Small businesses in Nigeria are operating in a rapidly changing environment with

different issues impacting on their long term survival. Thus the questions these project
hopes to answer are:

-What are the external factors (environment) affecting the survival of small businesses.

-How can small business protect themselves from the effect of rapidly changing and
unstable external factors environment?

In recent times, significant attention has been focused on small and medium scale
enterprises in developing countries because of their potential for diversification and
expansion of industrial production, as well as the role they play in the attainment of the
objectives of development. According to Navidi and Schmitz (1994) these roles are (a)
small scale enterprises utilize large labour surplus that exist in developing economies;
(b) they yield quick returns; given their capital requirements, they facilitate the
exploitation, mobilization and utilization of local capital resources. Thus, in any economy
where capital and institutional savings as well as management and technical skills are
inadequate, the contribution of these small firms cannot be over emphasized.

It is necessary at the beginning to state what essentially constitutes small and medium
scale enterprises. Often, there is no single criterion for classifying a business unit as a
small, medium or large enterprise. These terms small, medium and large are relative and
they differ from industry to industry and from country to country. There is no unique
universally accepted definition of these terms. It is important to note that definitions
change over time and depends to a large extent the country’s level of development.

n Nigeria, there are different definitions of SMEs according to Osuagwu (2001) the
national council on industry classifies small and medium scale enterprise in Nigeria with
regards to employed labour force and capital investment. Various scholars, institutions,
entrepreneurs etc. have given different definitions. Griffin and Ebert (1996), sees small
and medium scale enterprise as a business owned and managed independently and
does not dominate its relevant market segment of interest. The centre for industrial
research and development (CIRD) at the Obafemi Awolowo University, defines small and
medium scale enterprise as those enterprises with total assets not exceeding two
hundred and fifty thousand Naira (N250,000) and employing full time workers not
exceeding fifty (50) people.

The central bank of Nigeria (CBN) defined SMES as a business having a turnover not
exceeding 500,000 Naira. In addition, the CAMA of Nigeria of 1990 defines a small
business as one with annual turnover of not more than two million naira and a net value
of not more than one million naira. However the definition of SMES varies from industry
to industry and country to country. There are no generally accepted definitions of SMEs.

It has being argued extensively that Small and Medium Enterprises (SMEs) are important
because it does contribute meaningfully to economic development, in form of output
expansion, employment generation, income redistribution, promotion of indigenous
entrepreneurship and production of primary goods to strengthen industrial linkages.

The small and medium scale sector is responsible for about 70 per cent of the total
industrial employment in Nigeria and between 10-15 per cent of the total
manufacturing output. The agricultural sector which comprises mainly of SMEs has
promoted indigenous technology and increased utilization of local raw materials. They
are the strongest promise we have for industrial growth (CBN). SMES play a vital role in
both rural and urban economies of Nigeria and they abound in all sectors of the
economy. According to Adegbite (1997), in a study conducted by the international
finance cooperation estimated 125,000 in 1983. The number has been estimated to
above 200,000 in 1997 however this figure excludes numerous unregistered businesses
that are classified as the informal sector of the economy; there are indicators that SMES
account for about 70% of industrial employment and 10% to 15% of manufacturing
output (CBN 2000). It is said that less than 5 per cent of SMEs survive beyond their first
year of existence. source

Over the year government has pursued policies that would provide favourable
conditions for small business including trade liberalization and some incentives
therefore making the environment friendly to entrepreneurs. Some International
agencies and world organizations have invested and have been promoting the growth
of SMEs in Nigeria through funding and capacity-building initiatives/program, and have
continued to advocate for better support structures for operators in the small and
medium scale sector. Onugu (2005)

Some of the scheme embarked upon by government includes; the introduction of fiscal
incentive .i.e. granting small business tax holiday for the first six years of it operation.
Also the Central Bank of Nigeria set credit guidelines/rules requiring commercial bank to
set aside certain percentage of their funds as loan to small businesses. Several
developmental financial institutions and programs were also established to aid small
businesses, this include the Nigerian Bank of Commerce and Industry (NCBI), the
Nigerian Industrial Development Bank (NIDB), and the World Bank SME I and SME II
initiatives. There were also export incentives from the Nigerian Export-Import Bank
(NEXIM) to encourage export loan facilities to small businesses as well as export duty
exemptions administered by the Nigeria Export Promotion Council (NEPC). Other small
business incentive program includes various training (personnel), repair and
maintenance of machines, and extension services. Both local and state government have
in place various support programs for Small-business Okpara (2007). With various
programs and initiatives in place, the effect is yet to be felt by operator of SMEs. Put
differently the failure rate of businesses continues to increase and the effectiveness of
the programs remains unclear. With the increase in the failure rate of SMEs the future of
this sector looks bleak.

