The following recent studies based on surveys have dealt with the factors affecting SME success. Nurul Indarti and Marja Langenberg identified key components to be important in analyzing the business success of SMEs which includes the characteristics of the entrepreneurs; the characteristics of the SMEs; and the contextual elements of SME development.
Westhead studied factors influencing the survival of high-technology small firms. Kauranen carried out a follow-up study of 37 new manufacturing firms in Finland and studied the determinants of the future success of the firm in the short term and in the long term. Yusuf explored critical success factors for small firms in several industry sectors based on the perceptions of South Pacific entrepreneurs. Wijewardena and Cooray explored the importance of a set of success factors by studying a sample of small manufacturing firms in Japan.
Gadenne investigated the effect of various management practices on small firm performance by studying small businesses in the retail, service, and manufacturing industry in Australia. Bracker and Pearson studied planning and financial performance of small mature firms in the dry cleaning business. Baker et al. Pelham explored the relationship between market orientation and the performance of manufacturing SMEs in eight industry sectors.
Research Hypotheses The study intended to see the relationship between entrepreneur characteristics, characteristic of SMEs, management and know-how, products and services, the way of doing business and cooperation, resources and finance, strategy, and external environment towards business success. From the above theoretical framework, the following hypotheses were derived: H1 There is a relationship between SMEs characteristics and business success in SMEs. H6 There is a relationship between external environment and business success in SMEs.
This geographical area has been chosen as they represent a large number of SMEs in Bangladesh. Data collection was accomplished by mail and personal delivery. The sampled companies were contacted in advance by telephone. The population of the study consisted of front-line employees and middle management levels of SMEs in those areas mentioned earlier.
A self-designed questionnaire was used to gather the research data. The questionnaire consisted of three parts. The first part comprised of demographic, characteristic, and profile information of the respondents. The respondents were asked to rank statements on contextual condition related to each success factor faced by the respondents in the second part.
This part consisted of 45 questions which were intended to measure factors of business success, using 5-point likert scale anchored by strongly agree to strongly disagree. The factors were characteristic of SMEs, management and know-how, products and services, the way of doing business and cooperation, resources and finance, strategy, management know how; and external environment. In the third part, the respondents were asked to score the importance of perceived of business success.
Five- point likert scale anchored by strongly agree and strongly disagree were applied to measure the perceived success. A total sets of questionnaires were distributed among managers of SMEs, only 92 participants were responded. Survey Results A total sets of questionnaires were distributed to selected respondents, only 92 questionnaires were collected back; the response rate is However only 89 questionnaires were used for analysis, three questionnaires was rejected due to the respondents were not from the management level.
The majority of respondents, a total of 44 There are zero respondent from Primary School, 5 5. Two respondents having working experience less than 2 years 2. On the other hand for the Duration of Organization Operated, 18 Reliability analysis was used to measure both consistency and internal stability of data.
Therefore data that were collected for this research were considered to be internally stable and consistent. The results are shown in Table 2. Factors Beta T-Ratio Sig. Table 2, the summary table on regression analysis indicated that the R-square is This means that the seven variables which include SMEs characteristic, management and know-how, products and services, the way of doing business and cooperation, resources and finance, and external environment can explain The Durbin-Watson statistic shows that the serial correlation of residuals is 1.
This means that there is no auto correlation problem in the data. This means that there is no multi-collinearity problem in the regression model used for this study. This concludes that the regression model used in this study is adequate or in other words, the model was fit.
This technique examined the variability of the observation within each group as well as the availability between the group means. Therefore, it was conducted to find out whether the various groups are different in respect of business success. The results of the analysis show that only one of the demographic factors which is duration of organization operated has significant effect toward business success of SMEs.
Duncan statistics shows that SMEs that are operated longer period have been more successful in compare to those have been in operation in a shorter period. In addition to this independent sample t-test was used find out whether gender plays any significant role in business success and found out that gender does play any role in Business Success of SMEs in Bangladesh. Discussion The purpose of this study was to identify the factors affecting the business success in small and medium sized enterprises in Bangladesh.
