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ASSESSMENT OF A CORRELATION BETWEEN MARKETING

FACTORS AND PERFORMANCE OF SMALL ENTERPRISES
(A Case Study of Debre Markos Town)

A Research Submitted to the Department of Management, University of

Gondar in Partial Fulfillment of the Requirements for the Degree of Master of
Business Administration

MASTERS OF BUSINESS ADMINISTRATION PROGRAM

DEPARTMENT OF MANAGEMENT
FACULTY OF BUSINESS AND ECONOMICS
UNIVERSITY OF GONDAR

By: Gubay Aniley

Advisor: Mulugeta Negash

(PhD Candidate)

February, 2015
University of Gondar
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ደብረ ማርቆስ ከተማ አስተዳድር የቴክንክ ሙያና ኢንተርፕራይዞች ልማት ጽፈት ቤት (2006). የ2006 በጀት ዓመት
የዘጠኝ ወር ዕቅድ ክንውን ሪፖርት

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12/01/2015 10:40 AM.
Appendix A. Questionnaires

UNIVERSITY OF GONDAR
FACULITY OF MANAGEMENT AND ECONOMICS
DEPARTMENT OF MANAGEMENT
MBA PROGRAM
Questionnaire to be filled by small enterprises owners or employees in
Debre Markos town
The purpose of this questionnaire is to collect information about the marketing factors of small
enterprises in Debre Markos town. The research will be fruitful only when there is your
cooperation in providing genuine answers to the following questions. Your responses will be
kept confidential and are only for academic purpose.

Thank you in advance for your cooperation!

Part I: Demographic Information about the respondents

1. Sex A. Male B. Female
2. Age in years A. 18-25 B. 26-35 C. 36-45 D. 46-55 E. 56 and above
3. Marital Status
A. Never married
B. Married
C. Divorced
D. Widowed
4. Your educational level
A. Illiterate B. Up to Grade 8 C. Grade 9-10
D. 10+1-4 or Diploma E. 1st Degree and above
5. Have you ever been in any other business?
A. Yes B. No
6. Do you have other source of income?
A. Yes B. No
Part II. Enterprise Related Questions
1. Your business fields of industry_______________
2. How long is your business started?
A. Less than 1 year B. 1-5 yrs C. 6-10 yrs D. 11-15 yrs E. greater than 15yrs
3. How many employees including the owner (s) were when the business started? ___________
4. How many employees including the owner (s) are there in your enterprise? ______________
5. By how much total capital did the enterprise has start its activity? ________
6. By now how much is the total capital of the enterprise? __________
7. What were the sources of your start-up capital?
A. Personal saving
B. Micro finance
C. Banks
D. Borrowed from friends & relatives
E. “Equb”
F. Others (please specify) _____________________________
8. Do you participate in different bids?
A. Yes B. No
9. If your answer for question no. 14 is ‘yes’ at what level?
A. In national bid
B. In local bid
C. In Performa
10. As to your understanding, by which of the following are your customers being attracted
more?
A. By the quality of your product
B. By the price of your product
C. By your approach and communication
D. By referral of your loyal or satisfied customers
E. Others_________________________________
11. How did you get the market?
A. As you expected B. More than your expectation C. Below your expectation
12. What is your future plan?
A. Maintain production
B. Expand capacity
C. Reduce capacity
D. Shut down operation
E. Others (specify)_____________________________
Part III: Marketing Factors that Affect the Performance of SEs
The major factors that affect the performance of MSEs are listed in the following tables. Please
select to what extent these factors are affecting the performance of your enterprise and put (√)
mark on what you agree up on.
13. Factors related to marketing skills and promotion
No Factors (1) (2) (3) (4) (5)
Strongly Agree Undecided Disagree Strongly
agree disagree
1 Market needs are not surveyed
before production
2 Unable to create market
linkage to products
3 Orders are not finalize on time.
4 Unable to adapt to changing
environment
5 Unable to identify target
market
6 Sales staff are not well trained
7 Poor handling and weak
relation with customers
8 Unable to know the profit from
each item accurately
Promotion Questions
9 Lack of doing promotion to
attract potential users
10 Lack of networking and
referrals
11 Unable to participate in
bazaars
12 Absence of signboards
14. Place (for Working and selling) related factors
(1) (2) (3) (4) (5)
No Factors Strongly Agree Undecided Disagree Strongly
agree disagree
1 Poor location of business site
2 High rent for working and
selling premise
3 The premise is small in size
and affects production
4 There is no marketing channel
5 Market problem due to lack of
infrastructure to the premises
6 The premise is where there is
stiff competition

15. Factors related to price

(1) (2) (3) (4) (5)
Strongly Agree Undecided Disagree Strongly
No. Factors
agree disagree
1 Prices are not competitive
2 Unable to know detail costs
for price setting
3 Prices are not consistent
4 Prices are set without
considering the demand and
supply of products or services
5 There is no discount for large
quantity or repeated sales
6 There is no credit sales for
loyal customers
16. Factors related to product

(1) (2) (3) (4) (5)

Strongly Agree Undecided Disagree Strongly
No Factors
agree disagree
1 Unable to develop new products
2 Unable to differentiate products
from competitors’ products
3 There is no guarantee for
defected products
4 Customers are not involved in
product quality improvement
5 Lack of market for products
6 Raw materials are not the right
quality

Thank you very much again!

Appendix B. Interview Questions

Interview Questions

1. How did you prefer this business to other alternatives?

2. Had you done market analysis before you started this business?
3. Have you ever participated in any marketing training?
4. What kind of marketing strategy do you use to sell your products or service?
5. How do you create market relationships?
6. Do you keep your schedule (appointments) of serving your customers? If no why?
7. Are you at office (work area) all the times of working hours? If not, what kind of person
represents you?
8. What other marketing problems do you encounter in your enterprise?
9. How do you set your products’ or services’ price?
 ጎንደር ዩኒቨርሲቲ

የማኔጅመንትና ኢኮኖሚክስ ትምህርት ቤት

የማኔጅመንት ትምህርት ክፍል

የቢዝነስ አስተዳድር ማስተርስ ፕሮግራም

በአንስተኛ ኢንተርፕራይዞች ባለቤቶች ወይም ሰራተኞች የሚሞላ የጹህፍ መጠይቅ

የዚህ ጹህፍ መጠይቅ ዋና ዓላማ በደብረ ማርቆስ ከተማ የሚገኙ የአነስተኛ ኢነተርፕራይዞች
(ድርጅቶች) የገበያ ሁኔታ በተመለከተ በማጥናት የማኔጅመንት ሁለተኛ ድግሪ የመመረቂያ ፁህፍ
ለማዘጋጀት መረጃ ለመሰበሰብ ነው፡፡ በመሆኑም ይህ ጥናት ውጤታማ የሚሆነው እርስዎ ቀጥሎ
ለቀረቡት ጥያቄዎች እውነተኛና ትክክለኛ መልስ ሲሰጡ ብቻ ስለሆነ ትብብር እንዲአደርጉልኝ
በአክብሮት እየጠየኩ የሚሰጡት መረጃ ለትምህርታዊ ጥናት ብቻ እንጅ ለሌላ ጉዳይ እንደማይውል
በማረጋገጥ ነው፡፡ ለዚህም ሲባል በመጠይቁ ላይ ስምዎትን መፃፍ አያስፈልግም፡፡

ለሚደረግልኝ ትብብር በቅድሚያ አመሰግናለሁ!

ክፍል አንድ፡- ቀጥለው የቀረቡት ጥያቄዎች መልስ የሚሰጡትን ሰዎች በተመለከተ ስለሆኑ መልስ ይሆናሉ
ያሏዋቸውን ምርጫዎች በማክበብ ወይም ከባዶ ቦታው ላይ በመፃፍ መልስ ይስጡ

1. ፆታ ሀ. ወንድ ለ. ሴት
2. እድሜ ሀ. ከ18-25 ዓመት ለ. ከ26-35 ዓመት ሐ. ከ36-45 ዓመት
መ. ከ46-55 ዓመት ሠ. 56ና ከዚያ በላይ
3. የትዳር ሁኔታ
ሀ. ያላገባ(ች) ሐ. የፈታ(ች)
ለ. ያገባ(ች) መ. የትዳር ጓደኛ በሞት የተለየ(ች)
4. የትምህርት ደረጃ ሀ. ያልተማረ(ች)
ለ. እስከ 8ኛ ክፍል የተማረ(ች) መ. ዲፕሎማ ያለው(ላት)
ሐ. ከ9-10 የተማረ(ች) ሠ. የመጀመሪያ ድግሪና ከዚያ በላይ ያለው/ላት
5. ከአሁን በፊት በሌላ ቢዝነስ ወይም ኢንተርፕራይዝ ተሳትፈው ያውቃሉ?
ሀ. አዎ ለ. አልተሳተፍኩም
6. ሌላ የገቢ ምንጭ አለዎት? ሀ. አዎ ለ.የለም
ክፍል ሁለት፡- የሚሰሩበትን ኢንተርፕራይዝ በተመለከተ የቀረቡ ጥያቄዎች
7. ኢንተርፕራይዝዎ የተሰማራበት የስራ መስክ ምንድን ነው_____________________
8. ኢንተርፕራይዝዎ ሥራ ከጀመረ ምን ያክል ጊዜ ሆኖታል?
ሀ. ከ1 ዓመት ያነሰ መ. ከ11-15 ዓመት
ለ. ከ1-5 ዓመት ሠ. ከ15 ዓመት በላይ
ሐ. ከ6-10 ዓመት
9. ድርጅቱ ሲመሰረት ከባለቤቱ(ቶቹ) ጋር ምን ያክል ሰራተኞች ነበሩት?_____
10. በአሁኑ ስዓት በድርጅቱ ውስጥ ባለቤቱን(ቶችን) ጨምሮ ምን ያክል ሰራተኞች አሉ?_____
11. ድርጅቱ ሲመሰረት ምን ያክል ካፒታል (ገንዘብ) ነበረው?__________
12. በአሁኑ ወቅት ድርጅቱ ምን ያክል ካፒታል አለው?__________
13. ድርጅትዎ ሥራውን ሲጀምር የሚያስፈልገውን ገንዘብ ከየት አገኘ?
ሀ. ከራሱ ከባለቤቱ በተደረገ ቁጠባ መ. ከጓደኛና ከዘመድ በመበደር
ለ. ከጥቃቅን የገንዘብ አበዳሪ ተቋማት ሠ. ከእቁብ
ሐ. ከባንኮች ረ. በስጦታ
14. ድርጅትዎ በጨረታ ይሳተፋል?
ሀ. ይሳተፋል ለ. አይሳተፍም
15. ለ14ኛው ጥያቄ መልስዎ አዎ ከሆነ በምን ያክል ደረጃ ይሳተፋል?
ሀ. በሀገር አቀፍ ጨረታ
ለ. በአካባቢ ጨረታ
ሐ. በፕሮፎርማ
16. በእርስዎ እምነት ደንበኞቻችሁን የበለጠ የሚስባቸው ምንድን ነው
ሀ. የምርት ጥራት
ለ. ዋጋ ሐ. አቀራርብና መግባባት
መ. በቋሚ ደንበኞቻችሁ ጥቆማ (መረጃ) መሰረት
ሠ. ሌላ ካለ ይግለፁ______________________
17. እየሰሩበት ያለውን ገበያ እንዴት አገኙት?
ሀ. እንደተጠበቀው ለ. ከተጠበቀው በላይ ሐ. ከተጠበቀው በታች
18. ድርጅትዎ ለወደፊት ምን አስቧል?
ሀ. በዚሁ መቀጠል
ለ. ባለው ላይ ተጨማሪ ማስፋት
ሐ. አሁን ካለው ባነሰ እየሰሩ መቆየት
መ. ሥራውን ማቋረጥ ሠ. ሌላ ካለ ይግለፁ____________________
 ክፍል ሦስት፡- በግብይት ላይ ተፅኖ የሚያሳድሩ ጉዳዮችን በተመለከተ የቀረቡ ጥያቄዎች
ቀጥሎ ባሉት ሰንጠረዦች የቀረቡ ጥያቄዎች የድርጅትዎን ውጤታማነት ተጽኖ ሊያሳድሩ የሚችሉ
ከገበያ ጋር ተያያዥነት ያላቸው ጉዳዮች ናቸው፡፡ ከተዘረዘሩት ጉዳዮች ውስጥ የእርስዎን ሥራ ዘርፍ
በይበልጥ ተፅኖ የሚያሳድሩትን ያመልክቱ፡፡ ለእያንዳንዱ ጥያቄ ከአማራጮች አንድ ጊዜ ብቻ የ (√)
ምልክት በማድረግ ምላሽ ይስጡ፡፡

