ARBA MINCH UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

MARKETING FACTORS AFFECTING THE PERFORMANCE OF

MICRO AND SMALL ENTERPRISES (THE CASE OF SAWLA
TOWN, GOFA ZONE)

BY

BEKELE CHORPPO

ADVISOR: DANIEL TEKLE (PhD Candidate)

CO - ADVISOR: GETASEW YAREGAL (PhD Candidate)

A Research Proposal Submitted to the Department Of Management of

Arba Minch University Sawla Campus Weekend Programs for Partial
Fulfillment of Masters of Arts Degree in Business Administration
(MBA)

DECEMBER, 2023

SAWLA, ETHIOPIA
MARKETING FACTORS AFFECTING THE PERFORMANCE OF
MICRO AND SMALL ENTERPRISES (THE CASE OF SAWLA
TOWN, GOFA ZONE)

A Research Proposal Submitted to the Department Of Management of

Arba Minch University Sawla Campus Weekend Programs for Partial
Fulfillment of Masters of Arts Degree in Business Administration
(MBA)

BY BEKELE CHORPPO

ADVISOR: DANIEL TEKLE (PhD Candidate)

CO - ADVISOR: GETASEW YAREGAL (PhD Candidate)

DECEMBER, 2023

SAWLA, ETHIOPIA
DECLARETION
I, Bekele Chorppo Mego, declare that this proposal titled “MARKETING FACTORS
AFFECTING THE PERFORMANCE OF MICRO AND SMALL ENTERPRISES (THE
CASE OF SAWLA TOWN, GOFA ZONE)” Here by submitted to Department of
Management for the partial fulfillment of the requirements for the Degree of Masters of
Business Administration in Management is my original work and not submitted earlier for
a degree either at this college or any other University and all sources of material the
researcher used have been properly acknowledged.

Name Date Sign

Bekele Chorppo Mego ______________ _______________

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ADVISORS APPROVAL SHEET
This is to certify that the research proposal entitled “Marketing Factors Affecting the
Performance of Micro and Small Enterprises (the case of Sawla town, Gofa zone)”
prepared by MBA student Bekele Chorppo for his/her MBA thesis to be conducted under
my/our supervision. Therefore, I/we found the proposal satisfied the minimum MBA
thesis proposal requirements and hence recommend the student to submit his/her proposal
to the department for examination.

DANIEL TEKLE ______________ _________________

Name of principal Advisor Signature Date

GETASEW YAREGAL ______________ _________________

Name of Co-advisor Signature Date

i
EXAMINERS APPROVAL SHEET
This is to certify that the MBA Thesis Proposal entitled as “ Marketing Factors Affecting
the Performance of Micro and Small Enterprises (the case of Sawla town, Gofa zone)”
has been developed by. We, the undersigned board of reviewers, made rigorous
examination of his paper and oral presentation. Therefore, we checked that the student’s
work is his original, and we found that the student takes comments and corrections. Thus,
this proposal satisfied the minimum MBA thesis proposal requirements.

---------------------------------- -------------------- ------------------

Chair Person Signature Date

---------------------------------- -------------------- ------------------

Name of Examiner 1 Signature Date

---------------------------------- -------------------- ------------------

Name of Examiner 2 Signature Date

ii
Table of Contents
DECLARETION .................................................................................................................................... i
ADVISORS APPROVAL SHEET ............................................................................................................. i
EXAMINERS APPROVAL SHEET ......................................................................................................... ii
ABBREVIATIONS................................................................................................................................ 1
CHAPTER ONE ................................................................................................................................... 2
INTRODUCTION ................................................................................................................................ 2
1.1 Background of the Study ........................................................................................................ 2
1.2 Statement of the Problem ...................................................................................................... 3
1.3 Research objectives ................................................................................................................ 4
1.3.1 General objective ............................................................................................................ 4
1.3.2 Specific objectives ........................................................................................................... 4
1.4 Research Questions ................................................................................................................ 4
1.5 Research Hypothesis .............................................................................................................. 5
1.6 Significance of the Study ........................................................................................................ 5
1.7 Scope of the Study .................................................................................................................. 6
1.8 Limitation of the Study ........................................................................................................... 6
1.9 Organization of the Study ....................................................................................................... 6
CHAPTER TWO .................................................................................................................................. 7
REVIEW OF RELATED LITERATURE .................................................................................................... 7
2.1 Definition of Micro and Small Enterprises (MSEs) ................................................................. 7
2.2 Ethiopian Micro and Small Enterprise Strategy...................................................................... 8
2.2.1 Ethiopia’s Micro and Small Enterprise Promotion Policy .............................................. 10
2.3 Performance of MSEs ........................................................................................................... 11
2.3.1 Measures of Business Performance .............................................................................. 13
2.4 Marketing Strategies ............................................................................................................ 14
2.4.1 Product Strategy ............................................................................................................ 15
2.4.2 Pricing Strategy.............................................................................................................. 15
2.4.3 Distribution Strategy ..................................................................................................... 16
2.4.4 Promotions Strategy ...................................................................................................... 17
2.4.5 Physical Evidence ........................................................................................................... 18
2.5 Effect of Marketing Strategies on Performance................................................................... 19
2.6 Empirical Review .................................................................................................................. 20
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 2.7 Conceptual Framework ........................................................................................................ 24
CHAPTER THREE.............................................................................................................................. 26
RESEARCH METHODOLOGY ............................................................................................................ 26
3.1 Description of the Study Area .............................................................................................. 26
3.2 Research design .................................................................................................................... 26
3.3 Data type and source............................................................................................................ 27
3.4 Target Population ................................................................................................................. 27
3.5 Sample size and Sampling techniques .................................................................................. 27
3.6 Data collection tool .............................................................................................................. 29
3.7 Data Processing and Analysis ............................................................................................... 29
WORK PLAN .................................................................................................................................... 31
FINANCIAL REQUIREMENTS ........................................................................................................... 31
REFERENCE ..................................................................................................................................... 32

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ABBREVIATIONS
ADLI Agricultural Development Led Industrialization

GTP Growth and Transformation Plan

MOTI Ministry of Trade and Industry

MoUDHC Ministry of Urban Development, Housing and Construction

MSEs Micro and Small Enterprises

PPS Probability Proportional to Size

ROI Return-on-Investment

USA United States of America

1
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study

Micro and Small Enterprises (MSEs) are the main developing forces of marketing
economies. They are getting the most important inducement of economic growth and
provide substantive contribution to sustainability of economic development. Some writers
argued that MSEs also play a significant role in the creations of employment
opportunities and generations of income for quite a large proportion of population
(MoUDC, 2013). According to a study by Boaten (2012), the dynamic role of micro and
small-scale enterprises (MSEs) in developing countries as necessary engines for
achieving national development goals such as economic growth, poverty alleviation,
employment and wealth creation, leading to a more equitable distribution of income and
increased productivity is widely recognized. In an attempt to accelerate growth rates in
low-income countries, particularly in Africa, many development partners and donors have
made the promotion and development of MSEs a major concern. This shows that MSEs
are seen as essential facilitator for economic growth, job creation, industrial development
and poverty alleviation.

