1.1 Introduction
Small and Medium Enterprises (SMEs) are broadly defined as businesses whose personnel numbers, annual turnover, and asset base fall below a certain threshold, distinguishing them from large-scale enterprises. According to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN, 2019), SMEs are enterprises with a workforce ranging between 11 and 199 employees and an annual turnover not exceeding fifty million naira (Beck et al., 2005).
In Nigeria, SMEs constitute a significant proportion of the national economy, contributing to GDP growth, job creation, and the promotion of entrepreneurial culture. They operate across various sectors including manufacturing, services, agriculture, and information technology, providing innovative solutions to meet the needs of a diverse population (Olawale & Garwe, 2010).
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of terms.
1.2 Background to the Study
Small and Medium Scale Enterprises (SMEs) have been acknowledged the world over as the driver of economic development and growth. This is because these enterprises have great potential for employment generation, economic empowerment, poverty alleviation, improvement of standard of living, substantial local capital formation, achievement of high levels of productivity and capacity, means of achieving equitable and sustainable industrial diversification and dispersal, appreciable contribution to gross domestic product, increase harnessing of local raw materials and technological and export diversification (Ekpo, 2000; Essien, 2006; Butt, Hunjra and Rehman, 2010; Akpakpan, 2012). Not only do they provide employment and income for the bulk of the population, they have been recognized as critical breeding and nurturing ground for domestic entrepreneurial capacities, technical skills, and managerial competencies for private sector development (Derinola, 2008; Ojo, 2010; Olorunshola; 2014).
Small and Medium Enterprises (SMEs) have emerged as pivotal players in fostering economic growth, innovation, and employment across the globe. According to Beck, Demirgüç-Kunt, and Levine (2005), SMEs contribute significantly to national income, poverty alleviation, and social development, particularly in developing economies. In Nigeria, SMEs are reported to account for about 96% of businesses and employ over 60% of the labor force, demonstrating their critical role in national development (SMEDAN, 2019). Olawale and Garwe (2010) asserted that limited access to finance, high interest rates, and insufficient working capital restrict the growth potential of small businesses. Eze (2018) stated that poor managerial skills, weak strategic planning, and inadequate record-keeping contribute to operational inefficiencies, which often result in business failure. On the other hand, Ojo (2020) affirmed that infrastructural deficits, regulatory bottlenecks, and unstable macroeconomic conditions exacerbate the vulnerability of SMEs in the country.
Olokundun et al. (2019) contended that diversification, cost control, effective marketing, and strategic alliances are essential strategies that help SMEs navigate a highly challenging business environment. Adegbite (2019) reported that businesses that successfully implement these strategies are more likely to achieve sustainability, resilience, and long-term growth despite external pressures (Adegbite, 2019). This study is set against the backdrop of exploring these survival strategies in the Nigerian context, with the aim of providing insights into the factors that enhance SME sustainability and resilience.
1.3 Statement of the Problem
Investigation revealed that competition from both local and international markets creates a dynamic environment that requires SMEs to continuously adapt and innovate to remain relevant. Many small businesses struggle to adopt effective strategies for growth, marketing, and customer retention, which often leads to business closure within the first few years of operation (Eze, 2018). Additionally, the lack of adequate managerial skills and business knowledge among Small and Medium Enterprises (SME) operators contributes significantly to operational inefficiencies and failure to leverage emerging business opportunities.
Furthermore, external factors such as regulatory bottlenecks, tax burdens, and limited access to technology hinder SMEs from achieving sustainable performance. On the other hand, there is evidence that some SMEs survive and even thrive by adopting specific strategies such as diversification, cost control, and strategic partnerships, indicating that survival is possible under proper strategic management (Olokundun et al., 2019). It is against this backdrop that this study seeks to examine the survival strategies of Small and Medium Enterprises in Nigeria and identify the factors that determine their sustainability in a highly challenging business environment.
1.4 Aim and Objectives of Study
The aim of the study is to investigate the survival strategies of SMEs in Nigeria and evaluate their effectiveness in sustaining business growth.
The specific objectives of the study include:
- To evaluate the influence of government policies, infrastructure, and regulatory frameworks on SME survival.
- To examine the strategies adopted by SMEs to overcome operational and financial difficulties.
- To determine the impact of technological adoption and market competition on SME performance.
- To identify the major challenges affecting the survival of SMEs in Nigeria.
- To assess the role of managerial skills and strategic planning in SME sustainability.
- To provide recommendations for enhancing the resilience and sustainability of SMEs.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- What are the major challenges affecting the survival of SMEs in Nigeria?
- What strategies are SMEs adopting to overcome operational and financial difficulties?
- How do managerial skills and strategic planning influence the sustainability of SMEs?
- What role do government policies, infrastructure, and regulations play in SME survival?
- How does technological adoption and market competition affect SME performance?
- What recommendations can be made to enhance SME resilience and sustainability?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant relationship between the adoption of survival strategies and the sustainability of SMEs in Nigeria.
- H1: There is a significant relationship between the adoption of survival strategies and the sustainability of SMEs in Nigeria.
Hypothesis Two
- H0: Effective managerial skills and strategic planning do not significantly influence the survival of SMEs.
- H1: Effective managerial skills and strategic planning significantly influences the survival of SMEs.
Hypothesis Three
- H0: Access to finance and proper infrastructure does not significantly enhance SME sustainability.
- H1: Access to finance and proper infrastructure significantly enhances SME sustainability
Hypothesis Four
- Ho: Technological adoption and market-oriented strategies do not significantly improve SME performance.
- Hi: Technological adoption and market-oriented strategies significantly improve SME performance.
1.7 Significance of the Study
It is believed that at the completion of the study, the findings will provide SME owners with practical insights into effective strategies that will improve operational efficiency, increase profitability, and ensure long-term survival in a highly competitive and challenging business environment.
Furthermore, the general economy will indirectly benefit because SMEs that survive and grow will create employment opportunities, enhance income generation, and contribute to national economic stability.
Lastly, academicians and researchers will find this study valuable as it will contribute to the existing body of knowledge on entrepreneurship, business management, and SME sustainability in Nigeria. It will provide a reference point for further research into strategies that will enable SMEs to withstand economic pressures, competition, and regulatory challenges.
1.8 Scope of the Study
This study focuses on the survival strategies of SMEs in Lagos State, Nigeria, using selected small and medium-scale enterprises in the manufacturing and service sectors as case studies.
1.9 Limitation of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Definition of Terms
Small and Medium Enterprises (SMEs):
According to SMEDAN (2019), SMEs are businesses with between 11 and 199 employees and an annual turnover not exceeding fifty million naira. These enterprises are critical for economic growth, employment, and innovation.
Survival Strategies:
Strategies employed by SMEs to remain operational, competitive, and sustainable in challenging business environments. Olokundun et al. (2019) contend that such strategies include diversification, cost management, technological adoption, and strategic partnerships.
Sustainability:
The ability of an SME to maintain operations, profitability, and growth over time despite internal and external challenges (Eze, 2018).
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