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Importance & Challenges of Small and Medium Scale Enterprises (SMEs)

The first difficulty in discussing small and medium scale enterprises is that of definition. The working definition varies among countries, various sectors, groups and from one financial institution to another.

There have been growing acknowledgement, in recent times, that a truly sustainable economic transformation, especially in a developing country like Nigeria, can best be facilitated within the framework of private sector and entrepreneurial-driven activities.

Importance & Challenges of Small and Medium Scale Enterprises (SMEs)

Indeed, small enterprises created by innovative entrepreneurs have proven to be the most significant contributors to the National wealth of developed countries, where manufacturing, information and communication technology (ICT) and tourism have today emerged as the main money spinners and employers of labour. These three industries are predominantly characterised by small business enterprises.

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The importance of small and medium scale enterprises is manifested in its;

  1. Employment generating potentials
  2. Income redistribution projects
  3. Promotion of local technology and Entrepreneurship
  4. Ability to transform the rural areas and
  5. Stemming the rural-urban migration drift.

Challenges of Small and Medium Scale Enterprises

Small and medium scale enterprises are faced with many challenges which most times necessitate their failures.

Though many small and medium scale enterprises succeed, greater proportion of them does not. One-third of small businesses that have employees go out of business within the first two years and about 55 percent never stay beyond four years.

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The challenges that necessitate this high small business failure rate are as follows:

  1. Creating awareness for this company, services and products
  2. Building a strong image and brand equity
  3. Getting acceptance by their target audience
  4. Developing a viable and lasting customer base
  5. Providing benefits and value to the customer.

Small businesses are also more likely to fail when:

  • Going into business with little or no experience and without first learning something about the industry or market
  • Under pricing or overpricing goods or services
  • Underestimating how much time it will take to build a market
  • Failing to keep complete, accurate records so that the owners drift into trouble without realising it.
  • Not understanding business cycles
  • Starting with too little capital

The above challenges could be overcome by the SMEs through the use of marketing research as a marketing tool.

Marketing Research In Small And Medium Scale Enterprises

In spite of the importance of marketing research, SMEs still see it as a waste of time and resources. However, few SMEs carry out this research in a conscious and coordinated fashion. Their research, according to Okpara (1998) comes in form of:

  • Occasionally asking customers (particularly when next they call) how the products (goods or services) previously bought, fared.
  • Listening attentively to complaints of customers regarding the product, price, courtesy, etc
  • Buying and stripping competing products to know what makes them tick.

Only few SMEs managed by professional owners do conduct proper marketing research.

Misconceptions About Marketing Research By SMEs

Many small businesses assiduously avoid more than a cursory flirtation with marketing research because they misunderstand what it is and what it can accomplish. Five misconceptions, according to Andreasen (1983), often dominate managers’ thinking about marketing research.

  1. The “big decision” myth: You turn to marketing research only when you have a major decision to make; otherwise it had little to do with the details of day-to-day decision making
  2. The “survey myopia” myth: With its random samples, questionnaires, computer printouts and statistical analyse, marketing research is synonymous with field survey research.
  3. The “big bucks” myth: Marketing research is so expensive that it can only be used by the wealthiest organisations, and then only for their major decisions.
  4. The “sophisticated research” myth: Since research involves complex and advanced technology, only trained experts can and should pursue it.
  5. The “most research is not read” myth: A very high proportion of marketing research is irrelevant to managers or simply confirms what they already know. Often, the research is so poorly designed and written up or so esoteric that it simply ends up in the bottom drawer.

Adoption Of Marketing Research In Small And Medium Scale Enterprises

Marketing research is one of the marketing tools essential for Small And Medium Scale Enterprises’s promotion. However, most SMEs avoid research for cost reasons. The way out is to focus on basic low cost research according to Ayeni (2005), by carrying out simple but inexpensive consumer-oriented research.

This could be done in the following ways, among others:

1.) Identify potential consumers and ask questions on how they view:

  • Themselves based on activities, interests, opinions and attitudes
  • The world and their immediate environment
  • Types of problems encountered
  • Types of products used
  • Benefits achieved from such products
  • Reaction to your new idea/services.

2.) Carry out product placements to:

  • Find out consumers’ acceptance of your product
  • Confirm Laboratory tests on the product
  • Compare the new product with competition

3.) Sales and market research for:

  • Measurement of market potential
  • Market share analysis
  • Determination of market characteristics
  • Test markets and store audits
  • Distribution channel studies

Results in the above areas of research could be achieved by SMEs through a simple marketing research process.

The data collected in the research process must be turned into useful information. Careful, honest interpretation of the data collected can help a company find useful alternatives to specific marketing challenges.

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The final step in a research effort involves following up on the actions taken to see if the results were as expected. If not, the company can take corrective action and conduct new studies in the ongoing attempt to provide consumer satisfaction at the lowest cost. You can see then, that marketing research is a continuous process of responding to changes in the marketplace and changes in consumer preferences.

Research need not be intimidating. It can play an important role in effective. While research is not appropriate to all business decisions, it should not be neglected just because managers of small businesses entertain myths about the process. Rather, executives should be prepared to carefully analyse the particular conditions under which research of various kinds is warranted and to consider the wide range of possible low-cost designs. The payoffs from a less myopic approach to the marketing research function can be substantial.


An experienced blogger whose top aim is to share knowledge and give out information.

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