Effect of managerial Skills on Growth of Hotel Based. Micro and Small Enterprises in Keroka, Kenya
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1 Effect of managerial Skills on Growth of Hotel Based Micro and Small Enterprises in Keroka, Kenya Zablon Osinde Ongoro P.o Box 373(40202), Keroka, Kenya Esther Mugure Kiragu (Corresponding author) P.o Box, 268(40200), Kisii, Kenya Sarah O. Simwa (Corresponding author) P.o Box, 268(40200), Kisii, Kenya Abstract The purpose of this research was to investigate effect of managerial skills on growth hotel based MSEs in Keroka Town, Kenya. There are limited studies on how managerial skills influencing growth of MSEs particularly in the hotel sector. Most of the studies have concentrated in large towns and therefore, this study was therefore an endeavor to fill the gap particularly for those Hotel MSEs operating in small towns like Keroka. From, the results, above 70% of the respondents agreed that managerial skills stimulate enterprise growth. Therefore, managerial skills however much other people don t consider them they substantially contribute to MSE growth. Thus, managerial skills have a strong, positive and significant influence on the growth of MSEs. It was recommended that, there is need to organize for Hotel MSEs not only in Keroka town but country wide to impart the required management skills so as to enhance growth in the sector. Key words: Growth, Managerial Skills, MSEs and Keroka. 1. Introduction 1.1 Background of the study Micro and Small Enterprises (MSEs) are defined as income generating activities that employ between 1-50 persons, (Government of Kenya 2005). They play a significant role in the development process of Kenya. It is observed that, during the early stages of economic development, these enterprises manifest unique opportunities for wealth and employment creation. In the year 2003 the MSEs were estimated to employ 5.1 million people (Government of Kenya 2003). However, MSEs are considered to be the key in promoting an entrepreneurial culture as well as technological adaptation (Government of Kenya 1986). Thus, the development of the MSE sector is very important in poverty reduction in our country Kenya. The Australian Bureau of Statistics (ABS) defines a small business as an enterprise employing up to 99 people. A medium enterprise employs between 100 and 199 individuals and organizations with more than 200 employees are considered large businesses. This brings that, ABS definition is the de-facto definition of SMEs in Australia. According to the study done in 2001, more than 1.2 million organizations fell into this category according to the ABS (Macgregor, et al. 2007). The United States bases its definition on the position of the organization within the overall marketplace. According to the United States Small Business Administration (SBA), Section 3 of the Small Business Act of 1953 defines an SME as one which is independently owned and operated and which is not dominant in its field of operation. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 370
2 The definition can be based on a threshold in revenue, like it is the case in Canada, it can be based on number of employees, as in the UK, or it can combine the number of employees and turnover for legal and statistical purposes like in Portugal. The Slovak Republic, Mexico and Greece use the number of employees as criterion. The Micro and Small enterprises (MSEs) are actually accepted as the engine of economic growth and play an important role in the equitable economic development of country. The sector has employment potential at low capital cost thus, serving as its major advantage. The labour intensity of the MSE sector is much higher than that of the large enterprises, thus the MSEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. Therefore, for one to start and operate a small business/ a microenterprise there is always a likehood of success or failure. This is simply because of simple management mistakes performed and their small size. According to Longenecker, et al (2006), lack of planning, improper financing and poor management have been detected as the major hindrances to the growth of micro and small enterprises. Consequently, lack of credit facilities has been pointed out as one of the serious problems facing MSEs and hindering their growth (Oketch, 2000; Tomecko & Dondo, 1992; Kiiru, 1991). 1.2 Statement of the Problem The Hotel industry in developing countries is dominated by very small and informal enterprises, and the majority of them grow only when they are young, (Collier and Gunning, 1999; Tybout 2000; and Bigsten and Söderbom, (2006). Sleuwaegen and Goedhuys (2002) and Bigsten et al. (2004). Studies by Nautili, (2003) and Namusonge have shown that few entrepreneurs in this sector have demonstrated potential for growth. But there are limited studies on how managerial skills influence growth of MSEs particularly in the hotel sector (Naituli, 2003). Most of the studies have concentrated in large towns Naituli (2003), Namusonge (1995), Oketch (1999), and McCormick (1996). This study was therefore an endeavor to fill the gap particularly for those Hotel MSEs in small towns like Keroka. 