In Nigeria, there has been no concentrated effort to encourage and support new
businesses”. Others have argued that the gloom of SMEs in Nigeria is the lack of long-
term loans since most loans in the Nigerian market are short-term while what SMEs
require to grow and become really successful is long-term capital. The absence of
venture capital financing in Nigeria has also intensifies the situation as venture capital
provides long-term capital, which allows a small business to grow, as is the case in
Ghana and some developed economies.

Other problems, which frustrate SMEs in Nigeria and

make some of them to either die within their first two
years of existence or perform below standard even after
surviving the early years. The key ones include
inadequate infrastructural facilities (road water
electricity etc.), insecurity of lives and property,
inconsistent monetary, fiscal and industrial policies,
limited access to markets, multiple taxation and levies,
lack of modern technology for processing and
preserving products, policy reversals, capacity
limitations, data inadequacies, harsh operating
environment, fragile ownership base, fragile capital
base.

While some of the challenges that SMEs face are

induced by the operating environment (government
policies, globalisation effects, financial institutions, local
government policies, attitude to work etc.), other
challenges are driven by the inherent characteristics of
the SMEs themselves.
To understand the topic further I will be considering the various reasons for starting up
a business. Stoke (2009) found that reasons for starting a business as accounted for the
failure of some business. For instance during the dot.com boom so many business
sprang up because some many entrepreneur saw it as a way to get rich quickly therefore
going into the business without adequate preparation and this saw many of them going
out of business.

THE MOTIVATION FOR SETTING UP A BUSINESS

With the increase in new small business only a tiny minority have being recorded to
have experience substantial growth or grow to a large enterprise. Many cease to exist
only few years usually 1-2 years into trading this may be as a result of fading of heroic
visions or inappropriate “home-work”, some of whom quickly return to other types of
employment or sadly unemployed. The decision to start a business is always a
courageous one regardless of the type or business or circumstances surrounding the
decision. There are many reasons for starting up a business, Stokes (2010) identified this
reasons under the term pull and push influences. An individual can either be pushed
into self-employment because there was no other alternative or one can be pulled into
self-employment to pursue a business opportunity.

According to Grilo et la (2006) pull factors refer to the expectation of being better off as
an entrepreneur (i.e., attracted to self-employment with the expectation that it will
provide greater (im)material benefits), and that push factors is the conflict between
one’s current and one’s desired occupational status (i.e., associated with some level of
dissatisfaction). Push and pull effects are comparable to necessity-based
entrepreneurship and opportunity-based entrepreneurship, respectively. Opportunity
entrepreneurs are influenced by pull factors to start a business, while necessity
entrepreneurs are affected by push factors.

PULL FACTORS
Desire for independence: this when one desire to be boss of oneself and not wanting to
be pushed or under someone. This reason is believed to be common among female
entrepreneur.

Desire to be exploit opportunity: the identification of a gap or opportunity in the market

through experience or observation is a common reason for starting a new business. The
desire to explore this opportunity is a positive motive and can be done through
applying specialist knowledge or developing a new product, or through hiring the
appropriate technology.

Turning a hobby or previous work experience into business: according to research may
founders establish businesses in the area in which they have prior knowledge or
experience, example of Bill Gate and other great entrepreneurs.

Financial incentives: the probability of having access to large fund and earn large salary.

PUSH FACTOR
Redundancy: this is considered a push factor lately with the advent of the recession
which started with the housing crisis in 2008 where there has being a lot of
redundancies across the world. Men and women are faced with no job and on income
and this have made people set up their own business using the generous handshake
accompanied with redundancies in some cases.

Unemployment: job insecurity and unemployment varies in significance by region, and

by prevailing economic climate. According to scott el al (1986) a study of 25 per cent
business founders in the late 1970s were pushed, while later research showed a figure of
50 per cent when unemployment nationally are much higher.(Stoke et al 2010).

