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SME firms performance in Nigeria: Competitive advantage and its impact


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Small and medium enterprises (SME) performance forms a very important part of the Nigerian economy. The SME sector is a major engine which encourages the growth of jobs and wealth creation in the country’s economic system. SMEs performance act as a significant part that is linked to the strengthening and enhancement of the development of the country. The SME performance and growth in manufacturing, agriculture, services, and so on, has been considered as the engine drive and has contributed to the Nigeria economy. Sustainable growth and the increase of SME performance, competitiveness will open numerous doors for employment opportunities, tangible and intangible assets (investment) in the environment. The SME sector has developed rapidly over these years. The major aim of this paper is to look into the SME sustainable competitive advantage and emphasis on its growing importance. Likewise, some guidelines were offered in order for SMEs to reach performance and competitive advantage. In a wider perspective, this paper would provide some available conclusions and concrete recommendations. Besides, this work will serve as an information cause that will promote and orient SMEs performance towards competitive advantage. Through this way, it will contribute to the continuous promotion and active growth of SMEs, as easily to increase the level of the firm’s performance and business competitiveness in Nigeria.
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International Journal of Research Studies in Management
2014 October, Volume 3 Number 2, 75-86
© The Authors / Attribution CC BY
SME firms performance in Nigeria: Competitive advantage
and its impact
Eniola, Anthony Abiodun
University of Malaysia, Sarawak (UNIMAS), Malaysia (
Ektebang, Harry
University of Malaysia, Sarawak (UNIMAS), Malaysia (
Received: 14 July 2014 Revised: 19 August 2014 Accepted: 21 August 2014
Available Online: 30 August 2014 DOI: 10.5861/ijrsm.2014.854
ISSN: 2243-7770
Online ISSN: 2243-7789
Small and medium enterprises (SME) performance forms a very important part of the
Nigerian economy. The SME sector is a major engine which encourages the growth of jobs
and wealth creation in the country’s economic system. SMEs performance act as a significant
part that is linked to the strengthening and enhancement of the development of the country.
The SME performance and growth in manufacturing, agriculture, services, and so on, has
been considered as the engine drive and has contributed to the Nigeria economy. Sustainable
growth and the increase of SME performance, competitiveness will open numerous doors for
employment opportunities, tangible and intangible assets (investment) in the environment.
The SME sector has developed rapidly over these years. The major aim of this paper is to
look into the SME sustainable competitive advantage and emphasis on its growing importance.
Likewise, some guidelines were offered in order for SMEs to reach performance and
competitive advantage. In a wider perspective, this paper would provide some available
conclusions and concrete recommendations. Besides, this work will serve as an information
cause that will promote and orient SMEs performance towards competitive advantage.
Through this way, it will contribute to the continuous promotion and active growth of SMEs,
as easily to increase the level of the firm’s performance and business competitiveness in
Keywords: SMEs; performance; competitive advantage; resource-based view; strategic
Eniola, A. A. & Ektebang, H.
76 Consortia Academia Publishing
SME firms performance in Nigeria: Competitive advantage and its impact
1. Introduction
The performance and growth of small and medium enterprises (SMEs) is a major driver and indices for the
level of industrialization; modernization; urbanization, gainful and meaningful employment for all those who are
able and willing to work, equitable distribution of income, the welfare, income per capital and quality of life
enjoyed by the citizenry (Aremu & Adeyemi, 2011), because SMEs contribute to employment growth at a higher
rate than larger firms (Farouk & Saleh, 2011). The SMEs sector with global recognition is view as an important
force of driving the economic growth and employment creation in both developing and developed countries
(Ariyo, 2008; Kpleai, 2009); this is well documented (Birch, 1989; Storey, 1994). SMEs (firms with 200 or
fewer employees) makes up the largest business sector in every world economy (Culkin & Smith, 2000), and
governments around the globe are increasingly promoting and supporting the SME growth as part of their overall
national development strategy (Abdullah & bin Dakar, 2000). Harrison and Watson (1998), point to the
flexibility of SMEs, their simple organizational structure, their low risk and receptivity as the essential features
facilitating them to be innovative.
The importance of SMEs in the development of economic, reduction in poverty, increase in employment,
output, innovation in technology and uplifting in social status and standard is globally recognized and
acknowledged in developing as well as in developing economics. Small and Medium Scale Enterprises have
been acknowledged to have a prodigious potential for sustainable Development. It is primarily through the
growth of SMEs that employees made redundant by large firms have been absorbed back into the work force
(Storey, 1994; Frank & Landstrom, 1998). Through the multiplier effect, this employment provides income to
regions which stimulate local economic activity, in results, drives wealth and further employment generation
(Walker & Webster 2004). In order to compete and sustain successfully, locally, and globally, micro, small and
medium enterprises must not only be perfect in their area, but also conserve eventually.
