1

CHAPTER 1

The Problem

Introduction

Small businesses include a wide variety of business types that are

independently owned, operated, and financed. Small business owner faces a list

of struggles every day just to stay in business. Without the deep resources large

corporations have, small businesses find themselves working hard to generate

revenue and make profit. In order to be able to address the struggles of small

business owners, it is important to understand first and identify these daily

business issues.

Small businesses can be a vehicle for both schumpeterian entrepreneurs

introducing new products and processes that change the industry and for people

who simply run a business for a living (Wennekers and Thurik, 1999). During the

first decades of the last century, small businesses were both a vehicle for

entrepreneurship and a source of employment and income. This is the era in

which Schumpeter (1912) conceived his Theory of Economic Development. Here

Schumpeter emphasizes the role of entrepreneur as prime source of economic

development.

Over the past two decades there has been a mass of research which has

attempt to discover the difficulties of start-up planning and existing small business.

Some of them focused on problems of new entrepreneurs and other have

concentrated on exiting entrepreneurs (Mirry, 1998; Covin, & Slevin, 1991;

 2

Stanworth, 1991; Sexton & Bowman-Upton, 1991; Ahmadpour, 1990; Sharder,

Mulford & Blackburn, 1989; Bracker and Pearson, 1986; Miller, 1983). Some of

the researchers have addressed successful entrepreneurs but others looked at

the failure small business managers. All these studies were addressing if there

are any clear characteristics, which distinguish small business barriers to find out

which one is more important for policy makers and business owners.

After all, these studies still the main question remain that why some of the

small industrial business is successful but other is failed. Despite the growing

numbers of small firms in the cities in the Philippines, the share of small firms in

the economic business has been in decline and a matter of concern. This situation

has caused great concern, as a productive economy is reliant on the birth of

substantial numbers of new enterprises and growth of such firms.

Establishment of small business also provides more job opportunities for

huge army of unemployed young people and residents in a community. In fact,

small businesses help buyers afford products and avail their needs.

Small business owners need business strategies that differ from those of

large firms, but owners often lack training in business and marketing strategies.

Specifically, financial planners are trained to provide planning services that

include topics such as (a) debt reduction, (b) asset accumulation, (c) college

savings, (d) retirement, (e) estate planning, and (f) tax planning (Certified

Financial Planning Boards of Standards, Inc. [ CFP Board], n.d). Individuals, who
 3

attempt to start a business without sufficient skills suffer a high risk of failure (Luca

& Cazan 2011).

The purpose of this study was to explore the experiences of small business

owners, identify the reason and causes of their business failure and success, and

to discover their strategies, skills, and training that contributed to their success.

Their business experience provides insights for other small business owners or

financial planners who aspire to become independent and develop a business.

Therefore, results of this research will help the aspiring individuals and business

owner to develop reasonable planning to get advantage of development of small

business.

Statement of the Problem

The study aimed to identify the struggles and success of small businesses in

Nahapunan Bacacay Albay, as well as the factors that causes for business failure

and strategies that was used for the business success. It also attempted to

answer the following:

1. What is the demographic profile of the respondents in terms of;

A. Age of business in operation

B. Gender

C. Monthly Profit of the Business

D. Kind of Business Owned

 4

2. What are the struggles encountered by the owner of small business in

Nahapunan Bacacay, Albay?

3. What are the strategies they use in order to address the struggles of their

business?

4. What are the triumphs experienced of small businesses in Nahapunan

Bacacay Albay?

5. What are the possible ways to improve the business in the locality?

Scope and Delimitation

The study focused on the struggles and successes of small businesses in

Nahapunan Bacacay, Albay. The dissertation aimed to identify the factors that

affects the performance of the small businesses and the business' success. It also

intended to identify and understand the variables that causes for the business

problems, the strategies and action that the business owners perform, the result

and success of the owners while running the business.

The research was conducted in Nahapunan Bacacay Albay where the

respondents were the owners of different kind of small businesses in the place.

Every existing business that is managed by only one person known as sole

proprietorship type of business was covered by the study.