19. የድርጅቱ ባለቤቶች ወይም ሰራተኞች ያላቸውን የግብይት ክህሎት (ችሎታ) እና

ምርታቸውንና አገልግሎታቸውን የማስተዋወቅ ሥራ የሚመለከቱ ጉዳዮች

ተ. ጉዳዮች በጣም እስማ ለመወሰን አልስማ በጣም

ቁ. እስማማለሁ ማለሁ እቸገራለሁ ማም አልስማ
ማም
1 ምርቱ/አገልግሎቱ በገበያ ላይ የሚፈለግ
ስለመሆኑ ጥናት አለመደረግ
2 የገበያ ትስስር መፍጠር አለመቻል
3 የደንበኞች ትዛዝ በተባለበት (በፈለጉበት)
ጊዜ አለመድረስ
4 ወቅቱ ከሚፈጥራቸው ለውጦች ጋር
አብሮ አለመጓዝ
5 አትራፊ የሆነን ገበያ ለይቶ ትኩረት
አለመስጠት
6 ሽያጭ ላይ የሚሰሩ ሰራተኞች በዘርፉ
በቂ ስልጠና ያላገኙ መሆናቸው
7 ከደንበኞች ጋር ያለ ግንኙነትና አያያዝ
ደካማ መሆን
8 ከአንድ ምርት የሚገኘውን ትርፍ
በትክክል አለማወቅ
9 ደንበኞችን ለመሳብ የሚደረገው
የማስተዋወቅ ሥራ ዝቅተኛ መሆን
10 ከደንበኞች ጋር ትስስር ማነስ
11 በባዛሮች መሳተፍ አለመቻል
12 አድራሻ ጠቋሚ ምልክት አለመኖር
 20. የመስሪያና የመሸጫ ቦታ በተመለከተ የቀረቡ ጉዳዮች

በጣም እስማ ለመወሰን አልስማ በጣም

ተ.ቁ ጉዳዮች እስማማለሁ ማለሁ እቸገራለሁ ማም አልስማማም
1 ቦታው ለገበያ አመች አይደለም
2 የመስሪያና የመሸጫ ቦታ ኪራይ
ከፍተኛ ነው
3 የመስሪያና መሸጫ ቦታ ሥፋት
በቂ አይደለም
4 ምርቶችን ወደ ሌላ ገበያ ወስዶ
የሚሸጥ የለም
5 ቦታው መሰረተ ልማት ስላል
ተሟለት ለገበያ ምቹ አይደለም
6 ቦታው ከፍተኛ የሆነ ውድድር
ያለበት ነው

21. የመሸጫ ዋጋን በተመለከተ የተነሱ ጉዳዮች

በጣም እስማ ለመወሰን አልስማ በጣም

ተ.ቁ ጉዳዮች እስማማለሁ ማለሁ እቸገራለሁ ማም አልስማማም
1 የምርቶች ዋጋ በገበያ ላይ
ተወዳዳሪ አይደለም
2 ዋጋ ለማውጣት የግብዓቶችን
ዝርዝር ወጭዎች በትክክል
አይታወቁም
3 ዋጋዎቹ ወጥ አይደሉም
4 ዋጋዎቹ የምርችን በገበያ ላይ
ፍላጎት መጨመርና መቀነስ
ያገናዘቡ አይደሉም
5 በብዛት ወይም በተደጋጋሚ
ለሚገዙ ደንበኞች የዋጋ ቅናሽ
አይደረግም
6 ለቋሚ ደንበኞች የዱቤ ሽያጭ
የለም
 22. ምርት ወይም አገልግሎት በተመለከተ የተነሱ ጉዳዮች

በጣም እስማ ለመወሰን አልስማ በጣምአል

ተ.ቁ ጉዳዮች እስማማለሁ ማለሁ እቸገራለሁ ማም ስማማም
1 አዳዲስ ምርቶችን/አገልግሎቶችን
ማምረት/መስጠት አለመቻል
2 ምርቶችን ከተወዳዳሪዎች ምርቶች
የተለየ የሚያደርጋቸው ነገር
አለመኖር
3 በምርቶች ላይ ቅሬታ ሲኖር ዋስትና
አለመኖር
4 የምርቶችን ጥራት ለማሻሻል መረጃ
ከደንበኞች አለመቀበል /አለመሰብሰብ/
5 ለምርቶቹ በቂ ገበያ አለመኖር
6 ጥራት ያላቸው ግብዓቶች
አለመጠቀም

በድጋሜ በጣም አመሰግናለሁ!

 ለቃለ-መጠይቅ የቀረቡ ጥያቄዎች

1. ከሌሎች የሥራ ዘርፎች ይህን እንዴት መረጡ?

2. ወደዚህ ሥራ ከመግባትዎ በፊት የገበያ ጥናት አድርገው ነበር?
3. ከአሁን በፊት ግብይት በተመለከተ ስልጠና ወስደው ያውቃሉ?
4. ምርትዎን ወይም አገልግሎትዎን ለመሸጥ የሚጠቀሙት የሽያጭ ስልት ምንድን ነው?
5. ገበያ ትስስር ፈጥረዋል? በምን መንገድ?
6. ደንበኞችዎ በፈለጉት ወይም በተቀጠሩ ጊዜ ሙሉ በሙሉ ይስተናገዳሉ? ካልሆነ ለምን?
7. እርስዎ በሥራ ስዓት ከሥራዎ ቦታ ይገኛሉ? ካልተገኙ የሚተካዎት ማን ነው?
8. ከግብይት ጋር በተያያዘ ሌሎች ምን ዓይነት ችግሮች ያጋጥምዎታል?
9. የምርትዎን ወይም አገልግሎትዎን የመሸጫ ዋጋ እንዴት ይወስኑታል?
Table of Contents Pages
Acknowledgements...................................................................................................................................... iii
List of Acronyms ......................................................................................................................................... iv
List of Tables ................................................................................................................................................. v
List of Figures ............................................................................................................................................... vi
Abstract....................................................................................................................................................... vii
CHAPTER ONE ........................................................................................................................................... 1
INTRODUCTION ........................................................................................................................................ 1
1.1. Background of the study ............................................................................................................... 1
1.2. Statement of the Problem.............................................................................................................. 2
1.3. The research Objective.................................................................................................................. 3
1.4. Research Questions....................................................................................................................... 4
1.5. Scope of the study......................................................................................................................... 5
1.6. Significance of the study............................................................................................................... 5
1.7. Structure of the Research Report .................................................................................................. 5
CHAPTER TWO .......................................................................................................................................... 7
REVIEW OF RELATED LITERATURE .................................................................................................... 7
2.1. Theoretical Framework ................................................................................................................. 7
2.1.1. Definitions of Small Enterprises ........................................................................................... 7
2.1.2. Roles of Small Enterprises to Countries Development......................................................... 8
2.1.3. Roles of Small Enterprises to the Development of Ethiopia...............................................10
2.1.4. Marketing: Concepts and Definitions .................................................................................11
2.1.5. Marketing Factors that Influence the Performance of SEs .................................................12
2.1.6. Marketing Strategies for Small Enterprises ........................................................................ 17
2.2. Empirical literatures on marketing factors of small enterprises..................................................19
2.3. Conceptual Framework ...............................................................................................................21
2.3.1. Variables in the Study ......................................................................................................... 22
2.3.2. Hypothesis...........................................................................................................................22
CHAPTER THREE .................................................................................................................................... 24
RESEARCH DESIGN AND METHODOLOGY ......................................................................................24
3.1. The Settings /the Study Area ........................................................................................................... 24

i
 3.2. The study design .........................................................................................................................25
3.3. Sample design .............................................................................................................................25
3.4. Research Instrument....................................................................................................................25
3.4.1. Instruments Design ............................................................................................................. 25
3.4.2. Instrument Validity ............................................................................................................. 26
3.4.3. Instrument Reliability.......................................................................................................... 26
3.5. Ethical Consideration..................................................................................................................27
CHAPTER FOUR....................................................................................................................................... 29
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF RESULTS........................................... 29
4.1. Data Presentation and Analysis................................................................................................... 29
4.1.1. General Characteristics of the respondents ....................................................................... 30
4.1.2. Characteristics of Small Enterprises ...................................................................................31
4.2. Marketing Factors .......................................................................................................................35

4.2.1. Analysis of Marketing Factors Using Central Tendency and Dispersion ...........................35
4.2.2. Inferential Statistics Results.................................................................................................... 39
4.2.2.1. Pearson Correlation......................................................................................................... 39
4.2.2.2. Regression.......................................................................................................................40
4.3. Limitation of the study................................................................................................................41
CHAPTER FIVE ........................................................................................................................................ 42
CONCLUSION AND RECOMMENDATIONS........................................................................................42
5.1. Conclusion .................................................................................................................................. 42
5.2. Recommendations.......................................................................................................................43

ii
 Acknowledgements
First of all, my thanks go to the Super Natural Force, God, for blessing me in realizing my
dream. Next deep gratitude goes to my advisor, Mulugeta Negash (PhD Candidate), for his
invaluable guidance, advice and providing constructive comments.
My mother, Ayehu Wagaw, I know that this achievement makes you happier than me. Words fail
to express your contribution to my life. I wish you decades of years to live in peace and healthy
condition.
My wife, Yeshemebet Mengesha, without your moral and material support, I couldn’t do this.
You take all the burden of caring our children, Natnael Gubay and Meleate Gubay, during this
work.
Minalu Aniley and others of my family are big contributors to my life with a great love. Thank
you all.
I would like to thank Staff of Debre Markos micro and small enterprises development office
which helped me in providing necessary documents and information. I also present great thanks
to small enterprises owners and employees who were at the side of me by providing necessary
responses using questionnaires and interview.
Ato Gojjam Ademe, who was with me during my work from the beginning, did a lot for this
accomplishment. I will never forget your contribution. My heartfelt gratitude also goes to my
best friend Beza Belayneh and to others who supported me during this work. Finally, it is
difficult to wind up my acknowledgements without mentioning Sewnet Abeje’s financial and
moral support to me. I wish you long live.