Evenly component of business management, performance management can be one of the biggest challenges
faced by businesses in the SME sector, particularly with respect to their survival and competitive advantage. If
management is not trained and educated on how to manage finance, Mbonyane (2006) noted that small
businesses fail and did not succeed because more often than not cash flow is not properly managed. Performance
is from the aspect of financial and non-financial, the main elements of which consist of “sales-based and
firm-based." Empirically, it is found that there is a significant relationship between competitive advantage and
the sales-based performance of organizations. Profitability, growth, productivity, level of sales revenue, market
share and product, return on investments, product added value is used in the measurement of Sales-based
performance (Falshaw et al., 2006; Murphy et al., 1996; Wang & Lo, 2003; Brush & Vanderwerf, 1992; Neely,
2005; Spivey & McMillan, 2002). In addition, other previous studies have also further illustrated that there is a
significant relationship between competitive advantage and firm-based performance of organizations.
Firm-based performance is measured in terms of the emphasis on employee development, customer satisfaction,
job satisfaction and efficient organizational internal processes (Murphy et. al., 1996; Neely, 2005; Spivey &
McMillan, 2002; Wang & Lo, 2003).
In Nigeria the importance and performance contributions of Small and medium scale business as a creator of
employment, in particular, those with low skill level, is widely recognized. In 2002, 98% of all businesses in the
manufacturing sector were SMEs operating in Nigeria, providing 76% of the workforce and 48% of all industrial
output in terms of value added (Mahmoud, 2005; Odeyemi, 2003; SMEDAN, 2006). SME employs 87.9% of the
workforce in the private sector (Kadiri, 2012; Russell Olukayode & Christopher Somoye, 2013). In the
agriculture and manufacturing sectors, SMEs employ more than 80% of the total workforce. In the last few years,
an increase in employment of SMEs has exceeded the increase in their contribution to GDP, highlighting the
SME firms performance in Nigeria: Competitive advantage and its impact
International Journal of Research Studies in Management 77
employment creation potential of this sector of the economy (Killian et al., 2007).
During the transition period of civilian government in Nigeria, a lot of new businesses sprang up. Most of
them now faced new threats, challenges and crises as an outcome of sustainable competitive advantage within
and outside; how are they going to manage to face them successfully? This paper will help to increase the
understanding of the traits that make some firms, sustainable competitive advantages with emphasis on its
growing importance. As well as reviewing why some firms are able to perform in a diverse economic circle,
while others do not (Garnsey, 1996). Despite the widespread practical and academic interest in SME firm’s
overall economic performance, review studies and the impact of competitive advantage of SMEs firm
performance in Nigeria are minimal, so the focal point of this study.
2. Definition of SMEs
According to the Organization for Economic Cooperation and Development (OECD), the characteristics of
SMEs not only reflect the economic patterns of the country but also the social and cultural dimensions. These
differing patterns are noticeable reflected within different definitions and criteria of SMEs adopted by different
countries. Whereas some refer to the number of employees as their distinctive criteria for defining SMEs, others
use invested capital, and some other use a combination of the number of employees, invested capital, sales and
industry type (Dababneh & Tukan, 2007).
Table 1
Definition of SME by Nigerian Institution
Source: World Bank, SME Country Mapping (2001). National Council of Industry under the Ministry of Industry
NERFUND: National Economic Reconstruction Fund
NASSI: National Association of Small Scale Industrialists
NASME: National Association of Small and Medium Enterprises
Despite the disparity in the comparative definitions of SMEs, the enterprises have some common
characteristics, of which the foremost is that ownership and management are borne by one individual/ family
(Scott, & Bruce, 1987) and therefore, decisions are often subjective. Secondly, SMEs require small capital base
in general, disregarding of the industry and the country where they are based. Nevertheless, they are often having
difficulty in attracting funds for expansion as a resolution of which they have to bank heavily on personal
Thirdly, in practice, the management proprietor hardly differentiates his personal fund from the company's
funds and this largely contributes to the inefficiency and non-functioning of many SMEs. For them, most SMEs
operate with labor intensive technology. They find it less easy to shift from one product line to something
radically different; in fact, most SMEs tie their objectives more closely to the product line than in other matters
such as the use of capital. In most SMEs there is less organizational differentiation, higher employee turnover
and higher labor investment ratio. Lastly, the rate of business dearth is high, probably due to reasons of low
capital, lack of relationship between business life and that of promoter, inadequate market information and low
level of operation, amongst other factors (Nweze, 2009).
