AN ANALYSIS OF ENVIRONMENTAL FACTORS AFFECTING SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA (A CASE STUDY OF LAGOS STATE)


AN ANALYSIS OF ENVIRONMENTAL FACTORS AFFECTING SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA (A CASE STUDY OF LAGOS STATE)

CHAPTER ONE
INTRODUCTION

1.1 BACKGROUND TO THE STUDY
The word enterprise simply means a bold undertaking .It is the acceptance of risk production through uncertainty. A business enterprise is a decision-making unit concerned in serving certain needs through the production and distribution of goods and rendering of services at a profit. An entrepreneur is a person that setup a business at considerable risk. The entrepreneur decides what goods and services is to be provided and then coordinates the factors of production {land, labor, capital} necessary for the production of goods and services decided.

According to Ubom (2003) the seemingly simple subject of entrepreneurship is a major key to industrialization and wealth creation. This is because an entrepreneur is a person who undertakes the risk of investing in the establishment and operation of business for the purpose of making a profit.

Business as an open system in the society interacts within a particular environment, which must be favorable to the business for achievement of set objectives. The entrepreneur must plan, take decisions and execute them within the limits imposed by the environment. In other words, the environment is a strong determinant of the success or failure of an organization. Perhaps this was what motivated Chinonye (2004) to stress that the environment constitutes one of the factors that determines the choice between salaried employment and starting one’s own business.

The acronym SMES refer to Small and Medium Scale Enterprises. In Nigeria, the definition of small business firms has varied over the years and by institution. According to the third national development plan (vol. 1 p.353) manufacturing enterprise employing more than ten people or whose investment in machinery and equipment does not exceed N600, 000 are referred to as small-scale industry. In 1988, the Central Bank of Nigeria (CBN) defined small business firms as firms (excluding general commerce) whose investments (including land and working capital) did not exceed N500, 000 and/or whose annual turnover did not exceed N5m. Since 1993, Central Bank of Nigeria redefined them and the definition has since then been changing.

There are several questions, which prospective entrepreneurs might want to ask since the environment and the small and medium enterprises are linked together. However, to inform the questions, there is a need for the entrepreneur to be aware of his premise. This can be achieved through conducting a SWOT analysis (SWOT is an acronym for Strength, Weakness, Opportunity and Threat)

The essence of this research work is to analyze environmental factors affecting small and medium scale enterprises in Nigeria, taking Lagos state as our case study. His business environment, which may be economic, and this includes the general state of the economy, political which includes having a fair knowledge of the political situation and the extent to which it might affect the business, technological which involves the total knowledge we have about the way we do things, and physical which includes the availability of raw materials, population, land area, climatic condition etc.

Small and medium scale enterprises are faced with environmental factors, which affect their success. When the market is not made available, this poses threat for the small and medium scale enterprise.
In conclusion, the environment is very difficult and there is no competitive advantage over the bigger firms and foreign firms.

1.2 STATEMENT OF THE PROBLEM
The performance of small and medium scale enterprise has of recent been unimpressive in terms of its contribution to the economic growth of Nigeria. This research work will attempt to answer the following questions:

1. Are there existing technologies to meet the requirement of small and medium scale enterprise?
2. Are there any adverse or unfavorable government policies for the development of small and medium scale enterprise?
3. Is there a ready market for their product?
4. Does availability or otherwise of socio-infrastructure have any impact on the growth of small and medium scale enterprise?

1.3 OBJECTIVE OF THE STUDY

The objective of this study is to examine the environmental factors affecting the operations of small and medium scale enterprise in Nigeria. The specific objectives are:

1. To verify the existence or non-existence of appropriate technology.
2. To determine the compatibility of government policies with the development of small and medium scale enterprise.
3. To determine the availability of market for their product.
4. To determine the relevance of socio-infrastructure on the growth of small and medium scale enterprise.

1.4 JUSTIFICATION OF THE STUDY
The relevance of this study is that it looks at the environmental factors that affect small and medium scale enterprise in Nigeria. How small and medium scale enterprise benefits people in the industry, policy makers, academicians etc.

1.5 RESEARCH HYPOTHESES
This research study is set up to test the effect of environmental factors on the success of small and medium scale enterprise. The research hypothesis is stated below:
Ho: technology has no significant effect on the growth of small and medium scale enterprise.
H1: technology has significant effect on the growth of small and medium scale enterprise.

Ho: government policy has no significant effect on the growth of small and medium scale enterprise.
H1: government policy has significant effect on the growth of small and medium scale enterprise.

Ho: availability of market has no significant effect on the growth of small and medium scale enterprise.
H1: availability of market has significant effect on the growth of small and medium scale enterprise.

Ho: social infrastructure has no significant effect on the growth of small and medium scale enterprise.
H1: social infrastructure has significant effect on the growth of small and medium scale enterprise.

1.6 SCOPE OF THE STUDY
The study is for a period of one (1) academic session. The study will cover one local government area in Lagos state that is ikeja local government and 80 questionnaires will be administered to entrepreneurs. This will help provide valuable information that would not have been gotten somewhere else.

1.7 LIMITATION OF THE STUDY
On the basis of this study, the work is limited or constrained by unavailability of money and also time. The other constraint includes inadequate literature on this study.

1.8 STRUCTURE OF THE STUDY
Chapter one is introduction which reflects the background to the study, statement of problem, objective of study, justification of the study, research hypothesis, scope of the study, limitation of the study and structure of the study.

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