iii
 List of Acronyms
CRM=Customer Relationship Management
CSA = Central Statistics Agency
GDP=Gross Domestic Product
GTP=Grand Transformation Plan
ILO = International Labor Office
MoTI = Ministry of Trade and Industry
MoUDC=Ministry of Urban Development and Construction
MSEs = Micro and Small Business Enterprises
MSMEs=Micro, Small and Medium Enterprises
SEs=Small Enterprises
SMEs=Small and Medium scale Enterprises
UNIDO=United Nations Industrial Development Organization

iv
 List of Tables
List of Tables pages
Table 3.1: Number of small enterprises in their industries……………………… 24
Table 4.1: General characteristics of respondents ………………………………..29
Table 4.2: Small Enterprises Field of Industry …………………………………. .30
Table 4.3: Experience of Small Enterprises …………………………………….. .31
Table 4.4: Source of startup capital ………………………………………………32
Table 4.5: Customer attraction ……………………………………………………33
Table 4.6: Future plan of Small Enterprises…………………………………...35
Table 4.7: The current Market and Small Enterprises Expectation …………..….. 35
Table 4.8: Participation in bids ……………………………………………………36
Table 4.9: Level of Bid Participation …………………………………………. 37
Table 4.10: Factors related to owners and employees marketing skills …………..37
Table 4.11: Factors Related to Promotion …………………………………………38
Table 4.12: Place Related Factors ………………………………………………...39
Table 4.13: Factors related to Prices ……………………………………………...39
Table 4.14: Factors related to Products ……………………………………………40
Table 4.15: Pearson Correlation …………………………………………………...41
Table 4.16: Regression …………………………………………………………….42

v
 List of Figures
List of Figures Pages
Figure 2.1: Conceptual framework………………………………………….. 22

vi
 Abstract

Small enterprises are great contributors to the growth and developments of any country in the
world. Their role becomes paramount in developing countries like Ethiopia where the number of
huge factories and industries are not tremendously available. However, they are being
challenged by several factors. Being cognizant of this general fact, this study aimed to
investigate the impact of marketing factors on the performance of small enterprises in the case of
Debre Markos town. The study investigated the influence of five marketing factors: marketing
skills of employees and owners, promotion, place for selling and working, price and product
factors on the performance of small enterprise. From a total of 81 small enterprises, data were
collected from 68 samples as the researcher targeted the whole population for the data collection.
Self administered questionnaire and interview with key informants were used as data gathering
methods. Data collected using the aforementioned instruments were analyzed using both
qualitative and quantitative methods of data analysis. Findings from the study revealed that
there is significant marketing skill gap in employees and owners even though most of them are
literate. It was also found out that the enterprises are not using adequate promotion efforts to
create awareness about their products or services. Moreover, small enterprises are facing
problems of high rent, poor location, size problem and lack of marketing channel even though
most of the enterprises are using their working premises as selling shops. Price related factors
are also among the major marketing problems that affect the performance of small enterprises.
Therefore, the local government and other stakeholders need to provide working and market
premises, marketing and entrepreneurship trainings, other support to small enterprises so as to
foster their contributions to the growth and development of the nation in general and the local
community in particular.
.
Key terms: Debre Markos town, marketing factors, performance, Small enterprises,

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viii
 CHAPTER ONE
INTRODUCTION
1.1. Background of the study
Micro and small enterprises the world over comprises a widely divergent spectrum of
establishment, ranging from micro and rural enterprise to modern industrial units using
sophisticated technologies. Because of their contribution in each and every national economy,
the importance and emphasize on SMEs has been increased in the minds of policy makers,
planners and the industry (Hailay, 2007).
According to ILO (2014), “Almost 202 million people were unemployed in 2013 around the
world, an increase of almost 5 million compared with the year before. This reflects the fact that
employment is not expanding sufficiently fast to keep up with the growing labor force.” This
huge number of unemployed people needs urgent solution so that countries can create healthy
economy. Small enterprises are believed to be one of the most contributors in providing job
opportunities that account a remarkable share of the total employment of any country.
Small and medium scale enterprises (SMEs) are generally regarded as the engine of economic
growth and equitable development in developing economies. They are labour intensive, capital
saving and capable of helping create most of the one billion new jobs that the world will need by
the end of the century (Agwu and Emeti, 2014).
It is difficult to put demarcation between Small and Medium Scale Enterprises because of their
similarity rather are often considered together. Regardless of their similarity, their size varies
from country to country and their contribution is immense. Aware of this, small and micro
enterprises are become national agenda of Ethiopian government. The government has long
recognized the important contribution that these enterprises can make in poverty reduction,
employment creation and private sector development. They offer both a safety valve for the
survival of workers that is available to find steady wage employment and opportunity for the
poor entrepreneurs to raise their capital and income (Minilek & Chinnan, 2012) and (Ehinomen,
2012).

1
Epheriem (2010), clearly stated that MSEs can play a greater role in improving the socio-
economic condition of the poor since they create employment opportunity that enable them to
generate their income which in return leads to access for socio-economic merits such as
education, better health condition, good housing and nutrition.
The enterprises are described as the national home of entrepreneurship and provide an enabling
environment to exercise their talent to the full and to attain their goals. The sector is seen as an
important force to generate employment, and more equitable income distribution, to activate
competition, exploit niche markets, enhance productivity and technical change, and through all
of these stimulate economic development (ibid, 2010).
In most developing countries, MSEs by virtue of their size, location, capital investment and their
capacity to generate greater employment have proved their powerful driving effect for rapid
economic growth. The sector is also known as an instrument in bringing about economic
transition by effectively using the skill and talent of the people without requesting high level of
training, much capital and sophisticated technology (Commission on Legal Empowerment of the
Poor, 2006) [cited in Woldegebriel, 2012].
Understanding and believing on this, Debre Markos town micro and small enterprises
development office, which is one of micro and small enterprises government offices in the
country, works on increasing the numbers and sizes of small enterprises. In the area there are 81
registered and formally organized small enterprises in four industries- manufacturing,
construction, urban agriculture, and service.

1.2. Statement of the Problem

The contribution of small enterprises to the economy of a nation was identified a long time
before. They are sources of innovation, create job opportunity, and assist big enterprises by
distributing products and supplying raw materials. Micro, Small and Medium enterprises are
considered the driving force for the development of Africa economy. Being high in number, they
generate big job opportunities and competitiveness (Kirka, et al., 2013). For Ethiopia, in which
the number of big enterprises is limited, small enterprises are believed to be the main contributor
to the economy, particularly for providing a huge number of job opportunities to the growing
working population.

2
However, SMEs die in premature stage because of several factors. Among these factors
inadequate market research, over-concentration on one or two markets for finished products, lack
of succession plan, inexperience, lack of proper records or lack of any records at all, inability to
separate business and family or personal finances, lack of business strategy, inability to
distinguish between revenue and profit, inability to procure the right plant and machinery,
inability to engage or employ the right caliber of staff, cut-throat competition (Agwu and Emeti,
2014).
Similarly, the growth of small enterprises of Ethiopia is not as expected because of several
factors. From these factors, marketing related factors are considered to be the most decisive ones.
The business line of MSE activities in Ethiopia is relatively similar. A lack of product diversity,
however, is prevalent and as a result similar products are over-crowding the market. Some micro
enterprises shift from one product to another, and in doing so, capture better market
opportunities. Nevertheless, as soon as the market has established it, a multitude of further micro
enterprises start the same business and this causes the selling price to fall immediately
(Asegedech, 2004).
The researcher came to learn in Ethiopia at large and in Debre Markos town in particular, most
of the small enterprises do not conduct marketing research for their products or services before
starting their business. Moreover, there are limitations in attracting and maintaining customers.
Owners and employees are not skilled in marketing. In addition, they do not have appropriate
working premises. They do not have an effective and sufficient promotion. It is noticed to see
that there are some small enterprises, which do not have signboard that can show and give
information about their location, products or services (ibid). Therefore, aware of these marketing
problems the researcher personally observed and a relatively lack of study in the area, he decided
to undertake an empirical study to investigate the marketing factors or challenges of small
enterprises in Debre Markos in detail, and suggest possible solutions to the users or beneficiaries.

1.3. The research Objective

3
The general objective of this study is to assess the correlation between marketing factors
performance of small enterprises in Debre Markos town. Under this general objective the
following are specific objectives:

1. To investigate the main marketing factors of small enterprises in Debre Markos town.
2. To identify whether small enterprises start their business after conducting research on the
availability of markets to their products or services or not.
3. To identify the level of marketing skills of the enterprises’ owners/employees to sell their
products or services.
4. To examine to what extent small enterprises use promotion to sell their products/services.
5. To assess place (for working and selling) related factors that influence performance of SEs.
6. To identify problems that small enterprises face related to their products/services.
7. To examine how small enterprises set prices of their product/service.
1.4. Research Questions

The main research question that the study intended to answer is ‘‘what are the marketing factors
that affect the performance of small enterprises in Debre Markos town?’’. In light of seeking an
answer to this research question, the researcher investigated the following sub-problems:

1. Do small enterprises start their business activities after conducting market analysis?
2. Do small enterprises’ employees and owners possess the required marketing skills?
3. What efforts do small enterprises put to attract customers in promoting their products?
4. What problems do small enterprises face related to place (for working and selling)?
5. Do products/services of small enterprises have demand in their market? If not, why?
6. Do small enterprises set the price of their products/service based on reasonable ground?

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 1.5. Scope of the study
Due to time and financial constraints the scope of the research is delimited to small enterprises in
Debre Markos town. It is also delimited to those small enterprises that have been registered
under Debre Markos town micro and small enterprises development office. Even if micro
enterprises are also the concern of the office and both enterprises have other problems in
common, as to this research, marketing factors have more effect on the performance of small
enterprises. In addition, although the performance of small enterprises are affected by internal
and external factors, this research is delimited to analyzing only those factors which are under
the control of the owners and employees of the enterprises.

1.6. Significance of the study

The study is premised on the axiom that small enterprises play in the economic development of a
nation and the purpose is to assess the marketing factors they are currently facing. Small
enterprises of Debre Markos town will get knowledge on the gaps they face related to marketing.
This study systematically investigated the problem small enterprises face and suggested
strategies to tackle them. The output of this research helps stakeholders and policy makers so as
to boost the growth of these firms. By adding current knowledge to the field, other interested
researchers can get ground to further study the problems of these enterprises.

In general the output of the research will have value to the following stakeholders:

 Small Enterprises-The findings of this research will help small enterprises in identifying
marketing factors that affect their business performance and take remedial action.
 Government and other concerned bodies-The research output will fill the information
gap of the government in marketing challenges of small enterprises.
 Researchers-Other interested researchers in the area will get ground from the findings of
this research.
1.7. Structure of the Research Report
The research investigates marketing challenges of small enterprises in Debre Markos Town. It
tries to find out those marketing factors that inhibit or prohibit their performance. The research
has six chapters. The first chapter is about general introduction and includes background of the
study, statement of the problem, and objectives of the study. Significance, scope and limitations

5
of the study are also under this part. The second chapter includes review of related literature in
the area. Published and unpublished materials were referred. Other secondary sources like
different reports at Woreda, zonal, regional and national level, magazines and government
documents were used. The third chapter contains research methodology. Under this chapter study
area, study and sample designs, variables, instruments, and progress plan were included. In the
fourth chapter data analysis and interpretation were presented. In the fifth chapter from
conclusions and interpretations recommendations were made.