3. The Impact of SME Performance in the Economy
The proportion of Nigerian SMEs and their impact on the economy is pretty much similar to some
Parameters Total Assets ( N‘m) Annual Turnover (N‘m) No of Employees
Nigerian Institution MSE SSE ME MSE SSE ME MSE SSE ME
Fed. Min. of Industries <200 <50 Na Na Na Na <30 <10 <10
Central Bank <150 <1 Na <150 <1 Na <10 <50 Na
NERFUND Na <10 Na Na Na Na Na Na Na
NASSI Na <40 <1 Na <40 Na Na 3-35 Na
NASME <150 <50 <1 <500 <100 <10 <100 <50 <10
Nigeria Industrial Policy
Na Na Na Na Na Na Na Na Na
Eniola, A. A. & Ektebang, H.
78 Consortia Academia Publishing
developing and developed countries. Nigeria SMEs is playing a very important and the major role in the
development of the economy, particularly in the manufacturing sectors. Studies done by the Federal Office of
Statistics shows that 97% of all businesses in Nigeria employ less than 100 employees. The earlier definition of
SMEs shows that 97% of all businesses in Nigeria are, to use the term, small business. The SME sector provides,
on average, 50% of Nigeria’s employment, and 50% of its industrial output (Ariyo, 2005).
SMEs comprise 70% to 90% of the business establishment in the manufacturing sector in Nigeria
(Oyelaran – Oyeyinka, 2010; Frimpong, 2013). SMEs provide over 90% of employment opportunities available
in the manufacturing sector and account for about 70 % of aggregate employment created per annum. Moreover,
to the potential of SMEs to serve as an bedrock for entrepreneurial skills development, even distribution of
income, wealth creation, employment generation, and sustainable economic development; SMEs in Nigeria is
seen as the creativity and ingenuity of entrepreneurs in the utilization of the abundant non- oil, natural
resources of this nation will provide a sustainable platform and spring board for industrial development and
economic growth as is the case in the industrialized and economically developed societies (Schmiemann, 2008;
Ebiringa, 2011; Onwumere, 2000)
A survey conducted by the Federal Bureau of Statistics (FBS) across the 36 states of the federation and the
Federal Capital Territory (FCT) analyzed by the Minister of Trade and Commerce, Olusegun Aganga; shown that
there was a total of 17.28 million SMEs in the country out of which 17.26 million are micro enterprises valued at
less than N5 million (This Day Newspaper, July 20, 2012; NBS, 2012). It shows micro businesses had an
increase in some states, and it shows that micro enterprises represent about 99 per cent of MSMEs in the country.
The performance of the SMEs differs from country to country and from one type of business to another.
Lagos State had the highest number of SMEs in the country with 17 per cent of the national figure, followed
closely by Kano State, with Osun state hosting the fewest SMEs with only 0.4 percent of the national figure
(This Day Newspaper, July 20, 2012; NBS, 2012). From the percentage of micro, small and medium enterprises
in the Nigerian economy, it can be seen that micro enterprises constitute the dominant enterprises in this
economy. It testifies to the fact that SMEs and especially micro enterprises have the majority of the workforce.
SMEs in general play a key role in the economy.
4. The Importance of the SMEs Performance
SMEs play an important role as a breeding ground for entrepreneurs and a provider of solutions to address
the problems of unemployment, job creation, innovation and long-term economic development (Baard & van
den Berg, 2004; Molapo, 2007; white paper 1995; Storey, 1994). Their role is to provide jobs for the unemployed
and entrepreneurial opportunities for individuals who want to venture into businesses. “Small is profitable in
Nigeria"; the performance and role of SMEs going forward are bound to be even greater and more pervasive
with a demonstrable impact on the emerging world trading order. SMEs have to recognize what their resources
are and they need to know how to utilize them, flex them into an advantage for their business. Nevertheless, in
the frame of the world-wide economy, SMEs cannot compete by simply looking at the cost and by just cutting it;
they must compete on the foundation of knowledge and the value added (Bahiti, 2008). The development of
SMEs is an indispensable component in the growth strategy of most economies and holds particular significance.
The performance and development of Small and Medium Sized Enterprises (SMEs) has throughout the
world, been of great interest to, among others, development economists, entrepreneurs, governments, venture
capital firms, financial institutions and non-governmental organisations (Baker, 1992). Performance management
involves establishment of a shared understanding about what is to be achieved, how it is to be achieved; and an
approach to managing people that increases the probability of achieving success within an agreed framework of
planned goals, standards and individual and team competence requirements (Armstrong & Baron, 1998).
