Factors Affecting the Growth of Small Medium Enterprises - Research Proposal Example

Factors Affecting the Growth of Small Medium Enterprises Contents Contents 1 CHAPTER 1 3 1.1 Background 3 1.2 Problem Statement 4 1.3 Research Question 4 1.4 Objectives 4 CHAPTER TWO: LITERATURE REVIEW 5 2.1 Introduction 5 2.2 SMEs Contribution to Economy of a country 5 2.3 UK Fast Food Industry 5 2. 4 Characteristics of small and micro Enterprise Performance 6 2.5 factors affecting SMEs business success 7 2.6 Theoretical Framework 7 CHAPTER THREE: RESEARCH METHODOLOGY 8 3.1 Introduction 8 3.2 Preliminary Study 8 3.3 Research Approach 8 3.4 Research design 9 3.5. The location of the study 9 3.6. The target population 9 3.7 Sampling techniques and sample size 9 3.7.1. Sampling techniques 9 3.7.2. Research instruments 10 3.7.3. Observation 10 3.7.4. Questionnaire 10 3.7.5. Interview Schedules 11 3.6 Ethical Consideration 11 3.9 Data Processing and Analysis 12 Research Timing /2014 – 2015/ 13 References 14 APPENDIX 17 CHAPTER 1 1.1 Background Despite the development of a country (developed or developing), SMEs remain crucial for its economic development (Mazzarol, Volery, Doss, and Thein, 199). In developed market economies SMEs also account for a big percentage of employment and output (UNECE, 2003). In this context, one major contribution of SMEs is alleviation of poverty via job creation. On a more general perspective, SMEs sector’s importance in economic growth is reflected in its contribution to GDP (Gross Domestic Product). This may explain why there has been a growing body of literature on the SMEs sector in the late 20th century and early of 21st century. However, factors affecting SMEs are yet to gain much attention as in most cases big companies have been subject of research (Ghosh and Kwan, 1996; Kauranen, 1996 and Pelham, 2000). The 1.2 Problem Statement Unlike large companies which have advantages of scope, scale, resources, and opportunities, SMEs experience a number of problems. SMEs face a lot of uncertainty when there are environmental changes. They have limited resources for acquiring information concerning the market and altering the enterprise’s course. Their response to environmental changes is much different from that in their large counterparts. Large companies can do away with a non-performing business area in their portfolio, but often this is not possible in a single-business organization. The alternatives for responding are constrained by the strategic choices and resources of the firm, and the opportunities available in the industry and business place. Moreover, these challenges may vary between the stages of development of the organization. 1.3 Research Question The research question addressed at the end research. What are the determinants of SMEs business success? 1.4 Objectives The main aim of this study is to identify factors that determine business success of SMEs. Specific objectives of the study include; To find out the factors affecting SMEs business success To find out the extent to which these factors affect SMEs To find out causes of failure of small business enterprise CHAPTER TWO: LITERATURE REVIEW 2.1 Introduction This chapter reviews the available related literature. This focuses on business success in terms of finance, reputation, survival, and growth among other success indicators. 2.2 SMEs Contribution to Economy of a country SMEs form a crucial portion of the economy: the European Economic Area has 20 million SMEs. The Department of Trade as well as Industry (DTI) approximates that there existed 3.8 million SMEs within the UK at the start of 2002, creating jobs for 22.7 million people, with an approximated yearly turnover of £2200 billion, one of the world’s highest records (DTI, 2003). In the food industry of UK, 99.8% of the restaurant and hotel sector are SMEs. Around 87.7% of business within this sector in micro-businesses creating jobs for less than 10 people (DTI, 2003). 2.3 UK Fast Food Industry The UK population has well embraced fast food culture. According to Brown (2005, p. 3) the UK fast food industry has a yearly turnover of £7.2 billion, made by serving 1.5 billion meals annually in 20000 outlets, offering employment to almost 200000 people. Humphries (2010) reports that the UK fast food market is double Germany’s size, and triple French market’s size. This indicates the leading role of UK in the fast food market. According to Fastfoodnation-online (2010) the UK in 2008 was the country recording the highest number of fast food restaurants/outlets per individual globally with Australia in second, with the United States in third, and amongst these a quarter of the entire fast food outlets were located in England alone. A similar study in 2008 indicated that 45% of the people within UK were more probable to concur with the fact that they favored the fast food taste to give it up (Fastfoodnation-online, 2010). Furthermore, the financial crisis that followed served to fuel about 8 percent growth of the fast food industry within the UK (Kuhn, 2009). Moreover, the fast food market in UK grew by 5.2% to get to a value of $2.2 billion in 2008 (Kuhn, 2009). 2. 4 Characteristics of small and micro Enterprise Performance According to Papadiki and Chami (2002), many typical characteristics of small enterprises are determined by factors like size of organization or independent ownership (family of small group of people, age and size of the business and its location. Age of a firm determines the survival, growth, decline and death the liability of newness that makes new small enterprises face a greater risk of survival than older firms (Staines, 2005). Stokes and Wilson (2010) confirms that enterprise size, as well as growth rates, are inversely related to the probability of closure. Stokes (2005) proposed experience and education were “antecedents” to the decisions to start a company and ultimately affected performance. Testing the effects of education on business ownership in a longitudinal study, Stokes (2005) reported that the levels of staying and reentering a business increased with higher levels of education. 