Abstract
This study focused on the assessment of the influence of external business of environment on the performance Small and Medium Enterprises (SMEs). Small and Medium Enterprises (SMEs) face unique challenges in the business environment. SMEs need to successfully deal with the prevalent forces for change if they are to survive and grow and meet the expectations to create investment and employment opportunities. Successfully adapting to change from technological advances, customer expectations, supplier requirements, the regulatory environment and increasing competition requires successful implementation of organizational change. The study made use of 300 respondents from the SMEs in the selected geopolitical zones in Benue. Data obtained from the study were analyzed by the use of descriptive statistics such as percentages, frequencies and Chi-square statistics Analysis. The study concluded that external business environment has positive effect on performance of Small and Medium Enterprises (SMEs). The study therefore recommended that owners/managers of SMEs should have positive perception towards economic environment as customers today tend to have control of the economic environment in order to increase their performance.
CHAPTER ONE
INTRODUCTION
- Background of the study
Challenges to the growth and viability of Small and Medium Enterprises (SMEs) are arising from globalization, increased customer expectations, technological advances, and increased competition. Business improvement models and process and management techniques have largely originated in large, private-sector organizations and are not necessarily applicable to SMEs. It is not considered appropriate for researchers to postulate that the planning and change processes of large organizations can be applied to SMEs in a less formal manner or on a smaller scale (McAdam, 2000; McAdam & Armstrong, 2001; Curran & Blackburn, 2001). The purpose of this article is to present a tool designed to provide greater understanding of the impact of environmental changes specifically as they relate to SMEs. The „Degrees of Turbulence‟ model is proposed to aid SMEs in the assessment of their environment therefore addressing an essential component of strategic planning. By providing a clearer picture of their current situation and a greater understanding of environmental risk, this model has the potential to assist SMEs with strategy formulation and revision. The environmental analysis is very important for the business managers and entrepreneurs in doing their business because it will help enhance the business capability to increase their business performance. However, the external environment is considerably more important for the entrepreneurs and managers because it will stimulate the alertness to monitor the unexpected factors and prepare for business guard (Birkinshaw, Hood and Young, 2005). Considering that performance is crucial objective of an organisation, it is generally accepted that the structure and decision making in an organisation is influenced by environmental complexity and volatility (May et al., 2000). Furthermore, it is argued that the alignment of strategies of organisations with the requirements of their environment outperform organisations that fails to achieve such alignment (Beal, 2000). Thus, business organisations had perceived the environment as opportunities and threats presented by such external environment as variables as sociocultural, legal, political, economic, technology and infrastructural factors. This is not to conclude that other factors found in the micro (internal) and intermediate business environments are not important. It shows how important the scanning of the macro (external) environment is, because this in turn affects the other two environments. Where there is absence of good understanding of the external business environment, the attendance effect of this on organisational performance cannot be over emphasized. After all, it is the good performance (effectiveness, efficiency and responsiveness) that can guarantee the sustainability of the organisation in relation to its corporate goals and objectives. It must be noted, that amidst the environmental scanning and considering the fact that the Nigerian business environment is fast changing which deserves the means by which future opportunities and problems can be anticipated by organisation and company executives and administrators needs adequate attention (Birkinshaw, Hood and Young, 2005). The modern business manager operates in a more dynamic environment. The change in the environment has been rapid and unpredictable impact on the performance of Small and Medium Scale Enterprises (SMEs). Economic and other external variables has been complex both in form and impact on the practice of business in Nigeria. Consumers and clients have shown complex behaviours both in local and international markets. The most dramatic change has been that exhibited by competitive pressures. Competitors have been applying one strategy or the other to adapt to the dynamic and unpredictable nature of the business environment. The most single significant influence on organisational policy and strategy is the environment outside and inside the organisation (Duncan, 2012; Giannopoulos et al., 2013). Business enterprise performance according to Oghojafor, Olamitunji, and Sulaimon (2011) is how a manager effectively and efficiently utilizes the organization’s resources so as to achieve the organizational goals and satisfy the stakeholders.
- STATEMENT OF THE PROBLEM
Several of the existing literatures such as Samad (2007), Saleh and Ndubisi (2006), Teoh and Chong (2008) identified various problems facing SMEs in a globalized environment such as, difficulty in facing recession, low productivity, lack of managerial capabilities, lack of financing, environmental factors, difficulty in accessing management among others. These problems cause the small and medium enterprises not to perform effectively. Environmental downturn has been a constant challenge facing SMEs since the year 2007 (Harvie, 2004). The world economy experienced several unfavourable environments, which lead to low performance of SMEs. Most nations are currently showing a diminishing environmental growth and increasing cost of production, which results to collapse of these business firms (Harvie, 2004). However, to the best of the researchers’ knowledge, few studies have been conducted using economic, socio-cultural and technology as external business environmental factor on performance of SMEs in Benue State. Therefore, this study seeks to contribute to the existing literature by empirically examining the effects of external business environment (economic, socio-cultural and technology) on the performance of small and medium enterprises SMEs in Benue State.
OBJECTIVE OF THE STUDY
The study has one main objective which is divided into general objective and specific objective, the general objective is to examine the influence of external business environment on performance of small and medium scale enterprise in Benue state; the specific objectives are;
- To examine the influence of external business environment on the performance of small scale business in Benue state
- To examine if there is any relationship between external business environment and the profitability of SMEs in Benue state
- To ascertain the impact of external business environment on the growth of SMEs in Benue state
- To explore the role of SMEs on the economic development of Benue state
RESEARCH QUESTION
The following research question were formulated by the researcher to aid the completion of the study;
- Does external business environment have any influence on the performance of small scale business in Benue state?
- Is there any relationship between external business environment and the profitability of SMEs in Benue state?
- Is there any impact of external business environment on the growth of SMEs in Benue state?
- Does SMEs play any role on the economic development of Benue state?