Performance is from the aspect of tangible and intangible resources
SME firms performance in Nigeria: Competitive advantage and its impact
International Journal of Research Studies in Management 79
5. Mixed theories pertaining to Competitive Advantage
RBV has been widely used in the business management literature as well as in entrepreneurship. In fact,
some scholars argued that “at present, the resource-based theory of the firm is perhaps the most influential
framework for understanding strategic management” (Barney, Wright, & Ketchen Jr., 2001, p. 625). Strategic
management is especially often asserted important just for the corporation, and it has happened that the manager
of the SME did not pay the right attention to the strategic management of the SME.
Competitive advantage is a base for a good strategy, and a good one creates competitive advantage (Analoui,
& Karami, 2003). Another group of scholars focused on examining specific resources which give rise to
sustainable competitive advantages. The resources they examined included: response lags (Lippman & Rumel,
1982), routines (Nelson & Winter, 1982), functionally based distinctive competencies (Hitt & Ireland, 1985,
1986; Hitt, Ireland, & Palia, 1982; Hitt, Ireland, & Stadter, 1982; Snow & Hrebiniak, 1980), unique combination
of business experience (Huff, 1982; Prahalad & Bettis, 1986; Spender, 1989), organizational culture (Barney,
1986b; Fiol, 1991), invisible assets that by their nature are difficult to imitate (Itami, 1987), organizational
learning (Teece, Pisano, & Shuen, 1997), entrepreneurship (Nelson, 1991; Rumelt, 1987), and human resources
(Amit & Schoemaker, 1993), among others.
In 1991, Barney, presented a more concrete and comprehensive framework to identify the needed
characteristics of firm resources in order to generate sustainable competitive advantages (Barney, 1991). Four
criteria were proposed to assess the economic implications of the resources: value, rareness, inimitability, and
substitutability. Value refers to the extent to which the firm’s combination of potential resources and fits with the
external environment so that the firm can exploit opportunities and or neutralize threats in the competitive
environment. Rareness refers to the physical or perceived physical rareness of the resources in the factor markets.
Inimitability is the continuation of imperfect factor markets via information asymmetry such that resources
cannot be obtained or recreated by other firms without a cost disadvantage. Finally, the framework also considers
whether the organizations are substitutable by competitors. Hunt and Morgan (1996) proposed that potential
resources can be most usefully categorized as financial, physical, legal, human, organizational, informational,
and relational.
The importance of a competitive advantage increased these last decades (Hamilton, 2003). Competitive
advantage considered as objective of the strategy. Porter (1985), a firm has a competitive advantage when it can
create more economic value than its rivals (Barney & Hesterly 2010) do. Porter's (1985) arguments reflect the
strengths, weaknesses, opportunities, and threats (SWOT) of the framework for assessing competitive advantage.
Competitive advantages are those factors that a firm needs to have in order to succeed in business (Analoui, &
Karami, 2003). There are three types of competitive advantage; the cost of leadership, differentiation and focus
(Porter, 1985). Lynch, (2006) argued that each of these three strategic options represents an area that every
business and many not-for-profit organizations can usefully explore and every business needs to choose one of
these in order to compete in the marketplace and gain sustainable competitive advantage. Lynch (2006) also
stated that the general principles can perhaps be applied to public service and not-for-profit organizations where
they compete for resources, such as government funding of SMEs. Consequently, some strategic management
researchers are advocating the importance of dynamic core competencies (Lei et al., 1996) or the understanding
of firms’ market positions from a dynamic theoretical perspective (Porter, 1991)
Unique competencies help a firm stand out in its markets when its competencies are superior to its
competitors (Andrew, 1971). Unique resources are those resources that can create sustained competitive
advantage for a firm. These resources are distinctive or unique capabilities specific to particular organizations
and cannot be imitated. Core competencies and distinctive competence are two main factors that induce SMEs to
have a competitive advantage. Core Competences are the skills and abilities by which resources are deployed
through the organization’s activities and processes in such a way as to achieve competitive advantage in ways
that cannot be imitated or obtained by others. (Johnson et al., 2010, p. 65) Competitive advantage is important
Eniola, A. A. & Ektebang, H.