1.3 Objective of the study The objective of this study is to investigate the extent to which managerial skills is a challenge to growth of hotel based micro and small enterprises in Keroka town. 2. Theoretical Framework 2.1 Managerial Skills In a study conducted on enterprise success factors in MSEs Gauteng, South Africa, it was concluded that a lack of technical and managerial skills (Brink et al., 2003; Rogerson, 2008) impedes on enterprise development. Also research conducted on MSE failures in South Africa revealed that failure was primarily caused by a lack of management skill and training. This finding is confirmed (Rogerson, 2008) by 90% of a sample of 1000 entrepreneurs who believe that MSE failure is due to a lack of managerial skills. However, taking the importance of training and skill into account, it is cautioned by Rogerson (2008) that skills are not the only or even primary answer to the challenges facing MSE development. Managerial skills not only influence owners perceptions regarding their business, but various literature sources (Watson, 2004) acknowledge that a lack of managerial skills and training is an important cause of enterprise failure (Naicker, 2006) complimented by lack of experience and lack of organizational culture acting as an impediment to the establishment of MSEs. The owner manager s characteristics (O Gorman, 2001) can also act as a barrier to growth in that the personality, managerial skills and style including the entrepreneur s and/or management s negative attitude towards change can negatively influence an enterprise growth (Leopoulos, 2006; Naicker, 2006). 2.2 Research Gap From the previous researches, it is seen that most of the studies conducted in the MSE sector have focused more on factors influencing the growth and development of micro and small enterprises in Nairobi and other big towns. Also, researches have been conducted concerning the entrepreneur s characteristics and growth of MSEs. Whereas this is important, an understanding is required on the factors constraining the growth of micro and small enterprises. This is because the future sustainability of MSEs is largely the result of these factors. 3. Research Methods 3.1 Research Design The study adopted a descriptive survey research design. The design was meant to describe the respondents view and opinions on the variable of the study. The principal advantage of descriptive survey design is that it allows for collection of information on large groups of respondents, with minimum costs (Levy & Lemeshow, 1999). Through this design the study was able to establish how managerial skills strains growth of hotel based micro and small enterprises in Keroka Town. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 371
3 3.2 Population The target population of the study was 45 registered hotel businesses in Keroka town. These were hotels with between 1-5 employees and a low capital investment. These were registered with the County Council of Keroka as certified and licensed by the Ministry of health. 3.3 Sample Size and Sampling Technique Out of a population of 45 hotels, a sample size of 30 hotels was randomly selected. The sample size was within the lower limits of a normally distributed population as per Kothari (2002).The technique had the advantage of allowing all elements within the population to have equal chances of inclusion into the resultant sample (Dillon and hardaker, 1993). It also eliminated bias thus enabling errors to be estimated (Kothari, 2009). By this technique each unit in the population of 45 hotels had an equal chance of being selected. Through the technique it was possible to generalize the findings and inferences were made based on the entire population. 3.4 Data Collection Methods A structured questionnaire with three point likert scale response ratings was utilized in data collection. This basically provided primary information of the respondent s opinions on constraints of enterprise growth. A face interface was very vital in obtaining accurate information. The enumerator was able to clarify questions which appeared unclear to the respondents. A pilot test was conducted on respondents from units of the population not sampled for the study to examine clarity and effectiveness of the questionnaire. The data was analysed and was found to be reliable and valid for this particular study. Feedback from the pilot study was incorporated into the questionnaire that was used to gather data for this research. 3.5 Data Collection Procedure As a researcher, I administered 30 questionnaires among the existing MSEs of hotel businesses in Keroka town. Respective respondents were informed about the purpose of the study. They were further informed that, the completion of the questionnaire will take a short time and therefore would not waste their time. The following were the ethical issues explained to respondents: Firstly, informed consent was obtained from the participants by way of information leaflet outlining the purpose of the study. Secondly, the respondents were also informed that participation in the study is optional. Finally, participants were informed that confidentiality will be maintained on the information provided as no personal identifiers were used in the research. 3.6 Data Analysis The data obtained was summarized according to the objective of the study. The data was then subjected to Microsoft Excel Package for descriptive analysis. Method was adopted because the volume was not large enough to warrant use of sophisticated data analysis tools for example SPSS. The results of data analysis were then presented in form of frequency tables, and percentages. 4. Research Findings and Discussions The data obtained through the questionnaire schedules was first checked for completeness. The 30 questionnaire schedules were summarized and entered into Microsoft Excel Package to generate results. Visual aids in form of frequency tables and percentages have been used to present the results. 4.1 Effect of Managerial Skills on the Growth Of Hotel SMEs Table 4.1a The Effect of Good Managerial Skills on the Growth of Hotel enterprises Effect Agree Undecided Disagree (%) (%) % Quick Growth of Business Spur/stimulates Business Growth Results in Table 4.1a above all the respondents (100%) agreed that good managerial skills stimulates business growth while (70%) of the respondents agreed that managerial skills facilitates quick enterprise growth. Although, 27% of the respondents were undecided on quick how growth is facilitated by managerial skills whereas 3% of the respondents disagreed with the idea that quick growth of the business is as a result of managerial skills. Thus from COPY RIGHT 2013 Institute of Interdisciplinary Business Research 372