Significant of the Study

The result of the study was important to the following person, agency and

sectors;
 5

Government Sector. This will help in the design of policies as well as in program

implementation. There may be elements beyond the control of the business

sector that may addressed through public policy. This stems from the recognition

that the government may affect the competitive structure of the business

environment. Developing policies that may help business retain their

competitiveness may be vital for economic development.

Business Sector. This will help in providing a deeper appreciation of "strategic

philosophy" and other managerial theories. Hopefully, it may encourage more

discretion in adapting quick-fix solutions to challenges that confront them.

Moreover, understanding what makes business survive may lessen the "wasted

potential in otherwise successful companies".

Department of Trade and Industry. This will help the department to formulate

and plan activities which can help the business owners handle their businesses

and contribute to the economic growth. The findings of this study may contribute

to understanding of the importance of training and skills required for small

business to maintain its sustainability.

Barangay Officials. The result of this study will help the barangay officials of

Nahapunan Bacacay Albay to be aware of the economic status of the Barangay

and plan activities and programs to also help address the small business owners’

needs in improving their business.

Business Owners. The outcome of this study will be a great help for small

business owners for them to understand more and address properly the problems
 6

in business that they encounter. This will help them identify the factors that can

cause their business to fail and prevent it from occurring before it happens.

Aspiring Entrepreneurs. This provides them actual experiences and strategies

adopted by entrepreneurs before them. These may guide them to develop a

"philosophy" that could be deeply embedded in their respective organizations.

The Academe/School. In establishing a basis future research. The accumulation

of cases may be used to bridge business theory and practice. The findings of the

research program may also have implications on how subjects like

entrepreneurship, family business management, strategic management and

accountancy and business management should be taught.

Accountancy and Business Management Students. In exposing them to the

actual and more relevant business experiences. Understand better the business

field.

Future Researchers. This study will be a big help to other aspiring researchers

who plans to study similar topic like the present study about success and failure in

running small business. This will guide them to perform their study well.
 7

Notes

Ahmadpour-Daryany. M. (200). Entrepreneurship; Theoris and Models: Tehran:

Pardis. Third Edition.

Backer, J. & Pearson, J. (1986) Planning and Financial Performance of Small,

Mature Firms, Strategic Management Journal. Vol. 7, 503-522.

Certified Finacial Planner Board of Standards (n.d). Retrieved from

http://www.cfp.net

Covin, J.G., & Slevin, D.P. (1991). A Conceptual Model of Entrepreneurship as

Firm Behaviour. Entrepreneurship Theory and Practice, 16(1), 7-25.

Luca, M.R., & Cazan, A.MN. (2011). Involvement in Entrepreneurial Training and
Personality. Procedia Social and Behavioral Sciencer, 30, 1251-1256.
Retrieved from
http://www.sciencedirect.com/science/article/pii/S1877042811020672

Miller D. (1983) Correlates of Entrepreneurship in Three Types of Firms.

Management Science. 29(7) 770-791.

Mirry. A. (1995). A Study of Environmental Factors on Marketing Planning Iran's

Small Firms. Management Knowledge Journal, No. 34133

Schumpeter, J.A. (1934). The Theory of Economic Development. New York, NY:
Oxford University Press.

Sexton, D. & Browman-Upton, N. (1991) Entrepreneurship: Creativity and Growth.

New York: Macmillam.

Shrader C. B.; Mulford, C. & Blackburn, V. (1989) Strategic and Operational

Planning, Uncertainty, and Performance in Small Firms. Journal of Small
Business Management. Vol. 27 (October), 45-60.

Stanworth, J. (1991) Bolton 20 Years On: The Small Firm in the 1990's. London:
Paul Chapman.

Thurik, R., and Weneekers, S. (2001). A note on Entrepreneurship, Small

Business and Economic Growth, Centre for Advanced Small Business
Economics, ERIM Report Series refence number, ERS-2001-60-STR, Faculty
of Economics, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR
Rotterdam, The Netherlands.
 8

CHAPTER 2

Review of Related Literature and Studies

This chapter presents a review of relevant literature about small business

failure, struggles and success. It attempts to present a brief resume of research

findings related to small business struggles and triumphs. The interest of the

researchers is to identify and connect the findings of the past researches to the

present study. This also explains the synthesis of the state-of-the-art, the gap

bridged by the study as well as the conceptual and theoretical frameworks and

paradigms.