Marketing theories applied in enterprises are considered mainly valuable for MSEs as
well (Nwankwo & Gbadamosi, 2011). It is presumed that basic marketing principles are
relevant to any kind of enterprise, regardless of its dimension (Gabrielli & Balboni,
2010). Some authors (Gilmore et al. 2001) agree that MSEs have specific features,
differentiating them from large enterprises which are the object of those studies proposing
marketing communication models. The marketing practices in MSEs are subjected to
opposing forces: the external dynamics encourage efforts in marketing communication;
internal factors restrain investments in this area.

According to earlier studies in this field (Nowak & Phelps, 1994), successful MSEs are
the ones taking the most advantage of the integration potential, thanks to their
management flexibility and close relationship with customers. Studies carried out
underline some of the aspects characterizing marketing in MSEs, such as: being affected
by limited financial resources, lack of time and scarce marketing skills (Thrassou &
Vrontis, 2006). Management often coincides with the enterprise owner who is usually

2
more concerned with business and profits in general rather than with the impact modern
marketing strategies has on the market. Management publications feature extensive
research dealing with the challenges that MSEs need to tackle in order to survive despite
their lack of resources and marketing skills, but only a few studies address marketing and
marketing communication issues in MSEs. Most MSEs lacks a strategic marketing
outlook; they focus on short-term objectives to develop or maintain the level of sales; in
marketing management a tactical, customer focused approach generally prevail. Taking
these thoughts into consideration, the most important question addressed in this study is
what are the marketing factors affecting the performance of MSEs in Sawla town?

1.2 Statement of the Problem

Government supports the development of enterprises if they have to contribute to

economic growth of the country. Accordingly, Ethiopian government has developed
support service programs to enhance the growth and profitability of these enterprises in
all over the country (Mulate, Fantu & Tadele 2016). Hence, Sawla town MSE
development office is one of the government organizations took responsibility for
promoting these support programs and establish MSEs in various sectors. In spite of the
ongoing support service programs to promote MSEs, it was observed from data obtained
from micro and small enterprise development agency of Sawla town (2023), that out of
1988 enterprises licensed and entered in to the business from 2013-2019, only 1206 were
found to be active until the end of year 2022. However, the reason is not known because
there is no empirical study conducted to identify the problems.

Clough (2011) stated that micro and small enterprise (MSEs) can further be regarded as
the seedbed for development of the entrepreneurial talent and assists in the distribution of
national income and decentralization of industry. However, according to Hall (1987) they
face challenges, which affect their growth and profitability and hence, diminish their
ability to contribute effectively to sustainable development. As MSEs engage in
production of goods and services for commercial purpose to make profit, their activities
of are tied with marketing. A study by Clough (2011), confirm this by stating marketing
of a product or service is a central activity for a successful business. This shows that
enterprises must give attention to marketing operations and try to identify, anticipate and
meet the needs of customers so as to make sufficient profit and attain sustainability. In
today‘s rapidly growing businesses and corresponding competition environment, business

3
firms, especially the micro and small enterprises, should concentrate on building up their
marketing potentials and increase marketing efficiency.

Marketing is an essential instrument for increasing MSE's effectiveness and investment

growth. A skilled development of marketing strategy allows optimization of company's
activities, proper defining of target groups of goods and services, adjusting distribution
system etc. Increasingly, it became obvious that the issues concerning marketing had to
be resolved if the small and medium industry sector has to grow and be an important
contributor to national economy. It is ascertained from various studies that no imperial
study has been directed at understanding of marketing factors affecting MSEs’
performance in the study are. Therefore, this study has examined the marketing factors
affecting the performance of micro and small enterprises.

1.3 Research objectives

1.3.1 General objective

 To assess the marketing factors affecting the performance of micro and small
enterprises in Sawla town.

1.3.2 Specific objectives

 To examine the marketing practices in micro and small enterprises in the study
area,

 To assess the performance of micro and small enterprises and

 To identify the marketing factors influencing the performance of micro and

small enterprises.

 To examine the marketing challenges of micro and small-scale enterprises in Sawla

town

1.4 Research Questions

 Which marketing techniques micro and small enterprise in the study practice?

 How the overall performance of the enterprises can be rated?

 What are the specific marketing factors influencing the performance of the
enterprises?

 What are the marketing challenges of micro and small enterprises in Sawla town.

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1.5 Research Hypothesis

To accomplish the third specific objective; a point bi-serial correlation will be used. The
result of the correlation will be interpreted based on the hypotheses. The enterprises’
performance will be measured in terms of annual profit. The marketing factors will be
treated as binary variables. Binary variables are variables of nominal scale with only two
values. Hence, study participants will be asked to choose either “yes” or no” regarding the
practice of marketing activities throughout promotion, product, price and place marketing
mixes.

The null hypothesis of point bi-serial correlation states that the correlation coefficient, r,
is 0. In other words, there is no correlation between the enterprises performance and the
marketing factors under consideration.

Null hypothesis: r = 0

The alternative hypothesis on the other hand states that the correlation coefficient
between enterprise performance and each marketing factors is different from zero.

Alternate hypothesis: r 0

In addition, to determine the effect of marketing factors on the performance of the

enterprises multiple linear regression models will be used.

The null hypothesis of the model states that the coefficient of the parameters of the
independent variables equals to zero. This entails that a particular independent variable is
cannot predict the value of the dependent variable.

Null hypothesis: βi = 0

The alternative hypothesis conversely states that the coefficient of parameter is different
from zero. Put differently, the dependent variable can be predicted from the independent
variables.

Alternate hypothesis: βi 0

1.6 Significance of the Study

This study will contributes to micro and small enterprises under the study to be aware of
marketing factors influencing their business functions and develop strategies that
minimize risks that may arise. It also enables them understand marketing as key factor of
growth and profitability of their businesses. The output of the study will help MSEs look

5
through their businesses and understands risks facing their enterprises so as to proactively
take measures that reverse these risks. Furthermore, insights to be gained in this study
will contribute towards the development of policies by the government, MSE
development offices and other concerned organizations dealing with MSEs. The study
can be used as a reference by other researchers.

1.7 Scope of the Study

Theoretically, the study will focus on the marketing practices of micro and small
enterprises and their relationship with the performance of the enterprise. Geographically,
the study will be delimited to Sawla town administrations. In the course of the study,
specific methodological set ups will be selected on appropriateness. Accordingly,
descriptive and explanatory research designs will be used, qualitative and quantitative
data types will be employed, data will be derived from primary and secondary sources,
purpose sampling technique will be used to select the participants, questionnaire will be
used to collect the data, manual data processing technique will be adopted and both
descriptive and inferential statistical methods will be used to analyze the data.

1.8 Limitation of the Study

In conducting the study, limitations may face. The unavailability of well-organized

secondary data as previous researches in the study area on the study subject may pose
difficulty to see the time dynamics of the study subject. In addition, the scope of the study
may bring a sort of limitations in the course of interpreting the study results. In other
words, the study results will not represent the status of the study subject other than Sawla
town and time bound of 2023/24.

1.9 Organization of the Study

The paper will be organized into five chapters. The first chapter presents background of
the study, the statement of the problem, research objectives and research questions,
research hypothesis, significance of the study, scope and limitations of the study. The
second chapter compiles the reviewed literatures. The third chapter presents research
methodologies to be used and embraces research design, data type and sources, sampling
size and techniques, collection method and tools, data processing and analysis. Data
presentation and discussion of data will be presented in chapter four. Finally, chapter five
will constitute conclusion and recommendations.