4 this findings it is noted that managerial skills, when it comes to enterprise growth, are not such significant to quick growth This means that, an enterprise can grow with or without managerial skills. Research conducted on MSE failures in South Africa revealed that failure on SMEs Growth was primarily caused by a lack of management skills (Rogerson, Watson, (2004) also acknowledges that lack of managerial skills may lead to enterprise failure. The foregoing scholars agree with the findings of this study that managerial skills lead to MSE growth. Table 4.1b Managerial Skills on Customers and their Growth influence of Hotel enterprises Effect Agree Undecided Disagree (%) (%) % Relevant to MSE Growth Improves Customer Service Improves Customer relationship Also, from table 4.1b above, the findings show that above 90% of the respondents agreed that good managerial skills lead to enterprise growth through improving customers relationship and relevant managerial skills in fields like finance and human resource, thus attracting many of the customers. A majority 97% posited that enterprise growth is through improving customer service and by making use of relevant skills which lead to enterprise growth respectively.7% of the respondents were undecided concerning the issue that customer relationship may lead to enterprise growth while 3% were undecided with improved customer relationship and enterprise growth. This indicates that for growth of an enterprise to be spurred there should be improved customer relationship as well as by improving the service rendered to the customer. This will so far lead to general growth of an enterprise. 5. Summary, Conclusions and Recommendations 5.1 Summary From the data collected and analyzed managerial skills is key to enterprise growth amongst the hotel based MSES in Keroka town. This is true because more than 90% of the findings show that with managerial skills, customer relationship can be improved which leads to stimulating business growth at 100%. Therefore, managerial skills however much other people don t consider them they substantially contribute to MSE growth. 5.2 Conclusion It was confirmed that Managerial skills were key to the hotel based MSEs in Keroka. Lack of which could lead to business failure. This shows that managerial skills have a strong, positive and significant influence on the growth of MSEs. The respondents clearly recognized the importance of managerial skills as critical to MSE growth. This is supported by the conclusion by Marriott and Marriott (1999) that managers with good managerial skills improved their firms for better growth. 5.3 Recommendation From the above conclusion, since managerial skills have a significant influence on MSEs, it is therefore recommend that, there is need to organize for Hotel MSEs not only in Keroka town but country wide to impart the required management skills so as to enhance growth in the sector. This will not only attract clients for the good management but also increase the turnover hence leading to growth of an enterprise. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 373
5 References Alasadi, R. and Abdelrahim A. (2008): Analysis of small business performance in Syria. Education, Business and Society, vol. 1 (1), pp Dillon, J.L. and J.B. Hardaker, Farm management research for small farmer development. FAO Farm Syst. Manage Ser., (6): 302 p. Government of Kenya. (2003). Government paper on on Extensions Services and Enterprise development. ATPS working paper series no.362. Government of Kenya (2005) Economic recovery strategy for wealth and employment creation: , Nairobi Government of Kenya (1986) Sessional Paper No.2 of 1986 on Economic Management for renewed Growth. Government Printers, Nairobi. Kiiru, W. K. (1991). A review of the institutional lending to the jua kali and small enterprise sector in Kenya. Geneva: International Labour Organisation. Kothari, C.R., 2006, Research Methodology-Methods and Techniques, New Delhi, Wiley Eastern Limited. Longenecker, et al (2006). Small Business Management, An entrepreneurial emphasis. London: Thomson South Western. Naicker, 2006 The Ecosystem Approach and Regional Collaboration: Towards Achievement of the Millennium Development Goals, 26 th Annual Conference of the International Association of Impact Assessment, 2006, May, Stavanger Forum, Stavanger, Norway. Naituli, J. G. (2003). Constraints on growth of micro and small-scale women enterprises in Rural Kenya. Unpublished Ph.D Dissertion, Egerton University, Njoro. Namusonge, G. S. (1995). Determinants of growth oriented enterprises in Nairobi Area. Unpublished Dissertation, Jomo Kenyatta University of Agriculture and Technology: Juja. PhD Oketch, H. O. (2000). Gender Equity. In A. Mullei and A. Bokea (Eds). Micro and small Enterprises in Kenya: Agenda for improving the Policy Environment. Nairobi: ICEG. Oketch, H. (1999). Credit and finance for MSEs. A study Compiled for USAID/ICEG Micro PED Project and GOK/ICEG; Nairobi. Richard Rogerson, "Market Work, Home Work and Taxes: A Cross Country Analysis," NBER Working Papers 14400, National Bureau of Economic Research, Inc. Tomecko, J. and Dondo, A. (1992). Improving the potential of small scale and informal sector. Nairobi: K-REP and GTZ. Tybout, J. (2000): Manufacturing Firms in Developing Countries. How Well do They do, and Why? In: Journal of Economic Literature, 38, 1: COPY RIGHT 2013 Institute of Interdisciplinary Business Research 374
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