A major implication for the findings is that these findings will able to give better understanding for entrepreneurs and business owners in addressing the factors which will significantly affect the business success in SME. The results of this study can also be used as reference for anyone who is interested to start their own business which will provide insights into decision making in staring a business and also for any companies which are interested to continue to sustain and grow.
To achieve business success, many factors should be optimal simultaneously, since SMEs success is a multidimensional phenomenon. Both firm-internal and firm-external factors affect firm success.
Entrepreneurs in successful SMEs and those in failed SMEs thought that pretty much the same factors are the most important for business success, and held the same views on the factors to be avoided in business. The research has looked into characteristic of SMEs, management and know-how, products and services, the way of doing business and cooperation, resources and finance, and external environment. The results show that product and services played an important role in ensuring the SMEs business success in Bangladesh.
Innovative product, quality, cost, reliability, and services are the key strategic dimension in business success. Innovative product gives added value to the customer and it is important to achieve a suitable balance between product quality and costs.
Small-business owners must have a missionary zeal about their products or services, be willing to be personally involved in it, be willing to stick with the business, be able to define the market clearly and pay attention to details and proactiveness. Beside that, companies must compete based on their strength and specialization which is classified as cost leadership, differentiation, and focused Michael Porter Cost leadership-based companies have tight controls on their operational costs, have efficient production, are volume producers or focused on tonnage.
Differentiation described companies which offer differences in their product or services. They tend to put brands as a market capture, have high service levels, unique distribution and non- standard terms of business. Lastly, focused companies are companies concentrating on a particular buyer, group, geographic area or segment of the product line, continual improvement in quality, cost, delivery lead time, customer service and flexibility are part of the package to become world class.
Innovators with continuous growth should pay special attention to their research and development, and the ability to maintain their innovativeness.
External environment factor play a very important role as well for firm success. Social network, government support, and legality, are the key strategic dimension in external environment in business success.
Networks represent a means for entrepreneurs to reduce risks and transaction costs and also to improve access to business ideas, knowledge and capital. A social network consists of a series of formal and informal ties between the central actor and other actors in a circle of acquaintances and represents channels through which entrepreneurs get access to the necessary resources for business start-up, growth and success Kristiansen, In developing areas, satisfactory government support has been shown to be important for small firm success Yusuf In many cases, dealing with legal aspects has forced the SMEs to allocate significant amount of financial resources due to bribery practices.
Business success is usually the outcome of the way of doing business and cooperation. Inter-firm cooperation contributes positively to gaining organizational legitimacy and to developing a desirable marketplace reputation. Cooperation also may enable the small firm to improve its strategic position, focus on its core business, enter international markets, reduce transaction costs, learn new skills, and cope positively with rapid technological changes.
Successful firms were likely to spend more time communicating with partners, customers, suppliers, employees. Use of outside professionals and advisors, and the advice and information provided by customers and suppliers is also important for business success.
Networking seems to be important both between and within firms. The proportion of SMEs led by an entrepreneurial team was high among successful SMEs and low among failed SMEs, so fostering the formation of entrepreneurial teams in starting up businesses is recommended A huge proportion of successful SMEs are led by men. However, there seems to be no association between the gender of an entrepreneur and SME success.
Also, SMEs led by woman are rarely growth seeking. From this point of view, it could be expected that women have underutilized growth potential. On one hand, women should be encouraged to become entrepreneurs, and on the other hand female entrepreneurs should be encouraged to expand their firms. However duration of organization operated has a significant effect on the business success in SMEs; the longer the organization operates the more successful they are.
Conclusion We attempted to find out the most significant factors that affect the Business Success of SMEs in Bangladesh and found out that product and services, external environment, and management know-how are the most significant determinants of Business Success of SMEs in Bangladesh. Products and Services hypothesis accepted as innovative and high quality of product gives added value to SMEs customer in Bangladesh. To ensure Bangladeshi SMEs can continue successful they need to ensure good products and services deliver to customer continuously.