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CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Definition of Micro and Small Enterprises (MSEs)

As per Quartey and Kayanula 2000, there is no single and universally acceptable
definition of a small enterprise. This is so because the criteria and ways of categorizing
enterprises as micro and small differ from institution to institution and from country to
country depending essentially on the country’s level of development. A definition
forwarded for MSE differs from country to country, depending on the stages of economic
development and population. In USA and Europe MSE defined on the bases of number of
employment and turnover. European Commission and Organization for Economic
Cooperation and Development defines MSE as having below 250 employees (Habtamu,
2010).

In developing countries, the definition is a little bit different from developed nations. For
instance, in Tanzania to be MSE the major variables are level of employment and capital
investment; in Zambia annual revenue and capital investment are major requirement.
Likewise, the definition given to MSE in Ethiopia includes the variables such as
employment, capital investment, production capacity, level of technology and sub sector
(World Bank, 2010). Even within the same country, definitions also change overtime due
to changes in price levels, advances in technology or other considerations (Emma, 2009).
Firms differ in their levels of capitalization, sales and employment. Hence, definitions
that employ measures of size (number of employees, turnover, profitability, net worth,
etc.) when applied to one sector could lead to all firms being classified as small, while the
same size definition when applied to a different sector could lead to a different result.

In the past the definition of Micro and Small Enterprises was based on paid up capital
only. An enterprise is categorized as micro if it’s paid up capital is less than or equal to
Birr 20, 000. Similarly, an enterprise is considered small when its paid-up capital is less
than or equal to Birr 500,000.However, this does not provide information on the size of
jobs or number of employees in the MSE. It also did not tell the size of the total asset for
the MSE and did not differentiate between manufacturing (industry) and services. Current
definition considers human capital and asset as the main measures of micro and small
enterprise to addresses the limitations of the old definition.

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 Table 1 MSE categorization

Level of enterprise Sector Human Power Total Asset

Micro Enterprise Industry ≤5 ≤ Birr 100,000 ($ 6000)

Service ≤ Birr 50000 ($ 3000)

≤5

Industry 6-30 ≤ Birr 1.5 million ($9000)

Small Enterprise
Services 6-30
≤ Birr 500000($ 3000)

Source: Ethiopian Micro and Small Enterprise Development Strategy (2011)

According to Alasadi and Abdelrahim (2007) MSEs considered as a vital component of
the socio-economic development of both developed and developing countries, usually
some of these enterprises collapse within the first few years of their start up. Of those
operating, some grow rapidly, while others grow slowly. Thus, it is important to identify
the cause factors of success because it helps new entrants of the sector to consider the
factors and use for their future in the business. These factors could vary from one country
to another due to the economic, geographical and cultural differences. This kind of
investigation of the success factor is very important for developing countries like Ethiopia
because the investigation deduction could be useful for the economic development
planners as well as to individual entrepreneurs and business owners in the countries
concerned.

2.2 Ethiopian Micro and Small Enterprise Strategy

In contrast to many MSE related studies, the working definition of MSE in Ethiopia is
based on capital. According to the Micro and Small Enterprises Development Strategy;
(1) Micro Enterprises: are those business enterprises with a paid-up capital of not
exceeding Birr20,000 and excluding high tech consultancy firms and other high-tech
establishments; (2) Small Enterprises: are those business enterprises with a paid-up
capital above Birr 20,000 and not exceeding Birr 500,000 and excluding high tech
consultancy firms and other high-tech establishments (FDRE Ministry of Trade and
Industry 2007). Hence, in this case the definition is based on capital and the level of
technical and technological capacities adopted. The information on MSE in Addis Ababa
indicated that from all the total licensed enterprises,75.4% are micro enterprises, 20.9%

8
are small enterprises and the remaining 3.7% are medium and large enterprises (Addis
ReMSEDA, 2009).

During the socialist regime (1974-1991) due to extensive nationalization of private sector,
many of the former private sector firms ceased to exist. But after 1991, the current
government adopted several policies and regulations aimed at supporting the informal
sector. MSE serves as sources for sustainable job opportunities not only for developing
countries like Ethiopia, but also for developed countries like USA. Thus they are given
prior attention as they are important and serve for sustainable source of job opportunities
to our country. As a result many important overall policy and institutional reforms have
been undertaken including: safety net, decentralization, market economy, agricultural
development led industrialization (ADLI), etc. Moreover, a number of sector specific
policy reforms and restructuring of regulatory institutions may have contributed to the
process of creation of micro and small enterprises. One of the frameworks was related to
issuance of the National Micro and Small Enterprises Development Strategy in 1997 and
the issuance of Proclamation No. 33/98 to provide for the establishment of the Federal
Micro and Small Enterprises Development Agency (Addis ReMSEDA, 2009).

In the same way to promote MSE, the Addis Ababa Trade and Industry Development
Bureau has two branches, one is for MSE which focuses on the development of
enterprises and the other one is for trade and industry. Micro and Small Enterprises are
one of the focal points on the development agenda of the municipal government of Addis
Ababa. The MSE branch has three main departments namely; MSE Development,
Marketing Research and Promotion Department, and the Cooperatives Promotion and
Controlling Department. Similarly, the structure of the MSE is extended to all sub cities in
Addis Ababa. There are MSE teams and teams for the promotion of cooperatives in each
sub-city while at the ‘kebele’level it is handled by the MSE office under the
‘kebele’chief executive. The MSE branch has been organizing people with different skills
into individual business and cooperatives by creating job opportunities and providing
various supportive services in coordination with NGOs to create a favorable environment
for the growth of the sector.

Organizing and licensing was done by the cooperative office and a working premise was
provided by the sub-city administration, and other concerned housing and land agencies.
Space was provided depending on the size of the available land by assigning four square
meters per person for a monthly fee of Birr 1.00/m2for the food processing sector and

9
monthly fee Birr 2.00/m2for the metal and woodworks sectors (Addis ReMSEDA 2009).
In November 1997, the Ethiopian Ministry of Trade and Industry published the "Micro
and Small Enterprises Development Strategy", which enlightens a systematic approach to
alleviate the problems and promote the growth of MSEs (MOTI, 1997).

Elements of the program include measures with regard to creating an enabling legal
framework and streamlining regulatory conditions that hinder the establishment of new
and expansion of existing MSEs. In addition, specific support programs also include
measures related to providing working premises, facilitating access to finance, provision
of incentives, promotion of partnerships, business skill development training, access to
appropriate technology, access to market, access to information and advice, infrastructure
and institutional strengthening of the private sector associations and chambers of
commerce.