Related Literature

According to Ponthieu and Insley (1996), "Small businesses constitute 97

percent of all businesses and employ more than 50 percent of the labor force"

(p.35). The small business sector is growing at very impressive rate, with small

business making up more than 50 percent of the sales and products in the private

sector (U.S. SBA, 1994). The importance of small businesses to the economy is

quite evident.

Filley and Pricer (1991) defined several tools for small business success.

These included good management techniques, such as appropriate operating

strategies, leadership and time management. Other tools were good financial

management and pricing strategies, motivational strategies for employees, and

ensuring only those employees with ability are hired.

 9

According to Clark, S. (1997) of the Puget Sound Business Journal, the

majority of the cause of business struggles and failures can be considered into the

three critical issues, namely; Money, Management and Marketing.

Why are some firms successful while other firms appearing to follow the

same paths are not successful? It has been said that specific success strategies

used in one businesses, like people, are different (Hard, Sineath, & Howle, 1987).

There are so many variables to sift through. It would appear that the majority of

the studies in this area have found that most businesses that demonstrated

success were found to have characteristics or to use tools in three separate areas.

These are characteristics of the owners/entrepreneurs, demographic

characteristics of the business, or strategic tools used by the business.

Ibrahim and Goodwin (1986) stated that "Success in business is defined in

terms of rate of return sales, and age or longetivity of the firm" (p.42).

Cuba, Decenzo, and Anish (1983) and Khan and Rocha (1982) also found

that sales profit, and longetivity were important to success. Hofer and Sandberg

(1987) noted that high quality services or production was the key to success for

firms and was directly related to effective management and planning, which relied

upon effective management decisions.

According to Lussier (1996), "There is no generally accepted list of variable

distinguishing business success from failure..." (p.10). The two most commonly

stated variables, however, that seem to make the difference are capital and

management experience.
 10

Hand, Sineath, and Howle (1987) discussed variables thought to be related

to business performance, such as characteristics of the entrepreneur (age,

education, experience, willingness to work, and ability to deal with customers and

employees). Also discussed were the planning abilities of the entrepreneur.

According to Zetlin (1994), small business owners feel that having a good

product is most important, however, other means of achieving success include a

commitment to quality and to the customer, innovation in marketing, being flexible

when change is needed, maintaining good supplier/customer relationships, and

hiring good people that can be empowered.

Bird (1989) stated that firms where owners showed innovations, risk-taking,

and hard previous training were most successful.

O'Neill and Duker (1986) indicated that small business that were successful

had higher quality products, lower levels of debt, and lower capital intensity as

well as, relied on the good advice of their accountants.

Mintzberg (1994) stated that small business owners must be able to define

the required strategies to find success as they continue to change within their

organizations.

Related Studies

The following are the related studies that support the topic. These are the

studies that were conducted related to the study of business struggles and

success.
 11

A study by Beckman and Marks (1996) found that business experience was a

factor in the success of small firms. This study relates to the present study since it

also aims to identify the reasons for business success. Some of the small

business owners failed to manage their business properly because they are

lacking on experience in this field.

Another study by Costa (1994), indicated that strategic planning contributes

to long-running success for businesses. Other factors for success include quality,

customer focus, innovative marketing practices, flexibility and employee

empowerment (Zetlin, 1994).

These studies also have similarity to the present study in the sense that it

points out some possible reason for the success of small business. It identifies

factors that can be apply in the business management to attain success.

A study by Bates and Nucci (1989) confirm that the age and size of the firm

had an impact upon survival. The older the firm, the more likely it was to remain in

business, and the larger the firm, the more likely it was to be successful.

The study of Bates and Nucci explains that the age and size of the busines

has something to do with the business success. It emphasizes that size and age

of business is one of the basis to say that the business is successful. Since the

older it gets the more experience the owner has and learn proper management of

the business and be able to overcome its struggles while running the business.
 12

In a study by Lussier and Corman (1995), it was noted that successful firms

used better professional advisors than did non- successful ones, and it made a

significant difference if their parents owned a business.

