CHAPTER 2:LITERATURE REVIEW- SMMES IN DEVELOPING
3.6 Factors that Constrain the Success of SMMEs in Maseru
3.6.2 Task environment
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plans and resource famishment are the primary reasons why small businesses fail.
Education, training and experience are the major factors contributing to proper financial management of the business. A study by Bekele and Worku (2008) found that managerial skills and business knowledge are vital factors that stimulate the existence and long-term survival of SMMEs, empowering them to become competitive in economies and this can be put down to careful realisation and analysis of efficient ways of utilising scarce resources and opportunities. Ryu and Simpson (2011) add that managerial abilities are supported by the education of the SMME owners, managerial experience, and entrepreneurial experience. However, Cant and Wiid (2013) highlight that low educational levels found in SMME owners, especially in the micro enterprises, decreases their management competencies and this is one of the reasons why their businesses fail.
Previous studies recommend that all business managers need managerial skills that are vital for their success. According to Mohammed and Farhad (2003) training programmes are implemented to advance managerial skills such that they are motivated towards increasing their effectiveness and must have the ability to identify and accept the need for change. However, a study by (Das, 2001) shows that in most developing countries, business management training has become a concern, resulting in deprived results and inefficiency of managers involved in training. Das (2001) explains that the training efforts in these countries are very low as some managers have managerial weaknesses and are therefore reluctant to undergo training.
3.6.2 Task environment
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combination of factors such as price, product availability, location and the image of an enterprise. It is vital for emerging SMMEs to create relationships with customers from scratch. Nevertheless, Lindman (2004) states that SMMEs’ marketing is generally different from that of well-established larger firms. SMMEs have narrow scope in terms of business operations, a small market share and essential operations driven and managed by owners (Lindman, 2004).
Ross (2012) states that SMME owners in small and medium-sized enterprises fail to develop and maintain relationships with their customers with the assumption that when the sale is made, the relationship ends and the attention shifts to getting new customers.
Ross (2012) suggests that having a repeat customer is most valuable to the business because sensitive and personal relationships are established which make customers emotionally attached to the enterprise’s products and services. Lack of demand for the products and services offered by SMMEs in Maseru was identified as one of the major challenges these small businesses face (GOL, 2008). According to Ntlaloe (2011) the undifferentiated nature of SMMEs’ products and services offerings and lack of competitiveness between these enterprises due to the small market results in limited demand from customers.
(ii). Competitors
The majority of businesses in Lesotho are SMMEs, which continue to dominate the country as core contributors to economic growth hence the critical need for them to be competitive in the global market (MTICM, 2008). Small businesses operate in a very dynamic and competitive environment in which they are expected to succeed and most of them are vulnerable to competition and are not able to sustainably function in the business environment. According to Lepolesa (2008) the performance of Basotho- owned enterprises, especially those in retailing has declined in recent years, given the intense competition from foreign-owned enterprises, especially Asians who enter the city in large numbers and are given preference to access suppliers’ credits since they easily repay their loans on time. However, a study by the African Development Bank (2012) contends that the level of competition in the city is very weak. The weak competitiveness of the city’s economy results in numerous constraints that cause difficulty in determining productivity levels of infrastructural facilities, inadequate access to superior financial services, destitute quality of education and training, poor
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quality of contemporary technology as well as ineffective marketing (African Development Bank, 2012). Research by the World Bank (2013) also shows that Maseru’s uncompetitive business environment is one of the major constraints to the growth of businesses which affects both foreign investment and the growth of SMMEs.
Ntlaloe (2011) suggests that the ownership structure of small businesses in Maseru and the relationship between foreign-owned enterprises and Basotho-owned enterprises are critical issues that need to be carefully revised in order to adopt a sustainable environment for all SMMEs in the city. There is no legislative framework in place to enhance and control competition regardless of the initiatives by the Government of Lesotho. The conscripting of the competition bill and the preparation of the competition policy are currently overdue thus resulting in failure to provide any breakthrough (BTI, 2014).
(iii). Employees
The quality of relationships that exists between employees and management in SMMEs influences the employees’ capabilities to access crucial information to solve daily problems that arise in the workplace (Nelson et al., 2007). Ryu and Simpson (2011) state that employees can also be customers of the company; this means that if they do not receive fair treatment, the message will get through to customers and this can be costly to the firm. When employees are not satisfied, they opt to take time off from work through sicknesses; they show less interest for the company’s products and services and can even display their negative attitudes to customers (Euromonitor International, 2012). There are limited advanced resources available to SMMEs regarding the recruitment and developmental programs of employees, who are the driving force behind the success of an organization regardless of its size. Fathi et al.
(2011) add that SMMEs have inadequate development programs intended to improve an employee’s skills-base and knowledge, offering an opportunity for them to progress with the enterprise. There is a need for professional consultants who conduct seminars for employees for further training and skills development. These exist in larger businesses whereas for small businesses there is usually an owner, the manager and an employee (Fathi et al., 2011).
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