Small Business Enterprise: Wood Processing Enterprise in Nigeria - Case Study Example

Small Business Enterprise Table of Contents Introduction 3 Small Businesses 3 History and Background of the Business 4 Brief Information about the Business 5 Push and Pull Factors of the Business 5 The future of the Business 7 The target market of the Business 8 Managerial Strategy of the Business 9 Conclusion 10 References 12 Bibliography 13 Introduction The project begins by making an analysis of the nature of small businesses. This is done by choosing a particular small business in real and by describing its workings and operations. The project discusses about a wood processing enterprise in the Ondo state in Nigeria. It is backed by the unit’s history and background. General information about the company is provided which includes the strength of the organisation and the profits enjoyed by the business. The next part describes the strategies of the business, like the pull and push factors used. Then the project tries to explore the future prospects of the business. It identifies the areas in which the small business could venture and provides reasons for its success in those areas. It tries to identify the market that should be the main target of the business. Lastly, the project makes an analysis of the managerial strategy that should be employed for the success of the business Small Businesses Small businesses are essentially required in an economy as they support and enhance industrialisation of the nation. They help to acquire competitive gains and catalyse the process of development. These organisations primarily focus on research and development which results in the production of new and innovative products and the use of new and superior technologies (Berte, Rodrigues & Almeida, 2010, p.1). The workforce remains low as compared to the large enterprises. These businesses generally employ less than 500 employees (Headd, 2000, p.1). However, these firms are characterised by shortage of resources. Resource shortage influences their strategy formulation, especially the marketing and positioning strategies. Small businesses are often the young firms and are likely to be located in the rural areas. They are predominantly present in industries “with lower economies of scale” (Headd, 2000, p.1). The educational requirement for such firms remains different from the large ones. A large percentage of the employees have degrees below the level of graduation. Very few of them are said to have reached beyond the graduation level. These businesses are generally risk averters and their possibilities if failures due to taking risks also remain high. They also tend to be short sighted and aim to gain in the short term (Trevisan, 2009, p.3). History and Background of the Business The wood processing enterprise was set up in the Ondo state which is a place where a number of small enterprises have been established. The wood based small enterprises accounts for 44% of the total labour force in this rural region. The common characteristics of these enterprises are that they are extremely small and heavily reliant on the entrepreneurs and family labour. The operations are also carried out using simple and common technology. Logging, furniture and carpentry were among the predominant and commonest professions in the place. This provided the basis on which the wood processing enterprise was set up (Adedokun, Oyun & Adetogun, 2005, p.2). The place is also characterised by the presence of a large market where the large scale forest industries are unable to reach. This increases the requirement of the small businesses and consequently creates a large market for them. For a long time the small industries in the region were neglected. The world was undergoing industrialisation aggressively and the major focus was on the large enterprises. However, now the situation has changed. The attention has now shifted towards the wood based enterprises in the rural regions. This is the reason why this particular enterprise was chosen to be established in the area. Brief Information about the Business Because of the increase in attention towards this sector, this business has been able to transform itself in terms of diversity, production and sophistication. It employs 100 numbers of employees. The employees are recruited from adjoining areas only. This allows easy commutation for them. It also increases the attractiveness of the business as a place of work. The business requires skilled and semi skilled labour which can be easily available from the local rural areas. The primary reason behind growth of this business was the high demand for wood processed products. Forest products have grown in importance and popularity over the years. The attractiveness of wood products has also improved. Besides, wood products have become a necessity in the households present in both the rural and urban areas. This has catalysed the growth and success of this business. The increase in demand for the business’s products reflects in the increased sales revenue of the same. The business has also been effective in providing employment to a large portion of the rural workers. Most importantly, success of the business has evolved as a major contributor towards the economic development of the region. Push and Pull Factors of the Business The enterprise uses a number of pull and push strategies in its business. The push strategy is meant to use channels of distribution which are used to distribute the product in the market place. This involves adopting strategies which would make the company’s products more attractive in the market place and reach the target market more easily. “The pull strategy requires direct interface with the end user of the offering” (Business Plans, 2011). Advertising and other promotional strategies finds relevance in this strategy. The objective is to pull the prospects