Disagreement with previous employer: uncomfortable relationships at work has

influence people to start their own small business

According to survey it has shown that small business owner that are pulled rather than
pushed have higher chances of succeeding. Put differently, a positive motivation (pull
factor) to start a business will in the long run have a positive effect on the performance
of the business, on the other hand those who are self-employed based on the push
factors are less likely to be successful because they are being pushed due to
circumstances they find themselves in starting a business as a last resort, most time they
are not ready for the challenges associated with small business.
NATURE AND ROLE OF THE BUSINESS ENVIRONMENT
According to Gautam (2005) Environment refers to all internal and external factors that
influence the functioning of a business. A business runs in an open system as many
other open systems. A business uses various resources as inputs from and supplies
outputs to the environment. Business environment is set of all affecting factors to the
business. Thus, it creates threats to a business and at the same time brings new
opportunities as well. Businessmen should be able of avoiding the threats and exploiting
the every opportunity.

To further explore the factors that influence the small businesses: I will be taking a cue
from the previous researches where various researchers who have identified numerous
factor affecting small business. Stoke (2010) identified some factors which he termed “a
matter of life and death of small firms” in his book. These factors can be generally
divided two factors external and internal factors.

The internal factor: revolves around the characteristics and behaviour of the
entrepreneur. The external factors: are largely beyond the control of the entrepreneur.

This environment is classified as follows;

Economic

Technological

Socio – cultural

Political/Legal

Researchers (such as Stokes, 2010) are of the opinion that, the combination of less
controllable (external factors) together with controllable (internal factors) arising from
personal attributes, management competencies and behaviour of entrepreneur are
some off which influence the start up or survival of small businesses.

The SLEPT analysis model is similar to the PEST analysis but other factors deem relevant
were included to help in this study. This analysis is useful in understanding the market
growth or decline also the position, potential and direction of a business. SPLET is an
acronym for Social, Legal, Economic, Political, Technological factors which are factors
that directly or indirectly influence the operations of a business in a given environment.
The SLEPT analysis helps to understand the environment in which a business operates
and helps in developing a survival/growth strategy fit for the environment. The SLEPT
analysis is similar to the SWOT and porter five forces model as they are often used in
reviewing and planning strategy or position, direction of a business and marketing
position. However, SLEPT analysis essentially considers external factors, while the SWOT
analysis is based on partly internal and external factors.

Every Business is generally affected by the economic, social, legal, technological and
political factors. These factors collectively form the business environment. Business
environment includes those forces, factors and institutions that are beyond the control
of individual business organisations and management but affect the business enterprise.
While some factors affect businesses directly others have indirect effect. The various
factors of SLEPT model will be examined.

THE EXTERNAL BUSINESS ENVIRONMENT

According to………… say the external environment is the pattern of all the external
conditions that influences and relates to development. The factors include:

1) TECHNOLOGICAL ENVIRONMENT: These are related to knowledge applied in the

production process, innovations, machines and materials used for producing goods and
services. Technology is the way things are done, technological change influences the
way an organization carries out its operations.

Technology improves customer service and demand. This is especially true of modern
communication technology, because online databases enable vast quantities of
information to be shared easily and quickly between businesses and their customers.
Technology positively impacts the production and distribution of goods and services,
therefore improving the speed and efficiency with which goods and services are
accessed or delivered to the consumers, also help minimise cost. (Olabisi Ajayi, 2000).
Berisha-Namani is opinion that technology is having a significant impact on the
operation of SMEs and it is claimed to be essential for the survival and growth of
economies in general.

2) SOCIAL ENVIRONMENT: The social environment consists of factors related to human

relationships on business. The factors relevant in the social environment includes;
demographic characteristics such as population density and distribution, age group etc,
family structure such as changes in family structure, attitude of the family etc, social
concerns, social attitudes etc.

Thandeka(2008) “Businesses needs to take a pro-active approach and be ahead of these

changes, by anticipating rather than hurriedly making alterations to products and
 processes in a reactive way. Changes in social trends can impact on the demand for a
firm’s products and the availability and willingness of individuals to work.”

