Strategies for Successful Small Business Ownership in an Unstable Economy

By Dr. Chris Akaeze and Dr. Nana Akaeze

Since early 1960s Nigeria, economy has been unstable and monolithic, centered on crude oil production and export. Instability of Nigeria economy is contributory to why only less than 20 percent small startup businesses survive the first five years. In spite of the unstable business environment, owners created approximately 17.3 million small businesses across Nigeria and employed a total of approximately thirty-two million workers with contribution of about 45 percent to the GDP. Based on theory of constraints, the purpose of this qualitative multiple-case study was to explore strategies required by some small business owners to survive Nigerias unstable economy beyond five years. Data were collected through semistructured interviews with three small business owners who had succeeded in business beyond the first five years from three different regions in Nigeria. The business strategies may help prospective and existing Nigerian small business owners improve profit and sustain business for survival beyond five years.

• Language: English
• Publisher: Xlibris US
• Release date: Dec 9, 2016
• ISBN: 9781524567163

Dr. Chris Akaeze

Dr. Chris Akaeze Dr. Chris Akaeze is CEO of Standing by Your Dream Initiative Inc. and a freelance editor for academic and business manuscript. His professional work experience has been in the oil sector, sales, and management consultancy services. He holds a bachelor’s degree of engineering from AAU Ekpoma, an MBA from DeVry University, a doctorate degree in international business from Walden University, and a strategic management certificate from Harvard University. Dr. Nana Akaeze Dr. Nana Akaeze is president of Standing By Your Dream Initiative Inc., freelance editor for academic and business manuscript, and a scholar-practitioner. Her professional experience has been in banking, human resources, and consultancy services. She holds a BS in management from ABU Zaria, an MBA from DeVry University, and a doctorate degree in international business from Walden University, and has a professional certificate from Harvard University.

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Copyright © 2016 by Dr. Chris Akaeze; Dr. Nana Akaeze.

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Rev. date: 12/07/2016

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TABLE OF CONTENTS

Section 1: Foundation of the Study

Background of the Problem

Problem Statement

Purpose Statement

Nature of the Study

Research Question

Theoretical or Conceptual Framework

Operational Definitions

Assumptions, Limitations, and Delimitations

Assumptions

Limitations

Delimitations

Significance of the Study

Value of Study to Business

Contribution to Business Practice

Implications for Social Change

A Review of the Professional and Academic Literature

Small Business Constraints

Internal Constraints to Small Business Success

External Constraints to Small Business Success

Theory of constraints

TOC - A Process of Ongoing Improvement

Application of the TOC

Generic Management Strategies

Cost leaderships strategy

Differentiation strategy

Focus strategy

Porter’s Generic Strategies and SME Performance

Small Business Success and Survival Strategies

Nigerian Economy

Unstable Market Economy and Small Business

Small Business Successes and Failures

Challenges to Small Businesses Organizations in Nigeria

Factors that affects growth of small business in Nigeria

Literature Gaps

Themes Emerging from Literature Review

Summary

Transition

Section 2: The Project

Purpose Statement

Role of the Researcher

Participants

Research Method and Design

Research Method

Research Design

Population and Sampling

Sample Size

Data Saturation and Triangulation

Ethical Research

Data Collection Instruments

Data Collection Technique

Data Organization Technique

Data Analysis

Reliability and Validity (Qualitative Only)

Credibility

Integrity

Dependability

Transferability

Confirmability

Transition and Summary

Section 3: Application to Professional Practice and Implications for Change

Introduction

Presentation of the Findings (Qualitative Only)