into the channel outlets which would create and increase the demand for the product (Business Plans, 2011). In this business the pull factor has a major role to play. The function of the suppliers is greatly enhanced and the customer is tempted to take further steps into the process of buying. In this business the supplier takes steps to increase interaction with the buyer and this interaction tempts the buyer to purchase the product (Bissantz, 2001, p.1). In this business there are a large number of potential customers. Customers like those purchasing wood products from hotels and other organisations usually buy products in lots. For such customers the push strategy would include lowering of price. This would make the purchase of the product more lucrative and cost effective for the customer. This business uses the push strategy by firstly making an assessment of the requirements of the client and their preferences. Every customer is not treated in the same way. For a customer who buys a large number of products from this business, the strategy for him would include giving few pieces of the product for free or at subsidised prices along with the product lot. For a customer who buys a rare product from this enterprise, the push strategy would include predicting “the development of the customer in order to find out the chances when a new or different need, that he can satisfy, appears” (Bissantz, 2001, p.3). It is critical to maintain fair and healthy relationship with the customer, so that when he feels the need of a particular product he would think of purchasing the product from this enterprise. That is why this business tries to maintain good relationship with its customers and in this way it has been able to gain the loyalty of the same. The pull strategy, on the other hand requires great investments by the producer. Because of the shortage of funds, the push strategy is preferred more than the pull strategy. The pull strategy involves investments in sales promotion and advertisements (Economy Point, 2006). Such promotional strategies are less used by the small businesses or enterprises. The display of products is the only form of push strategy used by the wood processing enterprise. The various products produced are displayed at the business stores. The customers visiting the stores get attracted to the products and this creates a demand for the same. The future of the Business The future of this enterprise looks bright as the demand for wood products has been increasing gradually and is expected to rise in the future as well. The developed countries account for the consumption of a major portion of the wood products in the world. However, there are also certain conflicting pressures on the enterprises. However the government of nations have been trying to resolve the dilemma. Certain forest management techniques have evolved and technologies for the processing of forest products have increased which have produced a range of solutions for the problem (FAO, n.d.). A critical aspect of the success of the enterprise would depend on the extent of international trade expansion. The expected flow of wood products flowing from the developing nations to the developed nations is said to increase year by year (FAO, n.d.). This would create opportunities for the developing nations. The OECD countries are the primary consumers of wood products while the developing countries are the main suppliers. Thus the situation looks profitable for the wood processing enterprise in Nigeria. Thus it can be assured that the demand for the enterprises’ wood products would remain in demand in the market. The furniture market was hit by the economic turmoil. However, the condition is gradually improving. The “US consumer confidence on furniture purchasing appeared to improve” (Global Wood, 2010). In a survey it was found that the orders for residential furniture and shipments have been improving since 2010. There was a rise in demand for furniture by 9% in March 2010 since the previous year. The survey also revealed that the number of orders for furniture was much higher than the previous year. The recovery of the US market, improvement in the consumer spending and increase in demand for wood products from the wood importing nations of the world are some of the causes of the bright prospects of the enterprise (Global Wood, 2010). The target market of the Business Firstly it is important to create and expand the market within the borders of the state. Since it is small business, it would be difficult to gain recognition in the initial stages. The furniture stores within the state could be targeted. These stores would have large number of visitors who would like to buy the furniture. Since it is a small business and produced furniture which were not very expensive, it would be successful in drawing the middle class of the society. It would not be judicious to produce big and luxurious products as it would be not be able to find a market for itself. Rather the products produced should be meant to meet the regular needs of the middle class households. This is the way it would have to gain reputation in the field of wood production. After that it could increase links with the local stores providing products in wholesale to the hotels and other organisations. It could also display its products in the local fairs. Fairs would have a large number of visitors of different classes. This would be effective in getting a large market consisting of people from different classes and sections in society. This would also act as a development process where it would have to design strategies to fight competition in the regional markets. Managerial Strategy of the Business Small businesses are generally prone to getting affected by the economic fluctuations. A downfall of the market conditions requires them to cut back on prices and production. They also take