2.2.1 Ethiopia’s Micro and Small Enterprise Promotion Policy

The role of Micro and Small Enterprises (MSEs) is indispensable in poverty reduction
through employment generation. Cognizant of this, a national MSEs Development
Strategy was formulated in 1997. Ethiopia’s MSE Policy envisages not only reducing
poverty in urban areas but also nurturing entrepreneurship and laying the foundation for
industrial development. The strategy was revised in 2010/11 with renewed interests and
more ambitious targets on employment and number of entrepreneurs and transition to
medium size level (Addis ReMSEDA 2009)

MSE development, being one of the key focus areas of the country’s development
strategy, receives massive support from the government in the form of access to finance,
market, technology, training and working space. The government strongly believes that
MSEs are the right solution to reduce urban unemployment and hence reduce poverty.
This ambition is reflected in the GTP. For instance, it plans to create three million new
jobs in the MSE sector in the five years growth and transformation period. Therefore,
MSE promotion and support is the vital strategy to fulfill this national plan of
employment creation in the short-run and achieving industrialization in the long-run.

Ethiopia adopts a layered policy support in which MSEs are categorized into start-ups,
growing- middle and maturity. Start-up stage enterprises refers to those enterprises found
at their establishment stage and comprises a group or individual aspiring entrepreneurs
that seek various supports to make their enterprise operational. The basic challenges at

10
this stage include lack of initial and working capital, poor knowledge of business
management and entrepreneurship and lack of knowhow about the different government
policies and directives related to the sector.

In order to mitigate these challenges, FEMSEDA has designed a strategy that focuses on
facilitating access to initial capital, supporting MSEs in formalization and legalization
process and provision of training on business management, entrepreneurship and
production technique. Growing stage enterprises refers to those enterprises that are
competent in the market in terms of price and quality and successfully utilize the various
government support packages and are profitable in their business. However, enterprises at
this stage also suffer from different challenges like financial constraint, stage, knowledge
of international standards and better production technology are disseminated to
enterprises lack of appropriate technology and technical skill, absence of sufficient
working and sales premises and rent seeking behavior.

To alleviate these specific challenges, FEMSEDA has formed a national strategy that
focuses on facilitation of financial support and skill and technological development
program. On the other Hand, enterprises are considered to have reached the maturity
stage when they are fully profitable and engaged in further expansion and investments in
the sector. At this stage FEMSEDA has a strategy that aims to strengthen enterprises in
terms of productivity and product quality. Moreover, at this stage, knowledge of
international standards and better production technology are disseminated to enterprises.

2.3 Performance of MSEs

Two significant management dimensions in the domain of success measuring of business

systems are effectiveness and efficiency. Effectiveness dimension is oriented towards the
choice of the right goals (doing the right things) which will have the market verification
by consumers while efficiency dimension is determined by the degree of rational use and
engagement of available resources (doing things in the right way). It is possible to be
successful only with effectiveness but for a short time, while the complete success is
guaranteed when both dimensions are realized at the high level.

The analyses of some literature in the field of management, business and entrepreneurship
with a view of searching for success criteria of owners/entrepreneurs/managers can give
numerous terms used for defining the mentioned category. Business performance,
entrepreneurial success and owners’ success goals can be met.

11
The category of success/performance is set as a dependent variable primarily in relation
to management practice and the volume of management activities in small businesses in
order to explain connections and possible influences in the direction of improving
business results. Therefore, it becomes necessary to precisely understand and restrict the
notions of success and performances that are usually used as synonyms. It is also
necessary to define criteria which really measure success of micro and small businesses.

Beaver (2002), has commented there are very real problems with the term success (good
performance) and its various Interpretations and perceptions in the small firm sector. The
subject of success factors in small businesses has become more popular in recent years
amongst business researchers and entrepreneurs, each attempting to provide a definitive
formula for success (Beaver, 2002). Success is often viewed in terms of growth or
profitability, but this becomes more complicated when trying to determine the factors that
lead towards it. It is important to recognize that while a common measure of success in
business is still to be defined, there are some general factors found to influence the
success potential of businesses (Beaver, 2002).

Previous research into the relationships between various factors and small business
success has been lacking a comprehensive theoretical framework, and many small
business owners are aiming to discover the management strategies, business objectives
and personal characteristics most closely linked to small business success (Walker and
Brown, 2004).

According to Martin (2010:67) performance is defined simply in terms of output terms

such as quantified objectives or profitability. Performance has been the subject of
extensive and increasing empirical and conceptual investigation in the small business
literature (Bidzakin K.J., 2009:31). The issues that remain unresolved are the goals
against which performance should be assessed and from whose perspective the goals
should be established (Etzioni, n.d:128).

Rami Alasadi and Ahmed Abdelrahim (2007:6-13) on their study defined performance as
follows.

The most commonly adopted definition of success [good performance] is financial

growth with adequate profits. Other definitions of success [good performance] are equally
applicable. For example, some entrepreneurs regard success [good performance] as the
job satisfaction they derive from achieving desired goals. However, financial growth due

12
to increasing profits has been widely adopted by most researchers and practitioners in
business performance models.

A business enterprise could measure its performance using the financial and non-financial
measures. The financial measures include profit before tax and turnover while the no-
financial measures focus on issues pertaining to customers’ satisfaction and customers
‘referral rates, delivery time, waiting time and employees’ turnover. Recognizing the
limitations of relying solely on either the financial or non-financial measures, owners-
managers of the modern small Business has adopted a hybrid approach of using both the
financial and non-financial measures (Chong, 2008).

2.3.1 Measures of Business Performance

Business success is usually measured in terms of economic performance. As Walker and

Brown (2004), small business success can be measured by financial and non-financial
criteria although The former has been given most attention in the literature. Traditional
measures of business success have been based on either employee numbers or financial
performance, such as profit, turnover or return on investment. Implicit in these measures
is an assumption of growth that presupposes all small business owners want or need to
grow their businesses.

For businesses to be deemed successful these financial measurements require increases in

profit or turnover and/or increased numbers of employees. As Walker and Brown (2004)
cited from the Study of Hall and Fulshaw (1993), ‘the most obvious measures of success
are profitability and growth’. In economic terms this is seen as profit maximization.
Economic measures of performance have generally been popular due to the ease with
which they can be administered and applied since they are very much hard measures.
Furthermore, Walker and Brown (2004) suggested, ‘all businesses must be financially
viable on some level to continue to exist’. However, given that some businesses have no
interest in growth, thereby implying that financial gain is not their primary or only
motivation, then there must therefore be other non-financial criteria that these small
business owners use to measure their business success.

In smaller, entrepreneurial and independent firms, measures of success may have more
complex Dimensions than just financial performance (Mohan-Neill 2009). Non-financial
measures of success used by business owners, such as autonomy, job satisfaction or the
ability to balance work and family responsibilities (Walker and Brown, 2004; Mohan-

13
Neill, 2009) are subjective and personally defined and are consequently more difficult to
quantify. The hard measures previously mentioned therefore, are easier to understand and
can be used in a comparative way against existing data and as benchmarks for future
measures.

Non-financial measures are based on criteria that are personally determined by the
individual business owner although commonalties within the partners of small business
owners occur. These non-financial measures presume that there is a given level of
financial security already established; it may be that this is within the business, or that the
small business owner does not require the business to be the primary source of income
(Walker and Brown, 2004). The election of performance measures that reflect the true
situation of small businesses with some degree of certainty and reliability is indeed a
crucial process. The lack of universally accepted standard performance measures left
the door open to business organizations to decide and choose its own performance
measure that might not truly reflect its performance (Alasadi and Abdelrahim, 2007).