External Environment hypothesis accepted as social network help entrepreneurs in Bangladesh to reduce risks and transaction costs, improve access to business ideas, knowledge and capital. Government support is vital to foster SMEs development and legal aspect is used in selection operating decision in order to ensure SMEs future business success. Hence, Bangladeshi SMEs should ensure they have built a strong social network and good government relationship in order to ensure their business success.
Besides that, use of outside professionals and advisors should continue to be practiced by Bangladeshi SMEs. Ahmed, M. Ahmed, Momtaz Uddin, et. Baker, W. Davis Business planning in successful small firms. Long Range Planning 26 6 , Bhattacharya, D.
Bracker, J. Pearson Planning and financial performance of small, mature firms. Strategic Management Journal 7 6 , Bridge, S. Understanding Enterprise, Entrepreneurship and Small Business. New York. Palgrave Macmillan. ISBN X. Foley, P. Green eds.
Small business success. London: Chapman. Gadenne, D. Critical success factors for small business: an inter-industry comparison. International Small Business Journal 17 1 , Ghosh, B. Kwan Stockholm, Sweden, June Hallberg, K. Henriette Hesselmann, Comcare, Peter Bangs. Only the factors of location and gender are discussed in this article.
The literature is sparse on location but that on gender has historically stated that women owner-managers are different from men owner-managers; there is an assumption that women often operate micro businesses from a home-base. One of the myths concerning very small businesses or businesses which are not high growth businesses is that they are often operated by women.
Rather, women overall have not been oper- ating businesses for the same length of time as their male counterparts, and have not had the same opportunities as men to found corporations. In addition, a well- documented motivation for women to start business in the first instance is the need to balance domestic responsibilities Brush, ; Buttner and Moore, ; Loscocco, ; Still and Timms, Therefore a predominant aspect of their success has often been non-financial affective measures.
A contemporary Australian study showed that women in the paid workforce are still the principal family caregiver, in charge of issues such as childcare arrangements Bardoel et al. So the ability to become self-employed often alleviates some of the pressure and stress that they experience in the paid work- force, especially at a managerial level Buttner and Moore, ; Jurik, ; Still and Guerin, ; Walker, The concept of domestic responsibilities being the principal obligation of women is not new; however, a trend has emerged from the work and family literature of Downloaded from isb.
Russell et al. A final factor that needs to be considered is the location of the business; that is, whether the business is operated from a home-base or from external premises. Most busi- nesses actually start off as small enterprises and often from a modest home-base, so the decision to grow and potentially move from a home-base has personal implications for the owner-operator in relation to aspects such as additional risk, both of a financial and emotional nature.
The reasons for this are the perceived lack of credibility of home-based businesses as genuine businesses and the diffi- culty of identification Morris and Pike, ; Stanger and Woo, Most of these myths have been refuted; however, what is known is that the longer a business operates from a home-base the less likely the business owner is to move the business to external premises.
In addition, as many home-based businesses are service orientated and with the continuing technological advances in electronic communication, there is in fact no real need to move out of home to external premises as the business can very feasibly be conducted from home.
What appears to be the case is that many home-based business operators slip into a comfort zone and are prepared to forgo more business and therefore potentially more financial rewards and the commensurate stresses that more work bring, for a better work life balance. This can also be linked back to the initial motivations for starting the business, with lifestyle being a major factor. The variables of gender and location were used to test whether they had any effect on how owners of small businesses measured their success.
The initial qualitative approach took the form of 11 semi- structured interviews with owners of businesses from a variety of industry sectors and equally apportioned between male and female. These interviews explored motivations for being in business and how they judged success of the business and was intended to establish the themes for the questionnaire construction.
By the 11th interview it was considered that saturation point had been reached in so far as factors were concerned. The questionnaire incorporated sections dealing with: demographic details, respondents perceptions on and reasons for going into business, attitudes to employing staff and measures of business success.