2.5 factors affecting SMEs business success After reviewing a number of literature Philip (2010, p. 6) arrived at 6 main factors that affect business success in SME sector. The factors include: SMEs characteristics, Management and know-how, the way of cooperation and doing business, resources and finance, products and services, and external environment. 2.6 Theoretical Framework In any economy, the performance of SMEs depends on 6 factors are as below: Performance of small and medium enterprise Finances Level of education Age of the business Products and services Location of the business External environment CHAPTER THREE: RESEARCH METHODOLOGY 3.1 Introduction This chapter describes in an explicit manner the procedures and strategies that were used in carrying out this study including: research design, study location, target population, sample and sampling procedures, research instruments, pilot testing of the instruments, data collection process, and data analysis procedures. 3.2 Preliminary Study For the purposes of identify errors, challenges and alternative testing methods a pilot study involving 5 respondents will be conducted. The preliminary tests will help test the appropriateness of the questionnaires and their relevance in the study (Zehdnicker, 2002) before they are dispatched for the final study. 3.3 Research Approach In this survey, both the inductive (qualitative data approach) and deductive (quantitative data approach) research approaches will be applied. The use of both research approaches is justified by the need give room for empirical analysis of data obtained for the study (Zehdnicker, 2002). Data collection will be achieved by personal delivery and mail. The sampled companies will be contacted in advance via telephone. 3.4 Research design This research will be done using a descriptive research survey design, because it allows the researcher to use both qualitative and quantitative data. It is also fundamental to highlight that research design allows the implementation of the qualitative and quantitative information to identify, analyze, and interpret different conditions that are seen to exist in relation to the policy guidelines. This research design always entails making comparison of what is expected and what is present at the moment. The findings will then be presented in form of tables, pie charts, and bar graphs. 3.5. The location of the study This study was located in Westminster, London 3.6. The target population The target population is small-scale restaurant owners in Westminster. Small-scale restaurant operates as either small scale or medium scale traders. A sample of 50 small-scale restaurants will be used for the study. 3.7 Sampling techniques and sample size 3.7.1. Sampling techniques This study will apply simple sampling techniques. This type of sampling allows an equal chance for each individual to be picked for interview. This technique of sampling also allows the respondents to be picked just by chance. This type of sampling technique will be selected due to the fact that the study dealt with a larger population. Westminster as a study location has a very big populations sample to be just and representational simple sampling technique is the best. Simple random sampling is very appropriate because it will give each person equal chance to be chosen. Using simple random sampling technique also has an impact on improving the quality of results attained. 3.7.2. Research instruments The research instruments that will be applied in this study include: questionnaires, interview schedules and document check lists. The use of various number of research instruments is always encouraged to ensure that the data collected is accurate and holistic. Expert opinion will be sought from the relevant personnel to ascertain the suitability of the of the research instruments. The research instruments are therefore explained as follows. 3.7.3. Observation Observation as a research instrument will be employed in this research to assist in collection of primary data. This method is very reliable due to the fact that it is less costly and easy to carry out. It involves viewing of the situations as they appear in the site. Direct observations will enable me collect data which I believe is default to gather when using other instruments of data collection. 3.7.4. Questionnaire This study will use self-designed questionnaire to collect primary data of the research. The construction of the questionnaire will take into account various factors that were in accordance with the objectives of the study as outlined in section two. It must be noted that any questionnaire that contain questions, which are clearly constructed questions, is always considered a very fundamental research tool. The questionnaire used in this research was properly and carefully constructed for the respondents to understand. 3.7.5. Interview Schedules Apart from the questionnaire, the researcher will also use interview schedule to collect data. The use of interview schedule will be considered because it is very useful in collection of corroborative information. The interview schedules always compliment the questionnaire through corroboration of the quantitative information. The data collected will be used by the researcher to analyze and study and to approve the hypothesis of the study. 3.6 Ethical Consideration In order to abide by the requisite ethical guidelines and regulations an information sheet will be availed to respondents prior to the administration of the questionnaires. The sheet provided an overview of the survey and gave the respondents the freedom to pull away from the study at any time they want to do so based on any reason known to them. Measures will also be taken to conceal the identity of the respondents to prevent them from being victimized by any person as well as to enhance the confidentiality of the information they provided for the purpose of the study. No details of the participant will be included in the final report and information that will be provided by the respondents that is not required to be used will be destroyed. The steps were meant to ensure compliance with proper legislation as suggested by Saunders, Lewis, and Thornhill (2009). 