Such performance measures include but not limited to: sales volume, Organization
reputation, return-on-investment (ROI), profitability, and established corporate identity.
While some might argue that most of these performance measures are appropriate for
large corporations; they are not always perfectly applicable to small businesses. In this
study profitability was adopted to measure performance of these MSEs. This is mainly
because of the pilot study clearly indicates these MSEs are more focusing on profitability
than other modes of performance measures.

2.4 Marketing Strategies

There are a number of mechanisms which have been employed by marketing teams in
raising awareness of products and services offered across the world. Some of the
mechanisms are found to be appropriate in one situation or organization as compared to
the other. The marketing technique adopted by an organization is dependent on the target
population, the product being marketed, the market share of the organization and the
budgetary allocation for marketing. Most marketing strategies have elements drawn from
the 7P’s of marketing which include Promotion, Price, Product, People, Physical
environment, Process and Place (Smith and Saker, 2012).

14
2.4.1 Product Strategy

Product related marketing strategies are fundamental in any organization. These strategies
include use of product design and use of technology in product development as well as
delivery. The product can be argued to be the most important element of the retailing mix,
as only with reasonable products will the effort put into such things as pricing and
promotions reap any rewards Rose and Watkins (1997). Product is the principal item
offered by a company to satisfy the needs of their consumers. Kotler and Armstrong
(2013) noted that some of the strategies adopted in the domain of products are: perceived
quality or image, as the market faces competition, quality and reliability of the product
offerings gain importance. Quality in this case is viewed as customer’s perception of the
product. Perceived quality or image has to be created. Features- with many products in the
market, what distinguishes them is the features. The ‘first with the new feature’ has an
advantage similar to the ‘first product’ in the market. In the consumer non-durables, brand
extensions have taken the line of added features. New products face difficulties of
acceptability in the market. The first product of its kind has an edge over others and sets
the standards for subsequent ones (Ramanuj, 2006). Successful product management
relies on a well planned and executed product strategy and product range strategy.

The product is the core of the marketing strategy. Strategies that relate to new product
success include overall fit with organization’s strengths and a defined opportunity in the
environment. There are at least six marketing strategy options related to the newness of
products (Thorpe and Morgan, 2007). These are innovation, new product lines, product
line extensions, improvements or changes in existing products, repositioning and cost
reductions. Consumers patronize a particular retail outlet as a result of convenient
location, friendly personnel, desirable prices, and pleasant shopping atmosphere
(Lewinson and Delozier 2012). The patronage reason common to all consumers for
visiting a certain a particular store, however is the expectation of finding a product or a
set of products that will fulfill some present or future need.

2.4.2 Pricing Strategy

Price is the value placed on goods and services what customers are willing to pay for a
product or service (Rapert, Linch, and Suter, 2008). The role of price in marketing
strategy depends on the target market, the product and the distribution strategies that are
selected by management (Cravens, 2006). Managers developing a pricing strategy should

15
base their decisions on a careful consideration of several factors such as costs, demand,
customer impacts and competitor prices. Pricing strategies provide general and consistent
approaches for firms as they come up with prices for their products. Lovelock (2011)
suggested that pricing is the only factor of the marketing mix strategy that produces
revenues for the organization, whereas all the others are related to expenses. The degree
of complexity of pricing strategy amongst the service sector is comparatively significant
due to the high degree of homogeneity between most service groups and shared service
delivery and operating systems (Kotler, 2011).

Differential pricing involves selling the same product to different buyers under a variety
of prices. This strategy works when differences in the reactions to prices exist among
consumers and consumers segments. The quality and quantity of one product is sold for
different prices to different buyers. One common form of differential pricing is price
skimming which involves setting the price of the product relatively high compared to
similar goods and then gradually lowering it. A skimming strategy allows the firm to
recover its cost rapidly by maximizing the revenue it receives (Bitner, 2003). Competitive
pricing strategies are based on the company’s position in relation to its competition and
include; penetration pricing, price signaling and going rate pricing. Penetration pricing
involves pricing the product relatively low compared to similar goods in the hope that it
secures wide market acceptance that allows the company to raise its price. Price signaling
puts high prices on low quality products. For a company to successfully use price
signaling strategy, a segment of the buyers must believe high prices indicate good quality.
It must also be difficult for the buyers to ascertain this quality. Going rate approach is
used when products compete on the basis of attributes other than price (Yulkur and
Herbig, 2007).

2.4.3 Distribution Strategy

Distribution of products refers to providing convenience to the customer, that is ensuring

the right product, where and when needed. Usually involves some form of vertical system
where transaction and logistics responsibilities are transferred through a number of levels
(Ian, 2005). Rafiq and Ahmed (2005) argued that distribution is part of merchandising
and must be considered in any merchandising system. Distribution management involves;
merchandise replenishment, transportation management and distribution center facilities
management. The type of distribution system a firm needs is influenced by the buying
system the footwear company uses, the number of stores the footwear company has, the

16
geographic dispersion of the stores, and the characteristics of the merchandise carried.

Vachani and Smith‘s (2008) recent work dealing with inclusive distribution has merit as a
model for success. The principle of accessibility addresses the key area of goods and
service distribution. It is a critical principle for it not only addresses the issue of availing
products but also the possibility of partnership between mainstream distribution channels
blending with informal channels to create a seamless network for the flow of goods and
services to the markets. While many firms are willing to move into this market by
modifying their products and services, so that they are accessible to the poor, these firms
have faced the challenge of a suitable supply chain system that meets the needs of the
urban poor without having an adverse effect on the cost of operation and active
participation of the poor in the process of product and service delivery (Homburg,
Wieseke and Kuehnl, 2010).

Distribution strategy should be made on the basis of economies of scale. Producers

achieve economies of scale through the use of specialization, which breaks down a
complex task into smaller, simpler ones and thus creates greater efficiency and lower
average production costs. Marketing distribution can also attain economies of scale
through specialization, which distribution members can do some things more efficiently
than producers because they have built good relationships with their customers
(Weingand, 2007).

2.4.4 Promotions Strategy

Promotion involves both providing the consumer information regarding the footwear
store and its product or service offering as well as influencing the consumer perceptions,
attitudes, and behavior towards the store and what it has to offer. It is both an informative
and persuasive communication process. To be effective, the promotional strategy must be
guided by the marketing concept such as focusing on consumer needs and integrating all
activities of the organization to satisfy those needs (Keegan et al, 2002). Such strategies
include advertising and direct customer interaction. Good salesmanship is essential for
small businesses because of their limited ability to spend on advertising. Good telephone
book advertising is also important. Direct mail is an effective, low-cost medium available
to small business. There is no one promotional tool that is able to achieve promotion
strategy objectives which, in turn, means that most service organizations use more than
one promotional tool in order to avoid the disadvantages of each tool. This implies that

17
each promotional tool has different advantages and disadvantages so most service
organizations try to use more than one promotional tool in order to maximize the
advantages and minimize the disadvantages of each (Harrison, 2000).