It included tested items from earlier research on motivation and small business start-ups Birley, ; Birley and Westhead, ; Gatewood et al. The final version of the ques- tionnaire comprised 14 statements about their business on which respondents were asked to indicate the strength of agreement using a 6 point Likert scale with the anchors of strongly disagree 1 and strongly agree 6. It was pretested with the interviewees and validity and reliability checked with Cronbach alpha levels of.
While a cross-section of businesses were included in the interview phase, it was decided to administer the questionnaire in a single industry sector, the Property and Business Services Sector. It was also anticipated that this sector would incor- porate the range of demographic variables that were of interest, namely having a reasonable gender ratio, a variety of business sizes and a significant proportion of businesses that are home-based. It was therefore felt that there was sufficient diversity in this industry sector to gain a broad overview of how these small business owners measure their success.
Because only one sector is being examined, some caution may be required in extending the findings across the wider small business population. A commercial database, Australia on Disc, was used to derive the random sample. This database is commonly used for research sampling purposes Small Business Development Corporation, ; Wooden and Harding, This provided a list of 13, businesses, from which the sampling frame of was generated.
In order to derive meaningful statistical analysis, the number of responses required, based on the size of the population was set at approximately De Vaus, A major difficulty in any research is achieving an adequate response rate. In order to achieve Downloaded from isb. Due to time and cost constraints, two-thirds of the sample was contacted in this way with the remain- ing group being sent a questionnaire without the courtesy contact.
The difference in response rates was noteworthy. Given the previously acknowledged diffi- culty of gaining good response rates Fischer et al. The final characteristics are the size and location of the busi- nesses, which are shown in Table 1, with micro business being defined as employ- ing 5 or less staff. To gain an insight into how the respondents felt about owning and operating their own businesses, they were asked to indicate the strength of their agreement on 14 statements using a 6 point Likert scale with the anchors of strongly disagree 1 and strongly agree 6.
The answers are shown in Table 2. Collectively, the respondents felt that they were running successful businesses and that non-financial measures of this success were more important than money.
Table 1. The data also show that a variety of measures are used to judge business success with varying degrees of importance.
Exploratory factor analysis was then conducted on these items — yielding four distinct factors — and is shown in Table 3. These identified psychological rationale, in terms of personal affective criteria lifestyle factor , financial rationale from both a high and low perspective diminishing financial factor and strong financial factor and a social responsibility factor.
The four items that contribute to the first factor, Lifestyle, are personal affec- tive feelings that the SBOs are expressing, balanced against the aspect of making money. The second factor, Diminished Financial, consists of two items that show that financial aspects of business ownership diminish over time.
The third factor, Strong Financial, incorporates the two items that are the traditional financial measures of business success making money and financial measures and two items ambition and running a successful business more associated with personal ego, but which have an implied financial overtone.
A paired sample t-test was conducted on the summed mean for the lifestyle and financial factors, the results of which are shown in Table 4. A significant difference was found between the combined financial and life- style criteria items as an attributed measure of small business success.
What this demonstrates is that on a combination of items that made up the lifestyle factor Table 3. To answer the research question based on this test, owners of small businesses do not favour financial criteria over lifestyle criteria in how they measure their success. Tests were also performed on the factors to check for differences between men and women. These are shown in Table 5 and, as can be seen, there were no signifi- cant differences on the individual success measures and gender.
The final test was to measure the impact of location on measures of success and showed statistically significant differences on the lifestyle and financial focus factors. Lifestyle factors were more important for home-based business owners than externally based businesses and home-based businesses were less motivated by financial criteria compared to the externally based businesses.
These differ- ences are shown in Table 6. Discussion The question therefore is, why do the traditional measures of small business success, which are taken to be financially based, appear to be less important overall to the respondents, compared to those of lifestyle criteria, and even less important to businesses that are operating from home? A number of reasons can Table 5.
Lifestyle focus 4. Financial focus 3. Businesses are only viable if they are financially solvent; therefore it was anticipated that a reasonable proportion of respondents would value finan- cial criteria highly. This was also supported by statements from several of the interviewees who mentioned making money as being their primary criterion for judging the success of the business.
