Management of Business Challenges Among Small and Micro Enterprises in Nairobi-Kenya

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KCA JOURNAL OF BUSINESS MANAGEMENT: VOL. 2, ISSUE 1 (2009).

MANAGEMENT OF BUSINESS CHALLENGES AMONG
SMALL AND MICRO ENTERPRISES IN NAIROBI-KENYA
Michael Bowen1
Daystar University, Nairobi, Kenya
Makarius Morara2
Smart Outcome Services Ltd., Nairobi, Kenya
Samuel Mureithi3
Daystar University, Nairobi, Kenya
Abstract
Small and Micro Enterprises (SMEs) play an important economic role in many countries. In Kenya, for example the SME sector contributed over 50percent of new jobs created in 2005 but despite their significance, SMEs are faced with the threat of failure with past statistics indicating that three out five fail within the first few months. This study sought to understand how SMEs manage the challenges they face. These challenges seem to change (evolve) according to different macro and micro conditions. This study employed stratified random sampling to collect data from 198 businesses using interviews and questionnaires. The data was analysed descriptively and presented through figures, tables and percentages. The findings indicate that SMEs face the following challenges; competition among themselves and from large firms, lack of access to credit, cheap imports, insecurity and debt collection. Credit constraint seems to be easing up when compared to previous researches. Relevant training or education is positively related to business success. The SMEs have the following strategies to overcome the challenges; fair pricing, discounts and special offers, offering a variety of services and products, superior customer service and continuously improving quality of service delivery. The research concludes that business success is a consequence of embracing a mix of strategies.

Key words: challenges, evolution, urban, small and micro-enterprises (SMEs)

INTRODUCTION AND BACKGROUND
The small and micro enterprises (SMEs) play an important role in the Kenyan Economy. According to the Economic Survey (2006), the sector contributed over 50 percent of new jobs created in the year 2005. Despite their significance, past statistics indicate that three out of five businesses fail within the first few months of operation (Kenya National Bureau of Statistics, 2007). According to Amyx (2005), one of the most significant challenges is the negative perception towards SMEs. Potential clients perceive small businesses as lacking the ability to provide quality services and are unable to satisfy more than one critical project simultaneously. Often larger companies are selected and given business for their clout in the industry and name recognition alone. Starting and operating a small business includes a possibility of success as well as failure. Because of their small size, a simple management mistake is likely to lead to sure death of a small enterprise hence no opportunity to learn from its past mistakes. Lack of 1

Dr. Michael Bowen (PhD) is a senior researcher at the Centre for Research, Publications and Consultancy in Daystar University, Nairobi, Kenya.
2
Makarius Morara (MBA) is the Managing Director of Smart Outcome Services Ltd. Nairobi, Kenya. 3
Samuel Mureithi (MBA, MA Communication) is a senior Lecturer in the Faculty of Postgraduate Studies at Daystar University, Nairobi, Kenya.

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KCA JOURNAL OF BUSINESS MANAGEMENT: VOL. 2, ISSUE 1 (2009).

planning, improper financing and poor management have been posited as the main causes of failure of small enterprises (Longenecker, et al., 2006). Lack of credit has also been identified as one of the most serious constraints facing SMEs and hindering their development (Oketch, 2000; Tomecko & Dondo, 1992; Kiiru, 1991). Education is one of the factors that impact positively on growth of firms (King and McGrath, 2002). Those entrepreneurs with larger stocks of human capital, in terms of education and (or) vocational training, are better placed to adapt their enterprises to constantly changing business environments (King and McGrath, 1998). Infrastructure as it...
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