The development of a successful promotional mix demands the careful integration of each
of the following elements; situation analysis, developing objectives, designing messages,
selecting channels, preparing budget, choosing mix and evaluating. In situation analysis,
companies are assessing the current position of customer features, the competitive
situation and the environment. While assessing the target audience, companies look at the
demographics and lifestyles, life stages, usage levels, understanding and perception of
services and the organization and the buying process of the targets. While designing
advertising messages, manufacturers use emotional and moral appeal, there is also use of
rational messages and humor, one danger is that a wrongly chosen promotional strategy
can bring negative reaction. Advertising is another form of promotion strategy. It is a form
of communication designed to persuade potential customers to choose your product or
service over that of a competitor. Successful advertising involves making your products
or services positively known by that section of the public most likely to purchase them.
A good advert should elicit attention, interest, desire and action from the target population
(Shada, 2008).

Gupta (2007) noted that a strong brand strategy can increase the awareness of a company
and its offerings in such a way that it establishes strong feelings and reactions and a
favourable view towards the company as a whole. To create this sort of brand awareness
in your market, it takes skilful Brand Strategy know-how. The function of branding is one
of the most important aspects of any business be it a large or a small business
organization. An effective brand strategy enables marketers to sell more and win the
market share. Companies around the world have continued to invest heavily in brand
management. Kimball (2002), stated that effective sales promotion campaign enables a
business organization to successfully out-brand its competitors is a continuous battle for
the hearts and minds of the market share and customers. m senior executives to customer
service, research and development, business development and even your business
partners.

2.4.5 Physical Evidence

This deals with environment where business operates. The physical environment

18
strategies are made up of ambient conditions; spatial layout and functionality; and signs,
symbols, and artifacts (Lui, Shah, and Schroeder, 2011). Ambience is one of the attributes
of the physical environment. The ambient conditions include temperature, color, smell
and sound, music and noise. The ambience is a package of these elements which
consciously or subconsciously help a customer to experience the service. Ambience can
be diverse. The marketer needs to match the ambience to the service that is being
delivered (Jobber and Fahy, 2006). There is also the layout and functionality of an office.
The layout is the form in which the furniture is set up or machinery spaced out.
Functionality is more about how well suited the environment is to actually accomplish the
customers’ needs. For example how comfortable the seats at the waiting area are or
whether there is adequate customer parking Kotler, (2012 noted that process based
marketing strategies are mainly used in industrial organizations. However, most
organization has a procedure of service provision to their clientele. Institutions design
their processes in a way that they are more appealing to the consumers. Some of the
common features that marketers take advantage in process strategies include time taken to
complete a service and the location of different service points required to complete a
process.

Duncan (1996) maintains that service environment increase customer satisfaction and that
within service environment customers can be exposed to numerous stimuli which
potentially affect how they act, buy and the level of satisfaction they derive with service
experience. Bitner (1992), indicated that the service environment has a significant impact
on customer perception of overall service quality. He pointed out that customers make
inferences about the service quality on the basis of tangibles that surround the service
environment. Lovelock (2011) argued that physical evidence is one of the vital
components of the 8Ps of the services management paradigm by which the company can
provide tangible objects to customers during the service delivery process and tangible
metaphors used in such communications as advertising, symbols, and trademarks
(Lovelock, 2011).

2.5 Effect of Marketing Strategies on Performance

The main purpose of marketing is to understand and meet customers’ needs and this is
achieved when all components of the marketing system, that is, suppliers and distributors,
are co-coordinating efforts and working in harmony (Kuester, Homburg, and Robertson,

19
2006). He points out those well-conceived and effective marketing activities will facilitate
the achievement of typical organizational objectives such as higher sales, market share,
profits and competitive advantage. Indeed, a marketing function is an important and
integral part of organizational business strategy. Specifically, marketing activity in this
study is based on practices associated with product, price, promotions, distribution, and
finally, customer-orientation, since the customer is perceived as the focus of all marketing
efforts.

Lui, Shah, & Schroeder (2011) noted that sound marketing practice is an important
contributor to performance in economic reform economies. Many businesses will adopt a
new attitude to marketing in transition environments, formulating strategies which
demonstrate a focus on customers. Thus for firms to be competitive in such environments,
it is essential to conduct effective product, pricing, promotion and distribution activities,
where customers are central to all marketing efforts and to the extent that these strategies
are successfully implemented, they are expected to result in improved performance.
Businesses that possess the ability to learn rapidly about their markets and to act on that
information are best positioned to achieve competitive advantage. To help an organization
deal with market events and trends, internal organizational processes develop (Day,
2004). Among the organizational processes that typically develop within an organization,
its strategic planning processes and the related processes it uses for analyzing market
information are cited as being among the most important (Moller and Anttila, 2007).

Market oriented organization possesses the ability to generate, disseminate, and respond
to information about market forces and market conditions better than their less market
oriented rivals (Jaworski and Kohli, 2003). This gives a market oriented organization an
important basis for improving performance by learning what buyers want, building the
processes necessary to deliver the value they desire and adapting those value generating
processes as market conditions change. To use these processes as the basis for improving
performance, an organization needs to develop the capabilities to generate, disseminate,
and respond to market intelligence and the processes to act on this information (Hunt and
Morgan, 2005).

2.6 Empirical Review

Conferring to Mead & Liedholm (1998) and Swierczek and Ha (2003), the main factors
that affect the performance of MSEs in developing countries is not their small size but

20
their isolation, which hinders access to markets, as well as to information, finance and
institutional support. The argument that small businesses in Africa are crucial in the role
they play in employment creation and general contribution to economic growth is not
new. Although this may be true, many new enterprises tend to be one person
establishments (Mwega, 1991).

This has tended to ensure that the journey of the MSE entrepreneur in many instances is
short- lived, with the statistic of MSE failure rate in Africa being put at 99 per cent
(Rogerson, 2000). Various reasons for these failures have been proposed by scholars
including lack of supportive policies for MSE development (McCormick 1998), intense
competition with replication of micro-businesses (Manning & Mashego, 1993; manager
characteristics including lack of skills and experience (Katwalo & Madichie, 2008 and
Verhees, F. M., & Meulenberg, M. G., 2004).

A study by Hall (1992:237-250) has identified two primary causes of small business
failure appear to be a lack of appropriate management skills and inadequate capital (both
at start-up and on a continuing basis). The research undertaken in Tanzania by surveying
160 micro enterprises showed that high tax rates, corruption, and regulation in the form of
licenses and permits, are found to be the most important constraints to 24 business
operations of micro enterprises (Fjeldstad et al, 2006 cited in Mulugeta, 2011).

According to JS Wiese (2014) who conducted a study on the determinant factors of

sustainability shows owners or managers with more experience (managerial, sector or
previous MSE experience) tend to have a greater inclination towards growth and was also
considered essential criteria for sustainability. Woldie, et al., (2008) and Mbugua, et al.,
(2014) contend that MSEs owners or managers with more experience (managerial, sector
or previous small businesses experience) tend to have more growth potential than those
with a lack of expected potential and also the higher the level of education attained by the
owner/manager, the higher the likelihood of growth of the enterprise. Managerial skills
and experience affect businesses performance at certain level. Since small businesses
account for sizeable proportions of economic activity, therefore, and since they are an
importance source of dynamism and innovation, small business management skills should
be a primary focus for economic policy in general and for innovation strategies (Keith,
2001).