more time to recover. It is difficult for them to survive from ill effects of the external economy. One of the most important strategies to be adopted by this enterprise is to create a niche market for itself and choose the market which is untapped. This would be effective in gaining an extra edge over its competitors. It would also be effective in creating a market which would comprise of a large number of loyal customers. Client retention would have to be important aspect of the strategy. Simple creating a niche market would not be effective. The enterprise would have to undertake after-sales strategies. This would help to build up valuable relationship with the client. The enterprise should not be focussed towards only money making. Customer satisfaction is an important aspect it would have to look into. In case of ill-manufactured products, the enterprise must provide a replacement without cost or rectify the problem. This would be effective in improving relationship with customers and also building good will for the enterprise. It is also important the enterprise develops a strategy which is different from that of its competitors. This would be most applicable for its pricing strategies. The price should be kept at little lower than that of its customers in the initial stages of the business or during downturns. However, this would not imply degradation of quality of products of the same. The focus should be to build a favourable image in the minds of the customer. Finally the enterprise must try to evolve as a favourable employer. A company’s worth is determined by the king of employees it employs. This enterprise should not compromise on the quality of workers it employs. Rather it should employ efficient and skilled men. People with knowledge and expertise should be preferred to the less skilled men who are available at low wages. Wages should be kept at par with the industry standards or a little higher than that. The pay packages must also be result oriented as this would provide an incentive for employees to perform better. This would be effective attracting employees of better qualities and expertise. A proper training program should also be developed and implemented to attain best quality of services from the employees. Training programs should be aligned with the business objectives of the enterprise. It should also be imparted in accordance to the skill requirements of employees. Employees should be trained to provide good customer services and relationship enhancement. Conclusion While doing the project it was found that the wood processing enterprise was established as a result of the fact the world’s demand for wood products were rising fast. Also Ondo was a state which encouraged and witnessed the growth of a number of small businesses. These businesses also had a large market for their products. The availability of skilled and semi skilled men was also high in the region which propelled the growth of the enterprise. Expansion of trade of wood products between nations has further acted as an incentive for this establishment. The push strategy finds greater preference in this business and is applied in the supply chain. This increases supply of products of the business. The pull strategy involves large investments in promotions which are not considered to be economical for a small business. The enterprise targets the middle class society and designs products for regular usage in the middle class households. It also targets the regional retain stores where the products could be displayed to a large customer base. Finally, the enterprise’s managerial strategy would include designing a price and development strategy which would be distinctly different from its customers. It also aims to emerge as a favourable employer and design an incentive system for its employees. Lastly, the focus must be provided in developing a training program to improve performance of employees. References Adedokun, M. O., Oyun, A. & Adetogun, A. C. 2005. Small-scale, wood based processing enterprises; their characteristics and impact on people of Akure local government area of Ondo state. [Pdf]. Available at: http://ageconsearch.umn.edu/bitstream/54390/2/Small%20Scale%20Wood%20Based%20Processing%20Enterprises.pdf. [Accessed on January 13, 2011]. Berte, E., Rodrigues, L. C. & Almeida, M. I. 2010. The Lessons Learned From the Unique Characteristics of Small Technology-Based Firms. [Pdf]. Available at: http://www.usimr.org/IMR-1-2010/v6n110-art7.pdf. [Accessed on January 13, 2011]. Bissantz, S. R. 2001. Push Concepts- An approach to active customer oriented strategies in E-commerce. [Pdf]. Available at: http://www.iacis.org/iis/2001_iis/pdf%20files/Robra-Bissantz397.PDF. [Accessed on January 13, 2011]. Business Plans. 2011. Marketing Plan. [Online]. Available at: http://www.businessplans.org/market.html. [Accessed on January 13, 2011]. Economy Point. 2006. Push Pull strategy. [Online]. Available at: http://www.economypoint.org/p/push-pull-strategy.html. [Accessed on January 13, 2011]. FAO. No Date. Global supply and demand analysis. [Online]. Available at: http://www.fao.org/docrep/003/x4108e/X4108E05.htm. [Accessed on January 13, 2011]. Global Wood. 2010. Wood Products Prices in The U.S.. [Online]. Available at: http://www.globalwood.org/market/timber_prices_2009/aaw20100601f.htm. [Accessed on January 13, 2011]. Headd, B. 2000. The characteristics of small-business employees. [Pdf]. Available at: http://pdfcast.org/download/the-characteristics-of-small-business-employees.pdf. [Accessed on January 13, 2011]. Trevisan, I. 2009. Entrepreneurial Characteristics Among Small Business Owners and Non-Business Owners in the Dakar Area. [Pdf]. Available at: http://www.iaabd.org/2009_iaabd_proceedings/track7a.pdf. [Accessed on January 13, 2011]. Bibliography Canzer, B. 2006. E-business: strategic thinking and practice. Cengage Learning. Read More