Key terms: Debre Markos town, marketing factors, performance, small enterprises

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 CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1. Theoretical Framework
2.1.1. Definitions of Small Enterprises
There are different ways of defining the term small and micro enterprises in different countries.
The base for defining is depending on the number of employees hired, the capital invested and
the total balance sheet (asset, liability and capital). Developed countries use small number of
employees as a criterion to be a small enterprise. The business type is capital intensive. On the
other hand, developing countries base their criterion on capital level as there is excess labor. As
to European Union definition small enterprise is an enterprise which employs fewer than 50
persons and whose annual turnover and/or annual balance sheet total does not exceed EURO 10
million (Minilek and Chinnan, 2013).
According to Norlaphoompipat, (2008) cited in Islam, Keawchana and Yusuf (2010), Institute
For Small and Medium Enterprises Development enterprises in Thailand have defined based on
3 broad categories taking capital level and number of employees as yardsticks. The first sector is
Production and it includes Agriculture Processing (medium size not exceeding 200 million baht
and 200 employees and for small size not exceeding 50 million baht and 50 employees),
manufacturing and Mining. The second sector is trade and it includes Wholesale and Retail
(medium size not exceeding 60 million and 50 employees, and small size not exceeding 30
million and 15 employees).The third sector is service (medium size not exceeding 200 million
baht and 200 employees, and small size not exceeding 50 million baht and 50 employees), where
one US dollar is 32.26 of Thailand baht.
In Zambia, according to the definition of small enterprises of (JUDAI, 2002, p. 13) cited in ILO
(2004) is “Any business whose total investment, excluding land and buildings, does not exceed
US$ 50,000 for manufacturing and US$ 10,000 for trading and services, where the annual
turnover does not exceed US$ 80,000, employs up to 30 people, registered with the Ministry of
Commerce, Trade and Industry”.
The national definition of SMES in Nigeria as adopted at the National Council on Industry (NCI)
in 1996 and as cited by Ehinomen and Adeleke (2012) is to classify small scale enterprises as
those with total cost, including working capital but excluding cost of land above N1.0 million,
but not exceeding N 40.0 million with a labour size of between 11and 35 workers. Medium Scale

7
Enterprises are defined as those with total cost, including capital but excluding cost of land
above N40.0 million but not exceedingN150.0 million with a labour size of between 36 and
100workers, where one US dollar is 161.29 Nigeria Nira.
Businesses (enterprises) are called small if they are independently owned, operated, and
financed, their employees number is less than 100 and have little impacts on their industries
(Hatten, 2012).
The new Small & Micro Enterprises Development Strategy of Ethiopia (published 2011) due to
global inflation the government has improved the definition as “Micro-enterprise is the business
enterprise found in all sectors of the Ethiopian economy hiring up to five man power and
100,000 birr capital for industry and up to five man power and capital of 50,000 birr for service
sector and small scale enterprise category, the industry sector includes 6-30 man power and
maximum of 1.5 million birr capital and the service sector involves 6-30 man power and capital
of 500,000 birr. Under the industry sector there are Manufacturing, Construction, and Mining
and under the service includes Retail, Transport, Hotel and Tourism, Recreation, Information
Technology and Maintenance are included”.
In general, the definition for micro, small and medium enterprises is different in different
countries. In developed countries, where businesses are capital intensive, the level of capital
increases with a limited number of employees. On the other hand, in developing counties, where
there is excess manpower, businesses are labor intensive and the capital level is limited.

2.1.2. Roles of Small Enterprises to Countries Development

Small and medium scale enterprises (SMEs) are generally regarded as the engine of economic
growth and equitable development in developing economies. They are labour intensive, capital
saving and capable of helping create most of the one billion new jobs the world will need by the
end of the century (Agwu and Emeti, 2014). To any country, whether it is developed or
developing, small enterprises contribute a lot for GDP growth. Many big enterprises are also
emerged from small ones.
According to Hobohm (2000), it is widely recognized that any types of development, SMEs have
significant role to play in economic development in general and industrial development in
particular. SMEs form the backbone of the private sector, make up over 90% of enterprises in the
world and account for 50 to 60% of employment. SMEs engage in manufacturing account for

8
between 40 and 80% of manufacturing employment. Hobohm has also put the contribution of
SMEs as vital because of the following reasons:
1. SMEs are more labor intensive and tend to lead to a more equitable distribution of
income than larger enterprises.
2. They contribute to a more efficient allocation of resources in developing countries.
3. They support the building of systematic productive capacities.
Small enterprises (businesses), for example, are the basic elements of the American economy.
They represent more than 99.7 percent of all employers; employ more than half of all private
sector employees, pay 44 % of total private payroll, produce 13 times more patents per employee
than large firms, create more than 50 % of private GDP (Hatten, 2012).
According to Andualem (1997), different socio-economic importance of MSEs, such as
absorbing enumerable capacity of labor, providing income earning opportunities, contributing for
more equitable distribution of income, satisfying the variety of cheap goods, less cost and
infrastructural requirements of the sector to start the business, motivating the opportunity for
investments, injecting competition to the economy constituting as center of innovation, providing
various linkage, relying on indigenous resources, flexibility to adapt to the changing market and
their being seed beds to the entrepreneurial development.
Similarly, Micro, Small and Medium Enterprises (MSMEs) are viewed as a key driver of
economic and social development in the African context. They represent a large number of
businesses in a country, generate much wealth and employment and are widely considered to be
vital to a country’s competitiveness. MSMEs are hailed for their pivotal role in promoting
grassroots economic growth and equitable sustainable development Pelham, (2000) cited in
Kiraka and et al., (2013). The critical social and economic importance of MSMEs is undeniable.
Throughout the world they are considered to be the backbone of healthy economies. Their
growth is a fundamental component of economic development. In many countries, they comprise
more than 40 percent of businesses and generally serve as the largest engine of job growth in
developing and transition economies, often accounting for 20–90% of employment. The
researcher also stated that the Government of Kenya reports shows there were 2.8 million MSEs
in 2002, contributing to employment of 5.1 million people (ibid).

9
2.1.3. Roles of Small Enterprises to the Development of Ethiopia
According to Ministry of Urban Development and Construction of Ethiopia (2013), tackling
issues of unemployment through the support and promotion of large scale manufacturing
industries has repeatedly failed. Large-scale enterprises are characterized by larger demand for
heavy machineries with relatively advanced technologies, high investment and working capital,
and more skilled manpower, which are all in limited supply in developing countries. In
particular, a survey conducted by the Central Statistical Authority (CSA) in May 1997 in 48
major towns showed that there are 584,913 informal sector activity operators and 2,731 small-
scale manufacturing industries that give employment to 739,898 in the labor force. Currently,
when the sector is being given a great attention in many aspects, job opportunities created are by far
greater than the aforementioned.
In most fast developing countries, MSEs by virtue of their size, location, capital investment and
their capacity to generate greater employment have proved their powerful propellant effect for
rapid economic growth. The sector is also a great means to create economic transition by
effectively using the skill and talent of the people without requesting high-level training, much
capital and sophisticated technology. (MoTI, 1997)

The Ethiopian government has long recognized the important contribution that small and micro
enterprises can make in poverty reduction, employment creation and private sector development.
Micro and small enterprises offer both a safety valve for the survival of workers that is available
to find steady wage employment and opportunity for the poor entrepreneurs to raise their capital
and income. These enterprises also offer a vehicle for acquiring and applying skills to raise
productivity and private sector growth, providing better wage earning opportunities for the poor,
while raising national income (Minilek and Chinnan, 2012).

While the importance of large industrial and other enterprises for the growth of the Ethiopian
economy cannot be denied, there is an ample evidence that the labour absorptive capacity of the
small business sector is high, the average capital cost per job created is usually lower than in big
business and its role in technical and other innovation activities is vital for many of the
challenges facing our country. (MoTI, 1997)

World Bank (2012) stated that many young men and women in rural communities of Ethiopia
have limited or no formal employment prospects. This challenge will continue in the context of a

10
high population growth rate. In addition, thousands of students graduating from universities and
colleges have aspirations of not returning to their parents’ farms, but instead moving into urban
and peril-urban areas, to look for jobs. This report also shows that between 2 and 2.5 million
young people are entering the labor market every year. This contrasts with a total of 2.5 million
people in paid employment in 2011, of which only 1.5 million were employed in the formal
private sector. During the GTP period, the number of young people entering the urban labor
market will be almost ten times the number of people retiring. For this great number of
unemployment, enhancing small enterprises in the country is one of the means of tackling the
problem.
According to the survey of MoTI (1997) over 89% of the informal sector operators are
concentrated in manufacturing, trade, hotel and restaurant activities. Of the small scale
manufacturing industries 85% are engaged in the manufacture of food, fabricated metal furniture
and wearing apparels. The survey also revealed that the number of people earning their
livelihood from the informal sector activities and small scale manufacturing industries is eight
times larger than those engaged in the medium and large scale industrial establishments.
From the above reviewed literatures one can easily understand that small enterprises are crucial
to the growth and development of any nation. In developing nations, in which the number of
huge industries is very limited, their contribution becomes paramount.

2.1.4. Marketing: Concepts and Definitions

Marketing of a product or service is a central activity for successful business; it is concerned
with identifying, anticipation and meeting the needs of customers in such away as to make a
profit for the business. Marketing is the base for the survival of any business (Clough, 2011).
Marketing is the homework that managers undertake to assess needs, measure their extent and
intensity and determine whether a profitable opportunity exists. Marketing continues throughout
the product’s life, trying to find new customers and keep current customers by improving
product appeal and performance, learning from product sales results and managing repeat
performance (Kotler and et al. 2005). Marketing is about producing products that can satisfy
buyers, creating awareness about their existence, distributing them to the area where the users are
found and providing service in using them. “Marketing involves all the activities needed to get a
product from the producer to the ultimate consumer” (Hatten, 2012 p. 265). Mid way there are a
number of activities that should carefully be done.

11
It is not uncommon that many people believe marketing and selling are the same. However,
selling is one small component of marketing. Marketing concerns not only current sales but also
future long lasting and increasing sales. Marketing is making profit from a satisfied customer. In
order to satisfy a customer, there are many things to be considered and done.
Temtime and Pansiri (2004) cited in Tiruneh (2011) also reported in their study of Small
business Critical Success/Failure Factors in Developing Economies, in Botswana shows that;
marketing activities such as product marketing, market research, and demand forecast and so
forth have a greater impact on the success of small businesses performance. The study also added
that customer relationship is one of the important determinants of the small business owners’
success.
A company must satisfy customers. The fact that they are central to the purpose of any business
has implications for integrity. Entrepreneurs who take customers seriously and care about them
as individuals are suitable to have more of them. And those they have are likely to return again
and again because of that attitude Longenecker, and et al (2008). In marketing the central point is
the customer. First, if there is no customer, there is no way to produce products. Second, if our
customers are not satisfied with our products, they will not buy them in other times in the future.

2.1.5. Marketing Factors that Influence the Performance of SEs

Small enterprises encounter several marketing factors in doing their business. These factors can
be internal or external. Internal factors are under their control while the externals, which are not
included in this research, are not within the control of the owners and employees. Internal factors
are going to be factors (independent variables) and will be discussed. The major internal
marketing factors of small enterprises are marketing skills of employees or owners, promotion,
prices, working (business) premise, and product.
Due to their size and financial limitations small enterprises face several marketing factors.
According to Ministry of Urban Development and Construction (2013), there are a number of
marketing problems that inhibit small enterprises not to grow into small and big enterprises. This
in turn affects their labor absorptive capacity of the sector.
Small enterprises usually regard market constraints and the inability to sell their products and
services as one of the most serious obstacles to the starting of businesses and growth beyond
mere subsistence level. Most Ethiopian MSEs lack adequate marketing channels through which

12
they could market their outputs. Marketing channels could serve both as means through which
marketing information is made available and sales outlets created for the products and services of
MSEs (MoTI, 1997).