Emergent Theme: Government Policy Constraints to Small Business

Emergent Theme: Capital Constraints to Small-Business Success in Nigeria

Applications to Professional Practice

Implications for Social Change

Recommendations for Action

Recommendations for Further Research

Conclusion

References

Appendix A: Michael Porters generic Strategies

Appendix B: TOC Process of Ongoing Improvement

Appendix C: Email Invitation letter

Appendix D: Map of Nigeria

ABSTRACT

S INCE EARLY 1960’S Nigeria economy has been unstable and monolithic centered on crude oil production and export. Instability of Nigeria economy is contributory to why only less than 20% startup small businesses survive the first five years. In spite the unstable business environment, owners created approximately 17.3 million small businesses across Nigeria and employed a total of approximately 32million workers with contribution of about 45% to the GDP. Based on theory of constraints, the purpose of this qualitative multiple-case study was to explore strategies required by some small business owners to survive Nigeria unstable economy beyond 5 years. Data were collected through semistructured interviews with 3 small business owners who had succeeded in business beyond the first 5 years from 3 different regions in Nigeria. Data analysis entailed using pattern-matching technique and coding to evaluate, organize, code, and analyze raw data. Member checking was used to strengthen credibility and trustworthiness of interpretation of participants’ responses. The 3 themes that emerged in the final report related to cost efficiency, informal crediting and aggressive marketing. Within this particular setting, results indicated that participants used cost effective, informal financing, and aggressive marketing strategies to succeed. These strategies may help prospective and existing Nigerian small business owners improve profit and sustain business for survival beyond 5 years. The findings may facilitate social change through provision of useful strategies to Nigerian small business owners. In additional, the findings may aid Nigerian small business communities to create training programs and curriculums for prospective owners.

DEDICATION

W E DEDICATE THIS study to our wonderful children Christian II, Solomon, and Samuel, whose encouragement and understanding has been significant part of our life pursuits. This is the base of our solid union almost worthy of bylines.

ACKNOWLEDGMENTS

S PECIAL ACKNOWLEDGMENT GO to Mr. Valentine Ahmad who is base in France as a small business owner and Practitioner with many years on the ground experience managing his small business organization known as ValASlim Limited in Nigeria. His contributions and guidance were crucial to the success of this book publication. I would also like to acknowledge Engineer Tobias Lessor who is a small business owner with over 20 years of experience managing his small business organization Treplicas Nigeria limited. His contribution was immensely useful to the completion of this book publication.

SECTION 1

Foundation of the Study

G ENERALLY, AN ECONOMY is a series of interconnected markets (Friesner, Rosenman and Bozman, 2009). Because of the markets connectivity, any change in one market may significantly impact the entire economy. When the economy of a nation is strong, expendable income is high and unemployment is low. In addition, consumer confidence cause citizens to buy more goods and services thereby placing money back into the economy resulting to businesses experiencing good fortune. A strong economy leads to improved small businesses and increased employment to meet demand. Strong economy triggers the hiring of additional employees, expansion of retail space and addition of new product lines. However, when same economy begins to stall, many small businesses owners find themselves crippling which lead to mass cutbacks and eventual business failures.

When an economic stagnates, consumers are anxious about their job stability and become cautious about spending which results to lowered revenue for small business owners. Lagging profit leads to difficulty for small business owners to repay creditors which negatively impact on long-term growth. Small businesses are forced to cut back on their workforce during economy stagnation thereby limiting the ability to serve customers, and contributing to the unemployment rate, which results to further economy slack. Nigeria runs a monolithic economy solely dependent on oil production and exports.

Changes in oil prices affect the Nigerian markets and overall economy resulting to economic instability. Rahman (2015) suggested that increase in oil price has direct impact on output due to the change in marginal cost of producing goods. In addition to direct increase in oil price, there is indirect impact of oil price shock on prices of other goods as well (Rahman, 2015). Consequently, the economic instability leads to small business failures up to 50 percent from startup in Nigeria. The intent of this study was to explore the strategies, which some successful small business owners use to survive business in Nigeria beyond 5 years. There are few studies on SMEs in Nigeria regarding strategic management research data (Oyedijo, 2012).