When the interviewees were pressed further and asked if there were other measures they used in assessing the success of their business, in addition to making money, then the majority mentioned lifestyle factors, particularly the flexibility which self-employment offered.
Often, being able to structure their working arrangements in order to free up time was an important feature of being the owner of the business. This allowed them to be able to do personal activities such as mind their young child so that their partner could continue their career, or go for a long lunch, without having to explain their actions to anyone.
These aspects of flexibility are generally not available in larger organizations. The reasons why lifestyle measures are so important to the SBOs can, in part, be explained by the previous literature, but need to be expanded further to incor- porate the wider picture of the changing nature of work and working life.
The world of commerce determines many broader societal aspects, and is by its very nature a competitive environment, overlaid with masculine mores. This is evidenced in the language and culture of large organizations, which frequently appear to assume a combative and often aggressive stance on business practices.
There is not much room for less masculine attitudes, such as achieving results through consensus or the fulfilment of personal non-financial goals.
Financial success is highly valued in most Anglo-Saxon cultures and there is both real and implied expectation that everyone must strive to be self sufficient and to not be beholden to the state for financial support, which can only be done by accumu- lating wealth. Additional factors that are precipitating the growing importance of lifestyle issues are other general environmental changes in work practices.
One of these key workforce changes is the decline of the implementation of the standard working week. The most recent ABS data on employment arrangements show that a large proportion of the paid workforce work more than 50 hours a week Thornhill, , which is considerably more than the statutory seven and a half hour working day. Further, this overtime is often unpaid, and normally affects employees who are salaried, who potentially have transferable work skills, which could be utilized by themselves in their own businesses.
The feeling of being abused by employers is a very real reason for leaving paid employment; and was a reason mentioned by several respondents as a motivation for starting their own businesses.
This type of condition of employment historically affected women and low-paid workers generally, but is now prevalent for all levels of employees.
Some contract work does have a high financial benefit for the contractor; however, it also means that the organization does not have to commit to real permanency of employment.
This contracting out of work can lead to high levels Downloaded from isb. Not all workers want to emulate the long working hours of previous generations. Therefore if some of these negative external factors are translated into the small business environment and to the owners of these businesses, then the aspect of balancing work and lifestyle becomes extremely appealing. Given that these were options that the respondents were consistently expressing, it is easy to see why high finan- cial rewards are not solely what SBOs are seeking from their businesses.
Conclusions The motivation for people to go into small business ownership is varied, and includes financial as well as non-financial factors like personal satisfaction, inde- pendence and flexibility.
This study has found that the owners of small businesses measure their success using both of these criteria, and that the non-financial life- style criteria are sometimes more important.
Given the strong entwined nature of the business and the owner, personal success often equates to business success. If non-financial measures are accepted as being a legitimate measure of business success, then small businesses do make a major contribution in relation to overall economic and societal well-being.
They may not be the panacea for employment growth as many politicians often claim, given that the majority of small business are non-employing and the owners prefer to remain in this state; however, non-employing small businesses are legitimate businesses and they do offer a valid option to employment in the current uncertain world of casualized work.
Accepting the continuously changing nature of work and the workplace and the uncertainty of paid employment, it could be anticipated that even more people will choose the uncertainty of self-employment. Even given the anxiety and stress that go hand-in-hand with operating a small business, most SBOs appear to derive more satisfaction by being the decision maker rather than the recipient of decisions made by others.
There will also always be some small business owners who are strongly motivated by financial rewards and who do have aspirations to grow and to become major players, and these SBOs should be encouraged to do so.
However, the results of this study, while restricted to the property and business services sector and including many home-based busi- nesses, show that owners who are financially motivated are in the minority and that most small business owners are content to stay very small.
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Barkham, R. London: Jessica Kingsley. Beaver, G. Harlow: Pearson Educational. Birley, S. Burns and J. Dewhurst eds Small Business and Entre- preneurship, 2nd edn, pp.
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