Lussier and Corman study explains and emphasizes that success also of

small business can came from the business history of the owners. Since it can be

an inherited property and legacy, it develops the ability of the business owner to

manage the business effectively and leads to success and capable of coping with

the struggles while running the business.

Synthesis of the State-of-the-Art

Researchers, through the related literature and related studies found out

what are the struggles and triumphs of small business as well as the owners and

how they were able to achieve success. Through the related studies and literature,

the researchers were able to identify the factors that affects the small business

success and causes failures.

Penrose (1995) began to look at entrepreneurial behavior and

decision-making abilities and concluded it was these that accounted for business

success or failure.

Other researchers (Acar & Winfrey, 1994; Barney, 1986) have stressed the

relevance of organizational culture in business performance. "Organizational

culture typically is defined as a complex set of values, beliefs, assumptions and

symbols that define the way in which a firm conducts its business", (Barney p.
 13

657). In this regard, organizational culture affects business decision making that

leads to better performance.

This review summarized much of the literature of previous studies to

determine whether new information has emerged overtime regarding criteria

leading to success. It was also written as an aid for new and experienced small

business owners, would be small business owners, leaders, policy makers,

educators and researchers.

While it is certain that all of these various factors will not work for every

organization, each one should be able to assess their weaknesses relative to the

suggested factors and be able to devise a plan to correct problems as needed. It

is also realized that across the various industries, small businesses differ greatly.

Certain of these factors may make a substantial difference for some and be of no

consequence to others. However, the factors provided in this summary should

allow business owners and others to become aware of the many options available

for success in a small business environment.

Gaps Bridged by the Study

After the researchers reviewed all the related information, the researchers

already have prior knowledge to identify the gaps to be bridged. There is no

similar study that was conducted before in Barangay Nahapunan Bacacay Albay

related to the focus of this present study. Therefore, researchers aimed to

connect and identify what were the struggles and successes that small
 14

businesses and small business owners experienced, and what were their

strategies in order to achieve triumphs in their business.

Theoretical Framework

Porter’s Five Forces Framework is a tool for analyzing competition of a

business. This model can apply for any type of business, from small to large sized

business. The purpose of this model is to determine the profit potential of a

market i.e business sector. According to Porter (1979) each business sector is

potentially influenced by five factors that he refers to as forces.

Porter (1980) focused on why some firms succeed and some firms fail.

Porter recognized that the issue of success or failure was complex, and the

fundamental reasons or causes for success or failure involved interactions among

a number of different variables. The five forces are namely, competitive rivalry,

threat of new entry, threat of substitution, supplier power, and buyer power.

The fist force is competitive rivalry, it looks at the number and strength of

your competitors. The intensity of competitive rivalry is the major determinant of

the competitiveness of the industry. Having an understanding of industry rivals is

vital to successfully market a product. A business must be aware of its

competitors marketing strategy and pricing and also be reactive to any changes

made. Another force refers to the threat of new entry, new entrants into a market

bring new competition, which can have a detrimental effect on profits. It affects

company’s profits as the customers have more variety to choose from. The third

force is the threat of substitution, substitutes perform the same or similar function
 15

or produce a similar product. The threat of substitution is a consideration for

managers in all industries, but in the financial planning industry, this threat is high.

Clients freely switch from one firm to another or from one advisor to another.

Another force is bargaining power of suppliers, also described as the market of

inputs. Supplier of raw materials, components, labor and services (such as

expertise) to the firm can be a source of power over the firm when there are few

substitutes. This can control pricing or product quantities, affecting profits (Porter,

1980). The last force refers to bargaining powers of customers, also described as

the market of outputs. Porter mentioned power of buyer which is especially strong

in industries involving knowledge-based consulting, such as financial planning.

Satisfied customers provide longevity to small firms, particularly when switching

costs are low and products are undifferentiated. Customer needs may be

intangible and difficult to define, but planners and managers must remain vigilant

to client signals.