3) ECONOMIC ENVIRONMENT: These are some of the small business enterprise that
originates from the nature and direction of the production, distribution and
consumption of goods and services in the area where the business operates. It covers
the price level, productivity level; interest rate, employment rate, real income level etc.
The amount saved and invested in an economy will have an effect on the spending
pattern of such economy.

4) LEGAL/POLITICAL ENVIRONMENT: The political system covers the forms of

institutions and the structure in which a nation is governed. The political environment
changes in response to new social pressure such as from military to democracy. (Olabisi
Ajayi (2000), political/legal environment are those factors which results from legal and
governing issues in which the business enterprises may want to operate (Osuagwu,
2001), restrictions are imposed on enterprise through fair trade decisions, tax
programme, minimum wage level etc.

Seven ps

the Services Marketing Mix consists of a set of tactics that a company can use to promote and
encourage potential customers to buy their service. The Services Marketing Mix is also known
as the 7 P's of Marketing.
...
Services Marketing Mix Example
 Product. ...
 Price. ...
 Place. ...
 Promotion. ...
 People. ...
 Process. ...
 Physical Evidence.

Product
Product refers to a good or service that a company offers to customers. Ideally, a
product should fulfill an existing consumer demand. Or a product may be so
compelling that consumers believe they need to have it and it creates a new
demand. To be successful, marketers need to understand the life cycle of a
product, and business executives need to have a plan for dealing with products
at every stage of their life cycle. The type of product also partially dictates how
much businesses can charge for it, where they should place it, and how they
should promote it in the marketplace. Product refers to the product or
services your business provides to your target audience. The product a company
provides can vary significantly depending on the type of company and what they
do. For example, McDonald's provides consistent fast food, including
hamburgers, french fries, and chicken products, whereas Salesforce provides
customer relationship management (CRM) software and marketing automation
tools for businesses.

Price
Price is the cost consumers pay for a product. Marketers must link the price to
the product's real and perceived value, but they also must consider supply costs,
seasonal discounts, and competitors' prices. In some cases, business executives
may raise the price to give the product the appearance of being a luxury.
Alternatively, they may lower the price so more consumers can try the product.

Marketers also need to determine when and if discounting is appropriate. A

discount can sometimes draw in more customers, but it can also give the
impression that the product is less exclusive or less of a luxury compared to
when it is was priced higher. Price refers to how much your product or service
costs. How you price your product depends on your competitors, demand, cost to
produce the product, and what consumers are willing to spend. Companies also
need to consider their pricing models, including choosing between one-time
purchases and subscription models.

Place 
When a company makes decisions regarding place, they are trying to determine
where they should sell a product and how to deliver the product to the market.
The goal of business executives is always to get their products in front of the
consumers that are the most likely to buy them.

In some cases, this may refer to placing a product in certain stores, but it also
refers to the product's placement on a specific store's display. In some cases,
placement may refer to the act of including a product on television shows, in
films, or on web pages in order to garner attention for the product.

Place refers to where and how people buy your product. Some examples of
places consumers can buy products and services include online via a web
browser, through a smartphone app, retail locations, through trade shows or
events, through marketplace channels like Amazon or Walmart, or through a
sales professional.
Promotion
Promotion includes advertising, public relations, and promotional strategy. The
goal of promoting a product is to reveal to consumers why they need it and why
they should pay a certain price for it.

Marketers tend to tie promotion and placement elements together so they can
reach their core audiences. For example, In the digital age, the "place" and
"promotion" factors are as much online as they are offline. Specifically, where a
product appears on a company's web page or social media, as well as which
types of search functions trigger corresponding, targeted ads for the product.

Promotion refers to specific and thoughtful advertising that reaches a company's

target market. A company might use an Instagram campaign, a PR campaign
that showcases a product, or an email campaign to reach its audience at the right
place and the right time.

Market research

Market research is the process of determining the viability of a new service or product
through research conducted directly with potential customers. Market research allows a
company to discover the target market and get opinions and other feedback from consumers
about their interest in the product or service.

it is important that to identify current challenges and potential problems in the current market, a

proper plan and strategy need to be to develop. This will helps a marketer understand market,
customers, competitors, and industry trends.

Market research can help you to discover what new products or services the market needs
and how you can provide that. Key issues with developing a certain product or services can be
identified and it can help you to avoid expensive mistakes with its development.