The researcher has selected the following marketing factors and reviewed them in detail. They
are independent variables for the research.

I. Marketing Skills

Perhaps at the center of every successful business is a real marketing person who actually
understands that the business grows when customers buy products or services. Generally,
running your business for your customers needs is where successful businesses come from.
Marketing is a key skill to have and buy delivering what people want to buy is an obvious
requirement to running a business but not many people truly understand how to market a
business correctly. Marketing led organizations always buck the trend and tend to produce more
revenues and profits than their competitors.
Marketing skills are decisive factors for the success or failure of a business. Marketing includes
all profitable human activities undertaken by the firm towards the creation of goods and services.
Sales and marketing skills will keep the entrepreneur informed, knowledgeable and confident as
to determine the most efficient method of physical distribution of goods and services. Important
sales and marketing skills, which the entrepreneur should posses to include: knowledge of
seasonal fluctuation of goods; ability to determine the extent to which products will sell; ability
to determine current trends in sales of products, ability to determine what customers need and
shortage of such goods, knowledge of advertising, ability to determine and interpret factors
which indicate extent of and strength of competition; and ability to determine availability of
goods/raw materials for product and shortage of finished goods (Ezeani, 2012).
According to Longencker and et al. (2008) Customer Relationship Management (CRM) it is
necessary to create good customer relationship by understanding their needs and wants
emphasizing on long term relationships with them. The authors clearly stated that
communication with customers is important so that to know about them and their needs and
wants. CRM is the mechanism that small enterprises are expected to use in their business.
Customer profiles are the main sources of CRM by providing pertinent data to the method.

13
“Effective buyer–seller interaction may help to secure a satisfied customer. However, to retain
customers over the long term, many service providers have to develop relationship marketing
skills for managing customer relationships.” (kotler and et al. 2005 p.635). Referral networks are
invaluable to a business. This does not only mean customer referrals, which are encouraged
through discounts or other rewards per referral, but it also includes business-to-business referrals.
If you have ever found yourself saying, ‘We don't do/sell what you asked here, but another
enterprise in that location does,’ it is more likely that you are getting a referral in return. Hatten
(2012), states that relationship marketing broadens the business philosophy. Here a business
owner recognizes the value and profit potential of customer retention; therefore, the guiding
emphasis is on developing long-term, mutually satisfying relationships with customers and
suppliers.

II. Promotion
According to Clough, (2011) small enterprises (entrepreneurs) do not carry out active promotion
of their products or services. They rely on short-lived trade and customers finding their
businesses by chance, which results in minimal and local sales. Many of them do not give
attention how much promotion can increase their sales and profits. Asegedech (2013) clearly
stated that even though some enterprises understand that issuing flyers, posters and business
cards have promotional values, they are not doing these activities because they use the money for
other urgent matters. Many MSEs are not correctly informed on how to join their respective
Chambers of Commerce, or trade association of their industry. They seem not to be aware of the
services that they could obtain from them. Certain MSEs that have previously participated in
trade fairs fail to follow up, simply due to lack of awareness and skill.

III. Price
Price is the only element from the marketing mix that can generate revenue. Other elements like
product, promotion, place (distribution) and person are costs that should be incurred to make
profit or to do business (Kotler and Keller, 2012). Prices are the easiest elements of marketing to
change. Let alone product feature and channel, communications take more time than price
change or adjusting price (ibid, 2012). “Price is the amount of money charged for a product. It
represents what the consumer considers the value of the product to be worth to them. The value

14
of a product depends on the benefits received compared with the monetary cost. People actually
buy benefits— they buy what a product will do for them” (Hatten, 2012).
According to Hollensen (2010) there is no fixed or the same price for relationship marketing
rather, the products vary based on the preference and asking of the customer, with the value
varying correspondingly. Customers naturally want to pay for the products they specify if they
get expected features.
Sometimes the reason why small enterprises set their products or service price lower is due to
lack of basic costing knowledge, overhead costs and salaries or wages of family involved in
business are not considered as costs or expenses. In addition these enterprises do not know the
unit costs of products or services. On the other hand these enterprises set higher prices when
compared with larger enterprises. However, large enterprises can minimize their unit cost of
production using economies of scale (Asegedech, 2004).
In the study of Endalkachew (2008), about identifying the underlying causes of micro and small
enterprises failures in Addis Ketema sub-city, the researcher found that the problem of pricing
was prominent among the reasons for MSEs’ failure as 58% of the respondents agreed. The
reason is that owners lack the capacity to ascertain best prices and they tend to operate at high
prices in relation to medium and large scale enterprises. This tends to away most customers to
their competitors who are operating at lower costs.

IV. Place (for Working and Selling)

A customer will not likely purchase a service or product unless it can be relatively easily
accessed. Placement helps make the purchasing process for a customer easier and more
convenient. Often the term distribution is used interchangeably for the placement component of a
marketing strategy and includes the decisions a company or firm must make to ensure the
connection with the customer or client. Placement is how the marketer connects the products or
services with the customer— the easier, more convenient, more accessible the product or service
may be, the more likely the customer will purchase the product or service. The number of buyers
passing a site strongly affects its potential for retail sales. If you are a retailer, you need to
determine whether the type and amount of traffic are sufficient for your business (Hatten, 2012).
The entrepreneur may not have an identifiable business premise in which to display and sell their
products. Many may sell their products in someone else’s shop or from their home. Business

15
location is also important to maximize on passing trade. If the business is located far from the
market the entrepreneur may rely on customers coming to them or will have increased
transportation costs to get their products to market (Clough, 2011).
Several MSEs engaged in activities such as shoemaking, furniture production, metal works,
photography, hairdressing and catering might have relatively substantial number of customers
provided that they are strategically located and have good salesmanship. However, accessing
premises in good locations may not be easy for MSEs. There may be the problem of
infrastructure as well as high rent for the premises. Small enterprises have limitations in space
available for both the production and storage of their products, which will limit the amount they
can produce (Asegedech, 2004) and (Clough, 2011).
According to ILO (2004) in Tanzania, almost all of the women entrepreneurs sold locally within
their own district, but 79% also sold within their broader region, and three% (4 women) had
international sales. Interestingly, the findings from Tanzania showed a shift in market coverage
as part of the business growth and formalization process of the business, with only 29% of the
women selling outside of their district at start-up, while 83% of them were doing so at the time
of the survey, which demonstrates a substantial development of their businesses.

V. Product
Product is something that buyers need or want it for filling their gaps. It is defined as “…
anything that can be offered to a market to satisfy a want or need, including physical goods,
services, experiences, events, persons, places, properties, organizations, information, and ideas”
(Kotler, and Keller, 2012 p.325).
According to Hollensen (2010), relationship marketing, when appropriately implemented, results
in products being cooperatively designed, developed, tested, piloted, provided, installed and
refined. The author emphasized that customers should involve in selecting, designing and
producing of products so that they can get the value customers want for each component of the
product and associated services.
Products are classified on the basis of durability, tangibility, and use. Nondurable goods are
tangible goods and consumed within a year. On the other hand, durable goods are tangible goods
that normally survive for more than a year. Services (intangible, inseparable, variable, and
perishable products) require more quality control, supplier credibility, and adaptability. Based on

16
use products are either consumer or industrial ones. Consumer products include Shopping,
specialty and unsought goods where as industrial goods include raw materials and parts, and
capital goods (Kotler, and Keller, 2012).
Small enterprises should work with increasing of the quality of their products. According to
Assegedech (2004) if micro and small enterprises can afford, they have to improve the quality of
their products continuously to increase their sales. On the other hand if they can’t do that they are
advised to maintain at least the current quality.

2.1.6. Marketing Strategies for Small Enterprises

Strategy is a decision-making process that transfers a long term vision into day-to-day tactics to
realize the long-term plan. Although often thought of only as something reflected in a business
plan, strategy is rather a continual process of assessment, reassessment, and analysis, which
constantly provides direction to the firm. “A marketing strategy is a fundamental pattern of
present and planned objectives, resource deployments, and interactions of an organization with
markets, competitors and other environmental factors.” (Hollensen, 2010: p. 2)
Essentially, marketing strategy is a plan that allows a business owner to direct activities that are
consistent with the goals of the business owner and organization and spend money wisely in
order to create the greatest amount of return on investment. Your marketing strategy should be
decided in the early stages of operating your business. It should state what you intend to
accomplish and how you intend to accomplish it. The marketing section of the business plan is a
good place for the small business owner to identify marketing strategies. Any potential investor
will carefully inspect how you have laid out the marketing action that will drive your business. A
good marketing strategy will help you to be proactive, not reactive, in running your business
(Hatten, 2012). Small businesses in the service industries must pay special attention to
marketing. When their service is one that customers could perform themselves, a marketing
strategy is critical. It is also often more difficult to differentiate or establish a brand image with
services than with tangible products. A marketing strategy that communicates the benefits that
consumers receive is crucial.
Marketing’s key component is creating value to customers. In doing this, first and foremost it is a
philosophy that dedicates resources of the firm to ensuring that the wants, needs, and demands of
the customer are the firm’s focus. This customer-oriented mentality is the base for the strategy

17
that makes up the entire marketing process. In addition, a proactive and focused marketing plan
can provide guidance for targeting the right audience at the right place and at the right time,
which in turn maximizes the return on investment and increases revenues. Moreover, marketing
is a process of creating value for the customer. It is a set of activities to educate, communicate
with, and motivate the targeted consumer about the firm’s services or the company’s product and
services.
Pricing is a powerful tool in developing a marketing strategy with a strong connection to the
financial condition of the organization. Pricing too low may result in economic consequences if
costs are not covered, and pricing too high may be a spectacular act on demand and sales of the
product or service, also resulting in adverse economic consequences. According to Asegedech
(2013), formulating good marketing strategy is developing a good marketing mix that contains
the 5Ps elements of the mix. They are Product, Price, Place/channel of distribution, Promotion
and Person/process. The mix also involves selecting the target client/market: Studying the client
with respect to his/her buying motive and behavior, segmentation of the market using relevant
bases, evaluating each of the segments, selecting the appropriate segment as target market.
According to Hatten (2012), one of the major advantages that small businesses have over large
businesses is close customer contact. Although this closeness can help you maintain your
competitive advantage, you will also need a certain amount of ongoing market research to stay
closely familiar to your market. If you are starting a new business, you will need market research
even more. Hatten also states that market research as the function links the consumer, customer,
and public to the marketer through information. That information can be used to identify and
define marketing opportunities and problems; to generate, refine, and evaluate marketing actions;
to monitor marketing performance; and to improve understanding of marketing as a process.