Porter (1991) posited that management choices were the fundamental

determinants of success; discrete activities determined a firm’s position in the

industry and its competitive advantage. A firm may start out with favorable initial

conditions, such as a high level of skills and a good reputation, but skills alone will

not ensure success. If managers understand their industry and know how to apply

their resources correctly, the firm can be in a better position to achieve and

maintain a competitive advantage (Porter, 1991). He stressed that Five Forces

are the key sources of competitive pressure within an industry.

 16

Threat
Of New
Entry

Figure 1. Theoretical Framework

 17

Conceptual Framework

Identifying the success and struggles of small businesses in Nahapunan

Bacacay Albay is the goal of this study. The flow chart will help the researchers to

have a better understanding about small business struggles and success and

their owner as well.

The study aimed to describe the demographic profile of the respondents.

Demographic profile of the business owners is one of the factors that affect their

business, it is important to know a background about the small business owners,

because it can help in gathering data.

The dissertation intended to identify the struggles and problems that the

owners experienced while running the business. This also aimed to familiarize

with the strategies that the business owners used to overcome the problems.

The goal of this study was also to determine the success and triumphs of

small businesses and the owners. It also attempted to state and recommend

strategical methods and effective actions that can be used by future business

owners and present interested business owners and managers that were

handling a business. It is useful for them to easily solve the problems in their

businesses. This show the benefit of this study as it intends to help and give

knowledge about running a business.

 18

Figure 2. Conceptual Paradigm

 19

Definition of Terms

The following terms are conceptually and operationally defined:

Entrepreneur. Someone who is involved in entrepreneurial activity such as

establishing a new firm of entering into self-employment.

Entrepreneurship. The process of creating and running a business activity.

Management Strategies. The means used to coordinate business resources in

order to achieve business goals or objectives.

Nahapunan Bacacay Albay. The place of focus of the study. The source of

respondents to the study who will provide data that is needed by the researchers.

Small Enterprise/Business. A business that is financed by the owner and

manage by the owner itself.

Sole Proprietorship. A type of business that is managed by only one person.

Struggles. Something that is difficult to do or achieve, dealing with something

that causes problems.

Triumphs. A great victory or achievement and celebrating success or

accomplishment.
 20

Note

Acar, W. & Winfrey, F. (1994). The Resilient Organization Sustaining

Organization Renewal and Performance Journal of Strategic Change, 3,
165-173.

Barney, J. (1986). Organizational Culture: Can it be source of competitive

advantage? Academy of Management Review, 11(3), 656-665.

Bates, T., and A.Nucci.(1989). An analysis of Small Business size and rate of
discontinuance. Journal of Small Business Management, 24(4), 1-7.

Beckman, J., and N. Marks (1996). Entrepreneurial success and previous

business experience. Southwestern Small Business Institute. Association
Proceedings, March,1996, 82-84.

Bird, B. (1989). Entreprenurial Behavior. Chicao, IL: Foresman.

Costa, S. (1994). 100 Yers and counting. Management Review, 83(12); 32-34.

Clark, S. (1997). Reasons for business failure come in there broad groups, "Scott
Clark, Puget Sound Business Journal, July 21, 1997.

Filley, A., and R. Pricer. (1991). Growing Companies: Tools for Small Business
Success. Madison: Magna Publications, Inc.

Hand, H., W. Sineath, and W. Howle. (1987). Small Business Concepts and their
Relationshi to Performance: A field study of retail service stations. Journal of
Small Business Management, 25(2), 55-63.

Hofer, C. and W. Sandberg. (1987). Improving new venture performance: Some

guidelines for success. American Journal of Small Business, 12 (Summer),
11-25.

Ibrahim, A., and J. Goodwin. (1986). Perceived causes of success in small

business. American Journal of Small Business, 11 (Fall), 41-50.

Lussier, R., (1996). A business success versus failure prediction model for service
industries. Journal of Business and Entrepreneurship, 8(2), 23-37.

Lussier, R., and J. Corman. (1995). There are few differences between successful
and failed small business. Journal of Small Business Strategy, 6(1), 21-33.

Mintzberg, H., (1994). Thats not turbulence, its really opportunity. Planning
Review 22(6), 7-9.
 21

Porter, M. E. (1980). Competitive Strategy. New York, NY: Free Press.