As per Simeon and Lara (2005) MSEs appear to be disproportionately afflicted by the

21
underdeveloped nature of financial institutions in developing countries. For various
reasons ranging from a lack of collateral to bias against small firms, MSEs tend to face
greater financial constraints than do larger firms. The study done in Kenya related to
financial management of MSEs identified the heavy investment in inventory ties up
capital which in the end reduces firm‟ profitability therefore, there is need for a tradeoff
between receivables and holding inventory if the firm is to attain the required profits
(Charles et al., 2014). Marketing activities such as product/service marketing, marketing
research and information and promotion impact negatively on the performance of MSEs
due to lack of marketing skills by MSEs owners. The study conducted in Nigeria by Ebitu
et al., (2015) identified most of problems encountered MSEs are marketing related some
of which include inability to apply modern marketing techniques and strategies, difficulty
in managing the firm’s advertising and other promotional tools, competition from large
firms, lack of adequate research, poor and mundane production technology, lack of
adequate financing of marketing activities, poor quality products and problems of
standardization, warehousing, inventory control, and poor transportation facilities,
branding/packaging, financing and credit facilities, and risk bearing among others. These
problems are capable of impeding, disrupting and hindering the growth, development and
expansion of the firms in its effort to satisfy its target market and also create value for the
organizations. According to Noghor (2015), MSEs are facing challenges brought about by
changes in technological environment; hence they are failing to keep abreast of these
changes. Large businesses, because they have the advantage of being technologically
advanced, end up poaching the MSE market niche and resulting in MSEs being kicked
out of the game. Failure not to employ the latest technology means producing at higher
cost than do competitors in the market thus, eventually exiting the market due to tough
competition.

Though MSEs are considered an important source of job creation and economic growth,
their survival is a difficult task for managers for they have typical characteristics that end
up becoming barriers to their development. According to Olawale, (2014) reason for
failure are lack of management experience, lack of functional skills, poor staff training
and development, poor attitudes towards customers, unavailability of a logistics chain and
a high cost of distribution, competition, rising costs of doing business, lack of finance and
crime. The reason for failure of MSE identified by Mariana, (2014) lack of customer,
previous experience in the field of business, lack of knowledge or managerial experience,

22
lack of government policies to support small business, the lack of bank credit. A study
has been conducted by Abera (2012) on Factors Affecting the Performance of Micro and
Small Enterprises by using stratified random sampling of 261 MSEs from two major sub
cities of Arada and Lideta in Addis Ababa.

According to this study, the main internal factors identified were management factors
which include poor selection of associates in business, lack of strategic business planning,
and costly and inaccessible training facilities. The major entrepreneurial factors include
lack of persistence and courage to take responsibility for one’s failure and absence of
initiative to assess one’s strengths and weakness. He further noted that the contextual
factors such as financial, workings premises, marketing and infrastructure had very high
effects on the performance of MSEs compared to other factors in the research area and is
prevalent to the businesses. In a survey conducted on MSEs in selected cities in Ethiopia
by MUDC (2013), they identified a number of factors including inadequate coverage of
the support services, low level of education among the operators, limited relevance of the
trainings and exclusion of the most of the private MSE operators from the support
services provided by the government. The other study which has similar finding indicates
Drbibe et al., (2013) lack of access to finance, lack of knowledge and skills, lack of
working premises, lack of access to market, lack of necessary support from relevant
institutions, shortage of raw materials, and regulatory problems as major challenges.

The major constraints identified by various studies on MSEs in Ethiopia are associated
with market and finance problems. According to Gebreyohannes (2015) Market is the
major constraint that highly hinders the firms‟ performance for all sectors in the
manufacturing MSEs. About 43% of the enterprises‟ sales performance is below their
expectation level and in few 18 cases there is no sale at all. This problem is attributed to
lot of factors as the location of the working premise and the display facilities is away
from the main road, burden of tasks in the entrepreneurs, lack of competitive business
skill, lower price of product offered by the informal sector and promotion of the sector is
focused more on its role in poverty reduction than its business role as quality products
and thus the customers came with expectation of lower price than to get quality products
with fair price in the market.

As indicated in survey of Assefa et al., (2014) the MSEs were inquired to identify the
major business constraints hampering their business. Access to finance tops the constraint
list where 37.7% of the MSEs reported it as a key constraint. The financial constraints

23
facing MSEs is one of the critical bottlenecks for the growth of MSE. Some of the more
common problems facing MSEs include failing to get the loan they applied for and when
they do, it is after a very long loan procedure. Repeated delays in loan delivery affect
their business. The upper loan limit set by the MFIs falls short of the loan requisite of
MSE. Especially matured MSEs usually find it very hard to meet their loan requirements
from MFIs. The MSEs feel that the interest rate and service charges are very high given
the business environment MSEs operate with. Literatures on MSEs, particularly those
done in Asella, are not conducted on financial performance aspects of the sectors. This
research is therefore, meant to address the factors determining the financial performance
of MSEs in a holistic way by targeting and deeply investigating those operators engaged
in construction, service, manufacturing and trade activities by capitalizing on operators in
Asella town administration.

As clearly stated in Terfasa et al., (2016) access to finance appears to be a very severe or
major obstacle as reported by about 55% and 64% of micro and small scale enterprises
respectively. The problem of access to finance is more severe for small enterprises
compared with micro enterprise as the latter often have access to microfinance institutions
(MFIs) as their loan requirement is within the capacity of MFIs.

2.7 Conceptual Framework

The study will examine the alternation between the enterprises’ performance and their
marketing efforts. The enterprises’ marketing practices will be grasped from the point of
four fundamental aspects. It follows that enterprises’ promotional methods, product
marketing, pricing techniques and place strategies will be examined. Subsequently,
statistical tests and models will be used to draw the relationship. The following diagram
demonstrates the dependent and independent variables that will be examined for their
relationship in the study. The dependent variable will be the enterprises’ performance
while the independent variables are the marketing mixes. The enterprises’ performance
will be measured in terms of annual profit of the firm.

24
Figure 1 Conceptual framework
Source: Author developed, 2023

25
CHAPTER THREE
RESEARCH METHODOLOGY

3.1 Description of the Study Area

The study will be conducted in Sawla town administration which is found in the Gofa
Zone, Southern Ethiopia Region. It is bordered by Dakisho Subo and Karcho Mella
Kebele in north, Zenith river in the South, Turga keble in the East, and Tsala Tsaba keble
in the West. Generally, Sawla town has encircled by Demba Gofa Woreda which is one
of woreda in Gofa Zone. It covers 12.7 square kilometer of area. Sawla town had its name
after the local name from which the name of town (Sawla) is derived “Sa7a Wula. It has
equivalent meaning with the English word “the Gate of land”.

This name was given to Sawla town because; it has been serving as the center of business
and information for the surrounding districts. Sawla town is astronomically located
between 6° 18’ N to 6° 21’N latitude and 36° 53’E to 36 °58’E longitudes. The altitude of
Sawla town varies between 1000 meter above sea level and 2000 meter above sea level. It
is situated at 513 km south west from Addis Ababa, 130 km from Wolayita sodo, the
regional capital (CSA, abstract, 2014).

3.2 Research design

The study will use descriptive and explanatory research designs. Descriptive studies are
typically structured with clearly stated fact expository objectives. Descriptive studies
concern with narration of facts and characteristics concerning individual, group or
situation. In this study, descriptive research will be appropriate choice because the
research aims to identify characteristics, frequencies, trends, and categories. To that end,
survey will be adopted. The descriptive research design through survey will allow the
study to gather relatively large data that will be analyzed for frequencies, averages and
patterns. The study will present the data in an outright manner without a sort of deviation.