80 Consortia Academia Publishing
for businesses. Only the firms with superior performance skills are bestowed with core competencies while
another firm needs to acquire them in order to stand in the competition. Not all businesses have a competitive
advantage; however, they have to find ways to have it. A competitive advantage is a concept of special
6. Sources of Competitive Advantage
A firm that formulates and implements a strategy that leads to superior performance relative to other
competitors in the same industry or the industry average has a competitive advantage. On the one hand, it is
important for SMEs to obtain, maintain and increase the competitive advantage through the internal and external
financial resources they may have and insure. Henry Mintzberg (1973) classified ten managerial roles into three
categories: interpersonal, informational, and decisional. Mintzberg’s general portrayal of managerial work for
competitive advantage was confirmed in later studies (Kotter, 1982; Tsui, 1984). On the other hand, SMEs have
to do the external analysis to identify the opportunities and threats and to do an internal analysis: to identify the
distinctive competencies. According to Resource - based theory, in-depth-time competitiveness of a firm depends
on the resources it possesses that differentiate it from its competitors and are durable and difficult to imitate and
substitute (Zaridis, 2009).
Source: Ovidijus, J. (2013)
Figure 1. Model Explains RBV and Competitive Advantage
The RBV posits that the improvements of firm performance depend on the availability of, access to,
valuable, rare, inimitable, non-substitutable and relatively immobile resources or resource bundles (Barney 1991).
Wernerfelt (1984, p. 172) posits that resources are “anything that might be thought of as a strength or weakness
of a given firm," comprising tangible and intangible assets. Tangible resources include financial capital (e.g.
equity capital, debt capital, retained earnings) and physical capital (e.g. machinery & buildings). While
intangible resources such as organization culture, learning, networks, and reputation tended to be tacit,
idiosyncratic, and deeply embedded in the organization’s social fabric and are more likely to produce a
competitive advantage (Winter 1987). According to RBV proponents, it is much more feasible to exploit external
opportunities using existing resources in a new way rather than trying to acquire new skills for each different
opportunity. In RBV model, resources are given a major role in helping companies to achieve higher
organizational performance. Developing earlier work by Wernerfelt (1984), and Rumelt (1984), Barney (1991),
the most prominent proponent of the RBV, proposed that a firm use of „idiosyncratic, immobile resources are
the source of sustained competitive advantage.
SME firms performance in Nigeria: Competitive advantage and its impact
International Journal of Research Studies in Management 81
Table 2
Classification of Resources
Tangible resources Intangible resources
Financial Human
Firm's borrowing capacity Experience and capabilities of employees
Firm's capacity to raise equity Trust
Firm's cash account and cash in hand Managerial skills
Practices and procedures
Physical Innovation and creativity
Modern plan and facilities Technical and scientific skills
Favorable manufacturing locations Innovation capacities
State of the art machinery and equipment
Trade Reputation with customers
Innovative production processes Reputation with suppliers
Brand name
Strategic planning processes
Excellent evaluation and control systems
Source: Dess et al. (2007); Kraja and Osmani (2013)
The RBV of the firm predicts that certain types of resources SMEs firm owns and controls have the potential
and promise to generate competitive advantage, which eventually leads to superior firm performance. Financial
resources such as cash-in-hand, bank deposits and or savings and financial capital explain the level of firm
competitive advantage and performance (Morgan et al., 2004; Ainuddin et al., 2007). Current research in both
strategic management and finance has begun to examine the relationship between firm strategy and its capital
structure (Ravid, 1988; Chatterjee & Wernerfelt, 1991). In a study of Brander and Lewis (1986); Gertner,
Gibbons, and Scharfstein, (1988) and Williamson, (1988) suggests that the two aspects of a firm may be closely
linked with each other. Balakrishnan and Fox, (1993 p. 3), state that “firm’s ability to manage its relationships
with lenders... becomes a key source of competitive advantage." Most theories of capital structure, however,
ignore the role of the suppliers of financial resources. Physical resources such as the production technology,
machinery, equipment, plant and capacity contribute positively towards SMEs competitive advantage and
eventually result in superior firm performance (Ainuddin et al., 2007; Morgan et al., 2004). Moreover, Human
resources in terms of experience and capabilities, trust, managerial skills, practices and procedures of top and
middle management, administrative and production employees were also able to elucidate the extent of firm
competitive advantage and the resulting SME firm performance (Adner & Helfat, 2003; Morgan et al., 2004;
Datta et al., 2005; Ainuddin et al., 2007; Abdullah et al., 2007a; Rose & Kumar, 2007). Experiential resources
such as product reputation, manufacturing experience and brand name can account for the variation in firm
competitive advantage and performance (Morgan et al., 2004; Ainuddin et al., 2007). In short, SME firm
resources are the base for attaining and maintaining competitive advantage.