18
2.2. Empirical literatures on marketing factors of small enterprises

According to ILO (2004) the study conducted to identify the Challenges of Growing Small
Businesses of women entrepreneurs in Africa, in Zambia, the profile of markets and marketing is
very similar to that of Ethiopia. If five enterprises are studied, most (i.e. three) have very
localized markets and sell by word of mouth; another (a guest house owner) has clients from the
region but is also trying to build an international visitor client base (primarily by word of mouth),
and the fifth business has an extensive market that operates throughout three provinces, and the
woman entrepreneur uses personal contacts from her previous employment in the sector as the
primary means of promoting her business.
According to CSA (1997) Survey, the increased role and contribution that the MSE sector could
have provided to the national economy is largely constrained by the various policy, structural
and institutional related problems and bottlenecks. Lack of smooth supply of raw materials and
working premises were reported to be the major bottlenecks facing small scale manufacturing
industries, while lack of sufficient capital and working premises were the leading problems of
the informal sector operators to start their businesses.
Clients whether they consciously do it or not, know the value of their money. And they always
want to know that they are being treated with the dignity they deserve as a client. Clients expect
to have undivided attention. Delivering full attention and also on top of that showing the clients
that you are attentively listening to what they are saying, you set yourself up for a repeated
business and possibly referrals. Listening carefully and having all attention on the clients,
absolutely flatters them. The clients will want to go back where they are treated with respect
(Elizabeth, 2013). This study conducted on 82 respondents in Tanzania shows that if the
businesses required marketing, the majority of the respondents 38.4% strongly agreed, 20.5%
agreed and 26.0% were undecided. Those who disagreed were only 4.1% and 11.0% strongly
disagreed. As to whether, marketing increases sales, still the majority 30.1% agreed, 28.8%
strongly agreed and only 15.1% were undecided. Those who disagreed were 9.6% and 16.4%
strongly disagreed. The data presented here show that marketing skills for the small businesses
lead to increased sales.
ILO (2003) in its study about women entrepreneurs’ sales and marketing channels, 86 per cent
said that they relied on themselves to market and promote their products and services directly.

19
About 10 per cent indicated that their production and market depended solely on orders from
clients, and a further 3 per cent said that they sold to and through retailers. This profile of
marketing practices and experiences would suggest that many of the women entrepreneurs do not
have good networks and limited contact with wholesalers or trading houses that could be used to
market their products further in a field.
According to ILO (2004), accessing appropriate and affordable business premises was also seen
as a challenge for start-up, particularly for those in Zambia and Ethiopia. Nevertheless in
Ethiopia all but one of the women entrepreneurs said that they had premises for their business.
Of the 122 women with premises, 59 per cent rented their premises, 37 per cent owned them, and
the remaining 4 per cent shared premises with others. Many (60 per cent) of those renting said
that whilst the premises were adequate for their business, the rents were too high.
A study conducted by Eshetu and Mamo (2009) indicates that most (87.5%) of the firms reported
that there is poor linkage between enterprises. For instance 63.2% of MSMEs indicated that they
have a major market problem in their operation. Despite the existing market problems, only
14.26% of respondents considered linkage as being important for development. One factor that
could explain this low level of partnership and other forms of business undertakings could be the
capacity of MSMEs in Ethiopia. The limited number of medium and large size enterprises in the
country conical the mutually benefits that could be derived from undertakings of partnership and
linkages.
In the same research with regard to working premises, comparing their past situation, about 64 %
of users have described the service as satisfactory, while the rest 36 % said less satisfied. All
argued that the service has helped to improve quality of their product, to get relatively more
customers and support of other service providers. Moreover, the service has improved weaver’s
relationship in sharing knowledge and skill. In addition, some argue that it saved them from
increasing workshop rent. However, particularly 36 percent of respondents said they were less
satisfied due to lack or absence of different utilities such as light, water and other sanitation
services.

20
2.3. Conceptual Framework

Under this topic, concepts that relate to one another are used to explain the research problem.
From previous researches, books and government documents reviewed above, the researcher
reached a valid assumption that there is a common set of marketing factors to small enterprises.
Many researches were conducted on the topic of small enterprises in the world at large.
However, in Ethiopia their number is a few. Therefore, this research can remarkably contribute
to the enterprises by identifying marketing factors that affect their performance. To align the
conceptual framework with the research objectives, enterprises’ performance is the dependent
variable whereas marketing skills of owners and employees, promotion, product, place (working
and selling) premises and price are the independent variables. The dependent variable is usually
measured by profit. Profit leads the increase of the income of owners and employees of the
enterprises. When profit increases, enterprises also grow which in turn require additional
employees and other resources.

21
Figure 2.1: Conceptual framework that shows the relationship of independent and
dependent variables

Marketing
Skills

Promotion
Perfor
Price mance

Place

Product

(Source: own drawing from literature summary)

2.3.1. Variables in the Study

The variables for the study are:
I. Dependant variable
The performance of SEs is measured by capital growth and the increase of
employees’ number in the enterprises.
II. Independent variables that are affecting the performance of SEs are:
1. Marketing skills
2. Promotion
3. Price
4. Place (for Working and selling)
5. Product
2.3.2. Hypothesis
After careful consideration of all independent variables and the dependent variable of the study,
the following hypotheses are developed.

22
H1: There is relationship between marketing skills and the performance of SEs.
In order to stay with the existing market, salespeople should know how to analyze sales data,
measure market potential, and develop marketing strategies and plans. They need analytical
marketing skills. It is believed that sales forces are more effective in the long run if they
understand and appreciate marketing as well as selling (Kotler & Keller, 2012).
H2: There is relationship between promotion and the performance of SEs
Promotion is one of the instruments in the marketing mix that is designed to provide information
and persuade customers into buying a product or service (Assegedech, 2004). Unless customers
get information where the products they need are found, their price, quality, and use, it is
unlikely to get sufficient buyers to products or services.

H3: There is relationship between price of products and the performance of SEs.
Price is one element of the marketing mix and affects the performances of small enterprises. For
similar products, customers prefer the one which has smaller price to higher price. Therefore,
these enterprises can use different strategies to make their price competent in the market.
According to Assegedech (2004), the best and most preferable pricing strategy is to lower costs
and consequently to minimize profit margins, which will both benefit the manufacturer as well as
the buyer.

H4: There is relationship between place (for working and selling) and the performance of
SEs.
Small enterprises constrained with lack of working place which is not also commercial area. In
most cases, small enterprises use their working area as selling area. This has a great influence on
their sales and overall performances (Diriba, 2013).
H5: There is relationship between SEs’ product quality and their performance.
Many entrepreneurs operate at the bottom of the market to take advantage by producing low cost,
low price and low quality products. Their low quality products demand in the market is not
sustainable which in turn negatively affects their performance.

23
 CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1. The Settings /the Study Area
According to Debre Markos Town Administration, Debre Markos is a city and woreda in east-
central Ethiopia 300 Kilo Meters to the north of Addis Ababa. Located in the East Gojjam Zone
of the Amhara Region, it has a latitude and longitude of 10°20′N 37°43′E Coordinates, and an
elevation of 2,446 meters. Debre Markos town was founded in 1852 by Dejazmach Tedla Gualu
who was the then administrator of the town. Its name was initially called Menkorer. The city was
named Debre Markos after its principal church, which was constructed in 1869 and dedicated to
St. Mark. Until the reorganization of the provinces that followed the adoption of the 1995
constitution, this city served as the capital of the province of Gojjam. Based on the 2007 national
census conducted by the Central Statistical Agency of Ethiopia (CSA), this town has a total
population of 62,497, of whom 29,921 are men and 32,576 women. The majority of the
inhabitants practiced Ethiopian Orthodox Christianity, with 97.03% reporting that as their
religion, while 1.7% of the population said they were Muslim and 1.1% was Protestants.

Even if the town was established earlier than many towns of Ethiopia, until the end of the last
millennium its growth was very limited. There are no factories and industries that can create jobs
to the working population of the town. Therefore, small enterprises are the first alternative to
these people in providing job and daily subsistence. The following table shows the number of
small enterprises and their shares in different industries:-
Table 3.1: Number of small enterprises in their industries

No. Types of industry Number Percentage from

of SEs the total
1 Manufacturing 37 45.68%
2 Construction 12 16.05%
3 Urban Agriculture 6 8.02%
4 Service 26 32.10%
Total 81 100%
(Source: Debre Markos town technical skills and enterprises development office 2013/14 nine
months performance audit report.)

24
 3.2. The study design
The population for this research is the total number of small enterprises in Debre Markos town.
There are 81 small enterprises in the town. Therefore, all small enterprises in the town are the
subjects of the study and the study is census.

3.3. Sample design

It will be appropriate for the researcher to take all the population as a sample. The reason is that
during conducting the research, the researcher has found that the number of small enterprises is
81. Therefore, taking sample out of such a population would not be advisable and desirable-
rather gathering primary data from all the subjects using the instruments.

3.4. Research Instrument

Data were collected from 81 small enterprises using questionnaires. Questionnaires were
prepared in a way that respondents are motivated to give genuine responses. They are brief and
concise without losing the intended meaning. In addition, the layout is simple to get the interest
of respondents. The base for preparing them is the literature review and the objectives of the
research. Three types of questions are included. The first part contains general information
questions that gather information related to sex, age, educational background, experience,
number of employees and financial sources. The second part involves questions that gather
information about their enterprises back ground and related issues. The last type involves
questions that gather information about the research variables.

To triangulate the research, interview was one instrument to collect data from respondents. 12
employees or owners were interviewed.

3.4.1. Instruments Design

Both instruments were designed to strength the practicability of the study. Data were collected
from small enterprises using
1. Structured questionnaires
Originally, questionnaires were prepared in English & then translated to Amharic & finally
retranslated to English by other person to check consistency.

25
 2. Interview Questions
To triangulate the research, in-depth interview was employed with questions to collect data from
respondents. 12 owners/representatives were interviewed.

3.4.2. Instrument Validity

In general, Validity is an indication of how sound your research is. More specifically, validity applies to
both the design and the methods of your research. Validity in data collection means that your findings
truly represent the phenomenon you are claiming to measure. Valid claims are solid claims (Anastasi &
Urbina, 1997, Creswell, 2009).
Before administering the main research, a pilot study was conducted to check the methodology
and the validity and reliability of instruments. Then questionnaires were printed, duplicated and
dispatched. The instruments selected can help to show factors that affect performance of MSEs.
It can clearly address how these factors affect the performance of MSEs in the town. The
relevant data were collected on the factors of the Small Enterprises that can better indicate the
relationship between factors and the performance of the enterprises. The structured and
unstructured interviews can also validate the measurement. Inferential statistical model was used
to test the relationship between the variables and to reach at valid conclusion.

3.4.3. Instrument Reliability

Reliability is the degree to which an assessment tool produces stable and consistent results.
According to Creswell (2009:190-92) the reliability of the instruments is the degree of
consistency that the instruments or procedure shows. In most standardized tests the reliability is
expressed as a correlation coefficient. Correlation coefficient (r) measures the strength of
association between independent and dependent variables and it varies between -1.00 and +1.00.
The two extremes show absolute reliability. 5 point likert scale that includes strongly agree, agree,
undecided, disagree and strongly disagree represent each statement in the questionnaire. Based on
this scale an internal consistency reliability test was conducted in Debre Markos town with a sample
of 12 small enterprises and the Cronbach's alpha coefficient for the instrument was found as 0.856
which is highly reliable.

26
 3.5. Ethical Consideration
In addition to describing the ethical issues in the questionnaire, brief explanation was given to
the respondents about the purpose of the research and privacy of their response during data
collection. It was clearly stated that since the respondents’ response is only for research purpose,
no need of writing and/or telling their names. Only numbers were assigned to the questionnaires
after they had been filled and returned for the sake of accurate analysis.

