Clifton (2009), noted that what the whole world need is a good job and good jobs are unavailable as entrepreneurs have not been able to develop the needed strategies for job creation. Good jobs have become necessary because social contracts between big companies and their employees have changed overtime. Therefore, the best job available is that where you are owner and self-employed (Clifton, 2009). Dabson and Wilcox (2012) noted that most developing countries use entrepreneurship as an economic development of last resort. For Nigeria to develop through the use of entrepreneurship like other developing nations the leaders must take cognizance of the people’s ability to create wealth, the process through which growth is achieved, the community where the activities take place and policies and practices that foster entrepreneurship in both public and private sectors (Dabson & Wilcox, 2012).

An SME according to the Central Bank of Nigeria (CBN) is one whose capital employed excluding land is between ₦1 million and ₦150 million and employs not more than 500 persons (Ebitu, Ufot, & Olom, 2015). Lagosdele (2007), noted that SMEs represent 90% of the enterprises in African, Caribbean and Pacific (ACP) countries. Also, SMEs provide 70% of employment opportunities for the citizens and promote the development of local technology. Oyedijo (2012), have observed that small businesses employ 53% of the private workforce and account for 47% of sales and 51% of private sector gross domestic product. SMEs possess great potential for employment generation, improvement of local technology, output diversification, development of indigenous entrepreneurship and forward integration with large scale industries (Central Bank of Nigeria quarterly publication, (2011).

Entrepreneurial strategies on the other hand is the means by which an organization establishes and re-establishes its fundamental set of relationships with its environment characterized by changes in the pattern of decisions taken by the organization. These strategies include competitive strategy which involves the ability of the organization to achieve leadership status in the dynamic and uncertain market they operate; human resources strategy which capitalizes on the use of the employees to achieve the organizations aims and objectives; market orientation strategy involves aligning the organizational output to suit the market and customers need and adaptation strategy which involves the use of innovation to allow the organization becomes relevant all in a bid to achieving SME development.