Although, competitive advantage is more likely to spring from intangible rather than tangible resources,
because tangible resources can easily be bought in the market so they confer little advantage to the companies in
the long run because rivals can soon acquire the identical assets. Therefore, RBV is more relevance in the field
of SME resourcing because of the importance of intangible resources of managerial competence and experiential
knowledge in developing competitive advantage. These resources are especially important in SMEs because
resource constraints preclude the procurement of this talent outside the organization.
On that point are some sources of advantage in the systems. They are high performance or technology,
quality, niche marketing, differentiation, low costs, quality, synergy, service, and vertical integration; culture,
leadership and style (Lynch, 2000). Also, it is important for SME owners and managers to know (Goldsmith
Eniola, A. A. & Ektebang, H.
82 Consortia Academia Publishing
1995), how to keep in a match among those external and internal factors; pay ongoing attention to external
factors- technological, economic, political and social components. According to Kume and Leskaj (2010), in the
incoming years, the competitive advantage may take in its roots based on; Service added in products; skilled and
trained staff in the long run; continuous improvement of the product and services; distinctive competencies and
quick answers.
7. SMEs Performance in Nigeria: Issues Related
The RBV through its insights into the nature of competitive advantage explains why some resources are
more advantage generating than others and discussing the role of a manager in resource deployment. Therefore,
the view indicates how advantages persist for some firms even in periods of open competition like the ones
raging in Nigeria. One of the assumptions of this study is that it can validate and contribute to the performance
view of SMEs, and the role competitive advantage has on the firm’s performance. The perspective's contribution
to this paper context is also framed in the entrepreneurship literature.
Most SMEs in Nigeria in terms of performance is proving to produce competitive advantage through
differentiation while some are producing it through cost. At the outset, the SMEs did not yield the proper
attention to the foundation of competitive advantage, but things have changed for good. Today, they are
performing their best. Some of the Nigeria SMEs succeed, and some fail because there is a set of problems, such
as the financial factor, strategic management factor, management experience factor, marketing factor, applied
science and innovation factor, and many others.
Financial Factor is related to resources that can enhance the performance and growth for SMEs. The non-
performance and high rates of failure among SMEs in the country are due to operating of SMEs in a
non-conducive financial planning environment through high-interest rate, high-collateral demand, difficulties in
accessing information and lack of market exposure. The financial planning environment should conducive for
the SMEs firm owners to create a track, and monitor business plans and forecasts in real time, and consolidate
forecasts by geography and product for potential expansion in order to increase the borrowing capacity. As
Penrose (1959:39) stated “ there is a relation between entrepreneurial, competitive advantage and the finance a
firm can attract, and that difficulty attributed to lack of capital may often be related to the existence of
entrepreneurial services.
Strategic management factor is linked to the fact that it often happens to start a business without accepting a
scheme of how to realize the great idea. Apparently, this mindset needs to be changed and for things to improve.
Besides, it’s imperative that businesses don't remain complacent in their approaches to planning. Business that
fail to drive planning practices and tools forward will stay bound by slow, stovepipe planning processes,
finding it difficult to compete with more-nimble and unified systems that are a lot more adept at leveraging
their resources
Reynolds and Miller (1992), one of the key factors for fully developed new firm, is a full time commitment
of the owner-manager and subordinates. Castanias and Helfat (1991); Spender (1993); Lei and Hitt (1995);
Conner and Prahalad (1996) noted that human resource factors form one of the most significant areas for
successful performance of the company to be competitive. Most SMEs in the country are finding it difficult in
employing right hand because of family overbearing. To be the member of the business family does not suffice;
what counts a lot is to recruit the correct person; full of experience, the skills and the capability to do the job and
perform perfectly. In realizing this, the organizations have to regard their staff as valuable resources. Successful
establishments have to create space to their staff¸ in order that they could act their best and showoff their skills.
Sometimes, for most businesses, human resources are the main resources that SME probably have.
Understanding and managing their human resources and their culture is seen as a competitive advantage by
Nigeria SMEs rely on more traditional labor rather than use of modern technology due to lack of enough
SME firms performance in Nigeria: Competitive advantage and its impact
International Journal of Research Studies in Management 83
capital or sheer ignorance of technological advances. Most SMEs manages their business with the traditional
approach that results in low performance in terms of productivity, low-quality products to small and local market.