27
28
 CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF
RESULTS
This Chapter presents and analyzes the data collected using questionnaires and interview, and
discusses it accordingly. Initially, the questionnaires were prepared in English but it was
translated to Amharic, the native language of the area, to communicate with the respondents
effectively. Face to face interview was also conducted between the respondents and interviewer.
In fact, the pilot test was conducted prior to the survey. This helped the researcher to see if there
were any gaps in relation to questionnaire and to modify based on the feedback of the pre-test. In
addition, the pre-test enabled the researcher to check the reliability and validity of the collected
data.

Descriptive techniques and inferential data analysis methods were used for data analysis. SPSS
(Statistical Package for Social Sciences, version 16) was used to analyze the data collected using
questionnaire. The analysis focused on attempting to assess relationships between variables and
the level of influence of factors on performance. In doing so, to show the results tables and
percentages were used. The research was conducted based on primary and secondary data
sources. 78 questionnaires were distributed to respondents of the four sectors and 72 were
collected representing 92.31% response rate. Three enterprises were not available during data
collection. From the 72, four incomplete questionnaires were rejected. Of the 68 successfully
filled and returned questionnaires 31, 22, 10 and 5 were manufacturing, service, construction and
urban agriculture sectors respectively.
4.1. Data Presentation and Analysis
First, the demographic profile of respondents is analyzed and presented followed by the
enterprises related issues. Both are analyzed using frequency tables and percentages. Then, the
data related to the factors that affect the performance of small enterprises are presented and
analyzed. The data were analyzed using descriptive statistics with mean and standard deviation.
To see the relationship and degree of affection among dependent and independent variables,
Pearson correlation and multiple regression analysis are also used. All expected marketing
factors for the activity of business were asked using likert scale through which respondents
shown their level of agreement. The identified factors were expected that their limitation can

29
affect the normal operation of small enterprise and performance. Factors with low mean values
in the tables indicate foremost obstacles facing small enterprises and also its effect too. All
questionnaires were used as they consist of factors constraining their performance.

4.1.1. General Characteristics of the respondents

As it easily be seen from table 4.1 below, the number of male respondents (56 or 82.35%) is by far
greater than female respondents (12 or 17.65%). The table also shows that the age of the
respondents, almost all (66 or 97%), is below 36 years. The rest 2 or 3% of the respondents are found
in the age between 36 and 55. Regarding to marital status of the respondents, the table also shows
that 33 or 48.52% in other words, almost half of the respondents are not married. And almost the rest
half (30 or 44.12%) are married with a few (5 or 7.35%) divorced. In addition, the table shows that
except 2 respondents, almost all (66 or 97%) are literate. However, half of the respondents (34 or
50%) didn’t get related training. On the other hand, the majority (51 or 75%) and (61 or 89.71%) do
not have related experience and other source of income respectively. 17(25%) and 7(10.29%) of the
respondents have related experience and other source of income respectively.

Table 4.1: General characteristics of respondents

No. Demographic profile Number Percentage
1 Sex:
Male 56 82.35%
Female 12 17.65%
Total 68 100%
2 Age in years
18-25 26 38.23
26-35 40 58.82
36-45 1 1.47
46-55 1 1.47
Total 68 100%
3 Marital status
Never married 33 48.53
Married 30 44.12
Divorced 5 7.35
Total 68 100%
4 Educational level
Illiterate 2 2.94

30
 Up to Grade 8 8 11.76
Grade 9-10 30 44.12
10+1-4 or Diploma 22 32.35
1st Degree and above 6 8.82
Total 68 100%
5 Other business experience
Yes 17 25
No 51 75
Total 68 100%
6 Other source of income
Yes 7 10.29
No 61 89.71
Total 68 100%
(Source: Field Survey, 2014)

4.1.2. Characteristics of Small Enterprises

The following table shows small enterprises fields of industry in Debre Markos town.
Table 4.2: Small Enterprises Field of Industry

Frequency Percent Valid Cumulative

Percent Percent
Manufacturing 30 44.12 44.12 44.12
Constru
10 14.70 14.70 58.82
ction
Urban Agricultures 5 7.35 7.35 67.64
Service 23 33.82 33.82 100.0
Total 68 100.0 100.0
(Source: Own Field Survey, 2014)

As one can easily see from table 4.2 above, 30 (44.12%), 10 (14.70%), 5 (7.35%), and 23
(33.82%) of the enterprises are manufacturing, construction, urban agriculture, and service
respectively.
Regarding to experience of small enterprises, as table 4.3 shows, almost all or 63 (92.7%) has
less than 5 years of experience. Out of this figure 22(32.4%) have less than one year experience.
The rest 5 (7.4%) have experience between 5 and 10 years.

31
 Table 4.3: Experience of Enterprises

Frequency Percent Valid Cumulative

Percent Percent
Less than 1 year 22 32.4 32.4 32.4
1-5 years 41 60.3 60.3 92.6
6-10 years 5 7.4 7.4 100.0
Total 68 100.0 100.0
(Source: Own Field Survey, 2014)

In order to start a new business there should be finance. Table 4.4 shows the finance or startup
capital source of the enterprises.
Table 4.4: Source of Startup Capital

Frequency Percent Valid Cumulative

Percent Percent
Personal saving 24 35.3 35.3 35.3
Micro finance 16 23.5 23.5 58.8
Borrowed from friends and
22 32.4 32.4 91.2
relatives
Equb 5 7.4 7.4 98.5
Donation 1 1.5 1.5 100.0
Total 68 100.0 100.0
(Source: Own Field Survey, 2014)

As table 4.4 shows 24 (35.3%) of the enterprises’ finance source or source of startup capital is
their own personal saving. Micro finances are financial sources for 16(23.5%). Relatives and
friends are also significant source of finance to them. Equb 5(7.4%) and donation 1 (1.5%)
contribute their own to finance the enterprises.
According to the response, the main sources of finance to small enterprises of Debre Markos
town are personal saving and informal credits. This study shows that the small enterprises totally
are not using banks for finance sources. The interview response also assures this. Banks require
collateral and other requirements to lend money. Based on this it is possible to conclude that
there is finance constraint that in turn affects production and sales.

32
Table 4.5 below shows more than half of the respondents 42(61.8%) gave response that their
customers are attracted more by the quality of their products or services. The rest 11(16.2%),
10(14.7%) and 5(7.4%) replied that customers are attracted more by price of their products, their
approach and communication, and referral by their customers. However, the interview conducted
shows differently. The majority of the interviewee replied that their customer attraction
mechanism is by approaching and creating communication with customers.

Table 4.5: Customer attraction

Frequency Percent Valid Cumulative

Percent Percent
Quality 42 61.8 61.8 61.8
Price 11 16.2 16.2 77.9
Approach and communication 10 14.7 14.7 92.6
Referral by customers 5 7.4 7.4 100.0
Total 68 100.0 100.0

Small enterprises of Debre Markos town, as indicated in table 4.6, have the following future
plan. Half or 34(50%) want to expand their current sizes. 10(14.7%) planned to maintain the
existing market. The rest 9(13.2%) and 15(22.1%) planned to reduce and shut down their
enterprise respectively.

Table 4.6: Future plan of Small Enterprises

Frequency Percent Valid Cumulative
Percent Percent
Maintain with the existing
10 14.7 14.7 14.7
market
Expand it 34 50.0 50.0 64.7
Reduce it 9 13.2 13.2 77.9
Shut sown 15 22.1 22.1 100.0
Total 68 100.0 100.0

(Source: Own Survey Results, 2014)

33
Table 4.7: below shows that 23 (33.8%) have got the market as they had expected. 19 (27.9%) of
the enterprises are in the market in which greater than their expectation. The rest 26 (38.2%)
have got the market below their expectation.

Table 4.7: The Current Market and Small Enterprises Expectation

Frequency Percent Valid Cumulative

Percent Percent
As expected 23 33.8 33.8 33.8
Greater than expected 19 27.9 27.9 61.8
Less than expected 26 38.2 38.2 100.0
Total 68 100.0 100.0
(Source: Own Field Survey, 2014)

In order to increase their sales, small enterprises are expected to participate in different bids.
However, as the table 4.8 above shows, over half or 36 (52.9%) of the respondents do no not
participate in any type of bid. The rest or 32(47.1%) of them participate in different bids.

Table 4.8: Participation in bids

Frequency Percent Valid Cumulative

Percent Percent
Yes 32 47.1 47.1 47.1
No 36 52.9 52.9 100.0
Total 68 100.0 100.0
(Source: Own Field Survey, 2014)

Table 4.9: Level of Bid Participation

Frequency Percent Valid Cumulative
Percent Percent
National bid 1 1.5 1.5 1.5
Local bid 11 16.2 16.2 17.7
Performa 20 29.4 29.4 47.1
Do not participate 36 52.9 52.9 100
Total 68 100.0 100.0
(Source: Own Field Survey, 2014)

34
 Table 4.9 depicts that out of 68 small enterprises 32 involve in different bids, of which 20 or
29.4% participate in Performa and 11 or 16.2% participate in local bids. The rest 36 or 53% do
not participate in any type of bid.
The root cause for this low participation of small enterprises in different bids, according to the
interview result, is financial constraint.

4.2. Marketing Factors

In this section marketing factors that are considered as predictors and affect the performance of
small enterprises were discussed using mean and standard deviation. The smaller the value of
the mean is that respondents agree on the existence of those marketing factors or problems and
the vice versa.
4.2.1. Analysis of Marketing Factors Using Central Tendency and Dispersion
Table 4.10: Factors related to owners and employees marketing skills
Orders are Poor Sales There Unable to Unable Unable Unable to
not handling staff are is no adapt to to create to know the
finalized and weak not well market changing market identify profit from
on time relation trained survey environment linkage target each item
with market accurately
customers

1.7206 1.7353 1.7206 1.7059 1.6324 1.8235 1.7206 1.7353

Mean
Std. 1.0658 1.0051
1.00514 1.07367 1.10421 1.03526 1.11892 1.07367
Deviation 7 4
Grand
1.7243
Mean
Grand Std.
1.0602
Dev.
(Source: Own Survey Results, 2014)

As it is indicated in the table 4.9, the score of grand mean and grand standard deviation of the
factors related to marketing skills of the owners or employees of small enterprises are 1.72 and
1.06 (the nearest two digits) respectively. According to the response it is possible to conclude
that orders are not finalized on time. This leads customer dissatisfaction and reduces sales
volume (performance). Similarly, there is poor handling and weak relation with customers. Sales

35
staffs are not well trained. As the above table also shows and it is indicated in part II, that
because the market is below their expectation as 26 (38.2%) replied.
According to interview data, employees and owners of small enterprises in Debre Markos do not
have the required marketing skills. Many of them had not participated in marketing trainings.
This has a negative effect on their performance.
Table 4.10: Factors Related to Promotion
Absence of Lack of doing Lack of networking Unable to
signboards promotion and referrals participate in
bazaars
Mean 1.7059 1.6618 1.7500 1.6176
Std. Deviation .97825 1.07357 .83532 .99295
Grand Mean 1.6838
Grand Std.
0.97
Deviation
(Source: Own Survey Results, 2014)

Small enterprises have to introduce their products to the market. This can be done using
appropriate market promotions. As Table 4.10 shows there is promotion related problem. The
grand mean (1.66) and standard deviation (0.97) score show small enterprises are not doing
adequate promotion to their products. Most of them do not have signboards that can show their
address and promote their products. Lack of networking and referrals and unable to participate in
bazaars are promotion related factors that the respondents agreed upon.
From the interview, the researcher assured that employees and owners of small enterprises
believe that signboards and other promotional efforts are not this much important. According to
their response, customers don’t face address related problems as the town is not complicated.

