The effect of stock management on the financial performance of SMEs in the mobile industry in Cape Town, South Africa

Abstract

SMEs operating in the mobile industry in South Africa are perceived to be underperforming, partly because of poor stock management. The main aim of this study was therefore to investigate the implications of stock management on the financial performance of SMEs in the mobile industry in Cape Town, South Africa. To address the objectives of the study, a questionnaire survey was undertaken with a sample of 50 SMEs in the mobile industry to obtain quantitative data. The data were analysed using descriptive and inferential statistics through SPSS and Microsoft Excel power pivot. The data were then interpreted using contingency theory in order to acquire a better knowledge of the subject. The results of the study revealed that the majority of sampled SMEs prepared stock budgets before purchasing stock, and that the most commonly used stock management technique was the economic order quantity. The findings also revealed that inexperienced personnel, a lack of technology, poor store records and inadequate funds were the factors most commonly identified by respondents as hindering the effectiveness of stock management. The study suggests that to tackle the root causes of poor financial performance among South African SMEs in the mobile industry, effective stock management could be crucial. The study not only fills a gap in the literature about the effects of stock management on the financial performance of SMEs but also adds invaluable insights into stock management in SMEs. The latter could serve to inform future government initiatives aimed at improving their performance. The researcher maintains that owners and managers of SMEs in the mobile industry should commit fully to sound stock management practices in their businesses to improve their financial performance. The study concludes that to reduce costs, SMEs should purchase stock from device manufacturers, using the just-in-time technique, as well as liaise with suppliers to adopt the consignment stock method.