It is noted that use of a traditional approach by SMEs tend to have effect on low productivity and, as a result, are
weak in terms of competition related. Significant fact is that innovation doesn't come from a single person. It
comes from the business itself. Innovation is there, but someone in collaboration with others has to bring it. It
can only happen when there is incentive support and freedom within and outside the firm for self-expression then,
there is often a good will.
The assumption is if the potential customers are not aware of your products or services no one will do
business with you (Scheers, 2010). Lack of customers demand is what businesses have to take. There is also,
ample research evidence to prove that marketing plays a significant role in the performance of SMEs for
competitive advantage. The SMEs manager should first involve in identifying what the customer needs are and
translate them into the planning of a new product or a new service. Knowing customers’ need about a product or
service helps them to satisfy customers’ expectations. Inadequate marketing skills of owners create marketing
problems in the small business sector. Customers’ expectations are continuously increasing; companies are
instantly demanded to work beyond their primary need of satisfying the customer, they are exceeding the
expectations to delight the client (Kraja & Osmani, 2013). Gilmore et al. (2001) reviews marketing limitations of
SME as limited resources (such as financial, time and marketing knowledge), Micro, Small and Medium
Enterprises do not possess enough ability to manage the technology (Wang & Wu, 2011). In Nigeria, SMEs
performances are faced with a lack of marketing skills.
Mahmood (2008), role of corporate governance is also an essential factor for SMEs performance,
sustainability and competitive advantage. Corporate governance is all about the individual roles of the
shareholders as owners and the managers. It is about policies that encourage and stimulate the development of
SMEs and economic sectors, in order that they could make best use of potential resources. Also, it is about
establishing and following rules and procedures to manage and run an enterprise, setting up a system of checks
and balances to stop abuses of authority and to ensure the integrity of financial statements (Eniola, 2014). Hence,
despite improvements and the advancement that this sector has experienced during this period, the performance
of SMEs in the country is still confronting a lot of difficulties.
8. Recommendations and Conclusion
From the literature review; organizational competitive advantage from the RBV is indeed consequential as it
can be used as a conceptual measure for SMEs performance in particular through application and manipulation
of identifying internal and external organizational resources to raise their competitive advantageous position.
Financing provision, inadequate management, lack of initiative and lack of managerial education are some
reasons why SMEs are not capable of sustaining a competitive advantage. SMEs face challenges and to
successfully manage those.
The owner-managers have to strategy and strategies by further enhance their aggregate resources, especially
tangible and intangible resources. Spending more time with the management of their business, because this will
aid in understanding the current position, (both financial and non-financial), and to make safe steps towards the
hereafter. Managers have to be mindful of what they are doing. That is in attaining competitive advantage, there
should be dilute ownership and control of the business. Human resources should be strengthened by employing
competent and professional’s persons that have the expertise, skills and capacity to share with the other members
of the business. If it is too important to choose the right person who knows how to run a business, incentive and
welfare motivation should be given to encourage them to perform the job well
Also, possible policy intervention by the government through fiscal measures, tax incentives or financial
initiatives is a way to improve the perceived magnitude of importance of financial policy in their relationship
with performance and in realising the firm valuable resources. The value - creation process depends on the
Eniola, A. A. & Ektebang, H.
84 Consortia Academia Publishing
translation of competitive dynamics into sustainable cash flows. A necessary condition for the value inherent in
strategic assets to lead to increased firm value is suitable for financing provision decisions. SMEs should try to
use or attain the best benefits from government policy or initiatives.
SWOT analysis has to be done by the SMEs owners- manager in the light of objectivity to determine if
things are working good by analyze the environment where the business is set up, whether to be enlarged to be
installed. Grounded on this analysis, they have to determine whether the business should be sustained to
continue or not. For the firms go on, it's important to generate a business plan; to deliver a strategic management
and competitive advantage, to know how things will go on, to analyze and to transmute everything in reality.
Knowledge is a critical element that change the competition model of business from time to time, and it has
been recognized as one of the most important success factors to an organization in many key aspects, such as
innovation, quality and so on (Gholipour, Jandaghi, & Hosseinzadeh, 2010; Ooi, 2009; Wang & Wu, 2011).
Innovation appears as the most significant and critical resources for the organization to prosper in a competitive
environment. Firm Management (employer and employee) have to try to be innovative. There best should be
put forward to pay full concentration not only in product innovation, marketing mix, market and services, but
also they need to increase improvement in the research and development ability on market and product, and pay
attention to the management of the enterprise intellectual capital. Intellectual capital is a very important element
for the success of organizations to get a competitive advantage
Eventually, Small business research, though rapidly progressing still lacks a theoretical grounded
understanding of the factors underlying business research. Especially the case within the context of Nigeria,
whereas business, academic research is incipient and lackluster, where statistics about SMEs are not updated.