36
 Table 4.11: Place Related Factors
High rent for Infrastructure Poor The premise is The premise There is no
working and problem to the location of small in size is where marketing
selling premises business and affects there is stiff channel
premise site production competition
Mean 1.8235 2.0735 1.8382 2.0441 1.7500 1.6471
Std.
1.14528 1.55800 1.19214 1.12547 1.01298 1.06175
Deviation
Grand
1.8627
Mean
Grand
1.1826
Std. Dev.
(Source: Own Survey Results, 2014)

As table 4.11 depicts, place (for selling and working) is one factor that affects the performance of
small enterprises. Among the factors of place the highest problem with mean 1.65 and standard
deviation 1.06 is lack of marketing channel. The second most important place factor with mean
1.75 and standard deviation 1.01 is stiff competition in the area. The least place factor is
infrastructure with a mean and standard deviation score of 2.07 and 1.56 respectively. In general,
the grand mean and standard deviation of these factors are 1.86 and 1.18 respectively showing
that place for working and selling is affecting their performance. On the other hand, the
interview data show that, even if the problem is there, it is not as such serious and affects
performance to the minimum level.
Table 4.12: Factors related to Prices
Prices are set without Prices Prices are There is no There is no Unable to
considering the are not not credit sales discount for know
demand and supply of competit consistent for loyal large quantity or detail
products or services ive customers repeated sales costs

1.7353 1.8235 1.7794 1.7794 1.8529 1.9853

Mean
Std.
.92426 .92947 .94388 1.03442 .99648 1.08576
Deviation
Grand
1.8260
Mean
Grand
0.9857
Std. Dev.
(Source: Own Survey Results, 2014)

37
As indicated in Table 4.12 above, price factors are one of the marketing factors that affect the
performance of small enterprises. These factors have almost similar effect on their performances.
Price fixation without considering the market demand and supply of products is the highest
problem with mean and standard deviation score of 1.73 and 0.92 respectively. Inconsistency of
price is the next factor that affects most with mean score and standard deviation of 1.78 and 0.94
respectively. The interview also shows that prices are not set based on calculations. Prices are
not consistent. Even for the same product, there is different price setting based on the bargaining
power of customers. Employees and owners fix price not by calculating unit costs rather based
on estimating trends.
Table 4.13: Factors related to Products
Customers are not Lack of Raw There is no Unable to Unable to
involved in market materials are guarantee for develop differentiate
product quality for not the right defected new products
improvement products quality products products

1.7059 1.8382 1.8824 1.7206 1.6176 1.6471

Mean
Std.
1.02300 .97139 1.12674 .84369 .93089 1.00394
Deviation
Grand
1.7353
Mean
Grand
0.9833
Std. Dev.
(Source: Own Survey Results, 2014)

The table 4.13 above shows that unable to develop new products and unable to differentiate their
products with mean 1.62 and 1.65 and standard deviation of .93 and 1 respectively are the most
important factors that highly affect the performance of small enterprises in Debre Markos town.
The second product related factors that have almost similar effect on their performance are lack
of customers’ involvement in product quality improvement and absence of guarantee for
defected products with mean score of 1.71 and 1.72 and standard deviation of 1.02 and .84
respectively. Lack of market for products with mean score 1.84 and standard deviation of .97
and poor quality of raw materials with mean score 1.88 and standard deviation of 1.13 are
product factors that have less effect when compared with the previous ones.

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According to the interview, customers’ involvement during product design is very rare. The
response to unsatisfied customers complain is not proportional. Instead, customers are told as if
they are the causes for these dissatisfactions.
4.2.2. Inferential Statistics Results
Inferential statistics are techniques that allow us to use samples to make generalizations about the
populations from which the samples were drawn. It is, therefore, important that the survey
accurately represents the population.
4.2.2.1. Pearson Correlation
In analyzing the relationship of the dependent variable and independent variables, Pearson’s
Product Moment Correlation Coefficient was used. Table 4.14 below shows that there is a positive
relationship between the dependent and independent variables.
Table 4.14: Pearson Correlation
Performance
Marketing Skills Factors Pearson correlation 0.363**
p-value 0.001
N 68
Promotion Factors Pearson correlation 0.253*
p-value 0.019
N 68
Place Factors Pearson correlation 0.167
p-value 0.087
N 68
Price Factors Pearson correlation 0.233
p-value 0.028
N 68
Product Factors Pearson correlation 0.295*
p-value 0.007
N 68
**Correlation is significant at the 0.01 level (2-tailed).
* Correlation is significant at the 0.05 level (2-tailed).
(Source: Own Survey Results, 2014)

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As table 4.14 above indicates, the relationship between marketing skills factors and product
factors with performance indicating Pearson correlation analysis are 0.363 and 0.295
respectively with the former statistically significant at 99% and the later at 95% confidence level.
Moreover, Promotion Factors and Price Factors are positively correlated with performance, i.e.
their Pearson correlation analysis results are 0.253 and 0.233 respectively and statistically
significant at 95% confidence level. The table also depicts that place factors are positively correlated
although the relationship is lower than the previous ones. It is 0.167 statistically significant at 95%
confidence level.

4.2.2.2. Regression
To know the extent to which the variables explain the variance, regression analysis was used.
The following table shows the results of the analysis and discussed below.
Table 4.15: Regression

Adjusted Std. Error of

Summaryb

R R Square R Square the Estimate

Model

.711a .506 .466 232722.172

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
(Constant) -1.187E6 172792.475 -6.870 .000
Marketing
31440.532 5639.655 .515 5.575 .000
Coefficientsa

Skills
Promotion 28156.757 8394.612 .301 3.354 .001
Place 16207.413 4974.872 .298 3.258 .002
Prices 23840.673 6215.889 .356 3.835 .000
Products 27108.727 6679.792 .373 4.058 .000
a. Predictors: (Constant), Products, Promotion, Marketing Skills, Place, Prices
b. Dependent Variable: Performance
(Source: Own Field Survey, 2014)

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Table 4.15 shows multiple regression taking performance as dependent variable and other
variables as independent ones for the survey of 81 small enterprises in Debre Markos. The result
of the regression proves that all hypotheses are accepted.
All predictors or independent variables have a positive relationship with performance or
dependent variable. If we see the table again, the regression analysis shows that multiple R or the
optimal linear combination of the independent variables, i.e. marketing skills, promotion, place,
price and product is 0.711. This is to mean that the independent variables have 71.1% effect on
performance. The rest 28.9% effect on performance is caused by or affected by other variables
that are not included in the research. In addition, it can easily be seen that the R2 value is 0.506
and adjusted R2 is 0.466.
The other point that the regression analysis shows is that all explanatory variables of the study
can explain at 99% confidence level to the variation on the dependent variable. Indeed, the
highest influence from the predictor on the dependent variable is the marketing skills that
employees and owners have with standardized coefficients or beta score of 0.515. The next high
value of beta from the predictors is product related factors followed by price factors by the score
of 0.373 and 0.356 respectively. Promotion and place related factors have similar effect on the
dependent variable with 0.301 and 0.298 beta value.
4.3. Limitation of the study
This research, like other similar researches, encountered some limitations. Some respondents
were not sure about the confidentiality of their response although they were clearly informed
about it. Many of the respondents required a great effort and frequent visit to fill questionnaires
and to be interviewed. However, these limitations do not have any interference with the findings
of the research.

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 CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
Chapter five is about the conclusions and recommendations of the study. Based on the
objectives, research questions, reviewed literatures and findings of the research conclusions are
reached and recommendations are forwarded.
5.1. Conclusion
Small enterprises are great contributors to the growth and developments of any country in the
world. Their role becomes paramount in developing countries like Ethiopia where the number of
huge factories and industries are not tremendously available.
The enterprises are performing their activities being affected by both internal and external
factors. This research focuses on marketing factors which is one of the internal factors that affect
the performance of small enterprises in Debre Markos town. The following conclusions are
derived from the research based on the objectives and findings:
 Owners and employees of small enterprises in Debre Markos are almost all or 66 (97%)
literate. However, the majority or 60% did not get marketing trainings in the area.
Moreover, out of 68 small enterprises, 51 or 75% do not have previous business
experience and only 7 or 10.29% have other source of income.
 Regarding to source of startup capital, only 16 or 23.5% borrowed from micro finances.
The rest 52 or 76.5% have got from informal sources and personal saving. This shows
that due to collateral and some other formality requirements, the enterprises have no
access to credit for their marketing purpose from banks.
 The majority (62%) of the small enterprises attract their customers by product/service
quality. However, interview finding contradicts with this. According to the interview,
83% of the customers are attracted more by approach and communication of employees
and owners of the enterprises.
 Although 23 or 34% and 19 or 28% of the enterprises have got the market as they had
expected and greater than expected respectively, a remarkable number of respondents (26
or 38%) have got the market below their expectation. This indicates that there is a gap in
conducting market research before entering to the business.

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  From the finding it is also possible to conclude that there is marketing skill gap in
employees and owners. Due to this customers are not served or are not getting products
or services based on schedule, unable to conduct market survey leads to difficulty to
know the demand and supply of their products, poor customer relationship, and unable to
calculate profit from each item accurately.
 It was also found out that the enterprises are not using adequate promotion efforts to
create awareness about their products or services to their customers. The majority even
do not have signboards that can show their address.
 Although most of the enterprises are using their working premises as selling shops, the
research investigated that they are facing problems of high rent, poor location, size
problem and lack of marketing channel.
 Price related factors are still other problems that affect the performance of small
enterprises. According to the finding, prices are fixed without considering the demand
and supply of the market. They are not competitive and consistent, fixed without
calculating detail costs.

5.2. Recommendations
The contribution of small enterprises to the economy of a nation was identified a long time
before. They are sources of innovation, create job opportunity, and assist big enterprises by
distributing products and supplying raw materials. The Federal Democratic Republic
Government of Ethiopian has paid due attention to the development of micro and small
enterprises understanding that they are essential means to address economic growth,
unemployment and distribution of income problems within the nation. Taking the
aforementioned importance of small enterprises into consideration, the government and all other
stakeholders should make their own efforts to solve marketing related problems that small
enterprises face.

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Recommendations to local government and the government at large

Small enterprises’ employees and owners should get entrepreneurship and business
concept trainings before starting and during performing their activities so that they
can be effective and efficient on their works.
Startup capital problem leads the enterprises to be incompetent in the market because
of unable to benefit from economies of scale. Therefore, government should create
favorable condition for the availability of credit from banks.
Debre Markos town micro and small enterprises development office in particular and
the government of Ethiopia at large should take market survey as a criterion and pre-
requisite to start small enterprises.
Place for selling and working is one of the major marketing problems that small
enterprises are being faced. Their income is not proportional with the rent they pay to
the premise owners. So, the government should motivate and support these
enterprises by providing the place with minimum lease until they get power.

Recommendations to small enterprises

The enterprises’ owners and employees should be conscious that both customers and
potential customers have to get information about their products and service through
different promotional efforts. At least any enterprise should have signboards that can
show their address and location.
Small enterprises should fix prices of their products and services based on reasonable
grounds. They should consider demand and supply of the market, calculate all costs
to produce a single product and the price should also be competent and consistent.

Recommendation to researchers

Interested researchers in the area are advised to replicate this study adding other
determinant factors by longitudinal data collection and using more statistical tests for
cross-validation purposes in future researches to identify the marketing factors that are
affecting the performance of small enterprises.

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