Porter, M. E. (1991). Towards a dynamic theory of strategy. Strategic

Management Journal, 12(S2), 95-117. Retrieved from
http://smj.strategicmanagement.net/

O'Neill, H., and J. Duker.(1986). Survival and failure in small business: An

Application of Strategic prescriptions in entrepreneurial firms.Journal of Small
Business Management, 24 (1), 30-37.

Ponthieu, L., and R. Insley. (1996). Rethinking the effects of small business failure.
Journal of Business and Entrepreneurship, 8(1), 32-42.

Zetlin, M. (1994). Off the beaten path: What must new age entrepreneurs do to
succeed. Management Review, 83(12), 28-31.
 22

CHAPTER 3

Research Design and Methodology

This chapter presented the research method, respondents, instruments and

data gathering procedures. The statistical treatment that was used to interpret the

data gathered is likewise explained.

Research Method

This study used descriptive qualitative research. The researchers utilized

questionnaire that was given to the respondents in order to gather data about the

struggles and triumphs in small business that the owner experienced, particularly

in Nahapunan Bacacay Albay. Provided with the questionnaire, the respondents

were able to choose their answers within the given possible choices and specified

some answer which was not cited in the choices. Using the questionnaire, the

researchers were able to identify easily the data that were needed in the study.

The researchers distributed the questionnaire to small business owners from the

place. The main goal of this study was to identify the struggles and success of

small businesses and the business owners.

Source of Data

The data about this study were drawn from several sources, primarily from

the respondents of the study using the questionnaire-checklist given to them. The

researchers also collected data from articles, unpublished master's thesis and

other printed and not printed materials which was related to the study. The data
 23

that was collected were used to support and explain the content and objective of

the study.

Respondents

The respondents of this study were the small business owners from

Nahapunan Bacacay Albay. Regardless of the kind and type of business they

owned and the product and service they offered, they were considered as one of

the respondents who provided and gave information that is needed by the

researchers.

Research Instrument

In gathering data, the researchers used questionnaire-checklist that was

given to the respondents. The researchers utilized the questionnaire-checklist as

their instrument in order to get the information needed regarding the study.

In the questionnaire-checklist demographic profile of the respondents is

asked and was followed by the struggles that they experienced while running their

business. The next part was identifying the strategies they used in order to

overcome the struggles in their business, and the effective ways they usually

perform when they encounter problems in their business.

The last part dealt with the success of the business. The triumphs that were

experienced by the owners as well, as a result of the strategies they had perform

and applied This was followed by the recommendations of effective strategies and
 24

practices in solving problems in the business. These were useful to the business

owners and other interested persons.

After the data gathering by using questionnaire the researchers marked and

rated the main factors about business struggles and triumphs. By rating and

marking the researchers was able to identify the common struggles and success

that small business owners and the business usually experienced.

Data Gathering Procedure

In order to gather data needed, the researchers submitted first a permission

letter to the Barangay Captain of Nahapunan Bacacay Albay. With that the

researchers were given a consent and were allowed to conduct their study in the

said Barangay. The researchers were able to have support from the authorities

and officials in Barangay Nahapunan. Then the researchers prepared the things

that were needed in conducting the study and started to gather data.

The researchers conducted the study at Nahapunan Bacacay Albay by

distributing the questionnaire to the respondents, they also had visitations in the

place during the distribution of the questionnaire to observe how their businesses

were going. The questionnaires were collected after couple of weeks. The

researchers also had short talks with the respondents regarding the business

performance and stability.

 25

Statistical Treatment

In order to identify the struggles and success of small businesses, the

researcher through the questionnaire collected data regarding the study. It was for

the researchers to identify the factors that affect the business, its success and

struggles. Researchers were able to determine the business problems that the

owners experienced and were able to identify effective strategies that can be

used by the owners and techniques they can apply to overcome such problems in

business. Through getting the percentage the researchers identified the most

common and usually experienced struggles in small businesses and by the

owners, as well as the most used practices and strategies by the respondents in

order to solve the problems they encounter.

Percentage = Frequency / Total No. of Respondents × 100

 26

Notes