The paper will contribute to the consistency of knowledge, serving as a reference point in assisting the
entrepreneurs, policy makers, and provide insight on the problems of SMEs, and what influences their
performance in a competitive environment.
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It is recorded that 99 per cent of the business bodies in Nigeria are MSMEs which has been an instrumental component in GDP and hub for work opportunities. Even so the identification of the important roles SMEs play in Nigeria, their evolution is mostly bounded by a number of elements, such as the existence of laws, ordinances, and rules that frustrate the growth of the sector. The study reviews the relationship between government policies and small and medium enterprises (SMEs) performance in Nigeria. The study offered some relevant recommendations to policy makers, entrepreneurs, and SME managers to ensure the appropriate scheme to improve the SME sector in Nigeria.
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It is recorded that 99 per cent of the business bodies in Nigeria are MSMEs which has been an instrumental component in GDP and hub for work opportunities. Even so the identification of the important roles SMEs play in Nigeria, their evolution is mostly bounded by a number of elements, such as the existence of laws, ordinances, and rules that frustrate the growth of the sector. The study reviews the relationship between government policies and small and medium enterprises (SMEs) performance in Nigeria. The study offered some relevant recommendations to policy makers, entrepreneurs, and SME managers to ensure the appropriate scheme to improve the SME sector in Nigeria.
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It has been admitted that green growth is a focus for various international organizations. The paper aims to clarify the fact that green growth is the best choice for Chinese small and medium enterprises (SMEs) in sustainable development. Problems and opportunities in the sustainable development of SMEs are discussed. Finally, some feasible approaches to the green growth of Chinese SMEs are elaborated.
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Abstract Purpose – The purpose of this paper is to discuss the role and contribution of SMEs performance in the national development of a developing country like Nigeria. The performance of SMEs plays a major role, but there is a dearth of literature about their contribution which are not well researched in Nigeria. This paper focuses on what SMEs performance contribute and what barriers are there which make them not to contribute at their optimum. A lot of research on the SMEs performance contribution is on developed countries and developing countries with little on developing countries. Design/methodology/approach – This is a general review paper on the performance of SMEs and its contribution that have been made and can make to the national development of Nigeria. Findings – the role SMEs performance in the national growth in Nigeria cannot be overemphasized. The performance of SMEs and its contributions has manifested and shown that they are a major area to be researched to assist the policy makers and the SMEs, owners to encourage enabling and conducive environment for SMEs to perform more Originality/value – This work is aimed at raising awareness of the importance and the performance level of SMEs to national and economic development of a developing country like Nigeria.
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This paper sets out to analyze the use of strategic planning in small and medium-sized high-tech companies in Brazil. These companies needs strategic planning in order to support the performance and enhance the competitiveness, by enabling effective responses to be found for market changes and uncertainties, and to refine their management capacity so as to generate and disseminate new knowledge at the same time as managers develop innovation, creative products in accordance with the customer’s needs. The major result of this paper is the matrix of mature strategic business, which is based on the management actions. The matrix derived from theoretical concepts, it used in practice by 13 companies for the evaluation their own specific business development. This indicates clearly the absence of formal planning models but underlines the importance of the strategic awareness, personal commitment of the manager in pursuing objectives and the relationship with the stakeholders.
The authors do not have rights to distribute the full-text online so only the table of contents and front matter are provided here. If you are an instructor seeking a review copy or teaching supplements, please use this link to locate your Cengage representative: Brief Contents PART ONE INTRODUCTION TO STRATEGIC MANAGEMENT 1 Strategic Leadership: Managing the Strategy-Making Process for Competitive Advantage 1 2 External Analysis: The Identification of Opportunities and Threats 43 PART TWO THE NATURE OF COMPETITIVE ADVANTAGE 3 Internal Analysis: Distinctive Competencies, Competitive Advantage, and Profitability 80 4 Building Competitive Advantage through Functional-Level Strategies 116 PART THREE STRATEGIES 5 Business-Level Strategy 153 6 Business-Level Strategy and the Industry Environment 178 7 Strategy and Technology 210 8 Strategy in the Global Environment 246 9 Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing 286 10 Corporate-Level Strategy: Related and Unrelated Diversification 318 PART FOUR IMPLEMENTING STRATEGY 11 Corporate Performance, Governance, and Business Ethics 359 12 Implementing Strategy through Organization 395 CASES
Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable over time, this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage-value, rareness, imitability, and substitutability are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.