Background of the Problem

The national economy of any nation involves financial resources management and encompasses value of all goods and services manufactured within the nation. Nigeria is one of the most oil-dependent economies in the world (Sampson, 2013). Nigerian economy is therefore unstable and monolithic centering on crude oil production and export. According to Zannawaziri, Kyari and Masud (2012), Nigerian economy is exposed to volatility because of oil price fluctuations and output unpredictability. In addition, oil sector in Nigeria has witnessed disruptions in recent times due to pipeline destruction, incidents of unlawful bunkering and theft of crude (Agbaeze, Udeh & Onwuka, 2015).

Nigerian economy is unstable and unpredictable because any major shock in the international commodities market negatively affects the economy. Sampson (2013) argued that over dependent of Nigerian economy on oil has a dire implication for the economy. Crude oil proceeds account for up to 80 percent of total revenue accruable to Nigerian federation account. In addition, crude oil is responsible for 95 percent of foreign exchange earnings, up to 15 percent of the Gross Domestic Product (GDP), and about 4 percent of Nigerian total employment (Sampson, 2013).

Currently the United States and China who are major buyers of crude oil have vigorous plans to attain energy independence as early as 2017. By 2020, the United States is projected to become the world’s largest producer of crude oil and may become entirely self-sufficient by 2030. According to Powell (2013), by 2017 the U.S would no longer need to buy oil from any source but Canada and will become a net exporter by 2035. Also, China the second largest oil-consuming nation is estimated to have roughly 240 billion tons of accessible oil shale reserves and will commence production of shale oil (Powell, 2013). Given the plans by US and China to enter the oil market bigly, the Nigerian economy may further destabilize because of heavy dependence on oil production and exportation.

SMEs boost the development process of most economies (Andawei, 2015; Suresh & Mohideen, 2012). Oyedijo (2012) argued that SMEs are the key drivers of employment and economic growth. Like in many nations, Small and Medium Enterprises (SMEs) business owners contribute immensely to the GDP in Nigeria. In addition, over 70 percent of workers in Nigeria are employed in the Small and Medium Scale Industries sub-sector (Ikharehon, 2014). According to C. Akaeze (2016), owners of small businesses are the economic engine of nations. Small businesses could be vital alternative for diversifying and sustaining the Nigerian economy. However, small businesses in Nigeria fail at an alarmingly high rate up to 50 % annually in Nigeria.

In spite of the unstable business environment under which most small business operate, owners significantly contribute to alleviate poverty in Nigeria (Bowale, 2013). Owners of small businesses play a significant role in any economy and vectors of economic growth, creating jobs and strengthening the middle class in many societies (Busega, 2014). Owners created approximately 17.3 million small businesses across Nigeria employing a total of up to 32million people with contribution of about 45 percent to the GDP (Ugoani & Ibeenwo, 2015). Continued failure of small businesses may lead to worsened economy which could result in reduction of Nigeria’s GDP and employment opportunity. This study is with the intent to explore the strategies which some successful small business owners use to survive business in Nigeria beyond 5 years. In general little research has been conducted on the constraints against growth of small businesses in Nigeria (Okpara & Wynn, 2007).

Problem Statement

Small and Medium Enterprises (SMEs) contribute approximately 30 per cent of the Gross Domestic Product (GDP) in Nigeria (Ilori, 2015). Over 70 percent of industrial workers in Nigeria are employed in the Small and Medium Scale Industries sub-sector (Ado & Mallo, 2015; Ikharehon, 2014). The business problem is the alarming failure rate of startup businesses at over 50% within the first five years. Akpomi and Nnadi (2010) argued that among annual startup businesses in Nigeria, only about 50 percent survive up to 18 months while less than 20 percent survives beyond 2 years. The specific business problem is that some small business owners in Nigeria lack strategies required for surviving business within unstable economy beyond five years.

Purpose Statement

The purpose of this qualitative multiple-case study was to explore strategies required by some small business owners to survive Nigeria unstable economy beyond 5 years. A purposeful sample of