3.9 Data Processing and Analysis The data entry process will commence once the questionnaire has been derived from the field. Qualitative data will be analyzed manually through summarizing the information into themes followed by categorization then codding. The data will then finally be analyzed using SPSS (Statistical package for social scientist) version 11.0 to improve the accuracy of the findings. 4.1 Data and data analysis The data collected will then finally be analyzed using SPSS version 11.0 to improve the accuracy of the findings. Reliability of the data will be established using the Cronbach’s Alpha coeffient. After establishing the data collected is internally consistent and stable, multiple regression analysis will be applied to determine whether the six independent variables have a significant effect towards SME business success in London. One-Way ANOVA will be used to determine whether demographic factors have an effect on SMEs business success. 4.2 Limitations of the study It is not easy to gain access into the research-target companies, interviewing senior managers in chosen companies, requires more effort and time for the researcher to coordinate the interview. Moreover, most senior managers and even employees are likely to be very busy. In addition, being highly competitive companies, this might cause hide significant data that may risk their trade secrets. 4.3 Timetable Research Timing /2014 – 2015/ Sem1 Sem2 Sem3 Sem4 Sem5 Sem6 Ch1 Background & Introduction Chapter 2 Chapter 3 Literature Review, and Theoretical Framework Chapter 4 Chapter 5 The Research Design & Methodology Reviewing of the Literature Preparation of Data Collection Methods (Interviews) Chapter 6 Collection of Data (Case Study) Analyzing & Discussion Chapter 7 Review of the Literature Conclusions and Thesis Submission References Brown, S, 2005, “Strategic Operations Management”, Butterworth-Heinemann Department of Trade and Industry, 2003. Small and medium-sized enterprise (SME) statistics for the UK 2002. London: DTI. Ghosh, B., and W. Kwan., 1996. An analysis of key success factors of SMEs: a comparative study of Singapore/Malaysia and Australia/New Zealand, in The 41st ICSB World Conference Proceedings I, 215-252. Stockholm, Sweden, June 16-19. Humphries, J, 2010, “Fast Food Market Share”, Next Generation Food, Accessed February 28, 2014. Available at: http://www.nextgenerationfood.com/article/fast-food-market-share/ Kauranen, I.,1996. The start-up characteristics of a new entrepreneurial firm as determinants of the future success of the firms in the short term and in the long term. Journal of Enterprising Culture, 4 (4), 363-383. Kuhn, K, 23 November 2009, “Recession fuels 8% growth in UK fast-food industry”, Caterersearch.com Accessed February 28, 2014. Available at: http://www.caterersearch.com/Articles/2009/11/23/331036/recession-fuels-8-growth-in- uk-fast-food-industry.htm Mazzarol, T., Volery, T., Doss, N., and Thein, V., 1999. Factors influencing small business start- ups. International Journal of Entrepreneurial Behaviour and Research, 5(2), 48-63. OECD, 2004. Promoting Entrepreneurship and innovative SMES in a global Economy: Towards a more responsible and inclusive globalization, Instabul, Turkey 3-5 organization for Economic cooperation and Development. Paris: Available at:< http://www.oecd-instanbul.sme2004.org> [Accessed 31 January, 2014] Orser, B. J., Hogarth-Scott, S. & Riding, A.L., 2000. Performance, firms size and Management problem solving . Journal of small Business Management 38 (4), 42 Papadiki, E and Chami, B., 2002. Growth Determinants of Micro-Businesses in Canada. Small Business Policy Branch Industry Canada. Available at [Accessed 31 January, 2014] Pelham, A., 2000. Market orientation and other potential influences on performance in small and medium-sized manufacturing firms. Journal of Small Business Management, 38 (1), 48-67. Philip, Mathew, 2010. Factors Affecting Business success of small and medium enterprises (SMEs):APJRBM, 1(2), 1-15 Staines, A. 2005. Double Trouble: The Growth of Small & Medium-Sized Enterprises in Small Island Economies. Available at< www.maltaenterprise.com/filebank/Nisson%20-%20Lancaster%20University.pdf> [Accessed 31 January, 2014] Stokes, D & Wilson, N., 2010. Small Business Management and Entrepreneurship. United Kindom. South-Western. Stokes, D. 2005. Small Business Management: An Active – Learning approach.. London: AP Publication Ltd. UNECE, 2003. Conclusions And Recommendations of the Expert Meeting On How To Become Suppliers Of Large Enterprises And Transnational Corporations, held in Geneva on 20- 21March, 2003. Zehdnicker, M., 2002. The Growth Gap: A small enterprise phenomenon. El Salvador: ANEP/GTZ. Available at: www.die.gdi.de/.../56a1abebb4eded3dc1256bd900310ea/de8f4dd48fcf613dc1256 [Accessed 31 January, 2014] APPENDIX QUESTIONNAIRE SOCIO DEMOGRAPHIC PROFILE (Tick where appropriate) How old are you? ____________ Years. Gender Male Female What is your marital status? Single Divorced Married Widowed Separated What is your highest level of education? Primary education Secondary education Tertiary education No formal education What is your family size? 1-5 5-10 10 and above No response SMALL ENTERPRISES PRACTICES (Tick where appropriate) What level of loan can you access? Ksh. (0-100000) Ksh. (100000-250000) Ksh. (251000-500000) Above Ksh. (500000) Where is your Business located Market Centre Home Roadside far from the road Hawking How old is your Business?------------------ What is the level of insecurity in your business location? Very High High Moderate Low Read More