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The influence of strategic management on successful small & medium businesses in the South African context
Author(s)
Le Roux, Jacobus Petrus
Date Issued
1998
Type
Thesis
Publisher
Cape Technikon
Abstract
The importance of small and medium businesses, (SMB's), and specifically the important
role that they perfonn in a country's national economy, have long been realized. In South
Africa, the emphasis being placed on promoting small businesses in the government's
GEAR strategy is an indication of how important small and medium businesses are
regarded, even at national government level. Statistical evidence underlining the valuable
contribution ofSME's is frequently quoted in the literature.
The following statistics are an indication of the contribution of SME's to the South
African economy:
• in 1991 there were approximately 800 000 formal businesses in South Africa of
which approximately 700 000 or 85% could be classified as 5MB's;
• their estimated contribution to the GDP at that stage was in the region of30%;
• in 1991 SME's employed more than 2.4 million people (2.7 million people in 1994)
which represented about 17% ofthe economically active population of 14.3 million at
that stage;
• "informal" Small Enterprises in 1991 was thought to be employing about 4.4 million
additional people.
If the high rate of insolvency's amongst SME's, relative to larger businesses in the
economy are to be taken as a guideline, it is clear that the financial risks involved in
managing, owning and/or investing in a small to medium sized business are relatively
high. With the above being a stated filct, the question was asked as to what can be done to
make this important sector ofthe economy more effective.
A great deal ofresearch was done in the past as to what actually causes 5MB's to go
bankrupt. Problem factors ranging from a lack of funding, high interest rates, hostile
labour relations and inflation to unsupportive governments were named in various studies
as primary reasons for the failure of these businesses. Previous research has also found
that the use ofstrategic management as a management tool in smaller businesses, such as
5MB's, is being neglected by the managers/owners ofSME's.
role that they perfonn in a country's national economy, have long been realized. In South
Africa, the emphasis being placed on promoting small businesses in the government's
GEAR strategy is an indication of how important small and medium businesses are
regarded, even at national government level. Statistical evidence underlining the valuable
contribution ofSME's is frequently quoted in the literature.
The following statistics are an indication of the contribution of SME's to the South
African economy:
• in 1991 there were approximately 800 000 formal businesses in South Africa of
which approximately 700 000 or 85% could be classified as 5MB's;
• their estimated contribution to the GDP at that stage was in the region of30%;
• in 1991 SME's employed more than 2.4 million people (2.7 million people in 1994)
which represented about 17% ofthe economically active population of 14.3 million at
that stage;
• "informal" Small Enterprises in 1991 was thought to be employing about 4.4 million
additional people.
If the high rate of insolvency's amongst SME's, relative to larger businesses in the
economy are to be taken as a guideline, it is clear that the financial risks involved in
managing, owning and/or investing in a small to medium sized business are relatively
high. With the above being a stated filct, the question was asked as to what can be done to
make this important sector ofthe economy more effective.
A great deal ofresearch was done in the past as to what actually causes 5MB's to go
bankrupt. Problem factors ranging from a lack of funding, high interest rates, hostile
labour relations and inflation to unsupportive governments were named in various studies
as primary reasons for the failure of these businesses. Previous research has also found
that the use ofstrategic management as a management tool in smaller businesses, such as
5MB's, is being neglected by the managers/owners ofSME's.
Additional information
Thesis (MTech(Business Administration))--Cape Technikon, Cape Town, 1998
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