The use of explanatory research design on the other hand can be justified by the fact that
the study will grasp the relationship between variables using models and correlation tests.
Explanatory research design is appropriate for a study concerning relationship
examination. In this study, correlation and regression model will be used for
understanding variables’ relationship.

26
3.3 Data type and source

The blend of qualitative and quantitative data will be adopted in the course of this study.
The study derived data will be delineated both in qualitative and quantitative terms. In
perusal of bodies of written works on the subject of the study, evidences of both
qualitative and quantitative nature will be embraced. This will enable a combined use of
data to make an indisputable references and interpretation to the expectation of academia.

Both primary and secondary data types will be used to examine the existing marketing
strategies and to determine marketing factors that influence MSEs business performance.
This will help to evaluate and communicate the study matter based on both first hand and
secondary data set. Sample respondents from the target population will serve as a primary
source of data. On the other hand, books, internet sites, magazines and articles will be
among the secondary data sources to be used.

3.4 Target Population

Population refers to all elements (individuals, objects, and events) that meet the sample
criterion for inclusion in a report. The target population for this study will be comprised
MSEs Operators of the Sawla Town administration. As indicate by Sawla Town
administration Enterprises and Industry development Office have a total population of
181 MSEs and 968 MSEs Operators in the following three sectors which are Industry,
Service, and Urban Agriculture sectors.

Table 2 Sawla Town MSE Population Data 2022

No Name of the Sector Number of Enterprises Operators under this

enterprise/Population
1 Industry 75 423
2 Service 47 235
3 Urban Agriculture 59 310
Total 181 968
Source: Sawla Town Enterprises and Industry Development office annual report June
2023

3.5 Sample size and Sampling techniques

Comprising all the owners of MSEs in the study area is practically difficult due to time

27
and financial factors. As a results sample size is determined from the population using
Yamane (1967) formula is as follows. The confidence level is deemed 95% with only 5%
error margin. The total population amounts 968.

Thus,
𝑁
𝑛=
1 + 𝑁(ℯ)2

Where, 𝑛=Sample size

𝑁= Population size

𝑒 = error margin, 0.05.

968
𝑛=
1 + 968(0.05)2

= 283

Sampling Techniques

Provided the sample size calculated above, the researcher will select participants from the
population by using different sampling techniques. The samples will be drawn from three
sectors of MSEs. These are manufacturing, service and merchandise/trading sectors.
These sectors are purposely chosen by the researcher from among the available sectors.
The purposive selection of three sectors can be justified by the fact that including other
like urban agriculture and construction sector will lengthen the time of the study’s
completion and financially demanding. There are 1180 enterprises throughout these
sectors. The sectors will be stratified, one constituting a single stratum. Samples will be
drawn from each stratum. To that end, proportional to size sample determination
techniques is used to decide the number of participants from each stratum. Probability
proportional to size (PPS) sampling is a method of sampling from a finite population in
which a size measure is available for each population stratum before sampling and where
the probability of selecting a unit is proportional to its size. The following table
demonstrates the proportional to size sampling from each stratum.

28
Table 3 Proportional to size samples from each sector

Proportional to size Samples

No Stratum No. of MSE's Total
2 Manufacturing 423 124
3 Service 310 90
5 Urban Agriculture 235 69
Sum 968 283
Source: Sawla Town Enterprises and Industry Development office annual report June 2023

Provided sample size from each stratum, the researcher will select participants using
purposive sampling technique. It follows that the researcher will purposefully include
participants from all sectors considered in the study according to their respective sample
size demonstrated in the above table. From each stratum therefore purposive sampling
technique will be used to approach owners of the enterprise. This is to increase the quality
of responses for both participant and sector specific questions. A total of 382 participants,
each from an enterprise will be involved. The unit of analysis in the study is contemplated
in terms of both respondents and/or enterprises.

3.6 Data collection tool

To collect the data from the study participants, questionnaire will be used as a major tool.
Questionnaire is chosen to assist in keeping standardization of the questions for all
respondents. It will save time and resources in contrast to other available data collection
tools. The questionnaire will be organized in both close and open-ended manner. Most
close-ended items will be prepared on choice and likert scale type and the open-ended
questions are supposed to encourage respondents to provide detailed answers to the
questions. Questions will be prepared in English language and later changed into
Amharic. This will help to ensure the clear understanding of the questions by the
participants of the study. The data will be collected by trained enumerators who will
approach the respondents in the work place and assist in the course of questionnaire
filling.

3.7 Data Processing and Analysis

The data will undergo processing steps before step up for analysis. The researcher will re-
check the question schedules for their correct filling and will edit for mistakes. Manual

29
data processing will be used. The data collected will be edited, coded and classified
manually. Both field and in house editing will be applied. Field editing will involve
examining the data to be collected in questionnaires/schedules to detect errors and
omissions and ensure that they are corrected. The schedule filled up by the enumerator
with illegible writings, circling and the like will be fixed. These will be rectified on the
field. In-house editing will be used that once the whole data collection will complete; a
final and a thorough checkup will be made. This will be done by the researcher after
getting all questionnaire schedules from the enumerators. Obvious errors will then be
corrected.

Once editing finalized, the data will be sorted and arranged for all the variables to be
considered in the study. This will be accompanied with assigning codes to data collected
for each variable. Then the data will be made-ready for entry and subsequently enter into
software for analysis. To that end, SPSS (Statistical package for Social Science), version
21 will be used.

Model specification
The study will predict the performance of the enterprises from the marketing factors
considered in the study. The nature of variables to be involved entail the usage of multiple
linear regression models in the course of the study.

Mathematically, the model can be written as follows:-

Ŷ = b0 + b1x1 + b2x2 + b3x3 + b4x4

Where Ŷ is the dependent variable, enterprises’ performance (estimated annual profit)-

there are various measures of enterprise performance yet for the sake of this study annual
net profit will be used.

b0 is the constant, represents the value of the dependent variable in case all the
independent variables assume zero value

b1, b2, b3 and b4 represent the unknown coefficient to be estimated from the model
outcomes

X1, X2, X3 and X4 represent independent variables; promotion, product, price and place
respectively.

30
 WORK PLAN
Table 4 Work Plan

No Activity October Nov Dec Jan Feb Mar April May June

1 Title selection
2 Literature Review
3 Proposal writing
4 Proposal
submission
5 Proposal defense
6 Data collection
7 Data analysis

8 Report writing
9 Submission
10 Final defense

FINANCIAL REQUIREMENTS
Table 5: Budget Break Down

No Item Unit Quantity Unit cost in Unit total cost

birr
1 Training Personnel 10 200 2,000
2 Stationary 2,800
3 Questionnaire forms Number 98 20 1,960
4 SPSS software assistance 2,000
5 Data collection costs Number 10 150 1,500
6 Interviewers Number 1 2,000 2,000
7 Duplication cost Modules 10 200 1,200
8 Transportation Trip 10 140 1400
9 Flash GB 8GB - 200
10 Mobile card 1000
11 Others 1000
Total 17060

31
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